How the Crisis Could Embolden Big Tech

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S1: When you’re a reporter, especially one on a specific beat, you get to know your beat inside and out. You watch for trends, you get acquainted with the characters, and you really get a feel for the narrative arcs and what you’re covering. That’s what Elizabeth Dwoskin does. She’s a reporter for The Washington Post and she’s been covering her beat Silicon Valley for seven years. And when she talks about it, you can hear her brain almost right chapters past, present and future.

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S2: It’s just a lens to look at what is going on across the tech landscape. When I moved to Silicon Valley, it was a moment of euphoria and it was a tech bubble. This was the rise of Uber with its at the time, 60 billion dollar valuation. And then, you know, that euphoria started to crash right around the 2016 election. And I covered that narrative.

S3: Elizabeth was reporting as text glossy narrative, lost a little sheen. Facebook, the Cambridge Analytica scandal and several other ones over privacy. This was a major breach of trust. And I’m really sorry that this happened. Both Amazon and Google had protests and walkouts and those same companies that once provoked wonder were often seen as villains. Then governments started pushing back. The Department of Justice opened an antitrust review of the leading tech companies whose strict data privacy laws were passed in Europe and in California. This comes amid an increasing global pushback against the big tech companies.

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S1: Late last summer, with all of this happening, Elizabeth left her beat to go on maternity leave. She knew that when she came back, there was still going to be a lot to cover.

S4: So when I was leaving, I thought really the biggest story on my beat in the year ahead is going to be the attempt at disassembling the power of big tech and the reckoning with the power of big tech, which has been going on for a number of years. But the complaints, you know, around Facebook content, moderation, around Apple, slowing down phones and pushing other companies out of the App Store on Google, potentially abusing its power in search and going into other markets about Amazon, increasingly diversifying its business into more and more and more and more tentacles of American life. And I just thought, like, this is gonna be the story.

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S1: Fast forward to March when Elizabeth leave ended and well, the world and big tax place in it were completely different.

S2: All of a sudden, like all these people are like doing dance parties on Instagram. And my parents are telling me that they ordered Amazon to the grocery delivery for the first time. You’re just seeing like what seems to be a change in habits and just seeing the kind of reliance on these tools as the world went into lockdown.

S5: That is the reversal of fortune for where things were a year ago before I went and had my baby.

S6: It’s it’s a whole different chapter in the arc of the story that I’ve been following for all these years. This new chapter, even with everything else going on around us. And despite public criticism of how these companies treat their workers is something Elizabeth wrote about calling it a once in a lifetime opportunity for big tech. Today on the show, she’s going to help us understand how big tech is amassing power and profit in the middle of this pandemic and how that could reshape our economy and the way we live. I’m Lizzie O’Leary, and you’re listening to What Next, TBD, a show about technology, power and how the future will be determined. Stay with us.

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S1: This week, Microsoft, Apple, Amazon, Alphabet and Facebook all reported their quarterly earnings. Typically, investors view these numbers as a way to measure how a company is doing and the prospect of money to be made in the future. But with the economy in disarray, these numbers tell a pretty singular story. Yes, things have slowed, but they’re nowhere near as dire as what other industries are seeing. Do you think these tech companies view earnings right now as as a one off? You know, sort of a singular news event? Or are they something that can tell a broader story about where the companies are now in time?

S5: I think they’re probably not beating their chests. From what I talked to people inside the companies, you know, there there is caution because, you know, nobody knows when the bottom is going to fall out. No one knows what’s going to happen to the economy, you know, and that creates anxiety for companies like Google and Facebook that make all their money from advertising. And the biggest advertisers are the brick and mortar world.

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S2: You know, the department stores, even though they’re failing the travel industry, well, they’re that’s tanking. But at the same time, like, I’m on LinkedIn job alerts for Google and they’re adding 30 jobs a day and Facebook saying it’s going to hire 10000 people. Well, if you’re working at that kind of company, how are you going to feel vs. anywhere else in America right now?

S1: Well, that’s the weird irony. And you wrote about this saying that the pandemic is sort of a once in a lifetime opportunity for these companies. What are the I guess, the specifics of that, why they are able to do things like hire 10000 people if your Facebook.

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S5: Well, for one, it goes back to the cash reserves that they’re sitting on, Microsoft alone, I think is worth one point three trillion dollars to give some perspective. That is bigger than the economy of forty seven U.S. states. These companies have just amassed the level at which they’ve profited since the Great Recession is just it’s really profound. You know, Amazon could buy all boutique retailers in the U.S. right now if they wanted to. So they’re sitting on all this cash. So they have a fallback. I mean, look at Boeing.

S4: It’s a major U.S. company. They’re cutting tens of thousands of jobs. That says that tech, in a way, is in a class by itself. When you look at other major American companies and how they’re faring, it’s not just the mom and pop businesses that are laying off people. It’s major American companies that don’t have the cash runway to withstand a crisis.

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S1: These enormous cash reserves held by just a few big tech companies are the result of years of growth. Elizabeth says if you trace these reserves back to their source, the story begins during the last economic crisis in 2008 during the Great Recession.

S2: The whole economy, the whole market took its licks. But what happened afterwards is very interesting because the Great Recession also coincided with the advent of the smartphone. So just remember, like smartphones come about, people start using their phones for everything. 2009, people start developing apps a few years later. People are using apps for this and that, but no one’s really shopping on their phones. And this is a big question around. Will people buy things on their smartphone? Well, that is something that Facebook and Google figured out to great effect. And once they solved that question, you really see their revenues just start to completely accelerate and kind of just catapult ahead of the rest of the digital advertising industry. The tech platforms become the hubs for all of our reading habits and material. And also on the back end, all of the measurement and delivery of ads. And so people woke up to that. I want to say 2015, 2016, all of a sudden you have these tech giants and everyone else’s failing. And the recession that’s kind of come because of kov, it is going to accelerate that.

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S1: So it’s a lot of the same industries when we think about, you know, who was decimated during the Great Recession, brick and mortar retail, hospitality media that are laying people off right now. And tech is really taking over a lot of those spaces and certainly did back then. Do you think these industries can can weather this or is this just a truly transformational moment?

S2: Oh, I think it’s a truly transformational moment.

S7: I think I have to paraphrase Professor Scott Galloway of NYU, who is so stood on all these topics, and he said, you know, it’s a tale of two Americas right now. So it’s big tech and it’s everyone else.

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S3: Everyone else includes not just other parts of the economy, but smaller companies within the tech industry, not only to the tech giants, have the cash to outlast an economy put on pause, but also the ability to work actively to edge out competition for the services that people are still using.

S1: When we think about other parts of the Silicon Valley ecosystem that aren’t the big four. What happens to these smaller companies, you wrote that, you know, a bunch of startup jobs, I think 30000 have been lost since March 11th. And yet at the same time, we’ve seen companies like Zoome, you know, really flourish. Right now, what happens to all of them?

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S2: Suzume is a great example, because right now, in this moment, everyone’s like Zoome is the you know, the success story of that. You know that the poster child of a success story. Yeah. During Koven. Not that anyone wants to say we’re profiting off of Cauvin. And, you know, I know they don’t feel that way, but certainly there’s that exhilaration of their business just exploding. I think it is screwed 90 percent just during the lockdown’s. But just look at what’s also happened in the last week. That speaks to the power of tech giants. Google has announced hangouts meet. They’ve created their own version of it. And Facebook is launching their own competitor to zoom into a house party. Another app that has exploded. I think I wrote in the story House Party according to app, and he has grown like fifteen hundred percent. And so right now you’re saying, well, no one’s heard of. No one’s using hangout. Google Hangouts me that no one’s using Facebook thing. But just three years from now, we’ll zoom exist. Will house party exist?

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S1: Elizabeth says this moment gives tech giants both the opportunity to push out smaller competition and capitalize on our new habits and also a chance to deflect or at least delay new regulations that we’re supposed to take effect this year. One place where you can see this happening is in California. At the end of last year, the state passed a new law that would give people control of their data. It’s called the California Consumer Privacy Act.

S4: The law went into effect in January of this year. And in California, the law says you can go to any tech company, you can ask them for your data. What data do you have on me? And if you don’t like it, you can ask them to delete it. And so companies have said that there’s a lot of cost of compliance with that law. And so for a while, they’ve been asking for a delay in the enforcement of the law, because if you don’t follow the law, it comes with big penalties. And you see the lobbying groups already for tech saying there’s no way that we can comply with this on time. The enforcement goes into effect in July. There’s no way we can make it by July. We need an extension and really kind of making that argument. And at the same time, increasingly on the other end, becoming effectively essential services for governments, essential because governments are now relying on that same data to track the disease. I used the example in the story of Gavin Newsom press conferences, and he’s holding up modeling for the car, charting the course of the disease. And those models, some of them are coming from underlying data from companies like Google and Facebook. And so especially in California, you see it because of the relationship of the tech companies to the state. But before the state was adversarial with big tech. I mean, even when Governor Newsom came on, came on board as governor, one of the first things he talked about was like, you know, data bill of rights for people. And, you know, it’s. And yet they’re using the data that is collected now to model the course of corona virus. So that in itself is is this is a big reversal.

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S3: At the same time, all of this is happening, how these companies treat their workers, especially low wage delivery workers, has spawned protests over lack of safety measures. Plus, there are agonized public conversations about the morality of using Big Tex products in a pandemic. It can be hard to square all this with how well these companies are doing this.

S2: This crisis is going to give a lot more power to companies like like Amazon. Amazon is clearly the winner, winner of winners. They’re winning with the people who stay at home and are using their services and apps. And they’re winning because Amazon is hiring one hundred and seventy five thousand Low-Wage delivery workers. So they’re winning on that end, too. I mean, one of the things you see, you just covering the tech world is the disregard for labor, whether it’s, you know, believing that labor is an afterthought to the technology itself. Amazon has had many, many covert outbreaks in its facilities because they were not taking the proper precautions with their workers. They were much more concerned with fulfilling demand than they were with protecting workers. When we first started writing about this, you know, Amazon wasn’t even providing sanitiser to workers in many facilities and was also not even enforcing the social distancing, because when you’re in these facilities doing packing, you know, you’re standing very close to people. And so I see the public pressure does appear to have an effect, but I don’t know how much of an effect. I think they’re going to do the minimum to get by and still run their business.

S1: If all of this happens, this consolidation and, you know, tech kind of making its big move right now, how do normal people’s day to day lives look different? What what are the consequences for us when powers consolidated this way?

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S2: I think a lot of people say I have been asking you, is that the world we want to live in, which is kind of an answer like we don’t know what the consequences of power are, but we know that there’s something about it that feels un-American. You know, the more I’ve learned about antitrust monopolies is like the history of American business, is this tension between businesses getting too much power and people thinking that the balance tilted too far. And so if we come back from Koven and we really noticed that in our lives, you know, there’s fewer restaurants and there’s fewer yoga studios and just the number of small businesses goes down by a lot. I think that’s going to be a really sobering experience for a lot of people.

S8: Elizabeth Dwoskin, thank you very much. Thanks so much for having me.

S3: Elizabeth Dwoskin is a Silicon Valley correspondent for The Washington Post, and The Washington Post is owned by Jeff Basis. That’s all for today. What Next? TBD is produced by Ethan Brooks and hosted by me, Lizzie O’Leary. And it’s part of a larger What Next family.

S8: TBD is also part of Future Tense, a partnership of Slate, Arizona State University and New America. And speaking of Future Tense, I want to let you know about a great series of online events. They’re hosting right now called Social Distancing Socials every Tuesday and Thursday at 4:00 Eastern. You’re hosting a fun, smart, challenging conversation on the most pressing tech and science issues of the day. In fact, I’m going to do one on May 7th. I’ll be talking to FEC Commissioner Ellen Weintraub about the movie The Social Network and how Facebook has evolved to be at the center of so much of our political world. So I hope you’ll join us. If you want more information on a Sociales, just go to Slate dot com slash live. Mary will be back on Monday. Thanks for listening. Talk to you next week.