Google Gets Sucked into the Parasite Economy

The Washington Post reports that Google “does not intend to repeat the mistake that its rival Microsoft made a decade ago.”

Microsoft was so disdainful of the federal government back then that it had almost no presence in Washington. Largely because of that neglect, the company was blindsided by a government antitrust lawsuit that cost it dearly.

Mindful of that history, Google is rapidly building a substantial presence in Washington and using that firepower against Microsoft, among others.

This story just keeps repeating itself. People build companies, and then activists, competitors, and politicians notice that they have deep pockets. It happened to Microsoft, then to Wal-Mart.  When the parasite economy first started lapping at Google last year, I wrote this:

Founders Larry Page and Sergey Brin and many other wealthy officers of the company got rich the only way you can in a free market: by producing something other people want. A lot of brilliant people worked long hours producing computer software that hundreds of millions of people chose to use, in the midst of a highly competitive market that offered lots of other options.

But in our modern politicized economy – which National Journal columnist Jonathan Rauch called the “parasite economy” – no good deed goes unpunished for long. Some people want to declare Google a public utility that must be regulated in the public interest, perhaps by a federal Office of Search Engines. The Bush administration wants Google to turn over a million random Web addresses and records of all Google searches from a one-week period. Congress is investigating how the company deals with the Chinese government’s demands for censorship of search results by Chinese users.

So, like Microsoft and other companies before it, Google has decided it will have to start playing the Washington game. It has opened a Washington office and hired well-connected lobbyists. One of the country’s top executive search firms is looking for a political director for the company.

What should concern us here is how the government lured Google into the political sector of the economy. For most of a decade the company went about its business, developing software, creating a search engine better than any of us could have dreamed, and innocently making money. Then, as its size and wealth drew the attention of competitors, anti-business activists, and politicians, it was forced to start spending some of its money and brainpower fending off political attacks. It’s the same process Microsoft went through a few years earlier, when it faced the same sorts of attacks. Now Microsoft is part of the Washington establishment, with more than $9 million in lobbying expenditures last year.

Google has become a brilliantly useful company. We can’t imagine how we got along without it. I can’t even imagine how I got along without Google Desktop. Some of us appreciate that; others believe that becoming indispensable imposes obligations on a company. Google has started to find out how it feels to be the most flagrantly successful company in America.

Alas, Google seems to have taken to Washington all too enthusiastically. As the Post notes,

In its first major policy assault on a competitor, Google’s Washington office helped write an antitrust complaint to the Justice Department and other government authorities asserting that Microsoft’s new Vista operating system discriminates against Google software. Last night, under a compromise with federal and state regulators, Microsoft agreed to make changes to Vista’s operations.

So Google’s brilliant staff are now spending some of their intellect thinking up ways to sic the government on Microsoft, which is once again forced to give consumers a less useful product in order to stave off further regulation. The Post’s previous story on Google’s complaint called it ”allegations by Google that Microsoft’s new operating system unfairly disadvantages competitors.”

Bingo! That’s what antitrust law is really about–not protecting consumers, or protecting competition, but protecting competitors. Competitors should go produce a better product in the marketplace, but antitrust law sometimes gives them an easier option–asking the government to hobble their more successful competitor.

Recall the famous decision of Judge Learned Hand in the 1945 Alcoa antitrust decision. Alcoa, he wrote, “insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened, and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connection and the elite of personnel.” In other words, Alcoa’s very skill at meeting consumers’ needs was the rope with which it was hanged.

I look forward to more competition between Microsoft and Google–and the next innovative company–to bring more useful products to market. But I’m saddened to realize that the most important factor in America’s economic future – in raising everyone’s standard of living – is not land, or money, or computers; it’s human talent. And some part of the human talent at another of America’s most dynamic companies is now being diverted from productive activity to protecting the company from political predation and even to engaging in a little predation of its own. The parasite economy has sucked in another productive enterprise, and we’ll all be poorer for it.