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Kevin Raulston, Owner

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kevin@globaldirectpartners.com

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Why a lot on Monopolies are Good

January 1, 2019

 

Monopoly is a game that most of us played as both children and adults. Also, in school we were taught the monopolies were bad. Monopolies were the territory of companies like Standard Oil early in the 20th Century. We have been told that monopolies drive up prices and created unfair environment for competition.

 

While often true, monopolies are not always bad. Inside in his recent book Zero to One, Peter Theil spends a great deal of time discussing creative monopolies. The beauty of this is the way he sets these monopolies against the term "competition". Growing up in Western culture most of us are taught that our economy is based upon competition. That it is competition that makes economy healthy creates jobs and provides the way forward.

 

However, if you're going to pursue a new business idea why would you choose an area full of competition?  Instead identify an area to build your business where you can have a virtual monopoly. Current examples of creative monopolies would include Twitter, Facebook, Microsoft, Google, Apple and LinkedIn.  Each of these examples are technology companies, with only Apple and, more recently, Microsoft making tangible products.

 

Beyond straightforward technology companies, the remains room for creative monopolies. One very well-known product company using technology is Amazon. Amazon is a great company for delivering products directly to people's homes and offices. Other companies that can be looked at as creative monopolies include delight of Airbnb, Über, Tesla.

 

What you're essentially looking for according to Thiel, is a new idea or product where you can create a virtual monopoly by having the best solution oriented product offered by an excellent company into a market that will deliver enough financial reward to support the required effort.

 

So if you have a great idea for new company, you may want to pay special attention to the seven questions that Peter Thiel believes every business that would like to monopolize its market must answer. These are:

 

  1. The Engineering Question - can you create a breakthrough product or technology

  2. The Timing Question - is now the right time

  3. The Monopoly Question - can you get the biggest share of a little market (and then extend and dominate)

  4. The People Question - are the right people on the team

  5. The Distribution Question - can you actually deliver your product

  6. The Durability Question - can you defend your market for 10+ years

  7. The Secret Question - what unique opportunity have you identified

 

To be fair, there are many companies that are highly successful, that cannot answer each of these questions affirmatively. However, it is very likely that if you cannot answer all seven positively, you are likely going to fight harder for long term profitability than ones that can.

 

If you are not a creative monopoly, you better make sure you are operating well, if you are going to be successful.  Without a creative monopoly, competition defines your business more than your uniqueness.  Facing that challenge directly, will give you the ability to succeed even without a monopoly…but, wouldn't making one of these creative monopolies be huge fun?  Of course it would.

 

 

"I think it's wrong that only one company makes the game Monopoly." - Steven Wright

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