Let me see if I understand Elizabeth Warren’s latest campaign promise (or threat, depending on your point of view).
Amazon and Google, the most innovative companies of our age, are a threat to innovation.
We know this because there are fewer technology startups, and we ruled out every other conceivable explanation. It has nothing to do with Silicon Valley’s anti-growth policies driving rents through the roof, nor San Francisco treating tech firms like cash registers. The regulatory concrete Washington has poured over innovation-starved sectors like healthcare and finance doesn’t inhibit innovation at all. Nor Sarbanes-Oxley souring the IPO market. Nor senators campaigning on the tortures they wish to inflict on successful tech companies.
No, the root cause is Google’s search rankings and Amazon’s same-day shipping. These have caused a national crisis: we have the wrong number of startups.
What will restore the right number? Anti-monopoly regulation, implemented by the monopoly FTC, the monopoly SEC, and the monopoly DOJ.
And of course the Senate. The same body that recently invited Mark Zuckerberg to write the regulations needed to bring Facebook to heel.
Does the buck actually stop?
My administration would restore competition to the tech sector by passing legislation that requires large tech platforms to be designated as “Platform Utilities.”
There’s a certain irony in a senator wanting to get out of the legislative branch and into the executive so she can pass legislation. But let’s suppose we give her the job, and she gets her legislation through.
What outcome can we expect? When will we back to the “right” number of startups? What is the “right” number, anyway?
Who’s accountable if her surgery doesn’t cure? She promises if you like your two-day shipping, you can keep your two day shipping. If that doesn’t prove to be the case, will Mrs. Warren face fines or imprisonment? Will she be fired?
Of course not. She knows us voters too well. We get very excited about important causes, but we reliably forget to ask for any measurable success criteria. And if the result is an obvious failure, we blame the Republicans or the speculators or the lobbyists — anyone but the person we hired to get the job done.
So she’s got a good gambit here. The potential upside is maybe this helps win her the presidency. And she’s claiming 5% of the annual revenue of any company that crosses her — one can buy a lot of headlines and political favor for that kind of money.
The potential downside to her is — well, nothing. If it transpires Google’s search exists only because of its ad business and can’t be cleaved from it, or startups continue to dwindle, she faces no penalty. Suppose Amazon would otherwise have developed a wildly disruptive health care product, and after Senator Warren’s axe they don’t. We would all be worse off, but we wouldn’t even know it.
We’ve seen this before: privatized profits, socialized losses.
Is she right about the problem?
She’s not wrong that the tech giants are hard to compete with. Their market dominance allows them to set up barriers to competition they wouldn’t otherwise have.
The government calls these practices anti-competitive, which is politician-speak for competitive. An ill-defined crime that doesn’t infringe any rights of any identifiable victim, it’s ultimately whatever officials say it is.
There’s no question the tech giants’ tactics have downsides, and not just to would-be competitors. Google, Facebook and Twitter’s dominance over mass communication raises all sorts of concerns for democracy and civil liberties.
But as a doctor once cautioned me, there’s no problem so bad we can’t make it worse. No one can say how a given intervention will affect millions of people’s lives, much less claim all those effects when added up come out positive.
Would we be better off with more startups and more innovation? One person’s “innovation” is another person’s “disruption,” so it depends whom you ask. The economy and society are evolving today faster than ever before in history, and downsides are easy to find — not least because Senator Warren is simultaneously crusading against them. Home prices and student debt are rising, union power is declining. Money plays an increasing role in Washington politics as more of the economy orbits Washington.
A long-running scam
One thing that hasn’t changed much is the anti-trust scam. 130 years ago, Rockefeller transformed America’s petroleum supply chain much like Bezos has transformed retail. Standard Oil drove prices of kerosene down 69% from 1870 to 1885, and another 26% by 1897. Kerosene replaced whale oil as the dominant lighting fuel, so America’s whaling fleet shrank 80% during that period.
Rockefeller’s competitors turned to Washington to do what they’d failed to do in the marketplace. Legislators obliged them with the Sherman Antitrust Act of 1890, claiming then as now to be protecting consumer choice.
Ironies abound. Standard Oil, Google, and Amazon won their huge market shares because consumers made their choices and continue to make them every day. Elizabeth Warren wants to rewrite those choices to impose her own vision of the market.
Her basic sales pitch is irrational. If a big monopoly is a problem, how can a bigger monopoly be a solution?
Google is what it is because we all vote for it ten times a day; does anyone really believe Washington is more accountable to the people? Even sitting senators apparently don’t influence the senate much, since Senator Warren wants to be President so she can pass legislation.
In fact, this is the same Elizabeth Warren who decries Washington’s lack of accountability:
Washington works great for the wealthy and the well-connected, but it isn’t working for anyone else.
We have to do something
Big tech poses some real problems. It’s easy to feel that we have to do something, Senator Warren is proposing something, therefore that’s what we have to do.
It’s just not a responsible move. “First, do no harm” is as important a principle in public policy as it is in medicine, and her proposals have at least as much potential for harm to consumers as for good.
If you’re nevertheless swayed by her job application, take her at her word about the benefits she’ll deliver. Start asking for measurable success criteria on specific timeframes, and real consequences if those goals aren’t met.