Opening of the new Google data center in Eemshaven

Corralling the Info-Monopolists

May 14, 2018 Amar Bhidé

The question of how to encourage innovation while limiting the abuse of market power long precedes the advent of the digital age. And today, the need to strike the right balance is nowhere more apparent than in the case of dominant information-technology companies like Facebook and Google.

MEDFORD, MASSACHUSETTS – In a modern capitalist economy, we celebrate innovations that produce market power, but fear the risks of unchecked dominance. Nowhere are those risks more apparent than with today’s information-technology monopolies.

The question of how to encourage transformational, market-dominating innovations while limiting the abuse of market power long precedes the digital age. In the United States, the story of Walmart founder Sam Walton is a case in point. The World War II veteran went from small-town variety-store franchise owner to multi-billionaire mogul, presiding over what would become the world’s largest private employer.

It is a stirring tale of audacity and enterprise, which included innovations – such as establishing distribution centers in sparsely populated regions and building up global supply chains – that business students worldwide now study. And the huge profits Walmart generates for its owners are dwarfed by the value it provides to its customers, who rely on the low prices made possible by the company’s ability to buy and sell on a massive scale.

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0 Comments on this paragraph, 9 Comments on this article

Michael Pettengill May 15, 2018

There are no info monopolists, only capitalists willing to pay ever more workers to build assets collecting information and process the information.

Google was late to search engines, with its primary advantage being a lack of greed for quick and easy profits. Yahoo! was at the time of Google being formed as a startup focused on monopolizing all access to the Internet, being the Internet Aol which had controlled all the "experience" of its users. Likewise, Altavista was doing far more searches with a larger database to access the info on the Internet, when Compaq spun/sold it off to "create wealth" by having it become the gateway monopolizing all access to the Internet and pushing ads on its Internnet users.

At the time, Google was considered to be a dead end, providing search for free with zero profits and no plan to push high profit ads on its users like Yahoo! and the new improved AltaVista. Google instead kept expanding its free services gaining new users, with many questioning its future of, assumed, endless losses. When it started selling ads, it was criticized for both forcing ads on users, and for not making the ads more intrusive to justify higher ads prices.

Google has invested heavily in capital, ie, information, without demanding immediate profits. The mapping software is an investment of almost two decades of paying workers at Google and other firm's to collect information on people and places.

Google has no monopoly on this info. Any other capitalist can pay billions to workers and the same firm's Google paid to buy info from. Any other capitalist can pay billions to programmers to produce free open source software distributions and tools for cell phones in competition with Google's Android software. In China, several competitors are producing competing software to Android,, and Apple's iPhone software.

When Wall Street demanded high profits and cost cutting back in the early 21st century, the capitalists ceded the market to Google, and likewise, on its handling of MySpace and other community forum systems, ceded much of that market to Facebook.

It was not some special market power, other than being willing to lose money for years, that gave Google and Facebook their market dominance, but instead the greed of their competitors.

Note that Uber has grown to near monopoly by losing money throughout its history. No one knows how it will ever be profitable. Uber has a "monopoly" on the info of who will contract at low prices to provide rides to those in Uber's info database who have ridden and will ride in the future. Any capitalist is free to be another competitor to Uber losing money too to build up info to compete, to be another Lyft or others.
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Prashant Kotak May 14, 2018

A bunch of points:

(i) Politicians and lawmakers invariably assume that because the data is anonymised that's fine, it can be gathered and processed - but several things are missed on the back of that: the tech giants are learning through data which of humanity's biological buttons can be pressed and how - a very dangerous situation. Anonymised data is fine for this, what the data giants crave is volume and spread. The point is, this data won't be public in the first instance, and I guess I'm saying we should at least make the attempt to stem the tide by *requiring* this data to be made public if a company wants to operate in a given jurisdiction. Although I accept, probably futile.

(ii) The message of this article appears to be that that data and information collection/storing/use can all be regulated in the same way as any other aspect of our lives.
I disagree.
Take one problem as an illustrative example: location. You cannot remotely expect to be successful with the application of local laws when data is trans-national and ethereal, encryptable, endlessly cloneable and instantly transferrable. And you are going to be laughed out of court if you try and make the case that it will be possible to get the buy-in of China, Russia, the Tech giants, everyone across the globe, etc. And in any case such a global imposition of rules also rings downright dystopian alarm bells. So if someone, anyone is gathering data, jurisdictional restrictions in some places will mean diddly-squat: data and its use/misuse will proliferate simply through time and osmosis. The fundamental problem is that information and data is not “goods” like a car, or a house – it is, ultimately, your very being – for example, the entirety of “you” can be extrapolated from the DNA in a miniscule bit of dead skin - allowing someone with this data to make a pretty clumping good guess at everything about you - from what you look like, to what you like.

If you think algorithms are making decisions about people, then even bigger terrors are in store in the near future with machine intelligence systems that prioritise correlation over causation: finding and utilising patterns in data neither you or anyone else knew even existed. Neural nets do this, "weightings" are stored in a diffuse form across zillions of "neurons". At that point you have a blind watchmaker on the rampage - you will not be able to point to a person-decision about why a system is favouring someone and victimising someone else - and you will not even be able to pin down why those decisions are being made, any more than you can pin down why, say, Putin is behaving the way he is.

I genuinely believe the jig is up - no real regulation is going to be possible. It is no coincidence that so far only authoritarian regimes have managed to keep a lid on data and information – but any systematic attempt at information control like China is doomed. The way such regimes can retain control is by embracing the chaos of the web and sowing disinformation, like Russia is doing.

Time to pray to Jude the Apostle.
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Michael Public May 14, 2018

Clueless. Data is the lifeblood of big these companies. Restricting data collection as you suggest would be like banning parking lots for Walmart.
- Lawrence Lipp May 14, 2018
  
  Restricting data collection would be like restricting, not banning, parking lots (or roads) for Walmart. To a certain extent, this is already done in order to benefit society at large. We require cars and drivers to be licensed/insured/maintained up to certain standards, and also ban certain cars from using certain roads/parking lots. In these cases, we as a society have decided that restricting one individual (or business's) freedom from doing "everything" to doing "most things you'd want to do that fall within society's reasonable standards of conduct," is more beneficial to the entire group (and system) than absolute freedom for a few.
  
  Banning data collection (which this article is NOT prescribing) would actually be like banning parking lots for Walmart.
  
  Would legislation like this take a large bite out of FB/Walmart/etc's profits? Absolutely...but if we as a society think limiting the absolute profitability of these companies is in the best interest of our society at large...and if we implement these laws using the Democratic Process subject to the rights preserved in the Constitution, what's wrong with that?
  - Michael Public May 14, 2018
    
    1. The thing is that they stop working when you split them up. If there were thirty Facebooks you would have to have thirty social accounts. 2. They give away lots of value for free - if there were thirty Googles and thirty Apples you would be paying 10 000 USD for a top end phone because the fixed R&D costs must be duplicated. 3. Democratic or not, government interference in business should be a last resort - and we are very far from last resorts with these companies - who have their reputation to protect and such will definitely take action to protect their relationship with their users.
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  - Michael Public May 14, 2018
    
    "Ensuring that today’s info-monopolists can legally collect only a very limited amount of personal data – say, what newspapers receive about their subscribers – would protect users"
    This would amount to a defacto ban.
    - Lawrence Lipp May 14, 2018
      
      **Responding to both in this one reply**
      1. Yes, they would be very inefficient if split up. If we impose legislation that limits their ability to collect this data because that is the will of the people, social media will no longer be profitable and will go away...this has positives and negatives for our society economically and culturally. Social media may also stick around but be much less profitable...again...that has positives and negatives for our society economically and culturally.
      
      Personally, I think less profit in social media/less social media in general might be the "best" situation. However, I do concede a lot of good has come from social media so...maybe a smaller social media world would be best? I also see how someone could think the opposite is best.
      
      2. They give away lots of value for free...true...but if they are profitable...the data we give them is more valuable than the services they provide us.
      
      I don't think we'd be paying that much for a high end phone...already Samsung and Apple own pretty much all of the tech that goes into our phones and there are so many 3rd party phone makers (for Android not Apple) because these companies license out their technology. If a large company or two chose not to license out that tech to make room for competitors they would be destroyed by the Sherman Anti-Trust Act.
      
      Arguing that lowering profitability would discourage innovation is a classical conservative argument. My response is, people will always seek ways to make more money than their neighbor, no matter how hard the government makes it to earn that next dollar. Might progress be slower? Sure. Might we not have EVERY POSSIBLE thing that could be invented? Sure.
      
      However, progress will continue since someone will always innovate to try to make more than their neighbor. Additionally, making things more difficult may lift the bar on what becomes a commercially successful product...if things were more difficult, fidget spinners, the pet rock, and pogs might have died a little bit earlier than they did...which isn't necessarily a bad thing. Remember beepers?
      
      3. This is a matter of principle. The only person I trust less than a politician is a businessman...the former wants my vote and the latter wants my dollar...each will lie to get what they want from me.
      
      4 (your second response). What is wrong with limiting online media producers to the data collection that print media is subject to? It'd be interesting to see what percent of an online media company's revenue comes mainly from the collection/sale of personal consumer data vs whatever it is they say they do that puts them in a position to collect that data.
      - Michael Public May 15, 2018
        
        1. You are right - for society smaller social media would be better, but it is not going to happen because if you try regulate Facebook in the US they will simply relist their shares in London and move their servers to Norway (for example).
        2. I think you misunderstand the phone industry - hardware is a commodity and you can buy it from a ton of people besides Samsung (btw Apple own exactly zero hardware technology). What is gold is the software - Android and iOS are literally worth hundreds of billions and Microsoft lost billions trying to make their own version.
        3. The thing with business is if you no longer trust (to whatever end) them they can fired overnight (remember Yahoo!), while oppressive governments tend to endure - see China/North Korea.
        4. There are two companies that are media/ad driven - Facebook and Google. They both earn close to 100% of revenue from data driven ads. All their other initiatives (like Android) are 'given away' and earn incidental income only. Limiting like you describe would literally shutter them overnight.
        
        Lawrence Lipp May 15, 2018
        
        1. They can relist and move their servers, but that won't change the fact that when operating in the US, they would have to respect our data collection laws. The US would have to put a dollar value on data collection...if are we willing to let the FANGs walk out and relist overseas for higher data collection standards? Honestly...if they all walked, that'd be bad for the US, but the EU (and Britain might follow suit) generally have higher privacy standards than the US so I don't think they'd do that.
        
        2. Their business model would have to change and would probably be less profitable...which a lot of people think means no more cell service. Although this means the larger telecoms might break up into smaller ones, or some will shut down...I think there is someone out there willing to see what kind of profit can be made off smaller markets (thank you American economic drive!).
        
        Worst case...we treat phones like actual utilities and maybe we have to have the government run it more directly...which could go well or terribly...
        
        3. Point conceded. However, with how rampant Crony Capitalism seems to be...I hope you don't mind that I don't trust anyone...
        
        4. I don't think it'd shutter them...Google's search service is insanely useful/necessary...but yes, their business model would have to change and again...I think it would be less profitable (but also still insanely profitable)...i.e., would it be so terrible if Google was only a $100 billion dollar valued company instead of a $600 billion company? And what if now there was $500 billion of capital to try to make 5 other $100 billion companies?
        
        The American economy would adapt, like it always has.
        
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