
Across the West powerful firms are becoming even more powerful - ilamont
https://www.economist.com/special-report/2018/11/15/across-the-west-powerful-firms-are-becoming-even-more-powerful
======
CoolGuySteve
This is also a national security risk. A nation state interested in war will
have an easier time shutting down a small handful of things simultaneously to
quickly cripple our economy.

For example:

\- Shutting down only Visa and Mastercard would disable the vast majority of
credit cards.

\- Disabling debit cards or withdrawing funds from JP, BofA, Wells Fargo, and
Citi would disable the majority of banking clients in the US.

\- About 40% of US air travel could be stopped by hacking American and
Southwest.

We've already seen similar large scale attacks on large companies:

\- In the 90s and early 2000s, Microsoft's weak security allowed worms to
cripple Microsoft Office and Windows.

\- 100 million JP Morgan accounts were compromised by 3 people in 2015.

~~~
bilbo0s
I'm not disagreeing with you, but the military side of me can't help but see
how all of those things would be beneficial for our government as well.
Stopping US air travel in an emergency. Stopping electronic transactions in a
financial emergency. Etc etc etc.

I think a lot of government types would see many potential benefits in the way
things are set up now. Even most regular people would have to, grudgingly,
admit that, if it were necessary, this system could deliver the government
unprecedented amounts of control. I mean, for good or for bad.

But yeah, there's likely a double edged sword there. No question.

~~~
wpietri
The US government already has a legitimate way to stop air travel. And the
government already has significant persuasive power; if the Secretary of the
Treasury asked all the banks to stop electronic transactions for a legitimate
reason, I'm sure they'd comply.

So what you're talking about is neither a legal government power or something
where people would trust the government and follow along. You're looking for a
way for the people in power to seize further power illegally when they think
it appropriate. There's no "for good" there; that's just authoritarians
undermining the rule of law.

~~~
JumpCrisscross
> _if the Secretary of the Treasury asked all the banks to stop electronic
> transactions for a legitimate reason, I 'm sure they'd comply_

“Franklin Delano Roosevelt proclaimed a Bank Holiday...that shut down the
banking system” in 1933 [1]. This is an old power pre-dating our current
hyper-centralised banking system.

[1]
[https://www.newyorkfed.org/research/epr/09v15n1/0907silb.htm...](https://www.newyorkfed.org/research/epr/09v15n1/0907silb.html)

------
vannevar
We need significant, international corporate reform well beyond just tax
policy, or Western liberal democracy will be lost as corporate 'citizens'
completely dominate the human ones.

~~~
bilbo0s
Good luck getting everyone to cooperate.

Think about it, how much did different cities cooperated when trying to get
Amazon's HQ2?

That said, you could at least _narrow_ the problem by getting just the US, the
EU, and China to cooperate. (But even that strikes me as a Sisyphean task. But
what do I know?)

~~~
atq2119
It would be rational for cities and states to lobby for the federal government
to introduce legislation which makes the kind of tax breaks that corporations
are angling for illegal.

Note: it is rational for them to _simultaneously_ compete for corporate
investment by offering individual tax breaks _and_ lobby for such tax breaks
to be made illegal at the federal level. This is rather hard to explain to
many even otherwise intelligent people, but it's one of the most important
lessons that game theory has to offer.

The EU was acting somewhat in this direction when it forced Ireland to collect
taxes from corporations.

~~~
icebraining
I don't think it's hard to explain: it's the cities' equivalent to
cartelization. It's no wonder why two competing firms would like to prevent
each other from lowering prices, and they often lobby for laws to do that. The
mechanism here is the same.

~~~
eiaoa
> I don't think it's hard to explain: it's the cities' equivalent to
> cartelization. It's no wonder why two competing firms would like to prevent
> each other from lowering prices, and they often lobby for laws to do that.
> The mechanism here is the same.

A city or a state isn't a "firm." It's not seeking the private profit of its
owners: it's seeking the welfare of its citizens, which is part of seeking the
welfare of all the citizens of a nation. When it comes to government,
"cartelization" isn't a bad thing, because it keeps private interests from
exploiting public divisions to harm the common good for private gain.

Cartels prevent "races to the bottom," but some of those are actually good for
society (e.g. the race to the lowest price per unit of product-value). Other
races to the bottom are bad for society (e.g. lowest standard of living per
worker), and government cohesion can help prevent them by resisting the
private interests that benefit.

~~~
icebraining
I don't disagree with any of that; just saying the mechanism is the same.

------
chiefalchemist
> "The firms involved in the journey made profits of $151bn and had a median
> return on capital of 29% last year. An equally weighted basket of their
> shares—call it the monopoly money portfolio—beat global stockmarkets by 484%
> over the past decade. Collectively, 17% of the companies’ shares are owned
> by just three investment mega-managers, BlackRock, Vanguard and State
> Street."

If these were a nation-state they would rank in the Top 10, yes? Top 20 at the
least?

With money comes power. With power the drive to maintain that power.

Where there is anti-West sentiment, these outfits should be very concerned. As
should the rest of us, as it is the rest of who will fight their battles /
wars, if history repeats itself.

------
SubiculumCode
Relatedly in NY Times: "Be Afraid of Economic ‘Bigness.’ Be Very Afraid. In
the 1930s it contributed to the rise of fascism."
[https://www.nytimes.com/2018/11/10/opinion/sunday/fascism-
ec...](https://www.nytimes.com/2018/11/10/opinion/sunday/fascism-economy-
monopoly.html)

~~~
dredmorbius
Fascinating, thanks. No idea why the negative reception.

Previously:

[https://news.ycombinator.com/item?id=18429409](https://news.ycombinator.com/item?id=18429409)

------
andrepd
I always see this as fundamentally a matter of weakening of democracy. In my
personal view, democracy is the principle that each person must have a say in
decisions that affect them. In other words, any given power must be shared
among the people that it affects.

Now as more and more "power" goes into the hands of corporations, less and
less power is in the hands of the (supposedly "democratic") governments, which
themselves are imperfect democracies. And make no mistake: corporations
control, and have power over, _vast_ and chunks of our lives. Crucially, that
power is fundamentally held in a nondemocratic way: not subject to any
scrutiny or control by the part of the people that it affects. For me, this is
one of the most critical flaws of capitalism, the fact that _privately held
power_ and _democracy_ are fundamentally incompatible, and that the more power
corporations hold, the less democratic is our control over our lives: the less
free we are.

~~~
dv_dt
The Dig podcast just posted a fascinating discussion of the roots of
neoliberalism talking about the binding of nations in favor of nameless market
structures. There is a discussion of Hayek seeing a ideal of people making
independent decisions, but essentially bound by market constraints in a way
that makes the system operate smoothly. I don't think there was the
anticipation of the rollup of large corporate entities in this kind of vision
- at least not to the scale that they start pulling on the fabric of the
system leading to instability.

[https://www.blubrry.com/thedig/39413662/a-history-of-
neolibe...](https://www.blubrry.com/thedig/39413662/a-history-of-
neoliberalism-with-quinn-slobodian/)

------
xoa
Note this is the intro piece to a series of articles in an Economist "Special
Report" which they do from time to time on various topics. They talk about
tech more specifically in the "The tech antitrust paradox". However, while
this not just a simple attack piece at all, and the Economist to its credit
tries to consider various defenses and complexities as well, I think they miss
a couple of really big ones by failing to really get down to some of the
fundamental foundations tech is built on.

The first issue is simple: fantastically enormous capital expenditures. The
basic story here is simple and repeated, the early and medium stages of a new
industry's development inevitably harvest all the low hanging fruit in terms
of pure physics and math. There is no path dependency yet either. But as it
matures the cost of incremental gains begins increasing non-linearly. In tech
we see this most particularly in semiconductor fabrication, where the costs of
the cutting edge processes that have powered everything we do have been on a
J-curve for each new node. An article by by SemiEng "Big Trouble At 3nm" [1]
earlier this year had a good graph from IBS show the trend in design costs
alone. In terms of the fab themselves IBS estimated "3nm will cost $4 billion
to $5 billion in process development, and the fab cost for 40,000 wafers per
month will be $15 billion to $20 billion", and it wouldn't be surprising if
that was _optimistic_. "7nm" (TSMC, ~Intel 10nm) has been hard and multi-
billion expensive also.

Economically the only way to make this work is by trying to amortize towards
the thankfully very low raw material cost through enormous volume, and players
must be able to front fantastic sums with very long time horizons. How does
this square with tons of tiny firms? Vertical integration could be gone after
so it's a pure foundry model, but that still leaves just a couple of foundries
in control there. That's chips alone though, lots of other areas of
electronics have the property of low resource cost combined with utterly
enormous capex requirements, such as state of the art displays. Improvements
in energy storage also require plants like the Gigafactory. The results are
super, super important in my opinion, it's absolutely in our overall interest
to keep pushing forward computation (not just silicon but whatever else
becomes possible like optical computing), to reduce the price and improve the
performance of energy storage technology, better human/system interfaces
(retinal scanning displays next perhaps?), more reliable better memory, and on
and on. We're far from "done" here. Yet this naturally takes not just long
time scale dirt moving but also R&D, inevitably including some blue-sky.

And blue-sky R&D in the context of tech brings us right back to government vs
corps too. In principle one way to try to allow smaller firms again would be
to offload a lot of this back onto government instead, which by definition has
a long time horizon and shouldn't be as worried about individual short term
ROI or any single area vs the long term health of the state as a whole. It can
make the results of research available to all. But government R&D has not been
keeping up there. Monopolies can act in effect as a pseudo-government in many
ways financially, and in fact a lot of the scary parts of them can also
potentially give them an escape from typical quarter-to-quarter thinking. Some
of the key foundations of our current tech trace right back to places like
Bell Labs and Xerox PARC, R&D outfits that performed long term research which
their parents often didn't even profit from, but were themselves backed in
part by the massive economic power of their parent corps.

And no discussion of this would be complete without getting back to one area
the government directly plays in monopolies: intellectual property. Maximalism
there long since got out of control. The Economist piece doesn't give this the
right level of attention IMO, particular wrt tech where rather then merely
having (overlong _incorrectly implemented_ ) copyright and trademark, there
are "software patents" and "business method patents" that don't just cover an
implementation but basic mathematics and fundamental ideas themselves. This is
a big practical part of the "moats" they talk about in their conclusion, and
the difficulty small firms have in competing because that would depend on
interoperability.

The capex part is just really hard, and I didn't even touch on things like the
space exploration SpaceX (and hopefully Blue Origin soon) has started to
revolutionize after decades of doldrums. It's one thing to talk grandly about
"splitting up the bad guys" and such, but asking the public to pony up tens of
billions to take their place might be different (if it can't be disguised
another way, like military spending maybe). And that's even assuming it'd work
and government could do the job there, which it might not. R&D is more
promising and the open research initiatives gaining steam now are an important
part of that, but also unfortunately doesn't seem a slam dunk or very safe
from politicians looking for easy things to cut and attack. "What is this even
any good for anyway huh?" etc.

IP is promising if only because it's purely within the power of government
itself in principle, it's a creation of government in the first place anyway.
Making copyright function with software like it does all previous media
(source escrow for non-open/available), reducing its term to levels that
reflect how modern electronic distribution has reduced costs and increased
audiences along with desired churn, eliminating software and business method
patents entirely, carving out far more powerful interoperability exceptions,
requirements that at the least technical protection measures cannot be stacked
with legal protections (or must be very term limited), would all go a long way
towards increasing dynamism there. So would legal changes to cut down the EULA
tape, and _not_ just for buyers either. Producers should also be fully
protected from liability by default without any contract, and contracts
reserved for sufficient sophisticated entities in bespoke arrangements that
wish to affirmatively bargain standard rights.

It'd be good if popular anger here could be channeled towards some real
positive changes, but I do fear that between lack of public or political
understanding and powerful entrenched interests it will instead be channeled
unproductively at best or into a real baby-and-bathwater situation at worst.
To some extent big corps have even perversely taken a role defending some of
our interests from governments in a way individuals cannot, would we be able
to oppose intelligence agencies efforts to backdoor crypto as well as Apple
for example? Of course conversely big companies have often been directly
complicit and key to government authoritarian impulses and intel gathering
too. It's really hard to figure out where to start, though I think IP at least
is a relatively easy pickings place.

\----

1: [https://semiengineering.com/big-trouble-
at-3nm/](https://semiengineering.com/big-trouble-at-3nm/)

~~~
qo32
Or as my boss likes to say, it takes a lot to grow a redwood tree and after
you are done you can't turn it into a blue whale. So you just sit there making
sure no one cuts it down.

------
CryptoPunk
Replacing one supergiant with a small cartel of giants doesn't make a major
difference in the balance of power.

What's needed is actual decentralization, where consensus occurs without a
trusted third party.

------
deytempo
In other news, green grass gets greener, at least in Michigan

------
ilaksh
I feel that we should at least mention decentralized technologies in this
discussion.

Please consider how systems like cryptocurrency, smart contracts, types of
content-oriented networking, etc. may enable open platforms that can be an
alternative to the monopoly companies'.

~~~
fabianhjr
Don't stop there, there is a push for Decentralized Planned Economies. (
[https://www.wikiwand.com/en/Decentralized_planning_(economic...](https://www.wikiwand.com/en/Decentralized_planning_\(economics\))
)

~~~
anoncake
That's just an empty page, you probably meant
[https://en.wikipedia.org/wiki/Decentralized_planning_%28econ...](https://en.wikipedia.org/wiki/Decentralized_planning_%28economics%29)

------
amelius
The problem with the free market is really _language_. Humans tend to converge
to a small number of words for everything. It's Google for search, iPhone for
phones, and Coke for cola. If we solve this language problem, then we can hope
to solve the problems caused by monopolistic behavior.

~~~
btown
It's an intriguing idea that language might cause humans to be biased towards
exploiting knowledge about common brands rather than exploring new ones. Do we
derive utility from having a thinner "tail" on our (shared societal)
vocabulary?

Unfortunately, the distinction between "brand" and "corporation" makes this
point, while interesting, somewhat moot. Consider that the Koch brothers have
been able to consolidate brands ranging from TIME to Sports Illustrated, from
Brawny towels to Dixie cups. In a world where users desire a "long tail" of
brands, corporations continue to consolidate but simply invest in a wider
variety of brand names and marketing for them. There's still synergy to be
gained from a consolidated entity operating all of those brands. And so we're
right back where we started.

~~~
eiaoa
> In a world where users desire a "long tail" of brands, corporations continue
> to consolidate but simply invest in a wider variety of brand names and
> marketing for them. There's still synergy to be gained from a consolidated
> entity operating all of those brands. And so we're right back where we
> started.

Exactly. An example: Whirlpool owns many major appliance brands (e.g. Maytag
and Amana). They can afford to make ever crappier products, because they know
when a customer is unsatisfied, they'll more than likely buy another Whirlpool
under a different brand name.

[https://recraigslist.com/2015/10/they-used-to-
last-50-years/](https://recraigslist.com/2015/10/they-used-to-last-50-years/)

------
tempodox
So the rich are getting richer and the powerful more powerful. Unfettered
capitalism is working as it's supposed to be. What else is new?

------
alienreborn
> “Competition is for losers,” writes Peter Thiel, an American venture
> capitalist, in his book, “Zero to One”. Monopoly is the goal, he says.

Wow!

~~~
gnarcoregrizz
It's specifically in reference to tech firms. He postulates that competition
causes human suffering since people work harder and harder for diminishing
rewards as things get increasingly competitive. On the other side, monopolies
are established because they invented some novel technology that other people
couldn't easily reproduce, or did something so much better than the
competition that everyone chooses to use them. Thus, he says monopolies are
responsible for making society richer. Moreover, he says they reduce human
suffering because 1. the great societal value produced by the monopoly, 2. the
workers at the firms don't need to work as hard since they don't have
competition, and 3. they can spend more on r&d, thus adding even more value to
society.

The statement is surprising on its face, but he plays a good devil's advocate.
There are plenty of holes to poke in his arguments, so have at it.

~~~
eiaoa
> There are plenty of holes to poke in his arguments, so have at it.

1\. You're not going to truly release the social value of a monopoly unless
you socialize it, either through social control or regulation. Without that,
the monopoly will mainly serve to benefit its owners.

2\. Monopoly R&D expenditure will likely be less than the excess profit
captured by the monopoly's owners, and mainly motivated by potential
regulation. IIRC, the main raison d'être for Bell Labs to exist as it did was
to convince regulators to not break up AT&T. Without that threat it would have
likely been more focused on AT&T's profit motive and less on generalized
scientific advancement.

3\. Monopolies (socialized or otherwise) will more likely end in stagnation.

~~~
gnarcoregrizz
> 1\. You're not going to truly release the social value of a monopoly unless
> you socialize it, either through social control or regulation.

I somewhat disagree. There are some monopolies which become more valuable to
society the larger they are due to network effects. One example is Google
maps. I suspect the more people use maps, the more accurate their live traffic
data will be, which gives every other user more accurate information.
Marketplaces are another example of network effects benefitting users - the
more buyers and sellers in one marketplace, the easier it becomes for them to
find one another.

> 2\. IIRC, the main raison d'être for Bell Labs to exist as it did was to
> convince regulators to not break up AT&T

Interesting, I was going to use Bell Labs as an argument in favor of
monopolies producing r&d. It seems like they invented everything!

