By Alan Murray and Tom Huddleston Jr.
August 23, 2017

Good morning.

I spent yesterday out in Silicon Valley, visiting two companies whose combined market cap now exceeds $1.3 trillion—more than Exxon, J.P. Morgan, GE and AT&T combined. It reminded me how, not long ago, people in the Valley argued that “big” companies were a thing of the past, and that nimble, venture-backed start-ups would win the future. In fact, “bigness” has become bigger than ever in the corporate world. It just has a different structure and logic.

The new issue of Harvard Business Review has an interesting piece marking the 50th anniversary of the publication of John Kenneth Galbraith’s “The New Industrial State,” which was one of the rare economic treatises to achieve bestseller status. (The 1960s equivalent of Thomas Piketty’s “Capital.”) In it, Galbraith warned of the dangers of unchecked corporate power. He felt the giants of the time—AT&T, GM, Standard Oil, IBM—had become the capitalist equivalent of the Soviet government—big, bureaucratic, all-powerful. Because of their control of capital and their marketing might, he said, their dominance would continue to grow.

It was a compelling theory, but turned out to be dead wrong. Those companies peaked soon thereafter, making way for the new breed—Microsoft, Apple, Amazon, Alphabet, Facebook—which have grown in scale not because of their control of capital and resources, but because of networking effects and the returns to scale inherent in digital businesses.

Yet the influence of these tech companies on today’s economy is surely as great, if not greater, than their predecessors a half century ago. One wonders how Galbraith would have viewed this outcome. He was wrong in his analysis, but not in his belief that bigness would prevail.

News below.

Alan Murray
@alansmurray
alan.murray@fortune.com

 

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