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>let the same free citizens start their own competitor. Except that starting a competitor often requires far more capital than the incumbents needed to reach t

>let the same free citizens start their own competitor. Except that starting a competitor often requires far more capital than the incumbents needed to reach their position. I don't support protectionism, but "true free market" economics are an illusion used to prevent and tear down regulations.

ttoinou 7y ago
Would you have examples? Starting SpaceX required far more capital than NASA?
- coldtea 7y ago
  SpaceX is mainly alive because NASA/government poured tons of money in it, so not exactly the best example: "As a company, their total contracts are worth $12 billion including commercial satellite launches as well as NASA and U.S. government missions. Of that total, $5.5 billion is from government contracts from NASA and the Air Force." Basically what could have been done (and was done, and reached the moon and built the space bus etc) on government money, is now paid to a private constructor to do (plus profits, minus the patents going to the state).
  - TaylorAlexander 7y ago
    Indeed, SpaceX nearly went bankrupt in the early days because they couldn't get a contract until they successfully launched a rocket. That first contract after their first successful launch was from NASA.
    - fragmede 7y ago
      NASA didn't do that out of the goodness of their hearts though. Pound-for-pound (which, to orbit is pretty pricey), SpaceX was cheaper. Blue Origin, a different space corporation, was not even in consideration, but if they had something competitive, NASA would have considered their bid as well. (Tbc, Blue Origin isn't shooting for that market at all, so this is in no way a dig at them.)
      - Retric 7y ago
        Risk is a huge factor in costs. Adjust for risks and early SpaceX was more expensive than their competitors.
      - coldtea 7y ago
        >NASA didn't do that out of the goodness of their hearts though. Pound-for-pound (which, to orbit is pretty pricey), SpaceX was cheaper Well, that's how you do it: you mismanage a state organization to make development costlier, and then you give the project + profits to private industry pals... That's how many-a-privitizations have started...
  - ttoinou 7y ago
    I knew that but I'm specifically asking about "starting a competitor often requires far more capital than the incumbents needed to reach their position", not where the money is coming from
    - coldtea 7y ago
      >I'm specifically asking about "starting a competitor often requires far more capital than the incumbents needed to reach their position" Well, isn't that self-evident? You can't beat Google or Amazon or Apple starting from the money Apple had at its times, or Amazon had when they started (adjust for inflation). They have tons of billions of cash at hand to stomp on you, tons of special deals, economies of scale, can buy the best talent undercutting you, have friends in government and media, have huge network systems of third parties, and so on.
      - ttoinou 7y ago
        Because you need to provide something different. "Pure" competition doesn't exists, all companies and products are different
        fragmede 7y ago
        Yes that's exactly the point. The fiction under which corporations are granted their strange and powerful place in society, is that the invisible hand of the free market results in the best, floating to the top. Unfortunately, that invisible free hand is more imaginary than real, giving incumbents far more power than intended - assuming that you view pure competition as the ideal state, rather than a malignant state.
        Mirioron 7y ago
        But they have to be different - that's how things improve. If they were exactly the same then what difference does it make for the consumer which product they buy? They're identical.
- TravisLS 7y ago
  There are tons of examples of this. Basically any company with a real competitive advantage is very expensive to unseat once established. Try to unseat Amazon, Google, Facebook, or Apple with the capital that launched those companies.
  - gridlockd 7y ago
    Google unseated Altavista and Yahoo, Facebook unseated MySpace and Friendster, each with less capital than its predecessor had available. It might seem inconceivable today that these giants could fall, but they absolutely can. Even if these giants don't fall, they can't just act as they wish, just because they have a dominant market position. They're kept in check by the fact that their products are easily replaced if they raise prices well beyond cost of replacement. As a result, they don't raise prices and the potential competition never emerges - which in terms of the social outcome is just about as good as active competition. There's an exception to this which the article mentions: Companies that sell themselves as "too big to fail" or "socially important" to gullible or corrupt politicians. The market can't fix this, only politics can.
    - booleandilemma 7y ago
      Isn’t it different though? A lot of people are reading your comment on an OS developed by Google, and mostly everyone they know is a user of Facebook, a company working on creating its own currency. Altavista, MySpace, and Friendster were never so powerful. They felt less like companies and more just like websites, if you know what I mean.
      - gridlockd 7y ago
        > Altavista, MySpace, and Friendster were never so powerful. They weren't that "powerful" because the web wasn't used as much. It took a while for us to adopt the digital lifestyle. Ultimately, they're just platforms though. Of course they have a lot of inertia, but user habits can change. Younger users in particular aren't engaging with Facebook that much anymore: https://www.theguardian.com/technology/2018/jun/01/facebook-teens-leaving-instagram-snapchat-study-user-numbers https://www.theguardian.com/technology/2018/jun/01/facebook-... > They felt less like companies and more just like websites, if you know what I mean. Google certainly has moved beyond being a website by creating many products. However, I feel that a lot of these products are rather crappy and wouldn't be competitive if they weren't given away. How dominant of a player can you really be, if you must give your product away for free? Most companies aren't in the business of giving away free stuff, so in that sense it is hard to compete. That's not necessarily a bad thing for the consumer though, they get all the free stuff after all.
- dredmorbius 7y ago
  Google / Alphabet have prove unable to displace telco / cable monopolies. Or, for that matter, Facebook's social networking monopoly, despite dumping billions into Google+. Since the 1920s, it's been virtually impossible to start a new consumer automobile company in the US, with several notable flameouts (Tucker and DeLorean notably). Tesla is a remarkable exception, though they are innovating on energy storage and traction. The aviation industry is similar. Likewise, banking. Despite ongoing consolidation and failures in Big N consulting firms, new entrants have not emerged in the space. What are now the Big Four had been the Big Eight as late as the 1990s. There are occasional cases of disruption. The emergence of discount retailers (Dayton, Kresge, and Wal-Mart, today Target, Kmart, and Walmart) all expanded greatly in the 1960s. I was stunned though to learn a few years ago that the Hudson's Bay Company still exists, and is the parent of Lord & Taylor and Saks Fifth Avenue, among others. It's also notable that some of the biggest names in technology are comparatively old: Apple was founded in 1976, Intel in 1968, and IBM formed in 1911 by companies dating to the 1880s. AT&T has at least persisted as a brand, if not an entirely continuous corporate legal structure, since 1885. (The current company operating under the name is a separate legal entity, though also an RBOC spin-off of the original company.)
  - WalterBright 7y ago
    Nobody remembers RCA, once the biggest tech company in the world.
    - dredmorbius 7y ago
      I'd thought of adding a few cases in which disruption does or has happened. Changing regulatory environments is one. Tobacco, freon, lead paint, asbestos, and numerous other concerns are lo longer with us, or are vastly diminished. Changing fundamental technologies. Vacuum tube to transistor, transistor to IC. This is a classic Christensian Innovator's Dilemma: do I cannibalise my own existing product base, or wait for someone else to come along and do it for me? To an extent, RCA lost out as television and radio became electronic and flat. Labour outsourcing is another major driver, especially in labour-intensive activities. So long as the product can be moved, odds are good that the manufacture of it will be as well. Textiles, appliance manufacturing, auto manufacturing, electronics manufacturing (RCA again), and more. Patent expiry. RCA was itself formed as or in conjunction with a government-mandated patent pooling, one of several such instances. Reaching the end-run of some fundamental technological capability. Steelmaking, xerography, film-based imaging, instant film-based imaging, telegraphy, various other chemical-based processes, a whole slew of 1960s "-onics" and "-tron" firms, etc., have their day in the sun and then fade. Finding some service or capability and continuing to serve that by some ongoing set of means seems to be more durable. Long and slow carve-outs from underneath. Television and Internet are finishing the eviceration of print news which began in the 1950s. Television and radio are themselves being undermined by packet-switched, on-demand, streaming, and App-based alternatives. Lower cost and greater flexibility or ease of use (even for a manifestly worse product or experience) very often (though not always) wins. Getting hung up on quality is generally a Bad Move. Social, economic, political, and cultural changes can drive major shifts. Wars have been known to markedly delimit "before" and "after" phases, likewise economic turmoil. That the two not infrequently go hand in hand doesn't soften the impact but amplifies it. By mention in Google's Ngram database, RCA hit its peak about 1982. That corresponds to a few of the trends I've described: the 1980s recession, the Reagan Revolution, the beginning of mass-consumer microchip-based electronics (if not computers), a switch from broadcast to cable as a predominant television transmission mode, and the growing dominance of Japan, with lower labour costs and higher quality reputations, especially from Sony, JVC, Panasonic, and other brands, which were competing on their own home turf and with the benefit of the Japanese focus on a active and deliberate government roles in economic and business policy and activity. I didn't even realise that the company went defunct (acquired by GE) in 1986. https://books.google.com/ngrams/graph?content=RCA&year_start=1900&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2CRCA%3B%2Cc0 https://books.google.com/ngrams/graph?content=RCA&year_start... (Now to do some reading on the fall of RCA.)
sieabahlpark 7y ago
Obviously you can't enter a market at full scale if you can't bankroll it but you can certainly start small and build up. Complaining that it's too hard to enter is a defeatist mindset.

ttoinou 7y ago

Would you have examples? Starting SpaceX required far more capital than NASA?

coldtea 7y ago
SpaceX is mainly alive because NASA/government poured tons of money in it, so not exactly the best example: "As a company, their total contracts are worth $12 billion including commercial satellite launches as well as NASA and U.S. government missions. Of that total, $5.5 billion is from government contracts from NASA and the Air Force." Basically what could have been done (and was done, and reached the moon and built the space bus etc) on government money, is now paid to a private constructor to do (plus profits, minus the patents going to the state).
- TaylorAlexander 7y ago
  Indeed, SpaceX nearly went bankrupt in the early days because they couldn't get a contract until they successfully launched a rocket. That first contract after their first successful launch was from NASA.
  - fragmede 7y ago
    NASA didn't do that out of the goodness of their hearts though. Pound-for-pound (which, to orbit is pretty pricey), SpaceX was cheaper. Blue Origin, a different space corporation, was not even in consideration, but if they had something competitive, NASA would have considered their bid as well. (Tbc, Blue Origin isn't shooting for that market at all, so this is in no way a dig at them.)
    - Retric 7y ago
      Risk is a huge factor in costs. Adjust for risks and early SpaceX was more expensive than their competitors.
    - coldtea 7y ago
      >NASA didn't do that out of the goodness of their hearts though. Pound-for-pound (which, to orbit is pretty pricey), SpaceX was cheaper Well, that's how you do it: you mismanage a state organization to make development costlier, and then you give the project + profits to private industry pals... That's how many-a-privitizations have started...
- ttoinou 7y ago
  I knew that but I'm specifically asking about "starting a competitor often requires far more capital than the incumbents needed to reach their position", not where the money is coming from
  - coldtea 7y ago
    >I'm specifically asking about "starting a competitor often requires far more capital than the incumbents needed to reach their position" Well, isn't that self-evident? You can't beat Google or Amazon or Apple starting from the money Apple had at its times, or Amazon had when they started (adjust for inflation). They have tons of billions of cash at hand to stomp on you, tons of special deals, economies of scale, can buy the best talent undercutting you, have friends in government and media, have huge network systems of third parties, and so on.
    - ttoinou 7y ago
      Because you need to provide something different. "Pure" competition doesn't exists, all companies and products are different
      - fragmede 7y ago
        Yes that's exactly the point. The fiction under which corporations are granted their strange and powerful place in society, is that the invisible hand of the free market results in the best, floating to the top. Unfortunately, that invisible free hand is more imaginary than real, giving incumbents far more power than intended - assuming that you view pure competition as the ideal state, rather than a malignant state.
        Mirioron 7y ago
        But they have to be different - that's how things improve. If they were exactly the same then what difference does it make for the consumer which product they buy? They're identical.
TravisLS 7y ago
There are tons of examples of this. Basically any company with a real competitive advantage is very expensive to unseat once established. Try to unseat Amazon, Google, Facebook, or Apple with the capital that launched those companies.
- gridlockd 7y ago
  Google unseated Altavista and Yahoo, Facebook unseated MySpace and Friendster, each with less capital than its predecessor had available. It might seem inconceivable today that these giants could fall, but they absolutely can. Even if these giants don't fall, they can't just act as they wish, just because they have a dominant market position. They're kept in check by the fact that their products are easily replaced if they raise prices well beyond cost of replacement. As a result, they don't raise prices and the potential competition never emerges - which in terms of the social outcome is just about as good as active competition. There's an exception to this which the article mentions: Companies that sell themselves as "too big to fail" or "socially important" to gullible or corrupt politicians. The market can't fix this, only politics can.
  - booleandilemma 7y ago
    Isn’t it different though? A lot of people are reading your comment on an OS developed by Google, and mostly everyone they know is a user of Facebook, a company working on creating its own currency. Altavista, MySpace, and Friendster were never so powerful. They felt less like companies and more just like websites, if you know what I mean.
    - gridlockd 7y ago
      > Altavista, MySpace, and Friendster were never so powerful. They weren't that "powerful" because the web wasn't used as much. It took a while for us to adopt the digital lifestyle. Ultimately, they're just platforms though. Of course they have a lot of inertia, but user habits can change. Younger users in particular aren't engaging with Facebook that much anymore: https://www.theguardian.com/technology/2018/jun/01/facebook-teens-leaving-instagram-snapchat-study-user-numbers https://www.theguardian.com/technology/2018/jun/01/facebook-... > They felt less like companies and more just like websites, if you know what I mean. Google certainly has moved beyond being a website by creating many products. However, I feel that a lot of these products are rather crappy and wouldn't be competitive if they weren't given away. How dominant of a player can you really be, if you must give your product away for free? Most companies aren't in the business of giving away free stuff, so in that sense it is hard to compete. That's not necessarily a bad thing for the consumer though, they get all the free stuff after all.
dredmorbius 7y ago
Google / Alphabet have prove unable to displace telco / cable monopolies. Or, for that matter, Facebook's social networking monopoly, despite dumping billions into Google+. Since the 1920s, it's been virtually impossible to start a new consumer automobile company in the US, with several notable flameouts (Tucker and DeLorean notably). Tesla is a remarkable exception, though they are innovating on energy storage and traction. The aviation industry is similar. Likewise, banking. Despite ongoing consolidation and failures in Big N consulting firms, new entrants have not emerged in the space. What are now the Big Four had been the Big Eight as late as the 1990s. There are occasional cases of disruption. The emergence of discount retailers (Dayton, Kresge, and Wal-Mart, today Target, Kmart, and Walmart) all expanded greatly in the 1960s. I was stunned though to learn a few years ago that the Hudson's Bay Company still exists, and is the parent of Lord & Taylor and Saks Fifth Avenue, among others. It's also notable that some of the biggest names in technology are comparatively old: Apple was founded in 1976, Intel in 1968, and IBM formed in 1911 by companies dating to the 1880s. AT&T has at least persisted as a brand, if not an entirely continuous corporate legal structure, since 1885. (The current company operating under the name is a separate legal entity, though also an RBOC spin-off of the original company.)
- WalterBright 7y ago
  Nobody remembers RCA, once the biggest tech company in the world.
  - dredmorbius 7y ago
    I'd thought of adding a few cases in which disruption does or has happened. Changing regulatory environments is one. Tobacco, freon, lead paint, asbestos, and numerous other concerns are lo longer with us, or are vastly diminished. Changing fundamental technologies. Vacuum tube to transistor, transistor to IC. This is a classic Christensian Innovator's Dilemma: do I cannibalise my own existing product base, or wait for someone else to come along and do it for me? To an extent, RCA lost out as television and radio became electronic and flat. Labour outsourcing is another major driver, especially in labour-intensive activities. So long as the product can be moved, odds are good that the manufacture of it will be as well. Textiles, appliance manufacturing, auto manufacturing, electronics manufacturing (RCA again), and more. Patent expiry. RCA was itself formed as or in conjunction with a government-mandated patent pooling, one of several such instances. Reaching the end-run of some fundamental technological capability. Steelmaking, xerography, film-based imaging, instant film-based imaging, telegraphy, various other chemical-based processes, a whole slew of 1960s "-onics" and "-tron" firms, etc., have their day in the sun and then fade. Finding some service or capability and continuing to serve that by some ongoing set of means seems to be more durable. Long and slow carve-outs from underneath. Television and Internet are finishing the eviceration of print news which began in the 1950s. Television and radio are themselves being undermined by packet-switched, on-demand, streaming, and App-based alternatives. Lower cost and greater flexibility or ease of use (even for a manifestly worse product or experience) very often (though not always) wins. Getting hung up on quality is generally a Bad Move. Social, economic, political, and cultural changes can drive major shifts. Wars have been known to markedly delimit "before" and "after" phases, likewise economic turmoil. That the two not infrequently go hand in hand doesn't soften the impact but amplifies it. By mention in Google's Ngram database, RCA hit its peak about 1982. That corresponds to a few of the trends I've described: the 1980s recession, the Reagan Revolution, the beginning of mass-consumer microchip-based electronics (if not computers), a switch from broadcast to cable as a predominant television transmission mode, and the growing dominance of Japan, with lower labour costs and higher quality reputations, especially from Sony, JVC, Panasonic, and other brands, which were competing on their own home turf and with the benefit of the Japanese focus on a active and deliberate government roles in economic and business policy and activity. I didn't even realise that the company went defunct (acquired by GE) in 1986. https://books.google.com/ngrams/graph?content=RCA&year_start=1900&year_end=2000&corpus=15&smoothing=3&share=&direct_url=t1%3B%2CRCA%3B%2Cc0 https://books.google.com/ngrams/graph?content=RCA&year_start... (Now to do some reading on the fall of RCA.)

sieabahlpark 7y ago

Obviously you can't enter a market at full scale if you can't bankroll it but you can certainly start small and build up. Complaining that it's too hard to enter is a defeatist mindset.