Except that starting a competitor often requires far more capital than the incumbents needed to reach their position. I don't support protectionism, but "true free market" economics are an illusion used to prevent and tear down regulations.
"As a company, their total contracts are worth $12 billion including commercial satellite launches as well as NASA and U.S. government missions. Of that total, $5.5 billion is from government contracts from NASA and the Air Force."
Basically what could have been done (and was done, and reached the moon and built the space bus etc) on government money, is now paid to a private constructor to do (plus profits, minus the patents going to the state).
Blue Origin, a different space corporation, was not even in consideration, but if they had something competitive, NASA would have considered their bid as well. (Tbc, Blue Origin isn't shooting for that market at all, so this is in no way a dig at them.)
Well, that's how you do it: you mismanage a state organization to make development costlier, and then you give the project + profits to private industry pals...
That's how many-a-privitizations have started...
Well, isn't that self-evident? You can't beat Google or Amazon or Apple starting from the money Apple had at its times, or Amazon had when they started (adjust for inflation).
They have tons of billions of cash at hand to stomp on you, tons of special deals, economies of scale, can buy the best talent undercutting you, have friends in government and media, have huge network systems of third parties, and so on.
That is where the harm comes in - as a consumer, I'd love a 50% better search (insofar as thats readily quantifiable), but the current architecture of the market ends up preventing this from happening!
Lots of money confers lots of power, sure, though this is not anything peculiar to corporations. Corporations are a strange kind of ownership -- since shareholders "own" the corporation but have almost no control of it or any direct access to its assets -- but what is the "strange and powerful" place that corporations are granted?
Sneaking up under the radar, making a lateral move, or finding a patron or sweetheart deal as an entry into a market is frequently required. Microsoft's break was its exclusive, per-CPU licensing deal with IBM, later extended to other OEMs, and followed by bundling (Office) and tying/dumping (Internet Explorer). Government contracts (national, state, or local) can be a path. Emerging during a period of general economic panic works for others -- both Google and Facebook effectively emerged during financial squeezes (and legal impairments) on incumbents or potential spoilers (2001, 2007-8).
Bernhard J. Stern's "Resistances to the Adoption of Technological Innovations" (1935) details numerous instances and methods of such dirty tricks, and is rapidly becoming among my favourite references to these:
https://archive.org/details/technologicaltre1937unitrich/pag...
Markdown: https://pastebin.com/raw/Bapu75is
And yet Apple beat IBM, DEC, HP, etc. which nobody anticipated. The same things you're saying today were said about IBM, etc., in the 70's and 80's.
In a totally different market. IBM wasn't making Apple I and II equivalents before, or Mac OS equivalents afterwards, and Apple wasn't making mainframes and workstations, and targeting enterprise (in fact, in the 90-96 period that it did try that, it almost tanked).
And the IBM PCs ended dominating the world (market share wise), IBM just didn't have exclusivity on building compatible devices.
But even all of those are beside the point: we're talking about now, not the 80s. At the time the home PC market didn't exist, companies started from scratch. And even enterprise computing (except for the big systems catered by IBM, DEC and co) was the Wild West.
It's like entering the search engine space in 1998 (when there were around 10 competing engines) vs today.
Not really relevant as to whether a small company can beat an incumbent in their own game today. If Google fades eventually it wouldn't be because a new search company beat them at search, but because the industry changed and search is not longer as relevant, ad revenues are marginal, etc, for example.
Except I've heard that argument for my entire life (I'm old). And it never pans out. Then there's a new crop of companies with "this time it's different". You can go back through a couple centuries of US companies and you'll find endless examples.
It might seem inconceivable today that these giants could fall, but they absolutely can.
Even if these giants don't fall, they can't just act as they wish, just because they have a dominant market position.
They're kept in check by the fact that their products are easily replaced if they raise prices well beyond cost of replacement. As a result, they don't raise prices and the potential competition never emerges - which in terms of the social outcome is just about as good as active competition.
There's an exception to this which the article mentions: Companies that sell themselves as "too big to fail" or "socially important" to gullible or corrupt politicians. The market can't fix this, only politics can.
They weren't that "powerful" because the web wasn't used as much. It took a while for us to adopt the digital lifestyle. Ultimately, they're just platforms though. Of course they have a lot of inertia, but user habits can change. Younger users in particular aren't engaging with Facebook that much anymore:
https://www.theguardian.com/technology/2018/jun/01/facebook-...
> They felt less like companies and more just like websites, if you know what I mean.
Google certainly has moved beyond being a website by creating many products. However, I feel that a lot of these products are rather crappy and wouldn't be competitive if they weren't given away. How dominant of a player can you really be, if you must give your product away for free?
Most companies aren't in the business of giving away free stuff, so in that sense it is hard to compete. That's not necessarily a bad thing for the consumer though, they get all the free stuff after all.
For instance, Facebook is losing engagement to Snapchat, Snapchat is losing engagement to TikTok, and so on. As a result, there is constant pressure to evolve.
IBM may still be around, but it's a totally different company now. Nobody uses "IBM PCs" anymore. Remember, back in the day those were very expensive, relatively speaking. IBM was as big as it ever was, relatively speaking. Yet, cheap clones by smaller companies drove down profits to make IBM give up on the market.
Also, IBM may still be a big company, but you'd be hard pressed to find a segment where they are absolutely dominating, unlike back in the day. I never said small guys will bankrupt and annihilate the giants, I'm saying competitive pressure from below is there at all times, no matter how big you are.
And sure, competitive pressure is there, but it can be at such a low level as to be nominally meaningless. Whether or not IBM dominates any segment, they are still around, despite being in many products and use cases, not at all the best option. That says to me the idea that competition will results in the best products at the lowest price points (the great-great etc comment that started this) is simply not the case except in a sort of platonic idealization of capitalistic competition that only imperfectly, when at all, plays out in reality.
I'm not even saying we should ditch that model of capitalist competition, though I clearly think it should be subject to regulation & oversight that a pure free-market libertarian wouldn't like. I don't know that there's a better alternative than a hybrid competition-with-oversight model. I just think we should keep our eyes open. We shouldn't blindly act from a position of philosophical assumptions that such competition will solve all problems. Or when it might solve them, that it will do so in an acceptable time frame, e.g., more than a century of industrial pollution without a competitive solution until the (less than perfect, better than nothing) implementation of the EPA.
Heck the entire concept of path dependency in economics exists to help explain why inferior choices may persist despite the possibility of better alternatives in a way that defies the "competition will provide" mantra. [0]
[0] https://en.wikipedia.org/wiki/Path_dependence#Illustration
I think you have trouble with the distinction between "the best" and "good". In market terms, "the best" is that which the market chooses. If the market decides that cheap junk shall succeed, so it will. Quality and cost are at odds, obviously. In some cases the market will even choose expensive junk, that's generally the success of effective marketing.
To understand why this mechanism is nevertheless desirable, we need to look at the alternative: A planned economy and design by committee. Those mechanisms tend to result in products that are neither good nor cheap. The real argument for capitalism isn't that market economies are great (though they are), but that none of the alternatives have ever worked out any better.
Perhaps a technological revolution can usher in a better system at some point, but whoever advocates for that had better done an elaborate computer simulation first.
> I'm not even saying we should ditch that model of capitalist competition, though I clearly think it should be subject to regulation & oversight that a pure free-market libertarian wouldn't like.
The first thing to note is that regulation rarely fulfills its purpose without unintended consequences that require further regulation later on. Furthermore, regulation usually benefits the big guys, who can afford to deal with it.
That's not to say you shouldn't have any regulation. Market externalities can not be dealt within from within a market framework alone. It is to say that regulation should be a last resort.
Anyway, your comments on the potential for a better system and market externalities show we're probably not too far away from each other on the general issue. Somehow we just ended up on opposite sides of this particular thread. There's not much of a better alternative on the table. I agree regulation shouldn't be the first course of action to any issue that might reasonably be solved by the market within a reasonable amount of time. What is "reasonable" being dependent on any particular issue's circumstances. (as examples, the market might be left to resolve issues of consumer inconvenience, but ones of public safety should get much closer scrutiny). The pendulum between the excesses of capitalism and those of regulation will swing back and forth, hopefully better approximating the ideal balance with each pass. And maybe at some point we'll be able to do better than this messy method.
I haven't made myself clear enough then: "The best" can still be awful, it's just better than whatever the next best alternative is, from a market perspective.
The market, at the end of the day, is people. If people reward short-lasting and cheap products over long-lasting and more expensive products, those are the "best products" in terms of adaptation to market demand.
They're never the best products in terms of resource usage or the environment or some other externality. That is unless that's what the market rewards, which it does to some degree, see "green advertising".
> The free market isn't especially efficient if massive resources are used to produce short-lived items when they might instead be used to produce more durable ones.
Nevertheless, market economies tend to be more efficient than non-market economies at allocating resources to where they are needed. This is because of local information advantage.
As I said, perhaps some future technology can be even more efficient at allocating resources than a market made out of people.
> But I'm arguing against the premise that started this thread. It was that a free market would result in the highest quality goods at the lowest price.
You didn't read that right. The OP started out by saying what companies should do: Produce the best products at the lowest prices. It's a prescription, not a prediction.
Of course what companies actually would like to do is sell the worst products at the highest prices. It's just that the market won't let them get away with it, unless they have really good sales and marketing, which is a big cost in and of itself.
In effect, the tendency with mass market products is to lower prices towards marginal cost and improve (or reduce) quality to acceptable levels, but not beyond. In the niches, for those people who really care and are ready to pay the price, there's still room for excellent products, maybe with a "lifetime warranty"
Or, for that matter, Facebook's social networking monopoly, despite dumping billions into Google+.
Since the 1920s, it's been virtually impossible to start a new consumer automobile company in the US, with several notable flameouts (Tucker and DeLorean notably). Tesla is a remarkable exception, though they are innovating on energy storage and traction.
The aviation industry is similar.
Likewise, banking.
Despite ongoing consolidation and failures in Big N consulting firms, new entrants have not emerged in the space. What are now the Big Four had been the Big Eight as late as the 1990s.
There are occasional cases of disruption. The emergence of discount retailers (Dayton, Kresge, and Wal-Mart, today Target, Kmart, and Walmart) all expanded greatly in the 1960s. I was stunned though to learn a few years ago that the Hudson's Bay Company still exists, and is the parent of Lord & Taylor and Saks Fifth Avenue, among others.
It's also notable that some of the biggest names in technology are comparatively old: Apple was founded in 1976, Intel in 1968, and IBM formed in 1911 by companies dating to the 1880s. AT&T has at least persisted as a brand, if not an entirely continuous corporate legal structure, since 1885. (The current company operating under the name is a separate legal entity, though also an RBOC spin-off of the original company.)
Changing regulatory environments is one. Tobacco, freon, lead paint, asbestos, and numerous other concerns are lo longer with us, or are vastly diminished.
Changing fundamental technologies. Vacuum tube to transistor, transistor to IC. This is a classic Christensian Innovator's Dilemma: do I cannibalise my own existing product base, or wait for someone else to come along and do it for me? To an extent, RCA lost out as television and radio became electronic and flat.
Labour outsourcing is another major driver, especially in labour-intensive activities. So long as the product can be moved, odds are good that the manufacture of it will be as well. Textiles, appliance manufacturing, auto manufacturing, electronics manufacturing (RCA again), and more.
Patent expiry. RCA was itself formed as or in conjunction with a government-mandated patent pooling, one of several such instances.
Reaching the end-run of some fundamental technological capability. Steelmaking, xerography, film-based imaging, instant film-based imaging, telegraphy, various other chemical-based processes, a whole slew of 1960s "-onics" and "-tron" firms, etc., have their day in the sun and then fade. Finding some service or capability and continuing to serve that by some ongoing set of means seems to be more durable.
Long and slow carve-outs from underneath. Television and Internet are finishing the eviceration of print news which began in the 1950s. Television and radio are themselves being undermined by packet-switched, on-demand, streaming, and App-based alternatives. Lower cost and greater flexibility or ease of use (even for a manifestly worse product or experience) very often (though not always) wins. Getting hung up on quality is generally a Bad Move.
Social, economic, political, and cultural changes can drive major shifts. Wars have been known to markedly delimit "before" and "after" phases, likewise economic turmoil. That the two not infrequently go hand in hand doesn't soften the impact but amplifies it.
By mention in Google's Ngram database, RCA hit its peak about 1982. That corresponds to a few of the trends I've described: the 1980s recession, the Reagan Revolution, the beginning of mass-consumer microchip-based electronics (if not computers), a switch from broadcast to cable as a predominant television transmission mode, and the growing dominance of Japan, with lower labour costs and higher quality reputations, especially from Sony, JVC, Panasonic, and other brands, which were competing on their own home turf and with the benefit of the Japanese focus on a active and deliberate government roles in economic and business policy and activity.
I didn't even realise that the company went defunct (acquired by GE) in 1986.
https://books.google.com/ngrams/graph?content=RCA&year_start...
(Now to do some reading on the fall of RCA.)
Complaining that it's too hard to enter is a defeatist mindset.