Standard Oil

By the late 1870s, John D. Rockefeller controlled roughly 90 percent of US oil refining, and he did it without discovering a single drop of oil. Founded in Cleveland in 1870, Standard Oil began with a play for size, secret railroad rebates that let it undercut any rival while still turning a profit, then absorbed dozens of competitors in a wave that came to be called the Cleveland Massacre. The flywheel of scale, lower cost, and more scale ran until the Supreme Court broke the company up in 1911.

For founders and operators, this is the case behind every claim that scale equals a moat, and it complicates that claim in a specific way. Bigness alone turns out to be fragile; what made Standard durable was something Rockefeller built on top of it. The decision it sharpens is which costs you still pay to a third party that a more integrated version of you would own, and how far that logic runs before someone notices. The exact ingredient that turned size into a moat is the part the app holds back.