Opinion | How Big Tech Is Killing Innovation

🌈 Abstract

The article discusses how large tech companies are stifling innovation by co-opting potentially disruptive startups before they can become competitive threats.

🙋 Q&A

[01] How Big Tech Is Killing Innovation

1. Questions related to the content of the section?

• The article argues that large tech companies like Google, Microsoft, and Amazon are acquiring or partnering with AI startups to prevent them from becoming competitive threats, rather than allowing the cycle of creative destruction to continue.
• Examples provided include Google acquiring DeepMind, Microsoft's partnership with OpenAI, and Microsoft's deal with Inflection AI.
• The authors believe this co-option of startups undermines technological progress, as the startups' innovations may be shut down or diverted to serve the incumbents' needs rather than disrupting the market.

2. What are the authors' proposed solutions to address this issue?

• The authors suggest the government should:
  • Expand laws to prevent tech giants from putting their employees on startup boards
  • Penalize dominant companies that discriminate in access to their data or networks based on whether a company is a potential competitor
  • When regulating AI, ensure rules don't entrench incumbents
  • Presumptively challenge mergers between tech giants and startups working on potentially disruptive technologies like AI and virtual reality

[02] Why Has No New Competitor Emerged to Disrupt the Market?

1. What does the article say about why no new competitors have emerged to disrupt the tech giants?

• The article states that the answer is not that the tech giants are just better at innovating. Evidence suggests startups are more likely to produce innovations than established companies.
• Factors that inhibit innovation at large incumbents include:
  • Less incentive to innovate since new sales may cannibalize existing products
  • Engineers are less enthusiastic about stock in a large company vs. a potentially high-growth startup
  • Managers are rewarded for incremental improvements rather than disruptive innovations

2. How have the tech giants learned to "stop the cycle of disruption"?

• The article explains that the tech giants invest in startups developing disruptive technologies, giving them intelligence about competitive threats and the ability to influence the startups' direction.
• They can also leverage their access to data and networks, rewarding cooperative startups and punishing those that compete.
• When these tactics fail, the tech giants can simply acquire the startups.

[03] The Role of Venture Capitalists

1. How do venture capitalists contribute to the co-option of startups by tech giants?

• As IPOs have declined, venture capitalists have increasingly relied on acquisitions to deliver the exponential returns they need.
• Venture capitalists know only a small number of companies can acquire a startup at a high price, so they stay friendly with the tech giants in hopes of steering their startups to deals with the incumbents.
• Some prominent venture capitalists oppose stronger antitrust enforcement, as it would be "bad for business" in terms of these acquisition opportunities.