Saturday, September 6, 2014

Roger Parloff — Peter Thiel disagrees with you


Good article on Peter Thiel at Fortune, with video.
… devaluing competition is a central theme of Thiel’s new book. He asserts that “capitalism and competition are opposites,” because “under perfect competition, all profits get competed away.” He exhorts entrepreneurs to seek out monopolies, concluding, “All happy companies are different: Each one earns a monopoly by solving a unique problem. All failed companies are the same: They failed to escape competition.”
Absolutely. Capitalism is not about competition but competitive advantage.

To be successful as an entrepreneur in today's highly competitive environment, you either have to open up a new market, which is chancy and expensive, or else carve out a niche in an existing market that either invisible to competition or not really worth competing for since it is merely a niche that's not very scalable, making it relatively safe and inexpensive for the one who finds it to enter.

This is becoming more and more true as more and more the informal economy is being monetized and then corporatized. It's nearly impossible to compete against the big boyz that enjoy economies of scale and dominate entire industries. The old mom and pop stores have gone the way of the buggy-whip makers.

Another way is to develop a new product and then sell the company. I had an acquaintance who was an engineer for a large tech company. He proposed they develop and introduce a new product he had designed. They liked the idea and told him that they weren't really into startups but that they would fund him with venture capital and then buy the company when it grossing $250 million. He gladly took the deal.

But the article is about much more than this and is definitely worth a read to catch the flavor of where the next Andrew Carnegie and Steve Jobs are coming from.

Fortune
Peter Thiel disagrees with you
Roger Parloff

6 comments:

Matt Franko said...

right this is like all the pushback Tesla is getting for trying to "go direct" rather than work thru the dealers who are cutthroats... rsp,

Tom Hickey said...

Right, that's really an outrageous abuse of monopoly power created by government capture. It's not only economies of scale that works in favor of the big boyz but also artificial barriers to entry to protect the establishment.

Anonymous said...

In practice, most capitalist firms are monopolistic in orientation. They compete, but they compete to win. They attempt to outcompete all of their competitors, and ultimate victory consists in swallowing up 100% of the market share so that there are no competitors left.

If society decides its interests are best served by preventing the existence of such monopolies, then it has to step in from time to time to break up firms that have acquired too much market share. But they shouldn't confuse themselves by thinking that they are only justified in doing that if the firms are "bad" because they have engaged in an unethical kind of "monopolistic behavior" that is pathological or abnormal. They should simply accept the fact that sometimes it is necessary to step in and reorganize a market in which firms are all behaving normally.

Ignacio said...

That's why we live in oligarchies, capitalists buy out governments to dictate policy and laws so they can keep a 'competitive' edge over competing corporations.

Is also funny that 'capitalism' as we know it nowadays was born through the creation of modern states as a tool of the rising bourgeois class against the old order (and new aristocracy was born). That's why all this 'free market' propaganda has always been a delusion and a marketing trick of TPTB to keep the status quo.

NeilW said...

Everybody has forgotten why 'anti-trust' laws were introduced.

Government has to be the 'big man' in a society, or you get other people trying to be the 'big man'.

Which requires regular smack downs to keep people in their place.

If the elected government isn't in charge, then somebody else is.

Because there is always somebody in charge.

Ryan Harris said...
This comment has been removed by the author.