I am also familiar with Peter Thiel’s idea about secrets. In Zero to One, he also talks about building and maintaining a monopoly using defenses to entry. He talks about building network effects, economies of scale, intellectual property, and brand. Do any or all of these hurt the overall good?
This is focused on the consumer side of things, not the third party benefactors. Though if you do find any of these often negatively affect third parties, please say so.
Economies of scale and network effects of a market makes it economical to have the large majority of production in a small number of hands. So long as the consumer sees some of that benefit either through lower prices or a better product, there is an increase in the overall good for the consumer to have a monopoly.
With intellectual property, you mentioned Tesla’s innovation being a public good due to their open patents. To my knowledge Tesla is still protected by generally a high level of innovation, economies of scale, and brand. Could one justify having closed patents if the patents drive higher profits which helps the company grow and innovate further?
I know Nike has patents for their green material for shoes, but licenses their patents to non-competitors to not stop their creation. What situations would the Nike method or Tesla method best benefit the public good?
Brand is a little more subjective, but things like fashion brands which have value because they are known to be expensive may be a public loss. A brand built on reliability, quality, or trust, if accurate, allows consumers to more reliably select the best product for them by providing more accurate information to the public.
As Peter Thiel says, if we don’t have a monopoly, the profits will be driven to effectively zero and the ability to innovate decreases (look at legacy car makers). In an efficient market, maximizing profits will maximize total well-being. In reality, there is corporate responsibility and this post covered some of it. How should we think about barriers to entry using EA? Thanks alot for the original post!
Hi Michael,
I am also familiar with Peter Thiel’s idea about secrets. In Zero to One, he also talks about building and maintaining a monopoly using defenses to entry. He talks about building network effects, economies of scale, intellectual property, and brand. Do any or all of these hurt the overall good?
This is focused on the consumer side of things, not the third party benefactors. Though if you do find any of these often negatively affect third parties, please say so.
Economies of scale and network effects of a market makes it economical to have the large majority of production in a small number of hands. So long as the consumer sees some of that benefit either through lower prices or a better product, there is an increase in the overall good for the consumer to have a monopoly.
With intellectual property, you mentioned Tesla’s innovation being a public good due to their open patents. To my knowledge Tesla is still protected by generally a high level of innovation, economies of scale, and brand. Could one justify having closed patents if the patents drive higher profits which helps the company grow and innovate further?
I know Nike has patents for their green material for shoes, but licenses their patents to non-competitors to not stop their creation. What situations would the Nike method or Tesla method best benefit the public good?
Brand is a little more subjective, but things like fashion brands which have value because they are known to be expensive may be a public loss. A brand built on reliability, quality, or trust, if accurate, allows consumers to more reliably select the best product for them by providing more accurate information to the public.
As Peter Thiel says, if we don’t have a monopoly, the profits will be driven to effectively zero and the ability to innovate decreases (look at legacy car makers). In an efficient market, maximizing profits will maximize total well-being. In reality, there is corporate responsibility and this post covered some of it. How should we think about barriers to entry using EA? Thanks alot for the original post!