BY JAMES PETHOKOUKIS
It’s easy to sound like a knee-jerk, anti-business agitator when calling for the breakup of Big Tech. These are America’s biggest and most innovative companies. China is trying to build many, Europe any. Consumers love them. What’s the problem?
But what if calls for sweeping antitrust action weren’t about hating the tech titans but, rather, about loving competition and innovation? Here’s what Sen. Elizabeth Warren has on her presidential campaign website: “The government’s antitrust case against Microsoft helped clear a path for Internet companies like Google and Facebook to emerge. The story demonstrates why promoting competition is so important: it allows new, groundbreaking companies to grow and thrive — which pushes everyone in the marketplace to offer better products and services.”
But the AmazonAppleFacebookGoogleMicrosoft entity isn’t to blame for low US productivity growth, at least as officially measured. That’s a global phenomenon. Moreover, it’s debatable — to say the least — whether antitrust was critical in the rise of the internet giants. It’s not just Warren. That’s the narrative typically heard in the media. And by “typically,” I really mean “universally.” But there is a different analysis worth considering. This from tech analyst Benedict Evans:
The tech industry loves to talk about ‘moats’ around a business – some mechanic of the product or market that forms a fundamental structural barrier to competition, so that just having a better product isn’t enough to break in. But there are several ways that a moat can stop working. Sometimes the King orders you to fill in the moat and knock down the walls. This is the deus ex machina of state intervention – of anti-trust investigations and trials. But sometimes the river changes course, or the harbour silts up, or someone opens a new pass over the mountains, or the trade routes move, and the castle is still there and still impregnable but slowly stops being important. This is what happened to IBM and Microsoft. The competition isn’t another mainframe company or another PC operating system – it’s something that solves the same underlying user needs in very different ways, or creates new ones that matter more. The web didn’t bridge Microsoft’s moat – it went around, and made it irrelevant. Of course, this isn’t limited to tech – railway and ocean liner companies didn’t make the jump into airlines either. But those companies had a run of a century – IBM and Microsoft each only got 20 years.