More on Chrome and AMP, The Case Against Google, Decentralization and Paradigm Shifts

Good morning,

Yesterday’s weekly article was super late, but not because I was moving house. In fact, yesterday was the first day that the kids were back in school, so it was the easiest working day I’ve had in weeks! My hangup was much more straightforward: I was stuck in the aggregator paradox I ultimately wrote about.

More on Chrome and AMP

Start with Chrome ad-blocking: the sort of ads being blocked are so transparently user hostile that it’s hard not to applaud, and yet the very idea of the leading digital advertiser deciding what ads are acceptable and which aren’t (Google is enforcing “guidelines” it had a heavy hand in crafting) is so transparently problematic that it is equally difficult to not be appalled.

AMP is a bit more complicated: there are plenty of legitimate reasons to complain about AMP, including the security risk of changing URLs and other user interface problems. Even more important is that the idea of a private company creating its own version of the web is not as much the creation of a walled-garden as it is the gentrification of a diverse ecosystem into pure suburbia. And, of course, it is being done by leveraging Google’s search monopoly.

And even then, the incentives on the web are so misaligned that abusive web pages and destructive advertisements are basically inevitable: there is real consumer welfare that comes from forcing publishers to clean up their act.

That noted, if Google were truly motivated by only consumer welfare, it could, for example, promote all web pages that are fast and mobile friendly, not just AMP pages (with the caveat that implementing such promotion would be significantly more difficult); that the company chose the option that is both easier to implement and better for its interests is not a surprise — nor does it mean it is actively bad for end users in the short-term.

For the record, while being initially supportive of the idea, I am against AMP in practice, and particularly object to the leverage of search. I’m not sure there is a legal case to be made but there is a moral one in terms of openness and the web. Chrome ad-blocking, meanwhile, is probably bad as well, but it is certainly closer. That it is hard to decide was, ultimately, the best point I could make.

The Case Against Google

Meanwhile, Charles Duhigg wrote a long piece for The New York Times Magazine entitled The Case Against Google. It is worth a read, and Duhigg acknowledges the consumer benefits that Google provides (although the Standard Oil comparison fails to note that a major contributor to low kerosene prices were Standard Oil’s railway contracts, which were the core of the government’s antitrust case):

“To what extent are consumers, rather than competitors, being harmed by Google?” says Hovenkamp, the antitrust scholar. “If the answer is ‘not much,’ then I’m suspicious of an antitrust remedy.” Others say the risks are too high. “There are very real costs associated with suing a company like Google,” says Geoffrey Manne, executive director of the International Center for Law & Economics, a nonpartisan research center. “You’re potentially impairing a firm that provides vital services to millions of people, and potentially benefiting competitors who don’t deserve that support.”

Duhigg goes on to argue that short-term consumer welfare is “beside the point”:

Antitrust has never been just about costs and benefits or fairness. It’s never been about whether we love the monopolist. People loved Standard Oil a century ago, and Microsoft in the 1990s, just as they love Google today.

Rather, antitrust has always been about progress. Antitrust prosecutions are part of how technology grows. Antitrust laws ultimately aren’t about justice, as if success were something to be condemned; instead, they are a tool that society uses to help start-ups build on a monopolist’s breakthroughs without, in the process, being crushed by the monopolist. And then, if those start-ups prosper and make discoveries of their own, they eventually become monopolies themselves, and the cycle starts anew. If Microsoft had crushed Google two decades ago, no one would have noticed. Today we would happily be using Bing, unaware that a better alternative once existed. Instead, we’re lucky a quixotic antitrust lawsuit helped to stop that from happening. We’re lucky that antitrust lawyers unintentionally guaranteed that Google would thrive.

Duhigg’s argument is rooted in an argument made to him by Gary Reback, who spearheaded the Microsoft antitrust lawsuit:

Reback had told Adam and Shivaun that it was important for them to keep up their fight, no matter the setbacks, and as evidence he pointed to the Microsoft trial. Anyone who said that the 1990s prosecution of Microsoft didn’t accomplish anything — that it was companies like Google, rather than government lawyers, that humbled Microsoft — didn’t know what they were talking about, Reback said. In fact, he argued, the opposite was true: The antitrust attacks on Microsoft made all the difference. Condemning Microsoft as a monopoly is why Google exists today, he said.

Surprisingly, some people who worked at Microsoft in the 1990s and early 2000s agree with him. In the days when federal prosecutors were attacking Microsoft day and night, the company might have publicly brushed off the salvos, insiders say. But within the workplace, the attitude was totally different. As the government sued, Microsoft executives became so anxious and gun-shy that they essentially undermined their own monopoly out of terror they might be pilloried again. It wasn’t the consent decrees or court decisions that made the difference, according to multiple current and former Microsoft employees. It was “the constant scrutiny and being in the newspaper all the time,” said Gene Burrus, a former Microsoft lawyer. “People started second-guessing themselves. No one wanted to test the regulators anymore.”

There are two problems here: first, considering that the Microsoft antitrust lawsuit is perhaps the single biggest part of Reback’s legacy, of course he believes it was worth it! That should be obvious. What is perhaps less obvious — but almost certainly more true, at least in my experience from working there — is that Microsoft employees are even more motivated to say that the antitrust lawsuit was effective. After all, that means the company and its employees can blame the government for their having “missed” both search and mobile, instead of themselves.

That noted, I get the argument: Duhigg notes that a failed antitrust lawsuit led IBM to open up its hardware to 3rd party software, creating the industry that would ultimately do IBM in. Similarly, Microsoft could have redirected Internet Explorer users to MSN Search but for the supposedly failed lawsuit.

Then again, one could just as easily argue that opening up to 3rd-party software entrenched IBM for another decade; ultimately, the company was done in not by software competitors but rather by a business model and corporate culture that valued hardware over software, leading to the decision to outsource the PC’s operating system to Microsoft.

Similarly, Duhigg ignores that Microsoft faced the exact same obstacles in search: the company’s business model was about building compatibility walls around its ecosystem and charging for access; Google’s success, from the business model to the technical insight undergirding PageRank, was predicated on tearing them down. There is no way that Microsoft could have out-competed Google for business and cultural reasons, and dominant though Internet Explorer may have been, the paradigm shift of the web and Google’s vastly superior ability to make sense of it all would have overcome any obstacles Windows may have put in its way (defaults matter, but they can be overcome).

Mobile is the same story: there Microsoft’s failure had nothing to do with antitrust, but rather the inability to break out of its licensing business model and the presumption that the PC would always be a user’s most important device. This is the pattern seen with successful companies again and again: they are done in by paradigm shifts, when the same assumptions that made them successful previously doom them going forward.

In short, to believe that Microsoft would have dominated search absent antitrust is to believe that the company was capable of defying everything we know about how businesses rise and fall. Clearly that wasn’t the case in mobile, and I don’t believe it was the case for search. That, though, is Duhigg’s case.

Decentralization and Paradigm Shifts

There was a line in Tulips, Myths, and Cryptocurrencies that I really should have fleshed out into its own article:

This is a huge deal, and probably the most viable way out from the antitrust trap created by Aggregation Theory.

This was the creation of decentralized crypto-networks; Chris Dixon did the fleshing out in an article entitled Why Decentralization Matters:

The Internet is still early in its evolution: the core internet services will likely be almost entirely rearchitected in the coming decades. This will be enabled by crypto-economic networks, a generalization of the ideas first introduced in Bitcoin and further developed in Ethereum. Cryptonetworks combine the best features of the first two Internet eras: community-governed, decentralized networks with capabilities that will eventually exceed those of the most advanced centralized services.

I am often asked why we don’t hear much about cryptonetwork work from Google or Facebook, and the answer is obvious: their entire business model is predicated on centralization, which means both are heavily incentivized to ignore crypto-networks — and to the extent either seeks to contribute, communities should be wary that the intent is to “embrace, extend, and extinguish.” In other words, cryptonetworks are the search and mobile to Google and Facebook’s Windows: the latter are driven by fundamentally incompatible assumptions, meaning their only strategy is to ignore or obstruct.

That, though, is a reminder of just how far cryptonetworks will need to go: gaining users and overcoming obstruction will require being fundamentally better. Dixon acknowledges it will be a long road:

Centralized platforms often come bundled at launch with compelling apps: Facebook had its core socializing features and the iPhone had a number of key apps. Decentralized platforms, by contrast, often launch half-baked and without clear use cases. As a result, they need to go through two phases of product-market fit: 1) product-market fit between the platform and the developers/entrepreneurs who will finish the platform and build out the ecosystem, and 2) product-market fit between the platform/ecosystem and end users. This two-stage process is what causes many people — including sophisticated technologists — to consistently underestimate the potential of decentralized platforms.

Another way to phrase Dixon’s point is that while a paradigm shift has happened in terms of the fundamental technology of cryptonetworks — that is, the shift to decentralization — what is missing is the paradigm shift in terms of the user experience (akin to search or mobile relative to Windows). I’m reminded of a March 2005 piece by Paul Graham entitled Return of the Mac:

All the best hackers I know are gradually switching to Macs…The reason, of course, is OS X. Powerbooks are beautifully designed and run FreeBSD. What more do you need to know?…

So what, the business world may say. Who cares if hackers like Apple again? How big is the hacker market, after all? Quite small, but important out of proportion to its size. When it comes to computers, what hackers are doing now, everyone will be doing in ten years. Almost all technology, from Unix to bitmapped displays to the Web, became popular first within CS departments and research labs, and gradually spread to the rest of the world…If you want to know what ordinary people will be doing with computers in ten years, just walk around the CS department at a good university. Whatever they’re doing, you’ll be doing.

In the matter of “platforms” this tendency is even more pronounced, because novel software originates with great hackers, and they tend to write it first for whatever computer they personally use…If you want to attract hackers to write software that will sell your hardware, you have to make it something that they themselves use. It’s not enough to make it “open.” It has to be open and good. And open and good is what Macs are again, finally.

Graham ends with an exhortation that his father buy AAPL stock, which was absolutely brilliant advice, but not because of the Mac:

What made Graham’s father rich, presuming he followed his son’s advice, was the iPhone. It was OS X, to be sure, but it was presented in a completely new paradigm. So it will be with aggregators — today’s Microsoft Windows. Yes, the hackers may have moved on to decentralized networks, but the power of controlling demand — and the sophisticated way that Google, in particular, does so — means that when cryptonetworks have their moment (beyond speculation), it will likely be in an application that is completely new, not an imitation with an inherently worse user experience.

Also, I shouldn’t be so quick to dismiss speculation: yes, right now it is driving abuses, but the fact there is money to be made in cryptonetworks is critical. After all, as I noted yesterday, along with all of their other moats, Google and Facebook are free. It’s not like a competitor can be cheaper…except, if it is making you money, it effectively is.

Anyhow, the road will certainly be long: presuming last year was the “peak of inflated expectations” we should be prepared for the “trough of disillusionment”:

Let’s just agree now that we aren’t going to credit antitrust authorities with making the cryptonetworks of the future viable.


The Daily Update is intended for a single recipient, but occasional forwarding is totally fine! If you would like to order multiple subscriptions for your team with a group discount (minimum 5), please contact me directly.

Thanks for being a supporter, and have a great day!