 So, in my lecture yesterday on competition and monopoly, I mentioned some of the claims that have been made about the technology sector in particular, firms like Amazon, Google, etc., exercising market power, engaging in so-called anti-competitive behavior, mainly because of how large they are, because of their large market shares. There's a lot of criticism of the tech sector in recent years, not only from politicians and regulators and commentators sort of on the political left, concerned mainly with these sort of antitrust concerns, but also those on the political right who have raised a set of additional concerns about how these firms are too large and too influential and too powerful, not only in terms of sort of conduct in the marketplace, but also in ways that they're influencing the larger culture, that they're having an influence on the political process, influence on social norms in ways that are harmful to the good of the greater community. In particular, their concerns that the tech sector is not only affected by the recent trend toward what we can call wokeness, but also that the tech sector is an enabler of or a driver of wokeness. Can we understand a little bit better, can we unpack these concerns and think about ways that the tech sector might be affected by, as well as a driver of social and cultural change? I'm using the term wokeness in what I take to be a fairly conventional meaning. The term woke has been around for a number of years, but recently has come to be used sometimes by its proponents, but mainly by critics, as a sort of ironic reference to a kind of emphasis on social justice that is a little bit different from similar movements that have been around since at least the civil rights era in the US and in Europe. So I'm going to define wokeness or woke as sort of a strong concern with so-called social justice issues, with particular reference to things like race, gender, sexual orientation, sexual identity, a concern with what in the corporate and university sector is now usually called DEI, Diversity, Equity and Inclusion, with a particular philosophical foundation. So wokeness differs from previous social justice movements in that it's really built on a particular set of philosophical claims, mostly those associated with the Frankfurt School and its more recent descendants. So what do I mean? In sort of epistemology or the theory of knowing, how do we know what we know, what are the appropriate sources of knowledge, how do we validate truth claims and so forth, the woke movement prioritized sort of subjective personal experience over sort of logical argument, appeal to data and so forth. It would be a woke person would say upon reading Karl Manger's principles and learning about Manger's unique treatment of his understanding of utility and Manger's claim that marginal units of a good are allocated to lower valued uses than previous units and therefore we can speak about diminishing marginal utility, a woke person would say, Karl, speak your truth. Okay, right. But you know, Marxists might have another truth and you know, Keynesians might have a different truth and mathematical economists might have a different truth and they're all equally valid, right? There's no way to adjudicate among those claims because we all, you know, just we sort of go with how we feel about it and if you think that two plus two is five, there's no reason why two plus two can't be five, okay. In terms of sort of ontology or how wokeness sees the world, right? Wokeness doesn't see the world in terms of individuals with personal traits and characteristics that are unique to those individuals but rather places an emphasis on group characteristics, right? What, you know, in what group are you a member of and you know, how does your group exercise power or influence over members of another group? In a sense, you're kind of inevitably, you know, drawn toward or torn by characteristics of a particular group. You know, part of one of the results of this is that, you know, there's a lot of this sort of in-group, out-group dynamic. You're either part of the acceptable group or you're part of the unacceptable group in which you should be shunned and ostracized. You know, people talk about so-called cancel culture, right? A world in which, you know, if you're speaking ideas that are not part of the, that are not acceptable to the dominant group, you know, you should be banned. You should be eliminated. Your voice should be, should not be permitted to be part of the public square. I mean, one of the assailant illustration of this ontological focus of wokeness as it, you know, as it sort of, you know, built on, you know, critical theory, a lot of people noticed in early 2022 that the anti-defamation, anti-defamation league, the ADL changed the definition of racism on its website. But prior to January of 2022, racism was defined by the ADL as, quote, the belief that a particular race is superior or inferior to another, that a person's social and moral traits are predetermined by his or her inborn biological, biological characteristics. So racism is a personal belief that members of one race or group are inherently superior to members of another group. That definition was rewritten in 2022 as the following, quote, the marginalization and or oppression of people of color based on a socially constructed racial hierarchy that privileges white people. So that's now the official definition of racism. It's not about the belief in your heart. It's not about how you feel about members of one group or another group. It's about, sort of, you know, structural inequities that privilege one particular group, especially, you know, heterosexual, cisgender, white males, maybe in the U.S. or in the West, right, over members, members of another group. There's also a particular sort of theory of history that is associated with wokeness and its foundation in Frankfurt School, you know, critical theory. And this, this is not only the idea of inevitable conflict among groups, right, which is why, you know, you've heard the term cultural Marxism, right, to describe this way of thinking. The Marxism is, so it's a version of Marx's idea of inevitable class conflict, you know, in Marxist view it's, you know, workers, it's labor and capital. In the cultural Marxist view, well, there's inevitable conflict, but among other groups, you know, people of one race versus people of another race or people with one kind of identity against people with another kind of identity and entities can intersect in complicated ways. According to so-called intersectionality theory. There's also this idea of an, of an inexorable upward march, which is also part of Marx, the Marxist understanding of history, right, that of course, you know, the old world in which we had, you know, something like the old definition of racism has been swept away and we're inevitably moving towards this new world where, you know, sort of the new definitions apply. That's why when you hear one of the popular phrases used by woke people is to say that someone they disagree with, someone who has the wrong opinions, is, you know, quote, on the wrong side of history. You know that term? These ideas are on the wrong side of history. The implication is that there's a right side of history. You know, history is going this way and if you're pushing against the tide, well, you know, you're just wasting your time, you're making life worse for other people, get with the program, right, get on board with the direction that history is going. Okay, so this is what I have in mind when I use the terminology of woke, wokeness, et cetera. And I think it's pretty standard, both among proponents of this worldview and among critics, although the proponents might, you know, might describe it in more glowing, you know, terms than, than I have. So I'm particularly interested in today's talk about how wokeness affects businesses, companies, right? Can we, does it make sense to talk about companies or corporations being woke? This term was, this phrase was introduced by the New York Times columnist, columnist Ross Douthat in an article in 2018 called The Rise of Woke Capital. I think that's the first time the term woke, terms woke capital, woke capitalism, woke corporations entered the lexicon. And he was describing the phenomenon that on the, on the face of it might seem kind of puzzling and surprising that a lot of, you know, for-profit capitalist companies, large successful profitable companies seem to be embracing woke ideology, right, inside the company, outside the company and so forth. So the amount of investment in companies on DEI training has skyrocketed in recent decades. Chris Rufo did a little count and showed that, you know, all 100 of the Fortune 100, the 100 largest corporations in the world, all have large and substantial DEI training programs, DEI hiring criteria, you know, DEI staffs with hundreds of employees and so forth, all designed to make sure that the company internally is following appropriate practices to promote diversity, equity, and inclusion. And you remember, equity is different from equality in the sense that equity refers to outcomes, right? So a company is lagging in DEI indicators if people with the appropriate, appropriately defined identities are not on average achieving the same results, right? So however you define these different identities, you know, however they're distributed in the population, percentage-wise, you should have the same percentage of people from those identities, you know, in the, on the executive team, same number of people, proportions getting promoted, same proportion on the board and so forth, okay? Wokeness also affects marketing and public relations, you know, it's kind of a joke now. I think almost everybody recognizes it's a joke that, you know, in the month of June, every company changes its logo to a version of that logo with a rainbow background or some other kind of colored background. Some critics have introduced, critics sometimes call this woke washing, right? Like you're pretending to be woke but you're not really woke. Companies are, large corporations are, are increasingly active in philanthropy, right? Making huge donations to groups like Black Lives Matter or other kinds of DEI oriented groups, as well as engaged in political action, lobbying other forms of rent seeking and so forth to try to influence policy. There was this, there was an ad in the Washington Post with over, I think it was about 120 large, you know, Fortune 500 companies based in the U.S., signed this open letter objecting to a change in voting laws in Georgia, which you might remember from a few years ago. In particular, it was the requirement that voters have a photo ID and so there were some complaints, well, this discriminates against voters, certain types of voters and, you know, you'd think why do all these, why is company, company based in California, you know, care how the Georgia, you know, electoral commission establishes the criteria for sending in an absentee ballot or whatever. But that became a woke, you know, celebrity cause, right? This is taking away people's voting rights. It's a threat to our democracy, blah, blah, blah, blah, blah. It's, you know, it's like electing Trump. It's like the end of democracy and all these companies were taking a stand to condemn the state of Georgia for its voting rights. You know, Disney is a good, you know, sort of a poster child of a company that has been extremely woke lately according to its critics. Disney participated in a a objected to a recent Florida bill that was about what's appropriate to talk, what's appropriate to share in the preschool, I think it was preschool classroom like grades up to second or third grade, the legislature passed some law that said public school teachers are not supposed to discuss issues of sexual orientation and sexual identity to students in, you know, K through two or the third grade. And that was subject to criticism from the woke crowd and Disney strongly objected and threatened to move business out of the state and so forth. And apparently the governor of Florida slapped them down a little bit by taking away some of their privileges that some exemptions to zoning rules and giving them, taking away some of their tax breaks and so forth. Okay. So what we're interested in here, you know, why is all this happening, right? Why are companies that on the face of it, you would think, look, they just want to make money, right? So why would they care about all this stuff? Why are they getting involved in politics? Why are they trying to influence the culture? How does that square with their mission of earning, you know, generating profits for shareholders? Well, it's useful. And you see in this literature an important distinction between what we might call normative versus instrumental motives for going woke and doing and engage in similar behaviors. By normative, I mean, so a company that is going woke for normative reasons is doing so because the key decision makers, board, top executives, employees, customers think that going woke is the right thing to do. We're doing it because it's correct. It's true. It's right. It's just and we care about doing the right thing as opposed to doing it for cynical reasons, because you think you can make more money. Okay. You know, when you go to Starbucks and you see all this stuff on the wall about how, you know, we source our beans from small farms in developing countries using sustainable practices because we care about the environment and we care about protecting the small farmer in Nicaragua or Colombia. I mean, most people recognize that Starbucks really doesn't give a hoot about those things. It's just people who buy coffee at Starbucks. Some of them are willing to pay a higher price for the warm fuzzy feeling you get inside knowing that you did a good deed as you're sipping your $8, you know, Frappuccino or whatever. So, you know, if customers are willing to pay more, are willing to buy more, pay higher prices from a company that proclaims fealty to woke values, then it is profitable for a company to do so. Or maybe you want to hire a particular type of employee. You want to hire a woke, you know, only want to hire recent graduates of Ivy League colleges and universities who are super, super woke and they won't take a job anywhere that isn't, you know, where the workforce isn't also woke and so, okay, you go woke to try to attract them. Again, that's this idea of woke washing. We're not really committed to these ideas normatively, but, you know, we can make more money by acting like we are, okay. Now, it could also be that, you know, owners of firms, investors, maybe top executives and other leaders are, again, deeply committed to these ideas. You know, slightly related, you can take a company like Whole Foods, right, which is not a woke corporation exactly, but the CEO and major shareholder of Whole Foods, John Mackie, has a deep personal commitment to environmentally sustainable practices. And so a lot of things that Whole Foods does, and Whole Foods is a very profitable company, really do reflect the preference of key decision makers. And of course, we would expect to see that in a market economy, right, especially with smaller firms, right, smaller owner operated firms, you know, there's no reason why they shouldn't engage in ways that reflect the preferences of the owners, even if it comes at the expense of profit. You know, Chick-fil-A isn't open on Sundays because the founders think that people should take Sunday as a day of rest for religious reasons, even though Chick-fil-A could probably make more money selling chicken sandwiches on Sunday. We would expect to see that in a market economy. So some of that could be, you know, the woke corporation, the drive toward the woke corporation could be explained to some degree by that. As I said before, maybe you want to recruit and retain employees with certain values, so you make the company embrace those values as well. But one, a factor that I think is under explored, I'm writing a paper on this myself at the moment, has to do with sort of the role of what we might call middle management, that it turns out empirically that most of these woke initiatives are really not coming from rank and file employees, they're not being primarily pushed by CEOs or by boards of directors. It's really a kind of middle manager position, you know, HR directors, people who are in, people who run DEI programs in companies, right, are the ones who essentially have been given a huge amount of latitude by the board and by top executives to sort of run these programs in whatever way they want. One likely explanation is that, you know, executives are terrified of bad publicity, right, they don't want to be called out as being racist or being sexist or whatever, and so they grant their lower level DEI personnel who are subordinates, right, an extremely wide berth will give you all the resources you need, you run whatever DEI programs you want, we want to look like we're supporting it. We don't really know what it is and we're not sure we're early on board, but the one thing we don't want is to be written up in the newspaper as being a company that has a hostile work environment because it's not woke, okay. You see this especially at universities, right, who runs all of the diversity programs and all the woke programs at universities. It's the assistant vice provost for student affairs, you know, it's not the president of the university who's pushing it, it's not the board of directors or curators or whatever, it's some kind of mid-level university bureaucrat and of course the ranks of mid-level university bureaucrats have greatly swollen in the last many decades which partly explains the increasing costs of college tuition. Okay, a little bit of broader context, you know, if you look at some earlier movements like the drive for companies to embrace so-called corporate social responsibility or to embrace an all-stakeholder model of governance and with just not just shareholders whose opinions matter but the opinions of various stakeholders, workers and customers and suppliers and so forth, you know, that movement has also been analyzed similarly to the way I'm describing woke capitalism and the woke corporation, namely that some of that is done for purely instrumental reasons. If we say that we care about the environment and we care about all our, you know, our workers and we're not just greedy profiteers, then we'll actually make more profit than we otherwise would. You know, it's different from wokeism in my interpretation in that, you know, CSR and stakeholder models, they don't have any particular philosophical grounding. They're not committed to critical theory or the Frankfurt School philosophy and really they're more about making marginal changes, right? We want to put representatives of organized labor on the board of directors so that we show that we have a commitment to a broader set of stakeholders. They don't want to tear capitalism down to its foundations and rebuild it, you know, in a different kind of model as many woke advocates surely do. I think it was Ibrahim Kendi who said, I don't have the quote in front of me, it was something like, you know, to be anti-racist is to be anti-capitalist. You know, we can't solve racism unless we destroy capitalism and replace it with socialism. You also get that from Robin D'Angelo and other sort of leading spokespersons for woke. Now, you might ask, why does woke seem to be concentrated in certain industries like entertainment, retail sales, technology, and so forth? You know, Nike's Colin Kaepernick ad, which you might remember from a few years ago, was one of the first examples of an explicitly, you know, sort of woke PR campaign. Gillette also did have this infamous ad at the Super Bowl a couple years ago, denouncing toxic masculinity. Gillette is a cell razors, but it was about how, you know, men who buy razors should not act like, you know, tough guys or whatever because that's toxic masculinity. Gillette got slammed both in the press and also their razor sales went way down. I just read last week of something at Disney where, so apparently I've forgotten this, but there's a section of Disney world with some, like a shopping area where it's like the Fairy Godmother's area, I can't remember, Fairy Godmother's land or whatever, and they used to have, all the employees would be female and they were called future Fairy Godmothers, the store employees. Now they've changed it to Fairy Godmother's helpers and any gender, people of any gender can be, you know, can work in these shops and the claim was, well, this is more, you know, this is more woke than having a gender specific designation for a particular type of employee and people have been sort of picking on that as well. Okay, so what about big tech, right? Why is big tech in particular, you know, playing such a strong role in the woke movement? Well, again, there are two ways to look at this, right? You might say, well, let's just look at the tech sector as another industry, as another type of firm like lots of other firms, you know, that is responding to the change in our culture, right? Our culture is becoming more woke, woke ideas are becoming mainstream and education and, you know, and so forth, communication and, you know, big tech just like other industries is also having to deal with this. Yeah, I mean, it's certainly true that tech companies are like any companies in that they do have to respond to external pressure, cultural change, social change, and so forth. You know, tech companies tend to employ, how should I say, employees of tech companies are probably more woke on average than employees of oil and gas companies, right, or employees of, you know, other kinds of companies. There was an infamous incident at Google where right after the 2016 election, when Donald Trump was elected president, Google called an all hands meeting. And here's the top Google team up on the stage, you know, helping employees to work through their grief and, you know, giving them how to set up safe spaces because of this obviously traumatic event that the wrong person got elected president. And the top executives were literally shedding tears on stage. I mean, it became sort of a joke. But you can say, well, look, if that's the way your workers are, if the majority of your workforce really is traumatized by the result of this election, well, it makes sense that the company would want to do something for those employees, you know, so they can continue to write code and be productive and do other stuff. As an aside, most tech companies are actually not very diverse at all in their workforces. I just read something about Amazon. The only sector, the only type of employee classification at Amazon that is at all diverse is like, you know, people who do physical labor at an Amazon fulfillment center, right? But the engineers, the executives are almost all white or Asian, okay? So it doesn't seem to be much of an effort to diversify the workforce, you know, in a more meaningful way. And again, you have this phenomenon I mentioned before of allowing these sort of mid-level HR people to run the Woke programs. That happens at tech firms just like it happens at any firms. You might have, remember the case of this guy, James D'Amour, who a couple years ago, he was an engineer at Google and he wrote a memo on an internal message board criticizing some of the DEI programs at Google, criticizing the Woke culture at Google and claiming that it was holding back innovation and it was not fair to employees who didn't share that same ideology. And then he was fired by Google for, you know, creating a hostile work environment by posting his opinion, by being on the wrong side of history, right? And posting his opinions on the internal message board. And then that generated a lot of publicity as well. So I mean, if he's right, these big tech companies are really not a very hospitable environment for people who don't share the sort of Woke ideology. But this is not what, you know, people like Senator Hawley on the right and other critics on the left, Elizabeth Warren, this is not really what they are complaining about with tech companies. They're claiming that tech firms are driving Woke-ness, not just dealing with Woke-ness like any other company. You know, for example, we have content providers and distributors, you know, Netflix, Amazon, Disney, whatever. I'm sure you've all heard plenty of jokes and seen memes or whatever about, you know, different things that are in movies and TV shows and video games that are trying to promote, you know, certain kinds of Woke-ness. Amazon has gotten criticized for its new Lord of the Rings adaptation that explicitly has a very diverse cast of characters, even though Tolkien described his stories as sort of allegorical, fictional accounts of England, right, with sort of English-looking people. You know, on social media, on platforms like eBay or Etsy, whatever, we've all heard about, you know, so-called de-platforming, right, that you get kicked off of Twitter, you get your account suspended and banned, you know, if you say certain things. It's not all about social and cultural things. If you say, you know, don't get the vaccine, the COVID vaccine, you'll get banned from Twitter. But, you know, the claim is that these platforms are not viewpoint neutral, right, you know, the terms of service on Twitter or Facebook or Instagram or TikTok, whatever. They, you know, they have some language like, you know, you're free to speak your mind unless you're directly threatening someone or, and now they've changed it, you know, unless you're, also if you're spreading misinformation, you can be banned, although, for instance, misinformation is never defined very precisely. And the claim is that companies are arbitrarily enforcing a particular ideology, right? People who are on the wrong side of history will get their accounts banned, or you can be as threatening and ugly and mean and nasty as you want if you have the correct ideology and you will be embraced and, you know, and supported. So it's a little bit like, I think there's an analogy here with universities, colleges and universities. You can say, well, colleges and universities are just like other institutions and organizations in society, right? They're seeing external pressure for wokeness and they're becoming more woke because they have to survive and they have to attract students and donors and so forth. Yeah, but of course, all the underlying philosophical ideas of wokeness came out of the university. So, you know, if universities are feeling hurt by this, it's like the chicken's coming home to roost, right? But again, it's not a perfect analogy, but it's similar in that you could argue, well, big tech has been an enabler, right? Big tech is helping to change the culture, not just responding to the culture. And that's something that people are concerned about. So, you know, so what do we do? Okay, can we understand why tech companies like universities are doing this? Well, first, remember that not all tech companies are the same. This is something I emphasized in my lecture last year on big tech. You know, they don't have the same business model. You know, Google, almost all of Google's revenue comes from advertising on Google search, right? Most of Apple's revenues come from hardware sale of Apple hardware and fees from apps that are in the app store. Facebook or Meta is also mainly an advertising company. You know, Amazon gets most of its revenue from its cloud storage service and then a little bit of revenue from retail sales. Microsoft, I guess most of its revenue from selling software, from Microsoft Windows, Microsoft Office licenses, et cetera. So, they don't all have exactly the same business model. That's an important point to keep in mind. So, you know, think about a company like Amazon, okay? So, if Amazon is getting most of its income from Amazon Web Services, from cloud hosting, you know, what determines how much revenue Amazon will receive? Well, the quality of its cloud hosting services, reliability and pricing and convenience and so forth. So, let's say, okay, Amazon also has a side business where it produces and distributes movies and TV shows on Amazon Prime. Okay? I mean, the Lord of the Rings thing, apparently, is super expensive. But on average, you know, Amazon's investment in media creation and media delivery is a small part of Amazon's overall activity. And the revenue that it gets from, you know, Amazon Prime subscriptions is small compared to Amazon Web Services. So, you can say, well, I mean, you know, the top executives at Amazon might say to the people in charge of Amazon Prime, hey, you do whatever you want. We don't really care. You know, this is just sort of a brand building thing. Or we want the customer data, right? Because we can integrate it with other kinds of customer data. Amazon has recently made a bid to acquire a hospital chain. And so, people are trying to figure out where the synergies might lie. What's probably something to do with acquisition and use of customer data, right? So, maybe as long as customer data is coming in in a way that's useful and Amazon Web Services is profitable, top executives at Amazon are willing to let the people in charge of Amazon Prime indulge their preferences for more woke content over less woke content. I'm inspired by an idea that I got from Murray Rothbard. I don't know. I didn't even find it in his writing, but I remember a conversation I had with him where he was talking about the book publishing industry. And the issue was why this, you know, this was 20, 30 years ago. You know, why is book publishing, you know, why is there so much sort of more left-wing, a bunch of left-leaning books get published and very few libertarian or conservative books get published, relatively speaking. Why are the big major commercial publishing houses publishing, you know, stuff by Robin D'Angelo and Kendi and all these people. Or whatever were their equivalents back when we were having this conversation. And he said, well, he said the book publishing industry is one of those industries that can be characterized by what they call the long tail phenomenon. The long tail, meaning that a very small number of titles account for the majority of the revenues. Right. So the typical book publishing company, you know, Random House, Basic Books, Commercial Publishers, you know, they publish hundreds of books in a year. And maybe only a handful will make money. You know, you have a few, you know, you have, you have, you know, Harry Potter books, although those are sort of have been canceled now, I guess, J.K. Rowling has. But, you know, or, you know, Malcolm Gladwell or whatever, you have Tom Clancy, you have these bestselling authors. But then the rest of the books, especially the nonfiction books, most of them won't make any money at all. So Rothbard's belief was the, you know, top executives of these publishers, they delegate a lot of authority to editors, right, sort of middle managers. Editors are the ones who select titles and work with authors to develop the books and coordinate with marketing and publicity and production to get the books published. The book editors are, you know, largely have a left-wing ideology themselves. And so, you know, as long as they're bringing one or two money-makers to the boss, the boss is happy. And then, you know, all these books to the right, you know, so the diagram is like, you know, popularity or usefulness on vertical axis, and then the number of products on the horizontal axis. And so you have a small number of products that are highly important, interesting, popular, and then most of them are not, right? So the editors are allowed to indulge their personal preference for promoting left-wing ideology, according to Rothbard, because most of the books won't sell anyway. And so the CEO doesn't care if it's a non-selling left-wing book or a non-selling right-wing book. Even a publisher who is not ideologically in sympathy with the editors will let the editors kind of choose the titles, even though that introduces some bias. And so the same kind of thing is likely going on in the tech sector, right? Where the tech firms are actually making most of their money is in areas where Woke isn't really all that relevant. Woke isn't playing a very strong role. And as long as those activities are generating revenue for the firm, shareholders, boards of directors, top executives will delegate a lot of discretion to lower-level employees to sort of do what they want, because it doesn't cost you anything, right? The cost of bias towards wokeness, the impact of Woke bias on profitability is low for many activities because of this kind of long-tail phenomenon. And I think that's largely what's going on in the technology sector. Okay. So suppose we believed that that for these reasons or for other reasons, these tech companies really do have a lot of market power or monopoly power. What are we supposed to do about it? What do we say to Elizabeth Warren or Josh Hawley or other critics who want to break up big tech or regulate big tech, because they're too woke or because they're harming consumers or harming workers in other ways? Well, I want to state at the outset, it is true that a lot of tech companies have large market shares. As I mentioned yesterday, not 100%, not even 50% in many cases, but pretty substantial market shares. No one would dispute that Twitter, Google, Apple, Microsoft, Amazon have a large influence in their respective markets. And there are a lot of reasons for this that are not in any way nefarious or suspicious, what they call network effects like for platform companies. A lot of critics of when people criticize Twitter or Facebook, one response is, well, people who get banned from Twitter, why don't they just go to another platform? There's GAB, there's Parler, there's the one that Trump started, I can't remember what it's called. Yeah. I mean, there's a bunch of other platforms that don't have the same content moderation policies as Twitter and Facebook. Well, a lot of people don't want to use those platforms as much because they're small. The whole point of being on a platform is to reach a large audience and connect with a lot of people. So there's a kind of a network externality or network effect more precisely that the value of the platform depends on the size of the platform. And so if one platform is already very large, it can be a challenge for new platforms to enter because when they're small, they're not very attractive, so why would people use them in the first place? You have the phenomenon of large upfront investments to write the code, to develop the hardware, and then small marginal costs to produce additional units or serve additional customers, which combined with first mover advantages or that is a kind of a first mover advantage that can sometimes lead to what they used to call these winter take all markets. And then it was quickly pointed out that 50% is not all of the markets. And now they call them winter take most markets. Path dependence is related to this as well. But of course, these markets are still competitive in the sense that we described yesterday as long as there's no government restriction on entry, as long as other firms are free to try to compete whether they're successful or not, these are still competitive markets. I always show my students this article from 2007 worried that my space because of first mover advantages and network effects would always be the dominant social media platform. A lot of you probably never heard of my space, but maybe when you're like a toddler, you heard people talk about it. So a lot of the criticism has been directed at so-called platform companies, right? A platform means you're not just providing products that you make, you're also creating like a space where other people can exchange products. eBay is a platform. eBay isn't manufacturing the stuff that gets sold. It just provides a venue where buyers and sellers can get together. Google is in many ways a platform company as well. So is Amazon, social media platforms or platforms as well. And so there's some concerns that not everybody can access the platform and that recent, most important recent concern is that if you have a platform that also is a producer of some goods and services that are available on the platform, the platform will privilege its own offerings over those of competitors. And this is a sort of inappropriate unlawful restriction on competition according to the critics. Like if you just Google search, you know, weather Auburn, Alabama, the first thing that comes up, it used to be like the weather channel would be the first thing that comes up, but then Google changed it so where Google just tells you the weather forecast, right? And now not many people are using it, but I mean, maybe some of you use Google flights. If you just type in, you know, flight to Los Angeles, Google now has its own, you know, ticketing, airline ticketing and search function. It doesn't take you first to Travelocity or Expedia or Kayak or some other product. Google tries to answer the question for you first. And so allegedly this is Google privileging its own offerings according to the critics. You know, it's trying to drive Travelocity and Expedia out of business by just doing itself what those companies also provide. I mean, this is actually a very old problem. If you go to Walmart, you know, and you want to buy some cornflakes. Well, there's the Kellogg's cornflakes, but next to it, you'll see the great value cornflakes. That's the Walmart brand of cornflakes. So if we take these arguments about self-preferencing on platforms seriously, which some people do, it should follow that it ought to also be illegal for companies to have a store brand, right? Walmart should not be allowed to have Sam's Cola or great value cornflakes because it's not only the seller of Kellogg's, but it's the seller of its own. And it could put the Kellogg's cornflakes in the back where you can barely see them and put the great value cornflakes in the front where they're right in your face. And that would be unfair to Kellogg's according to these critics. Okay. Part of what's going on here is the idea that, you know, competition is increasingly not just one firm competing against another firm, but a platform or even you hear the term ecosystem, an ecosystem competing with another ecosystem, like in my phone, you know, in mobile telephony, you know, there's the iOS ecosystem and the Android ecosystem, both of which include hardware companies and software companies and service providers and so forth. You know, does that affect how we understand competition? Do the lessons that we learned yesterday in our discussion of competition and monopoly still apply if competition is not among individual firms, but among like clusters of firms that are all part of the same network or the same platform? I would answer the argument that I would argue the answer is yes, the same principles described by Mises Rothbard and others about how competition works would also apply if firms form partnerships, alliances, they coordinate, they sign contracts to work together as a group competing against other groups. There's no, that doesn't violate any of our, you know, the idea that voluntary interaction is mutually beneficial, that in a free market entrepreneurs are free to experiment with different business models and different business arrangements, as long as the state is not privileging one firm or one ecosystem over another, this is just as competitive. A world like this is just as competitive as a world where you have only individual firms competing against individual firms. Another issue that critics have worried about, and I touched on this a little bit yesterday at the end when I mentioned monopsony, is this idea that well, these sort of platform companies are more like intermediaries. So eBay is an intermediary between buyers and sellers. So eBay has a certain contract with the buyers and a certain contract with the sellers. eBay is making money from the sellers and in some cases making money from the buyers. So the relevant places where we should look for so-called market power is not just in the relationship with buyers. Does eBay have a monopoly on the sale of little garden gnomes or sort of obscure thing that you only get on eBay? Part of the reason that critics are saying, well, this is not only the only market that matters, we also need to look at this market. Maybe eBay is not charging high prices to buyers. It's not ripping off buyers. That's not how it's using its market power. It's ripping off sellers by giving them a really low, charging them high fees or for other kinds of intermediaries paying a low wholesale price. You can see why the argument went in this direction. Because if you try to claim that companies like Google and Facebook and Twitter are monopolists abusing their monopoly power, it's like, but to use them, the price you pay is zero. Most of their products are given away to consumers for free, of course, because they're making money off of the advertising. So the standard monopoly arguments don't seem to work because they're clearly not restricting output to increase the price as in that monopoly diagram. So the argument has shifted towards people saying, oh, well, maybe they're ripping off their workers using their monopsony power on the input side or platform companies are somehow taking advantage of their intermediate position to extract more rents from the sellers than from the buyers. And therefore, antitrust should be used to break them up and so forth. Okay, do these characteristics give rise to monopoly power? To market power? I think the answer is no, they don't. Not in the sense of monopoly that we discussed yesterday. Someone asked me in the Q&A yesterday about so-called natural monopoly, which is kind of a technical variant of the standard monopoly argument that is supposed to apply to certain kinds of services like utilities, water, gas, electric. And some people have argued, Elizabeth Warren has argued that social media companies should be treated as public utilities. Right, just like the government regulates the price of electricity and what electricity companies could be in the market, the government should treat Twitter and Facebook and Google the same way and regulate them as public monopolies. I'm sure you won't be surprised to know that I'm not sympathetic to that. On the subject of so-called misinformation, I think if we look closely, I think there's tremendous political pressure on platform companies to, you can call it censorship, if you want, to regulate the flow of information in particular ways. There's infamous case where the laptop belonging to President Biden's son was discovered in New Jersey somewhere right before the election, and it had all kinds of information that was indicated that candidate Biden was politically compromised, had made secret deals with Ukrainians and Chinese and so forth. Gosh, what a shock that now we're deeply embedded in the war in Ukraine. The New York Times, Washington Post, made a deliberate decision that they would not report any information on this story, and Twitter and Facebook would ban any accounts or would delete any posts that mentioned the Hunter Biden laptop story. It was forbidden to be mentioned. And now, of course, we all know this is completely true. It's been verified by even the FBI and so forth. I think that there were high-level conversations in which, you know, the so-called deep state operatives, people in the intelligence community, the same ones who claimed that this was, quote, Russian disinformation, they made it clear to Twitter, Facebook, and other tech companies that you will not allow people to discuss the story, okay, and the tech companies caved. You know, think, what about, how about COVID? I mean, we have documentary evidence of meetings between Dr. Fauci and Dr. Birx and other members of the COVID response teams in the Trump and Biden administrations working with the tech platforms to decide what people will be allowed to say about COVID and what they will not. I mean, Birx, Dr. Birx just, her book came out a couple weeks ago in which she openly brags about reporting false information to the president and to the public, you know, two weeks to flatten the curve was completely fabricated. And she proudly admits that she just made that up as a way of trying to get people to shelter in place because if she said what she really thought that they should shelter in place for six months, they wouldn't do it. So the government is the source of most of this misinformation and they're putting a lot of pressure on tech companies to go along. Okay, so some libertarians have said, well, because tech firms are so deeply embedded in the state, we should really consider them as part of the state and treat them as state organs. I don't think that's literally true. Clearly, a lot of tech companies have benefited from public subsidies, state subsidies in various forms. You know, they engage in behaviors like de-platforming at the behest of state actors. They get certain kinds of legal privileges from the Communications Decency Act and the Section 230 exemption, which I would argue is a kind of a privilege or a subsidy given to tech firms, but it doesn't follow that they are literally part of the state. I mean, they're privately owned. The state doesn't control all aspects of their operation. If you want to say that companies that partner with the state, companies that benefit from the state, should be considered part of the state, well, I mean, then Goldman Sachs is more part of the state than, you know, Microsoft or Twitter in my opinion. Okay, so what should we do? Sorry. Yeah, I don't think there's any case for government policy to break up or regulate tech companies. Most of the specific regulations that have been proposed, we can talk about these offline, impose costs that are greater than any potential benefits. You know, we should stop subsidizing them, right? The best public policy towards big tech is to take away any special privileges that have been granted and let them compete freely and fairly on the marketplace, just like all firms, even those that are not the recipients of that kind of privilege and protection. So, thank you very much. Time for lunch.