Andrew C Wang's Blog
Tackling Monopolies

Tackling Monopolies

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Draft of ideas which I’ll form into an outline and cut stuff for a more coherent thought.

What Does Software Solve?

  • Software is inherently a mechanism of efficiency and automation of processes
  • B2B SaaS software products are typically software that solves the inefficiencies between people, specifically communication. Whether it be a chat application, a CRM, a project management tool like Asana, etc. Many of these products are centralized sources of information to speed up the communication of information with many enterprise B2B SaaS tools packaging node workflows to automate processes using triggers (think Zapier but designed specifically for the product).
    • Inefficiency is a cost problem. Think of it like a wheel. Earlier in human history, creating a wheel for tilling using bulls was hard, and maintaining its form and function was difficult, too; sometimes it wasn’t as round after heavy utilization. Innovation in material and tooling led to more efficient wheels. A rounder wheel with better material made farming more efficient which meant a lower labor cost.

What are Monopolies? How do you fight monopolies?

  • Software monopolies: software startups look to solve the inadequacy problem of efficiency. Software monopolies maintain the status quo of today’s level of inefficiency.
  • How monopolies want to maintain the current level of inadequacy where they can profit from the inefficiency
    • Recall, businesses try to solve cost problems. Software solves the inefficiency cost.
    • As a monopoly, since no one else can compete with you, you can simply increase the cost of the most efficient software which is the monopoly’s inefficient software.
  • Beating monopolies is difficult, but never impossible. When you provide a service/product that’s better than the market, it’s a normal business. Many new types of products start off serving at a premium price for those who need it most and can afford it such that the business selling the new product is break even.
  • Caveat: competitive advantage and moats
    • Let’s think outside a business context and think of countries: the US before 1941 had two natural moats: the Atlantic and Pacific ocean. The US didn’t need defenses because of how vast oceans were; a land invasion is difficult. Instead of an ocean, the English Channel denied the potential of an invasion from Nazi Germany. However, what made the US join WWII was Japan breaking down the natural barrier using the Zero warplane. The US grew complacent, just like a monopoly that doesn’t innovate.
    • In a different article, I may ask someone else to write a blog about globalization in the context of politics and US spending power, why offshoring was done too early but would eventually happen, etc.
  • What about the ChatGPT era? Many businesses were forced to rebrand, even rename their corporate legal name, to include “AI”. Many companies rapidly changed as everyone was crazed over the new AI frenzy, not that most companies who claim they use AI actually do (a firm I worked for had to make an “AI”; the feature I built that sales now pitches as our core “AI” feature was a single SQL statement). But this frenzy is when there’s a massive shakeup in the market with large demand that swelled people’s opinions on innovativeness of companies. Typically, crazes like this are superficial, as are most LLM products (the only good products I’ve seen are ChatGPT, FigGPT, DepHubs which I wanted to make, or anything that requires filling in the gaps). This latest craze was superficial because LLMs are gap fillers. But the best software products are massive and tackle human problems; these problems aren’t gaps. The Rippling CEO Parker Conrad described his company’s platform approach really well, and I’m a big fan because Rippling’s ability to store all data in one place and have all processes be controlled from Rippling mean it’s a complete dictatorship of the things necessary to HR.
  • What I’m trying to get at is monopolies have tech debt which make them slower to change. New startups learn from the incumbent’s mistakes and have much more time compared to incumbents to move fast where incumbents must maintain backwards compatibility. To beat monopolies, the product being served can’t be marginally better but tackle the deeper issue. In the case of software, there are many incumbents from the 2000s that solved point solutions and added more over the years like Salesforce. It has added several products, none well intertwined. The deeper problem for most B2B SaaS companies is data (not the privacy invasion kind like ZoomInfo lol. Rippling and Salesforce tackle the problem of many SaaS products being created but needing to be automated through integrations, but the number of integrations to build is proportional to the number of people you can dedicate to it). And of course the inherent problem of software is efficiency. When there’s a software category that you’ve identified has some inefficiency problems, there are likely more tangential problems that the data can solve via centralization. Centralization is inherently more efficient by keeping everything together in one product; with everything in one hub (like a data warehouse), you can interact and create automated processes more easily. When you’ve found a GTM product that the incumbent may not do well or the industry doesn’t have in general, tackle that first but ensure you’re building and tackling the market in a way that pitches your efficiency standpoint.
  • Google is a great example of just having a better product. It’s anti-monopolistic measures like paying Apple to show its search engine by default on Safari sets a high barrier of entry; however, with large investment like You.com or tangentially OpenAI, tackling the search engine giant is possible. ChatGPT was a great example of Google and many other companies losing shares, though ChatGPT’s as a product isn’t that great compared to Google. Social media has also eroded Google’s search engine share. If you noticed more disguised marketers on Reddit recently in 2024 where all a redditor’s posts include a link to their website, it’s because Google, trying to compete with social media, has been showing more Reddit and Quora posts to erode their share (and generally, the posts are better than most blog articles. There’s a market for competing with Google’s SEO engine).
  • You can’t be marginally better which means your investment into the business must be high. The Spirit and JetBlue merger in my opinion should have happened as legacy carriers’ methods of hubs are flexible compared to cheap airlines.
    • Funny story: my father runs a cheap assisted living facility. He wanted to become a doctor but his GaoKao was good enough for him to become an engineer which China values more in the 70s/80s at least. To run this is a dream for him since it draws from his really nice and altruistic personality (I think it’s unfortunate I carried this on because it’s kind of a distraction from thinking for myself), neither of which are good for him in business and society as people take advantage of him, but he’s had a lot of employees across all age ranges tell him that his business shouldn’t exist as it’s mostly break even rather than profitable (this year, multiple assisted living bankruptcies are happening). He has a Chinese perspective on business (provide the best quality at cheap cost). Obviously, the elderly and their families appreciate the affordability of his business, but people from the outside don’t understand the for the care the facility provides.
  • Probably should focus on how centralization helps with efficiency in B2B software since B2B software is all about centralizing data for greater efficiency and easier integration of data to provide more automation in products that an enterprise can create.

Blockchain against Credit Card Companies in Consumer Payments

  • My crypto friends say that the instantaneous nature of blockchain transactions will replace credit card companies Their GTM strategy is to tackle the financial business industry first instead of tackling consumer problems today. Crypto’s challenge is finding a better consumer experience, and instead they went to tackle a business problem. People’s complaints around credit cards are actually from the merchant fees, not the time it takes to settle. Credit cards is more of a service for consumers if we think from the perspective of lines of credit, which means an algorithm will 99% will never be suitable for that without spyware. Though I know someone who’s working on something tangential.

Advice for Finding the Right Market Conditions

  • Sometimes you need a wave to ride on to spur growth such that without quick growth, the service would die. This means finding opportune moments in the market
  • Inefficiency solves a cost inefficiency problem; when companies were reeling from high interest rates and low VC investment, I decided to launch a AI chatbot company, right before ChatGPT launched and all the crypto bros were looking for the next VC wave of investment. I tried to take advantage of the market’s need for cost-cutting measures. For crypto to boom, they need to find a market pain point, and settling “credit cards” transactions instantaneously isn’t a major pain point.
  • In times of high boom when everyone’s dancing in cash, companies use high profit eras to grow faster. With that extra flush of cash, companies buy nice-to-have products to grow by any means necessary.
  • I’ve taken several hours every day for a year to think about B2B businesses, so I can’t say much about consumer businesses. From an amateur POV, I’d say that consumer businesses are about taking advantage of the needs of Homo sapiens — the human mind. What do people need at the moment is more of a business problem; I think consumer problems are creating cheap — if not monetarily free like Facebook — products that feeds the brain’s appetite. Some things are due to efficiency, safety, even superficial points like credit cards.

What about non-software products?

  • Lots of great idealists spend a long time thinking of ideas within a niche space. A great example of Mr Beast who spent thousands of hours thinking of how to take complete advantage of YouTube
  • For me, since September 2023, I’ve been dwelling on B2B SaaS businesses for a long time. I’m not a genius; I think that stroke of genius in the B2B space lies in Salesforce founder Marc Benioff and Rippling founder Parker Conrad.
  • I’m no guru, but I think I understand the B2B SaaS space much better than most. If you’re looking to tackle the industry of toys, consumer software apps, etc., dedicate a year thinking to figure out the inherent problems your industry has been trying to tackle. For instance, plushies have been reinvented to look more cute and, of course, more soft. Obviously, the more soft the better, but plushies need to innovate on what characters they make based on today’s trends, which means reinventing the wheel to suit today’s needs. The aesthetic reinvention of plushies is also similar to women’s fashion. To me, there are two types of women’s fashion: the aesthetic kind for other women to admire and the functional kind for mostly men to ogle at. To make the most optimal of both categories combined is impossible. The uncertainty of what today’s trends are and what suits who allows for this large market to have few oligopolies per fashion niche. To me, the evolution of women’s fashion for the latter category has a singular goal that rides the line of conservatism that contemporary society is comfortable at today. LuLuLemon and Alo have nearly perfected that and compete on the other factors in consumers’ mindset such as material, price, aesthetics, etc.

Does the abolition of anti-trusts make it harder?

  • Yes, of course. Larger investments will be needed to tackle monopolies. Business 101 describes that to catch up with competition will require massive costs compared to the slow innovation of the incumbent.
  • Reagonomics and Thatcherism combined with austerity made bidirectional issues in Western spending power. A lot of Western problems are compounded by decisions that make it harder for competition to be spurred. VCs interested in software made the tech industry proliferate. As monopolies have set in to the software industry, their high profit margins has made it difficult for even the most innovative and highly valued startups to compete.