Lost cause: Big Tech cannot be regulated

By Yanis Varoufakis

NEW YORK: Modern societies have had to deal with exorbitant market power for more than a century. But is Big Tech’s power over us novel? Is Google, Amazon, or Meta inherently different from Standard Oil in the 1920s, IBM in the 1970s, or Walmart more recently?

If not, then perhaps we can regulate Big Tech by means of legislation harking back to the United States’ 1890 Sherman Antitrust Act. Lina Khan, the chairperson of the US Federal Trade Commission, is valiantly trying to do just that. Sadly, it won’t work. Big Tech is so profoundly different that it cannot be regulated like any of the trusts, cartels, or conglomerates we have hitherto encountered. Adam Smith’s portrait of capitalism as a market town where family-run butcheries, bakeries, and breweries promote the public interest through open-ended, morally grounded competition bears no resemblance to modern economies.

Virtually every industry – from railways, energy, and telecommunications to soap powder, cars, and pharmaceuticals – is a cartel of gargantuan conglomerates whose stranglehold is only occasionally loosened when politicians muster the will to enact and enforce antitrust legislation, even at times using it to break them up. Why can’t the same be done to Big Tech? What makes it unique?

Antitrust regulation was originally designed to prevent price gouging by megafirms that restricted supply until the price hit a level maximizing their monopoly profit, at the expense of consumers and workers (whose employment falls alongside output). Obviously, this is irrelevant in the case of Big Tech’s services, which are free of charge and free of supply constraints.

When US President Theodore Roosevelt led the charge to break up Standard Oil, it was technically simple, even if politically courageous. But how does one break up Amazon, Facebook, Paypal, or, indeed, Airbnb, Tesla, or Starlink? If the government tried, it would be confronted by enraged users for whom the universal nature of these platforms is the reason they use them.

Free services mean that users are not the customers; that role is reserved for the businesses that need to use Big Tech’s algorithms to reach the services’ users. When Amazon or Facebook charges sellers an arm and a leg for the privilege (thus extracting from them a form of cloud rent), regulators face an impossible political conundrum: they must sail against the winds of public opinion (the millions of users whom Big Tech enlists to its cause) to protect capitalists from these techno-feudal lords, or cloudalists, as I call them in my recent book Technofeudalism: What Killed Capitalism.

That’s a huge ask. Moreover, it is not even the main reason behind Big Tech’s exceptional power. Big Tech must not be confused with High Tech. Industrial robot manufacturers such as ABB, Kuka, Kawasaki, and Yaskawa produce splendid technological miracles but do not have Big Tech’s power over us. In the 1960s and 1970s, IBM’s computers had a stranglehold over government and the private sector, supplying them cutting-edge (for the time) machines.

AT&T too had a virtual monopoly over telephone services, until it was broken up in 1984. But neither IBM nor AT&T had anything like Big Tech’s control over us. One reason is that internet-based platforms like WhatsApp and TikTok benefit from massive network effects: with every new user they attract, the services they offer become more valuable to existing users.

AT&T’s network effects depended on charging more for calls to other telecom companies’ customers – an advantage that the regulator easily eliminated by banning carriers from charging more for calls to other companies’ customers. But how can regulators cancel X’s or Facebook’s network effects? Interoperability would mean enabling you to take all your posts, photos, videos, friends, and followers from X and Facebook seamlessly to another platform (say, Mastodon) – a virtually impossible technical feat, unlike the simple task of letting AT&T customers call Verizon customers at no extra charge.

Even the difficulty of imposing interoperability is not Big Tech’s greatest source of power. In the early 1970s, IBM monopolized the means of computation in a manner that differed little from Standard Oil’s energy dominance or Detroit’s near-monopoly of private transportation. What made Big Tech different from IBM was a stupendous singularity. No, its machines did not become sentient, Terminator-style. They did something more interesting: they transformed themselves, with the help of snazzy algorithms, from produced means of computation to produced means of behavioral modification.

In our capacity as consumers, Big Tech’s cloud capital (such as Alexa, Siri, Google Assistant) trains us to train it to offer us good recommendations of what to buy. Once cloud capital has our trust, it sells the stuff it selects for us directly to us, bypassing all markets. Cloud capital’s owners, the cloudalists, charge these vassal producers cloud rents while we, the users, work for free – with every scroll, like, share, or review – to replenish their cloud capital.

As for the proletarians in the factories and warehouses, they, too, are hooked into the same cloud capital, with hand-held or wrist-mounted devices that drive them, like robots, to work faster under the algorithm’s watchful eye.

Under techno-feudalism, regulators can do little for us, because we have forfeited full ownership of our minds. Every proletarian is turning into a cloud-prole during working hours and into a cloud-serf the rest of the time. Every self-employed struggler mutates into a cloud-vassal and a cloud-serf.

While private capital strips all physical assets around us, cloud capital goes about the business of stripping our mental assets. So, what must we do? To own our minds individually, we must own cloud capital collectively. It’s the only way we can turn cloud capital from a produced means of behavior modification into a produced means of human collaboration and emancipation. It may sound pie-in-the-sky. But it is less utopian than putting our hopes in government regulation of Big Tech.