The Selfish Monopoly

I have been meaning for some time to write a short article on the Selfish Monopoly. A chance comment under the arches of New College Chapel compelled me to action. I was attending a panel discussion on Commerce and Literature; the great opposition. The conversation quickly turned, as it often does, to the meddlesome impact of technology on literary integrity; how can the novel survive under the weight of e-books and new multimedia? How can the local bookshop survive in the shadow of Amazon? And, most importantly, how can traditional channels of recommendation resist the power and tidiness of the algorithm? Suffice to say questions were left unanswered, beyond the collective concern for automated omnipresence.

Amazon’s advanced recommendation algorithm drives the market for books; forget the LRB, the thinly veiled commercialism of a hand written recommendation at your local bookshop, your favorite broadsheet or even Oprah. Amazon’s algorithm reigns supreme, providing targeted (and cheap) books recommendations based largely on your purchase history. 35% of Amazon’s revenue is generated from its “item-to-item collaborative filtering” which takes into account our purchase history, wish list, liked and reviewed items. And Amazon go further than most, its “frequently bought together” and “related to items you’ve viewed” suggestions are as circuitous as they are duplicitous. Coupled with its wonderful one-click purchase functionality and you have a ready-made, closed loop, revenue generating monolith. Amazon, Facebook and Google are all pioneers of highly refined covert advertising that provides exposure to those items that best suit your purchasing and personal profile.

Targeted, preference-derived advertising is by no means new, nor did it start with the advent of the internet. Advertising executives studiously assess the appropriate placement of adverts in a television schedule, the flyers distributed across the city, the products placed in films with defined target audiences. However, the internet, its sophistication and the consequent proliferation of data have served to refine and, importantly, learn from advertising campaigns, to the significant detriment of personal and cultural exploration.

In order to understand why algorithm derived recommendations are so concerning it is worth looking at the economic model of the monopoly. An economic monopoly is a market in which a company that has both purchasing and selling power, as a result of its market share. Monopolies are considered to be economically inefficient; suppliers become ‘price-takers’, purchasers lose their economic right to choose, a lack of competition results in company inefficiencies which are passed on to end users. Economic logic suggests that all monopolies are inherently time-bound; efficiencies of scale become inefficiencies; smaller, nimbler companies start to chip away that the monopolist’s market share, a scandal, shareholder or employee activism erodes operational efficiencies, governments step in to regulate the market, promoting competition.

Monopolies exist outside of markets. Cultural monopolies, experienced under a totalitarian regime restrict cultural variety, religious freedom, artistic creativity and philosophical exploration. Like economic monopolies, cultural monopolies fail due to what economists call ‘diseconomies of scale’. Subversive culture starts to eek away at the monopolist’s cultural market share; a scandal, a popular uprising or economic malcontent erode cultural singularity, external governments step in to regulate and replace cultural oppression.

Until the advertising revolution of the 1950’s and 60’s, culture and corporate observed each other at a healthy distance. Patronage, fellowships and the commercialization of art muddied the water, however these relationships were often between an individual and the creator of cultural capital. The company, the market, and trade existed as a necessity, creating the wealth required to survive and, in some circumstances, indulge in cultural largesse.

A potent mix of mass communication, cognitive psychology and unregulated markets irrevocably compromised the integrity and independence of culture, by commerce. Consumer-facing companies could no longer afford to advertise the utility and relative benefit of their products, instead companies had to create a coherent persona, adopting many cultural and psychological tools to become embedded in the purchasing process and identity of the consumer.

The proliferation of Ecommerce represents the second advertising revolution. Google’s search engine, Amazon’s recommendation algorithm and Facebook’s eponymous Newsfeed have further placed cultural capital in the hands of the corporate. For reasons previously discussed, monopolies — both economic and cultural — are ultimately detrimental to the consumer. Google’s global market share is 89%, Facebook has 1.9 billion active users and Amazon controls over 60% of the online book market; all three are undeniably such monopolies.

Under traditional economic conditions, we would have little cause for concern: digital monopolies, like the monopolies that came before would tire; constrained by regulation, undermined by internal bureaucracy, starved of the quick-footed creativity of upstart rivals. These digital monopolies are, however, far more resilient. Digital monopolies are not at the behest of national boundaries, and they operate in a regulatory framework that lack the resources, understanding or global consensus to take action and, importantly, deal in a raw material devoid of traditional economic fundamentals.

A digital monopoly survives by having access to its users’ data. Every time we use Facebook, Google, or Amazon we are creating data, an input variable of great value for these companies. And, unlike traditional monopolies, these companies do not have to pay for their most valuable commodity. Furthermore, the diseconomies of scale that tend to blight traditional economies do not apply; more data results in a more targeted product for consumers which, in turn, proliferates data. This circularity increases market barriers to entry, entrenching the monopolist’s supremacy.

The trump card in the digital monopolist’s deck is its ability to reinforce our narrow cultural mores, creating a closed feedback loop, leading to a Selfish Monopoly. Amazon, Facebook and Google all power their recommendation engines from our purchase history, internet searches and personal data. This data is used to provide cultural and purchase recommendations that are tailored to our demographic and cultural disposition. It is very powerful to have our own social, cultural and economic mores relayed upon us by an organization that is perceived as ‘Other’ by its users. In this sense the inevitable failings of statist cultural monopolies are no longer applicable. The cultural monopolies presented to us are now our own; we are not being dictated to from a defined agent who imbues their own tightly defined cultural programme. Instead we are indulging in our own, repackaged culture; to turn away from these recommendations becomes a rejection of our identity.

It is because of two tools; the cyclicality of data and the Selfish Monopoly that Google, Facebook and Amazon have become the most powerful global monopolies we have ever witnessed.

Is there any cause for optimism, that precious commodity, so often monopolized by the idealistic techno-capitalist? Although we have good reason to be cautious, we should be optimistic regarding the human condition; our desire for individuality and interaction will ultimately undermine the efficacy of the recommendation engine. The (re) rise of the, artisanal coffee house (75% of which experienced increased turnover during 2015), vinyl record (which realized its best sales performance for 25 years) and book club (ref. Emma Watson) coupled with a proliferation of curated online cultural content highlights our need to discover and develop our identity, through valued, personal recommendations. We will increasingly use Amazon, Facebook and Google as a utility, wary of presenting too much of our real selves. Facebook is becoming a curated social CV, Amazon will be used as the most efficient means of buying life’s necessities and Google will be used with a greater understanding of the implications of data transfer. In 10 years’ time these econocultural monopolies will look very much like traditional economic monopolies: global utilities at the behest of quasi-traditional economic forces, battling with newcomers over the increasingly valuable data that we will learn to restrict and monetize.