Big Tech's inside job

Received wisdom in the tech world is that big, legacy companies are bound by inertia. The more established they are, the more they get set in their ways — and the more vulnerable they are to disruption by a nimble startup. Silicon Valley was founded on the principle that newcomers can move fast and break things — leading to world-transforming innovations.

For the most part, though, that's not how it works anymore. Last year, a couple of economists found that venture-capital-backed startups almost never lead to a new company listing on a public stock exchange. They don't replace the tech giants — they just get bought by the tech giants. That's been true in Silicon Valley for at least a decade. And the vast majority of startups have been acquired by the same five companies: Alphabet, Amazon, Apple, Meta, and Microsoft.

Ever since Joe Biden was elected, the Federal Trade Commission and the Justice Department have been looking into tech mergers and acquisitions for evidence of antitrust behavior. Have the tech giants been illegally short-circuiting competition by buying up their rivals? It's a really good question — but it may be the wrong one to ask. A new paper by two leading scholars suggests that these days, Big Tech doesn't have to resort to buyouts to crush aspiring startups. Instead, they're using their considerable cash and soft power to defang potential rivals from within — a process the scholars call "co-opting disruption."

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