Why should you build an Monopoly ?

Have you ever wanted to have your name in the news and millions in your bank account, what about billions. What if for just one thing the whole world would have to continue and you elope. If you've ever dreamt of building the next to Google or Facebook, you are not for today, we will explore the art on how to built a monopoly.

People hope for a better future, a future of progress that makes their life easier safer and more rewarding. Everyone strives for progress in one way or another, the bakers tries to bake better breads and Airport strives to get more flights and a horse breeder tries to breathe faster horses.

At the heart of all these ambitions lies the same thing horizontal progress taking something that exists and making it better, how you make it better does not matter because at the end of the day there will always be others who will gladly sell inferior goods at a cheaper price.

In the same ways that the fastest processor will never be the only processor in the world the best lawyer will never be the only one to build a monopoly then you need vertical progress the act of creating something that wasn't there before.

A monopoly built upon the fastest car will never exist but a monopoly built upon first flying car may very well become reality, vertical progress however is not enough for if you innovate without capturing some of your innovations value, you will be eaten alive by the arc analysis of all monopolies, competition that is why horizontal progress is so hard to monopolize. You're effectively trying to beat the best players of their own game.

Have a look at the fate of commercial aviation arguably one of the greatest inventions of the 20th century. In 2013, airlines earned just four dollars and 13 cents per passenger at a time when the average fare was almost $760. In other words, the airlines earned 13 billion dollars of net income on over 700 billion dollars of revenue compared this to a modern monopoly like Google who earned the same amount on only fifty five billion dollars of Revenue and you see why competition is such a thorn in everyone's sides.

If you're wondering whether Google is a monopoly, the real question is what is google monopolized.

Google owns eighty-nine percent of the global search engine market and yet by positioning themselves in a global advertising business or the global IT business, they make themselves out to be a small fish in a very large pond. Make no mistake all of their site ventures like Google Fiber and their self-driving cars are just as much a defense mechanism as they are attempts at innovation.

In the modern information age, it is very hard for a monopoly to survive once it gets in the public's eye. Bragging about how successfully monopolistic you are is a quick way to get audited and broken up. Thus modern monopolies must survive by hiding in plain sight.

Americans enjoy mythologizing competition is the great driving force behind innovation but historically the greatest innovations have come from the allure of monopolies

Without the promise of great wealth no one in their right mind would risk their fortune on innovation note that there is a difference between becoming a monopoly and staying a monopoly

In the 1960s for example IBM essentially old the IT business through their mainframe computers, then during the 80s when the market shifted to personal computers and Hardware became less profitable.

The power went to Microsoft and their operating systems then Microsoft lost ground to Google. 

When mobile computing started to take off at the end of the past decade, history has shown that if a monopoly does not innovate it will eventually be replaced.

How fast that happens depends on a lot of factors. The most important of which is government support but regardless of the speed the process of innovation is inevitable and eventually even the worst monopolies of today will become relics of the past.

Monopolies have a bad reputation in the US. because the country has had to deal with a lot of bad ones in the past.

Historically the worst ones were those formed around commodity goods as was the case with Standard Oil and American tobacco which jacked up prices to unreasonable levels.

In a static world that would be the only type of monopoly, but our world is dynamic and ever-changing with opportunities to innovate lurking around every corner.

To build a modern monopoly you need to see these opportunities said another way what you wants to build is a creative monopoly, one that does not overtake and strangle an existing market but rather creates an entirely new one for itself.

Essentially you need to solve a problem that a lot of people have. The trick here is that these people don't even know they have a problem, after all the people of the 19th century list perfectly fine without cars.

As the do 20 years ago without a smart phone. To build a creative monopoly you have to do three things: first get your hands on proprietary technology, innovation is the mother of all creative monopolies and the harder it is for others to replicate your product the more successful we will be. You can try to innovate existing technology but in general you need to

improve something by at least an order of magnitude before you can overcome your big established competitors.

It is hard to build a monopoly this way but it's not impossible and some of the biggest companies of our time did exactly that Amazon offered more than ten times as many books as any bookstore in existence.

Similarly Apple definitely improved the design of tablets by at least an order of magnitude, since they went from being borderline unusable to extremely popular.

Of course by far the best way to innovate is to create something entirely new since then you don't have any competitors to worry about at least initially next you must harness economies of scale.

A monopoly should only become stronger than larger it gets otherwise it will get destroyed by the copycats, it will inevitably attract it may seem delusional to think about scaling to the billions while you're still at the drawing board. But if your idea cannot scale it will never become a monopoly. Economies of scale are why it's so hard to monopolize a service, even if you've got the best doctors in the world they can only attend to so many patients at once. Software on the other hand lies at the other end of the spectrum and as the quickest road to monopoly since every new copy of your product is only one click away

Harnessing economies of scale becomes even more important if your product value relies on other people using it, also known as the network effect.

Consider the immense pressure people feel to make a facebook profile.

Almost everyone has one and if you do not join you are essentially dooming your social life to oblivion, but if none of your friends were on Facebook you wouldn't be compelled to join at all. Since what good does it do to join a ghost town. The problem with monopolies that rely on the network effect is that it's very very hard to get the ball rolling initially. 

Your network must provide value to its users regardless of its size in order to attract its initial user base. Counter-intuitively then the best way to harness the network effect is to start in the smallest market you can find

After all Mark Zuckerberg created Facebook for his classmates at Harvard not for all mankind. The final element you need is distribution collectively made up of advertising, marketing and sales. Remember all those people whose and witting problems you have solved those same people are being bombarded with other solutions to other problems all year round. You must convince them that they need your solution above all others and to do that you need a distribution strategy. People tends to scoff at distribution because it seems superficial and dishonest. Shouldn't a superior product be able to stand out on its own in an ideal world maybe but in our day and age even just convincing someone to try your product is a daunting task.

Distribution is important because it works, you may think that you are an exception that your tastes are authentic as it only other weaker - people can fall prey to advertising but make no mistake you are not different. People tend to live with the false confidence the autonomy of their preferences because they become very good at resisting kavya sales pages.

But the best advertising is hidden in plain sight and the best salesmen are those whose performance is so captivating that you don't even realize that you're being sold.

The true masters of distribution have job titles completely unrelated to what they actually do The people who sell customers are business developers, the people who sell companies are investment bankers and the people who sell themselves are politicians.

Persuading other people to buy what you are selling is quintessential and in the end regardless of whether you make your money through ad clicks or through government contract without a distribution strategy your monopoly is doomed to fail.

The allure of monopoly is hard to resist for although the opportunities are few the rewards are

great and those who succeed become a part of history

If you wish to try your hand at this daunting task I can highly recommend the book zero to one by Peter Thiel, the co-founder of PayPal. This book is what inspired me to write this article and it is a brilliant work that offers dozens of counter intuitive insights to help you see the world differently.

Thanks for reading this article.Hope you learned something new from this !