Few Americans noticed the July 2012 launch of a new business called UberX. But over the next few years, millions would eagerly, even avidly embrace the service. For people who lived in cities where taking a taxi was a normal part of life, Uber offered lower prices, clean cars, and push-button dispatch. In suburbs and even rural areas where there were few if any cabs, Uber for the first time made it easy to hail a driver, improving the lives of millions.
As radical as this new service seemed, however, it was in key respects also a reincarnation of a form of monopolization Americans had seen many times before.
At bottom, Uber was a play to enclose a public service—the provision of reasonably priced taxi services, regulated by municipalities—within a framework of private control, aimed at private profit. As many have written, the same basic technologies at the heart of the Uber system could also be organized under a variety of alternative business models, including ones controlled by and for the public.1 That Uber and its rival Lyft now largely control how we interact with these technologies is due mainly to the fact that these two corporations enjoyed the ability to swiftly attract enough investment capital to shape the public’s perception of the nature of this technology and of the service the corporations themselves provided. They had enough money, in other words, to make their particular business models synonymous with the technology.2
Uber’s expansion strategy was in fact little different from that of the monopolists of the plutocratic times or post-Reagan America. In 1901 it was the banker J. P. Morgan who engineered the creation of a near monopoly in steel production in the United States, and in 1986 it was Mitt Romney’s Bain Capital that floated the radical expansion of Staples, Inc. In 2011, it was an initial investment by Benchmark Capital, followed by huge infusions of cash by groups including Japan’s SoftBank and Saudi Arabia’s sovereign wealth fund, that armed Uber with enough money to price its service below cost for years at a time. This allowed the corporation simultaneously to buy the goodwill of millions of customers, and to bankrupt or severely weaken almost all its rivals and potential rivals.3
But Uber also enjoyed three advantages compared to the corporate tools of the bankers of the 1890s and 1980s.
Uber’s reach is much wider. The corporation’s character as an online platform allowed it to scale at an unprecedented pace and to capture control over taxi services in a phenomenally wide range of locations, not only across America but around the world.
Uber knows much more. Every monopolist knows more about the business of the people who rely on it than those people know about the business of the monopolist. But compared to Standard Oil or the Pennsylvania Railroad, Uber enjoys much greater ability to store and use the information it collects on its drivers and its users.
Uber has a license to discriminate. One way Uber makes profitable use of all the data it collects on its riders and drivers is to set different prices or payments for the same service on a person-by-person basis. The corporation, in fact, has bragged to Wall Street investors that it is doing precisely that.4
A fundamental rule of the American political economy, as we saw in the last chapter, is that there be no favoritism in the provision of any essential service or good, that every seller and buyer be treated the same. For the first two centuries of our nation, Americans understood that laws against such discrimination were foundational to democracy, individual liberty, and equality of opportunity.
That’s why Americans have traditionally required network monopolists such as railroads and telephone corporations to publicly post their prices and terms of service, and banned them from charging different prices or providing different services to different people and different businesses.5 This is true of particular groups of people, as defined for instance by race or gender. It is also, importantly, true of the person or business as an individual.
Uber, however, like Google, Amazon, and today’s other platform monopolists, has never been made subject to these traditional constraints on pricing and service.
Absent such rules, Uber’s bosses have been free to treat every single driver differently. This means they can favor some drivers with more rides, and disfavor others, for whatever reason they choose. This means they can pay some drivers more per mile, and pay others less, for whatever reason they choose. This means they can make some drivers travel farther than others to pick up a ride, for whatever reason they choose. It means they can pay a particular driver at a certain rate one day, then pay him at a different rate the next. In short, Uber’s bosses have been free to take the Tournament System model for pitting farmer against farmer, as perfected in recent times by slaughterhouse corporations like Tyson and Pilgrim’s Pride, and update it for the twenty-first century by using their app to automate it.6
Absent traditional pricing rules, Uber’s bosses are also free to build a similar sort of Tournament System for riders. In its statement to investors admitting that it engages in price discrimination, Uber implied that its goal was to charge richer people more than the rest of the population for the same level of service.7 But the corporation’s pricing system is actually designed simply to determine how much the people within a particular region are willing to pay for service, then charge that group accordingly. These relatively higher prices have nothing to do with demand; Uber charges them during rush hours and Uber charges them during off hours. And many factors other than having more money to spend can lead people to agree to pay more for a particular service. People who are more economically sophisticated often know how to pay less. People who are more economically desperate often have no choice but to pay more.
This is also true for how Uber treats you personally. Although what you see on your screen has been designed to look a lot like the free workings of a market system, in which the pricing of each particular ride you take is regulated by the most simple laws of supply and demand—with prices, for example, “surging” during rush hour—what is actually taking place is much different. Uber’s system is designed to carefully study your travel habits and shopping habits, your spending habits on Monday versus your spending habits on Friday, all so it can figure out how to charge you the maximum amount for any particular ride, without driving you to decide to take the bus or walk instead.8
Uber’s vast cache of data about where people go and when, we should not forget, not only provides an ever-more-perfect map of traffic to and from a community’s bookshops and coffee shops and dance clubs and churches, but also to its backroom casinos and after-hours clubs, its pushers and dealers and sex clubs and bordellos.
All this information gives the corporation ever greater ability to understand just how badly you need a ride. Do you rush off every Thursday at 8 pm to see your boyfriend? Do you like to squeeze your Sunday visit to Mom between a morning round of golf and the afternoon NFL game? Every Tuesday and Thursday at 3 pm, do you have to get to your psychiatrist and back without your boss knowing?
Well, even if your boss doesn’t know, Uber does. And Uber has the capacity to exploit its knowledge of your momentarily pressing needs to extract more money from you.
Uber has demonstrated its capacity and readiness to deliver different service to different people nowhere more perfectly than in its treatment of the public officials charged with ensuring the provision of safe and affordable taxi services. The corporation has repeatedly been charged with denying service to, and providing false information to, regulators around the world, including in Portland, Boston, Las Vegas, Australia, and France. Uber even developed a special term—“grayballing”—for such particularized targeting of individual law enforcers.9
The Organisation for Economic Co-operation and Development (OECD) recently described the general problem of such automated, highly targeted discrimination in dry language:
The current evidence … shows that the technological means for online personalisation and price discrimination are extensive and developing rapidly, and difficult to detect in market monitoring research by authorities. It also shows that online marketplaces, platforms and social media use or can use data analytics and profiling techniques to … personalise the ranking of the offers in online marketplaces and platforms, and may be used to rank and target offers on the basis of estimated maximum willingness to pay of individuals, or to vary prices to reflect the cost of serving individual customers.10
Put more simply, Uber has developed a system that enables it to gain intimate knowledge about you and your habits and needs, then to jack up the price you pay for its service whenever and however it chooses. It is a system that allows the corporation to cut you off, for whatever reason, whenever it wishes. It is a system that combines the tools to engage in simple extortion with an almost unlimited license to do so.
Uber has mastered, in short, the tools and practices of the corporations that have already come to dominate Stage Two of the monopolization of America and that are fast supplanting the relatively simple exploitations of the lords of the last generation.
Popular histories tell us the Boston Tea Party was a rebellion against taxes. Yet as we see in the writings of Samuel Adams and others, America’s revolutionaries viewed it mainly as a fight for liberty from the British East India Company’s monopoly.11 The revolutionaries objected to the idea of an all-powerful middleman corporation regulating their commerce. American colonists, they believed, were perfectly able to exchange goods and services with one another in markets of their own making with no outside regulator.
In the eighteenth century, there was no technological imperative whatsoever for any giant intermediary to exist. In the case of the East India Company, the corporation’s power was the result of nothing more than a government charter that protected a particular group of traders from competition with other groups of traders. The artificial nature of the East India Company’s power was made clear on February 22, 1784, six weeks after the Congress of the new United States signed a peace treaty with Britain. On that day the American ship Empress of China sailed from New York, bound for Canton with a cargo of ginseng. When the ship returned 14 months later, its traders sold its cargo of tea and porcelain on the open market. Without the active backing of the British state, the East India Company had no inherent power to stop the sale—let alone to determine anymore who sold what, or where or how they sold it, in America.
But over the next two centuries Americans would face many technologies that could not be broken into component pieces, the way a fleet of ships could be separated into individual vessels, or a company of investors could be separated into individual people. This was especially true of the railroad, telegraph, and other providers of essential intermediary services. These expensive and complex networks were built right into the physical world, and safe operation required great teams of people organized into intricate hierarchies. Time and again, however, Americans developed ways to ensure these essential intermediaries focused not on exploiting their gatekeeper position to manipulate and extort the public but on providing equal service to every seller and buyer.
In some cases, Americans chose direct public ownership of the intermediary or extremely close public regulation of private owners. We still see this today in commuter rail and bus networks and some local telephone, electricity, and water systems.12
In general, however, Americans have chosen to promote private control over vital intermediary monopolies. They have done so for a variety of reasons. These include practical considerations, such as that it can be far easier to convince people to contribute capital to a project by offering them a share in the profits than by dunning them for taxes. These also include political considerations, such as the desire to create a balance of power between strong private actors and strong public actors.
To ensure that these privately controlled systems served the public, Americans used various forms of common carrier law and other regulations that required these corporations to treat every customer the same. As we’ll see in more detail later, some of these laws simply banned corporations from personalized discrimination in pricing or terms. Others aimed to prevent conflicts of interest over what they sold, by prohibiting intermediaries from integrating into the manufacture of goods that might compete with products being sold by their customers.
Americans often supplemented these simple restrictions with various types of open standards and codes to make it easy to connect one network to another and to make it easy for many companies to manufacture products to run on the same common networks. For instance, in the case of the electrical system, open standards means anyone can manufacture refrigerators or fans or lightbulbs or circular saws or wiring. It also means that one town’s grid can connect to the next. In the case of the Internet, it means anyone can manufacture routers or write their own applications, and that one nation’s network can connect to the next.
Such policies empowered Americans to take full advantage of all the important network technologies introduced since the railroad in the 1830s, without real worry that the heavily capitalized corporations that controlled these technologies would exploit their middleman position to steal other people’s businesses or disrupt balances of political and economic power. Indeed, common carrier rules and policies have from the first served as a main pillar of American liberty and democracy and prosperity.
In the 1980s and 1990s, however, the neoliberal reactionaries of the Reagan and Clinton administrations, as they did with antitrust (and as we will discuss in greater depth in chapter seven), targeted many of the laws and policies designed to prevent such forms of discrimination.
Thus far, the effects of these radical changes have not reached to all corners of all networks. Non-discrimination rules still apply today to most traditional transportation and communications systems. Even airlines, widely derided for their wildly fluctuating pricing policies, enjoy little freedom to engage in true “first-degree” price discrimination, which is when the provider of a service charges each individual a specifically tailored price for the same service or delivers specifically tailored service for the same price.13
Similarly many antidiscrimination laws and policies have remained in effect in the digital economy in recent years, at least for periods of time. Non-discrimination principles, for instance, played a huge role in the big antitrust case against Microsoft in the late 1990s. That case aimed to prevent the corporation from favoring one Internet browser over another by reinforcing prohibitions against certain forms of vertical integration. Non-discrimination principles also underlay the “net neutrality” rules applied to telecommunications corporations and broadband providers in 2015.
Where we see the effects of the neoliberal revolution most dramatically is in the failure—by both Republicans and Democrats—ever to apply any sort of common carrier rules to online platforms, even after it became amply clear that Google, Amazon, and others had grown to a point where they provided essential services to other companies and to the public as a whole. This failure to apply common carrier to these giants is perhaps the single biggest factor behind the acceleration of the monopolization of the American economy we have witnessed in recent years. This de facto license to treat each seller and buyer differently, in combination with the ability of these platform monopolists to capture masses of data about other people’s businesses, is what gives these corporations such unprecedented power to control and manipulate individual companies and people, and the economy as a whole.
Over the last decade or so, the platform monopolists have exploited this license to reorganize entire realms of human activity in ways that serve not the public but only the interests of the masters of these corporations. And the extent of the threat these corporations pose grows almost by the day, as Google, Facebook, Amazon, and a few other vital online platforms move to control and colonize more corners of human society. These corporations increasingly match individuals to specific shoes and clothes, specific restaurants and hotels, specific movies and music, specific games and gamers, and increasingly to particular books, sources of news, jobs, and potential spouses. Google and Amazon even increasingly aim to manage the flow and use of electricity through the wires of the grid and within our individual homes.14
As with America’s chicken farmers and their relationship to corporations like Tyson and JBS, the result is the rise of systems of increasingly arbitrary governance and the destruction of the rule of law. The main difference between Walmart and the other dominant corporations and intermediaries of the last generation and Google, Amazon, and Uber, is that today’s online giants are able to manipulate individual behavior and decision making not only on a day-to-day basis, but moment to moment.15
To give us some sense of how these manipulation systems work, let’s look in detail at how Amazon, Google, and Facebook each shape some small portion of the human activities over which they have captured control. In the rest of this chapter, we will examine how Amazon regulates what consumers buy, how Google regulates where people go, and how Facebook (and Google) regulates what people read.
In 2018, Walmart reported $514 billion in revenue, far more than any other corporation in the world. That a single retailer controls such a phenomenally large amount of America’s consumer economy is proof, as we saw in the last chapter, of the revolutionary economic, political, and social effects of the overthrow of the American System of Liberty a generation ago. It also helps to illustrate another point we discussed in the last chapter, which is how much power Walmart can exercise over the individual suppliers who depend on it to get to market.
Yet when it comes to stock market valuation, we see a different picture. Although Amazon notched less than $178 billion in revenue in 2018, the corporation registered a total valuation of just below $1 trillion, putting it in competition with Apple and Microsoft for the crown as the world’s most valuable corporation. Walmart by contrast ranked twentieth, with a valuation of only $250 billion.
The reason? Walmart’s revenue in 2018 grew only about 3 percent over the year before, even in a boom economy. By contrast, Amazon’s grew by more than 30 percent. To invest in a stock is to place a bet on a corporation’s future profitability. Given that every day a greater percentage of total consumer purchases take place online, and given that Amazon already dominates online commerce, investors are simply concluding that Amazon will soon be doing more business than Walmart and will earn more—perhaps much more—from that business. They are betting, in short, that Amazon owns the future.
For hundreds of thousands of businesses, Amazon already owns today. The corporation wields more than sufficient power to make or break even large corporations swiftly, even suddenly. That’s one reason why a growing number of politicians and enforcers around the world have begun to talk of the need to break up Amazon.
The most immediate concern of most of these enforcers is the conflict of interest between Amazon’s role providing an essential platform on which other companies do business and its own fast-growing array of in-house products that it pits directly against the wares of its own customers.
Although no enforcer in the United States has yet moved to ban such unfair competition, in Europe federal officials in Brussels and the national government in Germany both appear to be targeting such behavior.16 In India, the government has already forced Amazon to limit its sale of in-house brands.
This is an issue my team at the Open Markets Institute and I know well. We began to study Amazon’s control over America’s book market in late 2009, first wrote about the issue in early 2012, and first spoke to politicians and enforcers about the issue in 2013. Then in January 2017 Lina Khan of our team published what is now the standard analysis of the problem.17
What we also see today is that as fast as the enforcers and politicians awaken to Amazon’s monopoly power, Amazon is moving to shift its business model even faster.
A huge part of Amazon’s business is still to take ownership over someone else’s product and then resell it, the way other retailers do. Amazon calls this its “first-party” business. One measure of Amazon’s power is that even the largest manufacturers of branded products now sell certain goods only on Amazon. They do so even though such deals—which Amazon calls “Exclusives”—serve mainly to concentrate more control in Amazon in ways that work against the interest of the manufacturers themselves.18
At the same time, Amazon has continued to grow its already-huge business by manufacturing its own “private label” brands to compete with those of these other companies. Amazon now designs and sells its own shoes, dresses, business suits, diapers, detergents, snack foods, electronics, books, movies, and videogames, as well as thousands of other products organized into some 150 in-house brands.19 Amazon’s ability to pit these products against even the biggest manufacturer is well understood. For instance, when an article reported that Amazon had begun to manufacture its own toys, the stock prices of Hasbro and Mattel plummeted.20
And Amazon wields this same basic power against many companies, including some of the best known in America. As a recent Washington Post article explained, “Amazon’s latest tactic offers AmazonBasics batteries to shoppers searching for Energizer models, its Trek Support gel insoles to customers searching for Dr. Scholl’s products, and its Basic Care nicotine gum to those searching for Nicorette’s offering.”21
Yet Amazon’s real growth in recent years has taken place in lines of business that are leading the corporation in an entirely different direction than traditional retailers, including Walmart, toward a model that looks a lot like Uber’s.
Under this new model, Amazon does little more than exploit its control over the marketplace to “match” sellers and buyers. Indeed, Amazon has succeeded in making itself the main place where other companies sell things. Rather than doing so on their own websites—in other words, on the open Internet—these companies now interact with buyers mainly across Amazon’s vast, sprawling private platform.
Amazon CEO Jeff Bezos bragged about how rapidly this transition is taking place. In his annual letter to investors in April 2019, while noting that first-party sales had grown from $1.6 billion in 1999 to $117 billion in 2018, Bezos said that during that same period, third-party sales grew from $0.1 billion to $160 billion.
Bezos claimed the main reason for this success was that Amazon was doing such “a great job” helping these independent sellers “compete against” Amazon’s own first-party business. Amazon, he wrote, adding his own italics, had provided other sellers with “the very best selling tools we could imagine and build.” The result, he said, was just terrible for Amazon. “To put it bluntly: Third-party sellers are kicking our first party butt. Badly.”22
From the point of view of the sellers themselves, who exactly is kicking whose butt looks somewhat different. These companies sell on Amazon because, online, increasingly there is no other place to find customers. As of early 2019, 66 percent of all individuals looking to buy online start their search for products on Amazon’s website. If they are looking for a specific product, the figure is 74 percent. When it comes to commerce in consumer goods, Amazon has become the Internet. If you are not on Amazon, you are not really on the Internet, hence you are not really in the market.23
And Amazon is fast extending its control over online markets in four other key ways.
Each of these new capacities gives Amazon many additional ways to lure or lever other people’s companies into dependence on its vast system of systems. And once these sellers do become dependent, they find that Amazon can manipulate their sales in an almost infinite number of ways, most importantly, through the corporation’s control over how information—including the price of every good—is presented to the potential buyer. The ultimate result, almost always, is that Amazon gets to carve off a bigger and bigger share of each deal made on its website. In early 2019, Amazon’s cut of the average deal struck on its platform topped 40 percent, roughly triple what it was a few years ago. The corporation, in short, has established itself as one of the biggest and most effective tax collectors in the world.26
And it’s not as if these captive sellers have the ability to raise their prices, even if they spot an opportunity to do so. Amazon has long retained control over all pricing decisions on goods it buys and resells and has long manipulated the prices of other people’s products for its own purposes. Until recently, third-party vendors on Amazon did retain full control over their own pricing. But as Amazon’s power over the market has grown stronger, the corporation has increased its manipulation of other companies’ prices. Just before Christmas 2017, for instance, Amazon arbitrarily decided to slash the prices charged by a number of third-party vendors up to 9 percent.27
There’s a reason these vendors don’t complain, even when Amazon breaks its own rules. If they do, there’s a good chance Amazon will simply cut them off from the market. It’s a tactic Amazon has used repeatedly in book publishing. The corporation stripped the buy buttons from Melville House in 2004, from Bloomsbury in 2008, from Macmillan in 2010, and from Hachette in 2014.
Another tactic Amazon routinely uses to get its way is simply not to police the sale of counterfeit items on its own website. Even when sellers harmed by such counterfeiting complain—as the shoemaker Birkenstock did repeatedly—Amazon has often continued to sell the bogus products even when it must know they are bogus.
So far, not one law enforcement official in the United States has raised a finger to protect the citizens who are being abused by Amazon. Which means that all other sellers now understand that Amazon’s wishes, no matter how arbitrary, are the law of the land.28 As one seller put it in a recent interview, “Amazon is the judge, the jury, and the executioner.”29
One of the best measures of Amazon’s power is its phenomenal surge in advertising profits, which went from a tiny line item in 2017 to $10 billion in 2018, and toward an estimated $38 billion in 2023.30 In an open commercial system in which there are many sellers and many buyers, advertising is a way to attract attention. In a closed system, where a single corporation controls the access to market, advertising is a tool of extortion.31 If you want Amazon to carry your goods, you have to pay whatever it demands to handle your goods. Increasingly, you also have to pay what it demands to advertise them to buyers.
Back in the day, Walmart’s aim was simply to force manufacturers to give it lower prices so it could more swiftly undersell and bankrupt rival retailers. Now that Amazon has effectively killed off all real online rivals, its model is to capture control over the businesses of every seller and trader online, and then to pit everyone against everyone in a carefully orchestrated scramble to be placed first before the eyeballs of the busy buyer. At one and the same time, Amazon gets to sell both access to the market and various forms of protection from its own thuggish actions.32
And like Uber, Amazon is extending this automated mafia machine from seller to buyer. As the reporter Julia Angwin detailed recently, Amazon is fast developing the same abilities to manipulate buyers as well.33 Or, more to the point, to manipulate you and your family. Into paying more. Into buying what they want to sell. Into sharing information you don’t want to share. Into becoming one more cow for them to milk.
By the time you read this book, Uber itself may be in real trouble. And the basic problem was evident long before Covid-19. Even before the corporation went public in May 2019, Uber had lost billions of dollars and had identified no clear path to profits. The corporation simply faced too much competition, from Lyft, from traditional taxis, from other forms of transportation.34
But no matter whether this particular ownership structure collapses or not, Uber’s business model will live on, hence the various threats posed by that business model will live on. One way to get a sense of who might end up running Uber’s business, or something very much like it, is to consider where Uber gets its mapping services.
In Uber’s early days, one of its biggest investors was Google. Once Uber began to gain real traction, however, its executives moved to cut ties with Google, in order to ensure their corporation was less subject to paying rent to other monopolists and more fully in control of its own destiny. This meant kicking Google executive David Drummond off the Uber board.35 More importantly, it meant developing its own mapping service. Between 2015 and 2017 Uber bought mapping technology and talent from Microsoft, purchased a startup named Otto that was run by one of the founders of Google’s Waymo self-driving car division, and hired the former head of Google search to run Uber’s own mapping operation.36
Then in April 2019, in advance of Uber’s initial public offering of stock, executives admitted that the plan had failed. Uber, the executives reported, had paid Google $58 million over the previous three years to use the larger corporation’s mapping services, and had agreed to pay some $245 million to settle a lawsuit for infringing on Google “trade secrets.” Even more concerning, Uber had forked over some $631 million to Google for advertising and marketing.37
In fact, despite Uber’s fight to liberate itself, Google and Google executives still owned large parts of the corporation at the time of the IPO.38 More galling, Google had also invested in Uber’s arch-rival Lyft and owned more than 5 percent of that corporation when it went public shortly before Uber’s own IPO.39
In its pre-IPO filings Uber made clear to potential investors that this failure to win its independence from Google meant that the corporation’s destiny was not in its own hands and certainly not in the hands of its customers. “We rely upon certain third parties to provide software for our products and offerings, including Google Maps for the mapping function that is critical to the functionality of our platform.”
And the Uber executives made clear that this was not going to change any time soon. “We do not believe that an alternative mapping solution exists that can provide the global functionality that we require to offer our platform in all of the markets in which we operate. We do not control all mapping functions employed by our platform or Drivers using our platform, and it is possible that such mapping functions may not be reliable.”40
In short, Uber depends on a landlord that can raise its rent and change its contract almost at will. In this sense, the corporation is really little different from one of the midsize manufacturers who depends on Amazon to get to market. Left unsaid by Uber was the fact that much of the extremely valuable data that the corporation gathers from its rides was also flowing straight into Google’s data vaults.
The reason Uber found no real alternative to dependence on Google lies in two acquisitions Google made more than 15 years ago. First was the Android operating system for mobile phones, which Google purchased in 2005, then made available to almost any phone manufacturer in the world. Android was designed precisely, in the words of its original developer, to be “more aware of its owner’s location and preferences” than other mobile phone systems.41 After years of refinement by Google, Android is now one of the world’s most powerful tools for tracking the movement of individuals, and it runs almost 90 percent of the world’s mobile phones. The amount of detailed data Google is able to collect on anyone with an Android phone is phenomenal. Not only can an Android device tell exactly where you are, and the speed at which you are traveling, but it can sense whether you are riding a horse or bicycle, or jogging or climbing stairs. Google then combines all this information into the world’s widest and deepest record of human movement across the face of the earth, a record of us both as individuals and as a species.
The second reason Uber found no real alternative to dependence on Google is that the corporation bought up control over most of the world’s best mapping technologies. This included the fundamental technology behind Google Maps, which the corporation purchased from two Danish brothers in 2004. More recently, it includes at least 11 big acquisitions, the most important of which took place in 2013, the first full year of Uber’s life, when Google purchased Waze, which at the time was the only large-scale independent mapping system left in the world.
Amazon has exploited its monopolization of the platform where sellers and buyers connect online to enclose many of America’s most important markets for consumer goods, in ways that give the corporation ever greater capacity to micromanage commerce in America. Google, in similar fashion, has exploited its monopolization of mapping software to capture great and growing control over how human beings interact with our own streets and highways, both in America and around the world. As a result, Google now enjoys not only the ability to micromanage the movement of the individual through the world but increasingly enjoys the ability to determine the failure or success even of some of the most powerful and well-capitalized corporations in the world.
Uber and Lyft are not the only corporations threatened by Google’s mastery of mapping. Until recently, manufacturers of cars and trucks were among the world’s most powerful corporations. Today their future looks increasingly bleak, not because they lack the ability to make great vehicles, or to develop software for those vehicles, but because someone else owns the operating system for the roads and highways on which their vehicles must run.
The women and men who run these corporations are smart. They understand very clearly how Google and Apple exploited their control over mobile operating systems to almost seamlessly displace Motorola, Nokia, and other first-generation mobile phone manufacturers and to capture almost all the value in that industry.42
For the moment, most automakers have chosen to try to keep some control over mapping by forging alliances with one another. Given the century-long rivalry of these corporations, this is not always easy. The result thus far has been a patchwork of loose deals: between Ford and Volkswagen, between General Motors and Lyft, and among all the German carmakers together.43 Toyota, meanwhile, has proposed an open-source self-driving system, on the model of Linux, to allow everyone to go their own way, but together.44
Yet here the carmakers face a second fundamental challenge to their traditional sovereignty: the institutional investors who control ever-bigger portions of these corporations may not give the executives all that much choice other than to join Chrysler and Nissan in turning the keys over to Google.
Consider for instance the role that the giant Tokyo-based investment fund SoftBank plays within this system. With vast piles of cash—much of it from the Saudi government—SoftBank has become one of the most dogged engineers of technology monopolies in the world. This includes engineering the elimination of competition in ride hailing in much of the world.45 In the case of self-driving cars, SoftBank now holds a stake in just about every play, including huge investments in the efforts by GM and Toyota to escape Google’s control.46
As one reporter described SoftBank’s new role in the automotive industry, “The overlapping investments and alliances have become so prevalent that they border on conflicts. And SoftBank sits at the center … From an investor standpoint, the interconnectedness makes the idea of picking a winner almost meaningless.”47
In other words, SoftBank, the octopus that controls access to capital, will use its power and sway to force even the biggest of the carmakers into the grasp of the octopus that controls the streets, Google.
And don’t count on any other corporation to come to the rescue. Even Apple, with its billions of dollars hoarded away, understands there is no way to match Google in mapping. For Apple, this is no theory but rather the lesson of hard competition. In 2016, after investing billions of dollars improving its own mapping software and databases, Apple realized that even a fast-growing share of iPhone users were switching to Google’s map, with its wider and deeper—hence more useful—base of data.48
Rather than fight Google, Apple chose merely to collect huge fees from Google—an estimated $12 billion in 2019—for preloading their search on every iPhone. Apple chose, in other words, the quiet life of the landlord over the more bracing, but risky, life of the innovator.49
For automakers, the future looks bleak. Surrounded by systems controlled by Google, two second-tier automakers chose simply to strike deals directly with the corporation or its robot car division, Waymo. Fiat-Chrysler in mid-2018 agreed to manufacture nearly 70,000 Chrysler Pacificas for Waymo.50 Then in February 2019 Renault-Nissan announced plans to work with Google on building self-driving cars.51
Absent a decision by a government agency to stand up to Google’s dominance of mapping and related technologies, the day will soon come when Ford, GM, Toyota, and Mercedes will also all be forced to surrender to Google’s control and accept a life of increasing senescence as benders of metal for the master of the map.
And as radical a concentration of wealth, power, and control as this would represent, we should keep in mind that Google’s mastery of the world’s streets barely touches on the full extent of Google’s power to shape and direct online commerce and, indeed, human society itself. In the 20 years since its birth, Google has been left almost entirely free to monopolize whatever sections of online communications and commerce it has wished. And Google responded with at least 225 takeovers that helped the corporation corner control over much of the Internet itself. In addition to maps, Google now also plays a dominant role in searches, email, mobile, online video, operating systems, browsers, and online advertising technology, among many other monopoly positions. And it expands its reach every day. This includes the emerging “Internet of Things,” which is designed to regulate the use of everything ranging from the appliances in your home to the electrical grid itself to the energy markets where hydrocarbons are traded. And this list of takeovers does not include the personal investments of top Google executives themselves.
Increasingly Google does not even need to buy other people’s companies and technologies. As is true of Amazon, Google enjoys the ability to simply take their businesses at will. When Google speaks of the radical nature of the changes promised by artificial intelligence, it is really often just talking about all the data it has collected about other people’s businesses and its ability to use that data to displace those businesses when it chooses.
And like Uber and Amazon, Google is also perfecting its ability to use these caches of information in an even more insidious way. It simply manipulates the sellers and buyers of various goods and services, as well as the various speakers and listeners, writers and readers in our society, in ways that allow the corporation to extort wealth, from everyone everywhere, just for doing what human beings do.
To understand the number and complexity of ways Google can discriminate in the information it delivers to you, let’s turn back to the service of mapping. In this case we are talking not about how Google prices access to its maps for a corporation like Uber, but the quality of the mapping services it delivers to you and other individual people. Already today we live in a world in which it is absolutely possible for Google to steer some people along better routes, and to steer other people—perhaps you—onto slower and more costly side routes. There is almost an infinite number of reasons Google might want to manipulate your behavior in some direction or other. The corporation might wish to direct you, for instance, down a particular street to please some major advertiser. Or Google might wish to get you off the main road so some more important person can go faster.
We know that the tolls on the interstate highway system can be highly unfair to poor citizens. But at least those tolls are posted. And at least they apply to all people evenly. In the case of Google’s mapping system, every decision made by that master mechanism is secret, hidden from everyone except Google itself. No government agency anywhere in the free world today is watching Google to prevent it from such blatant abuse of the absolute power that comes with providing each of its many essential services.
Our failure to apply common carrier rules to Google, to prevent the corporation from discriminating in the pricing and terms of the services it provides to different sellers and different buyers, has left that corporation free to build the most perfect system for micromanaging the movement of humans in the history of the world.
And every day the corporation invests vast new amounts of money and time in concentrating yet more power and control. In 2017, for instance, a division of Google named Sidewalk Labs announced plans to partner with the city of Toronto to build the world’s most digitally connected neighborhood. The plan calls for the newly named “Quayside” section of the city to be outfitted with snow-melting sidewalks, robotic garbage collectors, self-driving taxis, even sensors to study how people use park benches.52
In April 2019 the Canadian Civil Liberties Association sued Toronto to force the city to cancel its contract with Google. “Canada is not Google’s lab rat,” the association’s executive director said. “Our freedom from unlawful public surveillance is worth fighting for.”53 And to the surprise of many, Toronto’s citizens won this fight; in May 2020, Google abandoned its plans.
Power to the people of Toronto. But—like New Yorkers’ rejection of Amazon’s “HQ2” investment in 2019—even this complete victory was largely symbolic. It left the core of Google’s machine untouched. And that machine is already well on the way to controlling Toronto’s streets and those of every other city in the world—and in much the same way, just about every other communications platform human beings use to interact with the world around them.
Wired editor Nick Thompson is an old friend. I first met Nick in 2002, when we were both fellows at the Washington think tank New America. Over the years I have watched as Nick has perfected a particular way of using journalism to address concentrations of power by large corporations. Rather than write an economic analysis of the problem to help law enforcers act, Nick will frame the problem as a moral challenge for some leader inside the particular corporation in question. “Can so-and-so abandon his bad old ways?” Nick will ask. “Can so-and-so master his predatory behaviors?”
In early 2018 Nick wrote such an article about Facebook. The cover illustration—of a bruised Mark Zuckerberg—told the reader immediately that Nick did not intend to attack Zuckerberg—because others had already done that. Rather, it indicated that Nick planned to observe the Facebook CEO somewhat sympathetically. And this is precisely how the profile itself read. Yet at one point halfway through the article, Nick let down his guard. What slipped out was a sharp cry of horror, from this gifted journalist, about what Facebook was doing to his publication, his profession, and to American democracy.
“Every publisher knows that, at best, they are sharecroppers on Facebook’s massive industrial farm,” Nick wrote. “And journalists know that the man who owns the farm has the leverage. If Facebook wanted to, it could quietly turn any number of dials that would harm a publisher—by manipulating its traffic, its ad network, or its readers.”54
Google and Facebook both look highly complex, and Google’s structure certainly is complex. But ultimately the business models of these two corporations are very simple. Both corporations are designed to sell advertising—lots of it. That is why they collect so much information about us, why they so closely study our most intimate secrets. To make money, they combine their gatekeeper control over essential services with their license to discriminate in the services they deliver with the massive cache of data they collect on the people who sell and buy on their platforms. Google and Facebook then use their machines to steer the thoughts and actions of millions and millions of people, moment to moment. They then rent their manipulation machines, in the form of advertising, to anyone willing to pay for their use.
This model has proven phenomenally successful. In 2019 Google earned $120 billion just from advertising, while Facebook earned some $70 billion. Together the two captured roughly two-thirds of online ad revenue, and the total is growing fast.55
Unfortunately, from the point of view of the public, this model poses three huge problems.
First is that Google and Facebook have become the main spreaders of the lies and misinformation that have so disrupted our society in recent years. There is nothing new about propaganda; we can read about it in Thucydides’s account of the Peloponnesian War. What is new is the scale, reach, and speed of today’s manipulation machines.
When Google and Facebook built their manipulation machines, they did so in the expectation that corporations like Procter & Gamble would want to use them to steer buyers to, say, a more expensive version of Tide. Or that American Airlines might use them to steer buyers to a last-minute ticket to Cancun. But as we learned after the election of 2016, the manipulation machine is also of use to Vladimir Putin and others who want to steer the votes of citizens or stoke the rage of mobs. And Google and Facebook are more than glad to rent out their machines to them as well.
Second, a large portion of the advertising dollars that Google and Facebook pocket used to be spent somewhere else. Billions, for instance, used to go to newspapers and news magazines and local radio and television news teams.
In the early days of the Internet, companies like Craigslist also diverted money away from news outlets. But that was a long time ago, and by 2005 or so most publishers had learned how to adjust to the loss of classified advertising. Not this time; not against Google and Facebook. Between 2008 and 2017, as those two corporations diverted those billions of dollars in advertising revenue, newspaper newsroom employment fell by nearly half. Practically, this means 30,000 fewer reporters and editors walking beats in our towns and our state capitals. It means entire systems of specialized journalism have been wiped out entirely.56
The third thing Google and Facebook do is impose fear. I first came across this sort of fear in the book publishing industry in 2009. I discovered that many publishers, editors, and book authors would tell me horrifying stories about Amazon’s abuse of its power over their businesses, but they would do so only behind closed doors. They feared that if they spoke in public Amazon would strip the buy buttons off their pages and cut them off from the market, just as the corporation later did to Macmillan and Hachette.
Today much the same is true of our newspaper journalists and publishers. Even as Google and Facebook bleed them dry, they dare not cry out for fear the giants will squeeze even harder. This is true across the United States. It is true across Europe. It is true around the world.
If there was ever any real doubt that Google and Facebook would intentionally exploit their power to promote their own political interests, consider what Nick wrote in May 2019, when in a second feature in Wired he revisited the subject of Facebook.
Once again Nick focused mainly on the drama and decisions within Facebook’s executive suite. But once again he also snuck in a few words about his own fears, and indeed what Facebook had done to Wired after his previous article came out.
Shortly after Wired published Nick’s first article on Zuckerberg in March 2018, “traffic from Facebook suddenly dropped by 90 percent, and for four weeks it stayed there,” Nick wrote in May 2019. “After protestations, emails, and a raised eyebrow or two about the coincidence, Facebook finally got to the bottom of it. An ad run by a liquor advertiser … had been mistakenly categorized as engagement bait by the platform. In response, the algorithm had let all the air out of WIRED’s tires. The publication could post whatever it wanted, but few would read it. Once the error was identified, traffic soared back.”57
Nick then doubled down on what he’d written the previous year to make clear he knew exactly what Facebook had done. “It was a reminder that journalists are just sharecroppers on Facebook’s giant farm.”
Before we move on, let’s make sure we all fully understand the lesson Nick wants us to learn. In response to the original March 2018 article, which overall provided a very flattering profile of Facebook, and which Nick structured to provide Facebook executives with ample room to prove their good intentions, the corporation’s leadership responded by shutting off all traffic to Wired for a month.
The gravest threat to democracy in America today is not Donald Trump or Vladimir Putin or the Communist Party of China. The gravest threat is posed by Google and Facebook and Amazon. Not only do they spread other people’s lies. Not only do they starve the journalists whose job it is to counter those lies. They actively punish the journalists who speak truth to them. And they have captured direct political control over all the corporations—and executives—who depend on them.
In his 1912 campaign for president, Woodrow Wilson spoke of the political dangers that come of concentrating economic power in only a few hands. “I cannot tell you how many men of business, how many important men of business, have communicated their real opinions about the situation in the United States to me privately and confidentially. They are afraid of somebody. They are afraid to make their real opinions known publicly; they tell them to me behind their hand. That means,” Wilson concluded, “we are not masters of our own opinions.”58
Today we see a similar pyramiding of power. The combination of monopoly control over access to markets, plus the monopolists’ control of great masses of data on every seller and buyer, plus their license to discriminate in pricing and services, means even the most powerful corporations from Stage One of the monopolization in America—in other words, even the most powerful of the last generation of oligarchs—are fast being made subject to the wishes and whims of the new intermediaries.
Great masters of men who but five years ago ranked among the top tier of predators, who could alter the fates of hundreds of thousands or even millions of people with the flick of a forefinger, now themselves fawn and fuss and flatter, their lips carefully concealing their canines.
Who makes law in America today? Who chooses who wins and who loses? Increasingly it is the masters of Google and Amazon and Facebook and a few other corporations that control the gates into specific realms of human activity.
And when mere awesome economic power is not sufficient to achieve their ends, these masters resort to more direct forms of thuggery. Sometimes against journalists like Nick Thompson. Sometimes against politicians and regulators, as we saw with Uber’s brass-knuckled multimillion-dollar campaign against New York City officials in 2015 and its generalized system of grayballing.59 Sometimes against public critics like our team at Open Markets, as Google did in 2017 and as Facebook did in 2019.60 Sometimes even, as we saw in the last chapter, against the grain farmer and pig farmer and warehouse worker and other folks just trying to get by.61
In 1776, Adam Smith described how the market price of a good sends signals that enable people to change their actions. When a price is too low, suppliers turn to other lines of trade, other lines of business. When a price is too high, new suppliers will bring new production to market. In other words, basic supply and demand.
In 1946 the Austrian economist Friedrich Hayek used Smith’s idea about how prices distribute information as part of an argument against centralized state control over an economy. A key assumption by both Smith and Hayek was that the price for any good or service would be clear to every member of the public. They assumed that how a particular good is priced naturally communicates to every citizen certain vital information, such as the existence of a shortage of tomatoes or chickens, or of a bumper crop of corn. This information, in turn, enables every buyer and seller to alter their economic behavior accordingly, such as by buying fewer tomatoes and more corn.
Market prices do something else as well. They also allow the public as a whole, and particular classes and groups of people, to take political action, if they think it necessary, to address the reason why a particular good is in short supply or oversupply. If the price of a particular good—say shoes—goes up and stays up, this may indicate that a monopolist has captured control of shoe manufacturing, and the time has come for the public to use the state to break this monopoly. If the price of wheat goes up and stays up, then maybe the time has come to investigate whether some trader has amassed a dangerous amount of power over the wheat supply or wheat handling capacity. And if that proves not to be the case, people can use the information to help them decide to build a new road to open new lands, or to open a new trade with a wheat-growing land across the sea.
In other words, it is the public price that plays a major role in making the public the public. It is one of the main factors that allows people, as a group, to stand together in the public square and town hall and to compare our personal experiences with one another in ways that allow us to identify patterns and structural problems, hence to act as a coherent community able to make wise decisions. Markets, in other words, are not only where we exchange goods and services with one another. Markets are not only institutions that provide the individual with liberty to conduct her own business, free from restraint. Well-structured markets are also one of the main institutions able to provide that most basic stuff of democracy, which is trustworthy information about potential problems within the workings of the political economy.
Compared to today, the harms that Smith and Hayek feared seem almost innocuous. Yes, mercantilism and monopolism, just as they feared, do lead to the warping of commercial activities toward wasteful and unnecessary ends. But when the prices of goods and services are still made public, and the public as a whole is able to understand how it is affected, then the public as a whole can take actions to fix the problem.
The problem with first-degree price discrimination, then, is not merely that it gives to a monopolist the ability to pick and choose winners and losers. It is not merely that it gives to a monopolist the ability to manipulate commercial interactions in ways that allow them to extort money and political favor from those who rely on them to get to market.
The problem with the license to engage in first-degree price discrimination is that even as it helps to concentrate all power and control in one or two private corporations, it simultaneously, by atomizing prices, atomizes the public. This is true when first-degree discrimination is imposed on sellers. It is true when it is imposed on buyers.
Consider the small corner of the political economy in which our chicken farmers make their living. Back in the days of competitive markets, farmers who didn’t like the price offered by one processor could go to the next processor. If they did not like the prices offered by any processor, the fact that they were all presented with the same price enabled them to formulate common demands to these corporate buyers. And if that did not work, to formulate common demands—for reform—to their politicians.
Today, by contrast, when every farming family is given a different price, the farmers have no common information around which to organize. None of the farming families knows how exactly it is being exploited or to what degree. Every member of every farming family fears that if he or she complains, their family will be treated even worse or perhaps cut off entirely from the market.
And bad as this plucking of the chicken farmer’s family may be, it takes place in a very real world of feathers and sweat and ammonia, at the gate of a processing plant where for a moment or two the farmer can look into the face of the foreman and beg. Or perhaps, if but for that most fleeting of human satisfactions, yell and spit.
In the world of Uber, Amazon, Google, and Facebook, all this manipulation, all this breaking of spirit and hope, this breaking of the public, is managed from afar, automatically, algorithmically.
The result is not merely that we live today in a kiss-ass economy, in which we must compete to please The Man. It is not merely that we live today, technically, subject entirely to another’s will. Not merely that we are manipulated, moment by moment, by private masters who rule our commerce, our movement, even our thought.
It is that every one of us increasingly must now suffer alone, with ever less ability to commiserate with others about our common problems, because nowadays the power of the middleman is such as to make each of our problems unique, to make each of our problems solely a matter between us and the master.
The combination of monopoly plus massive caches of personalized data plus first-degree price discrimination means you have been set loose, to float entirely alone, like Pip in the midst of the vast sea, watching the little ship that carried our society sail into the maw of Leviathan.