The idea that a big company is something that will eventually become an unstoppably dominant giant is wrong.
The idea that a big company is something that will eventually become an unstoppably dominant giant is wrong.
I n the discourse around technology companies specifically and antitrust policy more generally, there seems to be a narrative that “big is bad.” These fears about the mere size of a company have in the past plagued our discourse about technology, but the history shows they may turn out to be more a spooky season scary story than something to actually fear.
Yet the idea that a big company is something that will eventually become an unstoppably dominant giant is wrong. Instead of “breaking up” the “Big Tech” companies, our best policy to promote competition has been innovation.
Let’s take a look at some of the examples of those “Big Tech” giants that were once bemoaned as unstoppable.
Before companies like Google, Amazon, Facebook, and Apple were questioned as monopolies, newspaper headlines and policy-makers bemoaned the rise of “tech monopolies” like MySpace and IBM.
IBM’s ascent began in the 1950s with groundbreaking innovations. In 1952, the company unveiled its first commercial computer, the IBM 701, marking its entry into the electronic-computing era. Throughout the 1960s and 1970s, IBM solidified its market leadership through continued innovation. But this success was also met with regulatory scrutiny, and the Department of Justice launched an antitrust case against the company in 1969. Thirteen years later, in 1982, the case was dropped as “without merit.”
The real scary story from this antitrust case shouldn’t be that IBM was once so dominant, but what the misguided case meant for consumers. The antitrust case likely led IBM to raise prices for consumers in order to lessen its market share. The company also started to decline to offer hardware and software bundled together. This illustrates how, even when ultimately unsuccessful, misguided antitrust action can still cause harm.
Less than 20 years ago, the Guardian declared that MySpace was a natural monopoly. These fears today seem almost laughable, not because governments broke up MySpace or prevented its acquisition by Rupert Murdoch’s News Corp, but because of how innovation took place. While headlines at the time speculated MySpace’s apparent monopoly would persist due to increased user-profile creation and the new investment, it was not long before newer platforms that better responded to consumers changed the nature of the social-media market. Less than two years after those headlines about MySpace’s natural monopoly, Facebook eclipsed MySpace in both cultural relevance and market share. This shift marked the beginning of MySpace’s decline, leading to its unsuccessful attempts to regain traction.
As with many other elements of the technology market, the very nature of social media itself had started to shift, and new entrants had captured the attention of what consumers wanted. Now, Facebook faces its own monopoly allegations, but like MySpace before it, younger generations seem to be shifting to other types of social-media platforms, proving once again innovation may be our most effective giant killer.
While “Big Tech” may be a popular bogeyman for policy-makers, if such companies are big and popular because they meet consumer needs, that should be applauded — not feared. As shown by the downfalls of the once-scary tech monopolies of the past, these monsters may often be more rubber masks than they are reasons for concern about stagnation in the market. Already, narratives are shifting with calls that early movers in artificial intelligence are monopolies, indicating how often the term is misused.
Hopefully, what we can learn from the past fears of tech monopolies is how often they have been proven wrong. Instead of being afraid of companies that are successfully responding to consumer demands, we should be afraid of policy-makers seeking to intervene unnecessarily into competitive markets in ways that could see the government unfairly pick favorite companies and take away beneficial products or service from consumers.
The truly scary story when it comes to “Big Tech” is not what happens if we do not break up these companies, but how misguided these claims often prove to be in hindsight and how unnecessary antitrust enforcement could actually be the monster under the bed that harms consumers.