On this episode of The Six Five Webcast hosts Patrick Moorhead and Daniel Newman discuss the tech news stories that made headlines this week. The six handpicked topics for this week are:
- The Microsoft JEDI Contract Gets Cancelled
- HPE Acquires Ampool
- Anti-trust Lawsuits Filed Against Google
- IBM Plans to Acquire BoxBoat
- Andy Jassy Takes The Helm At Amazon
- President Biden’s New Order Focuses on Big Tech
For a deeper diver into each topic, please click on the links above. Be sure to subscribe to The Six Five Webcast so you never miss an episode.
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Disclaimer: The Six Five Webcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.
Daniel Newman: Welcome back to another edition of The Six Five Podcast, episode 84. I’m the host today, Daniel Newman. I’m podding from my digs in Chicago, Illinois, for the last time ever, I will be moving south, where to Pat?
Patrick Moorhead: I don’t know, maybe Texas?
Daniel Newman: Texas, they say, but yeah. So, excited about this episode, lot of things cooking. I’ve got Mr. Moorhead here. He’s remote, I think he’s somewhere in the wilderness, in the beautiful mountains of Colorado, but I won’t disclose his location entirely because I don’t want anybody that read that piece. No, I’m just kidding. Anyway, we’ve got a great episode for everyone today. Excited to be back. Sorry, we missed you last week, with Pat being out of town and me in the middle of the move for the first time in like 83 weeks, we didn’t get our weekly out, but we’ll be back next week, don’t you worry now.
We’re going to be talking today a lot of regulatory and policy, with a lot of news having broke, we’ll be talking about the big JEDI contract. That’s no longer a JEDI contract. We’re going to talk about a couple of acquisitions by HPE and IBM. Some news about Google and Android facing some tough legal opposition with 36 states attorneys probing their business right now. New CEO takes the helm at Amazon and President Biden puts out a massive sweeping executive order that I can’t help but want to talk about.
All right, Pat, so we are back. This is good. You’re out, I’m out, but everybody out there, we appreciate you. So quick disclosure, this show is for information and entertainment purposes only and while we will be talking about publicly traded companies, please do not take anything we say as investment advice. All right, man, first topic, Pat, I’m not even going to give you a chance to talk about the beautiful weather in wherever in Colorado you are. Let’s just talk about the fact that JEDI, the $10 billion contract that was awarded last year to Microsoft with a whole bunch of controversy around it has been basically blown up. They’re starting over, new name, new contract and totally new scenario. Pat, I’ll let you take this one.
Patrick Moorhead: Yeah, Daniel, this was rife with controversy. So think, two and a half years ago, this was awarded to Amazon. That probably means that they had been working on this or two years before that. So let’s just round that out to five years. If you look back five years ago, there really was only one, I would say credible vendor, for plan at scale IaaS and that was Amazon. So, I don’t think anybody was surprised when that happens, except of course for Oracle and Microsoft. What happened is they both filed lawsuits and then we can argue whether Trump was involved in this or not with Trump’s dislike of Bezos and The Washington Post, but what happened is it swung over then to Azure. Then over the time by which I would say the first JEDI was submitted and when it was moved over to Azure, Azure did become a credible plan at scale, IaaS player.
So, it was pretty smart of Azure to do that. They had to make a lot of investments. They had to build out a lot of different products. Microsoft does a lot of business with the federal government and the Department of Defense. If you look at the client-based solutions, i.e. PCs and things like that, it’s all Microsoft. So they had a very big footprint in there and there’s a lot of Microsoft on-prem infrastructure as well. So it totally made sense.
So now, yeah, like you said, there really isn’t a JEDI anymore. It was blown up and it’s called the JWCC, which is a great acronym, which I don’t know what the heck that actually means. But anyways, I expect Daniel, for this to also open itself up to likely players like Oracle. I think, if anything, this contract has gone multicloud and it’s funny, the big story might be that the JEDI got blown up. But I think the biggest story from my analyst’s perspective is multicloud and it’s funny for, I don’t know, 10 years, it’s like, if it’s not public cloud, it’s junk. Then when AWS introduced their on-prem capabilities with Outposts, nobody was debating the hybrid thing, but we were all still debating the multicloud thing. I totally get it, multicloud is hard. Essentially, if you want to go to two vendors and have multicloud, you have to have two different sets of people because there’s two different sets of processes to get in that. If you’re going to do it the right way, you have a data fabric that’s continuous, you have a security fabric, so you have single sign-on. So, multicloud is tough, but I think this is a big market indication, I think Daniel, that multicloud has arrived. I don’t think this was some political thing. I think multi-vendor and multicloud trumps the complexity of doing multicloud.
Daniel Newman: Yeah, it’s some solid analysis. Was I surprised about this being blown up? No. I have to say this thing has been awarded to both companies at a different point of time. You were absolutely right, rife with controversy. The Trump and Bezos contentious relationships, certainly put more questions than answers for anyone that was speculating on the deal. The time it took for the original award to take place certainly gave Azure a runway to meet the technical requirement and that is important, but I think you really hit it on the head. I think if you’re out there listening to this turn to make heads or tails of it, multicloud isn’t something that’s just going to be an enterprise solution. Multicloud, and by multicloud, we mean multiple public clouds, private clouds, we mean here’s going to be an on-prem component.
As companies realize that each public cloud provider has some certain unique services, data sovereignties, redundancies, geographics, there are different reasons to put different workloads in different clouds. So the bar is going to be set. This new contract, I believe is GWCC. It will be set, companies like you mentioned, Oracle, IBM, Google are all going to want to have a chance to participate and the bar will be more clear in this particular contract, so that those companies know how to participate. I will say that the overwhelming perception at this point is that it is a two-horse race today for this contract. But I do believe the workloads will be doled out, will be distributed. They will happen to largely go to Amazon and Microsoft during the first award. But I could see this having a very evolutionary component where the award could be shifted and changed and expanded. By the way, 10 billion, I think it gets bigger. I think it gets bigger because I think at one time that seemed really significant, but overall in the end, not as significant as cloud-scale for one of the world’s largest government entities. So good stuff here, interesting. A change, and something I think we ought to keep an eye on, Pat.
Something a little bit more momentary in mind. HPE has been on a terror of acquisitions and this week it announced one for its GreenLake business company called Ampool. If you haven’t heard of Ampool that’s okay, most people have not. But what you may have heard about over the last few months is what HPE calls GreenLake it’s as a service stack, which they basically promised to commit by 2022, to deliver everything in the HPE family as a service. Furthermore, HPE has done what’s called Ezmeral and Ezmeral is its data analytics platform. And that’s what the Ampool acquisition is all about.
Basically, if you’re familiar with structured query language or SQL, or SQL depending on how you want to say it, it’s one of, if not the predominant database workload for most organizations, the problem is as modernization has happened, SQL has become more complex. It’s become harder to run, runtimes becomes slower, and the infrastructure that’s backing the SQL workload needs to continue to evolve. So this acquisition for HPE of Ampool was really all about making the Ezmeral software stack more capable to accelerate the analytics runtime for interactive SQL, SQL, whatever you call it. I’m not going to do that again, workload’s. Interesting. Like I said, what we’re really trying to deal with here is adding more simplicity, helping companies deal with the governance, compliance and visibility in hybrid IT, to tie this together with running these big data and analytics workloads, which we’ve heard so much about. But what we don’t talk about very often is how hard it actually is to apply this stuff into your organization.
So this really falls into a family and Pat, while I’m not going to dig, we don’t tend to go too deep and too geeky on this show because we want to make sure we keep this open and wide for the entire tech community, but what I really see here is this is HPE one by one, making very strategic acquisitions. It’s a company, I think has like 40 engineers, not a huge company, but has built something very specific that falls right into this stack to address an important part of the big data, software, hardware integration challenge, to offer consumption services in the GreenLake family. 40 engineers, so it’s not a massive acquisition, but the companies making lots of these little acquisitions, filling in gaps, solidifying its service, and then offering this in a very easy to apply consumption type of offering that companies can deploy at scale through the HPE family. I think that’s why HPE is doing well. They’re not jumping over their skis. They’re not over-investing, they’re buying the parts and they’re really executing to their promise, which is everything as a service and so far so good. I think the Ampool acquisition is one of many small pieces to a very large puzzle.
It’s not been fully figured out yet, but Pat, I think you actually mentioned this on our last pod, HPE, as it comes to delivering everything as a service is in the lead among the OEM, the IT OEMs, strategically the most diverse set of services, verticals, stacks are everything from the storage to compute to data. And this is just one more offering and a good add to the family.
Patrick Moorhead: Daniel, that was good analysis, buddy.
Daniel Newman: I was going to go fast.
Patrick Moorhead: Honestly, I have nothing incremental to add. One thing I want to reinforce is it’s amazing how far HP has come from a software perspective. I mean, it had a nightmare trail of software. I mean, if you look at the past 10 years, it has been ugly. Big acquisitions that went the wrong way, selling off assets, one of the biggest tech lawsuits that’s out there, but they’ve done a really good job. And Daniel, this is exactly what you said. This is a tuck-in, they’re building out the platform using open industry standards, open source software. I got to tell you, this has Kumar Sreekanti’s hands all over it. And of course you’d like to say, well, of course, head of software at HPE, but talking to him and we had him on the Six Five Summit, a couple of weeks back and he had alluded to some of the tuck-ins. I asked him about how they stay competitive in the future and this to me is exactly what it is, though, I’ll call it tactical tuck-ins. I don’t think that’s a bad thing to say, but with this one adding much more capability to a SQL workloads.
Daniel Newman: We’ll hit more on this when we talk about an acquisition IBM just made. But Cisco, they’ve been doing this very strategy with their WebEx platform, just little tuck-ins. I like that word by the way, that’s a good one. It isn’t always about Salesforce buying Slack. It isn’t always about making $20 and $30 and $40 billion acquisition. Sometimes it’s making an acquisition of a 50 person company that just does something that’s going to really expand or diversify, or just make your products better. I think that’s where he has been really focused on. So let’s go to number three, Pat, and this is this is a hot button item. I opined at scale, so I’ll give you the first blow here, but I’ve got a lot to say. Android getting the big probe from 36 states, going after Android for its abuses as a platform. Pat, I’m at a little bit of a loss that that Android would be the first to have to experience this particular undressing.
Patrick Moorhead: Well, the great thing is that you’re not. The first company to experience this was Apple with its App Store and if you’ve paying attention at all to what’s going on at the federal level and also at different countries with regards to Apple and the App Store. It’s very similar. It’s about how much power Google has with Android related to its developers, and how much it charges. I think what really raised the ire was this requirement for Android developers to provide a Google checkout as a mandatory. Now, unlike Apple, you could have the other option of having your own checkout, but there was a mandatory piece in there that said you had to at least give people the ability to check out with Google Pay, wherever Google Pay was offered. I think that’s what’s going on.
As a backdrop, I will say that Android versus iOS is really different. Android and Google do allow you to sideload applications, which Apple does not. Apple charges most people 30%. Apple does provide the smaller vendors 15% and Google is similar in that it offers 15% to 30% as well. But what Android used to offer, that it’s trying to push on people right now, is that you have to have an option. So there’s still a 0% option if the customers would choose to use, let’s say Epic Games checkout. So it is very different, but no, getting 36 states on your back is really a precursor, I think, to getting the entire federal government on your case. I mean, Google’s already being probed. And I forget whether it’s the department of justice or the FTC there, they’re kind of taking turns on big tech, but anyways, we’ll have to see where this goes. Google has more lawyers likely than those 36 states. It has a lot of money to wait this out, but I really think what raised the ire was all of the investigation into Apple.
Daniel Newman: Yeah, I think as a whole, and when I said first, what I really meant is they’re the first that’s really getting the full public suit brought against the probes are going on, but the suit’s being raised by the 36 states. I guess what was really interesting to me was how would a suit be raised on one and not the other? Because it’s very clear that the bad behavior that they’re suggesting is being done on both sides and arguably when it comes to Apple, you have no sideloading option. You cannot stand on your own. You cannot have an app loaded onto your iPhone that does not go through the store, the way with Android, you can. Of course there’s security risks and vulnerabilities, there’s quality control that cannot be managed when you do it that way but it’s a very interesting impasse between the companies.
The other thing that I would say is that I think this has a lot to do as well with the potential that Google has been trying to mitigate the little bit of competition it has. For instance, Samsung being one of the largest providers of Android-based devices, it was alleged that Google tried to basically stop, or shutter, or tell Samsung to stop having its own app store. Just use the Play store. That to me, I said, that was a very, if that’s true, and again, I can’t say for sure if it is, but that was what was alleged. If that was true. I said, “That to me is much more damning.” Because here’s my issue, Pat, and here’s my thing with the whole antitrust thing, and we’ll talk about this a little more when we talk about Biden’s executive orders. What is innovation worth to the market and should a company be able to profit for being successful, for being innovative and developing solutions that people use? I mean, the challenge is yes, it’s a two-horse race. You’re either on Android or Apple. That’s where we’re at right now. Could another company enter the fray? Maybe, maybe Microsoft that’d be the only one that I would say has a chance to potentially play here, but should it be free? What percentage is fair? You’ve built an ecosystem.
So if you’re a developer and this is a lot like the issue with Amazon, if you’re a reseller, Amazon gives you a platform, you can start a business and start selling tomorrow, be searchable, be find-able, do your commerce, make money. They take a piece of it. If you wanted to launch your own website, start your own store, sell your own products, do your own warehousing, do your own, all the things, the value adds that Amazon does, well, this is the same thing with software through these Play stores and through the Apple stores, these companies can become instantly relevant, searchable, find-able and successful and used because if you couldn’t use them on these devices, these products would never survive.
So, the balance here is that these companies aren’t entirely villains. Do they need to be managed better? That’s what we need to look at. Do we want to shut these things down? Heck no, it would ruin everything. So there’s a lot to explore here, Pat. I think we should come back to this one, talk more about it. It looks like you want to circle back the wagons on this one a little bit?
Patrick Moorhead: Yeah, yeah, yeah. You brought up some great points, Daniel, and it’s funny, just to put this in perspective for everybody, I think the debate is closed market, free market, and are you a utility or not? And then what does this mean to competition? if there’s not a lot of choices and you’re forced to go through certain things, the theory is that competition goes down. One thing that does annoy me related to Apple, we’re talking about Google, is that Apple really won’t even talk about how much it is invested in its store, for security, for storage, for hosting, for pairing, any of that stuff, because they don’t want anybody to know how much money they make. Now, does Apple deserve credit for creating the concept of a closed app store? I think they do. Then the question is, if they’re not investing in it, they’re not adding to it and they’re essentially squatting on it. Is that good for the market? Is that good for competition? I don’t have the exact answers yet, but I think we’ve posed the right questions. That’s my only follow-up here.
Daniel Newman: Yeah, no, I think that’s great, Pat. Like I said, I think we can come back to this, there’s going to be more episodes talking about antitrust. This is the only thing on the planet that the two parties could seemingly have some level of agreement on right now, is that big tech is the bad guy. I think that needs to be discussed more because this technology changes our lives.
So let’s talk about another. I mentioned another tuck-in acquisition. I don’t know if it’s just something in the water right now, HPE, IBM, it feels like every week these companies are making announcements of acquisitions, but these aren’t Red Hats and these aren’t Slacks, these are more tuck-ins, but it’s some interesting things, really quickly, not to, so IBM acquired a company called BoxBoat this week and not to go off the topic, but you probably heard if you’re out there that the president of IBM left the company. Companies doing a massive reshuffle of the quote unquote executive deck. It’s spinning off its global technology services, its managed infrastructure business to a new company called Kyndryl.
One of the areas that IBM has been really double, triple, quadrupling down on has been hybrid cloud and hybrid cloud services. So you knew about the Red Hat acquisition. You probably knew the fact that really its hybrid bet has been heavily placed on IBM Cloud plus Red Hat offering a set of solutions that addressed Pat, what we were talking about earlier, with the future being multicloud. But with this spinoff of GTS, the question mark was what happens to IBM services going forward? They still have the global business services, they still have the need to be able to support and consult with customers. And so BoxBoat is another, very strategic acquisition being made by GBS to help the company expand its hybrid cloud services business. What this particular acquisition really focused on, which is a smaller team, is its cloud ecosystem certifications.
This is a group of engineers that know Amazon Web Services, Docker, GitLab, Google Cloud Platform, Kubernetes, Azure Tech. And so recently, you heard IBM acquiring companies with SAP specialties, IBM acquiring companies with Salesforce specialties. Well, this is another case where IBM is saying, “We know all the workloads aren’t going in IBM’s cloud, but we are, whether it’s through satellites, whether it’s through Red Hat, participating at scale in the hybrid cloud and multicloud ecosystem. We are going to have a world-class leading services organization that can help orchestrate workloads into three, four or five different concurrent clouds at the same time.”
I thought this was a smart acquisition for this GBS business. Again, not a big number. I don’t think even any sales numbers or revenue numbers were disclosed, but it’s another tuck-in acquisition that really fits this sort of narrative that these companies that are trying to compete and stay relevant against quote unquote, big tech, who’d of thought we wouldn’t call IBM big tech? But, in terms of who is being looked at as big tech right now, this follows the Nordcloud and the Taos acquisition, and a number of the acquisitions that were made for observability. This gives them a deeper bench in hybrid cloud. So, smart little acquisition and it’s a nice way to diversify revenue and make it clear what services at IBM will look like after the Kyndryl split occurs later this fall.
Patrick Moorhead: Yeah. It’s pretty ironic, you look back, the valuations are definitely on the cloud companies that the people get perceived as cloud companies. What I find ironic is that 80% of the data and the spend is still on-prem. So, I think IBM, and to our conversation about HPE and Ampool, is it’s literally a foot race to get there to who can create the best hybrid capabilities and be able to monetize it and invest in it the best. So Daniel, a great analysis. This is right up IBM’s alley, whose goal is be number one in hybrid cloud, and it’s a nice little tuck-in.
Daniel Newman: Yep, absolutely. Tucking it in and that’s going to be a thing I’m going to say it forever now. We’re going talk about oxygen and tuck-ins because we get thematic with things and we can’t stop talking about them. Speaking of thematic and not stopping talking about them, Pat, a new CEO has been appointed at Amazon. I mean, one who wants to get sent to space. Some people are signing a petition to leave him there. I don’t agree with that, but Andy Jassy, someone that you’ve spoken to many times over the years and someone that we followed very closely, who’s done a brilliant job building a $50 billion run rate IaaS was appointed several months ago, but he has officially taken the helm as CEO at Amazon, Pat.
Patrick Moorhead: Yeah. So a little backstory here. So it’s funny. I feel like I cover AWS more than I cover, let’s say the retail operations business, you and I both cover the corporate side of it, but in all the analysis that we’ve done on AWS, Andy Jassy has always been at the forefront. So, it wasn’t ever a surprise to me that he would get chosen to run the company. I mean, Jassy had been at Amazon since 1997, he started off as a marketing manager at the company and he worked with Jeff Bezos in 2003 to come up with this whole concept of cloud computing and what initially started off as taking burst capabilities and leasing it to other people turned out to be … I mean the rest is history. Make no mistake, the most profit dollars since they started talking about breaking out the AWS financials, most of the profit dollars come from their cloud division and not from the retail operations.
Now, the revenue is bigger, but it’s quite amazing. So not net net, I guess what I’m trying to say is, is Andy Jassy built this incredible product and service that has enabled the retail side of it to be super competitive by flowing cash into it. Don’t let me say that Amazon, the retail side is a money loser, it’s not. Retail holistically is a lower margin business. So, it wasn’t a surprise to me.
The other thing is, is that what’s going to change immediately at Amazon? I don’t think anything. Why? Because Andy Jassy and Jeff Bezos were tied at the fricking hip. So my expectation a lot of the times when a new CEO comes in, got some big changes, maybe we’ll see ESG amped up a little bit. I mean, that’s a continuation of what we’ve seen through the last three to five years. The company’s under attack. I mean, my gosh, the company does amazing things for people and society and they still get attacked. They’re not perfect, pee gate. We don’t have people peeing in bottles. There actually were drivers peeing in bottles. Not that I’m a pee gate specialist, but listen, I worked in a factory for many summers. I know how people operate. I mean, actually, I worked in a factory for three summers. So at least they admit when they’re wrong. And they’re investing billions into the environment. Listen, I’m straying here. I want to give you a chance to weigh in on that. There’s so much oxygen in this room, Daniel. There’s no possible way to take it all.
Daniel Newman: Oh, absolutely. Look, I had the chance to talk to a lot of media. A lot of them asked that exact question, Pat, what does it mean? Your answer is pretty good. I think for the company, it doesn’t mean much. I think, first of all, Jeff Bezos is still the chairman. Yes, he is working on Blue Origin. He is working on big visionary things that people that become the wealthiest person on the planet might think about working on. He’s also working on philanthropy, leading ESG efforts, diversification of the business. Andy, I guess the big thing is what’s different? Well, he’s going to be focusing on different things. So for a long time, he focused on growing AWS, as you suggested the operating income leader for the company and by the way, the part of the company that allowed for a lot of the innovation that happened in Amazon’s commerce to happen, those profit dollars were shifted. So, when you started talking by the way about regulatory and splitting things up, it’s not that simple because Amazon’s retail business is there’s an interdependence on things like AWS Cloud for generating the income that allows some of that innovation and investment to take place.
Patrick Moorhead: By the way, you may have cited a regulator’s dream, which is why it should be split up.
Daniel Newman: Yeah, I may have, but I will fight that to the death. I’ll give you guys plenty of citings and things to read about why I don’t think so-
Patrick Moorhead: By the way, it’s profitable too, right?
Daniel Newman: Absolutely.
Patrick Moorhead: And with margins that are reasonable for that market. So, sorry to interrupt.
Daniel Newman: No, you make a good point, but the interdependence allows for innovation. It allows for investment in small businesses, it allows for plants and jobs to be created in regional markets that most big tech companies don’t even think of entering at any sort of scale. It allowed for, whatever, 18 billion investment in small business. Hundreds of millions in the climate pledge to be launched on global scale and many companies from every industry being brought into participate in carbon neutrality and accelerating the Paris Accord by more than a decade, with many even planning to accelerate it even faster. That stuff, Jassy’s going to be doing more than he was doing before. He’s absolutely going to be tied up in all this regulatory stuff. Amazon will be in the center of every single one of these suits, probes, he’s going to be the guy on the Hill, having the conversations with lawmakers, policy makers, regulators, and it will be his job to position the company in as positive light as possible.
Hopefully the talking points that we’re using … Look, you said this correctly, Pat, and I’ll leave us on this one here, because we’re going to do a continuation topic next anyway, but Amazon’s not perfect. I am a bit of a big tech defender. I believe in big tech. I believe the experiences that we all enjoy on a daily basis, that have become integral with our life are because of these platforms and the integration and the customization, the experience that can be created when technology is ubiquitous. When you split things up, you have to make sure that consumers should not be harmed in the process. So about Jassy though, he’s going to have new responsibilities, but to the point, you saw the two elevate together. Jeff becomes executive chairman, Andy becomes CEO. AWS keeps on tracking and trucking and the rest of Amazon will benefit from having someone that follows Jeff Bezos, the founder of that organization, who has basically been on his hip, trained right underneath his nose, understands how he did it and will bring his own unique value to the table. Let’s keep going. In a year, Pat, I think Amazon’s still going to be in very good shape.
Patrick Moorhead: Yeah. Hey, by the way, I think that Jassy also will play better on Capitol Hill, meaning how it looks. We’re anti billionaire now. I think that Jassy being on the stand and doing all that stuff, I think that’s going to be good for Amazon, because people looked at Jeff Bezos and thought, “Oh, he’s a billionaire and that’s bad. I’m going to take him to task.” So, I think it’s a good look for them.
Daniel Newman: Andy’s day is coming, Pat. Andy’s day is coming. So now let’s wrap this up. So last week, on Friday, President Joe Biden dropped an executive order zeroing in, not entirely focused on, but zeroing in on big tech. This was interesting, Pat, I think it was over 70 different recommendations and legal actions suggested in this tape and it covered a lot of ground. I think it was covering a wide swath of potential issues. But the focus once again, is really on unity among policy and lawmakers to put more and more pressure on the big tech environment.
So, what was in this thing? Just a couple of headers. It asked the FTC to put more energy into challenging bad mergers that may have taken place in the past. So, it’s a look-back recommendation. It was encouraging the FCC to restore net neutrality that were undone under Trump. There was a lot of support for net neutrality. So, that’s an interesting one to look at, but then there were some interesting ones in there, Pat, banning occupational licensing restrictions. Why would they do that? Well, so that people can basically have more economic mobility. It was asking for a limit or ban altogether of non-compete agreements. That’s pretty interesting. Giving a lot of power to employees who are going to be paid exorbitantly to bring ideas to companies and then be able to take their ideas elsewhere. I don’t know, an interesting one. Then there was even stuff as far out there as lowering prescription drug prices, supported by state and tribal efforts to import cheaper drugs from Canada.
A couple of quick takes on this one, Pat. The unity is all about the first one I mentioned, the challenging of bad mergers, bringing this to the attention, a look-back period. Right now we are in the middle of , we’ve got suits, FTC, the Facebook one just ended. Broadcom just got brought into a significant suit for the way they were making chip. Basically the broadband providers, they were threatening, supposedly, if they did not buy exclusively from them. So, that’s going on. You’ve got the 36 suits that we mentioned on this one. You’ve got probes into Amazon. Amazon’s MGM deal is now getting probed by the way. You’ve got the NVIDIA Arm deal, that’s going to go through significant, I mean, big tech, Pat, is under a spotlight like never before. The unity among lawmakers is what probably scares me the most, is that you have right and left actually agreeing on something and-
Patrick Moorhead: For different reasons. For different reasons too.
Daniel Newman: For totally different reasons. And you have five laws that have passed the House that are going to die in the Senate in their current form, but will likely be revived and rewritten and passed in some other form in the near future, that are going to give more power to regulators and lawmakers to break up big tech. The challenge, Pat, I’m going to speculate and I’m going to then throw this back to you because I could talk about this for a long time, but I don’t want to take the entire topic over here. We are at an impasse now where we are asking lawmakers and policymakers to potentially play God. I want to be very clear what I mean by that, because that could be pretty metaphoric in its stance.
But when Google, for instance, bought Android, there were certain promises made about how they would run Android. There was a certain window of time to understand how it added or created competition, and lawmakers at that moment in time had to make a decision based upon basically the road they could see, how far the sight line of what would happen and they had to allow it to pass because at that period of time, it was not monopolistic. It was not creating any sort of unfair practice or aggressive practice in stifling competition or harming consumers. 15, 18 years later, as the platform grows, the environment changes. You could actually have the same argument for Facebook being allowed to acquire Instagram or WhatsApp down the line. You could make the same argument about the NVIDIA Arm deal. You could make some speculations of what it is today and what it could be in 20 years. But the point is, is that the law is changing into a format that allow policy lawmakers to basically decide on a conflict based upon what might happen, is the reversal of what the law is all about.
The law is about enforcing current laws that are in showing to a burden of proof that companies are committing antitrust violations that are harming consumer and stifling competition, not the prospectus of that happening at some point in the future. If anything, all of this effort, all this energy, whether it’s Biden’s EOs, the new laws that are going in the house, and the regulation that’s going against the probes, is are we going to go after companies who are committing antitrust violations or are we trying to give so much power to lawmakers that they could actually make decisions based on what they feel might happen? That scares the crap out of me.
Patrick Moorhead: Daniel, gosh, we could do an entire show on this. I mean, first of all, what was interesting is it’s an exec order, but the exec order was really about recommending that the FTC and the DOJ and the FCC do some things. So, was this really an exec order? I don’t know.
Daniel Newman: It has no teeth.
Patrick Moorhead: The fairness too, of the idea that something was approved, and they’re going to go back and have a look at this? I don’t know, maybe this is just my Midwestern in me. I just think that’s horrible. Daniel, to your point on the potential to be a monopolist, or use monopolous power, as opposed to actually bringing harm to consumers or competitors, we saw that rear its ugly head with Qualcomm. There was no evidence that was even presented that there was actually damage done in Qualcomm suit, so I think that’s kind of scary.
Net net, I do think that we need to provide an open playing field, or a more open playing field for smaller companies to come in. History shows that when big companies get bigger, they do get less competitive. We haven’t seen it yet. So I know that sounds like I’m speaking out of both sides of my mouth, but if you go in and look at what some of our biggest innovations were driven by, they were by innovators, either creating new markets and with the tech companies getting as big as they are, is there still an open playing field now that we have all of these walled gardens? Or do all of these new innovators and entrepreneurs have to play in the sandbox of all these big companies? That scares the crap out of me, that not only do we have consumer walled gardens, we’re increasingly seeing enterprise walled gardens with Microsoft, what Salesforce is building, and even what Google has.
So yeah, I am talking a little bit out of both sides of my mouth. I do like the scrutiny of it. One thing though, I’m not going to stand for, that I don’t like it all and I don’t support, is the political politicization of it. I mean, let’s do it for the old fashioned rules of anti-competitive, as opposed to what politics might be. I say that on both sides of the aisle. By the way, I can’t imagine right now what big tech mice might be thinking because they supported Biden so much for Biden to come in and make their life very, very difficult. I find that incredibly ironic. This is not editorial. I mean, if you look at who gave to which campaign, the resounding majority of big tech gave to Biden’s campaign. So, something is going to change Daniel. I don’t know exactly what is going to stick and what is not, but it sure is great fodder for conversation.
Daniel Newman: Yeah. You made some great points and like you said, I could go back and we could go back and then you could go back and then I can go back. I guess balance is the one thing I want everyone to leave here in mind. Big tech has a lot of flaws. Just like we talked about Amazon, there are gaps to fill. The company can do more, do better, but will never do enough, same with big tech, but we want to act like everything in this world is binary. One of the biggest opportunities as a society we have is to start seeing the gray area again. There are things that can be done. There are regulatory and efforts that can be put into place that can make things more fair. We can do more to give people access to their data, to give people a chance to opt in and out of things more freely.
But at the same time, what big tech has offered our society, what it’s given us, whether it’s the ability to hail an Uber safely and make secure payments on any platform, or connect to our friends and family and stay in touch with people around the world seamlessly for pennies. We want to either villainize it or support it and it’s not that simple. It’s like everything in the world right now. We need to start to open our minds to a gray area. That’s what I hope all this does in the end, as we start to return to normalcy post-COVID, clear the fog of the COVID brain and start seeing the fact that there is a gray area. Big tech’s not perfect, but it isn’t the scapegoat for everything that is wrong in the world. Until we find balance, we may never be able to function normally as a society.
On that, Pat, I’m going to wrap this show, buddy. That was deep. That was deep. Sometimes our shows, we’re talking about five or six events, news items, new products, new services. This show was fun. We talked about a lot of big, thematic things. This regulatory story’s not going to end anytime soon. And if there’s anybody on the planet I’d like to have this discussion, it’s you, my friend.
Patrick Moorhead: Thank you, I appreciate that. Daniel, I can’t tell you how happy I am that the next time we do this, we’ll likely both be broadcasting from Texas. So anyways, I just want to thank the audience for an incredible show. I appreciate you dealing with my new background in my bunker here in Colorado. I’ll be back in the office with better connectivity and likely better audio and imagery next time.
Daniel Newman: I’ll say, you sounded good, you look good. And then everyone out there, check out the show notes, the links. Pat and I covered a lot of this stuff. Hit that subscribe button, join us, be part of the Six Five family. We appreciate all of you for tuning in every single week and sticking with us, but we got to go. We’ve got to say goodbye. We will see you later.
Patrick Moorhead: Take care.