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How Europe overtook the US in championing free markets

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The deregulation of major U.S. industries like telecom and energy in the 1970s and 80s sparked competition that lowered consumer prices and drove product innovation between competitors. Europe, on the other hand, lagged behind with more expensive internet, phone plans, airline tickets, and more until around 2000 when a major reversal of this trend began. Strikingly, when the EU strengthened deregulation and antitrust efforts to open its markets to more competition, it was the U.S. that reversed course.

According to a new book by French economist Thomas Philippon, Americans’ view of their country as the world’s beacon of free market competition and Europe as an over-regulated region of lethargic corporate giants is out of date, and may be inhibiting our ability to recognize growing corporatism at home. Philippon, a professor of finance at NYU Stern who earned a Ph.D. in Economics from MIT, was named one of the top 25 economists under age 45 by the International Monetary Fund.

“If you have nothing interesting or relevant to say, you can always take a jab at European bureaucrats. It’s the political equivalent of complaining about the weather…”

Based on Organization for Economic Cooperation and Development (OECD) data, the U.S. now has more regulations for opening a new business than every EU country except Greece and Poland — a complete reversal since 1998, when only the UK had fewer rules than the U.S. Per capita GDP growth in the EU outpaced that of the U.S. over 1999-2017. On a purchasing power parity basis, Americans have experienced a 7% increase in prices (relative to EU residents) for the same goods, due specifically to increased profit margins of companies with reduced competition.

The reason for this divergence? According to Philippon, corporate incumbents in the U.S. gained outsized political influence and have used it to a) smother potential antitrust reviews and b) implement regulations that inhibit startups from competing against them. As a result, the U.S. regulatory system prioritizes the interests of incumbents at the expense of free market competition, he says.

Philippon makes his case in “The Great Reversal: How America Gave Up on Free Markets,” released this past Tuesday by Harvard University Press. The book builds an argument from extensive data and pre-empts likely critiques by investigating numerous potential confounding variables or differences in research methodology. It is a compelling read for those interested in the dynamics of the overall innovation economy or the political debate over antitrust and Big Tech.

Incumbents over startups

Philippon, who was na states upfront that he isn’t claiming Europe is a bigger startup hub. In fact, he writes that “the U.S. has better universities and a stronger ecosystem for innovation from venture capital to technological expertise.”

What he does do is ring the alarm about a systemic shift in market consolidation in the U.S. that results in a small number of large incumbents charging high prices, an economy-wide prioritization of share buybacks over investments in innovation and government policy that inhibits competition from new entrants.

An important take-away for readers: there’s a concerning trend toward more barriers to successful entrepreneurship, higher prices for countless goods and services that startups use, an overall decrease of corporate investment in new technologies and fewer potential startup acquirers.

There are half as many publicly-traded companies in the U.S. as there were in 1997, and turnover within rankings of the top five companies per industry has declined sharply since the late 1990s as well.

Market concentration isn’t due to superstars

“The Great Reversal” considers that increased market concentration could be the result of “superstar” firms whose increased productivity is a win-win for shareholders and consumers alike. This has indeed occurred during the 1990s but the correlation between increased concentration and increased productivity ended around 2000 (with the exception of the retail sector).

Corporate after-tax profits as a percent of U.S. GDP were stationary for decades at 6-7% but increased to 10% in the last two decades, highlighting increased “rent-seeking” that shouldn’t occur if the leaders in most industries were facing the same amount of domestic competition or increased international competition.

From the 1960s through the 1990s, American companies poured an average of 20 cents from each dollar of operating profit into investments (R&D, capital expenditures, etc.). Since 2000, that’s fallen to 10 cents per dollar. With reduced competition, large companies are focusing less on advancing their product offerings and more on extracting profits for shareholders out of existing business operations.

Big tech isn’t exempt

Major tech companies — specifically Alphabet (Google), Amazon, Facebook, Apple, and Microsoft — are the focus of multiple chapters of analysis by Philippon, who rejects the notion that these companies are somehow unprecedented relative to the leading companies of prior decades from an antitrust standpoint. They account for a smaller portion of U.S. GDP and stock market value, and they have similar profit margins. Network effects and accelerating economies of scales are not new concepts in economics — existing antitrust regulations are capable of dealing with these companies.

In our interview, Philippon said that leaders of monopolies typically claim they need to maintain their monopoly in order to have the means to invest in innovation. He calls it bogus — companies innovate when competition pushes them to find ways to offer a better product at lower cost. Admittedly, the tech community has perhaps bought in too much to the narrative that the dominance of Alphabet, Apple, and Facebook has provided more long-term R&D into endeavors that will advance humanity.

These companies’ “moonshot” projects act as effective marketing for this narrative, distracting from the many billions more dollars that would be poured into innovation investments in the economy if the markets they are in were more competitive.

America’s most important industries are among its least competitive

Philippon acknowledges that the heart of America’s problem isn’t its failure to effectively regulate Silicon Valley; it’s the failure to stop increased concentration in the industries that most shape consumer spending: healthcare, energy, transportation and telecommunications.

During our interview, he estimated that this “great reversal” in the U.S. has cost the median household an additional $300 per month in markups on goods and services — reduced competition has allowed incumbents to increase profit margins at the expense of consumers.

The lack of competition in these industries contributes to America’s deteriorating infrastructure. More than 700,000 Californians experienced blackouts in recent weeks due to Pacific Gas & Electric’s failure to make capital expenditures that maintained and improved its assets. Most of the 15 million people who live inside the utility’s service area have no where else to turn.

What makes Europe different

A critical factor in Europe’s relative improvements over the U.S., Philippon argues, is the greater independence of EU regulatory agencies like the Directorate General for Competition from corporate or political influence. In negotiating over the creation of these agencies, European politicians were more fearful of agencies falling under the control of other member countries than they were fearful of lacking influence over the agencies. Regulators have frequently intervened in mergers even when politicians from the companies’ home countries lobbied to permit the deals. In the tech industry, the EU has insisted on consumers retaining ownership of their data and the freedom to take it with them in switching to a competing software service.

Less tied to election cycles and specific political parties, the independence of EU regulators enables them to iterate when new regulations have unintended consequences. Philippon argues that U.S. regulators fail to act in the first place because of concerns that if they don’t craft the perfect policy upfront, there will be political repercussions.

Regulatory influence is for sale in the U.S.

Philippon makes the case that politicians’ survival is the U.S. has become more heavily tied to fundraising and the overwhelming majority of that fundraising comes directly and indirectly from corporate interests. The top 1% of donors account for about 75% of all political contributions (and the top 0.01% for 40% of all political contributions). Business lobbies are by far the dominant source of money in American political campaigns according to statistics he cites from the Center for Responsive Politics.

Benchmarked against antitrust reviews in the EU, Philippon finds that the decline in the number of antitrust actions in the U.S. (by the DOJ and FCC) has largely corresponded to increased lobbying spending that targets the DOJ and FCC. Each doubling of lobbying expenditures in the U.S. by a given industry corresponds with a 9% decrease in antitrust reviews in that industry, and such lobbying spend tripled overall from 1998 to 2008. He also cites a 2008 book by UVA professor Christine Mahoney finding that the majority of lobbying efforts in the U.S. by corporations and trade associations are successful whereas the majority of lobbying efforts by citizen groups and foundations fail.

What we should take away from “The Great Reversal”

I find “The Great Reversal” to be a timely analysis of the weakening of America’s regulatory regime for protecting free market competition. The recent rise of populism as the driving force in American politics has included resounding cries from activists in both parties that capitalism is broken, that free markets have failed us. Tying in the analysis from this book, the more accurate target for this criticism, however, should likely be the country’s embrace of corporatism over free market capitalism.

Citizens’ complaints about large companies abusing their power are often blamed on capitalism in general, when the issue is often regulatory capture that protects those companies from being held accountable by competitors. Companies that treat customers poorly don’t survive in competitive markets.

Within the circles of politicians and media pundits, policies are referred to as generically “pro-business.” The term brushes over the often conflicting interests of the country’s largest companies and the vast landscape of small and medium size businesses who compete with them. America’s political leadership has been pro-corporate at the expense of entrepreneurs.

It’s a case for political reform but also a case for the country’s entrepreneurs and venture capitalists to form a more unified voice in Washington separate from industry trade groups that primarily act on behalf of the largest companies in each industry.

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The Marvelous Mrs. Maisel Set Sounds Absolutely Delightful, Thanks To Rachel Brosnahan’s Adorable Pig Story

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Rachel Brosnahan playing Midge in the Season 4 trailer for Marvelous Mrs. Maisel.

Over the course of four seasons, and soon a fifth installment, The Marvelous Mrs. Maisel has managed to one-up themselves and make the scale bigger, the set pieces more extravagant and the monologues snappier. While all of this has been amazing for us viewers, one-upping yourself every time must be quite stressful, and it has been according to Rachel Brosnahan. However, she also came up with an adorable way to de-stress and help the cast and crew by hiring therapy pigs. This also goes to show just how delightful the set of this Prime Video show seems, even during stressful moments. 

Filming Season 2 of The Marvelous Mrs. Maisel, which went on to win many Emmys in 2019, the cast and crew had taken on a much bigger challenge than they did in Season 1. By traveling around the world, and upping the ante overall the stress levels were high. However, Rachel Brosnahan revealed that she had a “delightful” stress relief activity planned involving therapy pigs, truly showing how wonderful this set seems. The actress behind Midge Maisel started her story about therapy pigs by setting the scene on The Late Show with Stephen Colbert, saying:  

So this is actually from our second season, we shot ten episodes during our second season, that’s the only time we ever did that, we never tried it again. We started the season in Paris, we traveled to the Catskills, we were on the move a lot. It was a really, really tough season. The crew was really tired. And toward the end of the season, someone had told me about this service in New York, where you can order therapy pigs to come to your workplace and make you feel better. And so, I brought therapy pigs to set and it was kind of incredible.



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Amazon’s renewable energy portfolio swells to over 20 GW

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Amazon's renewable energy portfolio swells to over 20 GW

Amazon increased its renewable energy capacity by 8.3 GW in 2022, bringing its total portfolio to over 20 GW, enough to power millions of US homes.

Growing to become one of the largest global companies by market cap comes with great responsibility. The bigger the operations, the more damaging they can be to the environment with more energy use, carbon emissions, etc.

After the pandemic shuttered most people inside their homes, online shopping became a go-to for many.

As a result, e-commerce giant Amazon saw its business surge, with an over 200% rise in profits as shopping habits turned digital. To offset the company’s explosive growth, it has been investing in renewable energy projects and other sustainable activities to reduce its environmental impact.

Since 2014 Amazon has been on a mission to decarbonize its business globally by adding renewable energy capacity and electric vehicles to its fleet while striving to make packaging more efficient.

The e-commerce giant committed to rolling out over 100,000 EDVs from Rivian by 2030 as part of its Climate Pledge. According to Amazon’s latest update, over 1,000 Rivian EDVs debuted this past holiday season to make zero-emission deliveries.

Amazon-renewable-energy
Amazon Rivian EDV (Source: Amazon)

Amazon’s renewable energy portfolio expanded in 2022

Meanwhile, the company added significant clean energy capacity last year to help it reach its goal of powering operations with 100% renewable energy by 2025, five years ahead of its goal.

Amazon announced today it set a new record for the most renewable energy purchased in 2022, adding an additional 8.3 GW through 133 new projects in 11 countries.

Altogether, Amazon now has over 20 GW, enough to power 5.3 million US homes. The clean energy capacity is spread throughout 401 projects (164 wind farms and 237 rooftop solar projects) in 22 different countries. According to Bloomberg New Energy Finance, Amazon remains the most prominent corporate buyer of renewable energy, maintaining the position since 2020.

Once complete and operational, Amazon expects to generate 56,881 GWh of clean energy annually.

Head of sustainability research at BloombergNEF, Kyle Harris, says Amazon’s clean energy portfolio is now among the leading utilities globally, adding:

The fact that it announced a new annual record of clean energy in a year mired by a global energy crisis, supply chain bottlenecks, and high interest rates speaks to its forward planning and expertise in navigating power markets and executing long-term contracts.

Despite economic uncertainty, Amazon stood by its commitment last year, doubling down on its renewable energy efforts.

Electrek’s Take

You have to give credit where credit is due. Amazon is doing its part by deploying hundreds of clean energy projects across the globe.

Amazon says renewable energy reached 85% of its business in 2021. By doubling down this past year, the e-commerce giant is now on track to hit its goal of powering business operations with 100% renewable five years ahead of schedule.

However, the company still has a lot of work to do to lessen its environmental impact. According to research from Statista, packaging accounts for the most significant share of greenhouse gas emissions in the e-commerce industry, accounting for 45% of total emissions.

Amazon has also made strides in reducing emissions by reducing per-shipment packaging weight by 38% (eliminating over 1.5 million tons of packaging), optimizing materials, and offering vendors incentives to use fully recyclable materials.

The e-commerce giant is making significant progress in its renewable energy goals, yet there’s still a long way to go in reducing packaging waste and energy usage overall.

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Buy Microsoft 365 Family today and get a $50 Amazon gift card

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Microsoft 365 is a must-have for just about every PC and Mac user. And on Tuesday only, Amazon is offering a free $50 Amazon gift card when you purchase a one-year subscription to Microsoft 365 Family. This is by far one of the best Amazon gift card deals you can get right now.

Formerly called Office 365, Microsoft 365 Family gives up to six people access to the latest versions of Excel, Word, PowerPoint, Outlook, and more. Microsoft’s various Office apps are thought of by most people as vastly superior to similar software from other brands. You need these apps anyway, so taking advantage of this one-day Microsoft 365 Family deal obviously makes sense.

Microsoft 365 Family 12-month Subscription (PC/Mac Download) + $50 Amazon Gift Card Microsoft 365 Family 12-month Subscription (PC/Mac Download) + $50 Amazon Gift Card $149.99 $99.99 (save $50) Save up to 33% Available on Amazon

For those unaware, Microsoft 365 includes all of the most important Microsoft Office applications and more. You get Word, Excel, PowerPoint, and Outlook. Your subscription also includes Microsoft OneDrive, Editor, and Family Safety, which is a suite of security solutions.

Unlike years past, this is a subscription service instead of a one-time purchase. You pay $99.99 annually for Microsoft 365 Family, and you’ll always have the latest versions of all of these apps on your Windows PCs and Mac computers.

Plus, you get access to the online versions of Microsoft Office apps. That means you can access them from any browser no matter where you are.

Microsoft 365 Family
Microsoft 365 Family is on sale for one day only. Image source: Maren Estrada for BGR

All that for $99.99 each year is already a terrific value. On Tuesday, however, Amazon is running a one-day sale that gives you a great bonus.

In addition to everything we listed above, Amazon’s deal includes a $50 Amazon gift card at no extra charge. Since you’re going to subscribe to Microsoft 365 anyway, why not renew now and get a $50 bonus for free?

There are plenty of other Amazon gift card deals you can find in our guide, but this one is a must-have.

Also, if you’re wondering, here are the main differences when comparing Microsoft 365 Family with Microsoft 365 Personal:

Microsoft 365 Family

  • For one to six people
  • Use up to five devices simultaneously
  • Works on PC, Mac, iPhone, iPad, and Android phones and tablets
  • Up to 6 TB of cloud storage (1 TB per person)
  • Additional features in the Family Safety mobile app

Microsoft 365 Personal

  • For one person
  • Use up to five devices simultaneously
  • Works on PC, Mac, iPhone, iPad, and Android phones and tablets
  • 1 TB of cloud storage

Microsoft 365 Family 12-month Subscription (PC/Mac Download) + $50 Amazon Gift Card Microsoft 365 Family 12-month Subscription (PC/Mac Download) + $50 Amazon Gift Card $149.99 $99.99 (save $50) Save up to 33% Available on Amazon



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