 Good morning, everybody. This is going to be a fun and interesting talk, at least for me, on the tech sector. I'm mostly going to talk about the economic analysis of, where's my, oh yeah, sorry. I'm mostly going to talk about the economics of technology and technology markets and the so-called big tech firms in particular. I'll talk a little bit about the sort of political and social issues because they're so salient, so much in the news these days, especially in our circles. But you can't pick up the virtual newspaper these days without finding a ton of headlines about different aspects of what's going on with big tech. I didn't check how many hits you get if you just search big tech in quotes, but it's a very large number. I pulled up some headlines. These are all, except for the first one, these are all from the last two or three days. Whether it's a general concern that big tech firms are sort of the robber barons of today, you often see these comparisons with Carnegie and Rockefeller and the railroad operators and so forth. And the same arguments that we heard 100 years ago about the alleged monopolization problem associated with big industry, manufacturing, whatever. We hear those same arguments now in the context of big tech. Whether it's antitrust or regulation, regulatory policy, or whether it's social and cultural issues or politics, did is or public health, did Facebook swing the election for Trump in 2016 and are various issues about de-platforming and so forth, swaying things in a different direction today. Biden the other day in one of his increasingly frequent off-script moments said that Facebook is literally killing millions of people by spreading so-called misinformation about vaccines. So from the political left, from the political right, from the political center, and even from the libertarian community, there's a lot of interest, most of it negative, a lot of criticism of big tech. So what is it everybody is so angry and upset about? It could be that these firms are monopolists, so-called, and are exploiting their monopoly power. Of course, we talked about that yesterday. There are also claims that having so many large firms where each industry or sector is dominated by one or two large firms is somehow holding back innovation. Now you might think that's odd because aren't these firms very innovative themselves, but the claim is, and this is a claim, by the way, that goes back 20 years at least in discussions of Microsoft, is that once a firm gets big and it begins to dominate its sector, it can then sort of kill off threatening innovations from newer smaller firms. By buying them off, there's a literature on so-called killer acquisitions, which means when a big firm acquires a smaller potential rival in order to get rid of its technology to prevent that new technology from coming on to the market. Lots of concerns about privacy and whether our privacy is being adequately protected, whether it's an abuse of our rights to sell our digital information to advertisers and so forth. Of course, now we're seeing increasing discussions of, I should put it in scare quotes, so-called misinformation, right? That big tech companies, social media platforms in particular are allowing the unchecked spread of lies. I mean, that's something that never happened before technology, right? If you read the New York Times or watched CNN in the old days, there was no danger whatsoever that incorrect information would get out, but now apparently that's a big deal. And of course, now we hear that, you know, big tech threatens the very foundations of democracy itself. It's really not obvious what people, when they make these kind of claims, what they define as democracy, democracy has become what I call it sort of a floating signifier that just means good stuff. Or stuff that I think is good is democracy. And so I'm in favor of democracy, but big tech by allowing misinformation and so forth and helping the instigators of the so-called insurrection of January 6th organize themselves in their attempt to overthrow the US government that social media platforms and technology in general is enabling these very serious social and political ills. So it seems like everybody is really mad and frustrated and angry about something that somebody in big tech is doing. Yet at the same time, we love our stuff, right? We love our gadgets. We love our platforms. And I mean seriously, especially for the older folks in the room, I mean, do you remember what life was like before internet search, right? When you literally could not, oh, you know, I need to go to a pharmacy. Where's the nearest pharmacy in Auburn and what time do they close? Imagine a world in which that information is almost impossible to get. Or you've got to run to a pay phone, a phone booth and hope it has a phone book and you can thumb through the phone book and try to find a pharmacist. And then you make several calls, maybe you'll get through, maybe you won't. We have all these things in the Institute called books. And there's a big building even in the center of Auburn's campus that's filled with thousands of these books called a library. And it used to be that, not only did you have to go to the library to get information, but to find the books that had the information you needed, you had to use this, what they called the card catalog. And there was this big sort of filing system with these little tiny index cards arranged by subject. And you'd thumb through these index cards. I joked when I was a PhD student, I got an injury and for a while I had a brace on my hand because I was looking up information, some statistics from my dissertation that were in these old, these books, these reference manuals. And the books were really big and heavy and they were on a high shelf. And so I had to keep grabbing these volumes off the shelf and writing stuff down and then putting them back and getting the next volume. So of course I got some kind of repetitive stress injury and had to wear a brace. Now, how do you explain to the ladies at the bar? Yes, I've got a library injury, right? I mean, I had to make up a story about skiing in the Alps or whatever. But imagine no Google, no iPhone, no social media, no Amazon, no Microsoft, et cetera. I mean, we like those things. Somehow we have in our mind an imaginary world in which we get all the benefits we associated with technological innovation, but without these sort of social harms or political harms, whatever they would be. And I think that's a challenge and a puzzle for us. Now, the first thing to realize as we start to think through these issues is that there is a tremendous amount of heterogeneity within what we call big tech, right? So you hear, well, companies like Google, they're harming us, they're abusing us by tracking us and selling our information to advertisers. Even though if we think about it, we get a lot of cool stuff that they provide for free. We don't pay for anything that almost, unless you have some kind of premium version, you don't pay for all the great stuff you get on Google like Google search, but somehow they're screwing us over anyway by selling our information. Apple's totally different, right? I mean, Apple's business model is that you buy things, right? You buy iPhones and iMacs and other products that are priced at a premium, right? So companies like Google, they give you the stuff for free, but they make money by selling information about you to third parties. Apple makes money by producing high-end gadgets and software that people like to buy. Facebook is a little bit more like Google, right? You don't pay to use Facebook, but it makes money from selling ads. I mean, Amazon is kind of like a Walmart, right? I mean, it sells products and services and delivers them to you at a discount, right? You typically pay less than what you would pay at a mom and pop or a traditional retailer. Although as you may know, Amazon actually makes most of its money not from selling merchandise, but from its cloud hosting service, Amazon Web Services is where Amazon makes most of its money. And of course, Microsoft, I mean, back in the day, Microsoft was the big tech firm that everybody was worried about. Now Microsoft is barely mentioned in sort of antitrust and similar conversations, but Microsoft makes money by selling Microsoft windows and office and some hardware products and so forth. So my point is the business models that so-called big tech firms use are very different from each other. So there's no such thing as a big tech firm or a big tech business model that we can analyze as sort of representative of the whole class. There's lots and lots of different things that are going on within this category. Really what big tech means is a technology-based firm that is very big in sales volume or market share or market capitalization. But of course, there are many, many different types of firms within that category. You might include, you know, what about Tesla? Is Tesla big tech? I mean, it kind of is. It's obviously a technology-oriented product and depending on how you measure, right? Tesla has a very large share of the electric car market, the electric battery market, you know, but it's not a software company, right? So it's different from these other firms in that sense. Okay, I wanna sort of walk you through a series of issues related to the analysis of big tech and give you some Austrian insight into those issues. Some of the language that you hear, some of the key terms and concepts in these conversations, most of which I'll discuss in just a moment, are the idea of, you know, markets for information or rather markets for information goods. So how do we analyze a firm that sells you not cups of coffee or physical gadgets but sells you information? How do markets for information or information goods work? What are network effects, right? Network effects, that's the idea that the value of having some product or service depends not only, you know, the use value at Manger's terms, depends on the number of people who are also using it. The value of being in the network depends on the size of the network. That has some interesting implications for how market structure plays itself out. There, you've probably heard about so-called first mover advantages. In some technology markets, it helps to be the first into that industry. You can take advantage of these network effects and get, you know, and become very large before other firms jump in. That often leads to winner take all or winner take most markets where allegedly it's not feasible to have 20 different firms in the industry. The industry will converge on just one or maybe two and that might be a concern. You hear a lot about platforms and ecosystems, meaning that firms like Facebook, right? Firms are kind of, many of these tech firms, they provide a sort of a platform where other content providers can participate, right? So Google doesn't write news stories, but sorry, Facebook doesn't write news articles. It doesn't have reporters and, you know, editors and journalists on the pay, well, probably does on the payroll, but not officially working for Facebook. But a lot of people get their news from Facebook because, you know, the local newspaper or the New York Times or your friend posts articles that were developed by third parties, written by third parties on the platform. So platforms are means of sharing information and products that are produced by other parties, okay? You even hear the language of ecosystem, right? That's a term from biology, right? Referring to different complementary aspects, you know, in the forest or the swamp or whatever. Well, technology products and services are also often clustered in ecosystems as well. iOS is, you know, Apple has an ecosystem. Apple Hardware, iOS, the Apple App Store, third party developers that write apps and other software for Apple, that's all part of one ecosystem. And so maybe competition is not between firms, in many cases, but between ecosystems, right? In mobile you have the iOS ecosystem and the Android ecosystem, each of which contains hardware manufacturers and software manufacturers and so forth. You also hear a lot about so-called two-sided markets where the focal firm is dealing with downstream buyers and upstream suppliers that may have some interesting applications as well. And you've heard of terms like freemium as a business model, you know, where you give away the basic product for free but then you hope to get people hooked so that they'll wanna buy the premium product, you know, without ads or with extra features and then you make money, you give away your basic product for free but you make money selling the deluxe version of your product. Okay, let me talk about a few of these in more detail. Let's start with the notion of information goods. This is something that actually came up, I think, in the panel on Monday night, that it's very important to realize that, you know, from, if you think about Carl Manger's concept of an economic good, right, what is an economic good? There was one gentleman, I don't see you who asked a very interesting question in one of the panels about, you know, the marginal utility of truth or beauty or virtue, right? So from Manger's point of view, those are not economic goods because you can't buy and sell a unit of truth or buy and sell a unit of beauty. Right now you could buy a photo of me and you could say that's like buying a unit of beauty, right? But literally what you're buying is the photo, not some abstract thing. So, you know, Manger's concept of the good and then the notion of the marginal utility of that good and diminishing marginal utility and the production process by which entrepreneurs convert inputs into outputs, all of the stuff we've been talking about this week, it only applies to things that can be parceled out into discrete units and bought and sold, right? So information is not literally an economic good. Information per se is not an economic good. A book is a good, an economic good. Why do you buy a book? Well, I mean, you might buy it as a doorstopper, you might buy it as a paperweight, you might buy it as a weapon, you know, if you get like George Reisman's capitalism, you could really stop an intruder with a copy of that. But the main reason we buy books is because we want the information that is contained in the book. We wanna read it and we want to learn. So yeah, I mean, ultimately you're buying a book to get the knowledge or get the information, but you're not literally buying knowledge, you're buying a book, right? You can buy a video, you can hire a consultant, you can pay to go to college and get a college degree. Again, you know, if your grandmother asks you, you know, the abstract, why are you going to college? Why are you majoring in economics? Oh, and you know, you have some answer about all this wonderful knowledge that you'll get. I mean, that's true at one level, but the literal transaction is you or maybe your parents are paying the university in exchange for the right to come in to the campus and sit in the classroom and take exams and get grades and get a diploma, right? You're buying the experience of being in the classroom. So we don't literally buy and sell information, we buy and sell information goods and these information goods are just like other economic goods in that they, you know, they are evaluated on the margin based on their subjective value to the buyer, right? There's a downward sloping demand curve for information goods and so forth. The reason I point this out is because you often see in this literature, you know, the claim that, well, these kind of markets are totally different from other markets. Yeah, the market for shampoo, entrepreneurs are combining physical factors to produce shampoo and they're selling it to consumers on the market and the prices are determined by supply and demand, et cetera, et cetera. But you know, for a social media platform is totally different. It's not totally different, right? There are some peculiarities associated with the nature of that economic good or service, but it's the same thing. I mean, you're, you know, for some information services, you pay a subscription fee for the right to access the data or the right to, you know, think about Netflix, another big tech firm we could have used in our example, right? You pay a monthly subscription fee for the right to stream certain content. I mean, that's not really that different from buying toothpaste, right? You evaluate the benefit that you get from having the subscription against the monthly subscription fee. You decide whether to buy or not. If they increase the subscription price on the margin, the number of subscribers will fall, other things equal because the demand curve for Netflix subscriptions, just like the demand curve for toothpaste is downward sloping and so forth. And again, you know, we've been selling books, printed books since Gutenberg and scrolls of papyrus, you know, since time immemorial. A map is an information good, a paper map, you know, lectures. You think, well, Google search is totally different because what you're buying is like a search result. But again, we had pre-internet means of searching. They were just much more cumbersome like the library card catalog or, you know, telephone directory. You guys know what a phone book is, right? I mean, you can look through and find an address or a name, and you know, you could buy a phone book. I mean, the phone companies used to give them away, but in principle, you could buy and sell phone books and it wouldn't really be that different. Now, what's interesting, one of the things that's interesting about information goods is that they often involve a high upfront investment. So it costs a lot to make the thing in the first place, but then it doesn't cost very much to produce additional copies, right? Again, this is not an internet-specific phenomenon. Think about a book. I can tell you, as someone who has written multiple books, it has a lot of work to write the book, but then once the book is written, you know, I'm not even, you know, the publisher does it, to print one more copy is not that big of a deal, okay? So that may have some implication for the pricing strategy, right? I may choose to charge a sort of, choose to charge a different price. I might do one of these, you know, sort of two-part pricing where I, like I said, I give away the free version, but I charge for the premium version, or I put a preview on my website. You can download and read chapter one for free, and that'll get you so excited you'll wanna buy the other chapters and pay me money. It may be easier in these markets to charge different prices to different buyers, you know, so-called price discrimination, right? Price discrimination is difficult to pull off, you know, in the market for toothpaste at the grocery store, or at Walmart, because the Walmart doesn't know you when you walk into the store. They don't know what's the most you'd be willing to pay, right, but in principle, if I go on Amazon and I'm using my regular browser and I have loud cookies and I'm not using, you know, whatever kind of dark web browser most of you probably use. They know what I've already bought, and you know, maybe I actually get a different price than, you know, Jeff Dice gets when he goes onto the same website. So it may be easier for sellers to target prices and advertisement and so forth to specific users based on the information that they have, and to preview my next point, you often get increasing returns, meaning that there are advantages to being, you know, if Judge Napolitano, you know, he's already written his great book on natural law and so in one sense, that's a sunk cost for him, right? He's not gonna get those hours back. So let's say I wanna write a book on natural law, but he's already written one, so he can produce marginal copies and sell them for a dollar a piece. And it's like, well, I would have to sell a certain number of copies to justify the time it would take me to write one since I haven't already written one. So it's hard for me to compete head to head with him because he's already got the book, right? So there's an advantage to being the incumbent in a case like that and a potential drawback to being a new entrant. Again, other things equal and other things aren't always equal. Obviously, my book on natural law would be way better, right, just because I'm me. The presence of network effects, they used to call it network externalities, but a better term is network effects because they're not necessarily externalities. You might have heard of this in the context of the QWERTY typewriter keyboard. So I've never looked at the keyboard on your laptop or whatever and even on your phone. It's got this weird English language keyboards, have this weird layout, Q-W-E-R-T-U-Y. And in some other countries, you have slightly different arrangements, but it's like, why? I mean, why isn't it just A-B-C-D-E? And you may have studied this in a class or had one of your professors talk about it. There's a lot of different stories about why the QWERTY keyboard came to be the dominant one and there's some controversy about differences of interpretation. But the point is, once the QWERTY layout became established as the most common layout, it's very difficult to replace that with some other layout. Right, I mean, you could easily reprogram your laptop to use a non-QWERTY layout and some people do. There's something called Dvorak, which it's cult-like adherence claim is much better than QWERTY, but it's really not. But the point is, if you learn to type in school or you use some kind of software to learn how to type, once you know how to type using the QWERTY keyboard, you can borrow your friend's computer and type. You can use the computer in the library over here. You can buy a new computer. If everybody's using the same layout, then it's easy for you to move from one machine to another. If you only know how to type on some idiosyncratic layout, then you can't use the computer here at the Mises Institute. You can't borrow your friend's computer because it would have a different layout. So even if there were a tiny efficiency advantage in using some other keyboard layout, that would probably be outweighed by the nuisance of having to reprogram every device to conform. So once that particular layout gets established, it's very hard to dislodge it, to put it in the language of network effects. The value of using QWERTY, of knowing how to type on QWERTY, depends on how many other people in the world also use QWERTY. But I mean, if the whole world switched overnight to Dvorak, well, that'd be fine too. I mean, we'd have to retrain ourselves. But as long as the whole world's using the same standard, it doesn't really matter which one it is. So then, according to some of the critics of these markets, skeptics about the efficiency of these markets, they say, oh, well, small historical accidents can lead us to choose something that's really not that great. But then we're kind of stuck with it. So-called path dependence, right? Another famous example of this is the video cassette recorder, one of the old VHS tapes your parents, your grandparents had. When that technology was introduced, there were multiple competing formats. There was a smaller kind of a cassette called a Betamax cassette made by Sony that was allegedly much better from an engineering point of view. But yet the market sort of settled on VHS. And where that was the days, when you would rent videos at Blockbuster, you've seen that in old black and white movies, right? So you gotta have the same kind of machine that the tapes are made for, right? But the movie companies are only gonna make the tapes for the kind of machine that everybody has. It's kind of a chicken and egg. So it doesn't make sense to have multiple cassette sizes in the market because then it wouldn't be possible to use other people's cassettes and so forth. It's kind of like typing on another QWERTY keyboard. AC power over DC power is another example. The use of internal combustion engines, what we have in our cars, versus steam engines or electric engines that were available 100 years ago is allegedly another example of the market kind of arbitrarily choosing the wrong technology but then us being stuck with it because of network effects. And of course, social media is like that too, right? I mean, you don't wanna, I mean, so have you guys tried any of these new, people who are mad about being de-platformed? They have alternative platforms like GAB and Parler and I guess Telegram is sort of a platform too and there's the newest one is called, starts with a G. What is it, Gitter or Gittler or something like that? Is this sort of a Trump supporter type social media platform? Problem with these platforms is, there's no point in you being on it unless a bunch of your friends are on it or celebrities that you follow or whatever. So it's hard for new platforms to break in once another platform has been established. So is this bad? Does the presence of network effects, is that a source of market failure? Does it mean we need the government to step in and fix the problem somehow or have the government choose the optimal technology from day one to make sure we don't get stuck in some kind of a bad equilibrium? I think you can guess the answer to that, right? First of all, I mean, when a new technology is introduced we don't always know what is gonna turn out to be the best one. And so you have competition among different standards, different platforms, different technologies and typically one or more will win out in the competitive process. I mean, entrepreneurs don't know and certainly government bureaucrats don't know when a new technology is introduced which one is gonna be the best. And so we don't want bureaucrats forcing everybody to converge on one technology before we get a chance to sort of play this out in the market. And the political process itself is characterized by a lot more path dependence and inefficient decision making than anything that we would expect in technology markets. But it's also interesting to ask whether these phenomena really even exist the way they're described. Two economists, Stan Liebowitz and Steven Margolis have written a number of articles on these phenomena including an article debunking the standard textbook story of the QWERTY keyboard. They claim that QWERTY was actually good. People adopted QWERTY not arbitrarily but because at the time it actually worked better than some of the other layouts. You might know QWERTY is just back in the old days of manual typewriters, you know, like a piano where we had physical key little hammers that would type out the letter on a piece of paper. The idea was to space out the most frequently used letters in English to minimize the chance that you'd get a jam that the hammers would like get stuck to each other. So there was some rationale behind the layout. And Liebowitz and Margolis go through a number of examples of cases of network effects where the actual story is a little bit different from the one you get in the textbooks. Even on social media platforms, I like to show my students this infamous article published in 2007 in the left-wing Guardian. Will my space ever lose its monopoly? I mean, Facebook started at some point, right? Twitter got started at some point. What's the fastest growing social media platform these days? It's not Facebook, it's not Twitter, it's not Instagram, TikTok, right? So according to the theory of network externalities, nobody would ever use TikTok because Twitter, Facebook, and Instagram already dominated. So how could a new one possibly get started? Well, I mean, as you know, these platforms are not identical. They're used in slightly different ways. Maybe Snapchat is another example, right? So we know empirically that new social media platforms where network effects are all over the place, they do come onto the market and they often succeed quite well. Most interesting recent example is Zoom. I don't know about you. I think I had not ever used Zoom before March of 2020. And then within a few weeks, I was teaching my classes on Zoom. I was having all of my faculty meetings on Zoom. I was meeting with my research collaborators on Zoom. We were all using Zoom and Zoom, I don't have the exact, the numbers in front of me, Zoom grew from a very tiny installed base, a few hundred thousand users to hundreds of millions of users within the space of just a few weeks when the pandemic hit, okay? When everything was shut down and schools were closed and businesses were closed. And now Zoom is the dominant video conferencing platform. Of course, there are others. There's Webex, there's Microsoft Teams, there's Google Meet, there's a whole bunch of them. But Zoom because of ease of use and for other reasons quickly became this sort of dominant platform. And what was hilarious, unintentionally hilarious to me is you started to see articles saying, well, this proves that Zoom, this proves that markets with network effects cause, you know, create monopolies. And I'm like, wait, you just told me that a new entrant started at almost zero and quickly became the dominant platform because people liked it better than the other ones already on the market. But now you're saying Zoom can never be dislodged from its perch because of network effects. I mean, you see how this is a self-contradictory claim? The rapid rise of Zoom gives the lie to the concern that, oh my gosh, without regulation or antitrust, whatever, you can never have more than one firm in a particular market segment. No, they rise and fall all the time. As I mentioned before, some of these tech firms, not all of them, right? Some of them are not just producing a product or even any products at all. They're producing platforms on which other people can participate, create content, buy and sell goods and services and so forth. I mean, Google is a platform in the sense that what most people use Google for is search, right? And so you're not searching for something made by Google. You're searching for information on, you know, that's from the Mises Institute or from the New York Times or whatever. One concern that has been raised is that, particularly in antitrust conversations, is that platforms, you know, they can restrict who gets on the platform, right? So there was, actually I'll talk in just a minute about some antitrust cases that involve alleged restricted access. So Google, if it wanted, could say, we're gonna block Mises.org from appearing in our search results. Okay, so no matter how hard you search on Google, you will never find anything from the Mises Institute or, you know, the reason that Google became the dominant search engine is because of its, you know, top secret algorithm, right? For ordering search results in a way that the algorithm thinks will be useful to the users. That's the secret sauce that everybody tries to reverse engineer with SEO, optimization tools and so forth. That was what made Google overtake its rivals like Alta Vista and Yahoo Search back in the day. But of course, how do we know that the search results are really displayed in the order that, you know, based on quality or popularity, what if Google is trying to manipulate us? It's rigging the search results, or, you know, your timeline on Facebook or Twitter or whatever. How do we know that they're not rigging it in a certain way to brainwash us into getting certain sources of information or not? Well, of course, we don't know. We can't prevent that from happening. But as long as we have competition among platforms, right, if you feel that when you go on Twitter, you're not getting a good balanced view of the conversation in the world, you're getting the only of the stuff that Twitter wants you to see. Guess what you can do? Not use Twitter, okay? If you don't like the way Google displays search results, you can use DuckDuckGo or Bing or any of the other numerous search engines that are out there. So it's in the interest of a search engine provider to give information that is useful to its users, otherwise they'll choose to use a competing platform. Another concern that's been raised is that sometimes, sometimes the platforms themselves compete with the third parties that are on their platforms. Okay, so for example, if you type into your phone, you know, whether Auburn, Alabama, it's gonna look something like this, right? So notice the first actual search result is from the Weather Channel. But before you get that link that takes you to weatherchannel.com or weather.com, Google just tells you the forecast right away. And so the claim is, well, this is not fair, right? Google is offering its own versions of these different, you know, products made by firms trying to make a living and wanting their stuff to come up on Google and people aren't going to the, they're not clicking on the Weather Channel because Google just gives you the information right at the top. Or more recently, Google has introduced its own flight search capability. So if you type, you know, I wanna fly to Los Angeles, here's United Airlines is the first actual search result that comes up, but Google finds the flights for me and displays that information already. So the claim is Google is taking advantage of its status as the dominant platform to privilege links to its own products and services over those of competitors, right? I mean, one problem with this is remember that these products and services offered by Google are typically free to the user as well, okay? So Google is making money from Google Weather and Google Flights and Gmail and all these other services the same way it makes money from Google Search, namely by learning more about you that it can use to target, to sell information to advertisers who can target their ads to you. So that's kind of the whole point of the business model. But also, I mean, if we were to restrict platforms from, you know, having their own versions of products that are also sold on the platform, then we would also have to outlaw, you know, generic cereal, right? When you go to Walmart, you can buy Kellogg's brand Cornflakes or you can buy great value Cornflakes. That's what I do, right? That's the Walmart branded version of Cornflakes. Typically it turns out that the store brand is actually manufactured by Kellogg's or Post or whoever just with a different label, right? So are we prepared to say that if you are Kroger or Safeway or Walmart or any major grocery store or CVS or Walgreens, you are not allowed to sell a store branded product because that would be unfair competition with the national brand product. I haven't heard anyone make that argument, but you would have to be prepared to accept that if you want to ban digital services from offering their own products on their platforms. You see a similar issue come up in the case of ecosystems, right? So I mentioned, you know, in mobile telephony, we basically have two competing ecosystems. There's a handful of, obviously there are dumb phones and I think there are some old blackberries around and maybe old Symbian phones or something like that. But the vast majority are either iOS or Android, right? So the Apple mobile telephony ecosystem is Apple making the hardware, the iPhones, right? Apple making the iOS operating system, Apple running the app store, which has apps developed by third parties, right? Spotify or whatever. And then you have Apple Music itself, which in some sense competes with Spotify, right? The Android ecosystem is a little bit more open. It's a little bit different because Google doesn't make the hardware, it makes the pixel, but most of the Android phones are manufactured by Samsung or LG or some other manufacturer. But you've got the operating system, you've got the hardware, you've got a Google's version of the app store, the Play Store, and then you've got, for example, YouTube Music, which is a Google-owned music provider. So point number one is that, again, are Apple and Samsung competing? Yeah, they're competing for premium handsets. Apple and Google are competing for mobile operating systems and app stores, right? So the competition is multi-layered with if you should have sliced and diced the products and services being sold in different ways. But if you think of these two ecosystems competing against each other, for the consumer, your decision to buy an Apple product or an Android product, it's not just determined by the physical hardware of the phone, right? You're not buying the phone, you're buying access to that ecosystem, and you're comparing it with whether, do you prefer that to the other ecosystem, the competition among ecosystems. I believe it was 2019, Spotify filed an antitrust complaint in the EU against Apple claiming that, so the way the app, you probably know the way the app store works, if you develop an app for iOS and Apple admits it into the app store, the license agreement requires you to give 30% of any revenue you generate from the app, you have to kick that back to Apple. So Spotify argued that this was sort of an unfair tax on the Spotify app. So if you have an iPhone and you've got Spotify on it, when you buy a song from Spotify, if you buy an album for 10 bucks, $3 goes to Apple, but if you buy an album from Apple Music, Apple's getting 100% of that, right? So Apple could actually charge a lower price, it could charge seven bucks for the album on Apple Music and it would make the same amount of money, actually it could charge three bucks, right? It would make the same amount of money as if you have to pay $10 on Spotify. So the claim was Apple is sort of artificially privileging its own apps by this 30% tariff placed on third-party apps. And to my knowledge, the judge can correct me if I'm wrong, I think that case is still being heard, there hasn't been a decision yet in the EU, but you can see how the competition among ecosystems provides additional nuance and complexity in the way we think about how firms compete and who is competing, what's the unit of analysis, what is the firm? But again, none of our standard principles about that we talked about yesterday in the lecture on competition and monopoly would be any different in a case like this. Some of the institutional details are different. The specific business strategies may be different, but the general principles about what it means to compete, right as long as no firm has a special legal protection, it's competing just like the toothpaste makers are competing. Okay, yeah, so a two-sided market is like eBay, right? Where eBay is making money from buyers and also making money from sellers. This relates to a point that I made in yesterday's talk that even if the prices that eBay charges to consumers are very low, if you think, well, yeah, but this is a two-sided market, so eBay could still be making money by charging high fees to the people who are selling stuff on eBay. And it could still be behaving in an anti-competitive manner, even if we see low prices or free prices, zero prices on the consumer side. So this relates to the point that I made yesterday about the new sort of antitrust thinking not just at the well-being of consumers, but the well-being of suppliers as well. That's particularly relevant in the so-called two-sided markets. Of freemium, I just mentioned a little bit before, but really, someone asked a question in the panel yesterday about entrepreneurs using internal markets, sort of pseudo tournaments or competitions as a way of allocating resources inside the firm. And I answered, yeah, I mean, that may be a perfectly legitimate management technology, but it doesn't get around the calculation problem as identified by Mises. Same thing here, I mean, look, does the entrepreneur want, does the entrepreneur embrace a business model like Netflix where you make money from subscriptions or a model like Facebook's where you don't charge any subscription fee, but you make money from selling ads? You know, what sort of policy do you want to impose on data sharing? Are you gonna gather a bunch of consumer data and then sell it to advertisers, or are you gonna be like duck-duck-go and advertise the fact that you don't collect data as a selling point and hope that people will use your platform on that basis and maybe eventually you have to charge a subscription fee. I mean, these are all different strategies that entrepreneurs can experiment with on the market. And there's no reason Exante to prohibit one of those particular strategies or to subsidize a particular strategy. Let the market figure this out the way it does with anything else. Okay, so finally, you know, what about those sort of more normative issues? You know, should we regulate big tech firms, especially social media platforms, should they, should antitrust law be used to break them up? Well, we already talked about the standard monopoly arguments and the Austrian responses to them in yesterday's talk. So I don't need to go over those again, except to point out the, you sometimes hear the term natural monopoly to describe a case where we have these big upfront investments and it doesn't cost much to produce more copies once you've made the upfront investment leading to so-called natural monopoly where, you know, over any reasonable range of output, the dominant firm always has a decreasing marginal cost, sorry, decreasing average cost curve. So it's hard for newcomers to compete because the big firm is already way down on its average cost curve and it can sell, it can charge a low price and still cover its costs, whereas the newcomer can't. So people say, well, these tech platforms are natural monopolies. There can only be one firm in the market. Therefore there's not competition and the government needs to regulate. Well, obviously there is competition to become that firm and there's always competition around the margins from newcomers that are offering a slightly different version or offering some other advantages that the incumbents have not yet discovered or created. So we can easily dismiss those kinds of arguments for regulation as well as the arguments that say, well, the government should force Facebook or Twitter to be a neutral platform, you know, like an electric utility. So an electric utility, it's illegal for the Auburn electricity company to charge the Mises Institute a higher electricity price than, you know, the Marxism Institute down the street because the electric company is run by Marxists. So they say, well, social media platforms should not be allowed to throw off conservatives or libertarians or whatever. They should be regulated as public utilities. Again, the argument doesn't really even make any sense for electric companies, much less for social media platforms. You know, so-called misinformation, I mean, come on, give me a break. I've yet to hear an operationally meaningful or useful definition of misinformation that would justify some kind of restriction on it, whatever it is. Misinformation just means stuff you don't like. Finally, one argument that you hear sometimes among libertarians is that, yeah, yeah, yeah, this is all true, but these social media platforms, they're not really private companies. They work hand in hand with the state. You remember last week, a Biden's press secretary said, oh yeah, in the White House, we're constantly flagging Facebook posts that should be taken down and sending them to Mark Zuckerberg, demanding that he take them down. We don't know how many of them Facebook actually takes down, but that number is probably not zero. Okay, so you hear people say, well, but look, you know, these tech companies, they rely a lot on public funding. There's a famous book by European economist Mariana Mazzucato arguing that, you know, because government supported tech research in the 60s and 70s, the internet and anything that came out of the internet really belongs to the public. I don't find that argument very, very credible. You know, the fact that they're taking our data and stealing our data and selling it to people, is that a reason for regulation? Well, again, what is our data? Your data on Facebook is just the digital record of everything you've posted, liked, shared. It's not obvious that that's like property that you can own that someone else could steal from you, right? It's sort of third party observations of things that you did, just as if you were walking down the street and somebody saw you and then they told their friend, they saw you, that's not stealing your information, right? You know, de-platforming, if social media companies are de-platforming people because of their political views, I personally don't like that. I don't think that's good for society, but they are private platforms and the best thing that we can do is not use them or use platforms that have a different policy. This is where people say, yeah, yeah, yeah, but they're so closely connected to the state that they need to be treated as part of the state. I don't buy it. I mean, if you wanna treat a legally private company as part of the state, I'd go for like Goldman Sachs, right? Or Lockheed or Boeing before I would go for Facebook or Twitter. In the panel, we can talk a little bit about section 230 and whether or not these platforms have kind of some special legal protection, which you could argue that they do. But bottom line is these are private companies. They're legally private, they have private owners. Do they sometimes do what the state wants them to do? Sure, lots of companies also do that, but they're formally owned and they are substantively controlled by their shareholders or their owners like other private firms. And we should rely on vigorous market competition to discipline their behavior if we're unhappy with how they're acting in the public sphere. Thank you very much.