I recently read Zero to One, the Blake Masters / Peter Thiel manifesto (of sorts).
One of the interesting points he makes there is to come down on the side of monopoly. I interpreted it as a one-sided position, but I think they were putting forward this one-sided position to stand in contrast to the typical one-sided view of monopoly you often hear -- namely the other side.
Most people are anti-monopoly. Competition s good! But low-margin businesses are like starved animals that will eat your face off to survive. A low-margin business chases out "nice" founders and executives -- they simply don't make it in that environment. You really do have to be an asshole to extract margin from nothing, because part of the way you do that is by squeezing people including your employees. In tight low-margin industries nice people finish last.
Monopolies -- or at least companies in industries with margins and pricing power like software -- can afford to be nice. They can afford to pay higher salaries, be more tolerant of mistakes, give better benefits, have looser schedules, etc. Obviously there are exceptions as people will be people, but on average these industries tend to be nicer places.
Nicer founders and executives can also make it in these industries, and in fact might have an advantage. People want to work with them.
Monopoly like most other things in economics and ecology is a paradox. You (economically speaking) want your employer or company to be a monopoly, but not others. That's because for others you are a customer, so you want them to be subject to brutal competition.
But there's a dark side to monopolies too, namely that they get lazy. The ideal is probably to have some monopoly and pricing power around, but not too much. Like most things in living systems the optimum is somewhere in between and the edges are both pathological.
I'm not sure I'd call "monopoly" in economy a paradox - after all, it's the very carrot you hang in front of every participant! Market economy basically works by telling everyone to play a zero-sum game and collecting the side effects.
But getting back to your main point, I really like how Yvain summarized it[0]. One quote from the essay:
"Imagine a capitalist in a cutthroat industry. He employs workers in a sweatshop to sew garments, which he sells at minimal profit. Maybe he would like to pay his workers more, or give them nicer working conditions. But he can’t, because that would raise the price of his products and he would be outcompeted by his cheaper rivals and go bankrupt. Maybe many of his rivals are nice people who would like to pay their workers more, but unless they have some kind of ironclad guarantee that none of them are going to defect by undercutting their prices they can’t do it.
Like the rats, who gradually lose all values except sheer competition, so companies in an economic environment of sufficiently intense competition are forced to abandon all values except optimizing-for-profit or else be outcompeted by companies that optimized for profit better and so can sell the same service at a lower price."
(There's more of that, CTRL+F for "under the bus")
Maybe this scenario would work better if it included a significant minority of the workers who took night school machine class, and then took jobs as machinist for a significant raise, leaving a shortage of workers willing to accept sweatshop salaries.
The Yvain example only works when there is an unlimited supply of untrained labor, who can't be replaced with more productive but higher trained workers, or automation.
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The Yvain example only works when there is an unlimited supply of untrained labor, who can't be replaced with more productive but higher trained workers, or automation."
Isn't this the actual situation for manufacturing workers right now, until we run out of places with desperately poor people?
Even large cushy Silicon Valley tech companies would say that if you have the time and energy left for night school, you're not giving 100% at work, not a team player, not a culture fit, etc.
I can't imagine why sweatshop workers would be allowed a day so short that they had time for eduction, absent regulation or unions.
> The Yvain example only works when there is an unlimited supply of untrained labor, who can't be replaced with more productive but higher trained workers, or automation.
You'll find plenty of low skilled people most anywhere in the world, even in first world nations due to welcoming immigration policies.
Hm. A monopoly doesn't have to worry about losing business nor employees to the competition. They can squeeze both for the last drop of blood.
ATT was a monopoly for years. They underpaid, charged for pathetic service, and were inefficient to the nth power. Maybe there was cash to be milked by individuals somewhere in all that. Probably executives. But I'm not sure the rank and file had it cushy.
They created a ton. Transistors, solar cells, lasers, satellites, cell phones, LEDs, UNIX and C all came out of that monopoly. That's an unparalleled track record of technical innovation.
With a great deal of government subsidies and grants. Left to own devices, private companies don't do theoretical, long-tail R&D, and you can see this in the fate of Bell Labs under the tutelage of Alcatel-Lucent. Its staff was cut 90% and their projects were subordinated to narrow, short-term commercial objectives with a 3-5 year go-to-market horizon.
Such an environment does not churn out transistors, fibre optics and TCP/IP.
> Hm. A monopoly doesn't have to worry about losing business nor employees to the competition. They can squeeze both for the last drop of blood.
But then again, they also don't have to worry about competition undercutting them. So it's more likely that they'll stop exploiting their employees at some point, if only because the CEO has conscience. But add in some fierce competition, and silly things like conscience have to go out of the window.
>they'll stop exploiting their employees at some point
So far as I know there is absolutely no evidence that this has ever happened. The evidence is all on the opposite side - monopolies become monsters to their workers, to their communities, to their political systems, and to their customers.
The only people they don't become monsters to are their owners and shareholders.
The most beneficial monopolies are Fordist, because they realise that you need to pay workers enough to grease the wheels of consumption. But the motivation there is still exploitative - it's just pragmatically exploitative, rather than ideologically exploitative.
Except the stockholders never gain a conscience, and the CEO is beholden to them, so there's no incentive to stop behaving like a sociopath and stop exploiting employees. Time and again evidence has shown that rich companies are never satisfied with being rich; they always want more.
Private investors still want profit, but hopefully they'd be more interested (because of their larger stakes on average) in less rapacious approaches.
Although, now that I think about it, the key metric here is probably growth. As long as a company is growing, if growth >> margin to be reclaimed by being an ass, growth wins. But when growth =< that margin... there's always going to be pressure (aka Google).
Right, sure, the competition part. But we have no real conclusion we can make about the monopoly part. They may be kind. They may not. And there's definitely still pressure on them to profit. So I'm thinking, not.
The term is monopolistic competition. If you can extract monopoly-like power by not being the only company, but simply the best one, or the one that most closely fits your customers' needs, then you can afford to treat your people well and do right by the community. It's only when you're doing the exact same thing as everyone else that you have to join the race to the bottom.
It gets complicated when competitors start trying to do the things that you do, and that's what prevents you from getting lazy. Monopolistic competitors can never just do the same thing they've always done because points of differentiation can disappear practically overnight. But what they do have is a head start, and if they continue to innovate, they can maintain their lead over other players. An important factor for innovation is attracting and keeping top talent, and you don't get that by treating your employees badly, or being viewed by the public as "evil."
One of the interesting points he makes there is to come down on the side of monopoly. I interpreted it as a one-sided position, but I think they were putting forward this one-sided position to stand in contrast to the typical one-sided view of monopoly you often hear -- namely the other side.
Most people are anti-monopoly. Competition s good! But low-margin businesses are like starved animals that will eat your face off to survive. A low-margin business chases out "nice" founders and executives -- they simply don't make it in that environment. You really do have to be an asshole to extract margin from nothing, because part of the way you do that is by squeezing people including your employees. In tight low-margin industries nice people finish last.
Monopolies -- or at least companies in industries with margins and pricing power like software -- can afford to be nice. They can afford to pay higher salaries, be more tolerant of mistakes, give better benefits, have looser schedules, etc. Obviously there are exceptions as people will be people, but on average these industries tend to be nicer places.
Nicer founders and executives can also make it in these industries, and in fact might have an advantage. People want to work with them.
Monopoly like most other things in economics and ecology is a paradox. You (economically speaking) want your employer or company to be a monopoly, but not others. That's because for others you are a customer, so you want them to be subject to brutal competition.
But there's a dark side to monopolies too, namely that they get lazy. The ideal is probably to have some monopoly and pricing power around, but not too much. Like most things in living systems the optimum is somewhere in between and the edges are both pathological.