Which Companies Are the "Big Brothers" of Our Lives?

When a small company that set out to defy the powerful becomes powerful itself, it gathers up information and starts running people's lives again. Where should its limits be?

Where does a company's power end? Suppose a company dominates its industry, has gathered enough important information, and can use that information to run people's lives. What may it do, and what may it not? If we call companies with this power "Big Brother" — the name George Orwell used in 1984 — then which Big Brothers rule our lives?

Of course, to become Big Brother a company first has to win users. It must be very successful, offering services users can trust (or at least cannot escape). That is often no bad thing. Such companies make hard things simple: Microsoft taught everyone what it meant to use a computer, and Amazon worked to reduce shopping to its simplest form with one-click ordering.

What makes Big Brother unsettling is that once these companies grow into behemoths, they stop innovating — which is why Apple first rebelled against IBM, the Big Brother of its industry. It is also that once they hold enough data, they can do things people can barely imagine, such as quietly selling your privacy.

They can choose to abandon "Don't be evil." That is what truly worries people about Big Brother.

In Orwell's novel, Big Brother watches your every move, every moment. It is everywhere, it holds all your information, and it uses that information to serve itself.

A company could well become this. In The Master Switch: The Rise and Fall of Information Empires, Tim Wu writes about information monopolies. Google owns the whole search industry, for example, and Amazon is the boss of online retail. Neither will be beaten anytime soon, and both have the power, as AT&T once did, to monopolize an entire communications industry and shut every competitor out.

We would like to keep our imagination on the good parts, but we also have to watch their limits. Where is the line between a company doing evil and not doing evil? Let us start with a few Big Brothers.

1. IBM: It put computers in more people's hands, but some doubted it could innovate

"If, for some reason, we make some giant mistakes and IBM wins, my personal feeling is that we are going to enter sort of a computer Dark Ages for about twenty years."

Many people know this line by now. Steve Jobs said it in a 1985 Playboy interview. IBM had already launched its personal computer, the IBM PC, which was spreading into offices, schools, stores and homes. IBM had brought computers into the commercial era with a momentum never seen before.

Jobs worried that IBM would not put much thought into the experience of consumer products like this. As an aging giant, it won markets less through product innovation than through resources built up over decades. IBM began making computers during the Korean War. It signed government contracts and first developed "defense computers," then turned to consumers. In 1981 it launched its first personal computer, the 5150, which brought the personal computer into people's lives. Within a month of going on sale it had 240,000 orders, and in its first year it earned the company nearly $1 billion in revenue.

Jobs thought he was a bit cooler. His computers ran an operating system with a graphical interface, and he knew how to combine technology and the humanities to make products that fascinated ordinary consumers. That was not IBM's focus. IBM was good at data processing and better at serving businesses and governments. It understood the market, but it could not necessarily read ordinary consumers' minds or make things they could not put down. Apple, the young company, believed it could. If IBM succeeded, computer makers everywhere would copy it, and in Jobs's view the IBM PC would leave the whole industry short of imagination.

But when Jobs, to launch the Macintosh, made an ad called 1984 that defied IBM, the Big Brother of its field, few people remembered that IBM had once been just as cool.

In the 1880s, as new immigrants poured into the United States, the census came under heavy strain. Anyone unlucky enough to land this job in a government office could expect to spend eight to ten years with colleagues finishing a single census. In 1890 a clerk there, Herman Hollerith, invented an automatic tabulating machine, freeing people from the drudgery and saving the government $5 million. The story does not end there. This basic design went on to change almost every industry for more than 50 years; even when commercial electronic computers appeared, they still used this original form of data processing.

Thanks to the electric punch-card machine it had invented, the company quickly monopolized the global punch-card market in the 1920s and made huge profits. It built up more capital during the Second World War that followed, supplying the government with large quantities of military equipment such as bombsights, and grew strong. With data processing as its core advantage, IBM became a true Big Brother. Look at the many fields it later entered, including some you may not know — Carroll embossing machines, Dayton scales, time clocks, hard disks, ATMs, relational database management systems, accounting computers, all the way to the personal computer — and you will find that in anything to do with data processing it had the first-mover advantage, and in the end made that information serve itself.

Jobs, who had studied calligraphy in college and cared about graphics, refused to accept this. With the capital and market position IBM had built up, the IBM PC would very likely have won in the end, and computers for everyone would have spread on IBM's terms — if not for troublemakers like Jobs.

2. Microsoft: About 95% of the world's personal computer operating systems once came from this company

"Hardware must be paid for, but software is something to share. Who cares if the people who worked on it get paid? Is this fair?" In 1976 Bill Gates wrote his "Open Letter to Hobbyists," a landmark in software history.

He was talking about MITS, a company he had worked with. Two years earlier, MITS had built a computer called the Altair around Intel's 8080 microprocessor, and Bill Gates and Paul Allen wrote a BASIC for it. But Gates felt MITS had broken its promise to focus on BASIC and was pushing its own computer instead, which let pirated software spread. He thought this was unfair.

This was how Microsoft began. At the time he and Allen were just two people dependent on MITS, writing software for others, but the business's potential gave them the means to rebel, and Microsoft was founded soon after. By 1998 about 95% of the world's personal computer operating systems were Microsoft Windows, and the company's market value had reached $250 billion.

Microsoft got many things right: it partnered with IBM, the giant of the day; it turned to the Japanese market very early; it saw bigger prospects early and turned down acquisition offers; and it saw the market for office software and hired researchers from Xerox to build Office. A company whose operating system runs on most people's computers can do much more. Beyond Office came the IE browser, a music player, an email service, online services, the instant messaging tool MSN, the news channel MSNBC and the Xbox game console... What a single programming product brought back then was that more and more people found computers easier to use and came to understand what a computer was.

The unfairness Gates once felt was gradually felt by companies in other industries too. Netscape, for one. Netscape, whose shares jumped to $75 on the day of its 1995 IPO, ran into Microsoft. Windows blocked the Netscape browser from connecting to certain programming interfaces. People who tried to use Netscape on Windows found that many programs they needed were incompatible, while the IE browser had no such problem.

This was the threat people saw in Microsoft at the time, and it was unsettling. On the strength of its operating system, it could keep launching related products and take market share in every field, and by then that was easy for Microsoft. The US government's 1999 antitrust suit against Microsoft targeted exactly this kind of "overreach." Holding more than 80% of a market is not in fact illegal in the United States; the worry was that if Microsoft carried on like this, innovation in other industries might be stifled by the mere presence of this behemoth.

3. AT&T: The giant that was split into eight

To make the worry about Big Brother concrete, AT&T may be the best place to start.

There is a story about a genius tied to this huge company. The 2012 documentary The Genius Shelved tells of Walter L. Shaw, a communications inventor who held 39 patents in his lifetime and whose talent should have made a career anywhere easy. After 14 years working for AT&T, he fell out with the company over a contract, and found that although no one understood the technology better, he could do nothing at all in communications — every business connected to communications was monopolized by AT&T.

So AT&T always calls to mind the famous antitrust case of 1984. That year the US Department of Justice broke AT&T into eight companies. Before then, local, long-distance and international telephone service in the United States had all been controlled by this one company, and the manufacture of telecom equipment fell within its monopoly too.

What really worried people about AT&T was not how big it was or how much of the market it held, but whether its conduct as a company had crossed the line. That was also what the Department of Justice cared about more. It controlled the telephone network, for example, and allowed no other company to connect to it. After the breakup, carriers such as Sprint and T-Mobile USA gradually rose, and within a few years the price of calls in the United States fell by 40%. Americans, fearing damage to democracy, also object when resources tied to the government are controlled by a few people for too long and to excess.

But it is best to look at it this way: how many things must a company get right to grow as big as AT&T? For more than a hundred years, AT&T made the best decision at almost every important moment. The first was the strategy it used against Western Union, the boss of the American telegraph industry. Western Union's strength was its nationwide network, and it could squeeze rivals by refusing to lay telegraph lines in their areas. AT&T, then still the Bell company, came up with an answer: give the full set of equipment to local telephone exchanges in return for part of their stock. This way the Bell network quickly reached San Francisco. In areas Western Union controlled, Bell did meet obstacles, but its business model was newer and more attractive. That led Western Union's sworn enemies to side with Bell and expand its territory, and from then on Bell led the new market.

The company then made several important decisions. It ran telephone service and also made the equipment, keeping a tight grip on the industry. Early on it targeted the business class who could afford to pay. It started long-distance calling early. When the telephone spread to the masses, it rolled out pay phones to make everything more convenient. And it bought up independent telephone companies while knowing how to manage regulators. All this made it the AT&T that could control every communications network.

4. Google: A company holding vast amounts of data may know you better than anyone

A closer example makes this easier to grasp. Take Google, now part of Alphabet. Alphabet's wholly owned subsidiaries show what the company has been busy with in recent years: research on extending the human lifespan, self-driving cars, drones that deliver medicine, smart glasses, blood glucose monitoring, smart homes and fiber-optic networks, plus Google's original businesses — search, maps, the browser and email.

Google seems connected to everything in our lives. As it finds more and more ways into every corner of our lives, it gathers more and more information each time you use one of its products. More than 90% of the company's revenue comes from advertising, and its advertising depends on knowing you. Google Analytics knows what you like to read, and every time you use one of its products, such as watching a YouTube video, Google learns your habits and preferences and can target ads at you more precisely. Through smart home products it will know what is happening in your home; through maps, where you often go; through glucose monitoring, the state of your body. It now seems unavoidable: a company holding this much data may know you better than your mom does.

In fact the prospect could hardly be better. These things will make your life more convenient than ever. Based on your daily habits, Google is slowly learning to plan you the best travel routes, the healthiest way to live, and the quickest, most useful information. How did Google, which once needed Yahoo's support to get started, manage all this? Put simply, its core advantage is its algorithms. Algorithms need huge amounts of data. Google first gives ordinary users the best search service, which draws more and more people to it. Once it has data on their search habits, its algorithms can place precisely targeted ads, attracting more and more business customers. That makes money, which pays for more of the idealistic projects we see today. It is hard to deny that this is a smart and great company.

Here is the problem: if such a company abandoned "Don't be evil," what it might do next is just as hard to imagine. The more people use its services, the more data it can collect at any moment, like Big Brother. Its products grow more refined, until people cannot leave; its ads grow smarter and its profits easier — and remember, this is an opponent that gets harder and harder to beat.

5. Amazon: Using new technology to take over consumers' thoughts of shopping

Amazon, now the world's most valuable retailer, has always seen itself as a technology company.

That is precisely why it acts more like Big Brother when it sells things. The urge to shop is instinctive, but like sleepiness, it needs a prompt — just as you fall asleep more easily when you walk into a comfortable room. What the first companies to build e-commerce sites had to do was keep taking over consumers' thoughts of buying with one new service after another, reminding you every so often that it was time to buy something. Shopping has become one of people's main impulses, the thing they think of whenever they are tired or worn out or simply itching to do something. In most cases that was the e-commerce sites' idea, whether Amazon abroad or Alibaba in China — and whoever keeps coming up with more such good ideas will lead the industry.

Holiday sales are a very common method, but Amazon, which sees itself as a technology company, did more and was a bit smarter. It understood one thing: what matters is making shopping simple. Then customers' habits change, they come to depend on it and buy more. With more money, Amazon can build more around shopping, more people use the other services its technology brings, and so they want to buy even more...

Look at what Amazon has done. Two "small things" were basically decisive. The first was one-click ordering: Amazon cut out every step in between so that a single click does everything, making shopping easy. Bezos patented it and sued later imitators and won. For the first time, Amazon began to look a little dangerous to others; booksellers saw it as monopoly. Technologies even less "friendly" to booksellers were still to come: selling e-books at a low price of $9.99, and the Kindle, which gave Amazon 90% of the e-reading market. Later it let authors publish new books on the site and keep 70% of the sales revenue, leaving publishers and printers far behind.

Amazon's other strategy is Amazon Prime. For $99 a year, users get perks such as free shipping, free online movies and one free book to borrow each month. It sounds like a money-loser, but one-click ordering had taught Bezos that when buying online becomes easy, sales go up, covering the losses the service brought at first. The result was no surprise: the service actually made the business run faster, and Prime members on average doubled their spending on the site.

Once Amazon set its sights on music, film and streaming, the booksellers' long-standing anger became futile. If the information Google holds is users' data, which it can use to pursue more of its ideals, then the information Amazon holds is the users themselves, whom it can mobilize at any moment with its best products. But this Big Brother — of an industry, and of consumers' urge to buy — has been doing the same thing from start to finish: making its site ever more tempting, and stirring up consumers' desire to buy with new technology, so that over time, whatever they want, it is the first place they think of.

Amazon Dash, Amazon's latest launch: record a voice memo or scan a barcode to put what you want into your shopping cart with one click

6. Tencent: There is almost nothing it does not do

In the history of China's internet, Tencent turns up almost everywhere. The company, which started with an instant messaging tool, has moved into social networking, entertainment, finance, healthcare and even space. Yet when people talk about Tencent, their impressions often come down to things like these: you cannot share songs from other apps in WeChat Moments; HTML5 links get restricted once they pass a certain number of shares; it once made the "difficult decision" to stop running QQ on computers with 360 software installed; and it is "the father of copycats"...

Tencent is almost the AT&T of the other hemisphere. It first used a new way to let more people stay in touch more instantly, and made that the norm. Nine months after QQ launched it had 1 million registered users, and a year later more than 10 million. According to Tencent's 2015 WeChat User Data Report, by the first quarter of 2015 WeChat already covered more than 90% of smartphones in China, with 549 million monthly active users in more than 200 countries and more than 20 languages. This is why Tencent "turns up everywhere."

These numbers are the information Tencent holds. They let it move into other fields more easily on the strength of this "mass base," and that original free social app is the business model that would make Tencent Big Brother. It is not easy to list everything Tencent has done on the internet, because there is simply so much, and most of its profit comes from there: partly from value-added services such as QQ memberships, partly from advertising, and partly from value-added services run with telecom carriers. This gave Tencent the ambition and the means to do "everything."

7. Cisco: Buying its way to the throne of internet services

When Microsoft faced its antitrust suit in 1999, some worried that Cisco — already worth $30 billion, with 88 patents — would meet the same fate. Over the previous seven years the company had bought more than 50 companies, including former competitors, and some critics argued that it bundled its in-house IOS software with its other products, a strategy much like Windows bundling the IE browser.

Cisco, an internet services provider, is a Big Brother in every sense, and the reason is acquisitions. It started with routers: at first, staff who had left Stanford University sold routers out of their home. After John Chambers took over in 1991, the company expanded its business enormously within a few years and became a giant like Microsoft. Chambers developed a business model all Cisco's own. Cisco had to truly serve customers and stop being a routers-only business, so it bought heavily — whenever a company came up with a new technology, Cisco's job was to find it and buy it.

Its core technologies now span ten areas, including switches, wireless, IP routing and IOS. The buying has continued this year, including Tropo, a cloud application development platform, and OpenDNS, a network security company, all of which round out the services Cisco ultimately offers customers. It makes itself stronger by gathering resources from every link of the internet, and so grows stronger still. In some of the lawsuits involving Cisco — such as its suit against Huawei several years ago over intellectual property in source code and technical documents, and a claim by Multiven, a small American company, that Cisco forced its network equipment customers to use Cisco's own maintenance services and kept rival service providers out of the market — this Big Brother was seen as blocking technological innovation. Cisco held 70% of the American network equipment market, and the way the government's monopoly charges against it ended was also seen as the fruit of CEO Chambers's dealings with the government. But there is no denying that this "king of the internet" did have the power to monopolize.

Former Cisco CEO John Chambers