Tech 63100 Week 7
What Tech Calls Thinking
Question: Is disruption fundamental to capitalism?
Disruption
According to the philosophy of René Girard, disruption simply seeks to rearrange whatever exists to make it "more efficient, more exciting, more something." Take, for example, reading physical books and reading books on Kindle. You are doing many of the same thing - reading a book - but the experience is totally different. The ability to shake things up resonates well with our experience with capitalism. In fact, it is new goods, new methods, new markets, and new forms of industrial organization that keeps the capitalist engine in motion (Daub, 2020).
Disruption itself is a result of competition and competition is a tenet of capitalism. Competition pushes the world forward allowing anybody with ingenuity - big or small - to take on larger, established companies by bringing lower-cost and higher-quality products. When fair competition is permitted, technology disruption often lowers the price of goods as seen in the graph to the left. Thus, in a normally-functioning free economy, capitalism is good for consumers (Hogge, 2016). With lower costs, the good or service becomes more accessible increasing market share when demand can keep pace making capitalism equally beneficial for both consumers and companies.
The Exponential Age
Question: How do we better regulate superstar companies from becoming monopolies?
The Unlimited Company
In the 20th century, companies often reached a limit in their growth. As they got bigger, they got more complex to manage and thus got increasingly expensive to operate leading to diminished marginal returns. Exponential technologies has allowed companies to overcome these diminishing marginal returns transforming them them into "superstar companies" through (1) the emergence of new networks that allows for access to a global market; (2) employment of platform business models that are incredibly capital-efficient; and (3) production of intangible assets to tap into the intangible economy that allows for growth to an unprecedented scale at an unprecedented pace. The growth can be achieved through (1) horizontal expansion by tapping into adjacent markets; (2) vertical expansion by taking more control of the company's supply chain; and (3) inventing new sectors of the economy that the company can go dominate (Azhar, 2021).
These superstar companies create a new economic paradigm that creates asymmetric advantage, but does not fall within the current definition of monopoly as framed by the existing U.S. antitrust laws, which focus on protecting the consumer. From a consumer perspective, superstar companies appear to be improving the customer experience while driving down consumer costs. The real damage occurs outside of the consumer: (1) Small-scale producers are exploited resulting in the absence of a competitive market that allows superstar companies to set their own price; (2) The acquisition of nascent competitors and employment of academics makes the economy less dynamic as research becomes narrowly focused on the strengths of the superstar company, inhibiting the potential for breakthrough inventions and disruptors; and (3) Tax avoidance due to the inability of governments to keep pace with the rate of change during this exponential age (Azhar, 2021).
To prevent these superstar companies from becoming monopolies, Azhar (2021) suggests that antitrust rules must change to (1) better regulate conflicts of interest through enhanced understanding and identification of "conflicts of interest that arise from massive scale and infrastructure power"; (2) limit organic growth of companies that achieve a certain size by enforcing interoperability requirements that preserve the network effects of the consumers but limit the self-serving network effects that scale a company's growth beyond control; and (3) treat these massive companies with ubiquitous capability more like utility companies that have historically complied to higher standards. Chen (2019) recommends against taking action that would break up a Big Tech company or limiting its growth as it could make things worse for users. Instead, she recommends (1) limiting the network effects by preventing companies from locking in their users through data portability, a similar concept to Azhar's proposal for interoperability; (2) make Big Tech share their anonymized data with smaller companies to create a fair environment for competition; and (3) don't allow Big Tech platforms to discriminate in favor of themselves to better support a competitive environment.
References
Azhar, A. (2021). The Exponential Age. Diversion Books.
Chen, A. (2019). How to regulate Big Tech without breaking it up. Retrieved Feb 2024 from MIT Technology Review: https://www.technologyreview.com/2019/06/07/135034/big-tech-monopoly-breakup-amazon-apple-facebook-google-regulation-policy/.
Daub, A. (2020). What Tech Calls Thinking. New York: FSG Originals.
Hogge, T. (2016). The 3 Tenets of Capitalism. Retrieved Feb 2024 from Medium: https://medium.com/@thogge/the-3-tenets-of-capitalism-6fd2c73d7d7.