Monopolies and Wealth: What do Bill Gates and Carlos Slim have in common?
I recently read a Wall Street Journal article on Carlos Slim, a Mexican billionaire who is currently the World’s Richest Man. Controlling over 200 companies in multiple industries, Slim has earned $27 million every day for the past 2 years.
His fortune also makes up a staggering 7% of Mexico’s yearly economic output.
How did he amass this huge amount of wealth? Monopolies. Controlling distribution and pricing for essential products with consistent and ever increasing demand.
His golden egg is of course, telecommunications. Telmex, his company controls 90% of the Mexican landline telephone market .
Analyzing Slim’s rapid rise to the top, this Wall Street Journal article outlines some of his money making strategies. I’ve condensed them into several general principles:
- Buy cheap companies and corner the market to establish monopolies.
- Invest smartly during an economic downturn
- Have an eye for recognizing market value
- Make powerful friends and social networks
- Be aggressive in expanding into new industries and markets.
- Target industries within one’s sphere of influence
- Groom a line of successors who internalize your methods
Monopolies are a Powerful Method to Develop Wealth
I find it very interesting that Bill Gates has made his wealth in a similar way to Carlos Slim. While Slim builds dominant companies within old industries like banking, airlines and telecommunications, Gates has found success through Microsoft’s anti-competitive practices .
Microsoft’s overwhelming dominance in the area of desktop operating systems allows it to extend its market share for flagship products like the Internet Explorer web browser and Microsoft’s office software suites.
Slim and Gates achieved great success because they were able to control growing industries considered essential not only by governments but a large target market.
And they knew how to reinvest their finances by embracing/monopolizing new companies or businesses adjacent to their financial interests.
How to Develop Profitable Online Monopolies
When it comes to establishing monopolies for online businesses or websites, technology and control of information is highly important, among other factors.
Here are some quick strategies you can use improve your market position:
- Establish inside sources within important businesses as they will provide leads and information on your competitors. This allows you to break or manipulate news which may have substantial financial impact.
- Regulate the Flow of Information. While you can’t censor other online publications, you can extend your business or site reach by having special agreements with prominent publishers. Make the media your friend.
- Protect your Technology. Safeguarding your patents and source code may also be a key to ensure the continuance of any monopoly you’ve developed in a specific field.
- Keep Exceptional People on your Payroll. It’s important to keep skilled designers, programmers and marketers on your payroll because they allow you to innovate rapidly to meet the actions of other businesses.
- Practice Vertical Integration. Vertical integration is a strategy whereby a firm seeks to own both upstream suppliers and downstream buyers. This involves controlling the supply chain and different aspects of production. Example: A business development company starting a web design business for bi-directional customer flow.
- Establish Restricted Access. It’s important to only allow people you trust, access to your thoughts or strategies. Information leaks are common online and exceptional success requires secrecy on many levels.
I am particularly fascinated by the strategies behind online monopolies and the more I read about micro-economics and management, the more I find weaknesses in my own websites and business models.
More to come on this topic in the future: I may write more on how you can practically apply some monopolistic strategies for your website, business or blog.
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Fantastic as usual Maki.
Two of the blogs I read that seem to fit this description are Mashable and GigaOM. Both Om and Pete seem to have insider information for their respective niches on lock. Mashable has also recently gone vertical with its social network, likewise Om with GigaOm TV.
I look forward to more in this series as I haven’t seen it discussed in any depth before.
great - robert kiyosaki uses the monopoly board as a example as well buying small and turing it into something big
even talking about paying people more money becuase they are getting you the money - so the payroll execerpt was nice
Great!
I agree with your statement, buy away all your competition and the complete market is yours
I guess the purchase of Macromedia by Adobe is a perfect example..
Nice article, is always inspiring to read your blog maki
goodone, maki.love when you get into economics. To add to your brilliance, attaining >85% market share to be a monopoly is an idealistic bingo unless ofcourse you a railway, electricity, or water dorminant supplier. This concept ties closely with being the top 5 in your niche. Unless you are government protected to create a barrier of entry, eventually the market should evolve to an oligopoly. The pioneer, or early adapters usually get to cash in the most rewards.good example, youtube need i say more, analyze the videohosting market trend. very cool article.
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Invest smartly in an emergent economy like China or Eastern Europe (Romania, Hungary)
Awesome post Maki. $27 million a day!?
Buying your competition eliminates risk.
Slim is the man, and Maki is the woman :p
The key here that you mentioned is recognizing the value in a small, undervalued company in a growing market. If you utilize the assets that you have and are able to recognize an opportunity; capitalize! This is a great article that puts levels of success into perspective. $27 million a day is mind blowing!
Hey I thought monopolies were bad and stifle innovation? Who needs 27 million per day? I’m all for making millions, but is life really that much better after the first 27 million?
Great post anyway!
I would also add the vision that Carlos Slim had about the future of telecommunications, specially in a country like Mexico with a young growing population and an emerging economy.
Great post!
Great post as usual Maki! Keep up the good work!
It`s nice to know it. But monopolies in today`s world?? I doubt. Carlos and Gates are from the last two decades - monopoly is not possible now a days. Look how many social marteking sites you have in the net. Lot……….and its growing. Things are not in a single hand anymore. Gates gone, Carlos will go by someone else as well.
Check my ‘About Me’ page, I work for Telmex
Interesting post. Online monopolies I can see are YouTube, eBay and Paypal, it will be interesting to see if you can relate that to individual blogs. I guess Techcrunch would be an example, but I think the strategy fails as the niches become smaller and smaller.
Carlos Slim didn’t create TELMEX, it was a govenment monopoly that he bought. He didn’t create the monopoly, he purchased it.
TELMEX also underpays its employees and trains its employees to screw over its customers.
I have personally been screwed over by TELMEX and although I had e-mailed, called customer support, and had gone to their offices many times to try to resolve it, the customer is wrong and is to be ignored and overcharged as much as possible. At this time, TELMEX owes me money and I have no telephone line.
Hey nice post.
I don´t give credit to Carlos Slim wealth. He steals from the Mexican people. Well… that monopoly rigth?
In Mexico you pay for internet broadband 260% more than the people in the US. (prodigy infinitum)
312% more for mobile service (Telcel)
88% more for landline telephone market. (Telmex)