Let’s begin with the good news.
Economic policy matters a great deal, but it matters far less than economic policymakers flatter themselves to think. Human nature includes “the propensity to truck, barter, and exchange one thing for another,” wrote Adam Smith. Human beings will go about such activities, irrespective of the approbation or disapprobation of their governments. Man is a not only political animal but an economic one. Ill-crafted regulation can annoy or hinder individuals — misdirecting their scarce time and efforts — but they will persist in working to better their economic lot within the confines of the incentives of the regulatory structures and markets in which they operate. The river of human nature has many strong and fast currents, which can be dammed up only at great cost and effort.
In one of the latest instances of private industry cheerfully disregarding regulatory intrusions, Google made public its acquisition of Wiz, a surging cloud cybersecurity vendor. Notwithstanding their great benefits to competition, mergers and acquisitions have become the object of misplaced regulatory ire in recent years. The antitrust authorities of the Biden administration adopted a “big is bad” posture towards business, emphasizing sheer corporate size over the competitive factors that have traditionally informed antitrust enforcement. In 2023, moreover, the Biden Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) crafted new guidelines in which the agencies expanded their conception of what kinds of mergers ought to be deemed illegal.
Although the Trump administration purports to have broken with the economic agenda of the previous administration, FTC Chairman Andrew Ferguson announced that he would not rescind the 2023 merger guidelines. The Trump antitrusters also echo the Biden antitrusters in their skepticism of Big Tech. Biden officials targeted many large technology companies — including Google, which the DOJ sued twice. These legal theories propounded in these cases had the structural integrity of a house of cards, notwithstanding a misguided ruling in the government’s favor in the case against Google Search liable for reversal on appeal.
The Google–Wiz news emerges amid — and despite — this storm of regulatory hostility and uncertainty. At $32 billion, Google’s largest acquisition yet, it also illustrates the indispensable economic functions this sort of transaction fulfills. Like most transactions agreed to voluntarily in the free market, mergers and acquisitions generally benefit both parties and conduce to robust competition, more innovation, higher product quality, expanded supply, and lower prices.
To date, Amazon and Microsoft’s cloud services have outstripped the competition within the cloud, reporting revenues in 2024 of $107.6 billion and $105.4 billion, respectively. Google, meanwhile, has lagged, its cloud revenue coming to roughly $43 billion that same year. “This acquisition represents an investment by Google Cloud to accelerate two large and growing trends in the AI era: improved cloud security and the ability to use multiple clouds (multicloud),” Google said in its announcement. The benefits will reverberate beyond Google’s improved services. Amazon and Microsoft, squeezed by new competitive pressures, will find themselves compelled to redouble their own innovative investments, inciting innovation sector-wide.
For Wiz, the deal pays returns on the investments and risks that attend the launch of any new business. The promise of eventual acquisition by a large incumbent fuels many a startup venture. Further, Google will make available vast reserves of capital — of the financial kind and otherwise — to the cybersecurity insurgent. “Becoming part of Google Cloud is effectively strapping a rocket to our backs: it will accelerate our rate of innovation faster than what we could achieve as a standalone company,” wrote Assaf Rappaport, Wiz’s co-founder and CEO. The customers of Google Cloud will, in turn, reap the benefits.
The obstinance of markets and entrepreneurs in the face of bad economic policy should not be taken as evidence that that policy has done no harm. Google has the necessary on-hand capital to acquire Wiz and pursue other innovative endeavors, but it and other technology companies bore the costs of Biden’s antitrust adventurism — sapping dynamism from the tech sector and the economy generally. Facing lawsuits and uncertainty, companies must divert funds and other scarce resources from innovation to compliance, from technologists to lawyers and lobbyists, from building new products to defending existing products in court. Also, uncertainty produces stagnation.
The Trump antitrust agenda has yet to harden. If the administration is prudent, it will fulfil the president’s campaign promise to be unlike his predecessor. The technology sector, like any sector, is imperfect. Yet it is also as close as any to being the indispensable sector to modern America — to American prosperity, American technological dominance, and American national security. The fact that the Biden administrations overreaches and abuses failed to stifle the tech sector completely does not mean that the Trump administration’s perpetuation of that failed agenda cannot do great harm.
And that might be the bad news.
