international analysis and commentary

Big Tech’s Dickensian Crossroads


The words of Charles Dickens written over a century and a half ago, well before mass electricity and with coal still powering London, are remarkably suitable to the state of the tech sector, and of Western “big tech” players in particular, in the year 2020.

It was the best of times,
it was the worst of times,
it was the age of wisdom,
it was the age of foolishness,
it was the epoch of belief,
it was the epoch of incredulity,
it was the season of Light,
it was the season of Darkness,
it was the spring of hope,
it was the winter of despair …

It is, by many measures, the best of times for the tech giants. Tech as a sector has not only survived the massive economic disruption and dislocation of the Covid-19 pandemic, it has surmounted the broader challenges, with the Nasdaq powering well above 10,000 points to new highs in 2020. It has helped that, in the words of Microsoft CEO Satya Nadella, the world experienced “2 years of digital transformation in 2 months” as the world adjusted to life at home, connected to work, friends, and family through only sinews of ethernet cables or waves of wi-fi.

According to the Institute for International Finance (IIF), e-commerce as a share of core retail sales has vaulted to 27.4% already by mid-2020, from 20.8% in 2019 and only 12.8% in 2012. US e-commerce sales already exceeded $600 billion last year, and in 2020 are forecast to increase more than 18% even as overall US retail sales drop by more than 10% to around $4.9 billion.

There are abundant superlatives that can be used to describe the ascendance of big tech. The five largest companies in the S&P 500 index – all tech companies (Alphabet, Amazon, Apple, Facebook, and Microsoft) – now comprise around 25% of the entire market capitalization of the index, and have accounted for the vast majority of the index’s gains over the past several years, with the remaining 495 listed equities contributing comparatively little.  As of late June, when put together, the combined market capitalization of Amazon, Apple, Google, and Microsoft now exceeds the value of the entire Japanese stock market capitalization. In other words, these four leading US tech companies are – in an abstract sense – the third largest stock market in the world behind the United States and China. And Apple is now the single most valuable company in the world, edging out Saudi Aramco.

Data may or may not be the “new oil”, as the saying goes, but the major tech players are, more than ever, not just service providers but essential platforms. Entire workdays are carried out across the ecosystems provided by Microsoft and Google. Amazon alone accounts for nearly 40% of all US retail e-commerce, and 60% of its sales derive from its third-party marketplace; it is not just a mega-retailer, but a bazaar for small business, as well. The percentage of UK adults making video calls weekly has doubled – to 70% –during the pandemic, from roughly 35% in February of last year. A newfound familiarity with digital socialization has set in, and the bar for physical travel has been, to some degree, perhaps forever raised. Notably, tech giants constitute three of the top five most loved brands in the United States, and sweep all five of the top five slots in the latest Forbes “World’s Most Valuable Brands” list. In many ways, it is indeed the best of times.

And yet, in a Dickensian paradox, this moment of ascendancy for big tech is also a moment of acute vulnerability. From antitrust investigations to Presidential threats to Congressional hearings, the prophesied “techlash” seems to grow closer and closer even as the distance between America’s digital winners and the rest of the real economy grows greater and greater. Indeed, far from killing the “techlash,” coronavirus may – upon reflection in several years’ time – be recognized as having accelerated it.

But just what does the “techlash” mean, after all? The popular portmanteau for tech companies’ public and regulatory reckoning is often casually referenced as if a unitary phenomenon, a universally recognized inevitability like Y2K. But in reality, the regulatory storms on the horizon for American tech giants are neither inevitable nor uniform. They can be loosely categorized across five domains of growing scrutiny.


National security and human rights scrutiny: Increasing pressure on tech firms to comply with government requests for unlocking accounts or devices amid investigations, to integrate backdoors into encrypted platforms, to refrain from transferring US tech or know-how via their operations in US competitors and adversaries, or to ensure that their supply chain is free of connections to humans rights abuses.

Antitrust and competition scrutiny: Increasing pressure on tech firms to justify past and present acquisitions, to possibly divest or firewall parts of their business, or to mitigate in various ways the benefits afforded to them by vertical integration and the scale of their user base and concomitant data.

Data management and privacy scrutiny: Just as governments in some cases are demanding greater access to data, so too are they more actively intervening in the collection, use, retention, and transfer of data. The EU is clearly the pioneer here with the General Data Protection Regulation (GDPR), with a new wave of uncertainty sparked by a recent European Court of Justice ruling (in the so-called “Schrems II” case) that calls into question the legal underpinnings of personal data transfers out of the EU and effectively invalidates the EU-US “Privacy Shield” arrangement.

Digital commerce revenue scrutiny: Driven by both the rapid growth of income tied to digital services, as well as an acute need for revenue to cover yawning fiscal gaps and pay for historically large stimulus programs, many governments have begun to draw up plans for new digital taxes. As of the middle of this year, 22 countries had implemented legislation allowing for taxes on digital commerce, while 6 had relevant legislation in a draft or public consultation phase, and 10 had announced an intention to implement such taxes. The United States, for its part, has launched Section 301 investigation of digital services taxes adopted or under consideration by 9 countries and the European Union, and has already announced $3.1 billion of tariffs – initially suspended for 180 days – against France’s digital services tax should it begin collected its tax retroactively starting in 2021. Multilateral talks on digital taxes at the OECD have stalled, meanwhile, amid a US walk out from the talks earlier this year, although talks on a global minimum tax are likely to make progress in the months ahead.

Political speech and censorship scrutiny: The role of social media platforms in politics has been thrust into the public consciousness after accusations of Russian interference in the 2016 US election as well as growing stories of social media manipulation around elections across the world. In the current zeitgeist of Washington, Democrats seem most concerned with what content should be removed from social media platforms due to the danger it poses to livelihoods, public order, or healthy democracy. Many Republicans, on the other hand, are preoccupied with what content should remain untouched by the invisible hand of social media moderators, claiming systematic prejudice against conservative voices and ideas.


It is unlikely that all of these regulatory urges will manifest uniformly, or with equal force. While some have declared, following the recent antitrust hearing in the House of Representatives, that the only thing that Republicans and Democrats can agree upon is the need to regulate tech companies, this is only partially true. In the hearing, Democrats were most preoccupied with antitrust and competition issues, while many Republicans were more insistent on using their time to grill the CEOs over the treatment of conservative speech on social media.

And, interestingly, whereas only two years ago, self-identified liberal Democrats were the most likely group (65%) to say that big tech companies need further government regulation, today that view among liberals has fallen to 52%, while self-identified conservative Republicans calling for further regulation has jumped from 42% to 53%. Moderate Republicans and moderate Democrats, meanwhile, are the least likely to see the need for further government regulation, each at 42%. The question for big tech, then, becomes less a matter of which party is occupying the White House and more a question of whether a stable center returns to American politics, or instead whether the political pendulum will swing from the populist right to the populist left and bypass the center entirely in the years ahead.

Meanwhile, the growing focus on competition and monopoly questions is hardly an American phenomenon. The EU and UK are each well into explorations of new regulatory tools to enforce competition in their digital markets, and China is reportedly looking to launch an antitrust probe into its digital payment behemoths, WeChat Pay and Alipay.

As long as national security, however, is the paramount and most urgent concern of governments, the regulatory hammer may create more opportunities than obstacles. The CFIUS investigation into TikTok, for example, creates opportunities for US players to expand into the space vacated by the Bytedance subsidiary’s removal from the US market.

And this last anecdote, perhaps above all, points to the clarifying paradox at the heart at all these various pressures. From Beijing to Brussels to Washington, the desire to regulate must be balanced against the imperative of ensuring tech champions that can compete on the global stage. As these governments enter the 2020s, their tech champions represent incredibly attractive targets domestically, and indispensable partners on the global stage.

It is the best of times; it is the worst of times.