Comment by SpEd3Y
6 days ago
You're missing my point. In a perfect competition environment all profits go to 0. This is great for customers horrible for innovation. Innovation happens when there's enough capital to take huge risks and lose. Google had a ton of innovation attempts that flopped really hard and lost ton of money. Without the extra capital none of the attempts would have happened.
I'm not sure I agree with you on innovation. One of the largest drivers of innovation, historically, has been war and desperation. In those circumstances, you generally can't afford to lose. So the idea of innovation needing the comfort of a soft landing doesn't really seem to fit reality.
I agree that war pushes innovation the most, but I assume you don't want humanity to be in constant state of war. So how do you get innovation in peace time? I would argue if you're in a very competitive market and you're margins are 1-2% you cannot afford to go for innovation. Bell Labs which arguably is one of the most innovative places in peace time was the result of the AT&T monopoly. Most innovation comes out of monopolies or excess capital in peace time.
Personally, I think you have it backwards, hard competition breeds innovation. Large companies don't have to innovate so they don't. They coast, sometimes going many decades between major innovations.
For example, Google doesn't have to change Chrome in any meaningful way to maintain (or even grow) it's market share. So, they don't. Browsers haven't changed much in a good decade and a half. That money is much better spent on marketing.
War is an extreme form of competition. It’s possible to have competition without violence.
> In a perfect competition environment all profits go to 0.
Competition drives prices down to the lowest sustainable point but not to zero. If one company drives prices below a sustainable (profitable) point that’s market failure because it starves the competition. It’s the thing Google did and the reason we have anti-trust law.
Google created a situation where they had no competition. Necessity being the mother of invention suggests that they innovate less in the absence of competition. Monopolies are poison to innovation.
I'm still missing it
We're not in a perfect competition environment ; profits are not to 0. There is an incentive for innovation.
Monopolies stifle innovation just the same. Imagine having an "amazon basics" product as your competitor. Or competing with something that embeds well in a closed off ecosystem like Apple's or Google's when 90% of your target demographic will value that integration.
Innovation breeds from a middle ground
The goldilocks is closer to 0 than not