Open Source as such did not fail. We are having more sourcecode in the open than ever. What failed are the expectations people had about Open Source.
Back in the day, having proprietary source code was meant to be a competitive advantage. What was right: having knowledge others have not is a competitive advantage. Source code was thought to be part of that knowledge.
That last assumption is now mostly rebutted - of course e.g. Google does not share the source of its Borg-platform but we get Kubernetes (yay!).
It is not the openess or closedness of software which determines economic success. It is the sheer amount of knowledge you have. And this includes (of course) the ability to (physically) store and leverage this knowledge for economic success.
In contrast to what was once thought a competitive disadvantage - opening up your source code - it was a business model of success. You open your software but you keep the knowledge silos closed or at least build access gateways. As an aside: Facebook itself recognized that a bit too late, giving external access to its family jewels. But after realizing that, they closed the access down again.
That said, it is quite obvious, why this belief - more open software equals a more open and more free society - must have faild: It was never about software, it was about knowledge and its concentration. Or to use a more hip term: it is about platform capitalism.
And Open Source played in as far a key role in that, that it allowed to collaborate on the software which makes it easier for everyone to built platforms, which in turn helped the platforms itself to improve their software to build a platform. Microsoft wants people to have a Linux version of VSCode? Let's do that whith the help of the community. A smart move, indeed. Everybody wins in some respect.
The problem is: what to make of it as a society? The question of how to deal with platform capitalism is a question, which can not be answered with software. It can only be answered in a free and public discourse.
As an afterthought:
From a technical point of view, it has never been easier to disrupt the industry with a new business model, since building the software itself is less of an obstacle to tackle; think of Alibaba, Wish, etc.
In this respect Open Source has helped shuffling the cards.
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