How Natural Monopolies Reshape Power Balances: A Decentralized Path Forward

Many of us find ourselves caught in a paradox: we depend on large-scale enterprises and governmental institutions to drive innovation and deliver services, yet we simultaneously dread the concentrated power they wield. This tension becomes particularly acute when examining how natural monopolies emerge in modern economies. The challenge intensifies because technological advancement—rather than breaking these monopolistic patterns—now tends to reinforce them, making power concentration seemingly inevitable. Yet this outcome is neither predetermined nor irreversible.

The core tension revolves around three dimensions of social power: Big Business, Big Government, and what we might call Big Mob (the concentrated force of civil society). Historically, these three forces balanced one another through natural constraints. Geographic distance limited reach, and coordination challenges prevented excessive scale. But the 21st century has fundamentally altered these constraints, enabling unprecedented concentration of power in all three domains simultaneously.

The Problem: Natural Monopolies and Economies of Scale

Natural monopolies represent a particular manifestation of power concentration rooted in fundamental economics. Unlike cartels or intentional monopolistic behavior, natural monopolies emerge from the structural advantages that accrue to larger entities. When a business can serve its entire market more efficiently than multiple smaller competitors, the market naturally gravitates toward dominance by a single player.

Historically, many infrastructure industries—telecommunications, utilities, railways—exhibited natural monopoly characteristics. However, the digital age has expanded natural monopolies far beyond traditional utilities. Network effects, data accumulation, and technological platforms now create comparable advantages in sectors ranging from social media to cloud computing to artificial intelligence.

The mathematics underlying this phenomenon are unforgiving. If one entity’s resources are double another’s, the progress it achieves will be more than double due to economies of scale. By the following year, the resource gap may widen to 2.02 times the original difference. Over extended periods, the most powerful entities inevitably expand their dominance, a process that natural monopolies powerfully accelerate.

Consider how this mechanism operates across industries: a social media platform with twice the users attracts twice the advertisers but more than twice the network value, making them exponentially more attractive to consumers. A technology company controlling twice the market share can invest proportionally more in research and development, further extending its lead. A financial institution managing twice the assets can lobby twice as effectively—or more—to shape regulatory environments in its favor. None of these represent malicious behavior per se; they reflect structural economic realities.

The Three Power Centers and Their Conflicts

The concentration of power through natural monopolies manifests distinctly across government, business, and civil society.

Big Business and Market Distortion

Large corporations possess capabilities to reshape their environment—economic, political, and cultural—far beyond what smaller competitors can achieve. Historical examples abound: De Beers’ engineered scarcity of diamonds, Starbucks’ role in urban homogenization, predatory gaming mechanisms designed to extract maximum revenue from players rather than maximize player enjoyment.

The problem extends beyond individual “evil” corporate decisions. It involves structural incentives. As businesses scale, they gain proportionally greater returns from distorting market conditions. A $10 billion enterprise can justify investments in regulatory capture that would bankrupt a $100 million startup. The mathematics of scale transform profit-seeking into monopolistic behavior almost automatically.

What often appears as “soulless” corporate behavior frequently stems from two factors: universal profit motives combined with institutional consolidation. When many large entities share identical strong incentives unbalanced by counterforces, they inevitably move toward similar outcomes. Meanwhile, the scale itself exacerbates homogenization—the urban standardization created by one dominant retailer dwarfs the cumulative effect of 100 niche competitors.

Big Government and Coercive Power

While corporations distort markets, governments wield coercive authority fundamentally different in kind. The power to imprison, conscript, or execute dwells exclusively with the state. This asymmetry has preoccupied liberal political philosophy for centuries under the concept of “taming the Leviathan.”

The ideal government functions as a reliable rule-maker: impartially enforcing laws, settling disputes, providing public goods—rather than pursuing its own independent agenda. When governments instead become players in the game they should referee, they become unstoppable actors possessing both coercive power and their own commercial interests.

Modern institutional design attempts to constrain this through mechanisms like separation of powers, rule of law, federalism, and subsidiarity principles. Yet these institutional safeguards themselves become vulnerable when combined with natural monopoly dynamics. A dominant government can shape laws, courts, and enforcement mechanisms to entrench its own power.

Big Mob and Distributed Coordination Failures

Civil society—the realm of associations, charities, media, and independent institutions—should counterbalance both government and business through dispersed power centers. However, it exhibits its own concentration risks. What begins as genuine grassroots movements can coalesce into mob dynamics following charismatic leaders, pursuing single goals through uniform action.

The “Cathedral” phenomenon described by certain critics captures this: ostensibly diverse civil society institutions unconsciously align around common assumptions and narratives, creating de facto coordination against dissenters. While lacking formal hierarchy, such coordination can prove as effective—and potentially more insidious—than explicit organizations.

Why Economies of Scale Are Amplifying Natural Monopolies

Two historical forces previously constrained monopolistic concentration: diseconomies of scale and diffusion effects.

Diseconomies of scale—the inefficiencies inherent in massive organizations—once naturally limited growth. Internal bureaucratic conflicts, communication breakdowns, and geographical coordination costs all increased with size. Large organizations stumbled against their own administrative weight.

Diffusion effects provided countervailing pressure: ideas spread across borders; employees carried skills between companies; technologies were reverse-engineered; successful innovations were adapted by competitors. This “diffusion of control,” while never perfect, prevented any single actor from maintaining absolute dominance indefinitely.

But recent decades have inverted these historical constraints. Automation dramatically reduces coordination costs, making global operations manageable with minimal personnel. Proprietary technology—software and hardware designed for use but not inspection or modification—prevents reverse engineering and diffusion of control. Network effects intensify rather than dissipate competitive advantages. Rapid technological change creates permanent first-mover advantages before followers can establish alternatives.

The consequence: economies of scale effects are strengthening precisely as their historical counterweights weaken. Natural monopolies become less “natural” (emergent from competitive forces) and more “structural” (entrenched through technological and legal mechanisms).

Breaking the Monopoly Cycle: Multi-Dimensional Solutions

Addressing natural monopoly concentration requires aggressive, deliberate diffusion of power and control. Several approaches show promise:

Mandatory Standards and Interoperability Requirements

The EU’s USB-C mandate exemplifies this approach: by requiring universal technical standards, regulations prevent dominant platforms from constructing proprietary ecosystems that lock users into their particular services. Mandatory technology-sharing requirements, such as China’s approach, or non-compete agreement bans in the United States similarly force the diffusion of knowledge and capability outside individual firms.

Intellectual Property Reform

Copyleft licensing models (such as GPL) establish that any software built upon open-source code must remain open, preventing proprietary capture of collectively developed capabilities. More innovative approaches could include taxation mechanisms penalizing highly proprietary technologies while reducing tax burdens on companies sharing technologies with society. The “Intellectual Property Haberg Tax”—taxing intellectual property based on valuation to incentivize efficient utilization—offers another avenue.

Adversarial Interoperability

This strategy, articulated compellingly by science fiction author and technologist Cory Doctorow, involves developing products and services that interface with dominant platforms without permission. Examples include third-party printer cartridges, alternative app stores, open-source browser extensions providing independent content filtering on major platforms, and decentralized exchanges converting between fiat and cryptocurrency without dependence on centralized financial chokepoints.

Such approaches work because much of Web2’s value extraction occurs at the user interface level. If users can access platforms through alternative interfaces—maintaining network effects while circumventing monopolistic extraction—they retain network value without submitting to monopolistic gatekeeping.

Embracing Radical Pluralism and Collaborative Difference

Concepts developed by economist Glen Weyl and digital strategist Audrey Tang describe “facilitating collaboration between differences”: enabling people with divergent views to cooperate while retaining distinct identities, benefiting from large-scale coordination without becoming monolithic single-goal entities. Applied to open-source communities, international alliances, and decentralized networks, this approach allows shared access to economy-of-scale benefits while maintaining competitive resilience against centralized giants.

This differs fundamentally from Piketty’s wealth tax approach. Rather than redistributing accumulated capital, forcibly promoting technological diffusion addresses the upstream source: the means of production themselves. This distinction matters because distributed control of productive capacity can constrain not only billionaire concentration but also authoritarian governments and multinational power structures simultaneously.

Lido: A Case Study in Decentralized Power Distribution

The Ethereum staking pool Lido demonstrates these principles operationally. Though Lido manages approximately 24% of all Ethereum staked across the network—a proportion that would trigger monopoly concerns if concentrated in a traditional entity—concern levels remain comparatively low.

The difference: Lido deliberately distributes internal power. Rather than functioning as a unified corporation, Lido operates as a decentralized autonomous organization (DAO) with dozens of independent node operators. It employs dual governance: ETH stakers possess veto power over consequential decisions. By distributing both operational capability and governance authority, Lido transforms what could be a dangerous concentration point into a distributed authority structure.

This model proves exemplary precisely because it refuses the “efficiency” of centralized control in favor of the “resilience” of distributed decision-making. The broader Ethereum community has appropriately maintained the position that even with these safeguards, no single staking entity should control all network staked amounts. Such explicit governance clarity regarding decentralization thresholds becomes increasingly necessary.

Defensive Acceleration and the Moral Framework

Addressing power concentration risk creates a separate challenge: ensuring that defensive measures develop alongside offensive technological capabilities. Defensive accelerationism (D/acc) proposes that technological defenses—tools enabling individuals and groups to resist concentration—must advance simultaneously with the offensive technologies enabling concentration.

Critically, such defensive technologies must remain open and accessible to all. By democratizing defensive capability, societies can reduce the security anxiety that might otherwise justify power concentration as the “lesser evil” protecting against catastrophic threats.

Beyond strategic concerns lies a moral dimension. Classical philosophy presents two poles: enslavement morality (you must never become powerful) and master morality (you must become powerful). A comprehensive ethics centered on power balance proposes a third path: you must not establish hegemony, but you should pursue positive impact and empower others.

This reframes the ancient dichotomy between “empowerment rights” and “control rights.” The goal becomes possessing capacity to influence outcomes while actively constraining capacity to exercise unilateral control. Two paths enable this: maintaining perpetual diffusion toward external stakeholders, and designing systems resistant to becoming leverage points for concentrated power.

Conclusion: Plural Futures Against Natural Monopoly

The central dilemma of the 21st century: how do we achieve rapid progress and build prosperous civilization while avoiding extreme power concentration in either government, business, or organized civil society?

The answer requires deliberate, sustained intervention in the very mechanisms that naturally produce monopoly. Neither market forces alone nor technological determinism will automatically distribute power. Instead, conscious design of institutions, technologies, and regulatory frameworks must combat the tendency toward concentration inherent in economies of scale.

This demands thinking beyond traditional regulatory approaches toward affirmative strategies: mandatory interoperability, intellectual property restructuring, adversarial interoperability, and radical pluralism that preserves collaborative benefits while resisting unified-goal orthodoxy.

The future remains genuinely contestable. But only through deliberate diffusion—of technology, of governance authority, of productive capability—can societies sustain the power balances that protect both freedom and progress. Natural monopolies need not remain destiny. Human ingenuity can still construct frameworks enabling both scale and pluralism.