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).

Re:That is why standards are so useful

[Lennie]

But. But. But.

The Free Market doesn't WORK THAT WAY!

Does it? Does it?

A lot more negative way to look at it is this: companies that fear to not be the winner will help build standards to prevent other companies to be the winner.

Look at this:
https://www.opencontainers.org...

A company like VMware might be afraid Docker could be the winner because of the network effect of Docker, a company like Microsoft might be afraid Google could be the winner. CoreOS might be afraid Docker could kill their business. Who knows. Maybe I'm wrong.

But whatever the motive of the companies or the individuals, they are making standards and even open source code: https://runc.io/

I personally prefer winner-takes-all standards over that over winner-takes-all companies.

The market can deal with the rest of the problem: making products and services around standards.

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

[Kjella]

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.

Yes, but for different reasons. Software is in general a natural monopoly. There's a mostly fixed development cost, hardly any marginal cost. That means there is a strong cost incentive to reduce the number of implementations until there is only one, which is the definition of a natural monopoly. On the bright side there are two alternatives, a proprietary solution monopolized by one company or an open source solution shared by everyone. Both are theoretically efficient since there's no reinventing of the wheel. Of course once you introduce a few more real world conditions like whether there's is really one product to fit every need, how the feedback cycle from profit/benefit to new development works etc. it's a bit more complicated.

Social networks on the other hand have a huge network effect. That is to say, the value of an empty Facebook is almost none. Even they gave away all the source, said you can build your own site but not take any accounts or anything posted on Facebook, it would be almost worthless. So while software is a natural monopoly on the cost side, Facebook is a natural monopoly on the benefit side. Like the phone network, if you couldn't call someone with a different provider it doesn't matter even if the technology is trivial. That one is much harder to solve because you can always build better software, open source carries on even with almost no market share. But even if you have a better service, getting all the users to jump sides is incredibly hard. It's like how I'm sure it'd be easier if we all agreed to drive on the left or the right or 50Hz vs 60Hz or 110V vs 220V but the costs involved are absolutely massive compared to the gains.

Welcome to Capitalism

[GameboyRMH]

In a dog-eat-dog world, you end up with one very fat dog. Not always one, sometimes two. Most of the world's beer is made by two megacorporations. Most of the world's cars are made by less than a dozen companies, and a few megacorps have the lion's share among them (Volkswagen Auto Group, General Motors, Toyota). Most of the world's computers are made by Foxconn. It's the same with everything. Capitalism only sort-of works with a small population and lowish amounts of automation, and with a credible communist rival to keep it in check. Outside of capitalism's narrow butterzone, it's just low competition between exploitative megacorps and runaway inequality until the system implodes.

I also hate the way tech has been going for a long time now, towards walled-garden computing, unnecessary use of centralized online systems, user privacy violation, and worker exploitation. A disgusting industry that I hate and would like to get out of now.