If you're Target and you're hoping to hire someone who's just interviewed at Amazon, you have to beat Amazon's total compensation offer. But when Amazon makes that offer, they can pay some - maybe even *most* - of the offer in stock, rather than in cash.

This is a *huge* advantage! After all, to get dollars, both Amazon and Target have to convince you to spend money in their stores (or, in Amazon's case, with its cloud, or as a Prime sub, etc etc).

4/

Both Amazon and Target get their dollars from entities *outside* of the firm's four walls, and the dollars only come in when they convince someone else to do business with them.

But stock comes from *inside* the firm. Amazon makes new Amazon shares by typing zeroes into a spreadsheet. They don't have to convince you to buy anything in order to issue that new stock. That is their call, and their call alone.

5/

Amazon can buy lots of things with stock - not just the labor of in-demand technical workers who command six-figure salaries. They can even buy whole *companies* using stock. So if Amazon and Target are bidding against one another for an anticompetitive acquisition of a key supplier or competitor, Amazon can beat Target's bid without having to spend the dollars its shareholders would like them to divert to dividends, stock buybacks, etc.

6/

In other words, a company with a fantastic profit/earning ratio has its own money-printer that produces currency that can be used to buy labor and even acquire companies.

But why do investors value tech stocks so highly? In part, it's just circular reasoning: a company with a high stock price can beat its competitors because it has a high stock price, so I should buy its stock, which will drive up its stock price even further.

7/

But there's more to this than self-fulfilling prophecy. The high price of tech stocks reflects the market's belief that these companies will continue to grow. If you think a company will be ten times bigger in two years, and it's only priced at three times as much as mature rivals that have stopped growing altogether, then that 300% stock premium is a *bargain*, because the company will have 1,000% growth in just a couple years.

8/

Tech companies have proven themselves, time and again, to be capable of posting incredible growth - think of how quickly Google went from a niche competitor to established search engines to the dominant player, with a 90% market share.

That kind of growth is enough to make anyone giddy, but it eventually runs up against the law of large numbers: doubling a small number is easy, doubling a large number is much, much harder.

9/

A search engine that's used by 90% of the world *can't* double its users - there just aren't enough people to sign up. They'd need to breed several billion new humans, raise them to maturity, and then convince them to be Google users.

And here's the thing: the flipside of the huge profits that can be reaped by investors who buy stocks at a premium in anticipation of growth is the certainty that you will be wiped out if you're still holding the stock when the growth halts.

10

/

When Amazon stops growing, its PE ratio should fall to something like Target's, which means that its stock should decline by *two thirds* on that day.

Which is why Big Tech investors tend to be twitchy, hair-trigger types, easily stampeded into mass selloffs.

11/

That's what happened in 2022, when Facebook admitted to investors that it had grown more slowly than it had projected, and investors staged the largest stock selloff in history (to that point - hi, Nvidia!), wiping *a quarter-trillion dollars* off Meta's valuation in a day:

forbes.com/sites/sergeiklebnik…

As Stein's Law has it: "anything that can't go on forever eventually stops."

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Stocks Plunge After Facebook’s Massive Sell-Off, Nasdaq Falls 3.7%

Social media stocks including Snap and Twitter plunged on the news as the recent comeback in tech stocks faltered.

^{Sergei Klebnikov (Forbes)}

Growth stocks *have* to stop growing, eventually, and when they do, you'd better beat everyone else to the fire exit, or you're going to get crushed in the stampede.

Which is why tech companies are so obsessed with both actual growth, and *stories* about growth. Facebook spent tens of billions on bribes to telcos around the world, demanding that they charge extra to access non-Facebook websites and apps, in a bid to sign up "the next billion users":

eff.org/deeplinks/2019/02/coun…

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Countries With Zero Rating Have More Expensive Wireless Broadband Than Countries Without It

When an ISP decides to exempt certain applications or services from cutting into a user's data cap, that's zero rating. And the evidence is in that it conclusively makes broadband more expensive.

^{Electronic Frontier Foundation}

That wasn't just about some ideological commitment to growth - it was about the real, material advantages that a growing company has, namely, that it can substitute the stock it creates for free by typing zeroes into a spreadsheet for money that it can only get by convincing you to give your money to it.

14/

"Facebook Zero" (as this bribery program was called) was about *actual* growth: finding people who weren't Facebook users and turning them into Facebook users, preferably forever (thanks to Facebook's suite of lock-in tactics that make it a digital roach motel that users check into but don't check out of):

eff.org/deeplinks/2021/08/face…

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Facebook’s Secret War on Switching Costs

Update, October 1, 2021: The original version of this essay incorrectly stated that Metcalfe's Law dictated that the number of connections in a network doubled with each new user; that has been corrected, below.

^{Electronic Frontier Foundation}

But plenty of the things that Big Tech gets up to are about the *narrative* of growth. That's why Big Tech has pumped every tech bubble of this stupid decade: metaverse, cryptocurrency, AI. These technologies have each been at the forefront of Big Tech marketing and investor communications, but not solely because they represented a market opportunity.

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Rather, they represented a more-or-less plausible explanation for how these companies that were on the wrong side of the law of large numbers could continue to double in size, without breeding billions of new customers to sign up for their services.

The tell - as always - comes in the way that these companies refute their critics.

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When critics point out that Facebook spent $1.2 billion on a metaverse product that only has 32 users:

futurism.com/the-byte/metavers…

Or that practically no one buys anything with cryptocurrency:

mollywhite.net/annotations/lat…

Not even when the government gives them free crypto and passes a law forcing merchants to accept crypto:

bitcoinblog.de/2024/09/02/weak…

Or that hardly anyone uses AI, and what uses it does have are often low-value:

wheresyoured.at/oai-business/

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OpenAI Is A Bad Business

OpenAI, a non-profit AI company that will lose anywhere from $4 billion to $5 billion this year, will at some point in the next six or so months convert into a for-profit AI company, at which point it will continue to lose money in exactly the same w…

^{Edward Zitron (Ed Zitron's Where's Your Ed At)}

The "narrative entrepreneurs" behind the claims of infinite growth from these technologies all have the same response: "That's what they said about the web, and yet it grew really fast! People who lacked the vision to understand the web's potential missed out. Buy [crypto|metaverse|AI] or have fun being poor!"

It's true - there *were* a lot of people who were blithely dismissive of the web, and they *were* wrong.

19/

But the fact that the web's skeptics were wrong doesn't mean that skepticism itself is foolish. People were also skeptical of Qibi, Beanie Babies, and the Segway - all of which were predicted to continue to increase in value forever and become permanently installed as significant facts in the economy. The fact that lots of people think something is stupid is *not* a reliable indicator that it is actually great.

20/

So it's not just that capitalism adopts "the ideology of a tumor" in insisting that infinite growth is possible. The value in corporate claims to eternal growth is not aesthetic, it is *material*. If the market believes a company will grow, then that company gets to print its own money, which lets it outcompete mature rivals, which lets it grow some more.

But! When the company runs out of growth potential, the process runs in reverse.

21/

Not only do executives - whose portfolios are stuffed full of their own company's shares - stand to lose most of their net worth overnight, but once a company's stock starts to decline, it can expect to see an exodus of the key personnel who are compensated in now-worthless stock. That means that once a company hits a bad bump in the road that sets it off course, it needs to worry about losing all the skilled employees who can get it back on the road.

22/

So growth is important, not for its own sake, but for how it affects the cost basis of companies, and thus determines their competitive outlook. But not all growth is created equal.

Remember when Facebook pissed away billions in a bid to capture "the next billion users"? Those users - people from poor countries in the global south - were not as valuable to Facebook as its US customers.

23/

The news that sparked a $250 billion, one-day selloff of Facebook shares wasn't merely about anemic growth - it was specifically about anemic growth *in the USA*.

American customers are worth more than other users to Big Tech - that's true even of users from other populous countries, and of users from other wealthy countries. Norway is rich as hell, but each Norwegian Facebook user is worth pennies on the kroner compared to American users.

24/

There's brazilians of people in South America, but they're worth even less per capita than Norwegians. Even the EU, with its 500m+ relatively wealthy consumers, is worth a fraction of the US market.

Why is the US market so prized by Big Tech? Because it the only country in the world at the center of a Venn diagram with three overlapping circles. America is the only country in the world that is:

a) populous;

b) wealthy; and

c) totally lacking in legal privacy protections.

25/

The US Congress last updated American consumer privacy law in 1988, when the Video Privacy Protection Act was passed to protect Americans from the high-tech threat of...video store clerks leaking your rental history to the newspapers. Despite the bewildering, obvious, serious privacy risks that have emerged since *Die Hard* was in theaters, Congress has done nothing to extend Americans' consumer privacy rights.

26/

There are other rich countries where privacy law sucks, but they are small countries with few people. There are extremely populous *poor* countries with shitty privacy laws, but they're *poor*. Tech has to steal the private data of dozens of those people to make as much money as they can get from selling the data of just one American.

27/

And there are other rich, populous countries - like Germany, say - but those countries actually defend the privacy of the people who live there, and so the revenue tech gets from each of those users is even lower than the RPU for the undefended poor people of the global south.

America is exceptional in that it represents the one place where there are *lots* of wealthy people who are *totally* defenseless.

28/

We're an all-you-can-eat buffet for the privacy-annihilating voyeurs of Silicon Valley.

These are the two dirty secrets of Big Tech's economics. These companies are reliant on the fragile narrative of infinite growth, and that narrative isn't merely about *global* growth, but it is particularly and especially about growth in the USA.

Tech's power comes from an implausible story of discovering an endless stream of Americans to sign up and screw over.

29/

That story is extremely load-bearing - so much so that by the instant at which the first crack appears, collapse is only moments away. And boy, are there cracks:

wheresyoured.at/power-cut/

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Power Cut

A week ago, analyst TD Cowen revealed that Microsoft had canceled leases "totalling a couple hundred MWs," with "at least two private data center operators across multiple US markets.

^{Edward Zitron (Ed Zitron's Where's Your Ed At)}

I'm on a 20+ city book tour for my new novel *Picks and Shovels*.

Catch me in AUSTIN at FIRST LIGHT BOOKS on Mar 10:

thethirdplace.is/event/cory-do…

I'm in Austin for SXSW:

schedule.sxsw.com/2025/speaker…

With side-events for EFF-Austin:

schedule.sxsw.com/2025/speaker…

Fediverse House:

about.flipboard.com/fediverse-…

And Creative Commons:

classy.org/event/creative-comm…

More tour dates here:

martinhench.com

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Cryteria (modified)
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CC BY 3.0
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^{commons.wikimedia.org}