At the time of writing, the fall of 2020, the stock market has been roaring for quite a while especially for large companies like Apple, Amazon, and Tesla. But wait, have we been expecting a more decentralized future, but instead monopolies seems rising rapidly, not only in the US, look like Tencent and Alibaba in China, what’s the logic underneath? Is the world going more centralized? In this book, we believe monopolies are a necessary step to a more decentralized world. Ordinary people will benefit from monopolies rather than be harmed.
The short anwser is they are doing great.
Firstly, They are doing great things for society. The traditional opinions towards large companies say Apple, Amazon, and Google, would be like, oh, they are monopolies doing evil things and being lazy. Whereas this seems not the case for today’s big companies. People who tried Meituan and DIDI will know how efficient these platforms are. Even some bigger giants like Tencent or Alibaba is also really efficient. For example, Tencent is not just working for individuals like us by providing chat and payment through WeChat. They also have a mission to ‘assist the enterprise to do digital upgrade’. Jack Ma, the founder of Alibaba, always says, there is no guarantee that Ali can survive more than 5 years, we are in a free market, competitions and innovations are everywhere. We are not a monopoly, since ‘mono’, means special permission from the monarchy, which is not our case here.
Secondly, the general public understands their value more than ever. The high tech companies’ stocks go up like crazy, and especially the big 5 and Tesla. 5 years ago, people paid more attention to small startups, but now people going back to focus on big companies, for example, Softbank led by the famous Masa Son invested in lots of startups years ago, these investments have not turned out to be profitable. So starting from this year, they allocated more resources on big tech companies that have monopoly positions.
Lastly and most importantly, the big companies are at least for now the best ways to use resources efficiently and be innovative. The reason why today’s big companies, especially these from the US and China are so innovative because they get money from the stock market. We all know what drives stock price, expectations. Innovation is the best way to maintain people’s expectations. And even better, because of the nature of the stock market, if innovations fail, the sharing holders will bear the loss with companies. Tesla’s Musk said Tesla is many startups combined. Google is famous for having small and innovative teams inside the company. The same is true for Chinese companies. For example, Tencent will allow its small teams to compete with each other to be more creative. Wechat is such one result of such competitions. In contrast, companies from Japan are arguably not so innovative, and that’s probably because they get money from banks, if you borrow money from others, your top priority is to play it safe, guarantee profits, so that you can pay back interests every year, don’t do big investment on new ideas to make sure you will always be able to pay back the principles.
To conclude this part, big companies are nowadays not only benefit from their monopoly positions in the sense of brand and scale of economy, but they are also very agile and innovative, that’s why they serve people well and liked by the general public.
Trains are so efficient because it has rails, the efficiency comes from clear rules. Monopolies are good at unifying standards for each industry. That will bring efficiency to society and at the same time make all the industries more programmable with computer code.
The first thing we need to realize is that, without standards, we can not program the industry to automate things. The software has been eating the world for quite a few decades, but I still believe software has not even reached it’s 1% of its full potential. What is slowing down the deployment in many areas? It is the lack of clear standards. With clear standards, the process of doing things will be digitalized, which will make software practical for all sorts of tasks. Take Meituan as an example, food delivery has been there forever, but 20 years ago, if you want me to use software to automate the process, that wouldn’t be possible, cause each restaurant has its specific situations, and there was not so much can be generalized, and thus not so much can be programmed with code. So it took a big driving force like Meituan, to unify things, to convince every restaurant to follow the same rules, therefore code can realize its full power.
People who do not like big companies will consider them evil since large organizations tend to give room for a lot of bossy powerful people and lazy rich people. But IMHO, big companies are necessary at least for now, since we need them to iterate standards efficiently. We know code is law, but a good law should serve the real situation well, in an industry evolving very fast, a fixed law is not really a good thing. We need a big group of people to change the rules according to real situations. Monetary incentives will be needed for these people to do the hard work for us. That’s why big companies are now going really strong.
If we have to say big companies are evil, I will call them the necessary evil. Because they contruct clear rules for each industry and iterate on the rules efficiently.
However Large monopoly-like companies have their problems, so things must change over time. The goal is to replace human-controlled organizations with algorithm-controlled organizations.
Monopolies do have their own problems. They are often very efficient in the early stage, and when they reach a stable monopoly position, they tend to become lazy. And utilize its scale as an advantage to kill new competitors. The history showed that all the monopolies fell eventually, say Standard Oil, Ford Motors, AT&T.
The future does not have to go this way, with digital technologies ready, monopolies will become algorithms to avoid all the problems. On the one hand, We don’t want the monopiles to fall, since we do want orders and referees. On the other, we like automatic referees more, we want the referees to be sensors and algorithms, not humans. For example, the running race is simple but still fun, it mainly relies on a machine referre, namely, the timer. DIDI and Meituan are also a great example of this. The drivers don’t need to manage by any human, they are mostly under the guidance of code. Code and AI can never be corrupted, they won’t be lazy anyway.
So, when the monopiles finish their task to standardize all industries, the next step is to replace them by code. During this process, blockchain, machine consensus, and other concepts like this will be very important.
In conclusion, we should say monopolies are paving the way for a more digitalized future. They accelerations the world’s transition to a standards-based game. When we need to iterate on the rules, we will still need consensus, that’s why decentralized technology like blockchain will play a key role in the future.