Is Your Thinking Keeping You Poor? Article 44: Become a monopoly (and still go to heaven)
by Douglas Kruger
After tax, the second greatest threat to your prosperity is competition.
‘But wait,’ you say. ‘Isn’t competition supposed to be healthy?’ For an economy, yes. For you as a wealth-generating entrepreneur, absolutely not. The more competition you have, the less special and valuable your offering becomes.
But monopolies are bad, right? When one brand or organisation dominates the market, it’s unhealthy. That’s probably what you’ve heard all your life.
Here is a serious ‘Yes, but …’ On a national level, I, like many entrepreneurially minded people, am radically opposed to things like government monopolies and to the government bureaucracy that tends to create monopolies. I favour a free economy, in which people are permitted to compete and prosper according to their effort and excellence, and where businesses are free to innovate and create the incredible things that move our species forwards and benefit all of us.
Now, that said, let me offer you the wealthy person’s take: monopolies are one of the world’s greatest wealth secrets. When you are the dominant force in a growing market, you are on a path to the sort of wealth enjoyed by the ten richest people of all time.
On the grandest scale, if your steel- or oil-production company is the only one operating in a country, you are very likely to end up in the top 0.1 per cent.
On a much smaller scale, if you are the leading name in your industry (but not an absolute monopoly), your wealth trajectory will still be radically different from those of small, also-ran operators.
In most markets today, an absolute monopoly, which occurs when no one else is allowed to compete, is illegal. But there are ways of creating perfectly legal, ‘natural’ monopolies. These are referred to simply as market dominance. Market dominance is your friend; and even as an entrepreneur innovating in a free economy, it should be your goal.
Making it your goal not only leads to wealth, but also draws out of you the very best of everything: the best ideas, the best products, the best management, the best initiative and innovation. The questfor market dominance necessitates that we live and produce at the highest levels of our capacity.
Here is one major difference between modern market dominance, in a free-market system, and the older form. In the past, total monopolies were based on privilege. Today, their softer cousin, market dominance, is based on skill, ability and innovation. It’s based on the value that you offer to the world.
Ironically, in strict socialist and communist (collectivist) systems, in which you are not allowed to strive to become the biggest and best, productivity and the advancement of ideas tends to stall and fail. In free-market systems, in which you may grow your wealth and use it to grow and enhance your offering further, innovation and living standards increase dramatically.
You needn’t be a robber baron
For the sake of discussion, let’s abandon the mental images conjured up by the word ‘monopoly’: oil barons, steel tycoons, dodgy underhanded deals with government ministers. Most decent people feel at least a moral twinge at the idea.
If you are a fair-minded person, you probably inherently believe that competition is a good thing and, once again, on the level of a country, it really is. On the level of your individual earnings, it isn’t. How do we reconcile these ideas? Well, there are decent, moral ways of operating in a low-competition environment and achieving some degree of market dominance.
Firstly, what are the immoral ways of eliminating competition? They include mafia-style hits, in which you simply murder the other players. South Africa still sees this sort of behaviour regularly in the form of taxi wars. They also include corrupt politics, in which people in power give deals to friends for bribes. We see more than our fair share of this, too, having recently been identified as the most corrupt country in Africa. While writing this book, I started to see headlines like ‘SA outstrips Nigeria in the corruption stakes’.
But there are ways of ensuring that you keep your value high in a low-competition environment while still being permitted to enter heaven when you die. Let’s list them:
- Overcoming barriers to entry that others are unwilling or unable to overcome. These might be regulatory or infrastructural, or they might involve attaining a high-level qualification such as a medical or legal one;
- Going where there is no competition (for example, new and emerging markets that others have not yet monopolised);
- Satisfying a need that no one else is satisfying;
- Buying up the competition and consolidating them into one company;
- Creating something so unique that you can’t be copied easily;
- Being of such high value that you reach a tipping point at which the market nominates you as the best option and you become ubiquitous;
- Being someone so unique that you become iconic, like a Nigella Lawson or Jeremy Clarkson;
- Continually innovating so that competitors always lag;
- Innovating and making something that no one has made before. (Naturally, this is a temporary solution, as anything successful attracts duplication. The response to this is either, ‘I don’t care. I’m now so rich I can retire’ or, ‘I’ve patented this idea, and so it can’t be copied’ or, ‘No matter – while they’re copying my original idea, I’m already onto the upgrade, or the next innovation entirely, so they are always playing a game of catch-up);
- Supplying the same thing, but to your niche. Take the world of cars. There are many manufacturers, but Mercedes and Hyundai don’t compete with one another at all; and
- Satisfying an unusually specific need.
By doing any one, or a combination, of these things, you set yourself up for the desirable position of market dominance.
Poverty mindset: How can I compete with others?
Wealth mindset: How can I ensure such excellence and distinction that I don’t compete with others?
Douglas Kruger is a business author and professional speaker. See him in action, or read his articles, at www.douglaskruger.co.za. Douglas’s books, including ‘Is Your Thinking Keeping You Poor? 50 Ways the Rich Think Differently,’ are available at Exclusive Books, Estoril, CNA, and as ebooks from Amazon.com