July 14, 2024

Cocoabar21 Clinton

Truly Business

How Elon Musk and Jeff Bezos can help save our democracy

10 min read

With all the attention on politics and COVID-19 right now, you may have missed this recent headline: “Elon Musk overtakes Jeff Bezos to become world’s richest person.”

Or maybe you did see it and thought, who cares?

Well you should.

(Before you continue reading, a trigger warning: This column is about staggering wealth. The numbers you are about to read will shock you.)

It’s not so much that Musk is now worth some $200 billion, according to the Bloomberg Billionaires Index, versus Bezos’ $182 billion, (of course Bezos could easily regain the crown at any point.) Nor is it a matter of the insane run-up in Tesla’s stock recently, (although it is insane—up some 800% over the past year.)

No, the bigger point is simply how much money and power Musk and Bezos and other tech billionaires have right now. And that power ties directly to one of the greatest conundrums of our time, which is the unprecedented command and control tech giants—Amazon (AMZN), Google (GOOG, GOOGL), Facebook (FB), Microsoft (MSFT), Apple (AAPL) and a few others—have over us. It’s a matter of contention that touches on everything from free speech to Donald Trump and our political divisions to national security to the very future of democracy. It’s an issue I predict that will loom very large over the next four years.

The question, according to tech investor Roger McNamee, author of “Zucked,” a book critical of Facebook, is “do you want to live in a country that’s not a democracy? And I do think that kind of soul searching is going on. I do think in time the country is going to make the right choices. And I do know that there’s lots of ways to have successful tech companies that are not harmful.”

Before we explore McNamee’s point further, let’s return to the Bloomberg list because the top of it jumps out at you. Fact: currently eight of the 11 richest people on the planet are American tech billionaires. Can you imagine? In addition to Musk and Bezos, you have Bill Gates, Mark Zuckerberg, Larry Page, Sergey Brin, Larry Ellison and Steve Ballmer. Collectively these eight individuals are worth a stunning, staggering $923.7 billion.

“It’s an extraordinary concentration of wealth and power,” says Chuck Collins, a senior scholar at the Institute for Policy Studies and co-author with Bill Gates Sr. of “Wealth and Our Commonwealth.” “Maybe there were some parallels a hundred years ago during the robber baron, gilded age fortunes. A lot of those fortunes were people cornering some aspect of the natural resource world: coal, steel, oil, wood; in addition to finance. Here we are a hundred years later and you have what I would call democracy-distorting fortunes.”

Consider that $923.7 billion and the rest of us. For instance, some 9.2% of the U.S. population—or 30 million people—live in poverty (a conservative number BTW.) That $923.7 billion would be enough money to give each of those poor Americans more than $1,000 a year, every year for the next three decades. (Caveat: No one is suggesting that exact kind of redistribution of wealth could or should ever happen, it’s just a thought exercise.)

To be clear that list of eight people is actually quite the mixed bag. Some like Gates are no longer CEOs. Ellison is chairman of Oracle (ORCL), a powerhouse company for sure, but not in the same league as Facebook or Google. And ditto for Musk’s Tesla, (though more on that company’s potential dominance later.) Also, not included are Tim Cook and Sundar Pichai, CEOs of Apple and Google’s parent Alphabet, respectively, who wield tremendous power and are very wealthy.

It’s also important to note there are a number of other tech billionaires on the Bloomberg list—including Michael Dell, Laurene Powell Jobs, Eric Schmidt, Jack Dorsey, Evan Spiegel, Marc Benioff, Peter Thiel, Reed Hastings and other familiar names—and it makes sense to add them to this posse of tech billionaires.

High up on this list too is MacKenzie Scott, the 23rd richest person in the world worth $56 billion, who is of course Jeff Bezos’ ex-wife. (If the couple were still together they would be worth around a quarter of $1 trillion, richer than Elon, but that’s another story.)

WASHINGTON DC, USA - MARCH 9: Elon Musk, Founder and Chief Engineer of SpaceX, speaks during the Satellite 2020 Conference in Washington, DC, United States on March 9, 2020. (Photo by Yasin Ozturk/Anadolu Agency via Getty Images)
WASHINGTON DC, USA – MARCH 9: Elon Musk, Founder and Chief Engineer of SpaceX, speaks during the Satellite 2020 Conference in Washington, DC, United States on March 9, 2020. (Photo by Yasin Ozturk/Anadolu Agency via Getty Images)

The point is these American tech billionaires form a cohort, a cohort worth well over $1 trillion, with commensurate economic and societal power. And as I noted in a story recently their fortunes have been growing much faster than the wealth of the rest of us. True I don’t adjust my figures for inflation, (i.e., what is $1 trillion today in say, 2016 dollars), but when your stock goes up 450% over the past five years, like Amazon’s has, and the annual inflation rate has been between 0.7% and 2.3% over the same time period, there’s really no need.

So where did this great wealth come from? Overwhelmingly it accrued from the increase in value of these individuals’ stock holdings—mostly as founders of tech companies such as Apple, Amazon, Facebook, Google, Microsoft, Netflix (NFLX), Oracle, Dell (DELL), Twitter (TWTR), Snap (SNAP) and Tesla. The value of their stakes in these companies has soared to unimaginable heights because the stock market assigned huge valuations to these companies. Why? Because these companies are massive money-making machines and are likely to continue to be so. Thus, the free market has spoken and designated these people to be the richest and most powerful people in the world.

‘Breaking these guys up’

MAGA, Antifa, liberals, conservatives and moderates, nearly everyone in America agrees that Big Tech is too powerful. But when it comes to exactly what “the problem” is, we diverge. Republicans, wrapping themselves in the flag of free speech (which really doesn’t apply to private companies) say Big Tech muzzles them, while Democrats say Big Tech is a national security threat by allowing foreign actors to manipulate elections and domestic terrorists to organize.

And yes, Congress has called Zuckerberg, Dorsey, Bezos et al to task and to testify numerous times. Myriad federal and local, nevermind international, investigations and legal actions are ongoing against Big Tech. And yet one thing is missing here, and that is to call into question the personal power and responsibility of this American-techno-billionaire oligarchy which holds sway over billions of lives.

Before we delve into that subject, a quick note about Musk is in order because Tesla seems like the odd company out here as it isn’t banning anyone nor is it enabling bad guys. Tesla’s rise has been so swift it seems farcical to consider the company as a threat to society. In fact until recently people were saying it would go bankrupt. (Some still have serious questions about the company.)

And yet—and this is admittedly anticipatory at this point—imagine the power that Tesla could wield over the transportation industry in short order? And BTW, Tesla is already a force to be reckoned with. Just ask GM, Ford and Toyota about that. Even with GM stock hitting an all-time high this week, it still has a market cap less than one tenth of Tesla’s.

And let’s not forget Musk’s other endeavors. If SpaceX, SolarCity, Hyperloop, Starlink etc. (which have been created with an eye towards integration), pan out in a big way, Musk’s empire would become even more impactful. Bottom line: Given that Elon is the richest man in the world, the market is telling us all this could happen.

Back to the central issue at hand, which is the outsized power these individuals have. There is a course of action that addresses the problem head on, a solution not lost on Scott Galloway, professor of marketing at the New York University Stern School of Business and a keen observer of Big Tech.

“I think the place to start is with breaking these guys up,” Galloway says. “I think that it’s telling that we seem to be always begging the same one or two firms. I think increased competition would be good.”

We’ve broken up big companies in America before of course, typically for one of two reasons. In the first, management itself does the cleaving in an effort to maximize shareholder value. I lived through one of these when I worked for the biggest media company in history, AOL Time Warner, which sold off Warner Music, Time Life books, TimeWarner Cable, AOL, Time Inc. and finally itself to AT&T. Others in this category include GE, ITT, (two of its descendants are Starwood and Hartford Financial Services Group) and going back in time, Gulf and Western (known as “engulf and devour.”) The other group of companies were broken up by the government, most famously AT&T in 1984 and Standard Oil in 1911.

Now let’s talk about today’s big tech companies. First understand, they were built for dominance. These notions of a “flywheel” (a favorite construct of Bezos) and an “ecosystem” implicitly and explicitly have as their goals global scale with both vertical and horizontal integration. What businesses do Amazon, Google or Tesla want to get into? The answer is any business that can be melded into what they are doing currently, in other words just about anything. One thing that was never considered though: What happens if these companies become too successful?

To be clear there is other work to be done here. Section 230 of the Communications Decency Act of 1996—an anachronistic piece of legal code that allows tech companies to disclaim responsibility for what appears on their platforms—has to go. (The law was created to protect poor little tech startups from being quashed by litigation. Today, these giant companies employ thousands of lawyers who face down billions of litigation like it’s nothing more than swatting away a fly.) And there’s the profiting-off-of-poison business models (selling falsehoods and divisiveness) by the social media companies. But those problems apply mostly to Facebook, Google’s YouTube and Twitter, and not at all to Amazon or Apple. So we come back to the common denominator, which is size and power. Ultimately that is what must be addressed.

The notion of a government-mandated break up of Big Tech has been around for years now. There’s much that could be done: Facebook would spin off Instagram (love to see those two compete), WhatsApp and maybe even Messenger and Oculus. Amazon would split off AWS, Whole Foods and its devices (Kindle and Fire.) Google would shed YouTube, Waymo, as well as split off search from its other core products. In Musk’s case, his companies should end up as separate public companies. Apple could get rid of the App Store and its music business. Microsoft would sell Xbox, Skype, Azure, and LinkedIn (I know, I know, you guys just bought it!)

The snickers you hear come from the C-suites of these companies at the mere suggestion of this. As in “Serwer, you are so ignorant and naive. It’s impossible to do this! These businesses are intertwined!” To which I answer, I may be guilty of the first charge but it’s not impossible. Sure, some are more difficult to split than others, but it’s all doable. Hollywood movie studios made exactly the same claim when the U.S. government successfully sued to separate movie theaters from the studios, (United States v. Paramount Pictures, 1948.) Note that both studios and theaters thrived after that.

Shareholders would do very well by the stocks of newly severed tech companies. And I would bet more jobs would be created. But that wouldn’t be the real reason to break ‘em up. The real reason would be to put an end to this epidemic of bigness.

And here’s the critical part, I’m not suggesting the government do this, I’m suggesting the tech moguls do it themselves. Crazy? But why not? These people think of themselves as business non-traditionalists. Are they really? If Bezos, Zuckerberg and Cook et al did it themselves it would usher in an era of growth and entrepreneurship in Silicon Valley, the U.S. and the world. It could be a happy, proactive creative process, as opposed to the current defensive stonewalling. But most importantly it would restore, shore up, protect and enhance our democracy. What could possibly be more important than that?

We often hear that we have moved beyond shareholder capitalism and are now in an era of stakeholder capitalism. It would be the ultimate expression of stakeholder capitalism for the richest men on planet earth to consider the ultimate stakeholder, America itself.

It is also unassailable that if the tech moguls don’t do this, their companies will eventually atrophy and fade, or more likely and much sooner, face an increasingly angry mob.

“There’s been a total inaction. [tech CEOs] have slow-rolled the whole thing effectively,” says Galloway. “But I think that’s about to change. The shadow being cast by the Biden-Harris administration has already resulted in more change at Facebook in the last 10 days than we’ve seen in the last 10 years.”

Supreme Court Justice Louis Brandeis is said to have remarked: “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” I’m sure the tech billionaires know Brandeis’ words. The question is, are the tech billionaires evolved enough to understand they have become part of the problem, and if so, can they sublimate their egos enough to do something about it.

This article was featured in a Saturday edition of the Morning Brief on January 16, 2021. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe

Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.

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