The “New Mutant Capitalism” has a lot of worrying features. Let’s not worry about the wrong ones. In particular, let’s not worry about whether these companies are “monopolistic.”
The threat of monopoly in capitalistic commerce, industry, and finance has been a perennial bugbear for politicians, social critics, and do-gooders.
Maybe this is because warnings against monopolies go all the way back to the man who originally described how capitalism works. Adam Smith said in The Wealth of Nations, “The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition… is the lowest which can be taken.”
More likely, monopoly is a bugbear for do-gooders because they’re still mad about playing the Monopoly board game with the smartass kid from down the block (now running a hedge fund) who talked the do-gooders into letting him finance hotels on their Baltic and Mediterranean Avenues in return for giving him their Park Place to go with his Boardwalk.
Never mind that in a free-market system, monopolies are only possible with the bureaucratic enforcement powers of government. And government bureaucracy is controlled by politicians, social critics, and do-gooders.
And yet, the five largest U.S. corporations, measured by market capitalization, do seem somewhat monopolistic on first impression:
2. Alphabet (Google)
And first impressions matter.
The U.S. Department of Justice accused Microsoft of engaging in anti-competitive practices in violation of the 1890 Sherman Antitrust Act and tried to break it up in 1998. To put it in layman’s terms, Microsoft was guilty of being too good at what it did.
Microsoft got there first with the best of the computer operating systems… But I doubt that, when penning his antitrust bill, Senator Sherman (1823-1900) was thinking about a funny magic-lantern-show contraption that would sit on your desk one day in the distant future.
Microsoft settled the suit in 2001 by addressing some legal complaints I don’t understand with some concessions I don’t understand either.
Microsoft survived in one piece, but I bet it cost a whole bunch of 1s and 0s with a dollar sign in front.
Political and socially critical do-goodery is (as most things are) worse in Europe. In 2008, the European Union (EU) fined Microsoft €899 million for its excellence and in 2013 fined it another €561 million for failing to get un-excellent enough.
This year, the EU fined Facebook €110 million for monopolistic policies (not, alas, for allowing Hillary Clinton to “share” her Wellesley College commencement speech).
And the EU fined Google €2.4 billion for, among other things, restricting third-party websites from posting ads from Google competitors on Google. What? Macy’s buys a billboard and Gimbels gets to advertise on it?
Not that there is a Gimbels (or much of a Macy’s) left anymore, due to Amazon’s predatory monopolistic behavior.
Which doesn’t exist!
Amazon’s portion of total U.S. retail sales is 5%.
I repeat, 5%.
Let’s compare that to a real monopoly – me. I’m a total monopoly at my house. (At least I hope so. The UPS man is very buff…) Anyway, I have complete monopolistic control over retail sales to the O’Rourke household. (That is, if you don’t count my wife, my daughters, my son, and the UPS man who keeps bringing stuff no one admits to ordering…) And do you know what my portion of those retail sales are?
It may be more than 5%, but only because my tractor broke…
Anyway, let’s give up on my comparison and declare, “Amazon is not a monopoly.” Same with Microsoft, Facebook, Google, and Apple. Instead, they suffer from “The Kleenex Problem.” Their names have become synonymous with certain kinds of products.
This is also true of some kindred (and, in one case, subsidiary) Mutant Capitalist companies such as Uber, Airbnb, Twitter, and YouTube.
People with minds too small to contain more than one name for anything (e.g. politicians) assume that all e-commerce, computer operating systems, social media, search engines, smartphones, strangers taking you for a ride, unknown persons in the guest bedroom, incoherent thoughts had in the middle of the night, and time-wasting blurry videos we annoy our friends with are the products of monopolistic enterprise.
A better name for it might be “The Zipper Problem.” Kleenex does have 47% of the U.S. nose-blowing market, after all. “Zipper” was never even a corporation. The word was briefly trademarked by B.F. Goodrich in the 1920s, but only for use on rubber galoshes.
Until I looked it up, I had a vague idea that there was an enormous “Zipper, Inc.” out there, and that if it ever got greedy and decided to charge $10 per interlocking tooth, we’d all be going around with our barn doors open and our dresses falling off.
Apple has only 18% of the global smartphone market. And it would have less if its competitor Samsung hadn’t added the “liar, liar, pants of fire” feature to its Note 7 phones.
Also, on a personal note, the Apple iPhone design reminds me of the featureless black monoliths that keep showing up and causing trouble in Stanley Kubrick’s 2001: A Space Odyssey. (Yes, my children are threatening to get me a Jitterbug for Christmas.)
Microsoft might have once had a monopolistic air about it, but Windows is no longer the leading, let alone the only, computer operating system. Google’s Android has 40% of the market versus 36% for Windows.
This makes Microsoft and Google into what economists call an “oligopoly”… Meaning there are so few sellers of something that the few can control the price that the many (the buyers) pay.
However, you can’t have too much control over the price of your product when you’ve got competitors, like Linux, who are giving the product away for free.
Albeit, Linux is “free” in the sense that you’ve got to be living for free in your mother’s basement and have unlimited free time to install it because you’re unemployed. But, still…
Twitter, for all the press it gets… (Mr. President, Twitter founders Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams send their warmest regards)… has a laughable 5.2% of the social-media market.
Facebook does better with 39%. But to my teenage children, Facebook is about as interesting and hip as the school bulletin board. They have ways of electronically communicating with their peers that are so new, so devious, so incomprehensive to adults that, by comparison, the German WWII Enigma machine was a secret decoder ring in a breakfast cereal box.
If Putin’s famed group of computer hackers attempted to intercept messages about which boys are cute sent from my daughter Muffin to her best friend Bitsy, the hackers would end up running screaming from the Kremlin begging for jobs installing cable.
Uber estimates it has 40 million American riders per month. Go ahead and honk your horn, Uber. The U.S. Department of Transportation estimates 445.8 billion American car trips per year.
Airbnb projects 100 million “booked nights” in 2017. U.S. hotels have around 5 million rooms and a 62% average occupancy rate. That’s 1.2 billion booked nights. With room service – so you can order a drink and calm down about Airbnb taking over the American hospitality industry.
Only Google (79% of search-engine views) and its subsidiary YouTube (78% of video sharing) have real monopoly bragging rights.
Getting a monopoly in video sharing is like getting a monopoly in stupid. I’ve known guys who tried. (“Hold my beer and watch this… ”)
As for Google… Elsewhere in this issue of American Consequences I describe how awful it is as a search engine. But this doesn’t mean it won’t remain dominant in the business for a while.
Maybe for a long while. Horses were dominant in the transportation business for thousands of years. Then one day it occurred to people that a horse is a thousand pounds of bad attitude that kicks and bites and stinks up the garage. And the horse went the way of the horse and buggy.
There’s plenty to damn in the New Mutant Capitalism. But if you damn it for being monopolistic, you’re a horse’s…