industries like cable television or airlines,
digital companies tend to do well on customer satisfaction, and the digital economy
as a whole has become a cornucopia of “free”
stuff (paid for with consumers’ attention but
not their cash). And even though, in practice, consumers often get locked in to the
technologies these companies offer (if only
because once your data is in the cloud, it’s so much easier to stay
than leave), the businesses have no real leverage over consumers.
Most also continue to pour billions of dollars into research and
development, and they are constantly upgrading their products
and services. So it’s hard to argue that these giants have been anything but beneficial to consumer welfare, which since the 1970s
has been the standard that antitrust regulators apply.
Indeed, when we look at what the digital economy has done
over the past two decades, what becomes clear is that it has created
an enormous amount of value for consumers and for a small group
of big companies, even as it has diminished competition, centralized power, and made life much more difficult for businesses that
produce content or try to compete with the economy’s dominant
players. (In one way or another, if you want to make money in the
digital economy, you will almost certainly find yourself working
with, rather than against, one of the Big Five.) In the industrial
economy, the benefits were spread widely among companies,
employees, and consumers. The digital economy is giving us a
world in which the benefits are concentrated among consumers
and the Big Five who serve them. Everyone else just lives in it.
James Surowiecki is the author of The Wisdom of Crowds and a senior story producer at Vice News Tonight.
workers. This is a good thing from the perspective of efficiency.
But it also helps explain why today’s digital giants have a smaller
impact on the economy than dominant companies had in the
past. Together, the Big Five employ around 400,000 full-time
workers in the United States. That might sound like a lot. But
roughly half of those workers are Amazon employees, many in
relatively low-skill, low-paying warehouse jobs. And it’s actually
fewer employees than General Motors alone had in 1979, when
the U.S. workforce was a lot smaller. What’s more, where GM’s
production led to eight jobs in its supply chain for every one person it employed directly, the ripple effects of the Big Five’s businesses, with the exception of Apple, are much smaller. The result
is that the rewards of the digital economy are more concentrated
among a small number of workers than the rewards of the industrial economy were.
This is aggravated by the fact that the Silicon Valley dream
of starting a company in your garage and making it into a huge
business has become less realistic than ever. Even though billions
continue to be poured into venture funding (more than $200 billion between 2011 and 2016), and even though the number of so-called high-growth startups has not declined in recent years, work
by the MIT economists Scott Stern and Jorge Guzman shows that
fewer of those startups are succeeding than did in the past. Of
course, we still have the Teslas and Ubers (or Lyfts) of the world.
But they are rarer than they once were. And one plausible reason
is the sheer scale and scope of the Big Five, which can meet competitive challenges either by copying the innovations of others (as
Facebook arguably did with Snapchat), and thereby making them
seem superfluous, or simply by buying potential competitors at an
early stage. Regardless of why it’s happening, though, the result is
less dynamism in the economy, and less spreading of the wealth.
One obvious solution to the problems caused by the concentration of power in just a few companies is to break up the Big
Five or regulate them as, in effect, public utilities. And of late,
there have been more and more calls for dramatic action. But
this is difficult for a variety of reasons. First, these companies
don’t, for the most part, fit the stereotype of the monopolist.
They aren’t “natural monopolies,” like power companies, in markets where it would be practically impossible for a competitor
to arise. Anyone who wants to build a new search engine, or a
new online retailer, can do so. These companies also, with some
exceptions, didn’t achieve their dominance
by engaging in conventionally anticompetitive behavior so much as they exploited the
nature of the digital economy to build and
maintain their empires.
Nor do you hear too many complaints
from consumers, although issues of privacy
obviously still matter. Indeed, relative to
One obvious solution to the
problems caused by the
concentration of power in a
few companies is to break
up the Big Five or regulate
them as, in effect, public
utilities. This is difficult for a
variety of reasons.