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> "It’s a more interesting question to ask if this would be more economically efficient." it's almost self-evident that it would be more efficient. the more in
by clairity 5y ago
> "It’s a more interesting question to ask if this would be more economically efficient."
it's almost self-evident that it would be more efficient. the more interesting questions are how and why. fair and efficient markets at steady-state would largely be composed of a few medium-sized companies and a bunch of small companies, with new entrants occasionally. that would enable healthy competition that would drive progress while keeping chaotic upheavals mostly at bay. it would also distribute wealth more widely, which means we'd get more diverse ingenuity and more interesting entrepreneurship, rather than having the capable simply stowing away at large companies taking their safe and boring little toll on the income river.
- Retric 5y agoI don’t think it’s clear because economies of scale do exist. Honda can simply spend more on R&D than a company 1/10th it’s size. Large companies definitely have their own issues, but there isn’t some clear maximum size where companies universally become less efficient at say 1,000 employees. It’s more a question of management overhead and flexibility etc.
- clairity 5y agoeconomies of scale taper off because other effects (like coordination problems) tend to overwhelm it with scale. also, capital becomes less efficient at scale due to opportunity costs and the innovator’s dilemma, for instance. there are many more reasons why economies of scale aren’t the be all and end all of market economics.
- Retric 5y agoI agree, my point was it depends on industry. You can’t build a modern Fab for a 100 million it simply takes billions to be competitive. Further, you need a pipeline of Fab’s to afford the R&D etc. At the other end a McDonalds franchise can be as profitable as their corporate restaurants.
- clairity 5y agothere's no intrinsic reason a capital-intensive industry can only be winner-take-all. capital-intensiveness is primarily a financing issue, and assuming capital finance has been corralled into being a competitive market, it isn't a particularly insurmountable problem. tokyo public transportation is an example of a capital-intensive market that still has competitive dynamics.
- Retric 5y agoIt’s not just about capital, my point was the benchmarks where different between industries. You can scale a soda bottling plant in the way you can’t scale a single sit down a restaurant simply because you can ship soda hundreds of miles without issue. Fab’s are built at such scale in part because finished chips are really easy to ship being both durable and value dense. They also benefit from that scale because of the nature of the lithography process which has many individual steps which need to be done in the same factory, but each step is very fast and operates on a full wafer at the same time. Millions of chips per year is basically the minimum scale that’s in any way reasonable.
- clairity 5y agosure, the scales of various industries can be very different, but that doesn't imply that economies of scale (or other economies, like scope) will necessarily dictate winner-take-all dynamics in any of them.
- Retric 5y agoA competitive market sure, but you can’t have 100+ competitive and independent companies running Fab’s worldwide while you can have literally 100,000+ competitive farms, restaurants, etc. That’s a small enough pool that individual failures starts to seriously consolidate the market. It’s already down to a handful of companies that can currently manufacture modern chips and if anything that number is likely to shrink rather than grow.