Should the Government Break Up Big Tech? A Soho Forum Debate


We have lived through an experience of
consolidation in the internet industries. They are not the industries they were before, they are controlled by fewer and fewer players. And I think they have to be watched very carefully. So the world that we have now is not a world in which big companies will continue to dominate everything, it’s a very dynamic world and
places like MySpace are no place today precisely because they couldn’t keep up
with the competition. So much of what Richard Epstein wants to happen, so much of this idea of churn, of new companies coming in industry of new voices being
heard, is a result of some kind of outer limit and you may not do this. We are in the situation in which we have a tech boom not a tech bust and we want to be
extremely opposed than any particular kinds of proposals that will upset the
applecart in order to secure a series of benefits which we will regret should we
ever have them. Again, the resolution reads antitrust should take the initiative to control the size of the big tech companies taking the
affirmative Tim Wu Tim please come to the stage taking the negative Richard
Epstein Richard please come to the stage Jana please close the voting and the
affirmative goes first that’s Tim wolf for 15 minutes Tim take it away what
yeah look put it put it there and then as you know your timer will be right in
front flashing five and two minute signs all right let me begin by saying that
was the least relaxing comedy routine I’ve heard in a while but
I’ll try and make you feel better so as I see it we are on the tail end of a
20-year experiment in which we have allowed an unprecedented and in many
ways unamerican abandonment of the principles of competition and the ideals
of a decentralized economy and it is my proposition today that we need to begin
to reverse those policies to begin to have greater control in the interests of
competition in the interests of free markets over over consolidation of of
this economy and I believe that that approach should begin with big tech
which is a poster child the most visible form of monopolies in most of our lives
and also an industry and a series of companies which have developed a
dangerous level of power over over not only the economy but also politics in
our country over even our daily lives and the accumulation of data and private
information it is my proposition that it is the American tradition and an
important role in the economy to have some controls over monopoly even if you
believe in a free market the abandonment of even the most minimal controls has
led us to a situation that is unacceptable and I want to give four
reasons for that in the time that I have remaining for it to me so the first is
an argument from antitrust in general which is the argument that monopolies
simply take too much away from the economy and are inefficient so these are
the economic arguments I want to point out to you that in the last 20 years in
a period which we’ve allowed unprecedented consolidations of so many
American industries we’ve been left with a country where Americans pay pay more
for for so many basic items whether it’s broadband whether it’s our cell phone
plans whether it’s airplane tickets HealthCare Pharmaceuticals so across
the board across industries the abandonment or the weakening of
antitrust has had a the predictable effect of allowing oligopolies or
monopolies to arise and across industries and give people less for more
money I think many of us have experienced this firsthand if you you
know have at any interactions with the healthcare system if you feel that the
airline industry with just three majors might have seemed of increased prices
increase its fees on everything reduce your seat sizes you know that’s
sort of the the poster child allowing consolidation of the airline industry of
what the rest of the economy has looked like look beginning look like including
a big tech and I want to add to it of that across the line weakening of
antitrust weakening of the basic idea that monopolization is is illegal that
mergers of competitors should not be allowed has also contributed to that the
problem of inequality which you know regardless sure across this political
spectrum is is become a looming issue of our time and that is for a number of
reasons I’d be happy to discuss in questions but the the basic economic
principle is that if you allow excessive corporate consolidation if you will it
leads predictably to higher corporate profits which are generally returned to
shareholders and in terms of either stock buybacks or dividends or other
methods which tends to accelerate the tendency of a smaller number of citizens
to have more money than the rest and this I is I’ll pick up in the political
side of the debate has exacerbated many of the political contentions the
division of the United States a sense that the the coasts of the country are
in some ways in a different position in the center of the country these are all
trends that are exacerbated I don’t say exclusively cause but exacerbated by the
weakening of antitrust enforcement the abandonment of the curbs on monopolies
so the second reason I want to focus on which is
to the tech monopolies is the problem that tech monopolies like other
monopolist simply take too much from the rest of the economy
now Richard may argue in his time and I suspect he will that the the good thing
about the tech monopolies is that they have provided new conveniences and and
services to consumers and I concede that I don’t deny that these are good
companies I think that they are you know I don’t think these are so the stag
stagnant backwaters or anything like that but the problem in allowance of
tech monopoly is the degree to which it starts to seize income sees revenue sees
opportunity from the rest of the economy people who are at all to take one
example you know what is the problem with Amazon
the problem with Amazon isn’t that it’s bad for consumers the problem for Amazon
is the the effect it has on other parts of the economy like suppliers and where
its buying power results in it having the ability to Sookie’s squeezed
suppliers across the economy and make it very difficult for them to make a profit
now Amazon this point is has not even reached its full extent but if you
imagine a future where Amazon is the more or less exclusive way of doing
business if it has no real competitors in the retail sector it’s not hard to
see that’s a very difficult economy to make money in if you’re anyone other
than tech or other than Amazon so I think this the the main problem when you
focus on a company like Amazon which in some ways is very appealing and I will
concede those points is the effects on the rest of economy and this squeeze of
opportunity and profits the third point I wish to raise in a defense of this
proposition is the fact that antitrust actually has a strong and good track
record when it comes the problem of tackling tech man Appa Lee now I don’t
want to have an you know a lengthy lecture on the history of the antitrust
laws but I want to talk about three times that the government has taken on
tech monopolies in the past and has produced good results for the US
economy so in the 1970s and 1980s the Giants of the day where IBM in AT&T and
at a time when the United States was facing increased competition from Japan
not unlike the competition we face now from China where the idea was that we
should be supporting our national champions we should be helping out AT&T
and IBM the approach of the US government was very different
it broke from the approach that the Japanese were taking which was not
unlike China’s to support their their monopolies to to give them everything
they wanted to make sure they were not subject to excessive competitive
pressure and instead the US government took aim at IBM and in AT&T and
attempted to break up both of these firms at the time many people said this
was a terrible idea at a time with rehearsal many of the arguments people
say people said you know everyone loves the bail system they rely on it
IBM there’s a beloved American innovator no one could be better these are the
arguments I think that we’ll hear today about how great and thoughtful efficient
these firms were nonetheless the US government took their case they broke
AT&T up into eight different firms and they nearly broke up IBM but certainly
chasing around for 13 years and forced it to separate software from hardware
the consequences of those cases as I said people the times would be a
terrible idea but if you look at the companies and the economic activity that
was opened up by the cases against the great monopolies they actually formed
much of today’s economy in the chase against IBM or the pressure on IBM it it
it it opened the software industry and gave rise to companies you know first
small ones but later companies like Microsoft companies that would later
grow into the monopolists themselves in the pressure put on IBM to to
make sure it didn’t excessively dominate the the PC space out came companies like
IBM Intel absent the old printer maker in other words these campaigns against
the computer monopolist made it obvious in retrospect that a lot was being held
back and I think if the government does conduct campaigns that is actually
currently involved in against Facebook Google Amazon it will begin to give
space to the entrepreneurs that have always been the backbone of growth of
the US economy and I think that if we surrender and we say well we shouldn’t
do anything you know we shouldn’t have we should take we should worship our
great tech companies we should trust them to take us the future that we’re
going to look back at some period and wonder you know those companies that
seem so great five or ten years ago have begun to stagnate have become more like
General Motors Chrysler Ford you know companies that grew too big stayed
around too long and ultimately upheld up the American economy alright I want to
turn to my final reason why I think that’s important too to have scrutiny a
big tech and consider limiting size and that is a political argument about
centered on the American distrust for concentrated unaccountable power I think
that we live in a time where we have to recognize that there is too much
potential in affect exercised power in a few small tech firms this is a
consequence not only of their aggregation of data but also by the fact
that a disproportionate amount of speech a disproportionate amount of what people
see in here goes through just several small platforms and no matter what your
political persuasion is no matter what you think of this candidate or that
candidate I think it’s important to be wary of a system so
centered on just a few platforms one that is has already proven itself
vulnerable to foreign manipulation and one that is constantly at risk of being
a system with a single point of failure I think it’s much safer time has told us
to have a more decentralized system for speech to have multiple points of
failure and not to just have one or two companies and in fact a decision of just
a few people decide what is saleable or not saleable to decide potentially who
is the advantage in an election I’m struck by the fact that when you
consider the debate over Facebook’s advertising political advertising how
much is decided how much in effect everyone assumes the decisions of one
person Mark Zuckerberg will have on the 2020 election and if there’s any
principle that is supposed to be the the principle of democracy it’s so you know
one person shall have no kingly prerogative to decide where political
power should lie I add to that I add to that finally the problem that monopolies
have always had excessive influence over the outcomes of the political discourse
and we are in a position where we risk a future where technically in some sense
for place in many aspects government in our lives and decide what it means to
live decide the most important conditions of our lives and decide
things and in that sense I’m at the question of whether you think we should
have more discipline of the tech monopolies is in some ways a question of
whether you believe in democracy or not because we have in some ways aggregated
a lot of the most important public decisions – a series of smaller
companies I think for the principles of democracy alone that trend must be
resisted even if we occasionally like to order things that arrive in one day
thank you very much and Richard Epstein for the negative you
take the podium Richard yeah I know you can’t not to say that all rights for
having a bull under these circumstances every Minister Richard it’s a very great
pleasure to be here and and let me see if I can state the opposite side of the
position Tim began with a statement that just
think of what the antitrust laws has been like in the last 20 years and how
much things have changed well start going back to say 2020 and you ask
yourself who was not around all the companies that he now wants to regulate
were either much smaller or non-existent at that particular point in time and all
of them have generally grown at the same time if you start looking at the
positions with respect to the antitrust laws it’s not as though they’ve taken an
abnegation on the way in which monopolies ought to be controlled just
yesterday I read a long disposition by the Deputy Attorney General who
announced that in these particular cases we are going to continue with the set of
sanctions that we imposed upon a cartel formation by giving leniency for the
first person to confess so that we can throw everybody else in jail and then
we’ll work out other kinds of an arrangements there’s absolutely no sign
whatsoever across either the Clinton or the present administration or any
administration in between that the case against cartels has not been made if you
look at the merger market the same kind of guidelines that have always been used
before now being used again and basically what happens is if you’re
trying to go 3 to 2 or 2 to 1 you can’t do that if you’re trying to go 5 to 4
and you check the analysis generally speaking a word which Tim did not
mention but which needs to be mentioned is that the efficiencies associated with
some of these unions are greater than any restrictive prices they could get
and so the case that’s on the basically on the cutting edge is the four-to-three
merger and that seems to me also to be a situation which is sound on antitrust
law then if you start looking at the way in which various companies start to work
there’s been a very established offering for a long time which says that if you
in fact are able to achieve your particular growth from eternal expansion
through acumen or through good luck this is not an ant
trust the violation it isn’t effect something which says that the reason you
got where you got is not because you have an operator where none exist that
you created opportunities for other individuals which were never available
to you before and so as I start to look at the antitrust laws that’s come down
there has been a pretty strong Democrat and Republican consensus with respect to
these particular positions and the question is why would anybody want to
change something given the fact that if you look at the European market which
has a rather different antitrust laws the number of new corporations of any
consequence the size that it’s been able to create is exactly zero and they spend
most of their time trying to figure out how they could wreck American companies
because they have a kind of international and be associated with the
operation of the system so that’s the first point then when you start coming
to the question is there anything specific about tech markets or may turns
out that the first thing you have to do is to remember what the question was
and the question was do we want to limit the size of these companies the question
was not whether or not we ought to give all of these companies a free pass and
the way in which we start to deal with these particular issues so I’m happy to
report right now I’m working on a case and which is not on the Google Sun it’s
on the other side of this particular circumstances and it’s an antitrust
lawyer over the past years I’ve been a plank to Sky and I’ve been a defendants
Khan because it seems to me that the system once you get it right is
something which has a certain amount of sense and balance associated with its
operation so if the question is whether you want to break up these companies the
question that you have to then ask is a simple one do you think that there’s
some other kind of remedy that you can do with respect to the practices that
these companies undertake which would solve the monopoly problem without
creating the breakup problem now why is it you want to do this breaking up as
they like to say is very very hard to do particularly if you are in a network
kind of industry if you break up the network then people from one side of the
industry cannot get contact the people on the other side of the industry unless
what you do is you create a series of interconnection agreements which is we
know from the telephone industry turn out to be extremely difficult to execute
and indeed when Tim mentioned they broke up the situation with respect
to AT&T in 1982 it wasn’t because the antitrust laws were inadequate it’s
because we had this elaborate system of regulation by the FCC which shielded it
from the antitrust laws and then they broke it up it is worth mentioning
however when they broke it up they didn’t know how to break it up and so
what happened is the consolidation that took place afterwards showed the folly
of the system that had been created which having local exchange carriers on
the one side and AT&T is a long lines carrying on the other side it turned out
that the much more efficient system was companies vertically integrated on the
one hand coupled with that new arrival which they never took into account in
1982 what are we supposed to do with the cell phone when it comes along and by
the time you get to 2005 there are more cell phones than they turned out there
were landlines and the whole stuff that Harold Greene was doing essentially
turned out to be quite farcical because he put such inhibitions with respect to
innovation that took place that the general view was that he held back
progress in that particular industry of my several years are you looking at IBM
and it’s the same kind of story it basically is a prelude to a case that
Tim did not mention which is the Qualcomm case on which I work and AT&T
was whether the IBM case was brought the day before the Johnson administration
went out of power just as the Qualcomm case was brought by the Obama
administration three days before it went out of power and is this thing going to
do any good well what was the theory that you had against IBM it was very
difficult to talk about it slowed things up and then when Bill backs to the very
person who decided to prosecute the AT&T case came along he dismissed with
prejudice the IBM case saying that it was meritless and in fact in the interim
what did it do to IBM it certainly slowed its kind of innovation up because
you now know every time you are going to engage in a new product or a new price
somebody’s gonna come and look at you and say uh-huh
you’re now engaged in a form of monopoly what did they do is they gave
opportunities for many other companies to get into business by selling to them
stuff which they could then use and it turns out if you look at companies like
Microsoft and Apple later on it turns out many of these companies actually had
sensible relationships with IBM before they spun off and did their own
thing if you recall Bill Gates who had an opportunity to buy back his operating
system because I believe it was IBM decided that Justin wanted in a rare
display of commercial acumen by a large company what you have to understand is
that these big guys in some cases have huge advantages but in some cases
they’re at an enormous disadvantage if you want to do a start-up you cannot do
it being a little Bank inside a big bank you have to be an independent company or
otherwise you cannot align the incentives your inventive what’s going
on so the world that we have now is not a world in which big companies will
continue to dominate everything it’s a very dynamic world and places like
MySpace and no place today precisely because they couldn’t keep up with the
competition it wasn’t the antitrust law that spelled
the end of the AOL situation remember it was going to take over Time Warner and
by the time it was done it was history and Time Warner had to ditch it these
are amazingly dynamic markets and the fact that you have dominant players
today and dominant players ten years ago and dominant players ten years from now
doesn’t mean that you’re going to have the same dominant players at all these
times the churn is every bit as important as the current consideration
and every current so-called monopolist knows that there is a sword of Damocles
hanging over their heads which will say if we make a misstep it will be on a
last step and somebody else will then come along under these circumstances and
take all the particular situations that we have and move them to the other side
so then how is it when you want to do this thing do you start to think about
the way in which these industries ought to be regulated and the first thing that
you start to do is you say well they’re not all the same kinds of industries and
they all may need very different kinds of treatments and you have to be careful
that you’ve gotten the right treatment so what are you gonna do with respect
the Amazon whose major sign is reliable delivery on the one hand at low prices
on the other a first thing you do is remember they don’t win in every market
in which standard there are certain cases and which smaller more adept
players are much better and when you’re trying to look at this particular stuff
what you have to remember is it’s not the global size that determines
competitive straw a large company like Amazon can face
competition in each local market by two or three small people who are much more
adept in their own space than Amazon can be so that it’s not a case of
essentially the big guy having no competition it’s not a case of the big
guy having competition by one or two other companies it’s a case of a big guy
having lots of competition from lots of companies in lots of different markets
and it has a disadvantage that it has to form national policy when they’re trying
to figure out how it is that they deal with local situation so what should we
do in Amazon buy away with respect to their goods and don’t read the
Washington Post and it seems to me that you will come up when somebody laughs at
least I you will come up with something that looks to be the same thing if you
look at the situation with respect to Microsoft they wanted to put all sorts
of duties on it so that they could not introduce products that would have
anti-competitive edges and they had to establish the compatibility with
services from other people and IBM took a terrible advantage of this situation
by saying you have to examine protocols with hundreds after hundreds of
different products that we’re gonna put out it’s gonna cost you a fortune and
most of these things that were asking you to examine for this kind of stuff
turn out to be stuff that we’re never going to use um if you continue down
this particular line and take the recent Qualcomm situation and one of the worst
judgments ever entered into in the history of antitrust law
you take America’s major 5g company and you want to subject to world revision of
the rates being done in a San Jose Court they’re telling them how they ought to
follow and deal with their products when they’re selling them in Korea or in
Japan or other places which have in fact their own antitrust law this is
absolutely crazy and then it turns out that when they start to go somewhat
further what you say in the fact is that the antitrust law now gives you a duty
to compete not only to compete with your competitors but to supply them at below
market prices are your particular technology so that they compete with you
and the Trinko doctrine which was one that was established in about 2004 makes
it very clear that your antitrust obligation is not to support your
competitors but to try and run your own business in a perfectly coherent in
general way so if you start to look at the way in which the
medial structure comes out in these particular cases where there has been
found to be an antitrust violation what you typically discover is that the
remedy in many of these cases turns out to be far worse than the disease and it
turns out that the best way in which to deal with this stuff is in fact to
encourage new entry by removing whatever barriers to entry it turns out to be now
what are these barriers to entry well sometimes it’s kind of funny let me just
mention to you two things one is Jonathan Barnett has an excellent new
book and what she says is the key barrier to entry in many of the tech
industries is a weak not a too strong patent law and why is that because the
companies that are entering the small companies they do not have an elaborate
industrial structure either they get patent protection and they get nothing
but if you’re an Intel or you’re some large company you can protect yourself
by contracting by trade secrets and other devices and so you get the paradox
that it’s all the big and established companies that are opposed to strong
patent connection and all the small companies which turn out to be in favor
of it so if you’re trying to figure out what it is that’s going on in these
cases when you’re figuring out the ways in which these things are gonna take
place it turns out that it’s much more difficult to do that than Timur said
then there’s also the problem what counts as a barrier to entry there’s a
danger of many kinds of shall we say effective cases as well as some real
cases so effective cases a recent suggestion that the reason we find that
facebook has a barrier to entry is that it lolled people in with the promisee of
strong privacy protection then change the rules and by that time it had a
monopoly position that’s the kind of crazy theory that nobody should give
credit to if you don’t like the privacy policies you can ask Facebook to amend
them and they’ve done it multiple times or you can decide to take your business
elsewhere and a company like snapchat not that I use any of these particular
services turns out to be getting much greater shares than you have so you have
to be very careful when people simply allege that there’s abuse to look at it
closely on the other hand if you’re a company like Google and you’re running a
network and what you do is you make it impossible by removing an old technology
when one of your competitors to sell their stuff that’s a very
serious operation it’s not straight an antitrust case it’s also a case that has
to do my landlords with your competitive obligations your good-faith services and
so forth now last what Tim mentioned was that we
have to worry about the internet in the control of ideas and he made a segments
of the sort which Mark Zuckerberg should not have that much influence articulate
though he may be well I run three podcasts today not a day a week on
average and basically none of them goes through Facebook although they can
transport it what happens is the rise of the Internet has meant that little guys
insignificant as I turn out to be turned out to find somebody like the Hoover
Institution wants to put them out there you could get free access to all places
on the internet and somebody like me who’d never been heard of under the
great age beforehand where you had large fixed telephone company can all of a
sudden get a voice and if you start looking at the number of sites in every
industry that have independent production capabilities what you’re
impressed with is the cacophony of different voices rather than with the
fact that under these circumstances you have only one person who could speak at
all why is this because water essentially always finds its way if it
turns out that one particular path is blocked you will take another path in
order to get what you think to be the appropriate way in which you want to
move your particular resources and so what you do is you get an absolutely
unmatched variety of things that take place because free entry on the web is
extremely powerful my friend Larry Lessig actually had one very good idea
which was the creative commons which allows also small people for credit to
get their stuff out so we are in the situation in which we have a tech boom
not a tech bust and we ought to be extremely opposed to any particular
kinds of proposals that will upset the applecart in order to secure a series of
benefits which we will regret should we ever have them thank you yeah good Jim five minutes rebuttal from
Tim who take it away Jim all right that’s all right well abstainers Oh give
me the fun well you know III don’t know you’ve done me the favor of giving me a
lot to fight at and I want to start with just starting with your misunderstanding
of the history of these tech industries if you look at the narrative of the last
thirty years is not a narrative where the industry sort of naturally took care
of itself it’s an industry it’s a narrative of the industry turning to
monopolies and at crucial points antitrust interventions breaking things
up and rebooting what was becoming and dangerously consolidate
you know you talked about how we have all these type of these firms Google
Microsoft all and-and-and you name it but those are the out shoots of a very
successful attack on Microsoft which was in a very dangerous position of
controlling the browser and about 2001 now these are very good companies but I
think the system we’ve had the reason an American Tech has been the leader of the
world is because we haven’t done what Japan has done we haven’t done what
China is about to do which is just stay away from from the big monopolies let
them dominate the text faces in their areas never break them up never threaten
them and I suggest we’ve had a very successful plan of putting the tech
monopolist to test forcing them to compete hard not allowing them to build
up artificial barriers of entry and has completed in an extraordinary way the
companies themselves for the success of American tech so I think that what
you’re actually describing is an abandoning of what has been an
incredibly successful program now second of all you suggested that you suggested
that sort of impractical to limit size or and and turn to the
question of what this debates all about so first of all the proposition is that
we should limit the future size of tech companies so what I’m suggesting is that
we not necessarily have to break up every tech firm but at the very least we
need to stop the big tech monopolies from buying their most dangerous
competitors that is what Facebook did and that is the the the the core of the
case against Facebook is that they bought their most dangerous competitors
in Instagram in whatsapp and have bought others which people don’t know the names
as well because they’re not as prominent and Google has you know for their sake
bought 260 of their competitors or so many of these were very friendly
acquisitions I don’t think the people minded getting the payoffs but the net
consequence is when you have too many companies allowed to buy off too many of
their competitors that you end up with an environment that is overly overly
monopolized overly concentrated and I think this is a danger to the viability
the future competitiveness of American tech this I think you and I both agree
that what has been the success of American tech is churned the question is
whether that happens naturally or whether government by putting scrutiny
on anti-competitive practices on preventing companies from building up
barriers to entry of giving entrepreneurs their shot of making the
tech economy a place of opportunity as opposed to a place where monopolies can
do whatever they want whether that is what leads us finally to churn a minute
on you know this sort of question a political danger I along with you agree
that the Internet has allowed a lot of voices obviously to get out there in a
way that was challenging but that is a view that is I would say threatened by
the domination of just a few platforms as it stands if you think about the you
know speech codes or the the speech codes and and the controls of the main
tech platforms they are deciding what speeches on the internet and I think
that should be a decentralized set of questions and I want to end by something
once that kind of gives me a sense of why I think antitrust is an important
player and why I think there should always be a public
role in deciding what happens in the private tech industries
once I had a opportunity to talk to Bill Gates and I slowly moved the topic to
antitrust supposing pretending suggesting I was a historian more than a
antitrust advocate and he said something very interesting which I I just want to
close on you know he said II didn’t really like the case and he said all
these sort of things but he said you know I’d had a lot of things go my way I
sort of deserve my comeuppance and it did get me into philanthropy about seven
years sooner so I want to suggest there is this this positive role in control of
any form of power including private power and including the power of the
tech industries Thanks five nature viral from by Richard I think we have to be
extremely careful to figure out what it is that is and is not a barrier to entry
what is and is not something that rather hopes there is much too much of a danger
now to put attention with respect to the antitrust law although that’s the only
operative force that exists so respect to new entry I’ve already mentioned to
you the importance of the patent system it’s also absolutely critical that you
don’t have something like the Fair Labor Standards Act interfere with the churn
and the competition of new companies when they start to take over it’s also
clear that the rules that exist in the securities industry which make it
progressively difficult for companies to start to go public has led to a system
where some of these companies are going to be a crime the second thing I think
you have to do is it’s extremely difficult when you start looking at
these merges to realize whether or not these are efficiency gains that you’re
watching a monopoly practice it you know you’re a company called googling to take
over a company called ways it’s got 12 employees it’s got revenues of
absolutely nothing and what you have here is an incredible synergy that can
take place when somebody’s got a Matt connection which is second to none and
somebody else has got a technology that can be put to use and so the question
you then have to ask is whether or not want these two people to go separately
at which point the synergies are going to have to come in some other way and it
could delay these things from happening to begin with the third thing I think
that one has to remember on this stuff is if you have several large companies
that are always in the market but buying small companies or can go public this is
going to be a strong inducement for people to start to create new companies
that are going to start to take over so if you start looking at the Obama era it
turns out that anything that looked like technical innovation was something that
they built with presumptive suspicions the moment he’s out of office and you
then start to look at the number of startups you see an absolute u-turn
taking place on this thing because it’s generally thought that the Trump
administration was sufficiently incompetent to sufficiently indifferent
that it wasn’t going to wreck the way in which these companies started to operate
and this has nothing whatsoever to do with the antitrust law it has to do it
the question as to whether or not when you start don’t do one of these
particular businesses you’re gonna be able to find out having done this
particular business that you’re going to be able to obtain to some extent of some
kind of a decent turn with respect to the way in which it goes the second
point is when you’re dealing with the antitrust laws this is not a matter of
aspiration this is a matter of technique and it turns out as I mentioned earlier
it’s not a question as to whether you think there is or is just a violation
and so forth the question is what’s the kind of remedies that you want to impose
so if you want to impose a break up on a large company like Microsoft what you’re
gonna do is separate its operating system on the one hand from its various
peripheral operations on the other this will do absolutely nothing in antitrust
firms because it turns out that the monopoly power if you have one is in the
operating system and so long as that is kept as a unified whole then it turns
out that the problem is going to exist or whether or not you spin off the
application side of the business or not and then if you try to break up the
operating system you do run into a very serious problem under the circumstances
which is the way in which you’re now going to get the two parts to start to
interconnect with one another or there are other problems so for example you
talk about privacy and this is a hugely important issue and often times it’s
extremely difficult exactly who’s responsible for what when
leaks start to take place and data is taken over and so on if you have one or
two large companies with large databases in there’s a leak generally speaking is
easy to track down where it comes from then if you have a number of small
companies who may have less effective techniques with respect to the ways in
which these operate than the larger companies and so that what you can do is
in an effort to try to deal with the antitrust kinds of issues is you could
create exposures that you don’t want to welcome in other kinds of areas so when
you start to think about this question of breaking up this is a momentous
problem generally speaking you could say with perfect confidence as you start to
break these people up that the value of the shares in its constituent parts is
going to be less than the whole when it’s put together at that particular
point if you’re running a social examination what you then have to do is
to figure out exactly where the social game is coming from with respect to the
break-up and you can show that what you can show is an effect that new people
trying to come into the industry will have fewer people with whom they can
deal and so forth there’ll be privacy problems there’ll be huge transactions
cause there may be serious misallocations in the way in which you
allocate things from one point to another you don’t want to do it and just
the last point is when it comes to the political markets they’re particularly
vibrant today precisely because there’s so many more channels now than they were
ever before this is a case where technology has gotten rid of the problem
of holdup has reduced the influence of the FCC and we’re all the better off of
that because again what we want to remember is that technology can enable
just as it can restrict and so the point is to look to those bad practices that
firms undertake and to stop them but to stop messing around with the size of the
industry in the vain hope you can make this thing actually work thank you thanks to you both
we now go to the QA part of the evening I as I mentioned to Tim Wu and now to
you Richard will will be give you guys any
opportunity want to ask each other questions at any time there’s often just
an inclination to solicit the audience of questions first so line up at the mic
since you’ll be up pretty soon I I do want to take moderators prerogative just
ask one question if Tim Wu and then and then have Richard comment when Richard
Tim emphasized a couple of times that the question is you you say that it’s
too big but then then then what do you do like for example what would you do
about Amazon if you would let’s say to a rule well you’re too big we’ve got to do
some breakup we’ve got to do some curbing what would you curb what would
you break up yeah I don’t have any blanket sort of rule that says you have
to do anything I think it is important to be case by case to be sensitive I
think it would be not disruptive and good for competition for Facebook all
right okay okay no button open no bones broken just
a little milk on the floor and I think we’re okay right yeah good yeah I Tim
that broke your train of thought big time so maybe you want it they’re going
to go back God you know dial it back a little bit and start again go ahead so I
don’t I don’t have any you know grand aspirations to say you know we have a
rule we break up every firm because you do it for the joy of it I think if you
need to look carefully in every situation and ask whether it would do
better with competition in obvious ways and I want to give an example where I
think that’s true so Facebook in my view illegally acquired two of its most
dangerous competitors what’s up an Instagram it is a violation of the
Sherman Act to buy your competitors because the antitrust law believes in
competition not monopoly and I think you should ask Facebook to divest Instagram
and what’s up to be separate companies so that you then have three main social
networks competing with each other I think there’s a lot of you know contrary
to what Shep Steen said this is not impossible this is not something that
you know destroys life for the American you know for the average person I mean
now you have Instagram and and what’s up and Facebook competing with each other
and that is the spirit of the antitrust laws which is we believe in competition
not in monopoly I think that those firms facing independent pressure to protect
privacy independent pressure to provide better protection against foreign
electoral attack independent pressure to treat us better deliver less ads we
deliver the usual consequences of competition over monopoly so there’s an
example of a nice break up that I think actually would do a lot to help the
American public and you know and also deal with some of these little cons
concerns when I’ve talked about just having one person with too much power
which is you know an age-old thing that I think we want to resist so I think you
got to be careful about it I’m not formulaic this is everything it has to
be done but I do believe that history has shown time and time again that we
sometimes overestimate what’s so great about today’s monopolist an
underestimate competition underestimate what it means to give opportunities to a
bunch of new firms who want to give take their take their chance in the breakup
of 18t our last big breakup everyone said this is gonna be the worst it’s
gonna destroy life as we know it out of that fallen tree out of that carcass
came the companies that created what we now call the internet because they offer
dial-up services companies like AOL CompuServe and so forth and we’re able
to do so free from this sort of colossal shadow of AT&T so if you want an economy
that looks like America’s I think you should believe in controls and
ultimately breakups of illegal mergers or anti-competitive conduct if you want
an economy look like Japan’s where you just stick with a few big monopolist and
hope that they’re gonna be great and trying to defend them and I want to just
make this clear Richard Epstein’s prescriptions our prescription for doing
nothing if you accept what he says we continue what we’ve been doing for the
last 20 years which is a weakened antitrust law which basically does
nothing except mergers like the Sprint t-mobile merger which we just saw and we
won’t soon I believe have an economy like the Japanese economy where we don’t
bother anyone we assume the companies will do for the best but we lived in
stagnant times I come in Richard see if I could explain that why they made two
basic points one is you want to sort of break up the companies on the face book
in its acquisition and so forth the first thing is when these mergers took
place there were very different companies than they were now they were
exhaustive reviews that had been taken under the FTC to see whether or not
these things should have got gone forward I think they made a perfectly
defensible judgment it was Bill Co bass kick I think who was in charge of these
things a real pro in this business and they decided given the state of the
companies then that these things in fact we’re not going to be able to win
because they were companies that were much smaller than now now if you want to
break them up it’s an implicit transfer in some sense from Facebook to other
companies perhaps all the shareholders will be
just fine but then there’s the next question that starts to take place and
their twofold one is it’s gonna be real hard to get future mergers that make
sense technically if you’re gonna have this consequence coming on you
afterwards and it’s also the same problem that they had with respect to
Microsoft which is that if you have yourself an integrated company and you
want to break these things up you’re gonna have to take thousands upon
thousands upon thousands of line of code and try to figure out which belong to me
and which belong to thee and how it is that you’re gonna run any connection
between these companies when you start to have it this is not anything that you
can do is something which they eventually shied away from in a
Microsoft case even though they came up with inferior stuff Japan is a very
different company from the United States it is not a company which simply lets
things alone Japanese is a company which essentially has had restricted entry
practices from beginning to end impose by matters of law and what they’ve
managed to do is to take a once dynamic economy that was gonna capture the world
in 1980 and have turned it into some kind of an economic doormat precisely
because they’re mercantilist to the core the last thing I want to do is to give
any protection to any American company when it comes and they start to face
competition and so I mentioned for example the Qualcomm stuff and you get
yourself time when these companies and start to chew away at their particular
situations you get counter-attacks lining to go on a no sign that there’s a
lack of competition the real danger is that there will be a lack of competition
if this is gonna be taken over and run by a judge in San Jose who does not know
what she is talking about or doing when she starts to make these kinds of
situation and so you also have to remember if you start talking about
various kinds of regulation on these companies you have another monopolist
that you have to deal with it’s called Uncle Sam or some of the states and it’s
not at all clear that these guys know exactly the way in which it’s going to
start to happen so if you start to look for example at the AMEX merger which
took place it’s a kind of a complicated deal I think in effect the United States
eventually backed off the state of Ohio decided to pursue but this is a
two-sided market and you have really complicated two sides of markets it
turns out that unless you have subsidies going across a platform on the market
itself turns out to be inefficient if you look at what the government did with
respect to this and the at card market they wrecked an industry
to very large extent because they didn’t understand the way in which this thing
started to work and so if it’s amateur hour in the FTC or amateur hour in the
DOJ or damn it around in the Congress with the likes of Richard Durbin what
you have to do is to realize that you can do an immense amount of damage with
the government because at this point there’s no new entry that can weaken it
so I think Japan in fact is a basket case we have to avoid all of that and I
think what happens is the steady as you go perfectly sensible antitrust policy
which is not pussycat and lied down is the way to continue we don’t need to
have special targets for large tech companies because of their songs um
thank you okay question from the floor just frame your question as a question
please you don’t have to identify yourself where does one draw the line
between the most successful most competitive company and a monopoly well
I mean that’s the exact renewal component what you do is if you’re the
most successful company because you’re the most resourceful company and you get
very launched Shaam if there’s free entry into this particular business and
you provide an efficiency justification you don’t want to mess with success but
if it turns out that the way in which you got this was through mergers or
through Kartal is a ssin than you do and so what you do is you figure out the way
in which it goes now what makes this somewhat more difficult to deal with is
there is clearly a very large sentiment particularly in Europe that when you
have a dominant platform even if it’s lawfully acquired do you want to have
various service obligations that you’re going to impose upon it and you know get
the priorities right as to where the ads are place them things that that’s what
my view is that practice restrictions are something that you always ought to
consider but consider them carefully but that break up which goes to the size is
almost always the wrong solution if you got success through sighs that’s Brunel
that’s the Alcoa case we want not to reverse those policies comment from Jim
yeah so I think that you know having studied the history of large companies
monopolies I think they go through a natural life cycle and often companies
become a successful large because they have good products and the great end of
and people love them and that is their early stage and that’s fine the problems
and the time the government needs to get involved is when firms get a little bit
older to become a little less interested in trying to build new products a lot
more interested in trying to keep out potential competitors even at their
early stages in other words they’re not unlike members of Congress who start out
talking about how great everything’s gonna be and become interested only in
keeping themselves in power and that’s the point I think where antitrust
becomes important I want to make a really key point because he’s focused on
barriers to entry which is that failure to enforce the antitrust laws is itself
a buried entry and that’s what we’re talking about here when you give firms
an idea as we have for the last 20 or 30 years that you can essentially twenty
years particularly can do whatever you want you can build up barriers to entry
you can buy out your main competitors there is no nothing stopping firms from
building up barriers to entry and therefore insulating themselves from the
forces of competition which we both believe in and you know mark my words I
will tell you that if there is no antitrust or if we keep at the levels we
have now which are pussycat which are weak which have allowed firms to with
impunity buy out their competitors merged into tight oligopolies we will
face a future in the tech industries where we talk about them and like what
happened this used to be you know the the engine of the US economy but we
decided well they can really do no wrong let nature take its course
well Facebook book beat myspace so you know when there’s nothing to worry about
it’s like an exception to the usual laws of of economies of scale mark my words
we will see higher prices reduce competition reduce growth reduce
opportunity for entrepreneurs unless we start eliminating entry barriers which
is what the antitrust my words this will never happen if you start to look at
some of these great companies who proposed barriers to entry you could
start thinking of companies like AOL and that really worked out terrifically when
they had the first movement you could look at a company like Jack Welch’s GE
which he built which fell apart when in fact that
this if you engage in sloth and spend your time trying to deal with barriers
to entry basically what you’ve done is you’ve signed your own death warrant one
of the constant Maxim’s that people have in competitive industries is that the
only way that you can conceive could succeed is to cannibalize your own
products that is if you’ve got a dominant product at one particular point
in time you know that it’s half-life is gonna be X years if you don’t eat it up
and put in a new company somebody else is gonna eat it up and so you’re gone
either way and so the question is how do you survive and it requires that so
these companies are constantly innovation laboratories but it’s very
difficult in many cases for larger companies to do that because they don’t
have the right incentives to get small products into big products because it’s
too small an issue for the top management to worry about so in the
natural cycle you want small companies to be independently owned and then when
they have a coherent product either sell to somebody else is to go public and
there’s absolutely no sign that this cycle has stomped the number of
companies that have been built in the last 10 or 20 years with billion dollar
valuations whose names I’ve never heard of is the number of companies built in
the last five or six years with billion dollars of I don’t know who these people
are but I’m not the relevant door this is the problem you’re talking about ten
years ago no talking about today you’re talking about there’s much more
innovation today than there’s ever been before the biggest mistake that you had
was not at the end you got to get out more and talk to more venture
capitalists taking too much time you know you got to talk to where the action
is there’s the venture you talk to any venture capitalists and they’ll say like
you know yes that week say you’re talking about 10 years ago you talk
about 15 years ago maybe that you’re talking about the Golden Age of Silicon
Valley those days are over they have gone but the new generation of
vendors campus is going up if you check for example levels of patent innovation
which is a pretty good mark of innovation and these things the number
of applications is way up the numbers not weighed down I think it’s just
irresponsible and inaccurate to start to say that when you’ve had a constant
antitrust policy for the last 20 years which produced the gains 10 years ago
which you said that somehow or other is going to produce the failures the big
difference now is that the Obama processes were always regulatory on
labor and similar kind of issues terrible patent statute and so
forth and that was really harmful and I think the things will start to get
better don’t get rid of the antitrust laws but by heaven’s sake don’t try to
create any of these fancy innovations all of which are going to lead to real
technological stagnation hey this question is mostly for Richard many
right-wing dissident voices such as Nicholas J Fuentes monopolist loora
loora loora loora etc have been banned from social media platforms and I do to
the network effect of YouTube Twitter Facebook and whatnot I don’t believe
they can reach an audience that their left-wing counter-plan counterparts can
they can form an obscure blog or a podcast but these are niche
comparatively now I happen to think that you are on to something which is very
serious in these particular cases but it’s just not the Internet the same
thing happens to the federal society when it tries to run meetings and it
finds that it’s going to be picketed it’s happened to Brett Kavanaugh and he
wants Austin want the president and I think what really has to happen in these
cases is a following kind of structural organization you cannot on any kind of a
program if it turns out that you’re a partisan with respect to the some of the
issues so if Jack Dorsey is a left-wing if you want to get the hell out of
Twitter and let somebody else take it over who’s politically indifferent and I
also think by the way it may not be an antitrust solution in these cases but I
do think in fact there may be a contractual obligation that is being
breached when these characters announces they always do they’re trying to be fair
and impartial and you’re all sign and I would certainly allow for that kind of
campaign to go I think in some of these cases in fact the remarks that you make
about these people are downright defamatory and while it is that you may
not be required to put them on their network to start to say about
organizations of which I’m a part of support that they’re always fascist
operation or what they’re trying to do is to oppress this and the other group I
regard that stuff is very very serious so there are remedies I think that need
to be had but they’re gonna be in contract law and they’re gonna be in
defamation law they’re not gonna be an antitrust so I want to
turn again I’m sorry but let me just understand what what should these people
do have been been what would you do if Facebook and Twitter said to you Richard
get the hell off what I would do in effect is I mean me I would basically
continue with my PI across cuz I don’t know
I would think of our a serious institutional competitor I would sue
them for breach of the contract a fair deal in which they announce to all their
potential customers so these people should bring a lawsuit whooping I mean I
think I mean my view about it that would work now the question is if you go
before judges who are completely sympathetic with that people have made
that decision it’s not gonna work if you go before neutral judges and then
you start C Prager University getting to problems I mean I’m quite appalled at
the fact that somebody wants to knock them off because I agree with many of
the things that Dennis says even though I disagree the reason that the reason
Richards sorry please there is the Richard the reason Richards answer
didn’t quite make any sense is because he’s dancing around the fact that there
is a problem of concentrated power over speech in these areas and I don’t care
what side whether you’re on the right or the left I think that you don’t want a
tiny number of platform owners setting speech codes for the United States and
they have and we have you know what’s being built right now at Facebook and
Twitter even though some of it may be closer to my politics is one of the most
powerful sensor mischief machines ever built in the history of humankind and if
you’re on the wrong end of that it’s it’s very unpleasant and you know
Richards suing Facebook for defamation is not an answer for being thrown off
this this is the reality of private power you know these are people who have
strong opinions and I just think it’s too much power concentrated than too few
people and that’s one of the reasons that’s non-economic that’s frankly
political for why we have the antitrust laws is to try to fight against this
problem of too few too much power too few spots but too few well too few
individuals the antitrust may get you from three to four firms and all these
firms may have the same politics it’s not going to be a solution to this
problem and what makes it worse is if you don’t have
but guys doing this would least make the appearance of trying to adjust thing
you’re gonna have the government trying to do all this and then you have a
single monopolist who’s going to be involved trying to figure out what’s
teak coach that wants and so now you’re a new situation is to have the speech
codes that they put in place at the University of California dominate the
way in which everything works so the answer here is there is no first best
answer the question is which is the best second best answer and my view about it
is I think that everybody like Tim when a moment you start seeing somebody like
Twitter do something like that you go on Twitter and you blast Twitter for
engaging in those kinds of activities I regard it as very very dangerous
just the way I regard shouting down speakers at public events as being
extraordinarily dangerous to me the real problem is the polarization and
intolerance in American society that puts people like that into these kinds
of positions I think it’s really tragic really tragic that every one of these
big magnets that these big tech companies is hopelessly uninformed
left-wing in terms of their politics question hi my name is Michael Madrid I
have a question for Tim Tim with regard to takeover of um close competitors
you’ve mentioned delete Instagram and whatsapp do you have other examples you
would point to and you have I believe you said that enforcement should be
flexible but I imagine we would need some sort of objective standards if so
what would you envision yes so I think you need to draw the line at that at
mergers to monopoly or three-to-two you know he’s talking about four to threes
and stick with the line that it’s not okay to buy out your most dangerous
competitors so other examples besides that I think for example that Google
should not have been allowed to buy ways the other major mapping program and
doesn’t make sense to me that you have one company controlling the two major
you know ways of figuring out from A to Z how do you get from A to B
and the reason is that those firms are both potential platforms for new
entrants into these markets and so that there’s another example I question
whether some of Amazon’s acquisitions should have been allowed particularly of
other online retailers that where they you know might have been another
platform to creating more competition in this area or maybe they wouldn’t be
bought out by Walmart or Target to create a stronger competitor my overall
message is that through merger policy and it’s not just a big tech it’s also
across the economy and and you know other parts of tech like broadband and
which we’ve focused less on that we’ve just sort of given up on the idea of
competition and I don’t think you need to be you know any kind of Raving you
know right wing left wing any person to believe that you know competition is
much better track record than does monopoly and that’s what I this is where
I disagree profoundly with Epstein you sort of with Richard Epstein is he sort
of naturally believes that everything will take care of itself but I think the
track record suggests from the 19th century onward that main these
industries become monopolies and the monopolies actually do stick around for
a long time you know one time people thought AT&T was the most vibrant and
exciting and innovative company in the world the 1950s people said General
Motors is so innovative we can’t ever imagine a company like
that stagnating they just think of something new every day but these
companies managed to one way or another create barriers to entry and they were
undisciplined and not subject to the forces of competition particularly AT&T
and eventually the the wunderkind of today becomes a stagnant monopolist of
tomorrow so that’s why I think you know like I’m not that interventionist I’m
just saying you got to keep a watch on it and stop the most aggressive obvious
mergers – monopoly mergers from 3 to 4 to 3 3 to 2 and we haven’t done that
based on this sort of magic dust that we think oh you know there’s something
magical about tech you know it’s it’s cyber activated and you know so it
doesn’t matter I think what’s happening is we’re learning that the old economic
lessons are too true for tech as well which is that you that many of these
markets tend towards monopoly and that monopolies in the long run are highly
inefficient everybody these monopolies are highly inefficient
but that doesn’t dictate the nature of your merger policy there so take ways in
Google suppose you decided that ways could not be taken over by Google
there’s nothing which says that this tiny little company from Israel would be
able to get the sufficient financial backing to become a viable competitor
and so instead of having a more efficient Google you have to take into
account the possibility that you’re gonna have a less efficient Google and
nobody coming in then what happens is you put it in there and they merge with
Waze if you haven’t no barriers to entry policy it doesn’t prevent anybody else
from getting a patented or trade secret alternative technology so they could
take after the combined company you’re gonna say oh it’s a little bit harder
because these guys are more efficient than it would have otherwise it’d been
but that’s to ignore the fact that the efficient company does a lot more
service than it would have done if it had been a less efficient company so I
just don’t see it in terms of the large companies like general well AT&T it was
protected by a statutory monopoly if you go back and you look at the hush phone
case this monopoly was so powerful in 1956 that when somebody wanted to put a
little thing on the end of the receiver so you could hear things better are the
antitrust it rather the FTC said all right actually said you can’t do that
because it’s an end-to-end monopoly that runs by AT&T these guys are at the end
what broke this down in effect and what really has to be given the impression
was that MCA or MCI rather decided to run a dedicated line from Saint Louis to
Chicago in order to transmit data they didn’t need the benefit of the network
effect that you have when you’re trying to get telephone calls and then they
sued an antitrust violation against AT&T and which was a pretty well conceived
complaint so the issue is not whether you want to have an antitrust law or a
merger policy and so forth but you’ve got to be able to apply it correctly and
I think most of the efforts in this particular business are going to be
misconceived if you’re trying to make sure that
little companies that may become big companies cannot be acquired there’s a
real benefit of allowing them to be acquired which is although little
companies will come in and if you want to get them to become public offerings
you have to change the securities law or which have had two very bad effects it
delays the time at which companies go public it increases the
likelihood that they’ll be taken over and it increases the likelihood that
companies that are public is gonna try to go private so if you look at the
number of listings on the New York Stock Exchange you want to tell me what the
answer is or should I tell you it’s way down right and it’s because of a bunch
of knuckleheaded policies that have taken place in the SEC people who are so
dumb that they don’t realize that the protection you give to a small investor
is to say buy a mutual fund instead of wrecking in the market
the current SEC problem says we got all these bemis on the fast track we got to
make room for the bicycles that’s what they’re trying to do unforgivable
I’m glad you mentioned statutory monopoly because I think that’s an
important topic so statutory monopoly is monopoly protected by government and one
of the I think dangers of one of the dangers of continuing to tolerate and in
fact celebrate tech monopoly is I think it’s predictable in fact serving in
government I felt this this coming that the major tech monopolies Facebook being
example will begin to ask in one way or another more subtly or less subtly for
protection from competition from government now the way facebook does
this Facebook if you haven’t noticed recently has started to ask to be
regulated now that might seem a little weird what is Facebook want to be
regulated why do they want privacy laws well they know that if they have
influence over privacy law they can design a regime so complicated so
Byzantine that it gives Facebook the advantage and makes it almost impossible
to start a company because of the start-up costs and compliance costs with
these privacy regimes Europe’s privacy law gdpr which i don’t think has been
that effective has however been very effective as an insulation of the main
Tecmo Napoles from competition so i think one of the problems with
tolerating monopoly is the inevitably understand we need to protect this
monopoly the best way to protect this monopoly is government we can do that by
group some of them do it by enormous accumulation of patent and the other way
is just asked for some complicated regulatory regime that keeps us in power
and makes it harder to challenge us so I think that is the next step I think
that’s one of the the challenges and to pretend that’s not going to happen would
be naive I think that too distinctions one is amassing patents if
you get them in a sensible way to put together a portfolio can be as people
well understood a form of vertical integration in the 1992
antitrust guideline on this which says that you cannot put into the same patent
pool competitors but only compliments is in fact an appropriate response that was
done I think it was under the either the late Bush of the early Clinton
administration and it’s a perfectly good Dale I know what Tim says about the
other thing is going to the government to ask themselves to regulate me so as
to raise my rivals costs even greater is the absolute kind of thing that a
classical liberal terian like myself gags on our because what it does is it
shows the dangerous but this has happened all the time you get
organizations like the TVA and other kinds of places that get government
subsidies to operate and then they put restrictions on private firms and so
that’s a way of killing private enterprise and then what you do is you
get other private firms that get the inside track and they could then kill
upstarts coming in from without and so the basic rule here is never never never
ever ever ever let people go to the government so I think Tim would how do
you prevent that from happening they’re already there I was in government and
facebook says we want to be your friends and one of the things we have to do is
take care of nor pennington one of the worst decisions ever which essentially
says if your petition the government for cartel like activities you get an
absolute immunity from the antitrust law and that should not be the case that’s
exactly what happened with the right amendment which basically wrecked the
Dallas Airport market for god knows how many years and you simply don’t want
that to happen so I think no privileges no special antitrust laws be the same
old boring stuff I think the situation isn’t emerged in the 1990s which was
kind of bipartisan has done perfectly well and when people start to go beyond
it as with the microsoft case on the remedial side you run into real troubles
we have to have a one more question when you look at the areas of the tech
economy that have experienced most dynamism in there in recent years I
would point to enterprise markets where you’ve seen companies adopt Linux based
technologies like AWS Microsoft Azure and Unleashed you know
software a service and the economy that come as a result of that and then I
would also point to Android and the adoption of that as a mobile operating
system and the ways in which that’s encouraged innovation and them in mobile
app space and then when you talk about the issues that you brought up right so
for example the you know Facebook brought up both both were you’re talking
about it right you know Facebook and it isn’t really a lot of that driven by a
lack of transparency and a lack of you know lack of lack of using open source
technologies and in that way isn’t really the solution to a lot of these
problems not antitrust but requiring or encouraging the adoption of open source
technologies by the way as you use two words in the dick interconnected Lee
which has never be linked together encouraging and requiring you you can
encourage anything you darn well please but please don’t try to please both
sides yeah I mean but what this can’t be to give you about one illustration the
UNIX thing comes up and what Microsoft says to you you’re a rump amateur you
want to have the Box open and everything done its software for dummies will
supply you because we know you’re a dummy and on the other hand people
actually put together their own network say go to you next you get a perfectly
good segregation right as it is I send second and nobody in my belief and and
and faith and open platforms is driving entrepreneurial innovative conduct the
same as you said and I think the importance of the antitrust laws is in
telling companies if they’re gonna operate an open platform that they can’t
trick people they can’t pretend it’s open and say well you know here’s this
open platform and then and then come along later and play with the game so it
offers a warning people running open platforms they really have to be open
that was the offshoot the Microsoft case I think that was one of its most
important ideas and that’s why it’s a tradition I think is important because
we need to have open platform companies understand that if they want the
benefits of promising an open platform they really do have to keep it open
thank God Tim is a libertarian he’s basically argued for an anti fraud
proposition with to open software okay and we now go to
the summary part of the evening I’m afraid we’ll have to cut off all the
questions I hope that both of you guys will stick around because I because I
think that number of the people in the audience is gonna want to chat with you
afterwards but meanwhile we want to go to the summations so take it away check
sure five minutes thanks I’m confident you’ll be able to so I think what we
face tonight and I think it’s been a good debate is the classic question of
monopoly and the u.s. system and the US economy and I want to suggest that we at
the United States came up with an innovative answer a classic answer to
the problem of monopoly and that is the antitrust laws they are a middle point I
would suggest between a full lays a fair form of capitalism and and other central
planning socialistic answers and I think has had an extraordinary track record
over the last century for the US economy based on the idea the sort of basic
principle idea the competition is better than monopoly and what I want to suggest
and I want to say that that’s true both in the in the economic side where over
the long run I think that stagnant industries dominated by one monopolist
or two or two monopolist do underperform competitive industries over the long
period whether it’s innovation whether it’s growth on any measure I don’t think
it’s it’s it’s seriously in question but I also think this is an important matter
when we think about the broader speech and political consequences I think that
and I reiterated this multiple times that there is always a danger from too
little accountability too much control in too little few hands over speech over
data over privacy and that those questions
are not new but they have been settled and and and repeatedly addressed by the
idea of telling private industry that there is a final constraint on their
power that there is some sort of form sort of final oversight backstop beyond
which they cannot go and that is through using illegal means to maintain a
monopoly and merging to monopoly and one of the things I want to emphasize is
that you know so much of what Richard Epstein wants to happen so much of this
idea of churn of new companies coming in industry of new voices being heard is a
result of some kind of outer limit and you may not do this and that’s what I’m
talking about when I’m talking about the revival of antitrust that’s what I’m
talking about what I’m saying we can’t pretend we’re living in the year 2005
and the internet is just you know a thousand firms and and new and and
there’s no competitive advantages to anybody and platforms don’t last we have
lived through an experience of consolidation in the internet industries
they are not industries they were before they are controlled by fewer and fewer
players and I think they have to be watched very carefully we can’t
preemptively say you know we don’t care about anything that has done in these
areas we need to be very serious about the problem of buying out competitors of
creating barriers to entry and last what I what I said earlier which is the the
problem of asking for statutory monopoly and asking for special government
protection against competition that’s the direction where I’m concerned that
we’re going to see that the future go so if I end this I would return to where I
began and say we’ve had a successful track record in America in challenging
our most successful challenging our dominant firms and has taken the United
States to preeminence to leadership in the tech industry now is not the time to
say the tech industry should can do no wrong now is not the time to say that
we’re going to allow any and bless any merger
because we think there’s something special about big tech I think it’s time
for scrutiny I think it’s time to make it understood that there is some kind of
final backstop and I think that policy and that policy alone is the kind of
thing that will maintain the vibrancy of the US economy and also preserve the
conditions of democracy which seem under greater threat than ever so thank you
very much I appreciate your time let’s sort of start from the beginning
about what it is that we do with the problem of monopolies and how we deal
with it I mean the first point to understand is an antitrust is not the
only tool that has to work for that arm is also vods history of regulated
industries which actually started the same year as the passage of the Sherman
Act 1890 with the Minnesota rate cases because there’s some monopolies that you
can’t break up so rate regulation some other form of regulation is appropriate
that system of regulation generally doesn’t work so much for the internet
situation because they don’t charge prices like you do for electricity for
gasoline and so what you can’t do is to sort of try and control the rates when
the rates turn out to be zero you could try to alter other things in
the mix that are going to take place but generally speaking if you tell people
for example that you’re not gonna get advertisement and you have to pay for
things that’s gonna probably be far more disastrous than anything else when it
comes to the antitrust laws we’ve had a very erratic situation even when you go
back to the age of big business and the way in which these things work a
Northern Pacific survives they go after Standard Oil and they manage to do so
just after it’s lost its monopoly power in that particular industry
point which is debated but you give a very large industry and you got a lot of
moving technologies other people are going to come in are the antitrust laws
through basically the late 1940s through the mid 1970s was generally a very bad
body of law some of the mergers stuff in cases like bonds grocery and so forth a
brown shoe were the sorts of things that happened where you prevented very small
companies from merges and it was only when we had the
discipline of using the her friend dollar index to measure but the
concentration ratios ought to be that we brought that to some degree of a
situation and so what Tim says is surely true that we prefer competition to
monopoly and nothing I’ve ever said I would ever want to deny that it is also
surely true that we never want to let anybody whether a competitor or a
monopolist go to the government and get some kind of special favor a
dispensation which puts differential costs on their competitors
that’s just essentially an abuse of the public process and we need to take steps
to make sure that government doesn’t have that kind of discretion which is
one of the reasons why I’ve argued very strongly for a strong takings clause in
the Constitution to prevent that kind of government discretion from moving
resources from one party to another it is in fact a self conscious effort to
try to room it rent-seeking that takes place and you can only do that at the
government level you should expect all private firms good better and different
to want to engage in behavior that will benefit themselves whether they do so in
ways that benefit their social welfare or whether they do so in ways that are
antithetical to that social welfare and that’s a reality but when you want to
try to apply these particular positions you really have to be very very careful
you have to know who is a monopoly and you have to know whether a particular
merchant it turns out to be something that is anticompetitive you have to
worry about whether or not it’s the dominant player whom you’re stopping or
whether it’s something else if you will look at the history of the antitrust
laws or what you discover is it divides itself into three categories category
number one is per se offenses where except in narrow circumstances you think
that the consequences are likely to be bad and the rules with respect the
chordal is a ssin and the collective refusal to deal are things that actually
make that an antitrust does it the merger law is very very much more
difficult so if you go back to Ollie Williams since classical paper on this
he gives you a little diagram and he shows that when the merger starts to
take place it’s got some restrictive power on the one hand then it has some
efficiencies on the other and you have to figure out which of these two forces
turns out to be dominant and that requires a kind of an Inquirer that you
cannot do in court and so you have to do to have some administrative body do that
we had that all the way through this particular period Tim may disappear with
the results that happened there but the people who made these judgments
certainly had the right criterion I think in many particular cases what they
did is they came up with the right result and then third you always have to
worry about cases of predation and I think those are extremely dangerous
cases to be because to the extent that you call something predation which
drives out somebody else you may well be confusing an efficient victor within a
you evil Victor and what happens is you’re proposing anti-competitive
strategies through the antitrust law and so the basic lesson that you have to
learn is that the antitrust laws like every other tool that we have in
government sometimes it works for good sometimes it works for bad what you
really need to do is to figure out a filter which way and which is going to
go as I’ve tried to indicate a stopping the various kinds of efficient
inefficient merges stopping abuses of government power stopping private
mechanisms that engage in force a fraud or all part of what we need but breaking
up big tech is not thank you and it looks as though we are getting the
results that Jane is handing me and so I will read the results okay
again antitrust should take the initiative to control size of big tech
companies the yes vote initially got 27.2% and picked up votes to thirty
point one that’s a two point nine percent gain for the yes vote that’s the
number to beat the no vote got forty three percent went
to 61% a 17 percent dank gain so the no vote gets the Tootsie Roll
congratulations you




Comments
  1. It may be that the duration of a lot of the patents issued the big tech by the government(s) is excessive compared to their technical and economic relevance. Copyrights are also allowed a depreciation period way too long compared to any other immovable business assets. It is these exclusive rights (improperly relabelled as "property") that allow inefficiencies accumulate in the major big tech established players.

    Breaking up companies is very much like rearranging chairs on the Titanic to avoid overcrowding the the deck.

  2. Hard to see how this could be a libertarian's question in the first place. NO, government should not be breaking up ANYTHING.

  3. Maybe
    But technology isn't going to stop
    LoL
    Crapitalism is crapitalism
    Money doesn't solve problems
    Solving problems solves problems
    Money is an insensitive
    When the insensitive is to only make money
    It's to exploit people
    Not actually solve problems
    Solving problems
    Be become a different species
    A designer species
    Design it out
    Design it in
    Metaphorically speaking
    I partly agree with you
    You can break up tech
    But tech is going to continue
    It's a complex matter
    It's not all black and white
    Good or bad
    Depends
    I think in monopoly
    Because
    I think in terms of maximizing things
    Not because I want to be evil
    Just saying
    I'm ahead of my space-time continuum
    Metaphorically speaking
    🧠👈 right here
    Meaning
    Speciation
    What if we could give everyone a million IQ?
    That would level the playing field
    Hypothetically
    The problem is
    Or the question is
    Would be destroy eachother
    The nature of the market has always been based on differential advantage
    Unfortunately
    So
    This is why
    We may need to upgrade everything
    Including are brains and bodies
    It's a complex matter
    I assure you
    Even with the best intentions
    Love and beauty
    Difficult to discuss

  4. YouTube, Facebook and Twitter can't be the arbiters of freedom of speech, and control the information that people see in pursuit of their own political and social goals. Their behavior is incompatible with a free and democratic society. If they won't honor our freedoms, then they don't deserve theirs.

  5. So, LOOK… We just need a few things when it comes to big tech:
    transparency, no special government protection, and free speech.

    If someone is offended by certain contents, just block the user.
    What do you think?

  6. Monopolies are not allowed for many reasons. The censorship and political bias exhibited by the Google government is just not right. Something should be done about it. The first amendment is in place for a reason. Louis Farrakhan and others can incite violence and not be prosecuted, So why do we allow censorship of the opposite views?

  7. No make government very very small utility with little power. Public servants fully personally liable for their actions, including prosecutors (summary execution for non prosecution.)

  8. In economics, free trade by definition requires anti-trust laws. Companies seek to maximize profit and the real life consequence is them crushing or taking over competitors and becoming rent-seeking monopolies.

  9. The military should blast the spy satellites out of the sky. 5G needs to be dismantled. Technocrats are eugenicists.

  10. Reason tv needs to do a vidioe about ecosia they are a german search engine that uses there profit s to plant trees

  11. Big tech will do whatever they want.
    We will eat cake.
    The future will not be bright for no man . The damage is done and the reality will catch up. This is an invasion, a poison here to destroy
    humanity and we are caught like moths to the flames. Money and efficiency has costed us our human
    Quality by overwhelming us with information. This is more or less an attack on humanity and we like those moths aren’t equipped to conceive of this possibility.

  12. Government should stop giving them subsidies, stop importing foreign workers for them, and cut the regulations they lobbied for. Oh, and arrest the CEOs of google for lying to congress, which is a federal offence. Big Tech companies are the result of Corporatism, not Capitalism.

  13. Fascism needs to be stopped at its roots. Google, Facebook, Neuralink Sued for Weaponized AI Tech Transfer, Complicity to Genocide in China and Endangering Humanity with Misuse of AI – THE AI ORGANIZATION
    https://theaiorganization.com/google-facebook-neuralink-sued-for-weaponized-ai-tech-transfer-complicity-to-genocide-in-china-and-endangering-humanity-with-misuse-of-ai/

  14. Problem is they are part of the intelligence apparatus of the Military Industrial Complex oligarchy. More complex than most realize.. Much more a problem than people realize also! We must defend individual liberty and the bill of rights. Can't be a platform and a publisher at same time!

  15. Alternative take: The problem isn't big tech and big business, it's big government. The US government doesn't know when to leave the market alone anymore, they have placed so much regulation and control over every facet of our economy. As a result, barriers to entry in many markets have gone _up_, making it more difficult to introduce new competitors to the established oligopolies that are being artificially propped up by the very same legislation that supposedly was trying to make the market better.

    This is the same reason why minimum wage doesn't help the low end of the working class. It forces them out of the market because nobody is going to hire them over their more competent competitors if their work is artifically overvalued.

    I'd also like to add that corruption doesn't cause an excess of power, it comes from that excess. The reason why money has so much power and influence over our government is precisely because we gave them that power. If the scope of government were more limited and had less control, less of a direct effect on our lives, there would be less of a reason for companies to buy out politicians.

  16. An tech monopoly is not appealing it's frightening like driverless cars..the more our lives become tech based.Too easy to be controlled by someone else. There will always be a battle between good and evil or as we see today freedom and socialism. We have an illusion of freedom now but it is being chipped away. We need alternatives just dont know the best way to achieve that. Encouraging competition seems best

  17. Yes, the government is so great at creating monopolies, breaking them up and then expecting people to be grateful. This guys ideas are as bad as his haircut.

  18. I'm really interested in a debate or a video on weather the government has the right to shut down businesses or force people to quarantine for "public saftey".

  19. Same ol' shit, same ol' complaints. How about, instead, we trying something different and NOT have the gov't involved? What's that old saying about insanity? Yeah.

  20. By the way, saying "it's a prescription for doing nothing" isn't an argument. You'd think someone with an education would know this. Sometimes doing nothing is the right thing to do.

  21. Why do these anti-trust advocates make it sound as if the sellers have no agency, and the bigger firm takes over by force?

  22. One of the only valid functions of the federal government is to prevent monopolies and enforce antitrust law. Of course we should break some of them up, Google/YouTube at the very least. Google has been operating YouTube at a massive loss since day #0, just to keep the competition out.

  23. the government is propping up facebook google and amazon with massive gov't contracts. that is a huge issue. the monopoly is not natural from creating a superior product, its government enforced. im not for busting neccesarily, but when it comes to social medias nature of monopoly or amazons just in time algorithm and massive supply lines/ shipping subsidies it is impossible to compete on anything besides craftsmanship.

  24. I think a debate on 'Is It Time To End The Fed' and / or 'Should We Outlaw Lobbyists?' would both make good discussions. I am a libertarian, but I still agree these companies are anti-competitive. Ask Alex Jones if you need proof. Also very interesting both are too scared to name the G company.

  25. The issue is censorship. Facebook and Linked In commit the social media equivalent of murder by summarily disabling a persons account with no due process whatsoever if they tell a truth these monopolies find objectionable. Free speech is dead. It means you can mumble to yourself in your basement. But since all social media are privately owned monopolies, you cannot use technology to speak to others unless your speech is agreeable to someone like Zuckerberg. This is outrageous and treasonous. The internet’s promise is thwarted due to the monopolization of social media. The first amendment should penetrate all social media and no one’s voice should be silenced because he posted things that are true which Zuckerberg didn’t like. These giant companies should be subject to lawsuits for disabling the accounts of persons who violated no community standards other than, perhaps, saying something true about a particularly powerful and Machiavellian minority.

  26. The Facebook break up example is not a good one. Instagram and WhatsApp or nothing like each other and they are nothing like Facebook. It can’t be Monopoly if they’re not the same.

  27. Regulating these companies will just result in them buying off some bureaucrats and blocking their competition.
    It's exactly what happened in the problematic industries he mentions and why those industries are dominated by monopolies.

  28. The government should break up Big Government.Antitrust laws are nonsense on stilts.All the excesses sited by Tim originated with the government,not private companies,including and especially barriers to entry.Government should not be involved with commerce and industry.

  29. Allowing mergers was a mistake for similar industries because they reduce competition. Of course, if the competitor is about to go under, the merger is fine.
    In the longer run, competition is better than synergy.
    For MSFT, it was fine they had the monopoly on OS, but to give competition on the apps that run on it. Besides, there is Linux and MacOS (and other Unix flavors).
    Patents sound good, but small players can't afford to enforce it. You have to find those stealing your IP, then sue them which takes years and hundreds of thousands of dollars. If you try to sue a big player, they will counter sue with hundreds of patents that you'll then have to defend against. In the end, the one with the money wins in patent battles, now who actually owns the IP.
    All that said, our goal was to be acquired by a bigger player, hopefully so the bigger player could enter the market and compete against our bigger competitors. But allowing our competitors to buy is would mostly be to reduce competition, not to acquire or technology and patent.

    I'm okay with Epstein's general view, though, which is to act when you see bad actions, not just to prevent a future imagined bad actor.

    We did see how Amazon first fought having to collect sales taxes from states they have no nexus in. But once they got big enough, then they flipped and decided everyone should do this. It's because the biggest guy can handle the regulations and complexity and confusion and hit to the bottom line, keeping smaller sales from growing. How to fix this is hard because government won't fix the problems it creates.

  30. 14:40
    "The question of whether or not we should discipline tech monopolies is in some sense a question about whether you believe in democracy"

    laughs in Hoppe, so to speak

  31. Tim Wu cannot adequately explain why the government could have the knowledge, wisdom, and foresight to be trusted to know at what point a company should be broken up.

  32. "More centralized server is easier to find the source of the problem "
    No it isnt, not to mention a centrist system is much easier to infiltrate.

  33. 55:13 Innovation in Silicon Valley is indeed on the decline, and the VC's know it. But they are betting (correctly, I think) that future innovation will come from elsewhere, not that it will decline worldwide.

  34. 1:07:50 Wu is correct that regulatory barriers to competition are among the main reasons that the tech giants are so dominant.

  35. I can't take anyone who refers to WhatsApp as "WhatsUp" seriously…

    I agree that companies have been buying out competitors, such as Disney buying Fox. The FCC used to regulate production and distribution, but Disney+ is a prime example of a crony capitalist venture.

  36. You know you've gone off the rails when you see efficiency as a bad thing. Wu is a loon, clearly. He even cited the Microsoft web browser case where the antitrust case was dropped because by that time there was no case at all, as competition materialized in a natural and organic way. His mention of that case made me completely lose any hope that he would make any interesting argument in the future.

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