Famous Bike Defeats Obscure Plane

By Mo Fakhro

Much of the discussion around business success is framed as a choice between competition and monopoly. It is a convenient way to think about markets, but it obscures the more important variable. In practice, profitability, margins, and ultimately valuation are not determined by the absence of competition, but by the degree of market share a firm commands. Markets reward companies that matter and quietly punish those that do not. It is not competition that destroys value, but obscurity.

Most industries do not resemble the textbook extremes of monopoly or perfect competition. They exist instead along a continuum in which firms capture varying shares of demand. As market share increases, a series of reinforcing effects begin to take hold. Pricing power improves, unit costs fall through scale, brands shift from being options to defaults, demand becomes more predictable, and competitive behaviour becomes more disciplined. Margins improve, earnings stabilise, and valuations rise accordingly. These effects are not linear. A firm with 40 percent market share behaves very differently from one with 10 percent, even though both technically operate in competitive markets. This is why market capitalisation correlates far more closely with share of market than with abstract ideas about market structure.

The world’s most valuable companies illustrate this clearly. They do not operate in empty fields, nor do they rely on the absence of rivals. They operate in highly visible, competitive markets while commanding dominant shares. Microsoft dominates desktop operating systems despite intense competition across software. Alphabet retains the majority of global search traffic despite constant challengers. NVIDIA competes with other chipmakers yet controls most of the market for advanced AI accelerators. None of these firms are monopolies in a strict legal sense. What distinguishes them is that they capture a disproportionate share of usage and revenue in markets that are large, visible, and economically significant. Their valuations follow naturally from this position.

A particularly clear illustration of market share translating into value comes from the oil industry. In 1949, J. Paul Getty paid approximately $9.5 million for the right to drill for oil in the northern corridor between Saudi Arabia and Kuwait. At the time, oil markets were relatively competitive. There was no cohesive producer cartel, pricing power was limited, and future revenues were uncertain. Adjusted for inflation, Getty’s purchase would be worth roughly $120 million today. Those same oil fields now generate operating profits of approximately $7 billion per year. Using Saudi Aramco’s market-quoted price-to-earnings ratio of around 16, one can infer a present-day market value of roughly $112 billion for that asset alone.

What changed was not the oil underground. What changed was market share. Through OPEC, producers consolidated control over global supply. That concentration transformed oil from a competitive commodity into a market governed by pricing power. Extraction costs for these fields remain low, roughly $15 to $25 per barrel, while oil sells for $75 to $85 per barrel. The value of the asset lies entirely in that spread. If oil were forced to sell at marginal cost, the asset’s value would collapse regardless of how efficiently it was drilled. The same resource, serving the same customers, became vastly more valuable once producers controlled enough of the market to influence prices.

The same logic applies to modern technology markets. NVIDIA’s GPUs function as the oil fields of the artificial intelligence economy. The cost of manufacturing a chip has not increased proportionally with its selling price. What has changed is that NVIDIA controls a dominant share of a scarce and essential input at the precise moment when AI has shifted from experimentation to infrastructure. This position allows NVIDIA to generate net profit margins exceeding 50 percent of revenue. As demand for AI compute has become increasingly inelastic, pricing power has shifted decisively toward the supplier with scale. NVIDIA’s valuation reflects not only growth, but the market’s recognition that it controls a critical bottleneck with global reach. This is not monopoly in the abstract. It is market share expressed through margins.

Competition does not preclude profitability when market share is concentrated. Coca-Cola and PepsiCo compete intensely, yet together command a large majority of the global carbonated soft-drink market. Their rivalry is continuous, but demand is concentrated. Margins remain strong, brands remain durable, and valuations remain high. Competition in this context does not destroy value because market share is not fragmented. Rivalry exists within a structure that preserves pricing discipline.

The contrast with industries where market share is diffuse is stark. Airlines generate enormous revenues, yet even the largest carriers command modest shares of total capacity. Switching costs are low, routes are contested, and price competition is relentless. The result is thin margins and persistently low valuations. Construction is even more fragmented. Market share is spread thinly across many firms, differentiation is limited, and pricing is driven largely by tenders. Despite scale and experience, sustained profitability is rare. In both cases, the issue is not competition itself, but insufficient concentration of demand.

As one moves down the list of publicly traded companies by market capitalisation, market share tends to decline. As it does, pricing power weakens, margins compress, and investor confidence fades. Revenue on its own becomes an increasingly poor proxy for value. A company with five percent of a very large market can easily be worth less than a company with sixty percent of a much smaller one. Markets do not price activity; they price control over demand.

A useful illustration is Talabat, the Arab food-delivery platform. In some of its core markets, Talabat commands close to seventy percent market share. The total food-delivery market in the Arab world, at roughly five billion dollars, is a small fraction of the broader Arab economy, which exceeds two trillion dollars. Yet Talabat’s market capitalisation, at around six billion dollars, is greater than the annual revenue of the entire delivery industry in the region. What gives Talabat its value is not the size of the market it operates in, but the share of that market it controls.

New entrants often assume that by entering the same space they can capture some portion of that valuation. They overlook a basic but unforgiving reality: as market share declines, margins decline; as margins decline, profits fall; and as profits fall, market capitalisations fall with them.

The contrast becomes even clearer when compared with airlines. JetBlue, a U.S. carrier with a roughly 5% domestic market share and 1% of the global market share, generates almost $10 billion in annual revenue and operates a fleet of nearly 300 passenger aircraft. Yet, despite having almost $ 10 billion in revenue, its market capitalization is less than $2 billion. In other words, a company that operates a fleet of motorbikes—albeit a much larger fleet of around 160,000 bikes—is worth roughly three times as much as a company that operates hundreds of passenger planes.

This raises an uncomfortable but important question. Could a motorbike be more valuable than a plane? In theory, it can if the profit per bike is higher than the profit per plane, and in theory, that can happen if the market share of the bike is sufficiently higher than the market share of the plane.

Peter Thiel famously argued that “competition is for losers.” The statement captures the dangers of commoditised markets, but it overstates the case. Competition can be profitable, and even exceptionally so, when a firm commands meaningful market share in a large and visible market. There are numerous counterexamples. Richard Branson built successful businesses in fiercely competitive industries by accumulating reputation capital and market presence rather than avoiding rivalry altogether.

The more accurate lesson is that competition is survivable, but obscurity is not. It is therefore obscurity rather than competition that would make one a loser in the game of entrepreneurship. Markets do not reward firms for being alone. They reward firms for being large enough to matter. Valuation is not determined by the absence of rivals, but by the concentration of customers. In the end, capitalism does not punish competition. It punishes irrelevance. The winners are not those who avoid rivalry, but those who win it at scale.