Tim Wu Redefines “Monopoly”

by on November 13, 2010 · 34 comments

Tim Wu appears hell-bent of redefining the English language.  After reading his new book, The Master Switch: The Rise and Fall of Information Empires [See my 6-part review: 1, 2, 3, 4, 5, 6] and his new editorial in today’s Wall Street Journal, “In the Grip of the New Monopolists,” it’s clear to me that he has made it his mission in life to redefine some rather basic, widely-accepted economic terms to suit his own political purposes.  Among them: “market power,” “monopoly,” and “laissez-faire.”  I addressed his misuse of the term “market power” here and misunderstanding of the term “laissez-faire” here.

In today’s Journal editorial, it’s “monopoly” that Wu seeks to redefine.  He begins his essay by asking: “How hard would it be to go a week without Google?  Or, to up the ante, without Facebook, Amazon, Skype, Twitter, Apple, eBay and Google?”  He continues on to suggest that these “new monopolists” have an iron lock on their respective markets and that there appears little hope of escaping them.

But the problem with his argument that “we are living in an age of large information monopolies” begins with the fact that he speaks of “monopolies” in a plural sense and apparently misses the irony of that entirely.  If so many “information monopolies” exist, then Wu’s thesis is undermined by the very fact that no one company dominates the Internet landscape.  What Wu is really suggesting is that the Digital Economy landscape is littered with dominant firms in industry sectors that he has defined extremely narrowly. 

But even if one accepts Wu’s artificial, narrowly-defined industry sub-sectors (and I certainly don’t), he completely ignores the competition taking place among many of these giants and the fact that innovation and new entry continues at a healthy clip.  This week’s big news, for example, is the Google-Facebook war over email as Facebook readies a “Gmail killer.”  And it’s not like there aren’t plenty of other email options out there from large and small companies alike (most of which are free).  Meanwhile, Google has been trying to whittle away at Facebook’s social networking dominance, and many other social networking services exist for those unhappy with Facebook. (Some of us don’t bother with FB at all, believe it or not!  I’m mostly a LinkedIn guy. My Facebook page just directs people to my LI account).  Meanwhile, Microsoft has desires of its own in these areas, of course, and continues to compete aggressively. And I guess everyone has forgotten about MySpace already, even though I bet Wu would have named it a “monopolist” if he would have penned his editorial in 2007 instead of today.

What about Amazon and eBay?  If you define markets as narrowly as Wu does, then a case could be made they have formidable market power in their respective fields.  Back in the real world, however, most of us know that there are plenty of places online to engage in shopping, and Amazon and eBay actually compete quite aggressively against each other for our allegiance while fending off countless scrappy smaller competitors.  While many of those competitors lack the comprehensiveness of either Amazon or eBay, it doesn’t mean they don’t give them a run for their money in niche markets.  Think of cars, clothes, electronics, books, appliances, etc.  There are too many rivals in each of those niches and others to list here.

What about Apple?  It’s certainly a big, successful company making some terrifically innovative products and services that some people can’t seem to live without.  Yet, millions of us have completely rejected Apple.  I don’t have a single Apple product in my home and — no offense to the Apple fanboys out there — I really can’t understand why anyone would use anything the company offers considering the many wonderful competing products that exist in all the markets in which Apple competes: computers, tablets, operating systems, smartphones, online music stores, etc.  If Apple is a “monopolist,” shouldn’t it mean an information-hungry guy like me should be forced to own at least one thing the company offers?

Finally, Wu audaciously suggests that even Twitter is now a “monopolist”!  This is a company that didn’t even exist a few years ago and yet Wu is willing to write off the market as theirs.  But what is Twitter’s market, exactly?  Isn’t it really in competition with many other forms of communication and information dissemination?  For me, Twitter is a partial substitute for IMs, email, phone calls, and my RSS feed. Yet, like most others, I continue to use all those other technologies and those technologies continue to pressure Twitter to innovate.  Is Wu really suggesting that nothing better will come along to compete against Twitter or even replace it entirely?  (It reminds me of all the hand-wringing we heard about AOL a decade ago when people predicted its “walled gardens” would someday rule the Internet and IM).   Meanwhile, even if one accepted to premise that Twitter was a monopolist today, where is the harm?

Which gets to perhaps most stunning thing about Wu’s editorial today: He never even posits a “harm” that might be coming from the rise of these “new monopolists.”  That’s not surprising, of course, since he’d be hard-pressed to make the case that the sky is falling or that consumers are somehow the victims of some horrendous plight.  Hell, most of these services don’t cost consumers a dime!  And they are constantly innovating and offering an improved consumer experience.  If this is “monopoly,” then give us more!

What Tim Wu is really doing is propagating the simplistic old saw that “Big Is Bad.”  We could argue about how big is too big, but we shouldn’t confuse that debate with Wu’s mistaken redefinition of the term “monopoly.”  He has intentionally watered down the term “monopolist” such that it now means any combination of big firms he personally doesn’t approve of in markets that he has defined far too narrowly.   That’s not a proper understanding of the term “monopoly” and it most certainly isn’t an accurate representation of the real world of exciting digital innovation and ingenuity that we live in today.

It’s a shame Tim Wu continues to adopt such a hyper-pessimistic worldview and take such static, myopic snapshots of the state of the Digital Economy.   We should be celebrating the world we live in today, not bemoaning it.


[UPDATE 11/25:  See Prof. Wu’s response here on the TLF.  Two additional responses worth reading: “What’s An Internet Monopolist” by Josh Wright & Geoff Manne here on the TLF + “Should We Be Afraid of Apple, Google and Facebook?” by Matthew Ingram over at GigaOm.]

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