Last week the price of Bitcoin went back above $US20,000 apiece and its market cap – that is the total value of all Bitcoins – regained $US400 billion.
Tesla’s market cap, meanwhile, did NOT go back above $US400 billion, having fallen below that level about a month after Bitcoin’s did in November. Tesla’s share price continues to flounder at two-year lows, down 70 per cent from its peak.
As it happens, in one of those strange twists of fate, the total values of both Tesla and Bitcoin hit $US1.2 trillion a month apart in late 2021.
Are the fortunes of these two things that are connected by coincidence actually entwined?
In a way they are. Let me explain why.
Tesla’s share price crashed last year because its founder and CEO, the billionaire Elon Musk, decided to buy Twitter in April and has since been distracted by it, to put it mildly. His fellow Tesla shareholders are being driven to distraction.
Musk’s acquisition and wrecking of Twitter is the latest and most egregious example of how the free and open internet has been bought and buggered by billionaires.
Burst bubbles
Twitter and Bitcoin both started as projects designed to improve civilisation, but for each of them, something got lost along the way.
Bitcoin is the main manifestation of blockchain, the 14-year-old invention that allows people to transact directly with each other and, in theory, cut out the banks. It exists everywhere and nowhere, is controlled and owned by no one and represents a kind of renewal of the original idea of the internet, which was to democratise knowledge and therefore power.
But Bitcoin also became an object of financial speculation, which has distracted everyone from its original purpose and that of the blockchain on which it exists – to democratise money and transactions.
So the fact that it has now had several bubbles and busts has made speculators angry and spectators scornful, prompting confident predictions that it would implode and disappear. But the truth is that Bitcoin can’t be killed and now the price is rising again. Where it stops, nobody knows, but it will never be zero.
Meanwhile, Twitter has lost money almost every year of its 16-year existence but the original motivation of its founder Jack Dorsey was mostly altruistic. It has been a wonderfully useful product, but a terrible investment.
Last year Dorsey tweeted: “Twitter is funding a small independent team of up to five open-source architects, engineers, and designers to develop an open and decentralised standard for social media. The goal is for Twitter to ultimately be a client of this standard.”
Musk put paid to that.
Twitter is the only borderless, truly global communication tool used by about 400 million people and organisations (and robots). It was hugely important during the pandemic as the way the World Health Organisation and other official bodies communicated what was happening.
Dorsey called it the “public conversation layer of the internet”; Musk called it “the digital town square”.
But it’s not “public”, it’s a private asset, and now its new owner is trying to make it profitable at any cost. It doesn’t work as well any more because he sacked half the staff, and users are fleeing.
Right now, it seems the only way Twitter survives – and Tesla regains its value, by the way – is if Musk gives up and concentrates on making electric cars and spaceships.
From altruism to profit margins
Google and Facebook also started life as open-source platforms with application programming interfaces (APIs) available to all, but the desire to get richer overcame their owners, so they gradually locked them up and ate competitors.
The network effect exploited by those companies, as well as Amazon, Apple and Microsoft – where value increases exponentially with the number of users and creates natural monopolies – generated so much wealth that a new gilded age grew out of the internet (although less wealth now after 40 to 60 per cent declines in share prices last year).
As with the earlier Gilded Age (1877 to 1900), these men became billionaires on the back of taxpayer-funded technologies: All of the early work that led to the internet was paid for by the US government.
And now here we are with billionaires running the internet, keen to make more billions.
Except … not entirely. For a start there’s blockchain. It has had a patchy start, admittedly, with the ASX trying and failing to use it for share settlement, and the four Bitcoin bubbles and crashes not helping its credibility.
Early days
But it’s early days. The internet protocols were invented around 1971, but Tim Berners-Lee didn’t create the World Wide Web until 1991 and it wasn’t until Web 2.0 appeared after the dot.com crash of 2000 that things really got going, 35 years after the internet was born. Blockchain has been around for a lot less than half that.
Then there’s Wikipedia, the greatest collection of knowledge ever put together and the internet’s most important creation – and it’s free, edited by volunteers and owned by a not-for-profit.
And there’s also WordPress, the open-source content management software that powers about 40 per cent of the internet. GitHub and npm are both similar open-source software tools, although they were acquired by Microsoft.
Most importantly, the internet itself exists as a suite of protocols – TCP/IP, HTTP, FTP, RSS – that can never be owned (we hope), and are maintained by an American non-profit named ICANN.
Regulation needed
The Australian Competition and Consumer Commission (ACCC) did globally ground-breaking work on the power of the digital platforms, saying in its final report in 2019: “There has not been significant reflection on the implications and consequences of the business models of digital platforms for competition, consumers, and society.”
And: “The ubiquity of the Google and Facebook platforms has placed them in a privileged position. They act as gateways to reaching Australian consumers and they are, in many cases, critical and unavoidable partners for many Australian businesses.”
But the end result of the ACCC’s work was simply that Google and Facebook are paying money to the publishers they are disrupting. They are just doing what rich lobbyists always do – buy political acquiescence.
It’s way too late to nationalise Google, Facebook and Twitter – that would cost $2.6 trillion, more than Australia’s GDP, although they’re $2 trillion cheaper now than they were 18 months ago.
But governments need to get much more involved in regulating them.
We’re talking about some of the most important infrastructure of our lives now, as important as roads, water and electricity.
It should be treated like them, not simply left to billionaires to play with.
Alan Kohler writes for The New Daily twice a week. He is also founder of Eureka Report and finance presenter of ABC news
