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Full-Throated Capitalist

Scott Galloway@profgalloway

Published on November 17, 2017

I had drinks with John Battelle, an original gangster from the good — then very bad — old days of the nineties internet generation in SF. John is the founder of Wired, The Industry Standard, and Federated Media. Our careers have had similar arcs, if an arc were a roller coaster where you puke from the rapid changes of extreme success and failure.

John is a journalist / author at heart and wrote a thoughtful review of my book. At the end he said he felt I was holding back… that there was another shoe to drop. He was being nice — he meant I had wimped out. Reading it jarred me a bit, which signals it’s likely true. In sum, I’ve been writing and speaking about the Four (Amazon, Apple, Facebook, and Google) for several years and like to think I have some insight into the intersection between big tech, our economy, and society.

When people ask me if the Four should be regulated or broken up, I pivot to what I think will happen: Europe will levy the mother of all fines against one or more of them; an AG in a red state will take action. But I don’t really answer the question. To actively advocate regulation or, worse, the breakup of these firms is tantamount to suggesting Christianity should be split up. Btw, I think it has been, several times. Since I suggested Amazon could be broken up, and that the resulting two firms’ (Amazon and AWS) shareholders, among other stakeholders, might be better off, Stuart Varney of Fox News, a charming guy, now introduces me as a socialist.

So, my bottom line… or other shoe. I believe these four firms should be broken up. Why?

— Because they’re evil? No, they’re not. On average, employees at these firms are more civic-minded than most people I know. They’re like us, just smarter, better educated, and luckier. The fault here lies with the man or woman in the mirror. We need to elect people with the stones to hold these companies to the same scrutiny as the rest of business. These firms are not concerned with the condition of our souls, and they’re not going to take care of us when we’re older. Their singular goal is to grow shareholder value, full stop. But as Peter Drucker said, the purpose of an economy is to create a middle class, and we need firms that can grow the economy.

— Because they destroy jobs? Well maybe, but that’s what innovators do, and we have to be careful in thinking of job destruction as a catalyst for regulatory intervention. We need to let our freaks of success fly their flag. Farmers being displaced by factory workers, who are then displaced by service workers, is part of innovation.

— They avoid taxes and lie to regulators. Yeah, but they’re supposed to maximize shareholder value. If we can’t elect officials who write and enforce rules of fair play, we need to elect new government officials — blame the game, not the player.

— Because they’ve been weaponized by Russia? Getting warmer. They have economic incentives not to be Putin’s bitch and are begrudgingly moving toward the right stance, saying national security threats will be treated as such. However, it’s jarring that the Senate Intelligence Committee Chair’s closing statement at the hearings last month essentially said, “you’re our front lines against foreign adversaries. Please help us, we’re at your mercy.” Yeah, fuck that. I choose the marines as my front line against foreign adversaries. If the confidential hearings involved any quid pro quo (we’ll ease up on you if you provide intelligence on our enemies), then the lunatics have taken over the asylum, and we need to move in (regulate) crisply.

The reason we should break these firms up is that a key trait of capitalism is that the market leads, and not government (which would be socialism). A key component of the capitalist economic model is that when markets fail, and they do, we have referees on the field to throw a yellow flag and restore order.

We are so there.

The market is failing. Amazon can take any other consumer company’s stock down 10–30% just with a press release. The Four are dominating the press and markets, creating a concentration of power that fosters premature death for big companies and infanticide for small firms. In VC pitches, an unhealthy amount of energy is allocated to determining if a firm can compete with, or could be acquired by, the Four before VCs can decide whether to invest.

The Amazonian success of these firms wallpapers over the fact that, as a whole, the markets are not healthy. The traditional metrics / indices are buttressed by these firms. The Four represent 40% of the gains in the S&P 500 in October 2017. How has your portfolio done since the Great Recession? Answer: simple — how much of the Four do you own?

As media and the Four have fomented a gag reflex around the notion of regulation, suspend your convulsing and, as Obi Wan counseled, search your feelings… and answer me this. If there were two ecosystems — one with the firms below:

And then an ecosystem with these independent firms:

Which ecosystem would:
— create more jobs and shareholder value
— inspire more M&A and investment
— broaden the tax base
— lower rents, via increased competition from firms (advertisers and other media firms) who are traditionally better job creators?

Why should we break them up? Because key to our capitalist way of life is to maintain competition to prevent market failure, as we did by breaking up the railroads and Ma Bell. This type of intervention is not an attack on capitalism, but full-throated capitalism. It’s time.

P.S. I plan to do a lot more work / research on the topic. If you have any insight, data, or views you believe will inform these efforts, please reach out.

Life is so rich,



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