Tech world’s gang of four

Business Standard - - OPINION - SHAILESH DOBHAL

Scott Gal­loway’s not-so-char­i­ta­ble ac­count of rise and rise of Ama­zon, Ap­ple, Face­book and Google is a scary read on the smoth­er­ing tech oli­gop­oly over our lives.

As its lat­est of­fer­ing, the iPhone X, went on sales to en­thu­si­as­tic crowds across the world, Ap­ple Inc’s mar­ket cap­i­tal­i­sa­tion briefly breached $900 bil­lion on Novem­ber 3, well on its way to be the first firm to brace the tril­lion-dol­lar mark. On the same day Ama­zon’s founder Jeff Be­zos beat Mi­crosoft’s Bill Gates to be­come the world’s wealth­i­est per­son once again on the Forbes rich list, with a for­tune of $90 bil­lion.

Four days later, in Wash­ing­ton, Google and Face­book, the other two of the quad that make up the tech in­dus­try’s en­vi­able “Gang of Four”, tes­ti­fied be­fore the US Con­gress on the in­ves­ti­ga­tion into their al­leged role in Rus­sian med­dling in the last US Pres­i­den­tial elec­tions that put Don­ald Trump in the White House.

Ap­ple is the most prof­itable com­pany in his­tory, with its cash hoard equal to Den­mark’s GDP. One in ev­ery five of the 7.5 bil­lion peo­ple on earth has a daily re­la­tion­ship with Face­book. About one in six of the 3.5 bil­lion queries posed on Google each day have never been asked be­fore. And Ama­zon is un­ques­tion­ably the big­gest store on the planet.

With so much mar­ket, con­sumer, fi­nan­cial, so­ci­etal and, in­creas­ingly, po­lit­i­cal heft be­hind them, no won­der these four in­vite so much awe, im­i­ta­tion, de­ri­sion, even ha­tred. How did the “Four Horse­men,” as Scott Gal­loway calls them, ag­gre­gate so much power?

“Are they the Four Horse­men of the apoc­a­lypse?” poses Mr Gal­loway, once a re­luc­tant in­vest­ment banker, a se­rial en­tre­pre­neur and pro­fes­sor of mar­ket­ing at NYU’s Stern School of Busi­ness.

Mak­ing his un­char­i­ta­ble judge­ment of these firms’ ob­vi­ous right at the start of the book, he writes; “…Face­book and Google own me­dia; Ap­ple owns the phone; and Ama­zon is about to mo­lest the en­tire re­tail ecosys­tem.” The book pro­files each of them, and it is in these chap­ters that some of the “hid­den DNA” prom­ise of the book comes alive, mak­ing it an in­ter­est­ing read for any­one — con­sumer, com­peti­tor, part­ner or reg­u­la­tor — want­ing to un­der­stand the stag­ger­ing suc­cess of these firms.

Take Ama­zon. Mr Gal­loway avers that it is not op­er­a­tional ca­pa­bil­i­ties, en­gi­neers or brands that make up its “core”. It is the un­der­stand­ing of and ap­peal to our in­stincts in what­ever it does that makes Ama­zon such an amaz­ing and suc­cess­ful, though a heart­less, en­ter­prise.

How, one may ask? Ac­cord­ing to Mr Gal­loway Ama­zon ap­peals to our hunter­gath­erer in­stinct to col­lect more stuff with min­i­mum ef­fort — from one-click shop­ping that it pi­o­neered, Ama­zon is ush­er­ing in vir­tu­ally ef­fort­less, zero-click or­der­ing though its cashier-less off­line con­ve­nience stores (Go) and its ar­ti­fi­cial-in­tel­li­gence voice-or­der­ing as­sis­tant (Alexa).

“Lever­ag­ing big data and un­ri­valed knowl­edge of con­sumer pur­chas­ing pat­terns, Ama­zon will soon meet your need for stuff, with­out the fric­tion of de­cid­ing or or­der­ing… Your or­der will ar­rive with an empty box; you’ll put stuff you don’t want in the re­turn box, and Ama­zon will record your pref­er­ences. Next time, the re­turn box will get smaller,” writes Gal­loway.

This is not just fu­ture talk, as the firm has al­ready launched its Wardrobe ser­vice in the US, where a cus­tomer pays only for the se­lec­tion they make, and get a full week to de­cide what to keep and send back. And Ama­zon is not even let­ting out the fact how much ro­bot­ics — another of its core com­pe­ten­cies — it is em­ploy­ing at its ware­houses and the job havoc it is cre­at­ing. Mr Gal­loway es­ti­mates roughly 76,000 re­tail jobs will be de­stroyed in the US alone this year as a re­sult of Ama­zon in­creas­ing the num­ber of ro­bots in its op­er­a­tions by over half last year.

All this wouldn’t be pos­si­ble but for Ama­zon’s ser­e­nad­ing in­vestors with amaz­ing sto­ry­telling about its fu­ture, where “pa­tient cap­i­tal” is ever will­ing to buy the lore of vi­sion and growth over prof­its! “The eq­uity mar­kets now be­lieve what’s good for Ama­zon is bad for re­tail, and vice versa. It’s a situation al­most unique in busi­ness his­tory… The real hand-wring­ing is go­ing to be­gin when peo­ple start ask­ing if what’s good for Ama­zon is bad for so­ci­ety,” writes Mr Gal­loway.

Though less harsh on the other three horse­men, Mr Gal­loway doesn’t hold his punches ei­ther. So Ap­ple’s run­away suc­cess is based on el­e­vat­ing a lux­ury prod­uct to a sa­cred cult brand that al­lows it the lee­way not to fol­low the rules that gov­ern and bind the rest of the busi­ness world. That cou­pled with a busi­ness strat­egy with scarcity (rec­ol­lect long queues and month­s­long wait­ing pe­riod) and ver­ti­cal in­te­gra­tion as its cor­ner­stone gave it an out­sized and, for some, ir­ra­tional prof­its. The Cu­per­tino firm sold just un­der 15 per cent of smart­phones bought glob­ally last year, but its lux­ury-cult sta­tus al­lowed it to col­lect around 80 per cent of all prof­its in the in­dus­try.

Of­ten, how­ever, Mr Gal­loway sounds un­con­vinc­ing, even friv­o­lous, more so when he goes back to the evo­lu­tion­ary the­ory to ex­plain these busi­nesses’ hold on con­sumers. The reader may flinch at his ex­pla­na­tion of Ap­ple’s core as fill­ing our “two in­stinc­tual needs… to feel closer to God and be more at­trac­tive to the op­po­site sex.” Re­ally?

Or take this one on Face­book. Mr Gal­loway is clearly over­sim­pli­fy­ing hu­man na­ture when he writes: “…As a species, we are weaker and slower than a lot of our com­peti­tors. Our de­vel­oped brain is our com­pet­i­tive dif­fer­en­ti­a­tion. Empathy is what makes us more hu­man. The ex­plo­sion in images dis­trib­uted on so­cial me­dia plat­forms has led us to more empathy.”

Even as the four jos­tle to “be­come the op­er­at­ing sys­tem for our lives”, Mr Gal­loway says the only safety for the world is in the ha­tred the four har­bour for each other. As easy prey run out, they are com­pet­ing di­rectly with each other — Ama­zon in prod­uct search with Google; Ap­ple and Ama­zon in voice as­sis­tants; Google and Ama­zon in cloud com­put­ing; Face­book with Google for share of the mo­bile traf­fic. Will Google get Ama­zoned? Or will Face­book get Googled? It is a Go­liath ver­sus Go­liath bat­tle, with stakes for not just busi­nesses, but all the liv­ing and the un­born. THE FOUR The Hid­den DNA of Ama­zon, Ap­ple, Face­book and Google Scott Gal­loway Pen­guin Ran­dom House (Ban­tam Press) 310 pages; £31.99

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