

Ask HN: How are monopolies lost? - Haskell

Speaking about Apple's fall in the 90s, Steve Jobs says: "Apple had a monopoly on the graphical user interface for almost 10 years. That's a long time." [1]<p>Then he asks: "And how are monopolies lost?", following with his explanation for the phenomenon, which I don't think is accurate, because he bases it on the supposition that monopolies are created by great products, which certainly has not been the case with Windows.<p>I read somewhere that monopolies are not lost: they become irrelevant. Although I don't know if that is correct either: at Apple's case, what made it loose its monopoly was not technological irrelevancy, but the commoditization of complements promoted by Microsoft[2], which offered a slower, uglier, less robust, but cheaper alternative for the masses, forging the base for the Windows platform that would create a vicious circle, "forcing" users and developers to use its graphical interface.<p>But I don't have much knowledge about the rise and fall of monopolists, and that's why I would like to hear your answers, besides the obvious answer of governmental intervention.<p>Do you agree with my theory about Apple's fall? And more generally, what other cases do you know of monopolies that were not lost by technological irrelevancy or intervention?<p>[1] http://www.businessweek.com/print/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm?chan=gl<p>[2] http://www.joelonsoftware.com/articles/StrategyLetterV.html
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13ren
By a new technology that changes the nature of the value proposition, for
customers.

Warren Buffett seeks monopolies (like Coke). He avoids high technology because
of the uncertainty of technology revolutions (they can still happen but _less
often_ ; and even less likely to alter the nature of the value proposition -
though note that coke, chocolate and chewing gum were new technologies at one
time...).

\- Schumpeter's theory of "creative destructionism"[1] shows how innovations
can make monopolies irrelevant.

\- Clayton Christiansen's "disruptive innovation"[2] is similar. He tracks the
disk drive industry, and notes that incumbents retain their leadership through
technology changes - unless they change the nature of the value proposition
for customers. ie. no longer more of the same, but different tradeoffs. More
precisely: _a change in the ranking of benefits in the customer value
proposition._ e.g. Today's shift from HDD to SDD. [ _edit_ : he also predicted
the 1.8 inch HDD to rise in a new market that valued its attribute ranking
differently - pre-iPod]

\- Geoffrey Moore's "Crossing the Chasm"[3] is a more concrete analysis about
the adoption of innovations. He notes that once a leader is enshrined as the
leader, the market actively works to support them, granting them leeway never
given to the also-rans. He gives lots of reasons, but mainly it's mainly
derived from observation.

This _leadership_ has some of the qualities of a monopoly. It seems to be
pretty hard to lose, except when the basis of it changes. i.e. when it
"becomes irrelevant".

[1]
[http://en.wikipedia.org/wiki/Joseph_Schumpeter#Schumpeter_an...](http://en.wikipedia.org/wiki/Joseph_Schumpeter#Schumpeter_and_capitalism.27s_demise)

[2] <http://www.businessweek.com/chapter/christensen.htm>

[3]
[http://www.parkerhill.com/Summary%20of%20Crossing%20the%20Ch...](http://www.parkerhill.com/Summary%20of%20Crossing%20the%20Chasm.pdf)

------
mattmaroon
Windows was/is a great product in many senses. Great is not a word with a
single application to an OS.

Windows was great in that it allowed multiple hardware vendors to compete on
hardware without having to also design their own OS. It was great in that it
allowed multiple corporations to market the same platform. And as it grew, it
was great in that it allowed developers to write an app once that ran nearly
anywhere.

There's a lot more to "great", as applicable to an operating system, than even
usability, stability, graphic design. A lot of times the things you value, as
a developer, aren't what the general public does. You might want an OS that's
very much like Linux but with a much better GUI. Most people just want their
PC to cost $300 and run any program they buy or have bought in the past.

So Microsoft's OS was clearly great by far more people's definition of the
word than Apple's, and it reaped the rewards.

~~~
Haskell
"Windows was great in that it allowed multiple hardware vendors to compete on
hardware..."

Well, that is the "commotitized the complements" part.

The other part of your argument is that it is/was good enough for most users.

But let me put the question this way: If had it been 3x more expensive than
the Mac, would have it been successful?

If not, then there's a clear distinction between a great product and a great
price.

Remember the 3 Ps (Price, Product, Promotion)? Product and price are different
things, specially in the software market, where the price doesn't necessarily
reflect the cost.

So if people would not buy a 3x more expensive Windows, great product it not
the motive by which it was successful.

I think the most accurate explanation in this case is not that Windows was a
great product, but as another commenter said, that it offered a better value
proposition for the money invested - and Microsoft had not the better product
value, but the better price proposition, so they won that equation:

MacOS had a product value of 10, and a price of 5, so the value proposition
was 2.

Windows had a product value of 5, but a price of 1, so the value proposition
was 5, for each dollar invested.

~~~
mattmaroon
To the average user, if MacOS was a 10, then Windows was an 8. I won't argue
that they were playing catchup, but it wasn't that far behind after 3.1.

------
mattmaroon
How many monopolies were lost without government intervention? I wouldn't call
Apple's OS a monopoly, and even if it were, it wasn't for 10 years since
Windows overtook it in 1990.

I'm trying to think of genuine monopolies that faded away without intervention
and am coming up blank.

~~~
davidw
Good question. I suppose you'd want to dig around dead technologies... perhaps
someone had a monopoly in the wooden wagon spoke business or something like
that, that simply ceased to matter as an industry.

~~~
dnaquin
western union?

~~~
davidw
Still the only way that millions of poor people working in rich countries have
to send money home. If I recall correctly, at least.

~~~
DanielBMarkham
I'm outsourcing to South America and I've been using PayPal.

There were a few other options, as I recall. A service called Payoneer, some
others.

It used to be W.U. exclusively, but that's changed in the last ten years.

~~~
davidw
> I'm outsourcing to South America and I've been using PayPal.

Sure, but that's not the group of people I was talking about, who generally go
into a physical office, cash in hand, and want to send it somewhere else where
someone can go pick up cash. WU isn't a complete monopoly in terms of sending
money, obviously, but they still have a big chunk of the market. Actual facts
would help the conversation, though:-)

------
wlievens
By bad dice luck usually, or by aunt Jane placing a hotel on Park Lane.

------
rrf
Stronger substitutes would appear to be a significant factor. For example, the
erosion of IE’s dominance following the introduction of Firefox and others
(although the barrier of IE being pre-loaded onto the majority of personal
computers means this dominance will continue for some time). In this case not
necessarily new tech, but better tech.

~~~
Haskell
I don't think stronger substitutes (Job's better products) are the correct
answer - and as you observed, FF has only scratched IE dominance, not
eliminated it.

Better product certainlly have some relevancy, because improving IE (IE7/8)
will make it good enough that most people will not need to change, but we will
never really know how low IE6's marketshare could go if Microsoft had not
improved it - maybe it would still be good enough for most users.

At least, Windows was good enough for most users, even with better
alternatives along the history - Next, BeOS, OS/2...

~~~
speby
And also, don't forget that Firefox has also been around for a long time
now... and it still has only barely scratched that surface.

------
known
1\. Production 2\. Distribution 3\. Consumption

I think monopoly arises when (2) is vendor locked.

------
noodle
stagnation and complacency.

~~~
Haskell
Stagnation isn't a good argument if you take Coca-Cola into account.

I don't know if Coca-Cola is a monopoly because Pepsi is a close substitute,
but they are a leader in market-share in most continents, and if stagnation is
what causes the loss of market-share, they would have been gone long ago.

~~~
mattmaroon
They're certainly neither a monopoly nor stagnant. They've pumped out
innovative new products over the years (Diet Coke for instance) and continue
to do so. They've been an innovator in marketing in their industry.

Even the New Coke fiasco was only a failure to understand what nobody really
understood at the time, which is that people don't purchase a soft-drink based
on taste. It seems obvious to us now, but who would have guessed it back then?

~~~
Haskell
I meant their main product - Coke, which has stagnated as a product for as
long as I have lived upon this earth, and yet it is the leader in market
share.

But you are right that they have not stagnated on Coke's marketing, although
those Santa Claus commercials have been pretty repetitive.

~~~
mattmaroon
Well, it's not stagnant. The formula is (other than the change to HFCS
perhaps) but the marketing, which is the true product, is not. What New Coke
taught is that people aren't buying a drink for the flavor, they're buying the
physical representation of good marketing and the positive emotions that come
along with it. They've never stagnated in that aspect.

~~~
aneesh
They've also innovated in logistics. You can get Coke in places where there's
no running water.

They way I see it, Coke's goal is: 1) to make you want a Coke whenever you're
thirsty (that's the marketing), and 2) to make it very easy for you to get
that Coke (that's the supply chain/logistics part)

~~~
speby
To go with the notion that a drink isn't purchased on its taste: Take note
that Coke does taste different in certain countries, not the least of which
because they often substitute sugars, particularly in Diet Coke. Also note
that they even change the name of Diet Coke in many countries; a common one
being Coke Light.

------
TweedHeads
Monopolies create power and with power comes corruption

and debacle...

