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<\/a><\/p>\nThe monster tech firms are stifling competition and consolidating their power while they expand into new markets. Like the old industrial magnates, they want to control everything.<\/em><\/p>\n Ironically, the very entrepreneurial form that defeated Japan\u2019s bid for global technological dominance is morphing into an American version of the famed keiretsu<\/a><\/i> that have long dominated the Japanese economy. The keiretsu, <\/i>epitomized by such sprawling groups as Mitsubishi, Sumitomo and even Toyota,<\/a> spread across a vast field of activities, leveraging their access to finance as a means to expand into an ever-increasing number of fields. The can best be understood, notes veteran Japan-based journalist Karel van Wolferen, as a series of \u201cintertwined hierarchies.\u201d<\/p>\n Increasingly, American technology is dominated by a handful of companies allied to a small but powerful group of investors and serial entrepreneurs. These firms and individuals certainly compete but largely only with other members of their elite club. And while top executives and investors move from one firm to another, the big companies have constrained competition for those below the executive tier with gentleman\u2019s agreements<\/a> not to recruit each other\u2019s top employees.<\/p>\n At the top of the American keiretsu<\/i> system stands a remarkably small group whose fortunes depend<\/a> in part on monetizing invasions of privacy to use the Internet as a vehicle for advertising. These are not warm and cuddly competitors. Both Google<\/a> and Microsoft have been accused<\/a> of using anti-competitive practices to keep out rivals, in part by refusing to license technology acquiring of potential competitors.<\/p>\n \u201cTech is something like the new Wall Street,” notes economist Umair Haque,<\/a> \u201cMostly white mostly dudes getting rich by making stuff of limited social purpose and impact.\u201d<\/p>\n Like their soul brothers on Wall Street , America\u2019s elite tech firms \u2013 and their owners \u2013 have become fantastically cash rich. \u00a0Besides GE, a classic conglomerate, the largest cash hordes<\/a> now belong to Apple, Microsoft, Cisco, Oracle and Google, all of whom sometimes have more dollars on hand than the US government. \u00a0Seven of the eight biggest individual winners<\/a> from stock gains in 2013 were tech entrepreneurs, led by Jeff Bezos who added $12 billion to his paper wealth, Mark Zuckerberg who ranked in an additional $11.9 billion while Google founders, Sergey Brin and Larry Page, had their wallets expanded by roughly $9 billion.<\/p>\n This wealth reflects in large part the oligopolistic nature of many key tech sectors, for example, the Apple-Google duopoly on mobile phone software, Microsoft\u2019s dominant position in operating systems for PCs, Google\u2019s utter control of search, and Facebook\u2019s domination of social media. In most cases, these fields are controlled at levels of eighty percent or more.<\/p>\n America\u2019s new gilded age giants are similar to Japan\u2019s keiretsu <\/i>but they also share a lineage with the early 20th<\/sup> Century trusts<\/a> that controlled railroads, cotton, silver and other commodities. Those early fortunes helped provide the foundation for such banking firms as J.P. Morgan, Goldman Sachs, Oppenheimer, and Lehman Brothers, as well as the basis for the Rockefeller and Hearst empires. Their wealth, in the era before income taxes, was immense; by the 1880s the revenues of Cornelius Vanderbilt\u2019s railroad empire<\/a> were greater than those of the federal government.<\/p>\n The control of immense resources by a small group of tech firms, like the oligopolies of the earlier industrial magnates, produces a steady cash-flow them to look further afield for new opportunities and expand into potentially huge new markets. But even more importantly, it gives them the opportunity to fail and still live to acquire another day.<\/p>\n Google\u2019s recent sale of Motorola\u2019s mobile division,<\/a> at a paper loss of nearly $10 billion, would have led to bankruptcy head-rolling at many firms but for Google it hardly left a scratch. A $10 billion failure barely threaten a company whose last quarterly revenues neared $17 billion, has cash on hand of over $56.5 billion<\/a> and whose market cap<\/a> is now nearly $380 billion.<\/p>\n Indeed, if any of the tech powers on track to become a full-fledged keiretsu<\/i>, it\u2019s likely to be Google. Over the past year the company has ventured into a host of fields, such as robotics<\/a>, energy, mapping, and driverless cars \u2013 fields that have great potential but are only tangentially related to their core business. The recent acquisition of Nest<\/a>, a company founded by Apple alum Tony Fadell , brings Google into the \u201csmart home\u201d marketplace, part of the so-called \u201cinternet of things\u201d. This gives these firms a new capacity to harvest ever greater information hauls from your once \u201cdumb,\u201d but at least private, household appliances.<\/p>\n These investments and cross-industry ties are changing firms like Google in fundamental ways. \u00a0As industry veteran Michael Mace observes,<\/a> Google has stopped being a \u201cunified product company\u201d and is turning instead into what he calls \u201ca post-modern conglomerate.\u201d Its goal, he notes, is no longer to dominate search, or even the internet, but to invest, and hopefully, control anything that uses information technology, including everything from logistics and medical devices to the most mundane household devices.<\/p>\n By investing widely and eating up developing markets, the \u201cthe Gang of Four\u201d internet companies\u2014Microsoft, Apple, Facebook and Google\u2014have two key advantages: almost unlimited capital resources, and tech expertise and credibility. Allied with venture firms, and a vast reservoir of technical experts, the tech oligarchies, for example, already\u00a0 dominate such promising fields robotics,<\/a> with Silicon Valley home to half of all venture invested in the field, over 70 percent of employees, and a whopping 90 percent of market cap.<\/p>\n Others are turning to space, a field once dominated by NASA, once a key contractor for the Valley. Headquartered in the old aerospace center of Los Angeles, Space X, the largest of the space startups, was founded by billionaire Elon Musk, who previously founded PayPal and Tesla. By 2013, Space\u2019s X\u2019s total employment,<\/a> including contractors, topped 3800.<\/p>\n Musk is not alone in the space game. Amazon CEO Jeff Bezos founded his own private space exploration company, Blue Origin,<\/a> which has launched two vehicles into space, Charon and Goddard. It intends to build orbital space stations, and serves as a contractor for NASA. Like the nascent space industry\u2019s third new player, Richard Branson\u2019s \u2018Virgin Galactic,\u2019 these firms are all the pet projects of billionaires fascinated by space. If NASA continues to retreat from many areas of space exploration, it is likely that in the future the heavens too may end up belonging to the oligarchs.<\/p>\n The Media power-shift<\/i><\/b><\/p>\n A Google or Amazon space-ship may still be in the distant future, but we can already see the impact of the new keiretsu on information and culture. In the past, more hardware-oriented companies provided the \u201cpipelines\u201d through which traditional media disseminated their product. But increasingly, it\u2019s the tech oligarchs who control the news and information industry.<\/p>\n Google, by some estimates, already enjoys more advertising revenues<\/a> than either the newspaper or magazine industry. And they\u2019re positioned to take over the the hardware side by supplanting the traditional telecommunications companies with their own series of global pipelines.<\/a><\/p>\n This big tech takeover also previews a geographic shift from traditional centers of power like New York and Los Angeles to the new seats of influence, most notably Silicon Valley, San Francisco and the Puget Sound area.<\/p>\n The transitions of power and influence have come at heavy costs.<\/p>\n As the new software-based media expanded over the last decade, massive losses have pummeled newspapers, music, book and magazine publishing Since 200. The paper publishing industry, traditionally concentrated in the New York area, has lost some 250,000 jobs, while internet publishing and portals generated some 70,000 new positions, many in the Bay Area or Seattle.<\/p>\n To the new oligarchs, the old media are just part of what one venture capitalist derisively called \u201cthe paper economy\u201d destined to be swept away by the new digital aristocracy. As relatively young people who have already amassed fortunes, the tech giants have the time to disseminate their views to the public, both the mass and the influential higher echelons.Another $200 million new venture<\/a> with a mission to support largely left of center investigative reporting, is being backed by eBay founder Pierre Omidyar.<\/p>\n Buying up prestigious media outlets, an old tactic for consolidating influence that was previously used by gilded age moguls like William Randolph Hearst, has surfaced among the new tech giants, exemplified in the recent purchase of the venerable New Republic by Facebook co-founder, and Obama tech guru, Chris Hughes, who is reportedly worth $850 million<\/a>.<\/p>\n But perhaps more critical than buying old outlets will be the growth of their own oligarch controlled news media. Yahoo is now the #1 news sites in the U.S. with 110,000,000 monthly viewers, and Google News isn\u2019t far behind at #4 with 65,000,000 users. The Valleyites are also moving into the culture business<\/a> with both YouTube (owned by Google) and Netflix now creating original entertainment content.<\/p>\n The tech firms control over media is likely to become even more pervasive as the millennial generation grows and the older cohorts begin to die off. Among those over 50 only 15 percent, according to a Pew report<\/a> get their news over the internet; among those under 30, the number rises to 65 percent.<\/p>\n Impact on Innovation<\/i><\/b><\/p>\n Is this concentration of tech power a good thing? To some extent, the country benefits from having a Google, Amazon, Microsoft or Apple at the forefront of such fields as healthcare, robotics and space.<\/i> They possess the resources and the technical know-how to develop and market new product lines that smaller, more specialized start-ups might lack.<\/p>\n Indeed the shift of resources from social media and advertising to robotics or space travel has to be considered a basically positive development. Unlike the social media revolution, which appears to have done relatively little to benefit the overall economy<\/a>, the developments in space travel or driverless cars, may provide advantages that are more widely shared.<\/p>\n Yet, there is also a major problem with over-rich and over-confident oligopolies. It\u2019s a lesson demonstrated by Japan\u2019s arc over the past two decades and in the story of the big three US automakers and their era of domination \u2013 both examples show how concentration of power can stifle innovation and positive growth. Already some economists<\/a> see a slowing in the pace of technical breakthroughs. In the 1980s personal computer boom, scores of companies competing across a broad array of tech sectors resulted in few long-term winners but a rapid evolution of technology. In contrast, it is not easy to argue that Google\u2019s search function or Microsoft\u2019s code are any better today than they were three or even five years ago.<\/p>\n As the tech firms move further from their entrepreneurial roots, one critic notes,<\/a> many take on \u201ca timid, bureaucratic spirit\u201d that responds to the needs of investors and focuses on preserving already established business lines.<\/p>\n Would we be better off with say, a garage-bound Steve Jobs developing the software for robotics, rather than having development managed in a corporate structure that answers the demands of Wall Street analysts? Trusting a small, often closely knit group of investors, to oversee critical industries of the future, does not seem to be the best strategy to maintain and deepen our technological lead.<\/p>\n Digital innovation should be spurring the creation of new competitive companies. Yet,\u00a0 instead it is fostering an American version of the Japanese keiretsu, <\/i>where firms like Amazon, Google, Apple and Microsoft try to use their unfathomable riches to dominate the entire technological future. This is not a step forward but one that can limit Americans\u2019 ability to renew the entrepreneurial genius at the heart of our national character.<\/p>\n Correction: This article has been updated to reflect that Facebook co-founder Chris Hughes is not a billionaire. His net worth is reported<\/a> to be $850 million.<\/i><\/p>\n ___________________________<\/p>\n