Alex Moazed – Building Modern Monopolies

**Patrick O'Shaughnessy** (0:00)
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Hello and welcome everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_3** (0:59)
Patrick O'Shaughnessy is a principal and portfolio manager at O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (1:21)
I have a rule that when I love a book, I do my best to find and meet the author. I usually fail, but sometimes I succeed, and this week's episode is a great example of why I go to the trouble. My guest is Alex Moazed, and the book in question is Modern Monopolies, which explores the platform business model, think Uber, Airbnb or Github, and also explores the history of business in general. Most non-fiction books are three times too long, but I wish this one had been longer.
Alex is also the founder and CEO of Applico, a company he started in his dorm room and has grown into a huge enterprise, helping startups and Fortune 500 companies innovate with platforms. Alex and I talk about the history and future of businesses and different types of business models. There's a lot in here for investors, entrepreneurs and historians.
As you listen, try to wrap your head around the fact that Alex is still in his 20s. I had a blast and learned a ton, and I hope you do the same. For show notes, visit investorfieldguide.com forward slash Alex. Now, please enjoy my conversation with Alex Moazed.
Alex, thank you very much for joining me today. We're going to talk a lot about new business models, the history of business models and really get into the weeds, hopefully, on how to build platforms. I thought a fun place to start would be exploring a bit of the history that you talk about in your book from the linear business model, as you call it, to the platform business model. If we could start by you describing that big picture growth and transition, I think that would set the scene for talking about platforms.

**Alex Moazed** (2:57)
Sure. Great to be here, Patrick. Thanks for having me. If we were to start at 100,000 feet up and you look back thousands of years ago and think about a bizarre in ancient Rome connecting buyers and sellers, or now say the 20th century with shopping malls connecting buyers and sellers.
It's the same underpinnings of the platform model, but using brick and mortar as opposed to tech and digital and data.
Now, we look at say the 17, 1800s Industrial Revolution companies being created to leverage machinery, and industrial mechanics to create products, create value, transportation systems, building cars, and a whole slew of other products and services that are now enabled. Those businesses for really the past two or 300 years have been getting bigger and bigger and bigger. Every 20, 30, 40 years, you see a way to incrementally improve upon that linear business model. So value and information flow in a very linear way. I have suppliers and then I bundle that up and I create something and I package it and then I distribute it and I sell it. And so I have really one consumer, one customer, and I'm creating the value chain and controlling a lot of it internally.
Over the past probably 50 years, particularly in the 80s with Malcolm Porter and the idea of vertically integrated value chains and economies of scale, that idea was taken to the next level, which was, okay, if you go a step farther and now own your supplier and your supplier suppliers, you could shave a couple points of margin and add it to your bottom line. And since you're a huge multi-billion dollar company, that creates an immense amount of value. And then you saw a lot of consolidation and a lot of things happen like that to be more vertically integrated, say in the latter half of the 20th century. What we see now, though, in the late 90s and 21st century is the dawn of the platform business model essentially having a resurgence. It's somewhat always been around, but in niche markets and again through more brick and mortar means. But now with the confluence of technology, the Internet and then smartphones and so on and so forth, data unlike anything we've seen before and people's user behavior is actually molding to these new interaction models. Now you see that platform model really coming on to the scene and in a position of dominance.