Big Tech is Like Standard Oil

Venture-funded platform competition is a tontine. In European finance from the seventeenth through the nineteenth centuries, a tontine was a pooled investment in which, as each subscriber died, the remaining subscribers’ shares increased, with the last survivor inheriting the entire fund. Most governments eventually banned tontines because they created obvious incentives to hasten the death of other participants. In platform competition, the explicit goal from the first investment round is to be the one platform that achieves dominance while all competitors fail. Operating below cost to build market share, sometimes for years, makes financial sense if it eliminates alternatives and enables the extraction of monopoly rents afterward. Investors who hold positions in multiple competing platforms profit regardless of which one wins; the workers, users, and communities that depended on those platforms do not. The life cycle of a dominant firm in a network industry follows a pattern: enter…