Tech is not an Oligopoly — Telecom and Healthcare Are
Let’s start by reviewing some introductory Microeconomics. Even if you’ve already taken Microeconomics, whether as an AP class or in college, let’s review the fundamental definitions of monopolies in competitive / capitalistic environments and apply them to what’s going on today in order to understand the largest companies today a bit better.
Introductory economics has a very narrow definition of the word market, which is basically supply of goods and services meets demand of those same goods and services, and if either supply or demand change, the other will catch up and reach equilibrium. As consumers, we are much more familiar with the demand side of the economy than the supply side. We make several choices (some of us every day) about which products to buy that then support the suppliers who produce those products. The demand side of the economy represents all consumers, including us and our friends and family, put together that make up the total demand for all products and services in the market. Simple enough, right? So, let’s focus on what we don’t see: the supply side.
When markets are new (i.e. a product or service is newly invented — think smartphone), there can be chaotic levels of instability as dozens of entrants try to enter this market and try to reach economies of scale. That’s a microeconomic term that only applies to suppliers. Basically, it means that the more stuff your company makes, the better your company gets at making that stuff faster and cheaper and better because of several reasons like industry knowledge, talent, and distribution relationships. So, some new company who hasn’t made as much of that stuff yet is at a disadvantage and can’t compete with you because you are just that much better and cheaper and faster. So new entrants often go out of business since they can’t compete on price and quantity. But what about the other entrants who started at the same time as you? Most of them will go out of business too — but some of them won’t.
Some of these companies (aka suppliers) will also reach this magical haven of an economy of scale and we end up with between 3 and 10 companies engaged in a competitive oligopoly of product wars, where each tries to one-up the other in making something faster, better, cheaper, cooler, hotter, etc. This is the case with…
