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Wow, that's a hell of a preamble just to bitch about Facebook. Facebook emerged in a competitive market and was successful because it was visionary and was ext

Wow, that's a hell of a preamble just to bitch about Facebook. Facebook emerged in a competitive market and was successful because it was visionary and was extremely well executed. I think that they deserve the success that they've had, and you will have to do some more convincing to show me the 'rent' that they are extracting from me. Now if you were to ask me whether I think a closed proprietary corporate system is the ideal identity provider for the internet, I would say no. But I expect something better and more open to emerge within the next few years. The fact remains that the internet sector is fiercely competitive and open, and America's internet sector is the envy of the world, and plenty of well managed countries have been so far unable to come close to matching it. Lumping Facebook and Google in with the financial and regulated monopolies does a disservice to your argument.

rayiner 14y ago
Do you use Facebook because it's the best social network product, or do you use it because all your friends are using it? Can you imagine someone coming along and writing a better Facebook? One with stronger privacy controls, better UI, etc? Why hasn't anyone done it? Maybe it's because everyone uses Facebook? The article's point on this is sound: Facebook makes a ton of money because it operates in an industry where the network effect gives it a natural monopoly. A competitor doesn't just need to build a better product, but they have to overcome the tremendous advantage of Facebook's network. As the article points out, there is no money in competitive markets. In a competitive market, once Facebook proved the concept, it would've been flooded with clones offering the service at lower prices (less advertising). There is certainly nothing about the Facebook product itself that isn't easily copied.
- snowwrestler 14y ago
  People said the same things about MySpace and their lunch was eaten by Facebook. I use Facebook because most of my friends and family are on Facebook--true. But there was a time when I did not use Facebook, but still kept in touch with friends and family. I transitioned to Facebook because it worked better than the previous technologies I used (snail mail, phone, email, MySpace, etc.). There was nothing magically unique about that transition; it could happen again if someone makes something better than Facebook. I actually don't think Facebook is a great example of rent-seeking because Facebook makes so little rent...Zuckerberg is rich on paper because of how he played the investment market, not the rent he charges on his product. Facebook's profits are very small. Microsoft or Apple are probably better examples, but even those fail the typical definition of "rent-seeking", which is economic activity that is captured by regulatory exclusion. Neither Microsoft nor Apple achieved their position because the government mandated that everyone must use Windows or iTunes. They achieved their position by out-competing the alternatives. It's true that once they were on top, they were harder to defeat. But that does not make them rent-seekers. And historically this sort of advantage tends to be pretty temporary. History is full of dominant companies that are no longer around. I remember a time when Microsoft was the feared 800 lb gorilla that no one could beat...people don't think that anymore.
mempko 14y ago
You have it precisely backwards. It is "visionary and extremely well executed" because it got a crazy amount of investment before it became popular. Some rich people in the Valley thought it provided some social value (not to us, but to them). It became good after a ton of money was poured into it. It didn't get a ton of money because it was good....

rayiner 14y ago

Do you use Facebook because it's the best social network product, or do you use it because all your friends are using it? Can you imagine someone coming along and writing a better Facebook? One with stronger privacy controls, better UI, etc? Why hasn't anyone done it? Maybe it's because everyone uses Facebook? The article's point on this is sound: Facebook makes a ton of money because it operates in an industry where the network effect gives it a natural monopoly. A competitor doesn't just need to build a better product, but they have to overcome the tremendous advantage of Facebook's network. As the article points out, there is no money in competitive markets. In a competitive market, once Facebook proved the concept, it would've been flooded with clones offering the service at lower prices (less advertising). There is certainly nothing about the Facebook product itself that isn't easily copied.

snowwrestler 14y ago
People said the same things about MySpace and their lunch was eaten by Facebook. I use Facebook because most of my friends and family are on Facebook--true. But there was a time when I did not use Facebook, but still kept in touch with friends and family. I transitioned to Facebook because it worked better than the previous technologies I used (snail mail, phone, email, MySpace, etc.). There was nothing magically unique about that transition; it could happen again if someone makes something better than Facebook. I actually don't think Facebook is a great example of rent-seeking because Facebook makes so little rent...Zuckerberg is rich on paper because of how he played the investment market, not the rent he charges on his product. Facebook's profits are very small. Microsoft or Apple are probably better examples, but even those fail the typical definition of "rent-seeking", which is economic activity that is captured by regulatory exclusion. Neither Microsoft nor Apple achieved their position because the government mandated that everyone must use Windows or iTunes. They achieved their position by out-competing the alternatives. It's true that once they were on top, they were harder to defeat. But that does not make them rent-seekers. And historically this sort of advantage tends to be pretty temporary. History is full of dominant companies that are no longer around. I remember a time when Microsoft was the feared 800 lb gorilla that no one could beat...people don't think that anymore.

mempko 14y ago

You have it precisely backwards. It is "visionary and extremely well executed" because it got a crazy amount of investment before it became popular. Some rich people in the Valley thought it provided some social value (not to us, but to them). It became good after a ton of money was poured into it. It didn't get a ton of money because it was good....