[Analysis] Antitrust in the Modern Age

2018/09/08

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Sources

Yesterday, September 7th, this article was posted in the New York Times, written by David Streitfeld. While reading it, I was reminded of the arguments put forth in another article in Esquire, written by Scott Galloway. about why Big Tech needs to be dismantled.

The first article is focused on Amazon in particular, but the second article (from February) focuses on the argument for dismanting what Galloway calls "the Four": Amazon, Apple, Facebook, and Google.

Other sources for quotes: On why conservatives support Trump and the Wikipedia page for "echo chamber".

Analysis

On the Scope of the Problem

I am not inherently opposed to big business. Some problems require large amounts of capital and bureaucracy to solve: the negative aspects of big business are just a part of living in a modern industrial society. Enormous corporations are capable of cutting the cost of goods and services down to very low prices, which is why the cost of luxuries in the developed world is lower than it has ever been. (The other concerns, like the cost of necessities and certain other things like college tuition, are subject to different forces.) One could not even dream of having things like smartphones or high-class servers without enormous companies like Intel -- the capital investment required to create modern processors is in the tens or hundreds of millions. Small companies could not manage the kinds of supply chains involved: the savings come from the economies of scale involved. Even the popular socialist magazine Jacobin wrote about how only big businesses can provide modern labor protections. Opposition to big business is delusional.

However, we have a bigger problem on our hands with the Four. While other corporations in fields like manufacturing do most of their work behind the scenes, the Four play a constant role in our lives. We purchase an increasing amount of our goods on Amazon, communicate using smartphones running operating systems controlled by Apple and Google, search for information on Google (completely giving up our privacy in the process), and spend our whole social lives on Facebook. This is an incomplete list: all of these companies grow extremely quickly and constantly add new services to their portfolio as part of their competition. These corporations exercise direct control over the way we interact with and utilize information. Buying something new? Check the Amazon reviews. Looking for a place to eat? Check Google or Facebook. Want to do something new with your phone? There's an app for that.

So exactly how big are these corporations? Enormous. From the Esquire article (which is already outdated, having been written in Feb 2018):

Over the past decade, Amazon, Apple, Facebook, and Google—or, as I call them, “the Four”—have aggregated more economic value and influence than nearly any other commercial entity in history. Together, they have a market capitalization of $2.8 trillion (the GDP of France), a staggering 24 percent share of the S&P 500 Top 50, close to the value of every stock traded on the Nasdaq in 2001.

How big are they? Consider that Amazon, with a market cap of $591 billion, is worth more to the stock market 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.

Meanwhile, 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.

And what of Apple? With a market cap of nearly $900 billion, Apple is the most valuable public company. Even more remarkable is that the company registers profit margins of 32 percent, closer to luxury brands Hermès (35 percent) and Ferrari (29 percent) than peers in electronics. In 2016, Apple brought in $46 billion in profits, a haul larger than that of any other American company, including JPMorgan Chase, Johnson & Johnson, and Wells Fargo. What’s more, Apple’s profits were greater than the revenues of either Coca- Cola or Facebook. This quarter, it will clock nearly twice the profits that Amazon has produced in its history.

It's no surprise that Galloway would go on to say on September 5th that "... big tech has effectively become more powerful than the Senate" (although he's not only talking about their market value here).

This is only scratching the surface of the problem. BBC News found that children spend six hours or more on screens, doubling the amount of time spent in front of screens in 1995, when I was a young boy. (As an aside: it is true that many nerds spend longer than this in front of a screen every day, and I frequently double this. This lifestyle, which I have maintained since childhood, has deep costs -- and the fact that I personally spend too much time in front of a screen is exactly why I think I'm credible when I say that it fucks you up. Take that tablet away from your kid.) This isn't only an issue for children: social media applications routinely take up almost an hour of their users' lives on average, and many people have multiple of these applications installed.

So why are the Four more dangerous than other massive corporations? It's not only because they are staggeringly wealthy, but because they make up a core part of the lives of people in the modern world. To hand this much social control to corporations out of some misguided capitalist fundamentalism is to completely miss the point on why capitalism is a good thing.

The Destruction of the Internet

What many of the normie-friendly newspaper articles fail to recognize, however, is the social damage caused by these monolithic corporations. As an Internet native, I've watched nearly every other community wither and die. People used to have to actually engage with people they considered friends, not just scroll through their wedding photos and leave a heart react and a "Congratulations!" This kind of faux social connectivity is a major contributing factor to the loneliness epidemic which is worse than it has ever been.

Thriving, powerful Internet subcultures have been laid low by the network effects and magnetism of the major social media giants. Many of them try to migrate to these new platforms to remain relevant, but they soon find themselves corrupted and destroyed by their new medium.

Businesses find themselves neglecting their website in favor of their Facebook and Twitter accounts, creating a series of annoying walled gardens and contributing to the collection of even more data to be bought and sold by advertisers whose only goal is to get you to spend more money on shit you don't need.

Websites, although they're worse than they've ever been because of the proliferation of webshit written by garbage "programmers" who wouldn't be fit to clean Djikstra's shoes, are going the way of the dodo too. The Web, a series of hyperlinked documents in a large scheme of URLs etc, is being replaced by custom-written applications whose only job is to keep you scrolling endlessly like an idiot while some investors in Silicon Valley mine your eyeballs for pennies. These applications have much more power than any website could have through mere JavaScript -- which is the entire point. Anytime a website says "hey, we're glad you're here, have you seen our app?" is just politely asking you to be their bitch.

The Destruction of the Retail Economy

Amazon is one of the biggest companies in the world, with a market cap of 952B as of Sept 8. It got this way by ruthlessly optimizing every single step of the retail chain. It's difficult for brick-and-mortar stores to compete with a company that can deliver anything I want to my house within days (and potentially within hours once the drones start delivering Prime packages).

Anything you want to buy can be found on Amazon. If you shell out the money for Amazon Prime, you can get free two-day shipping too! And now that you've already paid for Prime ($99/year), you might as well get your money's worth, right? And now your apartment is full of shit you don't need and your savings are gone.

This kind of power has been good for consumers who just want to spend dollars to purchase things, but it's had a devastating effect on the retail industry. Many of these retail stores were crucial job providers in rural America, contributing to the second wave of mass unemployment in rural areas. (The first wave: the shifts in American industry that left many factory workers out of a job.)

People have spent decades talking about how Walmart has gutted economies across the country. Buckle up: Amazon is only going to get richer and more powerful. Walmart was just a preview.

The Destruction of Your Society

Algorithmic content distribution, self-selection effects on social media following, and the Greater Internet Fuckwad Theory have conspired to completely destroy the social structure. Think Trump's election was bad? Like I said above: buckle up. This is only going to get worse.

Americans fucking hate each other. If you were surprised by Trump's election, you weren't paying attention. (I had predicted his victory by mid-2015, defending my prediction against the heckling of my friends and family. I even had the good graces not to rub it in, but if you know me and you're reading this: I told you so.) Doing something "to own the libs" isn't just a meme: few things are as satisfying as watching compilations of liberals and leftists melting down on Nov 9, 2016. Poor conservatives do not care if Trump's policies would benefit them, just like they haven't cared if Republican policies will benefit them. Economics is beside the point. This is a culture war. From the previous article:

First of all, the bulk of Trump’s supporters have nowhere else to go, nor do they want to go anywhere. They experience themselves as living in a different world from liberals and Democrats.

Their animosity toward the left, and the left’s animosity toward them, is entrenched.

Trump’s basic approach — speaking the unspeakable — is expressive, not substantive. His inflammatory, aggressive language captures and channels the grievances of red America, but the specific grievances often feel less important than the primordial, mocking incivility with which they are expressed. In this way, Trump does not necessarily need to deliver concrete goods because he is saying with electric intensity what his supporters have long wanted to say themselves.

“President Trump reminds distrustful citizens of liberal institutions’ disinterest in, and disrespect for, challenges in their own lives,” Arthur Lupia, a political scientist at the University of Michigan, wrote in response to my inquiry about Trump’s appeal.

Meanwhile, the entire political platform of the Democratic Party nowadays boils down to "Fuck Trump", which leads to incoherent party politics, DSA shitfights, and the eternally-recurring ghost of Hillary Clinton, the worst Presidential candidate I've ever seen.

There is a single cause for all of this drama: everyone lives in a digital echo chamber. From Wikipedia:

In news media, echo chamber is a metaphorical description of a situation in which beliefs are amplified or reinforced by communication and repetition inside a closed system. By visiting an "echo chamber", people are able to seek out information which reinforces their existing views, potentially as an unconscious exercise of confirmation bias. This may increase political and social polarization and extremism. The term is a metaphor based on the acoustic echo chamber, where sounds reverberate in a hollow enclosure.

Another emerging term for this echoing and homogenizing effect on the Internet within social communities is cultural tribalism.

Exploitation of this echo chamber has been weaponized by the subculture that punches a hundred leagues above its weight class: the surge of underemployed, bored, technologically-literate 20-something white Americans known as the "alt-right", a term that refers to many more people than simply white nationalists and Internet Nazis. In this kind of climate, the rise of a decentralized mass that capitalizes on outrage culture is simply inevitable. The alt-right as a political project may be dead on arrival (for the same reasons as anarchists: absolutely no agreement on any point of policy or philosophy, merely a shared disdain for aspects of existing society), but as a cultural movement it is an unpaid legion of shitposters with no rival.

Their cultural rivals, the "SJWS" (a movement which is literally just Tumblr grown up), are the political opposite but serve much of the same purpose. I do not consider them as efficient in their tactics as the alt-right because they already influence our country's major institutions (colleges and corporations) and therefore must dedicate their whole lives to this project, while the bored legions of 4chan/pol/ sit in their basements and coordinate a military strike on rebel groups in the Middle East and fuck with washed-up celebrities.

Accordingly, both movements create their own echo chambers that fuel their further development and mobilization. This is not going to stop anytime soon, although the fiasco of the Unite the Right rally shattered any ideas of the alt-right coming out of the shadows -- the war will remain online.

You may think this is just Internet drama that has no effect on the real world. If so: were you asleep in 2016?

The New Face of Antitrust

These companies must be destroyed, but clearly our current interpretation of antitrust laws isn't good enough to get the job done. Fortunately, we have a superhero: Lina Khan. (See the first article source above.)

Ms. Khan has become something of a prodigy in antitrust law. From the article:

In early 2017, when she was an unknown law student, Ms. Khan published “Amazon’s Antitrust Paradox” in the Yale Law Journal. Her argument went against a consensus in antitrust circles that dates back to the 1970s — the moment when regulation was redefined to focus on consumer welfare, which is to say price. Since Amazon is renowned for its cut-rate deals, it would seem safe from federal intervention.

Ms. Khan disagreed. Over 93 heavily footnoted pages, she presented the case that the company should not get a pass on anticompetitive behavior just because it makes customers happy. Once-robust monopoly laws have been marginalized, Ms. Khan wrote, and consequently Amazon is amassing structural power that lets it exert increasing control over many parts of the economy.

Amazon has so much data on so many customers, it is so willing to forgo profits, it is so aggressive and has so many advantages from its shipping and warehouse infrastructure that it exerts an influence much broader than its market share. It resembles the all-powerful railroads of the Progressive Era, Ms. Khan wrote: “The thousands of retailers and independent businesses that must ride Amazon’s rails to reach market are increasingly dependent on their biggest competitor.”

The paper got 146,255 hits, a runaway best-seller in the world of legal treatises. That popularity has rocked the antitrust establishment, and is making an unlikely celebrity of Ms. Khan in the corridors of Washington.

Her hard work has made it possible to reframe the antitrust debate in a way that isn't just naive capitalist fundamentalism, but to actually take into account the growing non-financial power of these same companies. It isn't just a matter of how rich the Four are. The real concern is how powerful they are.

“Ideas and assumptions that it was heretical to question are now openly being contested,” [Khan] said. “We’re finally beginning to examine how antitrust laws, which were rooted in deep suspicion of concentrated private power, now often promote it.”

The hearings start next week, on September 13. We can only hope for the best.