Elizabeth Warren’s War On Big Tech

You can tell the silly season has started when politicians who spend most evenings sipping champagne at $1,000 a plate fundraisers begin to sound like college protesters.

In that vein, Elizabeth Warren, the outspoken US Senator from Massachusetts, tried on some tough talk at a campaign rally recently: “We have these giant corporations — do I have to tell that to people in Long Island City? — that think they can roll over everyone. I’m sick of freeloading billionaires.”

According to The New York Times, Warren threatened total dismemberment for the likes of Mark Zuckerberg, Larry Page, and Jeff Bezos, of the companies they founded, to be sure. She published her tech busting manifesto on Medium, the same blog which gave us the Uber and Google women rebellions.

Do Unto Donors

Warren overlooks one inconvenient fact. The billionaire freeloaders of Silicon Valley are the staunchest supporters of the Democratic Party. Either this is poetic justice for tycoons who cozy up to crusaders or Warren’s rage against the ten-figure class is a simple ruse to propel her past slow-moving septuagenarians like Bernie Sanders and Joe Biden, and ultimately, her arch opponent, Kamala Harris.

Whichever strategy one accepts, her tactics against the algorithm gang leave her with only three likely outcomes. If she prevails, she will have to slice and dice these formidable companies without igniting a war against the Democratic Party’s most prominent stalwarts. There is also the chance that the bright minds of Facebook and Google will move into survival mode and defect to her opponents in the primaries or, as bankers did under Obama, to the other side of the aisle. Or a third possibility is that this is nothing more than a political moment, see what clicks and sticks, then act?

The people who run companies should monitor this carefully because not only is Warren a good reader of the political winds, she knows how to push an idea into the public arena where it can go viral in ways no one has predicted.

Not even her, as we will see.

Tech is Toxic

Warren’s solution to the problem of bigness has three glaring hypocrisies that suggest a “Big Tech Break Up” will be complicated both in enforcement and in execution.

The first ‘tell’ is that Warren’s anti-bigness turns out to be a dog whistle for good old fashioned ranting at the business community at election time. Long before Warren, Teddy Roosevelt wanted constituents to see he was his own man and tackled Big Oil. His cousin, FDR, later brought down the Big Banks during the Great Depression. Meatpackers were next.

Warren is following the script by attacking Big Tech. Like her trustbusting forbears, her timing is impeccable. Privacy problems at Facebook and unruly sexism in the Google C suite, according to The New York Times, make them rich and ripe targets.

Even millennials are undergoing something known as ‘tech-lash’ and taking a social media detox. According to a recent study of 5,000 students commissioned by Digital Awareness, 71% of college-age kids have taken a breather from social media and 63% said they would not care if it didn’t exist. Even heavy users like Kanye West and Lindsay Lohan have suspended their feeds.

California Scheming

The second irony is that Elizabeth Warren’s hi-tech enemies happen to tilt West. LA based Wells Fargo is her favorite poster child for bankers gone bonkers, and now Silicon Valley and Seattle are her next quarry.

Politics is geography and that is why it is a smart move. Going after California based companies shields Warren from alienating donors in the Northeast and sends a signal to Kamala Harris to join the cause or ignore the issue and give Warren a debating point.

At this time, Harris is sticking with safety. She has issued talking points that refer to privacy-related issues but stop short of any hi-tech divestitures. The other candidates, like Senator Amy Klobuchar of Minnesota and Bernie Sanders of Vermont, say they have an open mind.

In other words, don’t get your fingerprints on this.

History Lesson

Then there is the third and most crucial irony. To anyone who studies American business history, when a company controls an essential piece of the economy, some politician is going to charge restraint of trade under the 1890 Sherman Hawley Antitrust Act.

In our lifetime, we have seen this happen to IBM, Microsoft, and ATT. In an earlier era, General Motors was in the frame, and before that, as noted, the banks under FDR and the Oil Trust of John D. Rockefeller under Teddy Roosevelt.

But there was a surprise in store for the trustbuster in chief, one that Roosevelt never considered, nor did his nemesis, Rockefeller.

And the same could happen to Elizabeth Warren’s best-laid plan.

Innovation’s Spawn

The trustbusting era began when Teddy Roosevelt assumed the presidency after the assassination of William McKinley. The new Oval Office holder wanted to signal that he was a man of the people, and brought suit against Standard Oil in November 1906.

The public saw the company as a kind of kingdom, with John D. Rockefeller as monarch. Journalists like Ida Tarbell pilloried its anti-competitive practices. By 1909, the Federal Court ordered the dissolution of Standard Oil into seven major independent entities with Rockefeller maintaining his ownership across the lot.

It only took a year for Capitalism to respond.

The new structure gave the country brands like Exxon, Mobil, Chevron, and Arco, all of them independent operations with their own research and development teams. Competition spurred the spawn of Standard Oil to experiment more aggressively, and within a year a new way to improve the efficiency of oil barrel to fuel conversion was discovered. It opened up a path for automobiles to use a combustion engine, which until then relied mostly on steam and electric energy. Henry Ford’s Model T was the result.

In the first year after separation,  Rockefeller’s wealth doubled. He subsequently became the richest man in history and the most significant donor to charity. The oil business boomed and so did the country.

We have antitrust to thank.

If Elizabeth Warren succeeds to the presidency or if the other candidates follow her lead and force the break up of big tech, it would likely result in a more innovative hi-tech sector. It will most definitely give us a richer Bezos, Zuckerberg, and Page.

Wouldn’t that be poetic justice?

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