Big Tech used to be Teflon—bad PR that would have tanked other industries, from tax dodging to using child labor to playing fast and loose with personal data, simply wouldn’t stick.
Not anymore. There are plenty of reasons: First, there’s the loss of trust in internet giants like Facebook and Google to protect people’s privacy in the age of NSA snooping, not to mention their own data mining for ad purposes. Then there are the massive overseas tax dodges on the part of firms like Apple—don’t be fooled by Congressional fawning over Apple CEO Tim Cook during his testimony last May; the pressure on corporate tax avoidance will increase. Tech is taking over for finance, which is finally being reined in via the Volcker Rule, as the focus of anger over the economic problems of our day. These include, of course, slow growth, high unemployment, flat wages, and corporations that appear to float above the problems of the countries in which they operate.
Indeed, the tax maneuverings of the largest tech giants are a study in hyper-globalization—they make cases for not being domiciled in any particular geography and thus are able to pay little or no taxes in many of them (see Amazon’s fight in the UK). But I suspect the real problem, the underlying cause of anger around these companies is that their business model is based on free labor. We not only hand over our personal information to be ‘monetized,’ we create much of the content they use as a backdrop for advertising (for a hilarious spoof on this point, check out Robert Shrimley’s column in the Financial Times today). And we get no jobs in return.
A fascinating new piece of research from the New America Foundation shows that the new generation of technology firms like Facebook, Amazon and Google create many fewer jobs relative to market capitalization than the generation of firms before like Apple, Microsoft, Intel and Cisco and vastly fewer than the blue chips of old—GM, P & G, etc. As Wall Street has learned the hard way, it’s OK to get rich if everyone else is getting rich too. But when you are taking the largest piece of the profit pie and giving back little, it eventually catches up to you. I suspect the next year or two will bring much more Washington scrutiny of, and public anger over, Big Tech.