"Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT&T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers."
Um, he managed to pick the THREE OF THE MOST FAMOUS EXAMPLES OF GOVERNMENT ANTITRUST ACTIONS, while trying to argue monopolies do not harm innovation.
Doesn't the fact all three of the previously dominant monopolies faced anti-trust decisions against them, before major new competing technologies sprang up, make it clear how important anti-trust actions are for encouraging innovation?
Seriously; the AT&T monopoly -> "now anyone can get a cheap cell phone" "example" is particularly historically deaf. Does Thiel not realize that the two largest cell providers, making up 66% of the market (AT&T and Verizon), are direct descendants of the baby Bells that the government split up in antitrust action? And that the only reason there are still 4 significant players at all (leading to barely-acceptable service pricing) is because the US government intervened and blocked the purchase of T-Mobile by AT&T, and later Sprint? Much as I love the market, there's no way you can credit it for maintaining the bare minimum level of competition in the cell service industry we have today.
Of course he does. While not stated directly, the implied message from Thiel seems to be: monopolies are fantastic, for founders and early investors. Given his own history, is it that surprising he is a proponent? Perhaps in this case, being contrarian might be less about intellectual enlightenment and more of a rationalization for self-serving decisions.
Thiel is challenging you to consider that the government's antitrust actions were unnecessary and counterproductive: Unnecessary because eventually upstarts find a way to leverage new technology to open new markets where monopolists' advantages no longer apply. Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition.
You may disagree, but to refute his argument effectively you'll have to do better than merely reassert conventional wisdom about monopolies.
> Thiel is challenging you to consider that the government's antitrust actions were unnecessary and counterproductive: Unnecessary because eventually upstarts find a way to leverage new technology to open new markets where the monopolists advantages no longer apply.
But none of the examples he gives demonstrates that, because they are not examples where the monoplist was displaced independently of antitrust actions.
> Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition.
Antitrust action does not occur against benevolent monopolies in the US system, it only occurs when a monopolist illegally leveraged their monopoly, either to prevent being displaced or to monoplize another market. So, even if benevolent monopolies are eventually displaced and good for the research they can produce, the US antitrust system isn't directed at them.
> But none of the examples he gives demonstrates that, because they are not examples where the moboplist was displaced independently of antitrust actions.
IBM and Microsoft weren't dethroned until roughly a decade later, so it's a real stretch to claim any kind of causal relationship. Especially because they maintained — to this day — their monopolies in mainframes and PC operating systems. It's just that technological change made their monopolies less relevant.
There was certainly a causal relationship WRT AT&T, but the conclusion to that tale does not go "and then, American telecommunications companies became well-known for their low prices and excellent customer service."
> Antitrust action does not occur against benevolent monopolies in the US system, it only occurs when a monopolist illegally leveraged their monopoly
That's rather begging the question. The DoJ's cases against IBM and Microsoft, in particular, may have been financial bonanzas for the legal industry, but the central legal claims were Kafkaesque: the supposed "unfair competition" was that IBM bundled support services with its computers and Microsoft bundled software with its operating system. Essentially, the DoJ's claim was that their products offered too good a value to consumers, and ought to have been made worse so their competitors' products would have a better chance.
IBM and Microsoft may well have engaged in genuine anti-competitive practices (ironically, MS' sabotage of OS/2 would be a good example), but those weren't. And maybe the DoJ could have brought cases against them that actually served to the benefit of consumers, but again, those didn't.
> the conclusion to that tale does not go "and then, American telecommunications companies became well-known for their low prices and excellent customer service."
You're kidding, right? Long distance calls during weekday hours used to cost like $6/minute, accounting for inflation. This improved rapidly after the breakup, not solely because of better technology, but because before that long distance was where AT&T was making most of its money and it had little reason to reduce costs or compete on pricing; i.e. it couldn't act competitively basically by definition.
The 80's and 90's saw the introduction of digital signals, computerized switching and fiber-optic cable networks (all Bell Labs inventions), which significantly reduced the cost of landline calls in general, and in particular eliminated the additional complexity associated with providing long-distance service versus local.
This was also the period in which landline started very rapidly losing market share to cell phones (also a Bell Labs invention[1]). Remember when they used to charge you a dollar per text message? Remember when they used to charge you an arm and a leg if you went over your allotted number of minutes? Remember how they still do if you go over your ration of gigabytes?
Telecom has exactly the same razor/blade business model it did 10, 20 or 40 years ago. All that's changed is which services are the loss-leaders and which are the bleeding-edge, desirable features that they charge you a king's ransom for. Normal technological churn.
> ["The 80's and 90's"] was also the period in which landline started very rapidly losing market share to cell phones (also a Bell Labs invention[1]). Remember when they used to charge you a dollar per text message? Remember when they used to charge you an arm and a leg if you went over your allotted number of minutes?
Funny how the more highly regulated European telecom market saw a huge and rapid adoption of mobile phones compared to the US which lagged by about 15 years.
European telecom regulations also held Europe back in other ways (mainly on the wired side) so I'm not claiming the straw horse that regulations are 100% great or 100% terrible. In fact consider Minitel: everybody could get an inexpensive computer terminal in their home, buy things online, chat, look up data, have set chat etc, starting from the early 80s. Digital lines were common. Yet 25 years later it died a backwater.
Your thesis seemed to be that phone service was worse and more expensive due to AT&T being broken up, no? I feel that proposition is absurd and at odds with all available facts. You seem to be saying that competitive pressure has no effect on prices.
I don't think that many people dropped their landlines for cell phones in the 80's, or even the 90's. I find it difficult to believe that fewer or no competitors would lead to the same or lower cell phone bills.
> Your thesis seemed to be that phone service was worse and more expensive due to AT&T being broken up, no?
I have no idea. What I can say is, relative to other countries and taking account of new technologies largely invented by pre-breakup AT&T, there's no clear improvement.
> You seem to be saying that competitive pressure has no effect on prices.
What competitive pressure? A national monopoly was broken up into local monopolies with hardly any more competition. In fact, our local-level cartels make things harder for new competitors than Ma Bell ever could; they have agreements (mostly enforced as part of the AT&T breakup) to share their easements and physical plant with each other as if they were all still part of the same company, but newcomers like Google Fiber have no access, and can be effectively held to ransom on a street-to-street and even building-to-building basis.
> I don't think that many people dropped their landlines for cell phones in the 80's, or even the 90's.
Not many people bought color TVs in the 1960s. Did their availability make black and white TVs cheaper? Hollywood movies better, or at least more spectacular? Not many people traveled by air back then, but did jet airliners make cars better and cheaper? I think the answers are obvious.
> I find it difficult to believe that fewer or no competitors would lead to the same or lower cell phone bills.
Maybe, maybe not. China Mobile is a monopoly but way less expensive than US providers. Europe is an oligopoly like the US but generally less expensive.
Not many people bought color TVs in the 1960s. Did their availability make black and white TVs cheaper? Hollywood movies better, or at least more spectacular? Not many people traveled by air back then, but did jet airliners make cars better and cheaper? I think the answers are obvious
I don't think these are as obvious as you might think. Cell phone service is more akin to TV stations or other television service than the hardware used to view it. Black and white hasn't always stayed cheaper: You could buy a "normal" color television cheaper than a small black & white portable, for example. It merely changed.
Hollywood doesn't always do even that bit: I find BBC's "The Hogfather" (based on a Terry Pratchett novel) to be pretty spectacular. I went through a phase of Asian horror films, spectacularly surreal. Bollywood often has some crazy stories. Making cars better is a matter of opinion. Do you have proof that airlines made cars cheaper? Because most of what I find says they've basically stayed the same price for 30 or so years. My understanding was that things like the assembly line and advances in production technology have been the main drivers for vehicle affordability in addition to things like a growing used car market.
> IBM and Microsoft weren't dethroned until roughly a decade later, so it's a real stretch to claim any kind of causal relationship.
Microsoft, strictly speaking, still hasn't been dethroned, it's just the market in which it has its monopoly has itself become less important in the grand scheme of things.
OTOH, it became less important because of other markets to which the government action prevented it from extending it's monopoly, which pretty clearly shows the relevance of the government action.
Likewise, the IBM antitrust action is what created the boom in independent comouter software and services businesses, which directly led to IBM being dethroned because software commoditized the computers running it.
>> IBM and Microsoft weren't dethroned until roughly a decade later, so it's a real stretch to claim any kind of causal relationship.
> Microsoft, strictly speaking, still hasn't been dethroned, it's just the market in which it has its monopoly has itself become less important in the grand scheme of things.
This is literally my next sentence?
> OTOH, it became less important because of other markets to which the government action prevented it from extending it's monopoly, which pretty clearly shows the relevance of the government action.
Smartphones? Somebody should tell Nokia. The only one whose actions prevented them extending their monopoly to that area was Steve Ballmer. (Or Steve Jobs — six of one Steve, half a dozen of the other).
> Likewise, the IBM antitrust action is what created the boom in independent comouter software and services businesses, which directly led to IBM being dethroned because software commoditized the computers running it.
Patently absurd. IBM's fate was sealed a few months after the start of the suit, when Digital introduced its PDP-11 minicomputer, and over the next 13 years, along with others, e.g. Seymour Cray at the high end, proceeded to disprove the DoJ's case in real time, taking huge amounts of market share away from IBM's mainframes the old-fashioned way, by offering a superior product at a (much) lower price. It was on Digital's machines, not mainframes, that software publishing (such as ...AT&T's Unix) first became a major industry.
Al Gore's representations about the internet weren't really all that bad by politician standards, but to claim John Mitchell[1] invented software development is a new one.
Around the time the DoJ dropped its case against IBM, they committed accidental suicide when they released the PC, with someone else's (Intel 8088) proprietary chips and, even more egregiously, someone else's proprietary operating system (DOS, by you-guessed-it), which enabled everyone and their brother to make their own, cut-price copies, and, adding insult to injury, giving their erstwhile chip and OS vendors gazillion-dollar licensing bonanzas that IBM never saw a penny of.
This was IBM's own dumb idea, not John Mitchell's.
I think you're confusing an absolute hermetic market monopoly with anti-trust law.
Anti-trust law doesn't require a total monopoly. It requires evidence of monopolistic practices which adversely affect consumers and customers.
If you're negotiating, it's not a monopoly. If you're negotiating with a gorilla you can't afford to anger, or if you're being told what to buy and when and not negotiating at all, it's a monopoly.
IBM, AT&T, MS all showed clear evidence of anti-trust breaches.
The PDP-11 proves the point. DEC's PDP series was marketed as a Programmed Data Processor and not a Computer because the IBM had a lock on computer sales and rentals. Upper management in most of America would never authorise a computer purchase from anyone other than IBM.
Marketing the series as a PDP meant technicians, scientists, and engineers could buy a computer through a side-channel that bypassed the usual corporate acquisition process.
This wouldn't have been necessary if no lockdown existed.
RCA, Honeywell, and others all tried to break into the computer market directly. Only CDC succeeded, and that was only because Cray gave CDC a lead in HPC that IBM couldn't match.
For bread and butter corporate computing, IBM really did own the market.
You take a very dishonest stance on the charges against microsoft. They actively broke other people's software (Dr DOS) and made APIs that that only they could use which provided enormous, abusable and well abused competitive advantage. They actively interfered with standardization processes.
They did a ton of dishonest, unethical and illegal things. They even had internal memos about doing these things like the famous "Embrace, Extend, Extinguish" memo.
In order to describe these charges as you have one must have a severe lack of information or an equally severe bias.
EDIT - Downvote away, without a thoughtful response it is the equivalent of a throwing a tantrum.
> Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition.
If you have enough resources, it's often it's cheaper to quash-and-copy the competition than innovate. You may start labs to grab up smart minds, but this practice seems to be as much about suppressing competition as culturing innovation. And it seems to more to support the former than the latter. I would love some good examples of how this isn't the case.
And yet, every time someone tries "a way to leverage new technology to open new markets where monopolists' advantages no longer apply" in the form of a new municipal fiber or wireless internet service, they're shut down by lawsuits on the basis of legislation the monopolists had written, which protect the likes of Comcast and TW from competition.
yes, Peter Thiel is for the most part an incoherent hypocrite. He postures as an ideologue but his own behavior doesn't match his ideology, and he engages in revisionist history to the point of grotesque absurdity, as you correctly point out.
The best strategy for a given business is a different question from what is a good strategy for egulators or society. This was repeatedly emphasized, both in Zero to One and in the many interviews supporting its launch. This blog post quotes a specific passage from the book without this context.
It's true that monopolies often have negative societal consequences but it's also true that building a defensible "monopoly" or "moat", in Buffet's way of saying it, is extremely powerful for a business. It's also true that centuries old econ 101 charts that assume a static world (perfect information, rational actors, etc) is a lousy way to model the prospects of a modern tech company.
A meta-question for those who follow Stratechery or the Exponent Podcast and are perhaps more deeply engrained in some of these companies being discussed...
Do you find the analysis to typically be pretty thorough and accurate?
I love the podcast and I think I've listened to every single one at this point, and they always talk through their reasoning at length in a logical, (mostly) structured manner, which I love. However in the back of my mind there's this little voice that says "they used to be management consultants and still do consulting, so of course they are good at making their arguments sound convincing--but how sound are they really from a strategic standpoint?"
Some of it we'll never know because it is in the realm of "what-ifs" but just curious for others' thoughts on the signal-to-noise ratio of their content.
I have the same meta-question, and would love to hear what other folks think – I enjoy Exponent a lot, but feel like it veers into just-so stories [1], and the theories / models could be interpreted to argue for any particular outcome
In particular, Episode 101 left me feeling skeptical [2]. Aggregation theory / unbundling somehow predicts both Netflix winning and Spotify losing, but I was left with the impression that – had things gone the other way – an equally persuasive argument could have been made.
Stratechery is generally very high quality but there's a lot of storytelling and a lot of ideology in there. I'd even call it magical thinking; something to make business analysis exciting for a wider audience than just executives. "The arrival of artificial intelligence" is an example, because AI hasn't arrived and it won't.
Ah, the AI effect in effect. AI is already here if you go by the original definitions set in the 50/60s. You just keep moving the goalposts as it gets better because "it cant' solve problem X yet" or "it's not quite as smart as a human" or "it hasn't exterminated all of mankind". This is a problem with humans when they don't want to share dominance with something else.
Intelligence is simply information processing. AGI is inevitable. ASI is worrisome.
I wonder about this too. I lean towards the side that this is just storytelling in hindsight, but hedge by reading the blog posts every so often. The best way to test this would be to check his history for predictions (or statements that can be adapted into predictions) and see if they turned out.
Of course, anyone who could make business predictions with certainty would be starting businesses, not consulting. Perhaps there's still some value in just being able to create taxonomies from past events, as long as they're consistent.
An even better metric is someone who publicly makes investments. An excellent non-VC example of this is David Gardener of the The Motley Fool, who publicly announced his stock purchases and rationale before making them. He bought AOL in 1994, Amazon in 1997, Amgen and Starbucks in 1998 and eBay in 1999. In many cases the trades were unpopular for a year or two but you can be sure that his analysis of businesses has carried great weight ever since.
It inspired me to take public positions for many years afterward. While my returns weren't quite as good as his, I learned a ton and absolutely crushed the market for 7 years until getting reckless with margin and learning a less pleasant lesson.
I'm not sure if this blog makes many actual predictions but if so it would be very instructive to track them.
It is important to Facebook to crush Snap, not only to maintain their dominance of the social graph, but also to send a message to future social networks: you can either be like Instagram and Whatsapp and let us buy you or be like Snapchat and be crushed. Snap's IPO payday of $3 billion is probably less than Facebook would have paid for them.
It's ironic that we're having this conversation again in a thread about Snapchat's relationship to Facebook.
Facebook was "Worth" $92 billion when they IPOed and most people on HN lost their minds about how overvalued they were when the stock dipped on that first day:
Amazon IPOed in 1997.. they didn't "make money" for over a decade, and even then, it was a tiny return. In the mean time, they built a massive business that's worth more than $430 billion today. Whether or not a company is making money in the most recent quarter has very little to do with their prospects.
Yes. It reminds me of DHH's loud proclamation that Facebook was not worth $33B. He'd have gotten a great return if he'd just bought some of their stock at that price instead of this:
>"Oh, well, but maybe Facebook just needs to mature, you say. If we give them just a few more years, the profit fairy might drop by and sprinkle her billions all over Facebook and its shareholders. I call fat chance."
FB's trajectory after that point had a few step functions which had nothing to do with talent or execution (i.e. more predictable factors), but the remarkable mutual back scratching arrangement going on between governments and Facebook (and similar companies).
For example, I don't know how anyone in their right mind would have allowed the FB - WhatsApp acquisition to happen after seeing the price tag. I really doubt if anyone who understands technology still thinks this wasn't a sweetheart deal between the govt and FB.
The other step function is the US government's (and probably other governments) decision to simply look away on privacy issues as soon as they saw the huge benefits of having a tame populace unable to untether themselves from the top social networks (i.e. less stuff to monitor).
This is all the more bizarre when you notice how the privacy intrusion has basically moved to a stage where just about anything goes, and not one person is actually able to function in the economy without accepting a drastic reduction in privacy. By which I mean, it is only a matter of time when this is going to turn against the politicos who helped usher in this era. In fact, we are already seeing this in some cases. It seems like the people who are reaching the top positions in politics seem to be disgustingly shameless. The more regular, normal politician is unable to withstand/ignore the scrutiny of all the skeletons in their closet. While that may be a good thing (the scrutiny), the outcome where the most shameless person becomes the leader by default is not.
You are taking huge risks when trying to understand what manipulations governments around the world would resort to when trying to predict currency movements. You take a similar risk in predicting the trajectory of private companies which manage to acquire enormous quantities of data because you don't know what kind of mutual back scratching arrangements that is going to set up in the future.
This is a bad take. At least pretend to look at their financials if you're going to make this argument. I'll help:
Facebook has $30 billion in cash and essentially no debt. The equity value of $30 billion in cash is.. $30 billion. So it's clear that they're worth at least $30 billion. On top of that they're generating ~$4 billion / quarter in net income. The equity value of net income is roughly Net income x (1 - Tax Rate), so call it $3 billion/quarter. Discount as you'd like for them to be worthless someday, but in the mean time they have a ton of cash and are printing a ton of cash.
I bet if you run the numbers and assuming a decent growth rate, you'll come to a total market cap of ~$420 billion. Efficient markets and all that..
So the stock market is a seriously overpriced bubble that makes no sense and will blow up sooner or later as it already did before. Jeff Bezos wisely chose not to make profit to give back to shareholders but to reinvest in his company instead. How does this mean anything in the story of snapchat making a smart move by refusing to be bought out by facebook ?
Snapchat would have to lose ~90% of its value to make the Facebook buyout offer better than the IPO decision. Even during the GFC, the NYSE only lost 50% of its value.
Measuring Snapchat's decision to refuse a buy-out is simple: The investors, founders, and employees all have more money now than they would have had if they had sold. This will be completely confirmed in roughly 100 days (once the lock-up expires), as long as their stock price is above ~$2.50 on August 1st, they're vindicated.
You could make the analysis more complicated with opportunity cost calculations or assumptions about whether they would have received Facebook stock (which has appreciated a fair amount since the buyout offer) but those are all marginal concerns.
Also look at how Zuck bought Oculus and turned it from VR fan favorite to this horrible Facebook division that inches away from PC VR everyday and into social and mobile spaces. Worse, it embraced the toxic politics of exclusives and couldn't keep its promises on ballpark pricing, delivery dates, openness, etc.
The Snapchat guys didn't want to be Palmer Luckey'd. They got the cash and kept their reputation. That's quite the win.
> Also look at how Zuck bought Oculus and turned it from VR fan favorite to this horrible Facebook division that inches away from PC VR everyday and into social and mobile spaces.
Because that's where the users are. PC VR is going to be a very small niche in the larger AR/VR space.
Maybe eventually, but early VR on mobile devices is crap. Even PC VR is pretty rough. They need one or two more generations before they can cram a quality experience into a phone.
I am just an anecdote but even as a founder of a tech startup who is highly plugged in, I ~barely~ use a PC when not in the office for non-work purposes and most of my immediate network is at best on par and worse completely off the PC bandwagon for almost all personal use.
As someone who deals with normal people and their computer/internet needs, your experience does not reflect population at large. Many regular people hate you for pushing things and change they didn't ask for and do not want on them.
Further more, this experience of population at large is not reflecting the actual experience of most of the population of the world that has little to no exposure to computers or internet.
But when designing for your kind in a vacuum you will encounter some success among your peers.
There was no future in 3D video each time it got introduced since the 50's and there's still no future today.
Understand that the human brain cannot deal with this for extended period of time without serious side effects and there's no VR outside of limited niche market such as learning to overcome phobias.
Tech democratization can be foreseen through the rate of adoption in porn (VCR, DVD, etc.), what's the trend for VR porn ?
You'd think so, but Grandma isn't paying $300 for goggles to strap on her face to view baby videos. Meanwhile gamers are chomping at the bit for quality VR experiences and have deep pockets as well.
Mobile gaming didn't stop console and PC gaming, why should VR be any different?
Well, you forgot to factor in that oculus had been crowdfunded and those people felt cheated when occulus sold out to facebook.
But this is how it works, either you build something in a pure me,me,me fashion aka you sell to the highest bidder, usually one of the giant tech that buys to preserve their own interest or push their agenda. Or youyou actually care about people, users, customers and are not ruled by money and you don't sell and deserve what you earn while maybe giving back value to people and the global world.
Acording to Wikpedia his percentage netted him $400 million. Given the guy was under 30 years old when FB bought Instagram, I'd say all told he's probably quite happy :) Honestly, once you get to almost half a billion net worth, what does it matter if you could have had more.
$400 million could be less than $200 million after tax. That's a lot if all you think about is consuming your wealth. But if you're looking to jumpstart something in billionairesville, it's quite different from $2 billion.
So what you say is that it depends if you're a decent human being or not. Can you live on $1 million a year with a roof over your head, food on your plate, clean water to drink and some extra comfort such as heat during cold season ?
with $200 millions you could give away half of it and live happily on the remaining for a century. With $2 billions, the only difference is that you could give away 95% of it and live happily for a century.
According to "What are your TRUE chances of getting rich in America? OR How to get rich in America"[1], he made enough to become one the anomaly and become rich outside of the 99% ways of doing so.
Also, when FB acquired Instagram in stock and cash, its own valuation was around $50B. Now it is 8 times that.
Also, you have to also account for the synergetic benefits which FB provided to Instagram in terms of getting users quickly started by following and being followed by their fb friends.
> Also, when FB acquired Instagram in stock and cash, its own valuation was around $50B. Now it is 8 times that.
An in the not so distant future it will be a few orders of magnitude less. That's how stock market bubbles work, they inflate in a silly manner then burst leaving the rich richer and the others with grains of dust and suicidal tendencies.
Probably not. He's past the point ($75,000 a year) where getting more money makes you happier and maybe even past the point where you're considered rich ($400,000 a year regardless of having a paying job or not).
I don't know. The whole post reads to me like it can be summed up as "I like Snapchat, I don't like Facebook" and some padding to disguise that. Saying Snapchat innovated and Facebook stole also reminds me of Apple suing Samsung for using rounded corners on phones i.e. ridiculous in my opinion. As if "hey, let's use the camera some more" was some grand vision that only Snapchat had.
I think it's more that he has a distaste for Facebook's "90's-Microsoft-esque" strategy of watching like a hawk for any potential competitors in the space, and going to them with a "either let us acquire you, or we will crush you" offer, and how successful that strategy has been so far. Most people have a vague sense, if only for aesthetic and "fairness" reasons, that we don't want the world to work like that. Unfortunately, the world doesn't care about our wants.
Don't be fooled by the showboating, behind every attempt at executing these aggressive strategies is a crumbling organization rife with disharmony and malcontent. They would not be focusing on what other companies were doing nearly this much if they did not feel threatened by it.
Yes, when your success relies on a monopoly or dominant position, your future is at stake if you don't use your dominant position to remove any competition that may chip at your domination.
This is exactly why monopoly are hurting everybody but the people profiting from it.
I bet Snapchat wished they had some patents on their product to assert against Facebook (and if they do and they aren't, they're idiotic). They're going to be destroyed (or have a ceiling placed on their growth) because Facebook can leverage its network effect based competitive advantage.
I can't think of a better recent example than the story of Snapchat and Facebook's ripping them off in favor of patents.
“The idea of featured ‘Stories’ is not new, so any patents would likely be quite specific to implementation details,” says Wagner. “And because the implementation/interfaces are slightly different, copyright doesn’t provide any protection. This is an area where IP laws don’t prevent the copying of another’s features or innovations.”
There wasn't a question in my comment. And I'm not sure how much value there is in a generic comment about intellectual property from a professor because the journalist needed a quote for their story.
Ok - so let us all believe in you since you are such an expert in patent law?
Do you really think that the idea of patenting "story" wouldn't have come across Snap given that is their main revenue driving feature? Do you think FB should have patented NF back when it was the first one who launched it?
This is a neat article, but I'm distracted by a thought only tangentially related: What does it mean that Facebook has a monopoly through the network effect?
So -
Diamonds. Classic monopoly. Physical good, limited natural supply captured completely by a single business entity. (Notably, AFAIK, the same is true for Areva and nuclear fuel).
Microsoft. Monopoly. Software goods. Their monopoly was achieved (AFAIK) through business deals and a quality-enough+ product. Has nothing to do with available supply.
Facebook. Network-powered monopoly. Achieved through a good product, maintained by good-enough+ and the network effect (and their adaptability). The number one hurdle for any FB "killer" (as opposed to unbundlers - arguably, Instagram, as an example) is competing with FB's network effect. There's zero supply that FB has controlled to maintain it's monopoly.
I'm not sure where this thought wants to go, but I'm trying to think up other categories or interesting things that fall into these categories.
It seems to me the reason you don't understand facebook monopoly because you seem to believe it was achieved through a good product which is not at all how it happened, (if the product is any good it's for facebook). They got there through a lot of tricks from the black book of shunned upon dark tricks to control supply (new registered users).
They kickstarted by seizing the universities students in ways that got them a lot of flak at the time then grew further by breaking their initial promises and more black book tricks and dark patterns.
Once they reached critical mass and user lock-in, the people themselves would recruit new users and further improve network effect.
There's also the shadow side that happened behind the scenes and can be pinpointed to around the time of Peter Thiel involvement.
So "Facebook has a monopoly through network effect" means that due to the sheer number of people registered it has an effective monopoly.
If you peruse the HN comments (or elsewhere) about facebook you will often see people that complains about facebook being a pile of crap that they can't leave because other people they want to stay to stay in touch are all there and some are only there. This is monopoly through network effect.
In next to no sense of the word does FB still have a monopoly. Most people have left for 'greener pastures' and while most other social networks center around a different mode of content sharing, people are much more fluidly moving across networks than they did back in the "fb vs myspace" days.
Remember when "innovation" was novel computer architecture or a totally new product category and not "a social network for pictures... that disappear!"?
If that's a genuine answer, the Family Guy segment is based on a long-running advertising campaign by the Pepperidge Farms brand of baked goods. I guess I'm old.
A lot of people underestimate that Snapchat has already captured a whole generation and formed their network graph on their platform. Another thing to remember is that this new 'format' that Facebook is ripping off is very much a cultural adjustment. I do not expect Facebook's most active users right now (30-60 years old) to be pulling out their phones out every 5 minutes, opening the Facebook app and taking pictures of themselves and what is around them. Snapchat has captured the audience that does do this, and it only happens on their app.
> A lot of people underestimate that Snapchat has already captured a whole generation
So did Hi5 back in the day, and it still went the way of the dodo. If you cater to attention-deficient people, they will leave in droves as soon as the next fad comes along.
I keep seeing posts about how great Facebook's DAUs are for their Snapchat clones.
This may be an anecdote, but my Instagram stories are mostly older people and brands. Snapchat is still where I go to catch up on what my friends are doing, and it's even more popular with younger generations.
no analysis feels complete unless it factors both benefits and costs. this post seems lopsided on the cost-side.
the author persuasively portrays the negative effects of a facebook monopoly, but does not objectively delve into the benefits.
consider the subsequent disruptions spawned by AT&T research, for example. even though AT&T itself did not commercialize most of these products (e.g., the semi-conductor), can anyone credibly argue AT&T did not foster innovation?
similarly, google's search monopoly produced cheaper smartphones, free worldwide communication, and self-driving cars.
facebook's monopoly lets it advance research on AI, drones, VR, internet access, and human-to-human communication.
it's far too early to judge if facebook harms or helps innovation.
perhaps there is enough data to assess google, however. one of google's victims is yelp. if yelp is worth $20B instead of $3B, but we don't have all the benefits of google's massive cash flow, is society better off? if we repeat the process for every google competitor, we can start to engage in an unbiased evaluation of google as a monopolist.
to clarify, i'm neither advocating for nor disparaging monopolies. the author is very sharp and one of the best tech analysts today. i'm simply hoping for fair and balanced analyses so we can reach informed conclusions.
I think he's making a good point here about the effect of a Facebook monopoly on the rest of the ecosystem. Facebook stifling other social networks is the least of our worries. The effect on the advertising ecosystem is enormous! and Affects nearly every other internet company in the world that needs to acquire users! In this regard, so far Facebook as enabled countless businesses to exist with it's high value advertisement platform, but this could change as their monopolistic powers increase.
I remember reading a piece on how facebook influence on online advertising had a very significant potential for causing a collapse of the online advertising business model by both driving prices down and pulling advertisers away from other websites, but also by exposing the fact that online advertising is mostly hype and fraud eventually causing the online advertising bubble to burst.
If you look at Linkedin, Twitter and Google+ you don't find the same features that are available with Facebook.
What I think has kept the social network so attached to our psyches is the same psychological principle as to why the Japanese love romanticizing high school in anime over and over again. Facebook was created as a utility to connect together alumni within a university. It plays on our tribalism and need for cliques.
Just like this post mentions it also is moving towards more visual feedback. The sensationalist adds, the lude pictures and facebook videos aren't enough. There must be more sensory feedback even if it requires a VR headset to get it.
Take the example of the IRC chat. There are no avatars and the names are user created. Just like with radio in contrast to television you get less stimulation. It doesn't engorge the senses.
I don't know the current state of things with Facebook as of right now, but I think at some point there is going to be a movement that begins to build and build and it will come from a deep revilement for the sensationalized news, the abundance of ads, the platform that promotes arguing, the too-slick ease of doing virtually everything in a virtual format. At the core of it is the fact that long ago people sought to break away from illusory things. Think Buddhism and Gnosticism. Now, instead, we are willingly and eagerly enshrouding ourselves in something that looks glossier and more fabulous than real life and it seems like we've forgotten to remember the signs along the road in case we want to turn back.
Your company fails when you stop innovating and start copying, and enters a death spiral when smart employees (and investors) leave, because they know that no amount of fancy demos and vaporware will make up for the declining quality of the core product. Eventually the neglected core becomes weaker and weaker to the point where it fails spectacularly. We are saw this with MySpace, are seeing it with Wikipedia, Google Search, and if Facebook continues on the same path, it won't be long before they suffer the same fate.
Number of editors is in decline. Presentation hasn't changed in 15 years. Policies are moribund. No innovation. No leadership. It's just a matter of time.
I don't think this point is relevant if the UI is good enough or have been this way for so long that people are used to it. Changing it would be weird.
> No innovation.
You want to innovate an online encyclopedia? How exactly do you do that? And without sacrificing integrity?
> It's just a matter of time.
What is this time to event thing that you speak of?
>Craiglist presentation hasn't changed either. I don't think this point is relevant if the UI is good enough or have been this way for so long that people are used to it. Changing it would be weird.
There are many problems with Wikipedia's presentation of information [1], but the point is that, even if Wikipedia's UI was the best there was, new media inevitably come along that change the way customers want to access their information. For example, you may think it's 'weird' to change Wikipedia's text-heavy UI, but kids brought up on Snapchat, WhatsApp and Instagram might want a more visual interface for their encyclopedia.
>You want to innovate an online encyclopedia? How exactly do you do that? And without sacrificing integrity?
Beyond UI, Wikipedia has many problems in its data structure, policies, and integrity, by which I mean the veracity of its information, and its endemic bias. Rather than discuss them here, please read my blog post: Wikipedia's 13 deadly Sins. [1]
>What is this time to event thing that you speak of?
The rapid collapse of an incumbent site due to its monopoly position and consequent lack of innovation i.e. the point of the original post.
Your response appears to confirm that the lack of imagination that goes hand-in-hand with monopoly products is not just confined to their creators. Their customers want the monopoly, until they don't. Wikipedia, Craigslist, Google and Facebook are not unassailable. Everything dies.
The answer is, of course, Facebook, which was launched in February 2004. But no one knew that until a couple years later, when it opened its doors to the general populace.
The true competitor to Wikipedia will probably look nothing like Wikipedia. It will likely appear "suddenly" to those not in the know. And Wikipedia probably won't die die... After all, Myspace still exists. It will just be a place no one goes to anymore, or maybe as a last resort when other options are fruitless.
What do you mean ? If you're asking for which one will eventually replace wikipedia only time will tell. If you're asking if wikipedia has competitors, yes quite a numbers of them even from before wikipedia started.
And there are also many specialized competitors, while Wikipedia is very generic. For instance, I can't think of anyone I know that would go to Wikipedia first to find out about a movie. First choices would be Youtube for trailers or IMDB for detailed data.
They look similar, sure, but Vector is more refined. It uses larger fonts and pads things out a bit, and rearranges items to improve usability. To compare directly:
You're badly misunderstanding where Wikipedia's current challenges lie.
The encyclopedia itself is the largest and most comprehensive ever created. Its accuracy rivals or exceeds any general-interest encyclopedia, and most special-purpose ones.
Wikipedia has gotten tremendous mileage out of ordinary contributions, but I suspect is starting to test the limits of what a crowdsourced project can accomplish.
Moreover, it's specifically the question of who finds it appealing to volunteer, or in cases, "volunteer", their efforts to the project, which is becoming a problem. It's been a problem for some time, but it's becoming more of one.
Several major areas are already political minefields, not only among actual and qualified experts within the fields, but of those who seek to control models and understanding for other reasons. Climate change is certainly one of these.
There are more mundane issues as well. Wikipedia is quite good on any events or facts based after roughly 2004, but coverage can become quite thin for earlier periods, particularly those which aren't popular.
There's the problem of sourcing material, especially as Wikipedia itself is online, but many of its primary sources aren't, at least not cheaply and legally.
The upshot: the problems Wikipedia faces today are not those that it faced starting out, at least not for the most part. Much of the real work and innovation is going behind the scenes. Part of that is technical, part is managing the emergent social dynamics of the project and its contributors.
It would be trivial for any other competing project to match Wikipedia -- it simply has to copy the content. For it to actually exceed Wikipedia, in accuracy, as an epistemic system, it would have to improve on the process overall.
You're badly misunderstanding what wikipedia is. It's not an encyclopedia and fails short of the definition by design and the first encyclopedia was much more comprehensive (though was at a time where there was no pokemon to artificially grow this perception). Its accuracy is both terrible and good depending on which article you read and quality is often dubious when you wander outside of english wikipedia.
The problems wikipedia faced at the start was the dubious source of funding by a shady founder, the problems wikipedia faces today is the colossal amount of money they don't actually need but ask for and receive anyways and drop conspicuously in private pockets.
So not much has changed basically except maybe the core of people in control behind the scenes managed to drive away newcomers and contributors to keep the control and power they have.
The good thing is that the licensing issue is mostly fixed and we should be able to fork wikipedia and salvage the data (if they ever fix their data structures and resume offerings usable dumps).
>The result of monopoly pricing is that consumer surplus is reduced and producer surplus is increased; the reason we care as a society, though [..] is deadweight loss.
>Facebook may have a monopoly in social networking, and while that may be a problem for Snap or any other would be networks, Facebook would surely argue that the lack of deadweight loss means that society as a whole shouldn’t be too bothered.
Traditionally, the main issue with monopoly has been about suppressing competition and innovation, not about prices. Price analysis was at most an afterthought. Here's e.g. Woodrow Wilson [1] campaigning against monopoly in 1913 (he later created the FTC and signed the Clayton Act):
"Our purpose is the restoration of freedom. We purpose to prevent private monopoly by law, to see to it that the methods by which monopolies have been built up are legally made impossible. We design that the limitations on private enterprise shall be removed, so that the next generation of youngsters, as they come along, will not have to become proteges of benevolent trusts, but will be free to go about making their own lives what they will"
"Monopoly means the atrophy of enterprise. If monopoly persists, monopoly will always sit at the helm of the government. I do not expect to see monopoly restrain itself. If there are men in this country big enough to own the government of the United States, they are going to own it"
>Facebook may have a monopoly in social networking
Last time I checked social networking was still overwhelming done in actual AFK social interaction across the world. In the online digital realm the king of social networking was still email by a significant margin. A good clue being that facebook ask for your email while email doesn't ask for your facebook.
So please don't fall for this language manipulation trick.
I'm not so sure if the neoclassical general equilbrium theory applies so aptly to social constructs. Interesting approach, and I guess it gets the author's point across..
I'm kinda suspicious of how it's used here, too. What exactly is the "price" that consumers pay when they use Facebook? Their time? Their generation of content?
What exactly is the product that's offered? Connections to their friends? News articles?
It seems that Facebook simultaneously acts as a supplier (of connections to people / news) and a consumer (of connections to people / news).
So, it's not really clear what the 'price' and 'quantity' axes really represent in reality.
It's quite literal about price for advertisers, and not so literal on revenue sharing for publishers. It explains what it is talking about both times, and also explains that talking about price for readers is nonsense.
Dynamics are not the same (as they were in the 80s). Although the principles of supply/demand tend to be the same, we are talking about product/service that sucks in the "naive" users that fail to see the end-game and only see the cat photos.
Addiction plays a huge role and Facebook is playing its cards very well.
If prices do rise, that's still indirectly bad for Facebook. While in the short term they are going to make more due to the price increase, other ad networks will follow the trend and increase their own pricing/ restrict supply. This would make other content on the web more profitable, and produce better content removing some of that traffic from facebook. If high price ads are better (less clickbait e.g.) then this would be a benefit for consumers.
surprised there's not more focus about network effects (a nod and link to "aggregation theory", which is more about distribution), and the fact that any social network's value, is tied to that in a big way, and therefore (at least in theory) most social products or features's value is also tied to the size of the network. so FB's argument could be that the value/benefit of its copying features/products (both to itself and users) should take into account the scale of its network. having tried to open a formatted Pages doc with MS word, I can see MS making a similar argument. Don't even get me started on excel vs. numbers (though excel and google spreadsheets is not TOO bad actually...)
One thing I've found super interesting/impressive about Snap is that it didn't try to outcompete FB in terms of sheer network size for its usage stickiness, and instead turned smaller, tighter and more private networks into a differentiator, while at the same time providing advertisers/brands with a competitively massive audience - not an easy thing to identify, much less execute on. TBD if that differentiator is enough to keep them alive vs. FB's more traditional network-effect-driven advantage, which will be hard to beat on its own terms. I think Snap's success will depend a lot on its ability to avoid being tempted to play that game (see: Twitter!).
Relatedly, I think there could be a lot more thought given to how we should think about monopolies in the context of markets where networks effects are crucial to the business value (aka. Facebook and Google most obviously, arguably Amazon, Apple), because one logical conclusion is that in a market where network effects are a major factor, the biggest network should be best positioned to provide the most value and therefore (assuming it doesn't actively eff things up on other fronts) should continue to grow until it dominates the market...which seems to pretty much be what happened, and it makes pretty good sense for the most part. in these cases, it actually seems BAD to break these networks apart, since their scale is arguably one of its primary values to the customer - this doesn't mean of course that they can't abuse their monopoly powers (I think they probably do to some degree and will continue to), but interesting to think that the traditional "break up monopolies" impulse doesn't make as much sense. this leads me to think it will just be more consumer-protection-related regulation (under the banner of consumer privacy, or maybe even public health, given all the "social media addiction" thought pieces out there these days ha).
random other thought: this all also reminds me that Mark Zuckerberg has not made a peep about wanting FB to be thought of as a "utility" in a long time (or maybe he has and I just missed it...but couldn't find any recent mentions), probably in part because they are now a lot more at risk than ever before of being regulated like one (see this talk from 2013: https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be...). Also kind of funny to hear him talk about "we don't want FB to be cool" too, because now it seems like FB very much wants to be cool again now that Snap has become cool and has threatening user counts.)
Completely disagree. Google has far more data including mapping data that FB does not have. A key aspect is FB only has curated data where Google gets all your data.
I would never share my searches on FB. Google photos has all my photos and FB what willing to share. Then YT has over 1 billion hours a day viewed which is 19x more than FB video and growing faster.
"Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT&T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers."
Um, he managed to pick the THREE OF THE MOST FAMOUS EXAMPLES OF GOVERNMENT ANTITRUST ACTIONS, while trying to argue monopolies do not harm innovation.
Doesn't the fact all three of the previously dominant monopolies faced anti-trust decisions against them, before major new competing technologies sprang up, make it clear how important anti-trust actions are for encouraging innovation?