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Corporate giants

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Apple, Amazon, Facebook, Microsoft and Alphabet (the parent company of Google), are economic powerhouses. These tech behemoths have created an Internet oligopoly that has changed the face of modern capitalism. Collectively, their combined market capitalisation is worth three trillion dollars, making them the most valuable public companies on the planet.

Each is a digital superpower and undisputed ruler in their chosen market. Amazon is the world’s biggest online retailer. Google is the world’s dominant search engine. Facebook is the world’s most popular social network. Microsoft is the world’s largest software company. And Apple is the world’s leading smartphone manufacturer.

Their phenomenal corporate might has led some commentators to dub them “the frightening five”. Together, they control much of the critical digital infrastructure which underpins global commerce. Their products play a big role in our day-to-day lives and they are increasingly defining how we work, shop, bank, communicate and play.

The growing dominance of these colossal corporations is fuelling concerns about data privacy. The world’s most valuable resource is now data and Silicon Valley has cornered the market on amassing personal information. Apple, Amazon, Facebook, Microsoft and Alphabet each hold enormous pools of data about their users.

Quantifying the amount of data captured and stored by the big five tech firms is very difficult - but it is astronomical and this is what sets them apart. For example, 40,000 search queries are performed every second on Google and this equates to a staggering 1.2 trillion searches per year. Each search generates “data exhaust” - the trail of clicks that Internet users leave behind.

It is this data exhaust from Internet searches, smartphones and other connected devices that is enabling the big five to sweep up vast quantities of data about consumers’ activities. This, it is said, puts them in the personal data extraction industry. A recent article in The Guardian explained how tech firms make money from monitoring everything we do.

Companies harvest data by observing as much of our online activity as they can. This activity might take the form of a Facebook like, a Google search, or even how long your mouse hovers in a particular part of your screen. Alone, these traces may not be particularly meaningful. By pairing them with those of millions of others, however, companies can discover patterns that help determine what kind of person you are - and what kind of things you might buy. These patterns are highly profitable. Silicon Valley uses them to sell you products or to sell you to advertisers.

While surveillance capitalism is big business, critics argue that it destroys privacy and produces inequality. These concerns are picked up in Jonathan Taplin’s book: “Move Fast and Break Things: How Facebook, Google and Amazon Cornered Culture and Undermined Democracy”.

Taplin notes that “not since Rockefeller and J.P. Morgan has there been such a concentration of wealth and power” in the hands of so few. He laments that “the enormous unprecedented fortunes created by the digital revolution have done much to increase inequality in America”.

Unquestionably, the handful of men who have shaped the tech industry have been handsomely rewarded. Indeed, these titans now dominate the ranks of the world’s wealthiest people. According to Forbes magazine’s 2017 Rich List, the net worth of America’s tech billionaires continues to grow:

  • Microsoft visionary, Bill Gates, is the world’s richest person ($86b).
  • Amazon founder, Jeff Bezos, occupies the third rung ($72.8b). 
  • Facebook CEO, Mark Zuckerberg, sits in fifth position ($56b). 
  • Google pioneers, Larry Page and Sergey Brin, are in 12th and 13th place respectively ($40.7b and $39.8b).

Messrs Gates and Zuckerberg intend to give most of their respective fortunes away. Notwithstanding this philanthropy, many commentators believe that it is time to rein in America’s five winner-take-all tech giants. There is growing concern that they are a threat - both economically and politically.

In any market, regulators like to see competition as this gives consumers choice. Having one dominant player lessens competition which typically leads to higher prices. But in the case of Google and Facebook, their services are free thereby making concerns over pricing irrelevant. So, the focus must be on whether there are other harmful economic effects.

As noted by Bloomberg Technology, companies like Amazon and Facebook are the middlemen for today’s essential products and services, giving them leverage over both producers and consumers. The tech giants are also growing by snapping up potential rivals that might threaten market share. Bloomberg data shows that the big five have made 436 acquisitions worth $131 billion over the last decade.

The companies themselves say they are successful because of the quality of their offerings, so why punish success? To quote Bloomberg:

Consumers appear to agree it’s hard to beat Google’s suite of free products or Amazon’s convenience. Their dominance may not be about predatory practices so much as the nature of competition in the digital marketplace, where tech platforms benefit from network effects: As more people use them, the more useful - and dominant - the platforms become.

Politically, there is growing disquiet over the big five’s influence over culture and information. For example, Facebook has become a global political force as the largest and most influential entity in the news business. The New York Times Magazine described Facebook as “the most powerful mobilizing force in politics”. During the US election, propagandists used the service to turn fake stories into viral sensations.

The digital economy knows no national borders and this is a threat to the jurisdiction of governments around the world. Given this, we will likely see increasing friction between the big five companies that rule the tech industry and the governments that rule the lands those companies are invading. The nation-state is fighting not to lose its grip.

Love them or hate them, there’s no escaping these tech superstars. They have become part of the fabric of our lives and will continue to cast a long shadow over the political, economic and social landscapes. For anyone in any doubt about their clout, I’ll leave you with this sobering fact: If tech’s big five were a nation defined by market value, it would rank as the world’s fifth biggest economy - just ahead of the United Kingdom.

Regards
Paul J. Thomas, CEO

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CEO Paul Thomas