Modern Monopolies

Alex Moazed & Nicholas L. Johnson


What It Takes to Dominate the 21st Century Economy


Story of Nokia and BlackBerry vs. Apple & Android

Chapter 1 - Platforms are Eating the World

Platform attributes

  • Audience building
  • Matchmaking
  • Providing core tools and services
  • Setting rules and standards

Exchange platforms vs. Maker platforms

Commoditized platforms vs. Noncommoditized platforms

  • Noncommoditized services platform should focus on facilitating easy search and discovery for its users rather than automatic matching.
  • Commoditized services platforms should be responsible for setting prices to ensure its users receive the optimal price.

Chapter 2 - Hayek versus The Machine, or Why Everything You Think You Know about the Twentieth Century is Strong

Central Planning and the Man in the Pajamas

  • The Theory of the Firm
  • Coase's "Theory of the Firm"

The Computer and tbe Market

Dot-Com Disappointment

The Connected Revolution

  • The Democratization of Processing Power and Computer Storage
  • The Declining Cost of Communication
  • The Rise of Ubiquitous Connectivity and Sensors
  • The Growing Returns to Scale on Data Analysis

"It turns out that people don't have any problem with central planning in principle - they just don't like BAD central planning."

Chapter 3 - The Zero-Marginal-Cost Company

"Network effects are the strongest economic moat of all." - Bill Gurley

Chapter 4 - Modern Monopolies - Platform Capitalism and the Winner-Take-All Economy

Chapter 5 - Designing a Billion-Dollar Company - How the Core Transaction Explains Tinder's Success

The Core Transaction

  1. Create
  2. Connect
  3. Consume
  4. Compensate

Start with one transaction only

Chapter 6 - The Visible Hand - The Four Functions of a Platform

  1. The Core Transaction
  2. Audience Building
  3. Matchmaking
  4. Providing core tools and services
  5. Creating rules and standards

Chapter 7 - Let the Network Do the Work

Metcalfe's Law - The value of a network is proportional to the square of the number of connected users in a system. - does not take into account the quality of users (e.g. Chatroulette, Friendster & Myspace)

Most Network Effects are Local - network density

Network quality trumps network quantity.

The Network Effect Ladder: A Framework for Growing Quality Networks

  1. Connection
  2. Communication
  3. Curation
  4. Collaboration
  5. Community

Chapter 8 - Why Platforms Fail, and How to Avoid It

Three Ways to Subsidise Value

  • Monetary Subsidies
  • Product Features Subsidies
  • User Sequencing

Seven Ways to Solve the Chicken-and-Egg Problem

  • Provide Security through a Large, Up-front Investment
  • Cooperate with Industry Incumbents
  • Act as a Producer
  • Tap into an Existing Network
  • Attract High-Value or "Celebrity" Users
  • Target a User Group to Fill Both Sides
  • Provide Single-User Utility

Conclusion - How to Spot the Next Big Thing