The federal government's war on big tech is a fascinating one.

Last week, it announced plans to ban children under 16 from social media and an aim to crack down on misinformation and disinformation spreading online.

By doing so, it is pitting itself against some of the most powerful companies in history.

But those companies play a unique role in 21st-century society. They sit consciously at the nexus of technology and media, in a global network of influential information.

Their control of our data, and what information they allow us to share on their platforms, is the source of their wealth and power. 

Why would they want the Australian government meddling with it?

Competition is for losers

It's worth remembering an argument from one of Silicon Valley's most influential individuals, the US billionaire Peter Thiel.

In 2014, The Wall Street Journal ran an article written by Thiel, which was an excerpt of his then-upcoming book.

It had the headline "Competition is for losers". 

If you haven't heard of Thiel, here's a taste of his politics:

"I no longer believe that freedom and democracy are compatible," he wrote in 2009.

"The 1920s were the last decade in American history during which one could be genuinely optimistic about politics.

"Since 1920, the vast increase in welfare beneficiaries and the extension of the franchise to women — two constituencies that are notoriously tough for libertarians — have rendered the notion of "capitalist democracy" into an oxymoron."

Thiel is one of the co-founders of PayPal and the CIA-backed Palantir Technologies. He was an early investor in Facebook. He's a major financial backer of MAGA Republicans in the US.

He's also one of the subjects of Jonathan Taplin's recent book, The End of Reality: How four billionaires are selling out our future (2023), along with Elon Musk, Mark Zuckerberg, and Marc Andreessen.

None of this is an endorsement of his political views. 

For today's purposes, we're interested in Thiel's view of what a "capitalist" is, and what he thinks entrepreneurs should do, and why so many businesses tell contradictory stories about themselves.

In that 2014 essay and book, Thiel argued that anyone interested in building a start-up today should try to create a new product or service that would help their start-up become a monopoly. 

Don't bother trying to enter a highly competitive market with an undifferentiated product where your profits will be competed away, he said.

Rather, you should try to create a business that will have no competition, and will end up generating long-term monopoly profits that you can then use to shape society.

"Creative monopolists give customers more choices by adding entirely new categories of abundance to the world," he wrote.

"Creative monopolies aren't just good for the rest of society; they're powerful engines for making it better […]

"Why are economists obsessed with competition as an ideal state?

"It is a relic of history … in the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot.

"Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business," he wrote.

Thiel then gave a series of lectures at different universities that expanded on his thesis.

The lies we tell and the confusion that follows

Check the 6-minute video below.

It's an excerpt from a lecture Thiel gave at the London School of Economics in 2014, and it neatly distils some of his arguments.

"We think capitalism and competition are synonyms, [but] I believe they are antonyms," he says in the video.

"I believe that a capitalist is someone who's in the business of accumulating capital. 

"[But] a world of perfect competition is a world where profits are competed away. So if you want to compete in a crazy way, you should open a restaurant. You will never make any money doing so. 

"At the other end of the spectrum, what I think everybody who is a founder or entrepreneur should aim to do, is build a monopoly. All the great companies that people have built are monopolies of one sort of another."

Thiel says our cultural confusion about the supposed value of competition and monopoly leads to situations where companies routinely lie about themselves.

"If you have a monopoly and you don't want the government to look into it too much, you will say that you are in a much, much bigger business, so if you're Google you'll never say you're a search engine, you'll say you're a technology company, [and] technology's a vast, incredibly competitive space," he said.

"You're competing with Apple on iPhones, and you're competing with Microsoft on Word documents, and you're competing with Facebook on social, and with the Detroit car companies with your self-driving car, and there's just competition everywhere," he said.

On the other hand, he said, if you were in a hugely competitive business, you'd end up telling the opposite story.

"Let's say you're trying to open a restaurant in London … and you try to get investors for your restaurant," he said. 

"This will be hard to do. They'll say, 'Well you know, no-one makes money, everyone just loses money when they open restaurants.' And you'll say, 'Well, this is totally different from any other restaurant. It will be the only British-Nepalese fusion cuisine within a five-block radius.'"

According to Thiel, since business owners constantly tell these kinds of fictional stories about themselves, it distorts what's going on.

He says it prevents us from seeing the true nature of business and the value that different businesses contribute to society.

Again, this is not an endorsement of his argument or Thiel's politics.

But it's important to be aware of that way of thinking, and the powerful people in Silicon Valley that embrace it.

The so-called "Magnificent Seven" stocks — Apple, Microsoft, Google parent Alphabet, Amazon.com, Nvidia, Meta Platforms and Tesla — are huge technology companies that account for about half of the weighting of the Nasdaq.

In the third decade of the 21st century, they occupy a profoundly important place in our capitalist system.

The federal government has to deal with them.

According to the Australian Media Literacy Alliance, 80 per cent of Australians say the spread of misinformation on social media needs to be addressed.

But last week's intrusion into the world of Silicon Valley's capitalists won't be making the government friends there.

To protect their monopoly power and profits, we can expect them to tell contradictory stories about themselves. They definitely won't be monopolists, for instance.

But some of their arguments will explain why attempts by governments to regulate speech online can be so dangerous, and those arguments will find plenty of supporters in Australia.

Is this government capable of finding the right language for its legislation that will lead to better outcomes for society?

As a taste of the tone of the fight to come, when Elon Musk, the owner of social media platform X (formerly known as Twitter), heard about the government's misinformation bill last week, he tweeted one word in response.

"Fascists," he called them.