Are major tech companies too big to escape regulation?
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U.S. tech companies are facing increasing scrutiny as fake news and advertising regulation becomes a more prominent issue. Their global dominance is inarguable: Facebook has the eyeballs of one-quarter of the world’s population, Amazon rakes in half of all the money spent online, Google has 81 percent of the search market and Apple is the world’s most valuable brand in terms of marketing, and very often, market cap.
These companies are the subject of “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” which comes out next week. Marketplace Tech host Molly Wood talked to author Scott Galloway, a marketing professor at New York University’s Stern School of Business, about how these companies became so powerful and whether we can do anything to stop them. Below is an edited excerpt of their interview.
Molly Wood: In this book, you essentially talk about how we, the public and the tech media, I’m sorry to say, look at these four companies practically as deities. How did this come to be?
Scott Galloway: Well, they’re impressive companies. We now all kind of worship at the altar of innovation versus kindness or character. And these are the most innovative organizations in the world, and they’ve created tremendous shareholder value. And each day, as consumers, we get a lot of reward from these companies.
Wood: And then you also argue that we may have been fooled a little bit in terms of their benevolence, that these companies also treat employees unfairly, evade taxes, sell our information. The way the business ecosystem is set up, do you think it’s possible to grow into a major tech company without doing these things?
Galloway: I think these are good people, or statistically they’re probably no less good or more good than any other group of people. In a way, they kind of create an illusionist trick. They wrap themselves in a very progressive blue, neon blue, pink or rainbow blanket because as a whole, progressives are perceived by the marketplace as nice but weak, whereas conservatives are seen as smart and mean. And if you’re Microsoft and the leaders of that organization are seen as smart but mean, regulators are more likely to step in. Whereas Facebook, I think, is able to skirt more hard-core, rigorous scrutiny because everyone wants to lean in. The message coming out of there is very aspirational. I think Tim Cook, first openly gay CEO of a Fortune 500 company, is impossible not to like.
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Wood: Do you think that’s going to last? Do you think the illusion of these companies having these personalities is starting to be pierced?
Galloway: Just in the last few weeks, the worm has turned against Big Tech, specifically with the news coming out about Russian entities using Facebook as a platform or kind of weaponizing Facebook, if you will. I think people are starting to regurgitate on the Big Four and starting to get angry, and I think for the first time, they’re going to start playing offense against these companies instead of just worshipping them.
Wood: Do you think there really would be a regulatory push against them? I mean certainly Europe has been on to these companies for a while, it would seem. But the U.S. doesn’t really have a long history of that kind of crackdown.
Galloway: Yeah, and you’re absolutely right. The data supports what you’re saying — 20 or 30 years ago, there were about, on average, 20 antitrust or ATC or FTC investigations filed against companies during mergers. Now we average around three. But to your point, it’s going to happen, and it’s likely going to come out of Europe in the form of a monster fine. I think you’re going to see the first $10 billion plus fine against one of these companies in the next six to 12 months because the U.S. garners a lot of benefit from these companies. They’re a source of national pride, they’re great for our brand, the real estate in Palo Alto gets driven up, these schools can send their kids and justify the tuition we charge at NYU Stern and Stanford because these companies recruit a ton of our students. So the regulation, the big fines, I believe are going to come out of Europe first. But I also think there’s a movement afoot here in the U.S., especially around this Russia stuff.
Wood: People generally use Google, they use Amazon unless they consciously choose not to use them. How much power is left for the American consumer to vote with these clicks and dollars?
Galloway: You’d think the consumer does have a lot of power, and you could argue that Google is sort of one click away from going out of business, that if two kids in a dormitory at MIT do come up with a better search engine, that Google could fall pretty fast. But having said that, I think the only the only thing that stands between these companies and their increased dominance at this point is probably government intervention and regulation, because they have kind of made the jump to light speed where their size and their strength kind of creates more size and strength, access to more human and financial capital, lower cost, and they just get stronger and stronger. And it’s very hard to kind of breach the walls that they have built around their core businesses. Having said that, history shows that when people like me say these companies are unstoppable is about the time they start to go into structural decline. So we’ll see, but I personally don’t see anything getting in the way of these companies other than maybe themselves or some sort of government intervention.
Wood: And then the back half of your book is almost like a how-to guide to use these strategies in your life or your business. I mean, is there an argument that their tactics are still kind of the platonic ideal of capitalist company building?
Galloway: They’re great at what they do. I think there’s a lot we can learn, whether it’s trying to figure out a product that ages in reverse, where the more you use it, the better it gets. Unlike when you buy a tube of toothpaste or buy a car, the moment it begins providing utility and you begin using it, it declines in value. When you type a search query into Google, it gets better for the 3 billion other search queries that day. When you turn on Waze, it gets better because it begins GPS locating you, assuming you’re a point in traffic and updating the algorithm to help other people get to their destinations. So there’s a great deal that we can all learn from these companies.
Wood: Do you use any or all of them?
Galloway: Oh, every day. Love them. I think they’re outstanding companies, and I’m addicted to them, whether it’s checking my Instagram feed, or my iPhone is practically an appendage at this point, and whenever I need an answer that I trust more than anyone in the world, I go to the Google search query box.
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