Wu’s Anti-tech Rant is more Fiction than Fact

Tim Wu’s book, The Curse of Bigness is a bombastic attack on America’s leading technology businesses that lacks the requisite factual support. Perhaps Wu thinks that by attacking tech he will increase book sales. Or perhaps the view from Columbia University suggests something should be done.

However, Wu, not only fails to provide a cohesive factual argument for hipster-antitrust action, he is out of touch with the rest of the country and reality.

Consider one of Wu’s first points. He cites indexes showing fewer large firms as evidence of consolidation. But Wu ignores similar indexes showing the resurgence in small firms.

There is a direct correlation between the growth of small entrepreneurs and large online platforms like Amazon, eBay, Facebook, and Google.

The Kauffman Index of Growth Entrepreneurship shows that entrepreneurship is at its highest levels since 2008. Main street growth and startup activity are likewise up. The US Bureau of Labor Statistics found self-employment is up since 2014 and is projected to grow at 7.9% — faster than the projected rate for all workers.

In essence, there is a direct correlation between the growth of small entrepreneurs and large online platforms like Amazon, eBay, Facebook, and Google. These large platforms are helping small businesses the same way a large firm operates as an anchor for a shopping center or mall.

The large these large platforms grow means the more customer small businesses can access at increasingly lower and lower costs. To America’s entrepreneurs, the bigger, the better for them. 58% of Americans, and 73% of those between 18 and 24 years old, say online platforms helped them discover a small business they had not previously known.

To America’s entrepreneurs and small businesses, the bigger the platform, the better for them.

Wu creates a world where one business controls the market and once it has dominance, it raises prices on consumers and businesses. Take for example the oil industry, around which Wu bases his entire book.

But under the existing consumer welfare standard, big oil’s price gouging would violate our existing antitrust standards. Wu also cites actions against AT&T and IBM as evidence of antitrust failures. So, while Wu thinks he has found a slam-dunk argument against the consumer welfare standard, he accidentally shows that the current system works well.

Wu says a lack of antitrust enforcement in 1940s Germany gave rise to Hitler — “One way or another, concentration and inequality had its effects.” Wu’s insinuation that if we don’t engage in aggressive break-ups, a new Hitler will rise again is like science fiction. But Wu’s statements here are not only fiction but highly offensive to the horrible crimes committed against my people.

Rather than focusing on industries that are far more consolidated and businesses that are far more powerful, Wu prefers to follow the media narrative and criticize tech businesses.

Of course, all of Wu’s assertions are wrapped in an income inequality package. But Wu decides to attack free services that give voice to the most vulnerable in society. He almost entirely skips over important benefits of consolidation and also ignores that antitrust enforcement comes with significant costs.

Rather than focusing on industries that are far more consolidated and businesses that are far more powerful, Wu prefers to follow the media narrative and criticize tech businesses.

Wu mostly ignores big pharma — often blamed for raising prices on vital medication. Wu grants a pass to big banks — regularly criticized with burdening the financially vulnerable with extra fees and lack of access to capital and credit. Wu gives a fly-by of the Airline industry that people rely on to see their family. Tech platforms, that provide largely free services, are instead the primary target of Wu’s criticism.

Contrary to Wu’s belief that conservative economist Stigler would support his aggressive anti-tech antitrust policies, the reality would likely be the opposite. In his writing, The Theory of Economic Regulation, Stigler argues:

“The machinery and power of the state is a potential resource or threat to every industry in the society. With its power to prohibit or compel, to take or give money, the state can and does selectively help or hurt a vast number of industries.”

And this is the real danger that Wu ignores throughout his rant. Wu suggests that Europe has the right approach and that the US is too weak on business breakups. But Americans, unlike Europeans, are rightly cautious about handing over too much power to the government because we’ve seen the abuses of power.

Wu’s book celebrates that “When Roosevelt activated the Sherman Act, his goal was as much political as economic.” But most today would argue that using economic policy for political reasons is entirely inappropriate.

Perhaps Wu wants the government to use his hero Teddy Roosevelt’s approach to antitrust — the “I know it when I see it” approach. But this basis for enforcement is a greater danger to democracy than any business could and would certainly undermine due process.

Suppose a large firm makes statements condemning the President. Without an objective test for antitrust, government could use loosely defined rules for intervention to punish dissent.

American government is founded on principles that aim to prevent this abuse of power — the Constitution and Bill of Rights recognize the imbalance of power between government and the rest of us.

At the end of the day, Wu is not only wrong, but he stands alone from the rest of the country.

At the end of the day, Wu is not only wrong, but he stands alone from the rest of the country. Polling shows that only 10% of Americans think the government should prevent successful online businesses from acquiring other companies, and only 5% thought the government should most focus its anticompetitive resources on tech platforms.

To compare, 29% think the government should most focus its anticompetitive enforcement on pharmaceutical companies, and 11% said they should most focus on the electricity and gas industry.

Wu should stop and reconsider his advocacy. Consumer harm as a standard for antitrust enforcement is robust and effective — and if Wu wishes for antitrust enforcement on the tech industry, he should come prepared to argue how consumers have been harmed by the industry.

Let’s have a serious discussion about antitrust. Let’s look beyond the sensationalized headlines and hipster-antitrust and consider benefits of large players in a competitive industry.

I hope that Wu’s next effort approaches the issue from a position of research and open-mindedness, not staring with a conclusion and working backwards to prove it.