Mordechai Kurz’s The Market Power of Technology, Understanding the Second Gilded Age is a good textbook that helps explain how technology and intangibles changed the economy. I have long talked about how the technological revolution is radically different from the industrial one, and this book puts some academic structure around this qualitative assessment. This is not a pop culture book, but a book that delves into the fundamentals of theoretical finance, economics, and quality.
The copy sent to me is an unedited proof. I’m not an economist, so I skimmed the equations in the book, so the reference might be a little off, and I’m not making any claims about the underlying math. I see what the author is saying and how it fits with what the market and individuals have seen in the real world over the decades.
The main difference between the Industrial Revolution and the Technological Revolution lies in the capital and wealth gained from them. Software is not real. There is no promise written in the stock valuation either. The book defines monopoly wealth as intangible assets and intangible assets based on monopolistic advantage gained through acquisitions of smaller companies. Then on page 15 it is pointed out that “about 60 percent of all intangible assets on the balance sheets of the US corporate sector are held by the monopoly wealth of acquired firms.” Section 1.6 in support of the definition nicely describes the difference between capital and wealth.
A nice part of the book is that it doesn’t just focus on today’s monopoly practices. Chapter five describes technology diffusion patterns with detailed examples of electricity market growth. Although more reliant on modern technology and software, although faster implementation, it is not instantaneous, and this chapter describes the diffusion pattern well.
Buying new firms, integrating their technologies, or destroying them is a key way to control competition. From the end of the first Gilded Age to the 1970s, there was a movement to support antitrust. It began to fall apart in the 1980s, and now we are doing almost nothing. Chapter 6 describes this transformation, which, among other things, led directly to the increase in monopoly wealth, starting with massive tax cuts.
The remaining chapters examine in detail how the changes have accelerated and offer recommendations on how to address the threat. Chapter 7 discusses cumulative advantage and how it relates directly to technology firms. The last three chapters discuss policy reforms, including taxation.
There is one high-level problem with the book, aside from the lack of mathematical knowledge. The author likes to talk about the advantages of the first mover. This is a myth I have repeated for decades. Microsoft, Google, Apple, Oracle, Salesforce and other very large monopoly and monopsony players were not the first to move. They were fast followers. DOS wasn’t the first computer operating system, Google wasn’t the first search engine, and that continues. A smart fast follower looks at the market, sees what works and iterates. Knowing that something works makes R&D faster and cheaper. In fact, the author’s strong point in his book that acquisition slows down innovation and competition is an example of a fast follower methodology.
However, this should not deter anyone interested in the nuances Mordechai Kurz presents from picking up this book. Again, it’s not fluff. It is closer to the textbook. There are plenty of ideas to be gleaned from reading around the math, but for economists looking to appreciate the second Gilded Age, there’s real meat to be discussed here. The Market Power of Technology is a book that must be read and appreciated.