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Bold Opinion: From the Entrepreneurial Spirit to the Entrepreneurial Bubble

Hercules. Thor. Gilgamesh. The ancient civilizations that preceded us constructed heroes that spoke to the values of their cultures, with traits that embodied the aspirations of men of the age. But we live in different times, and as a result, have different heroes. Now, it’s all about the entrepreneurial heroics of Mark Zuckerberg, or Steve Jobs or Bill Gates, and their tales of dogged determination leading to nearly unfathomable wealth. It is the American Dream on steroids, and this idolization of the entrepreneurial spirit has created a world where Y Combinators and Embarc Collectives groom and teach would-be Zuckerbergs and Jobs and Gates how to scramble for the success that–more often than not–eludes most who try. Every kid with an idea is not a multi-million dollar business that will succeed. Truly Bold Ideas that create impact are not common.

Welcome to the entrepreneurial bubble. Don’t be surprised when it pops.

A Rose by Any Other Name Is Still a Rose

A bubble exists whenever market values are driven up by artificial means, like public perception, and that perceived value exceeds the actual, intrinsic value. At some point, the market corrects itself and that bubble pops–often with calamitous results. We saw the Dot-Com Bubble wreak havoc. A US Housing Bubble sent the market into a sustained tumble. Before most of us were born, there was a stock market crash that heralded a little fiscal catastrophe called the Great Depression.

Yet despite these harsh lessons of the past, bubbles continue to form, with the latest a product of too much media and not enough common sense. Innumerable seasons of “Shark Tank” and a never-ending stream of TED Talks have made the notion of entrepreneurship glamorous. Worse, it’s made success seem more attainable–an illusion that hides the fact that the vast majority of entrepreneurs fail to “make it big”.

To some, this may just seem like a form of economic social Darwinism, with the strong surviving while the weak die off. But what happens when an entire generation of future businessmen tries to skip over the essential lessons of running a company and go straight to the billionaire stage? What happens when they don’t succeed? Their failures, and the mess their failures leave behind, are something that will have a far greater impact on the economy than a few Chapter 7 and 13 bankruptcy filings.

To paraphrase William Shakespeare, a bubble by any other name is still a bubble.

The Entrepreneurial Spirit, Unchecked and Untamed

The statistics tell a truth that’s hard to accept:

Of small businesses started in 2014, only 56% made it to their fifth year.

Among the top causes of small business failure, 89% failed due to cash flow issues.

And when it comes to venture capital-backed startups, three out of four fails.

However, despite these stats, many are eschewing traditional educational- and business path for entrepreneurship. So much so that colleges and universities have begun offering degrees in the subject. Meanwhile, startup incubators have sprouted up, plucking from academic obscurity those deemed worthy and discarding the rest.

This is the entrepreneurial spirit, unchecked and untamed, and–ultimately–harnessed. But what happens to the majority whose big idea yields no big fruit? For the individual, there can be a host of challenges. On the macro-level, though…

When the Entrepreneurial Bubble Bursts

Imagine a system where success in business involves lessons learned in both the classroom and the boardroom. Now imagine circumventing that system. Instead of allowing for the natural evolution of business sense, and the shaping of ideas through experience, entrepreneurs and their ideas are taken from the vine unripened. And while sure, some of those ideas will be made into something. But what of the vast majority that don’t? What happens to those people whose grand ideas were for naught?

Therein lies the danger of the entrepreneurial bubble, one of human capital more than currency. Because of their path (and subsequent lack of knowledge and experience), those who have failed won’t re-enter the workforce and shake up the world. With the word “failure” written all over their resume, they aren’t equipped to drive businesses to thrive. Even if they were capable, who would give them a chance?

The value of the spirit of entrepreneurship has been greatly inflated.

Don’t get this message wrong. The role of entrepreneurs in our world is large and to be respected. At Bold Business, we look to inspire and assist this activity. Yet too much of anything becomes a bad thing. Excess by its nature creates issues. We are in an entrepreneurial bubble. When it busts, harsh consequences will follow for people, their spirits and the economy.

The Apple App Store and Its Possible Monopoly Infographic

The Apple App Store and Its Possible Monopoly Infographic

Tim Cook Speaks Out Amid Allegations About An Apple Monopoly Cartoon

cartoon of Tim Cook related to the ongoing dialogue about Apple Apps and the possibility of an Apple monopoly or monopsony
Apple CEO Tim Cook shares his two cents on the current matter about the company and its Apple apps.

Is the Apple App Store a Monopoly or a Monopsony?

On May 13, 2019, the U.S. Supreme Court handed down a landmark decision. The 5-4 ruling stated that Apple App Store purchases of iPhone users could participate in antitrust legal actions. In essence, arguments that suggested consumers of Apple apps were not the brand’s direct customers were rejected. Instead, the Supreme Court ruled that an Apple monopoly might exist, and its existence deserves judicial opportunities for further exploration.

The ruling substantiated concerns that the tech giant has exploited its market position, especially in relation to Apple apps. But at the same time, the Supreme Court opened the door for much more. For one, while the ruling sided with consumers’ concerns about an Apple monopoly, it also raised issues for suppliers. In other words, Apple app developers may also toss their hat in the ring regarding Apple monopoly allegations. This case has notable implications for Apple and other tech giants as well.

Defining the Apple Monopoly Situation

The Apple App Store and Its Possible Monopoly Infographic Thumbnail

The Apple App Store and Its Possible Monopoly Infographic

In assessing whether an Apple monopoly exists with its applications oversight, key definitions should be provided. A monopoly is said to exist whenever a single company dominates an entire sector or industry. In terms of the Apple App Store, it would be easy to claim that a monopoly is present. Not only does Apple require iPhone users to use Apple apps, but it’s also the only retailer for the apps. Likewise, Apple establishes many of the parameters related to the pricing of Apple apps.

Historically, the Sherman Antitrust Act and the Clayton Antitrust Act establish the ground rules when a monopoly exists. Any person injured in business or in property may sue a company in a monopoly situation. The original lawsuit, Apple Inc. v. Pepper, cited several app purchasers who claimed to pay excessive amounts for products. Essentially, they believed an Apple monopoly existed, and that fair competition was no longer present. This unfair environment was said to allegedly create elevated prices of Apple App Store products.

a photo quote containing a statement from the lawsuit filed against Apple amid the hot topic of Apple apps and the Apple App Store
Statement in the Lawsuit filed by Hagens Berman Sobol Shapiro LLP.

An Apple Monopoly, Monopsony, or Both?

While a monopoly refers to a single company exerting excessive control over a market, a monopsony is a bit different. A monopsony exists when a single buyer or seller controls supply, prices, or both. From the perspective of Apple apps, this detail has relevance to app developers. Because iPhone users can only get apps from the Apple App Store, manufacturers have to sell in this marketplace. Yet, Apple requires a $99 membership fee and takes 30 percent commission from every sale. Likewise, they set the minimum price at 99 cents and require all prices to end in 0.99 cents. All of these data support an Apple monopsony according to app developers.

In line with this, the Supreme Court ruling did not only advance support for an Apple monopoly among iPhone users. It also supported the possibility that a monopsony existed against Apple apps developers. As such, two such developers have come forward in a lawsuit against Apple, citing suppression of competition and innovation. It would, therefore, seem that Apple is caught in a legal battle with both iPhone consumers and Apple app developers.

Major Implications Beyond the Apple Monopoly Rulings

The Supreme Court opinion allowing lawsuits to proceed against the Apple App Store has significant repercussions for Apple. At the same time, it has significant implications for other “big tech” marketplaces. Apple presented a defense that stated iPhone app users were not direct purchasers because they were buying manufacturer products. But the Supreme Court disagreed. Thus, any “middleman” position or marketplace service can now be considered as a retailer selling directly to consumers.

cartoon of Tim Cook related to the ongoing dialogue about Apple Apps and the possibility of an Apple monopoly or monopsony
Apple CEO Tim Cook shares his two cents on the current matter about the company and its Apple apps.

As far as Apple is concerned, it has only one remaining defense. It can allege that its Apple App Store’s policies seek to protect iPhone users against “bad” apps and malware. As a result, it hopes to undermine the arguments that suggest an Apple monopoly or monopsony exists. Certainly, the final outcome will have a significant impact on Apple, iPhone users and Apple apps developers. Furthermore, the rulings may also impact other companies in similar positions in the future.