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To bring in another PayPal toe-in... Peter Thiel made some waves when he said the whole point of being a business is to create a "monopoly." His definition of "

To bring in another PayPal toe-in... Peter Thiel made some waves when he said the whole point of being a business is to create a "monopoly." His definition of "monopoly" is more similar to Buffet's "moat" than the legal definition of "monopoly." There's something very valuable in those guys' intentionally provocative choice of words.

dragonwriter 8y ago
> His definition of "monopoly" is more similar to Buffet's "moat" than the legal definition of "monopoly." There isn't really a difference: the whole point of a Buffet “moat” or a Thiel “monopoly” is avoiding commoditization and competition, which naturally tends to drive sale price down to marginal cost eliminating profits. That is, they are about retaining pricing power. Pricing power is also the key test for the existence of legal monopoly, since the existence of pricing power indicates that there are no actual substitutes in practice, even if there appear to be alternative products in the same descriptive market.
- dalbasal 8y ago
  It's a test. Honestly though, even the trust-bustiest of onlookers probably wouldn't call everything Buffet considers "moat" a monopoly. I buy fairy dishwashing soap. If the supermarket doesn't have it, I like the supermarket slightly less. If it's 10% more expensive, I still buy it. Home brand dishwashing liquid doesn't have this advantage. That's a moat. It's not really a monopoly though, just a "relationship" with customers.
maroonblazer 8y ago
>There's something very valuable in those guys' intentionally provocative choice of words. This isn't new thinking via Thiel or Musk. Michael Porter detailed this in his "Five Forces" article in 1979. https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysi...
- dalbasal 8y ago
  True. Nothing novel in any of these statements. This isn't science though, where someone discovers a thing and now it's known. Moreso, it's the current terms of the conversation. Imo, these are positive contributions.

dragonwriter 8y ago

> His definition of "monopoly" is more similar to Buffet's "moat" than the legal definition of "monopoly." There isn't really a difference: the whole point of a Buffet “moat” or a Thiel “monopoly” is avoiding commoditization and competition, which naturally tends to drive sale price down to marginal cost eliminating profits. That is, they are about retaining pricing power. Pricing power is also the key test for the existence of legal monopoly, since the existence of pricing power indicates that there are no actual substitutes in practice, even if there appear to be alternative products in the same descriptive market.

dalbasal 8y ago
It's a test. Honestly though, even the trust-bustiest of onlookers probably wouldn't call everything Buffet considers "moat" a monopoly. I buy fairy dishwashing soap. If the supermarket doesn't have it, I like the supermarket slightly less. If it's 10% more expensive, I still buy it. Home brand dishwashing liquid doesn't have this advantage. That's a moat. It's not really a monopoly though, just a "relationship" with customers.

maroonblazer 8y ago

>There's something very valuable in those guys' intentionally provocative choice of words. This isn't new thinking via Thiel or Musk. Michael Porter detailed this in his "Five Forces" article in 1979. https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysis https://en.wikipedia.org/wiki/Porter%27s_five_forces_analysi...

dalbasal 8y ago
True. Nothing novel in any of these statements. This isn't science though, where someone discovers a thing and now it's known. Moreso, it's the current terms of the conversation. Imo, these are positive contributions.