♾ Meta/Facebook and the state of American competitive capitalism
Perhaps the supposed monopoly power of Big Tech isn't what many critics think
Item: It was less than two years ago when Mark Zuckerberg, 38, was worth $106 billion and among an elite group of global billionaires, with only Jeff Bezos and Bill Gates commanding bigger fortunes. His wealth swelled to a peak of $142 billion in September 2021, when the company’s shares reached as high as $382. The following month, Zuckerberg introduced Meta and changed the company’s name from Facebook. And it’s been largely downhill from there as it struggles to find its footing in the tech universe. Its recent earnings reports have been dismal. It started in February, when the company revealed no growth in monthly Facebook users, triggering a historic collapse in its stock price and slashing Zuckerberg’s fortune by $31 billion, among the biggest one-day declines in wealth ever. Other issues include Instagram’s bet on Reels — its answer to TikTok’s short-form video platform — even though it’s worth less in advertising revenue, while the industry overall has been affected by lower marketing spending due to concerns over an economic slowdown. - Bloomberg, 09/19/2022
It’s been my experience that many people are confused when the fundamental, pro-progress mechanism of market capitalism is called “creative destruction,” a term coined by Austrian economist Joseph Schumpeter. It seems like an oxymoron such as “military intelligence” or “working vacation.” Another way Schumpeter described the “essential fact” of capitalism — new techniques and technologies disrupt the status quo — is as a "process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one." Maybe that helps.
Shorter: Capitalism without failure isn’t capitalism at all. And failure should be driven by companies competing with each other in the marketplace (as opposed to the halls of political power). That dynamic struggle is what pushes businesses to innovate and invest with the goal of improved quality or lower prices. And if this process is healthy, it should be really hard to stay on top. And in the American economy, it is hard — as this chart from consultancy Innosight on corporate longevity suggests:
Measuring corporate concentration
That said, there are other ways of looking at the economy-wide level of competition that are a bit more thorough. And when you look at these other metrics, particularly ones that attempt to measure corporate concentration, the story is — not surprisingly — a complicated one.
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