Capitalisn’t: Are Big Tech’s Regulators ‘Cowards’?

Tim Wu: There was a cultural campaign to make people who believe in structural separation, which is a market solution, be perceived as communist, disreputable, probably also drink Pepsi, I don't know. Other things. I think it's just a cultural campaign.

Bethany McLean: I'm Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Luigi: We saw an exercise of raw authoritarian administrative power levied against crypto. Marc Andreessen, Mind Matters.

Bethany: The Biden AI rule is overly complex and would stymie American innovation. David Sacks on X.

Luigi: The administration has done everything it can to sideline Tesla. Elon Musk, Business Insider.

Bethany: You just heard a chorus of tech leaders complaining that the Biden administration turned on them. Marc Andreessen, in particular, has complained that Democrats fractured the compact between tech and government, driving Silicon Valley figures toward the Republican Party. They argue that government overregulation and pressure now pose the primary threat to technological innovation, negatively impacting startups and industries like crypto and fintech. Today's show asks a different question. Are they reacting due to overdue scrutiny of platforms that no longer just innovate, they extract?

Luigi: Our guest, Tim Wu, is an author and a professor at Columbia Law and served in the Biden administration as a special assistant to the president for technology and competition policy, and was a key actor for the administrative antitrust and competition agenda, exactly what Big Tech complains about. His new book, The Age of Extraction: How Tech Platforms Conquered the Economy and Threaten Our Future Prosperity, argues that the defining story of the modern internet isn't openness or democratization, it's wealth extraction. The ability of essential and avoidable platform to take money from everyone else without actually providing value anymore.

Bethany: Remember that optimism we had back in the 1990s, for those of you who are around, the idea that the internet would spread prosperity and democracy? We got the opposite. A handful of platforms have captured the lion's share of the cash, while global politics have moved toward autocracy. Part of the reason, he says, is platformization, the creation of gatekeeping platforms that everybody else must plug into. Unlike a public town square, these are private profit-seeking corporations, often perhaps too lightly regulated, whose ambition is to rule their ecosystems and extract most of the value.

On Amazon, for instance, something Tim writes about, once sellers were hooked, alternatives became implausible. Amazon ratcheted up the fees, and ads turned from an opportunity to an obligation. On social media, influence means turning yourself into a product. Platforms weaponize convenience, so switching feels exhausting. Add in the coming AI twist, interfaces that can foster emotional reliance on top of all of this, and dependence may deepen. Eeks. We're delighted to have Tim Wu with us on the podcast. When I grew up in college in the 1980s and 1990s, it was almost uncool to think about the economy.

If you were an artsy, interesting, creative person, oh my God, that messy thing over there called the economy. How would you argue to somebody today-- I was struck by a line, I think. I hope you said in one of your recent podcasts that concentration of government and tech power today is a serious threat to human liberty. How would you tell somebody why all of this matters so much? Why it isn't just the economy and antitrust, and that it actually is really core to our society on a deeper level?

Tim Wu: I think the reason people care about these issues in the way they didn't in the '90s is that things were better in the '90s. We felt like we could look forward to a future of boundless prosperity, and so we could make movies like Slackers, which was all about people in Texas just hanging out and shooting their own home movies or whatever. Now it feels like we're headed for feudalism and a two-class society. I think at the core of our souls, our material condition matters most to us.

The prospect of having a comfortable life, being better off than your parents, not being left behind, these are things that really matter to people. There's a whole generation, possibly why Mamdani is so popular with younger voters, young men in particular, who just feel like they're being abandoned and they're being left behind. Business has become, as opposed to the place you build new products, looking for some point of extraction.

Bethany: As you started to dig into these examples of extraction, what surprised you the most?

Tim Wu: That's a good question. I will say one number surprised me. When I found that Amazon's revenue, just for those sponsored results, when you're looking for something on Amazon and something comes out first, that it makes $57 billion a year on that little trick, which is more than double all of the newspapers in the world combined, for something that actually makes search worse and so is bad for buyers, bad for sellers, that's where I thought this is what pure, valueless extraction looks like in the platform age.

Bethany: Does a platform inevitably become a monopoly without some form of societal oversight that prevents it from becoming one? Are there platforms that are different in nature, such that you don't have to worry about the monopoly component or the monopoly possibility?

Tim Wu: That's a good question. I think there are factors that push platforms, these parts of our economy and society that bring buyers and sellers and other transaction parties together. I think there's many things pushing towards monopoly. Just take an example like the Tokyo fish market. As soon as all the sellers of fish go to one place, as soon as all the buyers go to that place, pretty much you're going to have a dominant marketplace. I wouldn't just want to say, well, of course, everything's going to be a monopoly, so we have to accept it.

There could be more specialized goods. Etsy exists, for example. There are probably, in Japan, specialized markets for specialized kinds of fish. I think there are forces that push platforms towards there being a limited number. Let's put it that way.

Luigi: Can we think about platforms as a privatization of the market infrastructure? The Roman Forum was a public place and was managed by the city, was managed by the political authority, was not a profit-maximizing entity. Today, the place where you meet, you meet for buyer and seller, but you also meet for finding your mate, your soulmate, or whatever, all this stuff is run for profit. It's, to some extent, an extra layer of marketization of the society.

Tim Wu: I think that's exactly what captures it. I think it, in some ways, is what makes our times distinct from other periods. Somewhere in the book, I say that today's platforms have main character syndrome. Here's a good example. Today's tech platforms are constantly saying, "We need to make all the money we can because we have to invent everything. We need money to invest in R&D and stuff." We never said, when the electricity network started, we said, okay, we're going to leave it to Con Ed and all these various electric utilities to invent the computer.

They've taken advantage of this idea of being in the middle of everything to make it into profit-maximizing entity. I think that is a big difference.

Bethany: I can tell that you have children. Luigi, do you know what main character syndrome is?

Luigi: No.

Bethany: Oh, all right. It'll be interesting for our listeners to see who has teenagers and who doesn't, and who understands the concept of main character syndrome. That resonated with me, too. You were somewhat sympathetic to Google in the early days as a company that really did believe its motto. Is the core of the problem, going back to Luigi's question, is it shareholder pressure? In other words, if you were to remove shareholder pressure for ever-growing profits, would that, in and of itself, fix the platform drive to monopoly and extraction?

Tim Wu: I think it would do a lot. I think it's a very perceptive remark. Early Google had genuine good intentions. The problem is they failed to put them into structure. I believe that, over time, structure beats good intentions. What they did was they wrote a letter. I reread this letter when they did their IPO. As opposed to making themselves into a nonprofit or a Type B or having any serious structural limits on what they did, they wrote this very earnest letter that said, "We are not going to be a normal company. We reserve the right to pursue unprofitable projects. We're not going to maximize your wealth."

Then they made themselves into a normal Delaware corporation. Over time, the investor pressure just wore away at them. It is a little bit, to my mind, the original sin of Silicon Valley, and many of us, which is this belief you can have it all. They wanted to do good. They wanted to be the best at tech. They also had to be billionaires, all of them. The person who I think took a different path, suggesting things could be different, was Jimmy Wales with Wikipedia. He was ridiculed in the early thousands for not making hundreds of millions of dollars or billions.

He understood that structurally, the nonprofit forum was important for Wikipedia to work. Wikipedia may not be perfect, occasionally has errors, but they're not out there stealing your data, throwing elections, and contributing to authoritarian propaganda projects. I think, as I said, the structure matters, obviously.

Luigi: Actually, we are taping this a few days after OpenAI has been allowed to transform itself from a non-for-profit to a for-profit corporation. That's the ultimate evidence that when there is enough money on the table, structure doesn't matter because they had the proper structure, they were a non-for-profit. My understanding, they were able to lobby sufficiently strongly the Attorney General to get a go-ahead in something, and I'm not a lawyer, you are, but I think is obscene.

Tim Wu: Yes. You make a good point. I guess maybe you need good intentions and structure because they had the structure.

Bethany: You need to be held, your feet need to be held to the fire of the structure that you originally swore by, and you don't get to just say, "Oh, no, I don't think so anymore."

Luigi: If we think that this is just a version of privatization of markets, why don't we use the traditional public utility law and public utility doctrines to intervene massively on this infrastructure? I know you mentioned it at the end of your book, but you don't seem to be so keen in going really heavily after that. When you were in government, I don't remember you pushing that very hard.

Tim Wu: It's a good point. I think I have become increasingly converted to the idea that these technologies are mature enough and their take is big enough that the traditional tools of either common carriage or utility law do need to be used. Obviously, it depends on the particular platform and their importance. If we were rolling this back 100 years or so, and the railroads had taken this dominant position in the economy, and they were effectively extracting a private tax, or if you had toll bridges like in early eras of Europe, where you just have private gatekeepers taking a huge amount of money and affecting the economy, the answer in those cases is not ambivalent.

You just need to limit the take and get rid of the main character syndrome to come back to that, or abolish the private tax. There's two reasons I'm hesitant. This comes from my having grown up in the '80s and '90s and being exposed to lots of micro-economists. First is some nervousness about price regulation, which almost invariably is what you'd have to do. For example, maybe you'd have to say, Amazon, you get 30%, no more. Maybe that would be a good thing. Amazon is actually one of the easiest cases. What you do for some of the other platforms is slightly more challenging.

The other challenge is when you adopt regulation, at some level, you're accepting monopoly and possibly reinforcing it. You see an internal war inside me between my desire to limit the take and the extraction, and the caution, and fear that I will have created a new monopoly. Sorry, I will have reinforced and made untouchable a monopoly. What would it be like now to challenge an electric utility? It's not easy because they're effectively almost part of government.

Bethany: We were going to get to the solutions later, but while we're on this note, I'm wondering a fairly basic question that follows Luigi's. What could be done with the existing rules and regulations that we have? Were somebody so inclined to use them? What requires new rules and regulations? I guess that's especially complicated through the lens of the Chevron doctrine.

Tim Wu: I will sidestep. The Chevron's been overruled, I shall decline.

Bethany: No, that's what I mean, that because it's been overruled, that makes it complicated.

Tim Wu: What can be done is what we tried to do in the Biden administration, and it's still running under the Trump administration, which is antitrust action designed in general ways to reduce or limit the market power of the platforms. Whether that's preventing acquisitions that make them even more powerful, whether that's disabling the most obvious methods of preserving their monopoly to make them more vulnerable. I think that is the importance of the antitrust. To introduce another complicated topic, I think industrial succession is important, or just some pressure.

What it comes down to is an economic thing, which is discipline. Antitrust, in my view, disables the defenses against market discipline. I think that's important. What would require new regulation is what Luigi was talking about, utility laws. There aren't any natural open-ended utility statutes that apply to anything that shows up. The closest thing to that is what Europe has done with the Digital Markets Act, but it is not. That is a very partial approach to this.

Luigi: I'm very sympathetic to your concern that public utility regulation will lead to even more capture and more stability of the system. Even in your book, you mentioned that the highest moments are the one in which basically the government imposes some form of openness or interoperability to an existing system. Interoperability is a requirement that allows different operators to connect to a common network in a way that is seamless. Today, we don't worry about-- When I call Bethany, I don't worry whether she has a cell phone that is with Verizon or with AT&T because the two are interoperable.

In the old days, when phones were born, for example, people could only call people that belonged to their network. That creates the network externalities that makes a network more valuable the more people belong to that network. Most people think that the network externalities is just a technological fact that we cannot change. In fact, it can be changed. Interoperability destroys these network externalities and makes networks accessible to everybody. Why we can't think about a public utility doctrine in the sense of forcing interoperability? Because you don't even need to determine the price.

Once you have interoperability, you have competition, or at least the threat of competition comes much more close to being a real constraint. I think that it is very simple. It's not leading to a lot of infrastructure. [unintelligible 00:17:01] in the same way in which you describe when AT&T was forced to accept other players on the network, a lot of creativity was unleashed, and a lot of benefits came about. We should impose interoperability to Facebook, to X, to everybody.

Tim Wu: Yes. I feel like there's a real appeal to that idea. Economists are always drawn to it like moths toward a light.

Luigi: Guilty as charged. [chuckles]

Tim Wu: Irresistible. I am not unsympathetic. Having spent time in government, there is this practical side. You have to do it really well. You have to pick the right spot to do it. When you think about telecom networks, there was a natural break. There almost has to be a natural break. You need to cut at the joints. Maybe that's too metaphorical. In telephone regulation, you could tell Bell, you have to interconnect with every long-distance player. There were reasons that was plausible to let them do it.

If it involves the government trying to create an interoperability out of an existing system, let's say you tell Amazon, "Okay, Amazon, you have to interact with any distribution system who wants to distribute from you." Just an example. Let's say you're not allowed-- or you have to take fulfillment from any platform. The question is whether it works. The question is how hard it is to sabotage or not. I like those approaches. They just need to be well done, or else they crash. I guess it's a matter of engineering as much as anything.

Bethany: Maybe a way to think through that is through the outcome of the Google case. On the one hand, I could say it was really successful because, as a result, others have chosen OpenAI. Apple chose ChatGPT, not Gemini, because we're now in a world without payments from Google. On the other hand, to use your metaphor, it wasn't cut at the joints in a way that maybe you would have liked to have seen. Could that be a lens for thinking through what you're talking about? How to do it well, how to do it haphazardly, how not to do it at all?

Tim Wu: I've spent a lot of time thinking about search. I guess there's going to be an experiment in some ways, where, in theory, Google will be coughing up some data to help others search. Question all these things. Given you have a party who does not want to cooperate with government and has a real interest in making what they do useless to others, how do you get over that? I guess you threaten large punishments. To use a weird word, it needs to be self-executing.

What I think is a more promising-- In fact, some ways the most important thing about the Google case was protecting a possible successor to Google search based on AI search from being dominated, controlled, or leveraged by Gemini. Obviously, Google realized at least 10 years ago that AI was a potential threat to search, which is, of course, its main moneymaker. They started acquiring everyone they can. The United Kingdom sold-- I guess DeepMind and the United Kingdom, they acquired most of the scientists they could.

They've been trying to head off this threat to them, like the Greek god, Kronos, who tried to eat all of his children before they usurped him. I think that most monopolies are afraid of their own demise. They like being there. I think in a world without any antitrust scrutiny, somebody tries to buy OpenAI. Microsoft came close and has come close to acquiring OpenAI or otherwise nullify it. The real question is whether the Google case prevents Google from forcing Gemini on everybody as a condition of being with Google, because those are the real table stakes.

Luigi: Again, I feel like we slightly disagree on things while we agree on substance. When you say that everything is engineering, I would say engineering plus incentive. I've been actually on a board of an Italian telecom company, and I've seen how the unbundling was not done very well because if you control the major network, you're trying to send back the competition. To fix the problem, you have to have the network owned by a third party. Structural separation is a solution of many of this issue where you force interoperability also through structural separation.

Again, this is not that costly to maintain because once they are structurally separated, I think they are, to some extent, self-enforcing. Why judges and regulators, and legislators are so afraid to use this tool?

Tim Wu: Because they're cowards. Actually, I think that they have changed. I think they've become more cowardly. One of the things I've spent a lot of time studying is the history of AT&T. For most of its history, everyone knew that AT&T was a monopoly. They'd get into an industry, and then the federal government would kick them out. The first American broadcasting network of any significance was an AT&T network. I think it was called the US Broadcast-- I can't remember what it was. Then the antitrust authorities got involved and said, "Get out of that industry." They retreated to telecom.

They tried to take over the film industry at some point. They got pushed out by the Federal Trade Commission. They got into computing and semiconductors. The Justice Department forced them out of both of those industries. There was a tradition in the United States of doing what you're talking about. It's a form of structural separation. It says, "All right, we want you out of this industry. We're going to let this industry grow by itself." Unfortunately, maybe it creates a little more drama if we disagree. I'm a huge believer in structural separation.

Why there's so much resistance to it? I don't have a good answer. It was part of this country's history. One of the things people do in D.C. is they try to make something completely taboo. They try to take an idea like breakups or structural separation and say, only crazy people talk about that. They don't really say why. It just becomes known. Then someone, they're like, "Well, that guy talks about structural separation. You can tell he's some kind of degenerate."

There was a cultural campaign to make people who believe in structural separation, which is a market solution, be perceived as communist, disreputable, probably also drink Pepsi, I don't know. [laughs] There are other things. I think it's just a cultural campaign. I really think that the small, close-knit culture of D.C. has an effect on this. I'm writing another paper about the car industry in the United States in the '60s. I had a chance to read about General Motors in the '60s and all these very conformist cultures, why they wouldn't build a small car that could compete effectively with Japan.

It was all about this idea of shaming people who believed in small cars. There was this line that people who like small cars are pinkos or communists or hippies or weirdos and Germans, or all these weird, unembarrassing characteristics. I think, weirdly, a lot of thinking in our country comes down to the strange cultural conformity norms of why you need to spend time out of Washington.

Bethany: Speaking of your time in Washington, the Biden administration, at least, is widely thought of not to have been wimpy, at least the degree of animosity, and many that it provoked among private equity and venture capital and tech people is pretty unprecedented, at least in recent administrations. You've-- I guess, a two-part question. What do you think the legacy of that is in the end? Do you think it accomplished something? You've said in terms of voters that the problem was not so much what you did, it was a failure of messaging. I've heard that from people in the Biden administration elsewhere. Do you really believe that it's just messaging?

Tim Wu: I don't know. If I really said that I'm embarrassed that I said that, because I always say it's an excuse that everybody uses. First, you blame comms, then you blame your lawyers. What's next? Who's next to mine? Everybody comes out of everything. Unless you win another election, then everything's about your particular brilliance. It's interesting to hear you say that-- It's true, we aroused a lot of anger, particularly in merger policy, though I have to say that this administration is 10 times more aggressive than we are in terms of government action.

Now, some of that's very different type of action, like criminal prosecution or tariffs, or firing officials. They're way more aggressive than we were. In some ways-- My line of thinking is that in some ways, we weren't aggressive enough in terms of doing things for the population that they could notice. Maybe this turns a little bit to the messaging, but in terms of being-- we got started the antitrust campaign. We wanted to make it clear. We managed to make them angry, but we were less straightforward.

Now, I guess this is blaming the lawyers. We're sometimes timid to announce what we are doing because of the various rules around communication among current cases.

Luigi: Actually, can I follow up? I asked the same question in a slightly more aggressive way because Bethany is very polite, and I'm not. She says, a common friend, and I don't want to reveal his name, but a common friend, Tim, said that basically Lina Khan made President Trump win. It's not out of the question in the sense that we know that the victory was of two or three percentage point. It is exactly what the Silicon Valley and his people move around. They move mostly because of Lina Khan.

We both like Lina Khan's actions, so this is not to blame her. It's to blame, maybe the strategy of saying, you know, and you write in your book, when you have a lot of economic power, this translates into political power, and you are going to react. If you go after the biggest monopolist that history has ever known, you don't want to go there with an army of guerrilla people. You need to have a serious, dedicated army to fight. I feel that there was a lot of disorganization and not coherence. The Democratic Party was divided.

There were some key leaders like you and Jonathan Kanter, Lina Khan, but I cannot say that there was serious troops that really expressed this message and convinced the people that this is the right direction. Even like a big chunk of the senators and the Congress people were not behind you, so much so that you couldn't even pass a law. This was like a guerrilla tactic against the strongest army in the world. It's not going to work.

Tim Wu: Yes. I have a few reactions to that. It's very common after an election everyone can pinpoint something. Maybe it was immigration. If only they'd done immigration differently. If they'd messaged differently and handled inflation differently. If they'd fired the Federal Reserve chairman. I've heard like 40 different theories of the one thing they would have done that would have won the election. If they'd done environmental policy differently, they managed to make all these guys mad. There's-- what would be the right word in academia, it's overdetermined.

You can always pick up your one little thing that you thought would have turned it. I don't know. I think that it's quite possible, given inflation, which is poison to any elected government, which defeated governments, including conservative governments in the United Kingdom and other places, that even if we had done nothing on antitrust, we still would have lost due to the inflation poison and immigration policy. Now I'm picking on another issue.

I sincerely doubt that a lot of voters-- Now you could say, all right, maybe Elon Musk wouldn't have turned, but a lot of voters were thinking, "Oh, that Lina Khan, I really don't like her. I'm going to vote against her." I guess you could say the money was donated, but there was unlimited money in this race on all sides. These are--

Luigi: Sorry. The unlimited money came because Kamala Harris refused to run on a platform of antitrust. Had she really run on the Lina Khan platform, the money would not have been there. Reid Hoffman was very clear.

Tim Wu: Now, you've said something wrong. In presidential elections, unlike an obscure, let's say, local election for a state senate or something where money matters, presidential elections pass the point of any return on the money with the amount invested. You could add a billion dollars on either side. It doesn't make any difference. No one didn't know who Kamala Harris or President Trump was by the end of it. There was oversaturation. There was no more attention to be bought out there. I conclusively reject that theory. I also say something else.

Politics is one thing. Policy to me is more important. There are both political cycles of things going up and down, but the longer cycles of policy are more important. For me personally, this was the long game in antitrust. I don't think it had an effect on electoral outfits. It was clearly time for the country to reboot the antitrust law. That's where I would defend it in that picture. You can get too caught up in the back and forth of politics. That said, I'm saying I'm thrilled that the Trump administration won, but I firmly reject the idea that having-- In fact, if Kamala Harris-- Look, maybe she would have lost anywhere.

She's not a great candidate. If she had doubled down on the price-gouging, Bernie Sanders, AOC line, she might have stood a better chance. That's what I personally think.

Bethany: Why do you think-- You said something that the Trump administration, in terms of its actions toward corporations, has been a lot more aggressive than the Biden administration ever was. I started to think about that and thought that's really true. Why was there so much rage toward the Biden administration? Why is there almost a bended knee toward the Trump administration? Is it as simple as fear, or is it the belief that the Trump administration ultimately can be manipulated such that these players will get what they want at the end of the day?

Tim Wu: That is a really great question because the tariffs are obviously a terrible thing for so many American businesses and are much more aggressively imposed. Now, they obviously help some domestic businesses, but they hurt a lot of them as well. I am reluctant to give Trump credit, but there may be something to the fact that, because it's from the president himself, as opposed to the head of an agency, and because the threats seem more immediately terrifying, that he manages to clarify business as opposed to evoke their outrage. No, I don't think businesses were truly afraid of Lina Khan or Jonathan Kanter.

They didn't like these lawsuits, and so maybe that's it, or maybe it is, as you said, it evokes a different-- gets into some really deep, weird stuff where people respond to this imperial thing by taking the knee. Whatever you want to say about Lina and Jonathan, or even myself, we were not in this position of the emperor and summoning the people to come bow before us. It's a way-- I don't know. This goes slightly-- maybe I've been spending too much time in Rome, and that's why I'm thinking about-- When you're there, you can't help but think about Julius Caesar and all the republic.

Luigi: Yes, I understand the relationship, but I think that to some extent, you're right that the Biden administration did not have an imperial president that emanated this. It was more some group of people to which you belong that were supporting some ideas, but it was not clear what Biden wanted. In a sense, this is a slightly different way of what I was saying earlier. The Democratic Party was divided. There wasn't a common message.

If there is a common message, I think you can defeat any political pressure or business pressure, but if you are divided, you are eaten alive. I think that the Democratic Party was divided on these issues and was eaten alive.

Tim Wu: It's possible. If you imagine a different thing where Bernie Sanders won, and Bernie Sanders said, this is how it's going to be, and ignored all the stuff about talking about cases and said, "We're breaking you guys up." This is happening now, and he controlled Congress. He said, "We're doing it by antitrust, or we're doing it by this, but we feel that this sector is too concentrated. Either break yourself up, or we'll do it." That might have been a very different conversation. We were, in a sense-- Maybe this is a weird way of saying that Lina and I needed more power.

Bethany: [laughs] Now, that's a good answer. When you say that you were playing the long game on antitrust, do you think that long game has had an impact? I can't tell right now, I'm not close to it, but I can't tell within the Trump administration whether the JD Vance faction that looked originally quite sympathetic to the goals you were trying to achieve, has actually maintained power and whether it even was aligned with the goals that you were trying to achieve. I guess the not long-winded way of asking that question is, can you still see the long game playing out or did the long game get chopped?

Tim Wu: I think so. Obviously, if we'd want another term, it would be more clear, but I do still think so. I think it's very important to look at what is taken for granted. Antitrust is alive, it's used, the cases are ongoing. It doesn't have that sad, dead feeling that it had 10 or 15 years ago. Maybe that's not claiming a huge amount. Overall, I feel the anti-monopoly project is actually quite strong and that the Republican base, despite its corruptions, is something that scares people on this basis.

I feel like if all the cases against big tech were dropped, it would be a little bit like the Epstein files. It would become this like, what the hell happened? How did they do that? They could have dropped all these cases and taken a bunch of money. Mark Zuckerberg went to the president to try to settle the Facebook case one-on-one, but they wouldn't do it. We'll only know in 10 years, but I feel like antitrust was on the verge of its own extinction. When I was there, it had become this parlor game that consumed a lot of intellectual bandwidth, but had very little output.

Now, I think it's back in the game. In some ways, economic populism is probably the more important trend. The idea of being serious about controlling private power as part of the balance of power is part of the more important conversation.

Luigi: It seems that in this interview, you describe a trajectory from a very moderate Obama Democrat to a Bernie Sanders supporter. Are you supporting, given that you're in New York, Zohran Mamdani? Do you see Zohran as the new Bernie Sanders?

Tim Wu: Having run against Cuomo myself, there's no possibility. Yes, I think it's time for a new generation of people who speak to issues people care about. Mamdani has had success here in New York, basically by talking about affordability, economic justice. We can talk about it in complicated ways, like market power and stuff like that, but I think a populist politician will never be popular with intellectuals because they overstate things, and they make it more complicated. Someone has to translate the concept of market power into language that people can understand.

I think that's what Mamdani's doing. Speaking to a broader concern, I think when democracies fail people, they turn to more radical solutions. I do think we're in danger in our times of people turning their backs on democratic answers.

Luigi: To end on a positive note, in your book, you emphasize decentralization as a potential solution to many of our problems. You go back even to a tradition that is of some socialists, but also the social doctrine of the church. Leo XIII, the Pope of the first movement of the social doctrine of the church, was really emphasizing cooperatives and stuff like that. How do you see this unfolding in the 21st century?

Tim Wu: Yes. Part of this book, idea of this book, is in some ways, it's like a gateway drug to starting to thinking about alternative political philosophies. Maybe gateway drug isn't the best line, but that's what I've got. I can't even teach you there because I feel we live in a time where communism obviously failed very dramatically. Stalinist communism was a horrendous failure that made a lot of people miserable. Now we are witnessing and have witnessed the failure of pure laissez-faire capitalism. What we've seen as answers are, on the one hand, populist authoritarian dictators saying, I've got the answers for you, but we need better and other answers.

I think we need a rebirth of the movements, like the one you mentioned with Leo XIII, the distributist. Movement in Britain, the orto-liberals in Germany, the people who believed in decentralized capitalism and believed in private property rights, a smaller economy. We're very far away from there, but I think we need something to aim for, and I'm trying to encourage people to identify with a different way of thinking. That's one of the real goals of this book.

I'm not optimistic about the near term, but I do think we can learn from the platforms from the experience of the last 25 years and try and do better. I have some optimism about our ability to do that.

Bethany: Last question from me, your observation that I'd love to know if you think that that sounds right, that both capitalist and communist systems centralized power in a way. In the strangest way that what we perceive now is our very laissez-faire free market society is actually closer to being a communist society in the sense not, obviously, of equal distribution, but of the way power is centralized. Is that a fair observation that the ends of the circle are almost meeting?

Tim Wu: Absolutely. I think monopoly capitalism and Stalin communism, Stalinist communism are very similar [laughs] in the way the Soviet Union was organized after Lenin in the Stalinist period, like a giant monopoly corporation where Stalin was the CEO, with the power to not just fire people but send them to Siberia. I think we need to reject systems of centralized power and authority. They have their uses, but they can overgrow. They attract sometimes weird religious reverence for their size and power.

I think the happiest societies have been more distributed in power, then what we need is a balance of private and public power, and that's the philosophy we need to embrace. That's what I'm trying to do with my life. How's that? [laughs]

Bethany: Sounds like a plan. [laughs]

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Bethany: If you're enjoying the discussions Luigi and I are having on this show, there's another University of Chicago Podcast Network show you should also check out. It's called Big Brains. Big Brains brings you the stories behind the pivotal breakthroughs that are reshaping our world. Change how you see the world and keep up with the latest academic thinking with Big Brains, part of the University of Chicago Podcast Network. Luigi, we didn't really give Tim enough time to talk about his preferred solutions because there were so many other things to talk about, so maybe this is a little bit unfair.

Did you hear anything in talking to him that made you change your mind about solutions to this, or made you think that gain more clarity on what you think solutions are? Do you feel like you're already pretty clear on what you think we should do?

Luigi: Actually, what I learned from him, and mostly in our conversation, was that not all hopes are lost, that if you have a strong precedent, you can really make a difference. It's not impossible to have a strong precedence because, as he said paradoxically about the presidential campaign is the one that is least affected by money because you're so visible and so well known. When you go to state races, money makes an enormous difference because nobody knows anybody.

If you give a lot of money to one guy, and he can pay very aggressively, he can be elected even if people don't like who he or she is. When it comes to precedence, that's less of a case, this really suggests the importance of choosing a president with a strong agenda.

Bethany: Yes. I wonder if there's something slightly frightening in that, in the overtones of a strong man. I think, have not been in keeping with any of our recent administrations aside from Trump. I think it does beg the question of how much the vanishing president of the Biden years actually hurt a lot of things, that letting other people do the work and take the brunt really had a bigger cost than I think anybody admitted at the time. I still, something in me, rejects the idea of the strong man as president, even though I understand that that might be the way to get things done.

I guess in particular, it's off-putting to me because it's really hard to get any clarity out of-- Maybe if the Trump administration were at least clear about what its antitrust goals were. I'm really unsure from where we sit right now, if it's all a grift, and a grift upon a grift, or if there's a serious policy element to what's taking place now.

Luigi: I understand you reject a strong man, but maybe a strong woman will fit you.

Bethany: I don't know. The idea that women are nicer than men, I can give you example throughout history to say that just is not true. [laughs]

Luigi: What I'm saying is I think you need somebody ideologically committed to a particular idea. Think about Margaret Thatcher, whether you like or not what she did, she was very ideologically committed to what she wanted to do, and she carried through very effectively. In a sense, I think Biden was the worst president possible because he wasn't really strongly, ideologically committed to anything, and so the administration lacked really a coherent agenda, and particularly lacked the ability to overcome vested interest.

Remember when we had that meeting with Federico Stutzenegger, the advisor to Millet in Argentina? He said something very interesting, said many things interesting, but the one that struck me the most is how Millet was using Twitter to empower people like Federico to do their job. Why? Because vested interests go to the attack when they see somebody weak, but if you are strong, they don't want to get in the way. If you have the president that, via Twitter, endorses very strongly some of the action that somebody does, it's very difficult for people to get in the way. If the president is missing in action, that's a different story.

Bethany: Yes, it's really fascinating because I think this is one of those moments where my frame of reference is shifting, which I actually love, but I think I would have thought without ever having verbalized it consciously, I would have thought that the right role, the right way for a president to be, the right way for a leader to be, was to be the conciliator-in-chief, the one who's constantly listening to everybody and taking into account different perspectives and figuring out what the way forward is while balancing all of these competing needs. Maybe it's not the most effective way forward.

Maybe the most effective way to govern is to actually have things that you believe and deeply believe and try to make those things come true. By the way, neither of this, just for our listeners. This is not a comment one way or the other on Trump because I don't know yet what Trump believes. If he does believe anything, so this is just a broader comment than a pro or anti-Trump comment. It's making me think really differently about my implicit set of beliefs.

Luigi: I think that actually it depends. I don't think that there is a right leader for every moment. If you want to actually reconcile, so think about Mandela immediately after the end of apartheid, you really need to listen and reconcile and unify the country. There are moments in which you have to change things. Roosevelt, actually, both the rulers, but in this case, I meant more Franklin Delano Roosevelt, was a man of change.

He was a very imperial president, so much so that Trump sometimes says, I am like Roosevelt because he was very forceful. He had a very strong agenda, and he was able to push it through. With a benefit of hindsight, it was overall a big success.

Bethany: Yes, it's making me think more broadly, too, about schooling today because kids really are taught very much to listen to others and incorporate other people's viewpoints and make sure that you're not just on your own soapbox. I understand and appreciate all of that and have accepted it unquestioningly. Now, I'm wondering if maybe sometimes we also need to teach kids to stand up for what they believe in and to have an ideology, and to have a backbone sometimes.

I mean, it's a little too stark and the dichotomy isn't quite this, but there are times in life where you need to have a backbone, and you can't always be deferring to other people and listening to other people and trying to take into account other people's feelings and points of view. A broader philosophical comment about life.

Luigi: No, you bring back a memory that is very important because I remember as a, I think it was pre-teen or early teen, I was in middle school. I was never very tall, but I particularly grew slowly. By middle school, my classmates, particularly some, were twice as much as I was. One was a bully and threatened to beat me up, and one day he beat me up. I went home, reported to my mother, and my mother said, you have to give it back. You have to fight. It wasn't like, oh, poor you, I go to the principal and I will complain.

No, she told me, you have to stand up on your own. I think it was a very good lesson, and this ability to stand up on your own and for your ideas is built early on in your character, and sometimes it's painful. I still remember what it means to be beaten up physically, but I think it's useful.

Bethany: What else struck you about our conversation with Tim?

Luigi: I think that how he represents, in my view, the change in the Democratic Party because he was a big Obama guy, now is very comfortable with Mandami. In a sense, we're comfortable with Bernie Sanders running for president. It represents a pretty big chunk of the Democratic Party that has been deeply disappointed by the economic policy of the Democrats. It's even more striking because I hope you appreciate the fact he was a clerk for Richard Posner and Justice Breyer. He's very respectful of those two people, of course. He's also made clear that he has moved away dramatically from those positions.

Bethany: I don't know, though. Maybe I still have too many remnants in me of the 1990s and believing, I guess, unquestioningly in that era of the Democratic embrace of big business. There is something about it that I struggle with letting go of. What do you think? Do you think that's the way forward for the Democratic Party?

Luigi: Absolutely. I don't think there is any other alternative. I think that actually my view is that what created the imbalance in the US system is precisely the fact that the Democrat abandoned the anti-business position because they acted as a useful balance to the Republicans. Whenever you have a tough competitor, you're paying attention to what you do. Even the Republicans were better behaved because there was a check of the Democrats. When it became a race to who was more friendly to business, I think that the rest of the country was left behind.

Now, ironically, are the Republicans who present themselves as close to the people and away from the elitist Democrats. I don't see what is the future. Do you want the Democratic Party to become the former Republican Party of Mitt Romney? I don't think there's a future there.

Bethany: Yes. It's fascinating to the extent to which society needs contrasting ideals. I was thinking that societies do function better and political systems and economies function better when there are actually choices, when it's not all the same thing.

Luigi: This is the most appropriate way to end this episode that, after all, choice and freedom of choice is the most important thing in business and in politics. One of the messages of Tim Wu's book is that this freedom of choice is taken away from us by many of the platforms, and we have to fight to get it back.

Bethany: Agreed.

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Bethany: During the first Trump administration, the Federal Trade Commission sued Meta, alleging that its acquisitions of Instagram and WhatsApp had given it monopoly power in the personal social networking market. Just the other day, a federal judge dismissed the case, ruling that the FTC did not show that Meta currently holds monopoly power in that market. Luigi, what did you think when you saw the decision?

Luigi: First of all, the issue was whether Facebook has market power in the sector that regards your interaction with family and friends. The issue was whether TikTok was a real substitute for Facebook or not. By and large, the case was won by a testimony of one of my colleagues at the economic department, John Lister, who had an experiment showing that if you pay people to stay away from Facebook, several of them go to YouTube, several of them go to TikTok.

In the view of the defense and eventually in the view of the judge, this proved that the market for Facebook products was actually much larger, and there were effective substitutes, and there was easy entry because TikTok had entered in the meantime and was very successful in gaining market share.

Bethany: What do you think of that line of thinking?

Luigi: This is one of the weaknesses of all antitrust cases, is how you define the market. Actually, it reminds me of my Italian background because when Berlusconi controlled half of the Italian TVs, basically all the private Italian TVs, he said, "Oh, but I have no monopoly because there are a lot of newspapers out there and people can read the newspaper." It's true. If you define the market large enough, nobody's a monopolist.

What I find interesting is that in the very experiment by John List, more than 50% of the people who are paid to stay away from Facebook actually did not go to any other social media, which to me is the ultimate example of lack of susceptibility and market power. It's like saying, yes, of course, if I prevent you to watch TV in the old days, imagine pre-internet, I prevent you to watch TV. Yes, some people will read the newspaper because they have nothing- other source of news, but a lot of people will go out with their friends. A lot of people will actually read a book.

It's not saying that going out with a friend is the same market as the TV. It's simply that you have no close substitute, and you change completely the market. I'm actually shocked that the FTC did not push this point stronger because it seems to me a very clear indication that Facebook or Meta now has market power. Not to mention, the other thing is that the FTC try a different line of defense, or in fact, attack because they are the plaintiff, that Meta made so much money consistently that it is difficult to justify in a world in which you don't have market power.

I think that somehow that line of attack did not resonate with the judge who was quite dismissive. Even if it's, honestly, from an economic point of view, it's hard to explain how you can make this amount of money if there are not important barriers to entry. The existence of the network externalities is a gigantic barrier to entry because if I have all my friends, for example, I have all my high school friends on WhatsApp, and it's not a significant signal, it's not competing with WhatsApp.

If I cannot go to WhatsApp, I don't go to Signal because there's none of my friends on Signal. What do I do on Signal? I probably read a book.

Bethany: Do you think then that the FTC should have defined the market more tightly or more broadly? Could they have won this case if they had simply defined the market differently, or was the case unwinnable?

Luigi: I'm not so sure. I think that the judge really gives away his views in the opening line because if you think that the market changes very fast, basically, you don't have any monopoly. This is a line that goes back to Milton Friedman and say there is no monopoly except with the support of the government and the sanction of the government because everything else can be quickly bypassed with technology. Now, the secret is quickly because if you think about the AT&T monopoly, that took 90 years to undo.

Quickly, it might be in the eye of the beholder. I think that once you buy into that line, it's very difficult to convince you that anything is a monopoly because technology will always go around.

Bethany: Do you make anything of the fact that this case was brought during the first Trump administration and came to an end during the second Trump administration and that Meta has been courting Trump, or is that far too much conspiracy theory and has nothing to do with the merits of this decision?

Luigi: Actually, I really want to take a completely different lesson from the length that it took this case to be adjudicated, which is not unusual, unfortunately, in these important cases, which is much more important to block mergers when they take place rather than later on because for our listeners who might be too young or might have forgotten, I think the FTC authorized, back in the days, the acquisition Instagram first and WhatsApp second, and they could have stopped it or they could have challenged that and potentially stopped it back then.

It looks almost like the judge is saying, at the time, would have made a lot of sense to block it, but now, so much water under the bridge. You cannot really rewrite history. By now, it's too late. What is interesting is that in the economic literature, there is a big emphasis on the errors of Type 1 or errors, Type 2 in adjudicating. An error of Type 1 is when you are too strict. An error of Type 2, you're too loose.

The view of economists, which is a little bit self-serving, is to say, the biggest mistake is a mistake in which you block a merger because you cannot see the counterfactual. If you allow a merger, you can always later on catch up to it. The reality is you can't. At least you can't in a reasonable time.

Luigi: Yes. I thought that, to me, is the most interesting part of this is that it does argue for a preemptive antitrust policy because if you have, what is the right word, if you have an ex-ante policy or an ex-post policy where you're looking back and trying to decide whether something was right or wrong, whether the judge's argument is correct now, it is true that things move too quickly and the damage has been done. We don't know the competitors that could have come along and how the market would look different.

Anyway, I think that is the key takeaway from this, is that if the world moves really quickly, then maybe we should err on the side of being preemptive rather than trying to look back at things and say, after it's too late, "Oh, well, it's too late."

Luigi: The other remarkable thing is that this case had phenomenal, juicy quotes. It looks like Google has learned from the Microsoft case not to put anything on an email, but Mark Zuckerberg did not get the memo. There are phenomenal smoking guns like, it's better to buy than to compete, which on the face of it, if you want a smoking gun that you're trying to squash competition, and it says, what do you want more from life? The fact that you could lose a case like this is pretty depressing, in my view.

Bethany: Do you think, then, that it does? That's the question I wanted to get to. Do you think it does have larger consequences, then, for the landscape of antitrust? Does it make the FTC more or less willing to bring cases, and does it change anything else that's underway?

Luigi: Oh, absolutely. I think that there is only so many cases you can bring and lose because then you lose the momentum, the conviction. I think that, to its credit, the FTC has won a significant number of cases. This is, in my view, a major setback with percussion. I will expect the FTC to be much more cautious in bringing new cases.

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Matt Hodapp: Capitalisn't is a podcast from the University of Chicago Podcast Network and the Stiegler Center in collaboration with the Chicago Booth Review. The show is produced by me, Matt Hodapp, and Lea Ceasrine, with production assistants from Utsav Gandhi, Matt Lucky, Sebastian Burka, Andy Shi, and Brooke Fox. Don't forget to subscribe and leave a review wherever you get your podcasts. If you'd like to take our conversation further, also check out promarket.org, a publication of the Stigler Center, and subscribe to our newsletter. Sign up at chicagobooth.edu/stigler to discover exciting new content, events, and interviews.