Lawfare Daily: Tim Wu on ‘The Age of Extraction’

[Intro]

Tim Wu: But I think the significant thing is what it meant for the structure of the economy. Because this idea that Amazon was sort of going to liberate a whole class of small businesses and medium-sized businesses really started to change, and the direction in which the money is flowing went into the platforms.

Kate Klonick: It's the Lawfare Podcast. I'm Kate Klonick, senior editor at Lawfare.

Alan Rozenshtein: And I'm Alan Rozenshtein, research director at Lawfare.

Kate Klonick: And we're here with Tim Wu, Julius Silver Professor of Law, Science, and Technology at Columbia Law School.

Tim Wu: I want to live in a society where, more broadly, people think not in terms of how do I get in a position to extract, but, you know, can I invest and see some return on that investment? What kind of sense of economic liberty do I have? Am I going to invest in my career, in my education, and get something out of it?

Or is it, you know, all about, just trying to find, being the right place at the right time?

[Main episode]

Kate Klonick: Today we're talking about his new book, “The Age of Extraction: How Tech Platforms Conquered the Economy and Threaten Our Future Prosperity.”

Tim is perhaps one of the most widely read and cited scholars in technology and law. He coined the term net neutrality. He's written “The Master Switch,” “Attention Merchants,” “The Curse of Bigness,” and my personal favorite, “Who Controls the Internet?” with Jack Goldsmith.

They're all essential reading, and he is recently back at Columbia after being in the Biden administration where he led much of their work on competition and antitrust policies.

Alan Rozenshtein: Let's start with what I take to be your, these are the key thesis of the book. So just explain why you think the modern problem is with these tech platforms. And maybe also, I'm curious why you think they're worse than previous generations of monopolies, right? So like, what makes a Google or an Amazon different from, let's say, a Standard Oil?

Tim Wu: Well, let me start at the beginning. So I think the problem, I guess I'll put it this way in a line, referencing the titles, that there's too much extraction by an essential infrastructure. And more than that, I think the story I seek to tell in this book is a story about how there was this promise that the tech platforms would be this extraordinary catalyst of economic activity.

This platform for what, broadside wealth. Basically, they'd make everybody rich. And also spread democracy, also, you know, give a place for creators to do their thing and have their way.

And, you know, I think things did kind of start out that way, but that they've changed and that the platforms have become, in some ways, the most sophisticated tools of wealth extraction and other resources from us, from humanity, ever designed. And so I think that, I guess, I'd define as the problem, if it's a good way to put it, which triggers down to a lot of other problems.

I think maybe what makes this different than some of the other monopolies historically is just how expansive it is. I mean, what do you not do on a platform right now?

Like, consider, think about your life. And like, when you buy stuff, meeting people, keeping track of your friends, it's all platformized. And so you have these kind of essentials to commerce that are, you know, mainly monopolies and even if they're not, are clearly extracting a large amount––not only of wealth from every transaction that happens, but also of the most important data, time, attention, and so forth.

So I think that makes it a particular kind of problem. The contrast I'd have is with historical forms of infrastructure. You know, like the roads or I don't know, electricity. You know, they're also pretty important, but they didn't sort of take from everything.

There's more than that. But those are––so that, that's my lead-in at least.

Alan Rozenshtein: Talk about one of your main case studies, which is Amazon. All of us are familiar with Amazon, which I think is part of what makes such a good case study. Walk us through how Amazon went from basically a bookstore to this massive platform that controls a non-trivial amount of commerce in the country and quite possibly the world.

And in particular, at what point do you feel like it went from a platform that provided a very useful platform service to something that was specifically extractive? And I'd love to hear your theory of also the, of what makes something go from, you know, a platform fee, which I think we'd all concede you need, because platforms have to make money to something that is extractive in the kind of normatively bad sense.

Tim Wu: Yes, no, that's a great story.

I mean, I think the story of Amazon is in so many ways, the story of the Internet's promise, and in some ways it's betrayal. Back in the nineties, early thousands, there was a vision of the internet very powerful vision that suggested everyone would be able to open their own shops online.

Anyone with some kind of talent would be able to pursue it and make a living that way. It was going to transform the economy. It was the age of ‘small is beautiful.’ I read, there was a book “Small Is the New Big” that came out.

And the vision was one of an army of Davids, in the phrase of Glenn Reynolds, who's a law professor and a blogger. The Instapundit.

An army of Davids was going to defeat the old––the Goliaths of the industrial age in this new kind of age. And I think it was very inspiring vision.

And in some ways, I mean at first it was eBay that kind of people had in mind. And blogging. But then later, especially in e-commerce, it came to be Amazon in its marketplace.

You know, the Amazon marketplace began just as a place for used books, but gradually grew into every form of commerce. And it was different than Amazon's original business plan because it was Amazon inviting all the sellers of the world to come and sell their goods. And there was a period where honestly, it delivered on that promise.

Around the year, say 2012, I guess I want to say maybe, early 2010s. There was a period where Amazon marketplace was cheap. It was easy for people to set up. The fees were low, maybe, you know, depended, but could be as low as between 15 and 20% of your sales. And it inspired, you know, thousands, maybe tens of thousands, hundreds of thousands of people to start up little shops online. And sparked this kind of dream of, you know, the army of Davids: people quitting their jobs, experiencing new freedoms, living wherever they needed to. So that was the, in some ways the high point. I think what changed, and, you know, we talked about the extractive phase, I guess, is once Amazon had sort of conclusively beat eBay.

Once they had, in economic jargon, kind of established a monopoly on both sides of the market. They had all the sellers there, most of the buyers, pretty locked in with Prime. There's sort of a seller version of Prime too, that people were locked into. They had the best fulfillment services. That's when they started to turn the knob on the fees. And just turn it and turn it.

Add this fees, add that fees. I think the master stroke in this development was their development of the placement fee––they called it advertising––the sponsored result. So I don't know if you have been on Amazon lately and looked for something, but first things you see are all sponsored results.

Alan Rozenshtein: Yes. I find that extremely annoying.

Tim Wu: Well, that little thing––which actually makes search worse, obviously, because it depends on who's paying for the result––started earning more and more money. Went past 10, 20 billion.

Last year, 2024, it was in the high 50 billions, like $57 billion that they earned from just those ad placements. So––which, by the way, I'll mention is double the revenue of every single newspaper in the world combined, just based on those little things.

And I think it's been a real change for what it means to try to run a business online. And, you know, people still––it's still very useful. Some people still make it, a lot of people have quit or gone bankrupt, but you know, overall they still do it.

But I think the significant thing is what it meant for the structure of the economy. Because this idea that Amazon was sort of going to liberate a whole class of sort of small businesses and medium-sized businesses really started to change, and the direction in which the money is flowing went into the platform.

So that's kind of a long story, but just a sign of how the internet shifted from this place of flourishment into one of extraction, as I said earlier.

Alan Rozenshtein: So I just want to stay on this for a second, because, you know, I think the idea of extraction is a very powerful concept that you use, but I will admit it is one that I am still having trouble wrapping my mind around.

And obviously there's not going to be a simple test for when something is, you know, the cost of doing business versus extraction. But I do think it'd be helpful just to focus in on this. Theoretically, what factors do you look to––maybe, is maybe a fair question, a way of asking this question––to know when something goes from, look, this is just the price of setting up a platform or a middleman or a whatever, right? Which everyone loves to hate, but we all recognize that they're important. Versus, this is now becoming extractive.

Because that, to me is the key conceptual hinge upon which a lot of the account in your book relies on. And I'd love to get your sense of how you think about that theoretically.

Tim Wu: I'm going to give you a sort of more visceral, and I'll give you a more technical answer. Okay?

So the visceral answer is, as a buyer, you experience extraction when the seller is undisciplined in their market power towards you. In other words, they can charge whatever you'll pay. You know, an example might be is when you suddenly really need to get somewhere and, you know, that day, and you have to buy an airline ticket at the counter. And they've got you.

Or, you know, there's, maybe there's a drug you need to treat cancer, you know, the, a rare cancer you have. You really, there's no discipline. It's kind of what you're going to pay.

The more technical answer––and where I started, where I got the phrase from, is for microeconomics. So in microeconomics, people talk about monopoly extracting rent. So a rent extracted by a monopolist. And, you know, the technical answer is that it is the amount of money you're able to extract based on having monopoly power, having lack of some kind of competitor or something else disciplining you.

But I think both of those ideas are right. When is a turning point? The turning point, and I think we all feel this, is when you have the sense, you know, a good example is like you really want to go to a concert. And like Ticketmaster or a secondary seller is, you know, basically got whatever pricing power they need over you.

That again, I refer to as a visceral sense. And I feel like our entire economy has become more and more like that. And I feel that business has changed its approach. One of the things I do other than law school is teach at business school. And I feel like so much of business school teaching is now trying to find points of extraction, you know, the place where you've kind of, I think is another metaphor. It's like in poker when you've got the best hand, you have the nuts, and you can like, you know, really take at that moment.

That has sort of become, I think, business strategy in our time. It's like, where can I find that point of extraction and really take it?

Kate Klonick: So I, I think that this term is powerful. And it also taps into kind of the idea of, you know, ‘data is the new oil.’ A lot of other kinds of ideas that you hear about in both privacy and internet law around kind of this extraction element.

It kind of seems to me like what you're describing, to a certain extent, is coercion, or kind of a mismatch in power.

I'll give you an example of what strikes me as a great example more than like the ad revenue thing for Amazon, and you can tell me if I'm understanding this correctly. But for example, I will get these notifications from Google where I have had a, my main point of doing business for my, is my Gmail account, for the last 20 years.

And I will get a notification that I'm running out of storage space, and that all of my storage will be shutting down if I don't pay $3 right now. And it's for, it turns out it's a monthly fee. Now, I could go through and try to figure out why all of a sudden I'm running out of storage. I could delete old emails. I could like do a fi––you know, I, and I do occasionally do this, but it's also just easier and more convenient.

And this ties into some of like your other types of ideas and things like that. It's easier and more convenient to just pay the $3, right. It's a cup of coffee, right? It doesn't even, it doesn't even matter.

Is that kind of, to a certain extent, what you're talking about with extraction? Does it match with the idea of convenience?

Tim Wu: I mean, I think convenience has become the strategy par excellence of making sure people don't quit. And just having, raising enough costs or making it enough annoying so that it aids the lack of discipline.

But what you said earlier on is exactly right. This book is fundamentally about power. You know, there are a lot of definitions of power. I feel like an important one is the idea that it is the ability to make someone do something they wouldn't otherwise do.

And you know, I think in our heads, you have some kind of price you want to pay for, you know, most things. And then there's a maximum price you'll have to pay. You know, there are the privacy terms you would like to agree to, there's the ones you'll agree to 'cause you have to. There's like, you know, what you'll do, and then what you'll do when you have a whole bunch of data.

There's like, you know, using Gmail, your ideal, and then what you'll do. There's how much time you'd like to spend on the internet and there's how much time you end up really spending. And in many ways, when you think about your life, it's worth asking, how actually do you feel in control of your own life?

As opposed to your actual preferences versus you feel like you do this stuff 'cause you don't really realistically feel like you have a choice. I mean, you could spend all your time shopping for stuff off Amazon and trying discipline it. But, you know, I'm one consumer. Why am I going to do that? I actually have abandoned Gmail quite a while ago because I like, like having my emails stored in Switzerland, encrypted, whatever.

But most people, I think that's just like too much. And that feeling of powerlessness––and I, you know, it goes beyond tech platforms. Housing is another area where people, I feel like, the age of extraction is upon us. And we may get to that later.

We just, you know, I think it is the business model of our time. And I contrast it, with what I think is older, maybe better business model, which is you try to improve your product and deliver value.

And that, you know, that was the first half of the internet story. You know, Google search, Amazon e-commerce, you know, these are brilliant, incredible products. I don't know, Facebook, so-so.

But the other ones are, they're incredible, amazing products. But the first half of their life was building a better product. The second half of their life has been extraction.

And that's where we are today.

Kate Klonick: Yeah. And we're going to get to the, kind of, called the enshittification of things in a little bit. Alan and I are both excited to talk to you about that.

But I kind of wanted to go back to this idea of power. Because I do think it was your last book, “The Curse of Bigness,” spoke a lot about this. And was, kind of became kind of the manifesto, so to speak––along with, you know, your colleague and former FTC Chair Lina Khan’s––kind of writing around both her note about Amazon Antitrust Paradox, and her kind of subsequent writings with Zephyr Teachout and things like that became kind of part of the lexicon of the neo-Brandeisian movement, the formative texts.

And they, a lot of those were about power. And they were about harnessing an idea of power that Brandeis talked about, that was both kind of elegantly an economic power in how it translates into a democratic power. And so I––and I think, you know, that I've like written about like some of this and kind of, in particular what I wanted to kind of talk about was the first chapter of the book, which I, which is so interesting to me because I have also written a chapter trying, that starts off with you defining the word platform.

Which I also wrote, like spent an embarrassing amount of time writing what was ultimately three pages defining platform in both the economic sense and in the free speech sense. Because they are so, interestingly––that we, it's so interesting that we use the same word, right. They do reference essentially the same thing, but all of the logic and kind of a lot of the things are not copacetic ideas, necessarily.

The economic arguments that flow from defining platform, and the ideas and terminology, are very different in how they cash out in many ways in antitrust law are very different than the logic and the rules that you would follow if you followed kind of a lot of the, like, from John Stewart Mill to Meiklejohn, the ideas down the road for free speech platforms, right?

And so I'm actually, I'm with you on the Amazon stuff. I'm totally bought in on the commerce stuff and the idea that a lot of these platforms have this. But where I fall apart, and where I've often struggled with broadcast monopoly definitions and things like that as well, is how we marry these ideas––that are so kind of seemingly close together, but actually very disparate, and have very different solution sets––for ideas of publishing broadcast speech and ideas of competitiveness.

And I'm just kind of, I'm wondering if we can actually, kind of, maybe have a moment to kind of talk about, okay––so let's assume that we totally buy into the idea of extraction in the Amazon context, but how do we buy into that idea in other types of areas that are speech platforms, right?

That are not selling us things in the traditional economic sense, but are using our data, in other senses. And are controlling our speech, and having other types of anti-democratic effects that are very different than the anti-democratic effects or the lack of empowerment that a traditional commerce platform has.

Tim Wu: Yeah. It's a great question. And at the intellectual heart of this book is the subject of platforms, absolutely. And that has been a life-, like, a fascination of mine since I started in academia and in the net neutrality days, honestly.

Part of this book is––in some ways this book is, in quiet ways, a net neutrality book. About just about everything.

I started writing this book, started writing this book with a sentence. And I thought I would write this book out of the sentence, which is “Everything has to happen somewhere.”

The sentence is still somewhere in the book, somewhere in chapter two. But I was thinking everything––whether it's speech, whether it's commerce, whether it's conversation, whether it's meeting people––everything has to happen somewhere.

And very often we, you know, focus on the people who are speaking or on the, you know, things are being sold. But the places where it all happens, in many ways, shape and define a civilization.

And so you're not wrong. What we're both right about, and what you're right about in the First Amendment, free speech, and commerce context, is the stakes are very high.

Last week with my family, we were on vacation in Rome. And when you're in Rome, you go to the Forum. And you know, there it was, the––or in some ways, along with the Greeks, the original platform.

They had this big giant area in the middle of town where they had commerce. They had the judiciary hanging out there. They had their government, they had their religious rituals. They had, you know, this is where Cicero did his speeches. This is where people bought and sold things, is where, you know, they elected people. And it's very normally hard to say exactly how should that be, but it's very clear that how that platform is is going to inform what kind of civilization you have.

You know, Roman civilization isn't what it is without the Forum. You know, the town squares, the town halls of various societies, American Main Street, you know, all these traditions, and Main Street without stores and so forth.

And I have a lot of theories, some of them not in the book, as to––in a way because it's too much, but I, I feel––I have a couple of allusions to this––I feel, for example, you need to have some kind of open platform to have society with more than two classes. In other words. I think if you only have extremely powerful owners and employees or serfs or slaves, you, you don't need platforms, because there's only a small number of people who buy and sell.

But if you want to have independent sellers, farmers, artisans, kind of people who started the American Revolution, they need to have a place to sell. And if you want to have a democracy, you need to have a place people can speak. Now it can be more virtual, it can be, you know, news or, I mean, and it can be newspapers, but someone has to be able to get the newspapers to people and so on.

So, you know, there's a lot in there. But what I think is exactly the right thing, and I think anyone who understands power understands this, is that the rules of the central Forum, for us, the rules of the central platforms, once again, define how open or how closed the society we live in.

Alan Rozenshtein: So I want to turn to the solutions that you propose, but I do want to stay on the diagnostic point just for a second.

And Kate mentioned the term enshittification. It’s coined by the great writer Cory Doctorow. I think he actually has a book that just came out called “Enshittification,” setting out his theory about this.

Kate Klonick: Oh, Tim and Cory go way back.

Tim Wu: Yeah, that's true.

Kate Klonick: Didn't you go to elementary school together?

Tim Wu: We did. We went to elementary school.

Alan Rozenshtein: So, so you use that term and I, you know, obviously I think you co-signed the diagnosis.

And on the one hand, I definitely agree that there is some very non-trivial amount of enshittification, right. I think you, earlier you mentioned the fact that to buy any piece of crap on Amazon, you now have to scroll through just endless amounts of sponsored, these sponsored posts. Very annoying. People have talked about how, you know, maybe Google search is getting worse.

On the other hand, I worry sometimes that the diagnosis of enshittification––which I think is important to your broader point about extraction, I think those two things go hand in hand––is sometimes a little vibes-based, at least for my preference.

You know, at the same time that I recognize that a lot of the services I use, they feel like they've been getting worse, and in some ways they have, at the same time, others seem to have gotten really good. You know, YouTube today is at least for me, a kind of inexhaustible source of really cool nonfiction content.

And of course, we haven't even talked about––and we should at some point 'cause it also raises, it also has a prominent place in your book––AI. I mean, there's a lot to complain about, but at the same time, on many subjects, I can talk to what is effectively already an artificial general intelligence, like, in my pocket, essentially for free. You know, which to me is the opposite of enshittification. Like maybe a world-historical improvement to humanity. Right? It may also kill us all, which is a separate conversation down the line.

But just to me, at least, it is not obvious that enshittification is the dominant reality. And I'm curious how you think about it, in particular, maybe more analytically, how you make sure that any claim about enshittification––or the opposite, en-good-ification––is grounded in facts rather than in vibes.

Tim Wu: Right. That's a good, I mean, this might sound a little defensive. It's actually Cory's term, not––but I do have a very, I have a lot to say about this topic.

So first of all, leaving the diagnosis question to one side for a minute, I think the reason that in enshittification is such a visceral thing to people like Cory and myself is I think that we were––people who were young, who, when we were young, were very optimistic and excited about technology and the idea that always gets better. And, you know, that new gen, new versions of things will be better than the old version.

I think in that in some general sense that is in some ways the definition of being a progressive, that you believe in, you know, future getting better than worse. And so at some level enshittification, if that's the word, or things going back, is a warning sign that something's wrong, I guess, if you're a progressive.

You know that––now, this may be a very idealistic thing, to think everything can get better at all times. And, you know, every day will be a better day. And I admit there's almost like an article of faith to it.

But if someone isn't, you know, sounding the alarm when things start just backslide, you know, that's a problem. And I don't only mean that for, you know, I don't only mean that for technologies or websites. I also, you know, mean that for our democracy, for our, you know, products, for the things we depend on.

And if I can speak also to why the concept of things going backwards is very important to me, this book is actually the third in a trilogy. And the first book, “The Master Switch,” was all about the long cycles of technological development.

And one of the things that I noticed from long study of technologies like radio and the telephone and film and so forth, is that technologies do––I didn't have the brilliance of Cory to come up with a great phrase, but they do go through these predictable life cycles where technologies, you know, burst onto the scene, there's all kinds of people using them. Then they up and consolidate into just a few players. They often have kind of a golden age, then, for a while. And then they start to stagnate, decay, and become very defensive.

And it's––that phase can last a very long time. Like, you know, we're trying to look at this microdiagnosis of whether a website is bad, but––or good, but, you know, for example the AT&T monopoly was good for a while, but you know, lasted for 70 years. And the last like 30 years, there were no progress made. A company like Boeing is like stuck in some kind of nadir.

And so I think for someone like me, I know it's a very micro-phrase, but the macroeconomic side of it––which is basically monopoly stagnation––you know, a company became in coming so comfortable in its position. I mean, that's what this book is really about, at the sort of more theoretical level.

This book is about looking for those signs of things, but it's really about the challenge of having important sectors occupied by monopolies who do not need to prove themselves anymore and just think of better ways to get money and data out of you.

And you know, look, in some ways, you know, it's about tech because it's the most visible. It gets worse when you go to other industries. I mean, airline industry, I could is another example. Or you go to other countries where, you know, they've just had monopolies in place forever. They don't change anything. And everything sort of gradually gets worse and worse.

And so I'm kind of fighting for the soul of––I'll be dramatic, I'm fighting for the soul of America here. Which is a soul of progress and things getting better and people complaining when things get bad. And trying to ensure some kind of succession. Like what you really need is when things go bad, it needs to be possible to challenge them.

You know, I mean, AT&T, at one point in its history, was such an impenetrable fortress that took the government to break 'em up before you actually had things like the internet show up.

So it is in the service of this idea, the progress, that people like Cory and I are on the lookout for signs of monopoly decay and stagnation.

Did not answer your diagnostic question. But I can add, I would answer it by mono-, by sustain-, I mean, if I were acting it economically, I wouldn't be like, oh, there's bad vibes.

I would say, this company, you know, has held a monopoly position here, 15 years, with little signs of improvement, and seems be able to destroy all their competitors. You know, something doesn't seem right.

That would be more my way of looking at it, but that's not exactly as colorful as in justification.

Alan Rozenshtein: Okay, so let's now turn to the solutions you propose. And you're a big fan––and this reflects in your government work and in your academic work and your previous writing––in structural solutions.

So let's just start by having you just describe what makes a solution a structural solution rather than a, let's say, ex post, you know, ‘let's regulate the behavior’ or ‘let's tax and redistribute.’

You know, what kind of structural solutions are you talking about? And why do you think the structural path is the way to go, rather than the, ‘look, let the market do what it's going to do and then we will just tell the companies, you know, how to behave once they have achieved whatever level they achieve,’ right?

Tim Wu: I mean, weirdly enough it comes from faith in assertive market or a competitive process.

I mean, the structural solution or approach to problems is fundamentally an anti-monopoly approach. It suggests that you'll get better performance out of a market or a, an industry that has multiple players who fight and discipline each other. And if someone sucks, they lose market share and get beaten. And so they're under some kind of pressure, you know, like an athlete training with other athletes, to actually stay good, get better.

What you mentioned, YouTube, I think YouTube is under a lot of competitive pressure, which is why it needs to get better, find its own niches and so forth.

You know, a company like Facebook doesn't really have to do anything to hold onto that friends and family kind of, you know, sector it's got. And you, no one can leave it because then you say goodbye to your relatives.

So, that is what I mean by structure. I mean, you know, some, first of all, some ongoing competition and discipline within the industry or sector, where, you know, it doesn't have to be a hundred companies, even 10, but it's kind of, you know, more than two, ideally more than three, who are trying to call each other shots and take advantage of each other's weaknesses. So it's actually kind of a competition. And that's number one.

And number two, the possibility of succession. Industrial succession. A little bit like the TV show. But the possibility that something better can come along and actually replace what was there before.

That doesn't have to happen every year, but it needs to happen––there needs to be the possibility of that happening for a healthy macroeconomy.

Alan Rozenshtein: And just to expand on that. This is the, if I'm following you correctly, the Kronos effect that you talk about, the idea that ideally, you know, an incumbent will want––like Kronos trying to eat his children––will want to sort of consume the next generation.

Tim Wu: Yes.

Alan Rozenshtein: And we need to make sure they can't do that.

Tim Wu: Yes, that's right. Their natural instinct, I think left untouched is to––despite what they'll say, I mean, tech companies always will say, oh my God, we're so excited about this, that, and the other––but, you know, nobody wants to be replaced.

Kate Klonick: I actually kind of want to switch slightly, which is that we're in this moment where the White, where there's the White House is taking golden shares in Intel, we’re steering TikTok to political allies, right?

We're using regulatory power in this, in these nakedly political, no question like corrupt ways.

Do we really want to give, do we really want government to have more power over platforms? I mean, this has been kind of a little bit, one of the questions that I have, I've struggled with in the past, generally. And it's one of the criticisms I have of Europe's approach. Even though I do admire their ability to actually get regulation done, in so many ways.

But I guess it strikes me that really we have this problem actually in the technical sense with individuals, with these oligarchs. These, the Musks, the Bezos, the Ellison, the Horowitzes.

And their power isn't reachable, I don't think, with antitrust reform. I don't think that there is antitrust solutions to the structure of capital that funds Elon Musk.

Like, I think that there is an old-fashioned actual answer to that, and it is more taxes. And it is, you know, it is more taxes for the wealthiest. And that this is actually, I––at the end of the day, the progressive reform here is like actually based in socialism or more socialist tendencies.

And I know that's a dangerous word in general, but like, I can't help but think that like there's nothing you could do anymore to a lot of these companies from an antitrust perspective that would, that would harm their massive amounts of wealth.

They're all billionaires in the multi sense. And the power that they're exerting is not even tethered to their companies anymore. They could walk away from their companies. And they would still have this amount of power. I mean, which is just like, you know, rivals the GDP of many European states.

And so, I'm just very kind of curious like, why not just taxes? Why are some of these questions about antitrust? Because a lot of this just strikes me as solvable through something more direct. But maybe it's just that we don't have an appetite in the United States for taxes.

Tim Wu: No, it, well. It's a great––well, it is, this is the right debate to be having, I think. And it's a great debate I would sort of label as, what do you do about private power?

You know, the Constitution was very careful and concerned about public power and tried to separate it, horizontally, vertically. I don't need to do a Con Law 101 on this on this crowd or this gang.

But private power, which is a newer phenomenon––you know, when you think about public power, you read Aristotle or Cicero to, they’re all about tyranny and dictatorship. When thinking about that for, you know, more than 2000 years, problem with private power is only, you know, about 150 years old, maybe. You know, the idea of corporations that have maybe 300 years if you count the, some of the British––but whatever.

It is a newer problem. And I think we're trying to figure out the right solutions. To return a little bit to the last question because I think it's related. You know, I, with a sort of anti-monopoly background and a belief in structural solutions, you know, have been of the view that decentralization, distribution of economic power, is the best way to have, to keep it in check.

And, you know, the entity that can do that, the only entity powerful enough, is government, to try to break private power. So I believe in kind of a separation of powers which first of all has government against private industry, set up against private industry, and then tries to divide public power away from monopoly. And then hopefully let it take care of itself.

So what you said, maybe––there's a lot of what you say is like, you know, are you really serious about any of this if you're not serious about money. I guess you could put it that way. Or maybe taxes are the right answer. So, I think there's something to that. I, there's a reason Brandeis was obsessed with banking and finance.

And, you know, people who are interested in banking tend to––and financial regulation––you know, tend to have this deep instinct about the underlying power that is conveyed that way.

Now it is not clear to me exactly how, you know, control of credit and finance directly affects the situation. But I, there's an intuition to it. But the other question you asked, which is a hard one, is like, you know, is antitrust ever really powerful enough to handle these kind of problems?

I have some confidence that it can be. I guess I am relying on the history of Theodore Roosevelt and FDR and the high points of antitrust where they, you know, broke Standard Oil up or, you know, the periods where they, say, in more recent times, humiliated Microsoft or broke up AT&T. So those struck me as measures that did affect those businesses pretty profoundly. And their course.

And my faith or belief is it's easier to pass those laws than it is to pass high levels of tax. Now we obviously haven't been able to raise taxes. In fact, we repeatedly lowered taxes. So it's a question of which you think is less likely.

I mean, part of it just seems, you might just say it's hopeless. Government doesn't have power.

But government does have power. But it has to be used.

Alan Rozenshtein: Let me then follow up by asking about state capacity to do whatever reforms. Some will be structural, some will be ex post, whatever the case is. Now, you know, you have a long history in government. Most recently you were senior advisor to president, President Biden, on the National Economic Council. You've been involved at the FTC.

I mean, I think you probably have, certainly within the legal academy, as good as anyone of a sense of what the government can achieve when it is operating, sort of, at full capacity, as it were. And so the state capacity question, I think, has two parts.

So first is, let's assume the government is operating as well as it can. Can it in fact be effective, given the sort of size and complexity––and again, just to return to AI, the rapid pace of change of, let's say, the technology industry?

And then the second question, and this is kinda following up on, on what Kate said earlier, the government is not always operating obviously at full capacity. You know, what do we do in a situation where, whether it's this administration or future administration, we have a government that is both not technically competent and also is very prone to abuse whatever regulatory powers we give to it.

So it's kind of a state capacity question on both ends, sort of both in the optimistic scenario, but then also in the pessimistic, slash, these days, somewhat realistic scenario.

Tim Wu: You know, I think it's become difficult as a law professor or as anyone who's a policy person to talk about, like, what should we do?

Because then you have to specify, are we talking about this Congress? Or like the Congress we've had for the last 20 years, which doesn't actually pass new regulations ever? Or are we talking about, sort of, you know, a 1914 Congress? And, you know, what rules are we playing by? You kind of introduced that in your question.

If we were, you know, in a world where we're talking about the Congress of the thirties or the 1910s, like a legislature that studies problems, thinks about them, and enacts solutions, I mean, I think in that world I would say the government can do a lot. And, you know, just take a few exa––I mean, the government, there's no real upper limit if we're assuming a government that is operating. But we're seeing some of this in this administration.

I mean, going back to Weber. I think it was Weber who talked about the state having monopoly on the use of force. I mean, the state is still this uniquely powerful entity. The United States is the largest market in the world. In some ways, the current president has shown that government is not feckless, but is incredibly, you know, terrifyingly powerful. And if you had a Congress that did whatever you wanted, you know, I think I would go through that route.

In this world, and I think part of the problem, part of the reason that when I was in government that we went the path of antitrust as opposed to thinking about, you know, how can Congress handle all the platforms, was this fact that when you're in D.C., ‘leave it to Congress’ is a euphemism for, you know, shitcan that.

I mean, people will say leave things, we're going to leave this to Congress, just means we're not going to do anything, right. And so we wanted, we thought that the power of the tech platforms had gotten too strong.

That's why we appointed Lina. We appointed Jonathan Cantor. Unlike this president, we didn't tell them who to sue. You know, they brought this antitrust campaign against tech platforms. And you know, something got––happened. Meanwhile, Congress did, you know, play around with a couple bills. Amy Klobuchar wrote something that was pretty good.

But, you know, as usual didn't get anywhere. So, that is one of the reasons we've taken the structural path. I actually prefer structure and I, as a matter of political philosophy, believe in structural solutions over ‘tax and redistribute.’ And I can talk about that later.

But partially it was the desire to have actual executive action, as opposed to spend four years talking about Congress.

Kate Klonick: Yeah. So that kind of brings us to our kind of our closing question, which is like, according to this book and according to––so I also love that I didn't, hadn't completely pieced together that you had imagined this as the third in a trilogy, but I love that. And so it would be The Master Switch, The Attention Merchants, and then this, I'm assuming.

Tim Wu: Yeah. Yeah, that's right.

Kate Klonick: And these do fit together really beautifully, as an argument and like a vision of how you kind of see the world.

So at the end of your trilogy, what is the, what is your escape from Rivendell? What is your, what is your move to––where are we all sailing off to in a boat?

Like, are we going back to kind of rebuild the Shire? What's going to, you know, what is actually going––sorry. I'm like, really deep in the––

Tim Wu: No, that's not bad.

Kate Klonick: ––Tolkein references here, revealing my inner nerd, but I feel like I'm probably in good company. I was taking a risk.

But seriously, what is your vision here of, kind of, what this looks like? What does Amazon look like if it's a fairer Amazon?

Tim Wu: I have through the course of this trilogy, you know, come to be increasingly decided in my own political philosophy and views. And I'll answer abstractly first and then go to the individuals.

I have come to believe a few things. You know, first of all, that I do agree with Schumpeter that technology and economic growth are synonyms.

On the other hand, we've all seen the kind of disruption and chaos that can be caused by it, but, you know, it's not as if it's an option. It's, it is the sort of vital force in our lives.

I've come to fear size and centralized power, and think that, you know, the purpose of much of government is balancing a power. And most of the design of government is trying to create this sort of structure that maintains––whether it's private or public power, become kind of devoted to that line of thought.

And I've come to think that the long battle between communism and capitalism obscured the fact that both of them were highly, systems of centralized power. You know, Stalin ran Soviet Union almost like a giant version of General Motors. Except for he was the CEO and if you––instead of firing you, he could send you to Siberia.

I think both those solutions of absolute, laissez-faire, brute monopoly, capitalism, and centralized communism are disastrous over the long term. You know, they have their moments. They seem really exciting on the way up.

You know, my life goal, project, is to turn us back towards balanced economic power and decentralized solutions. So what does that mean a little more specifically, and particularly for platforms?

Somewhere near the end of the book, I say that the platforms in our time are suffering from main character syndrome. They have forgotten that they're supposed to be the hosts, the catalysts, the, you know, parts of our society to make everybody else great.

They've kind of inserted themselves in that role. They've insisted that they're the ones who should invent everything. You know, when you read all their arguments, they're like, we need to make money so we can invent this, that, and the other. As opposed to, you know, being the place where people deploy their new inventions or think of new things.

They're like a city square gone mad in some ways. And I think the goal of our times, I think––you know, what do I want Amazon to be? I want Amazon to be a low-cost facilitator and host for commerce.

There'll be a place where someone wants to start a store, they can, you know, pay a decent amount of their, of their revenue to make it happen, but not be crushed and extracted and have everything taken from them.

And I want to live in a society where, more broadly, people think, not in terms of how do I get in a position to extract, but, you know, can I invest and see some return on that investment? What kind of sense of economic liberty do I have? Am I going to invest in my career and my education and get something out of it, or is it, you know, all about just trying to find, and being in the right place at the right time?

So there's a lot in this answer. But I, you know, maybe a short, legalistic version is I think the platforms need to be like the utilities of other ages. You know, they need to be more like the electric system. The electric––like, think how amazing an electric system was, and in some ways how humble.

It sat there, it provided all the electricity. On top of that, people invented toasters, televisions, computers, you know, the internet. Everything was invented on top of that platform.

And that's what I'd like the internet platforms to be. And that's the kind of agent I'm looking for. So, in a strange way, this book is a little optimistic, or at least it has an optimistic hope, that if we can get the platforms under control, we can have a flourishing society with a lot of builders.

Kate Klonick: Okay. So I wasn't going to ask a follow-up question, but because you brought up electricity and utilities, I have to go there. Which is something that has also been in the background of a lot of what I've been thinking.

Which is that if you want platforms to be utilities, that is the opposite of an antitrust solution and a competitivesolution. Again, that is like a––that is a, that is a solution that they become highly regulated entities that don't have competitors. That there's a few big ones and we regulate them.

And so that is actually, you know, and Sabeel Rahman has written extensively about this, and I love his work in this and I actually agree with a lot of it.

If we do imagine some of these platforms to be so powerful as to be not Standard Oil, but, you know, but electricity––like, that is their power––then those are, I actually think that those are a different set of solutions than competitive principles.

Tim Wu: They are two different traditions.

I reject the idea that they're incompatible. I am very familiar. I––yes, I understand the idea they're different.

I think they should have to live by certain rules of the game given who they are. I think they should have to obey platform neutrality. I would prefer it if they don't sell on their own platforms, if they're confined to that role as sort of structural separation.

But I also think, you know, this may be contradictory, that could be competition between them, I don't imagine it's going to be like 10 actors. But I imagine, I’m a believer basically in both. You know, I spend a lot of my career thinking about one or the other.

I reject the idea that they're opposites. I'll just put it that way. I think they should have rules of the game. Public callings, common carriage, something along those lines.

I do think, and I will recognize it is true that regulated entities, AT&T being a great example, can sometimes abuse that, but we do desperately in our time need to stop the extraction of the platforms. And that's where I come down.

Alan Rozenshtein: I think it's a good place to leave it off. Tim, thanks for writing this really interesting book and thanks for coming on the show to talk about it.

Tim Wu: It's been a great pleasure. Thanks so much.

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