Date posted: 28/02/2020 5 min read

Who’s afraid of big, bad tech?

Accused of privacy breaches and election meddling, big tech is under fire. But are Facebook and Google as bad as critics say?

In Brief

  • Big tech firms such as Facebook and Google have faced a barrage of criticism.
  • In the kind of markets where these tech giants operate, it’s normal for one large company to dominate.
  • Twenty years ago people fretted about the dominance of Microsoft, but new competitors have appeared.

Everywhere you look, big tech is under attack. Competition authorities, politicians and academics are all on its case. Many of the indictments are for some alleged anti-competitive abuse of market power – rorting consumers or improperly deterring competitors – but there are plenty of other gripes, including mishandling people’s privacy and facilitating interference in elections.

The lead headline in The Wall Street Journal as I write is “How Google Interferes With Search Results”. Other recent headlines have included “Tech Companies Are Destroying Democracy and the Free Press” (New York Times) and “Washington Watches as EU Steps Up Scrutiny of Big Tech” (Financial Times).

Sometimes, as we saw with the Hayne inquiry into Australia’s banks, a sector is unpopular for good reason. But the more I look at the ragtag rabble swarming around big tech – the US nobbling Chinese tech companies, the EU nobbling American tech companies, politicians everywhere resenting the rise of unregulated online voices they can’t control, mainstream ‘old’ media who have had their lunch eaten by e-upstarts, assorted ambulance chasers – the more I’m left wondering: just what is it, exactly, that big tech is doing wrong?

So what’s the problem with big tech?

In asking that, I’m no soft touch on anti-competitive stitch-ups. I spent a long time on New Zealand’s competition authority. Show me a genuine abuse, in tech or anywhere else, and I’d happily see it prosecuted. A pharma company with the drug coming off patent that bribes generic producers not to make cheaper versions available (‘pay for delay’) – throw the book at it.

But even from my weed-it-out perspective, I’m still looking for the big problem with big tech.

Are these companies very large? Are they wildly profitable? Do they have market power? Sure. But that’s no crime, and high profits more likely point to popular services well delivered than to exploitation.

And in the kinds of markets where Amazon, Facebook and Google operate, it’s entirely normal for one large company to be the be-all and end-all of the sector, because of network effects. People and advertisers throng to where everyone else is. You don’t hang out on the social media platform that contains just you and your second cousin in Wollongong.

“You don’t hang out on the social media platform that contains just you and your second cousin in Wollongong.”

It’s also entirely normal for these companies to have their day in the sun, and then get eaten by The Next Big Thing. Indeed, their temporary high profitability is the very thing that signals to others that there’s something worth muscling in on.

Some people argue that while, in their day, Facebook ate MySpace and Google ate Yahoo!, Facebook and Google are now too entrenched to get eaten in turn. I doubt that. Virtually everything I used in the early days of the new IT was the dominant incumbent of its era: CompuServe, WordStar, Lotus 1-2-3, Netscape, IBM hardware, bulletin boards (kids, ask your parents). They’ve all been dethroned. What’s around now is better and cheaper, or created since then. There’s no evidence that Schumpeter’s gale of creative destruction has run out of puff.

Without thinking too hard, you can see how a TikTok could morph into a YouTube or a Facebook, or a DuckDuckGo into a bigger challenge to Google, or one of the colossal Chinese tech companies – Tencent (instant messaging), Baidu (search engine), Alibaba (e-retailer) – could chance its arm in the West.

We’ve been here before

If you’re still sceptical, cast your mind back to the late 1990s when there were people arguing that Microsoft should be broken up to save us all from the ‘Wintel’ stranglehold (Windows software, Intel hardware). It’s exactly what some people are proposing for Amazon and Google today. But is anyone still laying awake fretting about Microsoft’s dominance?

So I’m relaxed about today’s set of temporary ascendancies. I’m also struggling to see where they are allegedly exploiting their transient dominance.

One of the bigger claims is that consumers are being exploited, that we’re underpaid (in fact, unpaid) for the valuable data we provide to the Googles of this world. But are we? If I can do in a morning’s Googling what would have taken me weeks trekking through physical libraries, that’s a very valuable service I’ve received at no direct cost to me.

If Google monetises my data to make it work, what do I care? And if I did, and it came to divvying up the readies, who should pay whom? Who’s to say I haven’t already got the better part of the deal?

There’s an ‘old media’ parallel: free-to-air television. It’s hardly a terrible rort on viewers when they get their programs for free, but don’t share in the TV stations’ advertising revenue. What’s so different about Google?

What about your supermarket’s loyalty card? Sure, swipe the card and they’ll know everything you buy. But it’s not obvious that the discounts and the odd coupon for cheaper toothpaste are a bad deal for consumers. Would you really prefer no cards at all?

Advertising is not inherently evil

There is also a mindset that Facebook and Google users are being set up as naive fodder for clever advertisers. That’s an odd view. Some advertising is tedious, but some is genuinely useful: the bookseller who tells you that “people who bought X also bought Y”, for example, or the guy who advertised the obscure hub cap I was looking for.

That mindset also ignores the fact that we’re often advertisers ourselves. We look for clients for our businesses, and buyers for our cars and houses and knick-knacks. The online tech giants make our advertising cheaper, easier, faster and better.

Remember those expensive ‘classifieds’ in the print newspapers with any fondness? Me neither. But where are the people pointing out the benefits of enormously improved ways of matching buyers and sellers?

I’m not saying tech is angelic. Its hands are no cleaner than the next industry’s, and there are some genuine competition issues. Regulators are probably right to worry about incumbents proactively snaffling up start-ups that might have formed the nucleus of a new competitor. But I won’t be joining the villagers as they march with their flaming torches towards the tech giants.