Friends & Friction: There’s an enterprising upside to monopolies | Fin24
 
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Friends & Friction: There’s an enterprising upside to monopolies

Sep 03 2017 06:00
Muzi Kuzwayo

Sometimes a monopoly is a good idea.

You are probably too young to remember a computer services company called Netscape, which ushered in the Internet Age by giving consumers a widely available web browser called Netscape Navigator.

It went out of business when Microsoft flogged its browser as part of the Windows package, arguing that the internet was as integral to the personal computer as the windscreen wiper is to a car.

Netscape used the courts as well as politicians to try to stop Microsoft’s strategy, but all attempts failed.

The Microsoft monopoly capital produced Excel, which crippled some spreadsheet programs such as Quattro Pro, developed by a software company called Borland – and buried many others, including Lotus 1-2-3 from IBM, which represents the Stone Age of computing.

The carnage was not limited to spreadsheets; it was widespread.

It hit the word processing market, too. Great programs such as XyWrite, which had once captured the editorial rooms of respected newspapers around the world, shrunk into insignificance as MS-Word became dominant.

In a new industry, a monopoly determines the standard. If users had to learn all the different computer programs available, the empowerment of the individual would have been impossible.

The one-person consultancies would not exist and working from home would be a dream.

The Microsoft monopoly forced new players to conform to its standard. Even the model computer company, Apple, had to swallow humble pie and allow Microsoft Office to feature on its machines.

Barry Schwartz, a US psychologist, is the Dorwin Cartwright Professor of Social Theory and Social Action at Swarthmore College in Pennsylvania. He wrote a book, The Paradox of Choice, about how too much choice paralyses a person.

“When people have no choice, life is almost unbearable,” he writes.

“But beyond a certain point, [choice] no longer liberates, it debilitates.”

Facebook, Twitter and Google have narrowed down our online choices by shutting out social-media organisations such as MySpace and many others.

As a result, they have been forced to become niche players.

Facebook and its subsidiary, Instagram, are fulfilling an important consumer desire: they allow primates to brag to their hearts’ content.

That, too, would have been impossible to achieve if the market was too fragmented.

The down side of monopoly is that customers are charged exorbitant prices.

This is a necessary evil to attract investment, build the industry and deliver a societal need.

Monopolies do not last forever. The natural evolution of business does not allow that to happen. So, enjoy your Facebook account while it lasts.

The death of monopolies is seldom caused by a competitor in the same sector, but rather, because the company has been too slow to adapt to a changing market.

Telecommunications behemoth Telkom had a vice-like grip on the South African market. It used to take months to get a phone line – until cellphones came into the market and changed the need for it.

Then CEO Sipho Maseko reinvented the business, and the share price has increased fourfold since he took over.

The cellphone companies that once had their duopoly are also taking a hit as new technologies such as WhatsApp eat up their SMS revenues as well as the more profitable international calls.

The future is a lot dimmer for Eskom. Its monopoly is being eroded by alternative energy systems.

Some homeowners have their own power-generating capabilities, and, as the technology becomes cheaper and more reliable, so the need for the power utility will be greatly reduced.

Our problem is not monopoly or its colour, but the fact that we have stopped thinking and analysing.

Kuzwayo is the founder of Ignitive, an advertising agency

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