> Americans mythologize competition and credit it with saving us from socialist > bread lines. Actually, capitalism and competition are opposites. Capitalism > is premised on the accumulation of capital, but under perfect competition, > all profits get competed away. The lesson for entrepreneurs is clear: If you > want to create and capture lasting value, don't build an undifferentiated > commodity business. > > How much of the world is actually monopolistic? How much is truly > competitive? It is hard to say because our common conversation about these > matters is so confused. To the outside observer, all businesses can seem > reasonably alike, so it is easy to perceive only small differences between > them. But the reality is much more binary than that. There is an enormous > difference between perfect competition and monopoly, and most businesses are > much closer to one extreme than we commonly realize. > > The confusion comes from a universal bias for describing market conditions in > self-serving ways: Both monopolists and competitors are incentivized to bend > the truth. > > Monopolists lie to protect themselves. They know that bragging about their > great monopoly invites being audited, scrutinized and attacked. Since they > very much want their monopoly profits to continue unmolested, they tend to do > whatever they can to conceal their monopoly—usually by exaggerating the power > of their (nonexistent) competition.
< snip > > 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. This might be useful in a Principles or Micro course, to highlight what nonsense is in the textbooks. Written by Peter Thiel in today's WSJ. The article is excerpted from Thiel's new book "Zero to One: Notes on Startups, or How to Build the Future," The WSJ essay is titled "Competition is for Losers" . Full at http://online.wsj.com/articles/peter-thiel-competition-is-for-losers-1410535536?mod=trending_now_5 Gene _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
