In a less stable world, investors need to rethink their Big Tech plays

With $5.6 trillion of market value gone from the Nasdaq 100 in the first half of this year, it is understandable that investors would focus on the index’s weightiest listed companies from the point of view of growing their share prices and profitability. However, taking such a view ignores the impact from the dominance of a handful of technology companies such as Apple, Microsoft and Google-parent Alphabet. In the past decade, despite the billions of dollars gained in terms of wealth from holdings in these companies, we have lost much more as individuals, societies and nations from their expansive growth. Their accumulation of data and information about us has reduced government to a secondary role. We have felt the consequences of this reality, as political landscapes go through upheaval in an era when corporations the size of states can act both locally and globally and in real time – all to one end, to grow profit. Facebook parent Meta, for example, says it has about 2 billion daily users. Meanwhile, about 50 million people use LinkedIn to search for new jobs every week. Some 60,000 employees are needed to run Meta while tens of millions work in the public sector in China and the US. There is something wrong with the maths here. The manpower and resources at the disposal of governments around the world are predominantly only fit for a different age, before the internet. The public institutions who are responsible for our wellbeing, ensuring access to the best services, such as healthcare and education, are no longer the apex predators. How can you truly govern effectively when shadow governments are operating with little oversight and you are dependent on them for your own operations? You cannot. Meta, Amazon, Apple and Microsoft have added hundreds of billions of dollars to their market capitalisation over the past decade. During the same period it feels as if wages, opportunities and the overall standard of living in developed countries has not kept up with the big technology companies’ growth even though it could not have happened without the very users they accumulate. Redistribution of wealth or revenue is not a viable answer and would frankly become a distracting issue. Instead, investors should focus on ensuring we have a sustainable way forward. We should not reward a charge-ahead mentality. The expectation that all problems can be resolved over time by profit-driven strategies is a false one. How corporate earnings might be affected by interest rate increases, inflation and the threat of a looming recession may seem the most urgent concern to investors right now. On Wednesday, Meta reported a 36 per cent drop in profit in the second quarter compared to a year earlier. However, an imbalance of power in favour of the big tech firms at the expense of the influence of governments around the world, is the most pressing matter we all face, together with climate change. The solution to this is about more than companies following ESG principles – it is about a shift in mindset, similar to the one we are undergoing regarding the push to net zero carbon emissions and the energy transition. Companies can prioritise steadiness over growth; along the lines of the thinking pioneered by American economist Herman Daly. Otherwise, the lack of control over our own lives will only get worse as we enter an era where artificial intelligence will increasingly affect us. Who controls how it is used, rather than if we can profit from it, should be the burning question. For example, we do not know how any of the big technology firms’ AI works. Their secrecy has only resulted in our information being misused over and over again, leading to in a dramatic drop in trust, the weakening of public institutions and the undermining of law and order. This hits our quality of life and emotional and physical wellbeing. Given that big technology companies do not represent the people no matter how many of us make use of their services, our only real recourse is to become shareholders with the primary purpose of making them hear us. Governments are trying to redress the imbalance but they need our help to do so. In the UK, proposals to force the likes of Meta and Google to abide by a duty of care to users includes penalties of fines up to 10 per cent of their annual global turnover. They have signed a code of practice to self-regulate in New Zealand which many are sceptical will work. China has taken the most strident steps to rein in big tech companies. Last week, authorities fined ride-hailing firm Didi more than 8 billion yuan ($1.2 billion) over alleged data security violations. These moves have as much as anything else sough to improve data protection and limit monopolistic tendencies. We have been living for the past seven years with the EU’s General Data Protection Regulation (GDPR), which is more costly for companies in terms of compliance, but the consumer has not been unduly hurt by it in any way. Largely, with their reserves of cash, tech companies has shrugged off the inconvenience. As people have shown in recent years with co-ordinated action online to push up the stocks they like – even when the experts disagree – there is potential for a concerted movement to pressure big technology share prices in order to send a message to their managements. In the long-run this is better for humanity as well as the bottom line. Technology is not bad in isolation. Neither are the companies mentioned above. Also, they are succeeding according to the rules we have set. The good news is we can change them.