Attention on Digital Monopolies
The dominant position of companies such as Google, Facebook, Amazon is sure receiving a lot more attention these days. There is critical media coverage, including in traditionally pro business publications such as the Wall Street Journal “Can the Tech Giants Be Stopped?” and Bloomberg “Should America’s Tech Giants Be Broken Up?” There is also the Democratic Party’s “Better Deal” memo which focuses more broadly on the negative effects of corporate power. And then of course there is the European Union, which already fined Google 2.4 Billion Euros for manipulating search results and is considering another fine for Google’s alleged forced bundling of Google services with Android.
While I am happy to see the attention on the issue, I am concerned that regulators are missing the fundamental source of monopoly power in the digital world: network effects arising from the control of data. This will continue to lead to power law size distributions in which the number 1 in a market has a dominant position and is many times bigger than the number 2. That dynamic will play itself out not just for the very large companies which regulators are starting to look at but will be true in lots of other markets as well. The only way to go up against this effect is to shift computational power to the network participants.
I first started to write about this approach nearly three years ago in a post titled “Right to an API Key.” I then expanded this idea into what I am calling the “right to be represented by a bot” – as an enduser I should be able to have all my interactions with digital systems intermediated by software that I control 100%. You can watch my TEDx talk about this and also read more about it in the Informational Freedom section of my book World After Capital.
Unfortunately instead of looking for this kind of digitally native solution, regulators are largely reverting to the industrial age tool of antitrust regulation. As a result I have a feeling we will be stuck with network effects based digital monopolies for quite some time, despite the exciting work that is happening around decentralized blockchain-based systems.