Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Peter Thiel, co-founder of Pay Pal and also of Palantir, is coming out with a new book titled "Zero to One: Notes on Startups, or How to Build the Future," which will be published by Crown Business on Sept. 16.
The following was adapted from his book, and is in the WSJ. It is an interesting read. When we all took economics in school, we learned that perfect competition is good and monopolies are bad.
Thiel has a fairly interesting twist, arguing that monopolies = bad is only true in a static world; in a dynamic world, monopolies can = good.
So why are economists obsessed with competition as an ideal state? It is a relic of history. Economists copied their mathematics from the work of 19th-century physicists: They see individuals and businesses as interchangeable atoms, not as unique creators. Their theories describe an equilibrium state of perfect competition because that is what's easy to model, not because it represents the best of business. But the long-run equilibrium predicted by 19th-century physics was a state in which all energy is evenly distributed and everything comes to rest—also known as the heat death of the universe. Whatever your views on thermodynamics, it is a powerful metaphor. In business, equilibrium means stasis, and stasis means death. If your industry is in a competitive equilibrium, the death of your business won't matter to the world; some other undifferentiated competitor will always be ready to take your place.
Perfect equilibrium may describe the void that is most of the universe. It may even characterize many businesses. But every new creation takes place far from equilibrium. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.
Peter Thiel, co-founder of Pay Pal and also of Palantir, is coming out with a new book titled "Zero to One: Notes on Startups, or How to Build the Future," which will be published by Crown Business on Sept. 16.
The following was adapted from his book, and is in the WSJ. It is an interesting read. When we all took economics in school, we learned that perfect competition is good and monopolies are bad.
Thiel has a fairly interesting twist, arguing that monopolies = bad is only true in a static world; in a dynamic world, monopolies can = good.
Typical complete rubbish from the propaganda arm of the establishment. The historical context is the anti-competitive monopoly rising not from a competitive edge , but in its ability to prevent competitive forces, which were typically about the control of natural resources, political access and real estate. To wit, Ricardo's quote of Smith:
"The monopoly of the colony trade," he says, "like all the other mean and malignant expedients of the mercantile system, depresses the industry of all other countries, but chiefly that of the colonies, without, in the least, increasing, but on the contrary diminishing, that of the country in whose favour it is established."
This part of his subject, however, is not treated in so clear and convincing a manner as that in which he shews the injustice of this system towards the colony.
That is to say something like South Seas Company. That is to say its a benefit to someone at the expense of someone else, and probably a dead weight loss in the aggregate. There is no win, win as with a competitive edge of a proprietary nature.
A proprietary advantage, such that a private interest has advanced their craft excelling over others, is not the traditional target of a political economy or economics unlike a malignant monopoly power engaging in anti-competitive behavior. The clowns at WSJ ought to very well know this.
*snort* Take a look at the lists of complaints against paypal, think what it would be like if it was a complete monopoly, and then get back to us about that quote being "interesting" or even remotely valid.
Companies and individuals ARE interchangeable atoms. Thiel is an extremist libertarian; no doubt he thinks of himself as a special snowflake who generated great wealth through his special snowflake skills.
Indeed, the idea that Thiel's original paypal monopoly is anything other than leveraging network effects (via ebay originally and still primarily ebay) is ludicrous. Ebay is bad; that's why they keep raising seller fees without any risk that another auction competitor could rise up with enough capital to compete and then hemorrhage cash for years until they could build up a large enough user base to compete....
He wants government to FAVOR HIS monopoly over others.
only way there can be monopolies is if government forces it to happen.
shutting down competition.
otherwise if one sector becomes too profitable then people will come in to compete.
PETER THIEL is a wolf in sheep's clothing if he if for monopolies
vs competition.
why should WORKERS COMPETE
while corporations and businesses DO NOT?
is he STUPID?
"Customers were happy to finally have the choice of paying high prices to get a smartphone that actually works. The dynamism of new monopolies itself explains why old monopolies don't strangle innovation."
UM NO. we actually do not want to pay high prices.
We want to pay bang per buck.
the reason why people are happy to pay high prices is to impress their friends in their vanity.
like when some rich people donate they have to announce it to the world so they can get credit instead of doing it behind the scenes.
some do it behind the scenes without attracting attention and that is more respectable than those that go in front of the camera
Thiel has a fairly interesting twist, arguing that monopolies = bad is only true in a static world; in a dynamic world, monopolies can = good.
Thiel is full of it.
Quote:
So why are economists obsessed with competition as an ideal state? It is a relic of history. Economists copied their mathematics from the work of 19th-century physicists: They see individuals and businesses as interchangeable atoms, not as unique creators. Their theories describe an equilibrium state of perfect competition because that is what's easy to model, not because it represents the best of business.
His argument is a Straw Man.
Competition is not a "state." Competition is an influence, and it is dynamic and not even remotely static. There are two things that drive innovation and that is need, and/or competition.
Quote:
But the long-run equilibrium predicted by 19th-century physics was a state in which all energy is evenly distributed and everything comes to rest—also known as the heat death of the universe. Whatever your views on thermodynamics, it is a powerful metaphor. In business, equilibrium means stasis, and stasis means death. If your industry is in a competitive equilibrium, the death of your business won't matter to the world; some other undifferentiated competitor will always be ready to take your place. Perfect equilibrium may describe the void that is most of the universe. It may even characterize many businesses. But every new creation takes place far from equilibrium. In the real world outside economic theory, every business is successful exactly to the extent that it does something others cannot. Monopoly is therefore not a pathology or an exception. Monopoly is the condition of every successful business.
False premise there. Why should the death of any business matter to the world?
Under the Laws of Economics, we have the Three Laws of Business:
1] You must produced a product or provide a service that is in demand; and
2] The product or service you provide must be of the highest possible quality relative to price; and
3] Your product or service must be competitively priced.
That's a 3-Prong Test: fail anyone or more of those three, and you fail, period.
No business can ever violate those 3 Laws, and succeed, without external support. That support always comes in the form of government subsidies and/or regulations.
Under normal economic conditions, it is impossible for a monopoly to form.
If you study history, especially economic history in the US, you will see that every single monopoly or near-monopoly that ever existed, only existed because of government subsidies, or government regulations or other interference by government (such as using power of government to harass competitors and drive them out of business).
AT&T is a text-book example.
AT&T operates monopoly telephone systems in US Slave States in the 2nd, 3rd and 4th World. Not only does AT&T price-gouge, it also avoids paying any taxes (since the US government has repeatedly overthrown any non-Anglo or non-Western European government that attempted to tax US corporations).
That gives AT&T an unfair competitive advantage over its domestic competitors.
With the rest of the world subsidizing telephone service for Americans who use AT&T, those customers are paying lower monthly rates than the rates charged by domestic competitors.
Additionally, the extra monies from price-gouging and tax-avoidance gives AT&T a huge war chest to buy up domestic competitors.
Subsequently, that increases AT&T's profits, which drives up the price of AT&T's stocks, which attracts more large investors, providing the Capital for AT&T to continue its buy-out of domestic competitors.
Not just the US, but also in foreign States where monopolies exist, you'll find that in each and every case, government interfered and aided or abetted formation of the monopoly.
Monopolies are never good.
Why don't you have the more cost-effective, highly efficient, high quality Clinics and Poli-Clinics in the US medical system like all Euro-States that do not have national healthcare?
Because the American Hospital Association controls 82% of the hospitals in the US.
And thanks to Obamacare, you'll have a huge corporatist monopoly healthcare system...which is detrimental to you.
Under the Laws of Economics, we have the Three Laws of Business:
1] You must produced a product or provide a service that is in demand; and
2] The product or service you provide must be of the highest possible quality relative to price; and
3] Your product or service must be competitively priced.
That's a 3-Prong Test: fail anyone or more of those three, and you fail, period.
No business can ever violate those 3 Laws, and succeed, without external support. That support always comes in the form of government subsidies and/or regulations.
Under normal economic conditions, it is impossible for a monopoly to form.
A mafia run pizzeria used to launder their criminal operations is the exception to the rule that displays the company that a legal monopoly keeps.
Where I disagree with him is that monopoly is what is history from oil to local merchants using political influence to keep competitors out. One only has to talk to a older person who remember the local monopolies or read his story of it.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
