The Flaw In Demonizing Big Tech

Between all the burger-flipping, and making sure your mask didn’t catch fire while you were doing it, you probably missed an important development that happened over the holiday weekend here in the U.S.

Late Friday afternoon, a senator and a congresswoman introduced legislation that targeted anyone named Karen.

You see, for quite some time, there have been a lot of complaints — not to mention jokes and memes — circulating on the internet. I’m sure you’ve read many of those articles, but have been polite enough to never mention them to me … because, well, my name is Karen.

Thanks for that, by the way.

Here’s an example of what I mean.

As one Washington Post article (by a Karen, of course) put it, according to the growing consensus (now made viral on media, social and otherwise), “A young Karen likely would have been the class snitch, tattling on her classmates to the teacher to get them in trouble. Middle-aged Karen is the one asking to see your manager. And a Karen at the peak of her powers will call the police on someone for a mild inconvenience.”

The “Just Stop Karen” law will require all Karens to, well, just cut it out, or face jail time. I don’t know whether this extends to writing my occasionally snarky pieces on PYMNTS, but I’m firmly in the camp that orange is definitely not the new black.

Okay, of course, I’m just kidding. That’s what Karens do, I guess, which makes them all the more endearing.

But it helps make a larger point.

Big Bad Tech

Civilization has progressed enough that most of us know it’s wrong to demonize a group of individuals based on a personal characteristic — because it isn’t based on reason or evidence, and simply reflects base prejudice.

But this is more or less what’s going on with Big Tech, and even lots of tech that isn’t so big right now. Following several years of op-eds and articles that condemn tech companies and attach labels to them, like the Frightful Five, “Big Tech” has become a code word for “Bad Tech” among some politicians, regulators and the media. This group demonization has culminated in proposals for the “Just Stop Karen”-type legislation that targets these businesses — not for doing something necessarily bad, but for being part of that group.

Take the Pandemic Anti-Monopoly Act that was introduced by Senator Elizabeth Warren and Congresswoman Alexandria Ocasio-Cortez a few weeks ago.

That proposed legislation would impose a moratorium on acquisitions involving firms with more than $100 million in revenues, or by private equity firms, until small businesses, workers and consumers are no longer in severe financial distress. Since firms with more than $100 million in revenue can’t buy, other firms can’t sell to them.

That makes this a moratorium on firms selling firms as well as buying them.

The introductory language is an example of this group demonization. The authors claim that “Big Tech has moved to snatch up struggling startups” as one of the reasons for the proposed moratorium. The implication is that Big Tech, as a class, has been bad because they have acquired startups.

The proposed Act links to an article that claims acquisitions have supported the platforms’ trajectory to become among the most powerful companies in the world, and that startups need to be “disincentivized from selling out to the dominant platforms [aka Big Tech] in this moment of weakness.”

Even though many of them would like nothing more, since that is how they can take the assets they have created and see them scale, grow their own businesses, and hire and take care of their workforce.

Now, it is almost certainly the case that some Big Tech firms have done anticompetitive things, and perhaps they have acquired some small rivals they shouldn’t have. But that is very different from condemning Big Tech as a class, and suggesting that acquiring startups is generally a bad thing and that they shouldn’t be allowed to do it — now or any other time there is a national emergency.

Other Tech May Be Frightful, Too

At the same time, lawmakers and the opinion writers want to break them up. Senator Warren campaigned on breaking up Big Tech. Amazon, Facebook and Google headlined the proposal, but it extended to any “large tech platforms.”

Maybe you assume that just because you haven’t been called out as a member of the Frightful Five, you’re safe. But if you are any large tech platform powering the connected economy, don’t wipe your brow in relief just yet.

Consider the AB5 law in California. In theory, this legislation was about making companies treat workers as employees rather than independent contractors. It’s also a well-trodden subject in state and federal labor law.

But in scratching below the surface, it’s clear that AB5 is essentially an assault on app-based, on-demand tech companies.

It is replete with exceptions for much of the traditional gig economy — for instance, it’s for people selling Tupperware part-time, but not for someone dropping off meals for a restaurant delivery app. Uber and Postmates, in fact, have filed a lawsuit in which they claim that “AB5 is an irrational and unconstitutional statute designed to target and stifle workers and companies in the on-demand economy…”

For some extra #stayathome fun between Zoom calls, take a look at the exceptions. It’s pretty obvious.

So, if you have a company that’s smaller than the Frightful Five and you think you’re safe, guess again. Once you trigger that tech threshold and get the group label, you may be deemed a demon, too.

The Delightful Dozen

Of course, maybe some of these op-ed writers and polls have a point. Perhaps there is something about Big Tech, or Other Tech, that makes them frightful. With all of those acquisitions and accumulations of power, maybe they are charging consumers high prices or giving them lousy service.

Big business can be frightful sometimes — or at least annoying.

Many people used to really hate their local cable providers. They charged a boatload of money for hundreds of channels, most of which people didn’t need or want. And it was a huge pain to disconnect the service if they were fed up. If you needed to get cable installed, good luck with that — you had to set aside an entire day, since you couldn’t be sure when they’d show up. The large cable companies weren’t on anyone’s “most trusted” or “most admired” list of companies — far from it, in fact. In the old days, they were able to get away with this, because most people just didn’t have much of a choice.

But with Big Tech, there’s a huge disconnect.

Consumers like these companies. A lot. The 2019 Morning Consult survey found that Amazon and Google were the second and third most trusted brands among consumers.

Periodically, PYMNTS does surveys of various services in which we ask people what firms they would trust to provide them. These studies aren’t about Big Tech, but we happen to include Big Tech and Other Tech among the choices provided. Generally, people place a high degree of trust in Big Tech and Other Tech companies to provide them with a variety of critical services, including banking and financial services, compared with other companies.

And it’s not hard to see why.

Amazon has revolutionized online buying and home delivery. It made the friction of buying online very low and invested in a logistics system that enables people to get fast, reliable delivery. This didn’t just benefit Amazon shoppers — it also helped to bring new small sellers on board and gave them access to Amazon’s massive audience of high-spending Prime customers.

That also forced other retailers, including big physical ones like Walmart, to up their game and try to provide similar value to consumers. And it prompted other FinTechs to develop and scale their own platforms, giving sellers new opportunities to compete in a digital world.

Google has helped consumers find things online efficiently, for free, and has provided sellers with a low-cost, efficient method of advertising and generating leads. Since consumers can go online, and see many choices, that has made the competition more intense for online and physical retailers.

The other Big Tech companies have similar stories. And consumers keep flocking to these platforms and using them more and more — particularly today. Together, Big Tech and Other Tech are making it possible for our physical economy to be on lockdown and for consumers and businesses to continue to transact. Without them, it would be hard to imagine accessing essential products and services — particularly for those who are unable or unwilling to venture from home.

Right now, if you look at what consumers do with their clicks and say in response to surveys, these are the Delightful Dozen. It’s possible, I guess, that the story will eventually end with them being Frightful.

More likely, though, the Frightful Five is a character in a make-believe tech fairytale — and if you need a monster, why not make it them?

After all, the FAANG acronym is just so perfect for that.

The Tech Platforms Pulling Up The Rear

Smaller tech platforms might revel in the fact that the big guys are under the microscope. But the recent attacks on the gig economy platforms shows that once you start labeling tech with evil monikers like Frightful, there’s really no end.

Uber and the other ridesharing platforms upended a taxi-cab industry that passengers in many major cities reviled. Here in Boston, which is probably better than most, back in 2009 or 2010, if you ordered a taxi to pick you up at an appointed time, you had no guarantee that it would come, or when it would show up. If you needed to get to the airport for an early morning flight, you could either roll the dice or order a car from a very expensive limousine service.

In the U.S., Uber managed to get around oppressive operating restrictions by creating a loyal base of riders who would advocate for the service when regulators and politicians had to deal with inevitable efforts by the taxi industry to shut down a more efficient competitor.

Over the last decade, consumers have voted with their butts and their dollars to ditch taxis and rental cars in favor of ridesharing.

Meanwhile, lots of people have decided to make a few extra bucks by driving part-time for these and other local transportation platforms. Our surveys of gig economy workers find that they mainly do gigs to soak up a few extra hours and like the flexibility of the on-demand companies.

The AB5 law in California amounts to a large-scale assault on the business model of these companies and their ability to deliver value to people who to catch a ride, get a meal delivered or have someone shop and bring their groceries — and to also provide benefits for the people sitting in the driver’s seat for all these activities.

At least with Big Tech, the companies have strong balance sheets to help them fight back. Many of the new targets have yet to achieve a profitable growth path, so the restrictive laws and regulations put them, their customers and their drivers at risk that these platforms just won’t make it, or will fail to scale.

The Good, The Bad And The Ugly

Of course, like many driven entrepreneurs, the tech industry has a lot of people with sharp elbows, who are hypercompetitive and aggressive.

But the problem with the attack on Big (and Other) Tech is that it’s long on demonization, short of analysis and slim on facts. Companies buy other companies all the time instead of building key capabilities. If that enables them to create more efficient companies and get to market faster with more valuable services for consumers, we should applaud that.

At best, there’s loose speculation that some acquisitions might have squelched competition. And it remains just speculation unless someone can make the case, with data, that the purchased companies could have evolved into viable competitors or made some other competitor stronger, and that either would have been better than rolling those assets into the Big Tech platforms.

Even then, wouldn’t we want evidence of a consistent and significant factor in the success of these platforms rather than something that happened once in a while?

Like all other scofflaws, including the occasional Karen (present company excluded, of course), we should be targeting tech firms only when there’s evidence that they have done something bad, or that they will in the future.

Just like it shouldn’t be, “Oh, your name is Karen, so you must be a problem,” it shouldn’t be, “Oh, Big Tech, you’re bad and therefore you must be stopped.”