Market power is everywhere. Really. It's getting strange out there.
On the issue of how infrastructure and construction projects changed you have to go back about 75 years. In those days public departments were the largest engineering firms in any area. Also they started out as County entities. I will use Cook County for examples as I was the director there for a few years. The Cook County Highway Department was created nearly 10 years before the State of Illinois department of transportation. It did the planning and oversaw the construction of all the major highways around Chicago starting in 1940. Up until the 2000s the County HIghway department had nearly 2000 employees and over 1000 engineers. It now has less than 300 and that number is shrinking as it is hard to attract good engineers. The City of Chicago has dropped even more and must rely on outside contractors to complete all technical work and bidding specifications and contracts.
Construction projects are broken down into 4 parts: Transportation Planning, Design Engineering, Construction Engineering and Construction management Oversight. Even in the 20s and 30s the actual construction (e.g. Construction engineering was done be private firms as they had all the equipment and staff to move earth and pour concrete. The other 3 areas were done in house. Starting in the 1970s the pattern was engineers would work in the public sector for 30 years, take their pension and then work for 10-15 years in the private sector to get bigger paychecks. These Highway or Public Works departments were major sources of patronage, graft (e.g. large conracts).
The pattern started to change in 1970s as public budgets started to shrink and more work began to be outsourced to the private sector. Transportation Departments now will have outside contracts to do the planning, another set to do the design of projects, another set of bid contracts to do the actual construction and a final set of contracts to oversee the construction to make sure they meet the specifications. This accelerated in the 1980s when public funding shrank more precipitously and the 30 year trade off was less lucrative and tolerable. One of the goals of the Heritage Foundation recommendations to the Reagen administration was to make government employment less attractive as a destination. (There was much more behind the Reagen claim that Government was the "problem.") Government employment was seen as useful training for new graduates but anyone with skills "should" be encouraged to move to the private sector thus insuring the government would lose expertise over time. Young engineers would now work for a Highway or Transportation Department first and then move to the private sector. In some Cities the contract engineers actually have desks and offices in government departments to oversee big projects. The days when Government engineers and planners could concieve, design, plan and implement those plans has passed.
In the 2000s as the budget crunches got worse, we saw the rise of Design-Build, Design-Build-Manage, Design-Build-Manage-Finance and Design-Build-Manage-Finance and Operate models mostly tied to "Public-Private-Partnerships" (PPPs). PPPs were models to make it easier to finance projects and move evertything to the private sector. Thus the rise of even larger construction firms as the public agencies have lost the expertise to do the work.
The Monopolization/Outsourcing of construction started as a de-skilling of government. Now after nearly 40 years of pressure to outsource and demean the ability of government to be competent, we now have a whole series of financing mechanisms that encourage these giant engineering/finance firms to function as shadow governments.
Here's a strange one for you...Real estate photography. I'm an agent and due to the cost of hiring a photographer pre-recession - I bootstrapped my way to being a strong photographer for interior and exterior shots and short video. When the crash came, I used it as a sideline to make ends meet. I was slowly building a portfolio of business - and then WHAM! In came the big platforms that offered everything from soup to nut - pamphlets, virtual tours, 40 photos professionally lit with major post-processing, twilight photography - all for peanuts.
How did they do it? By finding kids who had been locked out of the job market and promoting it as a career "opportunity". Trouble is, they only paid $50 a shoot for 30 professionally lit photos plus post-processing. It said they could do the shoot and processing in "an hour". I double-dog dare anyone to shoot, light, compose and process 30 professional photos in an hour. Let's not forget getting to and from the site which could be an hour each way. Equipment maintenance, wear and tear on your car...Flipping burgers for minimum wage is a better gig.
The kids fell for it and there still seems to be an endless stream of photographer wannabes signing up. Of course, most of them think they can build a clientele of their own this way. Uh-huh...what the usually don't realize until it's too late is the noncompete clause they sign when they sign up.
Basically, it took a business that you could turn into a decent business if you put in the time and energy and turned it into a commodity in about two years flat.
Matt - First, I want to thank you for your excellent work on monopolies. I have been surprised at the wide variety of businesses that have become monopolies, or nearly so.
I also want to give Naked Capitalism a hat tip for introducing me to your writing.
While I don't know much about the engineering business, there is a factor that might address your question about the difficulty of rolling-up engineering firms and would be worth investigating.
In most jurisdictions, an engineering firm must be owned and managed by a state-registered Professional Engineer. Ownership by private equity might not be allowed under current state regulations. Also worth looking at would be attempts by private equity or others, e.g., ALEC, to change or eliminate such regulations.
You should look up Varsity Brands neighbor StackSports (formerly Blue Star Sports). They are rolling up the amateur sports software market at an incredible rate.
On the change in infrastructure construction, there is an excellent example in the mismanagement of the new Oakland Bay Bridge. There is plenty of information online. As I recall, the overall management of the project was put in the hands of an attorney - without, of course, any construction expertise - and certain parts of the bridge decking were contracted out to a Chinese company that had never built a bridge, welds were done in China in the rain (a huge no-no) and when engineers told the management of the poor welds, they were silenced. Cost minimization at the beginning became cost overruns and skepticism about overall quality. Not as deadly a story as the Challenger, but similar in process - when management desire overcomes engineering expertise.
Just found out about another one in the media space. It’s not strange but it is disturbing.
On the note on fatality towards the start, I have noticed among the democracy-minded in Europe are beginning to take a long look at finance and how too often it flies in the face of operating a democracy. It isn't the industrialist who stands in the way of democracy but rather the preference they obtain from bankers and financiers over those they consider "not safe". You have a central bank engage in quantitative easing to combat deflation but what you end up is with bankers refusing to accept risk and disperse the money responsibly. So they shovel the money into monopolies to ensure that they can find somewhere safe to park their money. I know you have remarked on this phenomenon before.
This reticence to disperse government issued money is perhaps the moment to rethink about how the finance industry as a whole is structured and perhaps recognise how many instruments we see in finance are simply outdated. Yanis Varoufakis makes the point that the basis of a corporation and the anonymous and tradeable share arose in 1599 with the creation of the British East India Company. This development, made 90 years prior to the declaration of the supremacy of the British Parliament over the crown, does sound like it is a relic of an emerging democracy that may be outmoded when we now have parliamentary supremacy over most of the nations worldwide. That in the face of much political democracy to be had we are at the whim of an economy financed by oligarchs and aristocrats.
The question I have is whether anti-trust laws can either overcome or otherwise elucidate on this problem. Because by my estimation, anti-trust is missing the cause of the monopolisation in the first place and is only a band-aid to an acne breakout.
Another blog I read all the time, Beat The Press by Dean Baker, talks over and over about Patents and Copy Rights. They also over the last forty years have gotten longer and more stringent. Now of course they are mostly what trade agreements are about not free trade. Looking at this article I have to say IP was mentioned quite a bit. I do not think PE firms would bother with industries like games if it was not for long IP rights.
Regulating private equity has been and always will be a failure. The lesson of the New Deal is if you let the rich keep their fortunes, they will eventually buy away any regulations of legislation designed to contain their wealth, even if it takes 60 years. The ultimate problem is that people who already have more than enough wealth are still trying to make more money. They are sick. They have a hoarding disorder which is detrimental to the rest of us. We need a cultural and political revolution against hoarded wealth, usury, and financial speculation. A person who has $50 million dollars and is still tying to make more money is a psychopath.
I have no news about what is currently being consolidated, however, roll-ups were once done by a myriad of private equity firms here in Los Angeles. It would not surprise me to find out that they themselves might have been consolidated.
Engineer here. My hunch is that the consolidation in engineering/infrastructure is less about market power and more about distributing risk. There were big changes in the insurance industry in the 1980s that drastically increased the cost of professional liability insurance. Meanwhile increases in project size and complexity (the dawn of "megaprojects") and uninsurable exceptions have also increased risks and reduced the number of companies that can even show they're qualified to do work on this scale. Professional services firms have nothing to sell other than the experience and talents of their employees. It is easier for giant firms to justify employing/retaining experts with necessary but niche experience, and to give mid-level staff developmental experience on large, challenging projects. They also have an easier time affording specialized software (which is also somewhat monopolized). These are fundamentally different patterns from many of the other companies you write about.
I just found one merger that created IMHO a monopoly about 3 or so years ago. Apparently I didn't know about Cabella and Bass Pro Shop merged. Being from the mid-west I know of Bass Pro Shop and have read quite a bit about their tactics. They are the king of conning towns back there into giving money, tax breaks, roads all kinds of things to attract a "destination" Bass Pro Shop. Thing is for most it does not materialize. There are these shops off major roads but no one actually stops. No one in the surrounding community gets to benefit from increased traffic, etc. This company when I read about it first I think in a David Kay Johnston book, got me thinking how do they keep making money if no one actually buys at these locations? Now I know a little more and now shoot they own the outdoor spere it seems to me!
Here's another one for you- John Malone's takeover of the music industry: https://testset.io/2020/07/16/live-nation-iheartradio-siriusxm-ticketmaster-and-pandora-are-now-all-under-the-control-of-one-man/
You could have been describing US wheelchair athletics in the early 70's...Essentially, the largest wheelchair manufacturing firm in the US had a genuine monopoly on 'durable medical goods' in this country, for which the company was prosecuted multiple times per antitrust law and simply paid fines as a cost of doing business. It was worth it pay up as that company had the exclusive contract with the VA to provide wounded vets with medical equipment. Needless to say their equipment cost US taxpayers as much as 10 times more than the same items in other countries (where the company did not have monopolies). The ceo of that company was also the ruler of wheelchair athletics in the US, and made certain that athletes could only compete in off-the-rack chairs (of which his company provided the vast majority). Those chairs were hideously heavy, yet also chronically weak - as if Tour de France cyclists had to use generic dime store bicycles or be barred from competition.
In the mid 70's the athletes started their own competition association and founded new companies to design and manufacture competition equipment, but more importantly also made highly functional (strong, lightweight) wheelchairs for everyday use.
Can you expand and add more details on yearbooks monopoly and puzzles monopoly (with if any PE involvement), thanks
I noticed the consolidation of the board game market by Asmodee a few years ago. I like playing board/card games, and I was fortunate enough to have bought many of the ones listed, as well as others, when they were still made and sold by their original creators, who were known by the community for having excellent customer service, and the one time I had an issue with a game that is exactly what I experienced. Conversely, my experience with Asmodee has been terrible, and I'm fairly certain I've seen people say the build quality of the games has gone down, too, another reason I'm glad to have bought them before Asmodee took control, as well as the fact I won't buy their products anymore after the numerous issues I've had with their games and their horrendous "support" (if you can even call it that). Just another example of a big corporation coming in and destroying a thriving market.