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THIS WAS NOT INEVITABLE – WE CAN CHANGE IT

We call these guys giants, because they have a giant sized impact on business, technology, media and politics. But as men they are far from being giants. They are very smart men who stumbled into great opportunities, and then took advantage of them. Don’t believe that? Keep reading.

The current degree of influence by this small group is nothing more than an accident of circumstances converging with a certain moment in the development of technology. Our inclination to regard what exists as inevitable is something that  Black Swan author Nicolas Taleb calls the Narrative Fallacy – that humans by nature simplify complex stories, which “shield us from the true randomness of the world, the chaos of human experience, and, to some extent, the unnerving element of luck that plays into all successes and failures.”

“Justifying the default system serves a soothing function. It’s an emotional painkiller: If the world is supposed to be this way, we don’t need to be dissatisfied with it. But acquiescence also robs us of the moral outrage to stand against injustice and the creative will to consider alternative ways that the world could work.” (Grant, Adam. Originals: How Non-Conformists Move the World (p. 7).

To understand what an accident this situation is, you just need to look at the history of these companies. There is nothing good or inevitable about the fact that information and media is controlled by a tiny group of left leaning men who control America’s biggest tech companies.  In fact, they all looked kinda like losers in the beginning – and the beginning was less than one generation ago.

Amazon

At first, Bezos was going to name his new company Cadabra, and also considered Aard, before stumbling onto the name Amazon. He raised $100,000 from his parents, and told them there was a 70% chance the new venture would fail. Bezos’ mother had so little confidence in the new venture that she tried to encourage her son to stay at his Wall Street job and try out the Amazon idea at night and on weekends. Many of the early employees passed on chances to invest, as prospects looked dubious. As one said “At first it didn’t really have a lot of the energy one stereotypically expects with a startup”.  The first week after the official launch in 1994 Amazon shipped $846 worth of books, their only product.

The early days in 1994 were slow enough that the tiny group of Amazon employees occasionally took hikes in the surrounding mountains of Seattle. A bell was rung in the office every time a book was sold. But the timing was perfect as the Internet was exploding, they pushed forward, things took off,  and Bezos was named Time magazine’s Man of the Year in 1999.

Then the market for tech stocks crashed, and in 2001 Amazon stock sank to $5.97/share (In 2018 the stock crossed the $2,000 share mark). Amazon lost $1.14 billion in 2000, so six years after being founded its losses were growing just as fast as its sales.  But even as Bezos and Amazon have risen to unfathomable wealth and power, the company has never been that profitable. In fact, even though it is a mature company now, it has reported more quarters when it lost money than when it made money. Apple made more money in the March quarter of 2018 than Amazon had made in its entire history up to that point. Most of Amazon’s profits, when it has had any, have come from Amazon Web Services (AWS), the division that supplies internet connectivity to businesses.  The part of Amazon that is famous; that sells Kindle books and sends deliveries to your house, has never been profitable.

So why are Amazon and Bezos so rich? Because Bezos happened to be developing Amazon in a period of time when American stock market investors were willing to pay massive premiums for unprofitable companies that were growing rapidly.  Tesla, with a market value of over $50 billion (as of October 3, 2018), greater than GM and Ford Motor Co., has never been profitable during its 15 years of existence, and shows no signs of becoming profitable. It has not always been the case that investors were willing to pay such huge premiums for companies that weren’t profitable. In fact, it is a very recent development.

Amazon’s rise to control half of all American e-commerce, and 60% of all books sold online, and Bezos’ rise to own the Washington Post and many other media properties, was never preordained, or inevitable, or even the result of any ability to generate real profits.  They sold a lot of stuff because they were selling most of it at less than cost, and investors heartily approved. Strange.

Apple

At the moment, Apple is the most valuable company in the world, followed closely by Amazon.  But co-founder Steve Wozniak didn’t have much faith in it. Wozniak started the company with Steve Jobs in 1976 but continued working full time in his engineering job at Hewlett-Packard until 1977.  “When an angel investor offered $250,000 to Steve Jobs and Steve Wozniak to bankroll Apple in 1977, it came with an ultimatum: Wozniak would have to leave Hewlett-Packard. He refused. ‘I still intended to be at that company forever,’ Wozniak reflects. ‘My psychological block was really that I didn’t want to start a company. Because I was just afraid,’ he admits. Wozniak changed his mind only after being encouraged by Jobs, multiple friends, and his own parents.”

Wozniak retired from Apple in 1985, long before Apple rose to its present heights.  The driving creative force behind Apple, Steve Jobs, was fired from the company in 1985, when Apple looked very much like a loser, a mere shadow to Microsoft, the dominant force in PCs and software at the time.  Neither Steve Jobs nor Apple looked anything like the cultural icons they would later become.

Google

“Although Google founders Larry Page and Sergey Brin figured out how to dramatically improve internet searches in 1996, they didn’t go on leave from their graduate studies at Stanford until 1998. ‘We almost didn’t start Google,’ Page says, because we ‘were too worried about dropping out of our Ph.D. program.’ In 1997, concerned that their fledgling search engine was distracting them from their research, they tried to sell Google for less than $2 million in cash and stock. Luckily for them, the potential buyer rejected the offer.”(Originals: How Non-conformists Change the World P.22)

Google changed its name to Alphabet in 2015 to highlight the fact that it was much more than the search engine. Alphabet now is a vast array of businesses, but very few if any of those other businesses actually make money. For example, in Q4 of 2018, 84% of revenue came from advertising via Google, 14.5% came from their cloud platform and hardware, and just 1.2% of revenue from so-called “Other Bets.” And really, the vast majority of the company’s current ventures are “Other Bets.” Mostly, bad bets, at least from a financial point of view.

Facebook

By no means was Facebook founder and current CEO Mark Zuckerberg sure of his success. This is what he said during a pitch meeting to potential investor Reid Hoffman:

"I'm not sure I'm going to keep doing this. After the summer, I may go back to school". And he closed by saying "Well, if you don't like this idea, I have another idea" which was basically a version of Napster.

But the idea took off, making Zuckerberg one of the richest men in the world. The company is run by Sheryl Sandberg, the liberal political donor and author.  Having become a billionaire from Facebook stock and a best selling author, it’s easy to forget that, as Chief Operating Officer she and David Ebersman, the Chief Financial Officer at the time —  bungled Facebook’s initial public offering, and the stock sank as a result (reaching a low of $17.55 the first year of the IPO).  Even as recently as 2018, Facebook lost more value in a single day than any company in history (shares fell as much as 20%, translating to a $124 billion decline in market capitalization)— as a result of ongoing privacy issues and other operational problems.

So, in summary, it’s fair to say the 4 giants have bungled and stumbled their way into control of American media and information.


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