I want to focus on what Gates said next, because it is incredibly relevant to the current conversation about platforms, regulation, and antitrust. Here it is, with my emphasis in bold:
It’s very tricky for platforms… these are winner-take-all markets. It really is winner-take-all. If you’re there with half as many apps or 90 percent as many apps, you’re on your way to complete doom. There’s room for exactly one non-Apple operating system and what’s that worth? $400 billion that would be transferred from company G to company M.
What Gates is describing is commonly referred to as the network effect, which says that the value of the platform to users is really created by all the other people on that network. There’s been a lot of great work exploring how this plays out over the past few years — you might be familiar with Ben Thompson, who has laid out a very refined argument about the network effect called “Aggregation Theory.”
The important thing to know is that it’s well-established that the network effect enables the winning platforms to achieve massive scale and preclude competition. It’s a devastating combination that Gates calls “complete doom.” There’s a reason so many tech markets tend toward monopoly or duopoly, like Android and iOS, or Google search, or Facebook, or Uber and Lyft — the network effect makes it basically impossible to build a competitor because you can’t populate the network. And you can’t buy your way out of this problem: Microsoft famously paid app developers to write Windows Phone apps when there weren’t enough users to otherwise draw developer attention, and… it didn’t work.
This is actually from three weeks ago, but I missed it then. Libertarian/conservative economic theory is sadly out of date when it comes to network effects, but maybe that’s changing.