Why tech industry monopolies could be a ‘curse’ for society

Why tech industry monopolies could be a ‘curse’ for society


JUDY WOODRUFF: But first: These past couple
of years have been a kind of turning point for public attitudes about some tech and social
media giants. It’s led some to ask broader questions about
monopolies, power and competition. At his confirmation hearing this week, William
Barr, the nominee to be attorney general, told senators — quote — “A lot of people
wonder how such huge behemoths that now exist in Silicon Valley have taken shape under the
nose of the antitrust enforcers.” That’s part of the focus of tonight’s report
from our economics correspondent, Paul Solman. It’s for our regular feature Making Sense. PAUL SOLMAN: You want to do what to Facebook? TIM WU, Columbia Law School: Break them up. PAUL SOLMAN: Break up the company, and thus
the Facebook monopoly, law professor Tim Wu was saying, in a trailer we shot for tonight’s
story. TIM WU: I think that, if you look carefully
at Facebook, it is in some ways the poster child for the curse of bigness in our time. PAUL SOLMAN: “The Curse of Bigness” is Wu’s
new book. The curse, that America has abandoned antitrust
enforcement and left us with an economy dominated by de facto monopolists like Facebook, Google,
and Amazon. And things used to be different. In 1911, John D. Rockefeller’s Standard Oil
Trust was broken up because of its vast power. Over a century later, many think Facebook’s
tolerance for disinformation and its invasion of privacy are similarly sinister. But Facebook proceeds unchallenged. TIM WU: The U.S. government allowed them to
buy their two main competitors, Instagram and WhatsApp. So there’s been no real competition in social
networking for the last six years. And so I think they felt in some ways above
the law, above competition. PAUL SOLMAN: But what about Google? TIM WU: Yes. So, you know, Google has proven itself willing
to destroy all of its competitors over the last 10 years or so. NARRATOR: Waze, the number one real-time navigation
app. TIM WU: Waze was this promising Israeli company
that could have been a platform for other competitors. And they just bought them. You know, online maps, that’s important to
commerce. That’s where people often start. Google has extinguished many industries that
might possibly compete with it vertically by giving its own products preference right
when you search. PAUL SOLMAN: And Amazon? TIM WU: What I’m concerned about with Amazon
is the fact that they have become the only real place online where you can sell things. PAUL SOLMAN: But it’s just amazing what Amazon
does, right? TIM WU: There’s good Amazon. There’s bad Amazon. The good Amazon, in my view, is the one that
has made it easier to get a lot of products relatively easily. But maybe you invent a better mousetrap. They make the Amazon version, and then they
own that market. PAUL SOLMAN: But they’re super convenient,
right? TIM WU: In our times, the path towards a dangerous
fate is paved with convenience, and it’s taking us closer to this structure that we had in
the Gilded Age, where you had one great monopoly per industry. PAUL SOLMAN: Or industries dominated by just
a few firms, not monopolies, but oligopolies, that still control price and service. TIM WU: People may like Amazon and Google,
but ask people how they feel about the airlines, ask people how they feel about their cable
company, and ask people how they feel about pharmaceutical bills. These are areas where the competition has
shrunk. We’re left with just a few choices. PAUL SOLMAN: The classic argument against
monopoly that I learned was that the monopolist will be able to charge higher prices because
she or he is the only game in town. TIM WU: Yes, that is the classic argument,
but I think it’s too thin an argument. And it turns out that the damage done by monopolies
is, frankly, much greater than just higher prices. PAUL SOLMAN: First, says Wu, the industry
tends to stagnate. TIM WU: A monopolist has no real need to innovate,
no real need to improve things. You know, like AT&T, by the 1960s or ’70s,
their idea of improvement was three-way calling. ACTRESS: Want someone else on the line? That’s easy too. Flip the switch button, then dial a code number,
and the number you want, and presto. TIM WU: They didn’t believe in answering machines
for regular people. It was against the fax machine, the modem,
the Internet, all this kind of stuff. Forget it. PAUL SOLMAN: So I remember films about General
Motors and how they prevented electric cars from coming in and how they wiped out light-rail
trams in cities. That was all true? TIM WU: That was all true, and it’s just a
long line of discussion of where — once a monopoly in a tech industry is there, they
tend to want to suppress what’s coming next or control it or make sure it doesn’t hurt
them. PAUL SOLMAN: I’m thinking about Silicon Alley
here in New York or silicon whatever all over the country in various cities. And I would have thought the last thing we
need to worry about is too little innovation in technology in America. TIM WU: You know, you would think that. But Amazon and Google are the new faces of
New York innovation. If you talk to venture capitalists in Silicon
Valley, they say, well, if you go anywhere near Facebook or anywhere near Google, you’re
finished. That’s the kill zone. PAUL SOLMAN: Twenty years ago, as we reported
back then, the kill zone was around Microsoft. Silicon Valley antitrust lawyer Gary Reback
had represented nearly all of Microsoft’s major rivals. GARY REBACK, Attorney: They can take any product
they want, bundle it into the operating system, and put competition out of business. PAUL SOLMAN: That’s what Microsoft had done
with its Internet browser. CHRISTINE VARNEY, Attorney: When you click
on that Internet icon, you’re going to get what Microsoft considers the best way for
you to get to the Internet, which is the Internet explorer that’s produced by Microsoft. PAUL SOLMAN: By bundling Explorer into the
Windows operating system for free, Microsoft, according to Netscape, was competing unfairly
with Netscape’s browser, called Navigator. TIM WU: Microsoft was the power of convenience,
1990s version. And I think there is this courageous moment
where the government said, we don’t buy it. We think you just want to monopolize this
industry. We think you want to control the future of
the Internet by controlling the browser. And so Microsoft’s control was broken. Then you had all these other companies emerge. That’s when Google, Amazon, Facebook got their
start. So I think it’s a cycle. I think you constantly need to keep your eyes
on the big guys and break their capacity to control the future. MARK ZUCKERBERG, Chairman and CEO, Facebook:
I know that, when we address these challenges, we will look back and view helping people
connect and giving more people a voice as a positive force in the world. PAUL SOLMAN: Another curse of bigness, you
won’t be surprised to hear, outsized political influence. TIM WU: The more concentrated an industry
and extreme the monopoly is the more easily able to influence government to get what it
wants. PAUL SOLMAN: So, what’s an example? TIM WU: 2003, you know, debating new prescription
drug legislation. The pharmaceutical industry decided that the
best thing it could do was to prevent Medicare, which, of course, is the biggest buyer of
drugs, from negotiating for lower prices. The lobbying effort was over $100 million. But the investment paid off to the tune of
$10 billion to $15 billion a year. PAUL SOLMAN: Now imagine the clout of a Facebook,
an Amazon, a Google. But even higher prices, stagnation and political
influence, says Tim Wu, don’t exhaust the list of bigness downsides. There’s also economic inequality. TIM WU: A growing number of economists have
recognized that, when you have most industry concentrated to three or four firms, the tendency
is towards wage stagnation, towards higher profits for shareholders and executives and
certain professionals, but the rest of the population making less. PAUL SOLMAN: Consider health care, Wu says,
the fastest growing sector of the economy. TIM WU: It’s very difficult to bargain with
a monopoly hospital for a higher wage if you’re a nurse. What’s your leverage, especially if there’s
only one hospital in town because they bought all the other hospitals? PAUL SOLMAN: Finally, Tim Wu cites one more
danger, perhaps the most ominous of all. You have written about the dangers of the
connection between monopoly and authoritarianism. TIM WU: There’s a history and a track record
of an economy dominated by monopoly flipping into an authoritarian form of government. And I don’t think it’s crazy to start becoming
concerned about possible rise of fascism in our times. PAUL SOLMAN: But you’re not saying Facebook
and Amazon and Google are in cahoots with the government in the way that companies were
with Hitler in Germany in the ’30s? TIM WU: No, I’m not saying anything like that. I think we need to be very careful about making
superficial comparisons. But I do think we need to be aware of the
dangers of a union of private and public power. Imagine Facebook cooperating with an authoritarian
regime. They know everything about us. They know what we do. They know how to influence us. If you imagine these two units working together,
I think it’s a very scary prospect. PAUL SOLMAN: For the “PBS NewsHour,” this
is economics correspondent Paul Solman reporting from New York.

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