While it may be convenient to categorize the five usual suspects under the Big Tech label, ignoring the differences between them, pointed out in previous posts, could lead to simplistic conclusions. Take the word “big.” How big is “big?” The most common parameter used to measure is market capitalization, which is consistently in the trillions range nowadays. However, not all companies that have such a capitalization size are part of Big Tech. NVIDIA and Broadcom are the best examples here. Additionally, market capitalization is primarily based on future expectations, rather than actual profitability. Regardless, Big Tech companies now have at their disposal vast amounts of capital that they manage directly. And they have been able to get there by centralizing and concentrating capital relatively quickly, while taking their own independent paths along the way.
Platforms have been the most common way to describe the way these companies operate. A relatively recent publication shows that over 15 different definitions of platforms have been proposed by researchers, with only a few making use of the two-sided market theory . That is a critical omission, as non-digital platforms have been in existence for a while. In any event, a massive digital platform literature is out there, ranging from platform capitalism to platform socialism . I have already reviewed much of this literature in previous posts.
Digital monopolies have also been extensively used to explain the behavior of Big Tech. While some follow the now classic work of Baran & Sweezy, others have developed perhaps more insightful frameworks that we can place under the rubric of intellectual monopoly capitalism . A common trait here is the assumption that knowledge has become a commodity and, as such, it is subject to capitalist accumulation. This can lead to its concentration and centralization in a few hands, even if third parties generate it. However, I could argue that the theory of real competition or market power could also explain Big Tech’s alleged sui generis mode of operation.
Perhaps the most bizarre analytical framework deployed to understand Big Tech is techno-feudalism. Digital monopolies control the digital real estate and, on that basis, make additional profits out of collecting rents. At the same time, the rest of us are under their spell and are apparently unconscious serfs. Such a view has been primarily endorsed by sharp critics of capitalism who, paradoxically, are about to certify its death. They might soon be out of a job, then. I also have an issue with the way rents are defined, which stems from mainstream economics and fuses super profits and rent.
I will review the latter two in more detail afterward. For now, I will argue that while these frameworks can be helpful, they tend to overlook the glaring differences between the five Big Tech members. They thus provide a partial explanation to our current digital conundrum at best.
By examining the overall production processes of Big Tech, the previous five posts have revealed both commonalities and notable differences among them. They have also exposed intense company competition in some markets where these companies operate, as they seek to protect their signature products while anxiously looking for new markets and opportunities. The most insidious common trait stems from how they leverage the digital domain to disintermediate analog markets and centralize digital intermediation. At this point, they openly foster the emergence of new digital intermediaries that utilize the digital platforms and tools these companies provide. That happens either directly, as in the case of Google and Meta, or indirectly.
Two-sided and multi-sided markets offer the means to achieve this objective. While some Big Tech members use two-sided markets to venture into traditional markets (Google and Meta), companies such as Apple and Amazon do precisely the opposite. Their signature products (digital devices and retail trade, respectively) can only be sold in one-sided markets. There is no way they can be fully digitized, and consequently, they have no choice. They venture into two-sided opportunities to strengthen their market position and increase market share, thereby protecting their products and services from stiff competition and unexpected disruptive innovation.
Microsoft is somewhat in between, as its signature product is software and application development. It profits from licensing agreements and the global enforcement of IP laws. It also functions as a two-sided (intermediary) market, albeit operating at the level of intellectual property. The intellectual monopoly capitalism framework seemed ideally suited for Microsoft, but is irrelevant mainly for companies that cannot escape the vicissitudes of the real economy. They still need to manufacture or purchase goods and sell them in traditional, analog markets. On the other hand, Google and Meta’s signature products, search and social networking, respectively, are almost fully digital — albeit they depend on digital infrastructure ranging from fast-speed networks to data centers and cloud computing. Selling them the old-fashioned way might not be ideal, as licensing or subscriptions will significantly limit their consumption. That is precisely the issue OpenAI is facing today. It is unlikely that generating substantial profits through ChatGPT subscriptions or API usage fees alone will be feasible. I am sure they are currently exploring new (or old) ways to maximize profits. And in doing so, it might pose systemic risks to the current incumbents.
On the competitive side, we have seen that these companies have already entered many markets, where they try to outdo each other in short order. Cloud computing, operating systems, digital and mobile devices, mobile apps, desktop software, web browsers, chips and hardware, search engines, advertising, AI, and health and educational platforms are regular targets. Having large amounts of capital readily available is crucial, as these companies can invest in new markets to increase profits or acquire potential competitors who may have products that could jeopardize their core businesses. All these investments are not driven solely by innovation. Competitive forces play a fundamental role and are part of their core behavior. They cannot afford to be out to lunch for even one minute.
Raul
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