Technology startups generally have relatively low entry costs and aren’t trying to jump into an established market with substantial network effect and force out an entrenched larger player.
How many startups do you see trying to, say, go toe-to-toe with Microsoft in the desktop OS or office suite market, and how successful are those?
It’s a fallacy to point to the lack of direct competition from startups in the desktop OS or office suite market and claim that as proof that natural monopolies exist. Companies that dominate an industry for a period often lose their dominance when new technologies come along that make their dominance irrelevant.
Companies that dominated telecommunications when fixed land lines were the only game in town now compete against cellular phone networks and Internet telephony. Microsoft’s dominance in the desktop OS space is becoming less and less relevant as more of people’s day to day computing needs move into the cloud. Google Docs is a potential challenger to Office in the future and has its roots partly in a startup (Writely).
Technological innovation has a way of undermining monopolies that are not protected by government regulation. Sometimes it even manages to undermine protected monopolies—the process of updating legislation to maintain profitable monopoly privileges in the face of technological change is fortunately slow enough that the rent seeking entities can be beaten by faster moving companies.
Technology startups generally have relatively low entry costs and aren’t trying to jump into an established market with substantial network effect and force out an entrenched larger player.
How many startups do you see trying to, say, go toe-to-toe with Microsoft in the desktop OS or office suite market, and how successful are those?
It’s a fallacy to point to the lack of direct competition from startups in the desktop OS or office suite market and claim that as proof that natural monopolies exist. Companies that dominate an industry for a period often lose their dominance when new technologies come along that make their dominance irrelevant.
Companies that dominated telecommunications when fixed land lines were the only game in town now compete against cellular phone networks and Internet telephony. Microsoft’s dominance in the desktop OS space is becoming less and less relevant as more of people’s day to day computing needs move into the cloud. Google Docs is a potential challenger to Office in the future and has its roots partly in a startup (Writely).
Technological innovation has a way of undermining monopolies that are not protected by government regulation. Sometimes it even manages to undermine protected monopolies—the process of updating legislation to maintain profitable monopoly privileges in the face of technological change is fortunately slow enough that the rent seeking entities can be beaten by faster moving companies.