Upon reflecting on 2019 and the decade that was, I’ll ask, perhaps more competition is needed?
There is no Call To Action, nor a verdict. It’s an open ended question.
On one hand, competition is amazing for the consumer in the short and long runs, and fantastic for innovation in the medium to long run. When companies compete, you win. And they invest in R&D.
On the other hand, competition inhibits the ability of a small set of firms to corner and extract the maximum amount of rent. A lack of competition is fantastic for the shareholders in the short run, and absolutely terrible for consumers and society in the medium and long run.
On balance, I believe that competition is good. So, maybe there should be more of it?
I understand the idea that firms tend acquire their competitors in order to reduce the bargaining power of suppliers and customers alike. Some argue they need that power in the face of technological disruption. A common story is about Microsoft. I remember 2004: they had cornered sign in, messaging, the operating system and the browser. They were using their market dominance to interpret standards in their own special way. I thought at the time that they could use competition.
Instead, they were disrupted by technological change. Mobile. Social. Search. Three simultaneous disruptions. They certainly needed the cash to compete. And they tried. They still lost in each arena.
I understand the idea that some firms tend to acquire their disruptive competitors in order to extend their own lives. A common story is about Facebook. I remember 2012: they had cornered social and messaging. They were using their market dominance to define access to the social graph in their own special way. They saw a platform that was even easier to use than Facebook, called Instagram, and they acquired it. Think about how easy Instagram is easy to use — really just a blend of the camera on mobile and a social graph — it was a disruptive combination of technologies. They go to great lengths to predict which firms are bringing disruptive technologies forward.
So, it can be argued that if you were concerned about a lack of competition in tech, one should just wait for a technological disruption to come along, and it would take care of it. Be patient. Do nothing.
I have reason to believe that technological triggers are created by the competition.
A great competitor to the giants would not only create a core technological trigger, on the order of a mobile or a social, but would also need to contain an organizing idea that would be heretical to an existing giant. They’d need to be un-acquirable.
Perhaps we need more competition in the next decade. Maybe we need a different type of competitors in the next decade. It’s difficult to predict what combination of technologies and culture would add up into strong enough competitors.
But it’s fun to imagine.