Should Big Tech break up?

From Scott Galloway’s article on Esquire

As technology grows, Big Tech companies at the forefront are transitioning from being looked at afar from the window and slowly transition into being put under a microscope. As power injects itself into Silicon Valley, questions arise around the world. Technology in itself is extremely powerful and resourceful and it seems as though that power is harnessed only by a handful. There is little distribution and tech companies are starting to have a monopoly feel to them. Should tech companies be held to a new standard? Is more regulation required? Should Big Tech break up?

The four companies that hold the most weight in tech are Amazon, Apple, Facebook and Google. From his article “SILICON VALLEY’S TAX-AVOIDING, JOB-KILLING, SOUL-SUCKING MACHINE” from Esquire, NYU-Stern Professor of Marketing, Scott Galloway refers to these companies as “the Four”. To put things into perspective of how much power Amazon has he says that to the stock market Amazon is worth more than “Walmart, Costco, T. J. Maxx, Target, Ross, Best Buy, Ulta, Kohl’s, Nordstrom, Macy’s, Bed Bath & Beyond, Saks/Lord & Taylor, Dillard’s, JCPenney, and Sears combined.” Quite impressive considering it was only a few years ago that Walmart was considered the epitome of wealth in America.

NASDAQ Companies ranked by Market Cap

Numbers Don’t Lie

Lets iterate over some more facts Professor Galloway presents. From his article, Galloway points out “Facebook and Google (now known as Alphabet) are together worth $1.3 trillion. You could merge the world’s top five advertising agencies (WPP, Omnicom, Publicis, IPG, and Dentsu) with five major media companies (Disney, Time Warner, 21st Century Fox, CBS, and Viacom) and still need to add five major communications companies (AT&T, Verizon, Comcast, Charter, and Dish) to get only 90 percent of what Google and Facebook are worth together.”

Later on in his article he points out the fact that although productivity has increase for the average employee due to technology, salaries stay the same.

Bang for their Buck

Tech companies have became super efficient in being able to squeeze out as much money generated per employee as possible. Galloway points out that “Uber set a new (low) bar with $68 billion spread across only twelve thousand employees, or $5.7 million per employee.”

Tech companies have also become very good at avoiding taxes. Apple for example, uses laws and a loophole to allow themselves to keep profits in Ireland so they won’t be taxed on them. In fact Apple has $250 billion rarely taxed kept abroad.

On November 1st an article on cnbc.com was published saying that Tim Berners-Lee the “father of the web”, gaining that nickname because of his invention of the World Wide Web, suggested that tech companies needed to be broken up. That article puts the enormity of Big Tech into perspective as well by saying “Apple, Microsoft, Amazon, Google, and Facebook have a combined market capitalization of $3.7 trillion, equal to Germany’s gross domestic product last year.” Tim Berners-Lee says that he’s upset with how technology is being handled with the numerous scandals over the “abuse of personal data” and allowing social media platforms to be used to spread hate. Tim was further quoted as saying “What naturally happens is you end up with one company dominating the field so through history there is no alternative to really coming in and breaking things up..there is a danger of concentration.” Is it safe to start putting tech companies into the monopoly category?

There’s also the question over whether this massive growth in technology is due to the lack of regulations in tech. At Europe’s Web Summit on November 7th, a gathering including giant tech companies as well as small startups, Big Tech was put under scrutiny. A CNN.com article quotes Christopher Wylie, the whistleblower for the Cambridge Analytica scandal as saying “When you go to a doctor, do you feel safe? When you sit on an airplane, do you feel safe? Yes, you do. Because of regulation,” then adding “If we can regulate nuclear power, why can’t we regulate some code?”.

So what do we do? Galloway proposes that instead of allowing “the Four” to rule them all, we should perhaps break each company into smaller ones.

Galloway proposes by doing so will allow more opportunities for job growth, shareholder value, and also broaden the tax base. Should individual companies continue to hold all this power? Is it time to break up tech like banks have been? We may not remember but it wasn’t too long ago, in the 1990s that Microsoft was considered evil for killing Netscape, which held 90% of the market at the time. Tech companies may still be evil, but they do look a lot better doing it now.