The invasion of personal privacy; the devastation of the traditional high-street; tax-avoidance; the dawn of ‘fake news’ – a lot of bad things have been laid at the door of the American tech giants, the GAFAs – Google, Apple, Facebook, and Amazon.
But are all these negative connotations fair? To what extent are they balanced by the positive benefits brought by these innovative businesses? And how much should we worry about the growing geo-political power of the GAFAs?
Last week Jeremy Ghez, HEC Paris Professor of Economics and International Affairs, introduced his research on the rise of the tech oligopolies at a stimulating lecture, hosted at the London School of Economics, titled: ‘When Tech Giants Take Control’.
According to Professor Ghez, there is a tipping-point between privacy and convenience. Currently consumers still largely see the GAFAs in a positive light, as innovative organizations that deliver huge convenience. However, in time the balance may change and we may decide it’s time to pull the plug on these mega-powerful organizations. But if we do will we have the ability to pull the plug or will our lives and our economies be too dependent on them?
The tech giants have moved beyond revolutionizing the tech and communications industries to now profoundly reshaping global commerce. Taken together, GAFAs generated $433 billion in revenues in 2015, putting them at the same level as a medium-sized economy in terms of financial weight and economic might. The signs are that their power will continue to increase as they look to stay relevant by competing for space in your daily lives, and as they aim, in Ghez’s words, “Not only to be an inescapable service provider among others but also to be the central hub indispensable to your activity."
This accumulation of power and influence, according to Ghez, is redefining our very understanding of power and governance, as well our perception of space and relationships. His research unearths critical questions about the sheer ubiquity of the GAFAs, their financial clout, their ability to re-calibrate socio-political rules and priorities, and their influence on the way we organize ourselves in our private, professional and public lives.
The GAFA’s success has come with the creation of an ecosystem that can potentially be customized to the extreme, for every single one of its users. This is a powerful paradigm and one that will strengthen with the exponential advance of digital technology. However, despite this, it is possible the GAFA oligopoly, like others, may be short lived.
The story of capitalism has often been one of concentration of market power in the hands of the few actors that control the dominant technology or resource of the age, from the ‘robber barons’ of the nineteenth century, to OPEC in the late twentieth, and in recent years the banking industry.
One threat to the GAFAs, is that other innovative companies are going after the benefits of their platform approach – meet the NATUs (Netflix, AirBnB, Tesla, Uber). Hence, within the immediate context of service provision, there will be competition which could conceivably displace the GAFAs.
Another threat involves the tipping-point. How protective/tolerant will consumers and regulators be with regard to privacy and intrusion into our private space and time? If access to data and data sharing is curtailed by regulators fearful for our privacy or for cyber security reasons it could weaken the grip of the GAFAs.
Furthermore, how willing are people going to be in allowing the inexorable rise of the tech giants? Professor Ghez included two quotes in his presentation that highlight why a desire to control the GAFAs may grow into a demand for regulatory action. First:
“Mr. Bezos has created a transaction engine that is reinventing the way entrepreneurs can do business. If his ambition is to colonize the entire infrastructure of consumption, it is not likely to be Amazon’s technological skills that set the limits, but the world’s willingness to accept him.” Barney Jopson, ‘From Warehouse to Powerhouse’, Financial Times, July 8, 2012.
And secondly, a powerful reminder that strong actors should be cautious when interacting with populations which increasingly believe they have nothing to lose:
“The America that voted for Trump does not own a Tesla, nor an iPhone and when it needs money, it does not ask business angels for help: it relies on bad credits. It is time to recognize that we need to develop technologies and businesses that will benefit the widest range of people possible, algorithms that do not divide but that bring together.” Carlos Diaz, ‘Le mur de Trump, c’est la Silicon Valley qui l’a construit’, L’Opinion, November 13, 2016.