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Stephen Moore / April 26, 2022

Another High-Tech Titan Falters

We don’t need trust-buster regulators in Washington policing our businesses. The market is doing that just fine, thank you.

You’ve probably heard of the high-flying Big Tech FAANG stocks — Facebook, Amazon, Apple, Netflix and Google. Among the five of them, their market cap reached $6 trillion last year, which is more than the GDP of all but a small handful of entire countries. Moreover, their net worth is larger than the entire annual output of India, with more than 1 billion people. These companies got so big and profitable so fast that politicians on the left, right and center started accusing them of monopolistic behavior. “Break them up!” shouted Democratic Sens. Bernie Sanders and Amy Klobuchar. Some Republicans, such as Josh Hawley, endorsed the same strategy.

But has anyone noticed what has happened to the stock values of these once-invincible powerhouses?

Netflix’s stock has gotten crushed of late. Just flattened.

Its share price collapsed by 35% in one day. This was one of the most significant single-day sell-offs in the history of stocks. For now, the rout doesn’t seem to be waning. Over the past year, Netflix’s market cap has tumbled from $267 billion to close to $96 billion.

Sorry if you own this stock. And most pension funds do own Netflix as part of their portfolios, so it wasn’t just millionaires who got hurt.

The Netflix brass blames its demise of late on “fierce competition” for subscribers.

Meanwhile, Facebook has suffered even more considerable losses that exceed one-half a trillion dollars. That’s not supposed to happen to monopolies that crush the competition. Instead, the hunters have become the hunted. Facebook is confronting serious competition from other social media platforms such as LinkedIn and China’s TikTok, which are elbowing out Facebook’s dominance.

What are we to make of all this jostling to be king of the mountain in the digital domain?

I carry no water for Big Tech, and I’m as frustrated with the free speech infringements against conservatives as anyone. But cries of “monopoly” are so early 20th century. Just as no one worries about Standard Oil, Microsoft or General Motors taking over their industries, we see the same cutthroat survival tactics in the hypercompetitive tech sector. This kind of competition is great news for the consumer. It lowers prices and makes a mockery of the “monopoly” rants.

Companies such as Google better look over their shoulders. If you slip up, the marauders are coming to steal away your market share. Sometimes, the raiders aren’t even American companies. Globalization and free trade have dramatically lowered the prices of nearly all digital products.

That is as it should be in a free-market capitalist world. One day, you are on top of the world and seemingly in an impenetrable fortress, and the next, you lose half your market cap. We don’t need trust-buster regulators in Washington, like the leftist Lina Khan of the Federal Trade Commission, policing our businesses. The market is doing that just fine, thank you.

America has gained tech dominance over our rivals, especially China, Japan and Europe, because we have allowed the digital economy to remain mostly tax- and regulation-free. It’s the Wild West in Silicon Valley and Austin, Texas, which created the trillions in wealth in the first place. The high-tech industry has added value and wealth at a blistering pace, and how sad is it that when our American ingenuity and inventiveness succeed, the trust-busters want to tear it down? Then, when these tech giants start to surrender their competitive advantage, the fool politicians want to give them billions of dollars of corporate welfare handouts from taxpayers.

The late and great Austrian economist Joseph Schumpeter called the process of inventing new products to challenge the extant corporate power structures in business “creative destruction.” The Netflix and Facebook sell-off is a jolting reminder that the market is a better way than government to keep companies honest and on top of their game. It also keeps prices low.

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