
Elizabeth Warren wants the government to crack down on technology giants - frostmatthew
http://www.vox.com/2016/7/4/12077568/elizabeth-warren-antitrust
======
skywhopper
I love Warren but I hope she and others in power make wise distinctions about
what's important and where technological monopolies can be reined in by
technology and where the market needs help. Subscription music services with
interchangeable catalogs are the least of my worries about the direction of
technology. Likewise e-books aren't really a market that needed immediate
intervention when Apple and the publishers tried to work around Amazon's abuse
of their position.

Monopolies at the ISP level where literally no competition exists is a major
problem. Near permanent copyright monopolies granting extraordinary power for
a century or more is a major problem. Patent trolls are a huge problem.

Privacy and fairness are major problems. Buggy OS upgrades, popular search
engines, and built in music programs are not.

~~~
cmurf
Buggy upgrades? I think it depends. If there's an updated iteration of a
surgical tool or drug, it goes through a 3rd party vetting process, a
significant portion of which is publicly transparent. There's a lot of
shenanigans going on in OS upgrades under the disguise of, it's proprietary
and no one has the right to see the code, as well as the EULA, as well as DMCA
that'll prevent some forms of reverse engineering to find out what the changes
entail.

That doesn't necessarily mean open sourcing all software. But it does mean
having some kind of transparent testability of inputs vs outputs, a statement
of expected behavior, tolerances, and so on. But what we seem to tolerate in
software these days is, "oh fuck that upgrade just fucked up everything" with
very heavy weight recourse like rollbacks or reverting to backups.

The problem with such regulation isn't the concept of regulating minimum
quality standards in software, but rather the competency and delays in getting
effective coherent legislation produced. It basically requires many people
getting pissed to get a law passed, and that's not really the best way to set
a standard is it?

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sethbannon
I read the headline and shuddered, but seeing the examples she gives of the
sort of behavior she'd like to curtail, it seems fairly reasonable:

"Apple uses control over the iPhone platform to advantage Apple Music over
other subscription music services.

Amazon uses control over the world’s largest store for e-books to advantage
books published by Amazon over books from rival publishers.

Google uses control over the world’s most widely used search engine to promote
its own Google-generated content even when a straight implementation of
Google’s algorithm would surface content by someone else."

~~~
zghst
It's all about the finesse in how these issues are worded. She reduces complex
issues to a bite sized, strong, yet inaccurate argument. By leaving out the
nuance of such issues, we could end up with overreaching legislation that
leaves the market less competitive than previously.

A company can choose to sell their products through Apple's store front,
however they have to play by Apple's rules. Target, Walmart, Amazon, etc all
make products in their stores that compete with products from other vendors
that sell items in their stores. If we change the rules because Apple is
perceived to have an unfair advantage, should the other distributors change?
And if so, what sustains the incentive to make services and products that
could possibly compete on price and quality with other vendors.

------
rayiner
It's going to be pretty amusing when Warren's fear-mongering against the
finance industry gets redirected to the latest boogyman: the tech industry.

~~~
heurist
I think technology is more accessible to people, and even if the general
public doesn't understand it they at least feel they can refuse to
participate. But it's hard to avoid a bank account and the finance industry
manipulates the economy in secretive or abstract ways, which makes them
distant and incomprehensible.

~~~
rayiner
They can't opt-out of technology automating away their jobs. I was in an Uber
the other day. The driver was a real estate agent talking about how terrible
Redfin is. He didn't seem super excited about his gig economy future.

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mattmcknight
More than just a collection of weird and incorrect statements about tech
companies, this is an example of the kind of "central planner" mindset that
Warren has which is extremely threatening to the world economy. In particular,
Warren complaining about the monopoly threat posed by Google+ is hilarious.
Her overconfidence in assuming she knows enough this industry to divine
regulations for breaking up large companies is frightening.

As other commenters have pointed out, the better role for government is in
eliminating the monopoly rights they have already granted to ISPs. If she
actually understood and cared about monopolies, she'd be attacking all of
those deals signed by clueless and/or corrupt local politicians. Instead, she
just wants to rail against the faceless enemy of "big business", in order to
drum up. She's a Trump of a different suit, just another populist looking to
derive power by exploiting simplistic ideas that don't work in the real world.

------
godzillabrennus
She should focus on the banks where popular opinion supports her before
venturing into a vertical relatively liked by society.

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HillaryBriss
> [Elizabeth Warren is] _suggesting comprehensive regulatory scrutiny for
> technology giants — calling out Google by name alongside Apple and Amazon._

These firms and their well paid employees generate a lot of income tax and
capital gains tax revenue for California.

I suppose California lawmakers ought to stridently resist such regulations. It
threatens their money source.

~~~
mwfunk
They ought to, or they simply have at least one possible motivation to? IMO
just because something is in someone's best interest by one metric doesn't
mean that they _should_ take that course of action. I don't have any opinion
on Warren's statements one way or another yet, but I would hope that
legislators would actively try to ignore the revenue stream aspect when
determining what the right thing to do is here.

Many police departments rely on ticketing drivers as a source of income, but I
wouldn't take that to mean that the police ought to redirect their resources
into ticketing as many drivers as possible.

~~~
HillaryBriss
Right. Strictly speaking, based on an unbiased ethical consideration of the
whole mess, I think you raise a good point.

But I think that money motivation proves quite powerful.

The cover story for, or rhetorical face of, the CA politician's defense of
these companies will look something like: high tech companies are the future.
They're clean and green. And CA is leading the way. And CA is superior to
everywhere else because those tech giants are mostly here (as opposed to one
of our competitors: TX, MA, NY or even WA).

And if we let this kind of misguided regulatory regime get started, we'll
endanger not just CA's economy, but that of the entire US tech industry...

------
youngButEager
Most of us in tech know this: existing tech firms and markets disappear very
quickly. It is exceedingly rare for a company to survive because of innovation
and 'creative destruction' aka 'disruption.'

How do you recognize a person out of their depth when they discuss tech? When
they have little experience in tech.

If she's not smart enough to know that tech trends last as long as produce at
the grocery, many of us would not want her making or influencing decisions
about tech.

Having consulted (software development, training programmer teams to write
code) at once-strong firms like Sun, Silicon Graphics, Global Village, and
others, it's pretty shocking how fast a tech giant can disappear.

Palm; Borland; Amiga; Napster; Friendster; GeoCities; InfoSpace; Gateway;
Netscape; and others. Dying slow deaths: HP; Yahoo; Zynga; etc.

Warren knows nothing about how the tech economy eats its own. No need to take
actions like she proposes.

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zekevermillion
I would like to see antitrust authority focus on technology protocols /
standards rather than, or perhaps in addition to, corporate mergers. Prohibit
"embrace-and-extend" for example. Place limitations on use of proprietary
formats where there is widespread third-party reliance on a technology.

~~~
stickfigure
_Prohibit "embrace-and-extend"_

Errrr... like what, ban the Fork button on github?

~~~
zekevermillion
No. That's a Microsoft reference. A strategy for coopting open protocols, then
adding proprietary extensions so no one else can use them. It does not have
anything to do with open source, and I don't think is something that Microsoft
particularly does anymore. Though there are ample analogies to behavior of all
large tech companies.

~~~
stickfigure
I challenge you to come up with a way to differentiate between "embrace-and-
extend" and "fork-and-commit" that does not involve your personal feelings
about the actor's motivation.

------
notadoc
Considering US v Microsoft in the late 90s was spurred by simply bundling a
web browser...

~~~
badsock
That was the straw that broke the camel's back. Back then Microsoft was an
abusive monopoly in many more ways than that (e.g. punishing their OEM
customers by refusing to sell them Windows if they offered any other OS as an
option).

~~~
mwfunk
This is the truth. The late '90s antitrust case arose after many, many years
of what many would consider anticompetitive abuse of market dominance.

One example: there were various competitors to MS-DOS and Windows throughout
the '80s and '90s. However, due to their relationship with IBM, MS had a huge
natural advantage in the PC OS market in the early- to mid-'80s. They pressed
this advantage to enforce licensing fees on computer makers. If a company
wanted to sell an MS OS on any of their computers, they had to pay MS for a
license for every computer, regardless of which OS was sold on it. This
guaranteed that any system sold without an MS OS would cost more, because the
customer had to buy the computer + the MS OS + OtherOS even if the MS OS
wasn't installed on the purchased system. This created a huge barrier to entry
for any MS competitor in the OS market.

Software vendors are within their rights to make such deals, of course. It's
only a problem if the vendor has so much of a market presence that it would be
suicide for a system vendor to decline from being an MS reseller altogether.
In this case, it was a problem.

This illustrates some aspects of antitrust law that a lot of people
misunderstand:

(1) Being a monopoly doesn't mean having 100% market share, it only means
having overwhelmingly dominant market share, which in some industries could be
as small as 30%. It's a somewhat arbitrary number that might be very different
from one industry to the next.

(2) Being a monopoly is not a bad thing in and of itself. There is a concept
of some industries being skewed towards natural monopolies. Natural monopolies
aren't inherently bad things either.

(3) Antitrust action is only taken when someone abuses their monopoly to alter
the very market that they compete in. This is using your strength in the
market to bias the market itself in favor of you, thus undermining free market
dynamics. Of course no market is 100% free, or rational, or efficient, but
that doesn't matter. What matters is that the monopolist is taking steps to
make it tangibly less free.

Unfortunately the nature of antitrust law is such that it is ripe for abuse by
bad actors or (legitimately) vanquished competitors. As a result even
seemingly clearcut situations like the MS OEM deals go on for years without
anything being done about it, because there are inherently so many legal gray
areas surrounding antitrust. But it did establish a record of patterns of
behavior that could be referenced in the eventual late '90s antitrust case.

IANAL so this should be taken with many grains of salt and I would love to
hear from actual L's if any of this is wrong or oversimplified.

------
fpgaminer
I'll play a bit of devil's advocate here and suggest that an even broader
approach would be appropriate; cracking down on _all_ giants. Not just when
they use their size to manipulate the market (i.e. when Apple uses its
platform to bolster their music service), but just in general when a company
is considered "giant."

The primary benefit of a giant company is efficiency. They are able to provide
their goods and services at a lower cost to the rest of the economy because of
their scale. The downside is that any level of corruption/cheating within the
company will become magnified by an order of magnitude, again because of their
scale. And the thing is, the majority of companies are anti-competitive or
otherwise have some tendency to "cheat" the market. That's human nature mixing
with the incentives of the economy. Usually that's fine in the sense that we
tolerate it as fellow, flawed humans. But when the company is giant that foul
play becomes a big problem, and we see all the pain that tends to accompany
giant corporations like those pointed out in the article.

So, is the increased market efficiency worth it? Doesn't the anti-
competitiveness cancel out any benefit that that efficiency may have had? Or
worse, perhaps the anti-competitiveness out-weighs the improve efficiency, and
giants are actually hurting the overall efficiency of the market?

That would be my devil's advocate argument. If giant corporations tend toward
anti-competitiveness by their nature, and if that anti-competitiveness is out-
weighing any benefit from increased efficiency, then it makes economic sense
to "ban" giant corporations altogether.

Another, perhaps playful, way to look at it is as an optimization problem. We
can view market efficiency as the loss function, which we wish to maximize.
Our current economy roughly applies Stochastic Gradient Descent (SGD) to this
problem. Try a couple things at once, measure average loss, and then propagate
that loss to the entities within the market roughly proportional to their
contribution to the loss. In other words, companies that helped make the
market more efficient are rewarded. Companies that did the opposite are
punished. Those companies adjust one direction or the other, and we iterate
again. The problem with naive SGD like this is that it _overfits_. Any data
scientist will tell you that. Overfitting the economy results in a very
optimal loss in the short-term (training set), but terrible loss (market
efficiency) in the long-term (testing set). And that's exactly what we see.
Giant corporations like Walmart give us really low prices, but in the long run
they are a strain on local and global economies and stamp out competition that
would have helped find a more optimal, global efficiency.

Digressing, this is of course idealistic. Making large companies outright
illegal would be insane in the current political environment, would not be
practical, and ultimately won't solve the issue. A more nuanced approach is
appropriated, and perhaps that's exactly what Warren is attempting here. To
that end, and if the above argument holds water, I'd have to say I agree with
her approach and wish her luck. A little L2 regularization will go a long way
to making out economy more robust.

~~~
oever
A simple measure to achieve this: a company that has x % market share should
pay x % taxes on their profits.

New companies are encouraged and old slow ones are discouraged.

~~~
zghst
What stops multiple companies from forming pacts to stomp out the little guys?
What happens when smaller companies cannot fulfill niche needs of their market
whereas a larger company could afford to do so?

