May 15th 1911 was a big day in the history of business. Yet oddly, for John D. Rockefeller, it wasn’t so bad. Rockefeller was a kind Jeff Bezos or Elon Musk of his day, and just as the likes of Bezos and Zuckerberg make money from drilling for new oil — also known as data — Rockefeller made his fortune from old oil, also known as, well, known as oil. On that day in the spring of 1911, Standard Oil, the business Rockefeller had founded, at that time the largest company in the world, and until recently, (apparently) the fourth largest in history, was broken up into 34 separate companies. The US Supreme Court ruled that Standard Oil was to be dissolved under the Sherman Antitrust Act. It was a momentous day, and yet the newly formed entities continued to thrive — and Rockefeller saw his fortune double within a year.
Today it is the giant techs that are coming under increasing scrutiny. What made me sit up and write this piece; however, was the news that in Nevada, a new bill could give companies the right to form a kind of local government. The bill is well-meaning. I read that “Democratic Gov. Steve Sisolak announced a plan to launch so-called Innovation Zones in Nevada to jumpstart the state’s economy by attracting technology firms.” According to AP News: “The zones would permit companies with large areas of land to form governments carrying the same authority as counties, including the ability to impose taxes, form school districts and courts and provide government services.”
The only companies in history that were bigger than Apple were South Sea Company, The Mississippi Company and the Dutch East India company
You might ask so what. Robert Owen applied a similar idea in England with his New Lanark mills in Lanarkshire, back in the first half of the 18th Century. The mills were quite utopian in concept and history cedes Owen almost saint-like status — nonetheless, this was an example of one man yielding enormous power. He just chose to yield it to do good.
And aren’t Bill Gates and Warren Buffett much the same with their fine endeavours? I guess we should all be grateful, although I don’t think either man expects us to prostrate ourselves on an altar in front of their likeness to give thanks.
Meanwhile, Elon Musk tries to do good via the companies he heads. Brin and Page at Google slowly seem to be giving up on the idea of the company they founded as a force that never does evil, and instead advance altruistic endeavours independently. And now Jeff Bezos has promoted himself upstairs, as it were, freeing himself up to fight climate change and conquer space, outside of Amazon.
I am sure that Gates, Buffett, Brin, Page, Musk and Bezos are kindly men who capture the spirit of Robert Owen. But I have two issues, number one, we shouldn’t have to rely on the kindness of bosses. One day the head of a corporation will be some evil genius stroking a cat and laughing maniacally at his fiendish plans. Number two, as the kindly bosses move on, the companies they leave remain super powerful.
Between them, Apple, Microsoft, Amazon, Alphabet, Facebook and Tesla are worth around $8.5 trillion. To put that in perspective, when Apple became the largest company in the world less than ten years ago, it was valued at less than $400 billion.
I don’t know what Standard Oil’s valuation would have reached if it had been allowed to stay intact. Estimates suggest its value would have tipped a trillion dollars in the early 2000s, but of course the share price of oil majors have fallen since then. The largest Standard Oil offshoot still standing today is Exxon Mobil. It is worth $211 billion — although it was worth twice that just over half a decade ago. Chevron is worth $171 billion. But the Standard Oil legacy lives on in other companies — Amoco is part of BP, for example, Vaseline (yes, Vaseline) is part of Unilever. Even so, if you were to tot up the value of Exxon, Chevron, BP, Shell and Unilever, you would still have accompany worth less than half the value of Apple. The giant techs really are giant.
I gather that the only companies in history that were bigger than Apple were South Sea Company, The Mississippi Company and the Dutch East India company.
And that takes me to a reason why it may not be necessary to break up the techs — nothing lasts forever.
The South Sea and Mississippi companies built fortunes based on lies — the South Sea and Mississippi bubble. The Dutch East India Company, with its private armies, surely and unambiguously yielded too much power. But none of them lasted. The Dutch East India company was eventually riddled with corruption and incurred massive debts.
The economist Joseph Schumpeter believed that monopolies were good things. He thought that companies strive to gain market dominance, that is their incentive, but that all monopolies eventually fall victim to great gales of creative destruction. Or to put it another way, they regress to the mean.
When there is talk of companies forming governments, I immediately think of umpteen dystopian novels — where the company rules all.
On the one hand, we know that digital tends to create natural monopolies. But what we don’t know yet is how long they will last. Will Facebook survive the latest onslaught of rival products with new innovative ways of providing social media from Clubhouse, with voice-based form of communication, to privacy friendly apps such as Signal and Tru.net which claims to be “a social media publishing platform built to elevate truth,” and which “offers a clean, curated feed, with no ads, noise or surveillance.”
Talking of truth, the truth is we don’t know. We don’t know how long the giant techs will keep growing. We don’t know how long it will be before they get swallowed by great gales of creative destruction. (Bezos has admitted that Amazon will fail one day.)
Indeed, when in 1998 Leslie Hannah looked at the list of the world’s largest companies in 1912, to see how they had fared since, he found that 19 were still in the top 100, 28 had survived and were larger (relative to inflation), 29 had experienced bankruptcy, or similar and 48 had disappeared.
But there must come a time when enough is enough.
How big are we willing for the giant techs to become. Would it be acceptable for the top six techs to see combined market cap of $10 trillion, $20 trillion, or $100 trillion?
And when there is talk of companies forming governments, I immediately think of umpteen dystopian novels — where the company rules all. ( For some reason I think of Alien, where the company decides the commercial interests of finding out more about the Alien outweigh the risks.)
I prefer Owen’s idea of creating something more utopian.
You may disagree, of course, but if you do, I will cite Robert Owen at you. He said: “All the world is queer save thee and me, and even thou art a little queer at times.”