As tech changed the world, it also changed the meaning of the word “competition.”
How it works: In most other businesses, competition means several rivals are fighting to win a prize — typically, the customer’s dollar.
- To win that competition, a company might offer a better product, a lower price, or some magic brand aura people crave.
- In the tech world, quality is often hard for users to gauge, prices for many consumer offerings are zero, and very few brands have had time to build auras.
Most tech companies still view themselves as engaged in fierce competition. They’re just going after a wider and more complex set of prizes.
- Sometime’s it’s scale. Sometimes it’s owning a standard. Sometimes it’s seizing the moment to set the course of the next technological wave or dominant platform.
- Sometimes it’s just earning a big payout for founders and investors at the right moment. And sometimes, the winner does end up with a monopoly — but no tech firm expects that to last long.
This different understanding of competition explains the deep mindset mismatch at the heart of today’s epic struggle between Silicon Valley and Washington, D.C.
- The view from the tech corner office sees an industry in a state of constant churn and paranoia, perpetually hungry for new products and afraid that some newcomer will eat their lunch.
- The view from the Beltway, and from many homes and small businesses outside tech, sees a handful of giants with strangleholds over key markets.
Why it matters: Whether you view the tech industry as competitive shapes whether you think tech giants need to be regulated or broken up.
- The enormity and power of just five companies — Apple, Google, Microsoft, Amazon and Meta —have triggered the loudest monopoly alarms since the trustbusters broke up Standard Oil a century ago.
Catch up quick: Tech’s history is a serial record of successive monopolies.
- In the IBM age, one company ruled the mainframes that ran big business and government.
- In the Microsoft age, one company ruled the personal computer operating system, and for a while the web browser, through which individuals worked.
These companies’ stories established the industry’s psychic underpinning: A belief that, as Intel CEO Andy Grove put it, “Only the paranoid survive.”
- You had to scan the horizon for the next paradigm shift or new platform so you could control it. Otherwise, your competitive advantage would erode and your dominance would fall to a nimbler upstart.
Yes, but: In the 21st century, tech’s shape has changed.
- In the past two decades, five companies — Apple, Microsoft, Google, Amazon and Facebook/Meta —have seized the industry’s reins and held onto them with a persistence and strength that shows no sign of waning.
- Their combined market value has hovered between $7 and $10 trillion for the last two years — roughly 23% of the value of the entire S&P 500.
- Their products — the smartphones that have become our outboard brains, the key apps we use every day, the services that we use to work and shop and get around — shape our lives.
Be smart: The question regulators and critics keep asking today is whether these companies are entrenched in an unfair way that blocks new entrants and ideas.
- This view — held by the leaders of the Biden administration’s tech policy crew, such as Federal Trade Commission chair Lina Khan and White House adviser Tim Wu — sees today’s tech landscape as a market failure.
- The giants, they say, have created self-perpetuating monopolies in specific markets like search, mobile app distribution, online advertising, e-commerce, and social networking. They run must-use platforms that unfairly advantage their own products. They shoot down new rivals if they can, and buy them if they can’t.
The bottom line: If these critics are right, then lawsuits and new regulations are needed to restore competition.
- But tech’s leaders argue that their competitive advantages edges are fragile and evanescent.
- The way they see it, the five-way scrum of today’s overall tech market means there’s always some amount of consumer choice and product improvement.
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