Antitrust regulators target Silicon Valley

     In my article "Deliver us from competition", I stated that no business should expect the government to keep annoying little startup companies from nipping at their heels.  Today, let's look at the competition picture from the opposite point-of-view:  Should small start-up companies expect governmental help to enter a market dominated by big players?  Does every startup company have a guaranteed right to market share?

Elizabeth Warren:  Break up the tech giants!

      Antitrust regulators have been harassing large companies for over a century now. The latest industry to feel the heat are the Silicon Valley firms, including big players such as Google, Amazon, and Facebook.  Some of the 2020 Democratic contenders for President have even urged that these tech giants be broken up. 

      Well, it's time to show the total lack of logic behind these antitrust laws.

      To begin, let's get it clear just what it is that businesses actually do.  The purpose of every business in the world is to make money.  And it ain't easy.  One of biggest obstacles is COMPETITION.  It's a never-ending battle.  Even if you're the first to come to market with some amazing, incredible new product, it's pretty much guaranteed that, before you wake up tomorrow morning, competitors will be springing up like weeds and invading your turf.

      So what do you do?  Well, you try to come up with a business plan that mitigates the competition problem.  You seek out markets where there is less risk of competition, or conjure up ways to keep them away.  Every business does this, and has done this, from the beginning of time.  The very first businessman in human history was probably a farmer selling corn - but he soon realized that lots of others also wanted a piece of the action.

     Business schools offer a course called Corporate Strategy, where they teach budding business moguls how to (hopefully) stay ahead of competitors.  In this course, one learns that there are two main avenues for solidifying your market share: vertical, and horizontal.  Vertical means to gain control of the upstream and/or downstream businesses that you do business with.  ("Upstream" is your suppliers and vendors, and "downstream" is your customers and clients.)  Horizontal means to gain control of your competitors.   All of this is done via mergers, acquisitions, partnerships, and marketing agreements.

      Does applying the techniques learned in a Corporate Strategy course guarantee big profits?  Um, no.  Sometimes yes, but often no.  In theory, larger businesses should be able to take advantage of "economies of scale" and operate more efficiently than small businesses.  But it's never that simple.  (Hence the other side of the merger coin, known as "divestiture".)  So although Corporate Strategy is good knowledge to have, the bottom line remains unchanged:  the businesses that make the best profit are those that run their company superbly, keep their customers happy, their expenses low, and hire good talent and treat them well.

runs Facebook

      But sometimes aggressive Corporate Strategy DOES pay off, and lo and behold you get your Google, Amazon, and Facebook.  However, make no mistake:  these are well-run companies owned and managed by extremely brilliant people who saw a market opportunity and jumped on it and worked their asses off to get where they are - starting at zero.  And despite their enormous size, they are under CONSTANT threat from competitors nipping at their heels.  Every minute of every day, year after year, they must continue to work harder than you can imagine and never stop thinking of newer and bigger and better products and ways to make their operations even more efficient than they already are.

      There is absolutely nothing wrong with a business being successful.  The tech giant companies - like all large companies - hire tons of people and contribute $zillions of dollars to our nation's economy.  They produce goods and services that benefit ALL of us.  Google and Facebook, for gosh sakes, offer their services for FREE to end users; how much cheaper can you get than FREE?!?  Amazon products are always very price-competitive, and you just can't beat Amazon's wide variety of stuff, delivered right to your door!  As I've said before many times:  employers are NOT the bad guys.

      So who is complaining?  Well, the gripers are the other wanna-be businesses and startups who find it difficult or impossible to compete with the big boys.  Granted, it is frustrating to be unable to get anywhere in the tech world when companies like Google have so completely dominated the market both horizontally and vertically.  (Google, for example, is accused of tinkering with the order of its search results so to benefit specific business partners.  True?  Probably.)

      And so the government bureaucrats get involved.  What exactly is an anti-trust law?  In essence, it says:  You must compete!  But … don't compete too much!! 

      Anti-trust is the ultimate example of a law that contradicts itself.  As explained above, competition is going to happen, regardless of what government does or does not do.  "Competition" is merely the act of trying to gain more market share than the other guy.  Every business competes, whether they want to or not.  A company that does a very good job of "competing" is naturally going to gain more market share than a company that does a poor job.  And that's a bad thing? 

      Clearly, "big" companies are assumed guilty.  Yet, this is the same government that will gladly spend a pile of taxpayer bucks to bail out some struggling multi-billion-dollar industry because they are "too big to fail".  What the heck do they want?

      A deep look at antitrust regulation reveals all sorts of confusing, contradictory logic.  For example, under some antitrust edicts, if a company sells its product for MORE than its competitors, it can be charged with "price gouging" or "price fixing".  If a company sells its products for LESS than its competitors, it can be charged with "unfair competition".  And if it sells its products for the SAME price as its competitors, it can be charged with "collusion" or "conspiracy".  You can't win!

      Besides, Google and the others aren't really "monopolies".  There are thousands upon thousands of active, profitable companies operating around the world that operate internet search engines, social media, and online shopping.  Goodness gracious, don't try to say that you cannot find a dot-com source for stuff other than Amazon out there!

a REAL monopoly

      Are there any REAL monopolies out there?  Sure, but they are monopolies because the government has so decreed that They Shall Be Monopolies and has outlawed all competitors, or because they are financed via taxation, or receive government subsidies.  (See:  Post Office, public utilities, Social Security, roads & highways, airports, professional sports teams; I could go on ...)

      So to all the high tech wanna-be's crying to the government because it's too hard to compete with Google and the others:  Dry your tears.  You do NOT have a government-guaranteed right to a profit, and government bureaucrats have no business picking the winners and losers.  In this nation, tons of new business startups happen every day, and most of them fail.  It's a cold, cruel world out there; always has been, always will be.  Yet, throughout history, nations such as ours with a free-market-based economy are always the wealthiest.

      Meanwhile, if you want to earn big bucks but lost the Google battle, here's some great advice:  If you can't beat 'em, join 'em!  The big high-tech companies are always looking for talent.