Facebook and Apple are toying with us, and it's scarcely believable

What to do when companies think they own their customers


Column Towards the turn of the century, my girlfriend revealed what she wanted more than anything else: a Tamagotchi. She added, in terms that revealed a good working knowledge of the Lysistrata, that it was my job to get her one.

Tamagotchi was the fad du jour, a keyring electronic toy designed for schoolchildren in Japan and thus irresistible to Western adults. You had to pretend it was a pet and press its ikkle buttons every so often to feed, cosset and protect it, and it either prospered or died. As if real life wasn't bad enough for that sort of thing.

The story was that Bandai, the creator of this monster, couldn't make enough of them; they were in very short supply. I found out when Hamleys would be selling its very limited stock, took an afternoon off, joined an actual throng, and didn't get one. I came back the next day, slipped a fiver to a stoned youth demonstrating model helicopters, and did. Everyone was happy.

Later that week, while she slept the sleep of the successful extortionist, I surreptitiously dismantled her e-pet, curious as to what was so difficult to make. Nothing, of course. It had the same LCD, solitary blob chip and handful of components as any $5 – to me, £20 plus five quid stoner tax – oriental gizmo. Bandai could have flooded the world with them in a week. A source confirmed that there were indeed huge supplies in Hamleys back rooms: I was the victim of artificial scarcity.

I don't feel too bad about it. This week, I'm in the company of Australia's 25 million citizens and Fortnite's 350 million players. Fortnite creator Epic Games is in a legal spat with Apple over what Epic considers entirely unfair terms for inclusion in the App Store, and Facebook has taken all news content off its Australian service because the government says it will force Facebook to pay a link tax to news providers.

fortnite

Now this is Epic: Fortnite maker takes Apple fight to the European Commission and... er... Bismarck, North Dakota

READ MORE

In all my dealings with Facebook, I have found it amazingly arrogant, a perception shared by everyone from drag queens to island-continents. It is a familiar arrogance, one I've also found with Apple. And at times, other companies like BT, Microsoft, Oracle, Sony, and Qualcommm have shown the same attitude, a stance proportional to how firmly each company considers it owns its customers. It expresses itself by dictatorship – what the company says, goes – without engaging in discussion or any admission of error or ambiguity. Where reality threatens to upset things, arrogant companies don't hesitate to act in very bad faith – sometimes illegally, or certainly on the edge of legality – because in their minds, they make the rules.

What grants companies this sense of untouchability? How can any company own its customers? In all of the examples above, it's because they have or had market dominance in a sector. They had a commodity, a product or a service that was impossible to duplicate – even if in Apple's case it's really just a fruit emblem – so customers couldn't easily switch away. With Facebook, it's social networks combined with a very simple publishing platform that creates a sense of locality. For many, Facebook is their internet. Getting people off Facebook is like clearing a country, village by village; the history of clearances and forced migration is not good. With Apple, you can't use an iPhone if you don't use the App Store, and you don't get to sell anything to iPhone users if you don't go through the App Store. Both Facebook and Apple are lords of their own medieval fiefdoms, both gatekeepers with absolute powers.

Gatekeepers with absolute powers make bad overlords. Limiting access for profit is a heady drug as market balances no longer apply. The economics of artificial scarcity, and that can make them very rich indeed by the paradox of reducing value to your peasants – sorry, customers – and doing as little work as you can get away with. For half of the 20th century, record labels had near-absolute control over the music industry because they were the gatekeepers to the distribution channels. They grew sleek and fat, unlike most musicians. But they didn't do as well as academic publishers, who don't even have to pay for their content and could charge what they like, having engineered a market based on making publicly funded scientific knowledge as scarce as diamonds.

There are some commonalities in all these cases, which should inform us about how to resolve gatekeeper greed in general. First, all are morally shameful. Apple is arguably extorting its App Store providers and definitely crippling many business models. Facebook just took all the real news stories off its site and left the fake news, in the middle of a pandemic.

The only justification that what is happening is in the public good is that it raises lots of money for developing new services. This is like saying bank robbers encourage innovations in the gun, fast car, and security cam sectors. So while there are no easy answers to each case – the Australian link tax idea is plainly bonkers – there is a principle that unless there's a much better reason than bank balances, gates are better open.

That principle is backed up by experience. You may remember that file sharing and torrenting were going to ruin Hollywood and the music industry. Amazingly, file sharing and torrents are still around, and so is Hollywood and the music industry. Likewise, academic publishing has survived despite Library Genesis and Sci Hub. Forcing open the gates does not kill the estate. But you do need regulation of what happens next.

I propose a National Trust model. The British aristocracy found modern life taxing – literally. Death duties and other levies designed to fund decent social support made ancestral piles, already money pits par excellence, impossible to keep. And so they went into public stewardship in lieu of taxes – often with the nobs staying on. But the plebs were let in; the gates were open. It has worked rather well.

The corporate equivalent can focus on the weak point of rentier gatekeeping – the mounds of cash – and leverage the massive margins such divisions engineer against the sort of tax breaks provided for R&D, debt management and so on. Governments can and do demand visibility of company finances, and can but shamefully don't use corporate tax to balance out power discrepancies. The principle that monopolies must follow special rules is well established; it doesn't have to be limited to very large sectors.

My Tamagotchi-obsessed girlfriend got what she wanted by insinuating she'd create an artificial scarcity of one particular commodity – one that the governments of the world should promise the tech firms in abundance. But who'd be a gatekeeper to distribution if they were being screwed by the taxman? ®


Biting the hand that feeds IT © 1998–2021