More Reassurance

Speaking of reassurance, perhaps you’ll find this article by Joel Kotkin at The Daily Beast reassuring:

Increasingly, American technology is dominated by a handful of companies allied to a small but powerful group of investors and serial entrepreneurs. These firms and individuals certainly compete but largely only with other members of their elite club. And while top executives and investors move from one firm to another, the big companies have constrained competition for those below the executive tier with gentleman’s agreements not to recruit each other’s top employees.

At the top of the American keiretsu system stands a remarkably small group whose fortunes depend in part on monetizing invasions of privacy to use the Internet as a vehicle for advertising. These are not warm and cuddly competitors. Both Google and Microsoft have been accused of using anti-competitive practices to keep out rivals, in part by refusing to license technology acquiring of potential competitors.

“Tech is something like the new Wall Street,” notes economist Umair Haque, “Mostly white mostly dudes getting rich by making stuff of limited social purpose and impact.”

A few things to keep in mind:

  • Big companies employ a lot fewer people per dollar of earnings than small companies do.
  • Big companies influence the legislative process in ways of which small companies can only dream.
  • Intellectual property law protects big companies against upstarts not the other way around.
  • Companies with revenues of $100 billion or over are rare. Innovative companies with revenues of $100 billion are even rarer.

9 comments… add one

  • Mercer

    Kotkin writes:

    ” In the past, more hardware-oriented companies provided the “pipelines” ”

    In the present cable companies control the pipeline. I have options for computers, smartphones, search engines, social media sites and shopping websites. I only have Comcast for broadband internet.

  • TastyBits

    @Mercer

    Before Google got into the patent wars over Android, they were trying to license airwaves from the FCC for WiMax(?). I am not sure where they are at, but it looked like they were trying to get free/low cost high speed internet access as wide spread as possible.

    Obviously, there is a cost involved, but people who are willing to allow Facebook and Apple to know every intimate detail about themselves probably do not care.

    I once trusted Google, but not so much any more.

  • steve

    Tell me again why I should not be worried about the concentration of wealth (meaning also power and decision making) into the hands of very few people?

    Steve

  • ...

    But, uh, GOLF, or something.

  • TastyBits

    @steve

    Concentrated wealth is not the problem. Concentrated power is the problem.

    The problem with a large central government is that power can be concentrated, and the most effective at concentrating and using that power are rarely within the government.

    Without concentrated power, wealth is difficult to concentrate, but it is not impossible. It is also difficult to maintain, but it is not impossible.

    As government grows larger, wealth becomes more concentrated. As wealth becomes more concentrated, government tries to control it more. As government control increases, power broker influence increases. As power broker influence increases, the power of the concentrated wealthy increases. As the power of the concentrated wealthy increases, the government grows larger. Rinse, and repeat.

    This is why power tends to corrupt.

  • Red Barchetta

    steve

    Tasty pretty much beat me to it. Restraint of trade, monopoly and regulatory capture are not the same as concentration of wealth.

    And if it really bugs you then you best start voting for small government advocates wherever you can.

  • steve

    Drew- You are too immersed in the ways of the world to not know that wealth means power. Whenever wealth is concentrated, which has been largely our historical norm, we have power concentrated (monarchies, oligarchies, dictators). Note that it has usually not been peasants overthrowing old monarchies and replacing them. It has been one group of wealthy people replacing another. You are trying to sort out some chicken and egg problem here which may or may not exist. What we know is that if you have one, you have the other. Make govt smaller, leave wealth concentrated, and you will still have power concentrated.

    More importantly, I dont see how you can have a government capable of enforcing property rights, that cannot then be bought, with enough money, to do almost anything. Look at what is happening in the article Dave cites. They have the rules written to their specifications. Same thing with the financial crisis. Everything just happened to work out in a way that made billions for those in the financial sector, yet somehow it was all the fault of a few poor people getting loans.

    Steve

  • steve

    Tasty- Nice theory, but we are talking democracies here. If we look at what has happened so far in democracies across the world (acknowledging that Mao may have been correct and it is too soon), what you actually see is that govt has been shrunk when it has become too large. That is what we saw in Canada and in the Scandinavian countries. We have seen liberalization of economies throughout much of the 2nd and 3rd world. It is what I expect you will see in some other EU countries. Of course, they started out w/o such extremes of inequality. Perhaps you are correct that we can only grow larger because we start out with such high wealth concentration.

    Steve

  • TastyBits

    @steve

    In wealthy countries, people get the order reversed. They have the luxury of believing that wealth buys power. In less wealthy, they do not have this luxury. The wealth of the Saudis will not protect them from the ruthlessness of the terrorists. Once the US does not need them for oil, they will fall.

    In wealthy countries, the powerful use more civilized methods, but they are ruthless nonetheless. They use the government to “screw over people”. (I am being lazy about the quoted statement, but everybody should get the point.)

    Bernie Madoff was wealthy, but he did the perp walk. Jon Corzine is powerful, and he will never be charged with anything. If Bernie had any sense, he would have obtained the power first. Also, notice how fast the Corzine incident is being tossed down the memory hole.

    I will go back to my favorite subject. We had over 60 years of fairly stable banking (sans S&L debacle) under Glass-Steagall, but in less than ten years after repeal, there was the same financial collapse that Glass-Steagall was designed to prevent.

    Note: There were plenty of regulations and regulators to prevent it, but the regulators were working for the best interests of the financial industry. Timothy Geithner is public enemy #1.

    If anybody in government could outfox these guys, do you think they would be in government? Well, the foxes do get into government, but I am not sure that is a good thing.

    In the end it really does not matter. You will never change your position. If the financial crisis was not enough, there really is nothing that will do it.

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