They Came for Rockefeller, and They Will Come for Zuckerberg

As I discussed here in January, regulation of Big Tech is an underappreciated and unexpected theme for 2019. Within tech circles, the theme took center stage yesterday, with Facebook co-founder Chris Hughes calling for the company to be broken up.

The technology industry has been wholeheartedly embraced by private citizens, capital markets, and the military, as society is in a cycle of private sector confidence. New technologies are displacing government sponsored, monopolies one by one (e.g. email/mail, Uber/taxi monopolies, etc). The biggest public monopoly is money creation (and trusted identify), and the crypto crowd is coming for it. Given this, a counterpunch by the public sector is not a surprise. Expect bi-partisan consensus (shock!) to emerge on this issue.

AntiTrust is a Bi-Partisan Issue in Washington

Liberal forces have criticized Big Tech for fostering economic inequality, encouraging anti-competitive behavior, and creating the means for election interference. Conservative voices have lashed out at the supposed liberal bias of Big Tech and its efforts to quash controversial free speech. What is emerging is a perfect storm of alignment amongst normally bitter opposing factions and Big Tech may have underestimated the situation. Compromise is rare in Washington, even rarer it seems, in the current era. Lawmakers and the President may all see it in their interests to demonstrate that they can work together in the 18 months leading up to a Presidential election

How bad is it? Here is an incomplete list of what been said by US politicians this year:

• President Trump has been a near constant critic of Big Tech, citing “liberal bias” across the industry
• Senator Elizabeth Warren has called for the breakup of Facebook, Google, and Amazon as well as for other measures to rein in large platforms
• Senator Bernie Sanders has consistently criticized Amazon’s treatment and pay of workers, even after the company increased its minimum wage
• Senator Kamala Harris has spoken out on hate speech, privacy, and election security
• Senator Amy Klobuchar has called for strengthening antitrust and privacy laws
• Congressman David N. Cicilline (chairman of the House Subcommittee on Antitrust, Commercial and Administrative Law) published a March op-ed in The NY Times calling on the FTC to investigate Facebook for violating antitrust laws
• Senator Ted Cruz tweeted that Big Tech has way too much power to silence Free Speech
• Representative Devine Nunes has sued Twitter and three users for defamation, seeking $250 million in damages
• Senator Josh Hawley, at this year’s Conservative Political Action Conference (CPAC), said that “Facebook, Google, and Twitter are pushing a left-wing social agenda while marshaling their marketing power to shut conservative voices out of the marketplace.”
• Former HUD Secretary Julian Castro has criticized the tax breaks that were offered to Amazon in Virginia and New York
• Former Congressman John Delaney stated that the concentration of tech power is a federal policy question
• In April, the Senate Judiciary Committee held hearings on technology censorship and public discourse
• The House Judiciary Committee is planning anticompetitive probes
• Members of the Federal Trade Commission are calling for a national privacy law to regulate how big tech companies collect and handle user data
• CPAC 2018 featured Google as a presenting sponsor along with the NRA and others. In 2019, they were nowhere to be found

How Did It Work Out for Microsoft?

Consider Microsoft stock performance after the final conclusion of its landmark antitrust case, initially filed in 1998.

Microsoft Stock Performance Since DOJ Settlement on 11/2/2001

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Much has been made of Microsoft’s lost decade, with blame placed on former CEO Steve Ballmer for missing numerous “obvious” trends like mobile and the cloud. Less has been said about the likely cultural shift away from unbridled risk-taking and innovation inside Microsoft post-the DOJ settlement. As you may recall, Google was founded less than four months after the Justice Department filed its initial case against Microsoft

How Much Power is Enough?

Consider the relative power and wealth of the wealthiest Americans and largest companies now versus the Gilded Age (post-Civil War until around 1990), an era that spawned the Progressive Era (1900 to 1917) during which the administrations of Teddy Roosevelt, William Taft, and Woodrow Wilson applied antitrust law to break up monopolies and trusts found to be restraining trade and manipulating markets. On core measures, wealth and power were more concentrated in the late 1800s/early 1900s. Despite this concentration, antitrust forces were able to successfully break up Standard Oil and other companies like American Tobacco. Those companies represented the platforms of the day, providing the “rails” for commerce. It is very likely that the same will happen in the current era.

Relative Wealth of Jeff Bezos v. John D. Rockefeller

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Relative Size of Big Tech companies v. Monopolistic Titans of the Gilded Age.

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They came for Rockefeller, and they will come for Zuckerberg.

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Any opinions or forecasts contained herein reflect the personal and subjective judgments and assumptions of the author only. There can be no assurance that developments will transpire as forecasted and actual results will be different. The accuracy of data is not guaranteed but represents the author’s best judgment and can be derived from a variety of sources. The information is subject to change at any time without notice.