On Thursday, Amazon reported blockbuster first-quarter sales. This week Microsoft, Facebook and Google showed robust gains of their own. Supply chain disruptions and slowing ad revenue have put little dent in these cash-rich giants that, together with Apple, account for 20 percent of the S&P 500 index. Amid the biggest economic crisis since the Great Depression, Big Tech is roaring ahead.
While tech’s largest grow larger, it has been a brutal quarter for start-ups and smaller companies, which have laid off or furloughed thousands of people.
Where does Silicon Valley go from here? Even if the technology giants grow more powerful, change is coming for them, too. The regulatory and antitrust standards developed for the industrial age are not enough to protect competition and consumer rights in the digital age, and this crisis is forcing policymakers to confront that. The rules under which Big Tech has been playing may finally get an update.
History tells us this has happened before. Detroit’s automobile industry began the 20th century as a cluster of venture-backed start-ups — another group of young tinkerers in garages, securing financing from wealthy investors who were willing to take a risk on a new product that changed the way people lived and worked. By the 1930s, they were immensely innovative, lightly regulated companies, and they resisted unionization as ferociously as some tech giants do today.
The Great Depression devastated Detroit. Sales of new cars fell by over 70 percent between 1929 and 1932. There were 40 U.S. companies making passenger cars in the late 1920s; a decade later, only 11 remained. By 1937, three giants — General Motors, Ford and Chrysler — controlled 85 percent of the market.
The automakers that survived the Depression grew bigger and more powerful, but something changed.
It started with the economic recovery programs proposed by President Franklin Roosevelt. Detroit executives rallied at first to help Roosevelt execute his New Deal agenda. But as wage and production controls rolled out of Washington in 1933 and 1934, big-business leaders began to express what the journalist Walter Lippmann described as “a revulsion of feeling against bureaucratic control of American economic life.”
Then, the unions that they had fought so successfully for decades also gained ground. As the Depression deepened, workers’ demands for better pay and working conditions escalated, and autoworkers were at the vanguard. Waves of labor action in Detroit and elsewhere helped precipitate passage of the landmark National Labor Relations Act of 1935, which protected the right of workers to organize into unions, to collectively bargain and to go on strike.
Roosevelt’s support for labor increased automakers’ frustration. In the winter of 1937, tension between General Motors and the White House peaked, when workers began a 44-day strike for higher wages and recognition of the United Auto Workers as a bargaining unit. The government sided with the strikers, and Roosevelt delivered a public rebuke to Alfred P. Sloan, the head of G.M., when he refused to come to Washington to negotiate.
Within three years, however, the industry’s relationship to big government and big labor had changed. Roosevelt persuaded G.M.’s president, William Knudsen, to step away from his day job for a dollar-a-year position mobilizing American industry for World War II, and he had to share authority over the war production effort with a labor leader. Although wartime regulations tightly constrained workers’ ability to strike, union membership soared. By 1945, more than one-third of the nation’s nonagricultural workers were unionized.
The war effort certainly didn’t hurt American automakers; they came out of the war bigger than ever and even more tightly connected to the centers of power. Charles Wilson of G.M. served as secretary of defense under President Dwight Eisenhower; Robert McNamara of Ford held the job under Presidents John Kennedy and Lyndon Johnson. George Romney, head of American Motors, was governor of Michigan and Richard Nixon’s secretary of housing and urban development.
But that political influence did not prevent the industry from becoming more regulated. Carmakers began voluntarily adding seatbelts to vehicles in the 1950s; in the 1960s, the government made the feature mandatory. Additional federal safety and emissions standards made cars safer for people and the environment.
It may be too early to tell what a post-coronavirus Silicon Valley will look like, but there are some early signs of a similar transformation.
Tech companies that long disdained big government have been urging federal leaders to do more and working with governors and mayors to address the pandemic. In Washington State, Microsoft is teaming up with public health officials to collect data about the virus and procure protective equipment. In California and New York, an effort led by Marc Benioff, the chief executive of Salesforce, has delivered truckloads of masks, gowns and swabs to hospitals. Facebook, Apple and Google have been “incredible partners,” Gov. Gavin Newsom of California said this month.
At the same time, the public’s dependence on digital technology during the lockdown and the growing market share of some platforms has increased calls for regulation. This week, Republican Senator Josh Hawley of Missouri called for the Justice Department to open a criminal antitrust investigation of Amazon, citing the pandemic’s devastation of the retail sector. “Amazon’s reported data practices are an existential threat that may prevent these businesses from ever recovering,” he said. Amid the shutdown, House and Senate committees have continued to consider tech privacy, which now includes concerns about how to protect personal data in the design of contact-tracing apps.
The worker activism already rumbling through tech has also accelerated. The blue-collar workers who power the digital economy — including fulfillment center workers and app-based couriers — are pushing for higher pay and better protection, just as Detroit autoworkers did 90 years ago.
The realm of political possibility is getting larger, just as it did in the 1930s. Roosevelt’s New Deal consisted of ideas that had been knocking around among activists for decades, but they lacked broad-based political support — until a crisis delivered it. Similar things are happening now, as Democrats and Republicans embrace trillions of dollars in government spending and mainstream Democratic politics tilt toward the left.