Big Tech Breakup: Antitrust Law, Policy & Economic Impact

[00:00:00]hi welcome if I asked you what you thought about  big Tech my assumption is that you would say you   don't like it it's too big it's taken over our  lives and it needs to be brought down a notch   that is the question I want to talk about today  because that is very much on the table right now   because a few weeks ago you know if you've  read the news story The Justice Department   in the US said that they were considering  considering a breakup of alphabet with the   that they make the company share its data with its  comparators now this might all be negotiating that   these are just threats to get the company to make  concessions but that breakup threat's been on the   table now for a while and it's not just alphabet  that's been in the targeted it's been Microsoft   and Amazon and apple and meta and what they share  in common is they've been incredibly successful   fairly or unfairly the answers that people have  range the Spectrum politicians economists lawyers   and I want to in this session look at bigte  through the perspective of antitrust is it   something we should be targeting with antitrust  law and what are the remedies if we believe that   these companies have violated that law now  before I get started I have to make a couple   of admissions one is I'm not a lawyer I don't  want to be a lawyer and the second is I'm not a   traditional Economist so I don't do the the big  you know on the one hand on the other hand what   I hope to bring to this process is understanding  of business and hopefully how I think this will   play out in finance and business now to understand  antitrust law we have to go back to the beginning   and that goes back to the late 1800s the US was  making this transition from being an Emerging   Market to one of the global large Global economies  and it was doing it in three with three Industries   leading the way steel oil and railroads and in  each of these industries there was a person at   the top a robber baron and they earned that title  now who is trying to essentially take over the   business in oil it was John de Rockefeller  with standard oil now in steel it was Andrew   Carnegie with Carnegie steel that he built up and  eventually sold to JP Morgan who took it public as   us Steel in the railroads it was different tycoons  in different parts of the country Cornelius vandel   J gold Leland Stanford all playing starring roles  usually as villains now these were not nice men   so let me be very clear they effectively wanted  to control their businesses and they used the   structure of trust to do it a trust was just a  collection of companies in the same business but   the companies got together and set production and  prices to monopolize the business now if you build   a monopoly a monopoly behaves like a monopoly and  these monopolies did they um they crushed their   competition they abused labor they exploited  labor and they took advantage of consumers and   eventually the backlash built up and in the US the  backlash showed up in two forms one was a an act   the Sherman Act that was passed in 1890 precisely  to stop trust to stop them from monopolizing it   was actually a very firmly worded act which said  that any contract combination of conspiracy and   Restraint of trade or monopolization should  be should be illegal but then it also added   the qualifier the Supreme Court did that that  constraint that is put in should be unreasonable   the law was short it was vague and initially the  vagueness worked against the government in 1896   when the Government tried to break down the  sugar business which had been monopolized the   Supreme Court stopped it but eventually The Kinks  get got ironed out and the following decade with   Teddy Roosevelt as president he became president  on the promise of busting the trust he saw this   this act used to kind of to challenge companies  in 1911 President Taft actually used the ACT to   break up Standard Oil and we'll talk more about  that breakup into multiple companies but the   Sherman Act effectively was the first shot in the  Anti-Trust battle as I said the Act was vague and   eventually Congress came back to it and they and  added some Provisions in The Clayton Act which   kind of filled out the antitrust toolkit for the  government it it extended the reach of antitrust   to cover a whole whole host of activities that  were anti-competitive mergers predatory pricing   sales stes it also bought individuals from sitting  on each other's boards if they competitors it also   created the Federal Trade Commission to enforce  the act more on that later and in the decade   since Congress has returned and added Provisions  the Robinson Patman act you know created price   discrimination Provisions the Sellar Act of now  filled in the merger provisions and the hards   Scot redino Act of 1976 introduced a requirement  that if you are going to do a merger that exceeded   a threshold the threshold changes from year to  year this year it's 111.3 million you'd have to   file a preem merging notification with the justice  department wait 30 days and the justice department   could challenge you if they felt that this merger  was anti-competitive that's the background on   anti-rust law now of course laws are only as good  as the enforcers and over time the US government   has developed an enforcement mechanism with  for en trust built around the Federal Trade   Commission the Federal Trade Commission actually  states its mission is protecting the public from   deceptive or unfair business practices and  from unfair methods of competition through   law enforcement advocacy research and education  notice the focus on the word unfair we're going   to come back to it because that is going to  be the fulcrum around which we look at big   big Tech and whether we should be challenging  with antitrust laws in carrying on the mission   the Federal Trade Commission is often relies  on the Department of Justice which has said an   antitrust division created specifically for this  reason in 1919 now both of these Tred to enforce   the laws but the US you end up in court it's the  courts that finally decide whether the Federal   Federal Trade commissioner of the Department of  Justice's case has Merit now over the decades   since these laws were put in place the laws the  enforcement of laws have ebbed and flowed for lots   of different reasons one is administrations change  and different administrations bring in different   ideological perspectives on the need for antitrust  law it has also changed based on what the courts   have have decided so you know sometimes courts  have been more in favor of the enforcement other   times there have been more of an impediment but  the biggest reason for the shifts across time   the es and flows is a fundamental question about  what these antitrust laws are designed to do in   fact there are two schools of thought that  have evolved one is the school starting in   the University of Chicago with Robert Bor who who  argued that the original intent of the law was to   protect consumers that competition for the sake  of competition really made no sense conversely   there was a different school of thought that  argued that the endgame of the law is in fact   to enhance competition not and and while consumers  maded they were not front and center that tension   has played out over the last few decades and we're  going to come back to it because it is going to be   Revisited now with the big Tech question in 2020  when Joe Biden became president he appointed Lena   Khan and of course yet to be you know approved by  Congress as chair of the Federal Trade Commission   she's the youngest uh I think the youngest head  but it's a background that made her interesting   and perhaps LED people to believe that this was  going to be a sea change in how antitrust laws   were enforced she made her reputation on a paper  she wrote while she was still a student at at   Yale called Amazon's antitrust Paradox and in that  paper she argued that platform-based companies   and Amazon Apple Facebook Google all fit into  that category put growth ahead of profits and   then once they built the platform they used the  platform size decimate competition she admitted   that at least in the near term consumers were not  hurt they were actually benefiting from freebies   from these companies but she argued that in the  long term once these companies these platform   companies had complete domination they would lose  the need to innovate and prices would go up so   that paper essentially laid the foundations for  hey bringing antitrust law to bear on B Tech so   when she became chair of the FTC people assumed  that tech companies would be targeted more now   if you look at the actual numbers they don't show  that change in emphasis this is actually on one   dimension of what they have TC does it challenges  merges you look at the number of merger challenges   there hasn't been a big jump in fact there's been  a drop off since 20121 both in numbers and as a   percentage of the total merges happening out there  now it is true that the FTC has become much more   outspoken about its challenging of mergers and  some high profile merges have been targeted you   might have read about the Microsoft antitrust um  the Microsoft Activision merger challenged by the   FDC because the FDC felt that it was you know  violation of antitrust law eventually microsol   won that case but you know it's a it's when the  FTC now challenges merges it's much more you can   see that it's much more public now whether that is  really to cover the lack of real change underneath   I don't know but whatever it is it's clear that  while miss Khan's original argument about the use   of antitrust to restrain big Tech companies might  have got a receptive audience among academics and   legal thinkers and politicians it's not quite one  over the courts now let's look at now that we've   looked at the the the the law and the enforcers  let's look at the remedies that the enforcers   have in their hands as as potential challenges to  companies the first set of Remedies are restraints   and changes that the FTC can make force a company  to make because they feel the company is doing   things that are anti-competitive of course  the the actions they're trying to stop or the   behavior they're altering has to be unreasonable  unreasonable being left in the hands of the court   to decide and if to meet the rule of Reason  threshold which is the anti-competitive effects   have to exceed any pro competitive effects  that's like sounds like legal Gobbledy go so   let's see what it actually means within that air  that grouping of of operating changes the first   of fores merger challenges I talked about the  heart rudino act pushing for you know mergers   that happened above 111.3 million the transaction  value that the company the acquiring company would   have to file a merg pre- merg notification with  the justice department now the justice department   in turn every year has to report how many merges  are challenged and whether it succeeded or not   so let me give the numbers at least for the 2023  fiscal year the most recent year the Department of   Justice challenged 16 merges that's it 16 merges  it had one win it had four consent agreements   think of those as partial wins one ongoing  litigation where you don't know who the winner   is going to be and 10 abandonments or restructured  complaints not a great winning record so far right   now if you look at the mo the businesses that  were most challenged at least the mergers were   were most challenged these businesses and you look  at the brick breakdown only about 7% emerges to   challenge this one out of the 16 I guess was  a tech company every other company was a more   traditional status quo company so not withstanding  Amazon's antitrust Paradox the original Lina con   tretis the focus doesn't seem to have shifted  much in the Department of Justice as what kinds   of companies to challenge we'll come back to this  later but that's the first the second is the FTC   can push for operating changes in some cases it  can force a company to devest itself of a part   of the business because it feels at keeping  it especially after a merger would result in   less competition I'll give you an example in 2023  the FTC forced this Energy company called vistra   which is acquiring another Energy company called  Energy Harbor to to devest itself of a power plant   in Ohio because it felt that if it did not do this  vistro would have too much Market power in that in   that part of the country in some cases um the FTC  can push a company to bundle products differently   or Price things differently this happened when  amen last year tried to acquire Horizon and FTC   because it feared that amen would use its large  drug portfolio to get pharmacies to push Horizon's   to Monopoly products the FTC secured a consent  order where Ament could not condition its pricing   or rebates on whether the Horizon drugs were  prescribed in terms of corporate governance you   know eq2 eqt was a company that tried to acquire  Quantum there were competitors and FTC felt that   because the companies were direct competitors  giving e corporate governance rights over Quantum   would reduce competition they forced e to devest  itself of its shares and prohibit it from having   a board seat so you can see that if it wants to  the FDC can push for some deep-seated changes   in a company and finally if the FDC feels it's  your pricing that's a problem it can force you   to change the price one of the most famous cases  on this on this issue was Archer Daniels Midland   in 1996 where the FTC essentially challenged the  company and was found guilty of fixing prices for   licing and animal feed in collaboration with  Japanese and Korean companies it had ended up   paying a $100 million F Executives went to jail  pricing policies had to be changed more recently   last year the FTC sued Real Page a property  management company that offered landlords   an algorithm that let them set rents because  FDC felt that because they were all using that   algorithm there was no competition in the rent  Market something to think about is AI makes this   algorithmic pricing more common so that's a first  set of actions try to change the way the companies   run its pricing Dev vestures Acquisitions the  second action is perhaps the most extreme one that   the FDC can take and force a company to break up  we talked about the Standard Oil breakup in 1911   standard oil at that time the Monopoly Oil Company  control by joh De Rockefeller was broken up into   34 companies you heard me right 34 companies eight  of those companies still survive in a different   form in fact you can trace almost every large us  you know large Western Oil Company to its has its   roots in that standard oil breakup Chevron Exon  Mobile British Petroleum Marathon kico Phillips   are all pieces of the original breakup there was  a massive breakup when it happened and the pieces   are still as I said around us the the second best  known breakup and happened at the tail end of the   century towards the 1980s was when AT&T Marbell  the Monopoly phone company for the US was broken   up into seven Regional Bells with their own names  and AT&T was the long-distance company came broken   up in eight companies but here's an interesting  feature in the decade s and people you know at   that time debated whether this breakup was going  to make Innovation greater whether these companies   would compete none of that really happened but if  you look at these companies 40 years later guess   what's happened they've reconsolidated saying  why that happened I think it reflects the fact   that telecommunications as a business is more  efficiently run Consolidated than as with than   with lots of competitors something we'll come  back and talk about in the context of what is   the right thing to do if you're the an anti trust  Authority challenging a company and finally at   the end of the at the last century it was the  start of this one Microsoft was targeted and   the justice department initially won a court  case effectively requiring that Microsoft be   broken up into an operating system company and  an application software and browsing company   that Court decision was set aside eventually  the company settled agreeing to some fairly   minor changes ultimately to settle the case right  breakups don't happen that frequently but when   they do they're big news there's a third choice  that the anti trust authorities can use it's   fairly rarely used in 1921 the Willis Graham act  actually effectively allowed the phone business   in the US to become a monopoly it allowed AT&T to  go buy its competitors all many of whom were on   their lost legs and trouble and create a monopoly  and the argument was that the phone business was   more efficiently run as a monopoly than as a  competitive business they say this is terrible   in return for granting AT&T Monopoly Congress  actually effectively took away the pricing power   essentially they required AT&T to earn only a  fair rate of return which in corporate finance   terms means you're earning your cost of equity  Capital so there were monopolies without pricing   power we can call them regulated monopolies and  other utilities follow that that model water   power but regulated monopolies now the argument is  that these regulated monopolies can deliver more   benefits for customers consumers that was the end  game and even though they're monopolies they can't   charge prices like monopolies these regulated  monopolies also have buffers because they have   don't have to worry about competition they can be  required to do things like offer phone service to   people that cannot afford it or provide Social  Services on the side and they can do it because   they can pass the cost through so so here's  the end game if you're thinking as an antitrust   enforcer what to do in a company you know you have  to look at the consequences for consumers and for   competitors which is the traditional trade-off but  I'm going to bring in three other things into the   equation making it even messier than it is today  the first is within the context of competition   you got to think about the overall business  here and the question you're asking is will my   antirust action how will it change the business  will it make it healthier or less healthy will   it make it a more efficient business or a less  efficient business will consumers at the end of   the process get better services or Worse services  and the reason I bring that up is As I said some   business are better Consolidated with only two or  three big players rather than with 15 the notion   that competition always makes things better is  not true because it depends on the business so   in businesses where consolidation is favored by  is favored pushing for more competition Force   competition will actually make the business less  efficient consumers will be hurt companies will   be hurt effectively you've created an unhealthy  model in businesses where competition is in fact   going to increase efficiency clearly know pushing  for antitrust rules to have more competition will   create more efficiencies helping consumers and  the companies the second thing I want to I want   to think about is how will this action affect  the company itself the targeted company saying   that's obvious they're going to be hurt investors  are going to be hurt is that true though because   one of the things about being a company that has  pricing power Monopoly have a lot of surplus you   can use the Surplus to subsidize other businesses  now the argument the the justice department uses   that is terrible that they're subsidizing other  businesses you know who else might agree with them   investors in those companies if investors in those  companies agree that these subsidies are not going   to deliver value long term as antitrust Regulators  you might have investors on your side saying go   ahead do it restrict the company from investing  in new businesses make the subsidies go away so   you got to look at the company's investors and if  com investors don't trust a company you're more   likely to have them as allies when you push for  Change and finally companies are part of a market   and presumably as an antitrust regulator you want  the overall economy and the market to do well if   you have a company that is creating e economic  growth is creating employment paying good wages   and its Market Gap is growing it is helping the  economy and markets now restricting that company   at least in the near term is going to mean you're  going to give up some of that good stuff and maybe   even in the long term so if the targeted company  is cutting wages not dealing with its Workforce   well is not doing well in terms of market cap then  you know restricting it is not going to hurt the   economy and the markets but if it's doing the  opposite of all of those then it will so those   are the tradeoffs that drive what to do with the  company so now let's turn our attention to Big   Deck now I think there are a couple of questions  to ask one is how big is Big de and the answer is   actually obvious and as you'll see it's clear that  big Tech has become really big maybe even too big   okay the second question is how did they get big  because the fairness question comes up if the way   they got big was by playing the game fairly then I  think your task as an antitrust regulator becomes   more difficult because getting courts to agree  with you is going to get more difficult as well   so let's start with the bigness of big tech there  are number of dimensions in which you can measure   the bigness of big tech let's start with the most  obvious one this graph I look at the collective   market cap of five big tech companies Apple  Amazon Google Facebook and Microsoft I'm going to   collectively call them the Fearsome five in 2009  The Fearsome fire had a market cap of about $720   billion by The End by the end on October 16th  of 2024 the collective market cap exceeded $12   trillion think about that 12 trillion that's  larger than the collective market cap of the   second largest Equity Market in the world it's  20% market cap of all us equities and over the   last 15 years is these five companies alone have  accounted for almost a quarter 25% actually it's   23. something per. of the increase of market  cap of all US stocks and 6,400 US Stocks mind   balding clearly big in terms of market cap it's  not just the market cap that's big though these   companies over the last 15 years have scaled up  revenues they've grown revenues 19% a year on a   compounded basis by itself you're saying so  what lots of comp companes grow at 19% year   not companies of the scale that these companies  are at they were growing revenues of 300 4500   billion 20% a year that's almost unheard of and  he here's the more even more impressive fact   they were doing while they were growing revenues  they were able to maintain these enviable profit   margins gross margins operating margins net  margins if there's a magic potion that allows   large companies to grow quickly and be incredibly  profitable these companies have that magic potion   and finally there's a third dimension which you  can measure how big they've become if you look   at your daily life and in during Co I actually did  this as an experiment through the course of a day   I chronicled how much of my time I spent on the  platform of one or more of these five companies   the end of the day I discovered that I was in  the grip of one or more of these companies for   all but 15 minutes of the day that's because  I don't take my phone into the into the toilet   with me the rest of the day I was in one and often  more than one platform New York Times article in   2020 a writer actually tried to live without big  tech for 6 weeks and talked about how difficult it   made her life clearly big Tech is a big part of  our lives and as an experiment think about what   would happen if you had to spend a day without  access to any of the big tech companies so our big   tech companies big absolutely but how do they  get there well let's look at that let's look   at the answer of the question first each of these  businesses has a core business that they dominate   for three of these companies that Core Business is  a significant part of the revenue pip for Google   and meta and Google and Facebook it's advertising  these are primarily advertising companies we'll   talk about the cloud business they're primarily  advertising companies with Amazon it's retail   there's there's an advertising slice and a  cloud slice but it's retail we'll come back   to the cloud slice as I as I said earlier apple  and Microsoft are a little more balanced but apple   is increasingly becoming an iPhone company you had  the iPhones and devices you can see that computers   have become a small slice of Apple's revenues  Microsoft used to be a software company but if   you look at it today it's actually more Cloud  than software windows and office put together   might have as much revenues as the cloud but the  cloud business has become the dominant business   let's talk about the cloud business because for  three of these companies Microsoft being one of   them but also for Amazon and for alphabet the  cloud business has become a significant slice   and it is not just of revenues but of profits as  well which brings me to my second Point each of   these companies has tried side businesses but  for the most part they have succeeded alphabet   remember it renamed itself because it wanted  to draw attention to the bets I know right now   they're saying I wish we hadn't done that because  all you see the bets doing nothing except draining   cash Amazon I've described as a disruption machine  but that disruption machine not withstanding it's   still primarily a retail company Apple has  been more restrained but it's tried it's head   and entertainment other businesses and meta had  that ill you know bad badly framed entry into the   metaverse remember that or the market punished it  more on that later but most of the businesses that   these companies have entered into have been more  cash drains and cash hubs they've not dominated   these other businesses the only exception  of course is the cloud business for Amazon   alphabet Microsoft the cloud business has become  a contributor it's in fact a contributed revenue   is an even bigger contributed to profitability for  Apple the services business which is all the apps   and the Apple Care and the other stuff they offer  people in the ecosystem that's created revenues   and profits but for the most part these companies  side Ventures have not been money-making and the   third common characteristic across these companies  is how much they give their consumers in terms of   freebies or cheap stuff I'm an Amazon Prime user  I've I've often said this before there isn't   another thing that I pay for in my day-to-day  life where I get a bigger bargain for my buck and   I pay that annual fee of 139 I get free shipping  entertainment you know services that are well in   excess of the 139 in fact Amazon's pretty open  about how much it costs them to have Prime they   make explicit the cost of shipping subsidies it's  the tens of billions of dollars alphabet offers a   whole range of products right Google Docs Google  Maps YouTube is free 100 and if you're Facebook   and if if you're a WhatsApp user clearly you  you're not paying any charges of fees in return   for using one of the most versatile apps on the  face of the earth I know I know there's nothing   free from Silicon Valley that they are collecting  data in return but you don't pay an explicit price   Apple and Microsoft have been a little more stingy  about the free stuff but even they offer some free   stuff so if you look at the three characteristics  a core business with they dominate side businesses   where the most part other than cloud and services  for Apple they haven't made money on and consumer   subsidies you have a description essentially  of what makes for a big tech company now let's   talk about it did they get there unfairly they're  big you see what these companies are constructed   but how do they get their dominance so if you  look at the arguments I've heard against big   tech companies here are the five that I've heard  over and over first is that they subsidize their   product offerings do they I'm sure they do is that  bad for competitors probably is is it great for   consumers yes so think about that trade-off they  subsidize the product offerings as far as I know   lots of companies do offer subsidies and products  and for the most part it's part and parcel of   running a business the second is networking  benefits these platforms when they get big   enough become so big that everybody wants to be  on them let's take online advertising Google and   Facebook have an incredible advantage in online  advertising because that's where everybody is if   everybody body's there advertisers want to be  there they have networking benefits which then   gives them this almost insurmountable advantage  over the competition and the third is as I said   in Return for letting us use their stuff we give  them data and that private data can be used to   Target their ads and make more money on their core  businesses I'll tell you those first three points   I accept are tough for competitors but they're  the nature of the business Facebook and Google   did not create the networking benefits in the  online advertising business they just were the   most successful at getting to those networking  benefits and it seems to be perverse that you   want to punish a company for being successful in  a business if this is how you climb the ladder   in the business the private data I know we have  mixed feelings about but it's voluntary nobody   forces you to give away your location data but  you want to use Google Maps so you give it away   there are two arguments where I think there's  some relevance something you can hang on to   the first is because you often have to go through  these companies platforms as a competitor you have   a piece of software that competes with Apple  Mail you got to go through the App Store and   apple collects 30% of your revenues that sounds  a little unfair that you cannot get on and play   without these big tech companies approving you the  other is many of these big tech companies live off   other people's content right you look up stuff  on Google you're looking up stuff often that's   on a newspaper or in a magazine or in a book and  you could argue that Tech platforms have you know   under have essentially taken advantage of content  developers you seeing this play art now with the   newspapers suing the big Tech compan saying we  need a share but tech companies benefit from   the content but they don't share the revenues they  get from the content so those two points squashing   Technologies and not paying a fair price of fair  ones so if I were to look at this collection of   arguments about fairness here's my conclusion  for the most part big tech companies have hurt   competitors they've been tough on competition but  they've subsidized consumers so this is a classic   of which side of that argument consumers are a  competition are you going to go to the second is   most of the sins that you see at these companies  are prospective sins things that people argue they   will do in the future if you read lenina Khan's  criticism of Amazon she admits that customer   right now benefit from Amazon Prime and other  freebies but our argument is one day they will   not that one day Amazon will get dominant enough  that they will cut back on Innovation and charge   you a higher price we have a word on that  but really there's no evidence so far we'll   talk about why this might not be happening that  big tech companies exploit their their strength   even after they've become pretty sure about that  strength so with that lead in let's talk about the   choices that the Department of Justice has with  these big tech companies the first of course is   it can go back to the Standard Oil and AT&T rule  book and maybe the Microsoft rulebook and try to   break up these companies I'll explain why I think  that's not going to work or if it does work it's   going to create cost vastly greater the benefits  the first is the platforms that you know when you   think of alphabet as a collection of platforms  you might say why can't we separate YouTube from   Google search boox from Google Docs or whatever  the the other platforms are the truth is alphabet   is an advertising company these platforms form  an ecosystem same thing for meta Facebook and   WhatsApp and Instagram are part of an ecosystem  from which it makes advertising there's no easy   dividing line where you can say these platforms  can stand alone and in fact if they did they'd   be less effective for advertisers and in the  only business you could argue that in these   companies you could split away is the cloud  business and what will that accomplish first   these companies dominance the cloud business at  almost nothing to do with their success in the   core business it's just a separate Venture and  second even if you manage to split off the cloud   business and make it a standalone business how  is that going to change the networking benefits   that allow these companies to dominate their core  businesses so it'll create costs without any real   Ben benefits so as I look at the tradeoff here  I think breaking up big Tech is going to give   you bad outcomes and almost every Dimension it'll  hurt the companies it'll hurt the business there   it'll make them less efficient and you know you'll  push them your forcing competition on a business   that should be Consolidated it'll be bad I mean  I don't see how you fill a 12.2 trillion hole   so if you can knock these companies down what's  going to I mean who's big enough to fill the gap   and finally for consumers I think in the near  term you will definitely be worse of because   many of the things you take for granted as free  achieve are going to be taken away all you will   have offered are promises that because you gave  up these things today you will face lower price   in the future but there's no guarantee on that  one he say what about treating them as regulated   monopolies I'm not even sure how this would work  with AT&T Congress gave AT&T the phone Monopoly   but the government doesn't control online  advertising or smartphones it can't give these   companies Monopoly power even if it wanted to and  what is it going to demand in return that they   charge lower prices I thought one of the problems  you have with these companies is they don't charge   a high enough price so if you think about treating  these companies as regulated monopolies and think   it through I'm not sure how this that would play  out in terms of what Market You' give give the   Monopoly power FR what the pricing power would do  and finally on the Innovation front making them   regulated monopolies will effectively take away  any Innovation incentives that they might have are   there actions you might be able to take well let's  start with the three where I think the Department   of Justice and FTC will have some success one is  I think they can force these platforms to be more   accessible to competitors I think they can start  with the App Store and Google play and allow them   to let competitors list and not take 30% of their  their revenues and I think that's going to happen   with or without the D doj already court cases are  playing their way through that might force that   to happen second is I think eventually we're  going to get to a more even playing field in   terms of how you pay for Content I think big tech  companies have to eventually share their revenues   to the content providers in a fair way and I  think that's you know that's you know if the   government can push for it all the more power  to them and finally the power dynamics here   are very imbalance I have a Google Blog I have  YouTube,300 videos on YouTube and if tomorrow   Google decide to shut my blog down and shut off  my access to YouTube there's almost nothing that   I could do I can appeal to Google but they then  get to decide whether the action they took was   fair or not I do think we need better recourse as  customers and users of the things we have on the   platforms because they don't belong to the company  they belong so it's an extension of the paying for   Content as for the actions where I don't think it  makes sense asking these companies to share data   with competitors strikes me as perverse because  this is a big competitive Advantage you saying   well don't we want to even the playing field  well if we adopt that argument then why aren't   we making um Coca-Cola share its um it's how it  makes this its Cola the the ingredients that go   into its Cola with its competition why we asking  Nova noce to give up patn on OIC and wovi and let   everybody do it in every other business we let  companies build up on the competive and this is a   competitive Advantage these companies have earned  it's not unfairly they've earned it fairly by   giving you products for free and getting the data  in return you can push to make sure they don't   cross subsidize but companies cross subsidize  again all the time Reliance GE would not exist   without the cash flows from Reliance  petrochemicals it's true the subsidies can   sometimes hurt the shareholders of the company but  that's between the company and its shareholders   in fact meta found out not that long ago that  investors will push back they tried to spend   100 B in the metaverse and I would argue that more  changes happen at meta and Google from investors   pushing back than from all the government actions  they' faced over the last decade and finally I   know you know we'd like all our device to be compa  compatible with every platform but let's be real   apple as a platform is going to work better with  an iPhone and iPad and with with Apple products   then it will with Google products no that's it's  not even that they're trying to make it difficult   for other device makers it's easier to do if  it's your own product I think requiring device   compatibility for the sake of compatibility will  just push up the cost of these devices and make   them less create less choice in this process so at  this point you're probably saying so what should   we do because it looks like breaking them up is  not going to do much for us it doesn't look like   they can be treated as regulated monopolies and  even the actions you can take are fairly limited   you're not going to like my answer because I think  doing nothing might actually be the best choice of   course you're saying but that's defe these big  tech companies are too big here's my reason why   I think doing doing nothing might actually be the  best outcome here when we look at these companies   right now they look Unstoppable right they're  incredibly successful they have huge Market   gaps and making a lot of money but in my work  on life cycles I've argued that tech companies   age in dog years that they grow fast they don't  stay at the top for very long and they scale down   quickly the winners of today can very quickly  disappear from The Horizon I'm not saying any   of these five companies are going to disappear  but now success is leading you let the let the   life cycle take care of it the second and I  think this one of the worries that lenina K   puts out is that they would stop innovating no  you know what'll cause them to stop innovating   if you don't let them make money when they're  at their Peak their life cycles are short if   they don't make an immense amount of money while  they're at the top you're not going to get much   Innovation to get the process started and I don't  think they're going to play it safe I don't think   they're going to try to raise price and here's  why disruption is always around the corner with   these companies and if disruption on the corner  you're looking over your shoulder you can't afford   to mistreat your your your consu your customers  because they're going to find those disruptors   and adopt them so I actually think that left to  their own devices these big te companies will   get smaller they'll be brought down and what will  bring them down is not the FTC not the government   but invests the market and the life cycle I know  that's a you know I am putting my faith in that   process working but I think when I look at the  costs and the benefits of every other course of   action the costs seem to exceed the benefits so  to conclude then I mean it's clear that I don't   see eye to ey with lenina KH but I I am going to  you know started the presumption that she has good   intentions and that she's thought through her you  know clearly I've read the Amazon antirust Paradox   it's well written and it's you know I I respect  the thought with that went into it my concern   with her views are twofold one is that she is a  lawyer and and I hate to use a broad brush but I   will law schools do a terrible job teaching their  graduates about business and I think lawyers are   extraordinarily ill suited to talk about Business  Solutions the second problem I have with Lena is   she's a True Believer and if you start with the  presumption that big tech companies are evil   you will find a way to justify almost everything  you want to do to cut them down to size now I I do   recognize that big tech companies have created a  whole host of other issues which are non-economic   they play out in the fact in our politics in our  in our cultural discourse and there's an argument   that big Tech platforms need to be brought down  because of those bad effects I share that concern   but let's say we broke down these platforms do  you really think that without these particular   platforms that will go back to being polite on  social media and return to the cultural norms   of yester year I don't think so there's something  about being online that brings out the worst in us   and with or without these big company platforms  that's going to come through you know there's   you know we opened a Pandora's Box 20 years ago  I'm not sure how we put things back but I think   taking our frustrations about what's happened on  these big tech companies will be like stabbing   ourselves in the eye because I don't see anybody  else who's going to be hurt as much as we are by   going down this path I hope you found the session  useful and I thank you very much for listening