How to Think About Monopolies


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The thousand faces of monopolies. Monopolies are villains because they charge “monopoly rents” — they can and often do hold purchasers hostage and jack up prices. To their owners and investors, however, monopolies can also be heroes — they make people rich (as Peter Thiel reminds us). How many of the tech-driven, city-based institutions now being built by NewCos will end up as monopolies? And should we be rooting for that — or trying to shape the rules of the game to encourage competition? For an overview of that issue, see this collection of long-form links (Redef). In the age of hyper-competitive market-winners like Amazon and sharp-elbowed platforms like Uber, antitrust law might well be outdated and ineffective. But if we want to let a thousand Ubers bloom (City Observatory), a few strategic market interventions could make all the difference. When Uber made good on its threat to pull out of Austin after the city passed regulations the company opposed, customers were upset and inconvenienced in the short run. But now, Austin has become a lab for Uber alternatives. We can’t stop innovative companies from winning new monopolies, but we can try to stop them from squashing the next round of innovation.

The rent is too damn low. Traditionally, rent is the price the owner of some scarce asset — land, an apartment, or a service no one else can provide — charges others to use the asset. But there are more creative ways of thinking about rent: You can take some commonly-owned resource, raise its price, and share the resulting income widely — as Alaska did with its oil reserves. Peter Barnes call this “virtuous rent,” and it has applications beyond public lands and natural resources. You can also imagine charging it for collectively owned digital abstractions like namespaces and other kinds of virtual real estate and goods.

The human tide toward cities changes everything. “Follow the money” — so went the old newsroom adage on understanding the world. But today, if you really want to fathom the rise of populism, the growth of inequality, or the sharpening of the partisan divide, you have to follow the people (Philip Auerswald in Medium). Cities, the engines of job creation and innovation, attract energy and talent. As urban migrations hollow out rural communities, these emptied-out regions are being consumed by anger, addiction, and despair. Meanwhile, cities are generating wealth, but for now at least that wealth is following a long-established pattern: It accrues to the owners of land, who get to charge rent and often wind up with monopolies. Any road from a world of “winner takes all” to one of “winner helps all” is going to run right through all our downtowns.

For millennials, plastic is no longer fantastic. Overall U.S. credit card debt has rebounded since the crash of the late 2000s, but one demographic is holding out. Younger consumers, already loaded with student debt and spooked by the havoc they observed during the Great Recession, aren’t buying into the credit-card game (The New York Times). The good news is they won’t be paying outrageous interest rates. The bad news is they won’t be establishing credit histories to help them get mortgages. Of course, maybe by the time they can think about buying homes, they’ll have reinvented that game, too.

Fashion cuts out the middleman. Like so many other industries, clothing and fashion retailers are redesigning their business to sell directly to consumers. The new companies — like Everlane, Warby Parker, DSTLD, and Mott & Bow — not only offer wide selection, online convenience, and lower markups; they also provide more transparency about the sources of raw materials and the conditions of workers (Racked). These businesses aren’t necessarily any easier to build than the old storefront model, but they’re catching on — and that helps explain why a BigCo like Macy’s is closing 100 stores.

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