The best flywheel is NOT found in physics!

Tech monopolies are founded on innovation: Amazon has figured out a thousand tricks for selling goods cheap and getting them to consumers much faster and easily. Apple invented an iPhone that revolutionized the entire industry. Google realized the key to search was to leverage links, and Facebook made social media into a social network. All of these tech companies saw daylight - and dashed ahead before everyone else!

Their focus changed from innovation to protecting their advantage at any cost. That is where all the problems started as defending a market is far easier than creating new ones.

It used to be that when one company took over entire industry niche, we called such a practice monopoly. And the antitrust agencies came up with their procedures, sometimes breaking up the party. The monopolists of big tech have managed to bypass that system intelligently. They fended off the normal limits on market power by exploiting their privileged position. Hence, enjoying the fruits of their innovations. At the core of their businesses, they invented a flywheel. In physics, a flywheel is a rotating disk that stores enough energy in its momentum, and then it’s spined out to a nearby engine.

On the other hand, in business context, the flywheel rotates so as to increase output which happens to be revenues without any increasing cost. The known ultimate flywheels for Amazon and Walmart are known as Amazon Prime and Walmart+ respectively.

Moreover, other firms are figuring out their flywheels. Once a brand manages to invent its own flywheel, then a monopoly is automatically formed which comes with network effects, cheap capital, idolatry of innovators, etc. Today, most of the profitable business (phones, digital marketing, loyalty programs) can are generating staggering value (“antimatter”) that entire industries are turning into loss leaders (“features”) to differentiate and protect the antimatter.

Netscape - known as the fastest-growing software firm in history - went from antimatter to feature when Microsoft decided to bundle it’s browser Internet Explorer with Microsoft Office. That was a long time ago before the pandemic. Today, a lot of innovation is monetising ill-will. For example, Amazon and the other big tech brands have abused their power to such an extent, they created opportunities for themselves by taking advantage of customer data and pass the savings on to their advertising resource units. The rapid rise of the tech firms during the Covid-19 pandemic implies their music is non-stop. The usual known trends; what goes up comes down have changed.

The increasing dominance of our lives and the economy which is mostly controlled by just a few tech companies has accelerated everything. What happens in a decade, the pandemic made it break the Moore’s rule. In no small part that’s due to market dynamics in rewarding winners like never before.

However, the winners in big tech are being rewarded to an even greater degree because their advantages are even greater. This is most true with respect to the big four tech brands (Amazon, Apple, Facebook and Google). The other few companies sharing such advantages are Microsoft, Netflix, and Tesla.

Today, brand building is the science of building goodwill that can be monetised. There had been an increase in online shopping benefits for other brands like PayPal and Shopify.

However, for people to do shopping, they need opportunities to make money, which are in short supply during the pandemic. And: in what universe does the suppression of travel benefit a company that makes high-end automobile? The Tesla flywheel is something. Go figure!