56 TheEconomistOctober 26th 2019
1“F
ather lennon, have you some mon-
ey? Buy Standard Oil.” That’s what
John D. Rockefeller is said to have told his
golf partner, a priest, when he heard the
news in 1911 that the Supreme Court had
ruled his oil company was to be broken up
into 34 smaller firms. It was good advice.
Within a few years the value of those firms
rose threefold. The net worth of Rockefel-
ler, who owned more than 25% of each,
grew from about $300m in 1911 to $900m in
1913, around $23bn in current dollars.
A break-up of today’s tech titans—Goo-
gle, Amazon, Facebook and Apple—could
also unlock vast value, say some with an
eye on the industry. If the most radical
plan, proposed by Elizabeth Warren, a lead-
ing Democratic contender for America’s
presidency, were fully implemented, by
some calculations the parts spun off alone
could be worth over $2trn—roughly half
the value of the four complete firms today.
Ms Warren’s two-pronged scheme was
presented in March, but it is now coming
under closer scrutiny as her campaign for
the Democratic presidential nominationgathers steam. The first part is relatively
straightforward. She intends to unwind
tech mergers deemed “anticompetitive”
because they were undertaken to neutral-
ise potential competitors. This is mainly
aimed at Facebook, which in 2012 bought
Instagram, a picture-heavy social network,
for $1bn and in 2014 paid $19bn for Whats-
App, an instant-messaging service. Both of
these, industry insiders argue, could have
become serious rivals to Facebook. But Ms
Warren also aims to undo other deals, such
as DoubleClick, an advertising exchange
bought by Google, and Whole Foods, a groc-ery chain acquired by Amazon.
The second prong requires more expla-
nation. The tech titans are mostly two-
headed beasts. They not only operate a
market but compete in it too. Amazon
owns the world’s biggest e-commerce mar-
ketplace and also sells products on it under
its private labels. Apple hosts the app store
on the iPhone but also offers its own apps.
This creates incentives for these firms to
promote their wares unfairly, for instance
by showing them at the top of the result
pages of their search engines.
Ms Warren wants operators of any on-
line marketplace which generates annual
global revenues of more than $25bn to be
declared “platform utilities” and prohibit-
ed from both owning a platform and doing
business on it. At a minimum this would
mean, for instance, that Amazon would
have to spin off its private brands, in partic-
ular Amazon Basics. Apple would have to
shed such apps as Mail and Maps.
Determining the effect of break-ups is
tricky, though an analysis of the revenues
of various parts of the tech titans’ business-
es gives a sense of their worth (see chart on
next page). Equity analysts who engage in
“sum-of-the parts” (sotp) analysis also try
to estimate the value of bits of a business
using similar firms as a yardstick. Their
over-excited assessments of how much
these might be worth sometimes look like
flights of fancy. But the approach may work
reasonably well for business units that
have closely comparable peers, such as In-Big Tech and antitrustHow to dismantle a monopoly
SAN FRANCISCO AND WASHINGTON, DC
Would it be possible to carve up Big Tech? If so, would it ever happen?Business
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