The On-Tech newsletter includes this article. You can sign up to get it here during the week. During the first few months of the pandemic in the US, businesses were closing or were in a state of chaos. As they were locked in, millions of people closed their wallets. At the time, I wrote in On Tech that it wasn’t clear that America’s biggest tech companies would keep doing as well as they had for the last ten or so years.
The bosses at Big Tech also seemed nervous. Even America’s five biggest tech companies didn’t do so well during the Great Recession, which happened almost 15 years ago. Maybe they would have trouble again.
I wrote on Thursday for The Times that the five tech giants—Amazon, Apple, Google, Microsoft, and Facebook—made more than $1.2 trillion last year. Big Tech had a strange and interesting year. Some companies are growing faster and making more money than they have in years, which I can’t believe.
Because of the pandemic, the tech giants and their bosses are now incredibly wealthy. (Even more ridiculously wealthy than before.) Apple has so much extra money that it is spending an extra $90 billion to buy more of its own stock. This is almost as much as Kenya’s GDP. Eight of the world’s 10 richest people got their money from tech companies. Jeff Bezos, the founder, and CEO of Amazon is the richest person in the world.
I’ve seen a lot of crazy financial numbers, including from these five tech giants. But I promise you that Big Tech’s numbers are so crazy now that I’m running out of words that don’t swear words to describe them.
What went wrong? I’ll tell you why in two ways: First, the pandemic made the economy weird, which helped some people and industries, like technology, while hurting others. During the last year of the recession, people and businesses wanted what the tech giants were selling even more.
That might seem obvious now, but a year ago, it might not have been. Some Americans’ need to shop from home became a matter of safety. As work and school moved online, families bought iPads and Macs. Any business with marketing money left overspends it on Google, Facebook, or Amazon. Even though companies may have cut back in other ways, they did buy software from Microsoft and Amazon.
Second, the tech giants took advantage of the pandemic to get better. In some cases, this meant spending less on things like travel, entertainment, and marketing. Google said that it was saving more than $1 billion a year on these kinds of costs.
On the other hand, the tech giants spent a lot of money on things that gave them an advantage. Amazon spent $50 billion on big purchases like warehouses and cloud computing hubs over the past year. That’s more than twice as much as Exxon Mobil spends each year to get oil and gas out of the ground. Again, bananas. Sometimes, tennis is just a game of waiting and waiting, waiting, waiting.
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Read on for the rest of the main story.
In 2021, when the economies in the US and some other parts of the world start to grow again, the tech giants will be lean, mean, and ready to make even more money. The question I have now is whether or not America’s technological powers are unbeatable. And do they win at the expense of everyone else?
The first question can’t be answered, but it feels like that’s the case. And I asked Thomas Philippon, a finance professor at New York University who studies how the power of big companies grows, that second question.
Philippon told me that the pandemic and the changes to digital technology that it forced did help small businesses. For example, restaurants had to change quickly to accept online orders and deliver food. Many of the changes they made will help them in the long run.
But he also thinks that the pandemic probably made the gap between the big, rich companies, like the tech giants, and everyone else bigger. He said, “Definitely, there is a feeling that this recession was good for companies that were already doing well.”
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