Right now we are seeing one of the greatest demonstrations on the fragility of businesses in competitive markets. It has been baffling for some to see many giant corporations struggling to stay afloat with the recent economic disruptions. “How come as an individual citizen, I’m expected to have enough savings to cover for emergencies like this for several months, yet these multi-billion dollar behemoths are going down in just a few weeks and are begging to government bailouts?” The fact is, most companies operate in competitive markets, and competition inevitably makes the firms that engage in it fragile to shocks. This fact unfortunately does not care for the size of the companies.

Peter Thiel talked about this in Zero To One, pointing out that the ultimate goal for any company is to become a monopoly. This idea doesn’t stem from some evil capitalist greed, but rather comes from the realization that monopolies are the only ones who can do materially better than “barely surviving”. In near-perfectly competitive markets (which is most markets, covering most companies), all goods are effectively commodities, and are fungible. Operating in these markets is fighting brutally at the bottom of the barrel, the competitive equilibrium point where everyone is selling at mere pennies above the cost. It doesn’t matter if you are a small mom and pop bakery or a multi-billion dollar airline, your relative profit margin is as low as it can sustainably be pushed. Thiel mostly makes the point that under these competitive operating conditions, there is no room to set aside money for grand R&D initiatives that may or may not pan out, no chance for innovations to happen. But it also means that companies in competitive markets do not have the luxury of building up a safety chest of cash for the potential rainy days, making them extremely fragile.

Monopolies, or their close-enough relatives (e.g. duopolies), don’t have this problem. So while airlines, hotels, and industrial firms are scrambling to survive with massive layoffs and begging for government subsidies, Apple and Facebook are giving away excess resources by donating millions of masks to healthcare workers. And this is not because the economic turmoil did not hit these large duopolies, it absolutely did. But they simply have more surplus resources, and therefore are much more resilient to shocks than their counterparts in more competitive markets.

But the story doesn’t end there. So far we’ve only looked at things from a single firm’s perspective. Individual companies in competitive markets are definitely much more fragile than individual monopolies. But looking systematically, the trend flips: competitive industries are much more resilient than industries with monopolies. In a way, this is just the nature of antifragility. Systems consisting of many smaller, independent, different entities are always more adaptive and less fragile to external stress than systems dominated by single large entities. In other words, the many different companies in a competitive market will all respond to shocks differently, some will do well and survive, while others will die, but the market as a whole will be fine. Whereas in a monopolistic market, the eggs are all in one basket. Yes it is a stronger basket, but if the single company mishandles the shock, the whole market may collapse.