A 1600, a group of English merchants were granted a royal charter, a legal document which allowed them to venture to foreign lands and seek trade. This was a big bet: not only were the territories they aimed to trade in a long way from England, dangerous to get to and occupied by people who didn't necessarily welcome English traders, but they had to invest £68,000 in the venture -- about £9m in today's money. For a period of 15 years, the royal charter granted them a monopoly on trade.1
The venture was the East India Company, later the British East India Company. By the mid-1700s, it accounted for half the entire world's trade. By 1858 it had a private army that was twice as big as Britain's, and ruled over the whole of what is now India, Pakistan and Bangladesh. That £68,000 bought its investors -- and Britain -- the biggest ROI the world has ever seen. The company turned a fifteen-year monopoly into an empire. If you want to understand the obsession that the Brexit-wrangling mouth breathers have with "Buccaneering Britain", look no further than the folk memory of the British East India Company.
This often comes to mind when I'm thinking about our modern technology monopolies. Like them, the East India Company founders took big risks – in fact, bigger risks than the likes of Mark Zuckerberg can ever conceive (no Facebook employee has, to my knowledge, been killed by cannon fire, even if, like the East India Company, their products have helped enable genocide).
Unlike those 17th century investors, the founders of modern monopolies are constrained by law rather than explicitly encouraged by it. We have, collectively, decided that there should be limits on the amount of wealth accumulated which monopolists are allowed to enjoy, and there should be limits to the power of corporations. Facebook, Microsoft, Apple and Google will, it's safe to bet, never be allowed a private army and the rulership of a big chunk of a continent.
In modern capitalism, taking risks brings rewards -- but only so far. And a dominant position, no matter how well-deserved, does not allow you the leeway to eradicate competition itself.
All this came to mind when reading Ben Thompson on the DOJ Investigating Nvidia:
Nvidia under Huang did everything we hope our greatest companies will do: they had a long-term vision, they innovated relentlessly to find new markets and applications for industry-leading technology, and when a world-changing opportunity presented itself with large language models, they were ready to take advantage of it, for a long-term benefit that may forever be unmeasurable. This is the behaviour our government apparently wants to punish?
Earlier this week, I listened to a great interview with Ben about on how he writes, which I highly recommend. In it, he noted his dislike of writing about antitrust:
“The one time I did almost burnout is like 2019, 2020. I was writing about regulation and antitrust and congressional hearings. And I'm like, oh, this is actually horrible. Like it's burning me out. I work a lot. That's not what's burning me out. It's writing about stuff that is kind of soul sucking for me from my perspective.”
I can tell Ben doesn't like writing about this stuff2, in part because I think he keeps missing a foundational point about antitrust: What's perfectly acceptable behaviour when you are a relatively small company becomes outright illegal (and rightly so) when you become dominant in an industry.
I'm not going to attempt to evaluate the merits of the DOJ case, in part because at present there is no case. Per Bloomberg:
"The US Justice Department sent subpoenas to Nvidia Corp. and other companies as it seeks evidence that the chipmaker violated antitrust laws, an escalation of its investigation into the dominant provider of AI processors. The DOJ, which had previously delivered questionnaires to companies, is now sending legally binding requests that oblige recipients to provide information, according to people familiar with the investigation. That takes the government a step closer to launching a formal complaint."
Seeking information about a company's conduct is precisely what the DoJ should be doing in any area where a dominant player is emerging, and the earlier it does that, the easier it becomes to make a case which has an actual impact. No one seriously doubts that Nvidia is now dominant in the market for AI processors. Is "AI processors" a market? Has Nvidia's conduct stepped over the line from tough competition to abuse of a market position? These are elements that an investigation should try to find out.
What the DOJ is clearly signalling, here, is it won't allow dominance to be abused even when companies have only recently crossed the line from being a competitor to dominance. Given the speed at which technology companies can distort markets and crush competition when they achieve dominance (who remembers DR-DOS?) this feels like a sensible approach. The other option -- giving businesses 10–20 years of the ability to destroy competitors not through making the best products but by sheer force of accumulated power -- has demonstrably stifled competition. And competition drives innovation (at least in theory).
Ben's best argument is that Nvidia has done nothing wrong, and in fact has done what we want companies to do: make long-term, industry - changing and fundamentally risky bets to achieve huge returns. And I agree! There is no doubt that Nvidia deserves the billions of dollars in profits it will make from being the biggest and best player in AI processors. The lead it has created from the investments it made will last for a long time, and generate a lot of money. Jensen Huang deserves all the credit he gets, and as many sharp black leather jackets as he cares to wear.
For anyone who has grown up in the era of the hero/founder and "startup in a garage" vision of Silicon Valley, I think it's a compelling view. Apple is another example. Under Steve Jobs, they made a series of "bet the company" product launches, culminating in the iPhone. They created a platform which over a billion people use globally, spending tens of billions of dollars a year on apps. Don't they deserve 30% of that, forever?
But one of the principles of Silicon Valley entrepreneurship was that success has to be continually earned. Andy Grove, who knew a thing or two about it, warned against "the inertia of success" because, even if you are at the top, you don't deserve anything unless you keep innovating, keep creating the best products. "Only the paranoid survive" because somewhere out there, a smaller, more nimble competitor is coming to eat you – and all your past success will not save you from that fate.
A company getting it right does not give it some kind of permanent licence to coast while printing money. The question that all antitrust seeks to answer is simple: how much is enough? When do the well-deserved riches and power that accumulate to companies that make big bets, execute well, and invest wisely start to be toxic for society or humanity as a whole, and for competition itself? Are the riches that the largest companies make earned, or are they simply the product of being large? If it's the former, great! But if it's the latter…
The founders of the British East India company also did everything we hope our greatest companies will do: they had a long-term vision, they innovated relentlessly to find new markets, and when a world-changing opportunity presented itself, they were ready to take advantage of it, for a long-term detriment that may forever be unmeasurable. Sometimes, enough just is enough.
