Trust & Anti-trust in US and China

US and China have built two vastly different internets that are reflective of their political systems. One is messy, open and chaotic. The other one is heavy-handed, top-down and enforced with an iron fist. The hands-off approach in US let a thousand flowers bloom, many wilted and a handful of them became trillion dollar companies that are critical to world economy. In China, all companies were equal until some were more equal than others. And they got the special care, grew more, had better access to capital, built better backdoors to government databases and got massive. When corporations grow so huge that they rival governments in providing services that they've long controlled (media, e-commerce, logistics, communication, etc), governments are rightful to be scared.

2020 was the year when US lawmakers suddenly realized the size of big tech and the scale of their influence. Congress paraded CEOs of Apple, Google, Facebook and Amazon for hearings, asked a few irrelevant questions that made for good TV, but mostly asked pointed, but predictable questions for which the executives responded with vague non-answers. By the end of the year, these companies' combined market cap grew at an astonishing pace despite many state attorneys general preparing to file antitrust suits against them. Investors are not only collectively yawning, but they're betting money on these companies to do what they do best: provide value to consumers, grow even bigger and make money for shareholders.

China is a different beast. Their antitrust body, SAMR, formed in 2018, is a baby compared to our legal institutions. When ANT financial, Alibaba's financial affiliate and one of the biggest private fintech firms in the world, was about to go public a few weeks ago SAMR stopped them in their tracks. The talk on the street at the time was that Jack Ma, Alibaba's founder and one of the most powerful entrepreneurs in the world talked shit about Chinese regulators and Xi Jinping took it on himself to put Ma into his place. This week China's state news agency reported that SAMR is looking into Alibaba's alleged monopoly practices and that shaved off a whopping $90B from its market cap. Shares of JD, Tencent and a few other Chinese giants', purportedly under SAMR's radar, have fallen considerably.

US, like most democracies has tried and tested means of buying the politicians, controlling the media narrative and placating the public. Though some of this is possible in China, it ultimately boils down to what the top echelon of Chinese Communist Party wants. Western government and corporations have historically bought their way into the country by bribing CCP officials and they'll continue to do so. But the unofficial bribe policy always has been 'nobody is bigger than the party'. By applying the brakes on Ant IPO and looking into the monopolistic behavior of Alibaba, the party is very clearly telling the consumers of China that they think Ma's behavior is not just ambitious, but also reckless and unsustainable.

In US, for the longest time regulators have viewed monopoly narrowly through the lens of price control. If somebody's able to elbow out competition by pricing low and then start charging higher prices after killing the competition, that's a problem. But now that tech giants control huge swathes of the economy, regulatory bodies are wondering how consumers will end up getting the short straw if there are only a handful of companies that are all worth a few trillion dollars each. Chinese regulators have a different problem. Though their internet is very closed the products have all sorts of backdoors to a government database. As their tech giants continue their undaunted rise, they will pose a formidable threat to the CCP: if a handful of them control the crux of essential services that the party solely controlled until a few decades ago -  then what's the raison d'etre of CCP?

People trust Amazon and Alibaba not only with their payment information, but with their shopping preferences. People trust Google and Baidu to not only deliver search results, but to use their search history responsibly. People trust Facebook and Tencent not only to connect with their friends and family, but to not snoop into private conversations and sell them out. Even as companies find it harder to continue to earn and maintain this trust, ultimately it's the government's job to ensure that these corporations are trustworthy. Regulation is the best way to ensure a level playing field for all entrepreneurs and a good deal for the consumer. But when a government carries a big stick to investigate bad behavior, it helps if they are trusted by the people to do the right thing. If the governments wanted people to rally behind their efforts in curtailing the powers of these giants, it helps if people trust government institutions. Unfortunately, politicians from both the countries have a lot to learn from their respective tech leaders.