Kevin Kelly, founding editor of Wired magazine, said something profound about innovation. The nature of an innovation,” he said, “is that it will arise at a fringe where it can afford to become prevalent enough to establish its usefulness without being overwhelmed by the inertia of the orthodox system.” Innovation is a big risk. It might not work. It might waste capital, and so it is never adopted by the mainstream outright, which has to compete mainly through volume and size rather than cleverness. Innovation is almost always tested first on the fringes of an industry, and once its usefulness becomes obvious, only then will it be adopted by the mainstream.
This reality presents a disturbing problem in today’s world. The fringes of almost every industry are under attack. Lockdowns, shutdowns, capacity limitations, they are all taking a sledgehammer to small business all around the world as Big Business like Amazon, Apple and Google take over. Small business though is the incubation grounds for human progress. As more of our lives come under the purview of these behemoth businesses – and I cannot think of a single person who does not rely acutely on all of three of the above companies – humanity increasingly resembles a hive. There are a few queens, and the rest of us are drones.
It’s not just tech. Daniel Oliver of Myrmikan Research notes that before the pandemic response was unleashed, two thirds of American restaurants are supplied by a single company, Sysco Foods. Four companies control half the food retail sector. Since 1950, the number of chicken producers has fallen 98%. Nearly 90% of soft drinks are controlled by 3 companies. None of this is natural or inevitable though, and that’s a good thing. It all has to do with the exceptionally low cost of capital, extremely low and even negative interest rates that small business has no access to because they do not have the economies of scale in order to qualify for wholesale funding.
We all know the same thing is happening in the gaming industry as well, the most obvious example being the strongest European market, the United Kingdom. Consolidation and rollup in the gaming sector has proceeded at an alarming pace over the last 5 years as real interest rates have fallen to negative. Still, in a paradoxical way, gaming has an inherent advantage over almost any other industry when it comes trends of capital concentration. That is, Big Government is not a perfect friend to Big Gambling as it is with, say, Google, Facebook, Apple or Amazon.
