Has Amazon become the new “Ma Bell”?
After Alexander Graham Bell patented the telephone in 1876, he formed the Bell Telephone company which for the following 100 years dominated the business of talking on his invention. By 1940, they had nearly 100% control of the industry – not only of the “network” but also ownership of the phone manufacturer Western Electric and the ability to prevent competitors from connecting to their equipment. The process of recognizing its influence and power to eliminate competition was drawn out with the first efforts being made in 1913 and again in the 1940s and 1950s before the Bell System acquiesced and broke up into the “Baby Bells” in 1984. Having somewhat reconsolidated, those businesses still thrive today and are most commonly known as AT&T, Verizon, and CenturyLink amongst others.
This week, prolific “tweeter” Elon Musk sent a message into the world suggesting that Amazon may need to break up. The thought was sent after Amazon removed access through its site to a book by former NY Times reporter Alex Berenson critical of the COVID-19 response. Amazon reportedly restored access after Musk’s support. Looking past the surface, competition is likely a motivation for the tweet with Musk’s SpaceX battling Bezo’s Blue Origin in commercial spaceflight. Regardless, the incident reverberates as the topic of censorship, free speech, and institutional power are top of mind for everyone.
Speaking to the influence of the technology industry today, Edge hosted a call this past Wednesday with celebrated venture capitalist and ardent data privacy advocate Roger McNamee (link to replay). His book Zucked: Waking Up to the Facebook Catastrophe raised public consciousness to the attention-manipulation strategies used by invasive data gathering business models in top technology companies today and has contributed to scrutiny of the practices by regulators and individuals. Currently under protection from liability by Section 230 of Communication Decency Act, certain companies have thrived to wield significant and potentially monopolistic influence over public communication. They have also, whether by design or not, created self-reinforcing echo chambers of opinion which may be dividing us further from each other.
Interestingly, many of these technology companies rank highly in equity indices that score stocks on Environment, Social, and Governance (ESG) factors. While the framework is still developing and applied individually by investors, it would seem that many standardized ESG frameworks do not truly capture the economic value at risk within these companies should the view of their responsibility to society change. As Roger noted, it is not without historic precedent that industries are held to account for the costs of their activity borne by the community at large (in economic speak, they are called externalities). Specifically, he noted the chemical companies of the 1950s and the pharmaceutical industry in the early 1900s.
While it may take time, actions have consequences.
Will Skeean, CFA
Partner – Investment Management Team Chair
Will Skeean, CFA
Partner – Investment Management Team Chair