History repeats itself and right now, the tech industry is starting to look a lot like it was in the 1970s. In the 70s, the tech was dominated by 2 firms: AT&T and IBM. AT&T’s telephones were in every home in America and it controlled pretty much the full gamut of communications – local, long-distance, equipment, infrastructure… you name it. Meanwhile, Big Blue was ostensibly the only name that mattered in the early days of mainframe computing.
Any of this sounding familiar? Alphabet, Apple, Amazon, and Meta (FAANG is dead, so we’ll call them MAAA) represent a back-scratching oligopoly that fights vigorously for wallet and mind share, however, is certain to “play fair” with the other 3 such that any emergent competition is squashed. The modern internet kind of feels like 4 websites all linked to the other 3. We are trapped within this limited ecosystem for our social media, communications, entertainment, equipment, and even infrastructure. But why is this a problem?
By the middle of the 70s, the US government had started trust-busting efforts to break up these two behemoths as both AT&T and IBM’s practices were viewed as anticompetitive. Ultimately, they were too powerful and had too strong a hold on their markets to allow for fair competition. This prevented new entrants from innovating on offerings, creating legitimate competition, and offering better products and services to consumers. When monopolies and oligopolies exist, capitalism doesn’t work very well, since the big guys can use all kinds of shitty tactics to keep the little guys from doing anything new and disruptive. In short, it stifles innovation.
Increasingly, we’re seeing antitrust lawsuits, fines, new regulation, and skepticism being brought towards MAAA by the US, EU, and countless governments all over the world. However, these efforts are not easy, as regulators are often fighting uphill battles against extensive lobbying efforts, overpriced lawyers, and sneaky tactics to sway public opinion. Currently it seems like for every win against big tech, we hear about just as many losses.
In 1974 the US Department of Justice filed a lawsuit against AT&T. The suit alleged that their monopoly had stifled innovation & competition, resulted in higher consumer prices, and hindered the growth a smaller companies. However, it would take nearly a decade for this suit to be resolved and another decade for the implications to land.
Big Tech has repeated itself and in doing so, failed us on its promise to be innovative. Once again, MAAA have become beacons of protectionism more than innovation and their most impressive modern accomplishments amount to creating closed ecosystems that users can’t escape and that bar out any competition. But where is this all going?
In 1982, the US and AT&T reached a settlement that would reshape the company and US telecom. AT&T slowly divested itself of many businesses, allowing for regional “Baby Bell” companies to take over operations and the emergence of countless small businesses that would make the 1980s one of the most innovative decades for telecom and computing.
IBM also had a case brought against them, but never suffered the same fate. The case was dismissed in 1982, however, the ripple effect of the AT&T decision would soon be felt. The vacuum created would allow the emergence of countless personal computing companies that would begin to nip at the heels of IBM. Through the late 80s and early 90s, IBM’s failure to innovate caught up, as their mainframe division suffered heavy losses to emerging Unix open systems and the PC revolution. IBM would slowly divest of much of their computing business and gradually (and barely) transformed themselves to a business services provider.
Two monopolizing companies, two different paths, two similar outcomes.
Antitrust debates are going strong right now in many countries. People point to the anticompetitive lack of innovation currently occurring in MAAA. Many more acknowledge the necessity of big tech; that with China’s emerging powerhouses (Huawei, Tencent, Alibaba, JD) and the nature of how emerging tech works, to break up US big tech would be to succeed victory to China. Supposedly, the big data requirements of machine learning necessitate massive tech oligopolies to allow for competitive models to be built
This is the dumbest thing I’ve ever heard.
Look at OpenAI. Though researching for years, it’s felt like overnight that Chat-GPT emerged and presented a legitimate challenge to the once untouchable Google search business. This is because the big data argument is bunk. Data is valuable, yes, but it’s also everywhere. And we are rapidly approaching the point where data access is democratized enough to allow kids in their parents garage to build competitive innovation just like computer and electronics startups in the early 80s.
Big Tech is once again dying and there are 2 ways this is going to go down. Governments may toughen up and continue down the antitrust path to start to break up these behemoths much like AT&T of the 80s, leaving room for a flourish of novel startups and digital innovation. However, even if government cowers away, it may take a little longer but these same startups will simply start to slip through the cracks and slowly, then quickly, each MAAA’s lunch. History will repeat itself.
We are witnessing the end of this era of Big Tech and I for one, couldn’t be happier. Big Tech has failed us. They gave us tremendous innovations during their rise to power, however, have suffered the same fate as most in the capitalism game; Big Tech has grown fat, lazy, and obsessed with its own business models, failing to evolve, and waiting for the slow release of death that regulators or entrepreneurs will soon bring.
Which is still, sadly, not soon enough.