Comment by torginus
8 hours ago
I think the main issue is lack of competition. If company A makes a 10% worse car that costs 10% more than company B, they very quickly go out of business.
There is no 'Reddit 2' substitute product (or indeed for lots of software), and network effects tend to dominate, so your benchmark is 'is it bad enough so people would rather use nothing than your product', which is a very low bar to clear.
Spot on. And it's worse than that: you're not choosing between a 10% slower product and a faster alternative, you're choosing between a slow product and losing access to everyone still using it. That's not a market choice, it's a hostage situation.
We can see this works in reverse: developer tools, CLIs, and local apps where network effects don't apply (ripgrep over grep, esbuild over webpack) performance actually matters and gets rewarded. Developers switch because they can switch without losing anything. But Instagram users can't switch to a lighter alternative without abandoning their social graph.
This is why the "developer time is expensive, user hardware is cheap" argument only works in the absence of competition. In genuinely competitive markets, efficient code becomes a competitive advantage worth investing in. The fact that it's "not worth optimising" is itself evidence of market power, not sound economics.
Your automotive analogy actually understates it: imagine if switching to a better car meant your old car's passengers couldn't ride with you anymore, and that's closer to what we're dealing with.
Network effect is basically the same thing as urban agglomeration in real life. The value of a city is from all the people aggregating together to provide goods and services and people are worrying about the housing crisis.
So what is the correct solution to all of this? I would be tempted to reach for a land value tax except this doesn't really apply to cyberspace. The only "land" is built by the platform themselves, but at the same time the platform isn't solely responsible for all the value generated on the platform. So, maybe we should tax network effects.