Ask Lemmy
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Closed social networks benefit a lot from the network effect, which makes them natural monopolies. This breaks one of the core mechanisms of capitalism, which is the free market that is supposed to drive innovation and make businesses strive to "perfection."
From that point of view, any supporter of capitalism would probably not support any of the current commercial social networks, and instead feel more comfortable on a federated alternative.
That is the theory (read, propaganda or at least narrative) about capitalism. I don't think it's a misunderstanding that all the biggest companies in the last 20 years (in tech) have done exactly the opposite, building walled gardens and locking-in users. I would say they feel pretty confident because nobody cares about competition as an abstract value, this is just the tool that is used to give the feeling of freedom. Even today you have the "freedom" to compete with the big dogs. You just need a few hundreds of millions of investment, which depend on other people wanting to make money out of your product and therefore force you to adopt a certain business model. Good luck.
Incidentally this is also why I don't understand those who see the fediverse as "competition" or hope for mass migrations (millions of users). The point of the fediverse for me is to create a space (in the cyberspace) which is outside the capitalist reach. The equivalent of a park or a square when you can exist without the need to consume or pay. Parks should not, and cannot, compete with malls.
About being in a space outside of capitalist reach.... I agree to a point but some instances outside of the top 5 or 20 can't seem to garner robust enough conversation without an infusion of users. The fediverse right now is my best hope for Android discussion but the numbers just aren't there yet and then there is the confusion of similar/same instances on different servers. It is a little chaotic now especially for disaffected Reddit users.
Working on UX is a big necessity. However, it's fine if communities are sitting on the biggest instances, although I would like it more if users were more distributed. People from smaller instances can anyway participate in the communities sitting elsewhere. In general I agree about having more users though, but the point for me is which users. Communities are growing, Lemmy (in my experience/bubble) is already completely different from how it was 2 weeks go (way more content). It will take time for niche communities, but I don't think that sacrificing what makes this place unique is worth the artificial influx of users that might come with it. We are experiencing a small and organic growth (3k active users a day circa), I think it's going to work out (especially if we all make a little effort - maybe more than we would have done in platforms).