4 ms·

* You have to have a monopoly in the other sector for it run afoul. Many companies enter new segments by loss leading taking profits from their established non-

* You have to have a monopoly in the other sector for it run afoul. Many companies enter new segments by loss leading taking profits from their established non-monopoly business to subsidize their growth in another segment. That’s not illegal in the least and is extremely wide spread. In fact the opposite in this situation is true. The EV market is extremely competitive but the supercharger market is dominated by Tesla. The fact they’re opening it up for use by competitors in EV means they’re not leveraging their supercharger hegemony to kill off EV competitors. * “the internet” isn’t a single market segment. There are a lot of monopolies though, and I would point you to the ongoing antitrust lawsuits. * you can’t proactively take someone for violating a law in the future to court. Yes they’ll likely be standard oil given how things are playing out. But they are not now. They would rightfully complain they’re being punished for future behavior that they may not do, and there may very well be a large competitor that springs up along the way. The market is too new and the government doesn’t generally interfere in market dynamics in nascent markets; and they definitely don’t punish you for something that might happen in the future. It’s not minority report - you actually have to commit a crime to be legally culpable for committing a crime. * there are lots of laws about pricing. But in a competitive market companies are allowed to loss lead. But to your point there a lot of ways that can happen that’s structurally unfair. Using one monopoly to predate in another market is potentially illegal. Competing on price in multiple competitive markets is not. And it shouldn’t be, because that’s almost always how companies break into new markets and gain market share against established competitors. I’d note regardless in this situation I will wager they do have an enormous cost advantage over everyone without loss leading. They have a scaled industrialized operation that generates revenues. No one else does.

vlovich123 3y ago
> Many companies enter new segments by loss leading taking profits from their established non-monopoly business to subsidize their growth in another segment. That’s not illegal in the least and is extremely wide spread Again, you’re arguing that something is legal when I’m saying the law should be changed. There’s no economically beneficial reason to allow anyone to loss lead by taking profits from one space and using it to capture market share in another, regardless whether you’re a monopoly to start with or not. That’s literally one of the well established mechanisms for a monopoly to start with. And once they get entrenched, they repeat that pattern to protect themselves from competitors, lowering the price until new entrants leave. There’s cases where loss leaders I’m more OK with, but that’s usually around when you’re selling multiple “fungible” items and you have a loss leader on one to drive traffic & it’s not the manufacturer of the item giving you a deal to make it a loss leader. Think grocery chains, outlets, etc. > you can’t proactively take someone for violating a law in the future to court No where did I propose this. All I suggested is that there’s enforced regulations to make sure that Tesla is behaving here in a way that won’t result in needing an anti trust case in the future. Microsoft’s anti trust lawsuit went nowhere. Sure it’s not as entrentched, but if they hadn’t built their monopoly position in the first place & stuffed their coffers, they wouldn’t have been able to survive the massively bad decisions they kept making for a decade or more. You seem to be taking on faith here that this is purely because Tesla has leveraged vertical integration to get a 5x savings cost. I’m skeptical though - if that were the case they wouldn’t need to be going after government bids for charger networks in the first place & could undercut on price. There’s just no way vertical integration in the car manufacturing space is yielding such impressive dividends in the charge manufacturing / operating space.
- fnordpiglet 3y ago
  I think the key is I think the law is largely well thought out in this space if often poorly implemented. There is a balance between exerting control over markets and letting markets run rough shod over us. Not every practice that’s distasteful need be controlled nor every whim fulfilled. Loss leading is a way for monopolies to be broken too - imagine a world where Tesla is well established with super chargers everywhere and has become complacent. It’s fat and inefficient, doesn’t use the best tech anymore, and rests on its market dominance. Startups just get crushed under foot. You could do some sort of antitrust thing then but that doesn’t ensure competitiveness. See Netscape vs MSFT, the action was way too late to be effective. It wasn’t until another adjacent company with a huge war chest loss led their way into the browser market that internet explorers illegally monopoly was actually broken up. So in the Tesla case, imagine now CATL sees an opportunity to leverage their battery dominance to enter the charger network business. If they don’t loss lead they face insurmountable penetration challenges even with superior technology that integrates better with their batteries. The capital and operational overhang is too great to immediately be profitable with a starting from 0% market share. The margins would have to start at infinity and work down as share grows to not loss lead. No one would pay a near infinite amount of money to charge their car. So A way to gain market share quickly would be to subsidize the bootstrap of their market share by pricing way under the cost covering margin required, and probably one that’s much lower than Tesla and is more in line with their at scale margin in the future if they’re successful. Is that fair? Maybe not in some very strict sense of the word. Does the same technique work in less established markets? Absolutely. What do you think startups are doing with VC money? Are the financiers of startups adorable small business owners trying to make it in a tough world of hard nosed business so deserve special carve outs? Because they’re the ones subsidizing the loss leading startups do to establish themselves. The startups are just the workers, the capital is coming from ugly megawealthy folks with near monopolistic control over capital deciding who wins and loses, seeking to create more and more monopolies from the winnings of their prior monopolies. Edit: on Tesla’s efficiencies I actually wouldn’t be too surprised if their relative cost covering margin is closer to 5x than not. However, expansion requires enormous capital investment and charging networks even at maximized margins can’t compare to return on investment to car sales. It’s an enabler for car sales scale, and a rising tide for EV lifts all boats. Every car maker wants to sell cars before charging services for that reason. So if they have $10 of capital for car making or $10 for charging infrastructure the cars get the money. So why does Tesla want the government to subsidize capital investment? Because they would rather deploy their earned and fundraising capital on their core business. The government wants the infrastructure and frankly other car makers want it too. Tesla takes operational risk, covers a non trivial amount of the capital commitment, and everyone gets the charger infrastructure we need in the present. The optimization of the competitive market would come later - once there’s a market to optimize. Frankly at a certain point Tesla would almost certainly spin off their charger network as it become a commodity and a capital distraction. Other car makers might compete then when their margins in cars are saturated, but I would put my money on gas station chains and oil companies deciding to get out of the age of fire and getting with fundamental forces and maxwells equations.

vlovich123 3y ago

> Many companies enter new segments by loss leading taking profits from their established non-monopoly business to subsidize their growth in another segment. That’s not illegal in the least and is extremely wide spread Again, you’re arguing that something is legal when I’m saying the law should be changed. There’s no economically beneficial reason to allow anyone to loss lead by taking profits from one space and using it to capture market share in another, regardless whether you’re a monopoly to start with or not. That’s literally one of the well established mechanisms for a monopoly to start with. And once they get entrenched, they repeat that pattern to protect themselves from competitors, lowering the price until new entrants leave. There’s cases where loss leaders I’m more OK with, but that’s usually around when you’re selling multiple “fungible” items and you have a loss leader on one to drive traffic & it’s not the manufacturer of the item giving you a deal to make it a loss leader. Think grocery chains, outlets, etc. > you can’t proactively take someone for violating a law in the future to court No where did I propose this. All I suggested is that there’s enforced regulations to make sure that Tesla is behaving here in a way that won’t result in needing an anti trust case in the future. Microsoft’s anti trust lawsuit went nowhere. Sure it’s not as entrentched, but if they hadn’t built their monopoly position in the first place & stuffed their coffers, they wouldn’t have been able to survive the massively bad decisions they kept making for a decade or more. You seem to be taking on faith here that this is purely because Tesla has leveraged vertical integration to get a 5x savings cost. I’m skeptical though - if that were the case they wouldn’t need to be going after government bids for charger networks in the first place & could undercut on price. There’s just no way vertical integration in the car manufacturing space is yielding such impressive dividends in the charge manufacturing / operating space.

fnordpiglet 3y ago
I think the key is I think the law is largely well thought out in this space if often poorly implemented. There is a balance between exerting control over markets and letting markets run rough shod over us. Not every practice that’s distasteful need be controlled nor every whim fulfilled. Loss leading is a way for monopolies to be broken too - imagine a world where Tesla is well established with super chargers everywhere and has become complacent. It’s fat and inefficient, doesn’t use the best tech anymore, and rests on its market dominance. Startups just get crushed under foot. You could do some sort of antitrust thing then but that doesn’t ensure competitiveness. See Netscape vs MSFT, the action was way too late to be effective. It wasn’t until another adjacent company with a huge war chest loss led their way into the browser market that internet explorers illegally monopoly was actually broken up. So in the Tesla case, imagine now CATL sees an opportunity to leverage their battery dominance to enter the charger network business. If they don’t loss lead they face insurmountable penetration challenges even with superior technology that integrates better with their batteries. The capital and operational overhang is too great to immediately be profitable with a starting from 0% market share. The margins would have to start at infinity and work down as share grows to not loss lead. No one would pay a near infinite amount of money to charge their car. So A way to gain market share quickly would be to subsidize the bootstrap of their market share by pricing way under the cost covering margin required, and probably one that’s much lower than Tesla and is more in line with their at scale margin in the future if they’re successful. Is that fair? Maybe not in some very strict sense of the word. Does the same technique work in less established markets? Absolutely. What do you think startups are doing with VC money? Are the financiers of startups adorable small business owners trying to make it in a tough world of hard nosed business so deserve special carve outs? Because they’re the ones subsidizing the loss leading startups do to establish themselves. The startups are just the workers, the capital is coming from ugly megawealthy folks with near monopolistic control over capital deciding who wins and loses, seeking to create more and more monopolies from the winnings of their prior monopolies. Edit: on Tesla’s efficiencies I actually wouldn’t be too surprised if their relative cost covering margin is closer to 5x than not. However, expansion requires enormous capital investment and charging networks even at maximized margins can’t compare to return on investment to car sales. It’s an enabler for car sales scale, and a rising tide for EV lifts all boats. Every car maker wants to sell cars before charging services for that reason. So if they have $10 of capital for car making or $10 for charging infrastructure the cars get the money. So why does Tesla want the government to subsidize capital investment? Because they would rather deploy their earned and fundraising capital on their core business. The government wants the infrastructure and frankly other car makers want it too. Tesla takes operational risk, covers a non trivial amount of the capital commitment, and everyone gets the charger infrastructure we need in the present. The optimization of the competitive market would come later - once there’s a market to optimize. Frankly at a certain point Tesla would almost certainly spin off their charger network as it become a commodity and a capital distraction. Other car makers might compete then when their margins in cars are saturated, but I would put my money on gas station chains and oil companies deciding to get out of the age of fire and getting with fundamental forces and maxwells equations.