Biden’s Antitrust Architect on How Big Tech Threatens U.S. Prosperity

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0:40You opened your new book talking about an Apple ad from the spring of 2024 that you called extraordinary. Can you describe it for me? It consisted of all the paraphernalia of human creativity, a piano, art brushes, other musical instruments, all being crushed by a giant kind of press-like device. It was all of sort of human achievement and cultural production, all produced and crushed into one tiny little thing. You know, Freud once said that jokes are always that which tell us what we really mean. And in our time, I think it's advertisements. And the truth revealed was the sense that the very nature of humanity is being extracted and commercialized.

1:24In some ways, we're the resource being mined. This week on Bold Names, we've got Tim Wu. He's a professor at Columbia Law School, and he's usually arguing on the side of breaking up big tech companies. Now, that's right, Mims. He was a key architect of the Biden administration's plans to promote more competition between U.S. businesses. And he has a lot to say on how companies should be regulated. He's recently put himself back into the spotlight by publishing a new book called The Age of Extraction. In it, he articulates his point of view on all of this, which is that if we don't check the power of big tech, we might all be in trouble.

2:06From the Wall Street Journal, I'm Tim Higgins. And I'm Christopher Mims. This is Bold Names, where you'll hear from the leaders of the bold name companies featured in the Wall Street Journal. Today we ask, what's the risk of living in a world dominated by a few big companies?

2:27I think most of our audience is familiar with big tech platforms, whether it's Amazon, Google, Meta, Apple. But there's something interesting in your new book, The Age of Extraction, how tech platforms conquered the economy and threatened our future prosperity. And you paint a picture of how these platforms actually have their roots in the ancient town square. Can you explain that? One of the things I think it's important to realize is there have always been essential platforms in every society. Things have to happen somewhere. And long ago, you know, like in ancient Greece, it was the city square.

3:03In Persia, it was the bazaar. We had markets, agricultural markets all through Europe. You know, you had Main Street in the United States. There's always been a place that commerce, culture, in some ways democracy or government depend on a public space. The difference is how those spaces are owned, who owns them, and who are the beneficiaries. And I think that's something that has radically changed in our times. Well, let's follow up on that, because what's different about today's platforms and how they operate? I think the main difference is in business model, or even the sense that they have a business model are these private entities.

3:40We have entered an age, and frankly, it was Bill Gates who first really got this idea that you could have a space, this was the early Windows operating system, that would be incredibly convenient, that would be the place everything happens, that in some ways would be this extraordinary agent of catalytic economic activity, but then the platform would take all the proceeds. And I think that model is really key to understanding the times we live in. You know, I'm curious, when you talk about tech platforms, what role do they play in our current economic era? I mean, I think they're both essential and extractive.

4:22So, you know, try going a week without using Amazon, Google, Apple, Facebook. They've won the war of convenience. Yet at the same time, they have perfected the business model. In the book, I talk about, not unlike a casino, it doesn't really matter what you're doing there. In the end, the platform is always going to win. They extract fees and money. They extract attention, time to sell to advertisers, extract data to build and make their products better. Like in the casino, they don't care what's going on. They care that you're here. But the trade-off is we get a lot. We get a lot of stuff. You can obviously have things show up at your door.

5:03You know, we've been living with this for a long time. It's familiar, obviously, to everybody. But the question is, what kind of bargain have we actually struck? It really kind of sounds like what you're painting is almost kind of two worlds. You've got, there's these platforms that are extracting value, and then you've got these businesses who become dependent. You've got consumers who are dependent. You've got employees who are dependent. So there's almost two sides to this. Yes, I think that's a good way of putting it. One of the risks that I think we run is an economy which is essentially divided in two.

5:36The platforms which extract the value not only from consumers, but also from all the dependent businesses, either entire sectors of the economy, news media being a good example, publishing industry, you name it. Every kind of sort of business in the United States becomes dependent upon the platforms. And then, of course, consumers, like we can't deal without them. And then the middleman basically making all the money. And it's a different kind of economic problem. This is all about not only consumers, but also producers all being caught in this sort of web where they're all paying. And so you have dependent business and consumers are on the losing side.

6:24Now, obviously, they're not going to take all the money, but it's enough to make kind of over time become this almost like a tax on the economy. So it wasn't always this way, right? I mean, I can remember a time when there was so much optimism in the early days of the Internet. You know, this is going to be this incredible, flattening, enabling platform where everyone can share their ideas, make money, connect with whoever they want. Why did that vision fail to pan out? I think, you know, there was a certain amount of idealism. I look at my old stuff from those days. I think many of us sort of were kind of caught up in the enthusiasm.

7:03But I think a lot of it had to do with a fundamental failure to understand platform power. Those days, the 90s and early 1000s were built on Microsoft, which had been humbled by the Justice Department. The Justice Department has charged Microsoft with engaging in anti-competitive and exclusionary practices designed to maintain its monopoly in personal computer operating systems. It has restricted the choices available for consumers in America and around the world. And also on top of the telephone networks and broadband, which were under net neutrality and were strictly limited in what they could do by virtue of being federally regulated.

7:46So you had one big player that was cowed by the antitrust folks who'd really put them through it. That's Microsoft. And the others, that antitrust action had happened before. But the point being they were heavily regulated to carry all traffic equally. Yes, that's right. And on top of that, the early internet built up. I also think there were many of us who fundamentally believed that there was something just internally different about places like Google. I went back and read Google's IPO letter when they went public. And it's extremely earnest. It talks about how fundamentally they want to make the world a better place.

8:31and I think they kind of believed at the time I don't have the conspiracy theory that you know they had this secret plan and were always going to take it but they did also want to be billionaires and also I think you know Google they make a lot of money but when you listen to them talk they feel like they are thinking thoughtfully about how they can help connect people with information and grow an ecosystem of ideas along with connecting buyers with sellers Right. So there's some value there. Right. Look, I don't I don't think that search is inherently evil. I do think it is unfortunate that we have a monopoly in search who has preserved themselves at the cost of competition.

9:18And frankly, just extracts a lot more money than at this point it's worth. and I say that it's basic monopoly economics. Once you have established your market and controlled it, you're going to price higher. Now their way of pricing is advertising to us and also the prices they charge their advertisers. They're very innovative until a certain point, but in search, technology has long since commodified. After the break, how did Amazon, a marketplace that Tim says was once an engine of mass prosperity, become a tool of extraction. The idea is to build kind of a cocoon of conveniences such that everything you could ever want is in one place and you never leave.

10:06Stay with us.

10:19Platforms, like you're describing, they enable buyers and sellers. But as you just alluded to with Google, at some point, that enabling of connecting the buyer and the seller becomes extraction. So let's look at an example of this in the real world. Let's talk about the Amazon marketplace. So what are you seeing there? I think the Amazon marketplace around 2012 really was an extraordinary place that was going very far in the direction of delivering on that promise of making, in a sense, giving an opportunity for everybody to make it rich. It was the world's largest marketplace. It was a great on order fulfillment.

11:02And the margins they charged people were reasonable. I think around 17 % to 20 % to sell on the marketplace. And it was, I would say, an engine of mass prosperity, an important engine of mass prosperity. So that was like, you know, how the internet was supposed to be. I think the story is, in some ways begins with hope and then leads in a much darker direction. As Amazon, you know, creates a dependence, makes businesses feel they have no alternative, make consumers, many consumers feel they have to be there or nowhere. They can't quite get the same stuff in other places. And then they just ratchet their fees up and up and up and up.

11:44The amounts now, there are different estimates, But many sellers are spending over 50, some 60 percent of their margins on Amazon. It's much harder to make money. And it's lost that sense that it's a beacon or a platform of opportunity. I mean, that said, a platform like Amazon lowers the barriers to entry for a small seller to almost nothing. I mean, right. They will give you a place to sell. They'll coach you on taking pictures. They'll coach you on making sure that you rank in their algorithm. They will do 100 % of the logistics for you. You just got to get goods into their warehouses. I mean, isn't that a good thing?

12:25I mean, I think Amazon, first of all, deserves a lot of credit for what it has built. And I also think that Amazon's success and the importance of it shows just how incredibly important a platform is to a flourishing economy. But what Amazon is no longer doing that it once did was being an agent of, in some sense, truly providing opportunity for medium and small sized businesses to make to make a real fortune and be an agent of balancing in the economy. I mean, I think there's one thing that most people agree on. Our economy is no longer balanced and the big guys have more and little guys have less.

13:08And, you know, a key issue in that is exactly how much Amazon and the other platforms, which businesses defend on, how much is their take. And that is my quarrel with Amazon. It's not there. No one would be upset about their fulfillment and no one would deny Amazon deserves to make some money. I think we keep hearing some words here that I think, so there's a pattern here, big, big, right? Like there's a role of scale that comes with these, gives these companies power and strength. And I'm curious what tactics attracted your attention? What tactics have big tech firms used to maintain their market power?

13:46Yeah, I mean, I think that's part of the challenge. I would think differently if there was robust competition, but I've come to feel that in many of these areas, just like in ancient times, there wasn't room for 10 Greek agoras in Athens. You know, there's a few businesses in any economy where there will not be a large number of them, and they will be essential to the livelihood, even the culture and the prospects for democracy in that space. And their share of the take is something we need to keep an eye on. And that's, I guess, what it comes down to, in my view. I mean, there's some benefits to scaling, though, right?

14:30It lowers prices for consumers. I mean, it's a balance. Yeah, I completely agree. I'm not one of these people who deny the benefits of scale. In fact, I think that's what we've seen. But if you believe in a balanced economy, I think you have to accept that some things like the railroad system, like the electric networks, like the selling platforms are going to be scale businesses. And if you want any hope for the things on top, you have to control how they function and how much their take is. Right. And we're going to get to that balance shortly. But while we're thinking about scale and ambition here, I mean, one of the things you write about is how these big, especially tech platforms, have gotten into the content business.

15:13And it seems like, you know, more and more day by day, right? Amazon bought MGM Studios a few years ago. Apple spent billions producing film and TV shows. Customers like this sometimes. But in your book, you argue it has its downsides, right? So what does this push into content and media by these tech platforms mean for the consumer? You know, I think it's been fascinating to watch. And the assumed wisdom had always been that when a company that has a perfectly good business starts buying media properties, it's a clear sign that things have gone downhill. That's the top. That was the clear assumption.

15:53And usually it meant that the son had inherited. Usually the father or the grandfather had this great business model. People alive back in the 80s and 90s may remember that Sony, which had a great business making electronics, decided to start buying American movie studios. Last Action Hero was a good one. Got to catch the red eye. A series of generally terrible movies now and then. Come on, that was a great movie. Some good ones. the movies were not always the most successful but I think no one there's less doubt about the wisdom of the acquisitions this shows something very deep and profound about the change of business models and I'll just say a word about that the platforms they're less interested in selling you something because they facilitate conduct and more in the business of herding.

16:54You just sort of have to have people there. And so one of the things that the platforms did over the last 10 years was much less any invention of great new technologies or brilliant breakthroughs. You haven't really heard much of the genuine technological innovations. It's more about a real big bet on human laziness and, frankly, couch lock. the sense that once you get used to things and if everything is where you are you'll be very unlikely to leave i mean i don't know if you've ever had that feeling where you consider buying something on a like the site that's not amazon or you try to give it a go and some other thing and then after a while you just decide it's too much of a pain and come fleeing back you got to put your credit card in you got to put your address in it's like uh there's all these little barriers right?

17:44You know, the business people or business professors call it switching costs. I would just call it a long bet on couch lock. The idea is to build kind of a cocoon of conveniences such that everything you could ever want is in one place and you never leave. You know, one of the through lines in the book that I thought was really, really interesting was talking about how modern tech owes a lot to the previous generation's efforts to enforce antitrust laws, especially when it comes to IBM and AT &T. What did you mean by that? So in the 1970s, the United States was dominated by two major tech monopolists, AT &T, IBM.

18:26And in fact, most countries were like that. And most of the countries in the 70s, following kind of industrial policy theory, just tried to support the big companies and and hopefully win a little bit like Boeing and aerospace or see this as an international competition. The American approach was very different. We broke up AT &T, and we tried to break IBM and made their lives miserable for about 13 years. And in that space, in the 70s and 80s, yeah. And in that space, if you look carefully at the history of tech, all the important companies in the 90s got their start. Microsoft, Apple, and so on.

19:10That's when they got their start kind of around these big giants. Then you had the big case against Microsoft. And the big Microsoft case humbled Gates and Microsoft, forced them to operate their platform more neutrally. Really scared them internally. I mean, they've been public about that since, people who've since left. And provided huge distraction too, right? Yes. I remember once sort of cornering Bill Gates at a cocktail party and asking him about it. And he said that he said he'd actually never lost anything before, really, before that case. So is it a cycle where just over and over again, you get these dominant platforms and then they get humbled and that makes way for the next thing?

19:54Yes. Although I think it's I think government has to do it. In other words, I don't think it's inevitable because I think monopoly is very good at finding ways to defend itself. And among the best ways is to recruit the government to defend it. And so it takes, frankly, at least the United States has taken strong government action. That's one of the reasons when I was when I worked in government in the White House, we were so focused on trying to, you know, pressure and and bring antitrust cases against the tech companies. our fundamental goal was to sort of prompt industrial succession. We wanted pressure on the companies so they would find it less easy to defend themselves so that whoever their successors may be may come along and have their moment.

20:42Yeah, I'm curious, what are the lessons of IBM and AT &T kind of inform your thinking about how our current big tech players should be treated as we look at this next frontier of technology with artificial intelligence? Because when you talk about scale, they're huge, and scale really matters with AI, with all that data, right? Yes. I think in terms of the long-term health of the tech industry and indirectly, therefore, of the US economy, that it's very important for AI to be a challenge to the tech platforms. Right now, I think it's often presumed that the AI platforms are just going to kind of help the tech platforms or be their friends.

21:28From the perspective of sort of a historian who thinks that industrial succession is very important, the moment where AI turns against big tech, If they become sort of allies and it's just, you know, open AI, Microsoft and Google, and maybe they are allowed to acquire each other, I just think the industrial power is locked in a way that becomes very extractive for the whole economy. So I'm very into the idea of provoking a fight between AI and big tech. After the break, we push back on the idea that big is bad. There's always arguments that you just need the big guys. I think the brilliance and genius of America, at least until recently, has been to ignore those arguments.

22:17That's next.

22:30how do you propose we change the playing field so that um these big existing platforms can be uh something more than tools of wealth extraction so one thing i think we have to recognize, and I think we do understand we have a problem with the extractive power of the major platforms. And I think one that the last 15 years suggests is not going to magically disappear. First of all, I think we need to empower the rights holders and businesses that are dependent on the platforms. So I would make it easier, for example, here's a good example, I'd make it easier for news organizations to band together to negotiate.

23:12I would make it easier for rights holders, copyright owners and others to sort of assert their rights, just in interest of making more of those proceeds go to more parts of the economy. I would subject the platforms to rules that, based on net neutrality rules my previous life, that force them to not be in some markets themselves and not prefer their own products and also not discriminate among the businesses that operate on their platforms. The most radical would be trying to set or limit the prices that the platforms charge for their services. There's a troubled history of price regulation, but I think everything should be on the table if we feel that the extractive potential is too big.

23:57And then finally, what I said earlier is I think we do need to provoke a fight between AI and the major tech platforms. I think the U.S. economy is kind of based on a model of constant combat. And the idea of good policy in this area is basically always to be stirring up fights so that the different parts of the economy are controlling each other. That's, in fact, one of the goals of the antitrust law is to keep everybody at each other to some extent to try to keep people lean. So those are some of the measures I think would be really important to restore some balance. It sounds like what you're saying is we should all want, in the battle between Google and OpenAI, we should all want Sam Altman to win.

24:41Or we should want there to be a real battle. And I guess we should want OpenAI to win. What we don't want is for Google to win it the easy way, which is either to buy OpenAI, hopefully this administration wouldn't let that happen, or to just make it impossible to get to them. Now, obviously, Microsoft is OpenAI's backer, so that helps. But I would like OpenAI to really emerge as its own power that challenges everybody in this economy and forces them to get better or surrender to the throne. So let's talk about the Trump administration. You were in the Biden administration helping with industrial policy, using antitrust in that way, antitrust laws, and really influencing kind of that broader debate.

25:28Now you're watching from the outside um i'm curious what you think about how the trump administration is going about it right they've had some wins that's with cases that began uh long ago with the google search case uh the google ad business case uh those were uh federal judges found uh google to be a monopolist in those cases we have had a settlement with amazon a case against apple by the doj is still pending how do you think the trump administration is doing not unlike many other areas there's a lot of strange contradictions in there yeah because on the one hand as you just described if you were i guess an outsider and you all your only if you're an alien your only source of information was reading court reports you'd say this administration hates big tech right and is pursuing the most aggressive attacks we've seen since roosevelt sailed across or sent his ships against Japan in the Pacific World War.

26:29There's this whole range of lawsuits that are designed to break out big tech, and they're being run by very powerful attorneys. Yet, on the other hand, the leaders of big tech, they're in the state dining room of the White House. They're hanging out. They were there on the dais at the inauguration. It's pretty chummy. So there's this total disconnect. My sense of the Republican base is not fond of giving tech an easy ride here, and they want to really bring it to them. So the extent that Trump befriends, overly befriends big tech, he fears enraging his base. So there's some limit there, but obviously he sees the temptation of their enormous money and backing.

27:18I imagine that it'll be one of these weird compromises where you do have the lawsuits go forward, but then, you know, they'll try to extract as much money as they can from them. Or my worst fear is that the forces of corruption will win and some kind of payoff will be the way of solving these lawsuits as opposed to letting them go forward. Now, we are hardly the first people to have this discussion, to have this debate. I mean, it's happening constantly in the face of these lawsuits, in the face of other actions by the Trump administration and the previous administration. And the argument that always comes up when we talk about antitrust action against these big companies is, number one, there's a whole school of economists, as you know, who argue that monopolies are great because they lead to sort of maximum economic efficacy.