Net Positive

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Includes: AAPL, AMZN, FB, GOOG, GOOGL, TWTR
by: Scott Galloway

My TED talk came out last week. Bucket list experience.

On Tuesday, I was part of an online forum at Thomson Reuters. Here are some Q&As.

Are the big four a force for good?

Net/net, yes. I think fossil fuels are net/net probably good for us. But that doesn't mean we shouldn't have regulation. Big pluses - search, media, stuff for less, and greater connections - all make our lives better. Huge consumer value, incredible shareholder gains, hundreds of thousands of high-paying jobs, source of national pride, healthy competition. But there are drawbacks: the Four are not held to the same standards as the rest of business. The result is an ecosystem that favors the big and reduces competition.

We've also become painfully aware that these companies are willing to sacrifice our privacy and security for shareholder value. Seems naive that we ever thought any different. There is an argument that it's the world we live in. I believe the world is what we make of it, and we can have our cake and eat it too. We can have competition, and markets that aren't failing - which they are - where a few firms have outsized power and influence.

The big four have been lightly regulated - Amazon (NASDAQ:AMZN) didn't even collect sales tax for a very long time. What changed in the environment to bring on the recent demands for regulation?

The fact that we're debating the AT&T (NYSE:T)-Time Warner (NYSE:TWX) merger is insane in my view. The content and distribution of each of the Four dwarfs the envisioned tie-up of AT&T and Time Warner. A few things have changed: Uber's (UBER) bad management, Amazon putting retailers out of business, light shed on tax avoidance, and then the straw that broke the camel's back - the weaponization of Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) (NASDAQ:GOOGL), and Twitter (NYSE:TWTR) by the intelligence arm of Russia. Done with a credit card, paid in rubles.

It's clear these firms don't allocate adequate resources around national security. They claim it's impossible, which is Facebook-speak for unprofitable. If Reuters can figure out a way not to be weaponized by Russia with $3B in free cash flow, then why can't Facebook with $12B in free cash flow? We're sick of these guys lying to us.

What specifically needs to be done? Tesla (NASDAQ:TSLA) offers vision and not much else, so clearly that's not the key?

Apple (NASDAQ:AAPL) will do double the profit this quarter that Amazon has done in its entire history. And Amazon's stock, in my view, will blow by Apple and hit $1T in less than a year. Tesla, great example. Delivered 76K cars last year. Ford (NYSE:F) delivered 6M. Tesla has greater market cap. Vision and growth, not profits, is what the market values … for now.

  1. We need to realize these companies are not concerned with the condition of our souls, and they're not going to take care of us when we get older.
  2. We need to elect officials who will hold these firms to the same scrutiny as the rest of business.
  3. We need to break them up.

Any signs that will happen?

Good question. Yes, but it won't come from where we think. DC doesn't have the will or the IQ to take on big tech. Amazon had 77 full-time lobbyists in DC, and the ultimate prophylactic in the Washington Post. The threat will come from a red state where an Attorney General sees a path to the Governor's mansion via a populist call to break one or more up. Or it will come from Brussels, more likely, because the EU registers all of the downside of big tech, and a fraction of the upside.

Like the major conflicts of the 20th century, the war against big tech will break out in Europe. I've been on Fox News a lot lately talking about this (keep your friends close, and your enemies closer), including when Stuart Varney called me a socialist. Nope, I'm a full-throated capitalist.

Europe deals with the downsides of the Four - tax avoidance, job destruction, meddling with elections - yet there are few university buildings or hospital wings named after Google or Facebook billionaires in Europe. You asked net/net if big tech is a positive. In the US, definitely yes. In Europe, not so clear. I believe there is a non-zero probability in the next 24 months a European nation bans one or more of the Four.

We're also likely to see the first $10B+ fine come out of the EU. Margrethe Vestager, the European Commissioner for Competition, is the only public official in the West whose testicles have descended, and is not afraid of big tech.

Who might be the first to act against big tech here?

Don't know, but the Missouri AG has launched an investigation. If you fly to NYC from SF, any state you fly over is a decent guess. Coasts have sucked trillions of value from middle class households using these firms, and the red states are fed up… and prone to electing demagogues - another talk show.