Industry Cloud Concentration
**Since writing this story things have come to my attention regarding the project ThreeFold, that needs addressing — please see this story for further details.
Ever heard of “Industry or Market Concentration”? Simply put a high Industry Concentration means few companies or oligopolists are monopolizing the market production in a given industry.
A study by Gustame Grullon of Rice University’s, Jesse H. Jones Graduate School of Business revealed that “In the last two decades, over 75% of U.S. industries have experienced an increase in concentration levels. We find that firms in industries with the largest increases in product market concentration have enjoyed higher profit margins and more profitable M&A deals. At the same time, we do not find evidence of a significant increase in operational efficiency…”
Some companies have such a high market share in their respective industry they are indeed too big to fail. Facebook had 78.7% of the 2017 market share of social networking advertising revenue in the United States and projected to be higher in 2018 and up for the gaining market share for the 4th consecutive year. Google has over a 90% market share, as of October 2018, of all online searches. Microsoft has over 75% market share, of computer operating systems worldwide as of August 2018.
Is it any wonder 71% of people polled in the US believe the US economic system is rigged? Major tech firms like Google, Amazon, Apple, Facebook, and Microsoft have acquired over 500 smaller firms over the last 10 years alone.
After a merger or acquisition have you ever seen prices go down? Certainly, I haven’t. Most companies believe they are duty-bound to their shareholders to ‘increase profits’. Without any science or studies behind this idea which was popularized in the New York Times article “The Friedman Doctrine — The Social Responsibility of Business is to Increase Its Profits” by Economist Milton Friedman, business has continued to push into a direction that has brought us to such high Industry Concentrations, as we have today. One person’s biased opinion, almost 50 years ago, has influenced business for decades. Yet this way forward continues to be one that chokes out whatever is left of fair competition but sadly legally all the same.
So what can we do today to change course? Truth is, there is no silver bullet and certainly no quick fix. But, we can start by decentralizing and distributing the internet.
More specifically the storage and IT computing that powers the internet — The Cloud. This is a resource that is arguably as important as electricity or oil today. It’s where our files, photos, and anything of digital value to us is stored. It’s how we communicate, research, and learn. According to Gartner, Inc. (NYSE: IT), a leading research and advisory company and a member of the S&P 500, Worldwide IaaS Public Cloud Services Market Share, 2016–2017, Amazon had 51.8% market share of this resource in 2017. To put that into perspective if the whole cloud space industry was a single company, Amazon alone would have ultimate and final authority with over 50% of the say-so. No one else would essentially matter. Such a centralized approach, without checks and balance and the internet, will undoubtedly continue to be run by top-heavy monopolies, and capitalism be damned.
Today there some very interesting mostly blockchain projects that are trying to reverse this trend. Sia, Golem, Filecoin, Maidsafe, Storj, and ThreeFold** (see below — it's not good) currently have made the most headway with Sia, Storj, and ThreeFold** already having functioning products. Their overall goal is similar; to decentralize the hosting of the internet in a safe and responsible way. i.e. away from the big few centralized cloud providers like Amazon, Google, Facebook, and towards information and capacity to be hosted instead in thousands and ultimately millions of smaller locations where data is essentially not owned by anybody but everybody.
Cloud industry ‘De-Concentration’ is paramount to a better tomorrow for the many and in follow-up posts, I will be looking deeper into the blockchain decentralized-distributed cloud space and analyzing the potential of such projects in more detail.
**Since writing this story things have come to my attention regarding the project ThreeFold, that needs addressing — please see this story for further details.
