On browsers and competition

Microsoft is talking a lot more about Windows Vista, and articles related to it are littered across the web. The LinuxWorld Expo is this week, too, and the growth of that conference is a sure sign of the growing maturity of the Linux products market.

Microsoft is talking a lot more about Windows Vista, and articles related to it are littered across the web. The LinuxWorld Expo is this week, too, and the growth of that conference is a sure sign of the growing maturity of the Linux products market.

I'm going to talk about none of those things, however, because that's not what's on my mind. I've always subscribed to the modus operandi of the Golden Ticket Winners when Willy Wonka shows them the room where everything is edible. There's a path, but it's far more fun to eat the large "candy" mushrooms hidden off to the side (though dancing orange midgets make me wonder if the candy is a bit off), or take a dip in the chocolate river.

I talked last week about the importance of monetary considerations in open source, and in the talkbacks, I somehow got into a discussion with a guy named Zinoron about competition in browser markets (I had talked about browsers earlier that week, so maybe it was just residuals). In response to this statement (made by me):

We could argue whether or not a market with 20 equally-competing browsers is more dynamic than one with a single dominant one, but the problem is there are also huge COSTS to fragmentation. That's why software always has dominant players.

Zinoron had this to say:

Do there need to be 20? No... three to five is a good oligopoly from a consumer point of view. For a public good point of view? Who knows, certainly isn't one.

I see where Zinoron is coming from. Certainly when Netscape and Microsoft were battling across the internet for browser supremacy, the features were rolling in faster than a Wonka magic boat ride. Hard fought markets produce more innovation, whereas those where there is one dominant player, as is the norm in software, have less. This fact serves as basis for many who think that with just a little bit of tinkering, the market can be made better, faster, and stronger.

The problem, however, is that markets are supposed to be smarter than that. The governing principle of market economics is that individuals make better choices than bureaucrats due to improved information. Individuals have more information about their own needs, and thus tinkering is usually a bad idea given that the tinkerer is operating from a position of ignorance.

So, there are two options: a) market economics has some fundamental flaws, and economies really do work better with some amount of management by smart people, or b) we're missing something fundamental about the markets that makes us think that the concentration around one dominant player is the wrong outcome.

Given my track record (one long established before I joined Microsoft in May), I obviously think that answer b) is correct, and as I noted in the original comments that prompted Zinoron's response, I think the reason is the costs associated with fragmentation. Competing software ecosystems, as would be the case with competing browser implementations, are costly, as it is VERY hard to ensure that there are no serious differences between implementations, even when the different parties are trying to be consistent. Lest that sound like Microsoft is being unusual in blazing its own trail, witness the problem of keeping old-school Unix consistent, or even the difficulties in maintaining consistency across Linux distributions.

So, what markets are doing, in my opinion, is trading fast-paced innovation for the cost savings from stability, even if stability means giving one group disproportionate control over a technology. The movie industry standardized on MPEG-2, even though it meant paying high licensing fees to patent holders, because standardization yielded greater benefit than fast-paced video competition. The industry in the 60s and 70s standardized on IBM products, even though IBM was anything but cheap. Consumers and businesses favored IE, which lead Microsoft to stop pushing the browser forward as fast.

The costs aren't as high as they might seem, though. I don't find the differences between IE and Firefox to be "revolutionary." Firefox is still recognizably in the same family as IE, even as they made standard certain features Microsoft will integrate in its upcoming version 7.0. Likewise, the barrier to entry for software is considerably lower than other industries. Open source can build product to compete with Windows. Something similar isn't possible in the printer industry, as an example, even though plenty are incensed at the extortionary fees printer makers charge for ink refill cartridges.

In other words, given the weird nature of software, the tradeoff makes a lot of sense from a cost/benefit standpoint. Standardization has large cost-related benefits, and the price of that -- less heated product competition -- is less extravagant than it might be in other industries.

Therefore, to claim that three to five (browsers) is a good oligopoly from a consumer point of view is, in my opinion, wrong, because if it were a better arrangement, then consumers would have chosen it. The fact that they didn't gives hints as to the real things that matter in software markets.

To Zinoron: I'm not picking on you. You just got me thinking, something you do quite frequently.