Monopolies and Innovation

Why monopolies can be good for technology development

Ron Chernow’s long-form bio of John D. Rockefeller, Titan, is one of my favorite books. It’s an 800-page tome that goes into excruciating detail on how one of history’s most iconic entrepreneurs built a company that allowed him to accumulate a personal fortune equivalent to 3% of US GDP by 1911.

What’s interesting to me about the history of Standard Oil, and the oil refining markets in particular, is how the relative price stability brought about by Rockefeller’s consolidation of close to 90% of refining capacity enabled incredible downstream innovations to be adopted by consumers en masse. Case in point is the Ford Model T which, were it not for abundant, relatively low cost, stably priced fuel would not have been as readily developed by Ford and adopted by the consumer.

Today, one might look at SpaceX as a modern day monopoly with its dominance of orbital launch. In 2023, SpaceX launched over 80% of all mass to orbit. Crazy numbers! On the one hand, someone could look at this and see a massive existential risk to be so dependent on one provider, similar to Standard Oil and refining capacity. On the other, it feels quite exciting to finally see reliable, relatively predictable cadence of commercial orbital launch be available for the first time in history. There will almost certainly be a Ford Model T equivalent built on the back of that price, volume, and cadence stability.

Should be fun to watch!