Amazon and Apple - coated in Teflon, and too big to fail

In drama, if not in politics, the last word on corporate malpractice and deception was spoken before the invention not just of the smartphone, the laptop, the television and the aeroplane – but before the motor car itself.

When, in 1882, Henrik Ibsen wrote An Enemy of the People, he portrayed a scientific whistleblower who reveals that the prosperity and prospects of his home town depend on a polluted water source. It has poisoned the baths that bring tourists to their spa. Far from hailing Dr Stockmann as a saviour, the townspeople vilify him for (in the words of Arthur Miller’s McCarthy-era version) “a relentless campaign to destroy confidence in a corporation”. The locals prefer a blind eye and a full purse. Who would put his fellow citizens’ wellbeing in jeopardy for the sake of an abstract environmental risk that it takes a geek to grasp? Only “a demon who cares more for the purity of a public bath than the lives of his wife and children”.

Because he is a dramatist of genius and not an agitprop merchant, Ibsen makes his Dr Stockmann snobbish, arrogant and really quite creepy: more Julian Assange than David Attenborough. But, as Miller argued, he clings to the truth and suffers the social consequences”. Too many people, humble as well as haughty, need the spa to thrive.

Today, 130 years after Ibsen wrote this definitive parable of cover-up and complicity, global firms spend time and money in abundance to monitor both present and future risks to their reputations. They worry that one day’s headlines – or, these days, one hour’s Twitter storm – may wipe out a century of trust. Scandal after scandal would seem to bear out their anxiety. Volkswagen’s diesel emissions fraud sees the light of day and, this week, the venerable car-maker posts a €1.7bn quarterly loss: the first for 15 years. Shares in the broadband supplier TalkTalk plummeted by a quarter after a data hack, initially reported in misleadingly apocalyptic terms. Since 2010, the Deepwater Horizon oil spill in the Gulf of Mexico has cost BP about $54bn – including a $19bn settlement in July to forestall future US lawsuits.

In the wake of the Libor rate manipulation swindle that landed it with fines of £284m, Barclays has installed a new CEO: Jes Staley. A public penitent, Staley immediately banged a big ethical drum with his vow to make the tarnished bank “a values-driven organisation”. In the boardroom, risk doctors and their twitchy clients all seem to agree with Shakespeare’s Iago. He tells Othello, prior to duping him: “Who steals my purse steals trash… ’Twas mine, ’tis his, and has been slave to thousands:/ But he that filches from me my good name/ Robs me of that which not enriches him/ And makes me poor indeed.”

Apostles of Adam Smith’s “invisible hand” maintain that this drive to cherish a “good name” – and the heavy penalties of losing it – prove that free markets really work. Social media, with their flash floods of outrage, merely add a new weapon to the armoury of scrutiny, protest and defection that helps consumers hold corporations to account. Sooner or later, mammoth firms that screw up, misbehave or cheat will pay the price. In the terminology devised by economic thinker Albert Hirschman, if we feel unhappy with our relationship with a commercial entity, we enjoy the options of “voice” and “exit”. We can complain and demand amendment. Or we can shop elsewhere.

Easier said, or theorised, than done. With banks or broadband, the power of sheer inertia kicks in. Seven years after the near-death experience that dumped RBS in the taxpayer’s lap (at a cost of £46bn), it ranks firmly at the foot of a new consumer league table for quality of service – in spite of the £952m profit unveiled this week. Millions of sluggish customers give an easy ride even to the bank they own.

Apathy likewise benefits the energy giants. Given the hassles of a switch, these virtual monopolies can ride out the reputational punches landed by stories of overcharging and under-delivery. You may, eventually, get to press the “exit” button. But just try exercising Hirschmann’s “voice” against a call centre that keeps you on hold.

The public’s short memory for scandal has its benign side. A poll this year confirmed that, for all the turmoil in its now-divested banking arm, the Co-op remains Britain’s most-trusted brand (ahead of John Lewis). Its 150 years of ethical principles still outweigh some unwise lines of credit – or coke. Besides, in retail banking, mobile telephony or domestic fuel, a competitive market just about exists – even if the tame Competition and Markets Authority has, this week, waved through an alarming £12.5bn merger between BT and phone network EE.

However, with data monsters such as Apple, Amazon and Google, their degree of market dominance may have hoisted them above the level at which a “good name” can give them a competitive edge, or its compromise can damage them. Apple has just announced annual profits of $53.4bn, the highest in corporate history. Its revenues rose 28 per cent in 2015. Sales in China doubled over a year. Allegations of sweatshop labour in its Chinese suppliers’ factories or illegal sourcing of minerals in Indonesia – topics of an intensive Panorama investigation last December – bounce off the firm like peas blown at a rhinoceros. After a flurry of damage control, with Apple boss Tim Cook “deeply offended” by the BBC claims, the story died as fast as last year’s phone. It was binned by the media with as little regret.

For its part, Amazon in 2013 signed a $600m contract to supply cloud-computing services to the CIA. Campaigners warned that it might formalise the transfer of consumer data to state agencies. The general reaction? Not bothered. Back in Europe, Amazon briefly shivered on the naughty step along with Starbucks as its tax-avoiding residence in Luxembourg came under scrutiny. “Ethical” consumers howled in anger, and then slunk back to their screens in search of a bargain-basement deal. Voice? Perhaps. Exit? Not today, thanks.

As with Ibsen’s spa-dwellers, the flow of opportunity and knowledge yields such riches that few bother to inspect the source. The tolerance now granted to tech companies seems limitless. Their data servers remember everything; their users rapidly forget the gravest lapses. Who now mentions that, in 2013, Facebook admitted that it had accidentally exposed the records of six million users – over an entire year? This is not so much information overload as willed oblivion.

For sure, we can always in theory say no to the alpha brands – unless you’re a film director, in which case no smart character has ever opened a computer other than a Mac. Not even Google counts as a “monopoly” in the strict sense. To avoid it, though, can often feel like more trouble than it’s worth. So the company that now lists itself as “Alphabet” (and recently revealed a 50 per cent rise in its profits) aims, like its counterparts, to serve as the Alpha and the Omega of our media life. Short of a massive data theft that led to the loss of money as well as privacy to millions, it is hard to foresee the reputational crash that would seriously wound the outsize data beasts. Have our digital overlords become not just too big to fail, but too big to shame?

None of the tech superpowers has yet faced a Deepwater Horizon moment, or even an embarrassment to match VW’s emissions cheat. Let’s hope they never do. They have, after all, a long way to fall. Almost a decade ago, I watched the then chief executive of Google in Europe mesmerise a hall full of old-school publishers in Greece as he assured them that “We are not evil”. They gazed at him like hamsters in front of a rearing cobra. Since then, Google and its ilk have not only grown their empires but also polished their shields with a coat of the high-minded rhetoric that goes by the name of “virtue signalling”. Thus the saints of cyberspace may have more to lose from a tropical-strength reputational storm than the corporate devils we know.

So far, they look as Teflon-coated and armour-plated as ever. Indeed, the history of scandal in old-economy hardware businesses should comfort them. Recovery from disgrace can be swift and complete. In 2009-10, Toyota recalled nine million vehicles thanks to a potentially fatal flaw in the design of the accelerator pedal, which it had covered up. Confidence fell off a cliff. In 2014, it pre-empted prosecution by paying a $1.2bn fine. Last month, the Japanese company regained its slot as the world’s largest motor manufacturer. It sold 7.49 million cars between January and September, edging ahead of Volkswagen.

Apple and its corps of tech titans have not only cash but faith piled high in the bank. For as long as we crave their stuff and sites, they will brush off dirt-diggers and party-poopers. In an age of alleged scepticism and disbelief, we love Big Brother with a pixellated face. Any heretic appears not so much as a champion of liberty and safety, but a busybody and killjoy. In short: an enemy of the people.

In drama, if not in politics, the last word on corporate malpractice and deception was spoken before the invention not just of the smartphone, the laptop, the television and the aeroplane – but before the motor car itself.

When, in 1882, Henrik Ibsen wrote An Enemy of the People, he portrayed a scientific whistleblower who reveals that the prosperity and prospects of his home town depend on a polluted water source. It has poisoned the baths that bring tourists to their spa. Far from hailing Dr Stockmann as a saviour, the townspeople vilify him for (in the words of Arthur Miller’s McCarthy-era version) “a relentless campaign to destroy confidence in a corporation”. The locals prefer a blind eye and a full purse. Who would put his fellow citizens’ wellbeing in jeopardy for the sake of an abstract environmental risk that it takes a geek to grasp? Only “a demon who cares more for the purity of a public bath than the lives of his wife and children”.

Because he is a dramatist of genius and not an agitprop merchant, Ibsen makes his Dr Stockmann snobbish, arrogant and really quite creepy: more Julian Assange than David Attenborough. But, as Miller argued, he clings to the truth and suffers the social consequences”. Too many people, humble as well as haughty, need the spa to thrive.

Today, 130 years after Ibsen wrote this definitive parable of cover-up and complicity, global firms spend time and money in abundance to monitor both present and future risks to their reputations. They worry that one day’s headlines – or, these days, one hour’s Twitter storm – may wipe out a century of trust. Scandal after scandal would seem to bear out their anxiety. Volkswagen’s diesel emissions fraud sees the light of day and, this week, the venerable car-maker posts a €1.7bn quarterly loss: the first for 15 years. Shares in the broadband supplier TalkTalk plummeted by a quarter after a data hack, initially reported in misleadingly apocalyptic terms. Since 2010, the Deepwater Horizon oil spill in the Gulf of Mexico has cost BP about $54bn – including a $19bn settlement in July to forestall future US lawsuits.

In the wake of the Libor rate manipulation swindle that landed it with fines of £284m, Barclays has installed a new CEO: Jes Staley. A public penitent, Staley immediately banged a big ethical drum with his vow to make the tarnished bank “a values-driven organisation”. In the boardroom, risk doctors and their twitchy clients all seem to agree with Shakespeare’s Iago. He tells Othello, prior to duping him: “Who steals my purse steals trash… ’Twas mine, ’tis his, and has been slave to thousands:/ But he that filches from me my good name/ Robs me of that which not enriches him/ And makes me poor indeed.”

Apostles of Adam Smith’s “invisible hand” maintain that this drive to cherish a “good name” – and the heavy penalties of losing it – prove that free markets really work. Social media, with their flash floods of outrage, merely add a new weapon to the armoury of scrutiny, protest and defection that helps consumers hold corporations to account. Sooner or later, mammoth firms that screw up, misbehave or cheat will pay the price. In the terminology devised by economic thinker Albert Hirschman, if we feel unhappy with our relationship with a commercial entity, we enjoy the options of “voice” and “exit”. We can complain and demand amendment. Or we can shop elsewhere.

Easier said, or theorised, than done. With banks or broadband, the power of sheer inertia kicks in. Seven years after the near-death experience that dumped RBS in the taxpayer’s lap (at a cost of £46bn), it ranks firmly at the foot of a new consumer league table for quality of service – in spite of the £952m profit unveiled this week. Millions of sluggish customers give an easy ride even to the bank they own.

Apathy likewise benefits the energy giants. Given the hassles of a switch, these virtual monopolies can ride out the reputational punches landed by stories of overcharging and under-delivery. You may, eventually, get to press the “exit” button. But just try exercising Hirschmann’s “voice” against a call centre that keeps you on hold.

The public’s short memory for scandal has its benign side. A poll this year confirmed that, for all the turmoil in its now-divested banking arm, the Co-op remains Britain’s most-trusted brand (ahead of John Lewis). Its 150 years of ethical principles still outweigh some unwise lines of credit – or coke. Besides, in retail banking, mobile telephony or domestic fuel, a competitive market just about exists – even if the tame Competition and Markets Authority has, this week, waved through an alarming £12.5bn merger between BT and phone network EE.

However, with data monsters such as Apple, Amazon and Google, their degree of market dominance may have hoisted them above the level at which a “good name” can give them a competitive edge, or its compromise can damage them. Apple has just announced annual profits of $53.4bn, the highest in corporate history. Its revenues rose 28 per cent in 2015. Sales in China doubled over a year. Allegations of sweatshop labour in its Chinese suppliers’ factories or illegal sourcing of minerals in Indonesia – topics of an intensive Panorama investigation last December – bounce off the firm like peas blown at a rhinoceros. After a flurry of damage control, with Apple boss Tim Cook “deeply offended” by the BBC claims, the story died as fast as last year’s phone. It was binned by the media with as little regret.

For its part, Amazon in 2013 signed a $600m contract to supply cloud-computing services to the CIA. Campaigners warned that it might formalise the transfer of consumer data to state agencies. The general reaction? Not bothered. Back in Europe, Amazon briefly shivered on the naughty step along with Starbucks as its tax-avoiding residence in Luxembourg came under scrutiny. “Ethical” consumers howled in anger, and then slunk back to their screens in search of a bargain-basement deal. Voice? Perhaps. Exit? Not today, thanks.

As with Ibsen’s spa-dwellers, the flow of opportunity and knowledge yields such riches that few bother to inspect the source. The tolerance now granted to tech companies seems limitless. Their data servers remember everything; their users rapidly forget the gravest lapses. Who now mentions that, in 2013, Facebook admitted that it had accidentally exposed the records of six million users – over an entire year? This is not so much information overload as willed oblivion.

For sure, we can always in theory say no to the alpha brands – unless you’re a film director, in which case no smart character has ever opened a computer other than a Mac. Not even Google counts as a “monopoly” in the strict sense. To avoid it, though, can often feel like more trouble than it’s worth. So the company that now lists itself as “Alphabet” (and recently revealed a 50 per cent rise in its profits) aims, like its counterparts, to serve as the Alpha and the Omega of our media life. Short of a massive data theft that led to the loss of money as well as privacy to millions, it is hard to foresee the reputational crash that would seriously wound the outsize data beasts. Have our digital overlords become not just too big to fail, but too big to shame?

None of the tech superpowers has yet faced a Deepwater Horizon moment, or even an embarrassment to match VW’s emissions cheat. Let’s hope they never do. They have, after all, a long way to fall. Almost a decade ago, I watched the then chief executive of Google in Europe mesmerise a hall full of old-school publishers in Greece as he assured them that “We are not evil”. They gazed at him like hamsters in front of a rearing cobra. Since then, Google and its ilk have not only grown their empires but also polished their shields with a coat of the high-minded rhetoric that goes by the name of “virtue signalling”. Thus the saints of cyberspace may have more to lose from a tropical-strength reputational storm than the corporate devils we know.

So far, they look as Teflon-coated and armour-plated as ever. Indeed, the history of scandal in old-economy hardware businesses should comfort them. Recovery from disgrace can be swift and complete. In 2009-10, Toyota recalled nine million vehicles thanks to a potentially fatal flaw in the design of the accelerator pedal, which it had covered up. Confidence fell off a cliff. In 2014, it pre-empted prosecution by paying a $1.2bn fine. Last month, the Japanese company regained its slot as the world’s largest motor manufacturer. It sold 7.49 million cars between January and September, edging ahead of Volkswagen.

Apple and its corps of tech titans have not only cash but faith piled high in the bank. For as long as we crave their stuff and sites, they will brush off dirt-diggers and party-poopers. In an age of alleged scepticism and disbelief, we love Big Brother with a pixellated face. Any heretic appears not so much as a champion of liberty and safety, but a busybody and killjoy. In short: an enemy of the people.