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The problem is this type of vertical splitting doesn't solve the problem of large tech companies. It's like treating a burst appendix with a kidney transplant.

by lotu 8y ago

The problem is this type of vertical splitting doesn't solve the problem of large tech companies. It's like treating a burst appendix with a kidney transplant. The problem of Amazon is that it is effectively the only online shopping place, and thus can act as a Monopsony in hiring it's workers for warehouses, splitting AWS out of that doesn't fix that problem. Maybe you could require that distribution centers be owned by separate companies. This might work but locally each Center would still be a Monopsony and thus cause the same problem. Maybe if you capped the size of distribution center you could force lots of smaller ones to be built, but at this point I worry that you are going to end up making shipping slower and more expensive. The problem of Google is they are very dominate in the Ads space splitting out the Ads portion into another company would not solve that. Facebook's problems is everyone has put their data in Facebook has friends in Facebook and feel compelled to keep using it. I don't see how splitting up the company into, Instagram, What's App, and Facebook solves the network effects of those apps. Splitting up tech companies is not a punishment to make the CEO feel bad or change their ways. It is a technique to change how we need the market works to benefit the large population. As such we need to think about how to split them, the effects, and most importantly if the effect achieves the intended result.

onlyrealcuzzo 8y ago
If we had a progressive corporate tax, I think all the problems would sort themselves out. You want to build a trillion dollar company? Fine. Corporate tax rate of 50%. You're a small business with less than $1M in revenue. Cool. Corporate tax rate of 0%. Big companies will break up to take advantage of the tax code. Problem solved. Instead, the bigger you are, the harder you can lobby for tax breaks. Currently, if you're a $1M company, that sucks. You pay 20%+. If you're Amazon, you pay $0.
- jamroom 8y ago
  I agree 100% and have long felt this is the right approach. Basically the bigger you get, the harder it gets to keep getting bigger.
  - taurath 8y ago
    I feel like all that will create is "partnership contracts" where a large company will be split into the "ideal" size tax-wise while still being run by an "advisory board". Compensation gets interesting at that point though, so many its an interesting idea.
    - patcon 8y ago
      a constellation of partnerships happening through more tangible corporate boundaries sounds much better. right now it seems to happen in unclear ways, and I assume is much less observable from outside forces (e.g. Sidewalk Labs & Google & Intersection, etc.)
  - solomatov 8y ago
    What you propose break economies of scale which are often needed to do something cheaply.
- rexpop 8y ago
  Netflix, Amazon, Boeing, Verizon, these companies are already dodging the regressive taxation we have. How will we enforce progressive taxes?
  - r00fus 8y ago
    Perhaps actually funding and staffing the agencies that enforce it?
    - onlyrealcuzzo 8y ago
      The IRS is pretty awesome and incredibly underfunded, yes. But we could simplify the tax code... The bigger the surface area, the easier it is to find a vulnerability / loophole. And anymore, the tax code is basically being written by BigCos to protect their interests and provide breaks for themselves. Enforcing a tax code that's 20-feet tall when printed out when companies are as complicated as they are -- it's a wonder anyone pays taxes. It would take years in court to figure out what a company honestly owes. If it's simple -- you make x profit or y revenue -- then you pay z dollars -- for any public company, good luck grossly cheating that.
    - hwillis 8y ago
      People always ask this as if it's impossible to change laws or have agencies that actually want to follow through on their missions. As if corporations are so devious and brilliant they are unfindable. It's just not true. If you vote for people who actually want taxes, the enforcement takes care of itself. It works the exact same the other way, because these people gut agencies and replace them.
    - archgoon 8y ago
      The issue is not enforcement. That would suggest the issue is tax evasion; which it's not.
- ulkram 8y ago
  I agree it should be harder the bigger you are, but it's not the tax rate. Right now, FAANGs either run a 0% profit margin, or book their profits to Ireland. Changing tax rates don't fix either of those.
  - hopler 8y ago
    Tax on worldwide profits, credit foreign taxes paid. You know, the same rules as for mortal non corporate persons. Sales/Use/VAT tax for payments to wholly owned subsidiaries.
- rjf72 8y ago
  I think this is an absolutely incredible idea if it could actually be made in a way such that the taxation and other factors could not be easily avoided. But there's one unspoken problem with taxes and particularly corporate taxes. Large companies are perceived as being proportionally beneficial to the US economy. If you made the US a place that was meaningfully undesirable for corporations, they can leave. And even if these companies did not leave, you would strongly deter new companies. For instance imagine you were able to create your system such that it could not be simply avoided through various typical methods. So big companies really did risk losing up to 50% of their net. How long would it take before e.g. YCombinator started requiring new companies to incorporate in e.g. Hong Kong (or wherever) instead of the US? Perhaps even moving the entire operation abroad. So even though I think this would be an absolutely incredible idea, I do not think it would work or be meaningfully considered in practice.
  - clairity 8y ago
    generally, large corporations (and wealthy people) do not, and will not, leave the US because of taxes. people want to live here and companies want to do business here. badly. but they also want an unfair advantage and will say anything (like "we'll just take our toys and leave!") to try to get it.
    - dahdum 8y ago
      It was actually common, they still do business here, before the tax law change they would do an inversion so they'd no longer be taxed by the US on their foreign profits (US had worldwide taxation while most every other country did not). Here's an article about 2016: https://www.bloomberg.com/graphics/tax-inversion-tracker/ https://www.bloomberg.com/graphics/tax-inversion-tracker/ US citizens can't avoid worldwide taxation, but they certainly move states to avoid taxes.
      - clairity 8y ago
        yes, our tilted tax system let them do that without any repercussion. not only can they keep doing business as they always have, they get extra incentive on top. let's just equalize the tax treatment of individuals and corporations already.
- hwillis 8y ago
  Only profits are taxed, and they're only vaguely related to revenue, and both profit and revenue are vaguely related to whether a company is a monopoly or not. Profit is an okay-ish measure of how much a monopoly a company is, but not great. Comcast and Amazon turn profits of ~10 billion. Apple is 60 billion, microsoft is 16 billion. Amazon is much more of a monopoly than either of those, and Comcast enjoys a much stronger natural monopoly as well. The industries are just different sizes and the supply/demand curves are different, and for some reason people are just super willing to pay an absurd premium for Apple products. A progressive corporate tax still makes some sense, and there's basically no excuse for their taxes being less simple than a citizen's. However active management is still required. Markets are fast and efficient but they are often dumb.
  - mrep 8y ago
    > Amazon is much more of a monopoly than either of those In what market are they a monopoly? Seriously. Amazon retail competes with walmart and target both of which offer online sales and AWS competes heavily with Azure and Google cloud. In what way is Amazon a monopoly?
- dd36 8y ago
  Wow. I've never seen this solution before and am a fan. I'm a big proponent of taxing negative externalities and this is definitely an easy one.
- refurb 8y ago
  I don't think the relationship between monopoly behavior is directly correlated with size. Your solution is a "one size fits all" approach will would probably cause problems for big markets with non-monopoly players.
- moron4hire 8y ago
  A million of revenue isn't a lot.
- sytelus 8y ago
  Taxes don't solve these problems. In your setup, companies would "break up" but only on paper to take advantage of tax code. Outside of papers filed in Delaware no one would even know these were separate companies. Many billionaires often have few 100s LLCs filed in such a complex graph of ownerships that would take days to decipher.
  - ardy42 8y ago
    > Taxes don't solve these problems. In your setup, companies would "break up" but only on paper to take advantage of tax code. Outside of papers filed in Delaware no one would even know these were separate companies. Many billionaires often have few 100s LLCs filed in such a complex graph of ownerships that would take days to decipher. An essential point any plan like the GP's would be to make conduct like you describe illegal, and make sure those laws are adequately enforced and have enough teeth to be a deterrent.
- SovietDissident 8y ago
  Taking morality out of it for the time-being, taxes serve as an additional barrier to entry for smaller companies; these tech giants have hordes of lawyers and accountants to make sure they pay very minimal taxes (if any). These companies are also multinational, so they can keep money overseas and search for tax havens globally---a choice smaller companies don't have. The point is: you can give big companies whatever rate you want, but they're in the strongest position to circumvent it, and they will. The better choice is to lower taxes substantially and give the smaller companies a chance to accumulate capital faster, so they can compete.
- hokumguru 8y ago
  https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve
wan23 8y ago
Splitting AWS out of Amazon isn't the thing that really matters though so much as preventing Amazon from operating a store AND a marketplace on the same site, not to mention having its own product lines. If you want to sell something online and you're not already a household name then you're at a big disadvantage if you're not on Amazon, but if you do sell there then the price is giving Amazon insight into your business. And if Amazon chooses it can basically bury you by promoting your competitors or worse, selling its own copy of your product.
rexpop 8y ago
This is very insightful. When one considers how a monolith application could be split into a collection of microservices but STILL serve the same user experience, it becomes evident how trust-busting won't affect meaningful change.
darawk 8y ago
> Splitting up tech companies is not a punishment to make the CEO feel bad or change their ways. It is a technique to change how we need the market works to benefit the large population. As such we need to think about how to split them, the effects, and most importantly if the effect achieves the intended result. What exactly is that intended result?
bhl 8y ago
In my opinion, Amazon as a platform has leveraged network effects to be both a monopsony and a monopoly: in essence by aggregating both consumers and suppliers, both sides of the transaction feel compelled to use Amazon as a middle man.

by lotu 8y ago

onlyrealcuzzo 8y ago

If we had a progressive corporate tax, I think all the problems would sort themselves out. You want to build a trillion dollar company? Fine. Corporate tax rate of 50%. You're a small business with less than $1M in revenue. Cool. Corporate tax rate of 0%. Big companies will break up to take advantage of the tax code. Problem solved. Instead, the bigger you are, the harder you can lobby for tax breaks. Currently, if you're a $1M company, that sucks. You pay 20%+. If you're Amazon, you pay $0.

jamroom 8y ago
I agree 100% and have long felt this is the right approach. Basically the bigger you get, the harder it gets to keep getting bigger.
- taurath 8y ago
  I feel like all that will create is "partnership contracts" where a large company will be split into the "ideal" size tax-wise while still being run by an "advisory board". Compensation gets interesting at that point though, so many its an interesting idea.
  - patcon 8y ago
    a constellation of partnerships happening through more tangible corporate boundaries sounds much better. right now it seems to happen in unclear ways, and I assume is much less observable from outside forces (e.g. Sidewalk Labs & Google & Intersection, etc.)
- solomatov 8y ago
  What you propose break economies of scale which are often needed to do something cheaply.
rexpop 8y ago
Netflix, Amazon, Boeing, Verizon, these companies are already dodging the regressive taxation we have. How will we enforce progressive taxes?
- r00fus 8y ago
  Perhaps actually funding and staffing the agencies that enforce it?
  - onlyrealcuzzo 8y ago
    The IRS is pretty awesome and incredibly underfunded, yes. But we could simplify the tax code... The bigger the surface area, the easier it is to find a vulnerability / loophole. And anymore, the tax code is basically being written by BigCos to protect their interests and provide breaks for themselves. Enforcing a tax code that's 20-feet tall when printed out when companies are as complicated as they are -- it's a wonder anyone pays taxes. It would take years in court to figure out what a company honestly owes. If it's simple -- you make x profit or y revenue -- then you pay z dollars -- for any public company, good luck grossly cheating that.
  - hwillis 8y ago
    People always ask this as if it's impossible to change laws or have agencies that actually want to follow through on their missions. As if corporations are so devious and brilliant they are unfindable. It's just not true. If you vote for people who actually want taxes, the enforcement takes care of itself. It works the exact same the other way, because these people gut agencies and replace them.
  - archgoon 8y ago
    The issue is not enforcement. That would suggest the issue is tax evasion; which it's not.
ulkram 8y ago
I agree it should be harder the bigger you are, but it's not the tax rate. Right now, FAANGs either run a 0% profit margin, or book their profits to Ireland. Changing tax rates don't fix either of those.
- hopler 8y ago
  Tax on worldwide profits, credit foreign taxes paid. You know, the same rules as for mortal non corporate persons. Sales/Use/VAT tax for payments to wholly owned subsidiaries.
rjf72 8y ago
I think this is an absolutely incredible idea if it could actually be made in a way such that the taxation and other factors could not be easily avoided. But there's one unspoken problem with taxes and particularly corporate taxes. Large companies are perceived as being proportionally beneficial to the US economy. If you made the US a place that was meaningfully undesirable for corporations, they can leave. And even if these companies did not leave, you would strongly deter new companies. For instance imagine you were able to create your system such that it could not be simply avoided through various typical methods. So big companies really did risk losing up to 50% of their net. How long would it take before e.g. YCombinator started requiring new companies to incorporate in e.g. Hong Kong (or wherever) instead of the US? Perhaps even moving the entire operation abroad. So even though I think this would be an absolutely incredible idea, I do not think it would work or be meaningfully considered in practice.
- clairity 8y ago
  generally, large corporations (and wealthy people) do not, and will not, leave the US because of taxes. people want to live here and companies want to do business here. badly. but they also want an unfair advantage and will say anything (like "we'll just take our toys and leave!") to try to get it.
  - dahdum 8y ago
    It was actually common, they still do business here, before the tax law change they would do an inversion so they'd no longer be taxed by the US on their foreign profits (US had worldwide taxation while most every other country did not). Here's an article about 2016: https://www.bloomberg.com/graphics/tax-inversion-tracker/ https://www.bloomberg.com/graphics/tax-inversion-tracker/ US citizens can't avoid worldwide taxation, but they certainly move states to avoid taxes.
    - clairity 8y ago
      yes, our tilted tax system let them do that without any repercussion. not only can they keep doing business as they always have, they get extra incentive on top. let's just equalize the tax treatment of individuals and corporations already.
hwillis 8y ago
Only profits are taxed, and they're only vaguely related to revenue, and both profit and revenue are vaguely related to whether a company is a monopoly or not. Profit is an okay-ish measure of how much a monopoly a company is, but not great. Comcast and Amazon turn profits of ~10 billion. Apple is 60 billion, microsoft is 16 billion. Amazon is much more of a monopoly than either of those, and Comcast enjoys a much stronger natural monopoly as well. The industries are just different sizes and the supply/demand curves are different, and for some reason people are just super willing to pay an absurd premium for Apple products. A progressive corporate tax still makes some sense, and there's basically no excuse for their taxes being less simple than a citizen's. However active management is still required. Markets are fast and efficient but they are often dumb.
- mrep 8y ago
  > Amazon is much more of a monopoly than either of those In what market are they a monopoly? Seriously. Amazon retail competes with walmart and target both of which offer online sales and AWS competes heavily with Azure and Google cloud. In what way is Amazon a monopoly?
dd36 8y ago
Wow. I've never seen this solution before and am a fan. I'm a big proponent of taxing negative externalities and this is definitely an easy one.
refurb 8y ago
I don't think the relationship between monopoly behavior is directly correlated with size. Your solution is a "one size fits all" approach will would probably cause problems for big markets with non-monopoly players.
moron4hire 8y ago
A million of revenue isn't a lot.
sytelus 8y ago
Taxes don't solve these problems. In your setup, companies would "break up" but only on paper to take advantage of tax code. Outside of papers filed in Delaware no one would even know these were separate companies. Many billionaires often have few 100s LLCs filed in such a complex graph of ownerships that would take days to decipher.
- ardy42 8y ago
  > Taxes don't solve these problems. In your setup, companies would "break up" but only on paper to take advantage of tax code. Outside of papers filed in Delaware no one would even know these were separate companies. Many billionaires often have few 100s LLCs filed in such a complex graph of ownerships that would take days to decipher. An essential point any plan like the GP's would be to make conduct like you describe illegal, and make sure those laws are adequately enforced and have enough teeth to be a deterrent.
SovietDissident 8y ago
Taking morality out of it for the time-being, taxes serve as an additional barrier to entry for smaller companies; these tech giants have hordes of lawyers and accountants to make sure they pay very minimal taxes (if any). These companies are also multinational, so they can keep money overseas and search for tax havens globally---a choice smaller companies don't have. The point is: you can give big companies whatever rate you want, but they're in the strongest position to circumvent it, and they will. The better choice is to lower taxes substantially and give the smaller companies a chance to accumulate capital faster, so they can compete.
hokumguru 8y ago
https://en.wikipedia.org/wiki/Laffer_curve https://en.wikipedia.org/wiki/Laffer_curve

wan23 8y ago

Splitting AWS out of Amazon isn't the thing that really matters though so much as preventing Amazon from operating a store AND a marketplace on the same site, not to mention having its own product lines. If you want to sell something online and you're not already a household name then you're at a big disadvantage if you're not on Amazon, but if you do sell there then the price is giving Amazon insight into your business. And if Amazon chooses it can basically bury you by promoting your competitors or worse, selling its own copy of your product.

rexpop 8y ago

This is very insightful. When one considers how a monolith application could be split into a collection of microservices but STILL serve the same user experience, it becomes evident how trust-busting won't affect meaningful change.

darawk 8y ago

> Splitting up tech companies is not a punishment to make the CEO feel bad or change their ways. It is a technique to change how we need the market works to benefit the large population. As such we need to think about how to split them, the effects, and most importantly if the effect achieves the intended result. What exactly is that intended result?

bhl 8y ago

In my opinion, Amazon as a platform has leveraged network effects to be both a monopsony and a monopoly: in essence by aggregating both consumers and suppliers, both sides of the transaction feel compelled to use Amazon as a middle man.