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Is it possible to out-compete or regulate Amazon, Apple, Facebook and Google? Here’s what author Scott Galloway has to say

Madanmohan Rao
14th Mar 2018
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Amazon, Apple, Facebook and Google have become formidable global players. What does so much concentration of power mean for competitors, startups, society and government?

Scott Galloway is the author of The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google (see my book review). He is a professor and serial entrepreneur, and has founded nine firms, including L2, Red Envelope, and Prophet. Scott has a weekly YouTube series, ‘Winners and Losers.’

In his informative and entertaining book, he explains how Google is like the brain, Amazon is like acquisitive fingers, Facebook is about emotion, and Apple is about luxury and sex appeal. However, industry and society have to figure out how to deal with the intended (as well as unintended) consequences of so much power concentrated in their hands.

Scott joins us in this interview on potential competitors to ‘The Four’ tech giants, the role of academia in entrepreneurship, and what governments can do in tech regulation.

YourStory: What is your current field of research?

Scott Galloway: I am a Professor of Marketing at the NYU Stern School of Business, where I teach brand strategy. The company I founded in 2010, L2, is a business intelligence firm that benchmarks the digital performance of brands. As of late, I’ve been focused on big tech companies and their impact on businesses and society.

YS: How was your book received? What were some of the unusual responses and reactions?

SG: One of the rewards of writing a book is hearing from a host of hall of fame business leaders (both friends and strangers) who are interested in continuing the discussion. We have a gross idolatry of innovators where both consumers and society (and legislators) worship at the altar of big tech. I think my book challenged that viewpoint and has made people take a deeper look at the impacts of big tech, and question whether or not their power and influence is good for society.

YS: In the time since your book was published, what are some notable new contenders you have come across against these four giants?

SG: The true Fifth Horseman, if you are talking about big tech, is already there, it’s Microsoft. Microsoft is the third largest tech/internet company in the US, right behind Apple and Google (Alphabet), and above Amazon and Facebook. I didn’t mention them because I think of them as a b2b company, which tends to appeal to the more rational side of business.

Typically, though, I would have said that the good money for the Fifth Horseman is Netflix, as consumers who stream TV shows are increasing across age groups and more Americans now subscribe to Netflix than cable television. However, Disney’s $66-billion acquisition of 21st Century Fox could make the Mouse a viable competitor to both Netflix and Amazon. Disney is an old economy firm with the scale, access to capital, and leadership to develop a Prime-like offering.

YS: Where do the likes of Samsung, Twitter and even Wordpress stand against The Four companies?

SG: Samsung is Apple’s closet competitor. However, they also spend double the amount of money on advertising, a tool that is becoming increasingly ineffective each day. While Apple consumers are exposed to an unbelievable experience called the Apple Store, Samsung consumers are left to a very mediocre experience with the AT&T or Verizon store to connect with their phone for Samsung and the other Android players.

As long as Twitter has a part-time CEO, they have no chance at Horseman status. Wordpress may be a widely used platform, however they just don’t operate on the same level as big tech.

YS: How big a role does academics play in entrepreneurship? Can entrepreneurship really be formally taught?

SG: I am a firm believer that entrepreneurs are born, not made. We romanticise entrepreneurship, but it’s hard … really hard. The traits of successful entrepreneurs haven’t changed much in the Digital Age: you need more builders than branders, and it’s key to have a technologist as part of, or near, the founding team. But I think there are three tests or questions:

  • Are you comfortable with public failure?
  • Can you sign the front, not the back, of cheques?
  • How risk-aggressive are you?

YS: What are the typical challenges entrepreneurs face as they scale up their company from launch to mature stage?

SG: Unless you have access to seed capital (most don’t, and it’s always expensive), then you’ll need to pay the company for the right to work your ass off until you can raise money. And most startups never raise the needed money.

Most people can’t wrap their head around the notion of working without getting paid — and 99+ percent will never risk their own capital for the pleasure of … working.

YS: Looking outside the US, which countries do you see as emerging hotspots of technology and entrepreneurship around the world who may one day challenge The Four?

SG: I think it will be a while before we see any startup come even close to being able to successfully challenge big tech companies. Since 2008, The Four have aggregated more economic value and influence than any other commercial entity in history. They have gained so much power and influence that they are able to acquire rather than fight any apposing threats.

However, the Chinese have been the most successful at protecting their local markets from The Four. China let Google in just long enough to steal their IP, propped up a local competitor (created a company called Baidu), and then they captured all of the incremental gains domestically. I think it will be only a matter of time before another nation bans one of The Four and focuses innovation inwards to re-oxygenate their markets.

YS: What trends do you see in venture capital movement into companies stacked up against some of The Four companies outside the US?

SG: My research is primarily focused on the American economy and the numbers show that the amount of new businesses in the US has been cut in half over the last 40 years, with the majority of the decline taking place in the last ten. The budding narrative among entrepreneurs nowadays is “We don’t compete with Amazon, Apple, Facebook, or Google. But we’d make great acquisitions.”

So if there’s a shot you’ll be bought by an enormous company, while simultaneously not competing with them (an oxymoron in itself) then you can raise billions. However, every other good idea raises zero.

YS: What are the top three success factors for government, civil society and industry to work together to ensure there is no ‘abuse’ of power by The Four companies?

SG: The first step is to elect officials who will hold these companies accountable. We have to have the stomach and the backbone to move in, and I think we've lost the stomach for that because these companies have done such a great job convincing us that somehow that's not Western, or it's old world or it's not innovative – I think we give these innovators the mother of all hall passes.

Chicago’s offer for Amazon’s H2Q, for example, includes an agreement to let Amazon keep their employee's payroll taxes and decide what to do with them, while Stonecrest, Georgia's proposal pledges to rename a part of itself the ‘City of Amazon’. We need to convince citizenry/governments to abandon the macho test (gag reflex when you discuss breaking big tech), and discern the difference between regulation and trust-busting.

YS: Would self-regulation by The Four be a viable approach to address concerns over monopolistic power? Which countries seem to have the right policy approach?

SG: If I we’re advising Amazon (and I’m not) I would preemptively spin off Amazon Web Services. I think that Amazon and AWS, as two distinct companies, could be worth more to Amazon shareholders. It would force Amazon’s retail unit to operate at less of a loss and reduce the pressure it places on the rest of the retail sector.

However, if, and when, regulation happens, it will be from Europe. Europe registers a fraction of the upside, but a lot of the downside of big tech companies in terms of anti-competitive or job destruction, which is going to stiffen the backbone of EU regulators.

 

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