Explain the economic impact of technology

Technology market power, understand the second Gilded AgeWritten by Mordecai Kurz, it is a good textbook that helps explain how technology and intangible assets have changed the economy. I have long talked about how the technological revolution is fundamentally different from the industrial revolution, and this book wraps some academic structures around that qualitative assessment. This isn’t a pop culture book, it’s a heavy read that delves into the financial, economic, and qualitative underpinnings of theory.

The copy sent to me is an uncorrected proof. Since I’m not an economist, I skipped the equations in the book, so the references might be a bit sparse and I’m not making any statements about basic math. I’ve looked at what the author says and how it fits in with what markets and people have seen in the real world decades ago.

The basic difference between the industrial revolution and the technological revolution is the assets and the wealth derived from them. The program is intangible. Nor is promise written into stock valuations. The book defines monopoly wealth as an intangible asset based on monopoly advantage derived from intangible assets and small business acquisitions. Then, on page 15, the book notes that “about 60 percent of all intangible assets on the balance sheet of the corporate division of the United States are monopoly wealth of the acquiring companies.” Section 1.6, to support the definition, contains a good description of the difference between capital and wealth.

A very nice part of the book is that it doesn’t just focus on current monopoly practices. Chapter 5 describes the pattern of technology diffusion with a detailed case study of the growth of the electricity market. While newer technology, more software-driven, has faster adoption, it’s still not immediate, and the chapter is good at describing the pattern of spread.

Buying startups and merging or killing their technology is a key way to control competition. From the end of the first Gilded Age until the 1970s, there was a movement in support of antitrust. That started to unravel in the ’80s, and now we’re seeing almost no action. Chapter 6 describes, among other things, how this change began with massive tax cuts that directly increased monopoly wealth.

The rest of the chapters go into detail about how to accelerate changes and offer suggestions on how to address the risk. Chapter 7 discusses cumulative benefits and how this relates directly to technology companies. The last three chapters discuss policy reforms, including taxation.

Aside from my ignorance of math, there is only one high level problem with the book. The author likes to talk about the first mover advantage. This is a myth I’ve seen repeated for decades. Microsoft, Google, Apple, Oracle, Salesforce, and other large monopoly and monopoly players weren’t the first to move. They were fast followers. DOS wasn’t the first PC operating system, and Google wasn’t the first search engine, and it continues. The smart fast follower looks at the market, sees what works, and repeats it. Knowing that something works makes research and development faster and less expensive. Indeed, the strong point that the author makes, repeatedly, in the book, that acquisition hinders innovation and competition, is an example of the fast-track methodology.

However, that shouldn’t stop anyone interested in the details Mordecai Kurz brought up from getting this book. Again, this is not fluff. It is much closer to a textbook. There are plenty of insights to gain from reading about mathematics, but for economists who want to assess a second golden age, there is real importance here to discuss. “Technology Market Power” is a book worth reading and evaluating.

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