5 questions for Mark Jamison on Big Tech and antitrust

From James Pethokoukis of AEI. 

"America’s biggest tech companies have revolutionized work, entertainment, and just about every aspect of life. But some in Washington are raising concerns about Big Tech, hoping to make the tech sector more competitive using antitrust. Mark Jamison joined me on a recent episode of Political Economy to discuss calls for antitrust action against America’s biggest technology companies.

Mark is the director and Gunter Professor of the Public Utility Research Center at the University of Florida’s Warrington College of Business and a nonresident senior fellow at AEI.

Below is an abbreviated transcript of our conversation. You can read our full discussion here. You can also subscribe to my podcast on Apple Podcasts or Stitcher, or download the podcast on Ricochet.

Pethokoukis: The critics of Big Tech would argue that antitrust, as it’s currently conceived, isn’t working. How has antitrust changed from the immediate post-war period to the way it is now?

Jamison: When we first started antitrust, if you look at the political rhetoric, it’s the rhetoric you will see on any particular issue: There are evil entities in the world, and our political heroes are going to correct that. Antitrust then was given a lot of energy by Louis Brandeis, who had a bias against anything large. And later, what people call the Chicago School stepped in and said, “Well, if you’re going to have antitrust, it really should be about consumers.”

This is what we call the consumer welfare standard, which over time became adopted. It’s the basic idea that if a government is going to say a merger shouldn’t be allowed, or to take on a particular business practice, their focus should be on, “Does the business practice harm consumers?” But today, we see people who would really like to go back to the idea that big is bad. They want to loosen the intellectual standards upon which we’ve built our antitrust policies for a number of decades now.

Are Big Tech’s critics saying the consumer welfare standard needs to be broadened? Or do they think that it doesn’t even work on its own terms?

The primary argument is that it’s too narrow. So you’ll see people arguing that we should be protecting competition, whatever that means, or we should be protecting competitors. We know what that means, and we know that can take us down the road Europe is on, where you’re protecting companies that aren’t serving customers very well.

What you see from people who argue that today’s antitrust is failing us are studies that try to show that companies today are bigger than they used to be and that this is a failing of antitrust. But it’s a tautological argument. It’s arguing that, “Well, since we now have bigger companies, that means antitrust has failed and therefore antitrust should attack big companies.” They’ve simply gone in a circle. They’ve not shown that customers are harmed. It’s simply showing that the standard they would like to have (“big is bad”) is not being addressed under current laws, which is exactly right.

Via Twenty20

Some people look at Google and say, “Everybody I know uses Google search. They’re dominating the market. How can that not be a case for government action?”

So there are two things there. First, if you look at how consumers view Google versus the rivals, the consumers rank Google much higher in terms of satisfaction than they do the rivals. And so this really is consumer choice. Google is as large as it is because you and I use Google instead of perhaps Bing or Yahoo.

The other thing to keep in mind: In these kinds of markets, we don’t really want someone to be another Google. What we really want is someone to create the next ecosystem and the next generation of products. The real excitement is in what’s going to replace these particular companies’ services.

Should I be bothered that, for instance, Facebook owns three big social media companies: Facebook, Instagram, and WhatsApp?

You would look at it as a problem if you had a large Instagram, a large Facebook, and a large WhatsApp proposing to merge. What we had was a startup called Instagram that had a really cool idea. And Facebook said, “We can make that a successful business.” Similarly, WhatsApp did not have a real revenue-generating model, but Facebook did.

There are basically three steps to making a successful company: One, you have to have the idea; two, you have to turn that idea into a product; and three, you have to turn it into a business which has the marketing, the cashflow management, working with investors, legal issues, etc.

Being purchased by someone who has a successful business model is a really good future for a lot of people who have bright ideas and can actually engineer a product but don’t want to become someone who’s in charge of large operations. They need a future where they can take what they’ve created, sell it, and then go create another future.

Are today’s Big Tech leaders so big, so much a part of our lives, or worth so much money that they aren’t vulnerable in a way Yahoo or MySpace were?

As we’ve looked at the companies that have fallen along the wayside, they are all companies that were in a service area that some of today’s tech companies are in, and today’s tech companies just did it better. What we actually do see in these current companies is a very dynamic system — one where it’s fairly easy for them to be set up to fail.

One thing I try to point out to people: If you look at the AlphaGo artificial intelligence that beat the world champion Go player, the AlphaGo computer burns about 170 kilowatts of electricity. The human mind playing Go consumes about 1/50,000 of a percent of that much electricity. So there’s a lot more to intelligence than what we’re doing today, but these companies are tied up in today’s artificial intelligence. And as soon as someone says, “Oh, I can do that better,” that opens the door to create the next ecosystem."