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Why big tech is the new Wall Street, Washington's whipping boy

Washington has a long history of cozying up to other centers of money and power — and for obvious reasons. Politicians want to glom onto movers and shakers and raise money from them. And the businesspeople get access. Consider Washington’s relationship with the oil and gas industry, Hollywood, and especially Wall Street.

But these are not always happy marriages. Invariably, Washington feels compelled to crack down on what it perceives as overreaching. Think breaking up Standard Oil in 1911; Hollywood in the 1930s and 1940s; and Wall Street after the 1929 Crash and the Great Depression. Most recently, during the Obama administration Congress passed financial regulatory reform after the 2008-2009 Great Recession that left our economy teetering on the brink.

Today that cycle is playing out yet again, this time with a new sector — one arguably more powerful than all the others — Big Tech.

Facebook co-founder, Chairman and CEO Mark Zuckerberg testifies before the House Energy and Commerce Committee in the Rayburn House Office Building on Capitol Hill April 11, 2018 in Washington, DC. (Photo by Chip Somodevilla/Getty Images)

It’s ironic that the tech sector finds itself in the same regulatory crosshairs as the mega banks were recently. For years Silicon Valley held itself out as essentially the anti-Wall Street, which would “do no evil” (as the Googlers used to say) and make the world a better place. And tech certainly has in so many dramatic ways improved our world. But that success plus the insularity of Silicon Valley has made too many of its leaders believe their press releases and delight in the mile after mile of shiny new buildings and the massive new additions to Google’s (GOOGGOOGL) and Facebook’s (FBcampuses. And on the other hand they feel persecuted: “The New York Times hates us,” a senior executive said to me. And they’ve become blinded to the disturbing ironies of $1,000 computer stands and ever more Porsches and Teslas (TSLA) whizzing by ever more people living in trailers or camped out in underpasses or asleep on Market Street in San Francisco.

The drumbeat against big tech gets louder

Calls for investigating and regulating the tech behemoths, most notably Amazon (AMZN), Apple (AAPL), Facebook, and Google have been percolating for several years. But the drums really began beating after the 2016 election with reports of Russian interference on Facebook, Instagram (owned by Facebook of course), Google’s YouTube and Twitter (TWTR). There have been other pain points that have drawn the attention of regulators and critics: alleged stifling of free speech on social media, Google’s dominant market share in search, Amazon’s powerful position in e-commerce, and ditto with Apple’s app store. And on Tuesday a Congressional hearing will examine the relationship between the news and tech giants on the heels of a report that Google made $4.7 billion from the news industry last year.

SAN FRANCISCO, CALIFORNIA - MAY 30: A billboard with an image of Democratic presidential hopeful U.S. Sen. Elizabeth Warren (D-MA) on May 30, 2019 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

Has anything specifically happened recently to spur the Department of Justice, the FTC, and Congress to consider actual investigations, as they recently have? Not really. It’s more that the problems haven’t gone away.

That and we are moving towards an election year. So even as politicians, particularly Democratic presidential hopefuls, are raising money in Silicon Valley, they are also bashing it too.

One problem for Big Tech, like Wall Street 10 years ago, is that besides some local elected officials, it has few friends. You know you’re in trouble when Ted Cruz retweets a criticism leveled at Facebook by Elizabeth Warren, saying “she’s right—Big Tech has way too much power to silence Free Speech. They shouldn’t be censoring Warren, or anybody else. A serious threat to our democracy.”


One thing everybody can agree on

Tech companies truly have bi-partisan “not” support. In a Hill-Harris X poll in March, 44% of Democrats said tech companies should be regulated. And 48% of Republicans agreed! That’s right, even more GOPers favor regulation. (No love there.) Last month the White House opened a tool (now closed, after receiving “thousands of responses”), to report supposed censorship by social media companies. “Too many Americans have seen their accounts suspended, banned, or fraudulently reported for unclear ‘violations’ of user policies,” the White House said on the tool’s website. “No matter your views, if you suspect political bias caused such an action to be taken against you, share your story with President Trump.”

This all sounds familiar to Wall Street CEOs. “High confidence” in the people running Wall Street dropped to 11% in 2008 and 4% in 2009, according to a Harris Poll. After that, (while not quite the deluge), at least the Dodd-Frank Act of 2010 created the Financial Stability Oversight Council, Orderly Liquidation Authority, and Consumer Financial Protection Bureau, among other federal agencies meant to oversee the financial industry and ensure the Great Recession did not happen again.

As for the prospect of that coming to Silicon Valley, folks who work for companies potentially targeted by Washington are loath to talk much, even off the record, except to distance themselves from Facebook.

Apple CEO Tim Cook delivers a keynote during the European Union's privacy conference at the EU Parliament in Brussels, Belgium October 24, 2018. REUTERS/Yves Herman

Others not directly in the line of fire are a bit more frank. While saying that tech has net/net been a positive factor in our society, John Donahoe, former CEO of eBay (EBAY) and current CEO of ServiceNow, a cloud enterprise software company, says, “I think the technology sector has to face up to what are some of the second order consequences and engage privacy issues, other issues — engage as constructive citizens, not just in the technology world, but as members of society.” Donahoe went on to praise Apple CEO Tim Cook for his company’s efforts in privacy.

Former Cisco (CSCO) CEO John Chambers was a bit more pointed.

“I think the Valley has made several mistakes. Some of the large companies here [have been] getting too far away from the citizens, doing what you should never do, in my opinion, which is lecturing others about how they ought to live their lives or what's important to them or what political candidate they ought to back or not,” Chamber said.

“And I think that's a danger. I said a year and a half ago, government will regulate, and antitrust will come,” he said. “And here we are a year and a half later, and it is coming.”

The other evening I was speaking with someone from Google and telling her how different I think the Bay Area still is from back East. “Really? I think it’s become just like New York,” she said. “Too crowded. All the hustle.”

Like New York or not, Silicon Valley certainly has the attention of Washington. And if you ask the Wall Street crowd, that’s usually not a good thing.

Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer

Read more:

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