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One of the fundamental tensions I see in economics is this:

Cooperation enables greater efficiency. You don't burn resources in efforts that exist just to harm your competitor. You get all of the economies of scale of sharing information, expertise, and technology.

But competition incentivizes greater efficiency. A monoculture can stagnate because there is less risk from failure, less urgency to grow and improve.

I think the point of maximum efficiency is somewhere in the middle where there's enough scale that you don't have the economic equivalent of millions of subsistance farmers each using hand tools to hoe their own patch, but where there are enough independent players to create some urgency and make regulatory capture harder.

The hard part is that there is no stable equilibrium near that regionn of efficiency. Businesses naturally consolidate and form cabals and capture regulation, so you have to constantly push against that.

I pretty much completely agree with this comment. I would add: the sweet spot is different in different industries (and may different in the same industry at different points in history), and economic policy would do well to recognise that rather than advocating for a blanket policy for everything.

"Cooperation enables greater efficiency. You don't burn resources in efforts that exist just to harm your competitor. You get all of the economies of scale of sharing information, expertise, and technology."

Exactly if you consume or spoil all the resources you get Tragedy of the commons [1] "The tragedy of the commons is a situation in a shared-resource system where individual users, acting independently according to their own self-interest, behave contrary to the common good of all users by depleting or spoiling the shared resource through their collective action."

Market players can self regulate and cooperate for the sake of common interest if not then it becomes zero sum game.

[1] https://en.wikipedia.org/wiki/Tragedy_of_the_commons

_ Monopolistic competition is more dynamic than the free, small-firm dominated market. Size gives companies the ability to earn surplus profit which is turned into long-term innovation rather than short-term fighting for market share._

Ah yes, this good ol’ myth. To debunk it, look around you at all the major players in tech who are hoarding cash like there is no tomorrow while doing incremental improvements to products rather than building something interesting.

The larger a company becomes, the more bloated and bureaucratic it becomes. Once they’re big enough, innovation is close to impossible, and the self-preservation instinct kicks in. Again, you can see that in almost all BigTech players today.

What I can see, literally, by looking around is that my phone is made by Huawei, my TV by Samsung, my medicine is made by a large pharmaceutical company, the train I take to work and the rail network are built by a state owned company, the web framework I used yesterday is made by a colossal tech giant, so is the text editor I use (granted that one may vary), and the cloud infrastructure my software runs on. So are the cars on the sideways looking out of the window. All big firms.

Large firms are quite literally who built all the complicated stuff at huge scale that pretty much everyone relies on all the time. I actually have to search around before I find something that was made by a small business.

And that's not because of some conspiracy, it's because they happen to make the best stuff cheap, which is a consequence of their scale. It's not a myth, you can literally confirm that by I suppose checking who makes the stuff you voluntarily buy each day.

None of those things were “invented” or truly brought to the edge of technological abilities by the companies you described. They piggyback off of existing invention, and pretty much are interested in keeping things as-is.

Your phone manufacturer doesn’t care about invention as much as they care about you buying the next, slightly better model.

Your TV manufacturer is interested in recouping the losses they have on selling you a cheap device by pushing as much advertising as possible.

The pharma company is interested in gouging as much money as they can through holding patents - they don’t develop medicine out of the goodness of their hearts.

You get the point.

> None of those things were “invented” or truly brought to the edge of technological abilities by the companies you described.

Actually, the large conglomerates do have R&D labs working on semiconductors, chemistry, manufacturing, and so on, so that they can come up with improvements to sell.

The reason why semiconductors get smaller, TVs get brighter colors, larger panels have acceptable manufacturing yields, is exactly because of this R&D.

A few large firms competing with each other is very different from a monopoly. Some of the things you mentioned have reasonable competition (phones, TVs, cars) and some are deeply steeped in anti-competitive practices (medicine, public transit).

Your argument was used to make Boeing into a monopoly and look how that turned out. It's easy to cherry-pick examples for either side, but I'd say take a step back and look at the trends and which way the evidence favors. At the end of the day it all comes down to incentives - and what incentive does a monopoly have to compete?

> few large firms competing with each other is very different from a monopoly.

very true but that's what we've been talking about in the comment chain, there's no actual global monopoly or one static entity, hence the explicit reference to Schumpeter's 'monopolistic competition'.

There is still competition between large firms, but the dynamism is temporal, few firms for years or decades seize outsized marketshare to dominate and innovate sectors before being replaced by other substantial firms, rather than a sort of bazaar economy of small firms competing at the same time. It's myspace being superceded by facebook maybe being eaten by tiktok that's going to drive technological innovation in social media, not mastodon instances.

Of course it's easy to cherry-pick, but you don't need to cherry pick. You can look at the economic development in mature economies vs developing economies. This tendency towards consolidation and innovation occurs in every single one. That's why South Korea and Japan have more large firms and are more productive than most of their Asian peers, it's why China with its economic model has outgrown India, where the same process is occuring now (see Jio).

And that is why the only innovation large corporations create is through acquisitions of smaller companies, which still have a creative spirit. Then they just consume the specifically desired parts of the acquisition and discard the rest.

And then the consumer/acquired parts become completely derailed/destroyed/super-monetized. This is conjecture, but awfully common.

Are we living in the same world?

> To debunk it, look around you at all the major players in tech who are hoarding cash like there is no tomorrow while doing incremental improvements to products rather than building something interesting.

Putting billions of dollars into VR/AR? Facebook acquired Oculus for >2 billion, and the project had mixed success, and Facebook is still investing more but into AR instead. Microsoft has had two versions of their AR product that are bulky and expensive, and with few users. But the 2nd generation of hardware much improved over the 1st. Apple is rumored to be developing AR glasses as well.

How about self driving cars? Google is the only company with actual driverless cars on the roads. Many startups made big promises but so far have nothing publicly available. Other large companies like Ford had previously announced their intent to develop autonomous cars, but backed out, saying the challenge is too hard. This shows that a truly large company is needed to develop autonomous cars, because billions of dollars are required for a project that carries high risk.

> Once they’re big enough, innovation is close to impossible, and the self-preservation instinct kicks in. Again, you can see that in almost all BigTech players today.

What about Amazon? Nothing could be further from the truth. They keep expanding into entirely new markets. In AWS, IoT, multiple retail stores, online video, healthcare, and probably other industries I'm forgetting.

And what about Google Stadia and Xbox game streaming? Or Facebook Libra? Or all of Google's NLP research? Project Loon? Fuchsia? Go? These are fundamentally new r&d projects.

> Your phone manufacturer doesn’t care about invention as much as they care about you buying the next, slightly better model.

Gestures broadly at 2G, 3G, 4G, LTE, and 5G Phase 1. Constantly improving display technology like OLED and transparent displays and improved cameras.

The things you are describing are not even close to being the revenue drivers or “reasons for existence” for the companies you listed. As someone who worked at FB, there is nowhere CLOSE to the amount of funding that Oculus gets compared to other parts of the company. I would venture to say the same about MS - Hololens is nothing more than an experiment, that is not the funnel in which Microsoft is pouring its revenue from other parts of the business. I am not arguing that companies don’t innovate. I am, however, arguing that companies, once reached a certain size, are less and less incentivized to do so.

> I am, however, arguing that companies, once reached a certain size, are less and less incentivized to do so.

Well, I am not sure I agree with that. Large companies can afford to take the risks. For medium-sized companies the same effort is much higher chance of going out of business. e.g. If a smaller company like Sonos announced development of an AR product I think that would be really surprising.

Clayton Christensen covered that in Innovators Dilemma. Large companies, on average, are very risk-averse.

Magic Leap comes to mind.

Magic Leap is a startup, I mean established mid-sized companies. The ones that are making money and steadily growing. For them taking a big risk can end the company. A startup is already expecting that they'll go out of business, and funding a startup is a big risk in general.

Sorry, where are you getting these views from? Every tech company I've worked at, or have talked to people who work at them, become incredibly risk averse to innovation as they grow.

The only time they makes serious investments in innovation is when they buyout smaller companies that pose a risk to their business, or who have innovated and proven that their innovation might actually be useful. And the reason for those investments is more to protect their business rather than to foster innovation itself.

> Large firms don't just exist because of power, but also because to manage an increasingly complex environment (scientifically, economically etc) large institutions are required to hold the necessary knowledge to function effectively.

Large firms don't exist because of power, but because with their power they can use resources to do things other firms can't?

Sounds like they exist because of power. And it sounds like unnecessary complexity is something they would evolve to create, not diminish, because it's a great moat for them to hide behind.

Is that what we're hoping to accomplish? Create a few hypercorporations with tens of thousands of people working bullshit jobs because they've shaped industries in such a way so as to force that bullshit to be the cost of entry?

No thanks.

I think Barron92 is drawing a distinction between "lust for power" vs "effective use of power".

To be frank that approach is historically best described as "nationally suicidal". Deciding to ignore advances because it would "unfairly centralize in somethinf other than us" tends to lead to no longer existing and either a subordinate replacing the leader in a coup and moderated because the other see that insisting on charging massed rifle instead of adopting them is a losing strategy or sticking to it and letting reality assert its brutal toll. Knowledge is power can be literal and it not being something you personally can understand is not the same as "nonsense" or "doesn't work". The benefits of capital investment are real and clear and "banning it" won't make things better, just the opposite really.

>The central dynamic around data collection in the information economy even amplifies that trend. Smaller firms are not going to reap benefits on the same scale as large firms can

I think data collection and company size is a very interesting topic. It's very hard to effectively anonymize data. It's been shown numerous times that just a little bit of extra information can undo that.

A large company, such as Google, can use the data they collect themselves. They are capable extracting value from this data through other products and ideas. A small company is much less likely able to capture the value from the data they have. So they sell it. They will anonymize it and do everything that is the standard at the time, but in the long term that data probably won't stay anonymous.

Would you rather have a megacorp use your data themselves or for your data to be bought and sold by different (smaller) companies that may or may not use your data? Which one would lead to less abuse of the data?

My intuition hates this but intellectually I’m forced to accept it. I’ve handed a huge portion of my private life to Google in the form of my browser, my phone, my search engine, my email, and a handful of other services. I arrived at that for the reasons you lay out - better all my privacy eggs in one basket where I know what they intend to do with it than to spread them around to several smaller orgs who may have more incentive to use it in ways I wouldn’t approve of.

> Size gives companies the ability to earn surplus profit which is turned into long-term innovation rather than short-term fighting for market share.

Except when companies don't, and instead use that surplus profit for:

- lobbying the Government for laws favorable to the company - funding laws and groups that favor breaking up the power of workers (e.g. no increase in minimun wages, anti-labor union laws) - investing that surplus into buying back the shares of the company, enriching its investors

There have been some investments in pure research and product R&D, definitely. But expecting companies to invest the majority of gains from centralization into research isn't what we've observed over the past few decades.

> This was Schumpeter's basic insight. Monopolistic competition is more dynamic than the free, small-firm dominated market. Size gives companies the ability to earn surplus profit which is turned into long-term innovation rather than short-term fighting for market share.

what was schumpeter's evidence for this?