3 ms·

For the reasons explained in http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf (yes, I'm one of the co-authors),

by btilly 6y ago

For the reasons explained in http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf http://www.dtc.umn.edu/~odlyzko/doc/metcalfe.pdf (yes, I'm one of the co-authors), I DO NOT believe that Facebook's social media "monopoly" is nearly as durable as it appears in our daily experience. And I think that they themselves are aware of that. The fact that Wall St misprices them gives them the money to buy potential competitors early. Which they have to do because they know very well that the barrier to entry to overthrow them is less than it appears to be. And indeed, the success of Tik Tok stands as a demonstration that their strategy of "buy every potential competitor for more than anyone else is willing to pay" is doomed to failure in the end.

dredmorbius 6y ago
The durability or lack thereof of monopolies is incidental to their harms and methods. The fact that one tax-shirking abusive anticompetitive monopoly replaces another with depressing regularity (IBM, Microsoft, Google, Facebook, ...) isn't a sign of progress but of pathology. And old monopolies often prove impressively durable. What's become clear to me in the decades since we first decried Microsoft's FUD, embrace-extend-extinguish, and unholy business practice methods is that every case of a monopoly I've encountered has 1) been describable as an extensive network (physical or virtual), where 2) that network structure is fundamental to its monopoly nature, with 3) a privately held central point of control. If you can describe a firm in terms of nodes and links, and it holds key control points, you're looking at a very likely monopoly: transport (people, cargo, pipelenes, ...), energy, water, utilities, communications, information, standards & protocols, APIs, marketing relationships and contracts, logistics, retail and wholesale networks, knowledge, education and certification, finance, insurance (access, underwriting, risk), social networks, reputation and ratings systems, just for starters. Understanding of these points are hugely distorted in large part through the direct and self-serving efforts of the Chicago School (Aaron Director, Milton Friedman, Robert Bork, Richard Posner, ...). It's only with recent revival in antitrust concerns, rejection of the Bork-Posner antitrust doctrine (in part by Posner himself), and work of people such as Lina Khan, Matt Stoller Tim Wu, Cry Doctorow, and Shoshana Zubboff, as well as the recognition of the intrinsic network-monopoly relationship, that this is beginning to change. That said, the Refutation is excellent.
adventured 6y ago
> The fact that Wall St misprices them gives them the money to buy potential competitors early. Facebook produced nearly $70 billion in operating income for fiscal years 2017-2019. They don't require their stock to be priced to a high multiple to buy competitors and they haven't been using that approach to competition since Instagram (2012) & WhatsApp (2014) - because they know they can't. They didn't require their stock to buy either Instagram or WhatsApp. Instagram only cost a billion dollars. As it turns out, using stock was a large mistake as it pertains to the owners of the company; the cash equivalent is ~1/10th as valuable as the shares used to buy Instagram turned out to be and Facebook will just keep piling up cash they can't spend. Facebook has been wildly profitable since fiscal 2009, when their profit margin hit 29%. They've had a giant pile of cash throughout much of their history, courtesy of considerable venture capital backing and reaching profitability 4-5 years after their founding. > And indeed, the success of Tik Tok stands as a demonstration that their strategy of "buy every potential competitor for more than anyone else is willing to pay" is doomed to failure in the end. That approach would work perfectly fine in fact, as it always does, were Facebook still allowed to buy a company like TikTok. They're not allowed to buy large competitors any longer due to government competition concerns. If they were, Pinterest would not be an independent entity at this point. They could acquire Pinterest and shut them down. Then buy Snapchat and shut them down. Then buy Twitter and shut them down. One after another, trivially. It would dramatically bolster their monopoly position. Regulators would never allow it and everyone - without exception - knows it.

by btilly 6y ago

dredmorbius 6y ago

The durability or lack thereof of monopolies is incidental to their harms and methods. The fact that one tax-shirking abusive anticompetitive monopoly replaces another with depressing regularity (IBM, Microsoft, Google, Facebook, ...) isn't a sign of progress but of pathology. And old monopolies often prove impressively durable. What's become clear to me in the decades since we first decried Microsoft's FUD, embrace-extend-extinguish, and unholy business practice methods is that every case of a monopoly I've encountered has 1) been describable as an extensive network (physical or virtual), where 2) that network structure is fundamental to its monopoly nature, with 3) a privately held central point of control. If you can describe a firm in terms of nodes and links, and it holds key control points, you're looking at a very likely monopoly: transport (people, cargo, pipelenes, ...), energy, water, utilities, communications, information, standards & protocols, APIs, marketing relationships and contracts, logistics, retail and wholesale networks, knowledge, education and certification, finance, insurance (access, underwriting, risk), social networks, reputation and ratings systems, just for starters. Understanding of these points are hugely distorted in large part through the direct and self-serving efforts of the Chicago School (Aaron Director, Milton Friedman, Robert Bork, Richard Posner, ...). It's only with recent revival in antitrust concerns, rejection of the Bork-Posner antitrust doctrine (in part by Posner himself), and work of people such as Lina Khan, Matt Stoller Tim Wu, Cry Doctorow, and Shoshana Zubboff, as well as the recognition of the intrinsic network-monopoly relationship, that this is beginning to change. That said, the Refutation is excellent.

adventured 6y ago

> The fact that Wall St misprices them gives them the money to buy potential competitors early. Facebook produced nearly $70 billion in operating income for fiscal years 2017-2019. They don't require their stock to be priced to a high multiple to buy competitors and they haven't been using that approach to competition since Instagram (2012) & WhatsApp (2014) - because they know they can't. They didn't require their stock to buy either Instagram or WhatsApp. Instagram only cost a billion dollars. As it turns out, using stock was a large mistake as it pertains to the owners of the company; the cash equivalent is ~1/10th as valuable as the shares used to buy Instagram turned out to be and Facebook will just keep piling up cash they can't spend. Facebook has been wildly profitable since fiscal 2009, when their profit margin hit 29%. They've had a giant pile of cash throughout much of their history, courtesy of considerable venture capital backing and reaching profitability 4-5 years after their founding. > And indeed, the success of Tik Tok stands as a demonstration that their strategy of "buy every potential competitor for more than anyone else is willing to pay" is doomed to failure in the end. That approach would work perfectly fine in fact, as it always does, were Facebook still allowed to buy a company like TikTok. They're not allowed to buy large competitors any longer due to government competition concerns. If they were, Pinterest would not be an independent entity at this point. They could acquire Pinterest and shut them down. Then buy Snapchat and shut them down. Then buy Twitter and shut them down. One after another, trivially. It would dramatically bolster their monopoly position. Regulators would never allow it and everyone - without exception - knows it.