Are the monopolies that bad?

It is questioning the unquestionable that Peter Thiel, Paypal’s Founder and one of the first external investors on Facebook, calls into question truths that we all held as absolute in the book Zero to One.

Common sense and popular opinion have been defending that Monopolies are the fastest way to weaken democracies and inflate the value of products because there is no competition to compete on price. Competition, in addition to having the power to allow more equal prices and adjusted to the market, enhances competition by gaining market share, making them have to improve themselves on a daily basis and put efforts to better serve the end customer, instead to look for ways to increase their margins.

What if everything we’ve taken for granted so far was the result of a set of preconceived ideas that have gained traction over the years, and in fact it’s just the opposite?

By the way, what Monopoly means is that there is a company that is doing much better than other companies, and that these companies are therefore unable to sustain themselves.

Companies that have the ability to create something that no other has been able to create is an advantage in itself as it will also force any potential interested in entering the market to do so with a better value proposition than the competition, and that’s all. it is possible through high levels of innovation.

The following example, given by Peter Thiel, is illustrative of this. The online search market is clearly dominated by Google, with virtually no competition, despite several attempts. This type of Monopoly can have its drawbacks, but if anyone has benefited from it – apart from Google itself – it is the user who now has access to an extremely powerful search tool adapted to his needs.

Monopolies, despite their negative connotation towards progress and innovation,  are much closer to being one of the catalysts for increased innovation and better solutions for all of us as they encourage other companies and businesses to come up with value propositions that are real added value to the user compared to the dominant company.

If ever a company comes up with a better online survey tool, this solution will be beneficial to all those who do online surveys, ie the entire population.

It is obvious that one of the ways to enter the market is through the price game, charging a much lower value compared to the dominant company. However, this approach has several disadvantages as it does not necessarily mean better service for the end customer, as profit margins will decrease.

This is the best example of the effects of using price as a competitive tool. In 2012, a study carried out on the highly competitive airline market, revealed that on average the profit margin generated by each passenger trip was $0.37!! Today Google keeps 1/4 of all receipts.

Doubts continue to hang over Monopolies as a valid and beneficial solution for markets, but at least this book now allows us to take a fresh look at what was long held to be an absolute truth. It’s always good when there are no monopolies of ideas.