30 August 2018

A Big Choice for Big Tech Share Data or Suffer the Consequences

By Viktor Mayer-Schönberger and Thomas Ramge

Over the last two decades, a few technology giants have come to dominate digital markets. Google performs about nine out of every ten Internet searches worldwide. Facebook, the world’s leading social media platform, has well over two billion users. Together, the two companies have seized well over half of the online advertising market. Apple, originally a computer manufacturer, now runs the world’s largest mobile app store in terms of revenue, with about 80 percent of the market, and the second-largest music streaming business, approaching a third of the market. And Amazon captures close to every other dollar spent online in the United States. These companies are what the economist David Autor calls “superstar firms,” able to gain huge market shares and translate their market power into enormous profits.

Their success has brought tremendous benefits to users—and grave dangers to societies and economies. Each company hoards the information it collects and uses centralized systems to run its huge businesses. That hoarding has hampered innovation and allowed the companies to abuse user data, and their centralized systems leave online markets vulnerable to unexpected shocks, posing risks to the wider economy.

The most common answer to the problem of overly powerful firms is to break them up, as U.S. regulators once did to Standard Oil and AT&T. Yet that would destroy much of the value that these digital giants have created and probably do little to improve competition in the long run, since without structural reforms, killing today’s digital superstars would simply generate opportunities for new ones to emerge. There is a better solution: a progressive data-sharing mandate. This would leave these companies intact but require them to share anonymized slices of the data they collect with other companies. Such a mandate would decentralize digital markets and spur innovation as companies competed to extract the best insights from the same data. Much is at stake; if governments fail to act, they will leave key parts of Western economies and

No comments: