Elizabeth Warren promotes the theory that we\u2019d all be better off if the \u201cFAANG\u201d companies (Facebook, Apple, Amazon, Netflix, and Google) were broken up in some way. Precisely how she wants to slice and dice these companies is unclear, but she\u2019s convinced they are too large.<\/p>\n
Warren is wrong to suggest the government should demand a break-up of these companies. But, that doesn\u2019t mean that some of them shouldn\u2019t break up for the benefit of innovation, management, and shareholders.<\/strong><\/p>\n The government has forced companies to break-up, to separate business functions, and so on. IBM, Microsoft, and Hollywood studios all come to mind.<\/p>\n IBM was forced to allow other companies to market hardware, software, and services for the IBM Mainframe lines in 1956. As recently as 2009, IBM was again accused of monopolistic practices in the mainframe niche. Mainframes are hardware, and IBM required all customers to lease hardware until the 1956 settlement with the United States Department of Justice. After 1956, you could buy IBM hardware for a one-time price. You could also buy used hardware. People point to Adobe requiring subscriptions as the same issue \u2014 but software isn\u2019t a physical thing. An application isn\u2019t like a used book or a used computer.<\/p>\n Microsoft was ordered to treat other software publishers as equals to Microsoft\u2019s own software running on Microsoft operating systems. The movie studios were forced to divest from cinema houses because they owned the product and the distribution channels. Again, these settlements were meant to encourage competition.<\/p>\n Tech companies rise and fall (and sometimes rise and fall again). IBM and Apple have had their great times, and their not-so-great times. Amazon\u2019s rise was not instant, and not without significant losses. Technology isn\u2019t quite like manufacturing. Setting up a car assembly line takes millions of dollars. Writing a great application? Setting up a cool website? These can be done for a few thousand dollars. You can even begin assembling computers for other people on a shoestring budget.<\/p>\n Today the FAANGs might seem all-powerful. They aren\u2019t. One great competitor could unseat any one of these companies.<\/p>\n Let us address these in FAANG order.<\/p>\n Facebook<\/strong>.\u00a0What does Facebook do that can be easily split into various companies? Other than social media, which is far from an essential service, what makes it impossible to live without Facebook or an alternative? Even Google, Apple, and Microsoft have tried to challenge Facebook without any luck. And Facebook itself did defeat much older \u2014 and at one time more dominant \u2014 social media platforms.<\/p>\n Before Facebook was MySpace. LiveJournal. Remember those? Friendster? I might have had accounts on all three, but they faded away. Facebook was simpler, yet better. MySpace didn\u2019t innovate. LiveJournal also remained stuck in its ways.<\/p>\n Remember Google+ and its rapid rise and fall? I loved it, but nobody used it\u2026 so I didn\u2019t check it after a time. It was a promising platform, too. And Apple had Ping (really a disaster) and Microsoft bought LinkedIn, which I detest.<\/p>\n You can dislike how dominant Facebook and Twitter seem to be, but the reality is that they are important because users chose to use them. We can live without these services. Many of my friends do.<\/p>\n Apple<\/strong>. I support the concept of separating Apple\u2019s hardware from its software divisions, but not a government order to do so. Apple has had several near-death experiences when the company could have been a take-over target. It was never quite near bankruptcy, but it was flailing about until Steve Jobs returned and brought focus to the company. The company is losing focus again, so it might be better off as three (or four) highly-focused companies.<\/p>\n Apple doesn\u2019t dominate business computing. It doesn\u2019t have much of a role in servers. It isn\u2019t the biggest or best at any one thing. Yet, it is one of the most profitable companies in the world because it sells products at a high margin. If you don\u2019t like Apple’s pricing, don\u2019t buy Apple products.<\/p>\n Apple doesn\u2019t have a monopoly in computers. In fact, it\u2019s technically a minor player in the personal computer market and not a competitor at all in the server market, though there is a Mac Pro server model. Apple has the most profitable phone and tablet business, but it doesn\u2019t see the majority of those devices, either. A company that doesn\u2019t dominate any hardware category by sales isn\u2019t a monopoly. At any moment, a competitor could introduce a better, cheaper computer, phone, or tablet.<\/p>\n The government protects which consumers or companies by breaking up Apple? The macOS (formerly OS X) is a variant of Unix.\u00a0The free Linux OS might be more powerful and\u00a0certainly more customizable than macOS, and anyone can build and sell Linux computers!<\/strong><\/p>\n The music industry has to deal with a lot, but Apple Music isn\u2019t much of a threat compared to Spotify and Pandora. Even Amazon\u2019s music service is better (and higher quality audio).<\/p>\n Complaints about Apple taking 30% of the revenue for items sold through Apple\u2019s digital stores ignore that physical stores selling music and software used to receive much better pricing (30-50% off retail). Apple developed the platform, maintains the servers, and has created a good purchasing experience. The Apple stores probably help companies sell more software, more than offsetting the costs.<\/p>\n Why would I break up Apple? Because the software, hardware, and streaming entertainment divisions have struggled with quality. I\u2019d divide the company so those three would have more focus. Hardware would retain operating systems, so the integrated \u201cApple experience\u201d would remain what it is. Apple had spun-off software in the past (Claris) and could do so again. Though a fraction of Apple\u2019s revenues, a spin-off software company would be huge.<\/p>\n Apple\u2019s streaming business could also be a lot better. Competing against Amazon, Netflix, Disney, HBO, and every cable company is no small task.<\/p>\n Amazon<\/strong>. Yes, Amazon dominates online retail, yet online retail remains less than 12 percent of retail. Amazon isn\u2019t Walmart (yet). Admittedly, Amazon has a dominant position, but someone could (and should) create a better shopping experience. When Amazon was just books, it was a lot easier to use and find things. Today, shopping on Amazon is a lousy experience.<\/p>\n Amazon didn\u2019t kill off bookstores. Sadly, the big-box bookstores were poorly managed and didn\u2019t create their own good online services. They could have. Why didn\u2019t Borders invest in a great online experience? Nobody thought it was essential. That\u2019s not Amazon\u2019s fault. I\u2019m still convinced a better bookstore will emerge, online and in the physical world.<\/p>\n What about Amazon buying Whole Foods? Sorry, but Whole Foods isn\u2019t a dominant grocer. And under Amazon, it has struggled. I\u2019m not sure what Amazon was thinking with that purchase. Amazon Fresh, the company\u2019s delivery service, isn\u2019t well integrated into Whole Foods. You certainly don\u2019t check out Whole Foods for the best prices.<\/p>\n Amazon Web Services (AWS) is the one division of Amazon I admire. Many other companies, including competitors, rely on AWS. Setting up an AWS server is easy and the reliability is outstanding. Amazon has taken years of experience with data centers and turned that into a much-needed and respected service. I\u2019d spin-off AWS as a company with its own stock and leadership.<\/p>\n Amazon is already three or four stand-alone divisions, though within a single corporate parent. Amazon\u2019s going to stumble as it keeps getting too diverse. The government doesn\u2019t need to protect us from Amazon.<\/p>\n Netflix<\/strong>. It\u2019s Netflix. What does it threaten? Movie theaters? Have you been to one of those lately? Neither have I. Netflix isn\u2019t a threat to any company, especially not Disney or Amazon. Cable companies? They make money providing Internet service to people watching Netflix!<\/p>\n Google<\/strong>. There were search engines before Google. The company simply did search better. It hasn\u2019t done much else better. Sorry, but I\u2019m not impressed with Google\u2019s social media efforts, their phone and tablet operating system (Android), or the Chromebook faux-computers.<\/p>\n Yes, we give Google a lot of data about ourselves. But, we do this voluntarily.<\/p>\n Google is a huge part of our lives, and that does concern me. Still, I don\u2019t believe the government should try to figure out how Google\u2019s parent company should be sliced and diced. Should mapping be a company? What about operating systems? Maybe Google\u2019s productivity applications and email should be stand-alone services?<\/p>\n Leave those choices to the stockholder and the company board.<\/p>\n Government as Shareholder<\/strong><\/p>\n Most of the FAANGS respond to stockholder concerns. The California Public Employee Retirement System (CalPERS) invests in all of them. Sovereign wealth funds, particularly Denmark\u2019s fund, invest in all of these companies, too. Unions and social democracies have influence over company boards. Investors can and should voice concerns when companies get too large to focus. (I\u2019m okay with sovereign wealth funds, but countries should not own controlling interests in companies.)<\/p>\n I don\u2019t believe in conglomerates. They don\u2019t give the best return to stockholders. The value of innovative divisions is hidden by larger, slower, less innovative other divisions. New ideas get crushed by company cultures.<\/p>\n So, I do want most larger companies split, as an investor and believer in competition.\u00a0I do not want government to manage companies. I also don\u2019t want government buying stocks and bailing out poorly managed companies.<\/p>\n Let the FAANGs compete in the marketplace. In 50 years, other companies will be at the top.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Elizabeth Warren promotes the theory that we\u2019d all be better off if the \u201cFAANG\u201d companies (Facebook, Apple, Amazon, Netflix, and Google) were broken up in…<\/p>\n","protected":false},"author":5,"featured_media":1533,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"iawp_total_views":5,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[5,36,37,34,8,10],"tags":[170,171,172,173,174,175,61,57],"class_list":["post-833","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-econ","category-history","category-law","category-media","category-politics","category-regulation","tag-apple","tag-corporations","tag-elizabeth-warren","tag-facebook","tag-google","tag-internet","tag-social-media","tag-twitter","entry"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.tameri.com\/almostclassical\/wp-content\/uploads\/sites\/3\/2024\/03\/AC_Banner_Gray_1200x630.png?fit=1200%2C630&ssl=1","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/pfivL7-dr","jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/posts\/833","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/comments?post=833"}],"version-history":[{"count":1,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/posts\/833\/revisions"}],"predecessor-version":[{"id":1388,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/posts\/833\/revisions\/1388"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/media\/1533"}],"wp:attachment":[{"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/media?parent=833"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/categories?post=833"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tameri.com\/almostclassical\/wp-json\/wp\/v2\/tags?post=833"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}