During the last twenty years, four technological giants, have been able to generate an unprecedented source of wealth for their shareholders, creating products and services that have transformed society and which are deeply rooted in the daily life of billions of people. But, could the time have come to consider how much power in the business world we want to continue to give these innovation leaders? Scott Galloway, Professor of Marketing at NYU Stern University and author of the book "The Four: The Hidden DNA of Amazon, Apple, Facebook and Google", argued for it during the celebration of an event organized by BigSur Partners, the multi-family office founded in 2007 by Ignacio Pakciarz, in collaboration with the NYU Stern University.
The event, which took place in Miami in early February, was the first of a series of presentations in which BigSur Partners aims to have leaders, experts, and academics across different sectors and industries participating in order to offer their clients the best investment ideas. "We are honored to be co-hosts of this event with NYU Stern given our commitment to collaborate with the best minds in our network. Internally, we created the "BigSur Intelligence Unit" in which we strive to find the best ideas in academia, industry experts, leading family offices and other counterparts interested in financial markets. We also believe that it is important to always look at the world from different angles and to listen carefully to innovative thinkers," said Ignacio Pakciarz, economist, founder and CEO of BigSur Partners.
According to Galloway, Amazon, Apple, Facebook and Google target the most primitive human instincts, which are then reflected as a body organ: Google channels its efforts towards the brain, Facebook represents the heart, Amazon targets our digestive system and Apple would be the company that champions sexual attractiveness. As a result of their respective strategies, they have created enormous value for their shareholders.
Since the great recession, its stock market capitalization has grown exponentially and currently only four nations, the United States, China, Germany and Japan have a GDP higher than the capitalization accumulated by these four companies, which is close to 3 trillion dollars. "
After studying these companies for ten years and examining them thoroughly during the last 24 months, Galloway came to the conclusion that the four big technology companies have to be regulated because they have reached a scale that could stiffen the economy.
Facebook is the largest social network in the world with 2.07 billion active users, who connect at least once a month, and 1.4 billion people connecting daily and also owns 6 of the 10 most downloaded mobile applications. With applications WhatsApp, Facebook Messenger, Instagram, Facebook and Facebook Lite, any smartphone becomes a distribution vehicle for Facebook.
In turn, Amazon represents 44% of the electronic commerce in the United States -the fastest growing distribution channel in the world-. "55% of sales made on Black Friday were made through the firm. 62% of American households provide a recurring income to Amazon through their Amazon Prime service. As if this were not enough, Amazon also owns 70% of the market share of the voice business, through Amazon Echo, the new appliance that will transform society."
Likewise, the revenues obtained by Google in advertising as of December 2017, of approximately 90.9 billion dollars, represent 92% of the totality of the advertising market in the United States.
After presenting his argument about the monopolies created by the four largest technology companies, Galloway suggested that the introduction of regulation does not necessarily restrict capitalism, but that it could actually revitalize the market.
Galloway concluded by mentioning the need to break these monopolies, not because of tax avoidance or the destruction of employment they incur, but by the need to increase the number of innovators in order to avoid that the only competitors of these four companies be themselves, or that when a potential competitor appears, it is acquired by one of the four at a price that fewer and fewer companies can afford. It is about creating an ecosystem with a greater participation of venture capital companies, with a more diversified source of employment, a broader tax base and greater competition among companies.
Once the event concluded, Ignacio Pakciarz showed his enthusiasm for the concepts expressed by Professor Galloway. "They are very interesting, and perhaps even radical for a technologist and defender of free markets. His idea of regulation as the only means by which to protect innovation is an interesting stand on the argument. As investors in the creative economy, we believe that this event is valuable to understand the cultures of these technological giants and how they operate, as well as the implications that regulation can have on the stock and venture capital markets," he concluded.