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Last Friday, I talked about the wave of fear in American business, how the ability of monopolists to retaliate is affecting what citizens can discuss. I have a different topic today, but first, a brief follow-up.
Google Could Make Me Homeless: The atmosphere of fear is pervasive, and fortunately the Wall Street Journal and the New York Times, both of whom have been truly spectacular in reporting on big tech over the last few years, are discussing it. I’ll highlight a piece in the Wall Street Journal from last week, on fake listings in Google Maps. Here’s a WSJ reporting pulling a quote from the article.
That’s essentially the nub of the problem right there - monopolies are private governments, and have governing power. This is not a new perspective. Just to offer one quote, in 1937, New Dealer James Landis said that the private management of U.S. Steel and other large corporations “possess a coercive force and effect that government even with its threat of incarceration cannot equal.” That was a common view, all the way up until the 1970s. Today’s confused idea that chartered corporations are private entities, akin to ordinary people, is the anomaly.
Anyway, I got a tremendous response from my post, with readers explaining to me how fear has altered their behavior - deleting of social media accounts, refusal to bring smart devices or audio assistants into their homes, getting off of platforms. I wonder, is this the first time the hacker/hobbyists who love to tinker and experiment, and who are often at the forefront of new consumer tech, are abandoning the horizon because they feel it unsafe?
I’m going to come back to the problem of fear, because it is pervasive at every level in society these days. (If you’re interested in how this kind of power dynamic impacts the very poorest, Chris Arnade’s Dignity is a beautifully written travelogue through the left-behind people in America.)
Three News Items of Note: First, the Bank of International Settlements, which is a club for central banks, released a report on big tech and payment systems. Though this report was in the offing before Zuckerberg’s news release on Libra, the Libra project is certainly accelerating a conversation in banking circles. Second, Senator Mark Warner and Josh Hawley are introducing a bill forcing big tech companies disclose how they value your data. Our capital markets cannot work if investors do not have a way of understanding what they are investing in, and big data is opaque. Third, Bill Gates put a $400 billion value on Google’s Android monopoly. Here’s what he said.
In the software world, particularly for platforms, these are winner-take-all markets. So the greatest mistake ever is whatever mismanagement I engaged in that caused Microsoft not to be what Android is. That is, Android is the standard non-Apple phone platform. That was a natural thing for Microsoft to win. It really is winner take all. If you’re there with half as many apps or 90 percent as many apps, you’re on your way to complete doom. There’s room for exactly one non-Apple operating system and what’s that worth? $400 billion that would be transferred from company G to company M.
Now, to Senator Hawley/Warner’s point, I doubt Google values its Android operating system at $400B on its disclosures to investors, but it should. After all, if there’s anyone who knows the value of operating system monopolies…
And now on to a very related topic.
Part One: Why Anti-Monopoly Is Back?
This week I’m going to explain why I think the anti-monopoly movement is coming back. This story is going to extend over several newsletters, so consider this part one of a series.
There are two basic components to the story.
Why have businesspeople, political leaders, and citizens lost faith in what was?
Why have businesspeople, political leaders, and citizens begun to see in private monopolies the central element of dysfunction?
This is a complex political story, and it is happening all over the world, not just in the U.S. Moreover, anti-monopolism is not a left-wing or right-wing type of politics, it is business reformism. It is how we think about our commercial selves, and thus our political selves. In today’s issue, part one, I’m going to try and describe where we came from, so that we can understand the magnitude of the shift. This shift is a very big deal, akin to a once in a generation political and philosophical revolution.
Revolutions start in our minds, and then they unleash themselves on the world through political events. For context, here’s one of my favorite passages from American founders, in a letter from John Adams to Thomas Jefferson in 1815.
What do We mean by the Revolution? The War? That was no part of the Revolution. It was only an Effect and Consequence of it. The Revolution was in the Minds of the People, and this was effected, from 1760 to 1775, in the course of fifteen Years before a drop of blood was drawn at Lexington. The Records of thirteen Legislatures, the Pamphlets, Newspapers in all the Colonies ought be consulted, during that Period, to ascertain the Steps by which the public opinion was enlightened and informed concerning the Authority of Parliament over the Colonies.
That’s the importance of public opinion and ideas. Moreover, a fancy founder said it in an old letter to another fancy founder so it must be true.
Ok. To understand how far we’ve come, we must understand what was. I am going to try and help us reach back to the 1990s before the financial crisis, Iraq War, big tech monopolization, before Nickelback jokes, and so forth. It’s a time we were alive and from which we have memories, but it’s also a time I find it hard to fully grok. Things seemed to be, well, really good. There was no Cold War or Iraq War, and the tech sector was vibrant and alive, as was the rest of the economy (or so it seemed to me, an urban liberal college student.)
Wall Street wealth was up, but trickle down was working. Discretionary income growth for many was up for the first time since the 1960s; the demand for labor was so strong that ex-cons were getting hired straight out of jail. This story is from April, 2000.
''Ten years ago, an employer wouldn't even look at an ex-con,'' said Willy Walker, director of the Detroit Employment and Training office. Now that the city's unemployment rate is 5.5 percent, down from 14.1 percent 10 years ago, some companies have changed their approach. ''Employers will call and say, 'We need somebody right away -- if you have any ex-cons, clean them up and send them over,' '' Mr. Walker said.
They had figured it out. The key shift had been to transform the conception of the person from a citizen to a consumer, to frame the point of life as consuming the maximum amount of stuff, and thus to turn us into utility-maximizing rational actors. For instance, Jason Furman, later to head Obama’s Council of Economic Advisors, penned a 2005 paper titled “Wal-Mart: A Progressive Success Story.” Big corporations and social justice went hand in hand, towards a more progressive future. If you want to know why boomers have such a hard time acknowledging catastrophe, it’s because the 1990s was the justification for everything they believed, and it seemed to work. I don’t mean to pick on Furman, he was just reflecting the ideology of the time.
The rhetoric and thinking of that time in technology was straightforward libertarian, with cyber-utopian clothing, and depending on how you saw it a justification for unvarnished greed or the triumph of the counter-cultural disdain for national sovereignty and traditional hierarchies (if you want more, Fred Turner’s remarkable From Counterculture to Cyberculture: Stewart Brand, the Whole Earth Network, and the Rise of Digital Utopianism nails it).
The below headline from The Onion in 2001 - just before George W. Bush took office - is how good we thought we had it during the Clinton administration. Now, it’s fascinating that the party who believed they brought forth this prosperity - elite Democrats - didn’t see the problem with a remarkably prosperous era in which, oddly, they lost power. But it would be one of many missed signs.
Of course, such attitudes were not just Democratic self-deceptions. The smugness was bipartisan, and existed deep into the commercial and policy worlds. In 2004, Ben Bernanke, then just a Fed board member, though in somber technocratic terms, did an economist mic drop, popularizing the term “The Great Moderation” to describe the stable and successful period of growth since the early 1980s. This wondrous economy had high productivity, high growth, and low volatility, it was both a dessert topping and a floor cleaner. Bernanke went through several potential explanations: better monetary policy, deregulation, or perhaps luck, and settled on monetary policy, as a Fed governor kissing up to Alan Greenspan is wont to do. But that’s not important, what’s important was the self-satisfaction flowing through the policy world.
All these great economic results happened because policymakers finally realized that scientific truth. Bernanke’s smugness was a long time coming. In 1992, Francis Fukuyama published The End of History and the Last Man, a book describing his post-Cold War thesis that man had figured out its political end state of liberal democracy. A global utopian view, peddled most aggressively by Thomas Friedman in his 1999 book The Lexus and the Olive Tree and his 2005 The World is Flat, continued this framework. The key wasn’t just that we have figured out domestic stability, but global stability as well; China would become a democratic state, slowly, because its people wanted McDonald’s and X-Boxes, and McDonald’s and X-Boxes turned countries democratic.
Bill Clinton structured online markets consistent with this basic libertarian posture. This is from the final version of his White House’s website.
The Administration continued to build on the successful May 1998 WTO electronic commerce declaration to formally extend the existing moratorium on customs duties on electronic transmissions and continue the WTO work program regarding the application of all trade disciplines to e-commerce.
The WTO electronic commerce declaration was important, because it extended what turned out to be a pro-monopoly framework worldwide. The internet, far from a natural emergent system, arose in the way that it did because of policy choices like this.
The 1990s libertarian model is the framework that is still embedded in many of our internet laws and regulations. But it wasn’t just the same ideas that led to today’s concentrated world. It is in many cases the same people. I’ll close with a memo written by Stuart Eizenstat, who has been a sort of political fixer for high-level Democratic circles since the Carter administration. Eizenstat was the ambassador to the EU in the early 1990s, and then Deputy Treasury Secretary from 1999 to the end of the Clinton administration. Here’s what he wrote.
The President has issued a number of executive memoranda over the past month on e-commerce. Sheryl has suggested and I agree that I should call a meeting of the various Treasury offices, perhaps led by Economic Policy, to kickstart a process to devise a comprehensive agenda of critical policy changes necessary for Treasury to enhance the growth of e-commerce and increase access.”
Executive Memoranda on Facilitating the Growth of Electronic Commerce instructs all agencies to identify any provision of law or regulation administered or issued by them that may impose a barrier to electronic transactions or otherwise impede the conduct of e-commerce and to recommend how such laws or regulations may be revised.
That Sheryl was, of course, Sheryl Sandberg, who was then the chief of staff to Larry Summers at Treasury. She was handling Digital Signatures and a whole host of other issues related to ecommerce. Today, I suppose, it’s accurate to say she’s still handling such issues, in a different capacity.
In the next issue, I’ll talk about why this system cracked, and the nascent anti-monopoly movements of the mid-2000s.
Thanks for reading, and let me know what you think. And if you liked it, you can sign up here for more issues of Big, a newsletter on how to restore fair commerce, innovation and democracy.