| HN Mirror

The term "efficient markets" tends to confuse and mislead people. It refers to a particular narrow form of "efficiency", which is definitely not the same thing as "socially optimal". It's more like "inexploitability"; the idea is that in a big enough world, any limited opportunities to easily extract value will be taken (up to the opportunity cost of the labor of the people who can take them), so you shouldn't expect to find any unless you have an edge. The standard metaphor is, if I told you that there's a $20 bill on the sidewalk in Times Square and it's been there all week, you shouldn't believe me, because if it were there, someone would have picked it up.

(The terminology is especially unfortunate because people tend to view it as praise for free markets, and since that's an ideological claim people respond with opposing ideological claims, and now the conversation is about ideology instead of about understanding a specific phenomenon in economics.)

This is fully compatible with Apple's App Store revenue share existing and not creating value (i.e., being rent). What the efficient markets principle tells us is that, if it were possible for someone else to start their own app store with a smaller revenue share and steal Apple's customers that way, then their revenue share would already be much lower, to account for that. Since this isn't the case, we can conclude that there's some reason why starting your own competing app store wouldn't work. Of course, we already separately know what that reason is: an app store needs to be on people's existing devices to succeed, and your competing one wouldn't be.

Similarly, if it were possible to spend $10 million to create an API-compatible clone of CUDA, and then save more than $10 million by not having to pay huge margins to Nvidia, then someone would have already done it. So we can conclude that either it can't be done for $10 million, or it wouldn't create $10 million of value. In this case, the first seems more likely, and the comment above hypothesizes why: because an incomplete clone wouldn't produce $10 million of value, and a complete one would cost much more than $10 million. Alternatively, if Nvidia could enforce intellectual property rights against someone creating such a clone, that would also explain it.

(Technically it's possible that this could instead be explained by a free-rider problem; i.e., such a clone would create more value than it would cost, but no company wants to sponsor it because they're all waiting for some other company to do it and then save the $10 million it would cost to do it themselves. But this seems unlikely; big tech companies often spend more than $10 million on open source projects of strategic significance, which a CUDA clone would have.)