Should We Fear Amazon (AMZN) (AAPL) (EBAY) (GOOG)?

If we were to believe the influential but clueless Columbia Law School professor Tim Wu, who has written a new book, The Master Switch: The Rise and Fall of Information Empires, companies like Amazon.com (NASDAQ:AMZN), Skype, Twitter, Apple (NASDAQ:AAPL), eBay (NASDAQ:EBAY), Google (NASDAQ:GOOG) and Facebook are the latest in high-tech "monopolies" that threaten our digital liberties, according to an excellent article by Forbes' Adam Thierer.

Here's his argument against the nonsense:

"The first problem with Wu's argument that "we are living in an age of large information monopolies" begins with the fact that he speaks of "information monopolies" in a plural sense and apparently misses the irony entirely. If so many "monopolies" exist, then Wu's thesis is undermined by the very fact that no single company dominates the high-tech landscape.

"That points to the second problem with Wu's analysis: He defines "markets" so narrowly that virtually every digital capitalist becomes a "monopoly." If both Amazon and eBay have monopolies, as Wu claims, then they couldn't possibly compete against each other and no other online shopping sites could exist. That's preposterous, of course: Amazon and eBay actually compete quite aggressively while fending off countless other competitors.

"Third, it's interesting to note who's missing from Wu's list of "information empires." There's no mention of Microsoft, MySpace, AOL (NYSE:AOL) or Palm. This points to just how dynamic markets built upon code can be. If Wu had published his book just five years ago, chances are that he would have named those companies "monopolists" using his narrow market definitions. Ten years ago, he probably would have listed Netscape, AltaVista, EarthLink (NASDAQ:ELNK), Friendster and Yahoo (NASDAQ:YHOO). But in each of those cases markets innovated around those once mighty tech giants--and did so in rapid fashion."

Thierer goes on to conclude that "the reign of any given information "empire" is brief, and its fall is often precipitous." So the idea of control of information and content by tech companies is ridiculous and reveals a lack of understanding of the sector and its economics.

Even the greatest investor in history, Warren Buffett, wouldn't significantly invest in Microsoft (NASDAQ:MSFT) when it was at the height of its growth, as he said there was no way he could reasonably project the growth of the company in the years ahead, and he obviously proved prescient in the matter.

Many of these high-flying tech companies today, won't be tomorrow, and new entities will arise to challenge and surpass them, leaving the idea of some type of ability to control the arena of ideas and content a extremely weak and anemic argument.




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