Warren’s plan to break up tech companies

Everyone and their mom have written about Senator Warren’s plan to break-up tech. She certainly hit the right button to get attention. I do feel that the whole thing is one-sided and presents a very limited view of the world around us. It reminded me a little of the stop BEZOS Act of Senator Sanders.

Both Warren and Sanders point at tech companies but – looking at Warren’s proposals – there are plenty of other companies where are monopolies or operate in oligopolies.

What about Walmart? Walmart has been killing local businesses for decades.

What about wireless carriers? They operate in an oligopoly.

How about cable operators? Large cable operators operate a monopolistic business in most areas and have no significant competition in their markets. Nationwide they operate in an oligopoly.

Another favorite topic right now is the cost of medicine. Medicines are a monopolistic business since there is often no or limited options for treating a particular illness. Are we going to break them up too?

Monopoly and oligopoly markets are not capitalistic markets. They are not open to other entrants. These markets do not function efficiently. Without intervention, it ultimately hurts the consumer in some way – either by high prices, poor products or no innovation.

It bothers me that tech is now singled out while every old established business is ignored. How can you not mention the merger between Sprint and T-Mobile in this context?

It is also weird that she singles out acquisitions as Wholefoods and Waze. I do not think Amazon nor Google have a monopoly or oligopoly in those markets. We can’t stop these companies from innovating and pursuing new markets – that would be condemning them to a slow death.

It is also interesting she mentions Bing as an inferior alternative to Google and that is a good thing in her mind. I am not sure, but Bing was started by Microsoft as an answer to Google Search since Google Search was on its way to owning 100% of the market.

I think her singling out of tech companies is just lazy and one-sided. At the same time, we should act when markets become monopolies or oligopolies. When I think about those markets, I do not think a single solution is going to cut it. I think each case is different and needs a different approach. I think we should just start by defining when a market is not working anymore. For instance, when 50% of a market is dominated by a single player or a particular market in the US is dominated by 5 players or less.

Remember that Microsoft invested $1B in Apple and made their office software available on its platform to avoid further regulatory scrutiny? Look how that turned out. It was not a bad deal for anyone involved.

Also, read the excellent analysis by Ben Thompon “Where Warren’s Wrong”.