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> Technology enables consolidation.

I don't think that's quite right. Technology enables scale. That doesn't inherently mean consolidation.

For example, you can imagine Uber as a decentralized or federated P2P free software app. It's essentially a market for rides. There is no inherent reason it has to work like Facebook rather than TCP/IP or DNS. Someone like FSF or Mozilla could build the technology and then the the only people making money would be all the small timers offering rides and getting good deals on rides.

The obvious question is why that hasn't happened. And it's because there are other forces pushing consolidation. Markets don't inherently need middlemen but you end up with them when some serious problem(s) exist which require a consolidated entity to solve them. Somebody has to fight the taxi commissions. Somebody has to process the payments.

It's the same reason Paypal exists. The technology for processing payments is hardly rocket science. Paypal shouldn't be a company, it should be a standard protocol supported by all financial institutions. You authenticate to your bank or credit provider, you provide an amount and a routing number and that much money is transferred from your account to the target account.

A protocol something like that must already exist as it must be what Paypal uses to communicate with the banks. The problem is it isn't directly available to the actual account holders. So I can't write a free app or library that will allow you to connect directly to your bank and request bank transfers regardless of which bank you use.

So when Joe Blow wants to pay for a ride or some knickknack on eBay, he can't just tell his bank to send the money, he first has to sign up for Uber or PayPal and tell them to tell the bank. Solely because they've filled out all the appropriate forms with the Department of Redundancy Department in order to gain access to your money that you don't have yourself. That's where the consolidation comes from.




Technology enables scale.

Technology may also reduce the need for scale. If you believe that Coase[1] was right about the "nature of the firm" vis-a-vis transaction costs[2] then it would follow that technology that can reduce transaction costs reduces the advantage of being big. And since there are innate downsides to size (people usually ignore this point), transaction-cost-reducing technology should generally work against bigger companies.

Is that happening? I don't know, I haven't really studied the issue, and I don't have enough data to say. But even if the argument leveled in this article is right (and I'm not sure it is), I'd be skeptical of the idea that it's technology which is driving a move towards bigger / older businesses.

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

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


Part of the issue is that sometimes reducing transaction costs gets them so low that the activity ends up being done by the individual rather than a business entity.

The other side of that coin is the "commoditize your complements" thing. If you make X cheap and people who have X want or need Y, whoever is selling Y is going to grow like a weed.

So that's kind of what we're seeing. Things either get so easy that you don't need to find somebody else to do them, or they don't while everything else does, in which case that thing becomes a bottleneck in the low transaction cost economy and the entity providing it turns into a giant business corporation.




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