How the world’s biggest tech companies regulation-proofed themselves

A decade ago, Tesla’s stock was worth a mere $17 a share. And with less than $10 million in the bank, Tesla could barely cover the costs of the cars it had already sold. This week, market analysts predicted Tesla stock to hit $7,000 a share by 2024, leading its stock to skyrocket. 

The investment firm which made that audacious prediction cited fairly traditional variables for its confidence: gross margins, capital efficiency, and Tesla’s move into autonomous driving. 

Yet these aren’t the indicators we should be watching; Tesla didn’t become bulletproof by traditional practices. Tesla and other big tech firms — Amazon, Google, Microsoft, Facebook and Apple, specifically — succeed precisely because they’re past the point of the traditional. 

They’ve long since ventured beyond their core digital products and services and into real-world, physical domains. And in so doing, Big Tech, or, “net states,” have essentially regulation-proofed themselves. 

Tech’s graduation from regulation can be seen in three key ways. First, because net states have diversified well beyond their primary digital products and services, it’s simply not possible to regulate them in their entirety. In 2020, digital services for any net state is simply one arm of the starfish.  

Tesla, for instance, isn’t just a car company; it’s an energy supplier, with its Powerwall business currently harnessing solar power in 18 countries. It’s a satellite system, with Starlink set to launch upwards of 30,000 orbitals. It’s a neuroscience R&D lab, with Neuralink exploring brain-computer interface designs. Indeed, Tesla now is more a confederation than a company. And it’s not the only one.

Take Google, for an example. Even if the U.S. finally did implement user data protections, as in California or as with Europe’s General Data Protection Regulation (GDPR), it wouldn’t meaningfully hinder Google’s ability to do business with its new drone delivery service, Wing, which recently got FAA approval, or YouTube, which just revealed it brings in more than $4 billion in ad revenue.  

Or take Facebook. Regulation might affect its data-sharing practices. However, its counterterrorism team would likely remain intact, if for no other reason than it is better equipped to fight terrorists than entire branches of the United States federal government.

This leads to the second point: Net states are expanding into domains formerly owned solely by governments, including defense, diplomacy, citizen services and public infrastructure. This is not to say that other companies aren’t involved in defense; many companies, and not just defense contractors, have been long tied to this sector. But net states are not merely tied to defense contracts; they’re building their defense divisions.  

It seems absurd to imagine even the most successful global companies — McDonald’s or Coca Cola, say — with counterterrorism or diplomatic arms. Yet, Microsoft recently opened its own office to the United Nations, replete with a former ambassador at the helm. And Google’s YouTube launched its first counterterrorism pilot three years ago. Big Tech is reaching into nation-state turf, and nation-states not only are not stopping them but are pleading with them for their expertise. 

Finally, net states are uniquely situated — physically and digitally — to sidestep regulation quickly. Just before the GDPR was set to regulate Facebook users in the European Union, the company moved 1.5 billion users out of reach,  back to servers in the United States.

When the U.S. Department of Justice subpoenaed Microsoft to hand over user emails, the U.S.-based company declined to comply, noting that the emails in question were stored on servers in Dublin, Ireland. And while U.S. lawmakers are calling for bans of facial recognition software, Amazon’s Rekognition continues to roll out in countries with less stringent protections, such as South Korea and India. 

In short, we’re past the point where regulating net states is genuinely possible. Even if we regulate one aspect, like user data, it likely won’t substantially alter their ability to operate their other potentially very lucrative new business ventures. 

In a recent interview with the world’s first Ambassador to Technology, Casper Klynge of Denmark, he reflected, “[Technology] will have a massive impact on the balance of power in the future. For that lesson, it’s high noon for many, many countries all over the world.”

To investors, Tesla may seem like a safe bet. For the rest of us, Tesla and other net states are a wakeup call. Big Tech isn’t just big: It’s something different. For governments to effectively contend with what Big Tech has become, they first must recognize that the nation-state is not the only game in town anymore. Net states have arrived.  

Alexis Wichowski is the Deputy Chief Technology Officer for Innovation for the City of New York and adjunct associate professor at Columbia University. Her book, “The Information Trade: How Big Tech Conquers Countries, Challenges Our Rights, and Transforms Our World,” will be published by Harper Collins on Feb. 11. Views are her own and do not reflect those of the City of New York.