Do tech companies, like Google, Apple and Facebook, make too much money? Some people seem to think so. What these critics might fail to realize is that if these winners in the technology marketplace are treated as “too profitable,” then the next Apple or Google may never appear. Why do critics believe these companies are too profitable? The reasons vary. Professor Clemons of The Wharton School thinks that the profits of companies like Google demonstrate that such companies are monopolies, leading him to the conclusion that they should be subjected to antitrust investigations. Others argue that big tech companies cause income inequality by engaging in stock buybacks, charging exorbitant prices for minor technology upgrades, or exploiting their less-skilled workers and their customers. It is true that familiar tech firms make a lot of money, as do their owners and executives. Apple made headlines when its quarterly profits jumped 38% last year. Three of the most profitable companies in the world in 2014 were information technology companies (Apple, Samsung, and Microsoft). Forbes’ list of the 25 wealthiest people in the United States includes eight from the tech world (Bill Gates, Larry Ellison, Mark Zuckerberg, Larry Page, Sergey Brin, Jeff Bezos, Steve Ballmer, and Michael Dell). Of course, we know about these success stories because they are success stories. The failures tend to go unreported. But do the successful make too much money? The answer depends on whether you want there to be another Apple, Google, etc.
Read “How much profit is too much? Tech companies and the surprising truth about their returns” on AEI.