Bill Gates: if we break up Big Tech, we'll just have more bad companies

In an interview with Bloomberg, Bill Gates dismissed the idea of breakups as a remedy for Big Tech's monopolistic market concentration; Gates said that breaking up an abusive company will just produce more abusive companies. Instead, Gates believes that specific monopolistic activities should be banned.

Gates has some company in this position: For example EU competition commission Margrethe Vestager (recently blessed with a surprise reappointment) says that attempts to break up Facebook will turn into protracted litigation boondoggles, and instead, she just wants to go on extracting massive fines from tech companies that misbehave (though these fines are also the subject of high-stake litigation).

But it's not just Vestager and Gates: Mark Zuckerberg wants to see regulation for Facebook. He says that clear rules will help him steer his company without daily, ghastly scandals.

The problem with this model is that expensive, difficult-to-implement compliance rules are tantamount to permanent licenses to dominate the internet: if you have to be a giant to afford to comply with the law, then we'll only get giants.

The other problem is that giants who extract monopoly profits from their suppliers and customers have plenty of money left over to lobby governments to let them get away with progressively worse behavior (which improves their profitability, leaving more money to lobby with, lather, rinse, repeat). This is why the first trustbusters focused on breaking up the giant companies (which were run by executives who were no less wicked than Big Tech's supposedly benevolent dictators): they didn't just want to have fairer, more competitive markets, they wanted to hamstring the industries' ability to corrupt democratic governance.

Gates is practicing a form of tech exceptionalism here: implicit in his view is that tech is intrinsically corrupting, and that the companies behave badly because it is in their nature to do so, not because we let them get away with it.

But he should know better. Tech's rise coincided precisely with the decline of antitrust enforcement (literally: Ronald Reagan hit the campaign trail the same year the Apple ][+ went on sale, and one of his first acts after the election the next year was to gut antitrust enforcement).

Companies that had been around for a while either had first-hand experience of the truly unpleasant experience of being targeted for antitrust enforcement, or had watched it happen to others close up. Senior counsel for these companies trained juniors to warn execs that monopolistic behavior would produce brutal, extended legal trouble.

But not tech: the fresh Stanford Law grads who went to work for the startups their EE and Comp Sci colleagues had dropped out to found had not direct experience of antitrust, and when the execs they worked for proposed monopolistic conduct that would have been severely punished under pre-Reagan antitrust, these lawyers did not pump the breaks — they hit the gas-pedal. And every time they did this, they were rewarded: the companies they worked for enhanced their profits by buying or crushing nascent competitors, by merging with major rivals, by cornering entire vertical markets. Corporate counsel went from being the adult supervision in board-rooms full of unexceptionally greedy and atavistic executives to being enthusiastic enablers of these execs' worst impulses.

Cue the Microsoft antitrust investigation. Bill Gates put in a legendarily terrible performance for his deposition, one of the first-ever corporate depositions to be video-recorded and released to the public, going viral as best as it could given the technology of the day. The sight of Gates, stimming and rocking and displaying belligerent arrogance with every word, was deeply traumatic to both Gates and Microsoft's executives.

Microsoft insider accounts claim that this traumatic experience, as well as the years and millions Microsoft spent fighting the DoJ (successfully, for the most part) changed the microeconomics of Microsoft's decision-making. Like every other large institution, Microsoft is (and was) composed of people with a variety of views on the wisdom and fairness of different courses of action, but the people who'd argued for monopolistic conduct had won every argument, because whenever the company followed their advice, it grew more profitable and faced no consequences.

But, after having faced lengthy antitrust action that was both personally and financially traumatizing, the naysayers in the board room gained a powerful new argument: "If we do this, they'll put Bill back on the stand."

Those same Microsoft insiders say that this caution is what allowed Google to emerge, without being crushed using the underhanded, unethical, monopolistic tactics Microsoft used on every other upstart that threatened its dominance.

This effect wasn't confined to Microsoft, either: for a brief moment in the early 2000s, the whole industry discovered a new forebearance, during which the ecosystem became more diverse, weirder, more interesting and more competitive than it had ever been, before or since.

(This same dynamic may be the reason that the IBM staffers who argued that the first PCs should be built from commodity components, and that Phoenix should be left in peace to clone its ROM chips won their arguments, despite IBM's usual practice of building systems out of proprietary components and subcomponents, and the bullying, monopolistic tactics that mired them in DoJ litigation for more than a decade, at the end of whic the company produced its first PC)

Gates wants us to believe that Tech is Different, and that anyone who runs a tech company will be so intrinsically rapacious and villainous that they will behave as he did when he was growing Microsoft; but the reality is that Gates and his fellow monopolists past and present are totally unexceptional in their willingness to cheat and bully their way to dominance. They're no less and no more rotten than Carnegie or Rockefeller or the Sacklers. The thing that let these garden-variety sociopaths get away with their bad behavior was not their exceptional brilliance: it was the state's deliberate decision to let them get away with it.

Gates's prescription is for governments and tech companies to create state monopolies, a new kind of industrial constitutional monarchy, in which companies like Microsoft (and Apple, Google, Facebook, Amazon, Oracle, etc) are guaranteed eternal rule over their sectors, in exchange for suffering themselves to be draped in golden chains by a regulatory aristocracy drawn from their own executive ranks, who will ask them to exercise noblesse oblige and throw some crumbs to us peasants laboring in their digital fields.

But even if breakups take a long time and even fail in the end, they're still worth pursuing. DoJ antitrust litigation changes the way companies operate, puts them on their best behavior and puts a giant thumb on the scales for the internal angels of the companies' better natures when they joust with their amoral board-room rivals.

(via /.)