http://www.nytimes.com/2016/01/21/technology/techs-frightful-5-will-dominate-digital-life-for-foreseeable-future.html?_r=0

Great article from the New York Times that talks about the 5 Tech Giants - Amazon, Apple, Google, Microsoft, and Facebook - which have dominated Silicon Valley for decades and with very few competitors even close to eclipsing them.

"By just about every measure worth collecting, these five American consumer technology companies are getting larger, more entrenched in their own sectors, more powerful in new sectors and better insulated against surprising competition from upstarts."

"Indeed, the Frightful Five are so well protected against start-ups that in most situations, the rise of new companies only solidifies their lead."

"These platforms are inescapable; you may opt out of one or two of them, but together, they form a gilded mesh blanketing the entire economy."

"So get used to these five. Based on their stock prices this month, the giants are among the top 10 most valuable American companies of any kind. Apple, Alphabet and Microsoft are the top three; Facebook is No. 7, and Amazon is No. 9. Wall Street gives each high marks for management; and three of them — Alphabet, Amazon and Facebook — are controlled by founders who don’t have to bow to the whims of potential activist investors. So who’s losing? Not one of them, not anytime soon."

The Second Gilded Age has not just produced monopolization on Wall Street, but in Silicon Valley. Bernie Sanders wants to break up the big banks ruling Wall Street...would he ever consider breaking up the big tech companies?

Great article and all, but I must say, I don't see Facebook having a future. I see it following Twitter's example and doing quite poorly. The same goes for an increasingly outdated Microsoft.

Corporations like government derive their power from the people. Only difference is that the CEOs unlike The President have much more power, such as firing employees without explication, what ever they say goes, foreign relations are much more stronger, and they basically decide what gets put out in public and complete control of media.

Corporations are basically dictatorships within a country.

Seriously, people chose to buy these products. Nobody forces them to.

The reason people buy these products is, of course, they are the most readily available and are the best designed. The reason these products are so good and available is because the companies that make them have a lot of money. The reason they have money is because people buy the products.

Welcome to the consumerist spiral.

theres nothing wrong with monopolies.

what about government monopolies?

TL;DR: Tech journalism is shit, and people should realize by this point that using historical analogies ("America is the new Rome", "We're in the Second Gilded Age", "The US is the new Athens and China is Sparta") to make arguments is very, very suspect because a few points lining up well doesn't make a good match.

55% of Apple's revenue comes from the iPhone, 18% from the iPad, and 13% from the Mac.
Facebook makes nearly all of its money from advertising.
Google makes 60%+ of its revenue from advertising on Google websites, and another 20% from advertising on Google's network's websites.
47% of MSFT's revenue comes from commercial licensing, with another 23% coming from consumer licensing.
85% of Amazon's revenue comes from product sales. Most of the remaining 15% comes from AWS.

Yep, that sounds secure. That diversification. That invulnerability.

Sources:
http://bgr.com/2014/02/06/apple-google-microsoft-revenue-sources/
http://finance.yahoo.com/news/must-know-assessing-facebook-revenue-170009607.html
https://www.quora.com/Where-does-Amazon-get-most-of-its-revenue-from

These companies are powerful, sure- in fact, Amazon, Google, Facebook, and Microsoft each individually control enough Internet infrastructure that they can (and have) accidentally brought down large portions of it- or the entire thing, in parts of the world.

However,

(a) This is not the Gilded Age

The Gilded Age happened mainly because of the invention of new business practices (many of which are now illegal)- especially vertical and horizontal integration- that specifically made companies invulnerable to competition. Carnegie, Rockefeller, Stanford, et al., were great businessmen, and their companies were great businesses as a consequence. They succeeded largely because of business structure and went out of their way to destroy competition by wielding their own power.

That's not the same way Silicon Valley happened. Silicon Valley happened because researchers, engineers, professors, etc., took advantage of the resources they finally had to supply consumer needs. Each of them rose to power despite having a much larger, well-established competitor when they entered the market- Google had to beat out Yahoo, Facebook had to beat out MySpace, etc. The fact that this happened clearly shows that the tech economy isn't built on these sort of practices- but instead on actual innovation that allows us to deal with data in new ways and use computational power and technical ability to meet consumer demands. The only one explicitly aiming to monopolize a new market is Amazon, and they still can't really do pull it off.

If you build a better search engine than Google, you can beat them (the hard part is actually doing it). If you build a social network that can surmount the chicken-and-egg problem and be more appealing to users than Facebook, you can beat them. If you build better software and hardware than Apple (see: Android's market growth), you can beat them. These companies are all volatile.

(b) Silicon Valley isn't New York City

Yahoo, MSFT under Ballmer, HP/Compaq, Twitter and a lot of other companies show that tech companies can get hit hard. Uber, Airbnb, etc., show that they can also rise really fast.

Silicon Valley is built on disruption- the reason most Facebook-competitor startups fail is because most startups in general fail. You don't even have to build a better search engine to beat out Google- just make their search model obsolete.

These companies are volatile af (and in many cases, are taking huge business risks that they can't effectively capitalize on)- Google is working on crazy ideas like Project Loon and Google Glass (you can see how their "monopoly" worked that time) and failing to capitalize on things like Android. Facebook is trying to use drones (see: Aquila) to spread the Internet and betting heavily on VR (Oculus); Microsoft is trying to make AR sexy through HoloLens (it may have hype, but so did Windows 10 and Cortana); Amazon is making Siri but as a hardware version that sits around your house (and the hard part of it- long-distance speech detection- isn't even something consumers would really appreciate); and Apple is losing its design game with every new iPhone iteration.

You can make an argument that each one of these companies is on its way out. And, as you can tell by their choice of investments, what they have now isn't going to guarantee them staying- you can either beat their product, or you can eliminate the need for their market. Tech subfields have to reinvent themselves every few years- just like smartphones weren't really a thing until '07, something else (VR?) might take their place in the very near future. We're regularly on a collision course with the future, where things that are currently just ideas suddenly become market-ready consumer products (again, Oculus).

It's a risky business. You can't just sit on top of your gold because it's going to melt away real soon.

Government intervention would be a horrible idea here (as I'd argue it would be with the banks, but not for the same reason) because these are successful businesses reliably delivering increasing value to consumers- i.e., they create value for humans (and arguably for humanity as a whole, through FOSS initiatives, funding and building space exploration, and funding research in some incredible fields that just a few years ago weren't even there). Let's not take the risk of ruining that.

Edited 1/21/2016 03:29:55

There was once the philosophy that

Companies strive for the

Highest Quality
Lowest prices
Highest wages

Now it seems the philosophy

Mediocre quality
Highest prices
Lowest wages

@Knyte -

These companies are volatile af (and in many cases, are taking huge business risks that they can't effectively capitalize on)

Do you think another dotcom bust is imminent? If these companies collapse due to volatility, increasing business risk, and lack of profit diversification then the whole tech industry will feel reverberations even if other competitors replace them. Wall Street is heavily invested in the tech giants and so are main street Americans and foreign investors. If another dotcom bust happens that will just fuel those who say government intervention is necessary. That's a losing situation because I do agree that Silicon Valley is producing immense consumer benefits, particularly in its new infiltration into online-education (see udacity) and biomedical research (see Abbott Laboratories). That being said I don't think you can deny that these 5 tech giants do have a monopoly (you may suggest its not permanent, but it strong).

Mediocre quality
Highest prices
Lowest wages

Isn't it the exact opposite in tech, outside maybe MSFT (which is reinventing the fuck out of itself after feeling the pain) and IBM (which is also reinventing itself as a consulting company focused on machine learning and databases)?

Mediocre quality

I mean, you could hate Facebook/Google/etc., but they ship out changes weekly, do a lot of A/B tests, and make stuff like brotli (a compression algorithm) and React.js/React Native when they don't really have to- in order to make better quality stuff. Google's also giving a good amount of money to private space exploration projects and researching some very crazy stuff (they're a company founded by PhD's, after all)- and they certainly don't hire low-quality employees. Amazon is on the bleeding edge of machine learning, Apple is an icon in design (although it's kind of losing it recently and starting to feel the pain).

We're talking about a market where companies start worrying not because they're losing their share of some existing market but because they're not able to create new ones- Tim Cook is attacked quite often for not being able to live up to Steve Jobs' legacy and literally create a new class of consumer product (although there's the Apple Watch to disprove that), etc. This is the exact definition of a market where you can't just rest on your laurels, where you have to pursue quality or you're fucked.

Highest prices

Except I can use Google App Engine, Google Sites, etc. for free. Google also makes an incredible amount of free software and really cheap products (like Android). Facebook builds JS frameworks and new programming languages (e.g., hack) for fun. The only stuff that's really expensive (HoloLens, Oculus, phones, etc.) is largely so because of production costs and because of supply/demand- not price gouging. So much of these companies' stuff is free or cheap right now.

Lowest wages

Lmao. I'm really gonna suffer when I graduate because of my decision to major in CompE.

@Jai:

Do you think another dotcom bust is imminent?

So it's a weird situation, because these companies' P/E ratio is generally on the low side (lower than Walmart, for example) and that doesn't quite scream bubble. But again, a lot of what they're gambling on is really, really risky (and tbh a good number of angel investors are complete idiots). That said, some of them might succeed- it's the YCombinator strategy (or the shotgun method)- really, they only need one of their gambles to succeed in order to win big. They're not that crazy, but they obviously are forced to gamble in order to deliver quality and maintain their lead (because you have to keep running in this industry, or you'll become irrelevant).

If these companies collapse due to volatility, increasing business risk, and lack of profit diversification then the whole tech industry will feel reverberations even if other competitors replace them.

Eh, these companies themselves aren't too big to fail- they've gotten hit pretty hard already and we've made it out fine. IMHO, most of the scenarios where they all fail at once are extremely unlikely just because tech has integrated itself so hard into life in general; the more likely situation is that, over the next few decades, they fall apart one-by-one as their markets slowly die out or they lose the battle to a better competitor that eats up their economic influence and takes out any losses.

I also don't think that the market as a whole is that volatile (outside startups- it's ironic how they're associated with making a lot of money when working at a startup is actually really scary because users are hard af to predict and understand), at least not in the "it's all going to fall apart" sense but in the "damn it's hard to run a company here" sense. Google's future isn't guaranteed, but I think tech's future looks super-solid right now.

Again, it's kind of this weird edge-case market because it's growing and I don't see it stopping soon as a whole. Imagine you're watching a bunch of people marching forward and you know they won't be stopped, but over time the people at the front lines get replaced and some of them fall behind/down and die. That's what I think the picture is.

its new infiltration into online-education (see udacity)

Edtech is hot, but it's not new. There's actually a lot of cooler stuff out there, too- there's stuff like Duolingo and Expii (and yes I'm biased when I list them). But it's not even that special- we've got IoT (which might fuck things up- enjoy getting your shoes hacked while you're on a jog), VR/AR, robotics, machine learning/"big data", and a crazy amount of innovation in hardware in general (yay the EE side of my degree is also relevant)- look at Leap/Myo/etc. (not quite consumer ready) and then stuff like Magic Leap. These things are huge, and in five years we might remember them and not Google.

The entire market is about making big leaps because that's essentially what technology is- it's really hard for me to even conceive of a tech market that's stagnant because technological advancement is the exact opposite of stagnation (and if the tech industry stops advancing, lel, it'd be easy to disrupt the fuck out of it -> tech industry advances again).

That being said I don't think you can deny that these 5 tech giants do have a monopoly (you may suggest its not permanent, but it strong).

That's true, if you don't know what a monopoly is. :P

(I apologize if I'm overly vitriolic, but I seriously believe that doctors and lawyers are in general incompetent- humorously enough, while you call for the intervention in my field, I call for the automation of yours and the elimination of the adversarial justice system; the difference is that one of us actually has a shot at succeeding)

Edited 1/21/2016 04:00:48

I didn't necessarily make that statement in regards to technology.

Good thing you got a degree.

In regards to private space exploration, I'm with my nig Elon Musk. Google can go off and hurt itself.

From Elon Musk and Jeff Bezos interviews I always come away feeling like they're evil madmen...or insane (at the least insane...genius, but insane).

That's true, if you don't know what a monopoly is. :P

lol. I'm using the basic and simple economics definition: "A situation in which a single company or group owns all or nearly all of the market for a given type of product or service."

1) Android has 51.4% of the smartphone market share followed by Apple with 44.2%.
2) In 2014, 48.61% of all device shipments (includes smartphones, laptops, and PCs together) had android operating systems. Windows was second with 14.00% followed by iOS/OS X with 11.04%
3) In 2015, Facebook had 45.4% of Social Media market share as indicated by site visits.
4) Kindle Fire was 33% of global android tablet devices in 2013
5) In 2013, Amazon had 85% of eBook sales

That's a lot of domination and not a lot of competition if you ask me. Though what definition of monopoly are you using?

humorously enough, while you call for the intervention in my field

Also to clarify I didn't call for breaking up the big tech companies...I wondered whether politicians (specifically Bernie) would ever consider doing so. Big difference. I'm a market capitalist myself...let the tech companies get big as long as they aren't engaging in explicit corruption that would violate anti-trust laws.

Edited 1/21/2016 04:15:58

X Prize isn't really exclusive with SpaceX. I know of at least two teams that are using SpaceX rockets to get to the moon.

From Elon Musk and Jeff Bezos interviews I always come away feeling like they're evil madmen...or insane (at the least insane...genius, but insane).
Remember stalin also was a very smart but crazy guy. I think that you have to have that sort of mentality to end up running a majorly powerful country or company.

Elon Musk is an interesting person, but I wouldn't exactly call him crazy. Yes, in order to get at that level you're probably a somewhat unconventional person (and I use it without any intended connotation).

Obviously they gave a shit about something and saw things differently, two factors that would make them a minority in nearly any community.

I think they own too much, and that that isn't going to change. For example, I own a laptop with several Windows products on it (Windows 10, Office, all those Win 7 programs I still use), an Xbox with a bunch of Microsoft made games (a good 75% of them, not to mention the box itself). And my dad owns an iPhone. And that is literally it. Excluding things like the dishwasher. But we bought them as we thought they were the best options, and in my opinion we chose right. To break the game, you have to make something an average person wants, and prove yourself to the average joe' that your product is the best. And until someone does that, the monopolization won't change.

But people are already doing that. Intel and Texas Instruments are getting #rekt in IoT by startups. HoloLens might lose out to Magic Leap. Windows has been losing market share for a while now, etc.

Normal monopolies (not to mention near-monopolies/oligopolies) often occur in non-flashy markets. Seriously, business owners were probably happy to hear about Carnegie's cheap steel, but do you think they went to friends who have never bought steel before and said "Hey, have you heard about this steel? It's amazingly cheap! I know you've never bought steel before, and never really had a use for steel, but hey! Low price!"? I highly doubt it. In the tech industry, however, small startups with brilliant products have become almost all of today's huge tech giants. The result is that when a new great product comes out, people have been actively trying to search for the "next big thing". Also, tech innovation is usually useful to everyone or just unbelievably cool, so people talk about it. A lot. The net result is when a startup produces a great product, it gets enough exposure to avoid being buried by the big 5.

With Carnegie, steel was steel. If a competitor tried to sell steel, Carnegie would sell steel for cheaper. They're directly comparable, and Carnegie was better. In the tech industries, both Google and Apple sell phones. Ignoring price, many people would argue that Android phones and iPhones are not interchangeable at all. People pick favorites because of the differences between them. With steel (I'm just going to keep using this comparison), if you ignored price, there was very little difference between Carnegie's steel and other steel. My point is that price has usually been what keeps a monopoly on top in a market, but this is far less true in the tech industry, rather, continued innovation is what keeps these companies on top. Monopolies from price are usually unbreakable. Everyone else simply can't afford to charge such a cheap price. Monopolies from continued innovation, on the other hand, are breakable by any independent worker with a good idea. Why do you think these tech firms go to such lengths to make their offices desirable? A desirable office means their workers will spend more time at their workplace, where they will discuss new ideas with co-workers, making it impossible for them to develop the idea into a product on their own.

also:

lol. I'm using the basic and simple economics definition: "A situation in which a single company or group owns all or nearly all of the market for a given type of product or service."

Notice how it says a single company or group? This situation is 5 companies, not 1.

Edited 1/21/2016 21:11:21

There is NO tech monopoly, as there are multiple tech companies that allow for competition.

if there is five of them is it really a monopoly?