
Peter Thiel: Competition is for losers - foobarqux
http://online.wsj.com/articles/peter-thiel-competition-is-for-losers-1410535536?mod=WSJ_hp_RightTopStories
======
spindritf
He means a very particular type of monopolist

 _To an economist, every monopoly looks the same, whether it deviously
eliminates rivals, secures a license from the state or innovates its way to
the top. I 'm not interested in illegal bullies or government favorites: By
"monopoly," I mean the kind of company that is so good at what it does that no
other firm can offer a close substitute._

which is simillar to Robin Hanson's "manic" monopolist

 _One simple robust solution to the innovation problem would seem to be manic
monopolists: one aggressively-profit-maximizing firm per industry. Such a firm
would internalize the entire innovation problem within that industry, all the
way from designers to suppliers to producers to customers – it would have full
incentives to encourage all of those parties to put nearly the right amount
and type of efforts into innovation._

It's not about rent seeking, or some silly brand recognition narcissism, but
about being able to coordinate and do stuff that would be widely beneficial
but unprofitable for any of the participants on their own.

[http://www.overcomingbias.com/2014/04/rah-manic-
monopolists....](http://www.overcomingbias.com/2014/04/rah-manic-
monopolists.html)

~~~
roel_v
"He means a very particular type of monopolist"

That's a very kind way of interpreting what he's saying. I'd go as far as
saying 'he's redefine common terms to fit a peculiar theory that is nice,
simple and wrong".

It's mostly populist (to a certain crowd) pandering: a bit of controversy
(monopoly is good!), a bit of pseudo-intellectualism (look at me being all
academic and worldly!), and some 'please validate my prejudices' (patents bad,
government stupid, big business bad except for those I'd want to work for).

~~~
latj
The world needs fewer Peter Thiels and more Elon Musks; Fewer Steve Jobs and
more Woz's; Fewer Rupert Murdochs and more Pierre Omidyars. Fewer Bill Gates
and more
__someone_who_just_gives_their_wealth_in_cash_to_the_poor_and_in_the_end_probably_does_more_for_them_then_pushing_their_own_beliefs_regarding_educational_philosophy__.
More one term presidents, fewer wall street guys, oh and at least one less
Kanye West. Please.

------
mempko
This is the secret of capitalists. Monopoly for them, and market discipline
for everyone else.

"Actually, capitalism and competition are opposites"

This is why State capitalism or something like fascism to them is the ideal.
Any democracy is the most HORRIBLE thing.

Because after all, there are only a few capitalists, and then there is
everyone else...

~~~
anon808
Capitalism simply means assets are owned by individuals and operated for
profit. The implementation details depend on the individuals (and their
values). Nothing about capitalism says anyone or thing needs to be exploited,
cheated or monopolized.

~~~
mindcrime
Thank you for presenting a reasonable and realistic viewpoint. Too much
lately, anytime capitalism comes up on this site, we get a deluge of people
just spouting left'ish wing propaganda and disparaging capitalism and
capitalists.

~~~
anon808
I think the problem is that there are a lot of practicing capitalists that
also happen to be massive assholes. It's not the capitalism that's the
problem, it's the asshole part.

~~~
jleader
But the assholes insist that they're _required_ to be that way, by the rules
of capitalism, and almost no one seems to argue with them (except those
"spouting left'ish wing propaganda").

------
bjt
Thiel is playing fast and loose with the definition of profit here. While it's
true that "economic profit" will go to zero under perfect competition, that
only means that the company's accounting profit is the same as the discount
rate in the economy generally. It doesn't mean that there's zero accounting
profit on the company's books.

[http://www.investopedia.com/terms/e/economicprofit.asp](http://www.investopedia.com/terms/e/economicprofit.asp)

~~~
tim333
He's also playing fast and loose with the definition of monopoly.

Oxford dictionary: Monopoly - 1) The exclusive possession or control of the
supply of or trade in a commodity or service.

There is no way Google is a monopoly by that definition. Bing or any other
company can and do compete. Google dominates because they are better but that
is a very different thing.

~~~
anon808
Maybe you could say that google has a monopoly on high quality/relevant search
results?

~~~
marknadal
Again, you are mistaking "high quality" with consumer's "differing tastes".
See my reply to your In-N-Out comment.

------
bambax
> _All failed companies are the same: They failed to escape competition._

This is absurd; most failed companies didn't face any competition because they
didn't find a market; you can argue that they in some way failed to escape
competition from alternative products to their own, that a firm is in
competition with every other firm on the planet because they all fight for the
money of their customers, etc., but this is specious.

Failed companies failed to sell above cost, and most failed to sell at all.
Not much to do with competition.

~~~
buckbova
> This is absurd; most failed companies didn't face any competition because
> they didn't find a market

You are saying the majority of companies that fail produce a product with no
market?

I doubt that's the case. There is a market, however small and a product that
is similar or can be substituted for your product is still in direct
competition.

~~~
bambax
Yes, I may be exaggerating but that's what I'm saying; -- many restaurants
would still have no customers _even if they were the only restaurant in the
world_.

------
marknadal
Monopolies are indistinguishable from governments at the end of the day, as
they become the enforcement agency. And if capitalism, by definition, is an
economic and political system not controlled by a government, then Peter Thiel
is flat out wrong.

This quote by Thiel, in the article, contradicts his argument:

    
    
       'By "monopoly," I mean the kind of company that is so good at what it does that no other firm can offer a close substitute.'
    

Even the mere presence of "other firms" implies there is something to compare
against, and as a result, that comparison is the competitive nature of
capitalism. Maybe he needs to review his economic theories, but he is in the
wrong and inconsistent.

~~~
adventured
Monopolies are easily distinguishable, at all times, from governments because
they possess no legislative authority, no control over or enforcement of laws,
and no authority over the use of force.

It's an extraordinarily simple, and obvious, line of separation that nobody
could ever confuse in a free market economy with constitutional protections on
individual liberty.

~~~
marknadal
That assumes we do live in a free market economy and that our individual
liberties are protected by the constitution. However, it looks like from the
disclosures of people like Snowden, that that is not the case.

The line gets blurred when the government meddles in the affairs of businesses
(like wire tapping) and when businesses lobby enforcement laws into place.
Over time, as entropy increases, things may become hard to distinguish.

------
rayiner
It's ironic how much people in the technology industry rail against
monopolies, when you think how much of the fundamental technology we depend on
today was invented by monopolies.

Point 1. The world of technology as we know it today was invented at Xerox
PARC:
[http://en.wikipedia.org/wiki/PARC_(company)#Accomplishments](http://en.wikipedia.org/wiki/PARC_\(company\)#Accomplishments).
The GUI, Ethernet, OOP. What wasn't invented at Xerox was invented at AT&T
Bell Labs:
[http://en.wikipedia.org/wiki/Bell_Labs](http://en.wikipedia.org/wiki/Bell_Labs).
The transistor, major advances in semiconductors, UNIX, C.

Point 2. PARC existed on the back of Xerox's patent monopoly on copiers:
[http://en.wikipedia.org/wiki/Xerox#1970s](http://en.wikipedia.org/wiki/Xerox#1970s).
Bell Labs existed on the back of the AT&T telephone monopoly.

The government initiated action against both monopolies in the 1970's: forcing
Xerox to license its patent portfolio to Japanese competitors, and breaking up
AT&T. It's interesting to think about whether these actions were ultimately
good or bad for innovation.

~~~
foobarqux
I think your list overstates the contribution of the private sector in many of
those inventions. For example, the (semiconductor) transistor was patented
elsewhere before IBM invented the way to produce it. OOP existed before Xerox
Smalltalk.

And while C and UNIX are widely used I don't think they were extremely
innovative; they were instances of a class, not a new class itself.

Finally, it is not clear how much state support was given to these labs. At
least today, Xerox Parc gets 1/3 of its funding from the government.

~~~
rayiner
I don't think the involvement of the state negates the point. The U.S.
government is the ultimate monopolist: almost totally insulated from
competition. My suspicion is that the R&D sector in the U.S. has evolved into
a highly-suitable structure for invention: a broad mix of government subsidy,
large corporate monopolies, and small R&D firms.

~~~
foobarqux
If the argument is that companies start research labs because of excess
profits then that would be negated by the fact that those labs are largely
funded by the government.

And the government is clearly sui generis, you can't compare it to private
industry monopolies.

~~~
rayiner
I don't think either AT&T nor Xerox PARC were ever "largely funded" by the
government.

------
analog31
>>>>> The opposite of perfect competition is monopoly. Whereas a competitive
firm must sell at the market price, a monopoly owns its market, so it can set
its own prices. Since it has no competition, it produces at the quantity and
price combination that maximizes its profits.

This is missing an important detail: It still has to be a product that
somebody wants to pay for. Even a monopoly could have a zero or negative
profit.

>>>>> By "monopoly," I mean the kind of company that is so good at what it
does that no other firm can offer a close substitute.

i.e., the kind of company whose success can only be described thanks to
hindsight.

------
mindcrime
IMO, this is the most important bit in the article, and it also seems to be
the piece that everybody is overlooking:

 _So why are economists obsessed with competition as an ideal state? It is a
relic of history. Economists copied their mathematics from the work of 19th-
century physicists: They see individuals and businesses as interchangeable
atoms, not as unique creators. Their theories describe an equilibrium state of
perfect competition because that is what 's easy to model, not because it
represents the best of business._

Yes, exactly. Pretty much all classical / neo-classical economic thought is
rooted in the idea of equilibrium, but a strong case can be made that economic
systems are _not_ equilibrium systems. Eric Beinocker covers this ground very
thoroughly in _The Origin of Wealth_ [1]. I would personally recommend this
book to everyone interested in economics. Beinhocker and the other "complexity
economists" present a model of economic activity as an evolutionary system
with periods of punctuated equilibrium as opposed to a strict equilibrium
system.

[1]: [http://www.amazon.com/The-Origin-Wealth-Remaking-
Economics/d...](http://www.amazon.com/The-Origin-Wealth-Remaking-
Economics/dp/1422121038)

 _In business, equilibrium means stasis, and stasis means death. If your
industry is in a competitive equilibrium, the death of your business won 't
matter to the world; some other undifferentiated competitor will always be
ready to take your place._

Bingo. Yes, the "goal" is to achieve a "monopoly" but even if you do achieve
that, you don't get to set still and just collect limitless money for
perpetuity... because evolution will eventually deliver a competitor in one
form or another.

~~~
roel_v
"Their theories describe an equilibrium state of perfect competition because
that is what's easy to model, not because it represents the best of business."

I've had this debate dozens of times and strangely enough I find myself siding
with the economists on this one. Yes, the 'end state' of most economic
theories is equilibrium; that doesn't mean that all of a sudden everything in
economics is wrong. If your end state is equilibrium but you acknowledge that
at any moment in time you're converging towards equilibrium, but also that at
any moment in time your convergence function is different, then your theory
might still hold. This is then the point where I argue that a system dynamics
approach is the way to do that, but apart from that: I found the theory in the
article flimsy and arguing a straw man. No economist in the literature today
argues what Thiel apparently argues in the article (and book).

But probably that's just part of the spin to get people to buy the book.

~~~
waps
That sounds like a reasonable argument, but it's not the reason economists
side with the equilibrium theory.

They side with the equilibrium theory because if they didn't there wouldn't be
an economics science to speak of (or at least, very smart people fear there
wouldn't be). And because we don't want to lose the useful results (a cynic
would say : or the many jobs in that field), ... we'll just believe that idea
and ignore the many reasons to question it.

People don't realize just how much of science works like this. A lot of
ancient physics theories are in wide use (e.g. newtonian mechanics), because
of this. Architecture wouldn't exist if we had to run gravity simulations on
buildings according to relativity.

Lots of theories don't really exist. In theory we can calculate strengths of
materials. In practice we don't, because the theories used to do that get it
wrong too often. How do we "know" strength of materials ? Well we measure lots
of materials, and create a catalog.

In theory we should know why, say a vaccine, or a medication works. In
practice we only have "after-the-fact" explanations. Yes we know what aspirin
does, but we knew about aspirin long, long before we had any idea what it did.
What I mean is that if medicine didn't have it's double blind studies
following "let's just mix stuff together and see what works" methodology, we
wouldn't have medicine.

Climate science has several proofs against it, which don't necessarily prove
it wrong, of course, but when it comes right down to it : climate science
takes bad measurements from 300-400 years and extrapolates from that what will
happen over unseen timeframes with never-before-seen circumstances. Needless
to say, statistically, this is not sound reasoning. Also: climate science
simply does not use first principles. Why ? Because if you did that, there
wouldn't be any climate science. It ignores the incorrect use of statistics ?
Why ? Because if it didn't there wouldn't be a climate science field.

Even in the "pure" sciences this happens. Godel's treatment of logic is
effectively ignored, to an extent. Given the incompleteness theory, don't you
think, at an intuitive level, that logic just kind of has to be fundamentally
wrong ? If we picked the right theories, after all, we did so purely by
chance, and we've never really changed our minds since 2000 BC. Yet logic is
presented as the be-all-end-all truth that supersedes all other truth (examine
the history of that idea, and you'll soon conclude that this atttitude is a
component of Christianity, or rather something from Greek culture that got
incorporated into Christianity, spread with it, and the original belief in
logic died out, but don't ever tell a mathematician that).

You can even point to historical situations where people did this, and they
... turned out to be catastrophically wrong. I guess the basic problem is a
"local optimum". A given science gets to a point where it is no longer
possible to improve it on a fundamental level without destroying the entire
body of knowledge in that field, most of which is perfectly correct, or at
least useful. So it is not done (take the relativity fight, and before that
the black-body problem, take Godel, take ... Godel pretty much walked into a
room filled with the core of mathematicians of the age, and told them not just
that all of their theories to be presented there were wrong, but that the
field itself was fundamentally unverifiable (just short of "wrong", think
about it. It may be right, but you can never verify it. What are the chances
you've just randomly picked the correct theory ?). Needless to say, this
resulted in exactly the reception you'd expect them to give someone like
that).

------
cromwellian
Apple is a counter example. They have stiff competition, control a minority of
the market, but make more than all the other players combined.

~~~
prostoalex
It's not like they're not building a moat, with things like Facetime, iMessage
and AppStore, which exist only within Apple ecosystem.

Analogs of them exist outside of that ecosystem, but it's not like the apps
you've bought through iTunes AppStore will magically work on Windows Phone,
should you decide to switch.

~~~
cromwellian
I don't know anyone who cares one iota about Facetime. The AppStore is the
only real moat because you pay all that money and can't take the apps out of
the platform.

Facetime and iMessage can be replaced with any number of cross platform third
party alternatives, many of them better.

------
larrys
Thiel fails to mention that at the time that air travel was regulated airlines
did make money even though they weren't a monopoly and had competition.

[http://www.investopedia.com/stock-analysis/031714/why-
airlin...](http://www.investopedia.com/stock-analysis/031714/why-airlines-
arent-profitable-dal-ual-aal-luv-jblu.aspx)

"The landmark event in U.S. commercial aviation history – as important as the
incorporation of sound was to motion pictures, or the forward pass was to
football – was the Airline Deregulation Act of 1978. Prior to its passage, the
federal government set rates, fares and schedules, guaranteeing profitability
to each oligopolistic airline but doing its best to thwart innovation. "

So prior to about 1978 during certain stretches it was pretty good to be
operating an airline.

~~~
Spooky23
Thwart innovation?

The only true change had been low cost carriers, who can use their late entry
to the market to avoid things like collective bargaining and route networks.

So now we have a dreadful airline industry that only survives by grace of the
occasional direct investment by the government.

------
thrush
I think an implicit point that Thiel is trying to make is that there are
enough untapped opportunities out there that there is no point to compete. The
startup world is not a zero-sum game. We can all win.

~~~
analog31
True, but competing could be a successful short term strategy, if you can
identify a target who are burdened with excessive costs for some reason, or
can think of a cheaper way to make something.

~~~
thrush
I see what you mean, and this would probably be good for society (you are
supposedly replacing something with a better version). Granted if you could
identify a different undeveloped business, you may have more to gain
individually. Imagine there is company A pursuing market A', if company B
decides to pursue A', then A and B have to split the value of A'. Rather, B
can pursue B', and if |A'| ~ |B'|, then there could be more to gain by not
being competitive. If B(A') < |B'| then this still holds true (where B of A'
is a function of how much value of A' that B can realize). In the finite world
that we live in, there can only be so many A', B' or X', so this strategy may
eventually much more in favor of competition. What I believe Thiel has
identified is that we haven't reached that stage yet, or even that it's
improbable that we will ever reach that stage.

------
roffles
Is google is the king of search, how do other competitors (bing/yahoo) stay in
business and why do they want to try to fight google? Why don't they just
focus their efforts on something else?

~~~
rwmj
They barely do make money. Bing is heavily subsidised both financially by
Microsoft and by what remains of Microsoft's desktop monopoly. Yahoo is a lot
more than a search company, and hardly in the best of health.

Is anyone making significant money out of search (apart from Google)? Does
DDG?

As for why they would want to be in search. For Bing it seems highly
misguided. DDG probably would like to be even 1% as big as Google, so they
could sell adverts and make $billions.

~~~
mbesto
Yahoo doesn't "barely" make money. $1.3bn to be exact.[0] You're right, Bing
is subsidized, but it's not like their revenues are $0.

I appreciated your effort to add to the conversation, but "They barely do make
money." followed by "Is anyone making significant money out of search" doesn't
add much to the discussion.

[0][https://www.ventureharbour.com/visualising-size-google-
bing-...](https://www.ventureharbour.com/visualising-size-google-bing-yahoo/)

~~~
rwmj
That's 1/50th of what Google makes, from a broader range of products. Seems to
back up my point.

------
jacknews
Thiel is correct that capitalism is more about monopoly, rather than
competition, and of course the fact that innovative companies in newly
emerging markets have managed to obtain locks on natural monopolies (eg in
operating systems, telephone networks and so on) has led to huge success and
profits.

But he's completely wrong that this is a good thing, at least not for the
overall economy in the long term, as opposed to individual companies in the
short term. To extend his example, if the restaurant business were like search
engines, you'd have a choice of just a few big chains (maybe macdonalds, and
pizza hut) which would be on every street.

Direct competition is absolutely vital, because it drives innovation.
Innovation is how companies escape competition.

Companies should perhaps enjoy some limited "monopoly" over their innovations,
but they should not be allowed to milk them forever, and probably, for
example, the current patent system awards much too much and too long a
monopoly for much too little innovation.

Introducing, encouraging, or even mandating competition by splitting companies
up, is required in order to keep companies innovating, rather than dominating
and then exploiting, and it is one of government's most important functions,
sadly neglected in recent decades.

Of course VC fund managers like Thiel would like you to believe that
monopolies are good, since that's how they profit - invest upfront, and then
reap huge rewards based on monopoly valuations.

------
QuantumChaos
This article is shallow and misleading.

Economists do indeed have models of perfect competition, and perfect monopoly.
But these are not the only concepts that economics has. For example, the
market for pharmaceuticals is competitive ex ante, but monopolistic ex post.
Anyone can choose to put research into developing a drug. But having
discovered a particular drug, they have a monopoly over it.

Even though the monopoly is bad _ex post_ , the promise of a monopoly is
needed as an incentive to engage in productive activity _ex ante_. The same
applies even more to company's like Apple and Google who maintain their
monopoly by creating a unique product.

So the article is completely wrong when it says _" To an economist, every
monopoly looks the same, whether it deviously eliminates rivals, secures a
license from the state or innovates its way to the top. I'm not interested in
illegal bullies or government favorites"_

Every kind of monopoly looks the same _ex post_ , but monopolies achieved
through innovation and monopolies achieved through bribery or favoritism are
completely different _ex ante_. The first kind of monopoly incentivizes
inventing new things. The second kind incentivizes unproductive activity such
as bribery.

------
lalos
Basically, don't enter over saturated markets unless you offer something that
makes you different. Google did it offering relevant results for search, Apple
did with an iPhone that just works. The key of Thiel's reasoning is 'By
"monopoly," I mean the kind of company that is so good at what it does that no
other firm can offer a close substitute'.

~~~
anon808
Exactly. A company can have a monopoly on product quality, or manufacturing
efficiency, not necessarily a monopoly on a vague, conventional definition of
an industry. Another example is in-n-out burger. They don't have a monopoly on
hamburgers, but they do have a monopoly on their kind of hamburger (high
quality/freshness, low price at scale).

~~~
marknadal
You must not have had an In-N-Out burger, they hardly have high quality. I did
a blind taste test study on 23 participants, between McDonalds meat and In-N-
Out. There were no significant results - people were only able to identify the
correct meat 53% of the time (and it was McDonald's, not In-N-Out's,
indicating a slight preference towards McDonald's taste). Essentially, every
time you ordered a burger, you could flip a coin and you wouldn't notice the
difference in the meat.

This was a small sample size, but I want to expand it with a more
comprehensive study. Where most In-N-Out fans go wrong is that they compare a
$1 McDonalds Cheeseburger that has no lettuce or tomatoes, etc. with a $4 In-
N-Out burger that lots of garnish and Thousand Island Dressing. A more
"accurate" comparison would be between one of McDonald's Quarter-Pounders, of
similar price, and In-N-Out, but ultimately the dressing is going to cause the
divide... not the "high quality/freshness" of the burger.

------
elchief
Some random thoughts:

\- Economists don't like monopolies due to dead-weight loss. However there is
only dead-weight loss if the monopolist cannot price-discriminate. If they can
price-discriminate, it's simply of a transfer of wealth from
customers/employees/suppliers to shareholders. So there is some room to argue
against it on efficiency grounds (if they can't price-discriminate), and
definitely room to argue against on equality grounds (if you care about such
things).

\- Unregulated monopoly is the most profitable form of business. Abusive
monopolies are probably more profitable than nice ones. Abusive monopolies are
illegal (?). As a manager at a US public company, you are legally required to
maximize shareholder value, ie try to create an abusive monopoly, ie break the
law.

\- Monopolies are bad for everyone except the shareholders and probably
management

\- Oligopolies probably do more R&D than monopolies, as monopolies don't have
an incentive to spend money on research. Perfect competition leaves no profit
to spend on R&D

~~~
Tloewald
Perfect competition might assume R&D costs as an expense of doing business, so
your last point is highly debatable. In general, technological change changes
the boundary values within which economic analysis produces useful results, so
the best economics can do is tell you what impact a technological change might
have once that change is well-understood.

~~~
lazylizard
if the R&D were any good, then there won't be perfect information though...

------
graycat
So, Thiel is interested in monopolies:

"But the world we live in is dynamic: We can invent new and better things.
Creative monopolists give customers more choices by adding entirely new
categories of abundance to the world."

Okay, I'll try to understand this:

I'll go back to the Al Capone "A person can get much farther with a kind word
and a gun than with a kind word alone."

Well, with a VC firm an entrepreneur can get much farther with "new and better
things" and traction significant and growing rapidly than with "new and better
things" alone. Or, with the traction, a VC might just assume there are "new
and better things" in there somewhere?

------
pdonis
There's a bait and switch in this article. Thiel starts out arguing,correctly,
that monopolies can generally capture more of the value they create. But he
ends up arguing, incorrectly, that monopolies create more value. Why
incorrectly? Because his own opening paragraphs say otherwise: he says
airlines (competitive) create more value than Google (monopoly), although
Google captures far more value than the airlines.

------
dredmorbius
A fascinating line of markets and competition that I've only learned of
relatively recently, and is of interest in light of YC's first category in its
request for startups,[1] is the role of the Texas Railroad Commission in US
oil markets.

I first ran across a reference to this in a paper from the Federal Reserve
Bank of Philadelphia, written by Keith Sill, chief economist, "Macroeconomics
of Oil Shocks":

"From 1948 to 1972, the price of oil produced [that is: extracted] in the U.S.
was influenced by the production quotas set by the Texas Railroad Commission
(TRC). Each month, the TRC (and other state regulatory agencies like it) made
forecasts of petroleum demand for the upcoming month and set production quotas
to meet the forecasted demand."[2]

A more complete history occupies most of Chapter 13, "The Flood", of Daniel
Yergin's _The Prize: The epic quest for oil, money, and power_.[3]

The short version: in the 1920s, an early abundance of oil which was proving
hugely useful for automobiles and machinery looked to be iffy, until vast
deposits were found in Texas and Oaklahoma in 1930. But that created a new
problem: with no restrictions on drilling, oil prices collapsed to as little
as $0.13/bbl. Government production controls were prohibited by Texas state
law (lobbied for by independent oil producers), though they were permitted in
Oklahoma. A target of $1/bbl. was set but there was no way to enforce it.
Before this was resolved, Oklahoma's governor had mobilized the militia to
take control of its oil fields in August, 1931, Texas mobilized the National
Guard and Texas Rangers shortly after, an oil shutdown was enforced
stabilizing prices. With the Depression settling in across the U.S. (and in
the wake of the Teapot Dome scandal, itself over oil), Franklin Roosevelt
appointed Harold Ickes as Secretary of the Interior, and established a number
of measures including "certificates of clearance" for all oil shipments within
the US -- oil without certificates wasn't salable.

That regime remained in place until March of 1972, when peak oil extraction in
the US meant that limits were no longer necessary -- slack demand was now
being met through imports, not domestic production. Which left the U.S.
vulnerable to a foreign oil embargo, experienced in October of 1973.

There's a pretty strong argument to be made that stable oil prices, as the
base of the U.S. economy, had a great deal to do with uniform economic growth
in the post-WWII period, from 1945-1972. It's after that date that many of the
"modern" crises of economics have been felt: stagflation, offshoring, wage
stagnation, etc.

There have been better and worse times, but those have tended to be driven by
total global oil abundance (or shortages), with cheap oil beginning in the
mid-1980s through the late 1990s, with few exceptions (1990 and the first Gulf
War War notably).

But yes, a noncompetitive controlled market can be a good thing.

More:
[http://www.reddit.com/r/dredmorbius/comments/2akwjj/oil_and_...](http://www.reddit.com/r/dredmorbius/comments/2akwjj/oil_and_the_free_market_or_not_so_much/)

________________________________

Notes:

1\. [http://www.ycombinator.com/rfs/](http://www.ycombinator.com/rfs/)

2\. [http://www.phil.frb.org/research-and-
data/publications/busin...](http://www.phil.frb.org/research-and-
data/publications/business-review/2007/q1/br_q1-2007-3_oil-shocks.pdf)

3\.
[http://www.powells.com/biblio/7-9781439110126-9](http://www.powells.com/biblio/7-9781439110126-9)

~~~
cynicalkane
It's interesting that wage controls, price controls, using martial law to
seize assets, and paying large handouts to oil-owning capitalists can be spun
as a "good thing" if you can produce a handwavey, mostly unsupported
association between these policies and the good ol' days of America.

Waves of economic thinking tend to coincide with one crisis and go out of
fashion with the next crisis. Most economic policies that were once popular
can thusly be blamed for "uniform economic growth" in a chosen period.

~~~
waps
What truly amazes me is that the US actually stopped doing it.

> That regime remained in place until March of 1972, when peak oil extraction
> in the US meant that limits were no longer necessary --

I come from Europe, where tons and tons of regulation is no longer necessary,
but has somehow transformed into yet another tax. Oil price controls were
introduced in Europe as well, but they somehow transformed from a bottom under
prices, into a 40%+ tax on gasoline.

~~~
dredmorbius
And that tax has served Europe very well.

It's diverted monies which would have gone to oil companies (and states),
allowed for infrastructure investments, and hugely increased energy
efficiency, particularly in transportation.

------
ekm2
Imagine if Mark Zuckerberg would have heard this advice and been convinced
that there was no point in competing with MySpace..

~~~
dredmorbius
But he _wasn 't_ competing with MySpace. Not when he started The Face Book at
Harvard.

Nor when he expanded that out over numerous other Ivys and Stanford, then
additional selective universities.

It wasn't until he'd created an existing, high-quality, attractive userbase,
of interest to both advertisers and the general public, that he was competing
with MySpace.

Sometimes the monopoly is in where you define your market.

Amazon took a similar tack, first going after book sales (an excellent market
for online commerce), then a broader set of markets.

~~~
staunch
Like Thiel, you're attempting to redefine the word competition. Facebook
destroyed MySpace by competing with them. They competed by offering a superior
service that attracted customers away. Amazon competed with book stores by
offering a superior service.

They competed by innovating but that doesn't change the fact that they had to
compete.

~~~
dredmorbius
Facebook _also_ incubated itself for a time in a space that MySpace didn't
effectively own or control.

See Ha-Joon Chang's _Bad Samaritans: The Myth of Free Trade and the Secret
History of Capitalism_ for more on this.

"Chang blasts holes in the “World I s Flat” orthodoxy of T homas Friedman and
other liberal economists who argue that only unfettered capitalism and wide-
open international trade can lift struggling nations out of poverty. On the
contrary, Chang shows, todays economic superpowers—from the U .S. to Britain
to his native Korea—all attained prosperity by shameless protectionism and
government intervention in industry."

[http://www.powells.com/biblio/2-9781596915985-8](http://www.powells.com/biblio/2-9781596915985-8)

Similar principles can be applied in business.

------
mullingitover
This is true of sports as well. True competition in sports is a lose-lose for
teams--if teams don't compete, they can coordinate to maximize their gambling
winnings, and everyone comes out ahead (except for fans, just as lack of
competition in business makes consumers the loser).

~~~
Double_Cast
This sort of reminds me of professional wrestling.

[0]
[https://en.wikipedia.org/wiki/Kayfabe](https://en.wikipedia.org/wiki/Kayfabe)

------
hyp0
Monopolists can afford R&D, without demanding products or papers. eg Xerox
PARC labs, AT&T labs

Today we have Microsoft Research and Google of course is funding lots of stuff
that it's not really making money from.

------
jokoon
it's true that patents create monopolies, but I don't think they're explicitly
designed for that.

Aren't patents there to allow a company to have a temporary monopoly, to
benefit from its invention, which expires the day the patent expire ?

------
known
Monopoly leads to Hegemony

------
lazylizard
so he's a joseph schumpeter fan!

------
glibgil
Cicada

------
notastartup
How do I create a monopoly with SaaS when we are constantly looking to
undercut each other?

~~~
lazylizard
undercut all of them out of business. now you're a honest to goodness
monopoly.

[http://dailycaller.com/2011/05/13/vindicating-standard-
oil-1...](http://dailycaller.com/2011/05/13/vindicating-standard-
oil-100-years-later/)

~~~
notastartup
can we say a SaaS is a commodity business? Amazing history, I am blown away by
Standard Oil, although I wonder if the same principles apply, continue to
innovate and keep prices low.

------
michaelochurch
True.

I wonder if he realizes that he just made an argument for professionalization
(or, worse, unionization) of software engineers. My guess is that he'd not
like that can of worms. But it's open.

Doing typical corporate programming, the stuff that any CommodityJavaDrone can
do, _is_ for losers. I'm not sure that _managing_ that kind of work (which is
the only way to make money in that world) is less loser-like.

Right now, the less-savvy (or cornered) programmers do what their bosses ask
them to do. The savvy programmers chase high-quality experience, read esoteric
papers on company time, and only seriously work on the 10% of in-company
projects that will help their careers.

This arrangement is anarchic but there are always enough people who are
cornered (family/financial pressures) and can be pushed into taking the less-
savvy path and doing what they're told. And the personal-brand-definers have
more fun and may get promoted faster early on, or get to strike out as
consultants, but they're unlikely to get seriously rich (500k+) as they would
if, you know, programmers were actually paid what they're worth. So the VCs
and corporate executives and (to a lesser degree) software managers still make
out like bandits.

What if that changed, though? What if programmers collectively realized that
we had allowed ourselves to be commoditized and were overcompeting and losing
all over the place?

Since I've been grappling with this issue for years, here's some further
reading from my blog:

[1] What’s a mid-career software engineer actually worth? Try $779,000 per
year as a lower bound. (
[http://michaelochurch.wordpress.com/2014/05/24/whats-a-
mid-c...](http://michaelochurch.wordpress.com/2014/05/24/whats-a-mid-career-
software-engineer-actually-worth-try-779000-per-year-as-a-lower-bound/) )

[2] Why programmers can't make any money: dimensionality and the Eternal
Haskell Tax. ( [http://michaelochurch.wordpress.com/2014/06/06/why-
programme...](http://michaelochurch.wordpress.com/2014/06/06/why-programmers-
cant-make-any-money-dimensionality-and-the-eternal-haskell-tax/) )

[3] Programmer autonomy is a $1 trillion issue. (
[http://michaelochurch.wordpress.com/2012/11/25/programmer-
au...](http://michaelochurch.wordpress.com/2012/11/25/programmer-autonomy-
is-a-1-trillion-issue/) )

[4] How the Other Half Works: An Adventure in the Low Status of Software
Engineers. ( [http://michaelochurch.wordpress.com/2014/07/13/how-the-
other...](http://michaelochurch.wordpress.com/2014/07/13/how-the-other-half-
works-an-adventure-in-the-low-status-of-software-engineers/) )

~~~
S4M
Can you explain what Thiel's article has to do with professionalizaton or
unionizaton of software engineers? Thiel's thesis here is that you need to
innovate to hold an at least temporary monopoly on something (you have the
monopoly because you're the only one in the market yet), it has nothing to do
with what you mention.

~~~
kyllo
Selling one's labor as an individual is competition, which Thiel says is "for
losers." Unionizing and practicing collective bargaining is effectively
forming a monopoly in the market for a particular type of labor--at least if
you can get a critical mass of workers to join your union.

------
3rd3
Off-topic: Why do these kind of websites always have a stock price next to
brand names? Is this useful Information? It looks a little bit scammy.

~~~
anthony_franco
Many times the articles reference some new, meaningful information about the
respective company and seeing the change in stock price adds merit to the
story.

~~~
SapphireSun
I don't know. Usually when I see this UI widget I think "correlation and
causation" over and over. It's the rare story that definitively causes or
reports on other news that causes a significant change in price. In a
prestigious newspaper, showing the price inline with the article devalues the
content. It emphasizes the "what's in it for me" angle rather than speaking to
considered learning. If I were the designer, I'd rather include those metrics
at the end of the article with more context and graphs (though I have a
feeling this was carefully A/B tested).

What's more is that even a few hours to a few days after a story is released,
the stock price no longer has any relevance to the story since the widgets are
not pegged to that point in time.

------
DominikR
His comparison of Googles high margins to those of a monopoly seems wrong to
me, because Google doesn't actually set any prices for advertisement.

Its customers set those prices by bidding on keywords. Not the other way
around.

------
oscargrouch
Moral of story: Make some billions and say any shit you want, newspaper will
create articles of whatever you say and people will think you are some kind of
a genius

Modern society is a funny thing

~~~
thesteamboat
This has been known for some time:

> And it won't make one bit of difference if I answer right or wrong.

> When you're rich, they think you really know!

\- If I Were a Rich Man, from Fiddler on the Roof

[http://www.youtube.com/watch?v=Pl7BVr36bbs#t=225](http://www.youtube.com/watch?v=Pl7BVr36bbs#t=225)

