A breakup of Google would impact the company more than its users: Heroic Ventures’ Michael Fertik

The Department of Justice is indicating it's considering a breakup of Google. The DOJ said it may ask a judge to force the company to divest parts of its business like Chrome, the browser, or the Android operating system. It says those services are being used by Google to maintain an illegal monopoly in online search. Joining us now, Michael Furtick, founder and managing partner at Heroic Ventures. You need to be able to look deep into the future to even have this discussion, I think, right? Should we even bother? Should we try? It would be years before we see what actually comes of this, right? I think that's the main point. I think we're probably reporting on this about three years early. It takes a while. Look, the two major guideposts that we can follow on this topic that are pretty relevant are Microsoft from 10 or 20 years ago and IBM from 10 or 20 years before that. The DOJ had some pretty strong antitrust litigation against those two companies. They both resulted in basically nothing, no breakup, no major change. Remember that the DOJ did say today that they would seek a number of remedies, including up to and including the most extreme, which is a kind of breakup. But it's possible that some more modest changes could appear. One would be this, right? So right now, Chrome is embedded. It's the default position on a number of platforms, from Samsung and so forth, across the internet and across hardware. You could imagine something as simple as when you turn on your machine for the first time or for the 10th time or nth time, you're prompted to ask which browser do you want to use? Those could be some intermediate steps that Google could probably repose or the DOJ could accept as an intermediate step. The big risk here is not for users, it's really for Google, right? After all of these many decades of extraordinary story, the storied company, Google Alphabet, it remains basically a one trick pony. The revenue, the profit, the enormous success of Google comes down to 10 blue links and associated search revenue and advertising revenue. So their ox could be gored, but I think it's a long time before we really know what's gonna happen. And Google would point to the judge's acknowledgement that people use Google, it's very high quality. But then again, you point out, why does it cost billions of dollars then for Google? That's it, so Judge Amit Mehta, who is the judge here, very smart guy. He also calls himself, by the way, a hip hop connoisseur. Your viewers may be interested to know that, a hip hop connoisseur. Judge Mehta did acknowledge that although he found Google to be a monopolist, that is law, that is his ruling, that is his fact finding, very hard to get that overturned. He also found that Google search quality was very high, perhaps the highest. And Google has come out swinging with their public defense. Their public defense is definitely gonna be, we are the best and in the best position because we are the best at search. Now, of course, if that were the only reason why would Google be spending billions, that's billions of the B, getting these default position contracts on platforms like Samsung and so forth. But I do think that that is gonna be their public defense. We do know that. An interesting other tidbit about this for our viewers, your viewers, is that the US and the EU seem to be marching on lockstep on this issue of Google antitrust. About a year ago, the European Union's Antitrust Task Force called Google, Alphabet, and five other companies, five of the six, by the way, are American, only one is Chinese, and none are European. That's from the Europeans. Six companies are so-called gatekeepers to the internet, to digital life, and Google was one of them. What this means is that there's kind of no major way to get an on-road to the internet economically if you're a company or competitor or challenger without going through these companies to reach the end consumer. And now, a year later, after Judge Mehta's fact-finding ruling in August, the DOJ is saying, we too believe that this is such a severe gatekeeping fact that perhaps one of the only ways to get the internet's blood to start flowing again so we avoid sclerosis is a possible breakup. I don't predict there'll be a breakup. I do predict there will be, this is my own personal prediction, I do predict there'll be path measures, intermediate measures, and that eventually the market will start curing this. We have seen recent reporting that Google's dominance in search is now finally being challenged after many decades by the growth of AI and, of course, platforms like TikTok, which, as you know, I believe to be digital fentanyl. But even their search dominance is being challenged. Michael, so that's my big question, which is, are regulators fighting last decade's war, if you will, which is, if you believe that open AI and perplexity and Claude and XAI and everything else is gonna provide these answers and break the Blue Link model, what are we talking about here? That's a very good question. Why is it that regulators are so good at fighting the last war? They are so good at fighting the last war. In the wrap-up to the last war, which, in fact, was Microsoft, the Circuit Court of Appeals, in that case, which overturned the findings of a monopolistic breakup approach from the government, they found that the Sherman Act, the antitrust law of the United States, was really not devised to cognize or cope with software. It was devised for the age of vertical and diagonal integration from the oil companies, the petroleum companies, the steel companies. It wasn't devised for bundling of browsers. So I do think that we even have, from the last war, evidence that the DOJ's regulators are still catching up with this war. And I do think that by the time the events roll on, the future rolls on, you will see that Google Search is gonna be less dominant. I actually think it would be better for Google's business if they were forced to start innovating again, acquiring other businesses, building new business lines that could be as impressive as Search has been for them for decades. I believe they have it in them. I mean, that's almost an anathema to the regulators. Well, it's certainly an anathema to Lena Kahn. Lena Kahn doesn't like acquisition. She believes that everything should be the way it is back in Stone Age four years ago. I agree, that's the note you're sounding right now. And I do wish that Lena Kahn would change her mind about acquisitions because I think she underestimates the chilling effect that her FTC antitrust policy has had on investment in Silicon Valley. America's Silicon Valley is the tip of the spear of the global economy, and I don't believe that Lena Kahn and her team appreciate that when they make acquisitions very difficult, they are disincentivizing investment in Silicon Valley. I'd be embarrassed. I'd be embarrassed if I was the EU. Yeah, we're going after, yeah, we have none that we're involved here. There are a lot of reasons for the EU to be embarrassed. It's 500, it's a continent of 500 million people, the European Union, and they don't have a single new idea. It's embarrassing. And I wish that instead of attacking American companies, they decriminalized innovation. You have a lot of brilliant, well-educated, creative people in Europe, and they have basically been told, you're not allowed to innovate.