Welcome back to Forests Over Trees, your weekly tech strategy newsletter. It’s time to zoom-out, connect dots, and (try to) predict the future.
Naughty Google
Even a broken clock is right twice a day… Isn’t that right DOJ?
Yes, US anti-trust authorities have finally logged a win against big tech. Specifically, against Google.
So it’s a big deal.
But with all the recent anti-trust news (mostly about the regulators losing), I’m worried folks might gloss over this.
Let’s not miss the forest for the trees (😉) – here’s a quick summary.
What happened?
Basically, the judge for a Google v DOJ case found that a/ Google was a monopoly in search, and b/ they acted monopolistically by signing contracts (and paying Apple billions per year) to be the default for search on iPhone.
Wait…why is it monopolistic to be the search default?
Because Google has money stacked to the freaking ceiling, they can pay more to be the default than anyone else…
…which means they win the default deal. Which means they get ~25% of US search traffic by default. Which means they can make search even better, monetize even more, etc.
Their competitors never get a critical mass of traffic, so they can never really compete.
So effectively, the contract to give Google more traffic becomes a monopolist contract to prevent others from competing. Which means it becomes a slam-dunk case according to the Sherman Act, which outlaws:
“…every contract, combination, or conspiracy in restraint of trade," as well as "monopolization, attempted monopolization, or conspiracy or combination to monopolize."
What are the controversial bits?
1/ This will be worse for users in the short run.
If you have to go through more hoops to designate Google as your primary search tool, or god forbid they let Bing pay to be the default, that’s no fun. And it flies in the face of the last ~60 years of the consumer welfare standard for anti-trust, which I wrote more about here.
2/ It’s an intervention in a free market.
This changes the game from “make it, take it” to more of a “loser drafts first” model. Market forces would reward Google by giving them more opportunities, but this (and similar decisions) give the losers a fighting chance at taking on the champs.
Wrapping Up
So if we zoom out, “Naughty Google” is a little bit tongue in cheek, because ultimately, signing a contract like this is a good business decision (profit maximizing) and is good for users (because Google search is the best). It’s just not legally defensible (although they’ll continue to argue about that in what is sure to be years of appeals).
Bonus Bullets:
Quick News Reactions:
Bets > Polls – Polymarket and other similar sites have popped-up in recent years, and they let users bet on real-world outcomes (not just sports, but like “will it rain in Los Angeles this week?”). They’ve been gaining steam as the US Presidential Election gets closer (in part because betting culture is rampant, in part because they’ve been trending more accurate than polls). Looking forward to comparing Nate Silver’s final predictions (based on polls) to the Polymarket data. I’ll bet Nate matches Polymarket (or is wrong!).
Layoffs are Back – It’s starting to look like a trend. In the last month, three major tech companies have announced layoffs in the thousands (Intuit 1.8K, Cisco 5.9K, Intel 15K). This is exactly what we should expect in an environment where interest rates have been held this high for this long, and it’s tech-specific evidence of the bigger trend in macro data (ex. US unemployment ticked up from 4.1 to 4.3 in August 2024, up from 3.5% in July 2023 -- source). I’ve written about the Fed’s dual-mandate before (most recently here)… seems like they will finally need to shift from worrying about inflation to worrying about unemployment.
Make it Make Sense — California has decided to issue permits to Chinese robotaxi company WeRide (sorry Adam Neumann!) for testing with passengers. Now look, if you’ve been reading this newsletter at all in the past few months, you know I’m obsessed with robotaxis… so that’s great. But what I’m confused by here is the allowance of Chinese tech like this, while we tariff their EV’s into oblivion (doubling their price), ban their Huawei devices (as I’ve written about before), etc. Will be interesting to see if this is quickly reversed or superseded by some US-wide ban/action.