How the Crisis Could Embolden Big Tech

Slate's If Then


This week. Microsoft Apple Amazon Alphabet and facebook all reported their quarterly earnings typically investors view. These numbers as a way to measure how companies doing and the prospect of money to be made in the future but with the economy in disarray. These numbers tell 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 just sort of a singular news event or are they something that can tell a broader story about where the companies are now in time. I think they're probably not beating their chests from what I've talked to people inside the companies. There is caution because nobody knows when the bottom is gonNA fall out. No one knows what's going to happen to the economy in on that creates anxiety for companies like Google and facebook that make all their money from advertising and the big advertisers are the brick and mortar world. You know the department stores. Even though they're failing the travel industry will there? That's tanking but at the same time like I'm unlinked in job alerts for Google and they're adding thirty jobs a day and facebook saying it's GonNa hire ten thousand people well if you're working at that kind of company are you gonNa feel versus anywhere else in America right now. 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 ten thousand people if your facebook well for one goes back to the cash reserve 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. Us states these companies have just amassed the level at which they have profited since the great recession is just. It's really profound. You Know Amazon. Could buy all boutique retailers in the US right now if they wanted to so they're sitting on all this cash so they have a fallback. I mean look at Boeing. It's a major. Us company they're cutting tens of thousands of jobs. That says that. Tekken away in a class of 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. 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 two thousand eight during the great recession the whole economy the whole market took its lex 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. Two Thousand and nine people start developing apps 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 solve 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 twenty and fifteen twenty sixteen all of a sudden you have these tech giants and everyone else's failing and the recession. That's Kinda come because of Cova is going to accelerate that 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. Oh I think it's a truly transformational moment. I think I have to paraphrase Professor Scott. Galloway of nyu is so stupid on all these topics and he said you know. It's a tale of two Americas right now. So it's big tacking. It's everyone else. Everyone else includes not just other parts of the economy but smaller companies within the tech industry. Not only the giants have the cash to outlasted economy put on pause but also the ability to work actively to edge out competition for the services that people are still using 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 thirty thousand have been lost since March eleventh and yet at the same time we've seen companies like zoom. You know really flourish right now. What happens to all of them? So zoom is a great example because right now in this moment everyone's like zooms. The you know the success story of the you know the the the poster child of Success Story. Yeah during Cova. Not that anyone wants to say we're profiting off cove. It and I know they don't feel that way but certainly there's that exhilaration of their business just exploding. I think it exclude ninety percent just during the lockdowns but just look at. What's also happened in the last week that speaks to the power of giants? Google has announced. Hangouts meet they've created their own version of it and facebook is launching their own competitor to zoom into house. Party another APP that has exploded. I think I wrote in the Story House Party. According to APP Annie has grown fifteen hundred percent and so right. Now you're saying well. No one's heard of no one's using hangout. Google hangouts meat and no one's using facebook's thing but just three years from now we'll zoom exist will house party exist. Elizabeth says this moment gives tech giant's 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 were 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 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 have some 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 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 before the state was adversarial with big tax. I mean even when Governor Newsom came on came on board as governor one of the first things he talked about was like data bill of rights for people and it's and yet they're using the data that is collected now to model the course of Corona virus so that minutes office is is a big reversal

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