Antitrust Alone Won't Revive American Innovation
When 2020 was in the distant future, I remember it was frequently cast as the year to expect groundbreaking advances in technology- flying cars, a cure for cancer, and a human colony on Mars (or at least the moon). But the understatement of the century is that 2020 didn't quite meet our expectations. Crises aside, I think 10-year-old me would be disappointed in the current state of society and technology. I lack the evidence to outright claim that meaningful innovation has slowed in the last decade or so, but I posit that innovation isn't progressing as rapidly as it could be.
Capitalism supposedly incentivises innovation. The motivation to create value is largely predicated on the assumption that you will get to receive a portion of it. But despite the lower U.S. corporate tax rates and famous tech-founding billionaires, innovation seems stifled in the current system. Anticompetitive, monopolistic behavior by large technology firms, as addressed by the July 29th hearing, certainly plays a significant role. Breaking up these companies could certainly help unlock more innovation, but there are other factors holding back the next cohort of American innovators.
A large portion of innovation is appropriately assumed to emerge from college-aged minds and recent graduates. They tend to be formally trained with the most up-to-date information, and something about the lack of distractions like a family with kids or a 30-year mortgage seems to enable the feverish pursuit of an outlandish idea. Not all twenty-something's are innovative, but the ones who are innovative conveniently divide into two classes: those who possess an entrepreneurial spirit, and those who don't. Both groups are actively deterred from developing world-changing technology.
For the group that don't have the intrinsic urge to be an entrepreneur, there are plenty of reasons to avoid that path. First, many college students already bear the weight of a 30-year mortgage they cannot default on: student loans. Then the cost of healthcare for themselves and potential employees is a prohibitive expense for any startup without venture capitalist backing, especially if the innovative product needs time to develop before acquiring meaningful revenue. The luxury of a parent's health insurance until age 26 is just one of the many forms of privilege contributing to the homogeneity of tech founders. Economic security and employer-subsidized healthcare are convincing incentives for a debt-saddled 22-year old to join a large, established company rather than start your own.
The group with entrepreneurial motivations may be inspired to start a business in spite of the looming costs. However, if one's desire is to start a business in America today, there is ample incentive to produce something patentable, marketable, and scalable, and not as much incentive to create meaningful, groundbreaking inventions. The internet has enabled a wave of recent entrepreneurs, but we wouldn't miss most of their businesses if they disappeared tomorrow. There are too many brands "re-imagining" socks, or offering undifferentiated products through a subscription, or selling enterprise SaaS tools that offer minor workplace efficiency improvements. Far too many people satiate their entrepreneurial itch by dropshipping cheap Chinese-manufactured products, trading options on Robinhood, or monetizing their social media accounts.
When there are so many relatively "get rich quick" business models for the natural-born entrepreneurs to chase, we need to create a more hospitable environment for the other group of potential founders to foster innovation in America. We need to fix student loans, and find a way to price public universities like the public services they were designed to be. Then we have to look at the portability and affordability of healthcare. Certainly, many good ideas are left untested because someone was handcuffed to their current employer for health insurance.
Absolutely, we can start with antitrust action, both to unleash competition and disrupt the massive scale that empowers such lucrative advertising business models. Perhaps then Google, Facebook, and Amazon won't be able to lure top software engineering talent to a career selling advertisements and paper towels. But monopolies aren't the only factor stifling innovation in America, so we need to examine other restraints with the same diligence the House Judiciary Committee executed during their yearlong investigation.