You’ve probably noticed that we don’t just have "some" options anymore. We have one. You don't "search the web," you Google it. You don't "buy handmade crafts from various local vendors online," you go to Etsy. This isn't just a coincidence or a fluke of branding. It’s the winner takes it all effect, and honestly, it’s becoming the default setting for the global economy.
It’s a bit scary.
In a classic market, competition is supposed to keep things balanced. If one bakery raises its prices, you just walk across the street to the other guy. But in the digital age, the "other guy" often doesn't exist because the first guy has all the data, all the users, and all the capital.
The winner takes it all phenomenon—often called "superstar effects"—describes a market where the top performer captures a disproportionately large share of the rewards, leaving basically scraps for everyone else. Think about it like a mountain. In a normal world, the mountain is a gentle slope where lots of people can hang out at different altitudes. In a winner-takes-all world, the mountain is a needle. You’re either at the very tip, or you’re on the ground. There is no middle class.
The Math Behind the Monopoly
Economist Sherwin Rosen actually nailed this back in 1981. He wrote a paper called The Economics of Superstars. He wanted to know why a tiny number of people—athletes, authors, musicians—earned so much more than people who were just slightly less talented.
It comes down to scalability.
Back in the day, a great singer could only perform for whoever could fit in the local opera house. Their "reach" was limited by physics. But once we got records, radio, and eventually Spotify, that one "best" singer could be heard by everyone on earth simultaneously. Why would you listen to the 10th-best singer in the world when the #1 singer is just as easy to access? You wouldn't. So, the #1 singer gets billions of streams, and the #10 singer struggles to pay rent.
That’s the brutal reality of it.
Network Effects are the Secret Sauce
If you’re wondering why Facebook (or Meta, whatever) still exists despite everyone claiming to hate it, it’s because of network effects. A social network with one person is useless. A network with two billion people is a gravity well.
The value of the service increases as more people use it. This creates a "moat." If I want to start a rival to LinkedIn, I don't just need a better website. I need your entire professional network to move with me. They won't. So, LinkedIn stays the winner. They take the entire market for professional networking.
It’s a feedback loop:
- More users lead to more data.
- More data leads to a better product (or better ads).
- A better product attracts more users.
- Repeat until you own the world.
Real World Casualties of the Winner Takes It All Model
Look at the airline industry. It’s a mess. Historically, it wasn't a winner-takes-all market because it’s incredibly expensive to buy planes and fuel. But look at "hub" cities. If Delta owns 80% of the gates in Atlanta, they effectively own the market for anyone living in Georgia. They get to set the prices.
Or look at tech.
Amazon is the poster child here. They didn't just win at selling books; they won the infrastructure of the internet. By the time competitors realized that AWS (Amazon Web Services) was powering half the web, it was too late to catch up. They had the scale. They had the "winner" status.
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The Google Example
Google's search engine is the ultimate example. Their market share has hovered around 90% for a decade. Even when Microsoft spent billions on Bing—and even with the recent AI boom—Google remains the "winner."
Why? Because they’ve seen more queries than anyone else. They know that when you type "blue thing that flies," you probably mean a specific type of drone or a bird. Their "win" is self-reinforcing.
Why This Isn't Always Great for You
We like to think that the best product wins. Sometimes it does. But often, the first or best-funded product wins, and then it stops innovating because it doesn't have to.
When a market becomes a winner takes it all environment, several things happen:
- Innovation Stagnation: Once a company wins, they spend more money on "defensive" acquisitions (buying up-and-coming rivals) than on making their own stuff better.
- Price Creep: Once the competition is dead, the "introductory offers" vanish. Look at Uber. It used to be cheaper than a taxi. Now? Not so much.
- Fragility: If one company runs the whole show and they have a massive technical failure, everything breaks. We saw this with the CrowdStrike outage recently. One company, one error, global chaos.
Honestly, it’s a precarious way to run a civilization.
The Cultural Impact: Fame and the "Long Tail"
It's not just business. It’s culture too.
In the 1990s, we had "mid-list" authors who could make a decent living selling 20,000 books. Today, the top 1% of authors (the James Pattersons of the world) take the vast majority of all book royalties. The "long tail" exists—there are millions of books on Amazon—but the vast majority of them sell zero copies.
The winner takes it all dynamics in the attention economy are even more extreme. A YouTuber like MrBeast gets more views on one video than an entire local TV station gets in a year. Because the cost of distributing a video is zero, there’s nothing stopping one person from capturing everyone’s attention.
We are living in a "superstar" culture where being "pretty good" is a death sentence. You have to be the absolute best, or the loudest, or the first. Otherwise, the algorithm just forgets you exist.
Is There Any Way to Beat the System?
If you’re an entrepreneur or a creator, this sounds depressing. How do you compete with a winner who has infinite resources?
You don't. At least, not head-on.
The only way to survive in a winner takes it all world is to change the boundaries of the "all." If Google owns "Search," don't build a search engine. Build a "Search Engine for Clinical Trials" or a "Search Engine for 18th Century Poetry."
By narrowing the niche, you create a new, smaller market where you can be the winner. This is what Peter Thiel talks about in his book Zero to One. He argues that you should aim to be a monopoly in a tiny market and then expand slowly.
But you have to be careful. The moment you get big enough to matter, the "big winner" might just try to swallow you whole.
The Role of Regulation
Governments are finally waking up to this. For a long time, antitrust laws were only triggered if prices went up for consumers. Since Google and Facebook are "free," regulators didn't know what to do.
Now, the conversation has shifted. We're looking at "monopsony" power—the power of a buyer—and the way these giants stifle innovation. The EU has been aggressive with the Digital Markets Act (DMA), trying to force these winners to play fair and allow smaller players to access their platforms.
Whether it works is another story. It’s hard to regulate a company that is more powerful than many nation-states.
What Most People Get Wrong
People think winner takes it all is about being the best. It’s not. It’s about friction.
The reason we use one platform isn't always because it’s the highest quality. It’s because switching is a pain in the neck. If you have 10 years of photos on iCloud, you aren't going to switch to an Android phone just because the camera is 5% better. You are "locked in."
The winner doesn't win because they are 100 times better than the loser. They win because they are 1% better at exactly the right moment, which allows them to capture the network, which then makes them impossible to displace.
Actionable Strategy: Navigating a Winner-Takes-All Economy
If you're trying to build something or even just manage your career in this environment, you need a different playbook than the one your parents used.
- Identify the "Gravity Well": Before entering a market, ask if it’s prone to network effects. If it is, and there’s already a dominant player, you’re probably going to lose. Look for markets where the "cost of switching" is low; that’s where competition still lives.
- Be a "Category of One": Don't try to be a better version of someone else. In a digital world, "better" is easily copied. "Different" is much harder to replicate. If you are the only person who does exactly what you do, you are the winner of your own tiny market.
- Own the Relationship: If you’re a creator, don't rely on a single platform. If you’re a business, don't rely on a single supplier. The "winner" platforms (Amazon, YouTube, Apple) can change the rules overnight, and since they take it all, they don't care if you're a casualty.
- Look for "Diseconomies of Scale": Sometimes, being huge is a disadvantage. Large companies are slow, bureaucratic, and often lose touch with their customers. Small, nimble players can win by offering the human touch that a global monopoly simply can't scale.
The winner takes it all trend isn't slowing down. As AI gets better, it’s likely to accelerate, as AI thrives on the massive datasets that only the "winners" currently possess. But understanding the game is the first step toward not getting crushed by it. You have to find the cracks in the monolith.
Don't try to compete for the whole mountain. Find your own needle and stand on top of it.