Peter Thiel’s Monopoly Model
Peter Thiel’s appeal for monopoly has long been hailed as the holy grail for growth of any Silicon Valley company wanting to be a monopoly (See his book From Zero to One). The main benefit of monopoly, he argued, is to allow the mass accumulation of capital and resources to be used on adventurous projects that will take years to materialize, yielding even more monopoly advantage. But recent years had witnessed the cracks of his monopoly model — that is, monopoly works only in so far in a single vertical. When a monopoly tries to overreach to other verticals, its incentive is no longer providing the best services — its incentive is to consolidate and expand upon the monopoly in the mother vertical, often transferring the resources (i.e. customer information) of the child verticals to their mother to make her even more immune to competition. However, the lack of proper development for child verticals has made the children vulnerable to competition, especially foreign competitions (Reason why Apple Music may never take off to fight Spotify). In fact, this line of justification for overreach is only getting weaker when more child verticals are running at a huge loss — often because they have a questionable business model (i.e. Alphabet’s many child companies). But in a valley where the case for monopoly runs almost unchallenged, all costs are justified.
Vine vs TikTok
In fact, monopoly has a decimating effect on many verticals it’s trying to overreach to. While some verticals had become subordinate to the monopolies, some — with less fortune — were forced to be integrated into mother verticals before they had a chance to blossom. A recent example would be Vine prematurely sold to Twitter in 2016, despite having a decent shot at dominating the video-sharing industry — and Twitter, with its shortsighted focus on its monopoly over microblogging, was only too happy to axe the new acquired in its infancy. The repercussion was huge — since then we had never seen a proper video-sharing platform until TikTok filled the void in 2019. TikTok’s success, in my humble view, was largely attributed to the lack of competition, thereby innovation, in the Silicon Valley.
Ironically enough, Peter Thiel himself had acknowledged the lack of innovation in the Silicon Valley in recent years, attributing it his reason for moving out of the valley. Monopoly, turns out, led to anything but innovation.
U.S. vs China
In a world that’s increasingly multipolar (i.e. China’s increasing ambition to dominate the high-tech industry), the monopolies in the Silicon Valley that used to be shielded by the American dominance are starting to face usurpers overseas. The Chinese companies will only become more aggressive at scooping up any opportunity where the Americans had neglected. Let TikTok be a reckoning for the case against monopoly. It’s not too late.
