by David Rosh Pina
The 21st century and the dotcom bubble brought about a new reality. For the first time in history, the five largest U.S. companies by market cap are all tech companies. These companies, known by their acronym FAMGA (Facebook, Amazon, Microsoft, Google, and Apple), account for a remarkable $3.5 trillion of the $8.2 trillion total market cap of the top hundred NASDAQ companies. The average FAMGA company is valued at over $700B. The smallest FAMGA stock by market cap, Facebook, at $503B, is twice that of NASDAQ number six, Intel, at $246B. The power of FAMGA is such that it surpasses the market cap of the next 44 largest tech companies combined.
Some may erroneously confuse FAMGA’s business model with cutting-edge hi-tech, but what binds these five companies is their data gathering business models, in which users utilize services while the services “sell” the users. Israeli scholar, Yuval Noah Harari, the author of bestselling books Sapiens and Homo Deus went as far as to state this data-driven economy will create more than just a different social class but a totally different species.
"Previously in history, all class division was legal, economic, and political, but it was never biological. There was never a deep difference at a biological level between the kings and the peasants, between the upper cast and the lower cast. In the future, however, we may see humankind splitting into different biological casts," Harari said in a 2016 conversation about Sapiens with paleontologist Lene Liebe Delsett.
The more naïve observers of the crypto phenomenon tend to see blockchain-based platforms as using a user data-free business model that directly contradicts FAMGA’s. But because of its decentralized nature, cryptocurrencies require trust, and trust requires KYC (know your customer) – and that in turn requires data. Who better to provide data than FAMGA? And what better place for them to expand than crypto and the banking system?
The recruiting of Coinbase executive David Marcus by Facebook last summer, and the privileged relationship the social media giant has with Coinbase, is just the latest in a series of not-so-subtle steps by Facebook and the other FAMGA to get into the blockchain ecosystem and create their own banking system.
Karl Marx said capitalism tends to concentrate wealth. We may be witnessing a consolidation process of Orwellian proportions. It might sound far-fetched, but think about it.
FAMGAs have masses of potential customers and know almost everything about them: their socioeconomic status, location, interests, and even moods. They push advertising on these customers and encourage them to shop through their platforms. They have mountains of investment cash, sophisticated systems to analyze every activity and profile, and security systems that can prevent fraud. At any given moment, they can decide they want to provide financial services to all their users and, within a few months, undermine the financial structure that has dominated the world for more than a hundred years. The blockchain will help them, and your privacy and client information will be an asset all the way to your bank statement.
Like in Orwell’s Animal Farm, not all FAMGAs are equal. Facebook has a serious lack of consumer trust. To restore public trust, Mark Zuckerberg has been trying to crack down on false content, brought Marcus in and launched a charm campaign on the U.S. Congress last winter. But, not even Coinbase’s wunderkind can make the blockchain community trust Facebook again.
Amazon, on the other hand, has so much consumer trust, people actually give their home and car keys to the delivery man. Google knows so much about its users, it can even guess which currency they want to buy based on previous searches, and Microsoft Windows 10 is the most trusted operating system in the market despite locating its users.
When Madison Avenue legend Fred Goldberg sent Apple's now famous 1984 to be tested by the leading market research company of the day, he was told it would be one of the least effective commercials the firm had ever tested. Its tagline, "Why 1984 Won't Be Like 1984" plays on George Orwell's dystopian novel and reassures viewers that Apple's new technology would be used for freedom, not control. One thing’s for sure. Apple knew what it was doing when it used 1984 in its commercial for Macintosh. It just missed the decade.
FAMGA are the most powerful companies ever created. They know all your information and pretty soon they will own your money. The 18th century brought us the seminal distinction of church and state. In the age of mass data, regulators must bring another seminal distinction between money and data.