Is monopolization inevitable in the digital era?

Not just a game.
Not just a game.
Image: AP Photo/Mark Lenniha
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How big is too big? It’s the question of the moment when it comes to technology platforms. To understand how we got here, and where we might be headed, Quartz spoke with Matt Stoller, a fellow at the Open Markets Institute, and leading expert on the history of antitrust in the US. Stoller recently published Goliath: The 100-Year War Between Monopoly Power and Democracy. He also writes “Big,” a newsletter on the history and politics of monopoly power.

In Goliath, Stoller begins with the consolidation of industries by the Gilded Age trusts and takes us through the roaring ’20s, Great Depression, New Deal, World War II, rise of free-market theorists, rebirth of Wall Street, and through the collapse of the New Deal and what he dubs the “last hurrah for antitrust.” It finishes in our modern era, with too-big-to-fail banks and dominant tech giants.

Quartz spoke with Stoller about his book, his favorite corporate villain, and whether monopolization is inevitable in the digital era. The interview has been edited and condensed for clarity.

Quartz: If we link to your new book, Goliath, do you prefer if it’s an Amazon link or a non-Amazon link?

Matt Stoller: Whatever you want!

You don’t have a strong antitrust opinion about that?

No, I don’t, because I’m not consumer-oriented. You can’t attack a monopoly through consumer boycotts. If you want to buy Goliath on Kindle—and I think that you should, you should buy it on all formats—or if you want to buy it on audiobook through Audible, there are a number of formats that you basically can only get through Amazon. This isn’t something that anyone can address through consumer choice because there often isn’t choice. You have to deal with this through politics. So there’s no irony in saying yes, sure, buy it through Amazon.

Matt Stoller.
Matt Stoller.
Image: Sophia Lin/Simon & Schuster

What got you interested in antitrust as a subject?

I started working on net neutrality in 2005. I was a blogger running a small business. And it was the first time that I saw the telecoms essentially threatening my ability to publish. That’s what the net neutrality conflict was about. And so it was the first time I saw the coercive power of a private government—in this case, Verizon and AT&T—make a political threat. They were very tied into the Democratic establishment and the Republican establishment.

Going forward, I started working on the financial crisis for a member of the House Financial Services Committee. That’s when I realized that banks, especially too-big-to-fail banks, were not technical, neutral institutions. They were political institutions and how we do finance and business is how we do justice.

Over the next couple of years, I started to learn about the relationship between monopoly and finance, particularly through the legacy of congressman Wright Patman, who had fought the bankers in the 1930s through the ’60s, and also fought chain stores in the ’30s and ’40s. I met one of his former staffers who taught me about this. That’s what led me to recognize the story of how we both defeated the monopolists and the financiers in the first half of the 20th century, and then in the 1970s a new generation of Democrats helped resuscitate and bring back those robber barons. And that’s the world we live in today.

How would you compare the rise of tech platforms like Google, Facebook, and Amazon to these earlier monopolistic eras in American history?

I think they’re very similar. It’s important to understand that Google and Facebook are conglomerates. It’s not like somebody started a company in a garage and 15 years later it’s the biggest company in the world. That’s not how it works. These guys rolled up the whole ad-tech space. They bought dozens of companies for tens of billions of dollars. It was a massive consolidation wave in basically 2004 to 2014.

That’s very similar to what happened in the steel industry in the 1890s. So in 1901, when when JP Morgan created U.S. Steel, that was a roll-up of 4,000 separate companies that had been involved in iron and steel production. That’s basically what happened with the internet space in the mid-2000s in roughly the same amount of time.

In the introduction to your book, you point out how much of modern life is now beholden to a small group of corporate giants. That feels especially true if you look at tech: our phones, our computers, the platforms we use.

It’s not just that they own it. It’s really a question of who governs. Are we governed by democratic institutions? Are we a free people who can govern ourselves? Or are we governed by private monopolists?

When you look at the massive market value of some of these companies, they’re in some ways comparable in financial clout to nation states.

They absolutely are. You know, I love Mark Zuckerberg, he’s my favorite villain. He’s talked about creating a Supreme Court. He’s trying to set up his own currency.

There is a level at which these guys are just explicitly private governments. The New Dealers understood this, and a lot of policymakers from the 1890s to the 1940s understood this as well. John Sherman—his name is on the Sherman Act—said, “If we will not endure a king, we will not endure an autocrat of trade.” 1 That’s a political statement about who governs. It’s not about consumer prices. It’s not about revenue.

What technology platforms and hardware makers do you interact with on a daily basis?

Well, all the monopolists: Google, Amazon, Apple, Microsoft. I don’t really use Facebook that often. I use Twitter too.

Do you use WhatsApp?

I have WhatsApp. I don’t really use it, but I have it.

So you do have Facebook on your phone, because Facebook owns WhatsApp.

If Mark Zuckerberg knows where I am, I just feel safer.

We’ve all seen stories about people who try to go off the grid. Have you ever tried that, and do you think it’s a realistic option for most consumers?

No, I don’t. I haven’t tried it. It’s incredibly difficult. It’s almost impossible to even know if you’re doing it because if you use the internet, you’re probably using Amazon’s AWS even if you don’t know it. The point of a monopoly is that you can’t escape.

And you could argue that for the average person now, who has a job that requires any form of digital communication, it’s not a choice, right? You have to use your email. If your company uses Google or Outlook, that’s that.

That’s exactly right. Even things like the infrastructure of the internet itself. The DNS is basically the technology that if you go to nytimes.com, turns that into a set of numbers that your computer can understand so your browser goes to the right place. There’s a company that manages that process called Verisign, and Verisign is an unregulated monopoly at this point. It makes 60-70% operating profit margins. It’s a toll booth. If you use email, or you use any of these systems, you have to go through their DNS registry.

There’s a million little pieces of infrastructure that you go through every day to organize your life. The people who control those, we call them billionaires, but really they’re not. It’s not like they have swimming pools full of gold coins. They own the toll booths in our economy.

You’ve talked about how Big Tech is part of the modern cosmopolitan liberal culture. I’m curious how you think that place in popular culture helps insulate technology companies from closer scrutiny.

I think there’s a vision of social justice behind how Mark Zuckerberg and Eric Schmidt think about the world. We want to organize the world’s information. We know what’s good for you. We’re technocrats.

That vision, which I think you see embedded in the Democratic Party, goes back to the turn of the 20th century, this belief in bigness as good, in bigness as virtuous. And that’s what you see with Google and Facebook, and a lot of sort of Silicon-Valley-left libertarianism. It’s this vision that concentrations of power in the hands of private actors—as long as those private actors are beneficent, progressive aristocrats—that’s the way to have social justice.

Do you think Amazon is a monopoly?

I do. I think Amazon is many monopolies, actually. It’s so big and and complex, it’s hard to figure out where they are, all of the places they are organizing their market power. You might be able to find other places to buy books, but if you want to buy a Kindle copy there’s really just Amazon. If you’re selling direct to consumers, it’s incredibly important to go through Amazon.

Maybe Amazon doesn’t have 100% of the market, but they have enough that you effectively can’t run your business without them. They have massive market power in logistics and fulfillment. They also have AWS, their cloud service. If you’re a business and you’re running on the cloud, maybe you can choose between Microsoft and Amazon, or IBM, or someone else. But once you’re on Amazon, once you’ve decided to build your products and services on top of AWS, then they have market power over you because it’s very expensive to switch.

So, the question of market power is not simple. And it’s not like Amazon is the one seller or one buyer of all things—although sometimes they are—but they have many ways of bossing you around.

Do you think you’ll get a nasty call from Amazon for saying these things to me?

I think if they thought a nasty call would work, I would certainly receive a nasty call.

Tech companies lean very heavily on this idea that whether something is a monopoly depends on how you define the market.

My favorite market definition comes from Reed Hastings at Netflix, who said that they are competing with sleep.

Why do you think we have such a hard time calling these companies monopolies?

I don’t think we have a problem calling them monopolies. If you look at the polling or you look at concerns among the public, everyone is like, “Yeah, these companies are too powerful and we need to do something about them.” Now what to do is kind of an interesting question. Whether the government can do it is an interesting question. But I think the people that don’t want to call them monopolies are a small club of insiders who are corrupt. The antitrust establishment is corrupt.

Why should the rise of monopolistic companies in tech—but really anywhere—matter to the average person?

The real reason is because it’s destroying all news. Journalists are the watchers of our society. They pay attention to our political and our commercial institutions, and they write about problems. People may dislike Fox News or MSNBC, but they basically want local coverage. They want their schools to be covered. They want their lives to be covered. They want to see themselves reflected and they want to see problems exposed so that we can solve them. And that’s not happening anymore, because Google and Facebook have destroyed the financing channel, aka advertising, for our publishers. And then they’ve created these giant manipulation machines that allow third parties to manipulate our society in very dangerous ways.

The US recently launched a series of probes into Big Tech. There’s the Federal Trade Commission investigation of Amazon, a House antitrust probe, and the state attorneys general investigation. One way to see this is the US is finally getting more serious about antitrust. A more cynical reading is that Trump is going after companies he perceives to be hostile to him.

I am not in the cynic camp for a couple of reasons. First of all, Trump is really not driving this at all. It’s actually the state attorneys general that are really pushing this forward. Then, there are a lot of corporations that are angry with Google and Facebook. So Oracle, Walmart, Comcast—they are all not fans of Big Tech. That’s a good thing.

The reason we have separation of power in government is that by fragmenting power, you make sure that no one person can concentrate it. And that’s what you’re starting to see in the corporate world. The unified political front that they had against the use of the antitrust and regulatory tools is breaking down, and that’s very healthy.

You write that nothing about monopolization is inevitable. But in the modern digital era, it has started to feel like it is. Where do we go from here?

It feels inevitable because a lot of people say it’s inevitable. It goes back to this notion that everybody wants a “Daddy” to take care of them. They always want to not have to take responsibility for living their own choices in their own liberty.

Being a free person, living in a free society, means that you have to actually make choices about how power is going to work. And it’s a scary thing to do. It’s also a liberating thing to do. It’s a wonderful thing to do. But it’s frightening.

And being a citizen, it means taking responsibility, it means wielding power, and wielding power is scary. Democracy is a system that is based on the idea that we as individuals can make choices, and that we as groups can come together to wield power. But we must choose to do so, or others will do it for us.