Like Rome, the Big Tech empires will one day fall
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’