Last week, I wrote a post titled, What Can an Overhyped Silicon Valley Juice Company Tell Us About the U.S. Economy. Here’s how I ended the piece:
Finally, and perhaps most concerning, look at a couple of the entities that helped fund Juciero to the tune of $120 million: Kleiner Perkins Caufield & Byers and Alphabet Inc. (the parent company of Google). These are large, sophisticated players and they bought into this thing. From what I can tell, they were mesmerized by the fact the machine looked like and iPhone, connects to the internet, and was headquartered in San Francisco. Either that, or they knew the whole thing was a marketing scheme designed to trick morons into spending an enormous sum of money for the right to buy expensive juice packets that could probably be emptied just fine using a $20 machine.
Neither of the above conclusions is comforting. Either high-profile VCs were tricked by this ridiculous product, or they willingly went along with a what appears to be a sleazy scheme. Unfortunately, the bottom-line here seems to be that Silicon Valley is rapidly running out of ideas. That, or perhaps something far more perverse and systemic might be going on.
Tomorrow’s post will attempt to address the above question, but for now it’s safe to say that this Juicero episode bodes very poorly for the one area of the U.S. that had heretofore been one of the last remaining hubs of innovation.
If this is the state of Silicon Valley, the American economy is in even worse shape than I thought.
Today’s post should be seen as the promised followup to the piece above, and will focus on the related question increasingly pondered by a wide variety of people as relates to America’s modern day technology platform monopolies, specifically: Google, Facebook and Amazon.
Matt Stoller is a policy thinker currently focused on the concepts of monopoly and competition, something which he believes is an under appreciated factor in the current sluggish, rent-seeking orientated U.S. economy. I share many of his concerns and find his work extremely useful and timely.
In that regard, I want to highlight some excerpts from a recent post he wrote on the topic, titled, The Evidence is Piling Up — Silicon Valley is Being Destroyed.
$120 million in venture funding from Google Ventures and Kleiner Perkins, for a juicer? And the founder, Doug Evans, calling himself himself Steve Jobs “in his pursuit of juicing perfection?” And how is Theranos’s Elizabeth Holmes walking around freely?
These stories are embarrassing, yes. But there’s something deeper going on here. Silicon Valley, an international treasure that birthed the technology of our age, is being destroyed.
Monopolies are now so powerful that they dictate the roll-out of new technology, and the only things left to invest in are the scraps that fall off the table.
It’s not that Juicero and Theranos that are the problem. Mistakes — even really big, stupid ones — happen.
It’s that there is increasingly less good stuff to offset the bad. Pets.com was embarrassing in 2000, but that was also when Google was getting going. Today it’s all scraps.
When platform monopolies dictate the roll-out of technology, there is less and less innovation, fewer places to invest, less to invent. Eventually, the rhetoric of innovation turns into DISRUPT, a quickly canceled show on MSNBC, and Juicero, a Google-backed punchline.
This moment of stagnating innovation and productivity is happening because Silicon Valley has turned its back on its most important political friend: antitrust. Instead, it’s embraced what it should understand as the enemy of innovation: monopoly…
There hasn’t been a Sherman Act Section 2 anti-monopolization case for 15 years. And the anti-merger Clayton Act is not being enforced. Neither Bush, nor Obama, nor Trump (so far), has seen fit to stop the monopolists from buying their way into dominance and blocking innovation.
Yes, the company created an amazing search engine over fifteen years ago. Since then, the company bought YouTube, Doubleclick, Maps, and Admob; it buys a company a week at this point. And it often shuts down products that don’t reach 100M+ users, while investing in luxury juicing machines. Surely Google is creating cool technology. But is that technology really being deployed? Or is it locked away, as patents were in AT&T’s 1956 vault before the government stepped in?
What once were upstarts and innovators are now enthroned. For instance, the iPhone is ten years old. Innovation means waiting to see if Apple will offer a bigger screen.
Its scientists and engineers change the world. We have such amazing technology, and such big problems. But our liberty to address those problems in the commercial world must be protected by a democracy in the form of antitrust rules and suits, or Silicon Valley will die.
Is that what Silicon Valley scientists and business leaders really want? To invest in and produce subpar juicers while everything cool waits on Jeff Bezos’s whim? Is that what they dreamed when they were young? Is that why they admired astronauts and entrepreneurs? Was their goal really to create “anti-competitive juice packet lock-in”?
That is where a lack of democracy has brought us, and Silicon Valley.
It is time for leaders in Silicon Valley to start demanding from our government the birthright of every American, which is an open market for commerce, innovation, and personal liberty.
I agree that innovation seems to be getting increasingly bland, and I think Matt makes an interesting case that these technology companies have become near monopolies.
To put some meat on the bone as far as market share is concerned, here are a few figures from a recent New York Times op-ed:
In just 10 years, the world’s five largest companies by market capitalization have all changed, save for one: Microsoft. Exxon Mobil, General Electric, Citigroup and Shell Oil are out and Apple, Alphabet (the parent company of Google), Amazon and Facebook have taken their place.
They’re all tech companies, and each dominates its corner of the industry: Google has an 88 percent market share in search advertising, Facebook (and its subsidiaries Instagram, WhatsApp and Messenger) owns 77 percent of mobile social traffic and Amazon has a 74 percent share in the e-book market. In classic economic terms, all three are monopolies.
I’m glad this issue is being discussed, because I do think the dominance of these firms in their specific niches presents a threat not just to economic competition, but liberty and freedom generally speaking. After all, the government itself doesn’t need to censor free speech if it can just lean on powerful companies with platform monopolies to do the dirty work for it.
The stifling of innovation around us also perfectly highlights why Bitcoin has captured the hearts and minds of so many people worldwide, particularly the best and brightest from the technology field. Thanks to its open source nature and decentralized structure, Bitcoin allows for permissionless innovation in an area that has always been most prone to excessive regulation and monopoly, value transfer. As such it has already changed the world in incredible ways.
For me, the overall lesson here is that innovation ultimately finds a way, but why do we have to make it so incredibly difficult?