Business & Society with Senthil Nathan
Inspiring and thought-provoking conversations with eminent thinkers and sustainability leaders about business in society. Hosted by Senthil Nathan, Chief Executive of Fairtrade Australia New Zealand.
Business & Society with Senthil Nathan
#20 The Monopoly Problem: How Market Power is Reshaping Our Economy with Matt Stoller
Have you ever wondered why essential goods like baby formula, eggs, and lifesaving medications keep facing shortages? The answer lies in monopoly power—a force reshaping our world in ways both visible and hidden.
Matt Stoller, director of Research at the American Economic Liberties Project and author of "Goliath: The Hundred-Year War Between Monopoly Power and Democracy," joins us for a profound exploration of how concentrated economic power threatens not just markets but the systems that keep us alive. Drawing from his experiences working with the Financial Services Committee during the financial crisis and his popular monopoly-focused newsletter "Big," Stoller brings unique insights into this critical issue.
The conversation takes us through Boeing's transformation from industry gold standard to quality nightmare, revealing how consolidation destroys excellence when financial priorities overrule engineering expertise. We examine the global dimensions of market concentration, from tech giants to the surprising revelation that just two European companies control 90% of global chicken genetics. Stoller makes a compelling distinction between legitimate business success and empire-building, arguing that breaking up monopolies would actually unleash innovation by freeing talented people from corporate bureaucracy.
Perhaps most provocative is Stoller's critique of modern business culture, which has moved beyond cutting fat to slicing away "muscle and bone," leaving companies fundamentally unable to operate effectively. The path forward requires business leaders with the courage to invest in capacity and quality despite financial pressures—those who understand that breaking empires rather than building them creates both better products and higher profits.
Whether you're concerned about economic inequality, business innovation, or simply why things don't work as well as they used to, this conversation will transform how you see the forces shaping our economic landscape. Subscribe now and join the conversation about monopoly power and its profound impact on our world.
Link to Matt's ...
Book: Goliath: The 100-Year War Between Monopoly Power and Democracy
Please visit our website, www.businessandsociety.net, for more inspiration.
Hello everyone. Welcome to the Business and Society podcast, where we discuss ideas at the intersection of business and society. I'm your host, senthil, and in today's episode we will discuss monopoly and market power. I'm excited to be joined by Matt Stoller, Director of Research at the American Economic Liberties Project, who will chat with us today about monopolies and market concentration. Matt is the author of Goliath the Hundred-Year War Between Monopoly Power and Democracy, which Business Insider called "one of the year's best books on how to rethink capitalism and improve the economy. He also worked for a member of the Financial Services Committee in the US House of Representatives during the financial crisis. His writing has appeared in various outlets, including the Washington Post and the New York Times. Stoller writes the monopoly-focused newsletter Big, which has tens of thousands of subscribers. Warm welcome, matt. Thank you for joining me today.
Matt:Thanks for having me.
Senthil:Matt, Let's begin with your personal story. You graduated from Harvard, worked at a software startup and served on a congressman's staff. You produced a show for MSNBC and later became a writer and actor in a television series. In 2015, you took on the role of policy advisor for the Senate Budget Committee. Subsequently, you joined Open Markets and later co-founded the American Economic Liberties Project. It seems, for the past decade or so, your career is centered around tackling monopolies and market concentration. What led you to dedicate a career to tackling monopoly power?
Matt:Yeah right, you can go through a bunch of like bullshit jobs I've had in the past. I don't know. I mean, I'm a political hack. So I'm interested in politics. You know people are interested in different things in this world.
Matt:I happen to love politics, which to me it doesn't mean, you know, rooting for a political party. It means the art of forming a society out of different people who have different views and different ideas, often with a shared heritage or shared kind of sense of community, but with different views on kind of what they want. And I think it's a really beautiful thing that people can come together and disagree but also build a society. So I got interested in that and I think in my lifetime and I'm fairly old at this point I have generally seen America and American government make poor decisions. N not always, but often and not just American government writ large, but business. Large businesses like Boeing or Google or whatever. They're not doing a very good job of kind of being a stewards of a society and sometimes they're not even doing a good job of making money. And so I kind of got interested in this problem, um of why we're failing at at our politics, why we're failing to create a society, and that I got interested in it during the first, uh, during the Iraq war in 2002, 2003, the debates over that, and then the war itself, and then I got increasingly interested in it during the financial crisis, and ultimately, what I, what I kind of came to conclude was that the, the, what has gone wrong in our ability to form a society, because America has done a very good job in general, going back to the founding um, really even going back to the colonial period, and what what happened is we just sort of put too much power in too few hands in, and that's generally true in um, in the commercial realm, and so what you have is a situation where there's there's a few people that have decision making authority who were way too much, and while you can, you know, while, while there are some people who are very smart and very competent, it doesn't matter how much, how smart and competent you are you only have 24 hours in a day and so you can only run so much and I think that the, the fact that we have consolidated economic and political power into a small group of people who just can't manage, it is why other people feel disempowered is why things keep misfiring, is why we keep putting huge resources into kind of white elephant projects that don't go anywhere and ultimately why we're kind of ruining ourselves as a society. And so that's kind of what I got interested in, and the basis of the law that's supposed to prohibit these kinds of concentrations is the ideological tip of the spear is antitrust and anti-monopoly politics, so that's kind of where I eventually came to focus my time and energy.
Senthil:ou are many practitioners out there who fight monopolies and corporate power. Academicians and people such as you. What I found different in your work is the urgency you show to address market concentration. What makes you believe monopoly power is such an urgent issue?
Matt:Well, I mean, I think if you look at the systems, I mean there's a lot of reasons why it's bad and unfair. You know there's inequality, there's lots of, you know worse consumer products and you know lower wages and blah, blah, blah, blah, blah. But you know, and then you can make your lefty argument about that or you can make a conservative argument about how it's undermining that. You know institutions like the church or local communities. But the broad problem I think that makes it most urgent is the fact that we are increasingly seeing the systems on which we rely to stay alive right now. So that would be things like shortages, right? So in the US right now, we have a big egg shortage, and the reason we have an egg shortage is because we have allowed the roll-up of egg production into the hands of a few companies, and they make more money when there's a shortage than when there's not. And so you know we have an avian flu problem which is killing a lot of chickens, but the thing is is that they're not really replacing their flocks to lay more eggs. Because why would they want to? Egg prices are really high and if they can restrain the production of eggs, then they will make more money than if they produce more eggs. So there was an economist for the United Egg Producers who said more hens, less income, and he wrote this in 1994. And this was the basis for a conspiracy that they organized and that's sort of, in one form or another, likely still going on. That's really scary. Not because eggs are necessary, you know, obviously you can go on without eggs, but if you have a shortage of vital foodstuffs, and if you have enough shortages, you get a famine right. And so we've had shortages in this country of baby formula, of eggs and of a whole host of materials from you know, like during the COVID era. You know everything from from chicken patties to black piping. But even even outside of COVID, you know we have really serious shortages of inexpensive pharmaceuticals that have been shortages for since 2012 or actually the mid 2000s, things like really cheap cancer drugs, and these are a result of the consolidation of power and the consolidation of production in just a few factories. And if you have one factory making something and that factory then has to be closed down, you won't have any more of it, and that's what we see over and over in lots of different vital areas. And so I think that's what creates the urgency.
Matt:And just to give like a very obvious example of how our systems are breaking down. You know, we all, in sort of the world I'm in, you know you sometimes take trips and you fly places and you're basically going to be on a Boeing plane or an Airbus plane. And it's really scary to be on a Boeing plane now. Boeing used to be the gold standard, like if the phrase was if it ain't Boeing, I'm not going right, because it was the world-class engineers who made planes safely, carefully, profitably. And now who knows? Right, I mean, they're not even making money, right, but the planes don't. You know, the quality is bad or worse than it should be. And so if you, the same trends that hit Boeing legal trends kind of hit every are hitting every company in America, and so that's really scary because it means that the systems that we use to make the things we need to keep us alive are breaking down. And that's where I think the urgency is coming from.
Senthil:Interesting you cited Boeing. Is there a history that they blocked new entrants into the sector or it's a high capex business and it's not that people like me or someone go and start an aircraft manufacturing venture? Is the industry set up a such that stopped competition.
Matt:Yeah, I mean they did block someone from getting into the sector, which was in the 90s. There was a merger, McDonnell Douglas. We had two aerospace producers, so there's always there's been, you know, a bunch of aerospace producers. I think Lockheed was making passenger jets and, um, yeah, um, was. There was a bunch of them and they kind of gradually consolidated. And in 1990s the government encouraged consolidation in the defense space, which included and Boeing, and those were the last two aerospace uh, civilian aerospace manufacturers.
Matt:And there was an antitrust case and there was a huge political fight over whether these two companies would be able to consolidate and McDonnell Douglas was sort of the last. I mean they were, they were, their business was kind of ebbing right, they weren't very good at making civilian aircraft, but they were still making them and Boeing both bought McDonnell Douglas and signed long-term contracts with the airlines, which meant that it was going to be impossible for anyone else to enter into the business. Not that it would have been easy, but if McDonnell Douglas had been forced to sell their civilian aircraft production unit to someone else, that could have capitalized it a little bit more. I mean, they had a business that was going and they could have. You know, we could have had more than one producer. Instead, it was consolidated into one producer and McDonnell Douglas people were bad at making aircraft, they were financiers, and Boeing decided to adopt the McDonnell Douglas strategy for a variety of reasons, and so immediately after that merger, there was a fight between the financial guys and the engineers, and the engineers ended up losing and so that that could just destroyed. Because Boeing was now a domestic. You know, it was a domestic monopoly. It was the only domestic aerospace producer. Um, it ended up ruining our entire aerospace industry.
Matt:Now there is a rival now, or potential rival. It's not a rival, but it's a potential rival. It's called Boom Supersonic and Boom Supersonic has been around since, I think, 2014. They make supersonic aircraft and I believe United has sort of pledged to buy 30 of their jets or something like that. So there is long-term financing for the space.
Matt:If somebody wanted to get into it and said, I'm going to compete with Boeing, but it's not like the government is encouraging that and it's not like we're making it easy for a new entrant to get in, you could say all right, Boeing, you have to let others come in and repair your you know your aircraft. That might be like the first way. And I mean, there there are ways that we could sort of help to to diversify the market a little bit. We're never going to have, you know, seven aircraft producers, but you could have more than one if you wanted to and we just have decided that that's not something that we really care about and we've also decided that, you know, we're not going to really force the people at Boeing to fix the situation. And that's really puzzling to me, since it does seem like a lot of the people that are kind of just letting things grind into dust also fly places. It's just weird, right. So anyway, that's a long answer to your question.
Senthil:It's such a fascinating story. I think that's a good segway to discuss your book, which has abundant stories about the history of monopolies and market concentration. I learned about it from Peter Goodman of the New York Times, who appeared on this podcast and recommended your book to our listeners. I must say the book is very special, particularly for taking the readers to some of the dark corners of business and politics in the past century. Would you give a quick summary of the book? I think it's more relevant now than 2018 or 19, when you released it.
Matt:Oh well, that's very kind of you to say. It's nice to hear that it's held up. So the story is about kind of the three like here's one way to characterize it the three paths. When you build industrial power right. In the early 20th century, there know this amazing, you know coal and oil and telegraphs and telephones and cars and all of the implications for modern weaponry, you have this immense power right that we have discovered as humans, engineering and scientific capacity. And how do you control it right politically, to do politics? And there are three different paths. And one path is to have the state control it all, and that would be like the communist path, and that's the path the USSR went down. And then you have the let private actors that are consolidated, let private monopolies kind of run things or fuse private monopolies in the state, and that was the Mussolini fascist path that veered into Nazism, right. And then you had but they kind of modeled Mussolini, modeled what he was doing after Teddy Roosevelt's ideas, although not the like murdering opposition. But just how do you control this power? And then you have the sort of liberal, democratic path, which is what the New Deal was about, which is okay, we're going to try to allow for this immense innovation and capacity in industrialization. But we're going to try to control it by fostering regulated competition.
Matt:And my book is about the fight to do that over the 20th century and focusing on in America, right. So Soviet Union and Nazi Germany are sort of the specters of the outside, but like it takes place in America, and it's about this congressman named Wright Patman, loosely right, like it follows his life, but a little bit before, a little bit after who was in Congress from 1929 to 1976. So a really long time in Congress when the US built the modern middle class and then, right after, traces how what he did to attack the consolidation of power in the banks and in the rest of the economy, how that did things like helped create Silicon Valley, helped create modern telecommunications. And then what happens afterwards, right after his legacy gets taken apart by the Democrats and the Republicans in the 80s and 90s and 2000s and where that led us as a kind of explanation of why we're seeing some of the trends that we saw in kind of early 20th century both in the US and abroad, like those are sort of reemerging and it's kind of just like an explanation of why.
Matt:And the book came for me.
Matt:It's like I started writing it because I was.. I was working as a staffer during the financial crisis in the House of Representatives and it was very weird to me that there was just not this awareness of a dormant or of this anti-monopoly tradition in the US and all of the agencies that we were dealing with to deal with the crisis, like the Federal Reserve and the Federal Deposit Insurance Corporation, the Securities Exchange Commission, all the alphabet agencies that come in and handle bailouts and banks and stuff that was all built during the FDR time, or at least the modern versions of it were and so there was just no historical understanding of why they were built and the anti-monopoly principles that were baked into them, and so I thought this is really weird.
Matt:I don't know anything about this and I just sort of was like I'm going to study it, and out of that came a book and a story of, I think, what was a dormant and important tradition that's coming back, because we're starting to see the problems not starting. We've been seeing the problems that came out of the collapse of those institutions and the anti-monopoly principles that were embedded in them in the 80s, 90s and so on.
Senthil:That's superb and I don't think we'll do justice by getting into the details of the book into this 40-minute podcast. But one key takeaway from reading your book for me is the time it took to dislodge the ecosystem that helps build monopolies. Take Andrew Mellon, or Mellonism you wrote about. It took quite a few years to decisively control his influence. Do you think people or societies have the stamina today, especially when multiple crises such as climate change, geopolitics, information overload, compete for society's attention?
Matt:uh, it's really up to us, I mean that that's the thing is. That is that you know, we, this is a, this is a human, this isn't. This is a story that every society has to go through in every culture and always had had to go through. Like, we get to choose, as human beings, what kind of world we live in now. Obviously, we're bounded by our traditions and path dependence. If, if you're you know, if it's 2000 BC and you're an Egyptian peasant, like you're not, you don't have a lot of agency, right, um, but uh, but we are, I think you know, in a, at least I am in a position where I'm the honor of living in a democracy and it's, I believe, it's incumbent on all of us to, you know, to advocate for the society that we want to live in.
Matt:And one of the reasons I wrote the book was because you know America, you know it's hard to have a republic, but we pretty much kept one from the 1770s until the 1970s. I mean, there were, obviously, uh, significant exceptions to that. You know, we, we did have a fascist South for a fair amount of time and slavery and segregation, and there were a lot of really, um, I mean, exceptions would be one way to put it, but there are. There are countervailing um themes in American history as well. But you know we've done it before and we've done it for most of our history. So the idea that we can't do it now is a I don't buy that.
Matt:I don't think people, I think, don't think human nature changes. I think the you know Louis Brandeis. I guess I'll close with this, this quote. He said the longing for freedom is ineradicable and it will express itself in a protest against injustice unless the longing itself for injustice is made to seem immoral. Right? So people naturally want liberty I think at least that's what Americans kind of naturally want and you have to spend a lot of effort suppressing it, right? And that's why it's like I think if we just recognize that and say you know what our longing for liberty is is legitimate and we should execute on that in terms of policy, I don't think it'll take that much time to take to take the dominant firms and oligarchs, you know, to bring them back into our democracy. I just think we have to want to do it.
Senthil:When it comes to fighting market concentration or monopoly power, what is the one lesson from the last hundred years we must not forget? There's abundant stories, as I said, very, very vivid, but if you tell our listeners that let's not forget this from the last hundred years, what is it?
Matt:So I guess what I I guess, what I would say is there is a there is a really big difference between doing business and empire building. Right, and I think what we've, we've, we've gotten into the for a variety of reasons, there's this perception that if you are saying we should promote business but not empire building, then you are anti-business. One of the things I want to break up Google, because I think Google is a holding company that is restraining the different parts of Google.
Matt:There are a lot of great people, very talented, within Google who are constrained by Google's like overwhelming bureaucracy, all the bullshit meetings they have to go to, and so and that's true in most big corporations most big corporations spend a lot of time trying to make sure their employees don't do anything right and bury that. It's like, you know, it's like a big government, right, that's what they are. And when one like there's this sort of traditional lefty frame which is those big companies are bad, they need to share the wealth, and that's not where I come at it. I am a lefty, but I'm not I don't think, oh, they have too much money, we should share some of that money. I think they are limiting human freedom because there's a few people making decisions when there's a lot of people in that place who are potential leaders and should be able to lead and potentially do things Right.
Matt:And so I think that traditionally we look, we would look at a company like Google and say this is a private government. It has 15 products with more than 500 million users. Why can't some of those be independent businesses? Why can't they cut deals with lots of other companies, companies? Why do they have to make all their deals internally right, preference their own products? That's, that's a waste. And and then and like that, that to me is a pro-business argument. And the antitrust law, you know the Sherman act, says that we're, we prohibit restraints of trade, which says don't, you know, take trade and stop restraining it. It is fundamentally about doing more business and I think people, people sometimes confuse the idea of doing more business with empire building. Right, Google buys another company or gets bigger and therefore it's more business, but in fact it's just restraining trade and I think that's like. We have to realize that how we do business, how we structure business, is a political question and we have to make the distinction between building more business and creating more business and just empire building.
Senthil:It's a very interesting answer, Matt. Before we talk about market concentration today, I just want to ask you some of the ideas you have shared is applicable just for the United States, or it's a phenomenon that you have observed in other parts of the world as well?
Matt:I think in general, everyone uses Google, except you are in China, Turkey or where Google is not dominant, but most of the world. You're using Google, right. You're using Meta, you're using, you know, Amazon's not dominant everywhere, but it has presence in a lot of places. And I think what you would see is, you know, there's there's two companies, I mean across the board, I'm bringing big tech, but there's a lot of companies that control vital infrastructure. So I believe there's like three main companies that do seeds and chemicals for like everyone in, for all farmers, right. There are two companies they're both European companies that manage the chicken genetics, that produce the best egg laying hens right, and they handle 90% of chicken genetics in the world.
Matt:And you see this kind of across the board where market power is really the governing system of most of the world, right, acquiring and wielding market power. I don't want to say not in China, because China has their own political strategy. Some of it involves either having their own dominant market power companies, but they're sort of a slightly different economic model. So the answer is that it is probably most extreme in the US, but it is a global dynamic.
Senthil:Actually, you answered my next question. I wanted to ask you could you give us examples of a few sectors where market concentration is rife and how it impacts societies, because we often hear terms such as big tech, big food, big oil, big pharma. I'm just wondering is it an exaggeration or is market concentration a problem across sectors?
Matt:I think it's across sectors. I mentioned that there are shortages of cheap cancer drugs before. Those shortages are actually worldwide and there are, you know. There, I think what you see is, you know, the model, the economic development model for at least the 1970s has been to consolidate economic power and globalize it. And I mean, I think what the reason and I'm not this isn't like a bunch of bad people got together and was like aha, we'll consolidate everything it was that in the 1970s, the, the kind of post-World War II order which was run by. Really it was based off of the New Deal. It was the domestic New Deal in the US, which was a lot of public control over markets and then expanded through the world through control over currency flows and global trade arrangements.
Matt:That was kind of breaking down and you had financial instability and you had inflation, and so there was a debate about what to do, right, and what do we do about this problem? And I think the argument from a lot of philosophers and political thinkers on the right and the left, for different reasons, but they basically said look, the problem we have is that we are penalizing companies that are big and we are penalizing capital. There's something called the capital shortage right. If I want to invest and make more stuff and build a factory, I'm not able to do that because of these constraints on capital, and that, in turn, generates inflation because I can't make as much stuff as I would want to too much money chasing too few goods. Therefore, what we should do is relax restrictions on capital on terms of trade, in terms of investment, in terms of mergers and acquisitions. And no, no, I know you think that if a company is really big, that it's probably dangerous. There's probably conflicts of interest, there's probably too much power.
Matt:Those are traditional, pre-1980 principles of managing American business. But actually what's really going on is they're just really good at what they do. That's why they're big. Right. General Motors is the biggest, you know, automaker in the world because it's just really good at making cars. Right. Ibm is the biggest computer maker in the world because it's really good at making computers. Right. This is 1970s and 80s right.
Matt:And so they said we should change the laws to encourage bigness so that we can have the best people making the most stuff, make it more efficient. And so they did that um, and then globalized that concept, and it was not just an American thing. A lot of Europeans bought it, a lot of of people in other countries around the world bought into it, and so it was a global arrangement where people said, yeah, actually we need to have bigger, more efficient enterprises and we need to encourage a lot more capital flows and not put restrictions on capital, because that causes all sorts of problems. And so what we have now is a world where you have very large enterprises managing our key social resources and you have lots of capital flows with no restraints on them, and that's caused its own problems, and that's where we are now.
Senthil:You subtly touched upon a point. If we look at some sectors, say aircraft manufacturing, for example, where business is that demands very high capex, consolidation is accompanied by high profits and barriers to entry. However, there are also cases where companies make better margins due to product differentiation and personalization. For example, a pharma company that makes pills for weight loss. Is it something wrong with the later? What if a business solves my problem better than its rivals and commands a premium for it? Isn't it all businesses aspire for, though? The unintended consequence of this may be a market dominance.
Matt:Sorry. So what you're saying is if a company is really good at what they're doing and they make a lot of money, isn't that good? Is that sort of the gist of what you're saying?
Senthil:My gist is that there are businesses that build barriers to entry and make those artificial boundaries where others cannot enter, but there are certain businesses that they're really good at their game in solving consumers' problem and they command premium for it. This is what they teach you in marketing, or no one? Yeah, yeah.
Matt:Okay, I got you. And Google is a good example, right, and one of the interesting things is sometimes it's hard to tell Like there's a. You know, Google was great company, did a lot of innovation. You know, I started as a Google user in 1998 when they came out and I was like this is amazing, it's so different, better. And then you know, it was great for a really long time and but it's 2025, right, and at a certain point between 1998 and 2025, it sort of stopped being just powerful because it was a great search engine and it started being powerful because it was engaged in all sorts of coercive practices to not let new entrants into the market.
Matt:Now, where that line is, it's not clear, right. But I think one way to measure the problem you're talking about is the durability of high profit margins, right. So if a company is just very profitable because they create a new product category, right, or they solve a particularly hard problem and they make a lot of money, good for you, right. You should make a lot of money being able to do that, like Ford Motor figures out mass production, that's awesome, right, we should want that. But when the profit margins are durable, high and durable, that's when we know there's a problem, because if someone's making a lot of money in a market system where you allow new entrants, you're going to see people copy. They're going to come in and be like you're doing that good thing that people like I'm going to come in and I'm going to capture some of your margin. I'm going to do it, but sell it cheaper. I'm going to do it better and sell it for the same price or whatever it is. You see product differentiation, as you noted, or you see lower margin products, but in America right now I don't know if this is a global thing, but I would assume it is Our companies today are older, they're bigger and they're more profitable in terms of pervasive profits than they have been, I think, almost ever.
Matt:Right, I mean, they're just. It's just like if you're a big company and old and you're very profitable, like that's like the standard US model of a company and it's not that they're producing like awesome stuff anymore, they're just have market power and it's really hard for someone else to get into the market because you know, whatever, you're a serial company and you control. You know you have deals with Walmart and Target to control the shelf space and so you're just like, yeah, you can, you know it's effectively a commodity, but you know you have a deal to block others from getting it right or other, you know other forms of distribution. So that's how I'd answer it, which is that, like, hey, most monopolies not all, but a lot of them start off by doing something different and better and then they become slothful and this prevent others from getting into the market.
Matt:But a barrier to entry that's just, my product is awesome is not a barrier to entry, it's just a better product. And we shouldn't. I mean. This is why antitrust cases are sometimes difficult, because that's what they argue. They're like our product is just better. Right, it's not a barrier to entry. But that's why we have laws, that sort of set up procedures to tell the difference between a company that's being unfairly unfair and a company that is just making really good stuff.
Senthil:Interesting. You touched upon tech companies as examples. There are arguments out there that the network effects that comes with these tech companies builds this natural ecosystem barriers to entry. Have you ever thought of that?
Matt:Well, yeah, I mean that's the basis, for I mean, there's a lot to say about that. Just on a very basic level, you could make an argument that Google search is a company. There's a line of business that gets better when they have more data and more users, right, so there are network effects there. And you could argue that, like, say, Gmail is the same thing or the, or that YouTube is the same thing. But I don't think there's an argument that having search and video sharing in the same company has some sort of network effect. That's just a legal arrangement. They just choose to merge the two of them. So it's like OK, Google, I said, had 15 products with more than 500 million users. Maybe each of those products has a network effect, but not across products. There's a sort of overstatement of that dynamic.
Matt:I just want two more points. One is network effects don't have to be contained within a corporation. What is the biggest network in existence? It would be the internet, right, and no one owns the internet. And it is the biggest network in existence because no one owns it. Anybody can connect to it.
Matt:So the idea that you need to have one company own the network for someone to take advantage of the operational scale is not true, right, actually, in 1994, 1995, robert Rubin, who was the Treasury Secretary in the Clinton administration, or maybe the NEC director at the time anyway somebody brought him a copy of Netscape and showed him the internet and he said who owns this? This is amazing, who owns this? And they were like no one owns it. And he couldn't believe it. Right? And I think that's where there's a little bit of a dynamic, where people are like, well, somebody got to own the network for it to scale. But that's not true and it's never been true. We can have all sorts of institutional arrangements, we can have data sharing, we can have, you know, network sharing. You can have, like those, those scale. The benefits of scale do not have to be captured by a corporation.
Matt:And then the third point I'll make is that there are a number of uh competition lawsuits, antitrust suits in the us against companies like Amazon, Google, Apple, Meta and the the Google one I'll talk about, because that one there's actually been a verdict and Google was found liable for being a monopolist. Like they lost the case, although there hasn't been a remedy yet, but the argument from the government, the successful argument, was Google uses its economies of scale to make a better search engine right. Data. If I use Google and I search for something, then they know what I'm searching for and they know what I click on. So then if you search for the same thing, they now have my track record and they know oh, people that search for that thing tend to click on this thing. We'll move that up right so their search engine gets better. That is a competitive advantage versus other search engines.
Matt:Now, that doesn't necessarily make it illegal to use that data, but what does make it? What became unlawful is Google pays companies like Apple or Mozilla or Verizon or Samsung to not put other search engines on their products as defaults. So what they're trying to do is deny rivals the data and the scale that they have. So it's like Google pays Apple $20 billion a year purely to deny Microsoft's Bing from getting access to those users and that data. So scale exists and it's an important attribute of business, but it's also a weapon for a monopolist to deny scale to their rival, and we see this over and over in lots of different areas. So those are the arguments I would make about scale.
Senthil:Such a great answer, Matt. I'll ask one last question before we move to the final section. What do you see as the future of business influence on politics? New York Times recently wrote the following about President Trump's inauguration, and I quote "three men, collectively worth close to a trillion dollars, were seated in front of Trump's cabinet bids and behind his family, creating what might be a hierarchy of influence."
Matt:Right. So typically, when people say business influence on government, what they mean is corruption, right, and getting secret, getting cronies and favors and stuff like that. And I don't think I think the question of business influence on government is broader, right, because it's a little bit like all right, you know, government, you know I talked about empire building versus actually doing business. Now, if the government is coming in and saying we're going to help set up markets, we're going to help encourage more semiconductor production, or we're going to, you know, try to restrict fentanyl, or whatever it is like, those are all business arrangements, right? Those are all things that government is trying to do. And they will often go to business people and say, hey, how do we encourage more production of blah, blah, blah, whatever it is? You know, our last night Trump established an office of ship building, right, because the US has no merchant Marine, so we need to go build ships, and that's, you know, and I'm sure there's a bunch of maritime people that have been encouraging the government to do that. And the government is going to go to them and be like how do we build more ships? That's good, that's not a bad thing, that's not corruption, that's just the government structuring what kind of business and how we're going to do business right.
Matt:But the question of cronyism and just how can government help us build more empires and capture more commerce that we then get to tax, that is really bad and that's what I think, what you saw at the inauguration where you have a monopolist like a Jeff Bezos or Mark Zuckerberg or you know, a Sundar Pichai or an Elon Musk like those guys are Musk a little more complicated, but with Starlink and SpaceX is a pretty strong monopoly, but with Starlink and SpaceX is a pretty strong monopoly those guys have captured control of businesses that they effectively tax and what they want is for the government and their private governments private governments, that's what Amazon is to kind of collude on either preserving their empires or expanding their empires and that, I think, is really bad and really dangerous.
Matt:I think the government should be trying to prevent empire building in private markets as opposed to encourage it. I can't say that. You know, some people on the right would say that those guys were not there because they were powerful. People on the right would say that those guys were not there to because they were powerful. They were there because they were surrendering to Trump. So, oh, don't worry, Trump is not going to do what Amazon wants, or Mark Zuckerberg or whatever. I don't have an answer to that, but I will just say that that's an alternative argument, an alternative view.
Senthil:Matt. Let's move to the segment how I Did did it where I ask all my guests three personal questions to draw lessons from their life and career. How do you handle differences of opinion or setbacks
Matt:among who
Senthil:with the people you work, your peers or you take? You said you're a lefty. I'm sure there will be rightwingers who come with different set of view. How do you manage that?
Matt:How do I handle disagreements in general,
Senthil:exactly
Matt:I mean, I think so, I guess. I guess I would have two observations about that. So if I think, if somebody has really studied a topic and they know what they're talking about, they've done the work and they come to a different conclusion, then I think it's worth listening to them and learning from them, because oftentimes they'll have objections that are worth taking seriously. Maybe they're, maybe it's worth changing your mind about it, right, if they can say here's a thing that you haven't considered.
Matt:Um, you know, then you need to, you need to deal with that. Sometimes they are just, you know, spending a lot of time trying to find ways of lying. You do have to know how they're portraying the situation, just so you can like understand how they're trying to wield political power. But if the point is is that if they're doing a lot of work to try to persuade you of something and they have a substantive knowledge whether it's honest or not, then you have to take them seriously. If they haven't done that work, I don't really believe in engaging. I don't think that, and there's a lot of superficial garbage and I don't know how to, and a lot of prestigious people who engage in superficial garbage. I don't really know how to deal with that. But that's one observation.
Matt:And then the other observation, um, about how to handle disagreement, is that, you know, I have what I call a zone of reasonableness right, which is that, like, if you're making a strategic call right, or making an observation, you're basically making a guess about the future. Okay, and there are lots of ways there's. We don't know what the future is going to bring and we don't know who's going to be right about anything. So what I look for in in this is just working with allies. But also, you know, people I've opposed to.
Matt:If they're making a guess and it's not the guess I make, but it's reasonable, it is potentially going to come true and I could be wrong, right, and they might be right.
Matt:But it's not the guess I make, but it's reasonable, it is potentially going to come true and I could be wrong, right, and they might be right, but it's a reasonable guess I'm willing to cut them slack and I'm willing to say, well, you might be right and I don't know, and we'll see Right. But if it's unreasonable, if it's and I'm and this is arbitrary where I draw that line but if I'm just like you clearly haven't done the work and you're just doing this because of some other reason, or you just haven't done the work and you don't know how this thing actually works and it's not going to work out that way, then I will sort of dispute them. But if they're in the zone of reasonableness and they have a different view about where to go, then I think it's worth listening and I think it's worth just like cutting them slack and saying maybe you're right, maybe I'm wrong. It's worth just like cutting them slack and saying maybe you're right, maybe I'm wrong.
Senthil:Interesting. What would your advice be to business leaders? If I say, give one or two advice, what would it be?
Matt:So I think that we have a really serious crisis within American business right now. Maybe global business, I'm not sure, but American business. What you see is the Chinese EV producers are much better than ours. They're better at a lot of stuff, even things we put a lot of money into. You see is like is the chinese elect um ev producers are much better than ours. They're better at a lot of stuff. Even things we put a lot of money into, like um, like ai, you know, deep sea comes out and and embarrasses everyone.
Matt:I I think there's a Boeing, a Ticket master like. We're losing the operational capacity to actually do business, and I think the reason is because we have a a, a vision of business that is really finance driven, and the finance guys are in there and what they're saying is we need to be radically efficient, we need to thin out our supply lines, we need to fire people, we need to thin out as much cost as possible. Right, and for a while, that might make sense. Right, if you're trying to lose weight, you do want to lose fat, you do want to eat less, but at a certain point, you are just starving yourself, and I think one of the things that's happened is we, instead of getting lean and then building muscle, what we've done is just started cutting into muscle, cutting into bone, and so we're just really understaffed at key things and we're letting the finance guys just run businesses into the ground. That's what Boeing was, but you see this across every corporate procurement department.
Matt:Everybody can tell you that the finance guys are claiming fake savings and really costs are exploding. You can see this in engineering departments. They're doing things that are stupid, like they're saying oh, you have to fill out a lot more forms for our engineers to use a hotel room. That saves us some money. And it's like then your engineers are spending their time filling out forms for a hotel room for travel instead of engineering, right? So there's a lot of short-term thinking and cost bloat, and I think that the reason is because business leaders are afraid to make decisions that cut against the finance brain and saying no, we're going to spend more money to make better products and that's going to save us money in the longterm. That's going to give us better pricing power in the longterm. Instead, they are just sort of like no, no, if I have a problem, I'm going to bring in Booz Allen or whoever to like, come in and do a six month engagement rather than building internal capacity, and since nobody ever gets fired for bringing in Booz Allen, it doesn't matter, we'll spend a lot of money on them and it doesn't matter if they come up with like a decision everybody ignores or you know, there's just a lack of courage and a lack of willingness to kind of go against the grain, but there are a lot of.
Matt:Really, I think I think the people that are going to be successful in business are going to be the ones who are a little bit more farsighted and are willing to make investments and are willing to ignore the kind of calls for thinning things out that we've been hearing since the 1980s. So I mean, I really feel like rebuilding the foundations of American business is a core objective. That is is a core objective that I think business leaders I mean you see this like. I think boom aerospace is a really interesting company.
Matt:I've seen, uh, Mike Beckham from Simple Modern is doing a lot of really interesting that they make, um, you know, uh, the metal cups that are. You know everybody has one now for water and they he just reshored a lot of his production um, and from China and and it's just like a really interesting new way of doing. They're making a ton of money, um, and Epic games has been in a lawsuit with apple over the app store. So rather than ignoring or trying to get in bed with a monopolist, he's just fought them and I think they're going to make a lot of money off of it and make better products. So there's like lot. There is a different way of doing business. That is about breaking empires as opposed to building them, and I think that's really where the if I had advice for business people, that's kind of where I would push them.
Senthil:Finally, Matt, can you recommend a book or two to our listeners? Do you read a lot?
Matt:I do, although I haven't. I have a young daughter so I've not had much time to read as I used to. Well, okay, so there's a lot of books that are great. So obviously I mean read Goliath. My book is really good.
Matt:If you want to understand antitrust, I think there's a short book by Tim Wu called the Curse of Bigness and it's good. It'll get you through the principles and the history and it's a fun read. If you want to read a novel, I just read a really good book that just came out by a guy named Cory Doctorow called Picks and Shovels, which is about a fight in the computer industry in the early 80s. But it actually will teach you a lot about policy. But it's fun, it's a novel, it's a thriller and if you want, let's see here. I mean there's just a lot of great.
Matt:There's a lot of great work coming out about monopoly power. I will say, if you want an academic book on the history of American telecommunications which is fascinating and really fun about innovation, like how innovation really happened, there's a historian named Richard John who wrote a book called Network Nation and it's about the 19th century creation of AT&T and Western Union patent law, anti-monopoly pause, fascinating and fun. And then the last one would be that I'll recommend is TJ Stiles, the First Tycoon, the Life and Times of Cornelius Vanderbilt, which is about really it's a biography of the first, I guess, billionaire type in America, but it's basically a story of industrialization and law in America in the 19th century and it is wonderful. So there's a bunch of books I like, fun reads. I think that's like the way to go. And those are four.
Senthil:Excellent. Matt, I think that's all the time we have for today. Thank you so much. What a pleasure speaking to you and listening to your path breaking perspectives.
Matt:Hey, I really appreciate you having me have a good one.
Senthil:Thank you so much for tuning and listening to our podcast today. When you get a chance, please do not forget to leave a rating and review of this podcast and feel free to write to me if you have any thoughts or comments or what kind of episodes you'd love to hear in the future. Thank you.