Always try to be a monopoly

Roughly three years ago we started TreeTalks, it was a very simple idea, we deliver cacti, succulents and indoor plants to people who ordered them online.

Our main target group was people and companies who wanted to have a cacti, or an indoor plants. People who are working in offices loved to have an indoor plant to decorate their desk, companies loved to gift plants for their employees.

We also implemented the idea around gifting, people can gift an indoor plant to their friends, partners, friends etc. Every pot will be customised according to their needs, everything will be hand-painted, and it will include a message or a quote suggested by the user.

The idea was a niche one, and there was only one other similar small business who was doing somewhat similar idea. And our business grew and grew, people were happy to get an indoor plant as a gift, especially a customised one.

Well, you get the idea. Business was great, business was growing. Yet there was something that always bothered in the back of my mind, and I knew it was just a matter of time before the inevitable.

Characteristics of a monopoly

Characteristics of a monopoly – Smart Diagrams

In one of Peter Thiel books called Zero to One, he outlines several characteristics that define a monopoly.

  • Branding – Something that Apple does so well. Their brand is recognised everywhere, there is no company that does branding better than Apple.
  • Proprietary technology – A monopoly should have a proprietary technology, for example Google. Google’s monopoly on search is built on top of their proprietary search algorithm. There is no other company in search that has an algorithm better than Google.
  • Network effect – Something Facebook and its group of companies have in common. Even if someone else come up with a better solution, still they can’t beat Facebook because of it’s network effect.
  • Economics of scale – Amazon is a good example for a monopoly with economy of scale. Amazon even though started out as a website to sell books online had the potential to sell just about anything they want though their website. The books were just the foot on the door, once they started expanding they had the potential to expand in to anywhere they wanted.

So once I first read these principals by Peter Thiel, I know that my business had nothing. Three was very low barrier to entry, anyone could do it, and there was nothing proprietary in what we did, no network effect, we had nothing.

So what this meant was that, anyone was able to copy our business and do what we did.

What copycats do

For the first two years, there was no competition. People tried to come up with places that offered similar service to ours, but none of them succeeded.

But since we are living in a pandemic, and people need to find some extra income, more and more people started copying our business. And copying our business was easy, why?

  • There is no barrier to entry
  • No one need to invest a big capital
  • There are were only few resources needed to get started
  • No special skill needed, anyone with drawing skills can do it
  • No propriotory technology

Now when I scroll through Facebook and Instagram I see someone starting an instagram page or Facebook page to do exactly what we are doing.

And one or two copycats are easy to manage, however, just like everything else copycats also have a network effect. When a person see someone copying something, they also feel like copying it. They too want to jump in and to cash in when there is opportunity.

Copycats drags the price down

Copycats when there are plenty creates competition among themselves. I know that competition is a good thing, when we started TreeTalks, and when there was one other business doing the something, we had a nice completion amongst ourselves, each tried to better the other, and grab more fans on social media. But this was a healthy competition, the competition between the two pushed us to the limits and created the best versions of ourselves.

However, the competition that we have today, competition among copycats is not a healthy competition. It’s a fight to sell the product at the lowest price possible. And customers also want the lowest price, but there is a limit where one should not cross, and need to have a reasonable profit to the effort that you put it.

The same thing can be seen in freelancer platforms like Fivver and WpWork etc. Freelancers (specially from South Asia) tend to drag the price down to a point where professional developers, designers would not like to offer.

Copycats and competition, even though is good for consumer can be bad for the growth of an industry.

I knew this day would come

I knew this day would come, I’m happy that I created a small niche brand in our country, and made a decent income along the way. And I guess like all good business it’s time to pivot. The brand that we created, and the customers we gained must be used as the foot on the door for us to get into something better.

Think before you start

When you start something, always think about what Peter Thiel said. Make sure your business ticks at least one or more points of a monopoly.

If it does then awesome, but if it doesn’t that’s also fine. But make sure to keep it in the back of your mind that you should always be ready to pivot, or change the direction. Because copycats are coming to get you.

Always try to be a monopoly.