Facebook: The Opt-In Monopoly
The company that created the richest man the modern world has ever known isn't Amazon. It's not Apple, either. Or Microsoft, or Facebook.
It was Standard Oil. In today's money, John D. Rockefeller's personal fortune would have been $340 billion. By the time the U.S. government took action to break up Standard Oil, the company controlled 90% of U.S. oil production.
And while the textbook definition of a monopoly is: “exclusive ownership through legal privilege, command of supply, or concerted action; exclusive possession or control; a commodity controlled by one party...”
It's pretty easy to say that Standard Oil fit the bill as a monopoly. It may not have had 100% control, but it was close enough (and close actually does count in horse-grenades).
Now, when a company gets that powerful, our elected leaders start getting a little nervous. That's when the "break them up" talk gets started.
Facebook's announcement that it plans to launch it's own cryptocurrency, called Libra, has some lawmakers grabbing for their torches and pitchforks. Congress has already called Facebook founder and CEO Mark Zuckerberg to account for his company's handling of people's data.
And just the other day, one of the good Senators from Missouri said, “We need to see exactly what their specific [crypto] proposals are, but I'm very concerned about Facebook's behavior on a range of fronts. I'm concerned about their size, I'm concerned about their anti-competitive conduct, I'm concerned about their rampant violations of privacy...”
For the record, I am no fan of Facebook. I quit that infernal site three years ago. But I gotta say, the whole "violations of privacy" thing gets a little old. Facebook told us all that it would sell every bit of our info to whoever would pony up.
Maybe you didn't notice because it cleverly masqueraded its predatory aspirations as "The Facebook Business Plan." And then it tricked you into accepting it by hiding it in the User Agreement and Terms of Service! The nerve!
The Opt-In Monopoly
Oil was an integral part of the American transition from farm to factory. There wasn't really any choice. Because there wasn't a fuel source that could compete. America had to have oil.
This may sound like a radical suggestion, but I don't think America needs Facebook. Unless you wanna say that arguing with your friends, being an emotional exhibitionist, and endorsing wingnut politicians is what America needs right now.
Powerful? You're damn right Facebook is powerful. One out of every five page views on the internet is a Facebook page.
The simple fact is, you signed up, you clicked "accept terms of service" button. And if you don't like it, it'll take you five seconds to hit the "delete account" button.
It's diabolical if you think about it: a monopoly that lets you quit whenever you want!
But seriously. The issue Congress is facing probably isn't that different than the one lawmakers faced at the turn of the 19th century. Basically, technology emerges faster than the human brain can evaluate the implications.
The simple fact is, most people didn't grasp the implications of a company that can attract 2.5 billion customers until we were like, "Holy crap, Facebook has 2.5 billion customers."
It's only been 20 years that the internet has been part of our daily lives.
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Render unto Caesar
AT&T ran a government-mandated monopoly on telephone service for decades. Because that was the only way a company would make the massive investment to run copper across the country.
When it came time to string coaxial from sea to shining sea, Congress gave Comcast et al. regional monopolies (which is a big reason the damn New York Yankees are perpetually dominant and my beloved Orioles will suck forever).
It's not that anybody likes Comcast. It's that Comcast played the game. And here we are, 40 years later, and Congress hasn't lifted a finger to "break up" cable. In fact, when Congress killed net neutrality, it was deliberately making cable companies stronger and also ensuring that MLB will never have a salary cap.
Google accounts for over 90% of internet search...
Apple accounts for over 90% of all profits from cell phones (largely because Samsung can't seem to make much money off its phones)...
Amazon controls 50% of e-commerce...
And Facebook has the two most popular social media sites (FB and Instagram), plus the most popular international messaging service, WhatsApp.
But none of these companies played the game. They failed to render unto Caesar. In fact, they deliberately tried to cut Caesar out...
For instance: Amazon reported $25 billion in R&D last year. That's double the R&D budget at Apple. And because R&D spending is a big ol' tax break, it's a big reason why Amazon pays a lower tax rate than I do.
It's like none of these CEOs has ever seen The Godfather. You pay up, or you get driven out to Long Island to "pick up a box of cannolis."
It's inevitable that Facebook is gonna get whacked. It's just matter of time. I've got an easy way you can make some loot off the inevitable. You can learn more here.
Until next time,
A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He also contributes a weekly column to the Wealth Daily e-letter. To learn more about Briton, click here.
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