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Sep 23, 2022

Survival of the Monopolists

By:Dylan Ratigan

We live in a country that has access to the greatest pool of liquidity in the world. Our market structure allows entrepreneurs, inclined to take risk, access to capital. Conversely, it allows for those with capital who are also inclined to take risk, access to ideas in which to invest. Combine that with ever advancing technology and what you end up with is a low-barrier-to-entry system where anyone can participate.

If you’re someone with an idea and motivation, our economic system offers opportunity. However, if you’re an established presence in the market, those same lackadaisical barriers to entry are a threat. Today’s King of the Hill is tomorrow’s has been. Companies that once dominated sectors of the economy are becoming displaced at increasing speed. Sears, IBM, Compaq, Radio Shack, AOL, MySpace, Napster, Alta Vista, Barnes and Noble, companies that once sat at the center of their respective industries are either gone or displaced by newer companies. Innovation alone is no longer enough for mature companies. If you want to survive, you need to establish a monopolistic presence through acquisition.

Ask yourself, what was the last major innovation by Apple? Facebook bought Instagram and Oculus before either company could displace them. Google acquired YouTube as people began searching video content for answers to questions. It’s a simple fact that as barriers to entry become increasingly easier to overcome, sector leadership becomes increasingly tenuous. It is an undeniable correlation.

Innovation is a market driven phenomenon. And just like individuals cannot outsmart or asset markets, companies cannot outsmart innovation. At some point, those that sit at the top of the pyramid will find themselves displaced. The only way of avoiding that is by gobbling up competitors in tangentially related fields where a correlation to the key business exists and can be strengthened. 

If you’re Amazon, that means owning more product lines. If you’re Apple, it means buying companies that further your artificial intelligence and health care offering. For both Amazon and Apple, it means expanding into television markets and acquiring sports broadcast rights. Does anyone think Amazon would still exist if they had simply remained an online bookseller? Would Apple be around if their only offering was the Mac? 

Marketplace survival is much like animal pack survival. The head of a pack will eventually be challenged for leadership. Waiting for that attack puts you at a disadvantage. Instead, recognizing from where the attack may come and moving first to negate the threat is how leaders survive in the wilderness. It is the same thing in corporate America and the faster the rate of innovation, the more important a monopolistic hegemon becomes.

Special Projects writer Josh Fabian contributed to this article.

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