In the last few years, big tech companies outperformed nearly every competitor. The disruptive force and dominance of these companies seem to have almost become a self-fulfilling prophecy, with consumers and investors rewarding them for almost everything they do. But what is driving our awe for these big tech companies?

Our observations

• Apple’s “1984” advertisement distinguishes Apple from other technology companies. In the commercial, a young and colorfully dressed woman (representing the Apple Macintosh) destroys a large blue computer and its colorless, obedient followers, symbolizing how Apple would disrupt the grey, blue-chip-computer corporates of that time (most likely IBM or Microsoft). The title 1984 is a reference to George Orwell’s 1984, and conveys the message that Apple’s technology can save us from the boredom and conformity of standardized mass culture, corresponding to Steve Jobs’ mission statement for Apple “to make a contribution to the world by making tools for the mind that advance humankind”.
• In April, more than 100 million people around the world had Amazon Prime, a paid subscription model that gives users free two-day delivery and access to other Amazon products and services. The company shipped a whopping 5 billion Prime items last year, succeeding in its mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online” and to endeavor “to offer its customers the lowest possible prices.”
• In his novel “Snow Crash”, author Neal Stephenson coined the term “metaverse”: a virtually enhanced reality, populated by user-controlled avatars, like a massive online multiplayer game. During the OC3 event in 2016, Mark Zuckerberg unveiled how Facebook users can create their own virtual avatars and by using Oculus’ (a Facebook subsidiary) VR headsets, they can socialize, communicate, and share experiences in a fully virtual world in real-time (the Rooms and PartiesProject). Facebook’s idea of social VR” resembles Stephenson’s metaverse concept, and is meant to aid Facebook in its mission to “give people the power to build community and bring the world closer together.”
• In their book The New Digital Age, then-Google Executive Chairman Eric Schmidt and Google Ideas CEO Jared Cohen explain how the internet and open data leads to the democratization of political systems, the flattening of our world into a global village and how information access would make superstitions crumble. In this sense, the book’s claim nicely fits Google’s mission statement that it aims to “organize the world’s information and make it universally accessible and useful.”

Connecting the dots

The dominance of big tech can be explained by the logic of platform economics. We have written about how data creates new business models and how platforms are disrupting traditional industries and create a “winner takes all” dynamic. By harvesting lots of data and having the in-house intelligence to transform this into meaningful information, these companies can leverage the free cash flows from their platforms and their scale into other domains to become powerful digital conglomerates. And indeed, the quadropoly of Amazon, Apple, Facebook, and Alphabet bears evidence to how powerful these companies can become in our digital economy.Big tech companies tap into our basic human desires. Apple addresses our longing for a lifestyle and sharing symbols and tokens with one’s peer group (iPhones, App stores), Facebook our desire to have relationships and connections to share (liking and sharing) our experiences and everyday life with others in a public space (the Instagram or Facebook wall as hyper-individualized representations of ourselves). Google’s Alphabet provides the information to satiate our thirst for knowledge by providing knowledgeas-a-service for free, while Amazon stills our hunger to consume ever more goods (from food to every imaginable FMCG). As such, these companies appeal to very fundamental categories of our existence.However, there is an even more fundamental aspect that makes these companies special to most: they (try to) provide a comprehensive narrative about their role in the digital economy. Facebook positions itself as the organizer of our socio-cultural capital from the emergent patterns of our digital energy (clicks and likes). As our living worlds and our daily activities are increasingly digitized, Facebook seesitself as the provider of the public digital market square where we meet and interact, and pay with our attention.Apple, on the other hand, has transformed computation into the highest layer of Maslow’s pyramid: by owning Apple products we actualize ourselves as digital consumers, and that is why we allow Apple products (iPhone, Apple Watch) to get very close to us. This enables Apple to generate valuable data, and allows it to further normalize digital technologies in our daily lives, hence re-establishing its position as disruptor and provider of new consumer technology. Furthermore, Amazon is the specialist that gets things done in our digital economy (delivering something from an Indian factory on our doorstep within two days).That is why Amazon re-invests almost all of its profits into new infrastructure and capex investments, to expand its logistics and digital empire, thereby further flattening our world and serving customers. Google even claims to have a theological vocation: spreading information to enlighten barbarian parts of the world that suffer under the yoke of friction (e.g. places without Google Maps) and ignorance (e.g. repressive or authoritarian regimes). Google therefore provides informational liquidity, but also turns more things into quantifiable, digital information that is organized and made accessible by Google again. These narratives tell us why they are inevitable in the emerging digital economy, and should convince us to regard them with awe.

Implications

• A narrative can provide a company its existential justification and a premium vis-à-vis “normal” competitors, like a nice punch at a party. However, it might also become dangerous when there is too much liquidity in the market, when euphoria in the storytelling blurs the real value added of the company. With the Fed and ECB now taking away the punch bowl from the party and public discourse becoming increasingly ambivalent towards big tech, these companies are forced to put their money where their mouth is. For example, they could start providing public infrastructure to improve our digital lives (e.g. Alphabet’s smart-city pilot or Facebook’s Free Basics), or provide their own strategies to “fix the internet” (e.g. Apple’s move on digital well-being or Amazon lowering its own prices ever more).
• The monopolization of new markets and consequent euphoria about these “frontier companies” is not unique in history. For example, the Robber Barons (e.g. Rockefeller) were initially praised for pushing the industrial age; the Nifty Fifty (e.g. McDonald’s, Disney, Coca-Cola) of the 1960s and 1970s were the embodiment of American hegemony and consumer culture; and euphoria about the dot-com companies was created by the belief that they were heralds of the “new economy”. Compared to these historical periods, the current big tech companies have a higher market cap but are still trading at lower valuations, suggesting even more room to grow. However, as we have written before, the history of monopolies shows that dominance of large companies is far from inevitable. Innovations in antitrust regulation (e.g. how to file a complaint against a company that doesn’t charge a price for its service, such as Google and Facebook, or a company that actually brings down consumer prices) and decentralized digital infrastructure are gaining momentum and could crack the market power big tech currently enjoys.