In a gold rush, sell tollbooths

Hey everyone,

Here's an uncomfortable truth about business:

The people doing the actual work often capture the least value.

Just look at NFTs. Thousands of artists created millions of digital artworks. They did the work, took the risk, built the hype… and mostly went broke. But the platform they traded on (OpenSea) captured a $13 billion valuation just by standing in the middle.

Here’s how I think about chokepoints, for businesses of any size.

NFTs are a useful example because the contrasts are so stark. When the wave pulled back, over 95% of the assets exchanged were essentially worthless.

But OpenSea took a cut of every trade. They didn't create any art. They didn't take creative risk. They just owned the tollbooth.

This is called the Platform Power Law: in fragmented markets, whoever aggregates and controls distribution captures disproportionate value.

You see this everywhere:

When you put a tollbooth at a chokepoint, the money can be crazy.

(Or look at Manuel Moroun, who literally owned a bridge between the US and Canada.)

But here’s the thing: you don’t have to be Amazon or a billionaire to take advantage of this principle. Small companies can use it too.

You just need to own your chokepoint.

Let's say you run a small services business like a marketing agency, a landscaping company, whatever.

You're probably competing with 50 other businesses doing roughly the same thing in your area. Fragmented market, commoditized service.

Here are three ways to find a chokepoint:

1. Control access to your best customers

Stop competing for every client. Instead, become the obvious choice for a specific type of customer.

Example: You're a fractional CFO. Instead of serving "small businesses" (fragmented), become the go-to CFO for dental practices in your region. 

Now every dental practice acquisition, every practice looking to scale, every dentist who needs financial help — they all flow through you.

2. Aggregate fragmented suppliers

Here's a move I've seen work beautifully: Find fragmented supply, bundle it, and sell access.

Say you run a marketing agency. Every client needs copywriters, designers, video editors. Usually, they're scrambling to find these people individually.

You build a vetted bench of 20-30 freelancers across these categories. Now you're not just selling marketing services — you're selling instant access to pre-qualified talent. Your clients save weeks of hiring headaches. You capture margin on every placement.

You've become the chokepoint between "clients who need creative talent" and "freelancers who need work."

3. Own the relationship in multi-party transactions

Look for situations where your customers need to interact with other vendors.

A landscaping business doesn't just mow lawns. Your clients also need sprinkler repairs, tree trimming, outdoor lighting. But they don't want to manage five different vendors.

So you build a network. You vet the electrician, the tree guy, the irrigation specialist. Your clients call you for everything outdoor-related. You coordinate it all, take your fees, and suddenly you're not competing on price for lawn care — you're the property manager's single point of contact.

You've inserted yourself as the chokepoint between "property owners" and "outdoor service providers."

If you’re just another participant in a fragmented market, you have no pricing power. 

But if you can find a way to rise above that market, or run a tollbooth somewhere, you’ll have way more control. 

So audit your current position:

If yes to all three, you're playing the artist's game. You need to shift to the platform's game.

The shift looks like this:

Stop trying to be the best provider in a crowded field.

Start trying to be the only connection between a specific type of customer and the solution they need.

In my experience, the businesses that break out of commoditization don't do it by being 10% better at their craft. They do it by repositioning themselves as the aggregator, the connector, the chokepoint.

—

One more thing: this isn't about being exploitative.

OpenSea charged 2.5% per transaction. It was pretty reasonable for the service. The problem was they didn't help artists build sustainable businesses. They just facilitated speculation.

When you position yourself at a chokepoint in your market, your job is to create more value than you capture. Make the market work better. Bring more customers to more businesses. Make transactions smoother, faster, more efficient than they’d be otherwise. 

Do that, and your tollbooth isn't predatory — it's valuable.

—

Thanks for reading!

Where are you positioned in your market? Are you the fragmented supply, or are you building the chokepoint? Hit reply and let me know.

Michael