Shareholder Pressure and Structural Limits

Did you know Amazon makes $37 billion a year—more than double the revenue of all the newspapers in the world combined—from its sponsored results alone? Yes, the same, spammy, sponsored results at the top of a search that bilk shoppers with fake or low-quality items and can starve legitimate businesses of traffic and revenue.

This is one of the many insights shared by our guest this week, Tim Wu, in his new book, “The Age of Extraction: How Tech Platforms Conquered the Economy and Threaten Our Future Prosperity.” He argues that the defining story of the modern internet isn’t openness or democratization, but rather wealth extraction: the ability of gatekeeping Big Tech platforms, such as Amazon, Facebook, or X, to take money from everyone else without actually providing net value in return. Platforms weaponize convenience, he writes, so switching to competitors or smaller platforms is designed to be exhausting. Add in AI technologies that foster emotional relationships with users, and our dependence on them may deepen even more.

An author and professor at Columbia Law School, Wu served in the Biden administration as Special Assistant to the President for Technology and Competition Policy. He discusses with Bethany and Luigi why we should care about Big Tech value extraction and posits how Big Tech power arose in the first place: from centralized power to shareholder pressure, from poorly aligned corporate structures to nefarious intentions. Together, they also chart how we can make our way out of this era of extraction. They discuss the feasibility of treating Big Tech platforms like utilities, applying frameworks for structural separation between the platforms’ various services, decentralizing digital network infrastructures through interoperability to allow users to switch more easily between different platforms, and how economic populism influences the political messaging around these issues. Ultimately, Wu makes the case for embracing a philosophy of decentralized capitalism to achieve a fairer and beneficial balance between public and private power.
 

Read more from Tim Wu in ProMarket:
The Consumer Welfare Standard is Too Tainted
Over recent years, the antitrust law appears to be returning to its historical standard, the “competition and competitive process” standard, often referred to in the Supreme Court as the goal of “protecting competition.” In this post, Tim defends this trend for rule-of-law reasons and presents a realistic assessment of the legal system’s capabilities and its limits.

A Conversation with Tim Wu
A transcript of Tim Wu’s keynote in conversation with Binyamin Appelbaum of The New York Times from the Stigler Center’s annual Antitrust and Competition Conference archives.

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