🛍️ The Mall Only Has 3 Stores
Consider who you buy from this holiday season
My small contribution to raise your level of consciousness as you transition from buying food to buying … more things.
The illusion of choice
Americans think they have a lot of choice - but most of the brands they buy are wholly or partially owned by only a handful of companies. Don’t believe me? Pick an industry and see for yourself:
In retail, 55% of Americans buy from Target and Walmart. At the high-end, Nordstroms, Saks Fifth and Bloomingdales dominate.
Social media? Facebook (which includes Instagram and WhatsApp) holds nearly 70% of the market. The newest entrant to the market, TikTok, arose from outside the United States. Nothing wrong with foreign companies building a business in the U.S., but it is a problem when that happens due to a business climate where domestic competition is impossible.
Some of these companies dominate to such a degree that they hold significant market share in multiple industries! AT&T isn’t just a telecommunications company … after a recent $85 billion dollar merger with Time Warner (which even the Trump administration sued to stop) it now owns TV studios like Warner Bros and New Line Cinema., online streaming services like HBO, channels like CNN and Discovery, and satellite providers like DirecTV.
Amongst the legacy companies, Disney is probably the most egregious behemoth. In an earlier newsletter I wrote about how it is almost impossible to avoid daily interaction with some part of Disney’s massive global enterprise. Amongst the “new kids” on the block, Amazon is the largest conglomerate, owning everything from movie studios like MGM to groceries stories like Whole Foods.
Wasn’t it always this way?
Let’s stick with media. In the 1980’s, 90% of American media writ large was owned by 50 separate companies. Today, five companies own 90% of the American media market. This consolidation of vertical markets was incentivized by government deregulation which started around 1978 and continued through the early 90s.
In the 1980’s, 90% of American media writ large was owned by 50 separate companies. Today, five companies own 90% of the American media market.
Initially, deregulation was a bipartisan effort. Both progressives and conservatives agreed that regulation encouraged price inflation and economic stagnation (the “stagflation” of Jimmy Carter’s presidency). But over time, deregulation became part of conservative dogma, and its no coincidence that the period of deregulation from 1978-90s coincided with the presidency of Ronald Reagan, under whom deregulation reached its philosophical zenith.
We live in the age of oligopolies
Government deregulation has encouraged significant consolidation over the last three decades to the point where only 2-3 companies dominate in each industry, e.g. an oligopoly.
Oligopolies make products expensive for everyone over time, contrary to how markets usually work where products usually get cheaper over time. Take insulin - the drug many diabetics need to survive. It is readily available and inexpensive to manufacture, and has been around for over a century. As products mature and manufacturing processes are perfected, prices drop over time (you can buy toasters for $8 now). But today, the price of insulin in the U.S. is at an all-time high, even when adjusted for inflation.
The average price in America, across all types of insulin, was more than ten times higher than the average for the other ten most expensive countries … combined.
Why? Because the insulin market in the U.S. is an oligopoly in which three companies — Eli Lilly, Novo Nordisk and Sanofi — share the spoils. The multinational triumvirate has a stranglehold on the American insulin supply, negotiating double-digit percentage price rises seemingly in lockstep.
The second major problem with oligopolies is that the people who work at these companies, as well as those vendors who supply parts to them - get paid less. Take Apple and Samsung for example, which together dominate the smartphone market in the U.S. The phones you buy from them are often produced in factories with questionable labor practices. But what is Samsung’s incentive to demand fair working conditions for its contracted factory workers? If Apple decides to accept say, $1 a day wage, all Samsung has to do is match it - paying its workers more won’t help it gain any market share against Apple.
There’s many other problems with oligopolies, but over time, these two problems: low wages and expensive products lead to a cycle of diminishing economic returns that create stagnant and inequitable economic systems where no one makes enough and even if they did, everything they could buy is too expensive.
So what can you do?
Support innovative, scrappy competitors. If it works for your budget, why not fly JetBlue instead of United? Or buy the Fairphone instead of a stock Android device.
Vote for representatives who want to strengthen the nation’s antiquated anti-trust laws and support the appointment of bureaucrats like Lina Khan who now heads the FTC and is an advocate for breaking up consolidated industries.
Choose to buy from local, independent merchants whenever possible instead of supporting anti-competitive platforms like Amazon. Often you’ll find better quality products, better vendor support and the same or similar prices buying direct.
🎧 Now Playing on the UnfairNation Podcast
✈️ Catch Me If You Can
Lake Arrowhead, CA | Dec 9 - 11
In LA? Join me at my home for an interesting conversation series being hosted by Potluck Presents - a new initiative started by a few friends to facilitate human connection through spaces enriched by storytelling.
📅 Reading & Watching
The Lost Metal by Brandon Sanderson
Stay classy Japan.
I think it’s about time to announce that I was born at a very early age.