The case for monopoly

Create an innovate company, not another airline.

Create an innovate company, not another airline.

Competition is considered the holy grail of capitalism. I suggest the opposite. Competition stifles innovation, whereas the modern monopoly fosters it.

Capitalism is the dominant economic system in the Western World; however, our obsession with competition often stifles progress and prevents entrepreneurs from building truly great companies.

When competition is rampant, consumers have myriad options — often with no differentiation. When monopoly is in play, consumers may have fewer choices, but the choices are often of significantly higher quality.

Google’s search engine is a far stronger product than Bing, Apple’s iPhone line is objectively stronger (both in design and market share) than other mobile devices, Amazon’s generalist approach to e-commerce is easier and more convenient for the consumer than department-store shopping.

Could you draw out the Google logo? The answer is likely yes. Now, can you also draw the Bing logo? The likelihood is no.

In practice, perfect competition strangles corporate profits, and creates a desperate state for companies inundated with a constantly changing landscape.

The airline industry is rife with aggressive pricing, lack of brand differentiation, and a number of other competitive preoccupations that stifle both profits achieved and innovations produced.

Sears uses sweatshop labor in Bangladesh to keep themselves afloat instead of innovating, and often those workers suffer deadly consequences. A significant number of Walmart employees rely on government aid, due to a lack of livable minimum wages at the company. Tyson Foods exploits immigrant workers to keep their operations cost-minimal.

The consumer gains nothing beyond marginally lower prices, and the workers suffer disproportionately as a result. The effects of perfect competition can be horrendous.

The main goal of a successful corporation is to achieve such innovation that they escape competition altogether and dominate their respective domain.

A brand for a company is like a reputation for a person. You earn reputation by trying to do hard things well. — Jeff Bezos

If a competitively strangled airline like Delta is pushed to raise worker wages, their financial department cannot achieve such an event until years far into the future. They must cut costs and plan comprehensively for it.

Amazon, blessed with monopoly profits, raised it’s effective minimum wage to $15 in a single month in addition to other company-wide raises (not a feat Delta could easily accomplish, despite a higher net income).

Target, a legacy retailer with no competitive advantage must wait until 2020 to enact such a reform.

Google is able to provide impeccable benefits to their employees. Apple, like the rest, has the time and money to think, innovate, and improve the world as it continues to dominate its home market and expand to adjacent ones.

While these companies still face competition in new and emerging markets, Google objectively dominates search engines, Amazon dominates online retail, and Apple dominates high-end PCs and a variety of other sub-markets (ie: mobile devices) on a statistical level.

They compete with each other, but the hits thrown do not endanger the integrity of their companies. Prominent companies are destroyed by failure to innovate, not failure to compete.

They have effectively escaped competition because they provide the superior solution to the consumer, to their employees, and ultimately, to the world. The ones that fail have not.

In the words of billionaire technologist Peter Thiel in his book Zero to One:

All failed companies are the same: They failed to escape competition.

The salient point here is not that your ultimate goal should be domination, but that you should avoid competition altogether. Business is not war, and you are likely not a warrior anyways.

Create an innovate company, not another airline.