Sharp Tech with Ben Thompson - The Past/Present/Future of Tech Antitrust Arguments and More on TSMC in Arizona

Episode Date: December 15, 2022

The FTC's approach to Microsoft-Activision as a microcosm of broader questions and challenges, what Bell Labs history can tell us about future solutions, and follow-up questions related to TSMC in Arizona and America's approach to onshoring.

Hello and welcome to Sharp Tech. I'm Andrew Sharp, and this is a free preview of today's episode. Hilariously enough, someone goes to the European Commission and asks about the FTC suit. And they come back saying, yeah, Microsoft didn't make any promises. They were very clear about this. Well, look, I'm sorry, but Microsoft's hands as far as monopolization is concerned. They are not blameless victims over the last 30 years. So they're...

So we get to lie about them? also, by the way, Microsoft got their rear end absolutely handed to them in terms of browsers. Chrome is now dominant by far. It's the browser that everyone writes to. And there's this like, this is the same thing with Facebook, Instagram. Like TikTok is handing it to Facebook as far as user sort of attention goes. We've talked multiple episodes about this. Why is there such a fear of competition?

What do you mean by fear of competition? Or a lack of trust, a lack of trust that competition. competition is going to materialize. Okay. So I would say the concern is with concentration. And the way to oppose this merger is to start from the premise that all of these giant corporate mergers have gotten out of control over the last 20 years. And it perverts the idea of a free market where you're supposed to have a level playing field and the company with the best product wins. If all these other industries, and I'm workshopping this particular take, so bear with me.

But I think the more people see markets that are dominated by one or two companies throughout American life, the more the American dream starts to feel like a little bit of a lie. And so I just think on principle fighting these gigantic trillion dollar companies as they try to hoover up more industries. And, you know, Amazon, they used a tremendously successful cloud business to, create a tremendously successful fulfillment business. And so you look up and Amazon is one of the most powerful companies on the planet. And I mean, Amazon, Apple, Google, you're talking about some of the most powerful companies in the history of the world. And there's not really any way to chip away at that power because they're so successful and have all these different modes at this point. and somewhere along the line,

I'd like to throw a wrench into the process and try to just like pause this trend we've been witnessing over the last 20 years. Yeah, and I obviously almost completely focused on tech, but I agree with you broadly, but like the problem here is the manner in which these tech companies accrue power is so fundamentally different than like one hospital in the city

buying the other hospital in the city. Right, that's an actual constriction and control of supply. All our monopoly laws and antitrust laws are by and large about the supply side because that's the way you built monopolies in the real world. Tech doesn't work that way, at least on the internet. On the internet, it's about you have the most users and that's what gives you control. And those users are not locked in except arguably with phones, which is why that's where I have the bigger issue with. That should be priority one.

Yeah. Like, again, I make this point again and again, but I've, I've, you know, get to better way make it. Like everyone gets super mad when Larry Page would say competition is only click away. But it really is, right? You can go to Bing.com. You can go to chat GPT. You can go to Yelp, get the app and search for a restaurant directly.

There was a huge thing when I started to techery. Google is in big trouble because vertical search is coming. People are just going to go to dedicated services and apps and they're going to do that. And Google responded by changing their search results and getting into local and, you know, stirring up a whole bunch more controversy. like they're acting anti-mopolistic, but people, they just memory hole the speculative take that Google is doomed because this local search is going to come along. And it was totally wrong. Now, in this case, it was totally wrong in a way that favored the larger company.

But like, here's the question. Why is the FTC not to put myself on a pedestal, but we have fundamentally different perspectives on how the market is structured today and how it's going to play out in the long run? Why do they get to say, based on our projection in 10, 15 years, we are going to stop something today? Yeah. It's a fair objection. That's why I enjoy your arguments are all cogent and compelling. And I think the only way to disagree with what you're arguing is to say the FTC is trying to get in front of a court and make the court decide whether to allow a trillion dollar company to buy a hundred. billion dollar. Right, which I don't think it's going to work

at court. Like I think I It probably won't lose. Which by the way, there's a separate discussion about FTC just setting their credibility aflame by you know, with some of these lawsuits. I think that I actually think it's incentivizing larger and more audacious acquisitions. Ooh. Interesting.

No, like look at my, look at Facebook. So what of my takes that I've dropped on a few different podcast is Facebook should buy Shopify. Like, because that solves the ATT problem. If they own Shopify, they can, it's all first party data. Right? You see, this is where I object because Shopify wants to compete with Amazon and they're just doomed. No, I know, I know because Apple screwed them, right? And so my take is like, again, not from a good for society perspective, from a business analyst perspective, Facebook should do it.

Why would Facebook not do it? It's not a, it's not a directly competitive business. It would be a vertical merger. And the answer is well, because they're for sure going to get sued by the FTC and go to court. If the FTC is going to sue them for buying a VR app, might as well make the FTC. effort worth it, right? For a transform of acquisition. And I think that's exactly what's going to happen. I think you're going to get some massive acquisitions that are really going to be upsetting. And they're going to do it because the FTC is making the cost of doing it zero.

If you're going to fight an acquisition, might as well make it worth it. Yeah, well, we'll have to see what it all turns into. By the way, that's pure speculation on my part of the Shopify thing. It just makes total sense. Well, no. And look, I'm rooting for Shopify. and so if they can't make it on their own, I would love to see them team up with Facebook

and try it that way. Facebook, I know like 10 different lawyers at 10 different firms who have worked for Facebook over the last like a few years or so. They have a lot of business available. Yeah, a lot of business in Washington, D.C. So we'll see how it all goes. I did like this note from David.

He said, we hear over and over that competition is good for society. It supposedly brings lower prices and technological. innovation. I would like to challenge that dogma just a bit because in my opinion, a lot of technological innovations are actually coming from monopolies. Number one, the U.S. military and universities gave us the internet. Bell Labs gave us the transistor, Unix, and the C programming language. Google and Facebook are contributing a lot in AI research, distributed computing, etc.

instead of trying to break these companies up, should we not try to regulate them and capture more of their profits and redistribute them for the good of society? Please note, I am French, so maybe that's why I sound like a socialist. The last line is why I had to read the email that really cracked me up.

So thank you, David. I agree, great email. I appreciate the admitting, you know, admitting to being French and socialist. So I didn't have to say it. You know, obviously as an American, And this is ridiculous. Now, in all seriousness, like, there is a real fundamental tradeoff here.

So like taking about the privacy sort of thing, like one of the reasons to push back against super hardcore privacy regulation is the only companies that are going to actually be able to exist within that framework, you know, do all the, you know, the compliance and have workable business models are the large companies that are already dominant. The most ridiculous argument over the last few years is with people who said. The privacy problem is we have insufficient competition. If we had more competition, we have better privacy. No, we wouldn't. We would have much worse privacy because the incentive to make money, we have a demonstrated, I think we, in my opinion, we have a revealed preference that customers don't actually don't really care that much about this sort of stuff.

And, you know, and so if you favor privacy and you favor regulatory porches, and ATT is a regulation, right? It's a private regulation, but it's effectively a regulation. Then, yeah, Apple can do that because they have monopoly or they, or they examine. exist in a duopoly as far as as mobile phones go. So like David does have his finger on something, particularly in terms of, of regulation. Now, I would use the example of the very large French company, which, oh, wait, no, all the large French companies are these old are not, not these innovative sort of tech companies.

Come on, Revlon. They had a good run there for a while. Right. Exactly. They did for a while. And, and now, this is like, there's just an empirical fact that great. competition leads to larger and more innovative companies, which I think for tech,

given the way tech changes, is a good thing. Like, I do, you know, I do share, I do worry about antitrust stuff. Like the Department of Justice's lawsuit about Google and Apple, I support, I think they're probably going to lose, but like I'm not 100% against this.

I supported the European Commission in their case against Android because I think the way that Google was leveraging their agreements with Android and OEMs was very problematic. Just as, by the way, you go back to the Department of Justice v. Microsoft, the real problem there was the way Microsoft was dealing with the OEMs. Like, that was the actual really bad anti-competitive stuff.

I think bundling a browser was, you know, this stuff is sort of connected. But I'm not anti this sort of, but I think you have to be really careful and understand what the dynamics and drivers are. Now, as far as innovation, Bell Labs is super interesting. It really is, you know, because the, what was in the, the volume of something. that was invented there was so compelling, was really interesting. There is one thing that's important, and this is a huge, huge checkmark in regulation and regulators' favor is the reason why all of that innovation could be shared broadly is because of an antitrust lawsuit, where they had to make all these innovations broadly available

license-free. And so anyone could take what was invented there and could build new companies. And, you know, what's interesting is that law. lawsuit against AT&T was widely derided at the time as a total failure and embarrassment for the Justice Department when actually it was one of the single most important and impactful deals ever. And it just, it gets at the point that regulators aren't good at predicting the future. They don't really know what's going to happen. And they got it totally right here by virtue of everyone saying they failed. And everyone, you know, as a failure.

You didn't break up AT&T. You didn't do the, all you did was got these concessions on the side. Those concessions on the side are actually what mattered. And I think this is actually broadly applicable. All right. And that's the end of the free preview. If you'd like to subscribe and receive every episode of this show, you can do so by subscribing to Stratecre Plus.

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