Ariel Ezrachi is Slaughter and May Professor of Competition Law and Fellow of Pembroke College, Oxford. Maurice E. Stucke is co-founder of the Data Competition Institute, professor of law at the University of Tennessee and attorney at the Konkurrenz Group.
Below, Ariel and Maurice share 5 key insights from their new book, How big tech barons are crushing innovation and how to fight back. Listen to the audio version – read by Ariel and Maurice themselves – in the Next Big Idea app.
1. Big tech barons are not the ultimate innovators.
The story we often hear is that big tech barons are the source and sustainer of innovation and future prosperity. But that’s not necessarily true. On paper, big-tech barons look like innovators. Google, Apple, Facebook, Amazon and Microsoft invest heavily in research and development. They tout how their platforms help others innovate by reducing costs and improving access. But while they certainly invest a lot of money in research and development, they also stifle a lot of innovation.
How? They use their vast powers to suppress and distort the flow of disruptive innovation. In other words, as they invest in technologies that support their ecosystem, they also wipe out any disruptors that threaten their value chain or power. The innovation we actually receive is designed to allow the tech barons to increase their influence over the empire. Other innovations that may benefit us may be reversed if deemed disruptive to this objective.
This may seem a little counter-intuitive, as we are all used to assuming that innovation is synonymous with the digital economy. Five years ago, when the European Commission asked us to study and report on online innovation, we assumed the best. But our study, and the years of research that followed our initial report, revealed the startling extent of the distortion of innovation pathways and the detrimental effects they have on our society. So while we may applaud the innovations of the latest iPhone, we actually get less of the disruptive innovations that could have created significant value.
2. We tend to believe that market forces dictate the path of innovation, but the reality is more like the movie The Truman Show.
We generally assume that market forces in the digital economy will provide the right mix of innovations. This means that if a new technology becomes available or is used by big tech companies, it’s because we, the users, want it. But the reality is different. Why? Because online platforms control the ecosystem in which users, sellers and innovators operate. What may seem like a natural dynamic, a natural market in which we interact, is in fact a controlled ecosystem.
“Like Truman in The Truman Showwe may have a sense of autonomy when choosing online services, but we often walk down a path that has been carefully designed for us.
Tech barons can affect the supply and demand for innovation in these ecosystems. So like Truman in The Truman Show, we may have a sense of autonomy when choosing online services, but we are often walking a path that has been carefully designed for us. Using dark patterns, self-preference, and other means, tech barons can direct us to the innovations they want us to adopt and steer us away from disruptors. They can keep disruptors out of our universe. They are the ultimate masters of what we often confuse with an organic, natural environment.
Consider, for example, apps that get kicked out of Google’s and Apple’s app stores. Why was the Disconnect privacy app kicked out of Google’s Android ecosystem? According to Disconnect, its technology had the potential to protect our privacy and disrupt the lucrative data-mining machinery. In the controlled ecosystem, this disruptive innovation had to be blocked – and it was.
3. Toxic innovation is increasing.
In the digital economy, where innovation is driven not by our desires, but often by the tech barons, it’s perhaps unsurprising that the nature of innovation is changing. And we believe that innovation is a good thing; regulators often say they don’t want to stifle innovation. But their focus is on how much money is invested in research and development, rather than the quality and nature of the innovation.
The truth is that not all innovations create value. In the digital economy and elsewhere, innovation can also extract or destroy value. So, as big tech barons become more powerful, the nature of innovation changes. Products and services that were originally intended to help us are now designed to extract ever more value from us.
“Ultimately, our smart gadgets are not designed for our benefit; they are designed to exploit us.
Our book looks at the transition from behavioral advertising. Originally, the big tech barons justified the collection of data about us and our tracking on the web by serving us more relevant advertisements. But technology has moved from predicting what we want to better manipulating our behavior and emotions. Some recently filed patents reveal the direction in which many new technologies are heading, including algorithms capable of decoding your emotions and thoughts.
Ultimately, our smart gadgets are not designed for our benefit; they are designed to exploit us. And those who are most vulnerable to exploitation, the economically and culturally marginal and at-risk segments of our population, will be the ones who will suffer the most.
4. What happens online doesn’t stay online.
The toxicity and control of innovation supply and demand is not limited to the online world; they affect us even as we seek to avoid the ecosystems of the big tech barons. We discuss how toxic innovations to manipulate our behaviors are redeployed elsewhere, such as in the political arena. You may have heard of Cambridge Analytica, but this is just one high-profile example of many we discuss in the book.
Ultimately, the toxic ecosystem innovations of big tech barons trickle down to society, helping to spread conspiracy theories, fake news and hate. When Facebook’s algorithms, for example, rewarded negative stories, political parties became more negative in their posts. This resentment and tribalism weakens trust and democratic systems. Likewise, new technologies affect our self-esteem and our mental health.
Beyond the political, societal and human stories lies a technological story, a story of innovation designed to generate profits, regardless of the effects on democracy, society and our well-being.
“Toxic ecosystem innovations from big tech barons ripple through society, helping to spread conspiracy theories, fake news and hate.”
5. Duck hunting, cities and the future of innovation.
You might think that new European regulations, such as the Digital Markets Act, Digital Services Act and Data Act, as well as proposed legislation in the United States and the numerous lawsuits against the big barons technology around the world, would restore competition and innovation. But it is essential to ask: are we aiming for the right target? When hunting ducks, you can’t shoot where the duck has been. Instead, you have to aim where the duck is title.
The problem with many proposed antitrust policy reforms is that they target many of the past anticompetitive practices of big tech barons. But in the digital economy, big tech barons don’t need to resort to those same past practices once they’re powerful. Thus, the proposed regulations focus on past anti-competitive strategies. They follow the curve rather than aiming for where the tech barons are heading.
But it’s not just about reining in the tech barons. At a more fundamental level, how to encourage innovation in the digital economy, an innovation that truly creates value? A surprising answer is cities. We often think of investing in companies to support innovation, and as companies grow they continue to innovate, but at a slower pace. Double the size of a company, and you won’t necessarily double the number of patents. But with cities, as they grow, they generally foster more innovation. Double the population of a city and you will more than likely double the number of patents in that city. So policymakers, rather than subsidizing companies to innovate, could do more to support cities. Cities, rather than large corporations, should be treated as the engine of diversity and growth.
In conclusion, instead of improving our standard of living, technological advances can prolong or worsen wealth inequalities, reduce our autonomy and well-being, and destabilize democracies. And we cannot expect this trajectory to correct itself; we need to fundamentally review our policies. We can and should expect more, but only if we demand it.
To listen to the audio version read by co-authors Ariel Ezrachi and Maurice E. Stucke, download the Next Big Idea app today: