Exhibit A is Facebook, whose documents are the most damning. Emails from Mark Zuckerberg, its chief executive, strongly suggest that since about 2008 he has had a method for controlling what in a 2012 email he called nascent companies that posed very disruptive threats to Facebook. His method has been the buyout or the aggressive cloning of features to compel a company to sell itself to Facebook. He foresaw that there would be a limited number of social mechanics, or areas of innovation in social media, each of which would have one winner. Instagram can hurt us, he wrote in 2012, right before acquiring the company and eliminating the threat that its photo- and video-sharing technology posed to Facebook.
Amazon doesnt come off much better. Its documents show an apparent willingness to lose money to keep competitors under water. Early on, because of low pricing, Amazon lost more than $200 million from diaper products in a single month. It ran its chief competitor, Quidsi, into the ground. (Quidsi owned Diapers.com.) Then Amazon bought the weakened company. This approach, like Facebooks acquiring of competitors, is how John D. Rockefeller built up Standard Oil in the 1870s. Its join us or face extermination. Likewise, Amazon has admitted to sometimes selling its smart speaker, Echo, below cost, presumably on the theory that collecting huge amounts of data on users and securing direct access to their homes will present an insurmountable barrier to potential rivals.
Then theres Google. In the companys early days, its documents suggest, its executives had little interest in YouTube as a product, but they feared its rise would threaten Googles monopoly on search. The answer? Once again, buy away the problem rather than compete to see who can offer users the best service. Google purchased YouTube in 2006 for $1.65 billion.
The picture that emerges from these documents is not one of steady entrepreneurial brilliance. Rather, at points where they might have been vulnerable to hotter, newer start-ups, Big Tech companies have managed to avoid the rigors of competition. Their two main tools buying their way out of the problem and a willingness to lose money are both made possible by sky-high Wall Street valuations, which go only higher with acquisitions of competitors, fueling a cycle of enrichment and consolidation of power. As Mr. Zuckerberg bluntly boasted in an email, because of its immense wealth Facebook can likely always just buy any competitive start-ups.
The greater scandal here may be that the federal government has let these companies get away with this. Dazzled by the mythology of Silicon Valley and blinded by a fixation with economic price theory (which suggested that the only potential problem with an acquisition would be an increase in prices paid by consumers), the government in the 2010s allowed more than 500 start-up acquisitions to go unchallenged. This hands-off approach effectively gave tech executives a green light to consolidate the industry.