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
Top News
•Chevron CEO Watson Is Stepping Down
Chevron CEO John Watson is stepping down by the end of September, according to Reuters' sources. Mike Wirth, the oil giant's Vice Chairman, is likely to be named Watson's successor in a surprising move that would come as major oil and gas companies continue to look for new ways to reduce costs and reign in spending after multiple years of depressed oil prices. Reuters
•Google, Walmart Join Forces to Battle Amazon Online
Walmart said it will make its products available on Google Express, the tech giant's online shopping service. Users of Google's virtual assistant will be able to voice-order purchases from Walmart. The two huge companies are joining forces to take on a common rival, Amazon, which dominates e-commerce and continues to expand into new businesses. Wall Street Journal, subscription required
•WPP Warns of Lower Ad Spending
Shares of the world's largest advertising firm plummeted after WPP cut its full-year revenue forecast and warned of lower ad spending by its customers, especially among those in the consumer goods sector, as clients continue to tighten their belts when it comes to spending. Bloomberg
•GoDaddy CEO to Retire
Blake Irving will retire at the end of 2017 after a five-year run as CEO of web hosting company GoDaddy. Current president and COO Scott Wagner will take over as chief executive in January 2018. During his tenure, Irving successfully took GoDaddy public in 2015 while helping to change the negative public perception of the company stemming from years of racy commercials. Fortune
Around the Water Cooler
•How Casper Flipped the Mattress Industry
Online mattress startup Casper sold $200 million worth of mattresses, sheets, pillows, and dog beds last year. In just three years the company has raised $240 million in venture funding, valuing it at $750 million. Fortune magazine's Erin Griffith writes that Casper, with its ubiquitous ads, "is the latest and arguably most successful in a class of upstarts turning mundane, unloved consumer products like beds, toothbrushes, suitcases, water bottles, and vitamins into something covetable and cool." Fortune
•Uber Drivers Have Received $50 Million in Tips, So Far
Uber customers have given $50 million-worth of tips to their drivers since the ride-sharing company rolled out its optional in-app tipping feature nationwide in mid-July. Uber offered the new feature, which it began testing in three U.S. cities earlier in the summer, in hopes of attracting more drivers after a stream of bad press for the company over the summer. Meanwhile, drivers at rival Lyft have earned $250 million in tips since 2012. Fortune
•Google Play Evicts 500 Apps in Spyware Scare
Google has removed more than 500 apps from its Google Play online store after researchers from the cybersecurity firm Lookout said the apps might contain spyware that could spread to customers' mobile devices. Fortune
Summaries by Tom Huddleston Jr. tom.huddleston@fortune.com
@tjhuddle
