Drivel or what?

But then, of course, Vince Cable’s rather confused about a number of things, isn’t he? What makes it worse here is that Vince was actually trained as, worked as even, an economist. He should have a rather better understanding of the economic concept of monopoly therefore:

Vince Cable has compared Google, Amazon and Facebook to the US oil monopolies that exploited their market power more than a century ago – and called for them to be broken up.

The idea that there’s a number of monopolies in the same market betrays a certain ignorance but then that’s The Guardian for you. Vince is actually here:

But the challenge we now face has one key difference to that posed by the oil barons. Rather than price-fixing, many of the tech titans provide a largely “free” service to the public. Facebook and Google don’t make most of their money through selling services to users, but through advertising. Amazon and Apple, meanwhile, do make money the traditional way, but corner their markets through other means, by squeezing suppliers in the former case or locking in users through software and hardware exclusivity in the latter. So why do these new monopolies pose a problem?

Squeezing your supplier isn’t usually thought of as cornering a market. But the real problem with this analysis is that none of these things are a monopoly. So the analysis of monoplies isn’t a great starting point.

Firstly, because they hold back innovation. By acquiring potential challengers before they become a threat, spending millions lobbying governments to ensure their economic interests are protected, and tying in users through the sheer scale of features and social interaction they offer, the tech giants’ dominant position often leaves entrepreneurs feeling they have no choice but to sell up, or close up. This is bad for innovation and bad for consumer choice – two things the tech giants once stood for.

A reasonably standard business model in Silicon Valley is to throw money at an interesting idea, an innovation, in the hope that it works. Then, 6 months down the line the investors all get rich as it’s bought by one of the majors. Those major and open chequebooks don’t stifle innovation, they propel it.

In addition, the tech titans have lost the ability to monitor what content gets put on their own platforms. A small minority of users are posting terrorist propaganda, depictions of child sex abuse, and hate speech. State and non-state actors use these platforms to spread false information and influence elections, including the Brexit referendum and the recent US presidential election. Facebook, YouTube and Twitter are either unable or unwilling to curb the misuse of the data they collect, and are increasingly seen as part of the problem.

Essential to the analysis of monopolies is that they control their market. That control enabling them to control it in their own interests rather than those of consumers. The insistence that they don’t so control isn’t evidence that they’re monopolies therefore, is it?

Finally, the new internet giants operate in a largely borderless world where their main source of profit is intangible intellectual property rather than measurable “things”. This is difficult to track and quantify, and has turned national tax authorities into largely powerless bystanders.

All of the people who own those tech titans – plus the incomes they receive from them – are residents of one national state or another. Which means such incomes can be taxed. That’s also the correct level to be taxing at anyway, tax people because there’s only us people here to carry the burden of taxation.

There’s not a great deal left of Vince’s initial analysis, is there?

More radically, companies should be broken up when their size becomes economically detrimental.

That is reasonable, yes. But it’s necessary to show the detriment. Which isn’t something anyone, let alone Vinny Boy, is managing.

One could imagine Amazon being split into three separate businesses: one offering cloud computing, one acting as a general retailer and one offering a third-party marketplace

Eh? Why? Our monopoly analysis has to start with the company exercising monopoly control of a market. Only then can we justify action – but breaking it up into three market dominating companies, each dominating a separate market, doesn’t aid our professed aim at all.

Second, internet companies should be held accountable for extreme content posted on their platforms through the establishment of a new independent standards body governing the handling of such content. This would put an end to the current “wild west” approach of self-regulation and haphazard government responses to tech-company failures. This is preferable to the draconian system recently put in place by Germany, which has already led to excessive censorship by private companies and a backlog of court appeals and disputes.

In order to beat monopoly power we’ve got to increase monopoly power? They must exercise more control over their markets so as to reduce their control?

Finally, we must entrench and expand the rights of people to own their personal data. The EU’s new General Data Protection Regulation is a big step forward in this direction, but it clearly needs to be tested in practice. And it is just the beginning, not the end of the story. We should seriously consider the possibility of compensating people – or society more broadly – financially for the data they currently hand over for nothing.

The data isn’t worth anything, that’s why people give it away. The information extracted from it is valuable. But then that extraction is done by organisations called Google, Facebook perhaps. The valuable information is created from the non-valuable data by the organisation – why shouldn’t the organisation gain the value it creates?

The real complaint here is simply that there’s lots of money floating around out there and politics and politicians aren’t determining where it goes. This cannot stand for what’s the point of being in politics if you don’t get to command economic resources without having created them nor adding anything of merit? Vince Cable wants his fingers in the pie, no more, no less.

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7 COMMENTS

  1. “One could imagine Amazon being split into three separate businesses: one offering cloud computing, one acting as a general retailer and one offering a third-party marketplace”

    Idiot.

    The three things are linked. The third party marketplace depends on the general retailer technology, warehouses and distribution. The cloud computing platform is also what their retail software runs on. And third party and regular are in competition.

    I’ve no idea why anyone would want to change Amazon. It’s magnificent. It makes almost no profit and allows me to buy Kindle books or giant tubs of lube while sat in my pyjamas.

  2. Clearly, Cable’s concept of “monopoly” is not backed up by anything but exists only to let him vilify Facebook et al. in an essay that rambles from economic organization to the mortal danger of social posts.

    Of course a large company propels innovation; it has entire departments studying what the customer base would pay even more money for. Perhaps the most radical innovations occur outside the company (which it then buys, and not indeed to snuff out the idea as Hollywood imagines). But hidebound Ford, wedded for a century to the liberty of driving “The American Road,” is now aggressively pursuing models where you don’t own your car and you don’t drive your car. You get taken to your destination, while posting to Facebook on broadband that Ford furnishes.

    • which it then buys, and not indeed to snuff out the idea

      You cannot intellectually protect an idea.

      If a major bought up a start-up with a genuine innovation and then snuffed it out, then the sellers of that original company could repeat the process. Start another organisation with exactly the same idea, and flog it off for millions. It would be quite a revenue earner, considering that all the original errors wouldn’t be repeated.

      You can buy a patent. That gives you 14 years, max (and your opponents can start preparing well before that). You can buy a trademark. You can buy rights to a book, a film or music. But you cannot prevent anyone using a good idea.

  3. If Amazon is a monoploy that needs to be broken up, you break it up into three cloud/retail/market providers, not into three entities in seperate sectors that don’t compete with each other. HTF does a cloud storage provider compete with a goods retailer?

  4. “Vince Cable wants his fingers in the pie, no more, no less.” pretty well sums up the political career of this odious man. Although, no doubt, he’d be equally odious in any other field.

  5. We should seriously consider the possibility of compensating people – or society more broadly – financially for the data they currently hand over for nothing.

    Really?

    I managed to miss the last census because I was out of the country. I’m looking forward to the government paying me for my information next time though! And my name and address on the electoral roll, for that matter. (Not because the government gathers it for their own use — that’s fine. But because they publish so much of it for others to use. Those users should have to pay for it, and I should get my cut!)

    Will schools have to pay parents for information about their students? Will supermarkets have to pay users of their loyalty cards? Will Google have to pay for information about the look of the outside of my house when they want to update Google Streetview? Actually Continental Telegraph has some information about me, and I want to be paid for that too!

    The Mormon church are in big trouble. The amount they have gathered for free about genealogy is going to be very expensive.

    Cable should think about how ubiquitous gathering information is before he spouts nonsense.

    Do you think he’s considered that his party asks voters polled how they intend to vote? That’s hugely useful information that his party are taking for free! I demand all pollsters pay up!