Comment by TomOfTTB | Hacker News Reader

Comment by TomOfTTB | Hacker News Reader

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The problem with this article is he lacks any historical perspective. The offline companies he quotes have all been around for a long time (relatively speaking) and that contributes to their position.

For example, Coca-Cola existed for 17 years before Pepsi even came on the scene. That's longer than all but two of the online "monopolies" he referenced (see the "great new monopolies" link). Beyond that Pepsi has been around fighting Coke for dominance for the past 100+ years.

Same with McDonalds (1955) and Anheuser-Busch (1852).

In all these stories the initial company had as much dominance as online companies do now. Pepsi was founded by a guy who wasn't willing to pay Coca-Cola's prices and realized he could produce Pepsi and sell it for half the price of Coke while still making a profit (See "Twice as much for a Nickle")

On the tech companies you're already starting to see erosion in the older monopolies. Windows is starting to see serious losses from increasing Mac sales, Intel has been beating AMD back with a stick and even Google is having to make improvements to keep Bing at bay.

So it will literally be decades before we can know if the author's thesis is even remotely valid

I agree with this opinion. The author lacks historic perspective. New successful businesses automatically are monopolies since they create new markets. This can obviously be seen in tech nowadays since this is all technogicially new.

Historically it was the same and these companies still benefit from their competitive advantage (or were crushed by the state) just to name Standard Oil, Bell/AT&T, BASF, Ford. Just over time did competititors take market share from them, because they became huge beurcratic monsters (as all monopolies do).

Agree with parent and gp. Not only that, the article lacks an Econ 101 understanding of microeconomics. Most markets have a few big firms because of the pervasive effect of economies of scale[1]--generally, bigger firms have lower cost per unit. That's why 1-3 is common in many markets. (For an interesting discussion of why it's socially advantage to have N>=2, see the notion of "deadweight loss" that happens when there is only one firm[2]).

Article is right in one way: software is very different from physical goods. The marginal cost of each additional unit of software is 0. And there's evidence (such as appears frequently on HN) that a bigger firms do not necessarily produce software more efficiently. I've always suspected the software industry is more dominated by network effects[3], which has a similar effect on the market as returns to scale: a small number of firms & high likelihood of natural monopolies.

[1] http://en.wikipedia.org/wiki/Economies_of_scale

[2] http://en.wikipedia.org/wiki/Deadweight_loss

[3] http://en.wikipedia.org/wiki/Network_effect

I think a big difference though is geographic segmentation. Pepsi could dominate the Southwest and Coke could dominate the Northeast; there's no reason why that would be true of amazon vs. buy.com.

We do see that with internet companies only for national or language boundaries, e.g. baidu in China, gumtree dominates in the UK vs. craigslist in North Am, Yahoo beats google in some asian markets, Orkut is popular in Brazil, etc, etc.

It also lacks anything close to a significant sample size. His observations, and to be fair most of the response here, are purely anecdotal.

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