Long winded I know, but there’s not many other ways of asking this same question.
Often when people ask such grand and well-meaning questions, it’s followed by a monologue justifying why their idea isn’t totally bonkers. Which is ok.
But I’m not going to do that.
What I’ll do instead is present: (1) How much cash the big tech companies are sitting on; (2) What that money can buy (3) Some of the ways in which the last 2008-2009 Global Financial Crisis impacted small businesses (which we must be reminded employ 60% of total employees in the UK, with a combined turnover of nearly £2 trillion according to the Federation of Small Businesses (FSB)) and (4) Why my proposed intervention should be considered.
So how much money is Microsoft, Apple, Google, Facebook, Amazon and others sitting on?
According to financial data and software company FactSet, Microsoft has cash reserves of about $136.6 Billion, while Alphabet (Google’s parent company) has reserves of $121.2 Billion. Apple is sitting on $100.6 Billion and Facebook has $52.3 Billion. Amazon has $43.7 Billion.
There are others on the list like Berkshire Hathaway ($128.2 Billion), not a tech company per se – but extremely cash-rich, Oracle ($35.7 Billion) and Cisco ($33.4 Billion).
Whichever way you look at it, these are significant resources. And to put it into perspective, IAG, the Anglo-Spanish multinational company that owns British Airways has cash reserves of £8.7 Billion.
But what can a billion dollars buy?
I know what you are thinking. He’s going to list lavish mansions, maybe a private island; exquisite sports cars and other billionaire toys; pricey private jets and all manner of luxury and opulence in an attempt to demonstrate what $1 billion of solid wealth can buy?
But I’m not going to do that.
Because we all know that huge price tags for items that are perceived to be luxurious do not accurately reflect the true cost of those items. What buyers pay for is the brand, the prestige associated with owning the expensive item, and recently – the ‘experience’.
What I’ll highlight instead are the investments that create new jobs (see another link here) or safeguard existing ones (see others here and here). The loans which enable some SMEs to introduce new services or grow operations. $1 billion is enough capital to provide 10,000 of the smallest SME’s in the UK with loans of $100,000 each, to safeguard thousands of jobs, create new product lines and buy equipment / stock. It may not be much money to some of the larger SME’s or to large companies with hefty balance sheets. But it surely can transform thousands of small SME’s and provide the much needed funding for restructuring, crisis management or business continuity.
So imagine then, if these tech companies collectively decided to set aside say $100 billion of their cash reserves to help the smallest SME’s in low-interest soft loans repayable over a medium (~5 years) to long-term (~10 – 15 years) repayment period. Imagine if over 1 million SMEs were impacted? Potentially, it would be an intervention that could safeguard over a million jobs. Now, I’m not suggesting that such sums of money would get rid of all of the challenges these SME’s face post-COVID19 or that $100 billion is all it would take to prevent a global recession. Far from it, but I think the effect of a revolutionary intervention of such an order in magnitude on top of all the numerous national and international government efforts being proposed in an attempt to prevent global economic collapse, would most probably be a positive one.
Amazon has already made interesting in-roads into the financial sector. So has Google, Facebook, Uber and Apple. Thus, the shift from offering simple payment services to providing billions in loans to SMEs may not be as significant as some people will have you believe.
Lessons from 2008 / 2009 Global Financial Crisis
When the Global Financial Crisis of 2008 / 2009 struck, SMEs were hit hard. Economic uncertainty and poor sales resulting from reduced consumer demand led to many closing their doors. Reduced access to financial resources and credit, and poor financial conditions constrained many SMEs from growing or functioning. According to data from Duedil 800,000 UK businesses went into administration in the UK. Between December 2008 and December 2010, about 1.8 million small businesses went under. In the US, the figure stood at around 170,000. Even historically stable economies such as that of Germany were affected, when in November 2008 Germany slid into a recession following an economic contraction driven in part by a plunge in exports due to a decrease in global demand for German products.
Everywhere, the knock-on effects in the form of massive unemployment, decline in the availability of credit, foreclosures and the associated mental health effects all made it extremely difficult for many people to run a small business.
Why such an intervention should be considered?
Of course this is in no way a suggestion to replace the extensive Government Fiscal measures that have been introduced in the UK and other countries in response to the coronavirus pandemic. Nothing can replace good business management and the much needed innovation or change of direction / focus that is required when a company is faced with certain types of market challenges.
But when SMEs are likely to be disproportionately affected by a recession, and when it is the case that many of the large Tech companies derive considerable parts of their incomes from SMEs (or people who are employed in SMEs), then surely it makes sense to want to help or support those demographics in a way that lessens the impacts of the impending recession. In any case, if individuals or companies tighten their ads budgets (relevant to Facebook & Google), if they stop buying new computing equipment (Microsoft, Apple & Google) or networking equipment (Cisco), if they reduce investment in business Software (Oracle), if they can’t upgrade their phones (Apple, Nokia, LG, Samsung) – it will ultimately affect the revenues of these Tech giants – something that could lead to job losses, departure of top engineering / management talent, and loss of market share.
A final thought is regarding Tax. We all know that Big Tech is often at the receiving end of accusations of Tax evasion. Many are the allegations that they do not pay their fair share of taxes, or that they are fond of using complex and legal “tax efficiency schemes” or loopholes to ‘hide’ profits in Tax Havens. Indeed almost every year, a report or other exposé is published which attempts to paint these companies as shady or unscrupulous in the way that they take advantage of the tax laws. In fact it’s exactly because of that long-running debate that a few years ago the idea of a Digital Tax emerged.
However, I think with a collective SME Business Loan scheme of the order described above, the big tech companies would have played a smart move that has the potential to not only safeguard each one’s longevity in the long-term (helping them retain talent while also preventing crippling reductions in trade), but also one which could win the hearts and minds of the general public – many of whom would thereafter view them as not that self-centred after all.