Privacy is the New Celebrity

Ep 5 - Jon Swartz on Anti-trust Legislation and the Consequences for Big Tech

August 26, 2021
Privacy is the New Celebrity
Ep 5 - Jon Swartz on Anti-trust Legislation and the Consequences for Big Tech
Show Notes Transcript

In this episode, MobileCoin's Chief Product Officer Henry Holtzman interviews Jon Swartz, senior reporter at Marketwatch covering the biggest players in tech. Jon lays out the incoming wave of anti-tech legislation that is currently winding its way through the government... buckle up, there are some big changes ahead! Henry and Jon discuss how Apple, Google, and Facebook are particularly vulnerable and Jon explains why Microsoft has been able to avoid some of the scrutiny impacting its competitors. Who is going to win this fight for the clouds!? (Hint: developers and consumers stand to gain some real ground.)

[00:02] - Speaker 2
Hello and welcome back to Privacy. As the new Celebrity. I'm Henry Holtzman, chief product officer at Mobile Coin, and I'll be your host today. If you've listened to this podcast before, you know that our main focus is Privacy and security technology. And during the conversations we've had on these topics, one thing that keeps coming up is the idea of holding big tech accountable. Over the past decade, we've seen some tech companies rise to incredible levels of power, but there have also been some consequences. Facebook, Apple, Google, Microsoft.

[00:37] - Speaker 2
They have all been accused of some level of malfeasance, such as selling our data without permission or facilitating the spread of fake news. And as a result of these issues, there's a growing effort to curb the power of tech through government regulation. You've probably heard politicians talk about breaking up big tech, and that effort is targeting what some view as the growing monopoly status of some of these companies. Well, our next guest believes we are on the verge of some big changes for the tech industry.

[01:05] - Speaker 2
His name is John Swartz, and he is a senior reporter at MarketWatch. He's been covering the tech industry for more than 20 years, so he is the perfect person to help us understand what's going on. John, thank you so much for coming on Privacy as the new celebrity. We've had a few conversations and you laid out what you see as some of the big changes approaching the tech industry in the broadest terms. What sort of changes do you anticipate?

[01:30] - Speaker 1
What I anticipate is two tracks, one in the House, which is very specific, specifically goes after Facebook in terms of mergers and acquisitions, and the one that goes after app stores, in particular Apple and Google, that's in the House in the Senate. What I anticipate is more broad, general antitrust legislation that would apply not just to tech but to other industries as well. So it would be a broader rush sweep, so to speak, I think yesterday and I can bring this up because it's timely. On Wednesday, the Open App Markets Act was introduced by Senators Blumenthal, Blackburn and Klobucher, which is bipartisan legislation to protect competition and strengthen consumer protection in the app market, which specifically goes after Apple and Google.

[02:23] - Speaker 1
That is kind of paralleling an antitrust case between Apple and Epic, which I think could have broad implications for the consumer much more so than maybe some of the other things that the government is looking to.

[02:36] - Speaker 2
Could you talk more about what changes you see coming for the consumer?

[02:40] - Speaker 1
Yeah. So if this Senate bill reaches fruition, and if Epic in some way defeats Apple and it's antitrust case, it would actually mean that developers would have more power on the App Store as well as the Google Play Store, which would mean they would be able, especially on the App Store, to open their third party payment systems. So you would pay directly to them rather than pay Apple, which would then delegate through the developer. So there would be more payment systems within the App Store. Apple, of course, is dead set against that.

[03:13] - Speaker 1
There's also the possibility of developers who would be able to side loader or import their programs into the App Store much more freely. And this is all in a sense, in protest of the Commission fees that Apple and Google charge. Specifically, Apple. Apple charges up to 30% to large developers to participate in its market. And Apple says this is necessary because they're spending billions of dollars on security and Privacy. Unlike anyone else, the developer saying is basically gouging, it's basically an extortion plot to steal money from them, that Apple is kind of lording over them and saying, look, if you don't participate in our massive platform, you're probably not going to reach the consumers you want to reach so you can go on your own good luck.

[04:02] - Speaker 1
But would you rather be part of this Galaxy of applications under this incredible iphone operating system and ipad operating system? Take your choice. But you're going to have to pay a toll as Apple as a gatekeeper. So basically, the developers, what they want to do is they want to destroy that system and kind of bypass the toll that Apple has been charging them, which they think is onerous in which they actually think leads to competition with Apple and also stifles innovation.

[04:33] - Speaker 2
Right now. That's pretty consistently a 30% charge, both from Apple and from Google. Is that correct?

[04:39] - Speaker 1
Well, Google has in some instances reduced its fee is Commission fee. So as Apple, Apple does, it under certain rules. But for the most part, if you're a large developer, like, if you're doing significant amount of business and the millions of dollars a year, you're going to get charged 30%. Unless if you're a smaller developer, it will be a lower percentage. But for the most part, it is 30%. And this is kind of the crux of the Epic cases that most developers worth their weight are on or under the Apple App Store, and they feel as if they're being gouged and losing out on millions of dollars in revenue because they have to pay this toll because they both charge the same or pretty much equivalent fee structure.

[05:25] - Speaker 2
We kind of lump Apple and Google together, but I think Google would probably respond that they permit the Loading of other app stores by that they do and side Loading of apps.

[05:37] - Speaker 1
Yes, Google has consistently said that. In fact, yesterday, when I asked them about this bill, they said, Look, Android is a different system than the other systems, which is pointedly they're saying, we're a much more open system than Apple without mentioning Apple by name. Yes, Google does have a little bit more leniency in what it does. I think this bill and I think the Epic case are primarily aimed at Apple. Epic also has sued Google. That case just hasn't gotten as much attention because the judge in charge of that case has moved much more slowly.

[06:13] - Speaker 1
But I think what Epic wants to do is they want to kind of set a precedent with Apple. First and foremost. The whole Apple Epic case basically could be decided on very soon. Probably perhaps by the end of August, probably in September.

[06:34] - Speaker 2
It is coming soon.

[06:35] - Speaker 1
Yeah. Initially, it mentioned something about this case when it first started. If you were a betting person, I'm not. But if you're a betting person, most of the antitrust experts I talk to are convinced that Apple would win handily. And as the trial came to its conclusion, and it was about a month long, based on the line of questioning from the federal judge in Oakland. And based on some of the testimony, it reached the point where people weren't so sure they were still of the opinion that Apple probably would not be forced to side load and would not be forced to allow third party payment systems on SAP Store.

[07:17] - Speaker 1
However, the judge kind of let it be known that the interpretation of state laws in California in particular might lead to some sort of anti competitive actions or threats against Apple. So their Apple is not completely in the clear as much as they had thought so initially. And also the other thing that hurt Apple was a number of companies in one form or another helped Epic Nvidia Microsoft match tile. A number of significant developers actually spoke up on their behalf, which is something you must never hear or never saw before with Apple.

[07:52] - Speaker 1
Yeah.

[07:53] - Speaker 2
I kind of noticed, Ironically, that if I subscribe, for example, to YouTube Premium online, then I get to pay less for it than if I grab it from the Apple Store.

[08:04] - Speaker 1
Right.

[08:05] - Speaker 2
Or an app on an Apple device.

[08:08] - Speaker 1
That was one of the points that was brought up in the trial.

[08:10] - Speaker 2
Yeah.

[08:11] - Speaker 1
It's almost that was used off in the toll that you had to pay. There was the analogy to railroad systems and the tracks. And in a sense, Apple has created this behemoth. In a sense, if you look at the size and the strength of the app store, it's quite amazing. It's bringing in billions of dollars a year to Apple, and it's outside of the iphone. It's their biggest source of revenue for the company.

[08:39] - Speaker 2
Does Google permit an app purchases in its store by app sold through its store without going through its store?

[08:49] - Speaker 1
Yes, I see. So there's a little bit more of a leniency there. But I think Epic is still in their lawsuit contentious about the idea of paying any type of Commission fee. I think that's more of the crux of the Google case, although it hasn't gotten as much attention as the Apple case, because Apple has a much more restrictive measures and restrictive policy. The irony, too, is that Apple has three years either through its worldwide Developers conference or even through its iphone announcements, played up its benevolence towards developers and its keenly, tight relationship with them.

[09:30] - Speaker 1
And that is something that's always been key to the success of Apple, because if you look at Apple users, traditionally, they use significantly more apps or programs than the non iphone or non Mac user. But what became clearer was that Apple really hasn't done a lot of polling of their developers and their viewpoints, and it isn't as beloved as it may think or may want us to think it is. It's kind of ruled with a sense of intimidation, and in some cases it was accused of bullying.

[10:07] - Speaker 1
I won't go as far as that. But it's kind of blown up this whole template that we had about Apple and its developer community. That's some damage, that's some PR damage that was done to Apple. Another thing was that Apple had said it wasn't clear to it if the App Store was profitable, and it's kind of hard to believe because Apple, I think, recorded gross profit of $35.5 billion on revenue of $53.8 billion. And it's last fiscal year, which includes App Store sales. This is for the services segment, which includes the App Store sales, along with subscription services and other online offerings and Google's Play Store not as large, but pretty close.

[10:50] - Speaker 2
So I want to dig in a little bit on the antitrust nature of this. Sure.

[10:54] - Speaker 1
If that's okay.

[10:55] - Speaker 2
Sure. One might say that the thing that maybe ties these two together is that they both charge the same sort of fees on the Apple side. They don't permit in app charging without coming through their platform. They don't permit other app stores. They don't permit side Loading. While all that's different on Google. So most of the remedies that you could imagine might actually just be to turn Apple into Google in terms of those policies. In which case, I start to wonder why, then, is Google even swept up in this at all?

[11:29] - Speaker 2
And the reason that I can think of is because if we are going at it from an antitrust perspective, Apple alone doesn't have a lock on handsets, right? There's lots of Android sold, but when you put them together, that's the entire handset market.

[11:46] - Speaker 1
That'S the entire market. Basically. Yes. Right. That's exactly. That's kind of a nod to the dominance and the Android. You're correct. Yeah. It's interesting, because when you talk about antitrust in general, it seems to be a lines of pattern or evolving or emerging that you have Facebook, which legislators are looking at for its acquisition policy of buying WhatsApp and Instagram and essentially eliminating potential rivals or competition. Then you have Apple and Google on the platform side where they have these monstrous digital platforms where they, in a sense, are in control of the entire ecosystem and in which they conceivably compete with some of their business partners in terms of pricing and in terms of ranking of the products.

[12:40] - Speaker 1
And then you have the Google with the search engine investigation, which is with the crux of the federal investigation and some state agencies. And then we have Amazon, which is kind of an interesting spot. I don't know where that's going to lead. No one seems to know exactly where antitrust with them will lead. It might be, as we talked about before, it might be tied to their large digital platform, their footprint. Or it could be the idea that they are systematically moving from one market to another to another and eviscerating the small operators.

[13:20] - Speaker 1
That's one of the key is that a lot of this antitrust legislation is keying on the elimination of smaller competitors and the stifling of innovation. Not so much about the market share or about the cost of consumer, because none of these companies, with the exception of Google and Search, have dominant market share. They don't have, like this overwhelming market share and what they are charging consumers. Actually, consumers are actually coming out far ahead. They're paying less than ever before, and they have more choice. But I think the concern is that you're wiping out this small and even mid range tech companies, and at the same time you're doing that, you're essentially eliminating what could be the future of Facebook or Google.

[14:04] - Speaker 1
It's also cyclical. So weird. Like when Microsoft was under investigation, it had to rear back. It had to modify what it was doing, which led to the creation of Facebook and Google as a result. Yeah.

[14:14] - Speaker 2
And also Microsoft. That seems to be more savvy in terms of not exerting anti competitive control, which has gotten it through this most recent batch of sentiment against big tech. Fairly unscathed.

[14:30] - Speaker 1
Right. That's a good point. So Microsoft has kind of escaped the scrutiny of the antitrust movement. And one of the reasons I would assume would be that they learn from their mistakes. They put systems in place, they know how to work the system, so to speak, after suffering for years with the Department of justice investigation, and that in a sense, they lost out on being even bigger in the Internet or smartphone markets. The irony is that they may have learned from their lessons. And now what they're doing is, in fact reversing the shaming.

[15:04] - Speaker 1
So when Microsoft is being investigated, it's competitors made hay competitive. Hay. Yeah. Now Microsoft, in a kind of a more subtle way, is presenting itself as a white Knight, and it's a holier than thou player in this, which has created a lot of enmity between them and particularly companies like Amazon, Apple and even Facebook.

[15:26] - Speaker 2
Remembering back on Microsoft and it's antitrust trials. I think there's a lot of parallels to what they said and what an Apple or Google is saying today, which was that they were just building the best system that could be built on behalf of their customers. And then, as I recall, it was the bundling of Web technology into Windows, what was at stake now we have very similar arguments.

[15:52] - Speaker 1
That was a logical extension. Really right. We were talking about this. It's almost kind of the next step they were to take on their path.

[16:01] - Speaker 2
Exactly. And I remember also at the time, like I was doing my own work in the tech industry, trying to start a company. There was a tech company and all the moves that Microsoft was making, I really appreciate it. As a developer. I was like, I'm going to be able to make better products because of what Microsoft is doing right now. But I also think that the Justice Department did us all a favor, that we saw much more diversity than we would have if Microsoft had continued on the course it was going right.

[16:33] - Speaker 1
And I think the fear that history is, in a sense, what could have happened back then, maybe happening now. So I think what happened and it all kind of comes down to politics as well. That was in the 90s, early or mid 90s, through the 2000s, and I think would help check after the birth of Facebook and Google. And I'm just thinking about this off the top of my head. Was they also as they were growing, they were looked upon by the Obama administration as an ally because they did a lot of fundraising.

[17:11] - Speaker 1
They thought, likemindedness in terms of the economy and where it was moving, and they perhaps were able to grow faster than if it was a non friendly Silicon Valley administration. So you remember the famous shot of Obama sitting at a table with jobs in Zuckerberg and other heads of tech, which kind of symbolized the relationship. And I think since then and even especially during the pandemic, these companies have become so large and so kind of invasive in our lives in a certain way. We're always around them, no matter where we are.

[17:51] - Speaker 1
We have our iphone on our hand. We have an Amazon Prime truck in front of our house. It seems seemingly all the time we're searching on Google. We're all Facebook members are 3 billion members. I think it's kind of reached the point now where now there's this idea that maybe they become too large and they are getting larger. And the irony is that the vice President for Obama Biden is actually putting in place the pieces to not put an end to it, but to somewhat slow it down or attempt to slow it down.

[18:25] - Speaker 1
I mean, it's going to take years, but I think it probably will go in that direction. I think we'll see some sort of checks and balances more so than what we've had before.

[18:36] - Speaker 2
Who do you think in the short term is? Let's say this legislation goes forward. Let's say these antitrust lawsuits favor the smaller guy, so to speak, who's the immediate winner is it the smaller companies that want to innovate? Is it the end consumer? Is it both?

[18:54] - Speaker 1
I think it's first and foremost as a developer. I think a lot of these developers have felt as if they've been put in a vise, and I think it would help in terms of innovation. I think one of the problems is that if you look at these charts and have been sent a lot of information about the number of acquisitions companies like Microsoft, Google and Amazon in particular have made, they, in a sense, have kind of eliminated a lot of those companies that could have emerged into trillion dollar evaluation companies eventually.

[19:27] - Speaker 1
So I think there's that concern. So for the developer, there's probably they're the first and foremost the largest winner and then eventually the consumer. Although I think the consumer is going to win regardless of what the outcome is, the service has never been more immediate and cheaper than it is now. Nothing's. Convenience has always been the word for a lot of these companies, and the whole app economy seems to be built around the concept of convenience, making your life easier on the most incremental things. And it's amazing how much money these companies make, finding a solution to an incremental thing like parking your car in a parking lot and having somebody watch it and clean it while you're at a show.

[20:06] - Speaker 1
There are apps for things like this.

[20:08] - Speaker 2
I remember sort of in a previous era of Apple, they had a reputation for targeting a company and saying, hey, we want to buy you. We think what you're doing is great. We want to make that part of the Apple operating system, right?

[20:23] - Speaker 1
That was next, right. That was the return of Sea job they bought next in December 1996.

[20:29] - Speaker 2
Right. I'm thinking about a couple of cases where the company said, you know what?

[20:33] - Speaker 1
No.

[20:35] - Speaker 2
We want to keep developing our own thing. We want to go our own way and Jobs purportedly said to them, Well, that's a big mistake because we are going to do this with or without you and you're just going to die.

[20:47] - Speaker 1
Yeah. One of them was Dropbox. I remember Dropbox was offered. I don't know if there was ever an exact figure, but it was billions of dollars by Apple and Google and Drew Houston, to his credit, said no and created his own company. But, yeah, he was one of those individuals who turned away from them. But you're right, join us or don't exist because we'll put you out of business or, in the case of Facebook, they would come up with feature sets that mirrored WhatsApp or Snap are doing.

[21:22] - Speaker 2
So.

[21:24] - Speaker 1
Don'T be acquired. Then proceed at your own caution, because we are going to come after you with the same applications, and we're going to have a much larger user base because certainly when we see the size of some of these acquisitions.

[21:38] - Speaker 2
When they're measured in the billions and the company sizes are tiny, it's hard to feel bad for those founders. It's pretty clear those founders and their inventors investors got a big payoff.

[21:50] - Speaker 1
Yeah. That happened to WhatsApp they were bought for anywhere. So I think it was $19 billion. There was always discrepancy about the cost, the price.

[22:00] - Speaker 2
Right.

[22:00] - Speaker 1
Within a few years, all the people associated with the founding of that company all left. I mean, they were all rich, but they all left for various reasons because they didn't agree with what Facebook was doing with the data. But, yeah, it's hard to shed crocodile tears over their objections.

[22:17] - Speaker 2
Yeah, but I think for each one of those cases, there are probably several companies that no longer exist because they turn down the offers, like Drop a Box is an example of a company that's doing pretty okay.

[22:30] - Speaker 1
It's been fine. You're right.

[22:33] - Speaker 2
They managed to get to scale before Icloud and Google Drive, and things like that really hit their stride. But I remember, like itunes, like Apple's itunes app. I'm trying to remember the company that was like the number one music player. And Apple tried to buy them, and they said, no, thanks. I can't remember their name anymore.

[22:59] - Speaker 1
That's probably their history of being forgotten. I think the biggest acquisition that Apple made was the beach acquisition for about $3 billion about a decade ago. I can't remember the exact year, but that was by far the largest. Apple usually doesn't make a lot of big acquisitions. What they do is they buy companies for less than $250,000,000. And I always thought that was pretty smart, because what they would do is it was an Aqua hire. Basically, they require the company for the personnel, and then they would then put those people within a division or within a project and then accelerate it.

[23:35] - Speaker 1
So either for augmented reality, for instance, or what have you storage security, while some of the others would go for the kind of the Whopper deals that would gain your attention and maybe get the attention of the antitrust regulators or people who are object to make acquisitions big bets.

[24:00] - Speaker 2
So just turning back a little bit to something that came up earlier. So we were talking about Apple and Google. The fact that this antitrust legislation over the app stores may not affect Google as profoundly as Apple, but they're kind of tied together. Google, you brought them up. They're in the news all the time now with being sued in the estates and outside.

[24:23] - Speaker 1
Yeah, they're the most vulnerable.

[24:25] - Speaker 2
Yeah, right.

[24:26] - Speaker 1
I think the general agreement is that they're the most vulnerable company, just based on the number of fines, especially in Europe. It's in the billions. The state attorneys general. There are at least two major actions against the predominance of the search and then the federal government. Google seems to be in the crosshairs. You know, it's interesting, too. It's just based on the tenor of the questions during House and Senate hearings. Google, especially is the focus of Siciliani David Siclini in the House, who is chair of a subcommittee overseas antitrust and the performance of Google executives usually is probably the least effective during these hearings.

[25:15] - Speaker 1
Sundar Pica, the CEO has been caught flat footed with. He's been confronted with things that they did or accusations made against them that he was unfamiliar with. They were only smoking gun incidents with them, not so much with Apple, which seemed to get a pass they usually were deferred to, as was Amazon. The two companies were Google in terms of actual actionable items, and then Facebook just based on their reputation. And they're just horrendous history of botching almost every single Privacy related issue or crisis the last five years.

[25:54] - Speaker 2
Given the topic of our show, I think we'll definitely want to dig into that. But before we get there with Google, I used Alta Vista before Google came around and I switched to Google because it was better and I've never left it because I've just never been tempted by thinking Google is no longer any good, or I know of something even better. So what are they doing wrong?

[26:19] - Speaker 1
Yeah, I know that when they had, when there was infosec and ultavista and excites at home, et cetera. All these Yahoo, there are all these choices, and it was like you I switched to Google and never looked back in a weird way. They're like victims of their own success. They still are. You look at their revenue when they announce their quarterly results. They're by far the number one digital advertising company because it reaches the most people. It's the most effective. It's got the best algorithm. It's a very seamless ecosystem.

[26:59] - Speaker 1
The results, there are still the best. So in a weird way, you're right. They're kind of being punished for their own success and their own.

[27:07] - Speaker 2
Well, I think you said the magic words just now is the issue has to do with their advertising ecosystem, not their search engine.

[27:15] - Speaker 1
Right.

[27:16] - Speaker 2
And they do a beautiful job of keeping those two businesses separate in terms of consumer perception. Like when I'm on the Google search page, I don't see a bunch of ads. I see a bar that I can search in, but that powers all of their I'm guessing that powers all of their understanding of me to do targeted advertising, along with the fact that maybe I use Android and Gmail and other signal that they can get to understand me better and then use that to target advertisements towards me, which potentially get better results.

[27:56] - Speaker 2
And therefore people want to use their advertising platform as merchants or whoever looking for customers.

[28:04] - Speaker 1
Yeah, they are very good at not being perceived as Facebook is. People think about Facebook is the targeted advertising company like you are using the service for free, but it comes at the cost of you being targeted by advertisers. And there are more than 10 million small businesses that advertise on Facebook and Google. The numbers are probably just as high, but they've done a good job of kind of erasing the connection between the two between the advertising revenue and the search, which drives almost all the advertising revenue at Google.

[28:45] - Speaker 1
And it's interesting because one of the things that I noticed and one of the things that they get criticized for Google gets criticized for during their earnings calls is the utter lack of transparency or detail about how they glean their revenue or the size of their business. Now they have finally broken out the size of the Google cloud revenue and then the search, advertising and other aspects, big bets, et cetera. But they have always kind of made it a point to be as drab and vanilla and as vacuous and tell you as little as possible, because I don't think they want you to see the connection.

[29:30] - Speaker 1
I think that's one of the reasons, among others, it's a very conservative company, just in the way it does public relations or the way it interacts with the public. On the other flip side, Facebook can't help itself. Like if you listen to one of the earnings calls it's about we did this. This amount of money came in, and here's an example here's a company. We changed the trajectory of this company. The narrative completely changed because they work with us. They will go into detail. And 99% of Facebook's revenue is advertising.

[29:59] - Speaker 1
So they proudly announced how it works in terms of targeting and advertising. While Google is kind of like a little bit more politically savvy, there's kind of a stealth aspect to when they share information. It's always been their way.

[30:15] - Speaker 2
So that turns us to breaking these companies up, making them smaller. It seems like Facebook is the poster child, right?

[30:23] - Speaker 1
Maybe Google and YouTube that's always thrown out there.

[30:28] - Speaker 2
I think part of Facebook is that it acquired Instagram and it acquired WhatsApp and it has continued to maintain them as separate brands. And so that could kind of feel like a really natural place to just get a chisel and a hammer and break it back apart.

[30:44] - Speaker 1
Again, I was thinking a certain way Facebook, they try to stay ahead of the legislative cycle, and I would not discount their five or ten year plan thinking if we are forced to do this, we'll be in a position to be able to do it somewhat adroitly. But I also think one of the things they've tried, they've tried to integrate services altogether, to bypass the whole argument that they're all separate entities. These are tightly ingrained in the product portfolio. So their argument would be if we break these off, we cause irreparable damage to Facebook proper.

[31:21] - Speaker 1
So they seem to be a company following a strategy that takes into account all the possibilities of what might happen. They're also the one company that is open to some sort of regulation, so they've actually embraced it more so than anyone else, probably because they think they could have an influence on how regulation might unfold.

[31:40] - Speaker 2
I definitely think that whether it's Facebook having Instagram and WhatsApp be under its umbrella, whether it's PayPal and Venmo actually now being the same company, Google Maps and Ways these are all examples of where you see a company purchasing a competitor and then rather than giving the consumer less choice, they continue to support both.

[32:04] - Speaker 1
Right.

[32:05] - Speaker 2
It seems smart. It seems, actually, as a consumer nice to not lose something you loved because it got acquired.

[32:12] - Speaker 1
Right.

[32:12] - Speaker 2
But it feels really weird at the same time. And I'm trying to put my finger on it. Like, where is my instinct saying there's something sinister at work here.

[32:28] - Speaker 1
They almost became like countries in and of themselves run by a Prime Minister or President. And I think they're just so blindly ambitious. And they're all competing with each other, by the way. So maybe is it possible to have five monopolies competing with one another to the exclusion of everyone else because you see their willingness and appetite to jump into markets that are connected to what they've already been doing? I'm thinking of Amazon. So you just keep building on to the Empire and expanding your territory. And as you do, it's really kind of addictive and somewhat difficult to stop.

[33:12] - Speaker 1
And once one company goes into augmented reality or into cloud, the others follow, like Amazon showed what they could do with cloud. Here comes Google. And here's Microsoft. Yeah.

[33:23] - Speaker 2
Well, as a customer, as an end consumer, I'm like, yeah, Amazon, Google. Those are completely very different companies. One of them is where I get all of my groceries. And the other one is I mostly think of it as where I get my email and my calendar. Right. And so they feel like very different companies. But when you look at what's the Crown jewels of each, it turns out it's a very one of the Crown jewels. It's a very similar product.

[33:48] - Speaker 1
Right.

[33:48] - Speaker 2
We have Google Cloud and we have AWS. Aws is so much an important thing to Amazon that that's where their new CEO came from.

[33:57] - Speaker 1
Right? I mean, that's clearly where the future of the company is, right. That's why he took over. And then the same thing happened at Google. And even in Microsoft, that Enterprise guys take over. The consumer focus goes to the enterprise side with Apple. It was kind of interesting. It was kind of about operations and becoming much more efficient. And Cook is probably one of the greatest, if not the greatest, at that side of the business. They incrementally just continue to expand beyond anyone's belief. It's interesting that once you start, you start going down a path and you see these different opportunities and they all see the same opportunities.

[34:35] - Speaker 1
The funny thing is, though, we're mentioning all the different markets they're in or the businesses are in, like groceries and delivery. And you think about that and you think, oh, well, they continue to grow at whose expense pharmaceutical companies. It's just you start thinking about where they're moving and the kind of tidal wave effect it has on the other industries it moves into.

[34:58] - Speaker 2
So I think to return to my previous question when I try to think just a little bit more about what is irking me about WhatsApp being Facebook and Instagram, being Facebook and all of that kind of stuff is that it comes down to they want my data, and they kind of don't care how they get it, because that's what they're making their money on. And I wonder if anywhere in all of this legislation that's happening is any of it focused on my data, my Privacy equalizing the playing field so that I have some control.

[35:31] - Speaker 1
Yes, that's definitely part of the overall plan is to give the consumer a little bit more control over their data. But the problem is you have the consumer willfully giving over their data. I know, like in California, we have the Privacy law, which requires that we agree to cookies or we don't agree to them. At least you get the option. But I don't know if a lot of these laws would be enforceable if you have consumers willingly, if not eagerly getting more service and just kind of making a trade off.

[36:04] - Speaker 1
I think most consumers I mean, I wrote a book about this about Privacy and data security and then the cost to your personal freedom or your financial side. If your data is stolen, most consumers are happy with the trade off they're making. The only time they regret it is when they are a victim of identity theft. Until that happens, they're more than willing to put up with whatever is thrown in front of them. And that continues to be proven quarter after quarter by the advertising revenue you see with Google and Facebook, or even Amazon.

[36:40] - Speaker 1
In terms of ecommerce side, Apple takes a different approach, but those companies until the user or the customer stops using them, I don't think it's going to change. And I think if it comes to pass where there is some sort of legislation, maybe there's an opt in or opt out button for the consumer, and I bet most of them will just click on it and just move forward without even thinking a second about it.

[37:07] - Speaker 2
I share your frustration.

[37:08] - Speaker 1
Let me just say that I hear these complaints. I've heard about this for 2030 years, and this is the case. Cambridge Analytical will change everything, or this case will change everything. There's just so many examples, and yet it just seems undeterred.

[37:25] - Speaker 2
Yeah, it is a decades long thing we've seen in Tech, where people who are Privacy advocates, Privacy researchers point a piece of data after piece of data that says people care about Privacy, like when you ask them. But when you measure their behavior, you see a different picture. So sentiment and action do not align around Privacy. When I show some empathy, though, for that person who is saying they want Privacy, but they're actually acting against that interest in the way they use technology. I would say that it's very hard to feel empowered, right?

[38:05] - Speaker 2
And to understand that you can make a trade off there. That isn't a I either get to use technology or I get to have Privacy, right. It's not kind of like a sliding scale where I can dial in just how much Privacy I want and see how much I have to pay extra to get it. It's more like if we're talking about Facebook, like, OK, I'm not going to know what any of my friends are up to. I'm not going to have a way to communicate with them, and I'm not going to know what parties I'm invited to because I decided not to be part of that platform because I have concerns about my Privacy.

[38:39] - Speaker 2
And so the trade off that people have to make is one where I doubt many people feel very empowered.

[38:45] - Speaker 1
The one thing that is heartening to me is that there does seem to be a resolve in the administration to follow up on its actions and to address what something Trump's administration started. This may be somewhat clumsily, and it may have been vindictive. In the case of Amazon, it was. But I think with the Biden administration has shown a true commitment through the FTC chair that they appointed the head of antitrust Department of justice, the White House adviser from Columbia University, Tim Wu, who's an outspoken predictive social media in particular.

[39:23] - Speaker 1
He's done a good job. His executive order, which addresses anti competitive business practices, especially tech companies, which tend to hoard the tech talent. They make it very difficult for them to leave or to go to a competitor. They have made a lot of movement in the right direction, and the legislation continues on. I mean, I was afraid that it might get lost in all the infrastructure discussion we were having, but there seems to be a commitment to the direction they're moving in, not just in the House but in the center as well.

[39:58] - Speaker 1
And it seems to be bipartisan. And we have more private lawsuits against a lot of these big tech companies. And so there's quite a lot of movement slowly, but they're pulling rope in the same direction.

[40:11] - Speaker 2
So I think that is encouraging if we look at some of that infrastructure legislation that at least I've been reading about in the last few days. There is like this tension right now happening with that, too, around people's Privacy, particularly around cryptography. In this infrastructure bill, they're trying to tighten up people being able to evade paying their taxes. But in the end, at least to some people's read of how these bills are coming together. It ends up removing everybody's financial Privacy because of requiring so much reporting to the IRS that in order for people to be in possession of the information that needs to be reported, hardware manufacturers, software manufacturers, miners, everybody along that cryptocurrency value chain is going to need to.

[40:58] - Speaker 2
I mean, this is what people are wondering. Basically, they're going to not be able to operate on transactions that are private to them, where they don't actually know who the participants are, which is kind of one of the tenants of the Privacy given by certain cryptocurrencies. So it seems like sometimes the government is looking to make its law enforcement job easier. It's revenue collection easier. It also goes after the innovations that give ordinary people Privacy protections.

[41:28] - Speaker 1
Right. One of the interesting dynamics of what's going on with Antitrust is a lot of these companies have kind of turned against one another. They don't do this. They do it in some cases, publicly, like Facebook will run advertisements that pokes fun at Apple and vice versa. But they have all positioned themselves as the good soldier in terms of their relationship with the public. So Apple has probably done the best job of presenting itself and by creating a system that does respect our Privacy, probably more than others.

[42:04] - Speaker 1
And it's funny. It's almost like a divide. The government sees this kind of dividing, conquer mentality among the companies. They're so competitive with each other to begin with. But they're also probably kind of a weird way wishing each other kind of ill. Will you start to feel a little bit of anxiety among some of the companies? I don't think they thought it would be as serious or as advanced a stage as it is now and now. Not only are they being scrutinized, but they've been vilified by politicians on both sides and the public as much as the public loves using these products.

[42:42] - Speaker 1
I don't think they necessarily trust or like the companies by their brands. I don't think that they are they don't think is highly of these companies as they did before. And that includes actually the employees who work within the companies who probably question what's going on. I know that's an issue with Facebook or has been Google as well, maybe even Apple to a smaller extent, Amazon, they all have their fallacies. Amazon, it's the unions and the treatment of employees.

[43:10] - Speaker 2
When I think back even further past Microsoft to Antitrust in my lifetime, I remember when I was a young adult, the breakup of Mabel, right. And I think that at and T is doing fine all these years later, right? It still exists. It's still a big, powerful company.

[43:26] - Speaker 1
Yeah. Ibm was looked upon Microsoft as we talked about. Yeah, they all survived.

[43:33] - Speaker 2
So it seems like these companies are going to be fine.

[43:36] - Speaker 1
They will be. They're just too big to fail. They're too big to change that significantly. I think they're all going to make concessions one way or another, but it won't have a devastating impact on any of their businesses.

[43:49] - Speaker 2
Do you think that there's any, like next layer down or two layers down companies that we talked a little bit earlier about the fact that they're probably the ones that in at least the shortest term get some advantage to this kind of legislation. Do you see, though, any fallout where the legislation causes more problems for smaller players, or is it really just going to affect how the biggest companies do their business?

[44:15] - Speaker 1
I think it's so focused on the largest companies, right. I think there's just this kind of blind obsession with the four or five largest. Yeah.

[44:25] - Speaker 2
So smaller companies, they get a break, they get an opportunity to compete the consumer. If there's more competition, probably gets better pricing, right? Bigger companies maybe have a harder time continuing to grow.

[44:38] - Speaker 1
Yeah, they won't grow at the same clip that they've been growing up, which is almost an unprecedented acceleration of growth to begin with. So I'm sure they'll be happy at growing 20% rather than 60% if their shareholders don't like it. Neither were top level executives, but they'll be fine. It's just for them. It's kind of a jolt of reality that they are no longer untouchable.

[45:03] - Speaker 2
Sean, thank you. I feel that this has actually been a very optimistic discussion. It sounds like this really could spell out a better future.

[45:11] - Speaker 1
I think so.

[45:13] - Speaker 2
Our guest has been John Swartz, senior reporter at Market Watch, covering the biggest players in Tech. John, thank you so much for being here. It's been a real pleasure to have you on the show.

[45:23] - Speaker 1
Well, thanks for your time. Enjoy talking to you.

[45:30] - Speaker 2 
You've been listening to Privacy as the new celebrity. If you haven't already, please subscribe wherever you get your podcasts. I'm Henry Holtzman. Our producer is Sam Anderson. Our theme music was composed by David West bomb, and our sound engineer for today was Mickey Kapper. We'll see you next time. Have a great week.