Today’s technology landscape is dominated by a small cadre of massive corporations with the likes of Meta, Amazon and Google snapping up fledgling startups before they can grow into potential competitors, ignoring labor laws that don’t suit their immediate needs, and generally operating like the dystopian corpro-villains Johnny Mnemonic alert us about. Traditionally, state regulation has acted as a gentle brake against American industries’ more problematic tendencies, however the speed at which modern computing and communications technologies advances has overwhelmed the government’s capacity to, well, govern them.
In their new book, Access Rules: Freeing Data from Big Tech for a Better Future, Viktor Mayer-Schönberger, Professor of Internet Governance and Regulation at Oxford, and Thomas Ramge, author of Who’s Afraid of AI?, argue passionately against the data-hoarding practices of today’s biggest tech companies and call for a more open, equitable means of accessing the information that these companies have amassed. One such method, explored in the excerpt below, involves addressing Big Tech’s monopoly power directly, as the Biden administration has in recent years, though the efforts have not been particularly effective.
Excerpted from Access Rules: Freeing Data from Big Tech for a Better Future by Viktor Mayer-Schönberger and Thomas Ramge, published by the University of California Press. © 2022 by Thomas Ramge and Viktor Mayer-Schönberger.
Early into his term, President Biden appointed Tim Wu, who had argued in favor of breaking up Facebook and written popular books on the dangers of Big Tech market concentration, to the National Economic Council as a special assistant to the president for technology and competition policy . Putting one of the most outspoken advocates of Big Tech trustbusting into a top advisory role is a powerful signal the Biden administration is taking a far more confrontational course.
Wu isn’t alone. His appointment was followed by the choice of Lina Khan for chair of the Federal Trade Commission (FTC). Khan’s youth — she was in her early 30s when nominated — belies her intellectual power and political credentials. A professor at Columbia Law School like Wu, Khan had authored papers papers on the need to fight Big Tech’s unchecked power. And she had explained why existing antitrust law was ill equipped to deal with Silicon Valley platform providers. But Khan isn’t just a Big Tech critic; she also offered a radical solution: regulate Big Tech companies as utilities, much like electricity providers or the venerable AT&T before telecom deregulation. With Khan at the FTC and Wu as advisor having the ear of the president, Big Tech could be in serious trouble.
Not just antitrust experts serving in government like Tim Wu and Lina Khan fear that the monopolistic structure of American tech dominance could turn into its Achilles heel. Think tanks and advocacy groups on both left and right have been joining the critics. Disruptive entrepreneurs and venture capitalists such as Elon Musk and Peter Thiel regard the well-rehearsed dance of Big Tech and venture capital with increasing skepticism, concerned that the intricate choreography is thwarting the next generation of disruptive founders and technologies. Taken together these voices are calling on and supporting regulators and legislators to prevent the most obvious cases of large companies removing potential competitors from the market by acquiring them—cases comparable to Facebook’s takeover of Instagram or Google’s acquisition of Waze. And they call on venture capitalists to take on the role for which Joseph Schumpeter originally conceived this class of investment capital, the role that the venture capitalists on Sand Hill Road in Menlo Park fulfilled up to the first decade of this century: financially support the bringing to market of new, radically better ideas and then enable them to be scaled up.
The antitrust tide is rising in the United States. And yet it’s questionable that well-intentioned activist regulators bolstered by broad public support will succeed. The challenge is a combination of the structural and the political. As Lina Khan herself argued, existing antitrust laws are less than useful. Big Tech may not have violated them sufficiently to warrant breaking them up. And other powerful measures, such as declaring them utilities, require action. Given the delicate power balance in Congress and hyper-partisan politics, it’s likely that such bold proposals would not get enough votes to become enacted. The political parties may agree on the problem, but they are far apart on the solution. The left wants an effective remedy, while the right insists on the importance of market forces and worries about antitrust action micromanaging economic activity. That leaves a fairly narrow corridor of acceptable incremental steps, such as “post-acquisition lockups.” This may be politically palatable, but insufficient to achieve real and sustained success.
The truth is that the current game based on exit strategies works only too well for everyone involved, at least in the short term. The monopolists continue to increase their rents. Entrepreneurs get rich quickly. Venture capitalists reduce risk by optimizing their investments for exiting through a sale. And government? It too earns money on every “Goliath buying David” transaction. Preventing such transactions causes annoyance for everyone involved. Any politician mounting a serious attack on Big Tech USA exposes themselves to the charge of endangering the great successes of American technology companies on global markets—a charge a few politicians could fend off.
Despite the renewed resolve by the Biden administration to get serious against Big Tech overreach, substantial change still seems elusive in the United States. In contrast, European antitrust authorities have been far more active. The billion-dollar fines lobbed at US Big Tech by Commissioner Vestager’s team surely sound impressive. But, as we mentioned, most of them were reduced on appeal to an amount that the superstar companies with huge cash reserves and skyrocketing profits could easily afford. The European Parliament may not suffer from hyper-partisanship and be willing to strengthen antitrust rules, but their effectiveness is limited by the very fact that almost all Big Tech is not European. At best, Europeans might prevent US Big Tech from buying up innovative European start-ups; the necessary laws for this are increasingly being enacted. But that will do little to break Big Tech’s information power.
The challenge faced by European regulators is shared by regulators around the globe, from the Asian Tigers to the Global South: how can national regulators effectively counter the information might amassed by Silicon Valley superstars? Sure, one could prohibit US Big Tech from operating. But that would deprive the local economy of valuable services. For most nations, such binary disengagement is not an option. And for nations that to an extent can and have disengaged, such as China, their homegrown Big Tech companies confront them with similar problems. The huge fines levied on Alibaba in 2021 surely are surprising for outside observers, but they, too, are targeting symptoms, not the root cause of Big Tech’s power.
Sooner or later, regulators and legislators will have to confront the real problem of reining in Big Tech: whether we look at Draconian measures like breakups or incremental ones like fines and acquisition lockups, these target the symptoms of Big Tech’s information power, but do little to undo the structural advantages the digital superstars possess. It’s little more than cutting a head off Hydra, only to see a new one grow.
To tackle the structural advantage, we have to remember Schumpeter. Schumpeter’s nightmare was that the capacity for innovation would become concentrated within a few large companies. This would lead to a downward spiral of innovation, as major players have less incentive to be disruptive and far more reason to enjoy market power. Contrary to Schumpeter’s fear, this concentration process didn’t occur after World War II, mainly because entrepreneurs had access to abundant capital and could thrive on disruptive ideas. They stood a real chance against the large incumbents of their time, a role more than a few of them took on themselves. But money is no longer the scarce resource limiting innovation. What’s scarce today is access to data. More precisely, such a scarcity is being artificially created.
In the data economy, we’re observing a concentration dynamic driven by narrowing access to the key resource for innovation and accelerated by AI. The dynamic therefore turns on access to data as a raw material. Economic policy to counteract market concentration and a weakening of competition must focus on this structural lever.
If we want to avert Schumpeter’s nightmare, preserve the competitiveness of our economy, and strengthen its capacity for innovation, we have to drastically widen access to data — for entrepreneurs and start-ups and for all players who can’t translate their ideas into innovations without data access. Today, they can only hope to enter the kill zone and be bought up by one of the digital giants. If data flows more freely through broader access, the incentive to use data and gain innovative insights from it increases. We’d turbocharge our economy’s capacity for innovation in a way not seen since the first wave of Internet companies. We would also learn more about the world, make better decisions, and distribute data dividends more broadly.
All products recommended by Engadget are selected by our editorial team, independent of our parent company. Some of our stories include affiliate links. If you buy something through one of these links, we may earn an affiliate commission.