16 The Economist January 22nd 2022
BriefingTechnology and innovation
W
hen corporatebosses want to im
press investors they increasingly
reach for the iword. Mentions of “innova
tion” during the earnings calls of s&p
firms have almost doubled in the past de
cade. And no other sector talks about it as
much as the technology companies do. For
HewlettPackard, a printer and personal
computer maker, innovation has on occa
sion become what location is to estate
agents and education to Tony Blair: so im
portant it has to be said three times in
quick succession.
Do they protest too much? Throughout
that decade some critics held that the tech
nology sector was not delivering as much
innovation as it should. When Tim Cook,
the boss of Apple, said that 2020 was the
firm’s “top year of innovation, ever” thanks
to the release of the new iPhone, Mac and
other devices and services it was possible
to feel he might be going some way to
wards making the critics’ case for them.
The things the products could do and the
ease with which they did them represented
a remarkable achievement. Yes, comput
ing power kept increasing, and softwarekept doing more. But where were the flying
cars, robot footmen and headsets through
which to meld minds?
In 2020 a report by an antitrust sub
committee in America’s Congress argued
that the dominance of big tech had “mate
rially weakened innovation”. The giants, it
said, accrue big benefits from the network
effects which make having the most users
the best way to add new users; they add to
the protection such moats provide by pre
emptively acquiring potential rivals.
Stamping out such “killer acquisitions”
was one of the aims of President Joe Bi
den’s executive order on increasing com
petition last year.
One counterargument to this is that
competition in tech is far from dead. It is
hard to find a part of the industry where
two or more of the “Big Five”—Alphabet,
Amazon, Apple, Meta and Microsoft—are
not facing off against each other. Another
is that when it comes to technological in
novation, competition is not necessarily
the thing that matters most.
When the twin foundations of the com
puter age, the transistor and Claude Shannon’s theory of information, came out of
Bell Labs in the mid20th century, it was
not because the labs’ owner, at&t, was fac
ing lots of scrappy competitors. It was be
cause it wanted to make and own the fu
ture. Rob Atkinson, head of the Informa
tion Technology and Innovation Founda
tion, a thinktank, argues something
similar is true today: the Big Five are “oli
gopolists which use their market power to
win the next big thing.”
Having gone through exponential
growth themselves, they are all well aware
that missing the next transformative
change could see them thrown out of the
futuremaking game. To get a sense of their
strategies The Economisthas analysed a
range of data on the Big Five’s activities, in
cluding the technology focus of the com
panies they have recently acquired and of
those they have taken minority stakes in,
their employees’ profiles on LinkedIn and
their publications and patents. The work
provides a sense of where this phenome
nal spurt of investment is headed.
That America’s big tech companies are
spending a truly vast amount on r&dis not
in doubt. In 2020 America’s public and
private spending on r&d added up to
$713bn. In 2021 the Big Five spent $149bn,
equivalent to roughly a quarter of that total
(though some of that money is not spent in
America). That is significantly higher than
the largest single government r&dbudget,
that of the Pentagon.
A lot of that spending is in product de
velopment, and it is true that the tax reS AN FRANCISCO
America’s largest technology firms are investing a truly huge amount.
We assess what they are trying to achieveBig tech’s private passions