Episode 248： What is a Monopoly and How Does it Work？
Episode Stats
Words per Minute
190.6092
Summary
In this episode, Patrick and I talk about what a monopoly is and why it's bad. Monopolies tend to happen when there's only one firm that sells the product, a high barrier of entry, and there's no close substitute.
Transcript
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30 seconds. One time for the underdog. Ignition sequence start.
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Let me see you put them up. Reach the sky, turn the stars up above.
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Cause it's one time for the underdog. One time for the underdog.
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I'm Patrick Bedevi, host of Alletainment, and today we're going to talk about an old school game
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that we all used to play with our friends and family, and that is Monopoly.
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But the question is, what is a Monopoly, and how does it work?
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I'm not talking about our buddy named Uncle Pennybags, who we play the game, and we roll the dice,
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and you hope to land on boardwalk, and pass go, and collect $200, and not go to jail.
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We're not talking about that game today. We're talking about real-life Monopoly.
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One, only one firm sells the product. There's only one firm that sells the product.
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Two, two, there is a very difficult barrier of entry, meaning the government's created so many
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regulations and licensing for you to get in that it makes it tougher for a smaller business to go in
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and compete with the bigger business. If there's too many regulations, too many laws, very difficult
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for the smaller business to compete with the bigger business.
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Three is there's no close substitute. So a close substitute could be, I have a choice between buying
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a car, but there's motorcycles. If a car sold for $100,000, then there's a motorcycle, then there's
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a bicycle, I have a close substitute. So when you think about those three things, I'll give you a few
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examples business-wise. When Apple first came out with an iPhone, you remember when the iPhone first
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came out, it was a big hit. It's called a smartphone. It's incredible. It does your thinking for you.
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One of the best things that happened for you and I is Droid came out, right? And one of the best
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things that's recently happened for everybody, including iPhone users and the consumer, is
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Samsung came out with a new phone called Galaxy S5. That phone is going to influence Apple to get a
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bigger screen and get better. If they don't, they're going to lose a lot of customers to Samsung, and
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they need to be a little bit more affordable for the average middle-income family to be able to buy
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that. If they don't, they're going to lose customers. You think about Netflix, product grew. It did
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very well. Stock's doing incredibly well. Amazon decides they want to compete with Netflix. You
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know what that's going to do? If you own Netflix, be excited about this because the product's going
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to get better. They're going to have to deliver a better product for you because there's a
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competition now. There's somebody that wants to take that marketplace. If Netflix is at whatever
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percentage, Amazon's just going to lower it, and Netflix need to think about creative ways
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to prevent that from happening. Some people may say, well, Groupon was a monopoly when it first came
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out. Yes, but it doesn't last long because within one year, a couple thousand group buying websites
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came out. They gave them so much competition that made Groupon change their regulations with their
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relationship with businesses where they had to go from 50-50 profits to 60-40 to 70-30 to 80-20
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because there were other people that were doing the same, and that continues on happening and
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happening and happening because the number one thing that prevents a monopoly from happening
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is choice. When there are choices, everybody has the pressure to improve. If I don't want to go to
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Starbucks, I have Coffee Bean. If I don't want to go to Burger King, I have McDonald's. If I don't
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want to go to Subway, I have Quiznos. The list goes on because choices prevents monopolies from taking
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place. So when you think about the pendulum, if we have a pendulum here, on one side, there's only one
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company. It's a pure monopoly. On the other side, we have pure competition, many, many firms. What do
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you think is the best opportunity for you and I? With a lot of firms. So that's why we call it free
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trade when there's, you know, allowing Japan to come and compete against Ford and Chevrolet when Toyota
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comes here, Honda comes here. It's allowing international companies to compete domestically.
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That not only creates the products to get cheaper and cheaper and cheaper for you and I, but it also
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makes the competitors produce better products. Innovation gets better because they're seeing their
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competitors, what they're doing. This has happened firsthand to me with competitors that I have
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that we deal with because every one of us is forced to improve collectively representing that one
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industry together. But above all, if there's one organization that can both prevent and influence a
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monopoly from taking place as the U.S. government, here's why. A U.S. government can get involved
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and say, no, this is a monopoly. This is not going to be taking place. And on the opposite side,
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U.S. government can also create a lot of regulations by the way you and I vote because it may seem like
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we're doing the right thing. Let's over-regulate this industry and this business because I don't like
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Apple. I don't like Walmart. I don't like this. Let's create more regulations. You know what the
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bigger businesses say? No problem. You're helping us out. Do you know why? The more the regulation,
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the less the smaller business can compete with the top guy, which means what for you and I?
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Prices don't go lower. And what you and I vote for as the consumer is to make things better,
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efficient, and more cost-effective. The more the regulations, the less that's going to happen for us.
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Thanks, everybody, for listening. And by the way, if you haven't already subscribed to
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And if you have any questions for me that you may have, you can always find me on Snapchat,
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back when you snap me or send me a message on Instagram. With that being said, have a great