
The Creative Monopoly - llambda
http://nytimes.com/2012/04/24/opinion/brooks-the-creative-monopoly.html?_r=1
======
spodek
"Thiel argues, we often shouldn’t seek to be really good competitors. We
should seek to be really good monopolists."

A better way to put this is to say that the starting point of competitive
strategy is to start with a _sustainable competitive advantage._ "Competition
Demystified" by value investing guru Bruce Greenwald covers this point in its
first chapter (available free on Google Books --
[http://books.google.com/books?id=NZYuAyW8M-sC&printsec=f...](http://books.google.com/books?id=NZYuAyW8M-sC&printsec=frontcover&source=gbs_atb#v=onepage&q&f=false)
and summarized by me in a series on political strategy, where the concept also
applies -- <http://joshuaspodek.com/north-korea-strategy-primer-strategy> and
with an important diagram here -- <http://joshuaspodek.com/the-first-step-in-
strategy>)

Finding a sustainable competitive advantage doesn't require creativity, so
Brooks's essay went astray at that point. But having a sustainable competitive
advantage gives you the local monopoly he alludes to that allows you to avoid
competing and, in business, charge higher margins without getting stuck
competing on price and efficiency.

I highly recommend "Competition Demystified" to understand strategy.

~~~
adgar
> sustainable competitive advantage

I think this is what so many commenters struggle with when it comes to "the
bubble" so many of us speak of now. We see so many companies' births and
deaths without ever having seen a clear "sustainable competitive advantage"
and wonder why these companies existed in the first place.

~~~
ryannielsen
Well, from one perspective, each of these failed companies could have been
testing their own "sustainable competitive advantage" thesis. A thesis that
turned out to be incorrect. After all, you don't know your sustainable
competitive advantage really is in fact sustainable and and a competitive
advantage until you win. (e.g. Google. They were just another search company,
and one that could have failed like so many others.)

From another perspective, each of these companies is wandering through, as the
author puts it, the "wildernesses nobody knows" looking for opportunities and
either didn't find one or weren't able to grow that opportunity quickly
enough.

Some say we're in a bubble. Others say we aren't. Frankly, I don't give a
damn. I just see that there's tons of innovation being funded. Some
innovations may be evolutionary, others may be revolutionary. Funny thing is:
you often don't know what will be evolutionary or revolutionary until you try.

I'm glad many people are trying.

~~~
adgar
I'm sorry, I feel I came across as making a broader point than I was. Probably
because of the "birth and death" bit which really isn't what I meant to focus
on.

I'm talking about a few specific examples that are astonishingly easy to clone
yet are being assigned enormous value. Groupon is what I was thinking of
especially, but I didn't want to "name names"... which is probably why I came
across as making a broad point. Dropbox is now being challenged in this way,
and many have been talking a lot about their sustainable competitive advantage
since the whole Steve Jobs "feature" quote. Instagram.

I wasn't making a direct comment about tech startups in general, many of which
are carving out real markets they want to crush.

------
knowtheory
What an _awful_ way to phrase a simple concept.

Rather than compete in someone else's market, create your own market.
Manufacture, or identify a need that has not been met, and, having been first
mover, use that to build an insurmountable lead over any possible competitors.

Whether it's mint toothpaste, or portable digital music players, this has been
done for generations.

"Creative Monopoly" is a bizarre term for it.

~~~
derekorgan
I agree it is a strange term.

I do think however the article is well written and quite insightful based of
course on Peter Thiel's ideas.

Inovation always wins, those that focus on just competing will lose. A country
has to foster inovation. the countries that innovate in education could be the
big winners.

To be fare to the US, some of there big colleges do that, but it does seem at
the grass roots of the system it needs change and that applies to a lot of
countries.

~~~
meric
Product differentiation is in every first year university marketing textbook.
As much as those textbooks try to use as many words as possible to describe a
simple concept, their description of product differentiation is likely to be
much shorter than the one in this article.

MBA's might not be good hires in a $100,000 startup, but they know more than
we think.

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nadam
I had the luck to understand this very early (being 17 years old). I've gone
to math and physics competitions, and while I had good results I could see
that there are the top level guys who are above my level: there is no point in
directly competing with them. So I thought I should do something different and
I became a programmer. Nowadays I also see this in programming. There are
markets where competition amongst smart people is too high. Too much smart
people want to work for the most famous companies, too much smart people
create programming languages and frameworks, too much smart people want to
start their indie game studios, too much extremely smart people wanted to win
the Netflix prize... While I love these topics, so I sometimes compete in
these very competitive markets, I know that it is/(would be) wiser to do
someting different where competition/(expected value) ratio is not so high.

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HSO
Wired's fake McLuhan interview from many moons ago:

 _What's your take on media juggernauts like Microsoft? Should it be allowed
to stranglehold electronic media?_

 _We fear that the owners of the monopoly will crush us, but this never
happens. In a flash, the monopolist's products appear out of date, and
competition in that particular industry becomes irrelevant because the whole
basis of moneymaking has shifted to a new area. As the pace of technological
change speeds up, shifts in economic power increasingly seem like magical
flipflops produced by luck. The old logic of monopoly - centralized
stranglehold - no longer works. The attention of consumers can shift instantly
and make the most profound investments obsolete in just a few years, soon to
be sped up even further. We will see economic empires crash within hours, and
new ones arise just as quickly. _The task of the economic manager now is to
try to hold monopolies in place just long enough for economic transactions to
occur._ The capitalist understands that to improve competition, he must
encourage monopolies._

    
    
      http://www.wired.com/wired/archive/4.01/channeling_pr.html

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maukdaddy
What he's talking about has already been written about and is taught in many
MBA programs.

Blue Ocean Strategy

<http://en.wikipedia.org/wiki/Blue_Ocean_Strategy>

Edit for the tl;dr crowd:

The blue ocean strategy is about creating your own market/niche/space in an
new or uncontested area (blue ocean) vs. competing directly with established
players in an existing market (red ocean).

The metaphor is the red ocean is full of blood from the sharks fighting over
the same profits/market share while the blue ocean is open water full of
opportunity.

------
hxa7241
This is bizarre. Not for wrongness -- but because it is baffling that what is
right about it should not be obvious and taken for granted.

Business is always, and _has_ always been, about _avoiding_ competition. One
can start by recalling Adam Smith's comment on any gathering of industrialists
inevitably leading to conspiracy against the public. Then simply look at what
any business does or tries to do, legal or otherwise -- what is a patent, for
example?

Competition between business is supposed to be good for the _public_ , not the
competitors themselves -- hence business always wanting to avoid it.
Competition is, broadly, destructive. It is only worth it because of other
effects (spurring effort, creativity), and when it is limited and
substantially supported by other cooperative systems.

------
bennesvig
The central point theme of this piece (creation vs. competition) is the main
focus of "The Science of Getting Rich" by Wallace Wattles, if anyone is
interested.

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guelo
OK, so I should choose my battles, great. I thought this column had very
little insight or utility.

~~~
astral303
Sadly, that's typical David Brooks. Between Maureen Dowd and Brooks, I think
NY Times should be embarrassed.

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wslh
Both things are competition. One is competing with established rules while the
other is competing creating or changing the rules.

------
robatsu
Years ago, I worked briefly for The Southern Company, which is the largest
publicly held electric utility in the U.S (Georgia Power, Alabama Power, and a
bunch of other ones).

While there was certainly a lot of expertise in electric generation and
transmission there, it rapidly became apparent to me that their true core
competency was maintaining and exploiting their legal monopoly.

It wasn't a pretty sight.

~~~
meric
Sometimes governments resort to measures like legal monopolies to ensure
infrastructure gets built.

Imagine a cash-strapped government 50 years ago in an undeveloped country
wanting to build electricity infrastructure. The country's economic growth is
stagnating because of a lack of infrastructure and there are few foreign
investments because the country's economic growth is stagnating. If a foreign
company DID choose to invest in electricity, and the investment was
profitable, other foreign companies will jump in to compete; but if the
investment was unprofitable, the company would just have lost a large chunk of
cash. Therefore it was always more profitable to simply wait for another
company to make the investment, and then see if electricity will be a
profitable business in the country before making investment itself.

These catch-22's mean the government has little choice but to allow the first
foreign company a local monopoly, at least for a limited time.

I'm just theorising all this out of thin air, though.

~~~
robatsu
In the U.S., this legal electric company monopolies were more or less granted
w/the proviso of providing universal access, sort of the same goal.

The past 20 years, the electric companies are trying to wiggling out from
under this, turns out they really don't want to sell electricity to
residential users, in a lot of cases their big customers are subsidizing
residential users. That is why, despite the hype to the contrary, residential
electric rates usually go up under deregulation.

The typical electric company strategy the past 20 years is to try "surrender"
their monopoly in unprofitable areas w/a lot of happy talk about
competition/choice/consumer benefits and attempt to keep their monopoly in the
profitable areas (wholesale transmission, generation/cogeneration for large
consumers).

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davemel37
This article is backwards. As humans, we crave competition. As Humans we crave
to be unique. Same concept, two different ways of saying it.

Both mean, "We want to stand out. Be appreciated and recoginized."

We will always seek ways to stand out. Whether its through one upsmanship, or
through differentiation.

We see this in marketing. When you are first in a new category in peoples
minds. They consider you the best.

Everyone wants to be considered the best. Its up to you how you get there.

