few digital superpowers. We see unmistakable evidence that a winner-take-all world is emerging in which a small number of “hub firms”—including Alibaba, Alphabet/Google, Amazon, Apple, Baidu, Facebook, Microsoft, and Tencent—occupy central positions. While creating real value for users, these companies are also capturing a disproportionate and expanding share of the value, and that’s shaping our collective economic future.
If current trends continue, the hub economy will spread across more industries, further concentrating data, value, and power in the hands of a small number of firms employing a tiny fraction of the workforce. Disparity in firm valuation and individual wealth already causes widespread resentment. Over time, we can expect consumers, regulators, and even social movements to take an increasingly hostile stand against this concentration of value and economic connectivity.
We are encouraged by Facebook’s response to the public outcry over “fake news”—hiring thousands of dedicated employees, shutting down tens of thousands of phony accounts, working with news sources to identify untrue claims, and offering guides for spotting false information.
But while value is being created for everyone, value capture is getting more skewed and concentrated. This is because in networks, traffic begets more traffic, and as certain nodes become more heavily used, they attract additional attachments, which further increases their importance.
Which companies will capitalize on the vast commercial potential of a new hour of free time for the world’s car commuters? Hub firms like Alphabet and Apple are first in line. They already have bottleneck assets like maps and advertising networks at scale, and both are ready to create super-relevant ads pinpointed to the car’s passengers and location.
Beyond these business-model experiments, automakers will need to play as the hubs do, by participating in the platform competition that will determine value capture in the sector. At least for the moment, alternatives to Google and Apple are scarce. One example is OpenCar, recently acquired by Inrix, a traditional auto supplier.
In contrast with traditional product and service businesses, network-based markets exhibiting increasing returns to scale will, over time, tip toward a narrow set of players. This implies that if a conventional decreasing-returns business is threatened by a new type of competitor whose business model experiences increasing returns, the conventional player is in for a rough ride. With increasing returns to scale, a digital technology can provide a bottleneck to an entire industrial sector.
How old is this? Lol
Are we planting the seeds of monopolies that will eventually have to be broken up?
Thanks for that moment of clarity and insight. Bears also, apparently, defecate in the woods.
I have no illusions but I remain hopeful. Thank you for continuously publishing relevant content.
The race of startups is now more important than living 🤧…