Monopoly is bad.
We have laws against monopoly. We have laws against market domination. We have an entire branch of economics that demonizes the practice as evil and morally reprehensible. We portray the monopolist as a fat cat who becomes rich off the backs of the poor.
We have it all wrong.
I assert that if you want to survive in any economy – monopoly is the end all be all goal of your efforts. You want to dominate your market so that you are completely without peer. A one of a kind firm.
#changemymind
Video Transcription
Good morning everyone. I want to thank you for joining me today.
In today’s White Board Friday, I’m going to talk about the first element of how to grow in any economy – dominating your market.
This is going to be the first part of a three part series, because this topic deserves considerable time and effort on your part. Each one of these videos is going to be about 15 minutes long, and it is designed to give you actionable strategies that you can use in your business right away. With that, let’s get started.
Domination v. Competiton
A brief recap from my first video, which will be linked in the description below, there are two types of approaches to the market. Domination and Competition.
Competition, you’ll remember, is when multiple parties are fighting one another for a single objective (in this case the sale), and the party that wins is usually the one who is just fractionally better in the mind of the purchasers. Competitive markets are characterized by multiple firms attempting to undercut one another primarily on price in hopes of growing their share of the market.
In contrast, dominating the market – those players control market activities.
Why is this important? Peter Thiel wrote a controversial article in the Wall Street Journal (link provided in the description/blog post), where he noted the following (he was talking about big business not necessarily being profitable business with the difference being competition v. monopoly):
For example, U.S. airline companies serve millions of passengers and create hundreds of billions of dollars of value each year. But in 2012, when the average airfare each way was $178, the airlines made only 37 cents per passenger trip. Compare them to Google , which creates less value but captures far more. Google brought in $50 billion in 2012 (versus $160 billion for the airlines), but it kept 21% of those revenues as profits—more than 100 times the airline industry’s profit margin that year. Google makes so much money that it is now worth three times more than every U.S. airline combined.
The airlines compete with each other, but Google stands alone.
While that phenomenon has changed somewhat – Google remains more profitable than the airlines, even with the airlines adopting a fee model to boost profits.
Why?
Google dominates its market. It’s a monopoly. Who’s second best to Google? Bing? Yahoo?
Really – who the hell even cares?
I mean that sincerely. While there are some people consumed with privacy and so they’re using DuckDuckGo and the rest – 70% of the market is Google.
That’s domination.
But why is domination important? It’s important really for three reasons:
One – Competition is pretty much BS as an analytical idea in the first place – for reasons I’ll explain when we get to the part of today’s presentation where I talk about being “incomparable” as part of your domination strategy.
Two – Domination affords better results internally and externally. Since a dominating firm doesn’t have to worry about competing with anyone, it has wider latitude to care about its workers, its products, services, customers, and its impact on the wider world. You don’t have that luxury when you’re getting nickel and dimed to death by competitors and barely scraping by in competition.
Three – Domination is the only way to mitigate the risks of the broader economy. The top 10% of any industry always have a job. The top 10% of any industry always survive the ups and downs. The top 10% of any industry always get the lion’s share of the profits, customers, and revenues.
In short, your industry is really composed of two groups – the 10% and then everybody else. If you’re not in that top 10% that owns the 90% of revenues, you’re literally fighting the rest of the entire market, the 90% of the competitors, for bottom 10% of the revenues
That’s why life sucks as a competitor.
How do you Dominate?
So how do you dominate?
Three elements that you must place your focus upon daily. As always in these discussions we’ll have – the law of cumulative gains is at play here. Each day discretely may not matter, but aggregating the micro changes lead to macro results.
Also as is the case in the other videos we’re doing, the solutions are relatively simple to describe, but not so simple to execute. I can tell you how to be a brilliant golfer – put the ball in the hole in fewer strokes than everyone else. Actually, accomplishing that objective is entirely another matter.
Thus, the strategy I’ll lay out isn’t complicated to understand, but it does require daily persistence and reinforcement to achieve. This is why so many companies fail. I’m betting you won’t fail because you wouldn’t be watching this video if you did not want to improve and become a stronger firm in your market.
The first element is making the commitment to achieve market dominance. This is going to be the main thrust of today’s talk, so I’m going to come back to this issue in a moment.
The bottom line principle is – you must commit yourself (and by demonstration of that commitment commit your actions and capital activities) to becoming the dominant player in your space. It means you’re going to think, walk, act, talk, differently.
The second element, which is next week’s video, is talking about optimization of your efforts. What I’m going to teach you in that segment is similar to the “Moneyball” movie. If you saw that movie, Brad Pitt plays Billy Beane, and the movie chronicles the use of mathematics and statistics to give the Athletic’s, a team without massive funding and resources, the ability to compete against the teams that have lots of money – like the Yankees.
The movie was based on the book by Michael Lewis, called “Moneyball: the Art of winning an unfair game.” The book makes a very powerful lesson – domination by focusing on what it takes to win games is more important than intuition, conventional wisdom, or conventional practice.
I think you’ll find it really useful – I know I liked putting it together.
Finally, we’re going to talk about repetition and scale. Amazon didn’t start out as a behemoth – it started out as a geeky looking guy in an office with ancient computers a sign spray painted and hung on his wall.
Scale is how you become dominant. Scale requires you to understand how to structure your activities, your follow up, your energies, so that the returns are non-linear. We’ll talk about that towards the end of the month.
But these three things are the three areas you’ll focus on daily to dominate the market. You’ll understand this after I finish this series. For now, let’s get into making the choice to dominate.
Domination and Competition are choices.
My hero, Vince Lombardi, famously put the choices we all have this way:
“Winning is not a sometime thing; it’s an all the time thing. You don’t win once in a while; you don’t do things right once in a while; you do them right all of the time. Winning is a habit. Unfortunately, so is losing.”
Habits are the consequences of our decisions and our psyche. If you’re interested, there are two really amazing books that I’ll link to in this blog post – one is called “Atomic Habits” by James Clear, the other is called “The Power of Habit,” by Charles Duhigg.
I suggest reading them both. Unfortunately, I won’t have the opportunity to talk about them today. But both of these books will help you wrap your mind around executing what I’m about to say:
You have to make the decision to be #1. You have to make the decision to dominate the market.
I realize that may sound trivial to hear. I have no doubt some of you are like “Yeah right Bryan, be the ball… decide to be it… and just be #1.”
That’s not what I’m talking about. This is not a trivial thing. You have to decide to be the best in your industry. You have to decide to be the number one player. Otherwise, all the other things you will need to do, won’t happen. You won’t do what it takes. You won’t do things to make yourself a leader without peer – incomparable.
So you have to make the decision to be the dominant force in your marketplace. You’re aiming to be the top 1% – whether it’s in your career or in leading your business. You’re going to strive for perfection and accept excellence.
To do that, I want to begin with what your subconscious may be saying – monopoly is bad, you can’t dominate a market, and if you can, you’re bad.
My background is economics – I have a BS degree in it. “Perfect competition” is considered both the ideal and the default state in Econ 101. The so-called perfectly competitive markets achieve equilibrium when producer supply meets consumer demand. Every firm in a competitive market is undifferentiated and sells the same homogeneous products. Since no firm has any market power, they must all sell at whatever price the market determines.
If there is money to be made, new firms will enter the market, increase supply, drive prices down and thereby eliminate the profits that attracted them in the first place.
If many firms enter the market, they’ll suffer losses, some will fold, and prices will rise back to sustainable levels. Under perfect competition, in the long run no company makes an economic profit.
The idea is that this is the best state, because, consumers drive the control of the market. Whatever they’re willing to spend is what firms must charge, and thus, the supply of the market is determined by what consumers want.
The opposite of perfect competition is monopoly. Whereas a competitive firm must sell at the market price, a monopoly owns its market, so it can set its own prices.
Since it has no competition, it produces at the quantity and price combination that maximizes its profits. In this scenario, the suppliers determine what the supply will be, not consumers.
Because of this fact, Monopoly is always “bad” – I mean think about all the fights that are spawned from landing on Park Place or Boardwalk during family time.
Someone always winds up being pissed right?
Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition, all profits get competed away.
The lesson for business leaders is clear: If you want to create and capture lasting value, don’t build an undifferentiated commodity business, build something that uniquely stands alone. That means you have to make the choice to be dominant.
Second, you have to do what it takes. Now many of you are watching this because you think a recession is coming. I don’t disagree – it will come at some point.
One of the first things individuals and businesses do during periods of contraction is reduce their advertising and marketing efforts. In my opinion is a big mistake. You have to be prepared to do what it takes in both good times and bad. That means, you’re always promoting, you’re always showing people your value, you’re always looking for ways around the competition.
If you competitor won’t be open on the weekends? Then maybe you should. If your competitor won’t service a certain type of customer – well then maybe you should.
Domination is born out of doing what the other guy will not do. You have to become “different” by doing all the things that the competition won’t do.
Competitors compete. Dominators own the marketplace.
The simplest way to start is to pick a specific niche of your market and own it. Own every aspect of it. Own it in such a way that nobody in their right minds would try to compete against you, and no customer in that market doesn’t know your name, your value, and your brand.
Now I realize that is a daunting task – I’ve spent the better part of my career attempting to get ideas understood, recognized, and known. But it is the only way to dominate. Two caveats, however, with respect to this process. One – you have to dominate an aspect of the market that matters; two – you have to capture the value of that market completely so as to prohibit others entering.
I have no doubt if I wanted to I could corner the market on buggy whips. I have no doubt I’d make the best damn buggy whip you ever saw. I also have no doubt, that it would have no impact whatsoever on the transportation market.
You have to become the best at some aspect of your niche that actually matters. This goes back to my earlier piece on WIIFM – what’s in it for me. You have to dominate an aspect of the customer’s life in such a way he highly values the solution you’re the best at providing.
If suddenly horses come back – Bryan’s buggy whips will be bad ass. However, I suspect autonomous electric cars are more likely.
This idea of doing what it takes, is hinged closely to the idea of getting attention. You have to get attention for what you’re doing and why you’re doing it. That means – MARKETING. That means – ADVERTISING. That means – PROMOTION. That means – PUBLIC RELATIONS.
Now I have no doubt I’m going to hear, “But Bryan we don’t have the money….”
Fine. Cold call then. Perfectly legit. Meet people around town. Perfectly legit. Meet people all across the country.
GO TO THE FISH AND THEN FISH WHERE THE FISH ARE! That is a perfectly legitimate way to spark dominating your market.
Again, when Jeff Bezos opened his shingle, he was a geeky ass guy in a sweater that looked like he was #1 in the ugly sweater contest, and a spray painted sign. But what he did day in and day out was decide we’re going to be the best at selling books. We’re going to do things the other guys won’t. We’re the best. We’re the best. We’re the best.
Now the guy is a zillionaire. When I was in Capri, I saw Jeff’s boat. It’s a 450 foot super yacht. That’s what the decision to dominate and the will to do what the other guy won’t gets.
And that didn’t start with a massive budget – it started with a geeky guy in an office with a spray painted sign; not the guy in Patagonia and Randolph’s you see jet setting around with “screw you” money.
When you do what it takes – you become incomparable. Which is the final element.
Competition requires a homogenous set of firms. Now, that may be a word you’re not familiar with – homogenous. You probably have seen the word on milk – homogenized milk has been the standard for over 100 years now.
To make homogenous milk, they smoosh the milk fat through tiny screens that cause the milk fat to break up from big globs into little ones. The little globs float around inside the milk and thus make the consistency and taste the same. Every element is the same.
If you compete – then you’re just like the milk globs, tiny, unremarkable, and not worthy of attention.
What you want to be is heterogenous – there’s you and then there’s everyone else. The choice is binary, they can either buy you, or they can make a mistake and buy everyone else. That’s the key positioning you’re trying to achieve.
There are more than eight THOUSAND jewelry stores in the United States. Only one of them is Tiffany and Company.
Tiffany and Company is incomparable. Nobody else has the blue box. As a matter of fact – that color, known in the “biz” as “Tiffany 1837” (for its Pantone color PMS number), is trademarked. No other jeweler can use that shade in its marketing, branding, or designs. No other jeweler is featured in two movies. No other jeweler is romanticized and idolized like Tiffany.
That is being incomparable.
Does Tiffany sell the best jeweler? No. As someone who considers himself an expert – I’d say their products are very nice, but they do not sell the best of the best of the best in the world. Are they worth the price tag on their items? Well obviously they are because people buy their products. But are their products “competitively” priced compared to other jewelers?
Absolutely not. Tiffany must have among the highest margins in the market.
When you are incomparable, you’re a monopoly.
Here’s the thing, it doesn’t matter what you are or what you do, there is a uniqueness with your company and your product. If for no other reasons, the people inside that business make it unique. Their focus will not be the same as every other business. Businesses are not, by their very design and makeup, completely homogeneous to one another.
What economists get wrong is – firms in the marketplace are not like interchangeable atoms. Tiffany is different from Chow Tai Fook (a brand you’ve probably never heard of but is Tiffany’s probably single biggest competitor internationally). Each offers a different experience and caters to a specific customer.
You have to differentiate yourself in the market place on issues that matter to customers. That means – you need to be a market of one. Only you come with the deal. Only the _______ comes with the deal. The more you are able to do that, the less comparable you are, and the greater your market power.
Monopolies set their own prices.
Recap
I hope you found today’s talk interesting. To recap – you need to focus on making the commitment to be dominant. You need to be prepared to do what it takes. Finally, you need to be focused on gaining attention and standing out – not blending in, not competing.
Any questions or comments – leave them below and I’ll be sure to answer them. Once again, this is Bryan Del Monte, and thanks for listening.
