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On Dominant Organizations

General | March 22, 2008 | 1 min read

As I was reading Paul Graham’s latest essay on small and large companies, I remembered something I noticed several years ago, something akin to Moore’s Law:

The dominant technology company in a generation reaches its pinnacle at about half the size of the dominant company in the previous generation, and it retains its dominance for half as long.

IBM was dominant for roughly 30 years. Microsoft’s domination lasted about 15 years. Google’s domination started at around 2005, I would think.

Why would such a thing be true? Same technological forces that are reshaping our lives are also impacting economies of scale. Technologies are lowering transaction costs, thereby making organizations reach their peak economic power at smaller scales. A related point which uses the Coase Theorem is made here.