THE BLOG

Scarce, Expensive, Bad: Why Entrepreneurs Should Love Monopolies

07/04/2014 15:53 BST | Updated 04/06/2014 10:59 BST

Next time you're in your local pharmacy, take a detour to the men's shaving aisle. When you get there, scan the shelves in front of you. You'll see high-gloss packaging, lots of "Fusion" and "Turbo" and "Mach" brands. It's almost like you're in the Formula 1 pit lane, isn't it? The choice seems abundant.

In fact, you're staring at an oligopoly, a market controlled by two multi-billion dollar corporations with 92% market share of shaving hardware products. Whatever you choose from those flimsy little metal hangers, it's probably owned by Gillette or Wilkinson Sword. While there are some valiant entrepreneurs in the shaving sector, like Will King (King of Shaves) and Simon Duffy and Rhodri Ferrier (Bulldog), for the most part this is the land of megacorps, where prices are high and innovation isn't quite what it seems.

Oligopolies deprive customers of knowledge and information. Take energy, a sector so opaque in the UK that even the regulator Ian Marlee recently admitted that he couldn't figure out whether energy suppliers were buying electricity from their own power plants at inflated prices, and passing these on to customers. "Actually there isn't enough transparency to be able to actually look at that," was how he put it.

Surely the most egregious example of a sector where power and information are locked away by a few incumbents, is academic publishing. While the internet has liberated knowledge in many spheres of life, university libraries still have to pay vast sums of our money to a handful of publishers to access the latest printed journals. And - scarcely believable in the social media age - academics have to pay for the privilege of having their research reviewed by their peers.

The great 19th century historian Thomas Macaulay, who introduced the English language to India, said that "the effect of monopoly generally is to make articles scarce, to make them dear, and to make them bad." Two hundred years later, he'd be shocked that in petrol retail, dental implants, banks, airlines and, yes, business information, closed oligopolies and quasi-monopolies persist.

But all is not lost. The same winds of change that transformed music, bookselling and the media, are howling through the cracks. Price comparison sites are illuminating closed markets; APIs (application programming interfaces) are giving small companies huge data and innovative power. The Open Access Movement is creating a social framework for academics to share ideas, particularly in new fields of discovery, which will eventually break the stranglehold of the academic publishing industry. For many entrepreneurs, monopolistic practices are flagging up huge market opportunities.

Indeed, in the academic world, the ruling junta has already been rumbled by Chris Anderson's entrepreneurial model, which challenges the very idea of what comprises academic prestige. The phenomenal success of the TED Talks has has turned academics into rock stars and put big ideas centre stage in public discourse. As The Economist said recently, in an article celebrating their 20th anniversary: "TED is the perfect example of the power of disruptive innovation... TED has done more to advance the art of lecturing than Oxford University has done in a thousand years."

Damian Kimmelman is CEO and founder of DueDil, the largest source of private company information in the UK and Ireland. The new v3 DueDil API, which lets any organisation integrate up-to-date business intelligence on 9 million companies, is released this month.