But that’s just the start of it. It’s not only Facebook and Google that are collecting data on everyone and leveraging the power of that data to favor the largest and most powerful. Big Tech has shown others the way, and now a vast variety of businesses are developing their own data-mining techniques to get in on this bonanza, spreading tentacles throughout the economy. Data brokers such as credit bureaus, along with healthcare data firms and credit card companies, collect and sell all sorts of sensitive personal user data to other businesses and organizations that do not have the scale to collect it themselves. These include retailers, banks, mortgage lenders, colleges, universities, charities, and—as if we could forget—political campaigns.37
Turn on your phone, and you are opening up a world of apps that track where you are and what you are doing at every second of the day. These apps alone represent a $21 billion industry of snooping, and it’s not only the largest tech companies that benefit (though they certainly do; Google’s Android system has 1,200 apps that do such tracking), but a host of companies that you probably don’t even think about, from Goldman Sachs to the Weather Channel.38 And that’s just the consumer side of things. The old commercial Internet is shifting to an industrial “Internet of things” that will push data harvesting out into the physical world—into design firms, manufacturing plants, insurance companies, financial houses, hospitals, schools, and even our homes.
Name any successful company: Starbucks, Johnson & Johnson, Goldman Sachs…and it’s likely that successful data mining plays an important role in their business strategy. Real estate companies use a variety of AI applications to mine the data of potential buyers and sellers, even automating the process of home flipping.39 Other companies crunch data from electronic monitors to evaluate employee performance, and create up-to-the-minute rankings for their bosses. Athletic companies now insert GPS locators in their running shoes to track where and how long their customers jog. Goodyear embeds sensors in tires to transmit performance data to their engineers.
These companies aren’t “attention merchants” in the same way that Google and Facebook are. And they don’t have entire business models built on selling and monetizing data. But they do leverage data to increase their return on investment. It’s telling that the fastest way to become one of those top 10 percent of companies holding 80 percent of corporate wealth is to figure out how to leverage not physical assets or even capital, but the value of “intangible” assets, including data, patents, intellectual property, and networks. Companies in every industry are counting on such electronic data to spur growth over the next several years. Data-driven artificial intelligence could generate up to almost $6 trillion in revenues for companies that deploy it successfully. (The biggest gains now come in sales and supply-chain management.)40 Most of the CEOs I’ve spoken to are extremely bullish on the subject, claiming their AI investments yield between 10 and 30 percent returns. But the more data the AI has to work with, the better it goes. That’s good for corporations, but will cause a tremendous amount of disruption for citizens whose privacy is being compromised and workers whose jobs are being automated.
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HOW IS IT that Big Tech has, in a matter of just twenty years, so reshaped our economy? Key to understanding that is this: Many platform technology firms operate as natural monopolies—that is, companies that can dominate a market by sheer force of their networks. Many people would argue that Google, Facebook, Amazon, and perhaps even Netflix and Apple fit this category (though Apple itself would counter that there are many competitors in its mobile marketplace, most notably Google, which takes a much larger share of the overall mobile market if tallied by percentage of users on the Android system). Natural monopolies are often a product of network effects, meaning that the more users a platform has, the more attractive it is to new users. Barriers to entry, be they capital costs or simply getting there first and controlling the physical or virtual territory, are huge, and prevent others from entering the market in an effective way. That’s how the railroads and the telegraph and telephone companies of the past, and even some of the media giants of today, achieved domination. For such networked businesses, monopoly tends to be less the exception than the rule, unless there is government intervention of some sort to stop it (like the government intervention with railroads and telecoms, or the Microsoft antitrust case of twenty years ago, which allowed Google to rise).41
As sweeping as it is, the transformation I’ve described has only just begun. Theoretically, each of the largest Big Tech companies operates in a separate market. But in the Darwinian struggle for market share, they so dominate their spaces that they don’t just lay claim to a market, but seize the market entirely. Then, they use that power to move into new ones, creating vast meta-networks that are astonishing in their power and reach. Netflix, Amazon, and, even to a certain extent, Apple, who are relative newcomers to the entertainment business, are no longer content being the uncontested leaders in the video streaming market; now they are also dominant content producers, becoming in effect TV and movie studios, spending billions of dollars (in the case of Netflix and Amazon) on original television programming,42 a move that has left the previous titans of the entertainment business scrambling to match them (hence the recent massive industry mergers of AT&T and Time Warner). Google has lurched into the transportation business with its bid to create a self-driving car, and Facebook is trying to launch its own finance system with the creation of a bespoke cryptocurrency, Libra (Apple has already teamed up with Goldman Sachs on a credit card).
Big Tech, in other words, doesn’t just want to become a leader in one sector. It wants to become the platform for everything, the operating system for your life. This is arguably something that Amazon has done best so far. Today Amazon is so much more than “the everything store,” as journalist Brad Stone called it in his book of that name. It’s also a giant server farm, housing an incalculable volume of cloud storage, and a delivery service to end all delivery services. Literally. It’s moved on from shipping its own products (books, socks, appliances) to just about anything else imaginable, from Netflix DVDs, Comcast cable boxes, and Condé Nast magazines, essentially taking on FedEx, the United Parcel Service, and the United States Postal Service in its ambition to become the nation’s go-to for the shipping of packages and mail.
By taking over other distribution channels, it aims to be the platform for virtually all commerce. In the process, Amazon can cherry-pick the high end of the package-delivery business for itself, take a cut of everything else, and leave the costly, low-end deliveries to rural America to the U.S. mail.43 Already, Amazon has commandeered over a third of the cloud’s global capacity, to keep track of all of its vast operations. It even delivers unclassified intelligence reports for the CIA.
Most recently, Amazon has gotten into healthcare—a $3.5 trillion industry—working to disrupt how we buy prescription drugs, pick and purchase health insurance plans, and more, by drawing on its supply chain and trove of personal background data that could easily be supplemented with real-time reports from health monitors in homes, hospitals, and doctors’ offices.44 It is ambitions like this that have made Amazon possibly the deadliest of the killer apps in terms of sheer market power. No wonder that Jeff Bezos, with a net worth of $112 billion, has emerged the richest of the tech oligarchs—indeed, perhaps the richest person of all time.45
The network effect is one way the big get bigger. Another is simply by intimidating smaller players and stealing their intellectual property. I think often of a story that one Boston-based venture capitalist and serial entrepreneur told me about how when one brand-name Big Tech firm was considering hiring his firm for a data analytics venture, they asked him to create open-source code, ostensibly as an audition of sorts, and then poached his idea and took it in-house. He would speak only off-the-record, like most people in the industry, for fear of becoming persona non grata in the market.
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“I had emails showing that they had taken the code,” he said. “There was no way I could afford to fight them legally, but I went to my contact there and said, ‘Hey, what are you thinking?’ And he said, ‘You have to understand, we’re dealing with six times as much data per second as a large bank, but we make 1/100,000th as much profit on it. If we have to pay for anything, we don’t have a business model.’ ”
As the tech companies get bigger and then bigger still, they are increasingly using that market power to squash their rivals, by buying up competitors as fast as possible or by poaching their talent. There’s an entire sector of venture capital now devoted to funding start-ups as “talent farms” for Big Tech, rather than successful entities in their own right. Google, Apple, and others have been known to sign cartel-like “no-poach” employee agreements with rival firms,46 effectively restricting workers from changing employers to secure better jobs elsewhere.
As awful as all this is for individual start-ups and workers, it is proving no less destructive for the economy that depends on them. For the past century, a new wave of start-ups has risen every twenty years, refreshing the ranks of the leading American firms and improving the country’s global competitive standing. Not anymore. As Big Tech has risen, early stage venture capital and the number of start-ups they fund have plummeted—taking the job creation that our economy depends on right along with them. According to the Kauffman Foundation, the number of companies less than one year old declined by a shocking 44 percent between 1978 and 2012, the exact period that modern Silicon Valley was rising.47 A number of other academic reports show the same trend line, and not just in one industry, but in all of them.48 As the economist Robert Litan of the Brookings Institution put it in his study looking at the entry and exit of new firms into the market, “Business dynamism and entrepreneurship are experiencing a troubling secular decline in the United States.” His research shows that while it’s been declining for decades now, it took a particularly sharp plunge in the mid-2000s, which is when Big Tech really boomed.49
While there are many reasons for the trend—from demographics to mobility to immigration—many economists feel that the rise of a technologically driven superstar economy, in which a few large players have taken an increasing share of the economic pie over that time, is a big part of the story. According to the Roosevelt Institute, “Markets are now more concentrated and less competitive than at any point since the Gilded Age.”50 And, despite Silicon Valley’s reputation for cranking out the New New Thing, nothing truly transformative has come out of the biggest technology firms in a decade or so; even Apple, a brand synonymous with innovation, hasn’t released a new groundbreaking product since the iPad in 2010, opting instead to simply add new bells and whistles to existing product lines.51 So where are the new innovators of today? All too often, strangled in their cribs.
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GIVEN ALL THIS, one might ask why the Big Tech firms haven’t yet been treated as monopolies by the federal government and broken up like Bell Telephone of yesteryear, and Standard Oil before that. Or at least transformed and constrained by the threat of regulation, like Microsoft was twenty years ago. Because of a forty-year shift in our economic thinking around antitrust policy.52 Or, more concisely, because of one man: Robert Bork. While infamous for being voted down by the Senate in his bid for a seat on the Supreme Court (and for firing Archibald Cox in the Saturday Night Massacre of the Watergate scandal years before that), Bork has achieved far more lasting importance for his work as the author of the 1978 book The Antitrust Paradox, which provided the legal rationale for Big Tech’s unimpeded global dominance and became the basis of a 1979 Supreme Court decision that is still being upheld today. Monopoly, Bork argued, should no longer be defined as it always had been under the Sherman Act, as a company that took unfair advantage of a commanding market position to stifle competition. Instead, monopoly occurred when a company unfairly boosted prices it charged consumers. If a dominant player didn’t raise prices, according to Bork, it was not engaged in monopoly.
Big Tech firms, however, have no need to raise prices, because they have a business model by which they are not paid in money; they are paid in data, via a system of barter. And in this system, many of the rules of capitalism itself seem not to apply. Adam Smith, the father of modern capitalism, believed that you needed transparency, equal access to information, and a shared moral framework for markets to work. In the digital age, those three things are rarely, if ever, in force.
In addition to “free” or cheap products, the monopolies of today are often praised for the convenience (one of the perceived benefits of monopolies) they offer. But people tend to overlook the fact that at the same time, they also narrow consumer choice, and, more important, reduce economic competition. Data has no monetary value in the sense that the owner can’t himself sell it to anyone directly (at least not yet). It isn’t listed as an asset on the balance sheets of companies that grow rich from it (though many regulators believe it should be). But in aggregate it is plenty valuable to the Big Tech firms that resell it to advertisers at a staggering profit.
Exactly how much a piece of individual data is worth varies. Google and other Big Tech firms have hired most of the top data economists in the world, which means that there’s little neutral or transparent research being done to reveal just how valuable that data really is. But one recent study, done by the security analysis group Sonecon and commissioned by the Democratic strategy group Future Majority, has attempted to put a rough estimate on the wealth generated by the mining of personal data.53 They found it was worth a whopping $76 billion in yearly revenue, not just for the usual Big Tech suspects, but for the other entities—credit bureaus and healthcare and financial firms—that mine it. The study found that sales derived from data harvesting have grown by 44.9 percent over the past two years. That’s faster than in the online publishing, data processing, and information services industry itself, according to U.S. Bureau of Economic Analysis data. If the current trends hold, our data will be worth $197.7 billion by 2022—more than the total value of American agricultural output. That is resource extraction on a massive scale. If data is the new oil, then the United States is the Saudi Arabia of the digital era. The leading Internet platform companies are the new Aramco and ExxonMobil.54
Data is the new fuel for growth in multiple industries, from manufacturing to retail to financial services. But unlike other assets, it doesn’t necessarily fuel job growth, but rather, profit growth. And those profits tend to be diverted directly into executives’ and shareholders’ wallets. A 2018 J.P. Morgan study found that most of the money brought back to the United States from overseas bank accounts following the Trump tax cuts went directly into stock buybacks that enrich the wealthiest people and companies.55 The top ten U.S. tech companies alone spent more than $169 billion purchasing their own stock in 2018, and the industry as a whole spent some $387 billion.56
While Big Tech has done the bulk of those buybacks, and has created vastly more wealth than any other set of companies in history, they’ve also created many fewer jobs relative to their market capitalization than any previous generation of business giants. In 2009, the twenty most valuable companies in America had 1,790 employees per $1 billion in market cap; today they have 656.57 Perhaps the starkest example of this trend in recent memory: When the social media firm WhatsApp was sold to Facebook in 2014, it had a market cap of $19 billion—more than any number of Fortune 500 firms—and only thirty-five employees.58 Facebook has about a third of the employees that Google does, and Google has many fewer than Apple, which in turn creates fewer jobs than Microsoft, which creates fewer than GM. And that’s not taking into account the jobs these companies disrupt—by March 2019, for example, U.S. retailers had announced more than forty-one thousand job cuts, more than double the number from the previous year, in large part due to the Amazon effect.59
The botto
m line is that most technology businesses simply don’t require many employees (think of all the robots roaming around Amazon warehouses), and this will only become truer with time. It’s been estimated that globally, 60 percent of all occupations will, in the next few years, be substantially redefined because of new disruptive technologies.60
It’s not only low-level or menial jobs that will be automated—it’s all jobs. In fact, there’s a case to be made that “knowledge work”—radiology, law, sales, and finance—will actually be automated faster than more physical jobs in areas like healthcare and manufacturing. Moreover, even in fields where humans can’t be replaced entirely, the gig economy and the “sharing” economy—driven, of course, by tech firms—have dramatically increased the number of contingency workers without benefits.61
Beyond these relatively easy-to-track numbers is perhaps a deeper and more worrisome issue, which is the way in which data-driven capitalism has turned people into the factory inputs of the digital age. Companies used to rely on people not only as labor, but as customers that supported demand for their products (and thus demand for new labor). In the age of Big Tech, advertisers and businesses that purchase the data analytics and eyeballs are the customers. People are the product. In this sense, Google and “big data” represent a core break with the capitalism of the past.62
It’s a shift that is almost metaphysical, as we move from an economy based on the tangible to one based on the intangible. But it is one that was perhaps inevitable, as we evolve into a new era of data-driven hyper-capitalism. Decades ago, in his book The Great Transformation, historian Karl Polanyi identified three “fictions” that needed to be sustained in order for the market economies of the industrial revolution to thrive.63 First was that human life could be rebranded as labor. Second was that nature could be rebranded as real estate. Third was that free exchanges of goods and services could be rebranded as money.
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