In the 1990s semiconductor giant Intel (INTC) sold the overwhelming majority of microprocessors for personal computers. Its nemesis was Advanced Micro Devices (AMD) (AMD), a scrappy Silicon Valley neighbor that railed against Intel’s monopolistic ways. Over time Intel’s dominance waned, but not because of competition from AMD. The one-time also-ran is now largely forgotten. What hurt Intel was a failure to replicate its PC position in mobile devices.
I thought about AMD’s lost struggle for relevance while reading a strained piece in Sunday’s New York Times that argued, I think, that nowadays there is room for strong No. 2 companies in the technology industry. The poster child for this hopeful thesis is Lyft, the mite of a competitor to 600-pound-gorilla Uber in what is awkwardly called the ride-hailing industry.
It’s true that the technology industry favors monopolists. Intel, Microsoft (MSFT), Cisco (CSCO) and, longer ago, IBM (IBM) each dominated their markets. Superior marketing rather than differentiated technology often made the difference. IBM wrote the proverbial book on the power of the right message, convincing customers that “no one ever got fired for buying IBM.”
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This never meant there wasn’t room for a No. 2, or several of them. What the history lessons tend to gloss over, however, is that technology’s monopolists typically lose out not because the government went after them or a competitor beat them at their own game. Instead, they falter because their success blinds them to where the market is going.
So it went that technology from ARM Holdings, Qualcomm (QCOM), and others dominated mobile, not Intel’s. Just as AMD never beat Intel, neither Netscape nor Sun Microsystems ever trounced Microsoft. It was Google (GOOG), which didn’t exist when Microsoft was battling those other companies, that beat Microsoft at a game Microsoft wasn’t playing. Similarly, while Apple’s proprietary personal computer line never seriously challenged computers running Microsoft software, Apple (AAPL) skated to a puck—digital entertainment and smartphones—that Microsoft barely knew how to slap.
Will Lyft ever challenge Uber or even thrive in its shadow? History suggests Uber’s biggest fear should be some innovation on the horizon, not the competitor on its doorstep.
