Economics: Does Big Tech Really Have Monopoly Power?

(Drivebycuriosity) - Big Tech stands in the pillory. President Biden, Elizabeth Warren, Bernie Sanders and many others claim that Big Tech has monopoly power and is using it against the society. Really?

 

 

 (POTUS )

 

Governments have state authority and they use armies and their police force to enforce their authority. Corporations don´t. Governments are collecting taxes and imposing penalties. Big Tech doesn`t. Government are passing laws and are setting rules for many things in life (regulations). Big Tech doesn`t. Governments can legally imprison people. Big Tech doesn`t.  Government authorities like the IRS can force you & me to give them your data, Big Tech can not! 

Amazon cannot force you to buy with Prime. Google cannot force you to use their search machine or their maps. Apple cannot force you to use iPhones or MacBooks. Some years ago I gave up on Facebook and cancelled their service. Did I get into prison for that? Nope. There war no punishment at all.

Milton Friedman said once: "There is no way in which General Motors can get a dollar from you unless you agree to give it to the company. That’s a voluntary exchange. It can only get money from you by providing you with something you value more than the money you give it. If it tries to force something on you that you don’t want, ask Mr. Henry Ford what happened when Ford tried to introduce the Edsel. On the other hand the government can get money from you without your consent. They can send policemen to take it out of your pocket. General Motors doesn’t have that power. And that is all the difference in the world. It is the difference between a society in which exchange is voluntary and a society in which exchange is not voluntary. It’s the reason why the government, when it is in the saddle, produces poor quality at high cost, while industry, when it’s in the saddle, produces quality at low cost. The one has to satisfy its customers and the other does not" (hoover).

Biden & Co. ignore, maybe even don`t understand, that the power of corporations is always constrained by existing or potential competition (except competition is forbidden by patents or other laws. Don´t print US Dollars!). The greatest force against corporation power comes from other corporations. When a corporation has success, her rising profits attract automatically others (copycats) who want a share from the pie. There are myriads of investors, including big funds, who are happy to put their money on the next Amazon, Google, Facebook etc. It is very easy to finance to new ideas. 

 Let`s take a look on Amazon. In the year 1995, when Jeff Bezos started Amazon, he was the only one who sells online. Amazon was a monopoly. Soon copy cats appeared - animated by Amazon´s success. They all want a piece of Amazon`s pie.  

Over the years the number of other online sellers, the competitors, has been swiftly climbing. Amazon`s success story inspired myriads of copycats to offer similar services. Today Amazon is competing against hundreds of companies selling online, including giants like Walmart, Target, Best Buy & Costco, who all developed large online departments, and there are also a lot online platforms like Overstock, Shopify, Wayfair, Etsy & Ebay, who all are copying Amazon`s success. A former Amazon employee used his knowledge to start in 2012 Instacart, an online grocery with annual revenues around $1.8 billion. The online giants Facebook & Google also want a piece from Amazon´s pie and provide online shopping on their websites. And globally Amazon competes against Alibaba, Tencent (both China), Rakuten (Japan), MercadoLibre (Latin America) and others. Amazon is far away from being a monopoly.

 

 

 

 

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When Steve Jobs sold the first iPhone on January 9, 2007, Apple was the only seller of smart phones, it had a monopoly. Soon others followed. Today Apple gets a lot competition for their iPhones, iPads, iMacs, MacBooks and services. Customers can purchase similar products & services from Microsoft, Google, Samsung, Huawei and a lot of other technology companies. And customers can choose between Apple´s iOS, Google`s Android, Windows other mobile operating systems.

Elizabeth Warren & Co. call Meta (mother of Facebook & Instagram) a monopoly. But the media company competes against media services like Tiktok, Snap and many others. The recent quarterly numbers from Meta show that the competitors of Facebook & Instagram are catching up (chart above). Google may look like a monopoly, by the company`s search engines are competing against similar services like Microsoft`s Bing, DuckDuck Go, Yandex & WolframAlpha. Google Maps are competing against Apple Maps, MapQuest & TomTom. And YouTube competes with Rumble and other video platforms.

And Google & Facebook offer most of their services for free. Their business models are based on advertisement. Both are fiercely competing against each against other and against myriads other ad-based companies for user numbers & advertiser billions.

 

The Internet makes it very easy to compare prices and to switch to other shops, news providers & entertainers, sharpening the competition. Customers can choose the company which has the best quality, the best service and/or the lowest prices which gives the consumers a lot power. As a result, customers have more power than the corporations.

 

Big Tech doesn`t need to be our friend, but the tech giants have to behave customer friendly otherwise they would go out of business. Adam Smith declared “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. That is also true for Big Tech. If Amazon would treat their customers unfriendly, if they would sell too expensive, deliver too slow & too unreliable, then customers would buy at Walmart, Ebay or elsewhere. That is the magic of competition. Because Big Tech has to compete against others they have to behave like friends. And competition is fierce as the sharp online revenue growth @ Walmart, Shopify & Target demonstrate.

 

Biden, Warren & Co. ignore history and the facts. Customers have more power than the corporations.