Big Tech's power remains unchallenged

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The power of Silicon Valley's biggest tech companies appears to be growing larger by the day with very little resistance from regulatory bodies. I'm delighted to be joined today by Rana Foroohar, a Global Business columnist. Over the past few months, Rana has written a series of columns examining the implications of the dominance of big tech for the market, for competition, for innovation, and for the health of American democracy.

Rana in your latest column, you wrote about how big tech is making enormous gains at hour-- that's to say at customers' expense. Companies like Facebook and Google are making these gains by monetising the personal data that we give away every time we go on social media or use a search engine. But not everyone is as worried about this as you think they should be, are they?

No. You know, it's arguable. I think that people don't really understand how these companies make their money. I mean, if you look at the chart that we've got up here, you can see that they're cash machines, right? I mean they have margins, in the case of Facebook, that sometimes go over 50%, Google around 30% or so. This is much higher than most other kinds of businesses.

But if you think about why it's so easy for them to make profits, their raw material is us, our data. And we're giving them that data for free. And that goes to another issue, which is anti-trust and monopoly.

In the US, monopoly policy, for the last 40 years has been built around, well, if a company is making something cheaper for the consumer, then that's good and they can be as big as they want to politically, economically. And, you know, these companies are giving away things really for free, not just cheap but free. The thing is free is not free if you think about the cost being data as opposed to dollars.

When you write in the column that the dominance of these big companies is overturning the basic rules of capitalism, what did you mean by that?

Well, if you think about it, when I go online and I give away all my incredibly valuable data, my social security number, my credit card numbers, my spending history, my medical records, that's worth a tremendous amount. But I don't see that value. It's being taken by these companies.

So you know Adam Smith, father of modern capitalism, would have said that you need an equal playing field to make markets work. You need price transparency. We have neither of those things here.

And, you know, you might argue, well, consumers have a choice, they can give the data, they can not. They're giving it. And we shouldn't argue with that, whether it's about choice is not for us to say. But they can be nudged in very subtle ways. Firms can promise that data will be held privately and governments and companies can't get access. No one knows if that's true or not. But it makes people more likely to give up that information.

These Silicon Valley companies like to think of themselves as engines of innovation, but your view is that their dominance is actually inimical to innovation, that they're crowding out new entrants to the market.

I think that it's really hard for you to argue at this stage that the biggest platform companies-- Amazon, Google, Facebook-- are actually innovating. What they're doing is aggregating data and monetising that. In fact, Google supported some research recently which found that it's not how wonderful an algorithm is that makes a difference, it's how much data you can stuff into it. So their game right now is to encircle as much data as possible, to get as many consumers on their platform, and then to monetise all of us.

And you borrow a lovely phrase from Timothy Wu. You said these firms are not innovators, they're attention merchants.

Absolutely. And, you know, really they're the last in-- or maybe at the apex of a long line of attention merchants. TV, radio producers, I mean, newspapers, we're all attention merchants. But the difference is the network effects of these firms make them much more likely, as big players, to be able to grab the market. And they can pinpoint with unbelievable accuracy what's going on.

You mentioned antitrust law just now. What prospects do you think there are there for rethinking US antitrust law to constrain big tech?

I think that it's going to happen. There are a number of cases I'm looking at. One is LinkedIn, which is a big social media firm. They are coming after a data scraping firm for using information that they say was proprietary. They let this firm use it for a couple of years. And then once LinkedIn had a similar business model, went in with a cease and desist letter, and said, no, you can't do that.

This happens all the time. The biggest firms either try and acquire small firms, try and limit them from using their IP. There are questions around the constitutionality of the patent system right now. The bottom line is there are many different threads that are being pulled on around antitrust and I think we are going to see a shift in attitudes.

This is going to be the biggest business story of the next five years, Rana. I'm sure we're going to have an option to talk again about it.

I hope so.

Thanks for joining me.

Thank you.