The Monopolist

When the Apple Watch will begin sales, there will have been dozens of “smart watches” released. At CES this week at least 56 “wearables” were on display. One could be forgiven for thinking that Apple’s Watch will compete with at least that many alternatives. Those alternatives don’t even include the entire existing mechanical and electronic watch market, which, surely, is also filled with competitors.

When analyzing competition, it’s easy to get caught up in one-on-one competitive comparisons, each posited as a decisive life-or-death battle. Consider the list of competitors that Apple has been declared as being in a death-match with:

  • Real Networks. Yes, there was a time when Apple’s survival depended on success vs. alternative media encoding technologies.
  • Adobe. Remember Flash? No Flash support meant that Apple’s fledgling phone would fail.
  • “The Music Industry”. Unhappy partners could surely shut down the iTunes music store, and their insistence on DRM would surely cripple the experience.
  • IBM. In nearly every aspect, their business/strategy/inclination and glimmer of intent was an existential threat the Apple.
  • Microsoft. In nearly every aspect, their business/strategy/inclination and glimmer of intent was an existential threat the Apple.
  • Google. In nearly every aspect, their business/strategy/inclination and glimmer of intent is an existential threat the Apple.
  • Samsung. Obviously. But not just phones or tablets. They have control over key components that Apple used in many of its products, before the iPhone even.
  • Palm/BlackBerry/Nokia/HTC/Huawei/Xiaomi Every phone maker (and every phone) was/is an existential threat to Apple.
  • Dell/HP/Asus/Lenovo et. al. Every PC maker was a threat to Apple. Some of them made MP3 players. Some of them make tablets.
  • Amazon. Obviously. Not only as an iTunes killer but as a device disruptor. They are working on drones, after all.
  • Sony. Remember them? No longer a PC maker but they moved in many circles Apple moved in. While we’re at it, add all the consumer electronics companies in Japan.
  • Dropbox. “If Apple can’t do iCloud right, they’re doomed”.

This is a very short list (feel free to suggest more) and it becomes clear that the total count of competitors that Apple has to counter “or else” seems to number in the thousands. Practically every hardware, software and service company is positioned as an “Apple Killer”. in fact, the more interesting question might be which companies are not competing with Apple.

Another interesting question relates to why there is no transitive property of competition. I.e. if company A competes with Apple and Apple competes with company B then it does not follow that company A competes with company B.

To wit, whereas HTC competes with Apple and so does Dropbox, it does not follow that HTC competes with Dropbox. So it’s entirely possible that it’s axiomatic that

“Most companies compete with Apple but few of them compete with each other”.

Recognizing a pattern, one could build a model of the technology world where Apple is the focus of all competitive efforts. But this starts to sound absurd.

Indeed, the flaw in the logic is that these competitive pairings are based on the overlap of features of products/services being offered. The features become the attributes of a product which supposedly defines their competitive power. But this is false for the same reason that the attributes of a buyer do not determine their buying behavior. Buyer attributes[1]  are easy to measure and they may correlate to purchasing behavior but they don’t cause it.

Similarly, product or company attributes are easy to measure and they may correlate to competitive behavior but they don’t cause the substitution of a purchase.

Therefore, appealing to Apple to change its strategy, operations or even its core beliefs in response to a competitor’s behavior is deeply misguided. The cause of success and failure in the marketplace is based on being hired by the customer to get a job done. Once hired, the chances are that the trust is secured and the relationship continues even if alternatives are available. There is comfort in the knowledge of whom you’re working with.

This aspect of trusted relationship between the buyer and the product and the interweaving of ‘brand’ (aka intentions) of the hired is the root of loyalty. Of course, loyalties can be betrayed and trust can be lost. But that implies that the primary responsibility of the manager is the creation and preservation of trust. When seen in this light, an alternative axiom becomes clear:

“Great companies don’t have any competition.”

Great companies are “monopolists of customer trust” and are unaffected by alternatives. They are positioned on and nailing the job their products and services are hired for. The alternatives must not only duplicate the exact job (which they almost never do), but they must also overcome the switching costs.

Remember this when analyzing the impact of yet another competitor and considering the “Apple must fix/do X or else” assertions.


  1. E.g. demographic, sociographic []
  • Mark Gold

    Peter Theil’s book “zero to one” makes a similar point. The truly great companies are monopolists and that they maintain their monopoly as long as their product or service is significantly better (10 times) than the competition. The competition is always looking to circumvent your advantage and the the only way to to stay on top is to constantly evolve, develop, expand your competitive advantage. The only way to forecast a companies future is to evaluated the way they manage their advantage. Great blog Horace!

    • No9

      Well done, you have told us nothing of any use. Fair point, you have indicated a book that is less than worthless.

  • Luis Alejandro Masanti

    As usual, great piece! Thanks.

    My 2 cents:
    – The best part of the article is, for me, when you use the ‘exact same description’ to speak of IBM, Microsoft and Google. (The reason, on the next point.)
    – We are in the internet era… the click-thru era. If I wrote a title ‘The Pirulo’s killer!’ who will click to see the article? But if I wrote “The Apple Watch killer!” almost everyone will go and see (me included).
    So, in the internet era, Apple solves the ‘job-to-be-done’ (a.k.a. get clicks) for a lot of lousy sites.

    Your conclusion on ‘monopolist of customer trust’ is wonderful.
    As Jobs and Ive and Cook and… said, what Apple is trying to do is amazing products. If people love them, they’ll buy them, and we can come back tomorrow to work! (Kind of a Steve’s quote.)

  • hannahjs

    Another great and benevolent monopolist was AT&T Corp. Why, if they unfailingly did the job, did they need to be broken up in 1982 into the Baby Bells, a first step down the dark ladder into today’s nightmarish dystopia of “service providers”?

    • Accent_Sweden

      I think you are misremembering history. In the 1970s, Lily Tomlin’s Ernestine used to say “We’re the phone company: we don’t care and we don’t have to.” and everyone laughed for a reason.

      • airmanchairman

        That’s pretty much BT’s mantra, aye even unto this very day, the source of many a migraine and heated escalation in my fourteen years as a network operations control technician and engineer…

    • vincent_rice

      I don’t think you have understood the article.

    • airmanchairman

      The USA’s ‘nightmarish dystopia of “service providers”‘ still compares favourably with the UK’s, since the break-up of AT&T into the 6 baby Bells was not a sham exercise as carried out in the latter, where BT still bestrides the telecoms market a larger colossus than pre-unbundling, and each of the 6 baby Bells today has revenues many times greater than their erstwhile parent, to the extent that one of them even bought out their parent some years back…

      • No9

        AT&T was broken up due to politics. The interesting thing about anti monopoly law was who created it, that person was the founder of standard oil. A bit of genius.

    • Tatil_S

      They did not “unfailingly did the job”. You could not even hook up an answering machine unless you bought it from AT&T. I’d love to have a dystopia of multiple service providers for my broadband connection rather than only one, Comcast, able to reach my home. Why would I want the same sad limitation for phone service?

  • Mani Ghasemlou

    The competitive relationship is not only transitive, it is also reflexive. Similar to your argument, the “Apple must” crowd refuses to observe this.

    “Most companies compete with Apple” could also be stated as “Apple competes with most companies”, but you will never hear it stated as such.

    • iObserver

      Those other companies spend a whole lot more of their time and resources competing with Apple than Apple spends competing with them.

      Sure, I compete with an ant and an ant competes with me symmetrically, but he’s going to die and I’m not going to notice the stain on my boot.

      Just because they’re transitive and symmetric doesn’t make them equal. This is why you’ll never hear it stated as such.

  • iObserver

    Excellent, succinct article Horace.

    I wish the Apple IS DOOMED! camp would remember this. Instead we get a litany of articles on the interwebs that essentially read:
    “Because Apple hasn’t unequivocally destroyed competitor X in metric Y (a metric that the author just made up or is parroting from another likeminded site) it will surely lose market share and therefore go bankrupt tomorrow.”

    I feel I’ll be linking to this one often…

    • rational2

      Apple is DOOMED. The app store only sold 500 million worth of stuff this year! Compare that to the 10+ billions they sold last year. DOOMED I say, DOOMED!!!!!

    • I don’t really think the doomed church is really that stupid or misinformed, they sell clicks (and the fall of a giant is a click bait) and they sell their hearth and soul (and Apple competitors can gain from a anti apple campaign so that they pay for it).
      Some are really incompetent but the most are doing their jobs.

      • vincent_rice

        Very true; and what a sad inditement it is that people are comfortable with doing this to make a living.

      • Yes but also sad that kind of articles are taken seriously, reputation should decrease quickly but in internet every news has the same value

      • art hackett

        No different to your generic con/salesman, car salesmen, politician, snake oil vendor, parasite, etc.

  • David

    You can say the same about facebook and Google. They have even more natural monopolies in their core businesses.

    • jameskatt

      The problem for Facebook and Google is that their core business is to sell ads to Advertisers – their real customers. Consumers don’t pay Facebook or Google a thing. To sell ads, they gather information from consumers by providing consumers “services” such as email which can be scanned for data, and sell that information to Advertisers so that the Advertisers sell more of their products. Google in particular uses its search engine to show ads to consumers and to gather data about consumers.

      As sellers of advertisement, Facebook and Google actually don’t have a monopoly. They compete directly against each other. They compete against Amazon – which also collects data from consumers. Google competes against Microsoft and Yahoo. All three have search engines through which they show ads that they have sold to Advertisers.

      And Google’s share of its search engine – a way to gather information about consumers and a framework to show ads – has shrunken as Yahoo has taken up more of the search market since Fox uses Yahoo as the default search. When Apple changes from Google to Bing as the default search engine on the iPhone, Google’s share of the search market also will shrink.

      Certainly there is little trust in Google or Facebook from an advertiser’s perspective. After all, Google and Facebook want to take them for all their money. And they have no assurance their ads are going to sell their products.

      Certainly consumers also have little trust in Google or Facebook. Teenagers have fled Facebook since Facebook is not cool with them. Teenagers grow up to be spending adults. So Facebook is under pressure since fewer consumers means fewer ads seen and fewer ad revenue.

      Unlike Apple’s ecosystem and hardware, Google and Facebook’s core business are hardly monopolies and are under constant pressure to deteriorate.

    • The monopolies over a job are very different from the monopolies over markets. One is more resilient than the other.

  • airmanchairman

    Yes, the “switching cost” is a formidable (but not impossible) obstacle to overcome, all other things being equal.

    Great post.

  • handleym

    I absolutely agree with the conclusion here, except for the very last sentence. A “monopolizer of company trust” can destroy itself when it abuses that trust and I’d argue (pace Marco Armand and a host of follow-ons) that Apple has been doing that over the past three years or so.
    Their destruction of trust has not been quite as blatant, stupid, and obviously short-sighted as SONY (slapped their logo on tons of crap from the late 90s on, took them about 15 years to lose all goodwill) or Samsung (slapped their logo on tons of crap, took them about 3 years to lose all goodwill), but has occurred from the same MBA/marketing mindset that prizes “selling” over “delivering”.

    The one “Apple must do X assertion” that is absolutely true is that Apple MUST fix their persistent niggling software bugs ASAP, before a revitalized Windows 10 (or maybe 11) actually looks good compared to OSX+iOS; and the only way they can get there is by
    (a) decoupling iOS HW releases from SW releases (just like Mac has done for years)
    (b) treating bugs (even bugs in five year old software) at the same priority level as shipping a new product. This means throughout the company culture: engineers get as rewarded for fixing bugs as for shipping new products, and managers get MORE punished for shipping buggy software than for slipping release dates.

    If you think I am being melodramatic here, launch Console on your Mac and look at the list of “All Messages” in the system log — it is utterly horrifying and terrifying. For every sensible and useful notification there are a dozen messages that indicate obvious bugs in the system — bugs that are so freaking obvious you don’t even need third parties to report them, you just need to ship an OSX that isn’t puking a thousand lines of error/warning messages an hour into Console.
    It’s a truism among alpha geeks that serious engineers write their code with all compiler warnings enabled from day one, fix every compiler warning the moment it happens, and are constantly on the lookout for new types of tools and tests (TSan, UBSan, MemSan, fuzzing) etc to automatically test their code against. Meanwhile Apple as a corporation behaves like the incompetent freshman in computer science 101 who has no idea what he’s doing, and switches off warning in the compiler because “that’s the only way I can get it to work”…

    Seriously, every reader. Don’t just think I’m bitching and whining here, run the test I said. And then ask yourself if what you see in Console gives you much confidence about Apple going forward.

    • novel

      This argument is tired enough already but the ridiculous angle of using debug messages in Console, never intended to be seen by users, to judge how “buggy” something is, is at least novel to me.

    • In my console it looks pretty normal. The only Apple issue I see is the photostream agent struggling to do its thing.
      One third-party app (Line) has an issue with what looks to be improper sandboxing on their part. It’s easy to go wrong in sandboxing, especially for a multi-platform developer.
      Other than those everything looks reasonable.

  • obarthelemy

    Jobs himself declared a holy war on Android, what did he mean by that if not design Apple’s strategy to hurt that competition as much as to benefit Apple ? Aren’t the overwhelming majority of features introduced to iOS these last few years taken straight from Android (OS or devices) ? The always-carefully-overlooked Apple internal meeting agenda (which is the only piece I know of that bypasses the PR filter) prominently featured watching competitors’ ads, and catching up to Google… It’s not outsiders urging Apple to adjust to competitors, it’s Apple themselves doing mostly that, and then dressing it up.Obviously the dressing up is working fine, that’s the part they must keep doing right in priority.
    I know Apple’s PR is all about perfect design in a ethereal world where only Apple and their customers exist. Behind the scenes though, it’s mostly about financials and lock-in and positioning vs the competition (again, see that memo). The amazing thing is that people lap it up, not even commenting on the blatant “designed for your hands” self-contradiction, if you want to leave competitors entirely out of it…

    • Kizedek

      Your mistake is to assume that all implementations of any given feature are equal.

      Let’s say PCs or smartphones were vacuum cleaners. There are any number of “features” that a vacuum cleaner maker *could* add. Furthermore, any features that a maker does decide to add are not added at the same rate or in the same order as another maker. So, *someone* is going to be first with some features, but not with others, if they do them at all (or change their mind about them). That’s the reality of any business.

      Now one maker decides to add a drink holder to the top of their vacuum cleaner. Pretty soon, lots of makers are doing that. A bit of plastic, what have they got to lose. Surely it will appeal to some yuppie homeowner, right? Might sell a few more of a tired line of vacuum cleaners.

      Well, Apple says no to that “feature” categorically. It also says no to a radio as well. But it is considering an air filter. That is a feature that has a real use and helps people with asthma, as well as improving the cleaning process. Lots of makers already include one, but some are just there to fulfill a spec list and the implementation is pretty poor (perhaps they just threw a couple extra sponges In there somewhere.

      Apple has been considering this feature for a while, has done its R&D, and finally decides the time is right to add it to a new model. Turns out Apple did its homework and not only does it work better than others, but it has ratings and approval from various clinical associations and institutions, etc.

      Because Apple didn’t rush to throw a couple of sponges into its vacuum cleaners at the first opportunity, it retains its monopoly on trust with its customers.

    • Walt French

      @obarthelemy:disqus wrote, “Aren’t the overwhelming majority of features introduced to iOS these last few years taken straight from Android (OS or devices) ?”

      No, they are not.

      Take the longest-standing example, multi-tasking. Multi-tasking has been an essential part of iOS since inception. (Really, it’s been fundamental to every general-purpose OS, for decades.) Apple did not remove it from iOS—“listening” for incoming calls took place smoothly in the background from day 1—but rather restricted it from all apps, until it had enough of a handle on how to manage it to meet Apple’s customer needs. Was customer-facing multi-tasking copied from Android? No, Apple had its multi-tasking approach underway before Android had its first phone, and rather than using the basic multi-tasking built into unix-based OSs, it added an additional layer to prevent unexpected power drain. (To my knowledge, Android still offers no way of restricting background apps’ power usage.)

      “what did he mean by [a holy war against Android] if not design Apple’s strategy to hurt that competition as much as to benefit Apple?”

      The “war” against Android took place most apparently in the courtroom, against devices that incorporated technology which Apple claimed patents or other rights against copying. Making sure that your own product includes all the features that customers want is a positive movement, regardless of the originator of an idea. It is not a “holy war” in any sense other than a bit of exaggeration in ordinary business competition.

      Copying is a normal function of humans, even “lower” animals, essential to life. But our societies recognize intellectual property that may NOT be copied. Let’s not get a holy war going about “copying,” no matter how inelegantly Apple may have attacked it per se.

      • obarthelemy

        So, your example of something not ripped off from Android is something that already is in Android… Let me guess the mythology will be the same for interactive notifications (which are *not* widgets), 3rd party keyboards, NFC payments, touch ID, PC-mobile linkup, tethering/hotspot, designed-for-your-eyes screens (what a concept !), a modern language w/ memory protection and garbage collection, etc…
        BTW, my Android phones have had not only toggles for apps allowed to run when the screen is off, but also handy notifications about which apps suck much power, for years. That might be OEM-specific though (Huawei in my case for the last 2 yrs). Ditto for geolocation, access to my contacts… and my OS updates don’t turn GPS and BT back on w/o asking 🙂
        There’s been 0 action against Android in the courtroom, only lawsuits vs Samsung (not Android, not Google) for design (not functional) elements. So either there’s no meat to the grudge, or the reaction is taking place somewhere else. Probably both.
        As for the copying that is “recognized by society”, it’s recognized by a handful of very flawed legal systems. I guess my kitchen drawers are infringing: they slide to open, and bounce back at the end… that’s what corp-sponsored lawmakers + overworked patent offices result in, not “society”.

    • “Aren’t the overwhelming majority of features introduced to iOS these last few years taken straight from Android”

      Only to someone that has a minimal and insignificant understanding of technology.

      • obarthelemy

        You have convinced me !

  • While the rest of the article stands, the mid-part on transitiveness of competition and the example used are incorrect.

    The example says that if HTC competes with Apple and Dropbox competes with Apple. Basically that translates to “A competes with B, and C competes with B”. Transitivity does not apply.

    What I think you are referring to, at least in math terms, is reflexivity: if A competes with B then B competes with A.

    • I am referring to the transitive relation: whenever A = B and B = C, then also A = C.

      I stated it as “A ~ B and C ~ B but A !~ C” where ~ is “competes with” and !~ is “does not compete with”.

      I assumed competition is reflexive. i.e. C ~ B implies B ~ C.

      Therefore my statement could be read as “A ~ B and B ~ C but A !~ C” which is a contradiction of transitive relation.

      • The part I’m not completely sure about is assuming the competition relationship being reflexive.

        The 2 examples I’m thinking about: 1) MP3 players and iPod; 2) cloud services.

        Takes completely separate, in the sense of removing all the ecosystem, I can probably see how for these cases competition is reflexive. On the other hand, at least in Apple’s case (MS, Google, Amazon too), it’s rarely the case that one can separate complete a product from the ecosystem. And in that case I’d say that competition is not reflexive anymore.

        This is actually a similar conclusion of your article, but yours discusses it in terms of transitivity, while my comment is questioning the reflexive nature.

  • rohit

    Thanks for a great article. I just think that in a real market where credible alternatives to your products exist, keeping a constant eye on your competition and constantly one-upping them is inherent to maintaining a monopoly on your consumer’s trust. If this was not the case, I think there would not have been a cat and mouse game between android and ios (for example though true for other industries as well) on hardware and software features. Please share what you think. Thanks.

  • JerryL

    There’s a classic analysis – I think, but I’m not sure, by Peter Drucker – of the one kind of monopoly that has proven to be stable over time. A characteristic example was something like a Swiss supplier of a device used in chemical laboratories. They were the only supplier in the world, and had been for 100 years or thereabouts. A couple of factors led to this stability:

    1. Small market. A few thousand labs in the world bought the things; nothing was ever going to expand the market by much.

    2. Scattered market. The company had relationships with all the buyers, and was known to everyone in the industry – so any new labs easily found them. But the labs otherwise shared little in common – anyone trying to enter the market would have to make a large investment to find the potential customers.

    3. Non-trivial technology. The maker had been doing this for many years. Anyone trying to enter the market would have to make a significant investment to build a competing product.

    4. Non-abuse. The maker was satisfied with a reasonable, continuing income. It maintained quality, kept prices reasonable, kept in contact with, and was responsive to, customers, kept focused on what it did well rather than trying to expand. As a result, it remained a trusted supplier.

    Combine all these and you can see that potential competitors would look at a market that was small, wouldn’t grow, and would require significant investment to enter, and would decide the payoff wasn’t worth it; while the buyers were satisfied and had no reason to look elsewhere.

    What’s interesting is the degree to which Apple’s position, while completely different on the surface, shares elements with all of these attributes. You’d think “small market” makes no sense for Apple – but Apple deliberately stays at the high end. By raw count, they are ignoring many theoretical customers – and indeed there’s huge competition for the much larger “cheaper” market.

    While Apple’s market isn’t scattered physically, the effect is in some ways similar. Phones are the best example: Until the iPhone, all cellphone customers could be reached through a small number of carriers and their stores. iPhones, on the other hand, can be bought at Apple stores, and customers who go to an Apple store can’t, at the moment of decision, be reached by any other vendor. More generally, other vendors, having sold through a carrier, have no way of directly reaching their own customers; the carriers own the relationship. Apple owns its own relationships with its customers.

    Technology investment is obvious.

    Non-abuse of position is interesting. The anti-Apple club will always complain that Apple stuff is over-priced – but they never claim that Apple is able to maintain high prices because of its monopoly position – that would be absurd. (In the one market in which Apple essentially had a monopoly – the iPod in its heyday – it was always very price-competitive.) Those who don’t trust Apple … don’t trust Apple and won’t buy their products. Over all, however, the degree of trust Apple’s customers extend it is extraordinary – perhaps one of the company’s most valuable attributes.

    As long as these factors remaining in place, as we’ve seen repeatedly, competing head on with Apple is a losing proposition.

    The chemical device company’s privileged monopoly position mainly came from factors inherent in their market. The only thing in they really control is the non-abuse part – and many a company has destroyed itself by deciding they should be more aggressive. (Often this happens when there’s a change of control – the founders retire or die and pass on the company to children who want to “do more”; the company is acquired by a larger one which wants it to be a piece in a bigger puzzle.)

    In Apple’s case, the analogues are pretty much *all* in Apple’s hands. It has to work to maintain them. So far, it’s done a remarkable job – but that doesn’t mean it will necessarily continue to do so indefinitely. In fact, all the evidence from other companies is that they’ll screw it up – eventually. Though anyone who bets on any *particular* screwup is likely to lose. (Everyone agrees that at some point silicon will reach its limits and we’ll move on to some other technology – but every *particular* technology proposed as a replacement over the last 30 years or more has failed.)

    — Jerry