16 Leaders The EconomistDecember 7th 2019
2 ministries like cash machines and hand out government jobs
based on loyalty, not merit. Many people depend on them for ac-
cess to health care, education or a salary. Hence politicians long
ago exposed as corrupt and incompetent can remain in power.
The situation is similar in Lebanon, where the warlords who
razed the country became politicians who loot it. The govern-
ment has racked up huge debts to fund Sunni, Shia and Christian
patronage schemes. The World Bank estimates that the waste as-
sociated with the power-sharing system costs Lebanon 9% of
gdpeach year. The government cannot even keep the lights on.
Or perhaps it does not want to, since the businessmen who sell
generators are often connected to sectarian leaders. With a fi-
nancial crisis looming, Lebanon must restructure its debt and
introduce reforms. Its leaders seem incapable of doing so.
Sectarian government is not only ineffective—it is also un-
representative. Lebanon has not held a census since 1932, but The
Economistobtained voter-registration lists from 2016. They show
that the allotment of parliamentary seats to each religion does
not match the share of voters from each faith. Polls show that Ira-
qis have lost trust in religious parties and leaders. Many peoplein both countries, especially the young, appear to be losing their
personal faith, too (see Middle East and Africa section).
The people of Iraq and Lebanon deserve political systems that
do more to reflect their views and represent their interests. That
means unpicking state-backed sectarianism. Increased transpa-
rency would help expose the worst patronage schemes; stronger
institutions might curb them. Militias should be brought under
the official chain of command. If Lebanon stopped forcing can-
didates to compete for seats that are allocated by religion, more
might run on secular platforms, not sectarian ones. In Iraq the
electoral law helps entrench big parties, while the electoral com-
mission caters to elites. Both need reform.
Such steps may not satisfy the protesters. And they will be re-
sisted by vested interests and their foreign supporters. Hizbul-
lah, a Shia militia-cum-political party in Lebanon, and the Shia
militias of Iraq thrive under today’s system and fear being con-
strained. They are backed by Iran, which uses them to extend its
influence. But Iran has also been rocked by big protests. The les-
son for it is the same. Reform a political system that has failed
the people, or risk seeing it come crashing down. 7“Y
eah, ok, whynot? I’ll just give it a try.” With those words
Sergey Brin abandoned academia and poured his energy
into Google, a new firm he had dreamed up with a friend, Larry
Page. Incorporated in 1998, it developed PageRank, a way of cata-
loguing the burgeoning world wide web. Some 21 years on,
Messrs Brin and Page are retiring from a giant that dominates the
search business. Alphabet, as their firm is now known, is the
world’s fourth-most-valuable listed company (see Business sec-
tion), worth $910bn. In spite of its conspicuous success, they
leave it facing three uncomfortable questions—about its strat-
egy, its role in society and who is really in control.
Silicon Valley has always featured entrepreneurs making
giant leaps. Even by those standards Google
jumped far, fast. From the start its search engine
enjoyed a virtuous circle—the more people use
it and the more data it collects, the more useful
it becomes. The business model, in which ad-
vertisers pay to get the attention of users around
the world, has printed money. It took Google
just eight years to reach $10bn in annual sales.
Its peak cumulative losses were $21m. By com-
parison, Uber has incinerated $15bn and still loses money.
Today Alphabet is in rude health in many respects. Its search
engine has billions of users, who find it one of the most useful
tools in their lives. One recent study found that the typical user
would need to be paid $17,530 to agree to forfeit access to a search
engine for a year, compared with $322 for social-media sites,
such as Facebook. Alphabet cranks out colossal profits. Many
pretenders have tried to mimic the Google approach of having a
vast customer base and exploring network effects. Only a few, in-
cluding Facebook, have succeeded at such a scale.
There are uncertainties, however. Take strategy first. Other
tech giants have diversified away from their core business—Am-azon began in e-commerce, for example, but is now big in cloud-
computing. In China Tencent has shifted from video games to a
huge array of services. Alphabet has not stood still: it bought
YouTube in 2006 and shifted to mobile by launching Android, an
operating system, in 2007. But it still makes 85% of its sales from
search-advertising. A big bet on driverless cars has yet to pay off.
As the firm matures, it should start paying a dividend.
The second question is how closely the company might end
up being regulated. Alphabet’s monopoly in the search business
has led to worries that it may squeeze other firms unfairly. Its
huge store of data raises privacy concerns. And because it is a
conduit for information and news, its influence over politics has
come under ever more scrutiny. All this augurs
much tighter regulation. Alphabet has already
paid or been subject to $9bn in fines in the eu,
and in America politicians on both sides of the
aisle support tighter rules or, in some cases, a
break-up. If it were to be regulated like a utility,
profits could fall sharply.
The last question is who will be in control.
Messrs Page and Brin famously sought “parental
supervision” in 2001 and hired an external chief executive. Both
founders will now relinquish any executive role, handing the
reins to Sundar Pichai, a company stalwart. Yet dual-class shares
mean they will still control over 50% of the firm’s voting rights.
This structure is popular in Silicon Valley. But there is little evi-
dence that it ages well. Of today’s digital giants, two have so far
faced succession—Microsoft and Apple. They have prospered
partly because their founders or their families did not retain vot-
ing control after they left the scene. Alphabet’s founders should
forfeit their special voting rights and gradually sell their shares.
Their firm faces deep questions—best to give someone else the
freedom to answer them. 7Search result
Google’s departing co-founders leave three unanswered queriesSergey Brin and Larry Page leave Alphabet