Kronos Effect

By nature, monopolists fear any innovation that threatens their position. And this fear drives them to seek to neutralize these threats by destroying or devouring (acquiring) them. This echoes the Greek Titan Kronos, father of Zeus, who ate his children because he feared they would usurp him — as they did, in fact ultimately. — From the Open Revolution, Chapter 1

Monopolists want to restrict or kill off any development that threatens their monopoly be that a product or a regulation. This is because monopolists fear with good reason that these innovations will one day threaten them by spawning or becoming competition.

Being a monopoly is a great position to be in for the company and its investors, and the benefits of innovation are normally dwarfed by the risk that this innovation will grow up to be something that kills you.

We term this the Kronos effect in reference to the ancient greek myth. Kronos was leader of the Titans and the father of Zeus. Told by prophecy that his children would one day overthrow him, Kronos ate each of his five children until the sixth Zeus, who by a trick, was spared. Zeus then freed his siblings and made war on his father, eventually overthrowing him and all the Titans to become ruler of the cosmos. This one mythic story captures much of the dynamic of a monopolist: their constant fear of being overthrown, their actions to control or kill-off new innovations or platforms which could threaten them, and, eventually, their fate: at last, to be overthrown — and replaced — by some innovation or platform that escaped their vigilance.

It is noteworthy that Andy Grove, who was CEO of the chip-maker and quasi-monopolist Intel entitled one of his books “Only the Paranoid Survive”. There are many, many examples that illustrate the mentality — and actions — of monopolists ranging from Microsoft’s behaviour towards Netscape to AT&T’s approach to the hush-a-phone and “unapproved” appliances. Moreover, the fear usually proved correct. AT&T was “overthrown” by the internet and cable, IBM was “overthrown” by Microsoft and Intel, Microsoft was overthrown by Google and others, and Google (may yet be) overthrown by Facebook etc.

Also why, other than to protect its monopoly position, would Facebook pay $22 billion for WhatsApp in 2014 (when WhatsApp’s sales were just $10 million)? Although the price paid by Facebook is publicly known, the cost in lost innovation and stunted competition is incalculable. It is the consumer, future innovators and society that lose out.

Credit: To my knowledge, Tim Wu was the first to use this terminology in his masterful “The Master Switch” though the idea itself goes back further and was something of a commonplace in the late 90s tech discussions (e.g. around AT&T, the Internet and the Hushaphone case.