Commentary

Why Elizabeth Warren Wants to Break Up Big Tech

Earlier this year, Democratic presidential candidate Elizabeth Warren posted an online missive in which she laid out her plans to break up big tech (notably Amazon, Google and Facebook). She noted: “Today’s big tech companies have too much power: too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

We here in the West are big believers in Adam Smith’s Invisible Hand. We inherently believe that markets will self-regulate and eventually balance themselves. We are loath to involve government in the running of a free market.

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In introducing the concept of the Invisible Hand, Smith speculated that,  “[The rich] consume little more than the poor, and in spite of their natural selfishness and rapacity…they divide with the poor the produce of all their improvements. They are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.”

In short, a rising tide raises all boats. But there is a dicey little dilemma buried in the midst of the Invisible Hand Premise, summed up most succinctly by the fictitious Gordon Gekko in the 1987 movie "Wall Street": “Greed is good.”

More eloquently, economist and Nobel laureate Milton Friedman explained it like this: "The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.”

But here’s the thing. Up until very recently, the concept of the Invisible Hand dealt only with physical goods. It was all about maximizing tangible resources and distributing them to the greatest number of people in the most efficient way possible.

The difference now is that we’re not just talking about toasters or running shoes. Physical things are not the stock in trade of Facebook or Google. They deal in information, feelings, emotions, beliefs and desires. We are not talking about hardware any longer, we are talking about the very operating system of our society. The thing that guides the Invisible Hand is no longer consumption, it’s influence. And, in that case, we have to wonder if we’re willing to trust our future to the conscience of a corporation?

For this reason, I suspect Warren might be right. All the past arguments for keeping government out of business were based on a physical market. When we shift that to a market that peddles influence, those arguments are flipped on their head. Milton Friedman himself said, “It [the corporation] only cares whether they can produce something you want to buy.” Let’s shift that to today’s world and apply it to a corporation like Facebook: “It only cares whether they can produce something that captures your attention.” To expect anything else from a corporation that peddles persuasion is to expect too much.

The problem with Warren’s argument is that she is still using the language of a market that deals with consumable products. She wants to break up a monopoly that is limiting competition. And she is targeting that message to an audience that generally believes big government and free markets don’t mix.

The much, much bigger issue here is that even if you believe in the efficacy of the Invisible Hand, as described by all believers from Smith to Friedman, you also have to believe that the single purpose of a corporation that relies on selling persuasion will be to influence even more people more effectively. None of the most fervent evangelists of the Invisible Hand ever argued that corporations have a conscience. They simply stated that the interests of a profit-driven company and an audience intent on consumption were typically aligned.

We’re now playing a different game -- with significantly different rules.
1 comment about "Why Elizabeth Warren Wants to Break Up Big Tech".
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  1. Charles Pierce from Private, September 22, 2019 at 9:48 a.m.

    So, LET'S PLAY A GAME. Trust me, it's worth playing.


    IMAGINE an industry with only TWO competitors left, and these players are the only source for people to obtain the industry's product. There are a few things unique to this industry:

    1) The two competitors, ironically, collaborate without being sued for Antitrust violations (so far, it is a REAL industry) to decide the rules on who can join their industry - they decide the rules on how their industry works..the qualifications to join the industry, how much capital can be raised and in what manner, and they control 100% of the output of the industry.


    2) This industry, starting in the early 1900s, actually convinced government to pay money to get their "brand" out to their consumers. This unnecessary expenditure is likely in the hundreds of millions of dollars in cost each year.

    3) Final Fact: These 2 competitors have COMBINED, no matter who won the right to sell their product, to actually run a $22 Trillion dollar loss over the span of their domination, which has left a tremendous debt for them to carry.

    By now, maybe, you realize this real industry which is much more dominant than Facebook/Google/Amazon - AND currently has put a $64,000 liability on every person in the US (babies to grandparents) - is Politics.


    The two competitors are the Democrat and Republican parties.


    So, I would be a little suspect of politicians, like Elizabeth Warren (and others), who want to "break up" or redo the businesses of large companies. I mean, given the safety of the dominant position their companies hold in their marketplace.


     


     


     


     


     

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