Like Rome, the Big Tech em­pires will one day fall

The Daily Telegraph - Business - - Business Comment -

Mark Zucker­berg fa­mously counts Au­gus­tus, the Ro­man leader who turned a repub­lic into an em­pire, as one of his he­roes. So when Face­book’s chief ex­ec­u­tive was called an “em­peror of the on­line econ­omy” in last week’s Big Tech com­pe­ti­tion hear­ing, per­haps Zucker­berg took it as a com­pli­ment.

Au­gus­tus never had to deal with pesky reg­u­la­tors try­ing to break up Im­pe­rial Rome. There was no bi­par­ti­san com­mit­tee ar­gu­ing that com­pe­ti­tion be­tween re­publics would im­prove con­sumer wel­fare, or that in­vad­ing Ger­ma­nia amounted to mar­ket abuse.

Un­for­tu­nately for Zucker­berg, as well as Ap­ple’s Tim Cook, Google’s Sun­dar Pichai, and Ama­zon’s Jeff Be­zos, to­day’s em­per­ors do have those things. Last week’s hear­ing of Congress’s an­titrust subcom­mit­tee may have had its far­ci­cal mo­ments, and the tech ex­ec­u­tives there avoided any par­tic­u­larly mem­o­rable gotcha mo­ments, but it was still the clear­est sign yet that a new era of com­pe­ti­tion en­force­ment is here.

In­ter­nal emails un­earthed by the com­mit­tee’s in­ves­ti­ga­tion, re­veal­ing al­legedly an­ti­com­pet­i­tive be­hav­iour from the com­pa­nies, will be use­ful ev­i­dence for any agency plan­ning to pros­e­cute them, as well as for politi­cians writ­ing mo­nop­oly laws fit for the 21st cen­tury.

All four bosses stressed that com­pe­ti­tion was alive and well in the dig­i­tal sphere. But Zucker­berg had the most per­sua­sive ar­gu­ment. Re­veal­ing him­self as a keen stu­dent of re­cent, as well as an­cient, his­tory, Face­book’s founder pointed out that of the world’s 10 big­gest com­pa­nies a decade ago, only three are still in that list. “New com­pa­nies are cre­ated all the time, all over the world,” he said. His ar­gu­ment was that the mar­ket works. Firms that fail to adapt to new de­vel­op­ments and tech­nol­ogy will be pushed aside. Those that con­sis­tently re­main on top are the ones that are nim­ble enough to in­no­vate: they are there on merit.

It is an ob­vi­ously self-serv­ing po­si­tion. The more one be­lieves that com­pe­ti­tion works it­self out, the weaker the ar­gu­ment for the sort of reg­u­la­tion that Zucker­berg’s coun­ter­parts in Congress were af­ter. But his­tory shows there is some va­lid­ity to it. The tech­nol­ogy com­pany that has faced the most mo­nop­oly scru­tiny in the last cen­tury was not at last week’s hear­ing. Nor is it Mi­crosoft, which fought a bru­tal bat­tle against the US gov­ern­ment at the turn of the mil­len­nium.

In the Fifties, IBM was ac­cused of hold­ing a mo­nop­oly over punch-card pro­cess­ing ma­chines, re­sult­ing in an agree­ment with the US gov­ern­ment that opened up the mar­ket in 1956. In the next decade, com­put­ing had moved on to main­frames, and the com­pany’s 70pc share of the mar­ket led to a 13-year le­gal bat­tle with Wash­ing­ton that was dubbed “the an­titrust di­vi­sion’s Viet­nam”. To­day, IBM has a much higher share of the main­frame com­puter mar­ket, but few are con­cerned, be­cause main­frames are no longer at the cut­ting edge.

To an ex­tent, the same thing has hap­pened to Mi­crosoft, which is still a gi­ant but not nearly un­der the same com­pe­ti­tion pres­sure as Face­book, Ama­zon, Ap­ple or Google. The US jus­tice depart­ment’s case against the com­pany, over its bundling of In­ter­net Ex­plorer with Win­dows, seemed vi­tal at the time. To­day, when al­most ev­ery­body down­loads Google’s Chrome browser, it seems al­most quaint.

The rea­son we don’t worry about IBM or Mi­crosoft as much is not be­cause they have lost their re­spec­tive mo­nop­o­lies; it is be­cause the mar­kets they con­trol no longer seem so vi­tal. Main­frames were sup­planted by mini­com­put­ers and PCs; PCs by the web and smart­phones.

The down­fall of Ap­ple, Ama­zon, Face­book and Google, when it hap­pens, is likely to fol­low a sim­i­lar tra­jec­tory. No search en­gine will re­place Google, but one day search en­gines will not be as cen­tral to our lives as they are now. It seems hard to imag­ine to­day, but the Fifties trust­busters thought the same about the punch card in­dus­try.

There are two re­join­ders to this idea. One is that to­day’s tech giants are suf­fi­ciently para­noid, hav­ing seen what hap­pened to the likes of IBM and Mi­crosoft, to be un­likely to fol­low the same fate. Face­book suc­cess­fully spot­ted the rise of both pic­ture-based shar­ing and pri­vate mes­sag­ing, and ac­quired In­sta­gram and What­sApp to counter th­ese trends.

This does a dis­ser­vice to prior mo­nop­o­lies, which were just as para­noid and ruth­less as to­day’s. Even­tu­ally some­thing came along that they sim­ply could not counter.

The se­cond re­sponse is that com­pe­ti­tion in­ter­ven­tion is ac­tu­ally what led to Mi­crosoft and IBM fad­ing into the back­ground, forc­ing them to take their eye off the ball. This is dis­puted, but it might be pointed out that plenty of suc­cess­ful com­pa­nies that did not face mo­nop­oly in­ves­ti­ga­tions, such as Nokia, have also fallen.

None of this makes the com­pe­ti­tion in­ves­ti­ga­tions hap­pen­ing in the US and else­where into Big Tech any less im­por­tant. There is plenty of ev­i­dence that the be­hav­iour of Sil­i­con Val­ley’s giants is hurt­ing consumers and smaller ri­vals to­day, and for those be­ing squeezed out it is not likely to be of much com­fort that the per­pe­tra­tors will even­tu­ally de­cline. But de­cline they will. Rome fell de­spite its once unas­sail­able power. To­day’s tech em­pires will fol­low, even if they are not forcibly bro­ken up.

‘Few are con­cerned about IBM now, be­cause main­frames are no longer cut­ting edge’

James Tit­comb

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