Big Tech should officially start panicking

Welcome to Buy/Sell/Hold, Marker’s weekly newsletter that’s 100% business intelligence and 0% investment advice. Each week, our writers Steve LeVine and Rob Walker make sense of the most important developments in business right now — and give them a Buy for clever moves or positive trends, a Sell for mistakes or missed opportunities, or a Hold if they’re noteworthy but too early to call.

⛏️ A Big Tech breakup may be just around the corner ⛏️

The Buy/Sell/Hold Analysis

If you haven’t noticed by now, two major Biden administration appointments affecting antitrust policy are attracting extraordinary chatter across industries, experts, and media. The reason is vexing confusion as to whether President Biden is signaling that he intends to upend four decades of antitrust law — a thrust that, if it takes place, could shake up multiple concentrated industries, disrupt Big Tech, and reorder some of the economy. The answer is a definitive yes.

I’m referring to Biden’s appointment of two antitrust firebrands, both Columbia Law School professors: Tim Wu, author of The Curse of Bigness: Antitrust in the New Gilded Age, is joining the National Economic Council; and Lina Khan, author of a seminal 2017 article in the Yale Law Journal titled “Amazon’s Antitrust Paradox,” is expected to be nominated to the Federal Trade Commission.

To understand why their elevation is so consequential, travel back a decade to the New America Foundation, a Washington, D.C., think tank. At the time, Wu had just finished a fellowship there. Khan was a junior member of the Open Markets Program, a New America unit run by Barry Lynn, an intense personality for whom the word “rabble-rouser” was invented.

I had an office down the hall, from which I observed Lynn forever prowling the corridors or boiling behind his desk, scheming anti-monopoly journalism to assign Khan or carry out himself. Khan churned out copy for Lynn; her stories had headlines like “The Rise of Big Chocolate,” “How Monsanto Outfoxed the Obama Administration,” and “Why Goldman Sachs Has No Business Owning a Coal Mine in Colombia.”

But what really animated Khan was Amazon. She thought the company encompassed a lot of the ills she had been researching with Lynn. By 2015, she had a job offer from the Wall Street Journal and admission to several Ivy League law schools. Khan was torn about what to do. She chose Yale but decided she could pursue her passion there: digging into Amazon in an unprecedented fashion. Researching the company and the field, Khan determined that antitrust law, as developed in the 1980s by Robert Bork and Milton Friedman, had veered wildly from its origins. When it came to Big Tech, and specifically companies like Amazon, their narrow-gauge philosophy was no longer relevant: For regulators policing industry in the first three quarters of the previous century, bigness and market concentration alone were often sufficient to warrant action.

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As influenced by Bork and Friedman, the standard changed to focus more or less on a single metric: whether prices charged by a given company had gone up. But by that measure, Khan saw, Amazon was no problem to the market at all, even though it routinely worked both sides of the deal on its platform, selling third-party products and replicating those same products and selling them in competition with its clients. Khan’s resulting Yale Law Journal article, explaining her new theory of antitrust, made her an overnight legal sensation.

Meanwhile, her old boss Barry Lynn had been thrown out of New America. He had crossed swords with Google, a big donor to the think tank, and that made him persona non grata. But the drama around the kerfuffle played to Lynn’s activism, and he reestablished his program outside the think tank. The Open Markets Institute became perhaps the most influential anti-monopoly think tank in the capital. Wu, with his latest book, had cemented himself as a leading voice calling for a return to antitrust origins and a breakup of one or more of the Big Tech companies.

Today, Khan, Wu, and Lynn are more or less the Woodward and Bernstein of antitrust activism. In naming not one but two of them to his administration, Biden knows their way of thinking will dominate the policy discussion.

Both move from the bleachers, shouting at the refs, to front and center, deciding how things will go. And that is a far more hostile environment than any we’ve seen in recent history for Big Tech, which can expect to see more serious action around monopolization, anticompetitive behavior, and potentially even breakups in the near future.

Verdict: Buy

— Steve LeVine

⚡Lightning Round⚡

⚡ Target quadruples down on hatching new brands. On Tuesday, the retail giant announced it was launching yet another private-label food brand in April, Favorite Day, which sports the trendy DTC startup–style designs ubiquitous among Target’s in-house brands. According to Forbes, Target has launched 30 private brands over the past five years; 10 of those lines hit at least $1 billion in sales last year, with four hitting $2 billion. If it seems like adding Favorite Day to the mix — which includes bougie snacks like French macarons and blueberry streusel bread — is overkill, consider the adage: If it ain’t broke (and it’s earning you billions), don’t fix it. Buy.

⚡ Edtech still wants its boom, despite lackluster numbers. Last Friday, online education company Coursera filed its S-1 with the SEC for its planned initial public listing on the New York Stock Exchange. Last year was a once-in-a-generation opportunity for edtech companies to soar, as millions of students were forced online. While Coursera’s revenue did grow from $184.4 million to $293.5 million between 2019 and 2020, its losses grew as well, from $46.7 million to $66.8 million, with an accumulated deficit of $343.6 million by the end of last year. “We expect to incur significant losses in the future,” the company states in its S-1. So while 2020 was an unusually good year for the company, Coursera hasn’t exactly hit its stride. Hold.

⚡Nike and Goldman Sachs put money behind their diversity efforts. Nike CEO John Donahoe announced on Wednesday that for the first time, the athletic behemoth would be tying executive compensation to the company’s progress toward its new 2025 goals for diversity and inclusion, as well as sustainable and ethical manufacturing (though it hasn’t detailed yet how the two will be linked). On the same day, Goldman Sachs announced that it would be investing $10 billion over the next decade in businesses and organizations that benefit Black women. Corporate giants like Nike and Goldman Sachs undoubtedly make these kinds of promises for the good publicity it brings, at least in part, so let’s make sure to hold them accountable. Hold.

⚡ Roblox goes public in a gangbusters direct listing. After delaying its planned IPO last December, the gaming company debuted on the public markets Wednesday via direct listing with a $41 billion valuation. Roblox develops a gaming platform that’s immensely popular with younger users, enabling them to create their own games and virtual spaces and trade an in-game currency called Robux (purchased with dollars). As Scott Galloway wrote on Marker, Roblox is betting big on the kid attention economy — and it looks like investors are betting on it, too, with a more than a 54% jump in its stock price on its first day of trading. Buy.

📈 The Number: 50%

That’s the share of their coronavirus relief checks that half of 25-to-34-year-olds are planning to invest in stocks, according to survey data cited by Markets Insider.

The survey, conducted by Deutsche Bank Research, found that this age group has more aggressive stock market aspirations for their coronavirus relief checks than either older or younger investors — but that significant chunks of every age bracket are eyeing stocks as a place to park at least some of this new cash. The standout status of that young-adult cohort makes sense, as the survey also found that over the past 12 months, a majority of those buying stocks for the first time — 61% — were under 34. These newbie investors, Markets Insider notes, “are more aggressive, as seen in the spike in the number of people employing some form of borrowing or leverage (26%) compared to those who had been investing for one to two years (9%) or longer (3%).” No doubt the rise of no-fee trading led by popular app Robinhood and its rivals, combined with a year of shutdown boredom and thriving online day-trading communities, have fueled the trend.

Still, it’s certainly not just young people playing the market these days. Deutsche Bank estimates that investors could pour $170 billion worth of coronavirus relief money into equities. Separately, Goldman Sachs has forecast that retail investors “will be the largest source of equity demand this year,” according to Yahoo Finance. Given how much retail investors have already shaken up market norms this year through the GameStop and meme stock episodes, it’s interesting to imagine how this new cash influx could play out. Are we on the verge of the Great Stonk Stimulus?

— Rob Walker

📖 Marker Reads of the Week: Inside the mysterious company behind those baffling but viral 5-Minute Crafts videos — and Money Talks columnist James Surowiecki’s argument for why we’re in an NFT bubble. .

🔎 Marker’s New Fixation 🔎

It’s been 371 days since I was last in an office. But this week I decided to see what it was like to go back (as 25% of white-collar workers have already done), in the only way I felt comfortable: via the Covid-free experience of a virtual reality game. I put on the clunky PlayStation VR helmet and fired up Job Simulator, a popular 2016 VR game that pokes fun at the drudgery of office life. I was quickly transported to a tiny cubicle, with a desktop computer, monitor, my own little coffee machine, a filing cabinet, copier, a stress ball, and wall of Post-its. One of my “assignments” was simply to chat with my co-workers by the water cooler and look at photos of their kids. As silly as it was, I just kept thinking about how much I would like to do this in real life. Later, when my virtual co-workers bought me a cake to celebrate a milestone, I truly felt a pang of longing for actual birthday cupcakes and other celebrations. (Even though I did feel a little uncomfortable blowing out the virtual candles, because — germs.) Perhaps the most satisfying part of the simulation was the end, when all my co-workers paraded past my cube and bid me farewell as they left for the day. When I finally removed my VR helmet and returned to my living room, I looked down and realized I had never changed out of my pajamas. On second thought, I think it might be tougher than I imagined to return to the office.

— Bobbie Gossage, Deputy Editor, Marker

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