Are We Playing Monopoly as a Society? Issue 153

Issue 153, March 28, 2024

Big tech has been taken to task repeatedly often without a complete understanding of who they are, what they do and how their business model functions. For many, it seems elusive to understand their motives, wrapped up in proprietary strategy. And frankly, just about no one (certainly not the average individual) can figure out what they’ve been up to and what their intentions are.? Are they out to help us or are they manipulating us for their purposes and goals? The fraternity is a tech cabal that is incestuous. These enterprises are founded by visionaries (oh so young at the time) who see the world as they predict, not necessarily the way it is or ever will be.

The Giants

Let’s start with the well-worn example of Amazon.? Bezos clearly saw a different US marketplace. And he scaled so fast, at all costs, to become the dominant player.? But in an imitation is flattery move, he unlocked the hopes of a flood of marketplace wannabes: Temu, Shien, Etsy, eBay, Shopify, Meta Marketplace, Google Marketplace, and a raft of smaller digital pure plays. At the moment Temu and Shien are rising quickly in the US, not yet on par with Amazon, but growing fast enough to have Amazon see them as a threat to their dominance.

Or consider Meta. Social media has become a trillion-dollar industry and seemingly the biggest target of advocacy groups and governments regarding privacy, access, and algorithmic behavior. Alphabet, aka Google, of course continues to dominate search and is sitting on its own exponentially growing and deep database of consumer information. We discussed TikTok last week as the?US Government’s perceived enemy of state ?while TikTok-addicted citizens across the country now flood congressional members’ offices with hate mail and calls.

The Shiny Apple

And then we have Apple.? Honestly, it’s hard to hate Apple. Its loyal customers are akin to cult members. But oh, so clever Apple was cultivating an addicted, deeply loyal consumer who never questioned what was going on behind the curtain. Like its brothers (Amazon, Meta, Alphabet and Microsoft) it became a monopoly in the device and app sector. So much so that the totality of Apple’s rise to monopoly status is due to the introduction of the iPhone in 2007 which continues to be its largest source of growth (and revenue) worldwide. The rise and success of the iPhone led to Apple’s deepening desire and long-term strategy to control the entire mobile customer experience and the App Store. Its moves were masked with the protection of its customer’s data and privacy, but if you look deeper and logically, it was about creating and growing sources of recurring revenue. Granted this is the ideal North Star for most organizations. Apple has received limited criticism over the years, and even bad news has little if any impact on customer loyalty and the business sector’s admiration.

As a society, we are coming to the realization along with the business sector that the cost-benefit of playing within the Apple ecosystem is not what it once was. As advocacy groups and the business sector leverage and exercise their lobbying capabilities, governments also seem to be getting the message. Consumers seem to be having brief moments of lucidity that perhaps their compulsive, nearly addictive immersion with big tech is more to the brands’ benefit.

Axios reports “Apple has already fallen foul of the EU’s rules. This month, the company?was fined 1.8 billion euros ?($1.95 billion) after the European Commission said it found that Apple had applied restrictions on app developers that prevented them from informing iOS users about alternative and cheaper music subscription services available outside of the app.” The fact that Apple has been keeping 30% of App Developer earnings has finally risen to the public consciousness. Now the US Government’s Justice Department has filed an antitrust suit against Apple focused on the perception that Apple is an anti-competitive monopoly.

They Have a Dream

These tech geniuses are so cunning and ahead of the game that consumers are just now seeming to stir from a deep sleep. Think about it, how many subscriptions do you have?? How many sites and apps have you shared your personal information with? How many do you use? How many passwords do you remember?

If you are like most people, you are dependent on all these streams, feeds, apps, TikTok rabbit holes, Facebook memory lanes and the endless aisle of digital marketplaces. As soon as the big five have scaled and infiltrated the pocketbooks and minds of the world’s consumers, the copycats and memes show up.

The market cap of these organizations is staggering, more than the GNP of most small nations. Their tentacles are so deeply entrenched in consumer behavior that the whole issue of technological determinism that we often write about seems about to be redefined. Next gens and a growing majority of older adults immerse in feeds descending into widening gyres to get news, information or even knowledge across Instagram, TikTok, X and Reddit. Think about that for a moment and take a deep breath. Have you fallen into the abyss of Instagram and Facebook Reels? TikTok recommendations? How much time have you lost and how influenced might you be by what you are watching (and possibly learning)?

Which brings us to the point of this storytelling exercise. Are monopolies good for the world’s consumers? Are monopolistic practices and maneuvers good for the economy? Do they support innovation? Do they sustain, grow, and even establish a thriving economy? Is there a point after our deep embrace of technologies and the resulting monopolies that we come to the realization that a monopoly may result in a type of?surveillance state ?

And how conscious is the typical individual about the behavior modifications that these tech giants have triggered? Maybe the business sector is finally coming to a reckoning that monopolies are bad for their own health. A reckoning that also borders on jealousy that the dominant players either got lucky or were opportunistic, and it’s time to tear them down. A reckoning that echoes enough is enough. Innovation and advancement does lead to unintended consequences.

Business Use Cases

Axios reports and reemphasizes our point: “The outperformance?of the U.S. stock market and its broader economy can in large part be attributed to its superabundance of world-spanning monopolies. The world’s biggest tech monopolies are overwhelmingly American, although China-based TikTok and other consumer companies are aspiring to tap one of the largest and richest economies in the world.

The American tech dominance, aka monopoly and monopolistic behavior, has been great for investors, although the jury’s still out on whether it’s good for citizens more broadly. Apple has a monopoly on smartphones. Alphabet has a monopoly in search and digital advertising. Microsoft has a monopoly in computer operating systems and its office products. Amazon has a monopoly in ecommerce. Nvidia has a monopoly in AI chips. Meta has a monopoly in social networks. X seems to be a falling star.

Do individuals care about monopolies? We think not or at least not in the ways that they should. They want what they want when they want it and are willing to pay if the value is there.? And we are forgetful.? Remember those passwords?

Market Dynamics

Besides us, possibly the harshest critic of the tech behemoths is Professor Scott Galloway. He has gone on record consistently to decry these organizations. His book, The Four asks, “Is it possible to compete with Facebook, Google, Amazon, or Apple? How fair is the market’s environment? He criticizes the Four’s efforts to eliminate their competition, creating a landscape of big tech monopolies.” We would actually make this the Eight and add SalesForce, Oracle, Adobe and Microsoft. While large, powerful companies always have a competitive edge, he argues that the core “Four wield their size and power unfairly to purposefully eliminate competitors from the market.”

He describes the monopolistic mentality as a drive “to eliminate competition in three ways: by purchasing competitors (Amazon’s much-used tactic to enter a market segment and/or maintain its dominance); by forcing competitors out of business; and by engaging in underhanded tactics such as breaking promises, borrowing, and stealing.” In our book,?The Truth About Transformation , we detailed Amazon and its acquisition behavior as it sought to eliminate rising stars that presented a threat. So much so that Amazon priced competitive products taking huge losses simply to grab customers from the rising stars, lowering the value of the competing company and buying them out at that lower value. Some might say that is just what happens and is even acceptable in a capitalistic society. Any behavior is acceptable in a free capitalistic economy. It’s simply the cost of doing business.

Galloway elaborates, “The Four are so massive and have so much capital that they can simply acquire any competitor that poses a threat to them, at prices smaller companies could never afford. A striking example of this is Facebook’s purchase of WhatsApp, at the time a five-year-old instant messenger company with only 50 employees, for?$20 billion.”

What enables these giants to scale and rescale is their business model. “The Four can also afford to lose money in the process of forcing their competitors out of business. For example, Amazon sustained a net loss of $5 billion on shipping fees in 2015 to incrementally reduce shipping times, but this was still a win for the company because other retailers didn’t have the capital to compete.” And that kickstarted the market disruption that started putting most legacy retailers out of business or resulting in their major downsizing.

The Western Way

And that leads us to the hostile marketplace we are operating in with capitalism prevailing – even decimating. “Capitalism is the most powerful system devised to elevate?the human condition. Its oxygen is innovation, which requires healthy markets. America has a?proud legacy ?of knowing when a corporate organism has morphed into an invasive species suffocating an ecosystem via predatory pricing, bundling, or other actions that control the supply of products and/or services. Historically, we step in — a competitive marketplace takes precedence over an aggregation of individual or corporate power. Antitrust laws pierce the canopy, oxygenating the marketplace and preserving a core attribute of innovation and prosperity: churn.” Galloway never lets up.

But here’s what hubris is unveiling. Axios’ recent headline: EU launches probe into Meta, Apple and Alphabet under sweeping new tech law. The financial technicalities are complicated. “The European Union opened an investigation into Apple, Alphabet and Meta, in its first probe under the sweeping new Digital Markets Act tech legislation. The first two probes focus on Alphabet and Apple and relate to so-called ‘anti-steering rules.’ Other investigations are looking into whether Google favored its own services over rivals when showing search results, potential issues with Apple’s iOS, and Meta’s ‘pay or consent’ model,” reports Axios.

The moves by the EU against Apple and their App Store have resulted in applause from Meta, Alphabet and even Microsoft as each company shares their support for the EU’s direction publicly. They see a potential door opening that they may opportunistically enter after having been so resigned to having no choice but to play ball with Apple. Despite their own monopolistic practices, they are seeking to project themselves as do-gooders who must help take down the bad guy. It’s harsh out there. The eat-or-be-eaten position becomes the envy of business leaders and the subject of inspirational leadership books.

The Endgame

Here’s where we are netting out. We’re all for a healthy economy and the dynamics of America’s breed of next-gen capitalists.? What keeps us up at night is how quickly a great idea can turn to the dark side and become pervasive, controlling, and limiting to society.? Linux’s open-source platform was a noble innovation when it launched in 1991. Then 32 years later Sam Altman promised OpenAI would be open source to help humanity.? Well, look how that played out. OpenAI, is not open source and it now consumes 75% of the market of those using AI singly and in partnership with Microsoft via their Office-based Co-Pilot.

The point is where are the guardrails to anticipate how all this can get so out of hand?? We are like lemmings running to the edge chasing these tech seductions. We are by no means advocating that we go back to sleep. Instead, we advocate the practice the essential skills of critical thinking, mindfulness, common sense and making systemic connections.

Open source was what founded the principles of American society: helping others, sharing information and education. Innovations to further society have always been embraced as the fruits of the collective many are better than the one. The strengths of open source are that many are better working together to advance society in contrast to drowning solo in a competitive construct. The hazard is that, as we said about flattery, originality is hard to come by and then too often imitated and then obliterated by more highly resourced competitors.

It’s a dog-eat-dog world out there but it seems we are so consumed by our feeds, to-dos, and rabbit holes that we are developing tunnel vision. We are also so distracted that we rarely determine if the monopolistic behaviors of brands are impacting us and our society. Be aware, be objective, and attempt to see the patterns. Good guys are bad guys and bad guys might be good guys, depending on your perspective.

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