One thousand billion dollars. A sum which, seeing as it refers to a single company, seems almost absurd. Yet, very tangibly, it is the value reached and exceeded by Apple on Wall Street in early August of this year. A month later Amazon also managed to reach such a figure, albeit only for a couple of days. A valuation greater than that achieved by companies such as Exxon Mobil, AT&T and Procter & Gamble put together. Yet ten years ago – unlike the three aforementioned companies – neither Apple nor Amazon were included in the list of the top ten companies in terms of capital value. A performance that besides being a "milestone" that has never been achieved before, is the clear indication that something has radically changed.

"The new thirteen figure valuation for Apple – wrote the New York Times – highlights how a group of companies that have grown in size enormously now dominates the United States' economy. The impact of this phenomenon has been obvious on stock markets, where a group of companies led by Apple, Amazon, Facebook and Google, has fuelled the second longest rally [a period when financial prices are on the rise] in history. But the effects of the consolidation of company profits extend well beyond stock markets and are not all for the better good".

The reason for this is that the new technological giants, although they dominate world finance and make stock market investors that much happier, are also the main instigators of other trends that are not so positive and are radically changing the economic outlook.

The first of these is the race towards "gigantism", to an extent that the world's economic scenarios had never experienced before. The dominant trend in the Silicon Valley is to promise continued growth, sweep the floor with the competition and keep taking over new market sectors by occupying all the space available. Here's an example of what this means: Facebook and Google are currently the kings of digital advertising, with a 57% share of the United States market, in the third quarter of 2018 the iPhones claimed 65% of the United States mobile phone market and Apple and Google supply 99% of all software used in smartphone the world over. Amazon is the undisputed leader in the e-commerce sector: according to e-Maketer's estimates, it accounts for 48% of the market in the United States, generating sales worth over 258 billion dollars in 2018 (+30% compared to 2017).

This is why their ruthless logistics combined with their platform's efficiency often cause complete upheavals in the specific sectors they target. For example last June, when Amazon decided to move into the pharmaceutical sector by acquiring a startup specialising in online pharmaceutical sales, the major pharmaceutical chains in America suffered up to 10% drops in value with an overall loss of approximately 11 billion dollars. "Competition is for losers" is one of the claims made by Peter Thiel, one of the most successful businessmen in the Valley (and a Facebook board member) in his book "Zero to One": the real goal is a monopoly.

But these concentrations are having detrimental effects on employment. As the New York Times wrote last spring "While this concentration has led to vast profits for investors and owners of major corporations such as Facebook, Google and Amazon, the competitive logic behind " the winner takes most" approach could be damaging to the workforce as a whole. In the last 30 years, their share of the income of the joint stock has been whittled away. And it is in the sectors that have witnessed the most concentration that the number of jobs has dropped the most".

The occupational levels among GAFA companies are much lower compared to the companies that dominated the markets before them. An article in the Economist that came out  two years ago put its finger on the problem.  "The rising of a superstar", pointed out that, "A quarter of a century ago, the three largest car manufacturers in Detroit recorded a total nominal turnover of 250 billion dollars, a market capitalisation of 36 billion dollars and 1.2 million employees; in 2014 the three largest players in Silicon Valley produced a turnover of 247 billion dollars, were worth over one billion dollars in capital terms but only employed 137,000 people". Today, two years down the road, the overall capitalisation of the three Silicon Valley giants is in excess of 2,000 billion dollars, and the overall number of employees at the end of September stood at just 260,000 people. Amazon does in fact employ over 550,000 people, many more compared to the rest of the GAFA companies, but much less than Walmart, their largest retail competitor, which employs 2.3 million.

It has to be said that employee unionisation in Silicon Valley has always been viewed as a nuisance to be avoided in Silicon Valley, to such an extent that Apple's letter to investors always included the following sentence: "Although in certain countries we have a legal obligation to allow our employees to access represention, our employees in the United States do not have any form of trade union representation". Since the spring of 2018 however, the employees of many major technological companies have started to organise themselves and are asking to have a say even in strategic decisions, especially where ethical chioces are involved. Google has withdrawn from an important Pentagon tender and published a document signed by its CEO on its ethical principles regarding the deployment of artificial intelligence after more than 5000 employees had taken a stand on these issues. So the employees in these firms may finally see the start of a new phase opening up.

The turnover of the four technological giants keep growing at incredible rates: Apple's 2018 financial statements foresee sales for 265 billion during the first nine months of 2018 while Facebook has announced a turnover of 38.9 billion dollars (+40%). Alphabet is claiming revenue amounting to 97.5 billion (24%) and Amazon has net sales worth 221 billion (+37%).

But are these giants fated to become bigger and bigger? In actual fact, for some of them, there are reasons for concern. Facebook would seem to be the one facing the most serious problems. The never ending controversies triggered by the Cambridge Analytica scandal which later merged with the New York Times enquiry on its unscrupulous lobbying activities have pointed the finger at a management that is having a harder time and seems very inept when it comes to managing the company's growing complexity. Its monthly active users by the end of September had increased further and reached a total of 2.271 billion, but in the United States and Europe their number has been stationary for various quarters. How advertising investors react to this situation will have to be assessed in the near future. But this is no laughing matter for a company where advertising accounts for 98% of turnover.

Apple in many ways is the perfect company owing to its turnover, its profit margins and its constantly growing value, even though the sales of iPhones (which account for 68% of its turnover) may have increased in terms of overall value but not in articles sold. However, how things will pan out in China will determine the immediate future. Although the drop in sales posted in 2017 in that market (which represents more than 20% of Apple's sales) has been reversed in 2018 what is particularly worrying now are Trump's tariff policies which could severely affect the Cupertino company.

But the greatest threat for GAFA companies is a direct result of their huge success: their absolute domination over the competition, the power they hold over the data industry, has opened up a debate on the need to regulate this power and somehow control their algorithms. Talk of imposing stricter regulations on their activities is no longer taboo. The giants may be becoming increasingly gigantic, but if a very short while ago they seemed unstoppable, now they could start to become more so.


You will find this article in the eastwest paper magazine at newwstand.