Monopoly allows innovation to flourish
25th June 2009
This may be old hat for some readers, but it’s worth reviewing and providing some good new data for. The motivation is the idea that monopoly-haters have that when some company comes to dominate the market, they will have no incentive to change things — after all, they’ve already captured most of the audience. The response is that industries where invention is part of the companies’ raison d’etre attract dynamic people, including the executives.
And such people do not rest on their laurels once they’re free from competition — on the contrary, they exclaim, “FINALLY, we can breathe free and get around to all those weird projects we’d thought of, and not have to pander to the lowest common denominator just to stay afloat!” Of course, only some of those high-risk projects will become the next big thing, but a large number of trials is required to find highly improbable things. When companies are fighting each other tooth-and-nail, a single bad decision could sink them for good, which makes companies in highly competitive situations much more risk-averse. Conversely, when you control the market, you can make all sorts of investments that go nowhere and still survive — and it is this large number of attempts that boosts the expected number of successes.