Regulating Big Tech firms involves conundrums. As President Biden recently described, many Americans are concerned that technology giants such as Alphabet, Amazon, Apple, Meta and Microsoft may be threatening privacy, fueling misinformation, fostering political polarization, negatively impacting the development of young people, and possibly exacerbating our society’s economic disparities. In response, political leaders from both parties and regulatory officials are clamoring for corporate breakups as a panacea for controlling Big Tech. By contrast, judicial authorities have voiced skepticism about regulatory overreach.
Regulatory debates, however, are missing a key point: Breaking up Big Tech companies could trigger unintended, and possibly irreparable, collateral damage to America’s quest to remain the world’s leader in new technologies. Regulators must grasp the reality that, in today’s voraciously competitive digital world, global preeminence requires Big Tech firms to operate at the frontier of emerging technologies and harness the synergistic co-evolution of research, product development, and manufacturing.
America’s Big Tech firms must retain the muscle to compete toe-to-toe with overseas giants such as China’s Alibaba, Baidu, TikTok and Huawei, South Korea’s Samsung and LG, and the Taiwan Semiconductor Manufacturing Corporation. Breaking up America’s Big Tech companies could unintentionally alter the global technology landscape, thereby weakening America’s global competitiveness and our national security.
Big Tech’s innovations in artificial intelligence (AI) and quantum computing (QC) require sustained risk capital, a critical mass of software and hardware (including cloud computing), and a ready supply of top technical talent (e.g., based on close partnerships with universities from which firms recruit the brightest faculty and students). Today, some of the most innovative work in AI and QC is being done in companies such as Google and Meta, whose employees include Turing Award winners working at the cutting edge of computer science.
The large scale of Big Tech enables it to leverage reciprocity among research, product development platforms at scale, in the case of software, and manufacturing at scale, in the case of hardware. If a firm has no commitment to new product development or manufacturing, it will not have sufficient revenues, or the incentive, to invest in longer-term research.
Big Tech firms, many of which benefited from government funding during their early days, understand the seminal role of research and development (R&D). In fiscal year 2022, the firms committed R&D funds at between 6-14 percent of annual revenues, with Meta at 30 percent. Those investments have delivered innovations for consumers such as communication platforms, web services, remote computing access, and millions of software applications. Indeed, part of Google’s search engine success is “only possible because of the foundational research we’ve done in AI for more than a decade.” Although the stratospheric profits of America’s Big Tech firms came back to earth in 2022, those firms continue to innovate and remain among the nation’s corporate R&D leaders. Indeed, corporate commitment to R&D is vital in light of fluctuations in government funding during recent decades.
Historically, Microsoft and IBM avoided regulatory breakup and have maintained steady investments in R&D (e.g., 5-21 percent of annual revenues since 2000). By contrast, AT&T’s 1984 breakup decimated Bell Labs’ extraordinary record of R&D (which yielded nine Nobel Prize winners and inventions such as the transistor, laser, charge-coupled devices and information theory). The faded remnants of Bell Labs are now under overseas control (by Nokia). The breakup of AT&T also helped crack open the door to international competitors, such as Huawei, which has become an influential firm in the critical market of communications networking technology.
It’s worth noting that Microsoft’s Bing search engine recently challenged Google’s hegemony by applying ChatGPT-4, an AI program developed by OpenAI and acquired by Microsoft, which has been using its large scale to diffuse ChatGPT-4. This is an example of the interdependent ecosystem of Silicon Valley venture-funded start-ups and Big Tech firms, which must be sustained. The future of AI, however, is being scrutinized because of concerns about ethics and potentially exploitative business models.
Therefore, in addition to thoughtful oversight of Big Tech firms themselves, regulators also should create guardrails for the specific technologies the companies develop. Regarding AI oversight, a valiant start has been made with the AI Bill of Rights issued by the White House’s Office of Science and Technology Policy, the National Institute of Standards and Technology’s AI Risk Management Framework, and even collaboration among international research groups involving OpenAI/Microsoft, Google’s Deep Mind, and the Beijing Academy of AI.
Big Tech needs rules of the road and should comply. Regulators must protect consumers. But regulators should avoid reactions to the Big Tech conundrum that cripple the innovation engines of America’s Big Tech companies. Regulatory actions that undermine America’s innovation capacity could inflict collateral damage to our nation’s commitment to remaining a global technology leader. When regulating Big Tech, use a scalpel, not an ax.
Venkatesh Narayanamurti is an emeritus professor at Harvard University, was the founding dean of its Paulson School of Engineering and Applied Sciences, and served as the director of the Science, Technology and Public Policy Program at Harvard’s Belfer Center for Science and International Affairs. He is the co-author of “Cycles of Invention and Discovery” and “Genesis of Technological Revolutions.”
Steven C. Currall is a visiting scholar at Harvard’s Paulson School of Engineering and Applied Sciences and professor of information systems and management at the University of South Florida, where he previously served as president. He is an innovation fellow at the BRG Institute, a senior adviser at the Huron Consulting Group, and co-author of “Organized Innovation.”