An explanation of the economic impact of the technology

The Market Power of Technology, Understanding the Second Gilded Age, by Mordecai Kurz, is a good textbook that helps explain how technology and intangibles have changed the economy. I’ve long talked about how the technological revolution is radically different from the industrial revolution, and this book wraps an academic structure around that qualitative assessment. This is not a pop culture book, it is an intensive read that delves into the financial, economic and qualitative foundations of the theory.

The copy sent to me is an uncorrected proof. As I’m not an economist, I’ve skimmed through the equations in the book, so the references may be a little off, and I’m making no claims about the underlying math. I took a look at what the author is saying and how it matches what markets and individuals have seen in the real world for decades.

The main difference between the Industrial Revolution and the Technological Revolution is the assets and wealth derived from it. Software is not tangible. The promise is also not registered in stock market valuations. The book defines monopoly wealth as intangible assets based on the monopoly advantage derived from intangible assets and the acquisition of small businesses. Then, on page 15, the book points out that “about 60% of all intangible assets on the corporate section balance sheet in the United States are the monopoly wealth of acquired companies.” Section 1.6, in support of the definition, contains a nice description of the difference between capital and wealth.

A really nice part of the book is that it doesn’t just focus on current monopolistic practices. Chapter five describes the technology diffusion model with a detailed case study of electricity market growth. Although modern, more software-driven technology is being adopted faster, it is still not instantaneous, and the chapter describes the diffusion model well.

Buying fledgling companies and incorporating or killing their technology is a key method of controlling competition. From the end of the first golden age until the 1970s, there was a movement in favor of antitrust. It started to fall apart in the 1980s, and we know of virtually no action. Chapter 6 describes, among other things, how this change began with massive tax cuts that directly led to an increase in monopoly wealth.

The rest of the chapters delve into the details of accelerating change and make suggestions on how to deal with danger. Chapter 7 discusses cumulative benefits and their direct link to technology companies. The last three chapters deal with political reforms, including taxation.

Aside from my ignorance of math, there is a high-level problem with the book. The author likes to talk about the first mover advantage. It’s a myth I’ve seen repeated for decades. Microsoft, Google, Apple, Oracle, Salesforce and the other very big players in monopoly and monopsony were not the first to act. They were quick followers. DOS wasn’t the first PC operating system, Google wasn’t the first search engine, and counting. A smart quick follower looks at the market, sees what has been successful, and repeats it. Knowing something works makes R&D faster and cheaper. In fact, the strong point that the author makes, repeatedly, in the book, that acquisition stifles innovation and competition, is an example of the fast-follower methodology.

That, however, shouldn’t stop anyone interested in the details advanced by Mordecai Kurz from getting this book. Again, this is not fluff. It’s much closer to a textbook. There are a lot of insights to take from reading around math, but for economists who want to assess the Second Gilded Age, there is real material to discuss here. The Market Power of Technology is a book worth reading and evaluating.