4 ms·

Competition, not break-up, is the cure for tech giants’ dominance

27 points by lukecameron 8y ago

shishy 8y ago
(I can't find the full article as I'm not an economist subscriber)... Isn't the general idea behind breaking them up that in their current state, these companies are near monopolies and make it impossible for new competition to thrive? Even more so because when they did have competition in the past (e.g. Facebook with Instagram), they just acquired them? I wonder if regulators were not fully aware of this when that merger was happening -- I think Ben Thompson at Stratechery hinted at this in an article some time ago.
- heliodor 8y ago
  There are different causes for monopoly and maybe they should be considered and addressed individually. Type 1) Very high costs You are free to build a competitor to Google Search. No one has the resources needed to build it or they don't think it's a good way to spend their resources if they do have them. Type 2) The nature of the product renders competition difficult You are free to compete with Facebook. Unfortunately, it's naturally a winner-take-all market because the more users you have, the more each user gets out of the product. Type 3) The company behaves unfairly You are not free to compete. This is the one that most people think of most of the time when they say monopolies are bad. Once you have power, you take actions to maintain your power and crush newcomers.
  - m-p-3 8y ago
    I was reading some comments on Slashdot regarding the Spotify vs Apple story, and some where saying "Spotify just wants to sell music subscriptions while asking to be hosted for free on Apple's app store. If they don't like paying 30% they can just make their own device and app store". Yeah, as if you can build an ecosystem as big as Apple from scratch just on the premise of selling music and nothing else. Some people are just out of touch with reality. Microsoft, with far more resources, tried with Windows Phone and it failed.
    - chillacy 8y ago
      What if: because building these things is hard, therefore it should be rewarding. Instead the hard stuff gets commoditized over time. Photolithography and operating systems are hard, but now social networking is where the money is at.
NoPicklez 8y ago
Right, but how do you create competition if the monopolies are so big that they will either continue to beat you in market share, or simply acquire you. Given that to rise up and "compete" you will likely need to have a product they don't have that appeals to the market. My understanding of "breaking up" is the artificial creation of competition when organic competition cannot come to fruition on its own.
- whb07 8y ago
  They just don't simply "acquire" you, with a gun to your head. They make an offer and then one presumes they would mull it over. It is publicly known that Yahoo tendered the $1 billion USD offer at Facebook in its infancy. Obviously they said no, and then they disrupted the market. I'd also like to point you to Clay Christensen's theory of disruptive innovation. One of the parts is that well run companies while doing everything optimally will lead themselves to destruction because they will laugh and scoff at the idea of being involved at the lower-end market brought on by new technologies. Then theres also the internal resistance within the company. Imagine trying to staff up a small team to checkout a possible new technology to do X. No rational manager will want to take that opportunity as it is clearly a fool's errand. They'd rather stay and be the manager for the profit generating center, rather than go pursue some foolish idea that clearly will never go anywhere. So what you end up with is many, many reasons why the best companies miss the ball on where the market was moving to in an obvious (in hindsight) way. [0]https://hbr.org/2015/12/what-is-disruptive-innovation https://hbr.org/2015/12/what-is-disruptive-innovation
  - mannykannot 8y ago
    In many cases, a large company can "hold a gun" to a small company by undercutting it until it acquiesces or goes out of business - see Amazon vs. Quidsi, for example [1]. This may well be proscribed anti-competitive behavior, but the damage is done before the courts rule, even if the startup can afford to see it through the legal process. And for publicly-owned companies, resisting is rarely feasible because a majority of shareholders will find it to be a risky proposition (and a majority may have invested in hopes of a takeover, anyway.) It is rare for a startup to grow large enough to challenge an entrenched incumbent in a large market without taking on a majority of investors who are not necessarily committed to fighting for independence. [1] https://www.recode.net/2017/3/29/15112314/amazon-shutting-down-diapers-com-quidsi-soap-com https://www.recode.net/2017/3/29/15112314/amazon-shutting-do...
sfopdxnonstop 8y ago
Oh look, someone arguing for the result of continued monopoly.
screenbeam 8y ago
Stop linking to paywall articles. No one pays for that trash.
- dang 8y ago
  Please stop posting these comments. The paywall issue has long been settled on HN. No one likes the status quo but the alternatives are worse. https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989 https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix&page=0&query=by:dang%20paywall https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...

27 points by lukecameron 8y ago

(I can't find the full article as I'm not an economist subscriber)... Isn't the general idea behind breaking them up that in their current state, these companies are near monopolies and make it impossible for new competition to thrive? Even more so because when they did have competition in the past (e.g. Facebook with Instagram), they just acquired them? I wonder if regulators were not fully aware of this when that merger was happening -- I think Ben Thompson at Stratechery hinted at this in an article some time ago.

heliodor 8y ago
There are different causes for monopoly and maybe they should be considered and addressed individually. Type 1) Very high costs You are free to build a competitor to Google Search. No one has the resources needed to build it or they don't think it's a good way to spend their resources if they do have them. Type 2) The nature of the product renders competition difficult You are free to compete with Facebook. Unfortunately, it's naturally a winner-take-all market because the more users you have, the more each user gets out of the product. Type 3) The company behaves unfairly You are not free to compete. This is the one that most people think of most of the time when they say monopolies are bad. Once you have power, you take actions to maintain your power and crush newcomers.
- m-p-3 8y ago
  I was reading some comments on Slashdot regarding the Spotify vs Apple story, and some where saying "Spotify just wants to sell music subscriptions while asking to be hosted for free on Apple's app store. If they don't like paying 30% they can just make their own device and app store". Yeah, as if you can build an ecosystem as big as Apple from scratch just on the premise of selling music and nothing else. Some people are just out of touch with reality. Microsoft, with far more resources, tried with Windows Phone and it failed.
  - chillacy 8y ago
    What if: because building these things is hard, therefore it should be rewarding. Instead the hard stuff gets commoditized over time. Photolithography and operating systems are hard, but now social networking is where the money is at.

NoPicklez 8y ago

Right, but how do you create competition if the monopolies are so big that they will either continue to beat you in market share, or simply acquire you. Given that to rise up and "compete" you will likely need to have a product they don't have that appeals to the market. My understanding of "breaking up" is the artificial creation of competition when organic competition cannot come to fruition on its own.

whb07 8y ago
They just don't simply "acquire" you, with a gun to your head. They make an offer and then one presumes they would mull it over. It is publicly known that Yahoo tendered the $1 billion USD offer at Facebook in its infancy. Obviously they said no, and then they disrupted the market. I'd also like to point you to Clay Christensen's theory of disruptive innovation. One of the parts is that well run companies while doing everything optimally will lead themselves to destruction because they will laugh and scoff at the idea of being involved at the lower-end market brought on by new technologies. Then theres also the internal resistance within the company. Imagine trying to staff up a small team to checkout a possible new technology to do X. No rational manager will want to take that opportunity as it is clearly a fool's errand. They'd rather stay and be the manager for the profit generating center, rather than go pursue some foolish idea that clearly will never go anywhere. So what you end up with is many, many reasons why the best companies miss the ball on where the market was moving to in an obvious (in hindsight) way. [0]https://hbr.org/2015/12/what-is-disruptive-innovation https://hbr.org/2015/12/what-is-disruptive-innovation
- mannykannot 8y ago
  In many cases, a large company can "hold a gun" to a small company by undercutting it until it acquiesces or goes out of business - see Amazon vs. Quidsi, for example [1]. This may well be proscribed anti-competitive behavior, but the damage is done before the courts rule, even if the startup can afford to see it through the legal process. And for publicly-owned companies, resisting is rarely feasible because a majority of shareholders will find it to be a risky proposition (and a majority may have invested in hopes of a takeover, anyway.) It is rare for a startup to grow large enough to challenge an entrenched incumbent in a large market without taking on a majority of investors who are not necessarily committed to fighting for independence. [1] https://www.recode.net/2017/3/29/15112314/amazon-shutting-down-diapers-com-quidsi-soap-com https://www.recode.net/2017/3/29/15112314/amazon-shutting-do...

sfopdxnonstop 8y ago

Oh look, someone arguing for the result of continued monopoly.

screenbeam 8y ago

Stop linking to paywall articles. No one pays for that trash.

dang 8y ago
Please stop posting these comments. The paywall issue has long been settled on HN. No one likes the status quo but the alternatives are worse. https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989 https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix&page=0&query=by:dang%20paywall https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...