To me, the only truly viable way for Google to combat that is to create a truly open, federated collection of social networks that can interoperate, by releasing the underlying code to G+ the way they did with Wave, or the way email works.

It would enable Diaspora, identica, etc. to become full-fledged social networks, and all still be viable because they could talk to each other, as well as talk to G+. Don't trust Google or any other company? Host your own Plus server. Companies could host their own internal Plus platforms.

I can't imagine that Google can fight the closed platform of Facebook with another closed platform, and the open web has always been its symbiotic ally.

    a lot of technically inclined people know a 
    lot of other people and want to interact with 
    them socially

For me, I never liked MySpace or the copycat Hi5 because noise, eye-bleeding page customizations and idiotic comments were actively encouraged and I couldn't stand it. Then Facebook came with a cleaner design and (initially) a more well-behaved audience and so I was hooked. But now that initial advantage is gone, the masses found out about it, so half of my news feed is filled with invites to idiotic games or stupid jokes and I don't have the patience to block them all (on the other hand Google+ has a spam problem already).

The reality is that technically inclined people are the trend setters when it comes to technology, not the other way around.

Yes, the technical elite from MySpace eventually moved to FB, but more importantly, FB got a ton of users that were never on MS. I don't think Google can do the same to FB, because there just aren't that many people that aren't on FB. They have to actively court current FB users. Stealing the technical crowd is relatively easy. But FB's network effect is unprecedented and represents a much bigger challenge, IMO.

I think this needs a new company. Anyone interested?

My not-so-secret hope is that the lesson Google took from the Wave debacle was to first focus on making a product that's compelling and engaging to users, get a critical mass of adoption, and then release the code. I guy can dream, can't he?

Once it gains critical mass, in theory there's nothing preventing it from becoming the new Facebook, and Facebook from going the way of MySpace

G+'s what's hot section resembles pretty much the image subreddit at this point content-wise, but the browsing experience is better since most content is displayed inline and I can easily navigate it with j/k.

Now they just have to figure out how you can get hot content for certain categories. Of course it's missing the anonymity of the reddit community, so the content will probably never be on par.

I think the metaphor is even more apt than you realize.