For those who live under a rock (which, these days, I would recommend), President Donald Trump has become increasingly belligerent towards Amazon and its founder, Jeff Bezos.
In addition to a sequence of tweets against the ecommerce and cloud giant , Gabriel Sherman reported in Vanity Fair yesterday that “Now, according to four sources close to the White House, Trump is discussing ways to escalate his Twitter attacks on Amazon to further damage the company. ‘He’s off the hook on this. It’s war,’ one source told me. ‘He gets obsessed with something, and now he’s obsessed with Bezos,’ said another source. ‘Trump is like, how can I fuck with him?’”
‘How can I fuck with them?’ could also describe America’s backwards approach to its flagging prowess in critical technology fields, policies that stand in stark contrast to the massive and focused investment of strategic adversaries like China.
Through its Made in China 2025 plan, China is putting in place a series of initiatives to dominate the future of technologies like 5G wireless networking, artificial intelligence, cloud computing, biotechnology, and semiconductors. It is working to raise about $36 billion for a new semiconductor fund, potentially spend $411 billion on 5G infrastructure, and create a massive domestic market for overseas stocks through Chinese Depositary Receipts.
China selects, grows, and champions a set of winners in each industry in order to concentrate resources and increase the probability of success globally for its chosen companies. As Antonio Graceffo described in Foreign Policy Journal, “National champions are companies which help further the government’s strategic aims and in return, the government supports these companies by providing easier access to financing, giving preference in government contract bidding, and sometimes oligarchy or monopoly status in protected industries, giving these companies a number of advantages over their competitors.”
One has to look no further than Huawei to see the benefits of these policies. Huawei was an unknown player when it started roughly three decades ago, but through an aggressive expansion plan and a wellspring of government support, it has emerged to be the single largest manufacturer of telecommunications networking equipment in the world, surpassing Ericsson back in 2012. The company had revenues of $92 billion last year, and it is taking an early lead in the 5G wireless standards race, which could give it a powerful position to shape the future of connectivity in the years to come.
Meanwhile, the leadership of the United States is increasingly targeting the tech sector — one of the few areas of true vibrancy in the American economy — and trying to undermine it at every turn. The Trump administration has announced tariffs on high-tech goods that will end up harming U.S. technology exports, rolled back net neutrality legislation, and now is talking out loud about breaking up Amazon through antitrust laws.
On the latter, it’s not just Trump calling for war against America’s tech leaders: there is a growing movement against companies like Google and Apple which has led to increasing calls for antitrust action from both right-wing and left-wing policy analysts.
There are good reasons to be concerned about market dominance — it limits consumer choice and often rises prices. However, there are obvious limitations on how many competitors can enter markets like wireless infrastructure and cloud computing. The upfront costs are exorbitant — just launching a single data center today can easily cost hundreds of millions of dollars or more, and conducting original R&D in a competitive industry like artificial intelligence is equally expensive when a machine learning expert can go for tens of millions of dollars.
We are never going to have five Googles, nor five Dropboxes or five Amazons — the economics in these markets just don’t work that way. Their scale is what allows them to offer such comprehensive services at such low cost to consumers. Knocking out Apple is really opening the American market to the next four smartphone manufacturers, which would be Asian manufacturers like Samsung, Huawei, Lenovo, and Xiaomi. That sounds like a pyrrhic victory to me.
The U.S. believes in the power of free markets to cull losers and ensure winners a fair return, and the government avoids picking “winners” as a matter of course in its industrial policy. That worked great when the American economy was dominant, but it is no longer tenable in a world where strategic adversaries are putting their full weight behind a handful of companies.
So instead of getting on The Twitter and blasting Amazon, maybe this administration should start to consider that Amazon’s size and dominance in ecommerce and cloud services is actually an incredible blessing of American capitalism. Maybe it should start to think about how the govenrmetn could assist Amazon in capturing more overseas markets, ensuring that the wealth generated by the company continues to return to its home country.
The threats faced by American tech companies parallel similar fears of the 1980s, when Japan’s resurgence on the world stage captivated the attention of U.S. politicians. China though is nearly eleven times the population of Japan, and has already overtaken the U.S. economy by some measures. This time really is very different, and the free market needs defenders. Ironically, that means backing American tech giants globally against their competitors.
from Amazon – TechCrunch https://techcrunch.com/2018/04/03/trump-should-invest-in-amazon-not-destroy-it/
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