Peter Thiel’s Idea of Monopoly Using Howard Stern as an Example.
I think a subtitle to this post could be “Policing Your Monopoly.”
So in my last post I noted Peter Thiel has ideas worth valuing (indeed, if you can, investing in). In his latest book, Zero to One, Thiel notes companies should seek to be “monopolies.” That’s a complicated term. Though he might not put it this way, he means “de facto” as opposed to “de jure” monopolies.
On the one hand, if you are a de jure monopoly then you (arguably) violate American and international antitrust law. On the other, you could get a legal monopoly in the form of intellectual property. Thiel is talking about something slightly different: Position your product, service, what have you, as though you are the only game in town. Think Facebook for social media, Google for search, YouTube for videos, and Amazon for E-commerce. Of course in a free market, where borders to entry are open, others can compete. But who else are you going to go to?
Maybe one day something will do to Facebook what they did to Myspace, what VHS did to Beta. Who knows where Apple will be 10 years from now? Such is the nature of capitalism.
But whatever legal monopolies companies possess with patents and copyrights, they can shrewdly “police” their turf with strategy.
So take Howard Stern for instance. I’ve long been a fan, from when I had an uneducated and unrefined mind. Now that I have an educated and refined mind, looking back, it surprises how his success lasted and how much $ he’s made. But there is a rational explanation: He has real talent, in more ways than one.
We think of him as a virtuoso “shock jock.” He’s also an extremely shrewd businessman (and a master interviewer to boot). He and his employers possess legal monopolies in the form of the copyright to his show’s content. The Supreme Court of the United States in a controversial decision said “business methods” are patentable processes but then backed off somewhat, recognizing the disturbingly anti-competitive implications of such.
Stern, from what I know, never “patented” his business method. But he policies his “act” as though it were a monopoly. He also, when entering any market, sought a monopoly by putting his competition out of business. Indeed, he ruthlessly put many of them down (Stern never got in trouble under American antitrust law, but perhaps could have).
And what happens when a new idea seems hot? Unless one has a legal monopoly from intellectual property rights, attracted competitors will model you and seek market share. As the Chicago School was fond of noting, natural monopolies attract competition such that if barriers to entry remain open, the problem tends to resolve itself.
For instance, I love The Beatles, Stones, Led Zeppelin, The Who, etc. They were innovators. And of course they had influences (among others, notably prior black American blues artists). But those Brits still managed to package themselves into something unique and innovative for the time. Once hot, bands imitating them exploded, the vast majority forgotten.
Howard Stern too, though he might not admit it, had influences (I won’t name his non-radio influences; but his radio influences include Bob Grant and Steve Dahl (and yes, disco did suck, IMO[/efn_note]. But Stern was not simply a “repackaging” of Grant meets Dahl. There was something trans-formative in a like way that the aforementioned British Invaders transformed their earlier influences.
So how did Stern react to those he influenced who came after him? He was as ruthless with them as with the jocks whose markets he conquered. He acted as though, that his new competitors imitated his proven business model somehow rendered them inauthentic and not worth listening to. But they had every legal right to be influenced by him and so compete.
That is, he didn’t have a legal monopoly (like a copyright or patent), but he attempted to police his de facto monopoly.
So compelling was Stern’s positioning that I was convinced. It took me years to recognize some of his younger competitors he influenced were also worth listening to because of their talent. (Stern’s line is “they are doing ‘my act.'” In a sense true, but they had every right to so compete.)
Back to our music analogy. Most imitators of The Beatles, Led Zeppelin, etc., weren’t worth listening to; they were like pale carbon copies. But some were good. Groups like Squeeze and Badfinger could sound like The Beatles while delivering solid music. But yeah, not as good as The Beatles.
Sometimes an imitator can beat the originator at their own game. Jimi Hendrix? Who could do him? Not many. But Stevie Ray Vaughn perhaps. What about Ray Charles? Richard Manuel. When an imitator “covers” an originator, the originator (or those shrewd business folks who own the publishing to the copyright) get paid. That’s the power of legal monopoly. Indeed, even if some of the licks, riffs and melodies sound too “substantially similar,” copyright can force the imitator to pay.
But if IP or the like doesn’t apply, the originator deals with the often brutal realities of competition. The younger, meaner, leaner competitor can kill you. The vast majority of Stern’s competitors influenced by him (“doing his act”) failed. But some were good. Opie and Anthony, for instance, lasted because they had talent. When pressed, they admit he strongly influenced them.
Did Stern ever have a nice word to say about them? Not while they were up and coming. The closest to a “nice word” was when O&A were unknown newbies and Anthony entered a contest on Howard’s show (Stern having no clue who either of them were). Stern was genuinely entertained by Cumia because Anthony was good. So good Cumia, IMO, could have been part of Stern’s crew (replacing perhaps Billy West) if he didn’t try to make a name for himself.
But when O&A started to rise, Stern was brutal with them as with everyone else, attempting to constrain them, policing his monopoly. Stern criticized them; they would fight back. They knew him too well. Stern’s past defeated competition were encouraged to “take the high road” and not respond while he proceeded to destroy them. Stern made, O&A knew, Philadelphia’s “Zookeeper” John Debella look like a “shithead,” with JD attempting to win the battle by ignoring Stern (which didn’t work).
As they progressed, O&A ended up working at the same station as Stern for a while. Stern got management to enforce a “gag order” where he could criticize them but they couldn’t respond. He did this by strategic manipulation of management, using his vast negotiating bargaining power. All legal of course. Stern admitted to Sean Hannity he did this.
His defense? Paraphrasing: These guys are doing “my act.” His act. His turf. His monopoly he policed.
Feature Image: “US Deluxe Monopoly Tokens” by ScooterSES at English Wikipedia – Transferred from en.wikipedia to Commons.. Licensed under Public Domain via Wikimedia Commons – https://commons.wikimedia.org/wiki/File:US_Deluxe_Monopoly_Tokens.jpg#/media/File:US_Deluxe_Monopoly_Tokens.jpg