Monopolies Are Distorting The Stock Market
This article is a part of my Best Reads of the Month section on my website www.mikegorlon.com. Each month I pick one or two articles or blog posts that I find on the internet which I thought were really insightful, interesting or moving. Then I share them with you. You can view the previous month’s articles by going to: https://www.mikegorlon.com/best-reads-of-the-month
October 2020: Monopolies Are Distorting The Stock Market
There is a lot of discussion going on with what to do with the monopolies in big tech, especially with the Department of Justice musing about breaking up the big tech companies, but what is less talked about is the market power of the companies in many other industries including beer, washer and driers, mayonnaise, corn seed, dialysis center, cell phone providers and many more.
When you look closer at these industries and many others you notice a very large market share concentrated in very few names and sometimes it’s hard to notice because a lot of the brands are all owned by one corporation but are marketed under different names.
Here are two great charts put together by Kai Wu that demonstrates some of this concentration.
For example, Proctor and Gamble owns several consumer brands such as Crest toothpaste, Oral B, Tide detergent, Bounty paper towels, Pampers, Pepto-Bismo and several other household names. In other words, Proctor and Gamble and a few other companies have a heavy concentration of market share in most of their industries and they’ve enjoyed this for decades… well, until recently.
There is one thing that is different today than the past 30 years and that is direct-to-consumer selling and the rise of social media marketing that has taken down the barriers for new companies to enter markets and allowed new companies to sell directly to the consumer. And Harry’s razors is probably the best example of why companies like Proctor and Gamble aren’t being looked at by the Department of Justice despite owning several brands in a concentrated industry.
Companies like Proctor and Gamble don’t pose as much of a threat because of new technology that has greatly weakened the barriers-to-entry and it’s most likely that new technology gets better in the future whereas it looks like the big tech companies will enjoy their monopolistic power for decades to come.
In this great article, Kai Wu takes a deeper look at the monopoly power of companies in several industries including some where you probably didn’t even realize how concentrated the industry really is. He also discusses how they gained their monopoly power and the ramifications of it.
It’s a great read that is well worth your time: