People have their lives, their IP on IT systems like Google Docs or iTunes or Facebook, and many businesses rely on the software and support of companies like Microsoft. Imagine what would happen to the American economy if Google or Microsoft failed. Imagine if Facebook shut its doors and you lost all of the data that you have with them as well as access to all of the companies that have built on their ecosystem (using Facebook Connect for example). You could argue that either of these scenarios would be damaging enough to the economy that they shouldn’t be allowed to happen in much the same way that a credit lock-up caused by a failure of several major banks was too catastrophic or the closing of GM would have been too catastrophic. In the popular vernacular, there are a number of tech firms that are “Too Big to Fail.”
The problem with tech companies that are too big to fail is that all of those companies are constantly doing risky risky things that have the potential to bankrupt them. Microsoft is betting the ranch on Windows 8 and its new cloudy features sometime in 2013. Google recently bet the farm on Social. Facebook isn’t even a public company yet and could easily make silly decisions. I’ve argued before that Apple is one or two failed product launches from being in serious trouble.
The question is what, if anything, to do about this. Technology is a risky business, we can’t just ask a company like Google to stop taking risks. Also, one of the reasons that these companies got so big is that the industry benefits from having dominant players in certain areas. So, if we can’t force tech companies to become smaller and we can’t force them to stop taking risks, do we just accept that someday a bailout for one of these companies may be necessary? Anyone have a solution I’m missing?