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We're from Washington, and we are here to help. It's a throwaway line from a bygone political era, but it's still true … and dangerous.
We had an inkling from a Washington Post story in June that federal regulators were circling around Amazon.com and Alphabet. Now we know they're coming after Facebook and maybe Apple, too.
It's a sea change for investors that warrants caution.
Some will make the case that big tech has been under attack for some time. They will point to a 2013 antitrust investigation into Alphabet that led to no meaningful changes.
All of this is true, yet it will not matter. Share prices for tech innovators are still headed lower. Here's why.
First, make no mistake: Big tech is winning globally because Amazon, Alphabet, Facebook and Apple have built irresistible ecosystems that customers love. With few exceptions, these companies are not harming competition; they are using customer loyalty and massive scale to stomp rivals.
They're winning because they are good.
Amazon, for example, has been ranked first in customer service for all businesses for several years. The American Customer Satisfaction Index, according to a Forbes story, had the online giant ranked No. 4 in 2018.
The list had Amazon behind fast-food shop Chick-fil-A, and food retailers, Trader Joe's and its parent, Aldi. Google and Apple also made it onto that list.
And when Interbrand, an international brand-building firm, sought to determine the best global brands of 2018, it ranked Apple, Google and Amazon in the top three spots. Facebook was ninth.
There is some room for improvement, though. Clearly, it's unfair for Amazon, Google and Apple to abuse their role as marketplace gatekeepers.
Amazon routinely uses the data it collects from ecommerce trends to develop new products that compete directly with sellers. Google and Apple collect up to a 30% tax on mobile apps where they have competing software.
Facebook, like it or not, cornered the market on social media by building the first product that scaled globally. Once it had family and friends, it won the category. As far as I can tell, that's not illegal.
However, this will not matter. Politicians, both Republicans and Democrats, are determined to scapegoat big tech for past elections, biases and motives far beyond simply making a buck for shareholders.
It plays well politically, but it's bad policy. And it's terrible news for investors.
It means truly innovative companies, the next Amazon.com, Alphabet, Apple and Facebook, are in the cross-hairs. Ultimately investors will want to pay less for revenue growth. They will see limited market opportunities because of regulation. Companies with better mousetraps will get lumped together with mediocre, legacy businesses.
Politicians are kneecapping American ingenuity.
The great irony is they're likely to succeed where the Europeans and Chinese have failed. Socialist taxes and closed markets didn't stop U.S. big tech, but a bunch of out-of-touch Washington elites just might.
Three weeks ago, I starting recommending that members raise cash. I could see then the potential for weaker stock prices, but I didn't think politicians would become the enemy of investors.
But here is the kicker: In the worst-case, break-them-up scenario, Amazon, Alphabet and Facebook are probably worth more as a sum of their parts.
The cloud businesses AWS and Google Cloud would be very valuable standalone enterprises. And they might actually benefit by breaking the association with their parent. The same is true for Facebook's Instagram and WhatsApp.
Dumb politicians are taking aim at big tech, but they will hurt the very companies they think they're helping. They will make it more difficult for them to raise capital.
