British media: Why are American tech giants becoming bigger and stronger?
2024-08-28
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Reference News reported on August 27On August 22, the website of the British weekly The Economist published an article titled "Why are America's tech giants getting bigger and stronger?" The article is excerpted as follows:
In 2019, Microsoft, then the largest tech company in the United States, was valued at $780 billion, followed by multiple competitors such as Apple, Amazon, Alphabet, and Metaverse (Facebook), with a combined market value of $3.4 trillion. Today, Apple alone is valued at more than that.
The combined market value of these tech giants has more than tripled since the beginning of 2019, to $11.8 trillion. Add in Nvidia—which has become the only U.S. chip company with a trillion-dollar market cap thanks to its key role in generative artificial intelligence—and these companies are worth more than 1.5 times the combined market value of the next 25 U.S. companies, including Big Oil (ExxonMobil and Chevron), Big Pharma (Eli Lilly and Johnson & Johnson), Big Finance (Berkshire Hathaway and JPMorgan Chase), and Big Retail (Walmart). In other words, the growing tech giants are leaving the rest of the pack behind.
It’s easy to dismiss this as an anomaly. The late Austrian-American economist Joseph Schumpeter coined the concept of “creative destruction,” in which waves of disruptive innovation relentlessly overturn old orders and create new ones. Of course, like their industrial predecessors, these tech companies, founded decades ago in dorm rooms, garages and shabby offices, should be vulnerable to a new wave of innovation.
But Schumpeter’s original vision of creative destruction was more complicated than that. To be sure, he revered entrepreneurs. He saw them as business heroes who drove the economy forward with new products and ways of doing things. But in later years, after watching decades of dominance by big American companies, he shifted gears. He argued that big companies, even monopolies, are the primary drivers of innovation. They have the money to invest in new technologies and attract the best talent. This view may disappoint some who see business as a battle between startups and established giants, but it’s actually prescient: It explains why today’s tech giants are able to outmaneuver and even acquire startups before they can make waves.
A large amount of data proves the correctness of Schumpeter's hypothesis. Since 2019, the capital expenditures of the five major technology giants and Nvidia have doubled to $169 billion last year, while the capital expenditures of the next 25 companies combined are only $135 billion, an increase of only 35%. In terms of talent, the six major companies added 1 million jobs and doubled their headcount during the same period. No one can accuse them of not making progress: they invest in artificial intelligence startups and invest heavily in building large language models. Metaverse platform companies also launch open source products that can be used by almost everyone. This year, they are also doubling down on artificial intelligence.
You might say that startups are more motivated to come up with revolutionary new ideas, that venture capitalists favor entrepreneurs, and that large tech companies waste most of their spending on building walls around their turf. These are all true. But don't be too romantic about small companies; they are sometimes very unrealistic. In addition, pushing the technological frontier is difficult. It takes decades of continuous innovation to create a product like the iPhone. Amazon not only pioneered online shopping, but also cloud computing. This kind of inspired thinking is the source of real power.
There is no doubt that the walls of Big Tech will be breached someday — either by a tough government or by new forms of competition. This month, the Justice Department announced that it may break up Google after a federal court ruled that the company was an illegal monopoly, suggesting that antitrust authorities are already out looking for prey.
New products, new ways of making and moving goods, and new forms of business organization keep the capitalist engine humming, Schumpeter wrote in his 1942 book Capitalism, Socialism and Democracy. Eventually, these tech giants will collapse, either on their own or under external forces. Some of America’s once-mighty industrial giants have suffered such a fate. General Electric was broken up this year after overexpansion and mismanagement. Dow Chemical and DuPont, two chemical companies that merged in 2017, have been dismantled beyond recognition. Boeing can’t even manage its civil aviation business, let alone its aerospace and defense businesses.
At the same time, new corporate giants are emerging, the largest of which is Nvidia, a maker of AI accelerator chips and software. This proves that even long-established companies can be disruptive. At the beginning of 2019, the company's market value was less than $100 billion, and now it has exceeded $3 trillion. (Compiled by Xiong Wenyuan)
