https://nyti.ms/2j3HuF2
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`TECHNOLOGY
`
`Tech Giants Seem Invincible. That
`Worries Lawmakers.
`
`Farhad Manjoo
`
`STATE OF THE ART
`
`JAN. 4, 2017
`
`In the technology industry, the sharks have never long been safe from the minnows.
`Over much of the last 40 years, the biggest players in tech — from IBM to Hewlett-
`Packard to Cisco to Yahoo — were eventually outmaneuvered by start-ups that came
`out of nowhere.
`
`The dynamic is so dependable that it is often taken to be a kind of axiom. To
`grow large in this business is also to grow slow, blind and dumb, to become closed
`off from the very sources of innovation that turned you into a shark in the first place.
`
`Then, in the last half decade, something strange happened: The sharks began to
`get bigger and smarter. Nearly a year ago, I argued that we were witnessing a new
`era in the tech business, one that is typified less by the storied start-up in a garage
`than by a posse I like to call the Frightful Five: Amazon, Apple, Facebook, Microsoft
`and Alphabet, Google’s parent company.
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`Together the Five compose a new superclass of American corporate might. For
`much of last year, their further rise and domination over the rest of the global
`economy looked not just plausible, but also maybe even probable.
`
`In 2017, much the same story remains, but there is a new wrinkle: The world’s
`governments are newly motivated to take on the tech giants. In the United States,
`Europe, Asia and South America, the Five find themselves increasingly arrayed
`against legal and regulatory powers, and often even against popular will.
`
`The precise nature of the fights varies by company and region, including the tax and
`antitrust investigations of Apple and Google in Europe and Donald J. Trump’s broad
`and often incoherent criticism of the Five for various alleged misdeeds.
`
`This is the story that will shape the contours of the next great era in tech: Five
`huge companies that can only get bigger are set against governments that
`increasingly see them as a clear threat to governing authority. So, happy New Year.
`
`Let’s start with some stats. In 2017, the Five are bigger than ever. As in 2016,
`they are half of the world’s 10 most valuable companies, when measured by stock
`market value. Their wealth stems from their control of the inescapable digital
`infrastructure on which much of the rest of the economy depends — mobile phones,
`social networks, the web, the cloud, retail and logistics, and the data and computing
`power required for future breakthroughs.
`
`Meanwhile, the Five are poised to jump beyond their corner of the lagoon. Over
`the last few years they have begun to set their sights on the biggest industries outside
`tech — on autos, health care, retail, transportation, entertainment and finance.
`
`The Five aren’t exactly immune to business cycles. Apple’s sales were flat last
`year, and after a monster 2016, Alphabet’s stock price hit a plateau. The Five also
`aren’t entirely safe from competition from start-ups, and one of the persistent
`features of the tech industry is that some of the most perilous threats to giants are
`the hardest to spot.
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`Still, at the moment, thanks to smart acquisition strategies and a long-term
`outlook, the Five sure do look insulated from competition from start-ups; today’s
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`most valuable tech upstarts, like Airbnb, Uber and Snap, could grow quite huge and
`still pose little threat to the collective fortunes of the Frightful Five.
`
`What has changed is public perception. For years, most of the Five enjoyed
`broad cultural good will. They were portrayed in the news media as forces of
`innovation and delight, as the best that American capitalism had to offer. The
`exceptions were Microsoft, which reached towering heights through corporate
`ruthlessness in the 1990s, and Amazon, which got under people’s skin for, among
`other things, making books cheaper and more widely accessible, thereby hurting
`bookstores.
`
`But generally people loved tech giants. They had gotten huge just the way you’re
`supposed to in America — by inventing new stuff that people love. And even their
`worst sins weren’t considered that bad. They weren’t causing environmental
`disasters. They weren’t selling cigarettes. They weren’t bringing the world to
`economic ruin through dangerous financial shenanigans. After I noted the Five’s
`growing invincibility last year, the biggest pushback I got from people at these
`companies had to do with the moniker I had given them: Why hadn’t I called them
`the Fabulous Five?
`
`Over the last year perception began to change. Familiarity breeds contempt; as
`technology wormed deeper into our lives, it began to feel less like an unalloyed good
`and more like every other annoyance we have to deal with.
`
`Silicon Valley grew cloistered, missing people’s unease with the speed with
`which their innovations were changing our lives. When Apple took on the Federal
`Bureau of Investigation last year over access to a terrorist’s iPhone, many in tech
`sided with the company, but a majority of Americans thought Apple should give in.
`
`During the long presidential campaign, Mr. Trump said a lot of things that
`people in tech found ridiculous. He vowed to call on Bill Gates to help him shut
`down the parts of the internet that terrorists were using. He promised to force Apple
`to make iPhones in America. He suggested that The Washington Post was running
`critical stories about him because its owner, Jeff Bezos, was scared that Mr. Trump
`would pursue antitrust charges against Mr. Bezos’s main company, Amazon. Few in
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`the tech industry supported Mr. Trump, but the industry’s antipathy seemed to
`matter little to the public.
`
`For years, most of the Frightful Five were given the benefit of the doubt as
`economic disrupters that were undercutting the cultural and economic power of the
`big industries that many people despised — entertainment giants, cable and phone
`companies, and the news media, among others.
`
`“During the periods where incumbents are battling disrupters, in general the
`U.S. has done a good job of encouraging disrupters,” said Julius Genachowski, the
`former chairman of the Federal Communications Commission who is now a partner
`at the Carlyle Group, a private equity firm.
`
`That describes the general direction of policy during the Obama administration.
`The tech giants were less giant for much of the Obama years, and various parts of the
`United States regulatory and legal infrastructure sought to protect and nurture them.
`
`During Mr. Genachowski’s term at the F.C.C., and then again during the term of
`his successor, Tom Wheeler, the commission passed rules favoring “network
`neutrality,” which declared that telecommunications companies could not favor
`some kinds of content online over others. It was a policy broadly favored by tech
`companies.
`
`But as Mr. Genachowski noted, as the disrupters grow, the dynamic often shifts.
`“The next part of the arc is that disrupters become very successful and in some ways
`turn into incumbents, and then you see two things — battles between incumbents
`and other incumbents, and a next generation of disrupters tackling incumbents,” he
`said.
`
`That’s where we are now. The Five have become incumbents themselves, and
`they are more likely to be treated as such by governments, who will look to both
`sides of the ledger — their benefits to society as well as their potential costs — when
`deciding how to police them.
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`But there’s a twist: With the Five, unlike in previous eras of tech, it is not clear
`that there are many potential disrupters among today’s start-ups. The battles for
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`dominance in cloud services, artificial intelligence and data mining, voice-activated
`assistants, self-driving cars, virtual reality and most every other Next Big Thing are
`being waged among the Five.
`
`That could likely raise the hackles of regulators and lawmakers even more; and
`depending on your position on corporate power versus governmental power, things
`could be fabulous, or frightful.
`
`Email: farhad.manjoo@nytimes.com;
`Twitter: @fmanjoo
`
`A version of this article appears in print on January 5, 2017, on Page B1 of the New York edition with the
`headline: Frightful but Not Invincible.
`
`© 2018 The New York Times Company
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