November 9, 2017 / 2:30 PM / a year ago

Breakingviews - Cox: Lisbon turns Tatooine for tech Rebel Alliance

LISBON (Reuters Breakingviews) - Not many regulators get the celebrity treatment accorded Margrethe Vestager. The European commissioner for competition took the stage on Monday in front of a crowd of thousands. “Society is about people, and not about technology,” she said to raucous applause at Web Summit in Lisbon, an annual gathering that has become the closest thing to the technology industry’s version of the Rebel Alliance from Star Wars.

Spaceship Earth is turned into the Death Star via projectors in advance of the release of the new Star Wars movie "Rogue One", at the Walt Disney World's Epcot Center in Lake Buena Vista, Florida, U.S. December 5, 2016. REUTERS/Scott Audette

The increasingly dominant enterprises of Facebook, Alphabet, Alibaba, Amazon and Apple play the role of the Death Star for the more than 50,000 people attending the event in the Portuguese capital. In the Star Wars analogy, they are the insurgents. The rousing welcome Vestager received suggests some see her as their Princess Leia, a heroine set on overthrowing the empire. Many delegates, though, simply came to share their ideas for coping with the oligarchy of the internet.

If Vestager succeeds in weakening the tech giants’ grip by challenging the heft of Alphabet and Apple, to name a couple, she will “set the standard for the rest of the world and will usher in a fundamental change in how the largest and most profitable companies in the history of the world are treated,” Paddy Cosgrave, who co-founded the summit as a small gathering in Dublin, told Reuters. “This changes the playing field for all other companies.”

That might sound like marketing hyperbole, but this year’s event comes as Silicon Valley’s top executives face increased scrutiny from policymakers, even in their home U.S. market, over their companies’ ability to influence not just commerce and social interactions but politics and society, too. It may be a stretch to think the long tail of the technology business can amass enough power to threaten goliaths like Apple, now tipping the market capitalization scales at over $900 billion. But the enthusiasm with which the crowd greeted Vestager’s remarks reflects a pent-up desire for the powers-that-be to rein in Big Tech – and not just in Brussels.

“We’re having a similar discussion about the appropriate response to the enormous power the so-called tech titans have to shape our lives, markets, and even our democracy,” outgoing U.S. Federal Trade Commissioner Terrell McSweeny told me. “The conference is teeing up provocative conversations about a range of issues regarding the impact of technology on society. I’m glad that antitrust is a part of that conversation.”

All that said, it was hard to find anyone in Lisbon with a business model predicated on the idea that regulators will save the day. Perhaps that’s just the nature of entrepreneurs: they tend to get on with things.

Take the co-founders of GoPuff, a U.S. startup with a simple yet brash idea: effectively, to put the corner shop out of business. “A convenience store is not convenient anymore,” says Rafael Ilishayev, who co-founded GoPuff with his roommate Yakir Gola a few years ago while they were students at Drexel University in Philadelphia. GoPuff today operates in two dozen markets, bringing essentials like beer, condoms, ice cream and chips to largely, but not exclusively, Millennial customers.

As they expand their business – adding another 20-something locations next year – the co-founders think not of taking on Amazon, but of venturing where the Seattle giant has yet to tread. For instance, the bulk of GoPuff’s business comes between 9pm and 2am, hours when the e-commerce giant’s delivery machine is largely dormant. The GoPuff bros even invented an acronym for this strategy: BAP, for Becoming Amazon Proof. “If you are in e-commerce today, and not thinking about Amazon, you’re absolutely nuts,” says Gola.

GoPuff spends much of its effort on creating brand loyalty with its customers. That’s why content creation, such as dreaming up clever Snapchat stories and the like, is now the biggest department in the company. “If we establish an emotional connection, customers will think of us as a best friend,” Ilishayev says.

Marie Ekeland, a leading French venture capitalist, concedes that while the Silicon Valley giants have won the first round, there are still many opportunities for upstarts from other lands to take their place in the pantheon of tech successes. “Look at everything that the blockchain can empower and we are only at the beginning,” she told me during a panel discussion on digital trade. “We are in a second generation of startups where what we see are sectors that need more than just a digital skill – think industry or health.”

History suggests Ekeland may be right, says VMware Chief Executive Pat Gelsinger, who points out that it was only a few decades ago that IBM’s computing dominance was seen as a monopoly worthy of government intervention. “It’s a bit silly” for anyone to pin their hopes on antitrust regulators coming to the rescue, says Gelsinger, because “tech keeps disrupting itself”.

In her keynote address on the second day of the conference, Vestager laid out the basis for the $2.7 billion fine the European Union levied against Google for abusing its dominant role in online search and the commission’s ongoing case against Apple for receiving unfair state aid from the Irish government. “We don’t think success should depend on a company’s size, or its connections with government. It should depend, quite simply, on the merits of its products,” she said.

Again, hearty applause from the thousands gathered in the arena greeted her comments. But the smartest of the bunch may well have missed Vestager’s speech. Like the GoPuff founders, the most active insurgents were running around the rest of the sprawling event, pitching their businesses to potential partners, investors and even journalists – really, anyone who can help them make their own dent in the Death Star.


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