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When people hear the word "monopoly," they often think of a business with an unfair stranglehold on a market, artificially driving up prices and restricting supply. Peter Thiel challenges this narrative, arguing that not all monopolies are inherently bad. According to Thiel, it's essential to distinguish between a bad monopoly, which harms innovation, and a good monopoly, which creates something new and valuable.
Photo: The New York Times
In a static world, where industries don't evolve, monopolies deserve their bad reputation. They take advantage of their dominant position by charging high prices or providing fewer goods, acting more like rent collectors. This type of monopoly adds no real value to society.
Good Monopolies Fuel Innovation
But there's another type of monopoly that Thiel sees as critical for progress. A good monopoly is one that creates an entirely new market, driving innovation rather than limiting it. One of the best examples of this is Apple. When Apple released the iPhone, it wasn’t just another phone—it was the first smartphone that truly worked well. For years, Apple enjoyed a monopoly on this groundbreaking innovation, which wasn’t about restricting supply but about offering something no one had ever seen before.
As Thiel points out, people lined up for the iPhone not because they were forced to, but because it offered them something they didn’t even know they needed. Apple’s monopoly was a result of innovation, not control.
The Power of Brand and Network Effects
Even today, Thiel argues that Apple still holds a kind of monopoly in the smartphone market, not just because of the product itself but due to the brand and network effects that have built up around it. The seamless ecosystem Apple has created—where all devices work together, from iPhones to Macs to Apple Watches—makes it incredibly hard for customers to switch to a competitor. It’s not just a product monopoly but an ecosystem monopoly, reinforcing Apple's position in the market.
Dynamic Monopolies Push Us Forward
In Thiel’s view, dynamic monopolies—those that innovate and introduce entirely new categories—are what push industries and societies forward. They create new possibilities rather than limiting them. The key difference, according to Thiel, is that these monopolies don't create artificial scarcity. Instead, they offer entirely new products or services that didn’t exist before, and people flock to them because they deliver real value.
Thiel’s perspective shifts the conversation from "monopolies are bad" to "some monopolies are essential." In his mind, the companies that truly change the world are the ones that achieve monopolies through innovation, not control. By introducing something completely new, they create a market for something that had never existed before—just like Apple did with the iPhone.
Listen to Peter Thiel:
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