On the other hand, it’s not unreasonable to believe that monopolies stifle innovation. Although Peter Thiel claims the opposite:
“Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can't dream of.”
Is he right? Looking at FB and Google, I don’t see much innovation on their core products: search and social.
Google’s autocomplete has improved, but in my anecdotal experience the search results have gotten worse. Certainly the UX is the same. Surely there are ways improve on a single list of results beyond a sidebar of knowledge graph information for known entities?
With FB, for all their efforts to tune my feed, I still see the same uninteresting content, even if I do occasionally snooze a “friend” for one too many dank memes. If anything, I see less relevant and compelling posts on my feed than ever before.
And yet I do love what I see from Google and Facebook in their ML research, and Thiel seems right that the massive resources put into those long-term projects only come from monopoly profits.
So it isn’t that a monopoly isn’t innovating, it’s just that they aren’t innovating on the value that is provided to their users. They are innovating on what can make them more money. With having conquered their markets and bought or bullied their competitors, they no longer have to make users happier with a significantly better core product. Instead, making more money requires innovating on their monetization products, or on side-products.
As a monopoly, the biggest risk is taking risks with their core product. But risk is where innovation happens. You might argue that their side-products carry risk, but what risk is there to well-paid well-funded workers on a subsidized side-product whose liquidity depends more on executives’ happiness than users’ happiness? What happens when you are making what capitalists want instead of what users want? If you’re a startup founder with meddling investors, you know what I’m talking about.
So although Thiel’s advice to aim for being a monopoly is relevant for creating a successful startup (in a tautological way), his arguments that monopolies are engines of innovation aren’t convincing.