Big Tech emerged as a hero of the Great Lockdown, connecting remote workers and students, tracing the disease and delivering streaming entertainment to cheer us all up.
Now comes the backlash.
Doubts around the power of the world’s largest technology firms have been building for years, but even as the pandemic still burns politicians are spinning a web of new laws to address an arc of worries from data privacy to election interference. The question for investors, whose tech stocks delivered handsome returns through the crisis and blowout earnings for the second quarter, is whether these rules will tame the Golden Geese—or kill them.
Last week's Congressional grilling of top tech executives revealed just how emotional and complex the debate has become, because voters themselves have very mixed feelings. They love their iPhones but worry about the Chinese supply chain. They can’t stop posting pictures of their cats, but they still aren’t sure what Facebook is doing with their data. A fresh U.S. poll shows technology as an industry has soared in popularity, even while Facebook, Google and Apple slip.
To understand the tricky waters ahead for Big Tech, it’s worth reviewing just how disruptive these firms have been—and continue to be. Breathless claims that "data is the new oil" miss the point. Data and technology firms today are far more important than oil.
Most successful business models or operational activities involve gathering, analyzing and processing information. It could be medical research or financial market dynamics. It could be assembling an automobile or mining for copper. The powerful combination of mobile communications, remote sensors, massive storage and powerful analytics means there are few such activities that can’t be done much better, much faster and much cheaper.
In particular, recent gains in artificial intelligence now offer the possibility of combining data sets that were too difficult—perhaps impossible—to link because of geographical, bureaucratic or technical barriers. Investors in almost any business need to understand if its managers have a strategy to incorporate these enchanting new tools or compete against firms that do.