Once upon a time, investing in a monopoly was an almost certain way to make money. Not just pure monopolies, either, but what economists call oligopolies: industries in which two, three or four players control the market.
Sometimes, these monopolies are regulated: think Sydney Airport (there's only one of those) or Melbourne's CityLink (ditto). Or perhaps just the result of supply and demand: two daily newspapers in Sydney, two in Melbourne and one each in Adelaide and Brisbane. Cabcharge's stranglehold over the taxi market falls into a similar category. And yes, no list of oligopolies is complete without mentioning our Big 4 banks. Others include our two supermarkets, our one dominant telco, three or four major petrol chains and a small handful of energy retailers.
![Walmart might be many times the size of the next largest retailer in the US, but it still has well under half of the ...](/web/20161206041440im_/http://www.theage.com.au/content/dam/images/g/t/4/q/2/m/image.related.articleLeadwide.620x349.gt4q30.png/1480980313678.jpg)
For context, Americans are bemused by the concentration in many Australian industries – Walmart might be many times the size of the next largest retailer in the US, but it still has well under half of the market share enjoyed by Woolies here in Australia, for example.
But that was then.
"Then" was pre-internet. No, not just the "world wide web" we all enjoy, but the days before significant amounts of connected technology.
Your correspondent remembers the days of paper Cabcharge dockets, retailers calling credit card companies to authorise transactions and when you had to have a copy of your signature sent to another bank branch if you wanted to withdraw money over the counter when you were on holidays.
That wasn't the cause of those monopolies – we can chalk those up, in general, to a combination of a small population and large geography that gave significant advantages to those incumbents that got big, first – but it certainly made competition tougher.
And this is now.
The "now" of globalisation. Of enormous interconnectedness. And of unparalleled disruption. The technology revolution destroyed traditional large-scale music retailing, book retailing and video rental. It destroyed Cabcharge's monopoly over single-passenger public transport (and the value of taxi plates) and forced newspapers to scramble for survival.
Broadband and mobile communications are destroying Telstra's fixed-line business. PayPal, Apple Pay and Android Pay are gunning for our (and the world's) banks. And, social media is disrupting everything – from information sharing (think: product reviews and consumer-ethics campaigns) to how we get our news, including the rise of "fake news" that is clearly a bastardisation of social media but also a genuine threat.
The root of the problem is in monopolies themselves. Sure, you can take an ideological view about them, but there's a more pragmatic reason: monopolies allow the incumbents to make so-called "super normal" profits. And Economics 101 tells us where significant profits are being made, competition will arise.
For many years, that potential competition was stifled by an analogue world that provided overwhelming support to the monopolist. It was a hill that was just too steep to climb for all but the very best-funded would-be competitor.
Foolish takeaway
We hear often that the world is now flat. To the extent that is (at least partly) true, it's technology that has done most of the excavation. We could see how music or books could be digitised, but the general view was that physical goods or services were safe. Then, along came an ASX-listed would-be digital bricklayer.
Monopolists are now officially on notice. Their profits are being targeted by technology. And it's no longer enough to rely on the old defences. The monopolist who isn't destroying its own business model is going to have it destroyed by someone else. And the complacent investor might see her capital eroded, too.
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Scott Phillips is the Motley Fool's director of research. He owns shares of Walmart and Telstra. You can follow Scott on Twitter @TMFScottP.