Decentralization is the answer to big tech
Monopolies won't self-regulate, and the government sure isn't doing anything
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Among applications of decentralized technology, Bitcoin has already proven its value as a currency independent from the incentives and policy decisions of governments. Inspired by the original cryptocurrency, smart contract platforms like Ethereum as well as non-blockchain decentralized technologies like IPFS and Arweave have also started decentralizing the foundations of the modern tech world. While progress there is especially promising, to achieve maximum decentralization we need not just decentralized infrastructure, but also applications that fundamentally re-think how the tech industry works today.
Many of the problems associated with big tech are due to their monopolistic positions eliminating most incentives besides pure profit maximization. Why are all these tech giants monopolies? They are all monopolies precisely because their business models benefit disproportionately from scale, measured by the numbers of users. Consider network effects, which follow the basic principle that the value of the network increases faster than the number of members. If the number of users increases by 10%, the value of the network may go up 20%, for example1.
Meta has become a semi-monopoly because as a social network, when new members join, the network grows not online in size, but also in depth as each existing member now has more potential connections to interact with. Apple, another tech giant, also leverages strong network effect to protect its position. The more users they have, the more developers interested in developing apps for the iOS app store, therefore the better the experience for each individual user. For digital advertising specifically, both Meta and Google generate progressively more valuable “data moats” for their ads businesses by accumulating user data. These larger data sets allow for increasingly accurate models to predict which ads users are likely to click on.
Who doesn’t want better products that get better as there are more users? The long term effect of returns to scale in a given industry is that smaller competitors are less viable. With fewer viable competitors, there’s less incentive for big tech to create a quality user experience or act properly, outside of their pursuit of profit.
Look at history for examples of the typical “big tech” playbook. Start by creating a quality service to attract a lot of users while treating users well. Note that in their days as scrappy underdogs, Google’s motto was “do no evil”2 while Facebook described themselves as a “social utility” to help people connect with their friends, positioning themselves like traditional “utility” companies serving the public good3. Once large enough to be unthreatened by competition though, Google started degrading search results by adding increasing amounts of ads4, and Meta started being careless with user data while also pursuing distasteful business tactics like creating social media products targeted at kids5. Despite frequent discussions of better regulation, government attempts so far have been largely toothless.
Why is decentralization the solution? In industries where returns to scale prevent viable competitive alternatives from emerging today, decentralized models offer better governance to prevent narrow-minded profit maximization. Today centralized tech companies always optimize for shareholder value, as they are run by investors and company leadership. In a decentralized world, developers, users and even employees would be able to participate in the decision making process. With their input, decisions to optimize for user experience, developer experience, or even ethical behavior could also be considered. Aside from better governance, the option to fork means that even should governance efforts fail, there is still an escape hatch. If communities become captured by profit-seeking investors, for example, members aware of the problem can clone the product and use their newly issued tokens to incentivize early adopters in order to reach competitive scale more quickly.
Decentralization offers more thoughtful governance for successful products, and provides tools for growth, but real world progress still requires the right products and communities to be formed. Though better decentralized technology is a starting point, and DeFi has already been very successful (especially in surviving recent CeFi collapses), we need more inspired builders to fully re-imagine the tech world we have today.