R U serious bout your me2 service? (Cont’d)

google-plus-logoThe Economist (Jan 20, 2018, Silicon Valley, we have a problem) has the beginning of an answer to my question.

It suggests that tech firms “keep alive businesses that they might otherwise scale back” – as Google has done with its social offering Google+ – as a “way to look less monopolistic“.

It’s a way for a tech giant to show that others are under attack, and that no rival is too well resourced and entrenched to take on.

For now, I’ll call that the “mirror effect“.

The argument does not go as far as to explain why firms introduce me2 services though.

On Deaton’s Antitrust Push

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This pro-market interview of Nobel prize winner Angus Deaton has been quite misread on Twitter.

At some point, Deaton suggests to make antitrust great again (he talks of “serious rethinking about antitrust“).

As could be anticipated, his word received substantial Twitter exposure — I actually found out about it there  (@CompetitionProf) – including by backers of a stronger EU antitrust against tech platforms.

So I checked, and read the interview.

Deaton’s point is that rent-seeking plagues the US economy, UNLIKE the European economy… The revolving door btw Gov and the private sector arguably turns slower in Europe.

There’s not a word on bigtech in the ITW.

According to Deaton, the culprit is the US health care sector (which benefits from an “exquisitely designed rent seeking mechanism“) and possibly finance.

Antitrust is for the short term

Short-Term

I strongly adhere to the Chicago School idea that markets tend to self-correct… with a significant qualification.

Self-correction often takes a lot of time.

Competitive disruption, innovation or entry is not instant.

Hence, we cannot simply trust that the market will fix it.

Some policy implications:

  1. Antitrust intervention should as a rule focus on remedying short term deviations from consumer welfare, not long term ones;
  2. Antitrust decision-making should be agile, and not too participatory or politicized as a rule;
  3. Antitrust proceedings should be fast. Abridged procedural rules – including deadlines – are necessary;
  4. Antitrust remedies should be predominantly behavioral, because structural remedies yield long term consequences which affect the trajectory and pace of market self-correction.

R U serious bout your me2 service?

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Is the question I would like to ask to Microsoft.

Why did they launch an attack against Google in its search moat? This is highly unusual. In tech, firms seldom attack each other in their core markets. When they do, they cream skim the most interesting segments (eg LinkedIn in professional).

Did they really believe they could leverage their cash to build a competitive search engine? One that could disrupt Google?

And why do they keep funding Bing to date? True, the share of Bing generated searches (and money per search) has increasedBut the chances of toppling the Internet search leader are as low as ever. And the wisdom in tech is to shut down unpromising projects (eg Google glasses and soon the Apple watch).

From many angles, Bing is a puzzle. Does Microsoft stick to its guns to keep iron in the fire in case Google search is dismantled by regulators?

Did Microsoft launch Bing for fear of missing yet again an important industry development like they did with mobile?

Changing the Conversation

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As I read on big tech and monopolies, it becomes crystal clear that the strategy of the Open Markets Institute  is about changing the conversation on monopolies.

The point is not to discuss monopoly as an economic problem, but as a political one.

This shift comes with profound consequences on the story telling. For indeed, we move from one world to another.

Evidence gives way to rhetorical mastery.

Reason is superseded by emotion.

Logic loses ground to graphics. Proof in the Lovecraftesque carton above.

In the Master Switch, Tim Wu had aptly captured the essence of this: “Antitrust, perhaps all law, is ultimately pliable by perceptions of right and wrong, good and evil“.

A Curse of Free in Tech?

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Is “free” the “future of business” as Chris Anderson said, or simply its curse?

Here’s my conjecture: users disrespect free, and this fuels demand for regulation.

Here’s the explainer: users of free tend to take supply as something due to them. Lawyers would say that users behave as if they owned a “natural” god-given right to supply. Economists would write that users view supply as a  putative “public good”. The upshot of this is that any reduction in quality is seen as theft. And that user intolerance is infinite: no bad deed in supply goes unpunished. Over its life, a free business is thus doomed to develop a bad rap with users. Because officials go with the flow, free business models end up in the cross-hair of regulation.

This could potentially explain all the regulatory issues faced by Google and Facebook (or RyanAir in the non tech world). And the lesser regulatory exposure – with limited exceptions – faced by Apple, in spite of several scandals over planned obsolescence.

Views, sources?

PS: one could make the additional point that free carries the illusion that production involves little cost, effort or inventiveness.

Why this blog?

I am an academic on a sabbatical until September. My plan is to write a book on tech giants, competition and innovation.

I feel a need to share my ideas and falsify them as they come. And I want to openly discuss those of others.

I will also post on digital, tech, AI, markets and public policy.

This blog is my notepad.

I change minds. Nothing here is definitive. All is draft, incomplete, work in progress.

I just want this blog to sway to the symphony of disruption.