- Antitrust Risk: the backlash against Tech
- Every company is now a tech company
A few items of interest to start the week…
First a fascinating interview with former antitrust prosecutor Maurice E. Stucke and Ariel Ezrachi of Oxford University.
In a series of recent research papers, Stucke and Ezrachi have put their finger on how platform companies are abusing their power…
“Once a harbinger of a new kind of capitalism, Silicon Valley has since become a place where “a handful of winner-takes-most companies have taken over the world’s most vibrant innovation centre…In the home of the entrepreneur, the number of startups is lower than it has been at any time since the 1970s. More firms are dying than being born. Founders dream of selling their firms to one of the giants rather than of building their own titans.”
The issue now is that the platform companies control the gateway. And as we increasingly abdicate our decisions to their digital assistants, there is huge scope for these companies to distort reality and crush competition…
“Within big data and artificial intelligence, network effects can raise barriers to entry, enabling big platforms to engage in behaviors such as collusion, behavioral discrimination and frenemy dynamic.
Think of the 1998 American movie The Truman Show – a controlled environment which is nothing more than a façade, but has the potential to deliver relative joy to its subjects. The main beneficiary, of course, is the one who controls the ecosystem. We, like Truman, may think that we’re ordinary consumers with ordinary lives with unremarkable purchases. We have no idea about how, and the extent to which, we are being exploited by the digitalized hand.”
My take: something’s on the turn. And I’m not referring to huge fines on Microsoft handed down by the EU since 2008.
There’s a gathering backlash against the serial monopolists. Note the recent criticism of Facebook over perceived partisan bias in its ‘trending’ news product and the censoring imposed by its robot algorithm of the Napalm girl photographs from the Vietnam war. The regulators are starting to ask: are these guys too powerful?
There is also rising concern about the way in which the likes of Facebook, Google and Amazon have structured their firms to limit the power of shareholders and other outsiders. But — and why wouldn’t they? — they will grab more and more power until they are stopped.
I foresee fines for misbehaviour on the way, increased regulations in the US and the EU and even perhaps a campaign by the Feds to break up perceived monopolies.
As Bloomberg asked recently– Who will be today’s version of Teddy Roosevelt pitching against the ‘robber barons’ and ‘ruthless monopolists’?
Every company is now a tech company
Interesting profile of Aberdeen Asset’s Asian chief Hugh Young in today’s FT in which he talks of a need to look beyond the numbers in stock selection and assessment to a company’s culture.
Read it here: Hugh Young on Tech Culture
I’ve certainly banged on about the pivotal importance of a company’s tech culture. In effect, every company is now more or less a tech company.
Young cites OCBC bank in Singapore as his ideal. ”A wonderfully conservative culture maintained by a founding family, still substantial shareholders combined with an adventurous management is a perfect blend.”
This had me rattling around for a company that somewhat fits Young’s bill on my tech beat.
One I’ve come up with is Israel based cybersecurity leader Checkpoint Software.
Its founder Gil Shwed together with cofounder Marius Nacht hold over 30% of the equity and pass up salary for stock options year-in, year-out.
They impose a rigorous cost control culture, which takes precedence over growth, within which high octane technologists develop and market a world ranking cybersecurity platform.
For a full treatment of developments in security and why I think Splunk also looks a very attractive prospect, see my recent briefing: “This $80bn industry is at a tipping point”.
From 0 to 1
Finally, this week I have been re-reading Zero to One by Peter Thiel.
One of Thiel’s comments –“competition is for losers’ — leads off a piece I’m doing for the weekly bromide, which this week will focus on “Story” stocks and my own experience of meeting charismatic and sometimes slightly unhinged tech visionaries.
I’ll send that to you on Wednesday,
Drop me a message here if you have any queries or questions.