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CHRISTIANE AMANPOUR: And we turn now to another prominent plague defining our time, that’s massive corporate monopolies. Big industries dominated by just a few giants. Take tech for example where Facebook, for instance, increase its market share by buying its competitors, WhatsApp and Instagram. According to our next guest, we have abandoned antitrust and economic regulation laws to the public’s detriment. Tim Wu is a legal powerhouse and he’s the author of “The Curse of Bigness”. He told our Walter Isaacson that we don’t need to fix Facebook, we need to replace it.
WALTER ISAACSON: Tim Wu, welcome to the show.
TIM WU, AUTHOR, THE CURSE OF BIGNESS: A pleasure.
ISAACSON: You just wrote a book on the course of bigness. How does that apply to the tech industry?
WU: Well, I mean, where do you start? I think the tech industry, as you all know well, used to be one of the most competitive, open to anybody kind of industry. Today, it’s dominated by three or four big players and it’s completely changed. Look at a company like Facebook that every day there’s some new revelation of being unable to control what’s happening, new privacy violations. So I think we have a bigness problem in the tech industry.
ISAACSON: We used to have a lot of competitiveness in the tech industry but that came about because of three really big antitrust cases against IBM, AT&T, and Microsoft. Do we really need those cases? Those three companies stumbled on their own and then —
WU: No. I think those cases were essential to the tech industry’s openness in the early 1000’s and its vibrancy over the ’80s and ’90s. You know, when you think about it, AT&T had a chokehold on telecom. IBM had mainframes. Microsoft had operating systems. And the fact that the antitrust division challenged them hard, each of them, in AT&T has broken in one piece I think made a huge difference in the openness of that industry.
ISAACSON: But the Microsoft case, it didn’t even totally win, did they at the Justice Department?
WU: Just part one, didn’t break them up. Bush administration, they were about to break them up. Bush administration decided not to.
ISAACSON: But antitrust in this country has a long history. More than a century ago, you had the big trust done by J.P Morgan in Andrew Carnegie and then they get broken up in the era of Teddy Roosevelt. What was the theory behind antitrust law?
WU: You know back when it was first enforced, I think it was a mixture of not only economic ideas, [13:40:00] the choking the economy, but also political ideas. A sense that companies like Standard Oil, a man like J.P. Morgan, some stands above the law that they wanted to dominate politics, they wanted to run the country. And so when Roosevelt broke up all these companies, he did because he said, “You know we have to prove that government rules this country and it’s not just run by a bunch of companies.”
ISAACSON: This was Teddy Roosevelt and he does it in a period that’s called the Gilded Age because these big companies had created great, multimillionaires of wealth. That disparity of wealth leads to some political problem. Do you see an echo of the Gilded Age in the present?
WU: Yes. I think we’re in a new Gilded Age. I think we’ve abandoned enforcement of the antitrust laws, abandoned a lot of economic regulation. And the unsurprising consequence is we have the same wealth disparities that we’ve had 100-something years ago. And we also have this enormous concentration where most industries are either oligopolies or monopolies. So basically recreated the Gilded Age. And you know you have the same politics as well. You know, more and more extreme politics, people getting angry, demanding more extreme leaders.
ISAACSON: It was Teddy Roosevelt who breaks them up. And also Lewis Brandeis who comes up with a theory of anti-bigness when it comes to both government and corporations. It wasn’t sort of a Liberal, Conservative, or Democratic, Republican thing. It was against big government, big corporations. Explain Brandeis’s philosophy as you do in the book.
WU: Yes, sure. You know Lewis Brandeis is one of the heroes of the book. He is very fixated on the what economy does for ordinary people, what it means for the nation’s soul. He wanted the United States to be a place where people could flourish, become who they might become. And he thought that the economy had so much to do with that. You know, just take one thing, your career, your job. Do you have steady work? Do you have vacation time? Are you worked — or are you sort of worked like a slave or are you unsteady, always worried you’re going to get fired? These factors he thought determine what kind of republic this was. And he believed that citizenship depended a lot on economic conditions. I think we’ve lost that today. We just sort of think of the economy, well you know, is the Dow up or down or what’s going on. Democracy is voting. But he had a much deeper conception I think of the way that economics and politics were linked to create a citizen and create a republic worth living in.
ISAACSON: You used to be in government. Would you have allowed and do you think Facebook should have been allowed to acquire WhatsApp, to acquire Instagram?
WU: No. I think the government — I was in it actually around that time, made a pretty serious error. Facebook in retrospect was concerned about competition. It was worried that it was going to become the social network of the past and it bought off all its most dangerous competitors. That is supposed to be illegal under the antitrust laws. We don’t just let people buy their competitors. That’s what Standard Oil did in the 19th Century. So we made a big mistake. I think maybe we can fix it. But allowing Facebook to buy off all competition was a huge mistake.
ISAACSON: But the antitrust laws has one test which is, does it harm consumers, to put all that together. And in some ways, these are free services to help the consumer. It’s easier to move back and forth from Instagram to Facebook. Should there be and has there been another test which is just you shouldn’t stomp out competition even though it might be cheaper for the consumer if there was no competition? We like competition because we like free markets. And if so, why?
WU: Yes. I think what we need to understand is the antitrust laws defend the competitive process, defend the system of competition which has been the American tradition for most of our history. And we’ve narrowed this idea, well, what the price is like? Are things going to be a dollar cheaper or not? That’s not the right question. The question is, as a company like Facebook, a company like Google, company — an industry like the airlines, are they destroying competition which is supposed to bring benefits for us as citizens, consumers, and employees?
ISAACSON: So you think competition has benefit even if it’s not just cheaper pricing as a benefit?
WU: Yes, that’s right. I mean you think about — I think of Facebook had competition from Instagram and WhatsApp. It couldn’t have racked up these privacy abuses. Or if it had, people would start leaving. Right now, you hear, “Oh my God, the latest privacy outrage with Facebook. What are you going to do?” One, you kind of quit, say goodbye to all your friends or go to Instagram which they own, go to WhatsApp which they own, you know. Some people are kind of stuck here. And that’s what it feels like when you don’t have competition, you don’t have choices. It’s about freedom actually. It is really a fundamental matter. Do you have somewhere else you can go if you don’t like the way things are? And in a lot of areas, you don’t.
ISAACSON: Is there any public sentiment for breaking up Google and Facebook?
WU: I think there is, frankly. I think you have a growing sense that things are out of control. It’s not only tech. You think about the pharmaceutical industry and the pattern of price rises. You think about the airline industry, think about cable. All across the economy, I think people feel kind of trapped. And you know, and you talk about this public. You got — you sense an anger and a desire for something different. Antitrust is an American tradition. It’s an American invention. And I think it responds to something really real which is a sense of powerlessness in the face of an economic force far greater than you. And people are asking for new answers. They don’t want socialism. I don’t think they want to anarchism. I hope they don’t want fascism. And so this is kind of the American compromise is we will challenge the biggest companies, break them up, and restore this kind of open economic order. And I think if we don’t do something, we’re going to have continued election of extreme leaders, continued, around the world, not just in the United States, of this pattern of economic anger generating very dangerous totalitarian tendencies.
ISAACSON: And Facebook actually seems to be a platform that amplifies that rather than brings us together. What is fundamentally wrong now with Facebook?
WU: You know I think it’s two things. First, its curse of bigness. They got way too big, way too fast, lost control of themselves. While at the same time, having this obsession with growth and money frankly which has just, in my mind, blindsided them to the dangers they were creating. I don’t think the Facebook sat down and said, “Let’s let the Russians hack us and influence the election.” But they were so obsessed with this business model of engagement, of time on site, of making sure billions of people spend as much time as possible on this product which is as addictive as possible, that they let everything else go to the wayside and have really created dangers for this democracy.
ISAACSON: And if Facebook wanted to, it could stop trolls and bots and Russian internet research agency, people in St. Petersburg from posting fake news if they tried hard enough. Do you think they should be either required by law to do that or pushed into doing that?
WU: No. I actually have a different view. I think it’s almost out of their — I mean they could control it but I think they are so genetically now predisposed to this model of just trying to get people engaged for as long as possible. I’m not interested in fixing them. I think we need to replace them. I think social networking is a noble undertaking done right. You’re trying to connect people, see friends and family. But when you have tied to it the idea that you’re going to constantly, maximizing the time and ad revenue and so forth, that leads in a very dangerous direction. So I think they’re kind of cursed by their makeup, cursed by their leadership, and it’s almost irredeemable.
ISAACSON: What do you mean cursed by their leadership?
WU: I think Mark Zuckerberg is not an ethical person. I think he might suggest that ethics are important if it sounds good. But I do not, in his core, believe that he has shown the traits of an ethical leader. And he is in a position of so much power over so much information that I think we cannot have a person like that in charge of so much that matters in the world.
ISAACSON: That’s a pretty stark charge. I mean I would think that Mark Zuckerberg probably tries to be ethical. He thinks he’s doing the right thing. Is there something pushing him the wrong way or do you think he just doesn’t care?
WU: I think when you look through the history of Facebook carefully, there are signs of a lack of ethics that are glaring. A sense that if you apologize, you can get away with almost anything. A sense that they are above the normal rules of ethics or law. You know I worked at the Federal Trade Commission when we did what we thought was a strong order to prevent them from violating privacy. And they showed absolutely no signs of having this reach of consciousness. So yes, I won’t go as far as saying that Zuckerberg is evil. But I will say he does not seem bound by the normal ethical constraints that would cause a person to ask whether or not they’re creating a danger to democracy, whether or not they’re breaking the law.
ISAACSON: And you think corporate leaders should do that?
WU: I think they should. I think there’s no choice. I’m kind of with the American framers in the sense and someone like John Adams who says that no matter what safeguards you have, you can’t really replace virtue. It really comes down to whether the people in positions of power are good people or not. And corporate leaders are incredibly powerful. This idea that — them thinking about shareholder welfare will generate a kind of republic you want to live in, I think it has proven a farce. We need a new generation of people who actually are what the Romans would consider people of virtue and ethics and good leadership. And you know, we dress it all up with separation of powers and they’re a corporate leader and they own the shareholders. But when it comes down to it, what are the people really like?
ISAACSON: Who is doing it right?
WU: That’s a great question. I have one example of someone. Jimmy Wales, started Wikipedia.
ISAACSON: Right.
WU: Could have made himself a billionaire easily. And he realized that if he ever took ads that Wikipedia would become a travesty. So he said we’re not going to take ads. We’re going to be a non-profit. We have to structure it carefully. Most of the leaders in Silicon Valley thought that they could have it all. They thought that they could be good people. I’m thinking of Google now, Larry Page, Sergey Brin.
ISAACSON: Don’t be evil.
WU: Don’t be evil. We’re going to be a positive force for human change. But we’re also going to be billionaires. We’re also going to dot the standard corporate form and we’re also going to promise we’re going to double our profits every year or so. Those things don’t work well together.
ISAACSON: But can you be a for-profit company as opposed to a Wikipedia and not fall prey to that? I mean you believe in free markets, free corporations, don’t you?
WU: I think — no, I absolutely do. I think you can. I just think this blind adherence leaving no room for anything but the pursuit of profit has led us into some very dangerous ethical territory. I mean I think I said Larry Page has good intentions, Sergey Brin. I think they mean well but I think this deal they made with advertising has really come back to bite them and has damaged their product. So that it’s actually a worse product than it was five years ago.
ISAACSON: You say that corporate leaders should have that higher calling.
WU: Yes.
ISAACSON: But that’s exactly what Google had. When they did their original public offering —
WU: Yes.
ISAACSON: — they said we are not going to be totally driven by quarterly shareholder returns.
WU: Yes.
ISAACSON: And then they put in it, don’t be evil.
WU: Right.
ISAACSON: What happened?
WU: You know, I went back and read that recently. They’ve made a mockery of it. I think they didn’t realize they were dealing with something much more powerful than themselves. They thought, like many people do, you know, I’m a good guy. I’m not going to get warped or obsessed with the quest for power or money. I’m different. And I think that is sort of the original sin of Silicon Valley. So they went for these standard corporate models. A little bit of difference but cosmetic. They had to do something much stronger. If I look back at Silicon Valley, early thousands, and think about the mistakes all of us made, I was also there. It was this sense that we could just trust a couple of good people to be good as opposed to creating a sort of constitutional, institutional structure that forces you to be good. That’s the difference between Wikipedia and let’s say Google or Facebook is they set it up so that this would be a different kind of enterprise for a long time, not for just five years.
ISAACSON: But if you don’t cater to the advertising revenue and keep increasing it, what’s your revenue model? Will consumers have to pay for it?
WU: Well, look at Wikipedia, donation model. They make more money than —
ISAACSON: But it’s not going to work for a Google or a Facebook.
WU: For Google, it would be challenging. I think they can have an advertising model but if they’re not bent on constantly needing to increase revenue by such numbers, they make enormous sums of money. They can run Google on $50 billion. I mean that’s a lot of money but they have to keep going, keep going, that’s what the markets want, that’s what their investors want. I think it’s trapped them. Frankly, I think the founders of these companies, sometimes I just wonder, how did I get in this position? I wanted to build a great product and here I am degrading my own product because of the demands of my investors. And that must be an uncomfortable thing to think about as you go into your later years.
ISAACSON: Tim Wu, thank you for joining us. Appreciate it.
WU: Thank you.