Change Is The Only Constant In Tech
As conversations surrounding tech and antitrust become increasingly politicized, it seems that a critical fact about competition is often overlooked: markets aren’t static. As Mercatus Center’s Jennifer Huddleston said at CES earlier this year, “innovation has in and of itself been the best kind of competition policy in America.” Further:
— Warnings of “natural” tech monopolies have been sounded before, only to later be proven overblown.
— The tech services once described as monopolies have lost their market positions as innovation has disrupted markets.
— Although technological disruption is difficult to perceive before it happens, its ability to upend markets has been proven time and again.
Warnings of “natural” tech monopolies have been sounded before, only to later be proven overblown.
“Will MySpace ever lose its monopoly?” (Victor Keegan, The Guardian, 2007): “If it were a country, MySpace would be the seventh biggest, ahead of Russia and Bangladesh, though not all users are active. It had 153,339,321 users when I started writing this article and 153,523,640 when I had finished. What does this growth bode for the future?”
“Who Will Break iTunes’ Monopoly?” (Talia Soghomonian, NME, 2010): “You might say: boo-hoo, that’s capitalism. But there’s a deeper point here. Apple’s winner-takes-all triumph is entirely in keeping with the trajectory of the music biz in the internet age, whereby a handful of giant aggregators reap all the profits, while taking none of the risks.”
“Nokia: One Billion Customers — Can Anyone Catch The Cell Phone King?” (Forbes, 2007):
The tech services once described as monopolies have lost their market positions as innovation has disrupted markets.
Since Keegan’s piece was published in The Guardian, MySpace has been overtaken by almost a dozen competing social platforms in terms of Monthly Active Users, according to the Our World In Data Initiative.
The rise in popularity of music streaming services has eroded the previous position of iTunes, according to data from Goodwater Capital.
Nokia was dethroned as the cellphone market increasingly became a smartphone market, and consumers preferred alternative operating systems to Nokia’s Symbian, according to tech analyst Benedict Evans.
Although technological disruption is difficult to perceive before it happens, its ability to upend markets has been proven time and again.
Tech incumbents are beaten by competitors that change the playing field rather than compete on the same plane, writes Benedict Evans. “With each cycle in tech, companies find ways to build a moat and make a monopoly. Then people look at the moat and think it’s invulnerable. They’re generally right. IBM still dominates mainframes and Microsoft still dominates PC operating systems and productivity software. But… It’s not that someone works out how to cross the moat. It’s that the castle becomes irrelevant. IBM didn’t lose mainframes and Microsoft didn’t lose PC operating systems. Instead, those stopped being ways to dominate tech. PCs made IBM just another big tech company. Mobile and the web made Microsoft just another big tech company.”
Developments in tech markets reflect the theory of “creative destruction” coined by the economist Joseph Schumpeter, writes the Cato Institute’s Ryan Bourne. “Economist Joseph Schumpeter warned against such monopoly fatalism. He recognized that the most important long‐term competitive pressure comes from new products cannibalizing incumbent businesses through marked product quality improvements. An antitrust policy that second‐guesses the future based on the present ignores this unpredictable margin of competition, to the detriment of consumers.”
5G, augmented reality, wearables, blockchain and crypto assets will all act as disruptors to current tech incumbents, writes AEI visiting fellow Bret Swanson. “The dominant companies of an era always look invincible at the time. Sometimes these companies remain dominant — as Thompson points out, America’s three early-20th century auto industry leaders are still the big three today. But the list of seemingly obvious monopolies that later went bankrupt is also long (and humorous). And the possibilities for future competition in the tech industry are underestimated. Bell’s law suggests a new wave of distributed computing may be just around the corner.”