The Imperial Powers of the Tech Universe -- Journal Report

Date : 12/18/2019 @ 1:29AM
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The Imperial Powers of the Tech Universe -- Journal Report

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By Rolfe Winkler 

Over the past decade, five big technology companies morphed into five great technology empires.

The stock market values this group -- Apple Inc., Microsoft Corp., Amazon.com Inc., Google parent Alphabet Inc., and Facebook Inc. -- at more than $4 trillion, while the six surviving men behind four of those companies are together worth nearly $450 billion, according to Forbes. Both valuations have quintupled since "Avatar" was in theaters.

Such an accumulation of wealth is unparalleled perhaps since Standard Oil. And the impact these companies have had on society may be just as revolutionary.

It starts with the billions of smartphones packed in pockets world-wide. We have outsourced so much of our daily lives to these mini-supercomputers, equipped with GPS chips, fast 4G connections and powerful cameras, they have become appendages, a third hemisphere of the brain.

Social media, internet search and online shopping were old news as the aughts rolled into the teens, but the mobile revolution was just starting, making our hand-held devices increasingly powerful. Witness the birth of the "gig economy," whose wildly popular services, from ride- and home-sharing to food and grocery delivery, barely existed 10 years ago but now employ millions.

As the five tech superstars blazed, they changed practically everything they touched. They vacuumed up data, hired so many top engineers and bought out so many rivals, the breadth of their powers not only kept expanding but reshaped and redefined the technology universe.

Take artificial intelligence. Theories underlying AI date back decades, but machine learning for commercial use became possible only with the amassing of huge data sets used to train computers to think on their own -- assets controlled largely by the big tech companies -- and the parallel development of faster semiconductors. Facebook and Google both have computers that can recognize people and objects in images with help from their gargantuan photo and video libraries. Now image search and auto-tagging, in turn, are useful.

Amazon's Alexa assistant, meanwhile, gets smarter with each voice query. And by the time the next decade ends, Google may have revolutionized the car and truck industries with its state-of-the-art autonomous-driving technology running on even faster 5G networks.

As successful as the tech giants have been, however, such concentration of power, both in computing and in the marketplace, has also come at a cost. As the decade ends, our dependency on these platforms is feeding a backlash over privacy, screen addiction, software algorithms that mislead users, the spread of misinformation and online mobs that pollute political discourse, and more. Critics want to see the tech giants broken apart by antitrust authorities, or at least regulated more tightly.

The turning point for public perception of tech companies came in 2016, in the wake of Britain's Brexit referendum and the U.S. presidential election, says Margaret O'Mara, professor of history at the University of Washington. Russia interfered in the U.S. election by posting propaganda on social media, U.S. authorities determined, and is accused of playing a similar role in the Brexit referendum as well.

"There was an expectation that these companies had control of their creations," says Prof. O'Mara. "Now it's more like Frankenstein's monster." Facebook, Google's YouTube and Amazon have allowed unfettered growth on their platforms for so long, they are difficult to police.

Americans' feelings toward tech companies took a noticeable turn in recent years. A Pew Research Center survey from July showed that U.S. adults rank tech companies second, behind churches and religious organizations, for having a positive impact on the country. But the percentage who felt that way this year was only 50%, down from 71% in 2015; the percentage who felt tech companies had a negative impact, meanwhile, grew to 33% from 17%.

Among the biggest concerns, Facebook has been used to spread misinformation and conspiracy theories, promote genocide, and live-stream a New Zealand mass shooting.

YouTube faces many of the same criticisms. It built algorithms designed to maximize "watch time" that also helped crackpot conspiracy theorists build massive audiences. In late 2016 and early 2017, its No. 1 content creator, Felix "PewDiePie" Kjellberg, repeatedly posted Nazi imagery and anti-Jewish material to his more than 50 million followers at the time. He was celebrated by the leading neo-Nazi website. Mr. Kjellberg said at the time the material amounted to "jokes."

Huge contract workforces hired by the companies have struggled to keep pace with the volume of violent, pornographic and other prohibited content that is uploaded every minute.

At the same time, the companies have come under fire for their very power to determine what we see and don't see.

"These people shouldn't be deciding speech codes for the world," says Zeynep Tufekci, a University of North Carolina professor who studies technology's impact on society. She describes them as "de facto sovereign entities" given their massive scale, and points out how, at Facebook and Alphabet, the decisions fall ultimately to their founders. Facebook's Mark Zuckerberg rules his empire via supervoting stock, as do Larry Page and Sergey Brin at Alphabet, although the latter two recently gave up their executive positions.

As Facebook has grown, it has also faced questions about how it handles user information. It was slapped with a $5 billion fine this year by U.S. regulators, for allegedly violating a 2012 consent decree in which it promised not to misrepresent how it shared user data with third parties. Repeated questions about violations of user privacy have fed distrust of Facebook, yet haven't had a significant impact on its business, judging from its stock price, which sits near record highs.

Amazon's advantage lies in the immense logistics network it has built, which makes it possible to deliver so many products across the U.S. in two days or less. More than 100 million Americans now pay for Prime memberships, more than half of households, according to an estimate by Consumer Intelligence Research Partners. That's up by a factor of 50 since a 2009 Piper Jaffray estimate put Prime memberships at two million.

Also over the past decade-plus, Amazon turned the computing infrastructure that supports its own operations into a juggernaut new business, Amazon Web Services, powering other companies' systems in its cloud. AWS is on pace for $35 billion in revenue this year, up 20 times since 2012, the first year Amazon reported the entity's stand-alone results. It also carries the fattest profit margin among Amazon's businesses.

Microsoft and Google are trying to catch up in providing their own cloud services. The three companies have such vast computing infrastructure, it's hard for others to compete, another example of how scale spins the flywheel powering the companies' momentum.

Amazon, too, is being criticized for allowing bad actors on its platform. It has been unable or unwilling to effectively police third-party sellers, some of whom sell dangerous or toxic products, many coming from China. And in its race to deliver packages quickly, it has been criticized for pushing third-party logistics partners to operate at unsafe speeds. In both cases the company has deflected responsibility, saying it is shielded from liability.

And therein lies one big threat to big tech next decade. To date, the giants have grown mostly unfettered because a powerful if little-known law lets them avoid responsibility for what is posted on their platforms, from hate speech to third-party sales of dangerous products. If the "techlash" ever pushes politicians to rewrite that rule, it could change the internet as we know it.

Mr. Winkler is a Wall Street Journal reporter in the San Francisco bureau. Email: rolfe.winkler@wsj.com.

 

(END) Dow Jones Newswires

December 17, 2019 20:14 ET (01:14 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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