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Comment by rayiner | Hacker News Reader

Monopolies are great. Almost everything awesome in computing came from companies insulated in some way from market forces, either because of outright monopolies, network effects, first mover advantages, etc. Bell Labs and the ATT monopoly. Xerox PARC, which gave us the GUI, OOP, email, LAN, was bankrolled by the Xerox copier patent monopoly. Google continues to use its network effect advantage and above-perfect competition profits to bankroll stuff like self-driving cars. Perfect competition is the current PC industry. Lenovo and Acer and HP. Nobody innovates because they can't take any risks with their frighteningly narrow profit margins.

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His point about monopolies is widely misquoted and causing a lot of confusion. I think he should have been clearer about distinguishing creative monopolies and what we commonly consider monopolies, in the negative sense. There are nefarious monopolies like Comcast that are insulated from competition because of an unfair advantage. A more nuanced position should entail something like the following:

- We want competition because it allows nefarious monopolies (and other companies) to be overtaken by better companies.

- We don't want to discourage companies from attempting to obtain monopolies in their markets, since this gives them to opportunity to capture monopoly profits. Monopoly profits are not inherently bad. If a company becomes a monopoly, we want them to be a creative monopoly.

- A competitive market in the sense of having low profit margins is very different from a competitive market in the sense of whether or not new entrants can come in and compete.

- It is a bad thing if a company has monopoly power through something other than being a superior company, is capable of preventing new entrants, and is uncreative. We want to preserve the ability of new entrants to come into the market with superior products and overtake monopolies.

(edit: formatting)

He's not misquoted. Read the WSJ op-Ed: http://www.wsj.com/articles/peter-thiel-competition-is-for-l.... He's not talking about companies that enjoy monopoly profits because they offer superior products. He's talking about companies that enjoy monopoly profits because they have no competitors. He does posit the "creative monopoly" companies that have no competitors because they're first to a new market. But that only lasts so long as there are barriers to entry in your market.[1] And now we're back to regular old Econ 101 monopolies. The "nefarious monopolies" I mentioned all came into existence through first mover advantage. But they endured because they were protected from competition. And much of their innovative legacy came well into their "static monopoly" phase.

[1] To use Thiel's terminology, it matters how quickly the market moves back into equillibrium, and that is dictated by the same forces that give rise to static monopolies.

He is talking about companies that enjoy monopoly profits because of superior products: "I'm not interested in illegal bullies or government favorites: By "monopoly," I mean the kind of company that is so good at what it does that no other firm can offer a close substitute."

Distinguishing between "good" and "bad" monopolies is sufficiently complex to deserve more in-depth exploration. Thiel is smart enough to realize that which is why I consider his point to be misquoted. Unfortunately, his view is oversimplified so as to be readily consumed and debated.

He lists characteristics of a monopoly in his book: proprietary tech, network effects, economies of scale, and branding. First mover advantage is mentioned as a "tactic, not a goal" - a chapter is even called "Last Mover Advantage." Google, for one, was clearly not a first mover in the search space.

Also, why use such a heavily loaded and overloaded term? I am sure he had his reasons, maybe because it is ambiguous.

I'm pretty sure we all agree that standard oil and internet explorer were not of great benefit to society.

It's a contrived distinction. If network effects, like Facebook enjoys in social media, keep out competition, you're a classic economic monopoly.

Monopolies can also cause stagnation as we saw with Internet Explorer back in the 90s. A company is certain you have to use their product so why waste any resources trying to make it better.

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