High-profile venture capitalists are demanding that Kamala Harris, if elected president, fire a top regulator for her aggressive policing of Big Tech. Not only do I disagree with them; I see their attacks as evidence of a bigger problem with the venture capital industry and, ultimately, our technology sectordream club, which is a critical driver of our economy and society.
Venture capital may be a small segment of the finance industry, but it has been a linchpin of the modern computing era. Over the past 75 years, venture capitalists repeatedly nurtured early-stage companies to the point where they could replace big, established firms and drive markets in new directions. From Fairchild Semiconductor to Intel, Apple to Google — all benefited from early venture capital support.
Times have changed. The power of major technology incumbents is now so great, and the dependence of venture capital firms on those incumbents so complete, that today’s V.C.s are now siding with the monopolies — and fighting government agencies that are trying to advance competition.
These tech monopolies were enabled in part by our government’s decision to loosen the reins on our biggest corporations. For much of the history of antitrust policy, which dates to the late 19th century, courts remained suspicious of market consolidation and used antitrust to maintain competition. In a landmark case in 1911, the Supreme Court ruled that Standard Oil, which controlled nearly 90 percent of the U.S. oil market, had used predatory pricing, control of oil pipelines and leverage with railroad shippers to unfairly obstruct competitors. It ordered the company be broken up.
That began to shift in the 1970s and 1980s, when legal scholars, influenced by free-market economists, argued that markets can police themselves, and the focus of antitrust should be on maintaining the quantity and prices of goods rather than on the levels of competition or number of businesses. If a large corporation wanted to undercut a smaller rival on price, that isn’t predatory, but a benefit to consumers.
As the internet matured in the early 2000s, there was hope it would spur a new generation of businesses by lowering the cost of reaching national or even global markets. Instead, a handful of enormous companies dominate key technology markets. To this day, and notwithstanding a surge since the pandemic, rates of entrepreneurship languish below the rate set in 2006.
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