One of my personal projects that I never pushed forward is a blog "a monopoly a day" (under-titled "keeps the EU away"). The idea is that everyday, I want to show small-ish negative impact of a big tech monopoly, and explaining it. The goal is that the sheer recurrence is enough to convince people of the negative impact on innovation and societal growth big companies have.
(That's with a pretty broad definition of "monopoly", including "user-specific monopoly" like you get with android / ios, notions that I would also try to explain in said blog)
> I believe this one shows how a monopoly can prevent innovation. Blackberry with the Passport had a new form-factor. To make this phone worthwhile, it had to use a mainline OS. At the time, only Android with Google apps was available. However, Google rules back then couldn't allow this.
Would HNers be interested in such content? And in contributing to it? (my knowledge wrt monopolies is in my area of expertise, and let's just say I like being employable, so it's better if it doesn't look completely targetted)
This project would be interesting only to the extent it accurately showed the negative impact of monopolies.
Unfortunately, this subject area is full of strong emotions and opinions that make it hard for people to be objective.
For example the article you link says that Google and Blackberry worked jointly on the 1:1 format phone, and jointly decided to stop working on it. That hardly sounds like an abusive monopolist.
And sure, at that point Android was more popular than the BlackBerry OS. But this actually demonstrates healthy competition. I had a Blackberry for work (edit to clarify: running BlackBerry’s own OS and software), and so did all my coworkers. Blackberry was the dominant mobile platform once. Through complacency and poor decision-making, they stopped innovating and competing. And thus, allowed new products with zero installed base on day one to come in and take their market.
> Unfortunately, this subject area is full of strong emotions and opinions that make it hard for people to be objective.
I actually think it's not possible to be objective on that matter, hence it needs to be properly explained, to understand the limitations of one post (but the goal is to have many posts, so hopefully readers can reject the ones they feel is wrong)
> For example the article you link says that Google and Blackberry worked jointly on the 1:1 format phone, and jointly decided to stop working on it. That hardly sounds like an abusive monopolist.
Let's just say that I've seen a bit of first-hand, and a lot of second-hand of "Google working jointly with XXX", and in the vast majority, Google-side doesn't spend much engineering time on those issues. I completely agree this is not an objective point of view. This can hardly be proved, shown or explained, so I have no issue with you not taking my word for it. Hopefully if other people join this project, there might turn out /some/ people that you do trust?
> And sure, at that point Android was more popular than the BlackBerry OS. But this actually demonstrates healthy competition. I had a Blackberry for work, and so did all my coworkers. Blackberry was the dominant mobile platform once.
I wouldn't exactly call the replacement of BBOS by Android a "healthy competition", when the main reason Android won was that it was an OS completely free of charge, paid for by another recurring stream for the company. (I'm not saying Android was worse than BBOS, that I have no idea, )
> Through complacency and poor decision-making, they stopped innovating and competing. And thus, allowed new products with zero installed base on day one to come in and take their market.
The iPhone came out before Android, was more expensive than a Blackberry at first, but started taking share from RIM. It also caused the Android project at Google to reset (their initial phone was similar to a Blackberry before the iPhone launch).
RIM’s complacency and flat-footed response to the iPhone has been very well covered, and can be Googled. By the time they were trying to partner with Google, it was already too late for them. Android is not what killed the Blackberry.
Except this assumption that there can be only a few winners taking all and the rest end up "killed" is exactly what effective anti-trust would prevent. Imagine the possibility where Blackberry kept making devices that fit their niche of hardware keyboards, running Android, and selling them to their established customers.
The elephant in the room is the heavy natural monopoly on software compatibility/interoperability, and the above thought experiment only makes sense because Android is a purportedly open platform.
Effective tech anti-trust has to work around that and not merely police behavior aimed at restricting competition. Modern tech anti-trust should be focused around mandating open access to proprietary systems (for starters, anything a web user can do, a program running on the user's behalf should be able to do), and privacy legislation to make it so that customers have to be earned rather than everyone being treated as a data subject by default.
Not reset, reprioritize. Fred Vogelstein only talked to one source who was on the Android team for his book, and that source may have had their own agenda.
Other sources, such as Chet Haas's book, make it clear that what became the G1 was already on the roadmap. It was just prioritized.
Yes, I would like that. It's nice to have a place to record negative experiences in a way that might contribute to a positive outcome eventually. Some of the best (and most verboten) content will come, of course, from insiders.
One issue I foresee, similar to how local business groups inevitably get overwhelmed with real-estate agents, is that this venture will get overwhelmed with complaints against ISPs and other utilities.
If you haven't already looked at it, Canada is a great case study and cautionary tale in monopolies and their ills. Look at both our consumer ecosystem (pricing, variety, and service) a well as innovation and industry, and at every turn you will find an economy optimized for monopolies to accumulate money at the expense of regular people.
I’d like to encourage you to advance the project, but with perhaps less of an ideological “this will prove X” slant.
I think it would be very interesting to explore the boundaries of monopoly, and to look at cases where monopolies are probably a good thing.
For instance, trademarks are a monopoly, but I don’t think many of us want any company to be able to co-opt brand names. That seems pretty clear.
Getting less obvious, IP-protected interfaces like GoPro mounts or those dumb Kureig coffee pods. Nobody likes those proprietary interfaces, and they do give monopoly control, but are they economically bad?
And how about console games, where all of the makers subsidize low Hw margins (therefore higher sales) with monopoly control and a cut of game publishing. Would the market be better if that was prohibited?
It’s going to be pretty easy to dunk on obviously harmful monopolies. It might be more interesting to explore more nuanced cases.
> I’d like to encourage you to advance the project, but with perhaps less of an ideological “this will prove X” slant.
Well, my current conclusion with my post is that wording is very very hard :-). What I said is "I want to show small-ish negative impact of a big tech monopoly". It will not prove it's all bad, even though it'll only give examples of where this is bad
> I think it would be very interesting to explore the boundaries of monopoly, and to look at cases where monopolies are probably a good thing.
Let's just say that the current tendency is to think that monopolies are fine, and I'd like to help reverting that. Yes your examples are worst discussing, and I have some of my own.
For instance, I definitely acknowledge that Android's monopoly helped whole unrelated sectors. But I also believe that innovation would be much better served if Android was opensource-in-spirit and maintained by something like the Linux Foundation.
> It’s going to be pretty easy to dunk on obviously harmful monopolies.
If it was, they would already have been ruled illegal? In Europe, I can't really name any "obviously harmful monopolies"
Isn't the whole idea that you would build something new to escape the competition of the current monopolies and succeed? "competition for losers" might be running the show, but it's also the pump in the cycles of disruption. It should always be running the show.
Not when FAANG companies have an infinite war chest to buy out your amazing disruptive startup with the sole intention of killing it or stripping it for parts.
I agree with much of this, I would like to highlight one thing in particular:
> The bigger a tech company gets the worse it becomes at providing consumer and customer surplus, because it needs to eat that margin (of a sort) to keep growing. Growth demands that tech companies eventually consume that which first engendered them good will.
When that comes to Google, I think they are talking about "eating the margin (of a sort)" of the good experience for end users, people searching. But the reality is they are actually eating the very real margin of the advertisers, their "actual customers".
In the last ten years, through the excessive ingestion of data about the advertisers businesses, Google has sought to expand their bottom line by extracting as much revenue from advertisers as possible. The advertisers margin has become Google's target revenue. If (nearly) all advertising is via Google, their only way to grow that revenue is by extracting more of the advertisers margin.
When you advertise on Google (and FB for that matter) you now have to transmit to Google's algorithm all data about all transactions on your site. This is sold as training the algorithm to enable the targeting of customers. But what you are in fact doing is telling Google everything about your revenue, they know exactly how much you are receiving from all sales. The algorithm is designed to maximise the extraction of the advertisers margin, to squeeze it as much as possible.
This is going to come back and bite them. I believe advertisers are going to fall out of love with Google, if they haven't done so already.
Something I would like to add to my original point, and why I think this is "anti trust". During the last 10 years there has been a proactive move to remove controls and visibility from advertisers, moving towards a black box algorithm. At the same time Google have a (near) monopoly on search advertising. The supposed "auction" between advertisers is closed book and controlled by secret algorithms.
Google are the ultimate beneficiary of the auction, but don't show how it operates, what the other bids were, and how they reached a value for the placement.
On top of that as the advertiser you have been forced to give Google your full revenue numbers in order to play this game.
In my opinion Google needs breaking up, they should not be able to operate as both the marketplace/exchange and the vendor when they have a monopolistic position. The advertising marketplace/exchange should also be regulated in the same way as financial exchanges.
> they should not be able to operate as both the marketplace/exchange and the vendor
This should just be codified into law, regardless of monopolistic intent. Any vendor that uses their position of power to limit the freedom of their customers should be hit with the full extent of the law - starting with FAANG, and then working our way down from there.
I think you are absolutely right. Even on our small ecommerce presence we are seeing it is harder to get a return from Google shopping. A decade ago it was a no brainer, and now it is a money pit. We are seeking instead to expand our influencer involvement.
As a side-note, increasing margins is not the only way to gain revenue, you can increase the market as well. This is what they have been trying all along with all their parallel products. It was very successful with Android, less so with their self-driving car (that could have increased the market by letting drivers consume internet content and ads during the drive instead of driving).
And it's same on the other side of the pipe, content creators on YT are getting worse and worse deal every year, that's why everyone nowadays runs sponsorships and patreon on it
Y’all worried about Google. But ads + search/recommendations is a lost battle, that’s just the status quo – the devil we already know.
I’m worried more about Apple. Why? Because Apple has been a counterweight to ad-tech. They’ve been able to champion privacy and UX for actual end users, they have literally been forced to care. But now they’re expanding into ad-tech as well, that’s terrifying; there is literally only Google left, and they’re full-on ad-tech already. So that means mobile (by far the biggest and most universal computing platform worldwide) will have NO customer champions. (Caveat Apple treats customers bad already yadda yadda, but this point still holds). This will be a truly “advertiser first” world.
I’m no antitrust expert, but I can understand a company maximizing its core business (or “do one thing really well”), and I can even respect pure ad-tech. What truly sucks though, is these “expand into every crack of the market” faceless mega-behemoths that these companies all become. (In McKinsey speak, I believe this horror is known as vertical integration.) This always sucks for the consumer.
In principle, the advertisers could buy Google shares and influence the company's policy towards an equilibrium that is more favourable to advertisers. If a natural monopoly is a public company, the entities that depend on this company could buy shares and bend the company's actions towards their interests. Is this happening? If not, why not?
Google is a trillion dollar company. You'd need to have billions of dollars in Google stock before you opinion even mattered around the board room. The majority of the companies advertising on Google couldn't even dream of that and for those that could it's not exactly clear that this would be a wise investment.
Advertisers have no choice but to go where the eyeballs are. So I don't see how they could possibly drop Google unless Google loses those eyeballs. If they could, then Google wouldn't be so exploitative.
I've always found it pretty weird how common the idea is that companies _need_ to keep growing indefinitely, regardless of the size they've reach. If a company is sustainably making a profit (i.e. makes more money than it needs to spend to keep running) and will continue to for the foreseeable future, why do they need to grow their revenue even higher? It seems like the expectation is they need to do this so that the stock price can go up, but if people only buy the stock to sell it when it's worth more due to being larger, what's the actual connection between the stock price and the amount of money the company makes other than everyone just agreeing to pretend there's one? Ostensibly the reason stock is worth anything at all is that it could eventually yield dividends, but there's no reason that a company already making a profit can't just start paying dividends regularly without needing to ever grow any larger.
I suspect in reality the increasing compensation of the executive suite in stock, while intended to alleviate the principal agent problem, means that it's substantially more remunerative for leadership to try to goose their stock price by whatever means possible within their tenure than to steer the ship in a growth-agnostic fashion. Doubly so with modern big tech companies where RSU growth can fuel a big chunk of your salary costs for your tech department when your company is on the rise, but scare everyone off when the reverse is true.
Due to inflation, basically. There is an effect like inflation which as far as I know is unnamed, where the credit growth & money creation in the economy hits asset prices and drives them up at a fast rate (eg, gold has been pretending to make real annual returns for the last few decades when we all know it isn't changing in value). A company that is treading water will still be growing in percentage terms year-on-year due to this, so a company that isn't growing is actually failing to position correctly vs the credit in an economy.
If that inflation wasn't part of the picture, companies holding steady would be more acceptable.
Although you wouldn't hear about it in the press; the hot companies are always the ones that are growing. There isn't much to say about companies that just sit there.
Inflation isn't the problem, it's investors. As others have noted, inflation is a wash for most cases. Investors expect regular returns and they sit on your board and they are NEVER satisfied.
When you put the world's greediest individuals in charge of what your business should do next, don't be surprised when the answer is ALWAYS "give us more money".
People expect their assets to earn 7%+ per year, both via individual retirement accounts and taxpayer funded defined benefit pensions. If that assumption is not met, then those debts cannot be repaid, which means someone (or everyone) has to take a hit on quality of life. This is politically unpopular because people get disappointed when their expectations are not met.
My argument is that a very large proportion of people benefit from borrowing from the future (obviously some more than others). Enough that it is politically unpopular to vote against the government ensuring these returns.
For example, taxes are lower today because of off the books borrowing from the future via these expected future asset valuations, as well as people liking their own 401k/IRA account numbers going up.
Whatever the actual proportion is, it is evident over many decades, that it is sufficiently large to ensure the election of leaders that will backstop asset prices.
> Whatever the actual proportion is, it is evident over many decades, that it is sufficiently large
Sufficiently-powerful. Don't confuse the two. In an ideal world, one would be indicative of the other, but history suggests this hasn't been the case. (No comment on the contemporary political situation.)
Would you mind explaining a bit more than "basically"? The money they take in also inflates, so if everyone who bought one last year buys another one, sales in dollars should increase by the same amount as inflation.
A company may not be able to increase prices as much as inflation eats. Eg, in 6 percent inflation, if you raise prices by 6%, it may result in customers shrinking their purchases by equivalent, or even larger amount. So after the price hike you could be worse off. That is the reason most companies often raise prices slowly in small increments over the months or years.
If we're talking about sales, then sure that should go up by CPI inflation. I thought we were talking about stock prices. Same difference either way, steady state is for economic losers if the money supply is growing exponentially.
Historically "growth" has just been a word for increased energy availability. If it is supposed to measure something else it is a bit meaningless (if some dude plays a game for 2 hours a day, then next year spends 2 hours a day playing a "much better" game on a faster XBox, what does growth as a % even mean? If he spends more hours on a game is that growth? These are profoundly silly questions to spend time on). The rough thinking is we should keep pushing for energy growth until we physically can't any more, because that helps poor people not starve which is actually important.
If that's the goal and I agree that's not a bad goal at all, we seem to have decoupled that from the outcomes.
Are energy companies even really doing that much to grow their energy production? Are we seeing much in the way of producers materially investing in increasing their production thus flooding their markets in a race to the bottom? It feels like a lot of these things have stalled out at present, or am I being too cynical?
Yeah. In the long run we always lose to entropy too. Life is about what happens before living is no longer possible so we may as well jump as high as we can. At least someone gets to enjoy themselves.
>If a company is sustainably making a profit (i.e. makes more money than it needs to spend to keep running) and will continue to for the foreseeable future, why do they need to grow their revenue even higher? [...], but there's no reason that a company already making a profit can't just start paying dividends regularly without needing to ever grow any larger.
Your comment is common but it implicitly assumes a stable steady-state in the business landscape. (E.g. phrases such as "profit _will_ continue to for the foreseeable future,")
That type of thinking can work for local businesses (isolated from global competition) such as a small family restaurant. The owner opens a new restaurant with 10 tables and then maybe the business modestly grows to 15 tables a few years later and then stops growing. The owner is able to maintain a steady-state business of repeat patrons at the restaurant for decades with predictable profits. Another example of somewhat predictable profits on a larger scale are legacy oligopoly/monopoly businesses such as railroad companies.
But unlike local restaurants, many businesses have to aggressively compete in national and global markets and if it stops growing, it starts dying. Predictable profits are not guaranteed for the foreseeable future. That's why giants like Motorola and Nokia got their mobile phone business killed by a (growing) hobbyist computer company named Apple. (Motorola and Nokia are still big but not as big as they once were.) The businesses in hyper-competitive spaces like technology etc are a basically in a Red Queen race: https://en.wikipedia.org/wiki/Red_Queen_hypothesis
E.g. Why can't Blockbluster Video stop worrying about growth and just pay dividends from profits? Because an upstart like Netflix competed away Blockbuster's rental profits. Using hindsight, we can see that assuming Blockbuster could just pay "dividends regularly and for the foreseeable future" is flawed. The same broken assumption is happening to Netflix today: Why can't Netflix stop worrying about growth and just pay dividends? Because Disney+ and HBO MAX are competing away Netflix's profits.
Growing revenue and profits allows adaption to new competitive threats.
It isn't just the investors who want growing businesses. The prospective employees find them desirable too. Many talented graduates of engineering would rather get a job with a growing Apple than a declining Motorola/Nokia.
I don’t understand your argument. Netflix, Blockbuster, Motorola and Nokia all pursued growth strategies, yet the latter three (at least) ultimately failed to maintain their lead in consumer facing markets. So how does that explain the need for perpetual growth? It doesn’t seem connected to your points.
And, in the case of Nokia specifically, maybe they would still be a significant player in the handset market if they had pursued profit by investing R&D into a smaller number of good handsets, rather than their growth strategy that, if memory serves, resulted in the release of one janky new handset every week.
It’s not like what Apple did was magic; it was mostly just hard work and vision. Motorola and Nokia lost their business by being unfocussed and stupid, not because they didn’t pursue growth.
>Netflix, Blockbuster, Motorola and Nokia all pursued growth strategies, yet the latter three (at least) ultimately failed to maintain their lead in consumer facing markets. So how does that explain the need for perpetual growth?
You're laying out a cause & effect I didn't claim. I'm not saying "pursue growth guarantees success" -- which is unrealistic. A variation of your scenario is like asking, "Most novelists pursued growth of their audience but most failed so how do those failures explain why novelists want to grow their audiences?"
The # of failures is a different subject from the _motivation_ for growth.
My reply to gp was to dissect the flawed premise that profits are predictable and stable. It's that flawed assumption that makes it seem like growth is unnecessary.
In other words, even if you want to deliberately create a new company with a "no growth" policy, the outside world has its own freewill and doesn't have to cooperate with your goal. New competitors or changing consumer preferences can sabotage your "no growth" idea and erase the steady-state profits.
> A variation of your scenario is like asking, "Most novelists pursued growth of their audience but most failed so how do those failures explain why novelists want to grow their audiences?"
Not at all. You said,
> Why can't Blockbluster Video stop worrying about growth and just pay dividends from profits? Because an upstart like Netflix competed away Blockbuster's rental profits
And I simply don’t see the connection.
Blockbuster could have done any number of things to prevent their demise but pursuing a growth strategy in the face of an obvious threat to their business was not one of them. And their size - perhaps achieved from a growth strategy - did not protect them. It’s possible that their size, and the blandness that was necessary to get there - actually made them more vulnerable. (We used to call it “Lacklustre Video”)
The same for Nokia and Motorola. It’s a strategy of crap products built en masse to drive growth into every segment which makes a company vulnerable.
So I think novelists make for a poor analogy. And I think there are plenty of companies that pursue a sustainable profit strategy rather than a growth strategy.
It’s just that you don’t hear about them because they aren’t screaming for your business.
>Blockbuster [...] their size - perhaps achieved from a growth strategy - did not protect them. It’s possible that their size, and the blandness that was necessary to get there - actually made them more vulnerable.
Again, you misunderstand my point and asserting claims I didn't make. To restate:
- growth by itself does not guarantee protection from competitors.
- a large company that became large from growth does not prevent them from stumbling over their own bureaucracy and losing to more smaller more nimble competitors who haven't grown into giants yet
Yes, it's obvious pursuing growth doesn't guarantee success. Blockbuster did try growing their streaming business to compete with Netflix but still failed. Lots of stories like that.
>pursue a sustainable profit strategy rather than a growth strategy.
The issue is that you're inserting the adjective "sustainable" as a presupposed condition which conveniently proves its own point. Thus in your mind, if it's "sustainable profits", it makes pursuing growth unnecessary. You've made the same exact assumption as the gp I replied to when he stated, "If a company is sustainably making a profit ..."
- your mental model: sustainable profits are the premise; therefore there is no connection to growth strategy
- others mental model: sustained profits are NOT assumed; therefore there is a strong connection to pursing growth opportunities
In the mind of many businesspeople, profits are not assumed to be sustainable. That's the key point. (E.g. Andy Grove's famous "only the paranoid survive"). Yes, you may have booked some profits for this quarter and try to make conservative assumptions for the next few but you don't know what competitors (many unknown to you) will do. Profits can suddenly flip from seemingly sustainable to unsustainable. What seemed like a "defensible moat" in Warren Buffet's can change and new competitors can just bypass the castle.
>And I think there are plenty of companies that pursue a sustainable profit strategy rather than a growth strategy.
Flip that around: A company can pursue growth strategy as one way to pursue sustainable profit strategy. Finding adjacent/complementary products. Finding adjacent markets.
The "sustainable profit" can be the outcome of pursuing growth. Growth is one strategy to offset the shrinking of sales from previous products and/or loss of customers. Or put another way, "pursuing sustainable profits" is partially achieved by pursuing growth because the components of last quarter's profit number is declining. Netflix started the streaming business in 2007 and grew it before profits declined from the DVD-by-mail business. Streaming revenue didn't surpass DVD revenue until 2016. If Netflix didn't grow the new product (streaming) and let it cannibalize its older product (DVD), other competitors would do it anyway. Growth is adaptation to a changing world.
If one is running a local Italian restaurant or a custom woodworking shop making custom furniture, competition isn't as cutthroat so finding ways to grow is less of a concern.
However, if one is starting a software SASS company with an initial successful product, the idea of growth will be on the radar because the premise of "sustainable profits" in the software business can't be assumed. That's because the SASS company can't control others such as Microsoft or AWS or some other unknown competitor offering a similar service for less (or even bundled for free). Jeff Bezos threatened other businesses with "your (profit) margin is my opportunity".
Nokia/Motorola/etc tried to compete and research but ultimately failed. This is not a counterargument, but rather underlines the cutthroat nature of international competition.
> And, in the case of Nokia specifically, maybe they would still be a significant player in the handset market if they had pursued profit by investing R&D into a smaller number of good handsets,
They picked the wrong horse, as the saying goes. At the time it was not so obvious which thing was going to win.
It’s not the pursuit of growth that matters, but the achievement of growth.
Companies need to grow in places because they will inevitably be shrinking in some places (as customers age or churn out, as competitors come in to compete in segments, as new substitutive goods compete for wallet share).
Even if you want to stay the same size, you will have some amount of growth in your strategy (or you’ll fail).
Apple's iPhone launch included the vertical monopoly that was their magic. It addressed consumer needs like no other and everyone else was left playing catch-up.
> How is a company dying if it continues to make profit in a changing market?
Because, for example. their market is being steadily taken away by their competitors, and the company doesn't have a way to stop it.
Death takes time, and may not be apparent if you're only looking at profits. The company could be profitable, but less so every year. Or, the company could be growing its profits year by year, but by a smaller factor. In more general terms: your profit may be positive, but if any of its derivatives (first, second, N-th) is negative and you have no way to address it, then you're dying.
>> Growing revenue and profits allows adaption to new competitive threats.
> Adaption to "new competitive threats" is done by humans.
Yes, but having more resources lets those humans invent and execute such adaptations better - in the same way it's easier for individuals and households to adapt to changing life circumstances when they have savings and a stable income source, and the more of these they have, the easier it gets.
“Because, for example. their market is being steadily taken away by their competitors, and the company doesn't have a way to stop it.”
This is circular reasoning: companies must grow because because otherwise they will have their lunch eaten by other companies who are growing because they must grow.
I realize that this is an absolute basic tenet of capitalism that you’re talking about, but this response only explains where we are, not why we’re there.
> I realize that this is an absolute basic tenet of capitalism that you’re talking about, but this response only explains where we are, not why we’re there.
It does both: we are here because it's a self-sustaining negative feedback loop. How exactly we got here has been long lost to history, and the specifics don't matter anyway: what matters is, how hard would it be to break out of this state, whether it's worth doing in the first place, and, if we somehow break the cycle, what's there to stop us from immediately falling back into it.
The driving motivator is just greed, nothing else. Growth is not per se required to run a successful company for a long time, that is just plain myth. Nor is growth a guarantee to survive for a long period of time. It may increase the chances to stay afloat, but that highly depends on the circumstances. Also, as soon as you make growth the main motivator to run a company you are opening yourself up to go bust, inherently so.
> The driving motivator is just greed, nothing else.
In some cases, sure. But I feel it's also a cop-out - it's easier to assume those business men are just driven by greed, than to look at the messy interplay of motivations and incentives that are the actual driver.
Perhaps that's too cynical a take, but I think it's quite common for small companies to focus on growth because... that's How Business Is Done. Many entrepreneurs are not experts in market economy, nor do they have everything figured out - they follow their intuition, what other entrepreneurs and business press says, etc.
> Growth is not per se required to run a successful company for a long time, that is just plain myth.
Define "long time". I believe that with competition and sufficiently long time, it's not a myth, but an inevitability.
> Also, as soon as you make growth the main motivator to run a company you are opening yourself up to go bust, inherently so.
You can always go bust. If you build a non-expanding, sustainable business, it's only a matter of time before change in the market, or competitors, or just plain increase of costs of living / inflation in general will force you to either grow or give up, as some nonzero amount of growth will be required to just maintain your status quo.
Turning this around, and giving another answer to the "driving motivator" question, you can view it through perspective of observer selection: pretty much all companies pursue growth, because those that didn't are no longer operating.
You have to mentally split the "rules" defined by what I call the financial "economy" (which is rooted purely in belief), and the real economy, which is vastly more complex. Something related would be what a company focuses on: Profit/money and using what they are doing as a means to accomplish that, or having a company to actually accomplish a goal and that goal, the idea comes first. Latter opens up the possibility, given that the financial means are there, to even make losses now and then, because you want to invest (more heavily) in change for one reason or another.
Thing is, this "growth before everything else" mantra comes from the financial "economy". If you apply this to real economy, you are in for a surprise, because there are limits everywhere. Such limits don't really exist in the financial "economy". But in return it also means you can operate in the real economy for long periods without growth.
Why "economy"? Economy exists because humans split their time to do all the things to fulfill their needs, you know, survival (food, shelter, ...) etc. Without that you wouldn't have any economy (as in trading goods) to write home about. Note that I wrote "humans split their time"; if you automate all that the need to split their time is rendered pointless, which also drives this economy into the ground, i.e. it is not needed to that extent anymore.
That is different with the financial "economy". The main goal there is money, and the value of that is rooted in belief. Which renders everything else on top of that also belief/speculation. But because of that it can also grow endlessly. The problem with it: It doesn't put food on the table (nor does it provide a new table should it need replacement). This also means all the rules in that space are only valid in there, and may very well not work at all outside of it.
> You have to mentally split the "rules" defined by what I call the financial "economy" (which is rooted purely in belief), and the real economy, which is vastly more complex.
I used to do that in the past, but the more I thought, the harder it got - today, what you call the "financial 'economy'" sounds to me like a natural outgrowth of increasing specialization in the "real economy".
> Something related would be what a company focuses on: Profit/money and using what they are doing as a means to accomplish that, or having a company to actually accomplish a goal and that goal, the idea comes first.
The former are what I used to call "toilet paper companies", as in "this company is doing computers or drugs now, but if it was cheaper to retool, it would be selling toilet paper or whatever else yields better profits this moment". The latter... mostly don't exist, I think. SpaceX is about the only example I can think of.
As much as it pains me, I came to understand that most companies exist primarily to make money for their owners, secondarily to pay salaries to employees, and thirdly (at best) to do something useful - and it can hardly be the other way. Not just because companies focusing on profit beat those focusing on the product/services - but also because that's what the owners and employees want. And it's not driven by greed.
I realized that when I stopped looking at the big corporations and startup unicorns, and instead looked at the local businesses I interact with daily: bakeries, convenience stores, pharmacies, barber shops, dry cleaning, ISPs, etc. None of them are in it for the idea, for the product. All of them are in it for the profit - because that profit is what gets them and their families some semblance of security and stability in this world.
Yes, it's not ideal, it's big part of the reason why every good and service seems to get worse with time, particularly as specific niches get hit by "financialization" trends. But it won't go away as long as everyone has bills to pay, food costs money, healthcare isn't simultaneously free and easily available, etc.
> Latter opens up the possibility, given that the financial means are there, to even make losses now and then, because you want to invest (more heavily) in change for one reason or another.
The "financial 'economy'" has this covered, too. In fact, they have terms and math and virtual products that cover it. That's the reason it exists: because as the "real 'economy'" gets larger, more complex, and more thought is put into it, people want to do more complicated things, and - perhaps most importantly - everyone wants to reduce their personal risks.
Want to build a factory making much-needed goods? You need more money than everyone in your village has put together. Are you a farmer who almost went into deep poverty last year, after most of your crops fell to a disease? You want some kind of safety net. Financial sector provides all that: loans, options, futures, etc.
> The main goal there is money, and the value of that is rooted in belief. Which renders everything else on top of that also belief/speculation. But because of that it can also grow endlessly. The problem with it: It doesn't put food on the table (nor does it provide a new table should it need replacement). This also means all the rules in that space are only valid in there, and may very well not work at all outside of it.
This stars with money itself - as you say, its value is rooted in belief. This by itself is pretty natural to humans - things like "company", "tribe", "government", "society", "money" - but also "family" - are all rooted in belief. Establishing such intersubjective beliefs is arguably humanity's superpower.
As for the rules in the financial space, yes, they're all abstract and virtual. That's the point. Much like money itself is the answer to barter not scaling to support growing population and increasing specialization, a lot of those financial industry inventions are ways to optimize trade by resolving some complexities in this abstract, virtual concept space. Your grain can be traded back and forth, changing its owners 20 times in a quarter, while never physically leaving your silo. Would it be better if it had to be trucked back and forth, just for it to look like "real 'economy'"?
All this is to say: yes, there's plenty of problems and pathology in the financial space, and it does a lot of bad things. But it also does a lot of good things, and it exists not just because of greed, but also because there's real need for it, and without it, the "real 'economy'" wouldn't support its own weight anymore.
There are several counterexamples to this idea, including companies 300+ years old, where a company does just fine without "competitive" expansion of its business, and where no competitors show up to eat their lunch.
The poster child for this model, I think, is Zildjian: the biggest global maker of cymbals. They have been doing it for hundreds of years, never expanded outside of cymbals, and continue to do well.
Companies run on this expansionist idea must keep expanding to avoid death, however, because they operate at unsustainable levels of expenses otherwise, and they hire managers on the premise of making bold moves to get promotions.
This "grow or die" mentality is entirely a cultural phenomenon of modern western companies, and they can absolutely opt out of it.
>There are several counterexamples to this idea, [...] where no competitors show up to eat their lunch.
Yes, I understand that and already provided several counterexamples. (Local restaurants and legacy railroads.)
>The poster child for this model, I think, is Zildjian: the biggest global maker of cymbals. They have been doing it for hundreds of years, never expanded outside of cymbals,
I actually own a bunch of Zildjian cymbals and saw several documentaries about the brothers' split into Zildjian and Sabian. In any case, Zildjian did expand into other products outside of cymbals. From wikipedia:
- In 2010, Zildjian acquired the Vic Firth Company and in 2018 acquired the Mike Balter Mallet company expanding the company's product offerings to include a full range of drumsticks and percussion mallets.
Zildjian also sells electronics like earphones[1]. The daughters that inherited Zildjian wants the company to grow. The growth has not been as fast as a tech startup but they do want it to grow.
But even without expanding product categories, the company can also expand markets to sell to. That was one of the motivations of Zildjian expanding their manufacturing into Canada as that export location allowed them to sell cheaper cymbals to Europe.
>This "grow or die" mentality is entirely a cultural phenomenon of modern western companies, and they can absolutely opt out of it.
Not just Western companies. Also East Asia companies in Japan like Canon, Sony, Toyota wanted growth. Korea companies like Samsung and LG. And Africa companies in Ethiopia and Nigeria want to grow too.
But I do agree with the point you were trying to make: if you happen to pick a business domain that doesn't have cutthroat competition, there's less pressure to grow to avoid dying.
RIM Blackberry didn't get into the drums cymbals business (slower moving competition of hammering round sheets of metal) but the phones business (fast iteration competition of electronics). They grew until the 2007 Apple iPhone made their keyboard phones and 2-way pagers mostly obsolete.
If you're an entrepreneur who believes the "growth treadmill" is insane and stupid, you need to pick the type of business that aligns with that philosophy!
I think you have a valid point about not being complacent but all of your examples highlight how hard it is to pick a growth strategy which actually works long-term. Those companies all did what Wall Street analysts wanted but chasing that growth lead to their downfall: Nokia and Motorola cut things like R&D, which is expensive and uncertain, and focused on marketing & expansion. They cut deals with the cell carriers which produced big numbers but turned creative control of their product over to the phone companies. Remember all of the calls for Apple to give Verizon what they wanted to gain access to their customers?
Blockbuster is a different industry but again they were focused on financial growth at the expense of the company. Trying to hit those targets meant they opened marginal locations and it also meant things like reducing “costs” like staffing (but not strategic investments like C-level compensation, of course) which had given them something Netflix couldn’t easily match.
If you leave profit (growth, resources) on the table, someone else will pick them up and beat you with it.
The supposed analogy is biological. You may choose to check out of the always-do-more-with-less rat race, or even out of existence completely. But that choice will help populate the world with "not your successors". Similar with companies: your "sustainably making profit" premise is incompatible with "willingly foregoes growth / change" – at least in the long term, due to competition.
Assuming there's always some proportion of people who choose to do otherwise.
Humans are powerful enough now that, if we wanted to, we could stop this. It'd require collaboratively punishing defectors, of course – because some humans are greedy – but until (and if) we meet aliens, we don't need to live like this, provided we can learn to work together.
It's fortunate, then, that motivated collaboration can produce better results than competition. The collaborators might be able to win the Last Competition.
Some people will say that companies need to grow to increase the bottom line, but my experience is that growth is actually a byproduct that indicates the health of your business rather than the actual goal. Growth is a result of competition, when new markets emerge, when competitors come up with better products, there is an opportunity to increase your market share and take in more revenue. Assuming you don't leave money on the table, it's understandable that you will compete and if you're doing well you will grow.
Yo be clear not all companies are expected to grow. But growth is the main characteristic of a certain kind of companies, and the reason why their stock can have very high PE ratio, because shareholders expect to get return in the stock going up instead of dividends. You have plenty of vale companies that pay dividends and do not grow very much, sustaining a healthy business on their market.
But the transition between growth and value is a bit tough. You need to stop hiring like crazy, intern promotions suddenly go more stale as a result, stock compensation is hurt a lot so your employees might not be super happy with it, the story is also appealing to a completely different kind of people, and your stock goes down a lot at first, all your financing suddenly gets a lot more expensive etc.
It is possible that we are witnessing that transition in some of the tech companies right now, as the symptoms match, but it really is too early to tell.
It seems to me that they need to keep growing because they are in reality pyramid schemes with the people (and investment institutions) at the top wanting ever larger profits. The company gets bigger but the number of people at the apex of the pyramid does not.
Population is growing. Your company's target market is a subset of population. Unless your target is a niche that nobody new is joining, then your company must grow just to maintain status quo. If you sell phones and you're not growing, it means you are actually contracting. That's why everyone is crazy behind growth. It means your business is not dying.
Theres that kind of growth, and then the expectation that you grow into every conceivable vertical to expand more rapidly or support stock prices for an otherwise stagnant business.
growth means constant investment. The day you stop growing, your investment is capped or much more constrained, and it's only a matter of time until your company is over.
More legal effort should be put into big companies coming in and crushing start ups.
They usually build something and price it at a loss, because big companies can afford that till start ups go under.
Or unfairly using their services to hinder competiton.
Amazon is a big prepetrator of this. There was a smart oven, sold on Amazon. Amazon was also an investor, who made their own into a basics product at a loss.
Many startups do the same thing to established industries. They burn VC money to "disrupt" a field, then when it's time to make money, they hike prices. But by then, there's no competition left.
I started to use the term "fracking" for this[0], because that's more-less what the likes of Uber, AirBnB, Doordash, etc. do to their respective markets: they pump billions of VC money like it was a fracking fluid, in order to crack the market, pump out all the value, and leave behind a toxic mess for the locals to deal with.
While I agree that startups can disrupt the big monopolies, past Uber, I now find them just as dangerous as big companies to the customers and the societies they live in. Perhaps more so, because big companies don't have to disrupt anything to extract their rents.
I feel startups are not like they used to be. Or maybe they always were what they were, and I became disillusioned only recently. Either way, today, this is a well-developed process of wealth transfer. In a sense, startups aren't something opposite to big companies - they're the means big companies use to frack an existing market and pump out all value. Startups are an integral part of the market ecosystem now, and from the POV of those at the top, it's arguably a symbiotic, not parasitic relationship.
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[0] - I used to call it "strip-mining a market for all its worth", pointing at fast extraction of value with no concerns about sustainability, but I think "fracking" is better, as it also evokes the image of first cracking the market by a sudden, focused infusion of seemingly infinite free money.
I've had a similar epiphany over the last five years or so. Once you take money from the VCs, you are essentially just an R&D department of the VC collective with perhaps a bit more autonomy than you might have in a BigCo but you are still heavily constrained by the demands of your funders. This is nothing like the romantic two guys in a garage with a great idea taking on the world narrative that we've been fed for decades.
I love the turn of perception here that’s being acknowledged out loud finally. I have a feeling HN would have buried this sentiment around 8 years ago a lot of folks here were busy fracking as hard as they could. Our capitalist system in America in general feels exceptionally worn out with guards placed at the gates to any real innovative work.
I'd wish. If all that happened was some people setting billions on fire, it wouldn't be that bad. The fracking analogy highlights that 1) those billions are used to eviscerate markets and industries, 2) it's a dirty process leaving a lot of collateral damage, and 3) the parties doing it are actually making a profit, so this process is self-sustaining (as long as there still are markets to frack).
Agreed. There are definitely adverse effects to the markets from these practices.
Could it be that the conglomeration of the startups controlled or at least heavily influenced by a few dominant VC firms essentially creates an oligopoly in the tech startup world? In other words, these startups, which behave like monopolies by razing certain markets with low prices while losing money, are small tentacles of the huge vc firms that are funded by large stockholders of the FAANG oligopolies.
You mean competition by more VC subsidized startups?
The competition (or sometimes faux-competition) lasts until investors get bored, then the unsustainable startups slowly go away (often extracting more money from the public on their way out, by means of an IPO), leaving a broken market that needs to be rebuilt, if it's possible at all.
Yeah, but we're now seeing the same problem with "innovation" as we've been suffering from wrt. "profit" for the past several decades - that is, neither "profit" nor "innovation" are a function of being nice and good for the customers, the society or the world. They are at best somewhat aligned - but once all those profitable/innovative and also good ideas were picked, we're left with pursuing profit/innovation that has negative impact on the world.
And so, the main innovation of the most successful startups in the last ~decade was in ways of breaking into and destroying (er, "disrupting") markets that before were just fine - not perfect, but at least sustainable.
Uber, for all the hate it receives, is significantly better than taxi service.
AirBNB, by the same argument, put offline-only vacation rental services on check.
Neither of these is models is going to go away now. The companies may have to deal with debt, may need to increase unit costs, and may have to conduct layoffs, but they fundamentally changed their markets and will remain the dominant players.
I know AirBNB mostly as a convenient trick for people to illegally rent out "residential" apartments to tourists (or desperate students) for way above market rate. And maybe as a utility for laundering the cash flow to aid with tax evasion.
Can't comment on Uber, because in my local market they lost against a community of taxi companies who have an excellent app.
Perhaps this happens on a diversity of time frames and in a diversity of contexts? The French historian Fernand Braudel says that during the 1600s the European merchants in India deliberately bought more than they sold, so that Europe was running a trade deficit with India for all of the 1600s. But offering so much money to India meant that India opened up to European merchants, who were then able to turn the situation around during the 1700s. Once they had been invited into every city and every kingdom in the sub-continent, the European merchants were then able to use their international networks gain an advantage over the local merchants. And then they added even more pressure by hiring local mercenaries to enforce their will with military power, thus beginning the conquest of India.
But the pattern seems to repeat on so many levels, and at so many different time frames: pump in money in a manner that seems generous, so as to gain control of a market. Then use that control to maximize one's own profits.
A trade deficit is not the same as a loss. It means that the UK ended up with more goods and the Indians ended up with more currency. If the goods are more valuable than the currency, it's still an economic gain for the UK. The US runs a trade deficit every year, and is far from going broke.
Anti-establishment startups becoming their parents are instances of a very common pattern.
Gods murder their primordial parents. Republicans overthrow kings and crown a Napoleon. The liberator-opressor complex litters history.
The first step is to notice the cliche and expect it. The phenomenon exists. Next step, tread lightly. Any reason you think up is too specific. Your reason why Microsoft became IBM under Ballmer does not explain why Cronus castrated Uranus or why he wanted to eat baby Zeus.
That said... I think "you are what you eat" is inescapable long term. Wikipedia would not have been wikipedia if it had been a startup, IPOed, etc. If you are a giant software company deeply embedded into locked in customers across all industries... you will have IBM-ish tendencies. Ballmer is Thanos, inevitable.
And yet, most people love the stability of existing systems. Trying something new is betting with your time: if the startup goes defunct in x years, you've created work for yourself to migrate to a competitor, and that's a big risk to take if you're a medium or large business evaluating a B2B product that maybe only has Series B funding (and is dependent on massive growth to survive without being sold off to some investment firm due to pressure from their existing investors).
With decent anti-trust, we would have many many more stable mid-size companies. I.e. startups that FAANG snapped up on their ascendence to stability, that would now be successful in their own right.
Some examples to rattle off a few household names: instagram, whatsapp, youtube, tumblr, android, beats, audible.
Instagram became big because of Facebook’s cross promotion and adTech.
YouTube had huge storage and bandwidth costs and was about to be sued out of existence.
Tumblr wasn’t exactly doing great before being bought by Yahoo and Yahoo wasn’t exactly a monopoly when it acquired Tumblr and its current owner is definitely not that big.
How do you think Android would have succeeded when better funded companies like Microsoft, RIM and Palm failed to make a dent?
Beats was already profitable before being acquired by Apple. No one can credible claim that Apple has a “monopoly” on headphones or in streaming music.
Traditional anti-trust (the kind we haven’t seen for at least 30 years now) is about preventing companies from creating monopolies - which requires proactive steps BEFORE they become a monopoly not when they go to purchase their last competitor.
That said, afaik the beats acquisition wasn’t about headphones as much as the streaming service… digital music is a market that apple was the largest player in for a long time (may still be idk?).
Rim and microsoft were squeezed out by android, That wasn’t an inevitable outcome - it was the result of google buying android. Google staying entrenched as the top search engine may also have something to do with their ownership of android.
You can pick apart some of my examples, sure, but if even one of those is true then of the hundreds (thousands?) of companies acquired by faang you must know that a good percentage of those would be viable stable workplaces… they were purchased usually because of that exact threat! and then repeat that for every industry in the economy with large players in it…
They were squeezed out by Android that was given away for free. How was a hypothetical Android company going to survive giving its only product away for free?
> you must know that a good percentage of those would be viable stable workplaces
How many former unicorns that did go public in the last decade are actually profitable today?
And how many funders, seeing that unicorns are illusions bound for failure in a market where anti trust is enforced, would invest in better and more stable start ups worth actual real-world business plans?
Exactly it doesn't. Android would have gone away or been a DIY tool.
And in a proper anti-trust environment, the app store (which Steve Jobs really resisted anyway) wouldn't have been permitted to act the way it did and probably make the iPhone too restrictive for most people to adopt.
So other consumer-driven solutions would have come about. It's not rocket science.
Yes because a DIY tool would have really taken off in the market.
And how would it have been better for Android not to exist?
And yes it’s not rocket science, that must be why all of the other open source mobile operating systems given away for free have been so successful. Who was going to fund it in your hypothetical world?
Yes and in a “proper anti trust world” a manufacturer who at the time had 1% of the mobile operating system would have come under scrutiny because of anti trust.
On stage during the launch, SJ said their goal was to capture 1% of the market in the first year. They barely reached that by the time the app store was launched.
> Yes because a DIY tool would have really taken off in the market.
*points at Linux, C, algebra, writing*
> And how would it have been better for Android not to exist?
*points at Boot2Gecko, J2ME, PalmOS*
Also, false dichotomy. Android (or something like it) may well have still existed; just, it likely wouldn't've been so dominant (and its ecosystem wouldn't've been so reliant on proprietary Google libraries, which prevent people from running Android programs on non-Google systems).
> Yes and in a “proper anti trust world” a manufacturer who at the time had 1% of the mobile operating system would have come under scrutiny because of anti trust.
… Yes. In case you're not aware, Apple already had a rather special relationship with telecoms companies at the time; something (e.g.) Handspring lacked.
The point of antitrust isn't to break up monopolies after they've already done damage to the market. It's to ensure that market dynamics continue to actually function in the real world – to ensure that the free market at least somewhat resembles a meritocracy.
Instagram might not became that big, but it definitely was on track to become somewhat big, that's why Facebook bought it, in fear of competition.
Same, Youtube might go down, but the idea was out of the box now, someone else would do that. Technology (ContentID) was there as well. As a consumer, I don't mind if it'd be called differently done by different team. It might have been better or worse of course.
Instagram c. 2012 was just burning VC money and had no plans for how it could be profitable. It wasn't until Facebook bought them that there was some thought about how to make it profitable.
> On Thursday, the company announced that it would begin introducing photo and video advertisements on the service, its first attempt to generate revenue since Facebook acquired the startup for $1 billion.
> ...
> It’s a sentiment Systrom has repeated to me for years–and an idea that many revenue-free startups have begun parroting. For entrepreneurs without a business model, it’s become almost fashionable to declare that they’re simply creating a new model altogether: Whatever it is–by god–won’t involve pesky traditional ads. No! The ads won’t be disruptive or annoying–they’ll be wanted and loved! (I’m waiting for the call, SnapChat.) But when push comes to shove, more often than not, the ads turn out to be nothing more than, well, traditional advertisements. See: any Promoted Tweets.
Yes, it was on track to be something big... but it wasn't on track to be able to make any money and was more likely to flounder once it ran out of VC interest and get bought for cheap by Twitter.
There's a reason that chart only starts listing revenue in 2015.
While Instagram might have been keeping Zuckerberg up at night with nightmares - one shouldn't pretend that it had a path to making money and being able to keep running.
And in a world where competition is allowed to see its course, Instagram would have disappeared. And further down the line, Facebook's poor decisions would have spelled oblivion for them too.
It also means the 2010s may have perhaps seen investors print billions into businesses that actually matter and deliver real innovation
If Instagram would have disappeared on its own, Facebook would have just built it in house. They spent $1 billion on it because it was cheaper to do that than to start from scratch. And how could anti-trust possibly stop that?
That's just wrong. It doesn't cost $1 billion to copy instagram, at most it'd cost a few million. By buying them, you not only get the app/feature set - more importantly you also remove them from the market as a competitor. This is exactly what we're seeing play out with tiktok. If FB could have bought tiktok, they would have - they couldn't, so they cloned it for far less than $1bil (fb reels) - but now we have a situation of two competing services that users can compare and contrast and prefer. The market it segmented. Which is bad for facebook's shareholders, but good for users, workers, and advertisers. This is exactly why we need good anti-trust
They really haven't. They've been acquiring startups, digesting and rebranding said startups innovations with an in house version, and (arguably innovating) in finding ways to plaster a transaction layer into solved problems that previously lacked a recurring revenue compatible transaction framework.
In short, subsidizing themselves by abandoning one time purchasable software, and replacing it with either ad serving or subscription based versions.
Monopolizing a vertical supply chain isn't even a concept that makes sense. The point is that with a monopoly customers have only one purchasing option. This condition does not exist when a company integrates vertically.
You're arguing the semantics of a monopoly, but you should just mentally replace the word "monopoly" with "market power".
When Apple buys components from a vendor, they have less market power. When they build their own components, they have more market power.
Both Apple and Amazon shipped their own ARM chips. This increased their market power. Because they're the only companies with access to those chips. Meanwhile, independent ARM vendors go out of business about once every 3 months because the biggest companies using ARM aren't part of their addressable market. Which means small companies have limited access to ARM CPUs.
When Amazon builds their own delivery company, they increase their market power. When they buy from Fedex and UPS, they decrease their market power. And, when they do their own deliveries, they limit competitors market power.
You can be fine with all of this. Those of us who are interested in competitive markets worry about it a lot. You don't have to be worried about competitive markets, though. It's totally valid to not think increased competition is a good thing.
There is a lot of nuance here. If you're stuck on the word monopoly, I don't think you're going to really hear the things antitrust folks have to say.
> When Apple buys components from a vendor, they have less market power. When they build their own components, they have more market power
So now you’re saying a company shouldn’t be allowed to build and design their own components? Doesn’t it help competition that Apple, Microsoft, Google, Qualcomm, and MediaTek among others are creating and modifying their own processors?
> Which means small companies have limited access to ARM CPUs.
Any company can buy an ARM processor from Qualcomm and MediaTek. Have you looked at all of the phone manufacturers who sell in China and India and even the US?
> Those of us who are interested in competitive markets worry about it a lot. You don't have to be worried about competitive markets, though. It's totally valid to not think increased competition is a good thing.
Every market you mentioned has a competitor that third parties can go to - ARM chips, delivery companies etc.
Vertical integration doesn't decrease competition, it increases it. If there are N companies in a market, and a company that purchases from one decides to vertically integrate.and enter the market, now there are N+1.
Almost no one who vertically integrates competes in the market they just shook. You can't get Amazon to ship things for you, so they don't compete with Fedex and UPS. You can't by an M1 chip from Apple.
Vertical integration is all about shrinking markets, not adding to them.
What can Apple make? What must Apple buy from other suppliers? How much are investors allowed to punish Apple's stock price (like they are currently encountering https://www.forbes.com/sites/qai/2023/01/08/why-is-apple-sto... ) or can they buy everything a company produces? Are others allowed to buy a company that only has Apple as a client and raise the prices?
Can Amazon work at improving distribution center efficiency with technology that they create? Or must they buy it from someone else?
Must Google create a business unit to sell its highly customized routers?
One could argue that they are purchasing companies to incorporate them into the company's product directly rather than relying on a 3rd party vendor to supply it.
The argument (I believe) is for leaving those companies as stand alone and having Apple and Amazon rely upon them not going bankrupt or getting purchased by some other competitor and disrupting their own company.
You've seen that happen before - BigCo is using a 3rd party vendor, someone buys it and then turns around and starts charging BigCo lots of money.
To prevent that from happening, BigCo should have bought the company when it started using it (if possible) to prevent that disruption in its systems, products, or services.
You're not really making coherent points here. No one is arguing that vertical monopolization corners a market on components.
When Apple bought Authentec, they increased their market power and reduced the market power of competitors.
As an independent company, Authentec could sell to Apple AND Apple's competitors. Apple obviously won't sell components to their competitors. They were incentivized to purchase Authentect to restrict competition.
So no one is arguing that a “vertical monopoly” corners the market. In that case, what are they monopolizing?
> When Apple bought Authentec, they increased their market power and reduced the market power of competitors.
The existence proof is that there were fingerprint authentication methods before and after the acquisition. Who exactly did they hurt?
> As an independent company, Authentec could sell to Apple AND Apple's competitors. Apple obviously won't sell components to their competitors. They were incentivized to purchase Authentect to restrict competition.
Well if that was the purpose - to prevent competitors from having fingerprint sensors - they did a horrible job.
In that model, would it be reasonable for another agency (company, PE, billionaire with an axe to grind) to come along and buy them and then raise the prices to rent seek on Apple?
You appear to be arguing that larger companies shouldn't be able to secure their supply chain and instead be forced to follow the whims of the market as companies go in and out of business forcing the larger company to either (a) build it in house or (b) keep redesigning every time something changes.
One thing about antitrust is that it's a set of restrictions only applies to companies with a certain amount of market power. It's not a set of rules that are designed to be fair for everyone.
So, yes, some other company could conceivably do something to diminish Apple's market power and not run afoul of antitrust. And I think that's ok?
Companies with too much market power should not be able to vertically integrate to increase their market power. They definitely should not be able to do this via M&A.
This is, again, not meant to be "fair". Because there's no such thing. Companies of a certain size are inherently unfair competition, antitrust rules just limit how they can flex.
Anti trust has nothing to do with market power in the US.
There has never been any restriction on “vertically integrating” and you have not shown where competitors are unable to buy alternatives because of it. That includes ARM chips, fingerprint sensors and every other component that Apple uses.
> Yes because Skype and GitHub are market leaders and it’s really hard to change your git origin.
Yes, for exactly those reasons. Have you actually tried getting everyone on a team to change their git origin? And that's before mentioning the other stuff you have to migrate: the issue tracker, the CI pipeline…
Hardly anyone uses GitHub’s rudimentary issue tracker and reconfiguring a CI/CD pipeline is child’s play unless you use GitHub actions and very few if any large companies use GitHub actions.
Ok, well, we're not talking about the same stuff here so I'm not sure it's worth going back and forth. We can just continue to be on different sides of the antitrust issue/
YouTube’s issue wasn’t just being sued, the storage and bandwidth costs are huge and YouTube was losing billions. Rumors are that YouTube is still not profitable.
YouTube took years and only became slightly profitable after burning through billions of Google’s money and then only by piggybacking off of Google’s existing infrastructure and ad network.
Price dumping is a bigger deal when it's a company in a monopoly position doing it. It's not necessarily anti competitive to sell at below cost.
YouTube could have been profitable by charging for their services. Like Vimeo. They could not have been profitable with ads. Google couldn't afford for YouTube to be small, they needed a near monopoly on internet video to extend their ad empire.
>YouTube could have been profitable by charging for their services. Like Vimeo.
Fyi, Vimeo was a money-losing business when IAC bought it 2006 and is still unprofitable after IAC spun it out as a public company in May 2021.
So it's not convincing that Youtube could have stayed independent and become profitable by charging for videos. Before the Google acquisition, Youtube was also threatened by the billion dollar Viacom lawsuit. The young Youtube startup didn't have the money to fight expensive legal battles like that and could realistically lose in court like Napster lost against the RIAA lawsuit.
Youtube getting acquired by Google got the video startup out of several fires: (1) switch to Google's datacenter infrastructure which reduces operating costs (2) tap into Google's extensive ad network to monetize (3) use Google's army of lawyers to settle with Viacom by convincing them that the ContentID fingerprinting algorithm will filter out piracy.
Google over-leveraged advertising on Youtube however. Most Youtube viewers use an adblocker on PC, and adblock is becoming more common on Android with each passing month. All because AdSense went with a more lax policy of moderation for ads after the 2017 fallout caused by Matt Watson scared away big advertisers like Frito-Lay and Toyota. The result was all ads were either falsely advertised Android games, multi-level marketing scams, or even nakedly racist political ads in the runup to the 2018 congressional elections. Adblock rates exploded, cutting Youtube's income and causing a panic response of running even more ads and locking users into seeing them. To this day Youtube still has a lax vetting policy for advertising partners, and actively hateful, harmful, or overtly false ads stay up for weeks until enough users report them.
As for subscriptions... Well, they tried that with Youtube Red. And then Youtube Premium. And then Youtube Music. Every time people turned it down, because the benefits weren't worth the cost each month considering all the features touted could be found legally for free elsewhere. And when video creators outed Red by showing they'd get a paltry amount of that revenue, despite Youtube saying the money from subscriptions would be used to pay them, even more of the viewing audience turned against it.
When you're in the uniquely precarious position of hosting high cost user-generated content, it's very easy for outside forces to break you over their knee and send you into a death spiral.
People are complicated! I like being healthy, but I also like eating pizza with mountains of cheese.
Wearing my “enterprise architect” hat, I love stability. I don’t want to choose a technology that just might be the silver bullet but probably isn’t, and will in fact be abandoned and need replacing in 2 years.
But with my “Hacker News reader” hat on, stability is boring. Constantly inventing and testing new ways of doing things is how we progress as a species. Anti-trust speeds that up and so I love it.
I guess I want a constant churn of innovation with other people bearing the risk. Perhaps if anti-trust were more aggressive it would at least level the playing field - at the moment, most innovation is from companies who can afford to drop $10B as an experiment. (And they get a tax refund either way.)
From being on both sides of the fence (providing B2B software as a startup, and dealing with small businesses as a client), smaller entities will be expected to adapt to the bigger fish.
Startups will bring translation layers to fit inside an existing system, and as a big client you can often send them the exact interface they need to adhere to and they’ll deal with it.
In that sense, the switching cost can be minimal (and you might keep your existing system running in parrallel), and if you’re big enough you’ll have the option to outright buy the smaller business if it were to flail.
It’s more complicated I think on the B2C side, where you have to buy more trust and establish a brand for people to give your their data and/or money.
When I lived in China and talked to VCs about the volatile regulatory environment and relatively frequent busting of companies one sentence I heard often was always something along the lines of, "sure it's annoying but you know what? For the occassional billionaire that gets toppled there's a hundred millionaires waiting to take their spot, it's just opportunity".
This changed my attitude quite a bit. In particular in the US the debate is often framed from the perspective of the very few individuals adverserly impacted by anti-trust. "If you break X apart, who will want to be the next Y? The answer is quite literally: hundreds of people gleefully waiting to take even a fraction of that market.
If there is a void to fill, someone will always do it. I think of all the measures one can take, anti-trust is one of the least disruptive things to the ecosystem overall, because it not only doesn't diminish, but strengthens market dynamics.
All companies strive/want/expect/hope/conspire for one thing for cost: When purchasing for the input it would like to operate with terms of a market economy but when selling their goods/services they would like to be monopolistic. It's very a fundamental and natural desire. Desire to kill competition is just a manifestation of this fundamental rule.
That's a bit of a weird article: the author seems to argue that monopolies etc are bad, but then makes the mental leap and assumes that just because there's something called 'anti-trust legislation' that it'll help.. The author himself almost grasps the problem:
> [...] Oracle became a company more famous for its legal department than new innovation.
Just like most other regulation 'anti-trust' is just another weapon that those with a big enough legal department can wield against the competition.
We need more competition, not less. Eg we need to allow Wal-Mart to open bank accounts.
> makes the mental leap and assumes that just because there's something called 'anti-trust legislation' that it'll help
I'm not trying to defend the author.
But there's no "mental leap" here; that's exactly the real-world, observable effect of anti-trust legislation when it is enforced. And what we're seeing now with the FTC is precisely the enforcement, for the first time in decades, of existing anti-trust legislation.
If your point is "legislation isn't enough", you're right, but trivially and uselessly right. Of course the real effect comes from enforcement, just as making murder illegal but then not charging and arresting murderers would, obviously and trivially, not decrease the rate of murder.
> But there's no "mental leap" here; that's exactly the real-world, observable effect of anti-trust legislation when it is enforced.
The problem is that it's selectively enforced, which makes the legislation dubious at best. There are hundreds of monopolies or quasi-monopolies out there that will never be challenged.
That’s an issue with enforcement, not the legislation itself. There’s no way to write legislation that prevents its abuse through selective enforcement. You have to address the abuse itself via strong government accountability.
Not having anti-trust legislation isn’t going to increase competition. Say you need more competition, also isn’t going to increase competition. Real markets naturally tend towards monopolies, only governments putting a thumb-on-the-scales to prevent monopolies keeps competition alive long term. Something the US seems to have forgotten in the past couple of decades.
Observation: there exists a few companies whose market positions are very close to monopolies and where the government isn't doing anything that has actual effect.
I don't think it is an issue with enforcement alone, but with laws that do not sufficiently obligate enforcement. Such laws are not created because politicians are corrupt.
Concluding that regulation dosn't help when what we're observing is non-enforcement is a bit disingenuous. If I'm being charitable.
If you’re talking about the US, then the laws absolutely exist. They were created to break up companies like Bell and Standard Oil, and are extremely effective, when used.
But they haven’t been used for decades, because regulators have decided not to use them. There are of course many reasons for that, including political pressure and regulatory capture. But to say the laws don’t exist, is just wrong. They exist, they just haven’t been used for a long time.
Also writing law to obligate enforcement is tautological. All law is meant to be enforced. Who’s gonna enforce the enforcement of enforcement laws? And why would they not be subject to same pressures to under-enforce as well?
> Concluding that regulation dosn't help when what we're observing is non-enforcement is a bit disingenuous. If I'm being charitable.
Why do think I came to that conclusion? My comment argues quite the opposite.
Breaking up Standard Oil was a farce. It was not a monopoly, and none of the arguments about how monopolies allegedly abuse their market power applied.
> Furthermore, and also in contradiction to monopoly theory, Standard Oil’s share of the market had declined from close to 90 percent in the late 1800s to about 65 percent at the time of the court’s ruling. These facts, however, did not faze the judiciary. The court ruled that because Standard Oil had consolidated some 30 divisions under one single management structure it counted as a monopoly. In other words, Standard Oil did precisely the opposite of what monopoly theory maintains—it reduced rather than raised prices, it increased rather than cut production, it lost rather than “controlled” market share, and it paid its employees more rather than less than its competitors—yet the theory that Standard Oil engaged in “predatory practices” and “exploited” consumers has prevailed in our history books.
I didn't say the laws do not exist. I pointed out that they obviously do not work. And they obviously do not work because politicians are strongly disincentivized to ensure they work.
> There’s no way to write legislation that prevents its abuse through selective enforcement.
Are you suggesting that all legislation is equally prone to abuse through selective enforcement? That's wrong. Legislation differs a lot in how straightforward it is to enforce universally.
Eg legislation about what people do in the privacy of their own bedrooms is almost impossible to enforce. Legislation about which side of the road cars should drive on almost enforces itself: you don't need the police to write you a ticket to figure out that driving on a different side of the road than everyone else in your country is a bad idea.
Would really like to see a credible source for this statement. There are industries where this happens (natural monopolies which is stuff like raw commodities, as competitors cannot mine at the place where you mine) but I don't think this holds in general at all.
Agree there needs to be more antitrust enforcement across the board. This is a movement that’s growing and takes time. There has been decades of non-existent enforcement and even encouragement of monopolies by the government. It’s past time the government break up some of these behemoths
Some of the purpose of antitrust enforcement is to establish a baseline to "warn" other companies. They've only really interfered with a handful of tech acquisitions in the last year, but it sure sounds like everyone doing M&A is being very careful right now.
Sometimes a credible threat of enforcement is enough.
From what I gather from reading Matt Stoller's newsletter on monopolies, there has been little meaningful enforcement of antitrust for a very long time.
Did you know there's a huge cheerleading monopoly [0]? There is essentially one company that runs the competitions, sells the uniforms, and sells the equipment. A quote from the article:
> The most interesting aspect of this case are not the legal arrangements, but the fear that I found in interviewing people in the cheer world. Virtually every interview I did was under the condition that the person remain anonymous for fear of retribution. Often people would email me saying that I had no idea the depths of the scandals in the sport.
How about monopolies in port-a-potties and MMA? [1]
The alternative seems to be that you do...nothing? And just let them keep consolidating a market? That can't be good.
Antitrust needs enforcement so that we can have competition.
Top down pressure on monopolies keeps competition healthy and active. A neverending arms race, which is good for innovation. It prevents lethargy, malinvestment, stagnation, and mere taxation.
Do you have any sources to back up your claim that anti-trust is something that’s most often wielded by big companies against smaller ones?
Because it sounds highly unlikely to me.
The whole point of anti-trust is to provide a check on only the most massive companies that over rent-seek their market and cannibalize competitors, before the startups are able to get off the ground, literally crushing competition.
One of the most worrisome statistics in antitrust is that for every case brought by government, private plaintiffs bring ten. The majority of cases are filed to hinder, not help, competition. According to Steven Salop, formerly an antitrust official in the Carter administration, and Lawrence J. White, an economist at New York University, most private antitrust actions are filed by members of one of two groups. The most numerous private actions are brought by parties who are in a vertical arrangement with the defendant (e.g., dealers or franchisees) and who therefore are unlikely to have suffered from any truly anticompetitive offense. Usually, such cases are attempts to convert simple contract disputes (compensable by ordinary damages) into triple-damage payoffs under the Clayton Act.
> The second most frequent private case is that brought by competitors. Because competitors are hurt only when a rival is acting procompetitively by increasing its sales and decreasing its price, the desire to hobble the defendant’s efficient practices must motivate at least some antitrust suits by competitors. Thus, case statistics suggest that the anticompetitive costs from “abuse of antitrust,” as New York University economists William Baumol and Janusz Ordover (1985) referred to it, may actually exceed any procompetitive benefits of antitrust laws.
The purpose of antitrust law and merger review and the FTC in general is to preserve and promote competition. It’s the government’s legal department against FB, Google, Amazon, Microsoft’s legal and lobbying departments
I wouldn’t approach it in terms of “enforcing antitrust laws.” It’s very hard to win those cases. What I would do is limit the cash that public companies can retain. This has the effect of distributing capital to new ventures and competitors naturally. And it has two knock on effects that are also very positive. If Sergei Brin et al want to develop self-driving cars, let them use their own money, or raise new money, not use an advertising company’s stockholders’ money vainly and cavalierly. Second, with less cash around, there’s less to waste in general, and especially for senior managers, less to steal.
We could implement my suggestion by making this more tax favorable for everyone involved. Liberate the cash!
Traditionally the answer to all of the economic problems we're facing today was taxation.
You're right that antitrust cases will never be won at the scale needed to have a material impact on the economy. Plus, big companies will never allow reforms anyway, and will lobby their way out of any loss. So what do we do? What are some ethical and amicable solutions that can be applied evenly and fairly to all citizens?
* Tax all property, not just homes. The US national property tax averages 1.1%. So we should tax stocks and other assets at around 1% also. Stockholders would choose to give up 1% of their shares each year, or pay their cash value to keep them. The current US stock market cap is $46 trillion, so 1% of that would be $460 billion. We paid $4.8 trillion in taxes last year, so this property tax would lower taxes for the rest of us by about 10%. The average income tax paid is $20,000 per year, so that would be about a $2000 savings per year.
* Charge sales tax on all property sales, including stocks. 5% might be a bit high, and some states don't charge sales tax. So a national rate would be needed to establish a baseline on stock trades, something like 0.1% to 1% per trade. Losses could be used as a tax write-off, so a final sales tax could be charged at the end of the year, which might equal the property tax. This could reasonably raise savings to between $2200 and $4000 per year.
* Fund UBI with the wealth taxes stated above. $2000/yr is $167/mo, but $4000 is $333 (about the cost of health insurance or a student loan payment or rent in rural areas). Instead of working to make rent, we could get back to getting real work done.
* Change the culture of tech. We could make the "I've got mine" mentality of tech bros uncool. Wealth concentration makes property a zero-sum game by forcing 90% of the population to subsist on 10% of the wealth. So we could openly criticize people who have assets above what they would need to retire (perhaps $10 million). Wealth beyond that is an effective theft of the time and resources of workers, who are forced to work to continue paying dividends on that wealth. The opportunity cost of that has grown to consume all of our time, giving us a lower standard of living, less leisure time and less upward mobility (by far) than we had before tickle-down economics which started in the early 1980s: https://www.weforum.org/agenda/2020/09/social-mobility-upwar...
Now to me, everything I said above is obvious. It's self-evidently the way to fix the problem. Any child could understand it. The real difficulty is around de-programming the so-called thought leaders who currently benefit from the wealth inequality status quo. We could and should call them out and challenge them at every opportunity.
The main and most important mono/oligopolies to break are in finance, medical education and law. These are the primary gatekeepers preventing value to reach consumer, these are rent-seeking vampires.
Tech is interesting example, of course, but it's like a tempest in the bowl right now. We should permit to innovate everywhere, not just in web search space and e-commerce.
Maybe we are all biased about the importance of tech but it is a sector that can expand beyond its confines.
Actually its not even a sector anymore. "Big tech" is hardly selling tech products or services anymore, its core profit is from selling ad or product marketplaces
The finance example is illustrstive. Big tech would love to expand into that space and "disrupt" that sector (double the size of conglomerates) but so far at least it has been pushed back by other equally entrenched oligopolies
The main and most important monopolies are, in this order,
1. Apple
2. Google
3. Amazon
> finance, medical education and law
Each of the above companies reaches deep into finance. Google and Apple capture real world payments on their devices, take 30% on top of any app software, limit or own the web, etc.
They're each trying to break into medical, with big medical endeavors underway right now.
Forget textbooks. Look at the fight between Google and Apple for the classroom.
These companies have their own film studios, for goodness sake. How the hell did we let that happen? Lord of the Rings is Amazon -- What?!
We didn't let anything happen. 50 years ago Singer sewing machines was making computers[0]! Why didn't people back then ask who let them innovate and risk their money the way they chose to.
I think they understood that you can't both have a process that delivers the fastest progress in human history, and dislike the vanishingly few participants who succeed at it inordinately well.
> think they understood that you can't both have a process that delivers the fastest progress in human history, and dislike the vanishingly few participants who succeed at it inordinately well.
Fastest progress in what? What you smoking mate?
60 years after Wright Brothers we landed on the moon! We went from a flying bit of cardboard to real space rockets.
Now another 60 years have passed, and we achieved fuck all.
It is amazind that free market advocates do not understand their most important feature. - competition
The world has changed dramatically in the past 60 years.
Cell phones to smart phones, medical imaging (e.g. MRI scans, ultrasound imaging), information processing and storage, genetic engineering, quantum computing, fibre optic communications, DNA sequencing, 3D printing, nanoscale lithography, public key cryptography, RNA vaccines, self-driving cars, the internet, the ISS, digital television
What a lot of people don't understand is that companies that compete also cooperate. All through my career I have been working along side companies that I also compete with for customers. Innovation often happens in isolation, but often it is with cooperation that innovation become the norm.
You typing this on an inconceivably advanced computer made by one of several competing companies whose information lances across competing yet collaborating network companies to rest on my pocket supercomputer?
Glad you just survived a global pandemic enabled by competing companies creating vaccines in record time, with your life made easier in the interim via streaming and video calling services enabled by competing companies.
Your example of going to the moon is the opposite. That was funded by taxpayers. Most or all this progress has been done by individuals and groups choosing to do it, not by presidential assignment of taxpayer money.
Funny you use "vanishingly few" in your sentence. Why is that do you think? Do you those amazing innovator megacorps with walled gardens into which new companies can't reach have nothing to do with it?
Why do modern Americans hate market competition so much?
I don't mean this as a gotcha question: I really don't understand what people are claiming when they say this.
All three of those companies are now large conglomerates with a lot of power (perhaps too much), but calling them "monopolies" is counter-productive (except Google search), especially in the context of regulatory or legal framework, where the facts have to fit a very precise pattern to take action.
They own a dominant platform for consumer shopping and use it to promote their own products. Meanwhile established competitors like Walmart cannot be featured on the same platform without submitting to rules that Amazon itself doesn't have to abide to. It's called a tie-in arrangement in antitrust law, and it's not legal.
I'd agree that they are "dominant", and that legal authorities should watch Amazon closely for specific violations, but they only control 35-40% of the online consumer retail market (by most estimates circa 2022).
Physical retail stores are not a natural monopoly platform like a shopping site is. There's nothing stopping Amazon from building a physical store next door to a Walmart and selling its products there.
How is a shopping site a “natural monopoly” when there is an existence proof that there are other large shopping sites - like Walmart.com?
If you go on Facebook or Instagram you can find thousands of small merchants who advertise there and ship directly to consumers.
> There's nothing stopping Amazon from building a physical store next door to a Walmart and selling its products there.
And there is nothing stopping you from building a website and doing targeted advertising that is reachable by anyone. Wouldn’t you say it’s a lot easier creating a website than building a physical store?
This is not true for Apple and I assume Google. It came out in the Epic trial that 80% of App Store revenue comes from pay to win games. If you look right now at many of the most popular non game mobile apps, most don’t monetize directly through the App Store.
Anyone can set up their own online store and many do using services like Shopify.
This whole article is such a mess, I don't know where to start... First, all companies try to capture consumer surplus. Second, how are ads "great value for everyone" but ads added later are "rent seeking"!? Third, Anti Trust will change none of this. In fact a company without a reliably monopoly has no option but to capture more surplus and do it sooner. Fourth, OP doesn't know what a zombie company is (one who's debt interest totally consumes it profit, so it exists only because of cheap credit and is not actually economically productive). Op is just throwing more "shit at the wall to see what sticks". Fifth, he seems very confused about corporate "profit" figures. Revenue and costs are fixed, real numbers. Profit is just made up. And since you pay taxes on profit, it's usually much lower than one would expect. Hence why Amazon is insanely large and successful but never actually makes any money. I dislike this, but I also know that as soon as anyone starts talking about a corporations profits they're making things up. Also, if GCP does close (because it's apparently so unprofitable) then that just makes Amazon (AWS) all the more dominant in the industry (so much for anti-trust). Plus how is any "start up" meant to get a few billion USD together to enter that market? And isn't a market with the largest player at 35% and no one making a profit (lol) exactly how competition is meant to look? Not to mention the 1000s of start ups that reply on these services to save them tonnes of cash!?
I am no expert on corporate structures, market structures, anti trust, accounting or economics (or anything else OP apparently is AND is the only one who sees this). But I know enough to know it's complex and there are no easy answers and anyone saying there are is either ignorant or lying.
Start with changing the name. Anti-trust evokes a negative vibe, pushing back on success, politics of envy etc.
In reality the policies we talk about are the proactive nurturing of a healthy economy. Systems thinking instead of systemic capture. Diversification as a fundamental risk management strategy. Keeping them small to keep them honest. Fostering competition that will unleash creativity. Etc.
I have a strong (but hard to prove) feeling that had the past decades in tech not been so dominated by a tiny number of conglomerates, the contribution of tech to society would have been materially much more impactful.
This is one of those hedonic treadmill words. Whatever you choose will have a bunch of 'non-profit', think tank, 'institute', Murdoch press releases nudging negative connotations.
It's illegal to teach critical reasoning in Texas. Until things like that get fixed no name change will immunize the public from corporate propaganda
Agree about the naming of antitrust being problematic. It comes from the trust busting days. I prefer talking about building a “decentralized economy” that stands in contrast to an economy controlled by concentrated corporate power
Say I make a search engine better than Google. If I market it, I get some share of Google's users. The better my search engine is, the more of user base I “steal”.
What's wrong with that? Is there something Google can (legally) do to stop me?
Google owns the web browser your users use to access your search engine. Google owns the search engine your users use to find yours. Google owns the ad platform you use to market your search engine. Google owns a large share of the software used to run alternate web browsers. Anti-trust is what stands in the way of google: Preventing your search engine from being used with chrome. Making your website not work with chrome anymore. Delisting your websites from google search. Removing your ads. Blocking your emails.
What are you going to do other than close your business when you've been effectively blocked from the internet?
Do you expect Google to do any of these things to OpenAI, if ChatGPT becomes the google killer that some people say it could be? It's very difficult for me to imagine any of that.
OpenAI isn't one person starting a search engine in their garage. But they acquired the reputation and resources to protect them from the behavior you describe through conventional means. And others can do the same.
I expect that when Google faces real competition against their core business they will be assessing the legal risk of every anti-competitive move they make, like every monopoly before them.
Be that buying the competition, dumping to kill the competitors business, slapping them with lawsuits or making their competition illegal through lobbying.
I don't believe ChatGPT-based solution will ever replace Google, but if someone tries and gains enough traction they'll encounter at least one of those issues and be on top of HN for that.
Google will find some plausible excuse, something deep in ToS they broke, competitor will not be able to work around it or reach someone within Google to explain to them what exactly need to do to restore that part of service.
We'll all suspect Google has done so intentionally and maliciously, but nobody will be able to prove that beyond doubt.
Google could buy OpenAI in a heartbeat unless the government stepped in to disallow it. We’ve seen this before with amazing company Figma founded to beat Adobe. Way better product but instead of Adobe dying or having to innovate they bought Figma
Tell you what, go open a customer support ticket with Google for assistance with a Google Workspace account.
Now, once you have discovered that this very normal and routine process literally does not exist, you might spend a little time researching how in the world this could be the case: even if you’ve spent thousands on that Google Workspace account, your only options are A) community support forums full of unpaid users helping users (Aw, isn’t that altruistic of those kindly users?) or, B) go away and deal with your problems yourself.
Anti-competitive practices and wielding a de facto monopoly position are perhaps not the singular or direct cause of this frankly astonishing lack of respect for their users, but it is absolutely tightly correlated with such open distaste for the people purchasing and using their products.
Lastly, not for nothing, but Google’s own origin story and wildly successful history are literally the result of anti-trust actions taken against their establishment competitors in the late 1990’s/early 2000’s.
To be honest I don't see how this is relevant here.
Anyhow, there's a lot of Google Workspace competitors, switching to one of them shouldn't be a problem (at least for internal communications; sharing a self-hosted OnlyOffice link with somebody expecting a Google Docs document would be mildly weird).
I think the point if you’re a small customer or vendor big companies don’t have to care about you and can treat their customers like shit. Airlines come to mind. Also, sellers on Amazon can be abused by the giant and have little recourse because Amazon controls so much internet commerce. The point I think is that monopolies can treat their customers like shit and get away with it.
Similar point if you’re on Southwest Airlines support. A true monopoly could close all support functions and people would have to deal with it because there’d be nowhere else to go
> The better my search engine is, the more of user base I “steal”.
Very bold assumption on your part.
Google's not #1 because it's orders of magnitude better than anything else anyone could come up with. It's #1 because Chrome's #1, while #2 (Safari) and #4 (Firefox) receive millions each year to keep it as default.
Your alternative, even if objectively better (whatever that means for a search engine) will never take a significant chunk of Google's market share because you can't outpay Google to get it into people's pockets by default. That's what anti-trust is about.
> Google's not #1 because it's orders of magnitude better than anything else
That was the assumption in the OP article – at least, that it was better than competitors at first. Of course, being the default plays a significant role in it keeping its popularity nowadays, but I still believe it can be worked around (and will be, but it'll take time).
It's still better than everything else in my opinion. I use DDG by default, but sometimes have to revert back to Google. But those are rare enough that it's not signifanctly better than anything else. Something better will come eventually, but it'll be a very uphill battle. Enthusiasts will use it (myself included), most other people will not.
TikTok is the only example I can think of of something succeeding in the past decade that's not from a company that also offers like a million other products. That's the power of having a monopoly.
If it gets regulated a bit (example: you get a prompt to choose your default search engine when you first open a browser), Google/Apple/Microsoft/Amazon might lose a dominant position in a category or two, but they have a dominant position in so many other categories that it'll mean nothing to them.
The only possible solution is regulating them hard, forcing each of those to dissolve into a dozen smaller companies and preventing them from buying up the competition even further. Then and only then will startups have a shot at snatching up a significant number of categories to really endanger what we now know as the Big Four.
If your engine is better then they will buy it and shut you down. Or they will put 100x as much money into marketing as you have. Or they will hit you with law suits.
What I am trying to say is in practice big corporations have many ways to get rid of their competion. For them there is no need to be better.
They can pay you lots of money to buy it off you, and then do what they want with it. Great for you, but (potentially) bad for all the prospective users. It also might be bad for all the users who would have kept using Google either way, since less competition allows Google to make a worse product (e.g., more ads).
> They can pay you lots of money to buy it off you
Only if you have investors that can force you to sell. I know that “just bootstrap your own search engine lol” is not an answer, but I do think there's some middle ground.
If you're actually a threat to them and still think so, it just means they haven't offered you enough money. They'll keep doubling the offer until you (or your family) starts to question whether sticking to your product vision is worth forgoing a once-in-a-lifetime option to literally win at life with a single signature.
Take all the answers to your question. Then consider that they're not just the reasons you'll have trouble competing, they're the reasons you won't bother starting.
It depends on what you like about startups. If it is the potential to make millions (which from my experience is 95% of the startup folk), then they are very much against anti-trust.
If you are a fan of disruption, innovation and advancing the world, you are definitely part of the minority that loves anti-trust.
I am personally aware of a few folk in FAANG, that pull ~1-3M a year currently and are busy touring asia to set up their "startup" with plans to make 10x their current renumeration. I cannot see these as people who 'love anti-trust'.
I think the author is unaware that “anti-trust” has been used for decades as a bargaining chip, where big companies trade gestures for barriers of entry with the political establishment.
The only reason the internet has been the biggest growth sector for more than 2 decades now is that it has been new enough to be less regulated than other industries, but as the giants (Google, Facebook,…) both settle new cases and push for self serving regulations, the barriers grow tall again, and innovation will stop.
This is dumb and idealistic. The only purpose of VC funded tech companies is to have an exit. Statistically by being bought by one of the giants or being foist onto the public markets where the public is the “greater fool”.
In the past decade, only one tech company has made a dent in the market and become consistently profitable - AirBnB.
I think this article's fundamental premise is wrong. To quote:
"The core reason that companies generally, and tech companies more specifically become the very sort of corporation that they once hated and took on with vigor is the need to keep growing, forever."
Small startups and companies don't hate large corporations. If they take on large corporations with vigor, it is only to take on a segment of the market, not the corporation itself. The only purpose of startups is to maximize profit like everyone else is doing, and if they can do that by being bought out or by becoming behemoths, of course they will do it. If anything, people in startups LOVE corporations because when they're bought out, they can retire early with a ton of cash.
The people who dislike large companies and who should favour anti-trust legislation are consumers. But founders of startups? Nah, they operate on the same profit-maximizing principles as the CEOs of big tech. It's all about money.
The quote you provided just did not say specifically that startups should like anti-trust law.
Is there another place in the article that says it specifically? I didn’t see one on a quick second read, but I could’ve missed it.
For most of the article the focus os on consumer surplus relative to rents sought, so the article seemed pretty clearly to be describing consumer preferences to me
> if you like small startups you should like anti trust laws
Small start-ups which cannot grow are not start-ups, they’re small businesses. This article is, if genuine, an anti-growth pitch. It ensconces the status quo.
Anti-growth doesn't mean zero growth. I meant it more in the sense of being against unbridled technological innovation, which is a lot different than growth in any possible way.
For example, a society could grow in other ways such as being restructured or even using less.
> a society could grow in other ways such as being restructured or even using less
This is not anti-growth, it’s different growth. We generate more GDP per unit of physical resources or energy than before. That is good and still growth.
That depends on how you measure growth. If you measure it as total wealth then you are right but if you measure it as wealth per capita then you can grow for a lot longer before you hit a wall if you keep the population under control.
> If aggregate growth is zero, the system is zero sum.
No, it isn't.
> Per capita doesn’t matter.
Of course it does. If all of the actors in the system perceive themselves to be better off then it doesn't matter is there is no actual underlying growth. This can happen, for example, through trade. If I have something you want and you have something I want we can create wealth literally out of nothing simply by exchanging those two things.
Or, if you have something I want, and you die and I inherit that thing, then I am better off than I was even though there has been no actual underlying growth.
Only if you use a vacuous definition of "growth" that fails to distinguish between an actual change in the underlying physical situation and a change in people's perceptions.
> if you use a vacuous definition of "growth" that fails to distinguish between an actual change in the underlying physical situation and a change in people's perceptions
No, this is fundamental game theory. Independent of what you’re measuring, if it isn’t growing, the game is zero sum. By definition. Of course if something else is growing that game may not be zero sum.
You are confusing the map with the territory. Mathematical models are only useful insofar as they correspond with reality. Go back to your original claim:
> Zero growth means zero-sim [sic] games. Pre-modernity. Sucks to be poor if you’re born into that world.
China is the second-largest economy in the world, and the fastest growing. Liechtenstein's economy and its growth rate are a tiny fraction of China's. But if you had a choice between being an average resident of China or an average resident of Liechtenstein you'd be a fool to choose the former no matter what game theory tells you.
We need Apple, Google, and the rest to have holes in them for the good of the entire market. If big players dominate and suck all the air out of the system, all of that money goes to malinvestment and incrementalism. Vanity promo projects that get closed in a year.
Big tech should win based on velocity and bringing value to customers. They shouldn't be able to just coast. And little companies should have a way of getting in without surrendering all their margins to, eg., the App Store.
I never understood anti-trust. Isn't it punishing a legitimate company for working their ass off for years/decades and growing too big for people's liking? It's my OS, I don't want to put your app on it, I want to put mine. What's the problem? It's actually against free market. I understand it from a socialist point of view though.
Edit: The comments so far have given me some perspective. It was a genuine question to understand.
Why do we like the free market? Because it has proven to be able to drive innovation, increase standard of living, and make life, in general, better.
But the free market also has problems, that need fixing. If these problems remain unfixed, they grow, and choke the things we like about the free market out of it.
The concentration of power and control in a few entities, and the subsequent effects these entities have on the rest of the market is one of these problems. And anti-trust exists precisely to reset this problem to a manageable state from time to time.
The free market is a great system. It's fair to say that it's currently the best system we know how to run the economic side of a society.
But it's also not a perfect system, and, like every imperfect system, it cannot be left running unchecked. Even the best server requires maintenance from time to time. If it isn't done, it stops working at some point.
> Why do we like the free market? Because it has proven to be able to drive innovation, increase standard of living, and make life, in general, better.
[citation needed], especially in environmental terms and for countries outside the first world
The purpose of anti-trust is to prevent firms from exercising market power that leads to predatory pricing and anti-competitive behaviors that lower social surplus and innovation. There's a whole subfield of economics called Industrial Organization that tackles this.
If you read a lot of the original liberal thought behind the "free market", it actually spells out something probably more aptly named "competitive market". A "free" as in "you can do whatever you want" market does not provide the same theoretical benefits as a competitive market (e.g. you can make models/derive theorems that the long run profits go to 0 due to competition, etc.)
Even the wikipedia page for "Free market" today includes:
"For classical economists such as Adam Smith, the term free market refers to a market free from all forms of economic privilege, monopolies and artificial scarcities.[2]"
I believe that interpretation can come from the following line in Wealth of Nations:
"People of the same trade seldom meet together even for merriment or diversion, but the conversation ends in a conspiracy against the publick [sic], or in some contrivance to raise prices."
> I understand it from a socialist point of view though.
I hope this provides further understanding from a liberal-capitalist point of view :)
One key thing I'd say is it's about using your power that you rightfully gained in one sphere to unfairly win in another.
I've spent years working towards having this motorbike why can't I use it in the Tour de France?
Google got into trouble for doing this with their terrible shopping thing. They didn't compete on having the best shopping tool they just forced theirs to the top knowing it was worse. This is bad for consumers as the assumption is that things get better as companies compete.
It’s about making the market work for consumers. Monopolies and the like sort of break the market dynamic by removing competition. It’s got nothing to do with socialism.
Oft-overlooked, but this applies beyond “big tech” too. The US has for decades lagged behind most developed countries on broadband internet speed, largely due to the uncompetitive markets.
Things like Local Loop Unbundling (back when ADSL was a thing) and allowing/encouraging municipalities to run FTTH would improve things a lot, but the incumbents have lobbied hard against such policies that would force more competition.
Sort of, but the problem with ISPs is "who owns the infrastructure?" because it doesn't matter how much you want ISP competition if the actual cables are owned by an ISP rather than an independent infrastructure company that ISPs are only allowed to contract to lay new cable without any say in who gets to use it.
(The US absolutely adores vertical integration. A company can own the land, the infrastructure, the access to that infrastructure, the services that run on that infrastructure AND strip your rights to the court by forcing you into accepting binding arbitration instead, and the US will point and it with starry eyes and proclaim it a shining example of success)
Right, LLU addresses exactly this by requiring network operators to open up their local exchanges to competitors, basically forcing a decoupling of the "last mile delivery" (which is a natural monopoly) from the internet service provision (which is more competitive).
It's quite clearly beneficial to consumers to do this, but companies hate it of course.
If you like start-ups you don't take away one of the greatest motivations to create them: the possibility of getting acquired.
If you love competition you don't take away the ability of the biggest players to enter "hard" markets and disrupt large entrenched incumbents.
And if you are in favor of both startups and competition you fight government regulations which corrupt markets, protects incumbents and grants monopolies.
If you were alive in the 1990s, you'd recall the great religion of the free market.
That language has disappeared from the political discourse, because almost all markets are at best cartels, at worst outright monopoly.
Antitrust died with the Microsoft trial, an open and shit case with blatant public statement and evidence galore, and the court system failed us, likely by design.
It looks similar to politics.
A new candidate have to bring something on the table: new ideas, new faces, new horizon whereas if an in-place politician is interested in being re-elected, he probably wants to show how great he was and keep its base happy enough to have high retention.
Maybe you seek rent when you have non negligible costs to maintain past (think maintenance and tech debt)
It's past time for the US to do to big tech what it did to Standard Oil in 1911. In fact, new legislation is needed to prevent this from happening in the first place.
And of course, it is also necessary to restrict the powers of the state to end the possibility of a government that can do anything.
Or....you hate it because you can't rely on the value proposition that comes from burning cash just so you can be the first monopoly in the growth industry and buy out your competition.
The issue with this becomes that anti-trust then becomes the tool of the $CurrentRegime to break up companies THEY dislike.
For example, part of the reason US costs for healthcare are skyhigh IS because of US govt regulation. IF the only applied it to healthcare giants, but they won't, because they're not the companies the govt dislikes, also $$$.
All this will do is end up giving more power to the govt to break up the only thing that actually has the capability endangers their power-hoarding : big companies.
Ultimately, Govt IS the biggest company, and you rarely have a choice to switch. If I don't like Amazon, I can go to walmart, or local store. I can't just willy nilly pack up and leave the country.
People support regulations (or hell, $MeasureX) until the govt comes for the thing they like, despite people like us telling them that eventually the govt will do just that. (Eg, abortion in the US : People like us were telling others that if they stampede on our rights, they will stampede on yours too, given the chance).
"democracy" is "democracy" in name only in many countries. Eg, in the US, Republicans and Democrats are fairly similar middle of the road people. In India, what democracy lol? Same in egypt.
"democracy" also depends on others wnating the same change as you. You alone can't do jackshit.
I alone can choose not to shop at amazon and choose walmart intead.
Progressive corporate tax rates (like personal income taxes, instead of the current flat corporate tax rates) would help small companies to compete with big ones simply and naturally without needing governments to decide what constitutes a monopoly.
I don't disagree with anything specifically, but think this is naive.
First, startups are deeply intertwined with monopoly. Financially, a startup is a small chance of huge success. The ultimate win scenario is becoming a monopoly like Microsoft or Amazon did. The next best thing is being acquired by one. If they can't become monopolies, there's a lot less reason to fund, found or work at a startup.
A startup that plans to participate in a competitive market is low potential. Making great apps isn't a good startup goal. A proper startup goal is to make the appstore.
Do startups, as we know them, even exist without monopolies?
Second... Abstract economics is abstract. Creative destruction doesn't exist in the way that economic theories want it to. It's almost non-existent at the enterprise/monopoly level. How many S&P 500 really become defunct? Creative destruction doesn't exist here unless you really squint. It exists in some places. Restaurants rise and file rapidly. So do barbers and many types of small business. Creative destruction definitely happens to startups. Most die.
Overall though, if take a cold empirical look... Creative destruction is orders of magnitude stronger or weaker, depending on sector. It's effectively a non existent dynamic for Microsoft, Loyds & such. You could argue that creative destruction is out of control in other sectors. The theory though, the theory abstracts all of this away. A firm is a firm. Parts manufacturer, energy supplier, record label or software company. The gradients of reality outweigh the abstract description.
This is true about a lot of economic concepts. "Normal" economics like market determined prices, broadly representing marginal costs in an industry... those are inapplicable concepts to most tech giants. They're not really applicable to government adjacent industries, creative industries, financial industries...
I don't mean that you can't use "normal economics" to describe these industries. I just mean that it's less describing a textile or commodity electronics manufacturer this way.
One striking difference between many monopolies of today and those of the past is the alternative. The alternative to Twitter or Facebook is simply "no Twitter or Facebook." If Toyota stops making cars, either someone else makes more or everyone has less. If facebook stop making facebook... social media is not scarce. People will still consume as much social media as they want.
This isn't like Bell. A court will never have to analyze Facebook's business in order to reorganise it into viable smaller companies.
The point of anti trust is not to allow more competition. The point is to stop monopolies that hold customers captive, charging monopoly rents (high prices) and stop innovation.
There is a classic paper by Alan Greenspan on the breakup of Standard Oil [1]. He makes the point that supreme court was wrong. The breakup was just for competitors, not for the benefit of customers. This is the worst of capitalism where big business use the government to fight competitors.
This is the applicable case with today's tech giants. They are providing often a free product to consumers and continue to innovate. The low barriers to entry provided by digital goods and the internet mean that startups have never had it better. The last thing that is needed is government involvement to break up these companies for "anti trust"
Stuff like unnecessary anti-trust is how you end up with a 1500$ phone which is completely locked and that you cannot charge while listening to music at the same time.
While we could all be enjoying a Windows phone whose OS could be freely torrented and installed by individual users with Fortune 500 companies subsidizing the whole experience.
A company will grow up to the point the market needs it to grow.
In a pure capitalist market without government I would expect to see a few large players where replicating the technology is really hard and then a bunch of large companies being killed by newer competitors.
We kind of see these mechanics in our market but nowhere close to enough.
The distortion in our model of crony capitalism is that our centralised government gives unfair advantage to existing corporations in the form of bailouts (hey, too big to fail!) and regulations (easy to implement when you're Amazon, a business killer when you're small).
I would love to build a fintech startup and do what banks are doing for cheaper, but regulations in the banking sector make it a very expensive endeavour.
Anti trust is not the solution, it's merely a small patch which gets applied incoherently and used as a weapon by governments to steal more money from massive companies.
I argue that no regulations would have a better effect on disrupting large monopolies, once there is enough money to be made with little risk.
In my experience (so anecdotal) there is a lot of weird reasoning going on by founders, akin to ‘I vote for low taxes and against a more socialist system while I am poor as dirt, because one day I will be rich and then I would’ve shot myself in the foot’. New founders reason it will benefit them when they are huge, while, like in the voting example, that probably will never happen.
Could be, i'm not American and it's not built into anything of myself. But I know many founders here (in the EU) who think like this as well. And I guess there is even less chance of them making it that big.
A "start-up" is a commercial company, intending to make money by selling products and services, and typically invested with large sums by individual or institutional capitalists.
In other words, it is the opposite of anti-establishment; at most, it might be antagonistic to the established providers of the relevant products or services.
I'm in favor of anti-trust initiatives, and I like startups.
That said, there were (anecdatally) a large number of people on here (founders?) for awhile (maybe still?) that subscribed to the Thiel school of ~"first to the monopoly wins!" which is good potentially for a business, but absolutely terrible for any sort of ecosystem (including, say, the earth). I'm not sure I like startups with the goal of monopoly at the outset.
My problem with anti-trust is my problem with taxing the rich. How do you define rich? How can you logically explain why, say, $999,999 per year is not rich but $1,000,000 per year is? Wouldn’t a homeless person say everyone with a roof is rich? It’s simply illogical.
With anti-trust, it’s defining monopolies. Maybe a company like Google dominates search advertising. But they don’t compete economically in search, they compete economically in digital advertising - or is it all of advertising? Isn’t Amazon and Apple eating their shirt in new spend on search ads? By the time the anti-trust case works itself through the courts it’s often that the “monopoly” has fallen quite a bit from their perch.
Now to get to start ups. Startups being acquired WANT to be acquired - otherwise they wouldn’t be sold. There is no gun that makes them be sold - their shareholders agree to it. If you love startups, you should be pro-founder, and that means letting them be sold if they want it. Otherwise it’s simply coercion and authoritarianism to prevent an owner to do what they want with their company they put their blood and sweat into.
Too much concentration of economic power will translate into political power. We see this already with how much Meta, Google and Amazon spend on lobbying. Excessive concentration of economic power breeds antidemocratic political pressures. Sure there’s an argument to be had about the freedom to sell your company but there’s also American industrial policy, workers rights, industry resilience and consumer protections to consider.
If any person wants to have no restriction on their business in terms of size, anti-competitiveness etc, then they are welcome to do so - provided that they can build their monopoly without incorporating. Hire as many workers as you want, expand as much as you want - but you have full personal liability for everything that your business does, as it is under natural law.
OTOH if you want a fictitious legal entity to shield yourself from liability, then the society is happy to accommodate - but it comes with strings attached, and one of those is anti-trust.
> My problem with anti-trust is my problem with taxing the rich. How do you define rich? How can you logically explain why, say, $999,999 per year is not rich but $1,000,000 per year is? Wouldn’t a homeless person say everyone with a roof is rich? It’s simply illogical.
We all put our heads together and say "how much money should you be able to make before you start needing to give a lot of it back?" (or alternately, "how much market share should you be able to get before you're broken up?") and then that's the number. Some people will want that number to be higher, some people will want it to be lower, but ultimately we (mostly) agree that it's better for all of us if we follow these rules around that number.
From your original post, you seem to feel progressive taxes requires some sort of absurdly different treatment for people who make $999,999/yr vs $1,000,000/yr, or at whatever threshold, but that is not at all how they function. Even with discrete jumps in marginal tax rates (as in the current system of progressive income tax in the U.S.), post-tax income is a continuous monotonic function of pre-tax income. Making a little more pre-tax income always results in making a little more post-tax income.
My problem is that no one can logically explain why they chose what thresholds. It doesn’t mean anything, they just decided some number. I can play games and avoid that number. It’s absurd
The logic of a progressive tax is that tax is supporting the system that we all exist in and benefit from. I pay less tax than someone who makes more than me because they are extracting more wealth from the system than I am.
Yes, the brackets are arbitrary. But if everything is working in a democracy, then it should be set by the majority to follow the curve of what the majority of people make in some reasonable way. But, it’s not in america, because money is speech apparently so rich people buy votes and keep their progressive taxes lower than they would otherwise be.
There is a common fallacy that going up a tax bracket can result in taking home less money. For example, sometimes you'll hear apocryphal stories about someone turning down a small raise because they did the math and realized it would move them into the next tax bracket and result in them taking home less money. That's not how progressive taxes work, and such stories are incorrect. I just wanted to double check that you understand this, right?
If I have significant sums of equities, I can sell half on Dec 31 and half on Jan 1 to avoid a new bracket. I try to avoid speaking much about my situation, but my tax advisors and I use every trick in the book to play all the games available, of which this is but one.
My issue is not that I have dedicated a lot of time and money to avoid taxes, but really that the tax rules are so arbitrary and stupid to begin with.
A wealth tax! Even France tried and abandoned that! Do you have any idea the side effects that would cause? Suddenly I would be a pauper, how simple this would be.
We have wealth taxes. They are called property taxes in the US. I have to pay a percentage of the value of my house. And I can't sell a tiny piece of my house to cover it. I have to use my other funds to pay for it. That seems so unfair, the poor weak billionaires of the world say. When My house goes up in value, my tax will go up, and down works the other way too.
Billionaires cry and moan about the impossibility of paying a wealth tax on their billions in stock. They can manage to do it, just like all the rest of us. The wealth tax is claimed to be this exotic impossible thing. Yet most every home owner in the us is paying, us 100 million plus people. Surely the rich, those who have millions or billions can do the same. The reason they don't is they have captured the legislature, their fox new advertising is very successful, no one wants to tax the very wealthy because surely they will be wealthy one day.
Out of all the possible ways you can tax me, a wealth tax is easily the dumbest and easiest to avoid. I wish the US would do it just to show the world why this is so absurd. I don’t even want to get into it, just that the folly would be enormous and my laughter very loud.
This doesn’t really address my question, or any of my other comments, and I haven’t really said anything about being rich or not — just that we should be able to make decisions as a society. That seems to disagree with you? So, uh, good luck with whatever weird tax scheme you have going on, I guess.
I guess if you have no position then your commenting makes no sense and probably you should not bother.
If what it seems is that you want society to vote on how much to steal from me, my point is a flat income tax is the most fair and straightforwards, and eliminate as many exceptions as you can.
But given my knowledge of this situation that’s impossible and it won’t happen, so good luck with your wealth taxes.
You mock leftists as having futile aspirations, thanks to your tax dodging abilities. But we do have progressive taxation as a rather strongly entrenched policy in the United States and most of the rest of the world, so in that sense, you are the one with a futile task ahead of you, in your aspiration to eliminate it. Good luck!
It’s like looking into a crystal ball that changes as you twist it.
On one end, yes, progressive taxation is the goal of laws at the high level.
But on the other, the implementation of such a policy is impossible, so if you have 3 degrees of separation between the goal and individuals trying to act in their own self interest, the folly becomes obvious.
Human behavior is unchanging, and so is the nature of those in power. The elite leftists will pass any amount of nonsense policies but will violate it themselves at will and protect their own elites.
I can’t really explain it other than you need to view the system properly and shake the crystal ball.
Put yourself in my shoes - pay millions in taxes, or pay a firm $100k and sign a bunch of documents to save millions in taxes. I’m not a sucker.
You are trying hard not to address the reasonable questions. This is not really the place to convince people of anything by says "view the system and shake the crystal ball".
I have an accountant and ask him how to do things to reduce taxes. But I'm not against paying taxes. I like to live in a safe place, with services, a city that is functional, a state that is working. I don't see it as a chump thing to pay taxes. I'm pretty fortunate as a software engineer. I feel sorry for you, with your inability to address the question and just calling people chumps and suckers for having different ideas.
Why are you playing games to avoid that number? There's no big difference in being slightly above vs slightly below that number. Indeed, it's slightly better to be slightly above.
I’m not really advocating for anything. I’m saying that some people say “these people making a lot of money are benefitting more from society, they should pay more” and other people say “actually they deserve to keep what they get” and we all argue and vote and come up with a system that everyone can mostly live with.
Sure, it’s arbitrary, but so is the flat tax percentage you’re talking about. Tons of laws are arbitrary. Speed limits aren’t some emergent property of the universe, or etched onto stone tablets by Adonai himself, but that doesn’t mean we should let people do 90 in a school zone.
Do you understand that crossing into a higher tax bracket does not mean you pay higher taxes on the whole income? You pay the higher tax rate only on the money earned in the higher bracket. I frequently encounter people who do not correctly understand marginal tax brackets.
That argument is completely unpersuasive. Startups might be forced to be in a position to be sold because their huge company competitors might be pressuring their potential customers not to use them (think amazon vs a new startup offering some database capability). If you can bundle your version of something or charge almost nothing, you starve the startup of any market.
It sounds like you want to ban competition. Surely if I own an ice cream truck, and I want to include a cone with my ice cream, that doesn’t mean I’m damaging the independent cone seller? Why is that fair but bundling a database is not?
Bundling per se isn’t a problem. It becomes illegal when a firm uses market power to destroy competitors. If you’re interested in learning more I suggest reading about the Robinson-Patman Act (1936) and Clayton Antitrust Act (1914) as well as the Sherman Act (1890)
What a bogus hypothetical. What market exists to buy individual cones?
It’s not the bundling that’s the problem, it’s dropping prices of a single product in a single market to destroy competition in that space while staying afloat with VC or other revenue streams/products.
> It’s not the bundling that’s the problem, it’s dropping prices of a single product in a single market to destroy competition in that space while staying afloat with VC or other revenue streams/products.
The same could be said of open-source software. Most open-source software are clones of commercial products, supported by free labor, and provided at $0. The most successful ones undermine their commercial counterpart and may go so far as to destroy a previously commercially-viable industry.
As an example, do you think Linux should be regulated out of existence because its provided at a unsustainably low cost with respect to the competition? If Linux didn't exist, commercial Unix could still be a competitive market. Linux's expansion has also resulted in the deterioration of the consumer OS market, where there had previously been AmigaOS, AtariTOS, VMS, Solaris, BeOS, etc. Linux is also backed by a cartel of commercial supporters that influence what gets added, what gets supported, and what gets kept out. Obviously, these decisions affect what hardware and software consumers would consider purchasing/supporting.
You’re right that these OS projects can and do destroy the competitive market for their space, but critically they are both free (as in beer and often as in freedom as well) and open. Their reason for being free is not for market capture to destroy competition and then drive up prices.
Amazon bundling a service and providing it at reduced cost to capture the market is neither free nor is it open.
So you say! I included a cone for FREE with my ice cream. I have dropped the price to zero!
If we banned ice cream trucks from selling cones, surely an independent cone business would spring up if market demand existed.
This contrived example is to prove my point - you claim I’m speaking absurdities, but if I claim bundling a database (or caching solution, or search engine, whatever) is merely a convenience, you cry foul. Nothing is logical here
Your example is not analogous. It is more accurate to say you are an ice cream seller and the only ice cream seller. Their is a thriving market of sellers for donuts and you wish to sell donuts so you give away free donuts with all the ice cream you sale. Not because this is your value proposition, but because you wish to make the donut business untenable for anyone other than the largest ice cream seller.
That is antithetical to competition. There should be limits or a prohibition on subsidizing horizontal or vertical business integrations. The limits should be related to the long term consumer value proposition.
What you say isn't really wrong, but I guess there is a different perspective.
I wish there were more startups that just keep operating standalone without being bought. Having the often passionate founders staying in control and evolving their company.
Of course, if they can sell than they get more money out of that and maybe have time for something else/new. But at the same time, how does it impact society if passionate founders leave all the time? Maybe that isn't really great for the overall progress.
On the other hand, were there less startups if they can't be sold/bought as easily? I'm not sure, but I imagine the impact wouldn't be so huge, since I expect for most people, selling their company is more the icing on the cake and not the major reason why they start something on their own.
I believe in freedom and individual rights. It’s so hard to build a company. Very hard. Try it yourself someday if you don’t believe me. Small, medium, large, lifestyle, whatever your endgame is I guarantee it’s 100x harder than you envisioned.
You say you wish more startups operated standalone. Is it possible that the same person who can build a company from zero to 100 people isn’t qualified and / or wanting to take it from 100 to 1000 people? Shouldn’t it be her right to sell her asset, and start something new?
Some people believe that society has some claim on companies, meaning the government should be able to arbitrarily coerce any company of any size to do anything. Less-logical people claim that society has a claim when a company reaches some threshold of size (which makes no sense as no one can explain what that size is except “eh I guess a billion dollars in revenue”).
The only defensible logic is to let the owner do what they want. Otherwise it’s authoritarian.
I feel like the logic here is that if companies behave badly enough competitors will emerge and kill the bad company. This school of thought was first pioneered by Robert Bork in the 70s along with the “consumer welfare standard” that hey if you can’t prove it’s hurting consumers then who cares. This is the dominant view of establishment antitrust lawyers to this day and why American industries from chocolate to diapers to national defense are concentrated.
The reality is that if the owners do what they want they will buy competitors, rent seek and not innovate. If the government seeks to meddle they will buy lobbyists. Additionally firms that have their market cornered will squeeze workers and their vendors. Finally close ties between concentrated industry and the government leads to more authoritarian rule.
America has 4% of global population. This tiny country population-wise is beating the shit out of everyone else by 1000x in economic and military might. Maybe you should see our system in a better light.
How about advocating for an economic revolution to align the system closer to Argentina and Venezuela is dumb considering the US is clearly the best on earth by a significant margin? No one prevents you from moving away.
Who here is advocating for Argentina's or Venuzuala's economic system?
If it's 100 degrees in the room and I want it to be cooler that doesn't mean I'm advocating for the room to be 0 degrees. Your need to exaggerate the point of others points to a weakness in your own argument.
Note that 65% of global stock value does not mean 65% of global value. The US has a much higher number of public companies. That doesn't mean that they are better.
All of the system? Including the progressive taxes?
You should also consider that we don't serve the economy. The economy should serve us.
Of that economic output you're so proud of, the vast majority of it ends up in the hands of rich people. Why would the average person want to defend that system?
> Is it possible that the same person who can build a company from zero to 100 people isn’t qualified and / or wanting to take it from 100 to 1000 people? Shouldn’t it be her right to sell her asset, and start something new?
Well, they don't have to sell the company to start something new. They can hire/appoint someone to take care and essentially only roughly supervise them which really doesn't take much time. The only difference is really the ownership part.
I still get your point and yeah, it is a disadvantage. But individual freedom has to be balanced against the needs of the whole society too.
> The only defensible logic is to let the owner do what they want. Otherwise it’s authoritarian.
Not really. Look, the owners of companies benefit from society as well. They get infrastructure, stability, especially laws and their enforcement and so on. This is not a given. The society doesn't let random people do what they want, e.g. steal from the owner of the company. Would you call that authoritarian? Certainly not. Neither is putting boundaries of what you can do with the stuff you own.
As social animals humans are exceedingly skilled at determining fairness if they decide as a group. They will never get it perfect but they will get close enough. Your argument is a schoolboy argument: if the pie can't be divided exactly then you get most of it because you're bigger.
Progressive taxes don't need the precision you're demanding. It's a strawman argument.
(That's with a pretty broad definition of "monopoly", including "user-specific monopoly" like you get with android / ios, notions that I would also try to explain in said blog)
One example:
> https://mobilesyrup.com/2016/09/27/why-blackberry-never-rele...
> I believe this one shows how a monopoly can prevent innovation. Blackberry with the Passport had a new form-factor. To make this phone worthwhile, it had to use a mainline OS. At the time, only Android with Google apps was available. However, Google rules back then couldn't allow this.
Would HNers be interested in such content? And in contributing to it? (my knowledge wrt monopolies is in my area of expertise, and let's just say I like being employable, so it's better if it doesn't look completely targetted)