Today’s tech landscape is dominated by a small group of massive corporations like Meta, Amazon, and Google that grab fledgling startups before they can become potential competitors, ignoring labor laws that don’t. unresponsive to their immediate needs and generally functioning as the dystopian corpro-villains Johnny Mnemonic warned us. Traditionally, state regulation has acted as a soft check against more problematic trends in American industries, but the speed at which modern computing and communications technologies are advancing has exceeded the ability of government to, well, govern them.
In their new book, Access Rules: Freeing Big Tech Data for a Better Future, Viktor Mayer-Schönberger, Professor of Internet Governance and Regulation at Oxford, and Thomas Ramge, author of Who’s Afraid of AI?, passionately oppose the data hoarding practices of today’s biggest tech companies and call for a more open and fair way to access the information these companies have amassed. One such method, explored in the excerpt below, is to directly attack the monopoly power of Big Tech, as the Biden administration has done in recent years, although the efforts have not not been particularly effective.
Extract of Access Rules: Freeing Big Tech Data for a Better Future by Viktor Mayer-Schönberger and Thomas Ramge, published by University of California Press. © 2022 by Thomas Ramge and Viktor Mayer-Schönberger.
Early in his term, President Biden appointed Tim Wu, who had advocated breaking up Facebook and written popular books on the dangers of big tech market concentration, to the National Economic Council as an assistant. President’s Special for Technology and Competition Policy. . Placing one of the most vocal advocates of Big Tech trustbusting in a prominent advisory role is a powerful signal that the Biden administration is taking a much more confrontational course.
Wu is not alone. His nomination was followed by the choice of Lina Khan for the chairmanship of the Federal Trade Commission (FTC). Khan’s youth – she was in her early 30s when she was appointed – belies her intellectual power and political credentials. A Columbia Law School professor like Wu, Khan was the author of influential articles on the need to fight the unchecked power of Big Tech. And she had explained why existing antitrust law was ill-equipped to deal with Silicon Valley platform vendors. But Khan isn’t just a critic of Big Tech; it also offered a radical solution: regulate Big Tech companies as utilities, much like electric utilities or the venerable AT&T before telecommunications deregulation. With Khan at the FTC and Wu as an adviser with the president’s ear, Big Tech could be in serious trouble.
Government-serving antitrust pundits like Tim Wu and Lina Khan aren’t the only ones who fear that the monopolistic structure of US tech dominance is becoming its Achilles’ heel. Think tanks and advocacy groups from left and right have joined in the criticism. Disruptive entrepreneurs and venture capitalists such as Elon Musk and Peter Thiel view the well-rehearsed dance of Big Tech and venture capital with growing skepticism, fearing the complex choreography will thwart the next generation of founders and disruptive technologies. Together, these voices call for and support regulators and lawmakers to stop the most obvious cases of large companies from taking potential competitors out of the market by acquiring them – cases comparable to the takeover of Instagram by Facebook or the acquisition of Waze by Google. And they call on venture capitalists to take on the role that Joseph Schumpeter originally designed this class of private equity for, the role that venture capitalists from Sand Hill Road to Menlo Park filled until the first decade of this century: financially supporting the commercialization of new and radically better ideas, and then enabling them to be scaled up.
The antitrust tide is rising in the United States. And yet, it is doubtful that well-meaning activist regulators, backed by broad public support, will succeed. The challenge is both structural and political. As Lina Khan herself has argued, existing antitrust laws are far from helpful. Big Tech may not have violated them enough to justify breaking them up. And other powerful measures, such as their declaration of utility, require legislative action. Given the delicate balance of power in Congress and the hyperpartisan politics, it is likely that such bold legislative proposals would not get enough votes to pass. Political factions may agree on the problem, but they are far apart on the solution. The left wants an effective remedy, while the right stresses the importance of market forces and worries about antitrust action that micromanages economic activity. This leaves a fairly narrow corridor of acceptable additional legislative steps, such as “post-acquisition blockages”. This may be politically acceptable, but insufficient to achieve real and lasting success.
The truth is that the current game of exit strategies is working all too well for everyone involved, at least in the short term. The monopolists continue to increase their rents. Entrepreneurs get rich quick. Venture capitalists reduce risk by optimizing their investments to exit with a sale. And the government? He also earns money on every “Goliath buying David” trade. Preventing such transactions causes embarrassment to everyone involved. Any politician who mounts a serious attack on Big Tech USA exposes themselves to the accusation of endangering the great successes of American tech companies in global markets – an accusation that few politicians could repel.
Despite the Biden administration’s renewed willingness to take Big Tech’s overreach seriously, substantial change still seems elusive in the United States. On the other hand, the European antitrust authorities have been much more active. The billion dollar fines imposed on US Big Tech by Commissioner Vestager’s team certainly look impressive. But, as we mentioned, most of them have been reduced on appeal to an amount that superstar companies with huge cash reserves and skyrocketing profits could easily afford. The European Parliament may not suffer from hyperpartisanship and wants to strengthen antitrust rules, but their effectiveness is limited by the very fact that almost all Big Tech is not European. At best, the Europeans could prevent US Big Tech from buying up innovative European start-ups; the laws necessary for this purpose are increasingly promulgated. But that won’t do much to break Big Tech’s information power.
The challenge facing European regulators is shared by regulators everywhere, from the Asian Tigers to the Global South: how can national regulators effectively counter the information amassed by Silicon Valley superstars? Of course, we could ban American Big Tech from operating. But that would deprive the local economy of valuable services. For most nations, such binary disengagement is not an option. And for countries that to some degree can and have opted out, like China, their local Big Tech companies face similar issues. The huge fines imposed on Alibaba in 2021 are surely surprising to outside observers, but they too target the symptoms, not the root cause of Big Tech’s power.
Sooner or later, regulators and lawmakers will have to grapple with the real problem of mastering Big Tech: Whether we’re looking at draconian measures like breakups or incremental ones like fines and acquisition blocks, they target the symptoms of power. of information from Big Tech, but do little to negate the structural advantages that digital superstars possess. It’s a little more than chopping off a Hydra head, only to see a new one grow.
To tackle structural advantage, remember Schumpeter. Schumpeter’s nightmare was that the capacity for innovation was concentrated within a few large companies. This would lead to a downward spiral of innovation, as major players have less incentive to be disruptive and many more reasons to enjoy market power. Contrary to Schumpeter’s fear, this process of concentration did not occur after World War II, primarily because entrepreneurs had access to abundant capital and could thrive on disruptive ideas. They had a real chance against the great starters of their time, a role that more than one of them took on themselves. But money is no longer the scarce resource that limits innovation. What is rare today is access to data. Specifically, such scarcity is artificially created.
In the data economy, we observe a dynamic of concentration driven by the shrinking of access to the key resource of innovation and accelerated by AI. The dynamic therefore revolves around access to data as a raw material. Economic policy aimed at combating market concentration and the weakening of competition must focus on this structural lever.
If we want to avoid Schumpeter’s nightmare, preserve the competitiveness of our economy and strengthen its capacity for innovation, we must drastically expand access to data – for entrepreneurs and start-ups and for all actors who cannot translate their ideas into innovations without access to data. Today, they can only hope to enter the kill zone and be bought out by one of the digital giants. If data flows more freely through wider access, the incentive to use data and derive innovative insights from it increases. We would boost the innovative capacity of our economy in a way not seen since the first wave of Internet companies. We would also learn more about the world, make better decisions, and distribute data dividends more widely.
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