The Winner-Take-All Trend In Tech (newyorker.com)

An anonymous reader writes: A pair of articles about the tech industry serve to highlight a growing trend. First, Om Malik writes in The New Yorker about the failure of ride-sharing company Sidecar, backed by Richard Branson, and how it's one more example of the winner-take-all tendency with modern tech firms. "This loop of algorithms, infrastructure, and data is potent. Add what are called network effects to the mix, and you start to see virtual monopolies emerge almost overnight. ... The more we use it, the more data we give the company, and the more it is able to control where we turn our attention."

The second article is from Jacques Mattheij, who notes a different side of the trend toward one winner and a whole lot of losers: unnecessary reliance on cloud-based components to force vendor lock-in. "In many of these cases if you look a bit more closely at what is being sold you'll realize that these are just instances of a business-model that was grafted on as an afterthought onto something that would have worked really well stand-alone but where the creators weren't happy with a one-time fee from potential buyers." Companies who hit it big early can't help but stay dominant if they force users to rely on their servers.

Comments

That is why standards are so useful

[Lennie]

That is why standards are so useful and we need to keep making them.

When winner-takes-all happens, it's better to have the standard be the winner. Not some company.

Because when winner-takes-all happens with companies you get a monopoly and abuse of that monopoly (possibly from the pressure of the stock market demanding better and better numbers).

Basic economics

[Britz]

I know that economics has a bad reputation. Rightly so. Keynes doesn't make sense, but seems to work and the crazy libertarians make a lot of sense in theory, but got us 2008.

Yet some models and explanations are solid and work. One of them is the concept of the natural monopoly. I would argue that Facebook, Microsoft (Windows and Office) operate in markets with natural monopolies.

Markets with a natural monopoly don't work well in a market economy. They either need to be heavily regulated or simply taken over by the state and out of the private industry. Both models aren't ideal.

But Microsoft isn't regulated. Facebook neither. This happens because of globalization. Nation states would need to regulate them, but since those companies operate on a global scale, there is little interest by national regulators to step in. Since there is no international regulator, there is no regulation. Hence these companies are free to exploit their natural monopoly.

Re:Basic economics

[NostalgiaForInfinity]

I know that economics has a bad reputation. Rightly so. Keynes doesn't make sense, but seems to work

Keynesianism does make sense, unfortunately it doesn't work in practice. For example, empirical evidence is pretty strong that the Keynesian multiplier (how many dollars the economy gains from each dollars spent by the government) is less than one. Progressives and Democrats on the one hand complain about crony capitalism and big corporations, and on the other hand hand out trillions of dollars to such corporations in stimulus spending and bailouts. And when these programs don't yield the promised results, they say that they should have spent even more. How stupid do you have to be to believe this crap?

and the crazy libertarians make a lot of sense in theory, but got us 2008

How can "libertarians" be responsible for anything in our economy? We haven't had anything even remotely resembling libertarian government for more than a century and government regulations have been steadily increasing. The few areas where we have had "deregulation" and "privatization" (e.g., telecoms, airlines) have not resulted in anything like a free market (although they have still been beneficial). Most deregulation and privatization by Democrats and Republicans have themselves been tied up with corporate interests and crony capitalism, something both parties are deeply beholden to.

Yet some models and explanations are solid and work. One of them is the concept of the natural monopoly.

There is little evidence that natural monopolies exist in any economically meaningful sense. That is, if you define your market sufficiently narrowly, you can claim that some company has a "natural monopoly", but there is no reason to believe that your definition of "market" is economically relevant. For example, if you define the "desktop PC" as a market, Microsoft has a "monopoly", but if you look at the market of all interactive computing devices, Microsoft is just one of many companies. Of course, free markets do sometimes produce monopolies (or cartels), but those monopolies aren't stable, and they collapse the faster the more economically important that monopoly is; if you try to fix those problems with regulation, the cure is worse than the disease.

2008?

[glennrrr]

Crazy Libertarians caused government created entities like Fannie Mae and the FHA to get people to take out mortgages they couldn't afford to pay?