Serial Monopoly

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= the strategy of firms involved in Netarchical Capitalism

Discussion

Richard Escow:

" It’s true that Amazon isn’t a monopoly or monopsony in anything except books – yet. But it has demonstrated through its actions that it intends to become one in every market it serves. It has used its enormous cash flow – cash flow based on government-provided tax breaks – in order to act proactively and ruthlessly to eliminate future competitors. While it’s far from a monopoly in diapers, for example, it used its revenue base to engage in brutal price competition with Diapers.com (which it then acquired).

This strategy could be described as “serial monopoly” and “serial monopsony.” It enters a market, leverages an economic advantage (sales tax exemptions, revenues from other product lines) and then preys on competitors until it reaches something like a monopoly position. Serial monopolists are always thinking about the next market to be dominated. Today’s revenues are often directed toward that end, rather than to short-term profits.

That’s why arguments like Yglesias’ miss the mark. When Yglesias writes that “’low and often non-existent ‘profits’ and ‘monopoly’ are not really concepts that go together,” he’s working from an old playbook. In the new “serial monopoly” model, they go together very well.

Uber’s leaders may not be as shrewd as Bezos, and their early move to “surge pricing” may have tipped their hand too soon. But “serial monopoly” is Uber’s model, too. That’s what those ice cream cones and kittens were really all about.

In one way the serial monopolists are a new creature, spawned from technology that allows them to enter new markets without initially manufacturing or warehousing the merchandise themselves. In another sense theirs is an old tactic, one that would have been familiar to the railroad tycoons who were setting the price of grain in 19th century America.


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These corporations are monopolists – and much more. They’ve quickly assumed extraordinary influence over our lives. They control what we know, what we see and how we spend our time. They decide who knows our most intimate secrets. They are acquiring the kind of power totalitarian governments of the past could only dream about.

Why have we been so quick to idolize the tech economy? Why have we accepted their claims so uncritically and paid so little attention to what they were actually doing? There’s the excitement of the new, and the cachet that comes with great wealth. There may also be an element of the phenomenon South American educator Paulo Freire called “the internalization of the oppressor consciousness,” where it becomes more comfortable to accept the values of the powerful than to confront the fear and sense of responsibility that arise when you challenge them.

Whatever its causes, our credulous embrace of the tech culture has left us vulnerable to its seemingly endless appetites and ambitions. Those ambitions, as expressed by everyone from its pundit and economist supporters to its own leading executives, add up to nothing less than the remaking of our economy and culture in their own neolibertarian image.

If that pink dolphin city is anything like the society the tech corporations are creating, then things we take for granted – things like privacy, competition and a thriving middle class – may not exist there. Google’s motto is “Don’t be evil,” and by its own lights these tech entrepreneurs probably aren’t.

Still, Silicon Valley represents a set of values that is amoral by commonly held standards. It’s rapidly taking control of the distribution systems for music, literature and arts. And it’s increasingly manipulating our access to information, even as it absorbs an ever-increasing share of our economy.

Scoff at the word “monopoly” if you like. But if these developments don’t concern you, you’re not paying attention." (http://www.salon.com/2014/10/24/silicon_valley_will_destroy_your_job_amazon_facebook_and_our_sick_new_economy/)


Examples

Richard Eskow:

"Despite its self-promoted reputation for “disruption” and invention, Microsoft’s monopoly approach is Silicon Valley’s real business model – and it’s been faithfully followed, in one form or another, by all of the massively successful tech ventures that have come since. (As a note: We use “monopoly” as shorthand, although in many cases – including Microsoft’s – we’re also describing monopsony practices.)

Facebook is the textbook example. Although it was never distinguished by smart design or ease of use, Facebook moved aggressively to capture a monopolistic share of the social media market. Then came the ads, the interference, the invasions of privacy, manipulation of users’ news feeds for the corporation’s own purposes – not to mention invasions of privacy and the sale of personal data to third parties.

Facebook builds nothing, manufactures nothing, creates nothing. Instead it encourages its users to do the creating, then “charges” them in invisible ways – by redirecting their time and attention to produce profits for itself.

YouTube, like Facebook, never generated its own content. It built its monopoly position by offering free access to the creative work of others. Once firmly established on its monopolistic throne, it began forcing viewers to watch advertisements before viewing videos.

That’s the model: First lure them in and establish your monopoly, then monetize.

YouTube is now owned by Google, which also commands a monopoly share of its market. Unlike some of its less-gifted peers, Google is a genuinely inventive and talented company. But, like its peers, it has relied heavily on government-funded technology (the Internet, computers, smartphones) and government-funded research to capture its monopoly share. It has used its monopoly to redirect users’ attention, and to exert frightening levels of control over users’ experience of the world.

Now a new generation of would-be monopolies is on the move. The most aggressive of them is the martially named “Uber,” which recently distinguished itself by earning an “F” rating from the Better Business Bureau.

Uber is following the path laid down by its forebears: First, identify a core market. Second, establish a monopoly position. Then capitalize on that position, either by squeezing customers and/or vendors or by using it to expand into additional markets." (http://www.salon.com/2014/10/24/silicon_valley_will_destroy_your_job_amazon_facebook_and_our_sick_new_economy/)