August 28, 2024 • 58 mins
In this episode, Ed Zitron sits down with Matt Stoller, author of the BIG Newsletter and Research Director of the American Economic Liberties Project to explain what a monopoly is, why they're so pervasive, how America entered a "monopoly crisis," and what all of this means for Google, Apple, Meta, and the rest of big tech.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
All Zone Media.
Speaker 2 (00:05):
Hello and welcome to Better Offline. I'm your host ed Zetron.
Today we're talking monopolies, and I'm joined by Matt Stoler,
who covers market power and antitrust for The Big Newsletter
(00:25):
and is the director of research at the American Economic
Liberties Project. Matt, thank you for joining me.
Speaker 1 (00:30):
Hey, thanks for having me.
Speaker 2 (00:32):
So this is a very dumb place to start, but
I think it's necessary. What exactly is a monopoly.
Speaker 1 (00:38):
Not a dumb place to start at all. There are
different definitions, but generally speaking, it is the control of
a recognized branch of trade or service, a unified control
of recognized trade or service. And that's a definition I'm
giving you from Lewis Brandeis, who was a Supreme Court justice,
(01:02):
but it's the same. I think Milton Friedman had a
kind of a similar definition. The essence of a monopoly
is control of a market or a recognized trade.
Speaker 2 (01:12):
And what the most people not actually understand about them what.
Speaker 1 (01:15):
I think most people characterize monopoly as kind of an
economic thing or you know, just a commercial thing, but
really a monopoly is a political institution. So when we're
talking about monopolies, we're talking about what is effectively a
private government over a market, over an industry. If you're
(01:35):
in that trade right, or that service, if you ply
your trade there. If you're operating in a market which
is monopolized, then you have a political boss who sets
the prices, the terms of trade, who can buy, who
can sell, and you're under their thumb and yeah, it's
your trade right. So it looks like the quote unquote economy,
(01:57):
but in fact it's really a person has or that
firm has political power over you. And if you have
enough monopolies in an economy, then at least in the
commercial sector, which is a big part of our lives,
we're not living in a democratic society. We're living in
a society of a of a bunch of of private governments,
authoritarian governments over markets.
Speaker 2 (02:19):
So Son Dapashi of Google would be like the president
of his private monopoly, his little private I think that.
Speaker 1 (02:25):
I think that's right if you if you think about
how people you know, there was a there's a good
quote that from a plumber actually in the in the
Wall Street Journal who said that, you know, the government
can find me, but Google can put me out of business, right,
because Google could take his business off Google Maps. They
could they could change his ranking in Google Search, and
(02:50):
so he was way more afraid of Google than than
the government. And that's that's because Google has governing power
over you know, over the Internet. You can see this,
like every publisher can tell you that the change in
Google's algorithm can be catastrophic or can be you know,
hugely important and pactful in some ways. So yeah, very much. So.
(03:13):
Google is the private government of the Internet, or at
least the gatekeeper of the Internet. And it is exactly
it's exactly what you're talking about. They also have political
power because they're a big company and they lobby and whatnot.
But just as infrastructure, they are governing that infrastructure.
Speaker 2 (03:27):
Almost feels like Yelp is like a borough of the
larger Google country than Yelp controlling the reviews, and Yelp
has a weird little mob like thing they do where
you have to pay them to get rid of bad reviews. Now,
it's very never really thought about the governmental comparison.
Speaker 1 (03:43):
Right, I mean, so what you have with something like
Yelp is because Yelp is under the control of Google, right,
And Google is doing all sorts of things to sort
of try to kill Yelp yelp, and Google has monopolized
to advertising, right, a company like it kind of has
no choice but to move towards a kind of sleazier
(04:04):
business model where they're extractive, because all of the other
areas where they could legit make more legitimate money have
been monopolized by Google or have been taken by Google. So,
in one sense, what happens when you have monopolies, you
have you know, higher prices and all the rest of it.
But another thing that happens is that businesses that are
(04:24):
operating often have a choice of continuing in existence or not.
And the choice of whether to continue in existence is
often to go down through a business model that can
look sleazier, can be problematic, or can be coercive. And
so it's like that's that's the choice. Do you go
(04:45):
out of business or do you this do this thing
that you know you don't like. Is there's a law,
there's a rule of thumb called Gresham's law about counterfeit money,
which is, you know, when somebody starts using counterfeit money,
then nobody wants to use real money. Because even if
you want to use real money, you know, you're like,
I'm not going to put real money out there if
it's all counterfeit.
Speaker 2 (05:05):
So yeah, the drive with the counterfeit has the advantage,
right rules.
Speaker 1 (05:09):
Good money drives out the bad. And so this is
one of the things you see. For example, when you
go to like a like a expeedyer or something like that,
and you're hotels dot com. You're looking for, you know,
to book something, they don't show the you know, resort fees,
the junk fees until you know, you get to the
last page where you're going to check out, or sometimes
(05:29):
even when you get to the hotel. And it's not
that every hotel wants to rip you off, but they
all know that you're going to be looking at the
price and comparing the sticker price that you see on
the on the results page, and if their rival is
not is not showing you that junk fee, then they're
(05:50):
at a competitive disadvantage if they don't lie.
Speaker 3 (05:53):
So yeah, yeah, well so well it's it's it's just
that a market where you have rules that enable that
allow fraud is just a different market than one where
we don't allow fraud.
Speaker 1 (06:07):
It's just there. You know, there's discussions about capitalism or
free markets or whatever. But the fact that you use
the term market doesn't mean anything because markets are politically structured,
like a farmer's market, a derivatives market, a slave market.
They all use the term market. They're very different institutions,
very different moral elements underpinning them, very different arrangements of power.
Speaker 2 (06:29):
So you've said something you wrote and deep, well it's
also on your main page. Is America's in a monopoly crisis, right?
What you mean?
Speaker 1 (06:37):
So what you haven't in a lot of areas and
in most I think monopoly or oligopoly, which is just
a small number of companies controlling a market is now
a systemic feature of the American economy, and it didn't
used to be. So there are different ways to measure it.
But you know, about seventy five percent of industries in
(06:58):
the last twenty five years have gotten more consolidated, and
so you see, you know, and this is largely through mergers.
So another statistic would be, you know, there's something called
the Wilshire Wilshire five thousand, which is an index of
public companies, and we don't have enough public companies for
the Wilshire five thousand. They're only about thirty four hundred
(07:19):
public companies. Now there used to be around nine thousand
in the nineties. Now we have around thirty five hundred.
It's largely because of mergers. Even the country per capitis,
you know that the decline is even more significant. So
just the number of big companies is smaller because companies
have gotten you know, they've merged and gotten much much bigger,
and this has a lot of consequences. What you see
(07:42):
is wages are much lower than they otherwise would be.
So the amount spent on employees with either increased wages
or healthcare or training is probably between fourteen and twenty
thousand dollars per American in the non in the non
financial corporate sectors eighty million Americans. You see things like
(08:02):
the cost of healthcare, which is largely driven by market power,
consolidation in hospitals, pharmaceutical companies, insurers. The price of an
insured family of four has gone from about ten to
fifteen thousand dollars a year in two thousand and eight
to about thirty thousand dollars a year today. So that's
(08:23):
you know, a lot of the you know, lack of
increase of compensation and wages. If you just take those
two facts of just how much lack of ability to
move to a new job because of consolidation. That's fifteen
to twenty thousand dollars plus the increase that we're paying
in healthcare. That's a lot of money. And that's you know,
(08:44):
every single year, it's basically almost a new car every
single year. That's just extracted from every family by this
increased amount of concentration.
Speaker 2 (08:55):
And do you have less ability to move because there
are just less places to work?
Speaker 1 (09:00):
Yeah, that's I mean, that's right. There's just like if
you it used to be that you had, say you
were in a town, you had ten stores, the you know,
a couple of dry goods stores and grocery stores, butcher
you know, like your you know, your standard main street,
and then that all got put under one roof Walmart,
and so you have one place to work and all
(09:20):
the stuff is sold there, and now you don't have
any place to bargain as if you're a worker or
if you want to set up a store, you can't
do that either because for you know, other reasons, because
that Walmart has more bargaining power with suppliers, and so
you can't compete. Even if you had a you could
do it more efficiently, you still couldn't compete because you
couldn't get the supplies that you needed, or you couldn't
(09:41):
get them at the best at the same price.
Speaker 2 (09:42):
And that sounds like another manifestation of the political nature
of these companies because they just set the terms that
customers will expect and businesses have to operate with.
Speaker 1 (09:51):
Yeah, I mean Walmart in the nineteen nineties and two
thousands as it was growing, and there are political reasons
that were there were just changes in pricing law and
anti trust laws. But Walmart would literally just go to
their suppliers and they would say, okay, you Levi Strauss,
you're not making your genes in China. We want you
to move production to China. That's if you want to
(10:12):
get into Walmart, and you need to get into Walmart
because we are eight nine percent of the retail dollar
and you need it, You're going to do this. And
they just did this across the board, and they literally
restructured how American production happens because.
Speaker 2 (10:27):
Was that to lower prices? Was that too? Why did
they want them to move to China.
Speaker 1 (10:32):
Lower prices usually? But also you know, they had they
had specific ways that they wanted to see their their
their business operate, so they just want control. I mean
there are other things that they did that are actually
really interesting to restructure how retail works. But yeah, it
(10:52):
was largely a price. It was a price element.
Speaker 2 (10:55):
And is the crisis that these there were just so
many of these little moving within America.
Speaker 1 (11:02):
You mean that there's so many mononoply crisis, Yeah, I
mean the crisis is that we have you know, as
people get used to being bossed around, they lose their
respect for democracy itself, right, I mean, that's that's the ultimately,
like you see a ton of cynicism. And I think
the reason that there's all of the cynicism about the
(11:23):
rule of law, about the idea of living in a
society is because most people experience living in an authoritarian
part of their lives. I don't want to overstate it.
We're not living in a dictatorship or anything. This is
still a democracy. But you know, you get bossed around
and you get told you can't mean, the amount of
fear in commerce is overwhelming at this point. When you
when you talk to people in lots of different areas,
(11:45):
they're afraid to talk about what's going on in their industry.
Because the monopolists can can retaliate against them. And so
if you're living in fear, then you're not living, You're
you're not free, right. You may not be living in
a dictatorship, but you're not free.
Speaker 2 (12:01):
That's interesting as well, because so much of what I've
talked about with the Valley is this without really framing
it like you are, which is people fear. Samultman of
Open Ai, he's grown big because people fear his existence,
what he may say about them read Hoffmann right, same deal,
And just the political nature of these institutions. I never
(12:21):
really considered is this how it got so bad that
the corporation's kind of got this level of power.
Speaker 1 (12:27):
So it's interesting the story of why this happened is
actually not a story of big corporations seizing power, because
we didn't actually have this problem in the nineteen seventies
and before that. I mean, you know, there's always like
some big companies, and there's always some problems here but
here and there. But largely this is a story of
bad ideas taking over. So what happened in the we
(12:53):
had this populist tradition in America, right, which you can
you can find this you know, really the the original
Populace was a political party in the eighteen eighties and
eighteen nineties. They were farmers from the South and the Midwest.
They were upset about a number of different changes in
the economy, the dominance of railroads, dominance of large banks. Basically,
they were mad about Eastern capital controlling their business and
(13:17):
making it hard to make a living selling farm products.
And you control by processors, controlled by railroads. This is
very similar stuff that we're seeing today. So standard oil.
I didn't like that, But you could go back, you
could find this, you know, you go back in the
sixteen hundreds and find antecedents in England and so on
and so forth. There has always been this tradition of
(13:40):
let's not have too much. No one should have too
much power in America, right, that's the checks and balances things,
the federalist papers and whatnot. Also, no one should have
there we should try to avoid conflicts of interest. I mean,
that's in the Bible. No man may serve two masters. Right,
So you have this these two sort of basic themes,
checks and balances, no conflicts of interest. And we've we've
(14:01):
always kind of understood that that's the way that we
should arrange our society. Very bitter fights in the nineteenth
century over corporate chartering. We regulated our corporusiness idea that
we used to be less a fair and that's always nonsense.
Speaker 2 (14:17):
Just corporate chaltering. What do you mean that?
Speaker 1 (14:19):
So just the idea of being able to charter a
corporation create a pupka idea, you can form one, yeah,
being able to form one limited liability corporation where I,
if my corporation does something, it's liable, but me as
a human being that runs it is not right. An
eternal entity that like you, doesn't die, is not a
(14:40):
natural person, but can conduct business as if it is
a natural person. That wasn't That was an innovation in
the nineteenth century. It's not something that ever anybody could get.
There were all sorts of fights over who could charter
it for what reason. Originally it was academic institutions, municipalities.
They didn't allow anyone to just charter a corporation. And
because they were like this can be really dangerous. Corporations
(15:02):
were originally chartered to allow the pooling. You know, eventually
they started to charter them in business and they said
you can pool capital and men to build things of
public works and make a little profit, and we're going
to put very restrictive confidence in there. And it was
very restrictive until the eighteen eighties and eighteen nineties, and
that's when you started to see federal antitrust laws because
(15:23):
the state chartering didn't work as well, and so we
needed a new regulatory regime, and that was the that's
when we got into the federalization of it. But that's
the story. The story is we've always kept a tight
rain on commercial concentrations of power. In the nineteen seventies,
there were sort of two different political and intellectual movements
(15:44):
that came that won the debate. Each one within the
Republican Party, one within the Democratic Party, the Republican the debate.
The one on the right was the Chicago School. These
were the Libertarians, and their argument was power doesn't matter,
Concentrations of power doesn't matter, conflicts of interest don't matter.
Traditional things like usery caps, all that stuff is very silly.
(16:05):
The only thing that matters is efficiency. We need to
just think about what is most efficient. And to understand efficiency,
let's think. Let's ask economists. They are the scientists, right,
We're going to move this political question out of the
realm of the public and the citizen and move it
to the expert, the scientists, the economist. That's why these
political things become the economy. That's why we start using
(16:28):
terms like human capital instead of people, or infrastructure instead
of bridges. Like it's just a very you know, the
language got gets weird and sort of flat distant, yeah,
exactly distant alien right. I noticed this in the in
some of the documents that I was looking at the
government doctor in the seventy eight seventy nine, that like,
the language started getting weird and very technocratic, wonky. So
(16:53):
that was on the right. On the left, it was
sort of like some quasi socialists who made a similar argument.
And they they you know, they they were not they
didn't like small business right because they thought that like
small business people were like uh racist and and Rubby
and Andy. They preferred working with you know, the big
(17:13):
the big banks and the and the big chain stores.
And they thought, oh, they're cosmopolitans regardless.
Speaker 2 (17:19):
Who knows how big corporations feel about race. Jesus.
Speaker 1 (17:23):
I mean, I'm not I'm just telling.
Speaker 2 (17:24):
You no, no, no, no, I'm not saying you're the one. He's
just like, oh god.
Speaker 1 (17:27):
Right, I mean so so. So they didn't like car dealers, right,
That was they were like, car dealers are sleazy, we
don't like them. They were kind of more socialists, and
they said, you know what we should we should have
big planning, right, work with IBM, work with like the
big fancy companies to sort of plan things, and and
and that. They were like, we need experts to kind
of be planners in the economy. And that's actually not
(17:51):
very different than saying, let's just allow the economists to
run things, right, It's actually very similar. Both the right
and the left they kind of hated each other, but
they agreed that populism was bad, that small business was
sort of foolish and silly, and that what we really
should do is is have big institutions running things. And
those big institutions, you know, maybe the right thought, well,
(18:14):
they should just generate cash because that's more efficient, and
the left maybe thought, let's have them be more socialist
and look out for the public interest. But that was
the sort of the gist of what both and they won.
And then they changed antitrust laws in the nineteen seventies
and a whole bunch of regulatory laws in the nineteen eighties, like,
for example, deregulation of airlines, which happened in nineteen eighty.
(18:37):
The most aggressive proponent of deregulation of airlines was Ralph Nader. Okay,
wasn't a right wing thing. The airlines themselves didn't want it.
It was Ralph Nader pushing it very aggressively. He was
also very aggressive about pushing for deregulation in banking. You know,
I mean, it's a weird history here.
Speaker 2 (19:07):
It's weird. How will like the two very different sides
both seem to kind of turn against workers almost.
Speaker 1 (19:14):
Yeah, So Nata realized he made a mistake. But what
the basic idea there was, Oh, this is it's bad
for consumers that we have this regulatory scheme of for
banks or for or for or for truckers or for airlines.
It increases prices, it's not as efficient as it could be.
If we consolidate power, that's more efficient. Right, all these
(19:36):
grubby you.
Speaker 2 (19:37):
Know, because scale, you'll be able to do.
Speaker 1 (19:39):
Right. And so the Chicago schoolers or the right wingers
were like, absolutely, this is completely right. I mean they're
hippies and communists and we hate them, but they're not
wrong about the need to bring the experts in to
run things and move away from these you know, grubby,
dumb small business people. And you know, the there's a
lot of it is the consumer rights move movement was
(20:01):
part was the people on the left who got this
to happen. And you know, even if today if you
read like the biographies autobiographies of people who worked in
the Carter administration, though like invective, the anger they have
towards the teamsters is really weird. Like I've read like
multiple people from was his name, Alfred Kahn was kind
(20:22):
of the big one. He was like diregular, but he
used to talk about like how the goal of a
lot of the policies was to just destroy the teamsters
and reduce wages like for workers, and.
Speaker 2 (20:32):
Did they did. Why was there such bipartisan descent for
small business? It just doesn't Maybe it makes sense just
looking back, like Hinslight's twenty twenty, but it just feels
so illogical almost on the left.
Speaker 1 (20:46):
There's an elitism to it. Right, So you had this
is the first generation like in this it's the sixties
and seventies, and now you have finally like tens of
millions of people who are college educated. Right, it's right
after the GI Bill and this the World War two,
and they're they're trying to understand the economy and the
New Deal. The New Deal exists, right, the New Deal
(21:07):
framework is there. Things aren't basically prosperous, and they stop
caring about questions of political economy and concentrations of power
and inequality because there just isn't that much of it.
I mean, yeah, there's like there's some like rich people.
There are rich people, but they're seen as kind of
like borish and tacky. They're not like considered powerful. Wall
Street doesn't really matter, you know, in the seventies, it's
(21:31):
just like a place with coupon clippings of like bonds.
It doesn't it's not you know, it's not a big deal.
And that's kind of the vibe that that most people have.
You know, it's in nineteen seventy nine, you could like
you could leave high school and you could just get it,
get a job making fifty bucks an hour in a factory.
(21:51):
Right that it was just a very different society. So
there just wasn't the concern over being able to make it.
Speaker 2 (21:58):
In and not fifty dollars an hour. Job was not
I'm going to guess from mega corporation.
Speaker 1 (22:03):
Or it was I mean, but it could be. It
could be but like it could be for Ford, or
it could be for a supplier of Ford or whatever.
But like it wasn't you know, there was a lot
of light manufacturing by smaller companies. But the point is
is that you had a lot There were a lot
of options, and it wasn't you know, it wasn't considered
weird or a bad thing, and inequality was fairly low,
(22:25):
and you could also start your own business. It wasn't
that hard to do that, right, But the political infrastructure
for that had kind of fallen apart. And when inflation
hit in the nineteen seventies, and inflation hit for a
variety of reasons, mostly having to do with changes in banking,
you know, some some oil shocks, those two movements spent
(22:47):
a lot of time convincing people that the American economy
was misshapen because there wasn't enough expertise running things. And
so in the nineteen seventies, when you started, when there
was inflation, when there were these when there were financial shocks,
the argument was we gotta we got to get rid
(23:09):
of these new deal rules. Now, there were legitimate reasons
to update those rules, like the train system was a mess,
and because you couldn't close down unprofitable routes. You know,
there was there were there was a lot of like
real problems with our with our transportation system. You know,
it was hard to update trucking rules. There were things
that needed to be updated. But they just said, you
(23:29):
know what, all of this stuff, just throw it out
and give freedom to capital, to to unionize, to do
whatever capital wants, because that's how to bring down costs.
You got to make things more efficient and that will
address pricing.
Speaker 2 (23:42):
So was there a succession of legislation or was it
one big moment.
Speaker 1 (23:46):
It was a bunch of different it was. It was
some legislation. A lot of it was through the courts,
so it wasn't you know, it's not like we ever
repealed any of these anti trust laws. It's just that
interpretations by enforcers and the courts changed. Oh yeah, and
that's actually the Reagan administration. You know. There's this document
that a colleague uncovered in nineteen eighty, the Transition, a
(24:07):
transition document from two important economists who said we're not
going to be able to convince Congress to get rid
of anti trust laws. So we're just going to have
to change it administratively by not enforcing the laws that
we don't like. So that's what Reagan did with mergers.
He said, we're no longer going to enforce merger anti
merger law. And so that's why, you know, you saw
(24:27):
a huge consolidation wave in the nineteen eighties. You know
the movie Wall Street, the nineteen eighty seven Oliver Spill. Yeah,
so that's about a merger, right, that is the moment, Like,
that's what happens, is that that change. You also saw
in terms of legislation. Yes, there was a tremendous amount
of deregulation of particularly of finance, but also of trade,
(24:50):
also of shipping, also of you know, railroads and trucking,
and there were a lot of legislative changes that fostered
the consolidation of economic power in the name of efficiency. So,
you know, one of the first laws that changed was
one that it was called the Consumer Pricing Goods Act
of nineteen seventy five. They said, we are going to
(25:14):
allow discounters to basically charge much less than an item
costs in order to kill their rivals. So you know
that the idea used to be that if I sold,
if I was a producer and I and I sold,
say Ingersol watches or something, I could tell the retailer
what price minimum price they could set, and that way
(25:38):
that retailer couldn't price below cost to draw people in
and kill their rivals. Let's say, like, you know, they
don't do that with Ingosole watches, but they did that
with milk, right, you know, price below cost to kill
your rivals. If you can price below cost, this is
what Amazon does, right, Like. The reason Amazon was able
to kill its rivals is because it could borrow from
Wall Street for as long as it took, whereas its
(25:59):
rivals couldn't. That's called predatory pricing. Uber did something similar
that used to be illegal, and one of the laws
that made it possible was the Consumer Pricing Goods Act
of nineteen seventy five that was put in place by
the Democrats who had just gotten elected reacting in a
reaction to Nixon, and they didn't know what to do
about inflation. So this is something that the Natorites told
(26:20):
them to do. They did it, and Walmart exploded as
a result, nineteen seventy, Walmart was about had about, I
don't know, twenty thirty million dollars in sales. By nineteen
eighty it had a billion dollars in sales by nineteen
eighty five. Sam Walton richest guy in the country. But
so a bunch of stuff, like a bunch of legal
changes happened, deregulation of finance, deregulation of all of these
(26:42):
different areas, and now so the relaxation, dramatic relaxation of
antitrust laws. And so when you make when you legalize monopoly,
which is effectively what happened, then you get a bunch
of monopolies. And this is to our earlier point. If
you don't monopolize, then you get eaten, right, and you
get destroyed. So you could say Mark Zuckerberg did what
(27:05):
he did, and that's bad by rolling up, you know,
the social media space. But if it hadn't been him,
it would have been somebody else, right, And same thing
with Google, same thing with all of these guys like
it was gonna When you create a legal environment like that,
that's what happens. So these big companies now they're big,
Now they're powerful, and they use lobbying, they use infrastructure,
and they're governing. But it didn't start out that way.
(27:27):
Now we have a political economy problem, but the ideas
have changed. So the intellectual framework they were operating on
of Google, we don't do evil, right, which is a
fundamentally a statement about governing. I think there's like a
general view that whatever you think about Google's business model,
it is inappropriate for a private entity to be used
(27:50):
to be wielding sovereign power. That's not it shouldn't be
up to them, right.
Speaker 2 (27:55):
So what does it actually mean that the government said
they had a monopoly of search? What? What does that
actually the ramifications?
Speaker 1 (28:03):
So this is getting to the search trial. We can
talk a little bit about that, but but a monopoly
means you know what the what? So they were just
deemed a monopolist by a judge judgment meta in in
DC District Court. It's actually their second loss. They were
also dubbed a monopolist in uh the Android app store.
Speaker 2 (28:23):
Controls with the case with that pig.
Speaker 1 (28:25):
Yeah, so this is their second and there's a third
case that's starting where it's about their control of software
that underpins advertise online advertising markets. That starts in a
couple of weeks.
Speaker 2 (28:38):
Yeah.
Speaker 1 (28:38):
Anyway, what what Metta said is that Google is a
monopolist because they control uh search right, general search services,
and then they control search advertising. And what they were
doing that was illegal is they were preventing rivals from
getting into the search market using contracts, and so it's
(28:59):
not just that they were monopolizing, it's that they were
thwarting rivals from challenging them, and then they were raising
ad prices as a result of their control of this market.
So the that's like the in anti trust law. It
didn't always used to be this way, but we interpret
it to really since the sixties to the eighties, depending
(29:23):
on what case you look at. If you are if
you are a monopoly and you and then you do
something to maintain that monopoly or to extend your monopoly,
that's what makes it illegal. Right, Like if I just
create a new product category, some widget that no one's
ever heard of before, and I start making it and
(29:43):
it's popular, I'm by definition going to have one hundred
percent of the market. That doesn't that's not illegal, right.
What it would be illegal as if I had one
hundred percent of the market and then I said to
my distributors. Hey, if you want my thing that everybody wants,
you can't distribute my rivals. Think that's what makes it.
That's what turns it into an illegal conspiracy, and that's
(30:06):
effective the argument about what Google was doing with search.
Speaker 2 (30:10):
So, how do you feel it's going to go?
Speaker 1 (30:13):
Why do you think, I mean the they're starting. So
the case started in twenty twenty. It was originally brought
by the Trump administration. The Biden administration has brought it forward,
and it took until twenty twenty four when it went
to trial and finally the judge ruled that Google's a monopolist.
Now is the second part of the trial, which is
(30:35):
called the remedy phase, where the government comes and says,
here's what we want to cure the monopoly, and Google
will say, no, I don't think that's right. This is
what you need to cure the monopoly. And there will
be another, effectively a trial, and then the judge will
rule and make a decision, and then it will go
on appeal, probably the Supreme Court, or depending on who
(30:56):
wins in you know, this election, they could settle it
as the Bush administration did with the Microsoft suit in
two thousand and one. So all of that being said,
we don't even know what the Justice Department is going
to ask for. So the Justice Department could ask for
something very small, in which case that's the most you're
(31:17):
going to get, or they could ask the end of it,
right well, I mean it's not the end. There's going
to be you know, yeah, that's the most you're going
to get. Or they could ask for you know, breaking
up the company and you know, opening up the data
vaults to let anybody use the data that that Google collected,
or you know, opening up their IP vaults and saying
anybody gets to use that, or you know, there's a
(31:39):
ton that the DJ could ask for. We're going to
sort of find out more about that in the next
month or two. The Remedy phase conference the have they're
they're just going to talk about the scheduling of the
remedy phase in I think September like sixth the ninth
or something like that. So, well, you know what we're
gonna be covering, mys be covering that. You're going to
hear about that if you if you want to see it.
(32:00):
But it's I know, it's very exciting. I mean, this
is the first big tech company that's been deemed to
be a monopolist and the anti trust law, you know,
a lot of anti trusts law is is just not
so much what the law says, but whether you use
(32:20):
the law. You know, the Department of Justice didn't bring
a monopolization case pretty much for twenty years since Microsoft,
like the Google case was the first one first, certainly
first big one. FDC brought a few. There have been
some private cases, but this is really the first big
one since since Microsoft. And what's gonna happen and what
(32:41):
is already happening is, you know, every big company is
we're you know, every CEO in a company that has
market power has to ask their general counselor could this
are we doing something that could get us into hot water?
They didn't have to ask that a few years ago,
because you could just the general counsel or their anti
(33:01):
trust council could say, eh, don't worry.
Speaker 2 (33:04):
That dude gives a shit, it won't do anything.
Speaker 1 (33:06):
No one would ever bring a case. Right But now
not only did the government bring a case, but they
won the case. So it's like, oh, okay, now we
got to be careful.
Speaker 2 (33:16):
And just so you when you say they won the case.
So it was the government versus Google with a no.
This is very simple with the judge, Judge Meta saying
I agree with the government, right, Yeah.
Speaker 1 (33:28):
It was the government, and then there were a bunch
of states as well, and the Meta didn't. He didn't
agree with everything the government said. So there were certain
things with like Google's advertising platform that he said that's
not a monopoly. But on the big stuff, the search stuff, yeah,
he agreed with the government.
Speaker 2 (33:47):
How do you break up a company like Google?
Speaker 1 (33:49):
Though Wall Street does it all the time. I mean,
you just saw what I think. DuPont just broke itself
up into multiple division. You know, Google is not just
it's not like one jumbled together thing. You know, Google
has different divisions, and so, you know, and they buy
companies and they sell companies, and you just you've got
put an investment banker in there to sell the company,
(34:10):
you know, sell parts of the company.
Speaker 2 (34:11):
It's not it would be selling off bits of the
company though.
Speaker 1 (34:15):
Yeah, you could just I mean, depending on what they
you know, you could do it in lots of different ways.
But this is something that Wall Street knows how to do,
so you could just It's not it's not rocket science.
You know Google. You just go to Google has a
bunch of people who work in the YouTube you know,
at YouTube, and they have someone who's a CEO of YouTube.
You just say, okay, if you have a share of Google,
(34:37):
you now have a share of Google and you have
a share of YouTube.
Speaker 2 (34:40):
Of a separate institution for.
Speaker 1 (34:42):
Companies, right, I mean there are difficult things to break up.
Like let's say you want it to have a different
a separate search engine, right right, okay? There do you
clone it? Who gets the Google domain? Like who gets
the brand? You know? There are also questions all right,
like let's say you open up the data vault and
you say other entities can come in and use the data.
That's those are technical questions and you could you could.
(35:04):
Basically the way you would deal with that is you
would have Google pay for a like a special master
who would kind of like run who would run a
like a technical committee that would make a lot of decisions.
That's what Microsoft had to do after they lost There
was a technical committee that came in and basically was
a regulator for Microsoft's a couple hundred people something one
(35:26):
hundred to two hundred people who were just making sure
that Microsoft's software was compatible with other entity software, and
they had certain legal authority over Microsoft. You do that
for for parts of Google where you can't actually do
a breakup, and there you know, there you go. This
is a remedy is not that hard depending on what
(35:49):
you want to do.
Speaker 2 (35:50):
It almost feels like they kind of want us to
think it's harder than it is because that benefits them.
It makes oh, it's impossible to do this. We couldn't possibly,
but I imagine and that that's the argument in the
remedies face.
Speaker 1 (36:02):
Well, I mean I think that yes, they they in
the in the epic. We've seen the remedy argument in
the epic the Apple. And what Google has been saying is, oh,
all of this stuff is so hard, it's so expensive.
It's how could we do this? And also it's not fair.
And the judge is basically like, come on, your Google.
You've been saying how awesome you are for a long time.
You can do this. This is not that hard and
it's not going to take you ten years and eight
(36:22):
gazillion dollars.
Speaker 2 (36:35):
So do you see any other monopolies within the tech industry?
Speaker 1 (36:38):
Yeah, I mean I think there's a lot of there's
a lot of market power in all over the economy,
and you see it in you know, I mean the
probably the most obvious monopoly is VeriSign's control of the
dot com domain. Like I know, it's like a small Yeah,
it's just so obviously if you want to register a
domain name and you want a dot com or you
(37:01):
own a dot com and you need to reregister, you know,
you need to renew it, you're going to pay a
you know, you're gonna pay registration company and they're gonna
have to remit whatever whatever they charge. I think they
charge like nine dollars and fifty cents and it's it's
like seventy percent operating margins. And because they manage the
(37:23):
dot com domain name, because the government charters them told them,
you can you get to manage this. They have contract
government that lets them do it. Just a very clear
one hundred percent of the market for you know, renewing
dot com domain names, and just everybody that owns a
dot com domain gives them nine dollars and fifty cents
a year. They should give them probably ninety cents a year.
Speaker 2 (37:45):
Right, So are you suggesting that'd be other chances or chanters?
Speaker 1 (37:50):
Well, what they should do is either just put a
price cap on it and say you get to charge
two bucks and that's it, like a utility, or say
every three years just bid it out and say, Okay,
whoever gives, you know, the best price gets to manage
the you know, the dot com domains. They've done that
for other you know, for other domains, and it tends
(38:10):
to drop the price. Pretty dramatic.
Speaker 2 (38:12):
This is a personal one. I'm going to ask, how
do you feel about the Madden franchise with electronic arts?
Speaker 4 (38:17):
So the reason the house this is because it sucks.
Speaker 1 (38:20):
It's something that I, you know, people have been telling
me about for a long time. So monopolies is not
It's not like always obvious. The moral arguments aren't always obvious.
Mad's a really good example where and I don't know
that much about this, but you used to have a
lot of different NFL sort of football games. You had
at least two, Yeah, and they were and they were innovative,
(38:40):
so you like, they had to innovate around like different features.
I don't play video games. I don't believe in fun.
I don't like, you know, I don't think there should
be any joy. But I lost that, so, uh, but
as long as you're not going outside, that's my main concern,
not a problem. Okay, good. So you know, the these
(39:02):
long term monopoly arrangements are like are I think there's
something really problematic about it, But I don't exactly know
what to do about the But but the you know
Madden has gotten is it's not that it's gotten worse,
it just hasn't improved, right, And and they're there there's
also some of the other sports games they're like extracting
(39:24):
more and more money. But did you see this with
fanatics too? They've made the experience in sports worse. So
it's what we need to look at is these kind
of long term exclusive contracts. And there are some there
are some questions like should the NFL be able to
(39:47):
leverage its brands to create you know, obviously they have
obviously they have a right to profit from their brand,
right and obviously the players and they all have right
to profit from their brand, just as movie company. You know,
they get a copyright of the movies they make. But
(40:09):
the question is should you able should you be allowed
to take that brand that is a government granted monopoly,
which is fair because you are generating you know, you're
making the product, right, but should you be able to
turn that into another monopoly? Should be you able to
leverage that you know, or should you have to say, okay,
(40:31):
well we will. I'm in a profit from it. Anybody
that uses the NFL in a game has to pay me.
But I can't restrict who gets to use that in
a game, right. That was a little bit like there
have been anti trust cases on that. There was one
in the forties that restructured Hollywood. So there were a
bunch of movie studios and they owned or they controlled
(40:55):
theater chains, and they wouldn't let rival movies into the theaters.
So it'd be like, if you want to get you know,
like Gone with the Wind, which everyone wants to see,
then you have to take our other movies and you
have to keep rivals out of your theater. And it
was just a way of controlling the commons. It was
a way of tran of turning their monopoly over legitimate
(41:17):
copyright monopoly over Gone with the Win, which they had made,
into a monopoly over distribution of movies in general. And
this feels the Madden thing feels a little bit like
it's turning their brand into control over over, just like
football related video games, and that that doesn't feel it's
(41:37):
had the consequences that we don't like higher prices worse quality.
Speaker 2 (41:42):
And you're right about Madden. I think it's a great
example of how of a problem of this kind of
long term licensing agreement because it's it is. I would
argue with people about whether it's good or bad. I
think it's a certain kind of mediocre. But you're right,
is it keeps things kind of trapped in amba it
only gets as good as the monopolist decides.
Speaker 1 (42:03):
Yeah, that's right. And EA Sports will overpay, right, like,
they will pay more just to just to be the monopolist. Right,
They're not paying for the license, they're paying for the
license and to exclude someone else from getting into.
Speaker 2 (42:18):
The space, kind of like Apple with Google.
Speaker 1 (42:22):
Yeah, that's right. I mean, that's the thing is you
don't want so the original the Sherman At Anti Trust
acts bars monopolization and restraints of trade. So if you
think about the term restraints of trade, it is about
saying someone shouldn't be able to restrain trade to to
It's not a critique of big business. It's a critique
(42:43):
of not allowing business to get big right, And this
is a case where they are preventing more business from
being done by paying explicitly so others won't get that
that NFL licensing brand.
Speaker 2 (42:59):
It almost feels like monopolies are just like distinctly on American.
Speaker 1 (43:03):
Well, you know they they you know, let me get
this quote from Woodrow Wilson because it's it's a really
good quote. I know he's you know, it was virulently
racist and everything, but you know, take the good with
the bad. So America was created to break every kind
of monopoly and to set men free upon a footing
of equality, upon a footing of opportunity, to match their
(43:23):
brains and their energies. So he actually appointed Lewis Brandeis
to the Supreme Court. And you know there is a
you know, Thomas Jefferson wanted to put an antime monopoly
plank in the Constitution. That was his one of his critiques.
You know. You see, like historically, the anti monopoly lens
(43:44):
is kind of a critical way to understand American history.
And you can see this like over and over and over.
There is this fear of monopoly power and it comes
from the the the recognition that we do not want
(44:04):
to be run by a king. Right, So John Sherman,
Sherman Anti Trust Act, said that, you know, if we
wouldn't be will not be ruled by a monarch, we
should not be ruled by an autocratic trade. Right, very
explicit about the link between monarchy and authoritarianism and monopoly.
(44:25):
And they were using the term monarchy because fascism hadn't
happened yet, right, so, but monarchy did exist, right then
in the nineteenth century, Americans were looking across the ocean
and they were seeing a bunch of kingdoms. There was
a little bit of democracy, but that's what they were
really looking at, and they were like, we don't want that.
And today we would just say fascism, right, but like you,
(44:45):
you know that we did analogize monopoly to fascism in
the nineteen twenties, thirties, forties. But it has always been
foundational in America that concentrations of power are what we
escaped and they are not what we want here. And
there's always been this tension because you do need to
(45:07):
consolidate capital and effort to do great public works and
to do great works in general, like you often do
need to do that, But how do you control the
power of that. How do you control the power of industry?
If you're going to put a billion dollars together to
build a railroad across the country, you know, that's awesome.
Now you have a transcontinental railroad, but who runs that
(45:30):
railroad and the prices they charge, the ability for them
to charge different prices to different classes of people based
on who they want to succeed. Now, all of a sudden,
you're talking about a political problem. Well, of course you
don't want to say you can't have a railroad, but
you do have to deal with the political power that's concentrated.
And it's true with telegraphs, it's true, you know, the
(45:52):
Internet going all of these things. So this has always
been a problem, a political problem that we've tried to address.
And I think what happened in the seventies and eighties,
and this has happened the last forty years, is we
just kind of forgot about it, and then all this
consolidation happened, and now we're trying to get a handle
on it again.
Speaker 2 (46:10):
And is this what you were referring to you mentioned
previous previous quote of your authoritarianism is coming for the
private from the private sector. Is this what you mean?
Speaker 1 (46:19):
That's right?
Speaker 2 (46:20):
These It's It's fascinating as well because I've been running
business fifteen years and felt pretty well learned about this stuff,
but never really thought about these companies as political entities.
Which leads me to a cloud compute question. So do
all police basically have the same problem because right now
in tech you have basically three or four, maybe five
(46:42):
companies that control all cloud compute? Is that something we
should let stand it? Like do we need to see
signs of price fixing? What are the bad signs?
Speaker 1 (46:53):
So really good question. Every market is its own special snowflake. Right.
You can't. You can't make you know, some markets, right,
you can? You could. You could structure a market to
have a lot of a lot of different entrants like farming. Right,
you can have a lot of people growing corn depending
(47:14):
on how you split up the land. You can have
a lot of banks, right. Not totally clear to me
that you could have a lot of say, auto producers, right,
not going to have a family, you know, artisanal auto
producer that makes a lot of cars, right, So same
(47:35):
with chemicals, same with lots of different I mean you
can like there's there's just there are some industries where
you're going to have a small number of producers semiconductors,
there's you know, they're not going to have like so
cloud computing. When I look at it, to me, it's
just a it's a capital story, right, Who has the
capital to put to build out the data centers to
(48:00):
get the power that you need to design the compute
that you need. And it might be the case that
you really can only have three or four of them,
maybe have some specialty cloud computing. I don't know. This
isn't an area I've studied extensionly. But typically when you
do have an entity where entity is where you have
(48:20):
like a huge capital investment and you can't have you
have their natural limits on the number of competitors, you
have some form of public utility regulation, which usually takes
the form of saying you can't engage in price discrimination,
like you can raise your prices, but you can't charge
(48:43):
more to that entity for the same service than you
charge to this other entity. And you can't you know,
and you can't say, engage in like surveillance of your
clients to give yourself an advantage that would be or
you know, there's certain like you can't pick winners and losers.
You have to you have to be a public utility.
(49:04):
It's a little bit like it was a little bit
like a railroad or a granary or something which is
clothed with public interest but is owned by a private entity. There.
You know, it gets a little tricky with things, you know,
with companies that make open source tools on top of
of uh you know, for cloud computing entities, do those
(49:27):
cloud computing anties just like absorb those tools make their
own version of it like there are you know, I
don't have an answer to all of the questions about
how to run a cloud computing infrastructure, but generally what
you want to do is you you want to say,
all right, we're gonna we're going to try to pull
(49:49):
the power out of we want the economies of scale,
but we're going to try to pull the ability to
be arbitrary and coercive out of the business model through
antitrust law or regulations or whatever we can do, or
just you know, transparency of pricing. You know, I know
(50:09):
there's some egress pricing. I mean that's you know, being
able allowing people to get out of the cloud computing
pull their data out if they want so. There are
different techniques, but the basic idea is to recognize that
there is a there is a public interest in this
private in these in these these in this private infrastructure,
(50:34):
and so the public has some right, not total right,
but some right to control how these entities are are operating.
Speaker 2 (50:41):
And that they could that they must be free trade
in the sense that someone can easily leave and go
to a competitor right within reason.
Speaker 1 (50:48):
In reason, Yeah, that's right.
Speaker 2 (50:50):
Another question I think we can wrap up with this
one is Meta a monopoly? Because Meta is the only
provider of advertising on metas products and they have there
is no way that someone realistically compete with Facebook. It
is too big at this point, and same with Instagram
kind of is it a monopoly? I'm trying to understand
(51:11):
these concepts in real time.
Speaker 1 (51:13):
Yeah, I mean I think you you know there are
different markets, right, So I think an easier way to
conceptualize this would be to look at Apple, right, Apple
and Google, and you would say, well, Apple's not a monopoly.
I mean, I can I can buy an Android phone, right, right,
I don't need to buy an Apple an iPhone, right?
And that's true if you're looking at it from a
perspective of somebody who's buying a phone. It's a duopoly.
(51:35):
There's a lot of market power there, but it's not
a monopoly. However, what if you've bought the phone now,
all of a sudden, you you know, you can't it's
not easy to switch, right, so you're kind of locked in.
Is Apple a monopoly? Kind of kind of? Okay, Well,
you can look at it from a different point of view,
which is what if you're an app developer right now,
(51:58):
you have to get on the I phone because some
of your customers are there and you can't not be
on the iPhone. So getting into the app store for Apple,
that's a monopoly question. And the same thing is true
for Getting So it's a little bit like you're you know, sure,
maybe you can. There's a lot of railroad options, but
(52:19):
there's only one railroad that goes from one town to another.
So there might be a bunch of different railroads, but
for what you need, there's only one option.
Speaker 2 (52:28):
So it's access to the customer.
Speaker 1 (52:30):
Well, right, just there's lots of different markets, there's lots
of ways to understand, you know, what what market power means.
So if you take that back to Facebook, which is
really like a conglomerate of Facebook, Instagram and WhatsApp. Do
they have market power and where do they have market
power over? I think you'd look at the ability to
(52:52):
buy certain kinds of advertising, right if do you need
if you're running advertising campaigns, do you need to buy
on Facebook? Or can you just avoid Facebook entirely? This
is one of the questions in the Google case, and
this is the question in actually multiple Google cases, And
it's been a question in a different case involving medical advertising,
(53:14):
which had to involve a company called IQBA, and the
court found that in fact, yes, if you are doing
specifically pharmaceutical marketing, IQB is is there is market power
involved in these very narrow places where you have to buy.
It's kind of like that smaller railroad, that one place
(53:34):
you put at the one the only one that goes
to the place that you need to go, the jack
up prices and control who gets to use it. So
the question, I think the question I would ask is,
if you're an advertiser, do you have to buy on
Facebook's products? If you are, you know, a company, do
you have to communicate through Facebook's tools? Right? I know
(53:57):
WhatsApp is really embedded in a lot of different business
arrangements at this point. So that's where that's kind of
how I would I would look at it, and I
think you could make a pretty good argument that Facebook
has immense market power in social networking in general. You
know the definition. There's different ways to test for monopoly.
(54:19):
You could just say, well, can they raise prices without
really losing very much? It's been, which they have been,
and I think it's pretty clear that they can. And
if there were another option, right, you could you probably would.
They would they would see loss of customers bleeding going
somewhere else, and they don't see that. Another way to
(54:40):
understand it is, after some of the scandals that they've had,
do they lose customers because of it? Do they lose
users because of it? And the answer is no. Right,
So there doesn't really seem to be an effect of
the quality of the product. It doesn't seem to affect
whether people you it or not.
Speaker 2 (55:00):
Oh, actually, I might push back at that a little bit,
and perhaps I'm misunderstanding your point. But Facebook's advertising product
is decaying to the point that it's actually unreliable how
much comes out of it, And also they approve there's
a big thing where they approve fake ads for fake
for other companies. So it's interesting as well because it
(55:22):
almost feels as if we need a full consumer awakening
just to the concept of monopolies writ large, so that
people can start looking at these companies and acting and
even just discussing them differently.
Speaker 1 (55:34):
Right, So, to Facebook, the product quality is decaying, the
advertising quality is decaying. Are they losing business because of it.
Speaker 2 (55:42):
As in they being meta or they be right?
Speaker 1 (55:46):
Because if they're not, then what that's proof of monopoly power?
Because what's right gowing is the quality is declining, but
they're not getting Like if it were if there were
a competitive market and the quality of a product went down,
people would say, I'm not going to buy that product anymore,
the shirts fall apart, I'll go buy somewhere else. But
because but it's like, if that's the only place where
(56:06):
you can get the product, you can't. You have no choice.
You have to keep buying from them.
Speaker 2 (56:10):
Right right, that makes sense? So Matt, Yeah, this has
been such a pleasure. Thank you so much for joining
me today. Where can people find you?
Speaker 1 (56:20):
So? I write a newsletter called The Big Newsletter dot com,
which is about monopoly, power and finance. And I also
am the research director of a nonprofit called the American
Economic Liberties Project. And then I rant on Twitter way
too often. That's my you know, that's my madden post.
Speaker 2 (56:41):
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Speaker 2 (00:05):
Hello and welcome to Better Offline. I'm your host ed Zetron.
Today we're talking monopolies, and I'm joined by Matt Stoler,
who covers market power and antitrust for The Big Newsletter
(00:25):
and is the director of research at the American Economic
Liberties Project. Matt, thank you for joining me.
Speaker 1 (00:30):
Hey, thanks for having me.
Speaker 2 (00:32):
So this is a very dumb place to start, but
I think it's necessary. What exactly is a monopoly.
Speaker 1 (00:38):
Not a dumb place to start at all. There are
different definitions, but generally speaking, it is the control of
a recognized branch of trade or service, a unified control
of recognized trade or service. And that's a definition I'm
giving you from Lewis Brandeis, who was a Supreme Court justice,
(01:02):
but it's the same. I think Milton Friedman had a
kind of a similar definition. The essence of a monopoly
is control of a market or a recognized trade.
Speaker 2 (01:12):
And what the most people not actually understand about them what.
Speaker 1 (01:15):
I think most people characterize monopoly as kind of an
economic thing or you know, just a commercial thing, but
really a monopoly is a political institution. So when we're
talking about monopolies, we're talking about what is effectively a
private government over a market, over an industry. If you're
(01:35):
in that trade right, or that service, if you ply
your trade there. If you're operating in a market which
is monopolized, then you have a political boss who sets
the prices, the terms of trade, who can buy, who
can sell, and you're under their thumb and yeah, it's
your trade right. So it looks like the quote unquote economy,
(01:57):
but in fact it's really a person has or that
firm has political power over you. And if you have
enough monopolies in an economy, then at least in the
commercial sector, which is a big part of our lives,
we're not living in a democratic society. We're living in
a society of a of a bunch of of private governments,
authoritarian governments over markets.
Speaker 2 (02:19):
So Son Dapashi of Google would be like the president
of his private monopoly, his little private I think that.
Speaker 1 (02:25):
I think that's right if you if you think about
how people you know, there was a there's a good
quote that from a plumber actually in the in the
Wall Street Journal who said that, you know, the government
can find me, but Google can put me out of business, right,
because Google could take his business off Google Maps. They
could they could change his ranking in Google Search, and
(02:50):
so he was way more afraid of Google than than
the government. And that's that's because Google has governing power
over you know, over the Internet. You can see this,
like every publisher can tell you that the change in
Google's algorithm can be catastrophic or can be you know,
hugely important and pactful in some ways. So yeah, very much. So.
(03:13):
Google is the private government of the Internet, or at
least the gatekeeper of the Internet. And it is exactly
it's exactly what you're talking about. They also have political
power because they're a big company and they lobby and whatnot.
But just as infrastructure, they are governing that infrastructure.
Speaker 2 (03:27):
Almost feels like Yelp is like a borough of the
larger Google country than Yelp controlling the reviews, and Yelp
has a weird little mob like thing they do where
you have to pay them to get rid of bad reviews. Now,
it's very never really thought about the governmental comparison.
Speaker 1 (03:43):
Right, I mean, so what you have with something like
Yelp is because Yelp is under the control of Google, right,
And Google is doing all sorts of things to sort
of try to kill Yelp yelp, and Google has monopolized
to advertising, right, a company like it kind of has
no choice but to move towards a kind of sleazier
(04:04):
business model where they're extractive, because all of the other
areas where they could legit make more legitimate money have
been monopolized by Google or have been taken by Google. So,
in one sense, what happens when you have monopolies, you
have you know, higher prices and all the rest of it.
But another thing that happens is that businesses that are
(04:24):
operating often have a choice of continuing in existence or not.
And the choice of whether to continue in existence is
often to go down through a business model that can
look sleazier, can be problematic, or can be coercive. And
so it's like that's that's the choice. Do you go
(04:45):
out of business or do you this do this thing
that you know you don't like. Is there's a law,
there's a rule of thumb called Gresham's law about counterfeit money,
which is, you know, when somebody starts using counterfeit money,
then nobody wants to use real money. Because even if
you want to use real money, you know, you're like,
I'm not going to put real money out there if
it's all counterfeit.
Speaker 2 (05:05):
So yeah, the drive with the counterfeit has the advantage,
right rules.
Speaker 1 (05:09):
Good money drives out the bad. And so this is
one of the things you see. For example, when you
go to like a like a expeedyer or something like that,
and you're hotels dot com. You're looking for, you know,
to book something, they don't show the you know, resort fees,
the junk fees until you know, you get to the
last page where you're going to check out, or sometimes
(05:29):
even when you get to the hotel. And it's not
that every hotel wants to rip you off, but they
all know that you're going to be looking at the
price and comparing the sticker price that you see on
the on the results page, and if their rival is
not is not showing you that junk fee, then they're
(05:50):
at a competitive disadvantage if they don't lie.
Speaker 3 (05:53):
So yeah, yeah, well so well it's it's it's just
that a market where you have rules that enable that
allow fraud is just a different market than one where
we don't allow fraud.
Speaker 1 (06:07):
It's just there. You know, there's discussions about capitalism or
free markets or whatever. But the fact that you use
the term market doesn't mean anything because markets are politically structured,
like a farmer's market, a derivatives market, a slave market.
They all use the term market. They're very different institutions,
very different moral elements underpinning them, very different arrangements of power.
Speaker 2 (06:29):
So you've said something you wrote and deep, well it's
also on your main page. Is America's in a monopoly crisis, right?
What you mean?
Speaker 1 (06:37):
So what you haven't in a lot of areas and
in most I think monopoly or oligopoly, which is just
a small number of companies controlling a market is now
a systemic feature of the American economy, and it didn't
used to be. So there are different ways to measure it.
But you know, about seventy five percent of industries in
(06:58):
the last twenty five years have gotten more consolidated, and
so you see, you know, and this is largely through mergers.
So another statistic would be, you know, there's something called
the Wilshire Wilshire five thousand, which is an index of
public companies, and we don't have enough public companies for
the Wilshire five thousand. They're only about thirty four hundred
(07:19):
public companies. Now there used to be around nine thousand
in the nineties. Now we have around thirty five hundred.
It's largely because of mergers. Even the country per capitis,
you know that the decline is even more significant. So
just the number of big companies is smaller because companies
have gotten you know, they've merged and gotten much much bigger,
and this has a lot of consequences. What you see
(07:42):
is wages are much lower than they otherwise would be.
So the amount spent on employees with either increased wages
or healthcare or training is probably between fourteen and twenty
thousand dollars per American in the non in the non
financial corporate sectors eighty million Americans. You see things like
(08:02):
the cost of healthcare, which is largely driven by market power,
consolidation in hospitals, pharmaceutical companies, insurers. The price of an
insured family of four has gone from about ten to
fifteen thousand dollars a year in two thousand and eight
to about thirty thousand dollars a year today. So that's
(08:23):
you know, a lot of the you know, lack of
increase of compensation and wages. If you just take those
two facts of just how much lack of ability to
move to a new job because of consolidation. That's fifteen
to twenty thousand dollars plus the increase that we're paying
in healthcare. That's a lot of money. And that's you know,
(08:44):
every single year, it's basically almost a new car every
single year. That's just extracted from every family by this
increased amount of concentration.
Speaker 2 (08:55):
And do you have less ability to move because there
are just less places to work?
Speaker 1 (09:00):
Yeah, that's I mean, that's right. There's just like if
you it used to be that you had, say you
were in a town, you had ten stores, the you know,
a couple of dry goods stores and grocery stores, butcher
you know, like your you know, your standard main street,
and then that all got put under one roof Walmart,
and so you have one place to work and all
(09:20):
the stuff is sold there, and now you don't have
any place to bargain as if you're a worker or
if you want to set up a store, you can't
do that either because for you know, other reasons, because
that Walmart has more bargaining power with suppliers, and so
you can't compete. Even if you had a you could
do it more efficiently, you still couldn't compete because you
couldn't get the supplies that you needed, or you couldn't
(09:41):
get them at the best at the same price.
Speaker 2 (09:42):
And that sounds like another manifestation of the political nature
of these companies because they just set the terms that
customers will expect and businesses have to operate with.
Speaker 1 (09:51):
Yeah, I mean Walmart in the nineteen nineties and two
thousands as it was growing, and there are political reasons
that were there were just changes in pricing law and
anti trust laws. But Walmart would literally just go to
their suppliers and they would say, okay, you Levi Strauss,
you're not making your genes in China. We want you
to move production to China. That's if you want to
(10:12):
get into Walmart, and you need to get into Walmart
because we are eight nine percent of the retail dollar
and you need it, You're going to do this. And
they just did this across the board, and they literally
restructured how American production happens because.
Speaker 2 (10:27):
Was that to lower prices? Was that too? Why did
they want them to move to China.
Speaker 1 (10:32):
Lower prices usually? But also you know, they had they
had specific ways that they wanted to see their their
their business operate, so they just want control. I mean
there are other things that they did that are actually
really interesting to restructure how retail works. But yeah, it
(10:52):
was largely a price. It was a price element.
Speaker 2 (10:55):
And is the crisis that these there were just so
many of these little moving within America.
Speaker 1 (11:02):
You mean that there's so many mononoply crisis, Yeah, I
mean the crisis is that we have you know, as
people get used to being bossed around, they lose their
respect for democracy itself, right, I mean, that's that's the ultimately,
like you see a ton of cynicism. And I think
the reason that there's all of the cynicism about the
(11:23):
rule of law, about the idea of living in a
society is because most people experience living in an authoritarian
part of their lives. I don't want to overstate it.
We're not living in a dictatorship or anything. This is
still a democracy. But you know, you get bossed around
and you get told you can't mean, the amount of
fear in commerce is overwhelming at this point. When you
when you talk to people in lots of different areas,
(11:45):
they're afraid to talk about what's going on in their industry.
Because the monopolists can can retaliate against them. And so
if you're living in fear, then you're not living, You're
you're not free, right. You may not be living in
a dictatorship, but you're not free.
Speaker 2 (12:01):
That's interesting as well, because so much of what I've
talked about with the Valley is this without really framing
it like you are, which is people fear. Samultman of
Open Ai, he's grown big because people fear his existence,
what he may say about them read Hoffmann right, same deal,
And just the political nature of these institutions. I never
(12:21):
really considered is this how it got so bad that
the corporation's kind of got this level of power.
Speaker 1 (12:27):
So it's interesting the story of why this happened is
actually not a story of big corporations seizing power, because
we didn't actually have this problem in the nineteen seventies
and before that. I mean, you know, there's always like
some big companies, and there's always some problems here but
here and there. But largely this is a story of
bad ideas taking over. So what happened in the we
(12:53):
had this populist tradition in America, right, which you can
you can find this you know, really the the original
Populace was a political party in the eighteen eighties and
eighteen nineties. They were farmers from the South and the Midwest.
They were upset about a number of different changes in
the economy, the dominance of railroads, dominance of large banks. Basically,
they were mad about Eastern capital controlling their business and
(13:17):
making it hard to make a living selling farm products.
And you control by processors, controlled by railroads. This is
very similar stuff that we're seeing today. So standard oil.
I didn't like that, But you could go back, you
could find this, you know, you go back in the
sixteen hundreds and find antecedents in England and so on
and so forth. There has always been this tradition of
(13:40):
let's not have too much. No one should have too
much power in America, right, that's the checks and balances things,
the federalist papers and whatnot. Also, no one should have
there we should try to avoid conflicts of interest. I mean,
that's in the Bible. No man may serve two masters. Right,
So you have this these two sort of basic themes,
checks and balances, no conflicts of interest. And we've we've
(14:01):
always kind of understood that that's the way that we
should arrange our society. Very bitter fights in the nineteenth
century over corporate chartering. We regulated our corporusiness idea that
we used to be less a fair and that's always nonsense.
Speaker 2 (14:17):
Just corporate chaltering. What do you mean that?
Speaker 1 (14:19):
So just the idea of being able to charter a
corporation create a pupka idea, you can form one, yeah,
being able to form one limited liability corporation where I,
if my corporation does something, it's liable, but me as
a human being that runs it is not right. An
eternal entity that like you, doesn't die, is not a
(14:40):
natural person, but can conduct business as if it is
a natural person. That wasn't That was an innovation in
the nineteenth century. It's not something that ever anybody could get.
There were all sorts of fights over who could charter
it for what reason. Originally it was academic institutions, municipalities.
They didn't allow anyone to just charter a corporation. And
because they were like this can be really dangerous. Corporations
(15:02):
were originally chartered to allow the pooling. You know, eventually
they started to charter them in business and they said
you can pool capital and men to build things of
public works and make a little profit, and we're going
to put very restrictive confidence in there. And it was
very restrictive until the eighteen eighties and eighteen nineties, and
that's when you started to see federal antitrust laws because
(15:23):
the state chartering didn't work as well, and so we
needed a new regulatory regime, and that was the that's
when we got into the federalization of it. But that's
the story. The story is we've always kept a tight
rain on commercial concentrations of power. In the nineteen seventies,
there were sort of two different political and intellectual movements
(15:44):
that came that won the debate. Each one within the
Republican Party, one within the Democratic Party, the Republican the debate.
The one on the right was the Chicago School. These
were the Libertarians, and their argument was power doesn't matter,
Concentrations of power doesn't matter, conflicts of interest don't matter.
Traditional things like usery caps, all that stuff is very silly.
(16:05):
The only thing that matters is efficiency. We need to
just think about what is most efficient. And to understand efficiency,
let's think. Let's ask economists. They are the scientists, right,
We're going to move this political question out of the
realm of the public and the citizen and move it
to the expert, the scientists, the economist. That's why these
political things become the economy. That's why we start using
(16:28):
terms like human capital instead of people, or infrastructure instead
of bridges. Like it's just a very you know, the
language got gets weird and sort of flat distant, yeah,
exactly distant alien right. I noticed this in the in
some of the documents that I was looking at the
government doctor in the seventy eight seventy nine, that like,
the language started getting weird and very technocratic, wonky. So
(16:53):
that was on the right. On the left, it was
sort of like some quasi socialists who made a similar argument.
And they they you know, they they were not they
didn't like small business right because they thought that like
small business people were like uh racist and and Rubby
and Andy. They preferred working with you know, the big
(17:13):
the big banks and the and the big chain stores.
And they thought, oh, they're cosmopolitans regardless.
Speaker 2 (17:19):
Who knows how big corporations feel about race. Jesus.
Speaker 1 (17:23):
I mean, I'm not I'm just telling.
Speaker 2 (17:24):
You no, no, no, no, I'm not saying you're the one. He's
just like, oh god.
Speaker 1 (17:27):
Right, I mean so so. So they didn't like car dealers, right,
That was they were like, car dealers are sleazy, we
don't like them. They were kind of more socialists, and
they said, you know what we should we should have
big planning, right, work with IBM, work with like the
big fancy companies to sort of plan things, and and
and that. They were like, we need experts to kind
of be planners in the economy. And that's actually not
(17:51):
very different than saying, let's just allow the economists to
run things, right, It's actually very similar. Both the right
and the left they kind of hated each other, but
they agreed that populism was bad, that small business was
sort of foolish and silly, and that what we really
should do is is have big institutions running things. And
those big institutions, you know, maybe the right thought, well,
(18:14):
they should just generate cash because that's more efficient, and
the left maybe thought, let's have them be more socialist
and look out for the public interest. But that was
the sort of the gist of what both and they won.
And then they changed antitrust laws in the nineteen seventies
and a whole bunch of regulatory laws in the nineteen eighties, like,
for example, deregulation of airlines, which happened in nineteen eighty.
(18:37):
The most aggressive proponent of deregulation of airlines was Ralph Nader. Okay,
wasn't a right wing thing. The airlines themselves didn't want it.
It was Ralph Nader pushing it very aggressively. He was
also very aggressive about pushing for deregulation in banking. You know,
I mean, it's a weird history here.
Speaker 2 (19:07):
It's weird. How will like the two very different sides
both seem to kind of turn against workers almost.
Speaker 1 (19:14):
Yeah, So Nata realized he made a mistake. But what
the basic idea there was, Oh, this is it's bad
for consumers that we have this regulatory scheme of for
banks or for or for or for truckers or for airlines.
It increases prices, it's not as efficient as it could be.
If we consolidate power, that's more efficient. Right, all these
(19:36):
grubby you.
Speaker 2 (19:37):
Know, because scale, you'll be able to do.
Speaker 1 (19:39):
Right. And so the Chicago schoolers or the right wingers
were like, absolutely, this is completely right. I mean they're
hippies and communists and we hate them, but they're not
wrong about the need to bring the experts in to
run things and move away from these you know, grubby,
dumb small business people. And you know, the there's a
lot of it is the consumer rights move movement was
(20:01):
part was the people on the left who got this
to happen. And you know, even if today if you
read like the biographies autobiographies of people who worked in
the Carter administration, though like invective, the anger they have
towards the teamsters is really weird. Like I've read like
multiple people from was his name, Alfred Kahn was kind
(20:22):
of the big one. He was like diregular, but he
used to talk about like how the goal of a
lot of the policies was to just destroy the teamsters
and reduce wages like for workers, and.
Speaker 2 (20:32):
Did they did. Why was there such bipartisan descent for
small business? It just doesn't Maybe it makes sense just
looking back, like Hinslight's twenty twenty, but it just feels
so illogical almost on the left.
Speaker 1 (20:46):
There's an elitism to it. Right, So you had this
is the first generation like in this it's the sixties
and seventies, and now you have finally like tens of
millions of people who are college educated. Right, it's right
after the GI Bill and this the World War two,
and they're they're trying to understand the economy and the
New Deal. The New Deal exists, right, the New Deal
(21:07):
framework is there. Things aren't basically prosperous, and they stop
caring about questions of political economy and concentrations of power
and inequality because there just isn't that much of it.
I mean, yeah, there's like there's some like rich people.
There are rich people, but they're seen as kind of
like borish and tacky. They're not like considered powerful. Wall
Street doesn't really matter, you know, in the seventies, it's
(21:31):
just like a place with coupon clippings of like bonds.
It doesn't it's not you know, it's not a big deal.
And that's kind of the vibe that that most people have.
You know, it's in nineteen seventy nine, you could like
you could leave high school and you could just get it,
get a job making fifty bucks an hour in a factory.
(21:51):
Right that it was just a very different society. So
there just wasn't the concern over being able to make it.
Speaker 2 (21:58):
In and not fifty dollars an hour. Job was not
I'm going to guess from mega corporation.
Speaker 1 (22:03):
Or it was I mean, but it could be. It
could be but like it could be for Ford, or
it could be for a supplier of Ford or whatever.
But like it wasn't you know, there was a lot
of light manufacturing by smaller companies. But the point is
is that you had a lot There were a lot
of options, and it wasn't you know, it wasn't considered
weird or a bad thing, and inequality was fairly low,
(22:25):
and you could also start your own business. It wasn't
that hard to do that, right, But the political infrastructure
for that had kind of fallen apart. And when inflation
hit in the nineteen seventies, and inflation hit for a
variety of reasons, mostly having to do with changes in banking,
you know, some some oil shocks, those two movements spent
(22:47):
a lot of time convincing people that the American economy
was misshapen because there wasn't enough expertise running things. And
so in the nineteen seventies, when you started, when there
was inflation, when there were these when there were financial shocks,
the argument was we gotta we got to get rid
(23:09):
of these new deal rules. Now, there were legitimate reasons
to update those rules, like the train system was a mess,
and because you couldn't close down unprofitable routes. You know,
there was there were there was a lot of like
real problems with our with our transportation system. You know,
it was hard to update trucking rules. There were things
that needed to be updated. But they just said, you
(23:29):
know what, all of this stuff, just throw it out
and give freedom to capital, to to unionize, to do
whatever capital wants, because that's how to bring down costs.
You got to make things more efficient and that will
address pricing.
Speaker 2 (23:42):
So was there a succession of legislation or was it
one big moment.
Speaker 1 (23:46):
It was a bunch of different it was. It was
some legislation. A lot of it was through the courts,
so it wasn't you know, it's not like we ever
repealed any of these anti trust laws. It's just that
interpretations by enforcers and the courts changed. Oh yeah, and
that's actually the Reagan administration. You know. There's this document
that a colleague uncovered in nineteen eighty, the Transition, a
(24:07):
transition document from two important economists who said we're not
going to be able to convince Congress to get rid
of anti trust laws. So we're just going to have
to change it administratively by not enforcing the laws that
we don't like. So that's what Reagan did with mergers.
He said, we're no longer going to enforce merger anti
merger law. And so that's why, you know, you saw
(24:27):
a huge consolidation wave in the nineteen eighties. You know
the movie Wall Street, the nineteen eighty seven Oliver Spill. Yeah,
so that's about a merger, right, that is the moment, Like,
that's what happens, is that that change. You also saw
in terms of legislation. Yes, there was a tremendous amount
of deregulation of particularly of finance, but also of trade,
(24:50):
also of shipping, also of you know, railroads and trucking,
and there were a lot of legislative changes that fostered
the consolidation of economic power in the name of efficiency. So,
you know, one of the first laws that changed was
one that it was called the Consumer Pricing Goods Act
of nineteen seventy five. They said, we are going to
(25:14):
allow discounters to basically charge much less than an item
costs in order to kill their rivals. So you know
that the idea used to be that if I sold,
if I was a producer and I and I sold,
say Ingersol watches or something, I could tell the retailer
what price minimum price they could set, and that way
(25:38):
that retailer couldn't price below cost to draw people in
and kill their rivals. Let's say, like, you know, they
don't do that with Ingosole watches, but they did that
with milk, right, you know, price below cost to kill
your rivals. If you can price below cost, this is
what Amazon does, right, Like. The reason Amazon was able
to kill its rivals is because it could borrow from
Wall Street for as long as it took, whereas its
(25:59):
rivals couldn't. That's called predatory pricing. Uber did something similar
that used to be illegal, and one of the laws
that made it possible was the Consumer Pricing Goods Act
of nineteen seventy five that was put in place by
the Democrats who had just gotten elected reacting in a
reaction to Nixon, and they didn't know what to do
about inflation. So this is something that the Natorites told
(26:20):
them to do. They did it, and Walmart exploded as
a result, nineteen seventy, Walmart was about had about, I
don't know, twenty thirty million dollars in sales. By nineteen
eighty it had a billion dollars in sales by nineteen
eighty five. Sam Walton richest guy in the country. But
so a bunch of stuff, like a bunch of legal
changes happened, deregulation of finance, deregulation of all of these
(26:42):
different areas, and now so the relaxation, dramatic relaxation of
antitrust laws. And so when you make when you legalize monopoly,
which is effectively what happened, then you get a bunch
of monopolies. And this is to our earlier point. If
you don't monopolize, then you get eaten, right, and you
get destroyed. So you could say Mark Zuckerberg did what
(27:05):
he did, and that's bad by rolling up, you know,
the social media space. But if it hadn't been him,
it would have been somebody else, right, And same thing
with Google, same thing with all of these guys like
it was gonna When you create a legal environment like that,
that's what happens. So these big companies now they're big,
Now they're powerful, and they use lobbying, they use infrastructure,
and they're governing. But it didn't start out that way.
(27:27):
Now we have a political economy problem, but the ideas
have changed. So the intellectual framework they were operating on
of Google, we don't do evil, right, which is a
fundamentally a statement about governing. I think there's like a
general view that whatever you think about Google's business model,
it is inappropriate for a private entity to be used
(27:50):
to be wielding sovereign power. That's not it shouldn't be
up to them, right.
Speaker 2 (27:55):
So what does it actually mean that the government said
they had a monopoly of search? What? What does that
actually the ramifications?
Speaker 1 (28:03):
So this is getting to the search trial. We can
talk a little bit about that, but but a monopoly
means you know what the what? So they were just
deemed a monopolist by a judge judgment meta in in
DC District Court. It's actually their second loss. They were
also dubbed a monopolist in uh the Android app store.
Speaker 2 (28:23):
Controls with the case with that pig.
Speaker 1 (28:25):
Yeah, so this is their second and there's a third
case that's starting where it's about their control of software
that underpins advertise online advertising markets. That starts in a
couple of weeks.
Speaker 2 (28:38):
Yeah.
Speaker 1 (28:38):
Anyway, what what Metta said is that Google is a
monopolist because they control uh search right, general search services,
and then they control search advertising. And what they were
doing that was illegal is they were preventing rivals from
getting into the search market using contracts, and so it's
(28:59):
not just that they were monopolizing, it's that they were
thwarting rivals from challenging them, and then they were raising
ad prices as a result of their control of this market.
So the that's like the in anti trust law. It
didn't always used to be this way, but we interpret
it to really since the sixties to the eighties, depending
(29:23):
on what case you look at. If you are if
you are a monopoly and you and then you do
something to maintain that monopoly or to extend your monopoly,
that's what makes it illegal. Right, Like if I just
create a new product category, some widget that no one's
ever heard of before, and I start making it and
(29:43):
it's popular, I'm by definition going to have one hundred
percent of the market. That doesn't that's not illegal, right.
What it would be illegal as if I had one
hundred percent of the market and then I said to
my distributors. Hey, if you want my thing that everybody wants,
you can't distribute my rivals. Think that's what makes it.
That's what turns it into an illegal conspiracy, and that's
(30:06):
effective the argument about what Google was doing with search.
Speaker 2 (30:10):
So, how do you feel it's going to go?
Speaker 1 (30:13):
Why do you think, I mean the they're starting. So
the case started in twenty twenty. It was originally brought
by the Trump administration. The Biden administration has brought it forward,
and it took until twenty twenty four when it went
to trial and finally the judge ruled that Google's a monopolist.
Now is the second part of the trial, which is
(30:35):
called the remedy phase, where the government comes and says,
here's what we want to cure the monopoly, and Google
will say, no, I don't think that's right. This is
what you need to cure the monopoly. And there will
be another, effectively a trial, and then the judge will
rule and make a decision, and then it will go
on appeal, probably the Supreme Court, or depending on who
(30:56):
wins in you know, this election, they could settle it
as the Bush administration did with the Microsoft suit in
two thousand and one. So all of that being said,
we don't even know what the Justice Department is going
to ask for. So the Justice Department could ask for
something very small, in which case that's the most you're
(31:17):
going to get, or they could ask the end of it,
right well, I mean it's not the end. There's going
to be you know, yeah, that's the most you're going
to get. Or they could ask for you know, breaking
up the company and you know, opening up the data
vaults to let anybody use the data that that Google collected,
or you know, opening up their IP vaults and saying
anybody gets to use that, or you know, there's a
(31:39):
ton that the DJ could ask for. We're going to
sort of find out more about that in the next
month or two. The Remedy phase conference the have they're
they're just going to talk about the scheduling of the
remedy phase in I think September like sixth the ninth
or something like that. So, well, you know what we're
gonna be covering, mys be covering that. You're going to
hear about that if you if you want to see it.
(32:00):
But it's I know, it's very exciting. I mean, this
is the first big tech company that's been deemed to
be a monopolist and the anti trust law, you know,
a lot of anti trusts law is is just not
so much what the law says, but whether you use
(32:20):
the law. You know, the Department of Justice didn't bring
a monopolization case pretty much for twenty years since Microsoft,
like the Google case was the first one first, certainly
first big one. FDC brought a few. There have been
some private cases, but this is really the first big
one since since Microsoft. And what's gonna happen and what
(32:41):
is already happening is, you know, every big company is
we're you know, every CEO in a company that has
market power has to ask their general counselor could this
are we doing something that could get us into hot water?
They didn't have to ask that a few years ago,
because you could just the general counsel or their anti
(33:01):
trust council could say, eh, don't worry.
Speaker 2 (33:04):
That dude gives a shit, it won't do anything.
Speaker 1 (33:06):
No one would ever bring a case. Right But now
not only did the government bring a case, but they
won the case. So it's like, oh, okay, now we
got to be careful.
Speaker 2 (33:16):
And just so you when you say they won the case.
So it was the government versus Google with a no.
This is very simple with the judge, Judge Meta saying
I agree with the government, right, Yeah.
Speaker 1 (33:28):
It was the government, and then there were a bunch
of states as well, and the Meta didn't. He didn't
agree with everything the government said. So there were certain
things with like Google's advertising platform that he said that's
not a monopoly. But on the big stuff, the search stuff, yeah,
he agreed with the government.
Speaker 2 (33:47):
How do you break up a company like Google?
Speaker 1 (33:49):
Though Wall Street does it all the time. I mean,
you just saw what I think. DuPont just broke itself
up into multiple division. You know, Google is not just
it's not like one jumbled together thing. You know, Google
has different divisions, and so, you know, and they buy
companies and they sell companies, and you just you've got
put an investment banker in there to sell the company,
(34:10):
you know, sell parts of the company.
Speaker 2 (34:11):
It's not it would be selling off bits of the
company though.
Speaker 1 (34:15):
Yeah, you could just I mean, depending on what they
you know, you could do it in lots of different ways.
But this is something that Wall Street knows how to do,
so you could just It's not it's not rocket science.
You know Google. You just go to Google has a
bunch of people who work in the YouTube you know,
at YouTube, and they have someone who's a CEO of YouTube.
You just say, okay, if you have a share of Google,
(34:37):
you now have a share of Google and you have
a share of YouTube.
Speaker 2 (34:40):
Of a separate institution for.
Speaker 1 (34:42):
Companies, right, I mean there are difficult things to break up.
Like let's say you want it to have a different
a separate search engine, right right, okay? There do you
clone it? Who gets the Google domain? Like who gets
the brand? You know? There are also questions all right,
like let's say you open up the data vault and
you say other entities can come in and use the data.
That's those are technical questions and you could you could.
(35:04):
Basically the way you would deal with that is you
would have Google pay for a like a special master
who would kind of like run who would run a
like a technical committee that would make a lot of decisions.
That's what Microsoft had to do after they lost There
was a technical committee that came in and basically was
a regulator for Microsoft's a couple hundred people something one
(35:26):
hundred to two hundred people who were just making sure
that Microsoft's software was compatible with other entity software, and
they had certain legal authority over Microsoft. You do that
for for parts of Google where you can't actually do
a breakup, and there you know, there you go. This
is a remedy is not that hard depending on what
(35:49):
you want to do.
Speaker 2 (35:50):
It almost feels like they kind of want us to
think it's harder than it is because that benefits them.
It makes oh, it's impossible to do this. We couldn't possibly,
but I imagine and that that's the argument in the
remedies face.
Speaker 1 (36:02):
Well, I mean I think that yes, they they in
the in the epic. We've seen the remedy argument in
the epic the Apple. And what Google has been saying is, oh,
all of this stuff is so hard, it's so expensive.
It's how could we do this? And also it's not fair.
And the judge is basically like, come on, your Google.
You've been saying how awesome you are for a long time.
You can do this. This is not that hard and
it's not going to take you ten years and eight
(36:22):
gazillion dollars.
Speaker 2 (36:35):
So do you see any other monopolies within the tech industry?
Speaker 1 (36:38):
Yeah, I mean I think there's a lot of there's
a lot of market power in all over the economy,
and you see it in you know, I mean the
probably the most obvious monopoly is VeriSign's control of the
dot com domain. Like I know, it's like a small Yeah,
it's just so obviously if you want to register a
domain name and you want a dot com or you
(37:01):
own a dot com and you need to reregister, you know,
you need to renew it, you're going to pay a
you know, you're gonna pay registration company and they're gonna
have to remit whatever whatever they charge. I think they
charge like nine dollars and fifty cents and it's it's
like seventy percent operating margins. And because they manage the
(37:23):
dot com domain name, because the government charters them told them,
you can you get to manage this. They have contract
government that lets them do it. Just a very clear
one hundred percent of the market for you know, renewing
dot com domain names, and just everybody that owns a
dot com domain gives them nine dollars and fifty cents
a year. They should give them probably ninety cents a year.
Speaker 2 (37:45):
Right, So are you suggesting that'd be other chances or chanters?
Speaker 1 (37:50):
Well, what they should do is either just put a
price cap on it and say you get to charge
two bucks and that's it, like a utility, or say
every three years just bid it out and say, Okay,
whoever gives, you know, the best price gets to manage
the you know, the dot com domains. They've done that
for other you know, for other domains, and it tends
(38:10):
to drop the price. Pretty dramatic.
Speaker 2 (38:12):
This is a personal one. I'm going to ask, how
do you feel about the Madden franchise with electronic arts?
Speaker 4 (38:17):
So the reason the house this is because it sucks.
Speaker 1 (38:20):
It's something that I, you know, people have been telling
me about for a long time. So monopolies is not
It's not like always obvious. The moral arguments aren't always obvious.
Mad's a really good example where and I don't know
that much about this, but you used to have a
lot of different NFL sort of football games. You had
at least two, Yeah, and they were and they were innovative,
(38:40):
so you like, they had to innovate around like different features.
I don't play video games. I don't believe in fun.
I don't like, you know, I don't think there should
be any joy. But I lost that, so, uh, but
as long as you're not going outside, that's my main concern,
not a problem. Okay, good. So you know, the these
(39:02):
long term monopoly arrangements are like are I think there's
something really problematic about it, But I don't exactly know
what to do about the But but the you know
Madden has gotten is it's not that it's gotten worse,
it just hasn't improved, right, And and they're there there's
also some of the other sports games they're like extracting
(39:24):
more and more money. But did you see this with
fanatics too? They've made the experience in sports worse. So
it's what we need to look at is these kind
of long term exclusive contracts. And there are some there
are some questions like should the NFL be able to
(39:47):
leverage its brands to create you know, obviously they have
obviously they have a right to profit from their brand,
right and obviously the players and they all have right
to profit from their brand, just as movie company. You know,
they get a copyright of the movies they make. But
(40:09):
the question is should you able should you be allowed
to take that brand that is a government granted monopoly,
which is fair because you are generating you know, you're
making the product, right, but should you be able to
turn that into another monopoly? Should be you able to
leverage that you know, or should you have to say, okay,
(40:31):
well we will. I'm in a profit from it. Anybody
that uses the NFL in a game has to pay me.
But I can't restrict who gets to use that in
a game, right. That was a little bit like there
have been anti trust cases on that. There was one
in the forties that restructured Hollywood. So there were a
bunch of movie studios and they owned or they controlled
(40:55):
theater chains, and they wouldn't let rival movies into the theaters.
So it'd be like, if you want to get you know,
like Gone with the Wind, which everyone wants to see,
then you have to take our other movies and you
have to keep rivals out of your theater. And it
was just a way of controlling the commons. It was
a way of tran of turning their monopoly over legitimate
(41:17):
copyright monopoly over Gone with the Win, which they had made,
into a monopoly over distribution of movies in general. And
this feels the Madden thing feels a little bit like
it's turning their brand into control over over, just like
football related video games, and that that doesn't feel it's
(41:37):
had the consequences that we don't like higher prices worse quality.
Speaker 2 (41:42):
And you're right about Madden. I think it's a great
example of how of a problem of this kind of
long term licensing agreement because it's it is. I would
argue with people about whether it's good or bad. I
think it's a certain kind of mediocre. But you're right,
is it keeps things kind of trapped in amba it
only gets as good as the monopolist decides.
Speaker 1 (42:03):
Yeah, that's right. And EA Sports will overpay, right, like,
they will pay more just to just to be the monopolist. Right,
They're not paying for the license, they're paying for the
license and to exclude someone else from getting into.
Speaker 2 (42:18):
The space, kind of like Apple with Google.
Speaker 1 (42:22):
Yeah, that's right. I mean, that's the thing is you
don't want so the original the Sherman At Anti Trust
acts bars monopolization and restraints of trade. So if you
think about the term restraints of trade, it is about
saying someone shouldn't be able to restrain trade to to
It's not a critique of big business. It's a critique
(42:43):
of not allowing business to get big right, And this
is a case where they are preventing more business from
being done by paying explicitly so others won't get that
that NFL licensing brand.
Speaker 2 (42:59):
It almost feels like monopolies are just like distinctly on American.
Speaker 1 (43:03):
Well, you know they they you know, let me get
this quote from Woodrow Wilson because it's it's a really
good quote. I know he's you know, it was virulently
racist and everything, but you know, take the good with
the bad. So America was created to break every kind
of monopoly and to set men free upon a footing
of equality, upon a footing of opportunity, to match their
(43:23):
brains and their energies. So he actually appointed Lewis Brandeis
to the Supreme Court. And you know there is a
you know, Thomas Jefferson wanted to put an antime monopoly
plank in the Constitution. That was his one of his critiques.
You know. You see, like historically, the anti monopoly lens
(43:44):
is kind of a critical way to understand American history.
And you can see this like over and over and over.
There is this fear of monopoly power and it comes
from the the the recognition that we do not want
(44:04):
to be run by a king. Right, So John Sherman,
Sherman Anti Trust Act, said that, you know, if we
wouldn't be will not be ruled by a monarch, we
should not be ruled by an autocratic trade. Right, very
explicit about the link between monarchy and authoritarianism and monopoly.
(44:25):
And they were using the term monarchy because fascism hadn't
happened yet, right, so, but monarchy did exist, right then
in the nineteenth century, Americans were looking across the ocean
and they were seeing a bunch of kingdoms. There was
a little bit of democracy, but that's what they were
really looking at, and they were like, we don't want that.
And today we would just say fascism, right, but like you,
(44:45):
you know that we did analogize monopoly to fascism in
the nineteen twenties, thirties, forties. But it has always been
foundational in America that concentrations of power are what we
escaped and they are not what we want here. And
there's always been this tension because you do need to
(45:07):
consolidate capital and effort to do great public works and
to do great works in general, like you often do
need to do that, But how do you control the
power of that. How do you control the power of industry?
If you're going to put a billion dollars together to
build a railroad across the country, you know, that's awesome.
Now you have a transcontinental railroad, but who runs that
(45:30):
railroad and the prices they charge, the ability for them
to charge different prices to different classes of people based
on who they want to succeed. Now, all of a sudden,
you're talking about a political problem. Well, of course you
don't want to say you can't have a railroad, but
you do have to deal with the political power that's concentrated.
And it's true with telegraphs, it's true, you know, the
(45:52):
Internet going all of these things. So this has always
been a problem, a political problem that we've tried to address.
And I think what happened in the seventies and eighties,
and this has happened the last forty years, is we
just kind of forgot about it, and then all this
consolidation happened, and now we're trying to get a handle
on it again.
Speaker 2 (46:10):
And is this what you were referring to you mentioned
previous previous quote of your authoritarianism is coming for the
private from the private sector. Is this what you mean?
Speaker 1 (46:19):
That's right?
Speaker 2 (46:20):
These It's It's fascinating as well because I've been running
business fifteen years and felt pretty well learned about this stuff,
but never really thought about these companies as political entities.
Which leads me to a cloud compute question. So do
all police basically have the same problem because right now
in tech you have basically three or four, maybe five
(46:42):
companies that control all cloud compute? Is that something we
should let stand it? Like do we need to see
signs of price fixing? What are the bad signs?
Speaker 1 (46:53):
So really good question. Every market is its own special snowflake. Right.
You can't. You can't make you know, some markets, right,
you can? You could. You could structure a market to
have a lot of a lot of different entrants like farming. Right,
you can have a lot of people growing corn depending
(47:14):
on how you split up the land. You can have
a lot of banks, right. Not totally clear to me
that you could have a lot of say, auto producers, right,
not going to have a family, you know, artisanal auto
producer that makes a lot of cars, right, So same
(47:35):
with chemicals, same with lots of different I mean you
can like there's there's just there are some industries where
you're going to have a small number of producers semiconductors,
there's you know, they're not going to have like so
cloud computing. When I look at it, to me, it's
just a it's a capital story, right, Who has the
capital to put to build out the data centers to
(48:00):
get the power that you need to design the compute
that you need. And it might be the case that
you really can only have three or four of them,
maybe have some specialty cloud computing. I don't know. This
isn't an area I've studied extensionly. But typically when you
do have an entity where entity is where you have
(48:20):
like a huge capital investment and you can't have you
have their natural limits on the number of competitors, you
have some form of public utility regulation, which usually takes
the form of saying you can't engage in price discrimination,
like you can raise your prices, but you can't charge
(48:43):
more to that entity for the same service than you
charge to this other entity. And you can't you know,
and you can't say, engage in like surveillance of your
clients to give yourself an advantage that would be or
you know, there's certain like you can't pick winners and losers.
You have to you have to be a public utility.
(49:04):
It's a little bit like it was a little bit
like a railroad or a granary or something which is
clothed with public interest but is owned by a private entity. There.
You know, it gets a little tricky with things, you know,
with companies that make open source tools on top of
of uh you know, for cloud computing entities, do those
(49:27):
cloud computing anties just like absorb those tools make their
own version of it like there are you know, I
don't have an answer to all of the questions about
how to run a cloud computing infrastructure, but generally what
you want to do is you you want to say,
all right, we're gonna we're going to try to pull
(49:49):
the power out of we want the economies of scale,
but we're going to try to pull the ability to
be arbitrary and coercive out of the business model through
antitrust law or regulations or whatever we can do, or
just you know, transparency of pricing. You know, I know
(50:09):
there's some egress pricing. I mean that's you know, being
able allowing people to get out of the cloud computing
pull their data out if they want so. There are
different techniques, but the basic idea is to recognize that
there is a there is a public interest in this
private in these in these these in this private infrastructure,
(50:34):
and so the public has some right, not total right,
but some right to control how these entities are are operating.
Speaker 2 (50:41):
And that they could that they must be free trade
in the sense that someone can easily leave and go
to a competitor right within reason.
Speaker 1 (50:48):
In reason, Yeah, that's right.
Speaker 2 (50:50):
Another question I think we can wrap up with this
one is Meta a monopoly? Because Meta is the only
provider of advertising on metas products and they have there
is no way that someone realistically compete with Facebook. It
is too big at this point, and same with Instagram
kind of is it a monopoly? I'm trying to understand
(51:11):
these concepts in real time.
Speaker 1 (51:13):
Yeah, I mean I think you you know there are
different markets, right, So I think an easier way to
conceptualize this would be to look at Apple, right, Apple
and Google, and you would say, well, Apple's not a monopoly.
I mean, I can I can buy an Android phone, right, right,
I don't need to buy an Apple an iPhone, right?
And that's true if you're looking at it from a
perspective of somebody who's buying a phone. It's a duopoly.
(51:35):
There's a lot of market power there, but it's not
a monopoly. However, what if you've bought the phone now,
all of a sudden, you you know, you can't it's
not easy to switch, right, so you're kind of locked in.
Is Apple a monopoly? Kind of kind of? Okay, Well,
you can look at it from a different point of view,
which is what if you're an app developer right now,
(51:58):
you have to get on the I phone because some
of your customers are there and you can't not be
on the iPhone. So getting into the app store for Apple,
that's a monopoly question. And the same thing is true
for Getting So it's a little bit like you're you know, sure,
maybe you can. There's a lot of railroad options, but
(52:19):
there's only one railroad that goes from one town to another.
So there might be a bunch of different railroads, but
for what you need, there's only one option.
Speaker 2 (52:28):
So it's access to the customer.
Speaker 1 (52:30):
Well, right, just there's lots of different markets, there's lots
of ways to understand, you know, what what market power means.
So if you take that back to Facebook, which is
really like a conglomerate of Facebook, Instagram and WhatsApp. Do
they have market power and where do they have market
power over? I think you'd look at the ability to
(52:52):
buy certain kinds of advertising, right if do you need
if you're running advertising campaigns, do you need to buy
on Facebook? Or can you just avoid Facebook entirely? This
is one of the questions in the Google case, and
this is the question in actually multiple Google cases, And
it's been a question in a different case involving medical advertising,
(53:14):
which had to involve a company called IQBA, and the
court found that in fact, yes, if you are doing
specifically pharmaceutical marketing, IQB is is there is market power
involved in these very narrow places where you have to buy.
It's kind of like that smaller railroad, that one place
(53:34):
you put at the one the only one that goes
to the place that you need to go, the jack
up prices and control who gets to use it. So
the question, I think the question I would ask is,
if you're an advertiser, do you have to buy on
Facebook's products? If you are, you know, a company, do
you have to communicate through Facebook's tools? Right? I know
(53:57):
WhatsApp is really embedded in a lot of different business
arrangements at this point. So that's where that's kind of
how I would I would look at it, and I
think you could make a pretty good argument that Facebook
has immense market power in social networking in general. You
know the definition. There's different ways to test for monopoly.
(54:19):
You could just say, well, can they raise prices without
really losing very much? It's been, which they have been,
and I think it's pretty clear that they can. And
if there were another option, right, you could you probably would.
They would they would see loss of customers bleeding going
somewhere else, and they don't see that. Another way to
(54:40):
understand it is, after some of the scandals that they've had,
do they lose customers because of it? Do they lose
users because of it? And the answer is no. Right,
So there doesn't really seem to be an effect of
the quality of the product. It doesn't seem to affect
whether people you it or not.
Speaker 2 (55:00):
Oh, actually, I might push back at that a little bit,
and perhaps I'm misunderstanding your point. But Facebook's advertising product
is decaying to the point that it's actually unreliable how
much comes out of it, And also they approve there's
a big thing where they approve fake ads for fake
for other companies. So it's interesting as well because it
(55:22):
almost feels as if we need a full consumer awakening
just to the concept of monopolies writ large, so that
people can start looking at these companies and acting and
even just discussing them differently.
Speaker 1 (55:34):
Right, So, to Facebook, the product quality is decaying, the
advertising quality is decaying. Are they losing business because of it.
Speaker 2 (55:42):
As in they being meta or they be right?
Speaker 1 (55:46):
Because if they're not, then what that's proof of monopoly power?
Because what's right gowing is the quality is declining, but
they're not getting Like if it were if there were
a competitive market and the quality of a product went down,
people would say, I'm not going to buy that product anymore,
the shirts fall apart, I'll go buy somewhere else. But
because but it's like, if that's the only place where
(56:06):
you can get the product, you can't. You have no choice.
You have to keep buying from them.
Speaker 2 (56:10):
Right right, that makes sense? So Matt, Yeah, this has
been such a pleasure. Thank you so much for joining
me today. Where can people find you?
Speaker 1 (56:20):
So? I write a newsletter called The Big Newsletter dot com,
which is about monopoly, power and finance. And I also
am the research director of a nonprofit called the American
Economic Liberties Project. And then I rant on Twitter way
too often. That's my you know, that's my madden post.
Speaker 2 (56:41):
This mindset, it's the greatest. You've all been listening to
Better Offline. Thank you for listening so much, and of
course the regular places to find me in the show
follow after this.
Speaker 4 (56:59):
Thank you for listening to Better Offline.
Speaker 2 (57:01):
The editor and composer of the Better Offline theme song
is Matasowski. You can check out more of his music
and audio projects at Matasowski dot com, M A T
T O S O W s KI dot com. You
can email me at easy at Better Offline dot com,
or visit Better Offline dot com to find more podcast
links and of course my newsletter. I also really recommend
(57:22):
you go to chat dot Where's Youreed dot ad to
visit the discord, and go to our slash Better Offline
to check out our reddit. Thank you so much for listening.
Speaker 4 (57:31):
Better Offline is a production of cool Zone Media. For
more from cool Zone.
Speaker 2 (57:35):
Media, visit our website cool Zonemedia dot com or check
us out on.
Speaker 4 (57:39):
The iHeartRadio app, Apple Podcasts or wherever you get your
podcasts
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