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Problem with monopolies is that they lag behind on innovation.

by tn13 11y ago

jonwachob91 11y ago
Have you met Google? (Said in my best NPH voice)
eggy 11y ago
True, but a monopoly due to beating the competition with fair business practices is not the same as the monopoly targeted by anti-trust laws. Until a genuine competitor beats the honest monopoly fair and square, they stand at the top. Government work usually is fertile ground for the wrong type of monopoly, so I am very happy to see SpaceX disrupt this field. SpaceX's rockets are upwards of $40 million a launch, and the Lockheed F35 fighter price is going to keep climbing upwards of $200 million per fighter. Now let's see another SpaceX or similar innovative company step in to the military weapons system market! This should, but it will not translate to less taxes for the average Joe.
patrickk 11y ago
An interesting counterargument from Peter Thiel: "Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can't dream of." http://www.wsj.com/articles/peter-thiel-competition-is-for-losers-1410535536 http://www.wsj.com/articles/peter-thiel-competition-is-for-l...
- nitrogen 11y ago
  I don't really buy it. Decades of monopoly profits are a powerful incentive to stagnate. Those profits definitely fund a lot of survival, and potentially some interesting side projects, but I wouldn't call most of it innovation or progress. As for ambitious research projects, some people just do those on their own, and for the rest, there's academia, government grants, and venture capital.
  - TeMPOraL 11y ago
    > As for ambitious research projects, (...) there's academia, government grants (...) I.e. both of which provided by a de-facto ultimate monopoly which can afford "luxuries" like basic research because they don't have to worry it won't pay off next quarter. > (...) and venture capital. I want to see VC-sponsored ambitious research projects. VC-money-induced thinking is very short term.
    - morgante 11y ago
      > I want to see VC-sponsored ambitious research projects. Isn't that exactly what YC research is?
      - TeMPOraL 11y ago
        Yes. It's also, like, just created. I'm observing it with keen interest.
  - jernfrost 11y ago
    There is something to it. E.g. the government telecoms monopoly in Norway in the 1980s spent way more on research than the present day commercialized Telenor. However they were not necessarily innovative in products, but they did develop a lot of the original cell phone technologies which got later widely used. I am not necessarily a fan of monopolies, but I think we owe it to ourselves to understand the tradeoffs and consider alternatives. E.g. how do you do basic research if there is so aggressive competition and shareholder look only 3 months ahead. It is also worth nothing that the case of ULA isn't necessarily a case of merely monopoly but also how how that monopoly works. E.g. being a monopoly shouldn't require a cost plus contract. Secondly GM and the other big three are certainly not monopolies but have not proven any more capable than ULA in competing with Tesla in creating an electric car. SpaceX is beating lots of other rocket companies which aren't necessarily monopolies. I think it is easy to overstate how bad ULA is when perhaps it is really about how good SpaceX is ;-) Also remember the Russians also operated government monopolies for rocket building and yet managed to build considerably cheaper rockets than the Americans. I think there is a lot more to this issue than whether it is prive/public or a monopoly.
- ricardobeat 11y ago
  Wow, that's a stretch. He even uses google's "don't be evil" as an example, which we know is dead and buried. Monopolies have a way, way stronger incentive to just stand still, optimize and collect profits.
- morgante 11y ago
  I think it comes down to leadership. Put simply, monopolies do have greater capacity to innovate. When you're stuck in brutal competition, it's hard to funnel money into research which might not pay off for decades—your competition might have driven you out of business by that point. On the other hand, the allure of monopoly profits is hard to ignore. It's tempting to simply funnel the profits into shareholder pockets and that's the approach investors will generally favor. For any middling CEO, it's the path of least resistance. This is why founder-controlled monopolies (Google, Facebook, Amazon, etc.) are such a potent force. They have the incentive to preserve the companies long-term legacy (it's their personal legacy as well) through ambitions projects while also having the credibility and power to resist investor preferences for short-term profits.
- Mvandenbergh 11y ago
  The argument is that the desire to establish a monopoly stimulates innovation, not necessarily that monopolists are innovative once established. There's also a big difference between natural monopolies (like electricity or gas distribution networks) and IP monopolies. Monopolies that are established by providing a vastly superior product require continuous R&D investment to maintain and natural monopolies do not.
- StillBored 11y ago
  That is so last century, when even monopolies tried to provide good customer service and a quality product. This century 100% of the effort is focused on business efficiency so that larger returns can be made for the shareholders/etc. This means little reinvestment, little customer service, and a product/service only good enough to keep the conservative party from admitting that sometimes a little regulation is necessary (aka just about never).
- tn13 11y ago
  PT said that in context of Google which is a search monopoly but pretends to me a media company where it might seem like just another fish in the pond. That analogy is not applicable here because PT is referring to businesses who capture market by innovation and growth and become monopolies. I am reasonably sure PT is not referring to monopolies like USPS/AT&T/COMCAST/Cable Companies who have become monopolies using government's coercive power. If you are running a business where your only customer is government and you are a monopoly I don't think anyone cares about innovation much. I would love to see counter examples if you have any.
j1vms 11y ago
> Problem with monopolies is that they lag behind on innovation. With an arguable rare exception being AT&T from the early 20th century up until about ~1980 perhaps, nurturing within it the renowed Bell Labs and its predecessor(s).
- tn13 11y ago
  What exactly has AT&T innovated in ? AT&T's monopoly in recent times is mostly because it has joined hands with government to keep others out.
TeMPOraL 11y ago
There are two types of innovation. Random "out there" market ideas? Yes, because upstarts have to find something to upset the monopoly, so they're self-selected to have something interesting. But long-term, actual innovation? Pretty much only monopolies can afford that. That includes governments, and that includes R&D departments of various corporations that can stay cost centres for years before accounting notices. There are of course exceptions - like Elon, who has and for whom the profitability of the company is only a secondary, supporting concern.

Problem with monopolies is that they lag behind on innovation.

by tn13 11y ago

Problem with monopolies is that they lag behind on innovation.

jonwachob91 11y ago

Have you met Google? (Said in my best NPH voice)

eggy 11y ago

True, but a monopoly due to beating the competition with fair business practices is not the same as the monopoly targeted by anti-trust laws. Until a genuine competitor beats the honest monopoly fair and square, they stand at the top. Government work usually is fertile ground for the wrong type of monopoly, so I am very happy to see SpaceX disrupt this field. SpaceX's rockets are upwards of $40 million a launch, and the Lockheed F35 fighter price is going to keep climbing upwards of $200 million per fighter. Now let's see another SpaceX or similar innovative company step in to the military weapons system market! This should, but it will not translate to less taxes for the average Joe.

patrickk 11y ago

An interesting counterargument from Peter Thiel: "Monopolies drive progress because the promise of years or even decades of monopoly profits provides a powerful incentive to innovate. Then monopolies can keep innovating because profits enable them to make the long-term plans and finance the ambitious research projects that firms locked in competition can't dream of." http://www.wsj.com/articles/peter-thiel-competition-is-for-losers-1410535536 http://www.wsj.com/articles/peter-thiel-competition-is-for-l...

nitrogen 11y ago
I don't really buy it. Decades of monopoly profits are a powerful incentive to stagnate. Those profits definitely fund a lot of survival, and potentially some interesting side projects, but I wouldn't call most of it innovation or progress. As for ambitious research projects, some people just do those on their own, and for the rest, there's academia, government grants, and venture capital.
- TeMPOraL 11y ago
  > As for ambitious research projects, (...) there's academia, government grants (...) I.e. both of which provided by a de-facto ultimate monopoly which can afford "luxuries" like basic research because they don't have to worry it won't pay off next quarter. > (...) and venture capital. I want to see VC-sponsored ambitious research projects. VC-money-induced thinking is very short term.
  - morgante 11y ago
    > I want to see VC-sponsored ambitious research projects. Isn't that exactly what YC research is?
    - TeMPOraL 11y ago
      Yes. It's also, like, just created. I'm observing it with keen interest.
- jernfrost 11y ago
  There is something to it. E.g. the government telecoms monopoly in Norway in the 1980s spent way more on research than the present day commercialized Telenor. However they were not necessarily innovative in products, but they did develop a lot of the original cell phone technologies which got later widely used. I am not necessarily a fan of monopolies, but I think we owe it to ourselves to understand the tradeoffs and consider alternatives. E.g. how do you do basic research if there is so aggressive competition and shareholder look only 3 months ahead. It is also worth nothing that the case of ULA isn't necessarily a case of merely monopoly but also how how that monopoly works. E.g. being a monopoly shouldn't require a cost plus contract. Secondly GM and the other big three are certainly not monopolies but have not proven any more capable than ULA in competing with Tesla in creating an electric car. SpaceX is beating lots of other rocket companies which aren't necessarily monopolies. I think it is easy to overstate how bad ULA is when perhaps it is really about how good SpaceX is ;-) Also remember the Russians also operated government monopolies for rocket building and yet managed to build considerably cheaper rockets than the Americans. I think there is a lot more to this issue than whether it is prive/public or a monopoly.
ricardobeat 11y ago
Wow, that's a stretch. He even uses google's "don't be evil" as an example, which we know is dead and buried. Monopolies have a way, way stronger incentive to just stand still, optimize and collect profits.
morgante 11y ago
I think it comes down to leadership. Put simply, monopolies do have greater capacity to innovate. When you're stuck in brutal competition, it's hard to funnel money into research which might not pay off for decades—your competition might have driven you out of business by that point. On the other hand, the allure of monopoly profits is hard to ignore. It's tempting to simply funnel the profits into shareholder pockets and that's the approach investors will generally favor. For any middling CEO, it's the path of least resistance. This is why founder-controlled monopolies (Google, Facebook, Amazon, etc.) are such a potent force. They have the incentive to preserve the companies long-term legacy (it's their personal legacy as well) through ambitions projects while also having the credibility and power to resist investor preferences for short-term profits.
Mvandenbergh 11y ago
The argument is that the desire to establish a monopoly stimulates innovation, not necessarily that monopolists are innovative once established. There's also a big difference between natural monopolies (like electricity or gas distribution networks) and IP monopolies. Monopolies that are established by providing a vastly superior product require continuous R&D investment to maintain and natural monopolies do not.
StillBored 11y ago
That is so last century, when even monopolies tried to provide good customer service and a quality product. This century 100% of the effort is focused on business efficiency so that larger returns can be made for the shareholders/etc. This means little reinvestment, little customer service, and a product/service only good enough to keep the conservative party from admitting that sometimes a little regulation is necessary (aka just about never).
tn13 11y ago
PT said that in context of Google which is a search monopoly but pretends to me a media company where it might seem like just another fish in the pond. That analogy is not applicable here because PT is referring to businesses who capture market by innovation and growth and become monopolies. I am reasonably sure PT is not referring to monopolies like USPS/AT&T/COMCAST/Cable Companies who have become monopolies using government's coercive power. If you are running a business where your only customer is government and you are a monopoly I don't think anyone cares about innovation much. I would love to see counter examples if you have any.

j1vms 11y ago

> Problem with monopolies is that they lag behind on innovation. With an arguable rare exception being AT&T from the early 20th century up until about ~1980 perhaps, nurturing within it the renowed Bell Labs and its predecessor(s).

tn13 11y ago
What exactly has AT&T innovated in ? AT&T's monopoly in recent times is mostly because it has joined hands with government to keep others out.

TeMPOraL 11y ago

There are two types of innovation. Random "out there" market ideas? Yes, because upstarts have to find something to upset the monopoly, so they're self-selected to have something interesting. But long-term, actual innovation? Pretty much only monopolies can afford that. That includes governments, and that includes R&D departments of various corporations that can stay cost centres for years before accounting notices. There are of course exceptions - like Elon, who has and for whom the profitability of the company is only a secondary, supporting concern.