Speaker 1: All Zone Media.
Speaker 2: Hello and welcome to Better Offline. I'm your host ed Zetron.
Speaker 2: Today we're talking monopolies, and I'm joined by Matt Stoler,
Speaker 2: who covers market power and antitrust for The Big Newsletter
Speaker 2: and is the director of research at the American Economic
Speaker 2: Liberties Project. Matt, thank you for joining me.
Speaker 1: Hey, thanks for having me.
Speaker 2: So this is a very dumb place to start, but
Speaker 2: I think it's necessary. What exactly is a monopoly.
Speaker 1: Not a dumb place to start at all. There are
Speaker 1: different definitions, but generally speaking, it is the control of
Speaker 1: a recognized branch of trade or service, a unified control
Speaker 1: of recognized trade or service. And that's a definition I'm
Speaker 1: giving you from Lewis Brandeis, who was a Supreme Court justice,
Speaker 1: but it's the same. I think Milton Friedman had a
Speaker 1: kind of a similar definition. The essence of a monopoly
Speaker 1: is control of a market or a recognized trade.
Speaker 2: And what the most people not actually understand about them what.
Speaker 1: I think most people characterize monopoly as kind of an
Speaker 1: economic thing or you know, just a commercial thing, but
Speaker 1: really a monopoly is a political institution. So when we're
Speaker 1: talking about monopolies, we're talking about what is effectively a
Speaker 1: private government over a market, over an industry. If you're
Speaker 1: in that trade right, or that service, if you ply
Speaker 1: your trade there. If you're operating in a market which
Speaker 1: is monopolized, then you have a political boss who sets
Speaker 1: the prices, the terms of trade, who can buy, who
Speaker 1: can sell, and you're under their thumb and yeah, it's
Speaker 1: your trade right. So it looks like the quote unquote economy,
Speaker 1: but in fact it's really a person has or that
Speaker 1: firm has political power over you. And if you have
Speaker 1: enough monopolies in an economy, then at least in the
Speaker 1: commercial sector, which is a big part of our lives,
Speaker 1: we're not living in a democratic society. We're living in
Speaker 1: a society of a of a bunch of of private governments,
Speaker 1: authoritarian governments over markets.
Speaker 2: So Son Dapashi of Google would be like the president
Speaker 2: of his private monopoly, his little private I think that.
Speaker 1: I think that's right if you if you think about
Speaker 1: how people you know, there was a there's a good
Speaker 1: quote that from a plumber actually in the in the
Speaker 1: Wall Street Journal who said that, you know, the government
Speaker 1: can find me, but Google can put me out of business, right,
Speaker 1: because Google could take his business off Google Maps. They
Speaker 1: could they could change his ranking in Google Search, and
Speaker 1: so he was way more afraid of Google than than
Speaker 1: the government. And that's that's because Google has governing power
Speaker 1: over you know, over the Internet. You can see this,
Speaker 1: like every publisher can tell you that the change in
Speaker 1: Google's algorithm can be catastrophic or can be you know,
Speaker 1: hugely important and pactful in some ways. So yeah, very much. So.
Speaker 1: Google is the private government of the Internet, or at
Speaker 1: least the gatekeeper of the Internet. And it is exactly
Speaker 1: it's exactly what you're talking about. They also have political
Speaker 1: power because they're a big company and they lobby and whatnot.
Speaker 1: But just as infrastructure, they are governing that infrastructure.
Speaker 2: Almost feels like Yelp is like a borough of the
Speaker 2: larger Google country than Yelp controlling the reviews, and Yelp
Speaker 2: has a weird little mob like thing they do where
Speaker 2: you have to pay them to get rid of bad reviews. Now,
Speaker 2: it's very never really thought about the governmental comparison.
Speaker 1: Right, I mean, so what you have with something like
Speaker 1: Yelp is because Yelp is under the control of Google, right,
Speaker 1: And Google is doing all sorts of things to sort
Speaker 1: of try to kill Yelp yelp, and Google has monopolized
Speaker 1: to advertising, right, a company like it kind of has
Speaker 1: no choice but to move towards a kind of sleazier
Speaker 1: business model where they're extractive, because all of the other
Speaker 1: areas where they could legit make more legitimate money have
Speaker 1: been monopolized by Google or have been taken by Google. So,
Speaker 1: in one sense, what happens when you have monopolies, you
Speaker 1: have you know, higher prices and all the rest of it.
Speaker 1: But another thing that happens is that businesses that are
Speaker 1: operating often have a choice of continuing in existence or not.
Speaker 1: And the choice of whether to continue in existence is
Speaker 1: often to go down through a business model that can
Speaker 1: look sleazier, can be problematic, or can be coercive. And
Speaker 1: so it's like that's that's the choice. Do you go
Speaker 1: out of business or do you this do this thing
Speaker 1: that you know you don't like. Is there's a law,
Speaker 1: there's a rule of thumb called Gresham's law about counterfeit money,
Speaker 1: which is, you know, when somebody starts using counterfeit money,
Speaker 1: then nobody wants to use real money. Because even if
Speaker 1: you want to use real money, you know, you're like,
Speaker 1: I'm not going to put real money out there if
Speaker 1: it's all counterfeit.
Speaker 2: So yeah, the drive with the counterfeit has the advantage,
Speaker 2: right rules.
Speaker 1: Good money drives out the bad. And so this is
Speaker 1: one of the things you see. For example, when you
Speaker 1: go to like a like a expeedyer or something like that,
Speaker 1: and you're hotels dot com. You're looking for, you know,
Speaker 1: to book something, they don't show the you know, resort fees,
Speaker 1: the junk fees until you know, you get to the
Speaker 1: last page where you're going to check out, or sometimes
Speaker 1: even when you get to the hotel. And it's not
Speaker 1: that every hotel wants to rip you off, but they
Speaker 1: all know that you're going to be looking at the
Speaker 1: price and comparing the sticker price that you see on
Speaker 1: the on the results page, and if their rival is
Speaker 1: not is not showing you that junk fee, then they're
Speaker 1: at a competitive disadvantage if they don't lie.
Speaker 3: So yeah, yeah, well so well it's it's it's just
Speaker 3: that a market where you have rules that enable that
Speaker 3: allow fraud is just a different market than one where
Speaker 3: we don't allow fraud.
Speaker 1: It's just there. You know, there's discussions about capitalism or
Speaker 1: free markets or whatever. But the fact that you use
Speaker 1: the term market doesn't mean anything because markets are politically structured,
Speaker 1: like a farmer's market, a derivatives market, a slave market.
Speaker 1: They all use the term market. They're very different institutions,
Speaker 1: very different moral elements underpinning them, very different arrangements of power.
Speaker 2: So you've said something you wrote and deep, well it's
Speaker 2: also on your main page. Is America's in a monopoly crisis, right?
Speaker 2: What you mean?
Speaker 1: So what you haven't in a lot of areas and
Speaker 1: in most I think monopoly or oligopoly, which is just
Speaker 1: a small number of companies controlling a market is now
Speaker 1: a systemic feature of the American economy, and it didn't
Speaker 1: used to be. So there are different ways to measure it.
Speaker 1: But you know, about seventy five percent of industries in
Speaker 1: the last twenty five years have gotten more consolidated, and
Speaker 1: so you see, you know, and this is largely through mergers.
Speaker 1: So another statistic would be, you know, there's something called
Speaker 1: the Wilshire Wilshire five thousand, which is an index of
Speaker 1: public companies, and we don't have enough public companies for
Speaker 1: the Wilshire five thousand. They're only about thirty four hundred
Speaker 1: public companies. Now there used to be around nine thousand
Speaker 1: in the nineties. Now we have around thirty five hundred.
Speaker 1: It's largely because of mergers. Even the country per capitis,
Speaker 1: you know that the decline is even more significant. So
Speaker 1: just the number of big companies is smaller because companies
Speaker 1: have gotten you know, they've merged and gotten much much bigger,
Speaker 1: and this has a lot of consequences. What you see
Speaker 1: is wages are much lower than they otherwise would be.
Speaker 1: So the amount spent on employees with either increased wages
Speaker 1: or healthcare or training is probably between fourteen and twenty
Speaker 1: thousand dollars per American in the non in the non
Speaker 1: financial corporate sectors eighty million Americans. You see things like
Speaker 1: the cost of healthcare, which is largely driven by market power,
Speaker 1: consolidation in hospitals, pharmaceutical companies, insurers. The price of an
Speaker 1: insured family of four has gone from about ten to
Speaker 1: fifteen thousand dollars a year in two thousand and eight
Speaker 1: to about thirty thousand dollars a year today. So that's
Speaker 1: you know, a lot of the you know, lack of
Speaker 1: increase of compensation and wages. If you just take those
Speaker 1: two facts of just how much lack of ability to
Speaker 1: move to a new job because of consolidation. That's fifteen
Speaker 1: to twenty thousand dollars plus the increase that we're paying
Speaker 1: in healthcare. That's a lot of money. And that's you know,
Speaker 1: every single year, it's basically almost a new car every
Speaker 1: single year. That's just extracted from every family by this
Speaker 1: increased amount of concentration.
Speaker 2: And do you have less ability to move because there
Speaker 2: are just less places to work?
Speaker 1: Yeah, that's I mean, that's right. There's just like if
Speaker 1: you it used to be that you had, say you
Speaker 1: were in a town, you had ten stores, the you know,
Speaker 1: a couple of dry goods stores and grocery stores, butcher
Speaker 1: you know, like your you know, your standard main street,
Speaker 1: and then that all got put under one roof Walmart,
Speaker 1: and so you have one place to work and all
Speaker 1: the stuff is sold there, and now you don't have
Speaker 1: any place to bargain as if you're a worker or
Speaker 1: if you want to set up a store, you can't
Speaker 1: do that either because for you know, other reasons, because
Speaker 1: that Walmart has more bargaining power with suppliers, and so
Speaker 1: you can't compete. Even if you had a you could
Speaker 1: do it more efficiently, you still couldn't compete because you
Speaker 1: couldn't get the supplies that you needed, or you couldn't
Speaker 1: get them at the best at the same price.
Speaker 2: And that sounds like another manifestation of the political nature
Speaker 2: of these companies because they just set the terms that
Speaker 2: customers will expect and businesses have to operate with.
Speaker 1: Yeah, I mean Walmart in the nineteen nineties and two
Speaker 1: thousands as it was growing, and there are political reasons
Speaker 1: that were there were just changes in pricing law and
Speaker 1: anti trust laws. But Walmart would literally just go to
Speaker 1: their suppliers and they would say, okay, you Levi Strauss,
Speaker 1: you're not making your genes in China. We want you
Speaker 1: to move production to China. That's if you want to
Speaker 1: get into Walmart, and you need to get into Walmart
Speaker 1: because we are eight nine percent of the retail dollar
Speaker 1: and you need it, You're going to do this. And
Speaker 1: they just did this across the board, and they literally
Speaker 1: restructured how American production happens because.
Speaker 2: Was that to lower prices? Was that too? Why did
Speaker 2: they want them to move to China.
Speaker 1: Lower prices usually? But also you know, they had they
Speaker 1: had specific ways that they wanted to see their their
Speaker 1: their business operate, so they just want control. I mean
Speaker 1: there are other things that they did that are actually
Speaker 1: really interesting to restructure how retail works. But yeah, it
Speaker 1: was largely a price. It was a price element.
Speaker 2: And is the crisis that these there were just so
Speaker 2: many of these little moving within America.
Speaker 1: You mean that there's so many mononoply crisis, Yeah, I
Speaker 1: mean the crisis is that we have you know, as
Speaker 1: people get used to being bossed around, they lose their
Speaker 1: respect for democracy itself, right, I mean, that's that's the ultimately,
Speaker 1: like you see a ton of cynicism. And I think
Speaker 1: the reason that there's all of the cynicism about the
Speaker 1: rule of law, about the idea of living in a
Speaker 1: society is because most people experience living in an authoritarian
Speaker 1: part of their lives. I don't want to overstate it.
Speaker 1: We're not living in a dictatorship or anything. This is
Speaker 1: still a democracy. But you know, you get bossed around
Speaker 1: and you get told you can't mean, the amount of
Speaker 1: fear in commerce is overwhelming at this point. When you
Speaker 1: when you talk to people in lots of different areas,
Speaker 1: they're afraid to talk about what's going on in their industry.
Speaker 1: Because the monopolists can can retaliate against them. And so
Speaker 1: if you're living in fear, then you're not living, You're
Speaker 1: you're not free, right. You may not be living in
Speaker 1: a dictatorship, but you're not free.
Speaker 2: That's interesting as well, because so much of what I've
Speaker 2: talked about with the Valley is this without really framing
Speaker 2: it like you are, which is people fear. Samultman of
Speaker 2: Open Ai, he's grown big because people fear his existence,
Speaker 2: what he may say about them read Hoffmann right, same deal,
Speaker 2: And just the political nature of these institutions. I never
Speaker 2: really considered is this how it got so bad that
Speaker 2: the corporation's kind of got this level of power.
Speaker 1: So it's interesting the story of why this happened is
Speaker 1: actually not a story of big corporations seizing power, because
Speaker 1: we didn't actually have this problem in the nineteen seventies
Speaker 1: and before that. I mean, you know, there's always like
Speaker 1: some big companies, and there's always some problems here but
Speaker 1: here and there. But largely this is a story of
Speaker 1: bad ideas taking over. So what happened in the we
Speaker 1: had this populist tradition in America, right, which you can
Speaker 1: you can find this you know, really the the original
Speaker 1: Populace was a political party in the eighteen eighties and
Speaker 1: eighteen nineties. They were farmers from the South and the Midwest.
Speaker 1: They were upset about a number of different changes in
Speaker 1: the economy, the dominance of railroads, dominance of large banks. Basically,
Speaker 1: they were mad about Eastern capital controlling their business and
Speaker 1: making it hard to make a living selling farm products.
Speaker 1: And you control by processors, controlled by railroads. This is
Speaker 1: very similar stuff that we're seeing today. So standard oil.
Speaker 1: I didn't like that, But you could go back, you
Speaker 1: could find this, you know, you go back in the
Speaker 1: sixteen hundreds and find antecedents in England and so on
Speaker 1: and so forth. There has always been this tradition of
Speaker 1: let's not have too much. No one should have too
Speaker 1: much power in America, right, that's the checks and balances things,
Speaker 1: the federalist papers and whatnot. Also, no one should have
Speaker 1: there we should try to avoid conflicts of interest. I mean,
Speaker 1: that's in the Bible. No man may serve two masters. Right,
Speaker 1: So you have this these two sort of basic themes,
Speaker 1: checks and balances, no conflicts of interest. And we've we've
Speaker 1: always kind of understood that that's the way that we
Speaker 1: should arrange our society. Very bitter fights in the nineteenth
Speaker 1: century over corporate chartering. We regulated our corporusiness idea that
Speaker 1: we used to be less a fair and that's always nonsense.
Speaker 2: Just corporate chaltering. What do you mean that?
Speaker 1: So just the idea of being able to charter a
Speaker 1: corporation create a pupka idea, you can form one, yeah,
Speaker 1: being able to form one limited liability corporation where I,
Speaker 1: if my corporation does something, it's liable, but me as
Speaker 1: a human being that runs it is not right. An
Speaker 1: eternal entity that like you, doesn't die, is not a
Speaker 1: natural person, but can conduct business as if it is
Speaker 1: a natural person. That wasn't That was an innovation in
Speaker 1: the nineteenth century. It's not something that ever anybody could get.
Speaker 1: There were all sorts of fights over who could charter
Speaker 1: it for what reason. Originally it was academic institutions, municipalities.
Speaker 1: They didn't allow anyone to just charter a corporation. And
Speaker 1: because they were like this can be really dangerous. Corporations
Speaker 1: were originally chartered to allow the pooling. You know, eventually
Speaker 1: they started to charter them in business and they said
Speaker 1: you can pool capital and men to build things of
Speaker 1: public works and make a little profit, and we're going
Speaker 1: to put very restrictive confidence in there. And it was
Speaker 1: very restrictive until the eighteen eighties and eighteen nineties, and
Speaker 1: that's when you started to see federal antitrust laws because
Speaker 1: the state chartering didn't work as well, and so we
Speaker 1: needed a new regulatory regime, and that was the that's
Speaker 1: when we got into the federalization of it. But that's
Speaker 1: the story. The story is we've always kept a tight
Speaker 1: rain on commercial concentrations of power. In the nineteen seventies,
Speaker 1: there were sort of two different political and intellectual movements
Speaker 1: that came that won the debate. Each one within the
Speaker 1: Republican Party, one within the Democratic Party, the Republican the debate.
Speaker 1: The one on the right was the Chicago School. These
Speaker 1: were the Libertarians, and their argument was power doesn't matter,
Speaker 1: Concentrations of power doesn't matter, conflicts of interest don't matter.
Speaker 1: Traditional things like usery caps, all that stuff is very silly.
Speaker 1: The only thing that matters is efficiency. We need to
Speaker 1: just think about what is most efficient. And to understand efficiency,
Speaker 1: let's think. Let's ask economists. They are the scientists, right,
Speaker 1: We're going to move this political question out of the
Speaker 1: realm of the public and the citizen and move it
Speaker 1: to the expert, the scientists, the economist. That's why these
Speaker 1: political things become the economy. That's why we start using
Speaker 1: terms like human capital instead of people, or infrastructure instead
Speaker 1: of bridges. Like it's just a very you know, the
Speaker 1: language got gets weird and sort of flat distant, yeah,
Speaker 1: exactly distant alien right. I noticed this in the in
Speaker 1: some of the documents that I was looking at the
Speaker 1: government doctor in the seventy eight seventy nine, that like,
Speaker 1: the language started getting weird and very technocratic, wonky. So
Speaker 1: that was on the right. On the left, it was
Speaker 1: sort of like some quasi socialists who made a similar argument.
Speaker 1: And they they you know, they they were not they
Speaker 1: didn't like small business right because they thought that like
Speaker 1: small business people were like uh racist and and Rubby
Speaker 1: and Andy. They preferred working with you know, the big
Speaker 1: the big banks and the and the big chain stores.
Speaker 1: And they thought, oh, they're cosmopolitans regardless.
Speaker 2: Who knows how big corporations feel about race. Jesus.
Speaker 1: I mean, I'm not I'm just telling.
Speaker 2: You no, no, no, no, I'm not saying you're the one. He's
Speaker 2: just like, oh god.
Speaker 1: Right, I mean so so. So they didn't like car dealers, right,
Speaker 1: That was they were like, car dealers are sleazy, we
Speaker 1: don't like them. They were kind of more socialists, and
Speaker 1: they said, you know what we should we should have
Speaker 1: big planning, right, work with IBM, work with like the
Speaker 1: big fancy companies to sort of plan things, and and
Speaker 1: and that. They were like, we need experts to kind
Speaker 1: of be planners in the economy. And that's actually not
Speaker 1: very different than saying, let's just allow the economists to
Speaker 1: run things, right, It's actually very similar. Both the right
Speaker 1: and the left they kind of hated each other, but
Speaker 1: they agreed that populism was bad, that small business was
Speaker 1: sort of foolish and silly, and that what we really
Speaker 1: should do is is have big institutions running things. And
Speaker 1: those big institutions, you know, maybe the right thought, well,
Speaker 1: they should just generate cash because that's more efficient, and
Speaker 1: the left maybe thought, let's have them be more socialist
Speaker 1: and look out for the public interest. But that was
Speaker 1: the sort of the gist of what both and they won.
Speaker 1: And then they changed antitrust laws in the nineteen seventies
Speaker 1: and a whole bunch of regulatory laws in the nineteen eighties, like,
Speaker 1: for example, deregulation of airlines, which happened in nineteen eighty.
Speaker 1: The most aggressive proponent of deregulation of airlines was Ralph Nader. Okay,
Speaker 1: wasn't a right wing thing. The airlines themselves didn't want it.
Speaker 1: It was Ralph Nader pushing it very aggressively. He was
Speaker 1: also very aggressive about pushing for deregulation in banking. You know,
Speaker 1: I mean, it's a weird history here.
Speaker 2: It's weird. How will like the two very different sides
Speaker 2: both seem to kind of turn against workers almost.
Speaker 1: Yeah, So Nata realized he made a mistake. But what
Speaker 1: the basic idea there was, Oh, this is it's bad
Speaker 1: for consumers that we have this regulatory scheme of for
Speaker 1: banks or for or for or for truckers or for airlines.
Speaker 1: It increases prices, it's not as efficient as it could be.
Speaker 1: If we consolidate power, that's more efficient. Right, all these
Speaker 1: grubby you.
Speaker 2: Know, because scale, you'll be able to do.
Speaker 1: Right. And so the Chicago schoolers or the right wingers
Speaker 1: were like, absolutely, this is completely right. I mean they're
Speaker 1: hippies and communists and we hate them, but they're not
Speaker 1: wrong about the need to bring the experts in to
Speaker 1: run things and move away from these you know, grubby,
Speaker 1: dumb small business people. And you know, the there's a
Speaker 1: lot of it is the consumer rights move movement was
Speaker 1: part was the people on the left who got this
Speaker 1: to happen. And you know, even if today if you
Speaker 1: read like the biographies autobiographies of people who worked in
Speaker 1: the Carter administration, though like invective, the anger they have
Speaker 1: towards the teamsters is really weird. Like I've read like
Speaker 1: multiple people from was his name, Alfred Kahn was kind
Speaker 1: of the big one. He was like diregular, but he
Speaker 1: used to talk about like how the goal of a
Speaker 1: lot of the policies was to just destroy the teamsters
Speaker 1: and reduce wages like for workers, and.
Speaker 2: Did they did. Why was there such bipartisan descent for
Speaker 2: small business? It just doesn't Maybe it makes sense just
Speaker 2: looking back, like Hinslight's twenty twenty, but it just feels
Speaker 2: so illogical almost on the left.
Speaker 1: There's an elitism to it. Right, So you had this
Speaker 1: is the first generation like in this it's the sixties
Speaker 1: and seventies, and now you have finally like tens of
Speaker 1: millions of people who are college educated. Right, it's right
Speaker 1: after the GI Bill and this the World War two,
Speaker 1: and they're they're trying to understand the economy and the
Speaker 1: New Deal. The New Deal exists, right, the New Deal
Speaker 1: framework is there. Things aren't basically prosperous, and they stop
Speaker 1: caring about questions of political economy and concentrations of power
Speaker 1: and inequality because there just isn't that much of it.
Speaker 1: I mean, yeah, there's like there's some like rich people.
Speaker 1: There are rich people, but they're seen as kind of
Speaker 1: like borish and tacky. They're not like considered powerful. Wall
Speaker 1: Street doesn't really matter, you know, in the seventies, it's
Speaker 1: just like a place with coupon clippings of like bonds.
Speaker 1: It doesn't it's not you know, it's not a big deal.
Speaker 1: And that's kind of the vibe that that most people have.
Speaker 1: You know, it's in nineteen seventy nine, you could like
Speaker 1: you could leave high school and you could just get it,
Speaker 1: get a job making fifty bucks an hour in a factory.
Speaker 1: Right that it was just a very different society. So
Speaker 1: there just wasn't the concern over being able to make it.
Speaker 2: In and not fifty dollars an hour. Job was not
Speaker 2: I'm going to guess from mega corporation.
Speaker 1: Or it was I mean, but it could be. It
Speaker 1: could be but like it could be for Ford, or
Speaker 1: it could be for a supplier of Ford or whatever.
Speaker 1: But like it wasn't you know, there was a lot
Speaker 1: of light manufacturing by smaller companies. But the point is
Speaker 1: is that you had a lot There were a lot
Speaker 1: of options, and it wasn't you know, it wasn't considered
Speaker 1: weird or a bad thing, and inequality was fairly low,
Speaker 1: and you could also start your own business. It wasn't
Speaker 1: that hard to do that, right, But the political infrastructure
Speaker 1: for that had kind of fallen apart. And when inflation
Speaker 1: hit in the nineteen seventies, and inflation hit for a
Speaker 1: variety of reasons, mostly having to do with changes in banking,
Speaker 1: you know, some some oil shocks, those two movements spent
Speaker 1: a lot of time convincing people that the American economy
Speaker 1: was misshapen because there wasn't enough expertise running things. And
Speaker 1: so in the nineteen seventies, when you started, when there
Speaker 1: was inflation, when there were these when there were financial shocks,
Speaker 1: the argument was we gotta we got to get rid
Speaker 1: of these new deal rules. Now, there were legitimate reasons
Speaker 1: to update those rules, like the train system was a mess,
Speaker 1: and because you couldn't close down unprofitable routes. You know,
Speaker 1: there was there were there was a lot of like
Speaker 1: real problems with our with our transportation system. You know,
Speaker 1: it was hard to update trucking rules. There were things
Speaker 1: that needed to be updated. But they just said, you
Speaker 1: know what, all of this stuff, just throw it out
Speaker 1: and give freedom to capital, to to unionize, to do
Speaker 1: whatever capital wants, because that's how to bring down costs.
Speaker 1: You got to make things more efficient and that will
Speaker 1: address pricing.
Speaker 2: So was there a succession of legislation or was it
Speaker 2: one big moment.
Speaker 1: It was a bunch of different it was. It was
Speaker 1: some legislation. A lot of it was through the courts,
Speaker 1: so it wasn't you know, it's not like we ever
Speaker 1: repealed any of these anti trust laws. It's just that
Speaker 1: interpretations by enforcers and the courts changed. Oh yeah, and
Speaker 1: that's actually the Reagan administration. You know. There's this document
Speaker 1: that a colleague uncovered in nineteen eighty, the Transition, a
Speaker 1: transition document from two important economists who said we're not
Speaker 1: going to be able to convince Congress to get rid
Speaker 1: of anti trust laws. So we're just going to have
Speaker 1: to change it administratively by not enforcing the laws that
Speaker 1: we don't like. So that's what Reagan did with mergers.
Speaker 1: He said, we're no longer going to enforce merger anti
Speaker 1: merger law. And so that's why, you know, you saw
Speaker 1: a huge consolidation wave in the nineteen eighties. You know
Speaker 1: the movie Wall Street, the nineteen eighty seven Oliver Spill. Yeah,
Speaker 1: so that's about a merger, right, that is the moment, Like,
Speaker 1: that's what happens, is that that change. You also saw
Speaker 1: in terms of legislation. Yes, there was a tremendous amount
Speaker 1: of deregulation of particularly of finance, but also of trade,
Speaker 1: also of shipping, also of you know, railroads and trucking,
Speaker 1: and there were a lot of legislative changes that fostered
Speaker 1: the consolidation of economic power in the name of efficiency. So,
Speaker 1: you know, one of the first laws that changed was
Speaker 1: one that it was called the Consumer Pricing Goods Act
Speaker 1: of nineteen seventy five. They said, we are going to
Speaker 1: allow discounters to basically charge much less than an item
Speaker 1: costs in order to kill their rivals. So you know
Speaker 1: that the idea used to be that if I sold,
Speaker 1: if I was a producer and I and I sold,
Speaker 1: say Ingersol watches or something, I could tell the retailer
Speaker 1: what price minimum price they could set, and that way
Speaker 1: that retailer couldn't price below cost to draw people in
Speaker 1: and kill their rivals. Let's say, like, you know, they
Speaker 1: don't do that with Ingosole watches, but they did that
Speaker 1: with milk, right, you know, price below cost to kill
Speaker 1: your rivals. If you can price below cost, this is
Speaker 1: what Amazon does, right, Like. The reason Amazon was able
Speaker 1: to kill its rivals is because it could borrow from
Speaker 1: Wall Street for as long as it took, whereas its
Speaker 1: rivals couldn't. That's called predatory pricing. Uber did something similar
Speaker 1: that used to be illegal, and one of the laws
Speaker 1: that made it possible was the Consumer Pricing Goods Act
Speaker 1: of nineteen seventy five that was put in place by
Speaker 1: the Democrats who had just gotten elected reacting in a
Speaker 1: reaction to Nixon, and they didn't know what to do
Speaker 1: about inflation. So this is something that the Natorites told
Speaker 1: them to do. They did it, and Walmart exploded as
Speaker 1: a result, nineteen seventy, Walmart was about had about, I
Speaker 1: don't know, twenty thirty million dollars in sales. By nineteen
Speaker 1: eighty it had a billion dollars in sales by nineteen
Speaker 1: eighty five. Sam Walton richest guy in the country. But
Speaker 1: so a bunch of stuff, like a bunch of legal
Speaker 1: changes happened, deregulation of finance, deregulation of all of these
Speaker 1: different areas, and now so the relaxation, dramatic relaxation of
Speaker 1: antitrust laws. And so when you make when you legalize monopoly,
Speaker 1: which is effectively what happened, then you get a bunch
Speaker 1: of monopolies. And this is to our earlier point. If
Speaker 1: you don't monopolize, then you get eaten, right, and you
Speaker 1: get destroyed. So you could say Mark Zuckerberg did what
Speaker 1: he did, and that's bad by rolling up, you know,
Speaker 1: the social media space. But if it hadn't been him,
Speaker 1: it would have been somebody else, right, And same thing
Speaker 1: with Google, same thing with all of these guys like
Speaker 1: it was gonna When you create a legal environment like that,
Speaker 1: that's what happens. So these big companies now they're big,
Speaker 1: Now they're powerful, and they use lobbying, they use infrastructure,
Speaker 1: and they're governing. But it didn't start out that way.
Speaker 1: Now we have a political economy problem, but the ideas
Speaker 1: have changed. So the intellectual framework they were operating on
Speaker 1: of Google, we don't do evil, right, which is a
Speaker 1: fundamentally a statement about governing. I think there's like a
Speaker 1: general view that whatever you think about Google's business model,
Speaker 1: it is inappropriate for a private entity to be used
Speaker 1: to be wielding sovereign power. That's not it shouldn't be
Speaker 1: up to them, right.
Speaker 2: So what does it actually mean that the government said
Speaker 2: they had a monopoly of search? What? What does that
Speaker 2: actually the ramifications?
Speaker 1: So this is getting to the search trial. We can
Speaker 1: talk a little bit about that, but but a monopoly
Speaker 1: means you know what the what? So they were just
Speaker 1: deemed a monopolist by a judge judgment meta in in
Speaker 1: DC District Court. It's actually their second loss. They were
Speaker 1: also dubbed a monopolist in uh the Android app store.
Speaker 2: Controls with the case with that pig.
Speaker 1: Yeah, so this is their second and there's a third
Speaker 1: case that's starting where it's about their control of software
Speaker 1: that underpins advertise online advertising markets. That starts in a
Speaker 1: couple of weeks.
Speaker 2: Yeah.
Speaker 1: Anyway, what what Metta said is that Google is a
Speaker 1: monopolist because they control uh search right, general search services,
Speaker 1: and then they control search advertising. And what they were
Speaker 1: doing that was illegal is they were preventing rivals from
Speaker 1: getting into the search market using contracts, and so it's
Speaker 1: not just that they were monopolizing, it's that they were
Speaker 1: thwarting rivals from challenging them, and then they were raising
Speaker 1: ad prices as a result of their control of this market.
Speaker 1: So the that's like the in anti trust law. It
Speaker 1: didn't always used to be this way, but we interpret
Speaker 1: it to really since the sixties to the eighties, depending
Speaker 1: on what case you look at. If you are if
Speaker 1: you are a monopoly and you and then you do
Speaker 1: something to maintain that monopoly or to extend your monopoly,
Speaker 1: that's what makes it illegal. Right, Like if I just
Speaker 1: create a new product category, some widget that no one's
Speaker 1: ever heard of before, and I start making it and
Speaker 1: it's popular, I'm by definition going to have one hundred
Speaker 1: percent of the market. That doesn't that's not illegal, right.
Speaker 1: What it would be illegal as if I had one
Speaker 1: hundred percent of the market and then I said to
Speaker 1: my distributors. Hey, if you want my thing that everybody wants,
Speaker 1: you can't distribute my rivals. Think that's what makes it.
Speaker 1: That's what turns it into an illegal conspiracy, and that's
Speaker 1: effective the argument about what Google was doing with search.
Speaker 2: So, how do you feel it's going to go?
Speaker 1: Why do you think, I mean the they're starting. So
Speaker 1: the case started in twenty twenty. It was originally brought
Speaker 1: by the Trump administration. The Biden administration has brought it forward,
Speaker 1: and it took until twenty twenty four when it went
Speaker 1: to trial and finally the judge ruled that Google's a monopolist.
Speaker 1: Now is the second part of the trial, which is
Speaker 1: called the remedy phase, where the government comes and says,
Speaker 1: here's what we want to cure the monopoly, and Google
Speaker 1: will say, no, I don't think that's right. This is
Speaker 1: what you need to cure the monopoly. And there will
Speaker 1: be another, effectively a trial, and then the judge will
Speaker 1: rule and make a decision, and then it will go
Speaker 1: on appeal, probably the Supreme Court, or depending on who
Speaker 1: wins in you know, this election, they could settle it
Speaker 1: as the Bush administration did with the Microsoft suit in
Speaker 1: two thousand and one. So all of that being said,
Speaker 1: we don't even know what the Justice Department is going
Speaker 1: to ask for. So the Justice Department could ask for
Speaker 1: something very small, in which case that's the most you're
Speaker 1: going to get, or they could ask the end of it,
Speaker 1: right well, I mean it's not the end. There's going
Speaker 1: to be you know, yeah, that's the most you're going
Speaker 1: to get. Or they could ask for you know, breaking
Speaker 1: up the company and you know, opening up the data
Speaker 1: vaults to let anybody use the data that that Google collected,
Speaker 1: or you know, opening up their IP vaults and saying
Speaker 1: anybody gets to use that, or you know, there's a
Speaker 1: ton that the DJ could ask for. We're going to
Speaker 1: sort of find out more about that in the next
Speaker 1: month or two. The Remedy phase conference the have they're
Speaker 1: they're just going to talk about the scheduling of the
Speaker 1: remedy phase in I think September like sixth the ninth
Speaker 1: or something like that. So, well, you know what we're
Speaker 1: gonna be covering, mys be covering that. You're going to
Speaker 1: hear about that if you if you want to see it.
Speaker 1: But it's I know, it's very exciting. I mean, this
Speaker 1: is the first big tech company that's been deemed to
Speaker 1: be a monopolist and the anti trust law, you know,
Speaker 1: a lot of anti trusts law is is just not
Speaker 1: so much what the law says, but whether you use
Speaker 1: the law. You know, the Department of Justice didn't bring
Speaker 1: a monopolization case pretty much for twenty years since Microsoft,
Speaker 1: like the Google case was the first one first, certainly
Speaker 1: first big one. FDC brought a few. There have been
Speaker 1: some private cases, but this is really the first big
Speaker 1: one since since Microsoft. And what's gonna happen and what
Speaker 1: is already happening is, you know, every big company is
Speaker 1: we're you know, every CEO in a company that has
Speaker 1: market power has to ask their general counselor could this
Speaker 1: are we doing something that could get us into hot water?
Speaker 1: They didn't have to ask that a few years ago,
Speaker 1: because you could just the general counsel or their anti
Speaker 1: trust council could say, eh, don't worry.
Speaker 2: That dude gives a shit, it won't do anything.
Speaker 1: No one would ever bring a case. Right But now
Speaker 1: not only did the government bring a case, but they
Speaker 1: won the case. So it's like, oh, okay, now we
Speaker 1: got to be careful.
Speaker 2: And just so you when you say they won the case.
Speaker 2: So it was the government versus Google with a no.
Speaker 2: This is very simple with the judge, Judge Meta saying
Speaker 2: I agree with the government, right, Yeah.
Speaker 1: It was the government, and then there were a bunch
Speaker 1: of states as well, and the Meta didn't. He didn't
Speaker 1: agree with everything the government said. So there were certain
Speaker 1: things with like Google's advertising platform that he said that's
Speaker 1: not a monopoly. But on the big stuff, the search stuff, yeah,
Speaker 1: he agreed with the government.
Speaker 2: How do you break up a company like Google?
Speaker 1: Though Wall Street does it all the time. I mean,
Speaker 1: you just saw what I think. DuPont just broke itself
Speaker 1: up into multiple division. You know, Google is not just
Speaker 1: it's not like one jumbled together thing. You know, Google
Speaker 1: has different divisions, and so, you know, and they buy
Speaker 1: companies and they sell companies, and you just you've got
Speaker 1: put an investment banker in there to sell the company,
Speaker 1: you know, sell parts of the company.
Speaker 2: It's not it would be selling off bits of the
Speaker 2: company though.
Speaker 1: Yeah, you could just I mean, depending on what they
Speaker 1: you know, you could do it in lots of different ways.
Speaker 1: But this is something that Wall Street knows how to do,
Speaker 1: so you could just It's not it's not rocket science.
Speaker 1: You know Google. You just go to Google has a
Speaker 1: bunch of people who work in the YouTube you know,
Speaker 1: at YouTube, and they have someone who's a CEO of YouTube.
Speaker 1: You just say, okay, if you have a share of Google,
Speaker 1: you now have a share of Google and you have
Speaker 1: a share of YouTube.
Speaker 2: Of a separate institution for.
Speaker 1: Companies, right, I mean there are difficult things to break up.
Speaker 1: Like let's say you want it to have a different
Speaker 1: a separate search engine, right right, okay? There do you
Speaker 1: clone it? Who gets the Google domain? Like who gets
Speaker 1: the brand? You know? There are also questions all right,
Speaker 1: like let's say you open up the data vault and
Speaker 1: you say other entities can come in and use the data.
Speaker 1: That's those are technical questions and you could you could.
Speaker 1: Basically the way you would deal with that is you
Speaker 1: would have Google pay for a like a special master
Speaker 1: who would kind of like run who would run a
Speaker 1: like a technical committee that would make a lot of decisions.
Speaker 1: That's what Microsoft had to do after they lost There
Speaker 1: was a technical committee that came in and basically was
Speaker 1: a regulator for Microsoft's a couple hundred people something one
Speaker 1: hundred to two hundred people who were just making sure
Speaker 1: that Microsoft's software was compatible with other entity software, and
Speaker 1: they had certain legal authority over Microsoft. You do that
Speaker 1: for for parts of Google where you can't actually do
Speaker 1: a breakup, and there you know, there you go. This
Speaker 1: is a remedy is not that hard depending on what
Speaker 1: you want to do.
Speaker 2: It almost feels like they kind of want us to
Speaker 2: think it's harder than it is because that benefits them.
Speaker 2: It makes oh, it's impossible to do this. We couldn't possibly,
Speaker 2: but I imagine and that that's the argument in the
Speaker 2: remedies face.
Speaker 1: Well, I mean I think that yes, they they in
Speaker 1: the in the epic. We've seen the remedy argument in
Speaker 1: the epic the Apple. And what Google has been saying is, oh,
Speaker 1: all of this stuff is so hard, it's so expensive.
Speaker 1: It's how could we do this? And also it's not fair.
Speaker 1: And the judge is basically like, come on, your Google.
Speaker 1: You've been saying how awesome you are for a long time.
Speaker 1: You can do this. This is not that hard and
Speaker 1: it's not going to take you ten years and eight
Speaker 1: gazillion dollars.
Speaker 2: So do you see any other monopolies within the tech industry?
Speaker 1: Yeah, I mean I think there's a lot of there's
Speaker 1: a lot of market power in all over the economy,
Speaker 1: and you see it in you know, I mean the
Speaker 1: probably the most obvious monopoly is VeriSign's control of the
Speaker 1: dot com domain. Like I know, it's like a small Yeah,
Speaker 1: it's just so obviously if you want to register a
Speaker 1: domain name and you want a dot com or you
Speaker 1: own a dot com and you need to reregister, you know,
Speaker 1: you need to renew it, you're going to pay a
Speaker 1: you know, you're gonna pay registration company and they're gonna
Speaker 1: have to remit whatever whatever they charge. I think they
Speaker 1: charge like nine dollars and fifty cents and it's it's
Speaker 1: like seventy percent operating margins. And because they manage the
Speaker 1: dot com domain name, because the government charters them told them,
Speaker 1: you can you get to manage this. They have contract
Speaker 1: government that lets them do it. Just a very clear
Speaker 1: one hundred percent of the market for you know, renewing
Speaker 1: dot com domain names, and just everybody that owns a
Speaker 1: dot com domain gives them nine dollars and fifty cents
Speaker 1: a year. They should give them probably ninety cents a year.
Speaker 2: Right, So are you suggesting that'd be other chances or chanters?
Speaker 1: Well, what they should do is either just put a
Speaker 1: price cap on it and say you get to charge
Speaker 1: two bucks and that's it, like a utility, or say
Speaker 1: every three years just bid it out and say, Okay,
Speaker 1: whoever gives, you know, the best price gets to manage
Speaker 1: the you know, the dot com domains. They've done that
Speaker 1: for other you know, for other domains, and it tends
Speaker 1: to drop the price. Pretty dramatic.
Speaker 2: This is a personal one. I'm going to ask, how
Speaker 2: do you feel about the Madden franchise with electronic arts?
Speaker 4: So the reason the house this is because it sucks.
Speaker 1: It's something that I, you know, people have been telling
Speaker 1: me about for a long time. So monopolies is not
Speaker 1: It's not like always obvious. The moral arguments aren't always obvious.
Speaker 1: Mad's a really good example where and I don't know
Speaker 1: that much about this, but you used to have a
Speaker 1: lot of different NFL sort of football games. You had
Speaker 1: at least two, Yeah, and they were and they were innovative,
Speaker 1: so you like, they had to innovate around like different features.
Speaker 1: I don't play video games. I don't believe in fun.
Speaker 1: I don't like, you know, I don't think there should
Speaker 1: be any joy. But I lost that, so, uh, but
Speaker 1: as long as you're not going outside, that's my main concern,
Speaker 1: not a problem. Okay, good. So you know, the these
Speaker 1: long term monopoly arrangements are like are I think there's
Speaker 1: something really problematic about it, But I don't exactly know
Speaker 1: what to do about the But but the you know
Speaker 1: Madden has gotten is it's not that it's gotten worse,
Speaker 1: it just hasn't improved, right, And and they're there there's
Speaker 1: also some of the other sports games they're like extracting
Speaker 1: more and more money. But did you see this with
Speaker 1: fanatics too? They've made the experience in sports worse. So
Speaker 1: it's what we need to look at is these kind
Speaker 1: of long term exclusive contracts. And there are some there
Speaker 1: are some questions like should the NFL be able to
Speaker 1: leverage its brands to create you know, obviously they have
Speaker 1: obviously they have a right to profit from their brand,
Speaker 1: right and obviously the players and they all have right
Speaker 1: to profit from their brand, just as movie company. You know,
Speaker 1: they get a copyright of the movies they make. But
Speaker 1: the question is should you able should you be allowed
Speaker 1: to take that brand that is a government granted monopoly,
Speaker 1: which is fair because you are generating you know, you're
Speaker 1: making the product, right, but should you be able to
Speaker 1: turn that into another monopoly? Should be you able to
Speaker 1: leverage that you know, or should you have to say, okay,
Speaker 1: well we will. I'm in a profit from it. Anybody
Speaker 1: that uses the NFL in a game has to pay me.
Speaker 1: But I can't restrict who gets to use that in
Speaker 1: a game, right. That was a little bit like there
Speaker 1: have been anti trust cases on that. There was one
Speaker 1: in the forties that restructured Hollywood. So there were a
Speaker 1: bunch of movie studios and they owned or they controlled
Speaker 1: theater chains, and they wouldn't let rival movies into the theaters.
Speaker 1: So it'd be like, if you want to get you know,
Speaker 1: like Gone with the Wind, which everyone wants to see,
Speaker 1: then you have to take our other movies and you
Speaker 1: have to keep rivals out of your theater. And it
Speaker 1: was just a way of controlling the commons. It was
Speaker 1: a way of tran of turning their monopoly over legitimate
Speaker 1: copyright monopoly over Gone with the Win, which they had made,
Speaker 1: into a monopoly over distribution of movies in general. And
Speaker 1: this feels the Madden thing feels a little bit like
Speaker 1: it's turning their brand into control over over, just like
Speaker 1: football related video games, and that that doesn't feel it's
Speaker 1: had the consequences that we don't like higher prices worse quality.
Speaker 2: And you're right about Madden. I think it's a great
Speaker 2: example of how of a problem of this kind of
Speaker 2: long term licensing agreement because it's it is. I would
Speaker 2: argue with people about whether it's good or bad. I
Speaker 2: think it's a certain kind of mediocre. But you're right,
Speaker 2: is it keeps things kind of trapped in amba it
Speaker 2: only gets as good as the monopolist decides.
Speaker 1: Yeah, that's right. And EA Sports will overpay, right, like,
Speaker 1: they will pay more just to just to be the monopolist. Right,
Speaker 1: They're not paying for the license, they're paying for the
Speaker 1: license and to exclude someone else from getting into.
Speaker 2: The space, kind of like Apple with Google.
Speaker 1: Yeah, that's right. I mean, that's the thing is you
Speaker 1: don't want so the original the Sherman At Anti Trust
Speaker 1: acts bars monopolization and restraints of trade. So if you
Speaker 1: think about the term restraints of trade, it is about
Speaker 1: saying someone shouldn't be able to restrain trade to to
Speaker 1: It's not a critique of big business. It's a critique
Speaker 1: of not allowing business to get big right, And this
Speaker 1: is a case where they are preventing more business from
Speaker 1: being done by paying explicitly so others won't get that
Speaker 1: that NFL licensing brand.
Speaker 2: It almost feels like monopolies are just like distinctly on American.
Speaker 1: Well, you know they they you know, let me get
Speaker 1: this quote from Woodrow Wilson because it's it's a really
Speaker 1: good quote. I know he's you know, it was virulently
Speaker 1: racist and everything, but you know, take the good with
Speaker 1: the bad. So America was created to break every kind
Speaker 1: of monopoly and to set men free upon a footing
Speaker 1: of equality, upon a footing of opportunity, to match their
Speaker 1: brains and their energies. So he actually appointed Lewis Brandeis
Speaker 1: to the Supreme Court. And you know there is a
Speaker 1: you know, Thomas Jefferson wanted to put an antime monopoly
Speaker 1: plank in the Constitution. That was his one of his critiques.
Speaker 1: You know. You see, like historically, the anti monopoly lens
Speaker 1: is kind of a critical way to understand American history.
Speaker 1: And you can see this like over and over and over.
Speaker 1: There is this fear of monopoly power and it comes
Speaker 1: from the the the recognition that we do not want
Speaker 1: to be run by a king. Right, So John Sherman,
Speaker 1: Sherman Anti Trust Act, said that, you know, if we
Speaker 1: wouldn't be will not be ruled by a monarch, we
Speaker 1: should not be ruled by an autocratic trade. Right, very
Speaker 1: explicit about the link between monarchy and authoritarianism and monopoly.
Speaker 1: And they were using the term monarchy because fascism hadn't
Speaker 1: happened yet, right, so, but monarchy did exist, right then
Speaker 1: in the nineteenth century, Americans were looking across the ocean
Speaker 1: and they were seeing a bunch of kingdoms. There was
Speaker 1: a little bit of democracy, but that's what they were
Speaker 1: really looking at, and they were like, we don't want that.
Speaker 1: And today we would just say fascism, right, but like you,
Speaker 1: you know that we did analogize monopoly to fascism in
Speaker 1: the nineteen twenties, thirties, forties. But it has always been
Speaker 1: foundational in America that concentrations of power are what we
Speaker 1: escaped and they are not what we want here. And
Speaker 1: there's always been this tension because you do need to
Speaker 1: consolidate capital and effort to do great public works and
Speaker 1: to do great works in general, like you often do
Speaker 1: need to do that, But how do you control the
Speaker 1: power of that. How do you control the power of industry?
Speaker 1: If you're going to put a billion dollars together to
Speaker 1: build a railroad across the country, you know, that's awesome.
Speaker 1: Now you have a transcontinental railroad, but who runs that
Speaker 1: railroad and the prices they charge, the ability for them
Speaker 1: to charge different prices to different classes of people based
Speaker 1: on who they want to succeed. Now, all of a sudden,
Speaker 1: you're talking about a political problem. Well, of course you
Speaker 1: don't want to say you can't have a railroad, but
Speaker 1: you do have to deal with the political power that's concentrated.
Speaker 1: And it's true with telegraphs, it's true, you know, the
Speaker 1: Internet going all of these things. So this has always
Speaker 1: been a problem, a political problem that we've tried to address.
Speaker 1: And I think what happened in the seventies and eighties,
Speaker 1: and this has happened the last forty years, is we
Speaker 1: just kind of forgot about it, and then all this
Speaker 1: consolidation happened, and now we're trying to get a handle
Speaker 1: on it again.
Speaker 2: And is this what you were referring to you mentioned
Speaker 2: previous previous quote of your authoritarianism is coming for the
Speaker 2: private from the private sector. Is this what you mean?
Speaker 1: That's right?
Speaker 2: These It's It's fascinating as well because I've been running
Speaker 2: business fifteen years and felt pretty well learned about this stuff,
Speaker 2: but never really thought about these companies as political entities.
Speaker 2: Which leads me to a cloud compute question. So do
Speaker 2: all police basically have the same problem because right now
Speaker 2: in tech you have basically three or four, maybe five
Speaker 2: companies that control all cloud compute? Is that something we
Speaker 2: should let stand it? Like do we need to see
Speaker 2: signs of price fixing? What are the bad signs?
Speaker 1: So really good question. Every market is its own special snowflake. Right.
Speaker 1: You can't. You can't make you know, some markets, right,
Speaker 1: you can? You could. You could structure a market to
Speaker 1: have a lot of a lot of different entrants like farming. Right,
Speaker 1: you can have a lot of people growing corn depending
Speaker 1: on how you split up the land. You can have
Speaker 1: a lot of banks, right. Not totally clear to me
Speaker 1: that you could have a lot of say, auto producers, right,
Speaker 1: not going to have a family, you know, artisanal auto
Speaker 1: producer that makes a lot of cars, right, So same
Speaker 1: with chemicals, same with lots of different I mean you
Speaker 1: can like there's there's just there are some industries where
Speaker 1: you're going to have a small number of producers semiconductors,
Speaker 1: there's you know, they're not going to have like so
Speaker 1: cloud computing. When I look at it, to me, it's
Speaker 1: just a it's a capital story, right, Who has the
Speaker 1: capital to put to build out the data centers to
Speaker 1: get the power that you need to design the compute
Speaker 1: that you need. And it might be the case that
Speaker 1: you really can only have three or four of them,
Speaker 1: maybe have some specialty cloud computing. I don't know. This
Speaker 1: isn't an area I've studied extensionly. But typically when you
Speaker 1: do have an entity where entity is where you have
Speaker 1: like a huge capital investment and you can't have you
Speaker 1: have their natural limits on the number of competitors, you
Speaker 1: have some form of public utility regulation, which usually takes
Speaker 1: the form of saying you can't engage in price discrimination,
Speaker 1: like you can raise your prices, but you can't charge
Speaker 1: more to that entity for the same service than you
Speaker 1: charge to this other entity. And you can't you know,
Speaker 1: and you can't say, engage in like surveillance of your
Speaker 1: clients to give yourself an advantage that would be or
Speaker 1: you know, there's certain like you can't pick winners and losers.
Speaker 1: You have to you have to be a public utility.
Speaker 1: It's a little bit like it was a little bit
Speaker 1: like a railroad or a granary or something which is
Speaker 1: clothed with public interest but is owned by a private entity. There.
Speaker 1: You know, it gets a little tricky with things, you know,
Speaker 1: with companies that make open source tools on top of
Speaker 1: of uh you know, for cloud computing entities, do those
Speaker 1: cloud computing anties just like absorb those tools make their
Speaker 1: own version of it like there are you know, I
Speaker 1: don't have an answer to all of the questions about
Speaker 1: how to run a cloud computing infrastructure, but generally what
Speaker 1: you want to do is you you want to say,
Speaker 1: all right, we're gonna we're going to try to pull
Speaker 1: the power out of we want the economies of scale,
Speaker 1: but we're going to try to pull the ability to
Speaker 1: be arbitrary and coercive out of the business model through
Speaker 1: antitrust law or regulations or whatever we can do, or
Speaker 1: just you know, transparency of pricing. You know, I know
Speaker 1: there's some egress pricing. I mean that's you know, being
Speaker 1: able allowing people to get out of the cloud computing
Speaker 1: pull their data out if they want so. There are
Speaker 1: different techniques, but the basic idea is to recognize that
Speaker 1: there is a there is a public interest in this
Speaker 1: private in these in these these in this private infrastructure,
Speaker 1: and so the public has some right, not total right,
Speaker 1: but some right to control how these entities are are operating.
Speaker 2: And that they could that they must be free trade
Speaker 2: in the sense that someone can easily leave and go
Speaker 2: to a competitor right within reason.
Speaker 1: In reason, Yeah, that's right.
Speaker 2: Another question I think we can wrap up with this
Speaker 2: one is Meta a monopoly? Because Meta is the only
Speaker 2: provider of advertising on metas products and they have there
Speaker 2: is no way that someone realistically compete with Facebook. It
Speaker 2: is too big at this point, and same with Instagram
Speaker 2: kind of is it a monopoly? I'm trying to understand
Speaker 2: these concepts in real time.
Speaker 1: Yeah, I mean I think you you know there are
Speaker 1: different markets, right, So I think an easier way to
Speaker 1: conceptualize this would be to look at Apple, right, Apple
Speaker 1: and Google, and you would say, well, Apple's not a monopoly.
Speaker 1: I mean, I can I can buy an Android phone, right, right,
Speaker 1: I don't need to buy an Apple an iPhone, right?
Speaker 1: And that's true if you're looking at it from a
Speaker 1: perspective of somebody who's buying a phone. It's a duopoly.
Speaker 1: There's a lot of market power there, but it's not
Speaker 1: a monopoly. However, what if you've bought the phone now,
Speaker 1: all of a sudden, you you know, you can't it's
Speaker 1: not easy to switch, right, so you're kind of locked in.
Speaker 1: Is Apple a monopoly? Kind of kind of? Okay, Well,
Speaker 1: you can look at it from a different point of view,
Speaker 1: which is what if you're an app developer right now,
Speaker 1: you have to get on the I phone because some
Speaker 1: of your customers are there and you can't not be
Speaker 1: on the iPhone. So getting into the app store for Apple,
Speaker 1: that's a monopoly question. And the same thing is true
Speaker 1: for Getting So it's a little bit like you're you know, sure,
Speaker 1: maybe you can. There's a lot of railroad options, but
Speaker 1: there's only one railroad that goes from one town to another.
Speaker 1: So there might be a bunch of different railroads, but
Speaker 1: for what you need, there's only one option.
Speaker 2: So it's access to the customer.
Speaker 1: Well, right, just there's lots of different markets, there's lots
Speaker 1: of ways to understand, you know, what what market power means.
Speaker 1: So if you take that back to Facebook, which is
Speaker 1: really like a conglomerate of Facebook, Instagram and WhatsApp. Do
Speaker 1: they have market power and where do they have market
Speaker 1: power over? I think you'd look at the ability to
Speaker 1: buy certain kinds of advertising, right if do you need
Speaker 1: if you're running advertising campaigns, do you need to buy
Speaker 1: on Facebook? Or can you just avoid Facebook entirely? This
Speaker 1: is one of the questions in the Google case, and
Speaker 1: this is the question in actually multiple Google cases, And
Speaker 1: it's been a question in a different case involving medical advertising,
Speaker 1: which had to involve a company called IQBA, and the
Speaker 1: court found that in fact, yes, if you are doing
Speaker 1: specifically pharmaceutical marketing, IQB is is there is market power
Speaker 1: involved in these very narrow places where you have to buy.
Speaker 1: It's kind of like that smaller railroad, that one place
Speaker 1: you put at the one the only one that goes
Speaker 1: to the place that you need to go, the jack
Speaker 1: up prices and control who gets to use it. So
Speaker 1: the question, I think the question I would ask is,
Speaker 1: if you're an advertiser, do you have to buy on
Speaker 1: Facebook's products? If you are, you know, a company, do
Speaker 1: you have to communicate through Facebook's tools? Right? I know
Speaker 1: WhatsApp is really embedded in a lot of different business
Speaker 1: arrangements at this point. So that's where that's kind of
Speaker 1: how I would I would look at it, and I
Speaker 1: think you could make a pretty good argument that Facebook
Speaker 1: has immense market power in social networking in general. You
Speaker 1: know the definition. There's different ways to test for monopoly.
Speaker 1: You could just say, well, can they raise prices without
Speaker 1: really losing very much? It's been, which they have been,
Speaker 1: and I think it's pretty clear that they can. And
Speaker 1: if there were another option, right, you could you probably would.
Speaker 1: They would they would see loss of customers bleeding going
Speaker 1: somewhere else, and they don't see that. Another way to
Speaker 1: understand it is, after some of the scandals that they've had,
Speaker 1: do they lose customers because of it? Do they lose
Speaker 1: users because of it? And the answer is no. Right,
Speaker 1: So there doesn't really seem to be an effect of
Speaker 1: the quality of the product. It doesn't seem to affect
Speaker 1: whether people you it or not.
Speaker 2: Oh, actually, I might push back at that a little bit,
Speaker 2: and perhaps I'm misunderstanding your point. But Facebook's advertising product
Speaker 2: is decaying to the point that it's actually unreliable how
Speaker 2: much comes out of it, And also they approve there's
Speaker 2: a big thing where they approve fake ads for fake
Speaker 2: for other companies. So it's interesting as well because it
Speaker 2: almost feels as if we need a full consumer awakening
Speaker 2: just to the concept of monopolies writ large, so that
Speaker 2: people can start looking at these companies and acting and
Speaker 2: even just discussing them differently.
Speaker 1: Right, So, to Facebook, the product quality is decaying, the
Speaker 1: advertising quality is decaying. Are they losing business because of it.
Speaker 2: As in they being meta or they be right?
Speaker 1: Because if they're not, then what that's proof of monopoly power?
Speaker 1: Because what's right gowing is the quality is declining, but
Speaker 1: they're not getting Like if it were if there were
Speaker 1: a competitive market and the quality of a product went down,
Speaker 1: people would say, I'm not going to buy that product anymore,
Speaker 1: the shirts fall apart, I'll go buy somewhere else. But
Speaker 1: because but it's like, if that's the only place where
Speaker 1: you can get the product, you can't. You have no choice.
Speaker 1: You have to keep buying from them.
Speaker 2: Right right, that makes sense? So Matt, Yeah, this has
Speaker 2: been such a pleasure. Thank you so much for joining
Speaker 2: me today. Where can people find you?
Speaker 1: So? I write a newsletter called The Big Newsletter dot com,
Speaker 1: which is about monopoly, power and finance. And I also
Speaker 1: am the research director of a nonprofit called the American
Speaker 1: Economic Liberties Project. And then I rant on Twitter way
Speaker 1: too often. That's my you know, that's my madden post.
Speaker 2: This mindset, it's the greatest. You've all been listening to
Speaker 2: Better Offline. Thank you for listening so much, and of
Speaker 2: course the regular places to find me in the show
Speaker 2: follow after this.
Speaker 4: Thank you for listening to Better Offline.
Speaker 2: The editor and composer of the Better Offline theme song
Speaker 2: is Matasowski. You can check out more of his music
Speaker 2: and audio projects at Matasowski dot com, M A T
Speaker 2: T O S O W s KI dot com. You
Speaker 2: can email me at easy at Better Offline dot com,
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