Google is not a simple company. To some extent, it rather looks like a state. By controlling the way we use the Internet, it seems to rule the state of the digital world. Indeed, Hal Varian, Google’s chief economist, holds as much credibility as a politician nowadays. While he publicly defends open access to Internet, his company monopolizes almost all search and advertising in the web, stifling innovation. Moreover, he apparently distrusts democracy, just like some politicians nowadays. The US congress has recently called Google’s chief executive to testify about privacy and political bias, expressing citizens’ concern about its dominancy. Mr Varian, though, considers that the company’s enormous user base provides with more than enough support.
Personally, I have to admit that, before Hal Varian was interviewed this Wednesday in Room for Discussion, I was expecting a different person. I imagined that, as a member of a technological company, he would be a nerd, that is, one of those stereotyped computer scientists like Steve Jobs, Mark Zuckerberg or Larry Page. However, Hal Varian is essentially an economist. Known for his bestselling textbooks about microeconomics, he has contributed to the field of Information Economics. As he recognized during the interview, he keeps saying what he said in 2009, “that the sexy job in the next ten years will be statisticians”. All things considered, in our society increasingly driven by massive data, working for statistics and data science means working for the future.
Asked about the impact of the fourth industrial revolution, Mr Varian looked overall optimistic. Understandably, most of the benefits of automation and digitalisation will end up in Google. Nevertheless, he pointed out that small firms can also piggyback on the access to relatively advanced technologies at lower or no cost. Additionally, users are able to complement their education with plenty of instructional content from open platforms, such as YouTube. In this sense, the fourth industrial revolution would contribute to the reduction of inequality.
Concerning the loss of manufacturing jobs as a result of automation, he declared not to be worried. Whereas technologies are increasingly replacing repetitive or algorithmic jobs, both manual and intellectual, other emerging sectors demand for brand-new jobs, such as data science. Moreover, due to ageing population, the workforce relative to the whole population is decreasing. Therefore, in response to the labour shortage, salaries should increase, according to Google’s chief economist.
The audience questions reflected one of the most important fears among citizens: the lack of competition in the digital world. The tech giants, such as Google, Amazon, Facebook and Apple, are said to be limiting the progress, given its surpassing dominion in their respective markets. Obviously, Hal Varian thinks that Google’s excellent performance is due to its own success and claims that “there is competition in the digital world”. Markets do not need such a desperate justification to be recognized as competitive, and there are generally no doubts whether competition is or not the case. Rephrasing Hal Varian’s, I would say: despite Google, there is some competition in the digital world.
By giving some examples, Mr Varian argued the existence of competition in the markets where Google participates in. On the one hand, Google’s lucrative activity represents only the 6% of its total amount of clicks, that is, the commercial clicks; whereas the remaining 94% of clicks are organic clicks, and therefore yield no revenue. On the other, several firms have emerged competing for the commercial clicks: Amazon, Travelocity, Booking.com, etc.
Another example of fair competition for Hal Varian is the smart speaker, in which both Google and Amazon are engaged. But, of course, as economists, we know that a duopoly is far from healthy competition. In the industry of streaming videos, Netflix and Amazon are challenging Google’s dominancy through YouTube. In a poor analogy, he compared competition with the mobility in the audio-visual production sector, such as the series Game of Thrones, whose film locations have been moved around the globe.
For Google’s chief economist, acquisitions act as an incentive to innovate, not to increase market power. Without mentioning the antitrust cases that fined Google for abusing its dominant position (last one was published on the same Wednesday), he only referred to positive facts, such as the synergies existing in using the data from Google Street View and Google Maps to design the autonomous vehicles. Concerning the European privacy legislation (the new regulation called GDPR), he admitted that there is a conflict between data mobility and data privacy. But, in his words, “Google is the best thing it ever happened to privacy”, meaning that searches in Google are anonymous and perfectly secure.
To sum up, let us consider what has converted Google into a successful, nearly-omnipotent firm: data. As Hal Varian recognized, data needs refining, in the same way as petroleum does. Both are strategic goods in our world, but for Mr Varian it is not important who owns the data, but who controls the data, referring to its access, use, restriction and regulation. Data are a non-rival good, that is, no matter how many people consume the data, its utility remains the same. Moreover, many data are open to everyone, just like a public good. Google’s executives compare data with sunshine, because it is available to everyone. Well, as he specified, at least in California.