(2021-07-23) Brander Aggregators Aren't Open-ended

Gordon Brander: Aggregators aren't open-ended. Aggregators are network effect monopolies.

Aggregators are able to do this by literally aggregating all of the demand in one place. They are hub nodes in the network, through which everything ends up traveling. How do they manage to become a hub? Through two mechanisms:

• Zero marginal cost: in real terms, it costs ~zero to add one more user to a software service.
• Network effects: each additional user increases the total value of the network.

Aggregators have a disturbing kind of evolutionary inevitability. Sick of ad-based social networks? Want to charge an honest buck instead? An aggregator will outcompete you on the basis of network effect growth. Aggregators are the sharks of networked software, apex predators perfectly streamlined by evolution to the contours of the internet.

So, aggregators commoditize supply. Being commoditized is not something you choose for fun

We would expect suppliers to find ways to build a direct relationship with customers, and eventually accumulate their own network effects

This is exactly what used to happen on software platforms

Layering is how technology evolves.

But with aggregators, this spiral broke. Aggregators have managed to leverage network effect to make it impossible to build new platforms on top of themselves

The Personal Computer allowed anyone to develop software for any reason. Software developers leveraged this expressive variety to invent never-before-imagined categories of things. Things like spreadsheets, browsers, the web, payment platforms, VoIP, wikis, streaming video, social networks.

Infinite expressive variety and permissionless innovation produced open-ended evolution.

Aggregators break evolution by limiting variety

Ashby's Law of Requisite Variety means that aggregators must limit the creative potential of their product to retain control of the ecosystem.

This is why aggregators don't allow Turing-complete scripting. Turing's black box contains infinites states. Guaranteed loss of control. Instead, most aggregators are built around relatively expressive formats (text, images, video) that cannot be used to build a metaplatform. It’s an ecosystem in a petri dish. It cannot escape the lab.

As long as some open-ended ecosystems exist, they will incubate disruptive new evolutionary strategies. We’ve seen two examples of this recently, as app stores tussle over open-ended technologies like WebAssembly, and cloud streaming gaming.

Separately, I wonder if the tools-for-thought space might not produce something beyond aggregators and SaaS services? My sense is that, more than other networked software, tools for thought want to be owned. I don't want to store my second brain on someone else's computer. What if we instead had a small tool that was personal, multiplayer, distributed, evolvable? Maybe this is just a niche category, or maybe it could be the basis for a new open-ended ecosystem?