The Vergecast - Tim Wu thinks it’s time to break up Facebook

Episode Date: September 4, 2018

Best known for coining the phrase “net neutrality” and his book The Master Switch, Tim Wu has a new book coming out in November called The Curse of Bigness: Antitrust in the New Gilded Age. In it, he argues compellingly for a return to aggressive antitrust enforcement in the style of Teddy Roosevelt, saying that Google, Facebook, Amazon, and other huge tech companies are a threat to democracy as they get bigger and bigger. Nilay sits down with Wu for this week's interview episode of The Vergecast. Learn more about your ad choices. Visit podcastchoices.com/adchoices

This episode of The Vergecast is brought to you by Audi. The electric car has always raised question. Can they contend with the elements? What's the range? High speed charging, long range capabilities, and quadrower all-wheel drive, the fully electric Audi. E-Tron could be the answer. Visit AudiUSA.com slash E-Tron to learn more and stay informed.

Hey, everybody, it's Neely from the Verge cast. This is the second of our new interview episodes we're going to start doing earlier in the week. It is Monopoly Week at the Verge. We have a whole series of articles coming out about antitrust law, monopolies, regulating big tech. And I got to sit down with Tim Wu, who you might know is the guy who invented the phrase net neutrality. He also wrote the book, The Master Switch, which we have probably talked about 5,000 times in the Burgecast for the past few years. Tim has a new book coming out in November called The Curse of Bigness, Antitrust, New Guilded Age. It is all about how we used to break up big companies like Standard Oil and AT&T.

Went after Microsoft, we stopped doing it, and he thinks we should start doing it again. So Tim and I talked about how antitrust law works, where it went wrong, how we can fix it, And honestly, we talked a lot about breaking up Facebook. Check it out. All right, we're here with Tim Wu, who is the coiner of the phrase in that neutrality. The last time we talked, which was years ago, you had some regrets about this phrase, but it has endured beyond your doubts. You also wrote The Attention Merchants.

I'm just a book about online advertising. You wrote Master Switch. And you have a new book coming out November called The Curse of Bigness, which is about antitrust law. Welcome, Tim. How are you doing? Thank you. Great. So it's Antitrust Week at the Verge, which I think we're actually calling Monopoly Week now.

It's a slightly more interesting name. And I know your book isn't coming out in November, but I really wanted to bring you on and sort of talk about the state of play in regard specifically to the big tech companies. I know you talk about them in your book. You specifically talk about breaking up Facebook as something that might be a desirable outcome. But I want to start with what's happening in the news right now, which is that Donald Trump, our president, is tweeting that he wants to regulate Google. There is animus towards big tech on sort of the right of this country. And it seems to align in a strange way with the idea that these companies are maybe too big and their power needs to be checked. Are you seeing that as in alignment?

Are you seeing what's happening in antitrust in a different way? I mean, one thing that Trump does, I hesitate to ever say good things about him, but he does have his finger on populist impulses. And one of the historic things you see is when business gets really big and feels very unaccountable. there starts to be this kind of popular desire for, you know, some more control or, you know, they need to be accountable. And frankly, Trump has been able to tap into that in all kinds of places. It's like sometimes it's China and trade is overwhelming us. And sometimes it's like Google, you can't control what the searches look like. You know, it doesn't make sense necessarily.

But he really does have his finger on something. So what inspired you to write a book about antitrust? I mean, we've talked about the net neutrality stuff. You were at the FTC for a while. Why now is, do you think there's a time for a book about antitrust and rethinking of that? You know, it's a good question. I think everything has its cycle. And the moment has come where I think democracy itself is under threat from the just sheer size and power of certain industries where they have more control over politics than people do.

So I think it's been going in that direction for a while. Maybe with some of my time in the White House, I started. to see very closely some of the concentration statistics and see how much more of the economy was running just to a couple big firms. I think for me it really dovetails also with the concerns about inequality that have come up, which is linked to concentration. And finally, with the rise of more populist and nationalistic, even borderline fascist leaders who say, hey, listen, you know, everything's out of control.

We're going to help you. I think we're in a time where we need to bring back the controls on bigness. So you say bring back. I think that's really interesting. I read the galley of your book at light speed before you showed up today. It did it as fast as I could. I probably didn't catch everything. But you make the case that historically in America, we have been very anti-giant corporation.

Yeah. And that was a thing that we treasured and revered. And we got away from that. Talk about that a little bit. Sure. I mean, what do you think the Tea Party was all about? The original Tea Party. It was an anti-monopoly protest.

You know, an American tradition. So the British Crown had a monopoly on tea and we threw it. Well, the British crown gave a British company, a monopoly on tea. And the colonialists were like, what is this? We just, this is not cool. So we're going to dress up and throw tea in the water. I mean, a lot of it was, a lot of the American Revolution was about resistance to centralized power. The Constitution is about resistance.

No one entity should have too much power. And monopoly, around the turn of the 19th century, people were like, what is this? Why do we have these creatures, you know, corporations were new then, they call them trusts. Like, how do we have an entity like standard oil? There's so much power that no one can control it. How is this compatible with the basic idea of the American Republic, where everybody is finally accountable to the people? So, you know, I think it's time to return to these traditions. Lewis Brandeis, who's one of the inspirations for this book, said, you know, we're a real danger of losing who we are.

We're going to become passive people who just sort of accept uncontrollable power. So, in any way, the time is here to return to the older American traditions that prized equality and thought that power should never be concentrated in too few hands. Yeah. And the idea that concentrated power is actually a threat to the government, I think, is not something that we think about anymore at all. It's obvious if you're in Washington. Really? You know, if you spend a little time there, you're like, well, you know, everyone pays lip service to the citizens and, you know, and what voters.

care about or so on. But they're like, you know, what is the oil industry have to say? What does tech have to say? What does the telephone industry want? You know, those are the real players. You know, they're the ones who make things happen or stop them. It's been like that for a while and somehow we accept it. One thing I'm suggesting is the more concentrated industry gets, the worse that problem gets. The more politics gets away from the people and towards, you know, what small industrial groups want. So the standard we have now, which you're saying in your book, you compellingly argue is a new standard, is the consumer welfare standard, which says that antitrust actions have to be predicated on prices going up for consumers. We've actually talked about in the

Veritcast. Lots of times that's really hard when you have a Google and a Facebook and their prices are free, when you have an Amazon that relentlessly promotes the lowering of prices, whether or not that's actually true, but they relentlessly promote the lowering of prices. And that all came out of what is called the Chicago School. I mean, honest with you, I went to the University of Chicago, so I feel a great deal of guilt that I paid a lot of tuition money towards the promulgation of this theory. But you're saying that standard is broken and we need to move away from it. That's right. And I love University of Chicago, too. I was a visiting professor there and, you know, I have a real admiration for the relentless way. But it doesn't mean you should let them run the

economy. It's a little different, you know. So, yeah, you know, we get a little technical here. Antitrust became neutered over the 80s through basically the 2000s because the Chicago school said you shouldn't have any sort of action. It's not about power. It's not about politics. It's not about helping small producers or any of the kind of historicals of antitrust. Instead, they said, you need to prove in every single action beyond, you know, whatever standard that we can clearly see a price increase here or clearly predict that one will happen. So, you know, I don't know, Microsoft wipes out all of its competitors. Okay, but can we clearly prove that therefore Microsoft Windows got more expensive or something.

And that's stuff kind of hard to prove. Yeah. And I think anyone will agree that creates a very challenging screen where most antitrust's cases die. Sometimes it's not, some of the prices will go up, but you can't prove it because it's hard to prove. And so basically it created an enormous barrier to antitrust law, and it has almost killed it. And that's what I'm trying to overthrow in my new book. Yeah, overthrow. That's a good word.

Yes. You've got to go for it, man. Yeah. So what's interesting to me about that is the DOJ just try to stop the AT&T Time Warner merger. I read the opinion in that case. I wrote thousands of words about it. And to me, it seems like everybody missed the point entirely. And the DOA didn't even argue a net neutrality argument because they can't because the FCC is striking down net neutrality.

But it seems like everyone missed the point, which is AT&T owns the pipe. They're going to give preferential treatment to Time Warner content. And they're going to not distribute Disney content the same way. I could not agree with you more. You know, this is what happens. You know, the economy is too important to be left to economists because it controls how we live. And we get fixated on something like, okay, if AT&T buys Time Warner,

will prices go up by 45 cents a month? Like that is what we're talking about when we should be talking about. What does this mean for the power of that entity? What does this mean for their ability to discriminate among different types of content? What does it mean for a republic predicated on the idea of free speech and the sense that too few people, controlling too few properties, creates problems. Is this a merger that will set off a chain

reaction of other mergers? As everyone armors up, it becomes fully vertically integrated? Yeah, I mean, those ideas are out there, but everything goes through this framework where we are having this insane debate impossible for anyone to understand who's actually a citizen, not an economist, as to, you know, how exactly this might affect cable bills in some ways. And so the law has completely lost its way. You know, I add to it, Facebook over the 2010s, basically bought most of its competitors, Instagram, WhatsApp, you know, these companies that might have challenged it. And the agencies could not find any problems with these acquisitions. And I've read some of the analysis, and it is, you had to have a lot of training to say things

as absurd as those decisions do. Wait, go into that. What do you mean by you need a lot of training to say things this absurd? Okay, so you ask a man on the street, are Instagram and Facebook competitors? They would be, yes. I read the analysis of the British Office of Competition, and they said, well, Facebook does not have that important a photo app. And they said Instagram in 2012 does not have advertising revenue yet. So Facebook and Instagram are not actually competitors at all. That was their conclusion. Yeah. So the merger goes through with no conditions. The same kind of thinking. Google was allowed to buy ways. So merger to doopoly. Google bought YouTube, which I think was anti-competitive.

Facebook bought WhatsApp. You know, WhatsApp was sort of a naturally more privacy protective messenger service that might have become a sort of rival social network based on its reach. That didn't happen. Now it has all the same privacy problems Facebook has. And its founders are literally leaving.

Yeah, they're leaving. They're so happy. One of the things that people predict will happen is if you have a merger to monopoly, it's either they'll raise prices or you decrease quality. One way you measure quality is privacy protection, right? So we all have this thing where

one of the reasons we have such terrible privacy protections is because we've allowed mergers to monopoly or duopoly in the online space. And neither Google or Facebook has any real reason to have to give you real privacy protections because, well, you know, what's the alternative? So a counterargument to this is so many startups in the Valley are literally created because they see a hole in Facebook's product or Google's product, and they know that's a good exit, right?

Is that the wrong incentive? Can you change that incentive? I think if we have a tech economy entirely premised on the idea that monopolists may one day buy the underlying thing. It really limits what can happen. I mean, Google and Facebook didn't start that way. Yeah. Google was like, hey, we can do search better. Let's do it. Now it's like, well, let's not try and do search better because that's Google's. And if we try to do that, we'll be destroyed. Let's try and find some tiny little niche. It's one reason I think that a lot of innovation, to my mind, like really profound innovation, no one's willing to fund it because it's like,

well, you're not going to displace Facebook or Google. So, you know, we'll go around the edges somewhere and try and find some cute little thing that doesn't bother anybody too much and get bought out. You know, I think that's a problem. I think, look, I think buyouts are part of innovation incentives, but I think you also have to have room for the deck clearing thing that is really trying to change everything. Yeah. Now, that's why someone's going through cryptocurrency.

It's another conversation. But I think everyone's, you know, kind of steering way away from the monopolist, and I think it's hurting innovation in the tech sector. Well, one argument would be that that's why there's so much action in cryptocurrency, right? This is done. We can't win. what's put all of this energy into something wild, but you're saying that's not necessarily the best outcome.

Well, I'm saying it would be nice if you could, and it's important, I think, to an economy, that we not have an IBM, we not have a Microsoft, we not have a company. You mean of those scales? Microsoft can exist in your mind, but not it's dominant scale. No, no, no, no. I mean, you can't have this,

it's bad for the economy when you have, and Europe's had this, and Japan has had this problem, where they have kind of these lingering monopolists who are there for decades, like AT&T back in the old days. Nobody dares really challenge them. And the sectors kind of become dead after a while.

You know, it's like what's going on with tech innovation in Japan over the 90s? It's like, Japan, everyone's like, oh, my God, Japan's going to pass America. But they never broke up their telecom monopolist. So everything was like, well, don't disturb the mothership. Yeah. And I think it's a really profound difference in the kind of innovation you see when people are afraid. Of, like, disturbing the mothership versus what you do when you sense a, real opportunity. So let me ask just the big sort of five. You think Google obviously has a monopoly

on search? Facebook has a monopoly on what, social networking? I guess it would be some, yeah, I guess that's hard to find the market. Do you think Apple is a monopolist? You know, that's a good question. Actually, I don't think so. It sort of defends on how you think the iPhone is its own product or whether it competes with Android. But I think it does compete with Android, so I don't think they're monopolist. That's interesting, because I would argue that they're the ability of Apple to tightly controlled distribution of apps on the iPhone, leads to some very big questions about discrimination. Oh, now, if you're going to ask me, do I think Apple does any competitive things?

Slightly different question. You kind of got me to this technical question as to whether they, you know, whether they have Well, explain the difference for the audience because not everybody. Yeah, sure. So there's a sort of, maybe this is too much education. No, this is what the Vergecast is all that. So, you know, the technical criteria or prerequisite for the law is that you wield monopoly power. and when you said, are you a monopolist,

that means, like, do you control 70% of your market or something? So Apple doesn't clearly control any one market. They're just very effective in their market. So that's what I meant by that. But I agree they do any competitive stuff. Things that challenge them on their own app store, they're not particularly friendly towards, Spotify back in day, for example.

So, yes, I do think they wield the power they have. Yeah. Do you think that should be regulated? I think they should be continually poked and not allowed. I don't think I would want a law that's like the App Store commission or something. But I think they should be constantly watched and poked whenever they do stuff that is blatantly anti-competitive. Like, oh, someone wants to do music, but that would be a threat to iTunes.

You need to poke them and make sure they use their phone. So, for example, right now, Netflix just remove the ability for you to sign up for Netflix inside of iOS because Apple charges a 30% fee. It's exactly what they did to Spotify. Yeah. Is that something that you'd want the government to poke at or the government to actually change? I think they should poke at Apple, but all this stuff. Partially depends on whether you really think Android as a competitor to the iPhone or whether people just won't switch.

Certain people just will never go to Android, right? And so, yeah, I think it should be the subject of a lot of poking. You have got me on one of the hardest questions in this. Yeah, I'm curious. It's a good question because, you know, you could say, oh, you know, they're a retail store and they get there 30%. You know, the average retail store charges 50%. But the average retail store is just a store.

They don't have this power. that Apple has. My thinking is that if you are a platform vendor, your obligations actually change, right? And so when you become the platform vendor, you have this set of obligations to consumers. I don't know how you would codify that into a regulation of any kind, but it seems like the second you become one of these dominant platform vendors, your set of obligations change. I'm sympathetic to the idea that we're moving toward an error.

If we are in an era where the platforms are the most important basis of power on top of our favorite topic, net neutrality, which is the wires. So if you take that seriously and you think, well, really, the economy depends on these major platforms and tiny decisions, then I think there's a case for strong oversight. We're going to take a break and we're going to hear from an expert on electric vehicles from Norway. Why Norway, find out in this advertiser segment brought to you by Audi. Hi, my name is Kerry Byron. I'm a former Mythbuster, which means I'm a seeker of the truth. There are a lot of myths about EV batteries.

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I mean, I've heard that the batteries can peter out when it's really frigid outside. I think in general they perform surprisingly well. I've tested so many cars doing this over and over again. Preheating the battery, pre-hating the car actually saves energy. Is it harder to reach a top speed when in an electric car? Well, you sure get there fast. It's like you reach top speed in terms of acceleration in a small amount of time. To learn more about going electric with Audi, check out AudiUSA.com slash E-Tron.

That's AudiUSA.com slash E-T-R-O-N. So moving on through the company, as we talk about Google, Facebook, Apple, Microsoft. Is Microsoft wielding anti-competitive power? Are they monopolist in some sense? They've kind of chilled out a bit. You know, I mean, they had this tangle with the Justice Department. I think it's very important. Can I make a point about Microsoft and also about IBM?

One of the really important things that antitrust does, I think, and what it hasn't done for 18 years now, is give a company an important lesson as to who actually rules this country. Microsoft was pretty much out of control in the late 90s. Any company that seemed threatening, they would just kill them. They had no sense that they were accountable to the law in any real sense. And, you know, the Justice Tournament took a very spirited run at them, found that they had violated the antitrust law very blatantly, in fact.

It wasn't even close. The effect was the sort of mellow out Microsoft. They were under watch. They had a policeman at the elbow. Yeah. And I think that really affected the early 2000. So sometimes I think what you see is because Microsoft in the early 2000s had been humbled, it had this monopoly over browsers.

And when you think about it, yeah, in the year 2001, I think Explorer had an 86% market share. So they own the browser market. Yeah. Now, if you have the old Microsoft and there's this new company called Google, and, you know, it's doing pretty good, why are you going to let Google succeed on browser? They didn't want to. I mean, they were pretty clear

that they did not want that to happen. Well, but they had, this is something that some tech people don't realize, is they were being watched. Microsoft's being watched and poked very carefully. And they could have said

Google doesn't operate in our browser. They could have said the default is always going to be MS, whatever they call it, MSN search, whatever. But they couldn't get away with it and they were afraid that that would bring back

the Justice Department, which would break him into pieces for good. So the whole generation of companies, Microsoft, Google, Facebook, some of these early companies, they owe a sizable debt to the antitrust law.

I'd add to that, you know, the same thing happened with the AT&T breakup. If you don't break up AT&T, you have this company which controls all the pipes, and at that point still didn't think consumers should have modems. You know, they didn't think it was appropriate. So, you know, modems don't really get started. Companies like CompuServe, AOL today, how do they get started?

So you have this, I think, really important. important role of sort of taming the beast in the tech industries. IBM's another similar story. I can go on in each of them if you want that I think we're overdue to do again. Yeah. You know, the thing about AT&T, it comes up in the master switch, comes up again in this book, that AT&T prided itself on being a monopolist. They thought they were operating in the public interest and a competition was bad. Do you think that has carried over into the modern era where the Facebook's, the Googles of the world, think competition is bad? Or is there a different tenor? to the conversation. They don't tend to say so openly. You have people like Peter Thiel, who writes that competition is for losers, that monopoly is kind of the transcendent form, that what you need to do is sort of trust in the great man

who's running the monopoly firm. This just has an alluring, the lure of like the great strong man who's going to run everything and be kind of absolute in his power. It goes back to Plato. But it never really goes away. And I think some people in Silicon Valley are like,

yeah, competition is for losers. What you need is one company that's kind of beneficent that knows best for everyone and just does it. And if you're competing with other people, you might have to make compromises or you know what. It's better just to have one guy, the right guy, making all the decisions. So that's what AT&T thought. They were like, listen, we know the phone system. We know what works. This internet stuff is never going to work. Packet switching is too blakey, too weird, too unreliable. what you need is like perfect networking with circuits, a little technical, everything's guaranteed, and, you know, free for all is a disaster.

And the problem always is that we're unable to realize our own limitations. You know, say AT&T, break the suspense was wrong about the Internet. You know, packet switching was better than they thought. The TCIP protocol worked for a lot of stuff. You know, they thought, okay, maybe it's okay for email. It'll never work for VAT. It'll never work for voice. I used to read long articles sort of in the early 2000s about how hard packets-switch

video is going to be. Yeah. It's never going to work. It does not appear to be the case now. Yeah. So, you know, basically we're, you got to entrust everything at AT&T or else you won't see the future. And I think sometimes Google and Facebook might think of things that way, just like leave it all to us.

They're not public and saying so, but they... So Mark Zuckerberg was recently just public about it. Yeah. He said if Facebook gets harmed, a competitor likely from China will fill the space. And he asked Harris Swisher and RICO Dika Diko, do you want that to happen? And I, honestly, I don't know the answer to that question. But I think he is thinking of himself in that way. Like, Facebook is the biggest thing.

I'm in charge of it. I know I'm trying to do it in this world. And if I go away, like, somebody else will do it and you might not trust them. I think that argument is very dangerous, actually. It's extremely dangerous. I mean, it is, like I've said, it has historically in politics as well in business supported the rise of dictatorships and authorities. governments and also support the rise of monopolists and, you know, who come to be trusted. But the countries who have listened to those arguments in the long run really suffer.

Most of Europe was like, you know, they're right, the telecom, like Deutsche Telecom. Yeah. Deutsche Telecom knows what's going on. We're not going to mess with them. And so, you know, Europe basically lost a generation because they listened to their phone operators who told them that, you know, the Internet was never going to work. And I think Facebook is exactly in the same position. They're trying to set themselves up as kind of the regular.

monopolist for the foreseeable future. By the time the audience here is this podcast, Facebook, Google, a bunch of companies will be testifying on Capitol Hill. Do you think that's why they're pushing towards, hey, we're open to regulation? Because if they make that compromise, their size and existence is guaranteed. I think Facebook knows that making peace is essential to its future. Historically, it is true that regulated monopolists do gain protections from competition. Facebook has this deep insecurity.

They know their products not that. good. Right? There's nothing exciting. There's never been anything like, oh, Facebook. What an incredible product. You know, Google, when the first time I used Google search, I was like, holy shit, this is good. Right? The first time you order something and I have, the first time I use Facebook, I was like, that's it. I mean, look, it doesn't crash, unlike Friendster. It wasn't as bad as my space, but you can't be like, oh, here's this, like, giant leap forward. It's like, okay, it works. So they have that kind of insecurity, and, you know, they're sort of comforting. Yeah, I think that they see regulation as in their favor so long as it doesn't expose them to competition.

So this was the argument against the GDPR, which I think a lot of people think was ultimately a good thing. But increasing the amount of regulatory burden imposed on a company will drive smaller firms out and actually benefit the larger incumbents and make them even bigger. Yes, I have this feeling. I'm a bit more American on this stuff and less European, which is I think that any time starting a business means mastering a really complex. regulatory scheme, that that tends to discourage a lot of businesses. So I'm not too into the European approaches. That doesn't mean I don't care about privacy, but I think that something, as I said, that involves mastering regulatory schemes can slow down competition. So where do you, so the Google and the EU right now, they got to break up Android. Right. So they got unbundle the play store

and play services from Android. Is that the right remedy or is the right remedy breaking up Google? I'm very much disposed towards structural remedies, which means breakups. Big breakups as opposed to unbundling or kind of ongoing. It's, again, I'm sort of anti-reveglatory. I'm a student of Lewis Brandeis, and I don't like concentrated power, whether it's private or public. You know, I make kind of an exception for net neutrality, but net neutrality is pretty straightforward. It's like, don't discriminate. Yeah.

So, yeah, I don't like these unbundling remedies. I prefer a breakup. It's somewhat challenging to ask what a Google breakup would look like. Maybe it would be like Google Europe. That's not a crazy idea. Google Europe facing the rest of the world. Maybe you break it vertically. So Android has to be broken off from Google and see if they can survive or not.

But I'm much more into the structural, break them up, reduce the concentration of industry as opposed to this sort of we're going to try to fiddle around at the edges and make something that works. So last week on this show, we had Microsoft's president and chief legal officer Brad Smith. We actually didn't talk about antitrust, but he had just been. at the code conference with Caraswisher, and he said, he basically implied that the police at the elbow situation in Microsoft is what distracted Microsoft and made them miss mobile, which is a lot. But surely they were distracted. You kind of laid out. They were more careful, they were more cautious. Would you prefer to structural remedy for Microsoft? Yes. I think it would

have been better to break Microsoft into two with Windows and the operating. Windows. Was Appsco? Yeah, some kind of thing that had all the applications and something. And, you know, see if they survive or not. Maybe Word Perfect would have beaten Word. I don't know. Yes, I would have preferred that.

I will say that having Microsoft with a policeman at the elbow, I do not think it was a bad thing. I think it was a really important thing for the early net economy. And I think we need it right now. I think Facebook and Google in particular need somebody to make them a little nervous about what they're doing in terms of anti-competitive actions. So let's talk about breaking up Facebook. There's really the reason I want to talk to you today, after all this preamble.

And I do want to talk about Brandeis a little bit. Sure. How would you break up Facebook? Well, the easiest way to do it is you start by breaking off WhatsApp and Instagram. So those are separate companies. And hopefully those companies try to introduce more privacy sensitive or otherwise better social networking options. So, you know, you have another option for Facebook. Most people don't really feel like they have right now.

So you think Instagram would be a straight-on-dive? a head competitor to Facebook? They'd be a little different. I mean, obviously they're slightly... But I think they might be that and also evolve into that as well when they realize they can do it. I mean, right now, because they're all owned

by the same place, they're never really allowed to get at them other ship and be a true replacement for Facebook. I think WhatsApp is even better position, frankly, to try to go at it. I mean, they've got this great messaging service. Everyone loves it. They have this enormous user base.

It's like, well, maybe it could also be a nice place to share photos with your family, like a direct replacement for the core function, which is like seeing other people's grandkids or whatever that is. Like go after that core family function. So if you can't go after Facebook with the consumer welfare standard

because all these things are free, what is the standard you would have found? No, you can, you can. If you want. I mean, I have my own standards, but I actually think the breakup Facebook would not be hard because what would be the harm. You know, you have three competitors.

It's not one of these things where you'd be like, oh, my God, if you get rid of WhatsApp and Instagram, Well, then the whole world's going to call apart. It would be like, okay, no, now you'd have some, you know, companies trying actually to offer you an alternative to Facebook. A very... You have to prove, to reach into a private company and break it up. You need to show some harm that has caused or show some reason.

Yes, I think it wouldn't be hard. I can get in the details, but you are allowed under a law called the Clayton Act passed in 1914 to assess mergers for their anti-competitive effects. I think if you took a hard look at the acquisition of what's up, and Instagram, the argument that the effects of those acquisitions have been anti-competitive would be easy to prove for a number of reasons. One was earlier I mentioned, which was loss of quality competition. The other gets even more technical. It has to do with attention markets and the idea that you had a decrease in the competition

for attention, which relates to my other book, the attention merchants, as a result of the merger. So I don't think actually would be a hard case. If readers are interested, they could get into the details in some of my academic work, but I don't think it's hard. Yeah. Do you think the Trump administration is going to go that way? I don't know. They're actually a little unpredictable when it comes to antitrust. They're unpredictable in all ways. But, you know, the Justice Department, I mean, they did bring this AT&T case and maybe they'll bring one. I think somebody actually might bring the case I'm describing for some of the reasons I've described. Now, you mentioned earlier, there's sort of a lot of popular anger at,

at big tech, people just think there's too much power, concentrated. They like the companies, but they think they're too powerful. So I actually would not be surprised. Yeah, I've actually heard the conversation in Silicon Valley around Facebook often includes the idea that it would have broken up. Yeah. I mean, one thing that you could say, so the case against Google, there's a stronger case for Google that having all these things together makes it a better company. The strong example is Google Maps integrated with Google Search. Yeah. Seems to make your life a little easier. You know, that's how I got here. Yeah.

And it seems to actually be an advantage. You know, Android, does Android and Google together an advantage? Well, at least there's a case for it. But the Facebook stuff, there's just like no argument. Yeah. One popular theory about Instagram is actually that it is effectively Facebook light, right? That Facebook is proceeding on two tracks. There's a regular Facebook app.

And there's this other thing that Facebook could have been, which is Instagram. And Instagram is a much happier place with fewer Nazis. And that really what Facebook had always wanted to build was Instagram. Right. Yeah. Unless you believe, as we said, that we want one ruling master of all social networking, and it should be Mark Zuckerberg. I mean, I just don't find that very appealing argument. But unless you believe that, then there's no good reason not to break it up, actually.

I would put it that way. Like, what's the argument against it? Well, I think the problem that faces is that currently as we live in America, the case for the government to proactively up and do stuff. We live in America, which has a strong and proud tradition of breaking up companies that are too big for an efficient reasons. That's what we need to reverse is this idea that's not an American tradition. We've broken up dozens of companies. Yeah. Look, obviously they don't like it. But it's not a person. You're not, so I agree that we should not chop people into pieces, but these are corporations. You know, they have subunits. Sometimes corporations divide by themselves. It's not that dramatic.

And there's been this campaign to say, oh, my God, this would be like the most insane thing ever. Well, first of all, Congress has repeatedly said that this is what you're supposed to do. Yeah. Most recently, 1950, where they said, listen, we don't want companies to get too big. And second of all, like, nobody gets killed. Yeah. This episode of Vergecast is brought to you by the Dollar Shave Club. No matter what you do in the bathroom, get ready, Dollar Shave Club is everything you need to look, feel, and smell your best.

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That is DollarShaveclub.com slash verge. Once again, dollar shaveclub.com slash verge. This takes me right into Brandeis. So there is a movement now. So we had the Chicago school, the consumer welfare standard, which has been dominant way of thinking about antitrust for some time. You're saying we got to go back to Lewis Brandeis. We got to go back to Teddy Roosevelt, basically, and start breaking up companies aggressively.

Yes. Talk about that movement. Is it building? Is this just you in a book and you hope it starts? Is there conferences? No, I think it is building. I think there is a new spirit. It's in a lot of different directions.

The larger movement is a great sort of public dissatisfaction with the state of inequality in the United States, with the sense that corporations are above the law too big to be accountable to anybody. Those people don't necessarily call themselves followers of Lewis Brandeis, but sometimes they have these instincts. And the popularity of candidates like Bernie Sanders and Elizabeth Warren is also part of it. On the left and on the right, actually frankly, you know, I hate to say it, But it is Donald Trump who sees some of that initiative of like, you know, we're really angry. He directs it in weird, dark ways like, oh, you know, it's really the Mexicans and the Chinese who are our problems or whatever.

So there's a lot of people who have these feelings. But Brandeis's vision is very enticing. And I, you know, sort of encourage readers to try to see if this works for them. There's two names for the movement. There's the sort of like Neo Brandeis, the new Brandeis School. And then I've heard it called Hipster Antitrust. The last term you coined was net neutrality, which has persisted. Which one would you pick now?

You don't want to call anything hipster anything. I was in a bar like two weeks ago. And someone who is kind of probably considered hipster 10 years ago, she was going on about how much she hates hipsters. I've never met anyone who has a kind word to say for hipsters, including people who would look like hipsters themselves. So you're going with the new Brandeis. Yes. You know, maybe I need to work on a better slogan. That's what I said with net neutrality too.

But let's talk about re-seizing the mantle of Brandeis. And maybe a return to neo-progressive movement. That sort of gives it 1910. Well, I think you could if you want to look, Teddy Roosevelt was not great progressive in many ways. Well, he did found a progressive party, by the way. Yeah. But, I mean, he ran as a Republican. He had some horrific policies of his own.

He was the first trust buster, right? He was the first trust buster, and he had courage. You know, if he were around today, he'd be like, what's this deal with Facebook? We've got to bring them to heal. So it is a combination of Brandeis and Roosevelt. And let me just spend a moment on what I think each contributes. So Brandeis has a very alluring sense of what the economy is for. He points out that, you know, for most of us, abstract freedoms are sort of important,

but our day-to-day is governed by our economic. conditions, our job, you know, public infrastructure, schooling, all these things. The economy governs how we live. And he said, we need a society where we have a sense of freedom, both from public coercion government, but also private coercion, you know, where people have the right not merely to exist, but to thrive and become all that they can be. Sometimes he sounds like a guy from the 60s, California, but it's very powerful. And I really think we should structure our government that way. And one of his points was when there's too much unaccountable power, when employees have no real say, we all become kind of passive. Cogs in a wheel, our lives start to lose meaning.

That's an instinct that I think we need to recapture. Now, Roosevelt, Theodore Roosevelt, what I like about him is he was fearless. He looked at these giant trusts, Standard Oil and J.P. Morgan, who made the trust. And he said, we need to make it clear that America is ruled by Americans. And the citizens are in charge. And, you know, if we think a merger is anti-competitive, we're going to stop it. So his courage is the courage that is willing to do something, take these actions, and stand up for the people. That's the tradition I wish to return to. And having spent some time as a trust buster myself, I think what we need is an infusion of sort of energy and courage in those areas. Do you think Facebook and Google are at the level of

standard oil? No. No, they're not quite, but they're getting there. The pharmaceutical industry could use some attention. Banking could use some attention. The airlines, the cable companies. You know, there's a lot of sort of unaccountable power, and I don't mean to say, like, it's only Facebook and Google control everything.

I think one thing is we see them every day. Yeah. Airline, you only see when you have to go somewhere. I don't know why we let airline industry become three major airlines. That was like one of the worst failures of the Obama administration. I don't want to get into it. Or, you know, Live Nation and Ticketmaster. I mean, you see these things now and then.

Google, Facebook, you see every day. But, you know, I think they have similarities. And one thing is that time makes a difference. You know, if we let this problem fester for another 10 years, I don't know what Facebook is like now, but if you imagine the trends continue, it's insulated from competition, 10 more years in, Zuckerberg starts to become a little even crazier

and more power-hungry. You know, that's not a pretty picture. So one thing my co-hosts on the Vergecast often says, Paul Miller is, look, big companies are stupid. They fail. And if they get big enough, they start to dawdle around and make mistakes. And there's opportunities for challenges to arrive or they might just collapse on their own. And in the book you bring up, there's actually dis-economies of scale at a certain point. Is time not just the remedy here?

There's Mark Zuckerberg, we get old, he'll make some bad decisions. You won't see around the next corner and he'll fail. It is true that bigness is a curse and leads, company become daughtering and bad. That's good. It's the name of the book. Yes, it is, the curse of bigness. But where your co-host makes a mistake is assuming that the market automatically fixes those problems. Let me give you a few examples. AT&T had a monopoly for 70 years. And, you know, by the 50s or 60s, they were not a great company anymore. They, as we said, were incredibly hostile to anything new. They thought they knew everything. They thought the internet

was a mistake. They didn't believe in modems. They didn't believe in answering machines. They were this enormous daughtering company, but nothing could get rid of them. General Motors. How long were they around 40, 50, 60 years? And obviously they should have been gone. But the market does not work where you snap your fingers and these companies get replaced. Nothing's great about the airline industry. There's three majors.

Their product seems to get worse every year, and they charge more for it, which is kind of an amazing. Think about the tech industry. You know, it's amazing. Airlines aren't in a way a tech company, right? And they are one of the few areas where the product frankly just gets worse. Yeah. The seeds get smaller, you know, you've paid for more things. And they're not getting displaced.

So the mythology and the problem is assuming that these companies sort of automatically go away. When they, if you wait long enough, maybe 100 years they'll go away. But we could very well have Facebook an inefficient, ineffective, obsolete company hanging around for another 20 years. and I'm just not really sure that's what we need. Yeah. Lay out the other standard. Because I was hoping when I said, how did you bring up Facebook,

you laid out the other standard? You could do it under the Clayton Act and consumer welfare. What is your other standard to preserve competition instead of focus narrowly on making a number go down? So Brandeis, when he was a Supreme Court justice, suggested a standard which was simply

you need to protect the process of competition. And usually, as a law enforcement, antitrust, trust buster, you face a situation where a small, company is under attack by a larger company. And I think what we need to do is simply ask the question of whether what the large company is doing is part of the competitive process, whether they're fighting fair, whether in fact they're destroying the other company on the merits, or whether they are exceeding the bounds of what's considered fair competition, and are,

in fact, destroying or excluding that other company without any particular justifications. or something you might say, well, I understand that that is actually serving the competitive process. I know that sounds a little subjective, but it's not, when you go inside an agency and you're facing real cases, this is actually what you're doing. Yeah. They don't mess with this numbers. They look, okay, Facebook's killing Snap. Are they doing that in reasonable ways? You know, they're copying them.

They're better than them. Or are they actually doing this in unfair ways? That's basically about the limit of where human minds can go. So you were at the FTC and this is the work that you were doing. Yes, that's right. And also the New York Attorney General's office. And that's basically what you can do. And I think that that is the standard when you do is a protection of the process of competition

and a defined jurisprudence as to what represents undue interference. It's a little bit, put the antitrust enforcer a little bit more in the position of a referee at a football game. Yeah. So you can imagine like, you know, you want the game to go on, but you don't want people to be holding doing illegal tackles because then it ruins the game. Yeah. And the side that wins is the side that master. all the dirty tricks. Right?

And so the process of competition is just like that. You want competition to be something where the better product wins. And the question is, is the defendant winning because they have a better product or they're winning because they're using dirty tricks?

Yeah. So there's a line that I've heard attributed to you by way of Brandeis that I just wanted to ask about at the end here, which is the idea that antitrust is the compromise between capitalism and socialism.

I've heard someone attributed to you, but I don't actually know if it's you. I think it's true. I wish I'd said it. Okay, I'll say it. That, you know, antitrust is a compromise between capitalism and socialism. Socialism is not appealing to me for a number of reasons. You know, the ideals are right, but it always ends up in the same direction, which is you have to accept concentrated power, unaccountable.

Most socialist economies monopolized all the industries and then put government in charge. And, you know, that didn't go so well. I'm a believer in a different faith. I'm a believer in the industry of the common man or common woman in charge of their own destiny. a nation of small businesses, small concerns, people feeling a sense of opportunity. And I think what deadens that is always excessive concentrated power, whether in government or in private industry, that kind of puts a lock on things. So, you know, that's the kind of country I want to live in.

I wouldn't want to live in a socialist country, and I don't like living in a country where unaccountable capital faces no real check on its power. Yeah. Well, I think that's as good of a place to end it as we can. you very much, Timu. I got to say, your book is coming out November. You can pre-order it now. Yes, that's right. On Amazon. You can, or other places.

Or other places. I don't mind people ordering on Amazon. And actually, it's a good deal. I should say, for a book, it's pretty cheap. Well, hopefully you come back again when it comes out. I'll have read it more closely. If we can come back again when it comes out. But check out the book, The Curse of Bigness, and I trust the New Guild of Age. It is, I will

say, on quick skin, extremely excellent. And I enjoyed reading it this morning. And Tim, thank you for being here. It's been a pleasure. All right, that's it. Thank you to Tim Wu. His new book, The Curse of Bigness, Antitrust, and the new Gilded Age comes out in November. You can go pre-order that on Amazon, everywhere else. Books are sold.

I highly recommend it. And let me know what you think of these new interview episodes. We really like them, but I'm dying to hear what you think. Tweet at me, I'm at Reckless. And we'll see you later this week for the normal Vergecast. This episode of Vergecast brought to you by Audi E-Tron. Despite all of its technology, there's a lot that the all-new Audi E-Tron doesn't offer. For example, it has no tailpipe emissions.

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