The past year has brought a pandemic, a national reckoning over race, plus antitrust investigations and charges against major tech companies, with massive swaths of the tech workforce working from their bedrooms. But also record profits, a booming IPO market, and trillion-dollar valuations at the same time. Does this suggest a disconnect, or point to a “correction” in the future?
That’s the first question we posed this week on our GeekWire Summit panel, “View from the Press Box: Tech in 2020 and Beyond,” with Ina Fried, chief technology correspondent for Axios and editor of its daily tech newsletter, Login; and Karen Weise, Seattle tech correspondent for The New York Times.
This week’s episode of the GeekWire Podcast features highlights from the discussion, including thoughts on the direction of the tech economy, the future of Amazon and Microsoft, the antitrust cases against US tech giants and the potential implications of the upcoming election.
Listen below or subscribe to GeekWire wherever you listen to podcasts. Watch a video highlight above, and continue reading for edited excerpts.
Disconnect between tech and the economy
Todd Bishop, GeekWire: Ina, do you have a sense for what the situation is with these seemingly disparate trends and phenomena in the economy and tech industry?
Ina Fried, Axios: A lot of things are happening at once, more than I think we’re even capable of processing as humans. And I think that is some of the challenge we’re seeing on the information side. You have a significant portion of the country just giving up on facts. You’re seeing a bad overall economy but tech grabbing an even larger share of it and accelerating some of the transformations that would have happened anyway. So things like curbside pickup, probably would have become a major force in retail.
But now it’s obviously become essential and a bunch of the digital laggards basically faced with their survival to quickly get online, have done so. And then some of the industries that have been slow to move online, sometimes for good reasons, sometimes just red tape, like telehealth, for example, really just taking off. So I think it’s been a lot, and I didn’t even get into antitrust and all that. But I do think what you’re seeing on the economic front is a very challenging economy for a lot of people, a lot of job loss. And yet for the tech sector, software’s eating more of the world, faster.
Karen Weise, New York Times: I think that’s exactly right. The companies were doing well because they were ahead of the curve on some of these trends are able to capitalize on these trends that have just accelerated because of the pandemic. So you think about e-commerce or cloud computing. Microsoft has seen crazy growth in Teams, their collaboration software.
It is a very strange thing to be reporting on the broad economy all the calamity that’s happening and then when earnings roll around, it’s just like, wow, they made a lot of money. And it is a “big, getting bigger” moment in general we’re seeing. Which ties in, of course, to the antitrust focus and stuff that’s happening right now. The pandemic is obviously aberrational, but we’ve seen that everything reinforces existing patterns in many ways.
Bishop: Is there a moment, though, when this comes back and comes home to roost, either through the economy and everyday consumers and businesses not being there to boost IT spending or consumer spending on tech. And through antitrust, where some of the biggest tech companies in the world, Microsoft not included, are being scrutinized on a level that they’re just not accustomed to, at least in terms of the extent of the action. Does it reach a point, perhaps in 2021, where some of this starts to match up more — where the tech industry is actually more in line with the struggles of the broader economy?
Weise: You think about a company like Amazon or the e-commerce providers, they need people to be spending money to buy things. So there is a connection to the broader economy. What has happened, though, is that the switch to online commerce, in the case of Amazon, has outpaced any pullback we may have seen in consumer spending.
So it is a good question, if the duration of the pullback extends long enough, if that multi-year compression of growth doesn’t make up for that anymore. With Microsoft, for example, they’ve talked about spending in high impact sectors like hospitality or the aviation industry pulling back, but it was made up for with accelerated spending on other fronts. So a lot of this gets down the duration (of the downturn).
[Related story from Weise and her New York Times colleagues: Big Tech Continues Its Surge Ahead of the Rest of the Economy]
Fried: The duration, and the intensity. … If the tech companies are getting hurt, it means the broader economy is getting hurt even worse. So tech will still outperform the broader economy. And then on antitrust, it’s interesting, because there’s a lot of criticism, but it’s not the same criticisms.
So you have the right and the left criticizing big tech broadly, and then specifically Section 230. They’re saying the same headline, but they mean totally different things. Other than these lawsuits from the DOJ, like we just saw against Google, I don’t think the broader measures will really move forward until there’s some agreement on what it is people are actually wanting, and what it is people are upset about.
Antitrust, competition and the election
John Cook, GeekWire: Antitrust is really interesting to watch right now. We had Bill Gates make some news here at the GeekWire Summit a couple weeks ago, when he mentioned kind of what you’re saying, Ina, that these companies shouldn’t all be grouped together. They all face very, very different aspects to what they do. Obviously, with the suit against Google, certainly a claim can be made that they have a monopoly in search.
But when you look at a company like Amazon, it’s a completely different industry and business they’re operating in, and it seems very strange to me why they marched all these CEOs in front of Congress, with such different business concepts and ideas and antitrust questions in front of them.
Weise: Conceptually, the idea was that they all ran dual-sided marketplaces, essentially. So for Amazon, it’s both the merchants that they’re pairing with us, the consumers, and their retail business. So that’s one dynamic that they focused on a lot. For Apple, the App Store was a big focus, where they’re matching developers with us consumers, but also have their own apps in it. Google’s matching consumers with advertisers essentially. But they all manifest themselves in such different ways.
Fried: We know how they compete with each other at the edges, but a fascinating dynamic that hadn’t gotten as much attention is how they help each other stay in their entrench monopolies more than they actually compete. So the Apple-Google deal, for example, and we’ve kind of pushed on this for a while. I finally got Tim Cook to talk about it a couple of years ago in an HBO interview I did.
Google writes a giant check to Apple for the right to be the default search provider, and that deal actually entrenches both of their dominant market positions. It gives Apple a ton of profits that it can use to invest in all of its businesses. And it makes sure that it’s very hard to compete with Google in search when. When all those searches [from Apple and Android] are going to Google, there’s just not that much of the market left to compete over.
Bishop: This is one issue – antitrust – where the two political parties seem to be aligned, even though they’re going after this for different reasons, and for different ideological purposes and from different ideological backgrounds. I think Amazon’s worst nightmare could be Elizabeth Warren being named the next Attorney General in a Biden administration, for example, but you could also look at this and say that they could actually be having even more issues if the Trump administration continues.
Weise: In the hearings in the House there was actually much less Republican opposition to Amazon, in part because they don’t really play in the social media or information space. There’s little bits here or there. The Section 230 debate has been the dominant argument against other large tech companies.
For someone who was there to be listening to the Amazon component of things, there was much more on the Democratic side. Bezos-Trump feuds and the Post Office mess aside, a Democratic administration is probably more complicated for them, or an Elizabeth Warren-led Department of Justice, for sure.
Amazon’s alternative realities
Bishop: One thing that strikes me about society in 2020 is the alternative realities in which we’re all living. With Amazon in particular, you saw this manifest itself with internal strife at the company, in terms of employees coming out, speaking out against the company in a variety of ways, and also investigations from journalistic organizations going in and finding things that were off base inside the company. Particularly in terms of injuries, a report just recently from the Center for Investigative Reporting.
Karen, you pay really close attention to Amazon here as the Seattle tech correspondent for the New York Times. How do you square these alternative realities of Amazon, the company’s positions and statements about itself versus what we actually see when somebody takes a close look at what they’re doing?
Weise: It’s very challenging to square it all, because it is such a large company in so many different lines of businesses, and because of the way it operates. It’s hard to get a comprehensive view of the company, because different teams don’t even know what’s happening in different parts of the company. And it operates in a way that really pushes responsibility down into teams. And so often what you’re seeing are things that are dismissed as being against policy, but they’re still happening.
As a journalist, how do I bridge this? I have this person saying they’re not doing enough to protect workers from COVID. And I have this person saying, I stayed up all weekend trying to protect workers from COVID. And they’re probably both telling me the truth of their experience. And so that’s a huge challenge I find in reporting. I’m always trying to bridge those two sides.
It’s the second largest direct employer in the country right now. That doesn’t include its growing contract workforce. And so I think the fact that you see a lot more scrutiny is not necessarily surprising. With the pandemic compounding that, and the George Floyd-Black Lives Matter movement compounding a look at how companies are treating their workforce, it’s not surprising that they’ve become a focus of attention.
And the reality is, it’s always balanced with the fact that people buy a lot of stuff from them, because they generally deliver on time. There’s an expectation, and they generally meet it. They will no doubt point to all the surveys that show how much people trust them. So it’s this dichotomy that they hold in the balance, pretty much all the time.
Fried: As journalists, and I know Karen does this in her work, really embracing the complexity there [is important]. It’s not so simple. The story that perfectly illustrates that, to me, is the headline a few weeks ago about how many thousands of Amazon workers had gotten COVID. And the first stories I saw had this very large total number of employees. And I was like, wow, that’s shocking.
But then when you looked at how large their workforce was, it was actually a fairly small percent, and a case could be made that it was lower than the general population. So are workers getting it? Yes. Is Amazon doing more to protect them? Probably. And it might be the case, and this is more complicated than I think we have the capacity to do, but look at all the companies they’re competing against: Amazon’s workplace might be safer for COVID. I’m not getting into the workplace accidents. So these things are really complicated.
Cook: I agree, it’s super complicated. Amazon, especially, is so interesting in how decentralized it is, as you were saying, Karen. They’ve surprised me for years in terms of how entrepreneurial the organization has stayed, even as they’ve grown to over a million employees. I’m curious what you think is the biggest risk to Amazon, when you think about this.
They are investing in so many different areas. They are able to maintain their entrepreneurial energy. They’re generating massive, massive profits through AWS that they’re funneling into fuel all this other startup activity under the umbrella. What do you both see as the biggest risk in front of them as they go forward?
Weise: It’s hard for me to think of like the biggest. I think they would say a “Day Two” mentality seeping through. And not to parrot back things, but it’s something that people who work there, people who have left there, talk about as a constant struggle. So purely from a business perspective, I think that’s what Amazon would say. And I think that makes sense over a long haul. The flip side of that is, there are opportunities for change if you break some of the status quo.
There was almost no diversity on the S team (Amazon’s senior leadership team) until up last month or something like that. And you could argue that that could actually help customers and help a business to have more diversity among your senior leaders, who haven’t been there forever.
There’s multiple different market forces, of course that could hit it. Or what would happen if there were a forced breakup or something like that? Retail actually makes more money than people realize. And if AWS were to be forced or spun off in some way, I don’t think people quite have really grasped how profitable the marketplace model is, and how that is actually fueling a lot of the investments on the consumer side of the business.
Cook: My own thought, and it gets back to this decentralized nature of the company, is that they just kind of implode. I’s just that in my mind, you can’t operate at the scale that they are with as many different pieces, parts moving around the organization, where, as you said, people aren’t really talking to one another. I’m just baffled that they’re able to operate in the way that they do. And folks I talk to inside the company, they confirm exactly what you’re saying, that it is totally decentralized. It’s very entrepreneurial.
Fried: Just watching Amazon from a little bit more afar than both of you do, because I don’t spend as much of my time watching them as closely, but I obviously pay a lot of attention to the broader dynamics. I would have to think antitrust (is the biggest threat), because they are so good at thinking four and five steps ahead. And they are constantly expanding the market that they’re eyeing.
Everyone has always underestimated Amazon, particularly rivals, but I think all of us. I remember when people thought of them as a bookstore. And they were really a broader online retailer. People thought of them as a broad online retailer, and they were moving into physical retail. They are always just grabbing and expanding and growing and doing it in a way that customers appreciate. And that’s going to make it very hard, I think, for rivals to compete.
One of the things that’s really interesting about the broad big tech, antitrust stuff, but particularly with Amazon is, people love these companies. There are workers that are criticizing Amazon, there are critiques of Amazon, but their customers love the service they’re getting. And that’s only increased during the pandemic. Things like Amazon Go, people really like it. Again, there’s labor critiques, there’s equity critiques initially. Some people only have access to cash and it was cashless.
But by and large, they’re very appreciated by the customer base for what they do. So yes, I would say probably number two would be an internal implosion. But I really think only antitrust scrutiny is going to slow down what’s been the most impressive land expansion I’ve ever seen from a company.
The full discussion and other content from the GeekWire Summit, including exclusive interviews with Bill Gates and other leaders in tech and science, is available exclusively to registered attendees. You can still sign up at geekwire.com/summit to access the content on-demand.
Podcast produced by Curt Milton. Theme music by Daniel L.K. Caldwell.