[T]hese observations apply just as well to yesteryear’s industrial leaders — whether Carnegie’s US Steel, Rockefeller’s Standard Oil, or Bell’s AT&T — who all increased the value of the end-user experience via vertical and horizontal expansions. These aren’t novel concepts. Even “effectively zero marginal costs” are not markedly different than those featured by early TV and radio, which spread across geographies with low marginal distribution costs and effectively zero marginal cost to end-users.
In sum, Aggregation Theory appears to be more of an observation about economies of scale, increasing customer selection, and decreasing consumer price than anything else… Were Ben just talking about decreasing marginal costs, then he’d be describing mere economies of scale; but he specifically underscores “zero” as “what makes aggregators unique”…
My takeaway from this whole exercise is that the lower the marginal costs, the higher the propensity for aggregation, which is more of a synonym for consolidation than anything else. Nothing is truly zero marginal cost, but a lot of these tech businesses and markets are materially lower marginal costs than their predecessors — due to some sort of innovation that predicated a supply or demand shock — and thus, in most cases, the plane of competition has been predicated on scale , which has ratcheted-up to a degree that predecessors could never have imagined: e.g. Radically lower marginal costs enabled regional scale to become global scale and thousands to become billions in exponentially shorter order than ever before. That scale is central to Ben’s “ user experience ” criteria, which is the gateway to entering the slipstream of what I’ve called the “ virtuous cycle ” — scaling with the tailwind of both network effects and virality — albeit rare in its purest form (e.g. Facebook not Netflix).
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