Some observations to string together:

In 1992 the Federal Trade Commission began investigating Microsoft for potential abuses of its monopoly power. The concern was that the dominance of the Windows operating system allowed Microsoft to squeeze all of the profits out of the hardware industry and slowly devour each segment of the software industry. WordPerfect had fallen to MS Word, Louts 1-2-3 to MS Excel. Microsoft’s ever sprawling empire would soon leave little room for anyone else to make money.

In the mid to late 1990s, these concerns lost popular support in the wake of a start-up boom in IT. That boom was fueled largely by a massive run-up in the stock prices of tech and especially internet related firms. Entrepreneurs and early investors could expect to earn quick, massive fortunes IPOing companies that had yet to define their business model, let alone turn a profit.

The conventional wisdom at the time was that this was an irrational and unsustainable bubble. When stock prices came crashing down in the winter of 1999, it seemed that the conventional wisdom had been proved correct.

Eugene Fama, however, disagreed:

The word “bubble” drives me nuts. For example, people say “the Internet bubble.” Well, if you go back to that time, most people were saying the Internet was going to revolutionize business, so companies that had a leg up on the Internet were going to become very successful.

I did a calculation. Microsoft was an example of a corporation that came from the previous revolution, the computer revolution. It was hugely profitable and successful. How many Microsofts would it have taken to justify the whole set of Internet valuations? I think I estimated it to be something like 1.4.

Nearly two decades after the dot-com crash Microsoft has an operating profit of roughly $20 billion; Google, $21 Billion; Facebook, $10 Billion.

Fama, it would seem, was right.

What about the Federal Trade Commission?

Perhaps the dot-com boom proved that tech is a fundamentally contested space in which profits are always available innovators. But, if not, and Microsoft (and by extension Google and Facebook) are only profitable by virtue of monopoly rents, the lesson is, paradoxically, much the same. In that case it was the lure of monopoly rents that spurred an investment boom so massive that it toppled Microsoft’s dominance.  The very bigness that threatens small rivals creates a juicy target.