“Competition can also lead to more justice”

“The Paradox of Profit” is the name of her bestseller. Elon Musk currently seems to be the perfect embodiment of this thesis. Or not?
My dissertation does not concern individuals. My thesis is about the new wave in tech. The so-called economies of scale, the fact that something gets cheaper the more you can produce, has led to this development, especially in digital technology.

Are you also alluding to the so-called network effect, that a network becomes more and more valuable the more participants it has?
Yes, in this environment tech companies are doing exactly what their shareholders want them to do. They maximize their profits. Therefore, this phenomenon cannot be traced back to Elon Musk. Rather, it is about what the government and regulators fail to do. If monopolies are allowed, this opportunity is also missed. We must therefore prevent such monopolies from arising and from exploiting customers and employees.

Maximizing profits is as much a part of capitalism as bacon is to hash browns. It’s not a new concept. But why have profits exploded over the past three decades?
A lack of regulation is certainly one reason. However, the main cause lies in the development of technology. In the digital world, a lot of capital is needed to open a business park. Once you’ve done this, however, thanks to the economies of scale mentioned, you can expand the yield almost indefinitely at no cost.

Isn’t that also good for the consumer?
That’s true. But it also facilitates the formation of monopolies. So we’re in a dilemma: it’s great that we have these companies, but they need to be regulated.

Peter Thiel, a former Musk business associate, in his book “Zero Not One,” advanced the thesis that competition is for losers. Thiel is, or at least was then, an ultra-capitalist. How do you explain that these circles of all people advocate the formation of monopolies?
The desire to be a monopolist is as old as capitalism itself. As Adam Smith said, anyone who owns a business doesn’t like competition. No butcher wants another butcher to come close. That’s why regulators need to make sure that’s exactly what’s happening. Preconditions must be created for competition to prevail. Monopolies are just as much a part of capitalism as regulation that creates fair barriers to entry into a business sector.

There are also natural monopolies, such as the water supply. Doesn’t it make sense that these are in the hands of the state and thus withdrawn from competition and profit maximization?
They can be state owned, but they don’t have to be. With sensible regulations, they too can be privately controlled and thus subject to the principle of profit maximization. This also ensures that they work efficiently.

After World War II, shareholders and workers shared more or less fairly in the gains of increased productivity. Since the 1980s, investors have increasingly benefited from this development. Corporate profits exploded, wages stagnated or even fell in the worst case. Why?
It is exactly this paradox that I speak about in my book. On the one hand, this was a conscious choice by the regulators. They wanted less regulation, less laws and less state intervention in the market. At the same time, former state-owned enterprises were privatized without being properly regulated.

But the main driver was technological change?
Yes, and the regulations have not been able to keep up with this development. No platforms have been developed on which multiple providers compete with each other. That’s why, for example, we have AppleStore and Google Android, which have unparalleled control over access to these platforms and can generate profits accordingly. For example, Apple currently accounts for 30 percent of the turnover that an app achieves in the Apple Store. That is why these companies have every interest in not changing anything and they spend huge amounts of money on lobbying.

In the US in particular, there is hardly any political will against monopolistic distortions of competition. Republicans in particular are against stricter antitrust laws.
Historically that’s true, but now there’s a growing anti-big-tech movement, even among Republicans.

But only because they believe Silicon Valley is a Democrat stronghold.
Not only. They also fear that the influence of Big Tech has become too great.

Which brings us back to Elon Musk. Has he not become too politically powerful with the takeover of Twitter?
Unregulated social platforms should indeed scare us. They have a huge influence on how people form their opinions. There is also the danger that the tech giants, thanks to their huge profits, also have the means to influence politics by supporting politicians with generous donations and making them dependent on them. This in turn makes it very difficult to regulate these companies.

How do you get out of this dilemma?
I think it is still possible. But there is of course the danger that companies will postpone this process until the last day with objections.

Apple, Google, Facebook: they all started in the proverbial garage as start-ups with the aim of conquering the world. Since then, the number of start-ups has decreased enormously.
In fact, the number of start-ups has almost halved since the 1980s, and it is true that the giants make life very difficult for young challengers. They have – figuratively speaking – hardly any air left to breathe. Or they are bought up and taken off the market.

Silicon Valley insiders like Jaron Lanier have been complaining about this development for years, fearing it will stifle innovation.
That is precisely why we must regulate platforms such as the AppleStore and thus ensure that young start-ups have more oxygen. Under the current circumstances, it has become pointless for startups to even try to get on these platforms.

For a few weeks now, the stock market for the tech giants, for Facebook, or Meta, has been crashing dramatically. Is this also an opportunity? Will there be new niches for start-ups?
I don’t have a crystal ball to see into the future, and you shouldn’t believe any economist who says I do. But we have experienced a number of crises in recent decades. None of them led to significant changes. The crisis, including the current inflation, affects all companies equally.

Geopolitically, a new competition is emerging in the technology sector, between the West and China. It is well known that China wants to become a leader in artificial intelligence. Is this a healthy competitive situation – or a dangerous political development?
From an economic point of view, this is a positive development. The more that participate in the competition, the better. Ideally, there would be major global platforms accessible to as many suppliers as possible regardless of their nationality, race, etc. You don’t have to worry about whether these suppliers are Chinese, American, or whatever.

In the current political climate, such a development seems unlikely to say the least. This is apparent, for example, from the discussion about TikTok, which is in Chinese hands. There is a growing fear in the US that this app could be misused for political manipulation. Do you share this fear?
Vladimir Putin abused Facebook in 2016 to help Donald Trump. That was dangerous. But today I don’t think TikTok is more dangerous than the other platforms.

Respond to your desire for more and better regulation, but consumers are not asking for it. Henry Ford once said: If I had asked my customers what they wanted, they would have wanted stronger horses. Even today, consumers generally don’t know what they want. So where should the pressure come from to lead to more sensible regulation?
We must not stop using our political system to benefit the consumer, even if the consumer is not aware of it. At some point this will have an effect. A vivid example of this is the change in attitudes towards smoking. Half a century ago, many thought it was healthy. By now everyone is aware that smoking is very harmful.

However, the tech companies want the exact opposite. Elon Musk—hopefully speaking to him one last time—wants to turn Twitter into an American answer to WeChat, an app where you can do everything from a simple phone call to online shopping to the most complicated banking transactions. And I’m afraid consumers would love it because it’s so convenient.
It will be a long time before such a thing can be realized – if at all. But if that is the case, and if all app providers then have access to such a platform and compete fairly there, that would be a positive development. It would be comparable to rail in the Netherlands, where the state provides the infrastructure and various private providers compete with each other.

They swear by better regulation to break the monopoly power of the giants. Others demand higher taxes. What do you think?
When it comes to redistributing money, taxes are a powerful tool. Taxing excessive profits makes sense. However, when it comes to overcoming the lack of competition, taxes are the wrong tool. Antitrust law is much more effective. Ultimately, this also means that excessive corporate profits fall and wages rise again. Competition can also lead to greater fairness.

In other words, we don’t need higher taxes, we need a second Theodore Roosevelt, the US president who destroyed the oil and railroad monopolies over a hundred years ago?
Precisely. Politically, however, Roosevelt’s plan did not work. He lost reelection.