“We need to break up Big Tech!”
“These corporations are too powerful!”
If you’ve followed political discourse over the past few years, you’ve heard variations of these complaints countless times. The underlying assumption is always the same: once a business gets big enough, it becomes permanently entrenched, immune to competition, and capable of exploiting consumers indefinitely.
But what if this assumption is completely wrong?
What if the natural tendency in free markets isn’t toward permanent monopolies but toward constant change, disruption, and renewal? What if the businesses that seem invincible today are actually more vulnerable than they appear?
Let’s start with a simple question: How many of today’s biggest companies were even around fifty years ago?
The Fortune 500 list began in 1955, ranking America’s largest corporations by revenue. Of the original 500 companies on that first list, fewer than 50 remain today. That’s a 90% turnover rate over seven decades. The companies that seemed like permanent fixtures of American business—household names that dominated entire industries—have largely disappeared or become irrelevant.
Where’s Woolworths, once the king of retail? What happened to Pan Am, which dominated international air travel? How about Kodak, which controlled photography for over a century? These weren’t small businesses that failed to adapt. They were industry giants with enormous resources, established customer bases, and seemingly insurmountable competitive advantages. Yet they all fell to competitors who found better ways to serve customers.
This pattern isn’t an accident or a series of unfortunate coincidences. It’s the natural result of how capitalism actually works when markets remain competitive.
In our previous discussion about the Gilded Age, we saw how entrepreneurs like Rockefeller, Carnegie, and Vanderbilt achieved market dominance by creating tremendous value for customers. These were natural monopolies—positions earned through superior performance rather than government protection or anti-competitive practices.
But here’s what the standard narrative misses: natural monopolies contain the seeds of their own destruction.
When a company achieves market dominance through innovation and efficiency, it faces a fundamental challenge. Success breeds complacency. The very factors that made the company successful—aggressive cost-cutting, relentless innovation, obsessive customer focus—become harder to maintain as the organization grows larger and more bureaucratic.
Meanwhile, that success creates enormous incentives for competitors to find better ways to serve the same customers. Every monopoly profit represents an opportunity for an entrepreneur who can deliver equivalent value at lower cost or superior value at the same cost.
Consider what happened to Sears. For decades, Sears was America’s undisputed consumer shopping champion. The company pioneered mail-order catalogs, built an extensive network of stores, and seemed to have an unshakeable grip on American consumers. By the 1980s, Sears was the largest retailer in the world.
But Sears grew comfortable. While the company focused on maintaining its existing operations, entrepreneurs like Sam Walton at Walmart were revolutionizing retail through superior logistics, inventory management, and cost control. Walmart didn’t compete with Sears by doing the same things slightly better. They fundamentally reimagined how retail could work.
Then came Amazon. Jeff Bezos didn’t try to build a better version of existing retail stores. He created an entirely new model based on online ordering, massive distribution centers, and direct delivery. Walmart, to its credit, has adapted and remains highly competitive, but Amazon’s innovation forced the entire retail industry to rethink how shopping works. Now Amazon faces similar challenges from companies exploring new delivery methods, specialized e-commerce platforms, and other innovations that seem cutting-edge today but might become standard tomorrow.
This creative destruction—economist Joseph Schumpeter’s term for how capitalism constantly renews itself—helps explain why natural monopolies tend to be temporary. The profit opportunities created by monopoly pricing naturally attract entrepreneurs who can offer customers better deals.
But this only works when markets remain genuinely competitive. When government intervention creates artificial barriers to competition, the self-correcting mechanism breaks down.
Consider the difference between Kodak and the barriers facing new businesses in highly regulated industries. Kodak dominated photography through superior technology and manufacturing efficiency. But when digital photography emerged, nothing prevented competitors from entering the market. Kodak’s “monopoly” disappeared almost overnight because it was based purely on a technological advantage that could be surpassed.
Contrast this with industries where a maze of regulations creates barriers for new competitors. These might include zoning restrictions that limit where businesses can operate, expensive licensing requirements that favor established players who can afford compliance costs, complex reporting mandates that require dedicated legal teams, or high operational fees that make it difficult for startups to get off the ground.
Most of these regulations aren’t created with the express intention of protecting incumbent businesses—they often arise from genuine concerns about worker safety, consumer protection, or community planning. But their cumulative effect creates a barrier that established companies can navigate more easily than potential competitors. The result isn’t better protection for consumers; it’s less competitive pressure on existing businesses.
This distinction between natural and artificial monopolies is crucial for understanding how capitalism actually works. Natural monopolies emerge from market success and remain vulnerable to market competition. Artificial monopolies emerge from political protection and remain immune to competitive pressure.
When politicians and activists call for breaking up “Big Tech” companies like Amazon, Alphabet, or Meta, or call their CEOs modern-day robber barons, they’re often conflating these two very different situations. These companies achieved their positions through innovation and customer satisfaction, not government protection. More importantly, they remain vulnerable to competitive disruption in ways that artificially protected monopolies don’t.
Amazon faces constant competitive pressure from traditional retailers improving their online presence, from specialized e-commerce sites targeting specific niches, and from new delivery models that might make Amazon’s current approach obsolete. Alphabet competes with specialized search engines, emerging AI technologies, and social media platforms that change how people find information. Meta must constantly adapt to new social media trends, changing user preferences, and emerging platforms that capture younger demographics.
Have these companies begun engaging in less-than-ethical business practices? Possibly, yes. But do consumers have other options if they object to those practices? Definitely, yes. None of them can rest on their current success. They must continue innovating, improving service, and responding to customer needs or risk following Kodak, Sears, and countless other former giants into irrelevance.
The real threat to competitive markets isn’t big businesses getting too successful. It’s government intervention that protects unsuccessful businesses from having to compete. When regulations create barriers to entry, when licensing requirements exclude potential competitors, when subsidies prop up failing companies, that’s when capitalism stops working properly.
So the next time someone worries about businesses getting “too powerful to compete with,” remember the Fortune 500 turnover rate. In genuinely competitive markets, no position is permanent. Success creates its own competition, and today’s giant is tomorrow’s footnote—unless government intervention freezes the competitive process in place.
The solution to concerns about business concentration isn’t more regulation of successful companies. It’s less regulation that prevents new competitors from emerging to challenge them. Because in capitalism, the most powerful force keeping big businesses honest isn’t government trustbusters—it’s the next entrepreneur with a better idea.Learn more about capitalism here.
