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How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? I'd say this is the biggest issue we have, and it does

How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? I'd say this is the biggest issue we have, and it doesn't seem like anybody is addressing it. After seeing countless interesting startups be bought up by Facebook or Google, it's time legislation was introduced to limit what Big Tech can do to distort the market with their obscene amounts of money. Interoperability would be fantastic, but utterly pointless if they can just buy up somebody who's plugging into their API and gaining significant popularity.

whb07 7y ago
Because Microsoft could have bought every startup in the early 2000s and yet..., it didn’t happen. Also there’s something called innovators dilemma. Where someone like Blockbuster could have bought Netflix, but why would they do that when clearly renting VHS is making boatloads of money?
- jplayer01 7y ago
  The tech industry has fundamentally changed since the early 2000s though. Microsoft was primarily interested in extinguishing competition. The new culture for the past 10ish years has been to assimilate. It's not an isolated case. There are too many examples to count. Are you arguing that FB/Google/etc haven't been on a crazy buying spree for years now because ... Microsoft didn't do the same thing 20 years ago? Or because Blockbuster didn't do it 25 years ago? We see the current tech giants doing it right now, probably learning from said mistakes in missing the boat.
  - whb07 7y ago
    Uh, yeah that’s what I’m arguing. They aren’t buying everything. It’s a tricky concept and you just demonstrated why it is so. A thriving smart manager in a top company will only recommend the “obvious” and “great” companies to acquire. They aren’t going to suggest to buy a risky or “clearly dumb” company in X vertical. But it is those dumb and risky sounding companies that become the next big thing. So why would GM worry about Toyota when those shitty Japanese cars are terrible and we can focus on the large vehicles where all the money is at? Why would MSFT worry about this whole phone business when clearly it’s making hand over fist with the desktop/pc market? Why would a bank want to get involved with the illegal activity and fraudulent market of crypto.... oh wait.
    - jplayer01 7y ago
      You keep picking these companies as examples that haven't made it a part of their model to buy potential competitors, that already made these mistakes and suffered because of it. I don't understand why. The companies I've named have already demonstrated their penchant for buying potential competitors. They don't even have to be particularly successful companies - it's enough for a company to have a niche where they're beloved or interesting to people and they'll be gobbled up. It doesn't even matter if the company gets a bit bigger, because Big Tech can just throw even more money at it. That's the problem - they're buying up anything that even remotely looks interesting, subsuming the tech or the engineers, sunsetting the original projects and moving on to the next startup to buy.
      - whb07 7y ago
        There is no ever fountain spring of money and time which is exactly what buying a company is. You have to throw lawyers and time and effort into it. Assuming you did have Apple's cash balance, lets say you did try to spend it all.... what then happens to next years class of startups/smaller companies? Apple's $billions cash pile isn't all acquired in 1 year but over the past decade. Furthermore, once you buy it you have to spend mental energy integrating the purchase into the company. Do you really believe all the shareholders and stakeholders are all down for that massive distraction? There is a weird chain of thoughts that needs to be interrupted here. Someone I spoke to earlier this year was essentially saying the same thing about Rockefeller, "well he was buying up all the smaller oil fields and producers!". Well, if you did hear that was happening wouldn't you yourself go out and try to strike more oil fields to be bought out quickly? Furthermore, what do you do when the massive fields in the middle east were found? Do you expect Rockefeller to start heading over there buying up the entire region to shore up the U.S market? This is quickly becoming an argument that defeats basic reasoning and basic reason.
notacoward 7y ago
> How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? Don't let them. While a breakup would run into all sorts of complicated problems, banning new acquisitions would be relatively straightforward.
- jplayer01 7y ago
  I agree. But I haven't seen anybody push this forward as possible policy anywhere. There's no discussion about it anywhere that I've seen.
  - a_humean 7y ago
    In the US its literately already the law of the land. Its called anti-trust, and it gives broad authority to break up companies and halt acquisitions. The regulatory agencies have just narrowed the scope of their actions dramatically over 30-40 years by only looking at the easily gamble metric of short term consumer price impacts. At least one of the US presidential candidates (warren) has already proposed using these powers to break up all of the big tech firms.
    - deleted 7y ago
      [deleted]
    - jplayer01 7y ago
      I'm not talking about breaking them up. Also, while anti-trust law exists, it's not enforced. And breaking the tech giants further doesn't ensure that anti-trust is enforced in any expanded sense outside of "consumer price", which is the epitome of uselessness. I don't think I've seen Warren et al. talk about making sure anti-trust is applied how it should be (would they even have the ability to do so?). Correct me if I'm wrong.
zozbot234 7y ago
> How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? Heck, let them keep buying. They're literally paying for new competitors to spring up! And it also makes investors more willing to fund potential competition, as the prospect of an acquihire puts a floor on valuations.
- dadarepublic 7y ago
  That hasn't worked well historically though has it. Looking at you broadcast media ;) Also, within tech/new media VCs are the ones feeding the beast, doing the initial investing and the reason for new competition to "spring up". Even if there is an acquisition plan in place, it's not the acquisition itself fueling new competition - it's a for-profit exit from competition.
  - zozbot234 7y ago
    Broadcast media platforms are not a contestable market, since e.g. broadcast frequencies, cable video capacity etc. are scarce and largely controlled by incumbents. New media is entirely different.
    - dadarepublic 7y ago
      True, because of the way broadcast frequencies were regulated. However the point remains the same with industry crossover into the new media space - TimeWarner x Verizon merger etc. Consolidation via acquisition and monopolistic behaviors tends to _reduce_ competition, not encourage it.
- notacoward 7y ago
  > They're literally paying for new competitors to spring up! They're paying for competitors to spring up and then disappear, which does nobody but the investors (and maybe the founders) any good whatsoever. Alternative idea: let them buy, but levy a 100% tax on the acquisition amount. The proceeds can fund development of truly open alternatives, or be paid to the users as recompense for their privacy loss, or perhaps just used to make regular people's lives better. That would discourage anti-competitive acquisitions, and even if they do occur at least somebody besides rentiers would get something out of it.
Jach 7y ago
There has to be agreement to sell on the other side. Since many companies successfully resist being bought, big tech can't simply buy all competition. There's lots of buying going on, sure, but also lots of refusing to sell. Taking away the option to sell from private companies will have dramatic rippling effects none of which I can imagine lead to a better world.
jasode 7y ago
>How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? Maybe you're using hyperbole with the word "literally" but just to level set ... they don't buy _all_ the competition. I previously try to explain why that's pretty much impossible: https://news.ycombinator.com/item?id=21419098 https://news.ycombinator.com/item?id=21419098 TLDR: startup founders have egos and many of them don't wish to become employees of Larry Page, Mark Zuckerberg, or Jeff Bezos -- even if you try to persuade them with billions of dollars.
- emn13 7y ago
  Contrasting perspective: Founders like you describe are likely mythical. Don't exist. Not a single one in the world... at least if you mean founders of possibly competing firms. To be able to compete with the likes of google, you're going to need considerable scale - there's going to be a lot of up-front investment necessary to get there. And that means they need to "sell out" to outside investors to get anywhere. The kind of people that are really fundamentally opposed to any kind of takeover by any large tech firm probably won't pass this hurdle. The people that do pass that hurdle probably are more successful precisely because they're more pragmatic. And in any case they'll be giving away some amount of control in the process, and may need several rounds of funding... it's pretty far-fetched to assume any business that survives that kiln will really have the (self-harming!) principles to oppose a lucrative takeover and retain the control to too. It's always possible somebody will find some really overlooked niche, grow big there, and then expand from there... but it's a really, really long shot, and certainly unlikely enough that this is never going to add up to significantly increased competition in the sector. Even if by some surprising happenstance one or two new competitors emerge like that... that's still a very, very inefficient basis for a market. We need hundreds of competitors (or at the very least no barriers to entry for hundreds of potential competitors) - not just a handful - for a market economy to do its optimization magic. A few plucky founders just don't matter.
  - jasode 7y ago
    >Founders like you describe are likely mythical. Don't exist. Not a single one in the world... at least if you mean founders of possibly competing firms. If that were true, both Larry Page and Mark Zuckerberg would have said "yes" to billion dollar offers from Yahoo and therefore both Google and Facebook would have become subsidiaries of Yahoo. Well, we know that didn't actually happen and Jerry Yang is not the boss of Larry Page and Mark Zuckerberg. Startup founders saying "no" to potential acquirers is not a myth.
sharperguy 7y ago
I'm not sure if buying companies would have the same effect in a world where APIs are mostly open. For example, Facebook buying WhatsApp: The value in WhatsApp was the network effect of having 500mil+ users all tied into the same proprietary server infrastructure. Switching to another service means losing the ability to cross communicate with anyone still on the platform. If Whatsapp's API was open, it could have allowed the users to fragment onto different servers while still cross communicating.
arrosenberg 7y ago
Break them up. It's the only self-executing solution to the problem of a consolidated, concentrated industry.
CharlesColeman 7y ago
> How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? The obvious answer is to subject such acquisitions to regulatory approval, and change the practices around such approval to make it much harder to acquire a competitor. There's always going to need to be some regulation, at a minimum. I think the question is what regulation will be the most effective at accomplishing the goal?
- tomtheelder 7y ago
  In fact, above a certain size there is basically no benefit to society in allowing companies to acquire other companies. Mergers and acquisitions by extremely large organizations should simply not be permitted, unless they can demonstrate a clear benefit to the public good (with a very high burden of proof). Doing that without first breaking up these giants would be a disaster, though.

whb07 7y ago

Because Microsoft could have bought every startup in the early 2000s and yet..., it didn’t happen. Also there’s something called innovators dilemma. Where someone like Blockbuster could have bought Netflix, but why would they do that when clearly renting VHS is making boatloads of money?

jplayer01 7y ago
The tech industry has fundamentally changed since the early 2000s though. Microsoft was primarily interested in extinguishing competition. The new culture for the past 10ish years has been to assimilate. It's not an isolated case. There are too many examples to count. Are you arguing that FB/Google/etc haven't been on a crazy buying spree for years now because ... Microsoft didn't do the same thing 20 years ago? Or because Blockbuster didn't do it 25 years ago? We see the current tech giants doing it right now, probably learning from said mistakes in missing the boat.
- whb07 7y ago
  Uh, yeah that’s what I’m arguing. They aren’t buying everything. It’s a tricky concept and you just demonstrated why it is so. A thriving smart manager in a top company will only recommend the “obvious” and “great” companies to acquire. They aren’t going to suggest to buy a risky or “clearly dumb” company in X vertical. But it is those dumb and risky sounding companies that become the next big thing. So why would GM worry about Toyota when those shitty Japanese cars are terrible and we can focus on the large vehicles where all the money is at? Why would MSFT worry about this whole phone business when clearly it’s making hand over fist with the desktop/pc market? Why would a bank want to get involved with the illegal activity and fraudulent market of crypto.... oh wait.
  - jplayer01 7y ago
    You keep picking these companies as examples that haven't made it a part of their model to buy potential competitors, that already made these mistakes and suffered because of it. I don't understand why. The companies I've named have already demonstrated their penchant for buying potential competitors. They don't even have to be particularly successful companies - it's enough for a company to have a niche where they're beloved or interesting to people and they'll be gobbled up. It doesn't even matter if the company gets a bit bigger, because Big Tech can just throw even more money at it. That's the problem - they're buying up anything that even remotely looks interesting, subsuming the tech or the engineers, sunsetting the original projects and moving on to the next startup to buy.
    - whb07 7y ago
      There is no ever fountain spring of money and time which is exactly what buying a company is. You have to throw lawyers and time and effort into it. Assuming you did have Apple's cash balance, lets say you did try to spend it all.... what then happens to next years class of startups/smaller companies? Apple's $billions cash pile isn't all acquired in 1 year but over the past decade. Furthermore, once you buy it you have to spend mental energy integrating the purchase into the company. Do you really believe all the shareholders and stakeholders are all down for that massive distraction? There is a weird chain of thoughts that needs to be interrupted here. Someone I spoke to earlier this year was essentially saying the same thing about Rockefeller, "well he was buying up all the smaller oil fields and producers!". Well, if you did hear that was happening wouldn't you yourself go out and try to strike more oil fields to be bought out quickly? Furthermore, what do you do when the massive fields in the middle east were found? Do you expect Rockefeller to start heading over there buying up the entire region to shore up the U.S market? This is quickly becoming an argument that defeats basic reasoning and basic reason.

notacoward 7y ago

> How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? Don't let them. While a breakup would run into all sorts of complicated problems, banning new acquisitions would be relatively straightforward.

jplayer01 7y ago
I agree. But I haven't seen anybody push this forward as possible policy anywhere. There's no discussion about it anywhere that I've seen.
- a_humean 7y ago
  In the US its literately already the law of the land. Its called anti-trust, and it gives broad authority to break up companies and halt acquisitions. The regulatory agencies have just narrowed the scope of their actions dramatically over 30-40 years by only looking at the easily gamble metric of short term consumer price impacts. At least one of the US presidential candidates (warren) has already proposed using these powers to break up all of the big tech firms.
  - deleted 7y ago
    [deleted]
  - jplayer01 7y ago
    I'm not talking about breaking them up. Also, while anti-trust law exists, it's not enforced. And breaking the tech giants further doesn't ensure that anti-trust is enforced in any expanded sense outside of "consumer price", which is the epitome of uselessness. I don't think I've seen Warren et al. talk about making sure anti-trust is applied how it should be (would they even have the ability to do so?). Correct me if I'm wrong.

zozbot234 7y ago

> How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? Heck, let them keep buying. They're literally paying for new competitors to spring up! And it also makes investors more willing to fund potential competition, as the prospect of an acquihire puts a floor on valuations.

dadarepublic 7y ago
That hasn't worked well historically though has it. Looking at you broadcast media ;) Also, within tech/new media VCs are the ones feeding the beast, doing the initial investing and the reason for new competition to "spring up". Even if there is an acquisition plan in place, it's not the acquisition itself fueling new competition - it's a for-profit exit from competition.
- zozbot234 7y ago
  Broadcast media platforms are not a contestable market, since e.g. broadcast frequencies, cable video capacity etc. are scarce and largely controlled by incumbents. New media is entirely different.
  - dadarepublic 7y ago
    True, because of the way broadcast frequencies were regulated. However the point remains the same with industry crossover into the new media space - TimeWarner x Verizon merger etc. Consolidation via acquisition and monopolistic behaviors tends to _reduce_ competition, not encourage it.
notacoward 7y ago
> They're literally paying for new competitors to spring up! They're paying for competitors to spring up and then disappear, which does nobody but the investors (and maybe the founders) any good whatsoever. Alternative idea: let them buy, but levy a 100% tax on the acquisition amount. The proceeds can fund development of truly open alternatives, or be paid to the users as recompense for their privacy loss, or perhaps just used to make regular people's lives better. That would discourage anti-competitive acquisitions, and even if they do occur at least somebody besides rentiers would get something out of it.

Jach 7y ago

There has to be agreement to sell on the other side. Since many companies successfully resist being bought, big tech can't simply buy all competition. There's lots of buying going on, sure, but also lots of refusing to sell. Taking away the option to sell from private companies will have dramatic rippling effects none of which I can imagine lead to a better world.

jasode 7y ago

>How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? Maybe you're using hyperbole with the word "literally" but just to level set ... they don't buy _all_ the competition. I previously try to explain why that's pretty much impossible: https://news.ycombinator.com/item?id=21419098 https://news.ycombinator.com/item?id=21419098 TLDR: startup founders have egos and many of them don't wish to become employees of Larry Page, Mark Zuckerberg, or Jeff Bezos -- even if you try to persuade them with billions of dollars.

emn13 7y ago
Contrasting perspective: Founders like you describe are likely mythical. Don't exist. Not a single one in the world... at least if you mean founders of possibly competing firms. To be able to compete with the likes of google, you're going to need considerable scale - there's going to be a lot of up-front investment necessary to get there. And that means they need to "sell out" to outside investors to get anywhere. The kind of people that are really fundamentally opposed to any kind of takeover by any large tech firm probably won't pass this hurdle. The people that do pass that hurdle probably are more successful precisely because they're more pragmatic. And in any case they'll be giving away some amount of control in the process, and may need several rounds of funding... it's pretty far-fetched to assume any business that survives that kiln will really have the (self-harming!) principles to oppose a lucrative takeover and retain the control to too. It's always possible somebody will find some really overlooked niche, grow big there, and then expand from there... but it's a really, really long shot, and certainly unlikely enough that this is never going to add up to significantly increased competition in the sector. Even if by some surprising happenstance one or two new competitors emerge like that... that's still a very, very inefficient basis for a market. We need hundreds of competitors (or at the very least no barriers to entry for hundreds of potential competitors) - not just a handful - for a market economy to do its optimization magic. A few plucky founders just don't matter.
- jasode 7y ago
  >Founders like you describe are likely mythical. Don't exist. Not a single one in the world... at least if you mean founders of possibly competing firms. If that were true, both Larry Page and Mark Zuckerberg would have said "yes" to billion dollar offers from Yahoo and therefore both Google and Facebook would have become subsidiaries of Yahoo. Well, we know that didn't actually happen and Jerry Yang is not the boss of Larry Page and Mark Zuckerberg. Startup founders saying "no" to potential acquirers is not a myth.

sharperguy 7y ago

I'm not sure if buying companies would have the same effect in a world where APIs are mostly open. For example, Facebook buying WhatsApp: The value in WhatsApp was the network effect of having 500mil+ users all tied into the same proprietary server infrastructure. Switching to another service means losing the ability to cross communicate with anyone still on the platform. If Whatsapp's API was open, it could have allowed the users to fragment onto different servers while still cross communicating.

arrosenberg 7y ago

Break them up. It's the only self-executing solution to the problem of a consolidated, concentrated industry.

CharlesColeman 7y ago

> How do you ensure competition when Big Tech can (and do) literally buy any and all potential competition? The obvious answer is to subject such acquisitions to regulatory approval, and change the practices around such approval to make it much harder to acquire a competitor. There's always going to need to be some regulation, at a minimum. I think the question is what regulation will be the most effective at accomplishing the goal?

tomtheelder 7y ago
In fact, above a certain size there is basically no benefit to society in allowing companies to acquire other companies. Mergers and acquisitions by extremely large organizations should simply not be permitted, unless they can demonstrate a clear benefit to the public good (with a very high burden of proof). Doing that without first breaking up these giants would be a disaster, though.