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Thiel is spouting the same snake oil that other management gurus have used in the last few preceding decades. It's clear that he has no appreciation for what economics really is, and, instead, harks back to those undergraduate courses in economics he most likely sat through. Economics, really, is behavioral psychology without calling the various theories psychologists have rolled out on that matter. It hasn't been all that long ago that economists were studying psychology in an attempt to refine their own discipline. As far as I can tell, that study yielded nothing.

No economics is the study of human nature, in its broadest context. The title is an attention getting trick. Monopoly can be achieved in two ways: With Superior Products or by Crony Capitalism. I am sure Peter Thiel, being a libertarian, does not mean the latter.  I question whether convenient libertarians would stick to their philosophy when competition gets tough. All it takes is one argument of sophistry why the status quo is not "fair", and the camel's nose of full government control gets under the tent. I submit you are seeing this already with the issue of internet regulation. Then you have the foundations of "crony capitalism". The next stage is regulation and regulatory capture, then a cozy symbiosis between the force of government and the regulated business. The regulators must go through theatrics to show their usefulness, yet they dare not let their wards go out of business either... the customer becomes not the citizen who pays, but now it's the regulator who must be satisfied. That is exactly what happens now with utility companies. We need to define MONOPOLY, and only then will things make sense. There is 1) a company which serves the customer better than all others, and 2) a company which uses the law, violence, or possibly bad business practices to keep out competitors. This makes all the difference!

The vast majority of monopolies are in category #2, while Thiel clearly considers himself a virtuous #1. When Thiel goes on and on without making this distinction, he is communicating badly, maybe even guilty of disinformation.  I have considered that, it is a subject all its own and very difficult to discuss in the context of Mr. Thiel's words. Those are emphatically in category #2, it is in most cases illegal for any other company to do what the utility does. There is an economic philosophy which rationalizes why this is necessary, but we should find some other forum to discuss that. This hardly qualifies as a new insight - bookshelves have been full of books for years that advise companies to find a strategic niche and/or sustainable competitive advantage. Similarly, Warren Buffett is constantly searching for companies with a 'moat' around them that protects from competition - that moat could have been achieved by brand-building (Coca-Cola) or physical monopoly (BNSF railroad). Thiel is simply peddling old wine in new bottles.

 

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