The Monopoly Game

So AngelList acquired Product Hunt. While this may not necessarily count as headline news, an unusually high number of high-profile acquisitions seem to have taken place in recent months.

Some of these include :

Bayer acquired Monsanto for $66 Billion

Microsoft acquired LinkedIn for $26 Billion

Didi Chuxing acquired Uber China in a deal that valued the merged entity at $35 Billion

Walmart acquired Jet.com for $3.3 Billion

A similar trend is unfolding in India as well and some of the more prominently covered acquisitions include :

MakeMyTrip’s merger with GoIbibo

PayU’s $130 Million acquisition of Citrus Pay

Jabong being acquired by Myntra for $70 Million (OK, so not all of these acquisitions are of equal stature)

Many are alarmed by the possibility that these acquisitions are creating powerful monopolies that could potentially marginalize consumer interests.



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These concerns have a very strong basis in fact.

For instance, the Didi-Uber merger already seems to be antagonizing its customers with high prices and poor service. It beckons a sobering, and rather grim future for the on-demand taxi market in India where mega-consolidation seems inevitable.

But perhaps an emerging monopoly is already imposing its dominance in the transportation sector in India.

A recent Indigo flight that I was on was scheduled to leave at 5:55 PM.

It ended up leaving at 1:20 AM. (Thats a near 7.5 hour delay, for a 1 hour 40 minute flight)

Just like every other flight, it had its fair share of business professionals who had planned meetings and onward journeys with the assumption that the flight would be on time. It also had senior citizens who needed medical attention and mothers having to devote all of their attention to their infant children.

Many of us requested (demanded ?) temporary accommodations until there was some certainty in the schedule.

We were told, in a rather matter-of-fact manner, that

“We don’t provide such services”

On that day, almost every other Indigo flight was delayed by at least 2 hours while many other airlines operated per schedule.

When we finally did board the aircraft, not a single apology was forthcoming.

For some reason, the first thing I decided to Google when the plane touched down was to check on Indigo’s market share, and found that Indigo today has a 40% market share of India’s air travel space.

To provide a perspective, Indigo has nearly as much market share as the next 3 competitors (Jet Airways, Air India, and Spice Jet) combined.

Clearly, monopoly allows you the luxury of not having to conform to the protocols of professional etiquette.

Experiences such as this have created an inherent aversion to a monopolistic market, especially for those who believe in “free-markets” and the democratic nature of capitalism.

We would like to believe that economies go through waves, alternating between peaks where a few companies exert considerable monopolistic power, and troughs where there is intense competition and disruption of the existing paradigms.

But is that really the case ?

A look at how the top 500 companies have stacked up as a percentage of total World Income reveals a surprisingly monotonic trend.



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To add a layer of nuance, here is a graph on industries in the US where the top 4 companies have accounted for at least 50% of the shipment value



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We have decidedly been moving towards an economy where a few dominant companies control an ever increasing share of the market and are therefore in a position to exert an ever increasing amount of power and influence.

But first, do we truly understand what competition and monopoly mean ?

Think back to the time you referred to the cabs market as highly competitive because of the price wars between Uber & Ola, about how the telecom business was difficult because Airtel was now under threat from Reliance, or used a similar argument to describe (dare I say it) the airline industry.

Do you notice that in each of these markets, the competition comprises of only a handful of players (sometimes exactly two), each with significant market share and pricing power ?

Most markets that we think of as being competitive, are in fact those with an Oligopoly in place, a characteristic that makes them distinctly similar to a collection of monopolistic firms.

However, the omnipresence of Oligopoly might not necessarily be a bad thing (Even if Oligopolists themselves say otherwise).

Some would say that the vast cash reserves that the big four internet firms (Apple, Google, Facebook and Microsoft) have accumulated through their monopolistic power allows them the resources to continuously focus on innovation in a manner no fledgling firm burdened by competition would ever be able to.

There is a reason innovation matters so much in a monopolistic setting.

While Kodak and Nokia remain recent examples of monopolies eaten alive due to their inability to adapt to a rapidly changing technology paradigm, a more profound case might be made of the Japanese keiretsu.

The keiretsu comprise of large conglomerates that continue to control an intricately connected empire of oligopolistic firms, such as Mitsubishi and Toyota, that have spread their influence across manufacturing, banking and financial services, food, metals and chemicals, mining and infrastructure as well as content and entertainment.

With such densely connected networks whose interests were protected by the government, there was little incentive for innovation and little chance for new entrants to break through.

If Japan’s GDP has been growing at the negligible rate of 0.5% annually since 1980, might that be attributed, to a significant degree, to the keiretsu that continue to exist today ?

However, innovation can also allow a monopoly to create an entirely new monopoly.

Case in point : Blackberry (Wait, what ?)

I know what you are thinking : Isn’t Blackberry dead ?

Not in Indonesia.



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While this video is dated, and the Blackberry device sales have been declining in recent years, it turns out that Blackberry’s BBM messenger is incredibly popular in the nation, more so than Whatsapp or Facebook messenger and is used for much more than just messaging.

Indonesians don’t seem to be complaining about either of Blackberry’s monopolies.

I am still working my brains to figure out what the monopoly that disrupts the airline industry will look like :

Will it be a company like Blackbird, with an Uber for X model to bring private jets to the mass audience, using existing aircraft inventory? (Example : Uber, obviously)

Will it be an entirely breakthrough technology like Hyperloop that makes existing transportation solutions obsolete ( Example : Apple and Samsung, over Kodak)

Or will it be a company like SpaceX looking inward to create an inter-planetary transportation monopoly (Example : Hmmmm…)