4 ms·

I want to add that consumers are weak and voting with your wallet is often not possible in a constrained market, plus many consumers are stupid or "not rational

by Klinky 6y ago

I want to add that consumers are weak and voting with your wallet is often not possible in a constrained market, plus many consumers are stupid or "not rational" and make poor choices and are easily swayed by marketing. Obviously we don't want to remove all avenues for self determination, but I don't think adhoc regulation or relying on consumers to reign in global corporations who now have market caps greater than GDPs of large countries is an effective option. Finding good civil servants is difficult, but so is finding honest and effective businessmen who genuinely have consumer interest in mind.

dalbasal 6y ago
It's not about honest individuals, nor smart consummers. It's about structures. Trying to fix monopolies with regulators is like trying to fix monarchy with princes. Regulators harden market structures.
- Klinky 6y ago
  Trying to fix monopolies by allowing them to continue to exist results in the monopoly continuing to exist. How is this better? There is nothing in a "free market" that disallows a monopoly existing or continuing to exist forever, buying and extinguishing all competition in its wake. It is essentially the end game, ultimate vertical integration and market dominance. You might say some startup is going to "disrupt" these incumbents, until we reflect on all the cool products bought and extinguished by the FAANGs. Basically you're relying on the monopoly getting lazy and hoping there's enough interest and capital available to do battle, all the while consumers get reamed for who knows how long.
  - eru 6y ago
    Buying upstart competitors ensures that founders and VC are motivated to provide a steady stream of upstart competitors. Ultimate vertical integration has been tried as a fad on and off. But it did not endure. None of the FAANGs are all that vertically integrated. Apple doesn't even make their own hardware in-house, do they? (Foxconn makes most of the phones, don't they?) If the monopolists are reaping excess profits (or having high costs) there's an incentive for new market entrants to come and take a share of those profits. If the monopolists keep prices low enough that this doesn't happen, then consumers don't have too much to complain about, do they?
eru 6y ago
Well, at least the honest and effective businesspeople have a chance of going bankrupt when they screw up. And consumers typically can choose a different provider. You are right about constrained markets. Hence everything is conditional on my plea for opening markets. It can be hard to encourage new startups, especially in areas of the world or country with less of an established startup mentality; but it's generally much easier to encourage foreign companies to come, and to encourage companies from other industries to branch out. For the latter, see eg when Walmart tried to do retail banking in the US. (Obviously, the established US banks used the regulation-happy American authorities to thwart that desire.) For more happy endings, see the kinds of industries Amazon is getting involved in.
- Klinky 6y ago
  I am going to add given that revolving doors and golden parachutes much of the C-level experiences, actual consequence is often something that many of the highest paid people in the world evade with ease. You can drive a company in to the ground and/or sexually harass employees, and still walk off with millions of dollars. At least with public servants, their position can potentially be term limited and subjected to a vote. Constrained markets are not always or even regularly the fault of regulators. There may just be few options or only one option available, and the cost of entry to the market is extremely high. It's not just a matter of some plucky startup entering the market when the incumbent can bleed money for a a year or two to kill off any competition in that area, then jack up rates. You also have collusion issues, which often occurs in the oil industry and DRAM/flash memory markets, and even in places like pre-made ice markets. A startup may not just have to be better than the immediate competition, they may have to be better than an entire cartel set on destroying them, which is very difficult and anti-consumer. Imagine going up against Microsoft and Intel in the 90s, who literally had billions of dollars at their disposal to turn the market against you, and actively did so.
  - eru 6y ago
    I agree with you that relying on startups alone is not enough. Hence my heavy emphasis on foreign competition entering local markets; and of cross-industry competition. Like Walmart entering retail banking. Microsoft and Intel are excellent examples! They were eventually toppled in their dominance, but it took quite a few years. My argument is essentially that toppling Microsoft and Intel in about a decade is all we can hope for; and that it is enough. Adding extra regulation mostly just gives the guys with the more expensive lawyers and lobbyists more tools.

by Klinky 6y ago

dalbasal 6y ago

It's not about honest individuals, nor smart consummers. It's about structures. Trying to fix monopolies with regulators is like trying to fix monarchy with princes. Regulators harden market structures.

Klinky 6y ago
Trying to fix monopolies by allowing them to continue to exist results in the monopoly continuing to exist. How is this better? There is nothing in a "free market" that disallows a monopoly existing or continuing to exist forever, buying and extinguishing all competition in its wake. It is essentially the end game, ultimate vertical integration and market dominance. You might say some startup is going to "disrupt" these incumbents, until we reflect on all the cool products bought and extinguished by the FAANGs. Basically you're relying on the monopoly getting lazy and hoping there's enough interest and capital available to do battle, all the while consumers get reamed for who knows how long.
- eru 6y ago
  Buying upstart competitors ensures that founders and VC are motivated to provide a steady stream of upstart competitors. Ultimate vertical integration has been tried as a fad on and off. But it did not endure. None of the FAANGs are all that vertically integrated. Apple doesn't even make their own hardware in-house, do they? (Foxconn makes most of the phones, don't they?) If the monopolists are reaping excess profits (or having high costs) there's an incentive for new market entrants to come and take a share of those profits. If the monopolists keep prices low enough that this doesn't happen, then consumers don't have too much to complain about, do they?

eru 6y ago

Well, at least the honest and effective businesspeople have a chance of going bankrupt when they screw up. And consumers typically can choose a different provider. You are right about constrained markets. Hence everything is conditional on my plea for opening markets. It can be hard to encourage new startups, especially in areas of the world or country with less of an established startup mentality; but it's generally much easier to encourage foreign companies to come, and to encourage companies from other industries to branch out. For the latter, see eg when Walmart tried to do retail banking in the US. (Obviously, the established US banks used the regulation-happy American authorities to thwart that desire.) For more happy endings, see the kinds of industries Amazon is getting involved in.

Klinky 6y ago
I am going to add given that revolving doors and golden parachutes much of the C-level experiences, actual consequence is often something that many of the highest paid people in the world evade with ease. You can drive a company in to the ground and/or sexually harass employees, and still walk off with millions of dollars. At least with public servants, their position can potentially be term limited and subjected to a vote. Constrained markets are not always or even regularly the fault of regulators. There may just be few options or only one option available, and the cost of entry to the market is extremely high. It's not just a matter of some plucky startup entering the market when the incumbent can bleed money for a a year or two to kill off any competition in that area, then jack up rates. You also have collusion issues, which often occurs in the oil industry and DRAM/flash memory markets, and even in places like pre-made ice markets. A startup may not just have to be better than the immediate competition, they may have to be better than an entire cartel set on destroying them, which is very difficult and anti-consumer. Imagine going up against Microsoft and Intel in the 90s, who literally had billions of dollars at their disposal to turn the market against you, and actively did so.
- eru 6y ago
  I agree with you that relying on startups alone is not enough. Hence my heavy emphasis on foreign competition entering local markets; and of cross-industry competition. Like Walmart entering retail banking. Microsoft and Intel are excellent examples! They were eventually toppled in their dominance, but it took quite a few years. My argument is essentially that toppling Microsoft and Intel in about a decade is all we can hope for; and that it is enough. Adding extra regulation mostly just gives the guys with the more expensive lawyers and lobbyists more tools.