Imagine a natural road spontaneously forms between point A and point B, and that as a consequence of this road, individuals suddenly wake up to the importance of point B, and of traveling there. Companies had first ignored point B altogether, but because the overwhelming majority of individuals now travel this road, these companies must now begin meeting individuals where they are: at point B. If they don’t, they will perish.
But then comes along a wonderful invention: a road between point A and point B, but built on Conveyer Belt technology by the iCompany. Anyone traveling on the iRoad will arrive to B in 1/10th the time of the natural road. At first, the toll for individuals is far too pricey, so they disregard the iRoad; individuals are ok with the time cost of taking the natural road. But as time passes, more and more people begin taking the iRoad due to its undeniable benefits. Time turned out to be just one factor. Journeyers on the iRoad experience benefits like reduced health risk, less wear and tear, and an all around more comfortable experience. At some point, not taking the iRoad becomes of great consequence to individuals. Taking the natural road becomes no longer an option.
The benevolent iCompany has done a great service for humankind building this road that has completely changed the way people get to point B. And because the iCompany knows that other companies would love to travel this road just the same to cater to all its journey-goers, it charges them a hefty toll for access. It says, “anything you sell to people on this road, we will take a meaningful percent of, in perpetuity, forever and ever.”
Sellers on the iRoad grimace once at the terms of the deal, but sign nonetheless, knowing that not being able to sell to journeyers on the iRoad means their business will cease to exist. They can go and sell to riders of the natural road, but it isn’t enough to guarantee a meaningful existence.
Over the days, months, and years, sellers go through a whirlwind of survival challenges all to put on a smile of a face to its customers on the iRoad, whom they can only meet through frosted glass. Throughout all the changes, mutations, and evolutions, one thing remains beautifully constant: the iRoad commission. It is the axiom of existence on the iRoad.
Merchants on the iRoad have for years felt the commission too high, and an impediment to their survival. But what can they do? Fight the iRoad, and risk being barred. Avoid the iRoad altogether, and immediately perish. Build your own iRoad, and fail.
Building an iRoad is of course no easy feat. In fact, only two companies in the history of the world have succeeded in doing so. The other such road, the gRoad, exists parallel to the iRoad, and funnily enough, charges the exact same toll.
It’s almost as if these two roads have a monopoly over access to passengers traveling to point B. We can say this because:
- Individuals can ignore point B at their own peril
- Companies can ignore point B at their own peril
- The only way to get to point B is via one of two roads
- Building your own road is historically impossible and impractical
- Both roads charge the same commission and are unwilling to negotiate
- This commission is often seen as egregiously excessive
In non-monopolistic cases, there would be many, many more roads to point B. And because individuals can choose which roads to travel, these roads compete to a point where commissions and tolls are reduced to their lowest natural level.
In cases of monopolies, there is no competition. And thus no real reason to lower prices, especially for a good as important as access to point B.
There are two common arguments one sees over this epic battle:
- The Textbook Libertarian: "If you’re not happy with the fee don’t use the road." As mentioned, one cannot simply ignore this road. This response is equivalent to "Don’t exist", but I think things that exist want to stay in existence. So this is ultimately too nihilistic a response.
- The Textbook Retailer: "All roads charge tolls." Sure, almost all roads will levy a toll. The difference is that traveling most roads is optional. Point B however is special. Very, very special. So special that if you ignore it you will perish. And there are only two roads you can travel to get to point B. These two roads appear to act in unison to maintain what sellers deem unreasonably high tolls.
It’s extremely important to understand what differentiates this case from any other case where you can successfully apply The Textbook Libertarian and The Textbook Retailer:
The constricting of competition.
The complete suffocation of choice.