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In 2014, Peter Thiel (pictured above) published his article in praise of companies like Google, which create a product so distinct and irreplaceable that it rules out challenges of competition. The article was entitled ‘Competition is for Losers’.
Before you form an opinion based on Thiel’s intentionally contentious title here is a brief overview of what Thiel wrote (a link is provided to the article in the Links section below). Thiel distinguishes between businesses in perfect competition – which frame themselves as being bigger and more unique than they are, and monopolies which present themselves as being smaller and more at the mercy of their competitors than they are, to continue raking in monopoly profits unfettered. This ability to make enormous profits – because it has no serious competition in the search engine space – is what allows Google to invest in things most companies could only dream of, like its famous open-plan employee workspaces, or its research and development programmes which lead to the many innovative products we associate Google with.
In a static world, Thiel argues, a monopoly – like Google – is merely a rent collector, charging what it wants because it can, contributing nothing to the betterment and progress of its customers’ lives. But the world isn’t static – it is dynamic and ever changing with new industries emerging all the time, many of which directly benefit from Google’s innovations and indeed base their very businesses on products provided by Google. So while Google may be a monopoly, its wealth generating contributions to other areas of the world economy make its market dominance in the area of online search worth it for everybody.
Google then, is more than a monopoly – it’s a sort of quasi global government department, charging exorbitant fees (which through this prism we might consider a ‘tax’), which come back to us in the form of new industries, new jobs (like ours, as web developers and digital marketers), and better ways of living.
Which is where the heart of the issue lies: do the benefits Google provides to global society entitle it to exert such power, often unbound by the same restraints governments face? And, what are the risks of entrusting Google with as much information about our lives as we do, when it is mostly answerable to but its own tiny band of shareholders?
Google’s potential to directly affect world events gained some long overdue exposure last year, as the ‘fake news’ it was giving oxygen to in its search results were shown to have a significant impact on the US election. Besides damaging the credibility of its flagship product, it would have been embarrassing to Google because, as Peter Thiel suggests a monopoly wishes to play down its monopolistic role so it can keep making monopoly profits. Google has since taken some very public measures to restore credibility to its search results.
But Google’s dedication to openness, based on an idea that an open society is a better society, is always going to be susceptible to manipulation via its products. From Google’s earliest days search engine optimisation has been fraught by ‘black hat’ SEO tactics designed to manipulate websites in to better positions on Google search results, phishing scams, tax scams – you name it. Not to mention the Google business reviews which are notoriously ridden with fake reviews. Quite possibly this is just the cost of running such a big operation – where there is opportunity, there will be opportunists looking to take advantage. But given Google’s monopolistic position over what is now such a massive part of people’s lives – ie the internet – might it not be prudent to place bigger, tougher checks on how Google manages the products it provides at the very least? Google’s USD 2.7bn fine for rigging its search results in Europe over a period of years should be a pretty strong reason for governments and regulators to keep a closer eye on how Google does business in their region. And if there was any thought this was just a blip, then Google’s highly documented evasion of tax in numerous jurisdictions (including New Zealand) is about as clear a declaration as you’ll ever get that Google does not care too much for playing by the rules in which it thrives.
Who would you trust to hold major positions of influence in the world: 2 computer geeks with a social conscience whose home-grown business has become one of the world’s most influential, or a real estate tycoon of inherited wealth who got elected President of the USA on populist rhetoric? The question is skewed so you’ll probably agree the computer geeks are the more trustworthy option, but when those geeks operate in a system which incentivises them to maintain their monopolistic position via tactics which include tax avoidance, and rigging its search results in its favour, you are going to see their social conscience become compromised by the realities of maintaining global hegemony in their trade. A president can at least – in theory – be voted or removed from office if he’s ‘doing evil’.
The idea of ‘responsible capitalism’ is one which Google has traded on since its inception. The “Do no evil” motto has got them a lot of mileage, but the duplicity of their public face and private dealings is becoming increasingly pronounced and more widely known. That’s not to say they won’t survive and become bigger and better – they will – but just as McDonald’s have had to start living up to expectation, Google is going to have to as well.
Responsible capitalism only happens until it becomes inconvenient. There is no better system than capitalism I know of, but to expect companies to be socially responsible in a system which encourages them to behave irresponsibly is utterly naive. If you think Google will always do right by you with all the information it has about you, just because the top 2 or 3 people in the company say that they will, unfortunately is naive too.
A man you have probably never heard of, but who is one of the more influential characters on the internet’s development is John Perry Barlow. Barlow used to be a lyricist for the Grateful Dead, and used his literary skills to write the influential ‘Declaration of the Independence of Cyberspace’ in 1996. He is also a founding member of the Electronic Frontier Foundation and Freedom of the Press Foundation. As a ‘cyberlibertarian’ Barlow’s views on how free the internet should be – like in areas of copyright are controversial. But his description of the way in which most Google ‘disciples’ are in denial that Google is a huge corporation, out to manipulate and profit from them is apt, especially given he said the following back in 2006:
“They see a couple of basically O.K. young guys – and they still are, in my opinion – join forces with a truly decent older guy and resolve not to be ‘evil,'” (referring to Google’s founders Sergey Brin, Larry Page and Eric Schmidt, Google’s chief executive). “How cool is that? What they don’t understand is that once a company sells its soul to the stockholders – which it must at that point – good versus evil is no longer a practical consideration. Google has already crossed that Rubicon.”
Is it at all surprising Google’s power has crept up on the world? It has provided us with a range of genuinely future altering, present changing advances in its 18 year history. And Google’s leadership know only too well that so long as they keep producing stuff we use and love, we will turn a blind eye to how they’re doing it and the associated costs. Like content creators now having to negotiate with either Google or Facebook to have their work or advertising published, rather than the decentralised media layout of the past.
Imagine if the secret algorithm which makes Google what it is was made publicly accessible to startup companies. How much more efficiently could they launch and benefit society with their own innovations? That’s not a far out idea, it’s happened before and we already know how it plays out. In 1956 AT & T – which had a monopoly on US telephone lines – was made to licence its past patents to any US company (for a small fee), and its future patents also. The result? The laser, the microwave, the microchip.. among other inventions we benefit from today. To us the most recognisable of those startups which was founded on the licensing out of AT & T’s patents is Motorola. Imagine how New Zealand’s tech industry, let alone the world’s would benefit if companies like Motorola were empowered to spring with the tools made available from the breaking up of the Google monopoly.
Links
Competition is for Losers – the original article by Peter Thiel, published in the Wall Street Journal. If you don’t have a WSJ subscription, read an adapted version by the California State University Northridge here.
Electronic Frontier Foundation – the issues they lobby for are probably pie in the sky stuff for most, but it’s very important. Trawl through the ‘Issues’ section.
A Declaration of the Independence of Cyberspace – idealistic garble or visionary prose. Time will tell.
It’s Been 20 Years Since This Man Declared Cyberspace Independence – in Wired. Background to the aforementioned declaration by Barlow.
Hyper Normalisation – BBC documentary by film maker Adam Curtis. Among other things features a different perspective on internet players like John Perry Barlow.
Is it time to breakup Google? – New York Times article by Jonathan Taplin. Succinct and information laden.
Wikipedia entry for John Perry Barlow – author of the ‘Declaration of the Independence of Cyberspace’, co-founder of the Electronic Frontier Foundation and Freedom of the Press Foundation, Grateful Dead lyricist.
Breakup of the Bell system – Google has just been fined USD 2.7bn for antitrust. This is a pretty interesting overview of another relevant antitrust case, plus the aftermath.