Facebooklets: breaking up Big Tech

Hey, Ryan Reynolds here wishing you a very happy half off holiday because right now Mint Mobile is offering you the gift of 50% off unlimited. To be clear, that's half price, not half the service. Mint is still premium unlimited wireless for a great price. So that means a half day.

Yeah.

Give it a try@mintmobile.com Switch upfront payment.

Of $45 for three month plan equivalent to $15 per month. Required new customer offer for first three months only. Speed slow. 135 gigabytes of network busy. Taxes and fees extra.

See mintmobile.com hey, Ryan Reynolds here for Mint Mobile. You know one of the perks about having four kids that you know about is actually getting a direct line to the big man up north. And this year he wants you to know the best gift that you can give someone is the gift of Mint Mobile's unlimited wireless for $15 a month.

Now you don't even need to wrap it.

Give it a try@mintmobile.com Switch upfront payment.

Of $45 for a three month plan equivalent to $15 per month. Required new customer offer for first three months only. Speed slow after 35 gigabytes. If network's busy, taxes and fees extra. See mintmobile.com.

Hello and welcome to the intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Nearly half the world's coral reefs lie in Southeast Asia, and they face a barrage of threats. Warmer, more acidic waters, overfishing, pollution. And it's not just divers who will notice corals affect the livelihoods of 130 million people in the region. And what does Genghis Khan have to do with business culture? A new book would like to paint him and other macho conquering types as model managers of people. But would you really want one as your boss? First up, though, The Internet era has produced some truly enormous business success stories. Amazon, Apple, Facebook, Google's parent company, Alphabet. These companies have market values in the hundreds of billions of dollars. And their apps and products reach billions of people. But some argue that big tech has in fact become too big. First off, these firms often crowd out competition. Like when Facebook hoovered up the messaging platform WhatsApp and the picture sharing app Instagram. That's the kind of practice that Democratic contender Elizabeth Warren rails against.

We all use them. But in their rise to power, they bulldozed competition, used our private information for profit, and tilted the playing field against everyone else.

Mrs. Warren thinks that big tech firms have simply become too powerful, both economically and politically, she wants to cut them down to size.

It's time to break up these big companies so they don't have so much power over everyone else.

She wants to do two things. One, she wants to unwind certain mergers these big tech companies have done in recent years.

Ludwig Sigele is our US Technology editor.

And the other thing she wants to do is she wants to not allow companies like Amazon, which operate a marketplace, to also offer wares on that marketplace, which would allow for more competition in her argument.

I mean, why does she want to go about it that way? If these firms have too much political power over democracy, why does breaking them up attend to all of that?

Simply because you'd have more of them and they would compete with each other, so politicians would not have to deal, let's say, with one Facebook or one Amazon. What I also would say is, in principle, there's two ways you can go about this. If you think companies are too powerful, you can try to break them up in smaller companies, cutting them down in size, creating more competition, but you could also kind of dictate somewhat how they should behave. And Warren has decided to go down the road of the structural remedies, the breakups. And that comes with a number of problems, not least that it will take a long time for these breakups to happen.

What would the difficulties be at the outset in trying to break up a company as big as Facebook?

I mean, okay, there's a decision in D.C. to break up Facebook or to force it to kind of unwind these mergers. WhatsApp and Instagram. Zuckerberg, the boss of Facebook, has already said he's going to go to court. We need to remember that the Microsoft trial, the last big antitrust trial in the US lasted for almost 10 years. Most likely then there will be some kind of a settlement or consent decree and perhaps they don't even have to spin off these companies. So uncertain outcome will take a long time. And in this fast moving industry, that's not a good thing. The whole thing may be obsolete by the time it's decided.

If these companies get as big as they do, in part because they wanted to sort of streamline operations and combine data sets and so on. If you want to break WhatsApp and Instagram off of Facebook, where does one stop and the other start?

That's a very good question. So originally, of course, these were three different companies and they have somewhat been kind of worked together, integrated, intermingled. So Instagram uses the same ad platform as Facebook. WhatsApp is still a Bit separate. But what Facebook is working on right now is to integrate the entire kind of the back end, the databases, the list of members in the background, so that if you, for example, on WhatsApp, you can send a message to Facebook, to your friend on Facebook. Now critics say Facebook does this in order to make it more difficult to be broken up. Because then if you have one big database, Facebook can say, actually we are one company. Why do you want to break us up? I mean, these different services are just kind of applications on our database, so we shouldn't be broken up. Zuckerberg says we do this to make life easier for users. So it's a good service so that I can send my messages from WhatsApp to my friends on Facebook.

And what about the degree to which.

Even if these things could be pulled off, it would change the ultimate situation? I know when we've talked about this before, you said breaking up Facebook would only result in a whole bunch of Facebook lits.

If you just break up these companies, what is likely to happen is that one of them of these Facebook luts becomes dominant again. That's called in the industry or some call it the starfish problem. So starfish, even if you cut them in half or in several parts, these parts then quickly become starfish again. And so the same thing could happen with these companies. And that's because the economics of the industry makes that size get size. So if you're big, you become bigger and at some point you dominate the industry. So if you break up companies, what you also have to do is create a set of rules that breaks those economic forces, which are called network effects. For example, by requiring data sharing, by requiring interoperability. That means that one, for example, instant messaging service can communicate with another. So that WhatsApp would have to be required to receive messages from Telegram or whatever messaging service.

Well, which might go by another name of heavy regulation. I mean, this sounds like a much more heavy handed approach than we have seen in other industries, at least in recent decades. Why is that? Why is this focus so strongly on big tech in that regard?

It's quite a natural evolution of industries that come up and become important. And that has happened with railways, that has happened with telecoms and other industries. And so I think it's quite normal that this would happen with a technology like social media, for instance, that is in a way even more important than the other industries I've mentioned. We now live on social media. So it's quite normal that society would try to design rules to rein in or control A technology.

Well, taking such an aggressive stance against these tech companies, I mean, kind of goes against this sense of it is these big companies that have been massive revenue generators, innovators, pumpers of the economy now for over the past couple of decades. Do you think that a strong, heavy handed regulatory push of this sort interrupts that cycle of innovation?

And that is certainly one argument certainly has happened that regulation has kind of stymied innovation. But I mean, you could also argue that antitrust, I mean regulations, a lot of things, but antitrust, that breakups or some antitrust settlements have actually created more innovation. Just think about what happened to AT&T in the 50s and they had to sign a constant decree which forced them to open up their intellectual property, to give away basically their patents, to license them pretty cheaply to other companies. And that then created a semiconductor industry and created innovation and then kind of created a whole new industry. And you could say the same thing about the Microsoft case is that if we have something like Google today that has been helped by the fact that the trustbusters went after Microsoft and forced it to be less aggressive and allow them for browser choice or to make its operating systems interoperable with others.

So I mean, what's your overall view here? You make an argument that sounds as if it could in fact be good for innovation. Certainly the likes of Mrs. Warren reckon it would be better for democracy and competition. Is this a good idea for. Well, I mean by this stage, the whole of the planet.

I'm more of a breakup skeptic because of the, as I explained, the uncertain outcome. It just takes too long and breakups in themselves don't solve the problem. So I'm much more in favor of very targeted behavioral remedies that force a company like Facebook to share data or to make its services interoperable with other services. So I'm much more on the side of what's called behavioral remedies, even though, I mean designing these is not, is not easy as well. So the whole thing is complex. But I just think that breakup sounds good, easy solution, but in the end I think won't solve the problem.

Ludwig, thank you very much for joining us.

Thanks, Jason.

Stretches of coral such as Australia's Great Barrier Reef are among the most stunning areas of natural beauty in the world. Made up of thousands of individual animals called polyps, they play a key part in supporting marine life. But corals and the bright bursts of color they bring to divers holidays are facing a myriad of threats.

So the outlook for corals around the world over the Next few decades is dire.

Miranda Johnson is the Economist's Southeast Asia correspondent.

More than half the world's reefs actually lie in waters around Asia. And they support myriad marine species, huge amount of fish and pollution, overfishing and climate change will affect them.

So clearly that's trouble for the corals, but what does that mean for the people near them?

So corals are actually a lot more helpful to humans than perhaps many humans realize. They act as types of coastal buffers, essentially protecting shorelines from the full force of the ocean and storms. And that actually protects the beachfront property and other bits of infrastructure that might be along the shorelines of countries. They also act as nurseries for many fish species, so ultimately support fish populations that millions of people depend upon for food. And they also encourage visitors, people like to come and see them. And so billions of dollars in tourism revenues depend on them.

But people are also behind some of the threats you mention?

Yes. So humans are affecting corals in two sorts of ways really. There are short term threats to them and long term threats. And the short term ones include things like overfishing, pollution from sewage, from farms. The longer term effects relate to rising concentrations of carbon dioxide in the atmosphere. And a rise in global temperatures of 1.5 Celsius relative to pre industrial times could cause coral reefs to decline by 70 to 90%, is the latest thinking. And given that the world is already about 1 degree Celsius warmer than in the 19th century, things are looking pretty bad for reefs.

So why is it that the corals are so sensitive in particular to temperature?

To understand that, we need to understand just a little bit about how corals work. They are tiny animals that maintain a symbiotic relationship with algae which live in their tissue. And it's actually the algae which gives corals their color. And the relationship is very delicate. It's very sensitive to temperature. And if temperatures get too warm in the water around coral for a sustained period of time, they actually eject the algae. And this phenomenon is known as bleaching. You get left with white kind of ghostly looking reefs. And we've been seeing more global bleaching events occurring much more frequently than they did even four decades ago. And the most recent bleaching event, which was between 2014 and 2017, may have affected more than 70% of the the world's coral reefs. So warming is very bad. And also the changing chemistry of the ocean, where we're seeing it becoming more acidic, makes it more difficult for them to form their skeletons.

So what's to be done Then what.

Kind of top down approaches can help with this?

So in the short term, there seem to be low hanging fruit that policymakers and others could reach for in it's important to try and control the local threats to reefs as quickly as possible. So impose tougher codes on construction where we see sediment from building sites end up in the water, or helping to build proper sewage facilities so that we don't get runoff into waters, things like that. Another solution to addressing short term threat overfishing is to establish marine protected areas and specifically ones with no take zones to better control who is fishing where and when.

I mean, those sound like good local remedies, but some of the threats that you mention are global.

They stretch beyond a marine protected area, beyond a single country's waters.

The broader, larger threats that reefs face are harder to address. Different species of corals grow in different ways in different places. They are affected by the local conditions. And so the hope is that scientists can increasingly research why certain species of corals do better in, for example, slightly warmer and saltier waters. Once we have a better understanding of why that is, there's better hope for transplanting corals that are perhaps a bit tougher into areas where reefs have already been badly damaged by warmer water. There is also genetic work that's being looked into and even more broadly, initiatives to try and cool reefs through marine cloud brightening and other kind of larger interventions.

It sounds as if the challenge is big, but there are quite a few things that can be done. What's your view in terms of the.

Hope in the long run for corals?

So I think the hope for corals lies in their biodiversity and they are certainly resilient. Recently to report on the plight of reefs in Asia, I went to the Philippines visiting reefs that had been badly damaged by a bleaching event almost a decade ago. And in some areas of the reef that I returned to, you could spot small signs of the damage, a sort of white piece of coral here. But overall I was much more impressed with the beautiful branching coral arms of blue. I saw small sharks. I saw huge pink and green plating corals. So they do have resilience and they do have the capacity to come back. The question now for scientists and for anyone really who enjoys the natural environment, is whether corals can survive the unusual concoction of threats that they face now from humans.

Thanks very much for joining us, Miranda.

Thanks, Jason.

What do Genghis Khan, Japanese samurai and the leader of a slave revolt in Haiti have in common?

Well, they're all business role Models cited in a new book by Ben Horowitz, who's one of the founders of Andreessen Horowitz.

Philip Coggin writes Bartleby, our column covering.

Management and work, which is one of the big Silicon Valley venture capital firms.

Role models, in what sense?

Role models for setting a culture within your organization. And culture is one of the buzzwords of the moment in management terms. But the idea is that it's not just the products that you have anymore, especially when you're a service based company, it's how you operate. And the culture is the kind of thing that people know instinctively how to do, and they do when the managers aren't looking.

So what is it that we are to learn from these historical figures as business role models?

Well, it's an interesting selection, isn't it? They're all pretty martial figures, they're all male, and in some ways they're a very odd selection for someone from Silicon Valley who is armed only with a spreadsheet to try and admire. But Genghis Khan, though he's got a reputation for massacring people, he did allow outsiders into the highest echelons of the Mongol Empire. He was pretty tolerant of other religions. He encouraged trade. So he was kind of a meritocratic leader. So it's the idea that you can have this very strict code and keep people down to it, which is what he's trying to get at.

You hint here that this is a fairly motley crew. I mean, it is, it has to be said, a fairly violent one.

Well, you know, you can't really move aside the big problems of these people. Genghis Khan was somebody who massacred a lot of people. And a generation after his death, the Mongol Empire was involved in the civil war and eventually dissipated. The samurai were such a controlling influence on Japanese society that it's only after they were all pensioned off in the late 19th century that the Japanese economy enjoyed its miracle growth period. So I'm not sure these are really the role models that you want to emulate. And there are no women, of course. So, you know, you could have gone back in history and said, say Elizabeth I of England would be a better role model. Somebody who kept herself on the throne for 45 years in difficult circumstances, tended to avoid war and managed to play off other people against each other. And also saw through a long period of potential religious conflict and said, I don't want to look into people's souls as long as they're loyal to me. That's not a bad culture to have.

Well, I mean, that's the question.

If culture is a driving factor in the success or indeed the perception of a company, what happens when the culture is bad? What are the effects of bad culture?

Yes, there's a good example there of Uber where Travis Kalanick had this very hard charging philosophy. And it's mentioned in Mr. Horowitz's book, you know, always be hustling champions mentality and things like that. And you know, when you have that ultra competitive philosophy, then it's perhaps inevitable that a few rules get bent. And he makes a very valid criticism of the board of Uber, that if they thought about the philosophy, they would have realized that these kind of things were likely to happen.

And so if we're going to go digging around in history for good examples of business culture or good pointers for business culture, who would you pick? Who are you inspired by?

Well, I think you could look at Paul Pullman, who took Unilever and over the course of 10 years change its philosophy to try and be more environmentally conscious, more socially conscious. You could look at Anita Roddick, who built up Body Shop with a philosophy of not testing on animals and managed to create a successful retail chain. So not all examples have to be quite so hard charging as the ones Mr. Horowitz selects.

And what about Bartleby, who your column is named after? Do you consider him a good role.

Model for business leaders?

Well, Bartleby is a character in a short story by Herman Melville. And the reason I chose it as the name for a column is he's very double edged. So he's someone who starts off as a bright worker, then suddenly refuses to do anything, saying I would prefer not to, and eventually won't do anything at all. And the office has to move away to get away from him, and he eventually dies in prison. But the point of it all really is that is this an example of managers failing to motivate the workers, or is it an example of workers rebelling against the meaningless nature of their work? And that's what the column really tries to do, to take that example and look at the double edged nature of work. So we'd be miserable without it, but some of the time we hate doing it. And it's that tension which really drives a lot of the problems that we face at work and a lot of the ways that people try to solve.

Them, problems that business culture can assuage.

In a good business culture, things are a lot better than a bad business culture.

Thanks. Thanks very much for your time, Philip.

Thank you, Jason.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple podcasts and you can subscribe to the economist@exterator.com radio. Offer to 12 issues for $12 or 12 pounds. See you back here tomorrow.