I recently read The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper and Denise Hearn. For a decade or two now I’ve felt the economy is over-concentrated and in recent years I’ve been super-concerned about concentration of market power in the Big-Tech sector where I’ve earned my living. Reading this book has reinforced that concern and been very helpful in introducing new angles on how to think about monopoly. The issue is central to the travails and triumphs of 21st-century Capitalism and if you care about that, you might want to read it too.

The Myth of Capitalism

Where I stand · I believe that de-monopolization is a necessary but not sufficient condition for getting us out of our current socioeconomic turmoil. In particular, I’d go after Big Tech. The functions that are provided by Amazon, Apple, Facebook, Google, and Microsoft should be provided by at least twenty different companies.

I hope to dig into a few of them, with specifics, in a series of blog posts, given time and energy.

A few juicy outtakes · I don’t necessarily agree 100% with all of these, but they are thought-provoking.

“X companies control Y% of the US market in Z.”

  • X=2, Y=90, Z=beer

  • X=4, Y=almost all, Z=airlines

  • X=5, Y=50, Z=banks

  • X=2, Y=90, Z=health insurers in many states

  • X=1, Y=75%, Z=fast Internet, most places in the US

  • X=3, Y=70, Z=pesticides

  • X=3, Y=80, Z=seed corn.

“[Warren Buffet,] when asked at an annual meeting what his ideal business was, he argued it was one that had ‘High pricing power, a monopoly.’”

“Given the lack of any new entrants into most industries, it should be no surprise that companies are getting larger and older. The average age of public companies in the United States is currently 18 years old, up from 12 years old in 1996. In real terms, the average company in the economy has become three times larger during the past two decades.25 Not only do we have fewer, older companies, but they are also capturing almost all the profits. In 1995 the top 100 companies accounted for 53% of all income from publicly traded firms, but by 2015, they captured a whopping 84% of all profits.26 Like Oliver Twist asking for more, there is little left for smaller companies after the big ones eat their fill.”

“The tech giants love startups, but in the same way that lions love feasting on lifeless carcasses of gazelles.”

“Since Reagan, no president has enforced the spirit or the letter of the Sherman and Clayton Acts. It doesn't matter what party has controlled Congress or the presidency, there has been no difference in policy toward industrial concentration. In fact, the budgets for antitrust enforcement have steadily shrunk with each passing president.”

“High markups matter a great deal in the inequality debate because they are tightly correlated with lower wages for workers.”

“Monopolies – not big businesses – are the enemy of competition. Big is neither beautiful nor ugly.”

“The easiest rule of thumb is that industries of fewer than six players should not be allowed to merge.”

Useful: Numbers and stories · In the first part of the book Tepper and Hearn establish that the economy is over-concentrated, demonstrating it with lots of facts and figures. There is a wealth of anecodotal case studies illustrating the practical ill-effects of this concentration.

Useful: Big-tech drill-down · They dive especially deep on concentration in Big Tech: Amazon’s retail, Google’s search, Facebook’s demographic sorting. Little of this was news to me, but for those who haven’t spent decades in the tech trenches, or who harbor any remaining illusions that this business is on the side of the little guy, the stories are valuable.

Useful: The German narrative · After WWII, it turns out that the Allies felt the massive pre-war concentration of the German economy had been a significant factor in the rise of the Nazis. So in the reconstruction of Germany, they made a deliberate attempt to keep that sort of monopolization from happening again. I don’t know if they were right about the rise of the Nazis, but history seems to have shown them right about designing economies; this economic structure has served Germany very well.

Useful: Post-consumerism · In recent times, the US has as a matter of policy gated all antitrust litigation on a single factor: Are consumer prices raised unduly? Tepper and Hearn argue convincingly that this is wrong on many levels. One of them is ethical: Humans are more than just consumers, and undue monopolization damages the human experience of life along many non-consumer axes.

Boring: Patents and trademarks · Yes, the modern IP regime is damaging and dysfunctional, but we already knew that, and this is not really essential to understanding monopolization. This chapter should just be dropped.

Useful: Regulation and lobbying · Most progressives, including me, are big fans of public regulation of businesses. Unfortunately, there is a strong case to be made that monopolies use regulatory arbitrage to crush potential competition and retain their steely grip. This is facilitated by massive lobbying efforts, the de-facto corruption that infests more or less all the capitals of the developed world.

Not only can you lobby for a regulatory structure that favors your company’s position, at some level a high volume of regulation becomes a qualitative advantage for big companies against small ones, because they can afford to hire the lawyers and compliance people to play the game, while startups can’t.

Useful: Cross-shareholding · When a small group of investors are investors in all the leading players in any given industry, this increases everyone’s incentive to carve the space up in a nice little orderly monopoly without any of that nasty profit-destroying competition. Evidence is not scarce.

Wrong: On Piketty · Tepper and Hearn go on a side-trip to explain why Thomas Piketty was wrong, but bizarrely begin by asserting “We have yet to meet anyone who has read the entire book. We're not making that up. Professor Jordan Ellenberg, a mathematics professor, did a study of bookmarks on Kindle e-books and found that almost no one made it past 26 pages in Piketty's book.” Um, wrong, I did. And, with the exception of the final section where Piketty introduces his proposed solutions to the problem, it’s not even heavy going.

I assume Tepper and Hearn’s “anyone” includes Tepper and Hearn, so I think it’s fair to pretty well blow off their discursion on growth and inequality, since to begin with their assertion about what Piketty claims is nowhere near what I encountered when I read it. Anyhow, no biggie, it’s just one little section. And then they go on to agree with Piketty’s finding that inequality has empirically been increasing continuously and strongly, and provide a bunch of useful data graphs.

Useful: Recommendations · Tepper and Hearn finish up with a series of how-do-we-fix-this recommendations. I’m not going to copy that many of them in here because if you care, you should read their damn book already.

But they make a crucial meta-point: Anti-monopoly regulations need to be clear and simple, and based on principles, as opposed to complex rules.

Next steps · Simple: Let’s start by breaking up a few banks and big-techs and agribusiness empires. This book probably isn’t the reason why, but public perception has swung strongly against The BigCos. At this point in history they’re soft targets and the rewards to all of us from doing this are potentially huge. (By the way, this includes their shareholders.)

The best time to have done this would have been ten years ago. The next best time is now.


Comment feed for ongoing:Comments feed

From: Chris (Jun 08 2020, at 19:26)

I'd like to see a postal bank offering retail banking services. Something similar for mortgages might be nice.


From: Karl (Jun 09 2020, at 04:07)

I believe the author's last name is Tepper, not Tapper.


From: Malcolm More (Jun 09 2020, at 13:39)

Hi Tim, you might be interested in Matt Stoller’s newsletter called simply ‘Big’ which is ‘a newsletter about the politics of monopoly.’ More details:



From: John Cowan (Jun 09 2020, at 19:22)

I think the IP is a *very* important part of the power of monopolies and why they are so hard to dislodge. Not only do they lock small companies out of the market in the beginning, but they make it impossible for even mid-range companies to buy into the exorbitant patent pools they need to operate safely in the legal system. The system isn't broken: it works very well for those it works very well for.


From: Matt Laird (Jun 11 2020, at 09:09)

While listening to the radio last week about historic companies struggling with the current crisis, I actually began to ponder company lifetimes, I never had before. Despite how much nostalgia we have for brands we know, shops we grew up with, I came to the conclusion perhaps there should be a maximum lifespan for companies just like people. The renewal a forest goes through after a fire is an important part of nature, letting new entrants in and giving them a chance to grow is good for a healthy economy too.


From: Rob (Jun 11 2020, at 16:54)

Well the tragedy of it is that at one time we had this. The old CCF knew what to do with an exploitative monopoly, and we got SaskPower, SaskEngergy, SaskTel, Saskatchewan Potash Corp, Saskatchewan Government Insurance, Saskatchewan Transportation Company, and a few others. They worked pretty well, but eventually the Tories privatized most of them, ostensibly for ideological reasons.


From: Joris (Jun 14 2020, at 02:00)

... and the link for the book goes to the amazon website


author · Dad · software · colophon · rights

June 08, 2020
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