I haven't read every single comment, but
the core idea was well expressed in a 2008 book by UC Irvine
professor Richard Mckenzie, DEFENSE OF MONOPOLY: How Market
Power Fosters Creative Productive. He also made the basic
point that with true commodities, pricing power falls to
zero and absent investment, risk, and profit margin...
innovation fails. Whenever you have a profit (or a
substantial profit) there is SOME kind of barrier which is
SOME kind of monopoly or quasi monopoly. For example, I have
a couple million miles on United Airlines, and they have a
"monopoly" when I leave my house or office and I look for an
airline they will treat me like gold and rebook me in 20
seconds after a canceled flight. It's different than
"monopoly" with the cartoon obese guy in a tuxedo with a
monocle and a money bag, but it's a kind of barrier to entry
and monopoly, too. I hope McKenzie's book gets at least a
footnote in Thiel (deserves more!), but Thiel isn't
published yet, so I can't say. Economists refer to a
temporary monopoly as the ideal circumstance for the entity.
But big profits lead to others entering the field, thereby
making the monopoly temporary and restoring competition to
the marketplace and lowering prices and profits for the
original entity that had the temporary monopoly.
Monopolies are undoubtedly great for the owners of the
company, but, they aren't always good for the people that
need the products. Some companies, such as Google and
Microsoft, are good at keeping the cost of their products
reasonable and the quality high, but others create problems
with affordability or begin to rest on their laurels. In the
end, I think competition is good for the market place and
ultimately the consumer. Thus disproving the basic premise
of his argument. The only way a "better monopoly can replace
an existing monopoly" is they don't actually have a monopoly
and they create competition.. This article is full of
contradictions and warped logic. WSJ should have been
ashamed to publish it as anything but an example of how not
to develop an argument.
Google is a bad
example of a monopoly. First of all, by the author's
admission it doesn't have 100% of its market. Second,
it all depends, as he notes, on how you define the market.
If Google doubled its prices tomorrow, my company would
still use it, but to a greatly diminished degree there being
many alternatives. Google would not collect as much in
monopoly rents as a real monopoly would. A real monopoly is
the municipal water company, although if it doubled its
prices I could flush less. Peter is using the word monopoly
because that is the language given to us by economists and
because he knows that language is inaccurate and provoking.
Let's transfer the argument into spiritual terms and provoke
again. Like us, our businesses exist to express their souls.
Humans and their creations thrive when they are distinct in
their value within their context...to the point of unique
identity and purpose. Unique people are not monopolies and
nor are unique businesses. Consider Ferrari or Tesla. Each
is distinct. Neither is a monopoly.
Taking my teleological tilt a bit further, the real purpose
of economic competition is to eliminate our creations which
aren't sufficiently distinct to be profitable. That turns
capitalism into an ethical system in which humans further
realize their souls. But it isn't often practiced that way
or often intellectualized that way. Why? Because we often
forget our own purpose and calling to be distinct, connected