How Big-Tech Barons Smash Innovation—and How to Strike Back

In this short interview Ariel Ezrachi, Slaughter and May Professor of Competition Law, tells us about his latest book published in 2022 - How Big-Tech Barons Smash Innovation—and How to Strike Back.

1. Tell us about your book.

Many people are troubled by the growing power and abuse of today’s leading Tech Barons:  Alphabet (Google), Apple, Meta (Facebook), Amazon, and Microsoft. Nonetheless, the prevailing view among many is that the big tech firms promote innovation. Indeed, innovation remains synonymous with the digital economy. And the underlying assumption is that big tech barons play a central part in promoting innovation. They are often analogized to coral reefs that facilitate market entry and stimulate innovation.

No doubt, big tech barons invest heavily in innovation. But, in our new book, which HarperCollins published in 2022, Maurice Stucke and I expose the gloomier reality of digital platform innovation. While tech giants invest in some innovations, they also stifle plenty. In their quest to protect their power, these tech barons deploy multiple weapons to identify and quash innovations that may disrupt their ecosystems’ value chain. Instead of disruptive innovations that create value, we often receive innovations that sustain and fortify their power and profits.

2. What prompted you to consider this problem?

Our inquiry into the distorting effects on digital innovation began in late 2017 when the European Commission asked us to research innovation in the digital economy. Our earlier work, including Virtual Competition, raised the concern of policymakers as we uncovered several significant risks of the digital economy. After submitting our report, we continued our inquiry into the effects that these big tech barons have on innovation and how they not only affect the dynamics of competition within their tightly-controlled ecosystems but also the nature of innovation we receive.

3. So how do Tech Barons suppress disruption?

Our book lays out how major tech platforms design their ecosystems to favour their interests, at the cost of crushing beneficial disruptive innovations. Their aim is to protect their value chains from external disruption, and they do so by dictating the type and scope of innovation that reaches the market.

First, they make use of their advantageous position as controllers of their ecosystems, to engage in near-perfect market surveillance needed to identify and neutralize nascent threats.

Then, with a clear view of risks beyond the horizons, the Tech Barons can engage in strategies aimed at distorting the supply of disruptive innovation, by preventing access to the market, reducing interoperability, depriving small innovators of much-needed scale, limiting disruptors’ access to long-term funding, and of course, the acquisition of these disruptors. 

The Tech Barons can also manipulate user demand for innovation, and in doing so reduce the adoption rate of disruptive innovations. For example, they may increase retention of users, reduce friction to the complementary sustaining innovations that fortify their ecosystem, and increase friction to potentially disruptive innovations. Using dark patterns, self-favouritism, and other means, the Tech Barons can nudge us toward innovations they want us to adopt and away from disruptors.

4. What happens when the Tech Barons distort the supply and demand of innovation?

As our book explores, we receive fewer disruptive innovations, more innovations that sustain the Tech Barons’ power, and more innovations that extract or destroy value. Once the Tech Barons can affect the supply and demand of innovation, the nature and value of innovation change. Value-creating innovations will be gradually displaced by innovations that focus on extracting value from the downstream users or upstream suppliers and primarily benefit the Tech Barons. Of course, this is not an all-or-nothing scenario. As the Tech Barons’ power increases, we won’t be inundated with solely value-destroying innovations. Instead, it reflects a material but subtle change in the value and nature of innovation as the plurality of innovation diminishes. A look at the patents and research by the leading ecosystems confirms this trend, with advanced technologies that go far beyond predicting our behaviour to some genuinely frightening methods of exploitation, manipulation, and extraction of value.

Most importantly, the distorting effects are not limited to the online world. Even if you are one of the few who do not rely on their technologies and ecosystems, you will not escape the ripple effects of toxic innovation.

5. Tell us more about the ripple effects from toxic innovation.

The ripple effects extend far beyond the Tech Barons’ ecosystems, the digital economy, the user experience, and the impact on disruptors. These toxic innovations ultimately erode our social and political fabric and harm our autonomy, democracy, and well-being.  The value chains and profit motives have left us with new technologies that are ripping apart our society's social fabric and foundations.

We see these effects, for example, when we look at the business models and retention strategies at the heart of social media and online behavioural advertising. Tribalism and rancour are part of the price we pay for the loss of innovation plurality. Similarly, democracy is weakened from advanced microtargeting and manipulation, as profit motives lead to distortions that undermine the foundations on which our society is established.

Many are familiar with Cambridge Analytica story, but importantly, it is only one example of the microtargeting, manipulation, and deception of voters spawned by these toxic innovations. It is a symptom of a spreading problem where data advantage and negative messaging are the ultimate tools to control the crowd. Political campaigns are now designed to trigger the desired emotional reaction of individual voters. So, if you are among those with a high need for arousal, expect more violent, sexual, and fear-provoking content. An evolving disinformation machine at a scale and efficiency never seen before.

With disruptors crushed, these innovations fortify the prevailing value chain and business model. And while the Tech Barons offer tools to mitigate some of these effects (like requiring certain political ads to include disclaimers with the name and entity that paid for the ads), they cannot prevent their platforms from being weaponized or their toxic innovations from being deployed to undermine democracy.  They must feed the beast, and that beast is destroying us.

6. Can competition law and regulation address these concerns?

Somewhat. Competition law and the proposed regulatory instruments (like the Digital Markets Act) offer some help but are limited in their current ability to effectively address the distorting effects that we identify. Our current policies do not address the key driver – the value chain – which is affecting the Tech Barons’ strategies.

But it is not simply erecting guardrails for the tech barons. Our book also explores proactive means to foster disruptive innovation. Some measures were (at least for us) counterintuitive originally, like investing more in cities, which have an important, yet often overlooked, role in promoting a plurality of innovation.  

7. How was the book received?

Quite well.  We’ve been invited to discuss it over various podcasts and online events, and with policymakers.  The press has also been fantastic. The Guardian called it a ‘remarkable new book [that] should be required reading for everyone at Ofcom, the Competition and Markets Authority and the DCMS.’ The Financial Times and Porchlight included it among the books to read for 2022; and Next Big Idea Club voted it among ‘The Top 22 Business Books of 2022’.  Plus the helpful feedback we have received has inspired future research projects. Very exciting indeed.

How Big-Tech Barons Smash Innovation—and How to Strike Back, published by HarperBus, is available now.