While I generally agree, the take on T-Mobile / Sprint is off base, and you ignore all the evidence that came out in their litigation with the states. Articles like the Vox piece just assume the companies could have continued on their own merry way, when in reality T-Mobile had very little mid-band spectrum and its costs were exploding as data use rose. There is no way the UnCarrier strategy could have continued without the deal, and Deutsche Telekom was pulling in the reins. Conversely, Sprint had almost no low-band spectrum and its coverage was patchy, which was becoming more and more of an issue as demand moved from buffered content to things like FaceTime calls, and it was bleeding subscribers.
The deal dramatically lowered the company's costs, really did let it roll out 5G mich faster, and led it to launch fixed wireless, which has been a huge success. The ReWheel people you cite have an axe to grind and their methodology ignores data use. Consumers in the US just prefer to use way more data than those in other countries -- in part, likely because the networks are much better. Per GB of usage, US consumers pay much less, and the downward trend in $/GB never stopped. Pointing to an average of sticker prices being up proves too much: that trend had already stopped before the merger. Entry level plans with few features have never been cheaper; the cheapest T-Mobile prepaid plan is $15/month.
The corruption take is way off. Ajit Pai, the FCC Chair, pushed hard for the deal because he was genuinely excited about accelerating 5G rollout. Makan Delrahim insisted on a patchwork divestiture to DISH because he thought he was clever. The White House wasn't involved at all.
A lot of lazy articles about this that just re-share the same bad takes.
Thank you. I saw that bit and I was like “wasn’t the consensus that this was exactly like the Spirit Airlines merger?” (with Sprint as Spirit Airlines, i.e. nonviable as a going concern absent the acquistion.) As someone who was on a Sprint-based network (in a major urban center!) I can assure anyone who isn’t aware that they really were absolutely terrible as a service compared to the competition (although attactive inasmuch as Verizon and co.’s prices were obscene.) The switch to T-Mobile has mostly been a pleasant transition to pretty low prices and dramatically better service.
Indeed. It seems to me the most likely outcome of a blocked merger would have been an even more entrenched AT&T/Verizon duopoly.
You also have to look at the downstream incentives: I’m not familiar with the particular history of Mint Mobile’s capitalization, but the possibility (eventually realized) of being bought by one of the big carriers surely was a necessary component. And so you got a serious, price-focused competitor.
Concerns that the next Instagram or YouTube or WhatsApp wouldn’t be allowed to exit via M&A has had a material effect on Silicon Valley investment patterns and IPOs, and probably at least partially explains all the (likely inefficient) capital concentration in the incumbent megacorps.
That's exactly what happened to the stock prices. When the merger was announced both AT&T and Verizon declined in excess of the broader market and the move was reversed when the deal was blocked because three ~ equal competitors creates a stronger market for consumers than two major and two sub-standard ones. This point is completely lost on the anti-monopolists though.
Also one thing that's unique about the telecom industry is that these companies have purchased x amount of wireless signal range from the government. It's a common resource, and the government has agreed to give each company a fixed amount, provided that they're competent & responsible stewards of it. If your telecom company is inept, your spectrum allocation is getting yanked! It needs to be re-allocated towards a better provider
I’m no economist but it seems obvious that the supposed platonic ideal of teeming numbers of competitors in most markets just isn’t realistic long term. Consolidation to a more steady state equilibrium seems to happen in most industries that I’ve seen.
I have the same feeling, and yet economists say the empirical evidence supports teeming competitors. Consolidation is unusual among middle-aged industries; it seems to primarily occur where training new workers or building full-scale plants create a substantial barrier to entry. See https://xiaoyangli.com/uploads/li_shakeouts_innovation.pdf
Seems like a lot of industries have some cyclical components. Things stabilize and consolidate a bit leaving room for some innovation (might be process, or business model or technical) to shake things up.
Yea, there was lots of evidence lying around at the time that T-Mobile was basically a minimum viable competitor in the market and Sprint would have been forced into bankruptcy and sold off for parts within a few years. Had that happened, AT&T and Verizon would have had the slack to outbid T-Mobile for mid-band just to strangle them, and then we'd have been back to the 1990's duopoly by 2030.
Having a third peer competitor has been unabashedly great for consumers, especially at the budget-conscious end of the spectrum.
Since it sounds like you have more experience in this area than I do, could you clarify your assertion that per GB of data usage, US consumers pay much less than other countries? A quick Google search of studies on this point (possibly of dubious rigor), put the US anywhere between 138 and 219 (the second list including island territories that have a different rate than the home country) in the world for cost per GB of mobile data. These suggest that the US remains one of the most expensive markets for mobile data, well behind most similarly developed peers.
What you mostly see online uses the methodology as ReWheel, they divide data caps for a plan by the price, and then they use a fixed and relatively low assumption of usage for unlimited plans. They aren't looking at actual usage. The numbers are largely driven by what share of the population are on unlimited plans and by the size of device subsidies. Which is why a lot of very random and poor places come out cheaply.
I don't have great public sources. There may be FCC reporting at some point, not sure what their timing is.
What’s funny about this is that we have evidence from nearly the beginning of time that unlimited plans induce demand (AER, 1979) AND that almost anyone should rationally opt in to an unlimited plan. It is so rational and those plans have been so mispriced that it is hard to say that there is any sort of flat rate bias in decent data. Basically every plan had been underpriced since forever .
At least for the big carriers & premiere plans, caps are so high that they might as well be unlimited. They’re there to provide recourse to cut off abuses like running your café WiFi off an iPhone hotspot.
This. I use a capped plan because it turns out that my real-world usage patterns are so far under the cap that it never ends up being binding. Unsurprisingly, 90% of the time I’m in WiFi range, which I assume is typical.
An important question in antitrust is whether the claimed efficiencies could be realized without a merger. Trading spectrum ownership rights could be achieved without merging.
Trading, but not combining. The efficiencies result from combining the portfolios. Also, it's not just whether done alternate arrangement is possible, but whether, absent the alternative of a merger, it would have actually occurred. There's no evidence it would have been profitable for the two sides to trade spectrum. In particular because T-Mobile didn't have piles of low band spectrum, it just had enough to be workable (largely from the break up package from the AT&T deal). Sprint several years before could have participated in an auction for some low band, but it ended up sitting it out because it couldn't afford to bid.
Kind of love the fact that the comment section has that one random guy that has an obscene amount of knowledge about a merger that happened in 2018, something that 90% of the population couldn’t tell you about
How many small business fetishists actually prefer smallness — and how many just hate capitalism but find “local” and “artisan” more emotionally satisfying than “abolish profit”? “Small business” often feels like a cottage chic aesthetic layered over a fundamentally anti-growth, anti-capital worldview.
These folks aren’t really trying to promote small business — they’re trying to knock capitalists of all sizes down a peg. They might admire a quilt maker scratching out a living at the farmer’s market, but I doubt they feel much sympathy for the local radiology co-op.
I think most people just SAY they love small businesses. Like, people love the idea of a local bookstore run by a former librarian who gives you great tips about what to read next. They want it to *exist*... but they actually spend their money on Amazon.
This was always my issue with the old complaints that Walmart is driving all these small stores out of business. If those small stores were so great, people would keep shopping there!
I personally like shopping at local stores and am willing to pay more to do so, but empirically, most people — even people who complain about Walmart showing up — don’t actually care enough to not shop at Walmart.
The vibes and feels of the lefties on this make no sense to me. Small business owners are the main group of rich conservatives! The blue-collar union people abandoned us and their own economic interests to own the libs! Their aesthetic preferences resent them, meanwhile the corporate managers and goldman sachs bros they hate are out here bankrolling Kamala's campaign 😭
This is just a “what’s the matter with Kansas” in the reverse. I’m not sure this is a strong argument either way. Someone can legitimately believe the morally right thing is to help make it easier for more people to vote, even though those new voters will vote against the person’s substantive policy interests, and someone can legitimately believe the right policy is one that harms their own economic interests, and someone can legitimately believe that small business is good even if small business owners vote against that person’s preferred other policies.
Sure, but that's why I said "vibes"--there seems to be a lot of "we're on a ~~team~~ with white union workers and small business owners against the big bad capitalists" vs "let's do things that are good for blue collar workers even though they hate us because it's morally right."
In the interests of transparency, Chat GPT Deep research suggested roughly 20% of voters say they support capitalism but disapprove of big businesses. I couldn’t find data on how many people approve of low profit but not high profit small businesses. We are going more on vibes here than anything empirically rigorous.
What the antitrust movement needs to wrap their heads around is that abstract calls against big corporations work. But attacking Amazon and Google — two insanely popular companies — is just gonna backfire.
As a small business owner whose business depends upon google advertising and detests the rents they are squeezing from me, I want my piece of a class action judgment. I pay 15% of my gross to google. Boooooo
I mean, customer acquisition costs are high for any business. I'm not sure I'd call google's ad market "rent seeking" - it feels like this is stretching the meaning of the term given the number of competing digital ad services.
Frankly Americans just need to learn to resolve the contradiction inside their own minds between "we hate big corporations, except most of the actual individual big corporations, which we love."
And the big impediment to small business ownership in many places is bureaucracy and regulatory capture that Abundance seeks to eliminate. Maybe chain restaurants wouldn’t be so ubiquitous if we made it a bit easier to navigate parking requirements and liquor license rules.
Most "small is beautiful" fetishists don't actually know enough about anticapitalism or socialism to really call them anticapitalists at all. It's a huge problem for us socialists when they try to join our groups.
"I think it’s good that if you want to get a loan in Kerrville, Texas, you can apply to a professionally managed bank with nationwide operations rather than being limited to a local pool of capital controlled by good old boys."
This helps me articulate as a political geographer, why few things* drive me as crazy as the left's unexamined fetish for "local" and "community."
* Ask me about the other ones! Get a drink and a snack first, though.
The most notorious authoritarians in US history were huge advocates of “local control”. It was locally elected sheriffs who enforced Fascistic apartheid in the Deep South not the Feds. It was states who turned a blind eye to activities of America’s most notorious terrorist organization. And it was local officials who encouraged and actively participated in extrajudicial executions in the name of enforcing the one party dictatorship.
I feel like pointing this stuff out is the best angle to helping convincing far leftists that a cult of “local control” actually had a pretty ugly history and maybe isn’t the best thing to be supporting if you want to help “regular” people.
Ugh yes. Trying to noise myself a little as the article wasn’t on South Africa but was on extra judicial killing in Africa and it’s uncommon enough to have peer reviewed empirical work in that area that it might doxx me
This is actually all downstream of the exact analytic sin that is discussed in the Abundance book -- i.e., the shift from a powerful central state under the control of a developmentalist, liberal regime seeking radical change (FDR) to an anti-change movement paranoid about state power and obsessed with the idea that the federal government is a force for global evil (1970s environmentalism, the anti-war movement, and then latterly the anti-Iraq backlash)
I think it would be good if you live in a suburb of Fresno, California, you can rent a house controlled by a professional landlord at a corporate real estate holding company with access to a network of plumbers, electricians, and locksmiths that can fix any issues you have, and who will leave you in peace as long as you pay the rent on time, instead of being limited to renting from nosy home owners who are always looking into how you live in "their" house, will skimp on handyman services, and will exploit you anytime they run into their own cashflow problems.
When I was four or five years old, I picked up a cotton mouth snake in our backyard and my mom screamed bloody murder and swatted it out of my hands. The neighborhood was seeing an influx of critters and snakes because the farmland that used to be on the other side of the highway was bought up and developed.
That's where Shreveport, LA built its first Target, Best Buy, Starbucks, Olive Garden, Hobby Lobby, KMart.... Aside from the snakes, we were delighted. I hear they have a Trader Joe's now.
The blurb from Basel Musharbash reveals his basic lack of familiarity with any of the literature on economic development.
The emergence of the joint stock corporation, which allowed complete strangers to pool their money together to fund ventures with uncertain payoff, was a key institutional development which allowed the West to grow faster than the rest.
That the average American retiree is willing to put the majority of their net worth in an index of ~500 companies (most of which they couldn’t name) is a minor miracle, and undergirds the capital markets system that allows American companies to thrive.
It seems that the anti-monopoly movement is just optimizing for vibes - I have no doubt it feels better walking into an owner operated coffee shop vs a Starbucks. But it’s pretty cool that millions Americans can walk into any of 16,000 stores across the country and get access to an extremely wide menu ranging from cinnamon dolce lattes to iced lavender cream oat milk matchas (yes I had to google this).
Sometimes people just need to step back and marvel at how incredible this would seem to anyone from half a century ago, let alone the two and a half centuries ago when Smith first published his treatise.
Yeah. Put simply, in most of America coffee sucked before Starbucks. The fact that you could get delicious espresso from a small business on Beverly Blvd. in Los Angeles doesn't make up for that fact.
(BTW when Howard Schultz was interviewed on 60 Minutes he pointed out Starbucks was actually good for mom and pop coffee shops because it got more people interested in good coffee which generated more demand across the sector. I buy that argument too.)
I would like to upvote this many times. That used to drive me crazy: “oh noes Starbucks is putting all the cute artisanal coffee shops out of business!” Outside of major cities and university towns, there were no artisanal coffee shops. You drank your Folgers industrial brew and liked it. Now thx to Starbucks, I can get a flat white in any part of the country. It’s a golden age.
I feel like this is quite common in much of the writing today - authors having ideological priors that leads to motivated reasoning and a lack of familiarity of the basic research on a particular topic. There’s papers and work going back a century discussing things like anti-trust, so I find it odd that writers think they somehow are qualified to overturn all of that work without actually seeming to have read any of it. Just vibes
It's basically just socialism-lite. They are emotionally on the same wavelength as socialists, but they correctly see that as not politically viable. They think the sweet spot (both politically and policy-wise) is to let people own property and engage in private enterprise, but not be allowed to get too rich.
I know this is a common take but I don't think it's actually true. Obviously the Soviet Union had a lot of corruption and party insiders did a lot better for themselves than common people, giving the lie to the radical egalitarian framework, but the USSR also dramatically reduced inequality. Compared to a millionaire executive or an aristocratic boyar, the party insider who gets various comforts and luxuries is not really that dramatic. And the lot of common people under the Soviet state was far better than under the Tsars, so it was to an extent successful.
The big problem with the USSR was not that it failed at redistribution, but that it could not sustain growth or manage the production of complex products due primarily to the information processing problems of a centrally planned economy. But market structures inevitably require winners and losers and relatively higher inequality because those are part of the information signaling mechanisms that make markets work.
I.e., poverty bad in an absolute sense, but the obsession with no inequality is what drives the collapse of these systems in the first place
The Soviet Union caused two mass famines, would have caused more if they didn't buy their way out of a third with oil wealth, and basically decimated peasant wealth in what was, in 1917, a peasant society through the "kulak" campaigns. It's hard to come up with a counterfactual that's worse for the Russian commoner.
Famines were extremely frequent in Tsarist Russia, as in basically every pre-industrial European country. But yes, the very earliest period of the Soviet Union included a lot of violence and displacement. But it is straightforward cold war propaganda to believe that the average person was in any way worse off in, say, 1955, than they would have been under the Tsars. Complete made up nonsense. The USSR rapidly industrialized an entirely agrarian state, and once the transition was complete living standards were higher and poverty was lower.
Also, your focus on the dekulakization (which was bad!) shows you have a miscalibrated sense of what Russian commoners *were*. Landowning peasants were very, very wealthy compared to the larger bulk population of tenant farming peasants and agrarian wage laborers.
Not saying you’re wrong but by the 1500s famine were pretty uncommon and small in Western Europe and famine of the scale that happened during Soviet Russia hadn’t occurred in Europe (or russia) since the 1300s.
Famines did happen, but they were mostly smaller, regional affairs (though a massive one did occur in the 1690s in France that was pretty bad)
You have grown more strident in your criticism of unions while retaining your core commitment to helping the precariat. In this regard, we are completely eye to eye. Some commenters seem unaware that free markets are not a great tool for allocating wealth even though they are the best proven tool for creating it.
I'm not sure if I agree with that. If you look at societies with free markets they tend to have pretty healthy middle classes.
Also, it really depends on your definition of free market. For example, many people (myself included) mean free competitive market when they say free market.
IE free market still doesn't mean anything goes. There's still a role for government to prevent fraud, and anti-competitive behavior.
The precariat and the middle class are very different. The American middle class is doing just fine, and probably extends didn’t as far as the 65th or even the 60th percentile of income. It is huge by historical standards, but the median American is lower middle class.
Big business is a major customer of small business. Companies with the necessary scale to make cars or airplanes have supply chains that often reach down to mom-and-pop machine shops.
Is that right? I would think small business is a good way middle class and poor people can get rich, but big business offers a much broader pathway for poor people to become middle class.
Bigger companies tend to have relatively firm ideas about how people should act, including behaviors that many people may culturally find confusing.
Blue and pink collar workers who start service companies, exurban residents who supply farmers market businesses, and many people who start restaurants are often not good candidates to work for big businesses.
In the context of mature economies with lots of functions that benefit from economies of scale being conducted by large enterprises, yes, this is often true.
In the context of developing countries where the basics aren't being done at scale and the complex stuff isn't being done at all, no, being the owner of a small business is not a route out of poverty, because everyone is poor, because little or nothing is being done at scale.
It's socialism lite and it's also this: humans love simple, sweeping explanations that explain things (it seems to me our species has an unquenchable thirst for comprehensibilty), and "monopoly" power is a tempting "theory of everything" to explain what ails the economy. A good example is Washington Monthly: they've been banging on about monopoly (and yes, using it seemingly to explain all manner of economic problems) ad nauseum for years now.
That’s why I shared the yimby theory of power piece yesterday! Housing really breaks the neo brandeisian brain because there is no easy corporate villain.
It did identify REITs as an easy corporate villain! That's why I said that they should get attacked just to get the antitrust dead enders on board with something.
That essay was silly in that the author raised the specter of “the corporate power of REITs” without, you know, showing his work or even hinting at examples; and ignorant in that he considers productive firms as only the ones turning out “material goods.”
The largest has a market cap of 102.75B and the smallest is 1.90M. These seem shockingly small with respect to other publicly traded securities, but it does suggest we could attack the entire sector because they may add up to at least trillion in aggregate. If we do that, we will need someone else prepared to own these assets, so maybe we could just gift them to the Trump organization as part of legislation to outlaw REITs.
Moreover, I believe REITs primarily represent certain tranches of the equity portions of building ownership and management, so we could also look into the debt/mortgage assets, as well as more bespoke combinations of debt/equity like warrants and options. I believe these securities are more of an over-the-counter product for which there is less public markets info.
Thankfully Google Search shows a lot of paid ads for these investment services related to real estate debt investing, so I hopefully some financial professional could help us figure out the next layers of private capital to reappropriate. Eg, https://www.commercialrealestate.loans/commercial-real-estate-glossary/real-estate-debt-funds/ suggests we're looking at around $700B in commercial real estate loans, circa 2018
So far as I can tell you're deep into Poe's law territory here, but regarding - "Moreover, I believe REITs primarily represent certain tranches of the equity portions of building ownership and management, " - why would this be the case for publicly-traded entities? Isn't the whole point of public trading to disseminate ownership as a mechanism of raising capital? Conceptually, one *could* offer public trading only of minority stakes, but, if you're rich enough that you only need an additional capital raise commensurate with the sale of a minority stake, is public equity financing really that much more attractive than private debt (or private equity) finance in view of all the regulatory overhead?
Simple answer: Most public corps have at most two equity (ie, stock) share classes, preferred and common, whereas a single corp can have dozens or more of different bond issuances as well as more complex offerings like warrants and options. Hence, there is far less interest in actively trading the non-stock offerings. At most these get wrapped up in to ETFs and mutual funds to provide an easier-to-value, more liquid, publicly traded financial vehicle for efficient trading.
Moreover, there has been an explosion in "private credit funds" (the debt analog of private equity) in the last decade to more competitively originate, intermediate, and hold bonds and other debt-like financial instruments. And there is increasing interest in more ETF-like vehicles to wrap up some of these bespoke offerings (eg, commercial real estate lending) for broader public investing.
The Bloomberg opinionist Matt Levine has written extensively on this topic over the last ~5 years. The private credit explosion has also come up elsewhere in financial media. There is certainly far more nuance than I appreciate, but this is my rough, non-AI assisted, understanding.
I think what gives that resonance is the fact that there are a lot of extremely wealthy people who do antisocial things and generally act like jerks, so it makes them a very believable "bad guy". Partly because both getting super wealthy and growing up in inherited wealth tend to *select* for jerkiness, and partly because being super wealthy gives you the *capacity* to be as jerky as you want to be. That has some resonance even for me. I just don't think the right way to address this is to prevent anyone from becoming (that) rich in the first place.
I think we sort of underrate still the impact of Trump here. Because he’s basically the perfect avatar of the far left worldview. He’s essentially the cartoon lefty villain in the real world.
And I think lefties, especially now, have at least some justification in saying “please look who is in charge”.
There is also the effect of money on the political and regulatory landscape. To what extent big money can sway the landscape to their benefit is an empirical question but there is an intuitive plausibility to the idea of defending democracy and lower socioeconomic classes by capping wealth.
This leads to a lot of distortion and friction in the economy overall though so perhaps alternative constraints on money in politics would be more effective (campaign financing, political advertising and lobbying restrictions for example). Apparently some of this is considered unconstitutional though in the US?
One of the frustrations I have with people complaining about "big" money in politics is that the entire 2024 election cycle was about $16 billion dollars. Meanwhile, the federal government will spend about 15,000 billion dollars this two year congressional session, and over $30,000 billion in the 4 year presidential term. And that doesn't take into account all the ways the federal government impacts things outside of spending money!
Yep. See the details of the Citizens United lawfare. [1]
But more importantly, with the advent of GenAI and our increasingly fragmented media ecosystem, we don't even need that much concentrated money to sway people understanding of reality anymore. Eg, just use bots on Reddit appropriately [2] and subsidize/market high-impact, paid media. Even just state coercion and private ownership of some media channels could be enough to impact our political information systems without the need for any explicit "money in politics".
Eg, Trump not enforcing the TikTok ban while he's also suing ABC, private ownership of Twitter/X, Zuckerberg's guaranteed control of Meta's board, Billionaire private ownership/control of NYT and WP, bot-based info-terrorism against BlueSky and Reddit, etc.
As demonstrated in the Citizens United case, we can't restrict spending on political messaging due to the 1st amendment as well as the subjectivity in differentiating between political messaging and commercial/creative expression. People and organization can spend their own money on promoting whatever message they want, including political messaging.
And I think that was the right call!
Recall that Citizens United began by trying to block the release of Michael Moore's Fahrenheit 9/11 in the lead up the 2004 election under the terms of the 2002 Bipartisan Campaign Reform Act. The Federal Election Commission allowed that film (rightfully so IMO), so CU attempted to create a mirror image film smearing Hillary Clinton, for release around the 2008 election. The FEC blocked that one, and when CU sued, the courts recognized the subjectivity in differentiating political speech from create/commercial speech. Moreover, the 1st amendment doesn't even have a carve out for political speech restrictions so its a moot point.
> both getting super wealthy and growing up in inherited wealth tend to *select* for jerkiness,
Sounds plausible, but is it actually the case that the wealthy are bigger jerks than the non-wealthy? Being a jerk can also lead to poverty if not overcome by other skills.
We are seeing an absolute trash heap of problems caused by people who have, in fact, gotten quite rich off an idea at the right time, continued to pull money because of that idea, and clearly don't have any other good ones. The world is not better off because Zuckerberg is as wealthy as he is. That isn't the same as small business are defacto better than large ones. But it is to say that the massive accumulation of wealth by the owners of these large firms is a problem.
And it is exacerbated by a world where the end is viewed as more important than the means. Making money is the goal, and how you make money is seen as unimportant so long as you are making more. It's a problem for us, even if the problem isn't that being big is guaranteed to be worse than being small.
I live in NYC so I can’t help but think about all of the terrible landlords who would fit their description of “owner operated.” Is that an incorrect leap?
Not at all, it's one of the things people actually living in the real world notice. Owner operated housing (aka small landlords) are often terrible for the renters and consistently less good at managing the properties than management companies.
As one of those small landlords who tries not to be terrible, from interviews with tenants I've done over the years, they tend to describe them as high variance, typical of most small businesses--the good ones really good, the bad ones really bad.
100% this. Not all small landlords are good, and some are worse than corporate landlords, but you can strike gold with some in a way that you basically never will with corporate concerns.
People like chains not because they offer the best stuff, but because one knows what one is getting.
There's almost certainly a steakhouse within driving distance that is better than a Ruth's Chris, but there is also almost certainly one that will cook your steak from frozen and it'll be raw in the middle. At the Ruth's Chris, you know what to expect.
Landlording, unlike many other types of small business, customers can't easily switch to the better landlords and let them expand their operations (this is partly because it's capital-heavy, so the better landlords have to buy more properties, and partly because of the static nature of the assets, ie the good landlords would have to buy from the bad ones).
If there are five shops selling fresh fruit and vegetables on your local high street, then customers will tend to prefer two or three and will switch to them from the others, meaning the better ones make more money and can sell more goods, while the worse ones will gradually fade away. But a similar situation with landlords see customers (tenants) trapped in the bad apartments with the bad landlords.
Note that the average landlord on a per-tenancy basis is worse than the average landlord on a per-property basis (because tenants stick with good landlords longer), so when looking at vacancies, the landlords are going to be below average on average.
Yes, but the flip side is that those golden small landlords are likely forging profit by being overly tenant friendly. Fine if the owners are sufficiently wealthy, but I imagine there are retires that do struggle a bit due to suboptimal rental investment and management decisions. Eg, not exercising their right to a full two months when a lease is broken early or being overly attentive to tenant requests.*
And the same is true of other small businesses. Eg, a small, money losing cafe that is being subsidized by the owners wealthy parents so that they can provide a great experience, quality product, competitive prices, and worker friendly wages and workloads.
As I commonly remind us all, a Marxist America, with true uniform, central planning may be a step down in quality of life for many of us. Eg, ask a military enlistee lifer about QoL in on-base housing and other accommodations.
* Note that there are rental management firms that small landlords can hire for more efficient (and legally compliant) management. Eg, Berkshire Hathaway HomeServices Professional Realty, https://www.bhhspro.com/resources/property-management
I'm usually a pretty risk-neutral person, but this is a space where I'm quite risk-averse. I would much prefer a guaranteed "basic competence, no charity" deal than roll the dice.
I am quite certain that people who prefer small landlords have never actually rented from one. They may have started their career in urban apartments owned by corporations, then purchased a home, but they definitely never lived in an apartment in NYC owned by a small landlord, or a house in the burbs that was some other couple's starter-home-turned-investment-vehicle.
I'll agree that corporate landlords are better overall, but I think a lot of people who prefer small landlords have had an experience with such a landlord who, e.g., didn't raise the rent (notwithstanding market conditions) because the landlord thought they were a good tenant and wanted to keep them in the property.
Small landlords have a very high variance. You can get:
1. Generous landlords who maintain the property, give tenants a break on the rent during financial hardship and generally act benevolently
2. Average landlords, who do just enough to keep the property standing, raise rent at an average level for comps and are indifferent to the tenant as long as they pay on time and don’t cause trouble
3. Slumlords who let the property degrade and jack up the rent by a large amount every year
This idea of owner-operator type businesses makes me think these "anti-trust" advocates have some fetish for neo-pastoralism. In a world where everything is a cottage industry, you cannot gain efficiencies by scale or scope.
Not to mention that a lot of people start businesses with the intent to sell them eventually. If that's difficult to do, you'll get less business formation. And ideally that would be what we're trying to maximize, the number of new businesses rather than the number of small businesses.
Do a lot of people start businesses with that intent? Startups, sure, but who sets up a landscaping company with the aim of one day selling it to a megacorp?
I feel like if you’re going to have zaibatsu equivalent national champions, subsidizing small businesses might be the price you have to pay to keep society going. I dunno though, it’s an interesting example
We don’t want an oligopoly like HK, but there’s likely a better alternative, such as breaking up some chaebols and also simply providing direct welfare benefits to those in zombie small businesses versus bearing the economic drag.
I remember riding around in rural Sri Lanka and passing through a village where everyone had a table under a tree selling roughly the same thing at the same price. Our guide told us that the people with get up & go had gotten up and gone to the big city or to the Gulf States.
I think that people have an aversion to the perception that the quality of a business and the product it provides is often divorced from how much money it makes.
There has seemed to be a trend, especially evident with private equity, that you can extract money from a business while making the experience for customers worse. It’s caused a disillusionment that profits are no longer derived from providing the best goods to customers but rather how well you can financially engineer the underlying legal structure of a corporation.
Companies like Microstrategy have certainly made me question what were even doing anymore.
Yes, but that perception could just stem from PE being the only willing buyer when a small business owner wants out at a decent price. Sure they could gift it to their children, who would run it to the ground, or sell for cheap to someone on their staff. But if the SMB owner actually wants to retire and provide for their children, then PE might offer them the best terms. Moreover, PE could be incentivized to buy due to the owner largely arbitraging their own time to create consumer and worker surplus. Eg, install professional management, raise prices, tighten up work requirements, and collect above average profit until consumers and the market fully adapts over the course of years.
But again, what is the alternative? Should the owner give up some of the sales value to hopefully find another sucker that can work 80 hr/wk for the benefit of other workers and the customers? Including the risk that the new owner could go bankrupt if the fail. That same person could manage the firm under PE ownership for 50 hr/wk and higher pay, including a variable bonus structure. PE might even give them the option to incrementally buy into the equity ownership. But I don't think we should count on overly charitable owners forever. After all, eventually even that will fail once some finds the Walmart or Amazon approach to competing at scale, possibly using tech advances in automation or just disintermediation a la Uber and Task Rabbit.
You are addressing a different point. I am not blaming the owners of a veterinary clinic or an orthodontist for selling the private equity, I am saying that there are a growing number of examples of private equity purchasing these types of businesses and systematically increasing costs for customers while reducing the quality of the goods and services. There are also numerous examples of PE loading up a company with debt in clever ways that leaves other parties holding the bag.
PE is much better at financial engineering than they are at running businesses with high customer satisfaction levels.
That is the perception drives people to prefer owner-operated businesses.
Yeah, I'm agreeing with you. I'm stating that the existing owner could've already done that but didn't because they either "believed the business would live forever" or they were engaging some pro-consumer charity exercise. They've could just raised prices and donated to EA. I certainly hope they were honest about their tax accounting and not putting their own personal vehicle under as a business expense. Corp audits would never allow that.
Moreover, the following line is BS:
> PE loading up a company with debt in clever ways that leaves other parties holding the bag
Who do you think is on the other side of that trade, if not a Private Credit shop? Moreover, both the PE and PC shop may have the same LPs, if not the same parent firm and branding. Eg, Black Stone and Bridge Water have massive PCs funds. And all financial incentives motivate ruthless, competitive behavior. Eg, I'll issue you debt on draconian terms, hoping your PE investment goes bankrupt so I can acquire the same assets with ease and less capital at risk. Maybe just sell it to another PE shop if they'll also issue debt to my PC fund.
There is the general concern around "financialization", but again, think back to the owner-operator who believed their business would last forever due to good honest management. How many consumers remain loyal when competition offers better pricing or service? What if their niche is eliminated due to technological advances or changes in consumer preferences? At least PE shops recognize and manage these risks and their LPs can accept some failures due to diversification. Some small business owners do the same, but then they are no different from a PE owned firm.
I don't think you have done much to refute the claim that they cleverly load companies up with debt.
PE would obviously prefer the company to be successful for a number of years to maximize their returns with a sale or by going public, but they create their deals in ways that don't require the underlying company to succeed.
Let's see where we disagree. The process goes like this:
- PE buys company and loads it up with debt to leverage their purchase.
- PE firm insulates itself from losses outside the deal by setting up a specific legal entity to own the deal
- PE gets an equity stake in the enterprise
- PE takes dividends and management fees to cover as much of their downside risk as possible
- Company either succeeds and it leads to a successful sale/public offering
- or company begins to struggle and PE accelerates its decline to avoid as much loss as possible (sales of assets, cost cutting to pay management fees at the expense of the enterprise, etc)
- Bankruptcy happens
- Debt holders are paid based on seniority on (PC uses remaining assets to recoup as much as possible)
To add, you are likely going to say that these are the same things that the clever owner-operator would do, but there are a couple of substantial differences.
The owner-operator fundamentally will care more about the success of the company. They don't have a portfolio of these investments.
They will also do what you referred to as "charity" where they don't treat their customers and employees as ruthlessly.
This is so counter to every bit if economic theory that I’m going need you to cite your data sources.
You’re basically arguing that economies of scale don’t apply to egg prices or HVAC components, which is ridiculous (or that vet practice groups are a local monopoly and are extracting rents)
Nope, not conflating anything. Pointing out that efficiencies of scale are not, in the real world, generally passed on to the consumer in monopoly situations.
Individual egg and veg purchases may not have to account for transport and storage costs in a way that creates a bargaining range. And PE buyouts of veterinary care to increase prices and decrease service are 100% A Thing — veterinary care lends itself to have natural monopoly-like characteristics in many markets because there just isn’t enough demand to support a large number of practices, but practitioner reluctance or ineffectiveness to extract maximum surplus via rents applies to individual practices but not to PE-owned ones.
The local vet thing absolutely happens. But that’s a market failure/monopoly. That’s not a small provider outcompeting a big one on marginal costs.
I feel this less about vet care- but man, PE acquiring hospitals almost always means fraud in the end. Like it seems the cost floor is so high even a national firm can’t make it worth it
No, I am pointing out the very simple fact that economies of scale ARE ONLY ONE FACTOR IN PRICING.
Egg prices direct from producer at local farmstands and farmer markets stayed at around $4 per dozen during the bird flu problems. Most of the price of food is NOT going to the actual producer, and buying direct typically can result in large savings.
Aside from the bird flu making local cage free eggs in the small grocery the less expensive option (at least where i'm at upstate), the cheapest eggs are at ALDI or Target. The local eggs may still be cheaper/the same price here in terms of cage free even when the bird flu ends. From my friend in Brooklyn, the local supermarket chains and delis really gouge for eggs and other foods. I've heard produce markets in NYC can be a cheap option.
Aside from these specific examples, something interesting I've noticed is opinion pieces saying large grocery chains have a lot of pricing power over suppliers which raise prices for the smaller grocery stores. My question is if this dynamic still leads to the lowest prices for consumers which I suspect but I'm not sure. I would like it if more chain groceries would establish themselves where there's less parking.
Oh boy, I'm eager to see how Matt's feed will go today as Antitrust Twitter yells at him.
It is real frustrating to see that sector so obsessed with anti-bigness that they can't see the trees for the forest. It's also frustrating that they won't go after the harms of rent seeking, regardless of if it comes from small or big business, due to it often needing to remove regulations instead of add them. And rent seeking always strikes me as being excellent on a political front to sate that desire for conspiracy theories: there's business and government colluding (a tactic antitrust typically don't like!) to rip off the customer for profit.
That set loves to admire Louis Brandeis, despite his history of being both ahead of his time in the Progressive Era, and behind his time in the New Deal Era. This looks to be striking the current antitrust movement again.
...and here was how Stoller reacted to seeing the bat signal:
"Abundance arguments are done in bad faith. @musharbash_b made the case that the Dallas market is distorted by large homebuilders and private equity, leading to a doubling of housing costs since 2011. Yglesias just pretended he said something different. [https://www.thebignewsletter.com/p/messing-with-texas-how-big-homebuilders]
Notice how his characterization of the piece on Dallas housing costs omits the thesis - big home builders are restricting supply and institutional investors are buying up the existing stock."
He also alleges that Matt "doesn’t like business people who aren’t corrupt.". I'm just enjoying the tasty popcorn.
This idea of ownership and preference for self-employment over employment doesn't sound all that far from the "ownership society" George W. Bush campaigned on in 2004. It was appealing to enough people to feature in a winning presidential election not very long ago. And if you put in the context of the longer Jeffersonian vs Hamiltonian debate, its also not that hard to see how the idea of a society where as many people as possible are as independent as possible has long been linked to political freedom and considered by many to be almost a predicate for an American democracy of equals.
It can be good to be a small business owner. It is usually bad to be a small business employee. And there are very mixed results, with a big bulge on the bottom side, of being a small business customer.
My first boss at my first job in high school at a small business went to jail for fraud. Part of my job was juggling when his wife (who he was divorcing) and his mistress were in the office. I had multiple paychecks bounce. That was educational in ways my parents didn't intend when they made me get a job.
My mother was a waitress at a small diner in my (rural, tiny) hometown a million years ago. This was in the days before computers & automated payroll providers. The owner was stealing the employees' Social Security contributions, out of their paychecks, for a number of years. He was eventually caught and just had to pay a fine- no prosecution, no jail, nothing. He later went on to be the Mayor of the town, and then a longtime city councilor
Yes, absolutely, I commented above that this has an updated yeoman farmer vibe to it. And there's something intuitively appealing about about the small local thing even if it doesn't actually necessarily pencil out.
Jefferson I could at least see what he was trying to do to make the country better, even with its flaws, and he was more pragmatic as President. Jackson, on the other hand...fuck that guy, always.
I can appreciate his work against the authoritarian turn of the Federalists (the Alien and Sedition Acts, of which the Alien Enemies Act is notorious today) but ugh, the anti-intellectualism, anti-urbanism and white supremacy are poisons that still linger.
Jefferson is another story, but this is just not true of Jacksonianism. The tipping point for universal White male sufferage came in the early 1820s. New York, for example, got rid of most property requirements for White men in 1821, and then scrapped the last few in 1826. Jackson's election in 1828 was a *consequence* of expanded sufferage, not its cause.
It's true that most Jacksonians had been supporters of universal White male sufferage, but the same was true of most Whigs. There were some exceptions on both sides, but it was a settled issue in all but a few states by the time Jackson was first elected, and it wasn't really a partisan issue going forward in the Second Party System.
Great point. A more “up to date” description might be TR’s “New Nationalism” v. Wilson’s “New Freedom.” That dispute sputtered out in the 1930’s, to be subsumed in the general acceptance of Keynesian economics.
Working in a large business has also been a very important tool, probably for a much larger percentage of people who have entered the middle class over the past century!
Big businesses are typically not a particularly good place to work for people of blue collar or poor backgrounds. On the other hand, a lot of blue and pink collar workers wind up creating small service businesses, restaurants, crafts and agricultural businesses, etc.
The goal is not to just provide a good living for highly educated, articulate, polished people. It’s to spread opportunity widely.
When Ezra pinned Teachout on this exact dynamic of "there's more anti-competitive behavior than just Meta, which doesn't actually seem that traditionally anti-competitive what's up with that?"
Teachout response was "I love America" followed by "were just starting to look at this" aka no clue how to process
This piece is clarifying that their actual goal is some sort of reshaping of the entire capitalist enterprise and anything less than pure, unmitigated worker power is "anti capitalist."
It makes sense why Khan was both celebrated heavily while losing most of her cases against tech. These people need to pass some new laws rather than continually try to stretch the legal definition of what they're doing to suit their political priors that no one else agrees with.
It would be tough to have a name that memorable. I feel like I've been hearing it for a decade, but then finally hearing her talk during that interview it was pretty quickly like "oh, okay, lol. Guess I don't need to worry about that."
Going after Meta for anti competitive practices because they have the simplest ad sales model creates all sorts of bad incentives for other large companies they sell ads (make your market as opaque as possible and people won’t go after it maybe)
It's pretty funny to see Europe deciding to go maximally in this direction, causing both increased consumer friction that pisses everyone off while making their digital industry even more irrelevant.
The end result of this logic is removing Maps from Google Search like they did because of invented anti trust ~reasons~ that costs €3-4M/month in dead time of people trying to find out where the hell to go. I'm sure we'll see a globally competitive Maps peer pop up in Europe any second now...right!?!??
The whole concept of forced debundling of an online company's products has always made zero sense to me. People aren't dumb, if they really want Google Maps they'll bookmark to it and still go it, they're just adding unneeded friction. And I say this as someone that gets very annoyed when one company tries to throw up all kinds of notifications to nudge me into their own products.
It's weird to me that the Microsoft cases in the 90s are talked about positively by the DOJ as successes. Do they really think that forced unbundling Internet Explorer from OEMs was the reason that IE didnt win the browser wars? They retained their market share until the instant Chrome and Firefox came along. The public legal field has really never quite understood how to regulate technology
Yes, that was the very first case when it struck me that this made no sense at all. I never used Internet Explorer because it sucked, and it was super easy for me to just download Netscape and then Firefox to get around it. We weren't some lemmings without agency like the DOJ argued.
I've always liked Urban Dictionary's leading definition for IE: "A simple Windows XP tool which allows the user to browse to Mozilla.com and download Firefox, a web browser."
The devil's advocate argument is probably something about limiting the capacity for other Microsoft products to take dependencies on an IE installation in a way that inhibits competition (even as its proponents would argue that it promotes functionality and ease of use in the way that iOS's walled-garden approach does.)
When you install Excel for the first time, you get asked if you want to use the conventional XLSX format, or the format from Open Office. I'm simply at a loss to know what the point of this nonsense is.
(Europe does have an effective mapping platform, but it was once owned by Nokia who got hammered over ten years ago. The platform does apparently live on as something called 'Here We Go')
I can deal with XLSX if they in turn let me have an option to completely turn off automatic formatting into dates--and especially into date formats no person would ever seriously choose first. No, Microsoft, when I type or copy & paste in 6-4, that does not mean 4-Jun! Cut that shit out.
There's a protein in humans originally called MARCH6 (Membrane Associated Ring-CH-Type 6) that eventually got renamed to MARCHF6 (Membrane Associated Ring-CH-Type Finger 6) because of Excel autoformatting.
I loved it when they used these attacks drag Sundar into Congress due to her complaints and we spend days prepping all the execs only for them to be asked if the iPhone is tracking their kids or whatever. He wasnt busy at all and it was a great use of all of our time
I feel like I just stepped into some Jefferson/Hamilton fan fiction. I guess that's America's version of other countries centuries long ethnic/religious conflicts.
Forget the fan fiction. I can assure that Jefferson/Hamilton dispute was quite real and there's some amazing historical media of various accuracy and maturity levels as well as entertainment quality throughout the last few hundred years of US history.
Even just learning about the growing depravity of the Confederates during our Civil War and how that increasing motivated what could appear to be an "ethnic cleansing" exercise in Sherman's March to the Sea could lead to some riveting discussions in contemporary US political discourse. You could start at Andersonville Prison [1] and augment that with the Confederates massacring surrendering black regiments, including their northern white officers. Those reports certainly shattered the myth of southern chivalry as we increasingly reorganized our northern industrial capacity into a war machine that would accept nothing but unconditional surrender.
There is also some great strategic brilliance in how Grant retraced certain lines of attack used in conquering and settling the west to increasingly fragment the confederate territories. Eg, the Mississippi campaign leading to the capture of New Orleans to cut off the waterways and associated rail and telegraph lines. He certainly knew his military history and appreciated logistics for physical goods and information! There was also a clever legal strategy in reversing the "people as property" belief to capture black slaves as contraband military goods before we had the courage to actually abolish slavery. Turned out they were all quite motivated to at least follow the along in the Union war machine, seeing as we had destroyed the Confederate's meager agricultural society necessary for substance. And many were chomping at the bit to train, fight, and even die in our army of vengeance.
So anyways, about rent seeking in suspect legal protections for archaic business structures in our modern Jefferson/Hamilton disputes...
I lazily learned about this stuff in primary school through entertaining media products, chiefly computer simulations like Rainbow 6 and Microsoft Flight Simulator. Eg, team-based simulations of the 1999 hit, "The Rock" [1] and the 1998 dud, "The Faculty". [2] Iron Maiden's Ace High was also riveting. [3]
I then reviewed as necessary using Yahoo, Alta Vista, Lexis Nexus, Google, plagiarized college essays, Wikipedia, and increasingly bespoke information theory SaaS. Eg, Amazon Prime and YouTube recommendations
"I think the existence of chain hotels makes it easier to confidently book a safe and clean place to stay in a town you’ve never been to."
One. Thousand. Percent.
I began my defense policy analysis job in the mid-1980s and that required frequent visits to Army posts, mostly in the South. The crappy motels we had to stay at -- my God. Still have some nightmares. The revolution over the next ten years or so that brought Hampton Inns, Holiday Inn Express etc to every corner of the country was such a godsend. (Plus chain restaurants!*)
People who bemoan the spread of that kind of corporate sameness and long for a return to small business owner motels have no idea what they're talking about, because they grew up in a very different world.
* Occasionally you could find a gem of a small family-owned restaurant which offered something different and enjoyable compared to the bland run of chain restaurants, but they were hard to find. No Yelp or Tripadvisor. You either knew or you didn't. We often asked the person at the front desk whose expertise in this area was questionable, to say the least.
And with the chains, if you need to complain to corporate, you might get an actual response. If you stay at a BNB, you're completely at the mercy of the owner if there's any problems.
I don't expect everybody to be a full-blown economic neoliberal who supports letting the free market run wild and then doing redistribution at the end, but it is weird to me that there's a group of people that is just pro-regulation regardless of what the regulation is. Would these people invent zoning laws if they didn't already exist? Probably not, but they do exist, so they must be defended.
It reminds me of polling about anti-terror measures post-9/11 where you'd repeatedly see polls asking, "Do you support [freedom-violating security measure]?" with n% responding "yes," followed by, "Do you think [freedom-violating security measure] will make Americans safer?" with n-10% responding "yes." The main takeaway being apparently roughly a tenth of the US population like government oppression for the sake of government oppression.
Putting aside lizardman constant, the more generous interpretation is that they interpret it either as signaling, or pro-social activity. Do I think bowing my head when someone prays before a meeting, or the prayer itself results in better decisions, nope, agnostic, but I do it for social and signaling reasons.
Can't find it but at the time of the "Muslim ban" that either was apr wasn't a Muslim ban depending if you liked the idea (if you like your Muslim ban, you can keep it), I remember seeing some polling data on whether or not there should be a list of Muslims in America. Some 35-40% of people were like "yeah that's a good idea." Then the surveyor asked if there should be a list of Jews too. A smaller, but still significant percentage said yes to that too. Keep running through different religious groups and it seems there's a certain number of people who just like lists.
There have always in my lifetime been people who just are on team regulation per se. Blind assumption that more regulation is always better was a part of political debates I've been in since the 90s at least.
Eh, ai drift in this direction myself some days due to negative polarization over deregulation as an agenda, as no matter how much it's not thr intent, I hear an asshole whispering 'they just want to shrink government until it's small enough to fit in a bathtub so they can drown it.'
I'm quite sure that's not actually Ezra/Matt's goal, but absent that trust, my knee jerk reaction to 'let's deregulate' is 'let's not'.
I’ve mentioned before but one the foundational moments for me in personal (semi) neoliberal turn was renting off campus housing in college. Consistently, the friends of mine who had the most negative renting experiences were people who rented apartments from “regular” people as opposed to renting in large complexes owned by large businesses? Why? Because for the “regular” people the rental house they owned was not their primary source of income. To be frank, lots of people don’t realize owning a rental property requires some level of expertise*.
I think related to this post is a recent interview Ezra Klein did with two critics of his “Abundance” book. Specifically, one of the interviewees was Zephyr Teachout. And to be frank, her answers were kind of terrible. Every single answer to any question Ezra had was “corporate power”. Like literally everything. As though it was some Rosetta Stone that explained every single negative thing in the world. And Ezra pushed her and essentially intimated that he at least partially agreed that corporate power is part of the problem (I agree by the way*). But she literally couldn’t fathom any other factors going on. I wanted to yell at Zephyr “Ok, you clearly have a semi Marxist view of the world. Fine. You know that Marx wrote extensively about the petty bourgeoisie and their role in society right? You seem incapable of understanding that Ezra is talking about the role of the petty bourgeoisie”.
* I think neoliberals (including Matt) are being too blase about Private Equity buying up houses. It is absolutely true that AS OF NOW, private equity doesn’t own a lot of houses. And yes it’s correct to push back on leftists who say this why rents are “too damn high” RIGHT NOW. But you are thinking long term. It’s very clear the long term plan is to, yes create a monopoly or localized monopoly. Please read about company towns in places like West Virginia. This is clearly the end point or at least a modern version. Do you really think it’s all that great if we we recreate a version of old school company towns? Please think through the likely scenarios if a private equity firm owns all the houses in a small city in the Sun belt.
How exactly is it "very clear" this is their long term plan? Frankly, this sounds like something someone just made up because they don't like private real estate investment funds and misapplied a complaint about some other thing to it.
This is me. https://www.linkedin.com/in/colin-chaudhuri-0bab7a31/ This is a topic I know very well a part of my job. I can tell you I have worked on deals where it was very clear the client's plan was to buy enough properties in a specific location in order to maximize rent increases to the greatest extent possible.
Now the Sponsors who clearly had this as part of their strategy who are now struggling? The ones who bought properties in 2022. Why? In part, the interest rate increases (don't need to be an expert in the industry to figure that out). But the other reason? Competition. Specifically, the flood of new construction product that came to market in 2022-2024 that put downward pressure on rents throughout the Sun Belt.
Which of course supports Ezra and Matt's point. You don't want to Private Equity to become a dominant player in a local market, there's no need to put in rules in place that prevents Private Equity ownership. If anything, that only reduces competition and allows the petite bourgeois to extract additional income through rents (both literal and in the economic sense). No instead, you need to remove the barriers that exist in places like SF and NYC that prevent supply from meeting demand.
My take on that was that private equity somehow forgot the lessons of Berkshire Hathaway post crisis and that buying up all those properties was an incredibly risky play. Like the intent wasn’t good, but it wasn’t going work out for them anyway and wasn’t going to work out looooong before they became an appreciable part of the market.
Strong upvote for the petty bourgeoisie point. If dead end antitrusters actually read Marx on this point they would see just how they can often be particularly hostile to the antitrust causes they ostensibly hold. It's a shame that Marx didn't live to see the Sherman Antitrust Act or anything past the end of the Gilded Age, it would have been good to get some of his takes on the record from those times.
"It’s very clear the long term plan is to, yes create a monopoly or localized monopoly."
You're going to have to put some math behind this one; what sort of concentration is there in *buying power* to justify even the possibility that this outcome occurs, even in a narrow geography?
At most it seems likely to me that you get an oligopoly, of three or four companies owning a chunk of rental properties, rather than one with actual monopoly powers.
To my knowledge there is basically no commodity, the provision of which is *more* fragmented than housing.
There are fewer companies out there milling flour than renting out housing.
I get that someone might have the ambition to reduce a specific sector of a specific market to an oligopoly but I don't even think that's possible, let alone significantly concentrating the housing of an entire city.
Don't US retail investors use professional property managers? In London every real estate office offers that service. That way the retail investor with a "portfolio" of one property doesn't need to personally know every kind of trade professional, they'll just have one they have a relationship with and use them when problems arise.
Only sometimes. The complaint I've heard about using professional property managers is that they eat so much margin that it makes the rental income a wash. All of the non-condo mom and pop landlords I've rented from maintain their own relationships with trade professionals.
By my reckoning only 2/36 entries bother to make the case for anticompetitive behavior. The rest just promote a simple idea, "big is bad," using an extremely flexible definition of what constitutes a market:
- Defense Contractors: "Since 1993, consolidation has reduced the number of large defense firms from 107 to five."
Five large firms sounds like a reasonably competitive market (edit: I should have said "is enough to support a competitive market"). Obviously collusion is possible, but that's not alleged here, merely that five (!) competing firms amounts to a monopoly.
- Food Service: "In 2015, the FTC and Justice Department successfully blocked a proposed merger of Sysco and U.S. Foods, the two biggest companies in the food services industry. Since then, the two companies have continued to consolidate nonetheless, as Sysco acquired North Star Seafood and U.S. foods acquired Cara Donna Provision Co."
It's hard to know what threat this poses when there's no denominator, no sense of scale.
- Cowboy Boots: "Four of the biggest brands – Justin Boots, Tony Lama, Nocona, and Chippewa – are all owned by Berkshire Hathaway."
No denominator. Four brands out of how many? What percentage of the market do they take up? WAIT A MINUTE, don't cowboy boots compete against other types of footwear? Are "mystery novel monopolists" a thing too?
- Appliances: "Whirlpool’s takeover of Maytag in 2006 gave it control of 50 to 80 percent of U.S. sales of washing machines, dryers, and dishwashers and a very strong position in refrigerators. Maytag also controls the Jenn-Air, Amana, Magic Chef, Admiral, and KitchenAid brands and holds a dominant position over supply of Sears Kenmore products."
First of all, look at those error bars ("50 to 80 percent"!). More importantly, notice that they're only looking at the US, while appliances are a global market.
I've picked the most egregious examples, but the other bullet points zoom in and out of geographical focus to make their points, carve industries and products up in bizarre ways to do the same, and make their case on short time horizons.
Maybe the OMI does some valuable work fighting anticompetitive behavior, but reading this makes me skeptical.
Defense is possibly the worst example you could have led with, here. The corruption/interest capture is spectacular, the pricing and contracting inflation due to lack of competition widely understood and admitted to by everyone in industry, and the outcomes have degraded a hundredfold since the DoD started pushing mergers on everyone in the early 90's in the name of "capacity retention," while no actual know-how was retained.
Did something happen in the early nineties to structurally reduce demand for defence production? If you turn swords into ploughshares, one consequence is that demand for swordsmiths goes down.
The defense department procures *a lot* of different products. If each of the 5 competitors only offers 40% of what DoD needs, that averages only 2 companies per product. That is bad. And as David R. says above the outcomes seem to be consistent with that.
This seems like a legitimately hard problem since the US DOD is going to be basically the only customer for a lot of this stuff. If you are making a military grade aircraft radar and US DOD doesn't want to buy it, is your company going to continue to work on that product? Its probably also the fact that the US DOD won't buy anything from a company that sells to china and russia (#2 & #3 militaries) so you don't really have any alternative customers.
That's entirely reasonable and I'm not arguing otherwise. OMI also does not make that argument. I encourage you to look at the page I linked to see the context.
Just registering that at least for the sole sourced Electric Boat subs and I imagine probably the HHI carriers too -- I don't think this creates any meaningful cost inflation. The DoD is in EB's ass during the procurement phase and genuinely does their own bottoms-up cost calculations during the negotiation. There's not even close to enough volume to support two players in the space and you can buy stock in both public companies. Their net margins tend to run around 10% and it's not like they have halls full of eng. just sharpening pencils. Electric Boat might have the hardest working team of engineers and I've been lucky enough to work within probably 20 different companies at this point. Their culture was inspiring.
It is entirely possible for the monopolist itself to come to suck so much that it's still barely profitable just because there is *nothing* keeping it honed.
I have no experience in defense so can't suggest that's what happening, but I will say that just because the people are impressive, doesn't mean the organization isn't a complete shitshow that squanders a ton of value. Been there, done that.
I can tell you - emphatically - Electric Boat is massively impressive top to bottom. Literally some of the best welders in the world work there. Probably the worlds best material science and acoustic engineers too. If you're going to point a finger at any waste it's tied to the DoD procurement rules. There's probably 100s of these ideas to use off the shelf tech that get shut down / can't get worked through the cycle.
This, I buy. We are working on DISA IL4 and FedRAMP... and thank God I am only aware of these projects as opposed to being in any way, shape, or form involved with or responsible for them.
The defense market is competitive which is why the modern united states can't make the same amount of 105 artillery shells in a year that WW1 Portugal could make in a week.
I'm skeptical that the inefficiency in the defense industrial base is primarily a result of a lack of competition (though I do think there needs to be more competition) and more a result of (a) poor spending priorities, changing requirements, and bad acquisition processes within government and (b) the same kinds of regulations on atoms that make it hard to build any kind of factory in America.
Tbf, in the 1950s, the US spent 5% of gdp (equivalent of $1.7 trillion on defense) and had significantly more robust industrial base. In 2010s, producing that many aircraft variants would be a pain logistically, and the F35 is significantly more technically capable than any jet from the 1950s (and history) and when adjusted for inflation, works out to be cheaper than what older jets were when the were made (F16, F15, F14). And no other country has been able to come even close to produce a jet with that quality and scale - 1200 have been produced, more than all other 5th gen’s combined. The F35 has been a success, even with its problems.
If you want to look at actual military consultation issues, ship building and nuclear silos and missiles are a place to start
Absolutely. My point was more that it was easier to maintain a competitive defense industrial base with lots of companies that could build fighters when you were developing a couple dozen per decade than when you're developing one.
Oh! You’re right! I think for the Air Force, you’ll see unmanned drones play that role and I think there is reasons to be optimistic about the Air Force.
Because the Army's strategy is no longer based on the massed artillery of WW1.
We still don't produce enough munitions, especially smart, guided ones, but that's on Congress and DoD, for whom devoting money for buying war reserve stocks is a very low priority.
For Congress and DoD, the highest priorities are always paying for people (and their healthcare) and for shiny new and cool weapon systems. Building sustainability for any extended conflict? Yawn.
This is a policy failure, but my point is that with robotics and modern production techniques, there is no way that a company that makes bicycle frames on a modern fabrication plant in Wichita couldn't do what, PORTUGAL, one of the poorest and least technologically advanced members of the Entente did in 1916.
The reason they can't is because the procurement contracts aren't there and Raytheon isn't about to let some upstart company hone in on their trough.
No, but the way defense procurement works in the US is pure regulatory capture. The lack of players just makes that easier.
I remember reading something years ago about this.
Say you're an air force colonel somewhere involved in procurement.
Lockheed Martin has a very nice half millions a year job just for you when you retire. For this job, your name will be on an office, you won't have to do anything, and you'll be called a consultant or a board member or some such.
Now, Lockheed wouldn't be so impolite as to say that this half million dollar job is dependent on you being friendly to the good folks at Lockheed Martin who are happy to work with the US government to defend freedom.
But it might help.
One of the big five used to boast that they had more generals than the Pentagon.
That's reasonable, and I should have said something like "sounds like enough players to support a competitive market" instead of "sounds like a reasonably competitive market".
> But you could also be making money by just reducing the amount of competition in the locksmith trade, letting yourself increase producer surplus while raising prices. Part of what makes this clever is that regulatory review of mergers normally happens because the dollar value of the acquisition is large. If you’re buying small companies, you can fly below the radar.
This is a little bit true but the typical roll-up is not buying a bunch of locksmiths that directly compete with each other in a small area, and avoiding competition is rarely a goal in anyone's mind. This roll-up makes money trivially because it takes a bunch of things off the table, like payroll, that take up time and money for everyone but a larger company can streamline.
However, the far bigger factor is that the average small business is run terribly and doing a bunch of stupid inefficient things, so just competent management is a huge step up. There's really nothing nefarious about this at all. Small businesses mostly suck as everyone who has worked at one knows.
" the far bigger factor is that the average small business is run terribly and doing a bunch of stupid inefficient things, so just competent management is a huge step up."
My experience has been that big businesses are just as likely if not more to do stupid, inefficient, and wasteful things, but scale is really, really powerful.
I’m somewhat sympathetic to this thinking, but then I wonder why if the advantages of scaling and good management are so obvious, why hasn’t the consolidation happened organically already?
There is no reason a successful locksmith can’t open another store or two, or buy out a competitor, and this was as true 50 years ago as today. And of course, a vast number of large chains, from McDonald’s to Jiffy Lube, did get started this way.
Starting with a large pool of PE capital has some advantages (ability to invest in enterprise-level scalable systems from day one, greater access to top end professional services, generally cheaper access to capital). But it also has clear disadvantages (lack of domain expertise, unproven business model, potentially more short-term focused investors). If the advantage is just better management, as opposed to rent seeking, I don’t see why PE is necessary.
Short answer is it’s a big fucking country and the benefit of buying a lock smith in kernerville Alabama is not worth the cost of running it for a conglomerate. Small businesses that stay small stay open because it’s simply not worth it for a big business to take over.
Wal Mart kind of figured out how to optimally place stores and have people think it was worth it to drive two hours to get their locks at wal mart, but not a ton of success stories for specialized stores,
Yeah, I was able to get copies of both my keys and pass cards at an automated kiosk in a 7/11 to give to a friend to water my plants when I was out of town, though they were cheap plastic. Meanwhile, the last time I had a human copy keys for me, he was supposed to make one copy each of three keys, but instead made one of the keys twice and skipped another key. And it took much longer. With that said, the quality of the human-made keys were better.
Funnily enough, my local hardware store guy sells keys faster, cheaper, and higher quality than the kiosks. For purely selfish reasons I hope he stays in business.
Yeah, I haven't used one of the automated ones, but I will say that I've probably had keys duplicated at something like 20+ times the frequency of having any sort of lock replacement/repair performed, so, if that's representative of most people, I suspect that a lot of locksmiths were dependent on key duplication for regular day-to-day revenue.
Well as you said this does happen quite a bit but the skills needed to run one locksmith are not the same skills needed to open and run several of them. But I think the bigger factor is this is not a very easy or obvious thing to do. If you bust your ass 365 days a year to run your shop and at the end of the year take home ~100K yourself, you don't necessarily have the capital or the time to open a second shop. Most small businesses are not great businesses. But if you can buy 10 of them, and pay all those operators 80K while taking a bunch of the work they were doing off the table, it might make sense for both sides.
A lot of small businesses - and locksmiths are a good example of this - are basically one or two skilled persons selling their labour to a lot of different customers rather than a business where there is a clear distinction between capital and labor.
Classically, these are "mixed income" rather than capital or labour income; part of the income of the locksmith is from their capital ownership of the business, and part from their skilled labour put into making keys, picking locks, installing locks, etc. Lots of economic statistics decline to distinguish how much of the mixed income is one or the other (this, btw, is why statistics like "percentage of GDP as labour income" can be of dubious value - if mixed income goes up and both labour and capital go down, it just means more small businesses and fewer large ones).
But a lot of them would be relatively happy to have the whole "running a business" part of the profession taken away from them and let someone else worry about answering the phone, doing taxes, running a calendar, keeping up a website, marketing and advertising, etc, etc.
You can see this same dynamic in white collar professions like doctors and lawyers too: plenty do hang out a shingle, but a lot more prefer to be employed, even though they have their own clients and relationships and can take those clients with them to another employer when they leave.
It's always sad when I see a local business that I like open a second location, then the quality of the second location is worse, but managing that causes the quality of the first location to drop too.
Then you're back to the core argument of the piece - stupid inefficient practices are also jobs programs, and everyone loves jobs programs, even if they're misguided.
While I generally agree, the take on T-Mobile / Sprint is off base, and you ignore all the evidence that came out in their litigation with the states. Articles like the Vox piece just assume the companies could have continued on their own merry way, when in reality T-Mobile had very little mid-band spectrum and its costs were exploding as data use rose. There is no way the UnCarrier strategy could have continued without the deal, and Deutsche Telekom was pulling in the reins. Conversely, Sprint had almost no low-band spectrum and its coverage was patchy, which was becoming more and more of an issue as demand moved from buffered content to things like FaceTime calls, and it was bleeding subscribers.
The deal dramatically lowered the company's costs, really did let it roll out 5G mich faster, and led it to launch fixed wireless, which has been a huge success. The ReWheel people you cite have an axe to grind and their methodology ignores data use. Consumers in the US just prefer to use way more data than those in other countries -- in part, likely because the networks are much better. Per GB of usage, US consumers pay much less, and the downward trend in $/GB never stopped. Pointing to an average of sticker prices being up proves too much: that trend had already stopped before the merger. Entry level plans with few features have never been cheaper; the cheapest T-Mobile prepaid plan is $15/month.
The corruption take is way off. Ajit Pai, the FCC Chair, pushed hard for the deal because he was genuinely excited about accelerating 5G rollout. Makan Delrahim insisted on a patchwork divestiture to DISH because he thought he was clever. The White House wasn't involved at all.
A lot of lazy articles about this that just re-share the same bad takes.
Thank you. Clarifying comments like these are one reason I, and I suspect so many others, come here.
Thank you. I saw that bit and I was like “wasn’t the consensus that this was exactly like the Spirit Airlines merger?” (with Sprint as Spirit Airlines, i.e. nonviable as a going concern absent the acquistion.) As someone who was on a Sprint-based network (in a major urban center!) I can assure anyone who isn’t aware that they really were absolutely terrible as a service compared to the competition (although attactive inasmuch as Verizon and co.’s prices were obscene.) The switch to T-Mobile has mostly been a pleasant transition to pretty low prices and dramatically better service.
Indeed. It seems to me the most likely outcome of a blocked merger would have been an even more entrenched AT&T/Verizon duopoly.
You also have to look at the downstream incentives: I’m not familiar with the particular history of Mint Mobile’s capitalization, but the possibility (eventually realized) of being bought by one of the big carriers surely was a necessary component. And so you got a serious, price-focused competitor.
Concerns that the next Instagram or YouTube or WhatsApp wouldn’t be allowed to exit via M&A has had a material effect on Silicon Valley investment patterns and IPOs, and probably at least partially explains all the (likely inefficient) capital concentration in the incumbent megacorps.
That's exactly what happened to the stock prices. When the merger was announced both AT&T and Verizon declined in excess of the broader market and the move was reversed when the deal was blocked because three ~ equal competitors creates a stronger market for consumers than two major and two sub-standard ones. This point is completely lost on the anti-monopolists though.
Also one thing that's unique about the telecom industry is that these companies have purchased x amount of wireless signal range from the government. It's a common resource, and the government has agreed to give each company a fixed amount, provided that they're competent & responsible stewards of it. If your telecom company is inept, your spectrum allocation is getting yanked! It needs to be re-allocated towards a better provider
I’m no economist but it seems obvious that the supposed platonic ideal of teeming numbers of competitors in most markets just isn’t realistic long term. Consolidation to a more steady state equilibrium seems to happen in most industries that I’ve seen.
I have the same feeling, and yet economists say the empirical evidence supports teeming competitors. Consolidation is unusual among middle-aged industries; it seems to primarily occur where training new workers or building full-scale plants create a substantial barrier to entry. See https://xiaoyangli.com/uploads/li_shakeouts_innovation.pdf
Seems like a lot of industries have some cyclical components. Things stabilize and consolidate a bit leaving room for some innovation (might be process, or business model or technical) to shake things up.
Yea, there was lots of evidence lying around at the time that T-Mobile was basically a minimum viable competitor in the market and Sprint would have been forced into bankruptcy and sold off for parts within a few years. Had that happened, AT&T and Verizon would have had the slack to outbid T-Mobile for mid-band just to strangle them, and then we'd have been back to the 1990's duopoly by 2030.
Having a third peer competitor has been unabashedly great for consumers, especially at the budget-conscious end of the spectrum.
Since it sounds like you have more experience in this area than I do, could you clarify your assertion that per GB of data usage, US consumers pay much less than other countries? A quick Google search of studies on this point (possibly of dubious rigor), put the US anywhere between 138 and 219 (the second list including island territories that have a different rate than the home country) in the world for cost per GB of mobile data. These suggest that the US remains one of the most expensive markets for mobile data, well behind most similarly developed peers.
What you mostly see online uses the methodology as ReWheel, they divide data caps for a plan by the price, and then they use a fixed and relatively low assumption of usage for unlimited plans. They aren't looking at actual usage. The numbers are largely driven by what share of the population are on unlimited plans and by the size of device subsidies. Which is why a lot of very random and poor places come out cheaply.
I don't have great public sources. There may be FCC reporting at some point, not sure what their timing is.
What’s funny about this is that we have evidence from nearly the beginning of time that unlimited plans induce demand (AER, 1979) AND that almost anyone should rationally opt in to an unlimited plan. It is so rational and those plans have been so mispriced that it is hard to say that there is any sort of flat rate bias in decent data. Basically every plan had been underpriced since forever .
At least for the big carriers & premiere plans, caps are so high that they might as well be unlimited. They’re there to provide recourse to cut off abuses like running your café WiFi off an iPhone hotspot.
This. I use a capped plan because it turns out that my real-world usage patterns are so far under the cap that it never ends up being binding. Unsurprisingly, 90% of the time I’m in WiFi range, which I assume is typical.
There is free Wi-Fi basically everywhere publicly at least in Europe so it probably doesn't matter
An important question in antitrust is whether the claimed efficiencies could be realized without a merger. Trading spectrum ownership rights could be achieved without merging.
Trading, but not combining. The efficiencies result from combining the portfolios. Also, it's not just whether done alternate arrangement is possible, but whether, absent the alternative of a merger, it would have actually occurred. There's no evidence it would have been profitable for the two sides to trade spectrum. In particular because T-Mobile didn't have piles of low band spectrum, it just had enough to be workable (largely from the break up package from the AT&T deal). Sprint several years before could have participated in an auction for some low band, but it ended up sitting it out because it couldn't afford to bid.
Kind of love the fact that the comment section has that one random guy that has an obscene amount of knowledge about a merger that happened in 2018, something that 90% of the population couldn’t tell you about
How many small business fetishists actually prefer smallness — and how many just hate capitalism but find “local” and “artisan” more emotionally satisfying than “abolish profit”? “Small business” often feels like a cottage chic aesthetic layered over a fundamentally anti-growth, anti-capital worldview.
These folks aren’t really trying to promote small business — they’re trying to knock capitalists of all sizes down a peg. They might admire a quilt maker scratching out a living at the farmer’s market, but I doubt they feel much sympathy for the local radiology co-op.
I think most people just SAY they love small businesses. Like, people love the idea of a local bookstore run by a former librarian who gives you great tips about what to read next. They want it to *exist*... but they actually spend their money on Amazon.
This was always my issue with the old complaints that Walmart is driving all these small stores out of business. If those small stores were so great, people would keep shopping there!
I personally like shopping at local stores and am willing to pay more to do so, but empirically, most people — even people who complain about Walmart showing up — don’t actually care enough to not shop at Walmart.
The vibes and feels of the lefties on this make no sense to me. Small business owners are the main group of rich conservatives! The blue-collar union people abandoned us and their own economic interests to own the libs! Their aesthetic preferences resent them, meanwhile the corporate managers and goldman sachs bros they hate are out here bankrolling Kamala's campaign 😭
This is just a “what’s the matter with Kansas” in the reverse. I’m not sure this is a strong argument either way. Someone can legitimately believe the morally right thing is to help make it easier for more people to vote, even though those new voters will vote against the person’s substantive policy interests, and someone can legitimately believe the right policy is one that harms their own economic interests, and someone can legitimately believe that small business is good even if small business owners vote against that person’s preferred other policies.
Sure, but that's why I said "vibes"--there seems to be a lot of "we're on a ~~team~~ with white union workers and small business owners against the big bad capitalists" vs "let's do things that are good for blue collar workers even though they hate us because it's morally right."
In the interests of transparency, Chat GPT Deep research suggested roughly 20% of voters say they support capitalism but disapprove of big businesses. I couldn’t find data on how many people approve of low profit but not high profit small businesses. We are going more on vibes here than anything empirically rigorous.
What the antitrust movement needs to wrap their heads around is that abstract calls against big corporations work. But attacking Amazon and Google — two insanely popular companies — is just gonna backfire.
As a small business owner whose business depends upon google advertising and detests the rents they are squeezing from me, I want my piece of a class action judgment. I pay 15% of my gross to google. Boooooo
I mean, customer acquisition costs are high for any business. I'm not sure I'd call google's ad market "rent seeking" - it feels like this is stretching the meaning of the term given the number of competing digital ad services.
Frankly Americans just need to learn to resolve the contradiction inside their own minds between "we hate big corporations, except most of the actual individual big corporations, which we love."
And the big impediment to small business ownership in many places is bureaucracy and regulatory capture that Abundance seeks to eliminate. Maybe chain restaurants wouldn’t be so ubiquitous if we made it a bit easier to navigate parking requirements and liquor license rules.
Most "small is beautiful" fetishists don't actually know enough about anticapitalism or socialism to really call them anticapitalists at all. It's a huge problem for us socialists when they try to join our groups.
"I think it’s good that if you want to get a loan in Kerrville, Texas, you can apply to a professionally managed bank with nationwide operations rather than being limited to a local pool of capital controlled by good old boys."
This helps me articulate as a political geographer, why few things* drive me as crazy as the left's unexamined fetish for "local" and "community."
* Ask me about the other ones! Get a drink and a snack first, though.
The most notorious authoritarians in US history were huge advocates of “local control”. It was locally elected sheriffs who enforced Fascistic apartheid in the Deep South not the Feds. It was states who turned a blind eye to activities of America’s most notorious terrorist organization. And it was local officials who encouraged and actively participated in extrajudicial executions in the name of enforcing the one party dictatorship.
I feel like pointing this stuff out is the best angle to helping convincing far leftists that a cult of “local control” actually had a pretty ugly history and maybe isn’t the best thing to be supporting if you want to help “regular” people.
The irony was lost on the "abolish the police" crowd, who tended to call for "restorative community justice." Not a good track record with that!
One of my first papers was on lynching in South Africa (neck tying). Community policing is uh… it’s lynching
They very much liked that idea, they just thought they'd be the ones doing the lynching rather than the other way around.
Did you mean “necklacing”?
Ugh yes. Trying to noise myself a little as the article wasn’t on South Africa but was on extra judicial killing in Africa and it’s uncommon enough to have peer reviewed empirical work in that area that it might doxx me
Being so afraid of being found, explains the Jimmy Hoffa alias.
Google says there’s no known connection between Jimmy Hoffa and necklacing so I think you’re safe here.
This is actually all downstream of the exact analytic sin that is discussed in the Abundance book -- i.e., the shift from a powerful central state under the control of a developmentalist, liberal regime seeking radical change (FDR) to an anti-change movement paranoid about state power and obsessed with the idea that the federal government is a force for global evil (1970s environmentalism, the anti-war movement, and then latterly the anti-Iraq backlash)
Far-leftists are closet authoritarians. It's the ol' horseshoe theory, they want to drive the bus and no one else.
Also, this, but for renting.
I think it would be good if you live in a suburb of Fresno, California, you can rent a house controlled by a professional landlord at a corporate real estate holding company with access to a network of plumbers, electricians, and locksmiths that can fix any issues you have, and who will leave you in peace as long as you pay the rent on time, instead of being limited to renting from nosy home owners who are always looking into how you live in "their" house, will skimp on handyman services, and will exploit you anytime they run into their own cashflow problems.
When I was four or five years old, I picked up a cotton mouth snake in our backyard and my mom screamed bloody murder and swatted it out of my hands. The neighborhood was seeing an influx of critters and snakes because the farmland that used to be on the other side of the highway was bought up and developed.
That's where Shreveport, LA built its first Target, Best Buy, Starbucks, Olive Garden, Hobby Lobby, KMart.... Aside from the snakes, we were delighted. I hear they have a Trader Joe's now.
I miss how easy it was to park there. 😅
The blurb from Basel Musharbash reveals his basic lack of familiarity with any of the literature on economic development.
The emergence of the joint stock corporation, which allowed complete strangers to pool their money together to fund ventures with uncertain payoff, was a key institutional development which allowed the West to grow faster than the rest.
That the average American retiree is willing to put the majority of their net worth in an index of ~500 companies (most of which they couldn’t name) is a minor miracle, and undergirds the capital markets system that allows American companies to thrive.
It seems that the anti-monopoly movement is just optimizing for vibes - I have no doubt it feels better walking into an owner operated coffee shop vs a Starbucks. But it’s pretty cool that millions Americans can walk into any of 16,000 stores across the country and get access to an extremely wide menu ranging from cinnamon dolce lattes to iced lavender cream oat milk matchas (yes I had to google this).
Sometimes people just need to step back and marvel at how incredible this would seem to anyone from half a century ago, let alone the two and a half centuries ago when Smith first published his treatise.
Yeah. Put simply, in most of America coffee sucked before Starbucks. The fact that you could get delicious espresso from a small business on Beverly Blvd. in Los Angeles doesn't make up for that fact.
(BTW when Howard Schultz was interviewed on 60 Minutes he pointed out Starbucks was actually good for mom and pop coffee shops because it got more people interested in good coffee which generated more demand across the sector. I buy that argument too.)
Before Starbucks American coffee was essentially Folgers and Maxwell House.
It's what makes the "gourmet shit" line in Pulp Fiction so excellent, as 1994 was right around when Starbucks was emerging.
And donut shop coffee (which didn't mean modern Dunkin but rather a pot of warmed over 3 hour old brown-black slop with Coffee Mate).
You can add in that disgusting gas station coffee that was big in the 80s and 90s too.
Ugh, my dad insisted on buying that before driving us to the mountain to go skiing. Terrible smell that'll always haunt me.
Yeah, plus whatever that disgusting stuff was that they put in your cup at Shoney's and Denny's.
Actually, now that I'm thinking about I bet McDonald's had the best quality coffee in the 90s. Gaviña has always sourced pretty good beans.
Indeed...I remember back when the best part of waking up was Folgers in your cup. Straight out of the can mmm.
The ads are burned into my memory. And the ad with "fill it to the rim...with Brim."
I would like to upvote this many times. That used to drive me crazy: “oh noes Starbucks is putting all the cute artisanal coffee shops out of business!” Outside of major cities and university towns, there were no artisanal coffee shops. You drank your Folgers industrial brew and liked it. Now thx to Starbucks, I can get a flat white in any part of the country. It’s a golden age.
There’s a reason they call good coffee “third wave” - Starbucks was the “second wave” that got people started thinking that coffee could be good.
South Park did a whole episode on this subject. It's the same one that gave The Discourse the beloved Underpants Gnome Logic meme.
I feel like this is quite common in much of the writing today - authors having ideological priors that leads to motivated reasoning and a lack of familiarity of the basic research on a particular topic. There’s papers and work going back a century discussing things like anti-trust, so I find it odd that writers think they somehow are qualified to overturn all of that work without actually seeming to have read any of it. Just vibes
It's basically just socialism-lite. They are emotionally on the same wavelength as socialists, but they correctly see that as not politically viable. They think the sweet spot (both politically and policy-wise) is to let people own property and engage in private enterprise, but not be allowed to get too rich.
Except in socialism you help poor people
Actually practiced Marxism has generally tended to enrich the governing elites of the society much more than the destitute.
I know this is a common take but I don't think it's actually true. Obviously the Soviet Union had a lot of corruption and party insiders did a lot better for themselves than common people, giving the lie to the radical egalitarian framework, but the USSR also dramatically reduced inequality. Compared to a millionaire executive or an aristocratic boyar, the party insider who gets various comforts and luxuries is not really that dramatic. And the lot of common people under the Soviet state was far better than under the Tsars, so it was to an extent successful.
The big problem with the USSR was not that it failed at redistribution, but that it could not sustain growth or manage the production of complex products due primarily to the information processing problems of a centrally planned economy. But market structures inevitably require winners and losers and relatively higher inequality because those are part of the information signaling mechanisms that make markets work.
I.e., poverty bad in an absolute sense, but the obsession with no inequality is what drives the collapse of these systems in the first place
The Soviet Union caused two mass famines, would have caused more if they didn't buy their way out of a third with oil wealth, and basically decimated peasant wealth in what was, in 1917, a peasant society through the "kulak" campaigns. It's hard to come up with a counterfactual that's worse for the Russian commoner.
Famines were extremely frequent in Tsarist Russia, as in basically every pre-industrial European country. But yes, the very earliest period of the Soviet Union included a lot of violence and displacement. But it is straightforward cold war propaganda to believe that the average person was in any way worse off in, say, 1955, than they would have been under the Tsars. Complete made up nonsense. The USSR rapidly industrialized an entirely agrarian state, and once the transition was complete living standards were higher and poverty was lower.
Also, your focus on the dekulakization (which was bad!) shows you have a miscalibrated sense of what Russian commoners *were*. Landowning peasants were very, very wealthy compared to the larger bulk population of tenant farming peasants and agrarian wage laborers.
Not saying you’re wrong but by the 1500s famine were pretty uncommon and small in Western Europe and famine of the scale that happened during Soviet Russia hadn’t occurred in Europe (or russia) since the 1300s.
Famines did happen, but they were mostly smaller, regional affairs (though a massive one did occur in the 1690s in France that was pretty bad)
OK then Kade did you like all the murder and the GULAGs and so on? Because that comes with the Marxist package.
You have grown more strident in your criticism of unions while retaining your core commitment to helping the precariat. In this regard, we are completely eye to eye. Some commenters seem unaware that free markets are not a great tool for allocating wealth even though they are the best proven tool for creating it.
I'm not sure if I agree with that. If you look at societies with free markets they tend to have pretty healthy middle classes.
Also, it really depends on your definition of free market. For example, many people (myself included) mean free competitive market when they say free market.
IE free market still doesn't mean anything goes. There's still a role for government to prevent fraud, and anti-competitive behavior.
The precariat and the middle class are very different. The American middle class is doing just fine, and probably extends didn’t as far as the 65th or even the 60th percentile of income. It is huge by historical standards, but the median American is lower middle class.
only in theory.
https://www.youtube.com/watch?v=JLGEF54RWos
Small businesses are a key way people can stop being poor.
Big business is a major customer of small business. Companies with the necessary scale to make cars or airplanes have supply chains that often reach down to mom-and-pop machine shops.
Is that right? I would think small business is a good way middle class and poor people can get rich, but big business offers a much broader pathway for poor people to become middle class.
Bigger companies tend to have relatively firm ideas about how people should act, including behaviors that many people may culturally find confusing.
Blue and pink collar workers who start service companies, exurban residents who supply farmers market businesses, and many people who start restaurants are often not good candidates to work for big businesses.
In the context of mature economies with lots of functions that benefit from economies of scale being conducted by large enterprises, yes, this is often true.
In the context of developing countries where the basics aren't being done at scale and the complex stuff isn't being done at all, no, being the owner of a small business is not a route out of poverty, because everyone is poor, because little or nothing is being done at scale.
It's socialism lite and it's also this: humans love simple, sweeping explanations that explain things (it seems to me our species has an unquenchable thirst for comprehensibilty), and "monopoly" power is a tempting "theory of everything" to explain what ails the economy. A good example is Washington Monthly: they've been banging on about monopoly (and yes, using it seemingly to explain all manner of economic problems) ad nauseum for years now.
That’s why I shared the yimby theory of power piece yesterday! Housing really breaks the neo brandeisian brain because there is no easy corporate villain.
It did identify REITs as an easy corporate villain! That's why I said that they should get attacked just to get the antitrust dead enders on board with something.
That essay was silly in that the author raised the specter of “the corporate power of REITs” without, you know, showing his work or even hinting at examples; and ignorant in that he considers productive firms as only the ones turning out “material goods.”
Agreed. Here's a credible-enough list of 197 publicly traded REITs. https://stockanalysis.com/list/reit-stocks/
The largest has a market cap of 102.75B and the smallest is 1.90M. These seem shockingly small with respect to other publicly traded securities, but it does suggest we could attack the entire sector because they may add up to at least trillion in aggregate. If we do that, we will need someone else prepared to own these assets, so maybe we could just gift them to the Trump organization as part of legislation to outlaw REITs.
Moreover, I believe REITs primarily represent certain tranches of the equity portions of building ownership and management, so we could also look into the debt/mortgage assets, as well as more bespoke combinations of debt/equity like warrants and options. I believe these securities are more of an over-the-counter product for which there is less public markets info.
Thankfully Google Search shows a lot of paid ads for these investment services related to real estate debt investing, so I hopefully some financial professional could help us figure out the next layers of private capital to reappropriate. Eg, https://www.commercialrealestate.loans/commercial-real-estate-glossary/real-estate-debt-funds/ suggests we're looking at around $700B in commercial real estate loans, circa 2018
So far as I can tell you're deep into Poe's law territory here, but regarding - "Moreover, I believe REITs primarily represent certain tranches of the equity portions of building ownership and management, " - why would this be the case for publicly-traded entities? Isn't the whole point of public trading to disseminate ownership as a mechanism of raising capital? Conceptually, one *could* offer public trading only of minority stakes, but, if you're rich enough that you only need an additional capital raise commensurate with the sale of a minority stake, is public equity financing really that much more attractive than private debt (or private equity) finance in view of all the regulatory overhead?
Simple answer: Most public corps have at most two equity (ie, stock) share classes, preferred and common, whereas a single corp can have dozens or more of different bond issuances as well as more complex offerings like warrants and options. Hence, there is far less interest in actively trading the non-stock offerings. At most these get wrapped up in to ETFs and mutual funds to provide an easier-to-value, more liquid, publicly traded financial vehicle for efficient trading.
Moreover, there has been an explosion in "private credit funds" (the debt analog of private equity) in the last decade to more competitively originate, intermediate, and hold bonds and other debt-like financial instruments. And there is increasing interest in more ETF-like vehicles to wrap up some of these bespoke offerings (eg, commercial real estate lending) for broader public investing.
The Bloomberg opinionist Matt Levine has written extensively on this topic over the last ~5 years. The private credit explosion has also come up elsewhere in financial media. There is certainly far more nuance than I appreciate, but this is my rough, non-AI assisted, understanding.
I think what gives that resonance is the fact that there are a lot of extremely wealthy people who do antisocial things and generally act like jerks, so it makes them a very believable "bad guy". Partly because both getting super wealthy and growing up in inherited wealth tend to *select* for jerkiness, and partly because being super wealthy gives you the *capacity* to be as jerky as you want to be. That has some resonance even for me. I just don't think the right way to address this is to prevent anyone from becoming (that) rich in the first place.
I think we sort of underrate still the impact of Trump here. Because he’s basically the perfect avatar of the far left worldview. He’s essentially the cartoon lefty villain in the real world.
And I think lefties, especially now, have at least some justification in saying “please look who is in charge”.
True, but also fascinating that the people who support Trump most are the opposite of wealthy elites.
There is also the effect of money on the political and regulatory landscape. To what extent big money can sway the landscape to their benefit is an empirical question but there is an intuitive plausibility to the idea of defending democracy and lower socioeconomic classes by capping wealth.
This leads to a lot of distortion and friction in the economy overall though so perhaps alternative constraints on money in politics would be more effective (campaign financing, political advertising and lobbying restrictions for example). Apparently some of this is considered unconstitutional though in the US?
One of the frustrations I have with people complaining about "big" money in politics is that the entire 2024 election cycle was about $16 billion dollars. Meanwhile, the federal government will spend about 15,000 billion dollars this two year congressional session, and over $30,000 billion in the 4 year presidential term. And that doesn't take into account all the ways the federal government impacts things outside of spending money!
Sounds like the government should just fund the two parties then.
Why?
Yep. See the details of the Citizens United lawfare. [1]
But more importantly, with the advent of GenAI and our increasingly fragmented media ecosystem, we don't even need that much concentrated money to sway people understanding of reality anymore. Eg, just use bots on Reddit appropriately [2] and subsidize/market high-impact, paid media. Even just state coercion and private ownership of some media channels could be enough to impact our political information systems without the need for any explicit "money in politics".
Eg, Trump not enforcing the TikTok ban while he's also suing ABC, private ownership of Twitter/X, Zuckerberg's guaranteed control of Meta's board, Billionaire private ownership/control of NYT and WP, bot-based info-terrorism against BlueSky and Reddit, etc.
[1] From my Jun 2024 comment, https://www.slowboring.com/p/moderate-donors-should-do-something/comment/58043732
As demonstrated in the Citizens United case, we can't restrict spending on political messaging due to the 1st amendment as well as the subjectivity in differentiating between political messaging and commercial/creative expression. People and organization can spend their own money on promoting whatever message they want, including political messaging.
And I think that was the right call!
Recall that Citizens United began by trying to block the release of Michael Moore's Fahrenheit 9/11 in the lead up the 2004 election under the terms of the 2002 Bipartisan Campaign Reform Act. The Federal Election Commission allowed that film (rightfully so IMO), so CU attempted to create a mirror image film smearing Hillary Clinton, for release around the 2008 election. The FEC blocked that one, and when CU sued, the courts recognized the subjectivity in differentiating political speech from create/commercial speech. Moreover, the 1st amendment doesn't even have a carve out for political speech restrictions so its a moot point.
[2] See details in https://www.slowboring.com/p/friday-thread-1af/comment/80408166
> both getting super wealthy and growing up in inherited wealth tend to *select* for jerkiness,
Sounds plausible, but is it actually the case that the wealthy are bigger jerks than the non-wealthy? Being a jerk can also lead to poverty if not overcome by other skills.
I think it's more a modernized Jeffersonianism, but they have replaced yeoman farmers with small business people.
For both there's a romantic idealized communitarian vibe appeal more than a practical analysis.
We are seeing an absolute trash heap of problems caused by people who have, in fact, gotten quite rich off an idea at the right time, continued to pull money because of that idea, and clearly don't have any other good ones. The world is not better off because Zuckerberg is as wealthy as he is. That isn't the same as small business are defacto better than large ones. But it is to say that the massive accumulation of wealth by the owners of these large firms is a problem.
And it is exacerbated by a world where the end is viewed as more important than the means. Making money is the goal, and how you make money is seen as unimportant so long as you are making more. It's a problem for us, even if the problem isn't that being big is guaranteed to be worse than being small.
I live in NYC so I can’t help but think about all of the terrible landlords who would fit their description of “owner operated.” Is that an incorrect leap?
Not at all, it's one of the things people actually living in the real world notice. Owner operated housing (aka small landlords) are often terrible for the renters and consistently less good at managing the properties than management companies.
As one of those small landlords who tries not to be terrible, from interviews with tenants I've done over the years, they tend to describe them as high variance, typical of most small businesses--the good ones really good, the bad ones really bad.
100% this. Not all small landlords are good, and some are worse than corporate landlords, but you can strike gold with some in a way that you basically never will with corporate concerns.
This is not just landlords / renting, though.
People like chains not because they offer the best stuff, but because one knows what one is getting.
There's almost certainly a steakhouse within driving distance that is better than a Ruth's Chris, but there is also almost certainly one that will cook your steak from frozen and it'll be raw in the middle. At the Ruth's Chris, you know what to expect.
Landlording, unlike many other types of small business, customers can't easily switch to the better landlords and let them expand their operations (this is partly because it's capital-heavy, so the better landlords have to buy more properties, and partly because of the static nature of the assets, ie the good landlords would have to buy from the bad ones).
If there are five shops selling fresh fruit and vegetables on your local high street, then customers will tend to prefer two or three and will switch to them from the others, meaning the better ones make more money and can sell more goods, while the worse ones will gradually fade away. But a similar situation with landlords see customers (tenants) trapped in the bad apartments with the bad landlords.
Note that the average landlord on a per-tenancy basis is worse than the average landlord on a per-property basis (because tenants stick with good landlords longer), so when looking at vacancies, the landlords are going to be below average on average.
Yes, but the flip side is that those golden small landlords are likely forging profit by being overly tenant friendly. Fine if the owners are sufficiently wealthy, but I imagine there are retires that do struggle a bit due to suboptimal rental investment and management decisions. Eg, not exercising their right to a full two months when a lease is broken early or being overly attentive to tenant requests.*
And the same is true of other small businesses. Eg, a small, money losing cafe that is being subsidized by the owners wealthy parents so that they can provide a great experience, quality product, competitive prices, and worker friendly wages and workloads.
As I commonly remind us all, a Marxist America, with true uniform, central planning may be a step down in quality of life for many of us. Eg, ask a military enlistee lifer about QoL in on-base housing and other accommodations.
* Note that there are rental management firms that small landlords can hire for more efficient (and legally compliant) management. Eg, Berkshire Hathaway HomeServices Professional Realty, https://www.bhhspro.com/resources/property-management
100% and a pretty good way to think about small businesses in general in how they treat their workers and customers.
I'm usually a pretty risk-neutral person, but this is a space where I'm quite risk-averse. I would much prefer a guaranteed "basic competence, no charity" deal than roll the dice.
I'm a small landlord too, and also try to be very responsive.
It's practically impossible to differentiate that in the market, though, except in the general sense of "you get what you pay for."
Another example is AirBnB. Even with the rating system and reviews, the quality and the experience varies a lot.
I am quite certain that people who prefer small landlords have never actually rented from one. They may have started their career in urban apartments owned by corporations, then purchased a home, but they definitely never lived in an apartment in NYC owned by a small landlord, or a house in the burbs that was some other couple's starter-home-turned-investment-vehicle.
I'll agree that corporate landlords are better overall, but I think a lot of people who prefer small landlords have had an experience with such a landlord who, e.g., didn't raise the rent (notwithstanding market conditions) because the landlord thought they were a good tenant and wanted to keep them in the property.
Small landlords have a very high variance. You can get:
1. Generous landlords who maintain the property, give tenants a break on the rent during financial hardship and generally act benevolently
2. Average landlords, who do just enough to keep the property standing, raise rent at an average level for comps and are indifferent to the tenant as long as they pay on time and don’t cause trouble
3. Slumlords who let the property degrade and jack up the rent by a large amount every year
And you also get people in between the above.
This idea of owner-operator type businesses makes me think these "anti-trust" advocates have some fetish for neo-pastoralism. In a world where everything is a cottage industry, you cannot gain efficiencies by scale or scope.
Economies that overwhelmingly consist of small businesses are pretty terrible! Look at Spain
Not to mention that a lot of people start businesses with the intent to sell them eventually. If that's difficult to do, you'll get less business formation. And ideally that would be what we're trying to maximize, the number of new businesses rather than the number of small businesses.
Do a lot of people start businesses with that intent? Startups, sure, but who sets up a landscaping company with the aim of one day selling it to a megacorp?
I think many might like to be able to sell it when they're ready to retire.
Try South Korea, where the government basically subsidizes small businesses as an ersatz welfare state
I feel like if you’re going to have zaibatsu equivalent national champions, subsidizing small businesses might be the price you have to pay to keep society going. I dunno though, it’s an interesting example
We don’t want an oligopoly like HK, but there’s likely a better alternative, such as breaking up some chaebols and also simply providing direct welfare benefits to those in zombie small businesses versus bearing the economic drag.
Eh, Spain has been one of the fastest growing economies in Europe for the last 2 years. Italy would be a better pick.
I remember riding around in rural Sri Lanka and passing through a village where everyone had a table under a tree selling roughly the same thing at the same price. Our guide told us that the people with get up & go had gotten up and gone to the big city or to the Gulf States.
When I was going through small cities in Guatemala there was convenience store about every 500 feet, all selling the same things.
I think that people have an aversion to the perception that the quality of a business and the product it provides is often divorced from how much money it makes.
There has seemed to be a trend, especially evident with private equity, that you can extract money from a business while making the experience for customers worse. It’s caused a disillusionment that profits are no longer derived from providing the best goods to customers but rather how well you can financially engineer the underlying legal structure of a corporation.
Companies like Microstrategy have certainly made me question what were even doing anymore.
Yes, but that perception could just stem from PE being the only willing buyer when a small business owner wants out at a decent price. Sure they could gift it to their children, who would run it to the ground, or sell for cheap to someone on their staff. But if the SMB owner actually wants to retire and provide for their children, then PE might offer them the best terms. Moreover, PE could be incentivized to buy due to the owner largely arbitraging their own time to create consumer and worker surplus. Eg, install professional management, raise prices, tighten up work requirements, and collect above average profit until consumers and the market fully adapts over the course of years.
But again, what is the alternative? Should the owner give up some of the sales value to hopefully find another sucker that can work 80 hr/wk for the benefit of other workers and the customers? Including the risk that the new owner could go bankrupt if the fail. That same person could manage the firm under PE ownership for 50 hr/wk and higher pay, including a variable bonus structure. PE might even give them the option to incrementally buy into the equity ownership. But I don't think we should count on overly charitable owners forever. After all, eventually even that will fail once some finds the Walmart or Amazon approach to competing at scale, possibly using tech advances in automation or just disintermediation a la Uber and Task Rabbit.
You are addressing a different point. I am not blaming the owners of a veterinary clinic or an orthodontist for selling the private equity, I am saying that there are a growing number of examples of private equity purchasing these types of businesses and systematically increasing costs for customers while reducing the quality of the goods and services. There are also numerous examples of PE loading up a company with debt in clever ways that leaves other parties holding the bag.
PE is much better at financial engineering than they are at running businesses with high customer satisfaction levels.
That is the perception drives people to prefer owner-operated businesses.
Yeah, I'm agreeing with you. I'm stating that the existing owner could've already done that but didn't because they either "believed the business would live forever" or they were engaging some pro-consumer charity exercise. They've could just raised prices and donated to EA. I certainly hope they were honest about their tax accounting and not putting their own personal vehicle under as a business expense. Corp audits would never allow that.
Moreover, the following line is BS:
> PE loading up a company with debt in clever ways that leaves other parties holding the bag
Who do you think is on the other side of that trade, if not a Private Credit shop? Moreover, both the PE and PC shop may have the same LPs, if not the same parent firm and branding. Eg, Black Stone and Bridge Water have massive PCs funds. And all financial incentives motivate ruthless, competitive behavior. Eg, I'll issue you debt on draconian terms, hoping your PE investment goes bankrupt so I can acquire the same assets with ease and less capital at risk. Maybe just sell it to another PE shop if they'll also issue debt to my PC fund.
There is the general concern around "financialization", but again, think back to the owner-operator who believed their business would last forever due to good honest management. How many consumers remain loyal when competition offers better pricing or service? What if their niche is eliminated due to technological advances or changes in consumer preferences? At least PE shops recognize and manage these risks and their LPs can accept some failures due to diversification. Some small business owners do the same, but then they are no different from a PE owned firm.
I don't think you have done much to refute the claim that they cleverly load companies up with debt.
PE would obviously prefer the company to be successful for a number of years to maximize their returns with a sale or by going public, but they create their deals in ways that don't require the underlying company to succeed.
Let's see where we disagree. The process goes like this:
- PE buys company and loads it up with debt to leverage their purchase.
- PE firm insulates itself from losses outside the deal by setting up a specific legal entity to own the deal
- PE gets an equity stake in the enterprise
- PE takes dividends and management fees to cover as much of their downside risk as possible
- Company either succeeds and it leads to a successful sale/public offering
- or company begins to struggle and PE accelerates its decline to avoid as much loss as possible (sales of assets, cost cutting to pay management fees at the expense of the enterprise, etc)
- Bankruptcy happens
- Debt holders are paid based on seniority on (PC uses remaining assets to recoup as much as possible)
- Other creditors get less or nothing
- PE has equity wiped out
- Workers lose jobs, vendors go unpaid, etc
To add, you are likely going to say that these are the same things that the clever owner-operator would do, but there are a couple of substantial differences.
The owner-operator fundamentally will care more about the success of the company. They don't have a portfolio of these investments.
They will also do what you referred to as "charity" where they don't treat their customers and employees as ruthlessly.
It should also be noted there's nothing preventing owner operated businesses now.
For example, WinCo (a decent sized grocery chain in my area) is employee owned.
I don't think it's back-to-the-land as much as it is the scene from Office Space where they take a baseball bat to the printer.
Successfull but not too successful.
Efficient but not too efficient.
Innovative but not too innovative.
Just in a friendly neighborhood artisanal way.
Scale isn’t necessarily providing lower prices to the consumer.
Individual providers of veterinary care, HVAC services, etc are generally less expensive than groups bought up by investors.
Individual purchases of veg and eggs are typically cheaper than the store.
Choice is a good thing.
This is so counter to every bit if economic theory that I’m going need you to cite your data sources.
You’re basically arguing that economies of scale don’t apply to egg prices or HVAC components, which is ridiculous (or that vet practice groups are a local monopoly and are extracting rents)
They are conflating monopoly rents with efficiencies of scale and scope. It comes down to a lack of experience with the language and terms used.
Nope, not conflating anything. Pointing out that efficiencies of scale are not, in the real world, generally passed on to the consumer in monopoly situations.
Individual egg and veg purchases may not have to account for transport and storage costs in a way that creates a bargaining range. And PE buyouts of veterinary care to increase prices and decrease service are 100% A Thing — veterinary care lends itself to have natural monopoly-like characteristics in many markets because there just isn’t enough demand to support a large number of practices, but practitioner reluctance or ineffectiveness to extract maximum surplus via rents applies to individual practices but not to PE-owned ones.
The local vet thing absolutely happens. But that’s a market failure/monopoly. That’s not a small provider outcompeting a big one on marginal costs.
I feel this less about vet care- but man, PE acquiring hospitals almost always means fraud in the end. Like it seems the cost floor is so high even a national firm can’t make it worth it
I can’t speak to it re: PE and hospitals, but I would believe it given what I understand the track record to have been in vet care and nursing homes.
Elder care is a miserable business. No one wants to pay what it actually costs to grow old in America.,
I did not claim that the marginal costs were lower? Just that the consumer prices are often lower in less consolidated markets.
No, I am pointing out the very simple fact that economies of scale ARE ONLY ONE FACTOR IN PRICING.
Egg prices direct from producer at local farmstands and farmer markets stayed at around $4 per dozen during the bird flu problems. Most of the price of food is NOT going to the actual producer, and buying direct typically can result in large savings.
There has been extensive reporting on vet practices and multiple other formerly independent service businesses being set up as local monopolies. See for example https://www.theatlantic.com/ideas/archive/2024/04/vet-private-equity-industry/678180/ which actually resulted in legislative responses https://www.warren.senate.gov/newsroom/press-releases/warren-blumenthal-slam-private-equity-company-for-consolidating-veterinary-care-raising-costs-for-pet-owners#:~:text=At%20some%20practices%2C%20corporate%20managers,Mobile's%20proposed%20acquisition%20of%20UScellular.
Aside from the bird flu making local cage free eggs in the small grocery the less expensive option (at least where i'm at upstate), the cheapest eggs are at ALDI or Target. The local eggs may still be cheaper/the same price here in terms of cage free even when the bird flu ends. From my friend in Brooklyn, the local supermarket chains and delis really gouge for eggs and other foods. I've heard produce markets in NYC can be a cheap option.
Aside from these specific examples, something interesting I've noticed is opinion pieces saying large grocery chains have a lot of pricing power over suppliers which raise prices for the smaller grocery stores. My question is if this dynamic still leads to the lowest prices for consumers which I suspect but I'm not sure. I would like it if more chain groceries would establish themselves where there's less parking.
Oh boy, I'm eager to see how Matt's feed will go today as Antitrust Twitter yells at him.
It is real frustrating to see that sector so obsessed with anti-bigness that they can't see the trees for the forest. It's also frustrating that they won't go after the harms of rent seeking, regardless of if it comes from small or big business, due to it often needing to remove regulations instead of add them. And rent seeking always strikes me as being excellent on a political front to sate that desire for conspiracy theories: there's business and government colluding (a tactic antitrust typically don't like!) to rip off the customer for profit.
That set loves to admire Louis Brandeis, despite his history of being both ahead of his time in the Progressive Era, and behind his time in the New Deal Era. This looks to be striking the current antitrust movement again.
...and here was how Stoller reacted to seeing the bat signal:
"Abundance arguments are done in bad faith. @musharbash_b made the case that the Dallas market is distorted by large homebuilders and private equity, leading to a doubling of housing costs since 2011. Yglesias just pretended he said something different. [https://www.thebignewsletter.com/p/messing-with-texas-how-big-homebuilders]
Notice how his characterization of the piece on Dallas housing costs omits the thesis - big home builders are restricting supply and institutional investors are buying up the existing stock."
He also alleges that Matt "doesn’t like business people who aren’t corrupt.". I'm just enjoying the tasty popcorn.
Matt's feed will be what it always is: wall-to-wall spam trying to get you to believe that so-and-so has great stock tips.
Wasn't one of Musk's big causes to try to reduce robots on Twitter? It can not be that hard to quash this kind of highly repetitive spam.
This idea of ownership and preference for self-employment over employment doesn't sound all that far from the "ownership society" George W. Bush campaigned on in 2004. It was appealing to enough people to feature in a winning presidential election not very long ago. And if you put in the context of the longer Jeffersonian vs Hamiltonian debate, its also not that hard to see how the idea of a society where as many people as possible are as independent as possible has long been linked to political freedom and considered by many to be almost a predicate for an American democracy of equals.
It can be good to be a small business owner. It is usually bad to be a small business employee. And there are very mixed results, with a big bulge on the bottom side, of being a small business customer.
My first boss at my first job in high school at a small business went to jail for fraud. Part of my job was juggling when his wife (who he was divorcing) and his mistress were in the office. I had multiple paychecks bounce. That was educational in ways my parents didn't intend when they made me get a job.
My mother was a waitress at a small diner in my (rural, tiny) hometown a million years ago. This was in the days before computers & automated payroll providers. The owner was stealing the employees' Social Security contributions, out of their paychecks, for a number of years. He was eventually caught and just had to pay a fine- no prosecution, no jail, nothing. He later went on to be the Mayor of the town, and then a longtime city councilor
I had a pretty good experience as a small business employee working for Matt & Kate. Therefore we need to break up the NYT.
Yes, absolutely, I commented above that this has an updated yeoman farmer vibe to it. And there's something intuitively appealing about about the small local thing even if it doesn't actually necessarily pencil out.
Jeffersonianism and Jacksonianism have been such noxious pollutants in American political culture
Jefferson I could at least see what he was trying to do to make the country better, even with its flaws, and he was more pragmatic as President. Jackson, on the other hand...fuck that guy, always.
I can appreciate his work against the authoritarian turn of the Federalists (the Alien and Sedition Acts, of which the Alien Enemies Act is notorious today) but ugh, the anti-intellectualism, anti-urbanism and white supremacy are poisons that still linger.
Fun fact, in the John Adams written Massachusetts constitution state representation was based on the town's assessed value not population.
It was also the basis of emancipation in Massachusetts via the State Supreme Court.
Its should be noted that Jackson and nearly everyone who initially supported him, from Van Buren to Calhoun, saw themselves as The Real Jeffersonians.
Yea, which is why I added Jacksonianism
Agreed. Kind of like how future politicians said they were into Reaganism in ways that didn't fit the actual governing of Reagan.
This is *popular* to say in the technocratic center but without them you literally don't get universal suffrage, possibly for decades, in the US.
And without universal suffrage in the US there's no way it comes on anything like the same timeline in Europe either.
If you don't count New Jersey in the 1790s, Wyoming in 1869 was the first state to give women the right to vote.
Jacksonianism was crucial to achieving universal male suffrage, without which universal suffrage isn't even remotely on the table.
Jefferson is another story, but this is just not true of Jacksonianism. The tipping point for universal White male sufferage came in the early 1820s. New York, for example, got rid of most property requirements for White men in 1821, and then scrapped the last few in 1826. Jackson's election in 1828 was a *consequence* of expanded sufferage, not its cause.
It's true that most Jacksonians had been supporters of universal White male sufferage, but the same was true of most Whigs. There were some exceptions on both sides, but it was a settled issue in all but a few states by the time Jackson was first elected, and it wasn't really a partisan issue going forward in the Second Party System.
Great point. A more “up to date” description might be TR’s “New Nationalism” v. Wilson’s “New Freedom.” That dispute sputtered out in the 1930’s, to be subsumed in the general acceptance of Keynesian economics.
If you look at how people have become successful, starting a small business has been a very important tool.
Working in a large business has also been a very important tool, probably for a much larger percentage of people who have entered the middle class over the past century!
Big businesses are typically not a particularly good place to work for people of blue collar or poor backgrounds. On the other hand, a lot of blue and pink collar workers wind up creating small service businesses, restaurants, crafts and agricultural businesses, etc.
The goal is not to just provide a good living for highly educated, articulate, polished people. It’s to spread opportunity widely.
When Ezra pinned Teachout on this exact dynamic of "there's more anti-competitive behavior than just Meta, which doesn't actually seem that traditionally anti-competitive what's up with that?"
Teachout response was "I love America" followed by "were just starting to look at this" aka no clue how to process
This piece is clarifying that their actual goal is some sort of reshaping of the entire capitalist enterprise and anything less than pure, unmitigated worker power is "anti capitalist."
It makes sense why Khan was both celebrated heavily while losing most of her cases against tech. These people need to pass some new laws rather than continually try to stretch the legal definition of what they're doing to suit their political priors that no one else agrees with.
I have friends who work in the antitrust space, and apparently there was a lot of embarrassment over that interview.
It would be tough to have a name that memorable. I feel like I've been hearing it for a decade, but then finally hearing her talk during that interview it was pretty quickly like "oh, okay, lol. Guess I don't need to worry about that."
I'm not surprised
Going after Meta for anti competitive practices because they have the simplest ad sales model creates all sorts of bad incentives for other large companies they sell ads (make your market as opaque as possible and people won’t go after it maybe)
It's pretty funny to see Europe deciding to go maximally in this direction, causing both increased consumer friction that pisses everyone off while making their digital industry even more irrelevant.
The end result of this logic is removing Maps from Google Search like they did because of invented anti trust ~reasons~ that costs €3-4M/month in dead time of people trying to find out where the hell to go. I'm sure we'll see a globally competitive Maps peer pop up in Europe any second now...right!?!??
The whole concept of forced debundling of an online company's products has always made zero sense to me. People aren't dumb, if they really want Google Maps they'll bookmark to it and still go it, they're just adding unneeded friction. And I say this as someone that gets very annoyed when one company tries to throw up all kinds of notifications to nudge me into their own products.
It's weird to me that the Microsoft cases in the 90s are talked about positively by the DOJ as successes. Do they really think that forced unbundling Internet Explorer from OEMs was the reason that IE didnt win the browser wars? They retained their market share until the instant Chrome and Firefox came along. The public legal field has really never quite understood how to regulate technology
Yes, that was the very first case when it struck me that this made no sense at all. I never used Internet Explorer because it sucked, and it was super easy for me to just download Netscape and then Firefox to get around it. We weren't some lemmings without agency like the DOJ argued.
I've always liked Urban Dictionary's leading definition for IE: "A simple Windows XP tool which allows the user to browse to Mozilla.com and download Firefox, a web browser."
The first time a friend of mine showed me how much better Firefox was to use, it was a revelation.
The devil's advocate argument is probably something about limiting the capacity for other Microsoft products to take dependencies on an IE installation in a way that inhibits competition (even as its proponents would argue that it promotes functionality and ease of use in the way that iOS's walled-garden approach does.)
This is what happens when the goal is to become the leader in regulation.
When you install Excel for the first time, you get asked if you want to use the conventional XLSX format, or the format from Open Office. I'm simply at a loss to know what the point of this nonsense is.
(Europe does have an effective mapping platform, but it was once owned by Nokia who got hammered over ten years ago. The platform does apparently live on as something called 'Here We Go')
"XLS? no please vendor lock me daddy"
Why would I want to be forced to use a buggy opaque proprietary standard from Microsoft like xlsx?
I can deal with XLSX if they in turn let me have an option to completely turn off automatic formatting into dates--and especially into date formats no person would ever seriously choose first. No, Microsoft, when I type or copy & paste in 6-4, that does not mean 4-Jun! Cut that shit out.
There's a protein in humans originally called MARCH6 (Membrane Associated Ring-CH-Type 6) that eventually got renamed to MARCHF6 (Membrane Associated Ring-CH-Type Finger 6) because of Excel autoformatting.
XLSX is a publicly documented format based on zipped XML? It’s not the original xls
Yes, but has specific limitations based on its design and implementation and is somewhat grudgingly open. I don’t think we should be forced to use it.
I didn’t realize that a lot of the German regulatory philosophy that people complain about was built in the 80s.
And she had to tack on "concentrated corporate power" as her boogeyman as much as she could.
I loved it when they used these attacks drag Sundar into Congress due to her complaints and we spend days prepping all the execs only for them to be asked if the iPhone is tracking their kids or whatever. He wasnt busy at all and it was a great use of all of our time
No one in Congress understands what a circular market is, and if they do, they know their individual constituents don’t.
I don’t know how you communicate some of the fuckery going on in Google’s ad markets but I’m sure cornerstone is going to try
In her defense she actually learned how to do the job with time which you can’t say for all the agency heads.
I feel like I just stepped into some Jefferson/Hamilton fan fiction. I guess that's America's version of other countries centuries long ethnic/religious conflicts.
Forget the fan fiction. I can assure that Jefferson/Hamilton dispute was quite real and there's some amazing historical media of various accuracy and maturity levels as well as entertainment quality throughout the last few hundred years of US history.
Even just learning about the growing depravity of the Confederates during our Civil War and how that increasing motivated what could appear to be an "ethnic cleansing" exercise in Sherman's March to the Sea could lead to some riveting discussions in contemporary US political discourse. You could start at Andersonville Prison [1] and augment that with the Confederates massacring surrendering black regiments, including their northern white officers. Those reports certainly shattered the myth of southern chivalry as we increasingly reorganized our northern industrial capacity into a war machine that would accept nothing but unconditional surrender.
There is also some great strategic brilliance in how Grant retraced certain lines of attack used in conquering and settling the west to increasingly fragment the confederate territories. Eg, the Mississippi campaign leading to the capture of New Orleans to cut off the waterways and associated rail and telegraph lines. He certainly knew his military history and appreciated logistics for physical goods and information! There was also a clever legal strategy in reversing the "people as property" belief to capture black slaves as contraband military goods before we had the courage to actually abolish slavery. Turned out they were all quite motivated to at least follow the along in the Union war machine, seeing as we had destroyed the Confederate's meager agricultural society necessary for substance. And many were chomping at the bit to train, fight, and even die in our army of vengeance.
So anyways, about rent seeking in suspect legal protections for archaic business structures in our modern Jefferson/Hamilton disputes...
[1] https://en.wikipedia.org/wiki/Andersonville_Prison and YouTube videos like https://www.youtube.com/watch?v=w_WS5yAzME4 and https://www.youtube.com/watch?v=C6B3LbMM8no . There's also a decent enough 1996 movie that could at least hold the attention of my 8th grade history class for two days, https://www.youtube.com/watch?v=KM64E9yKRj0
How do you find the time? This is really esoteric and interesting
I lazily learned about this stuff in primary school through entertaining media products, chiefly computer simulations like Rainbow 6 and Microsoft Flight Simulator. Eg, team-based simulations of the 1999 hit, "The Rock" [1] and the 1998 dud, "The Faculty". [2] Iron Maiden's Ace High was also riveting. [3]
I then reviewed as necessary using Yahoo, Alta Vista, Lexis Nexus, Google, plagiarized college essays, Wikipedia, and increasingly bespoke information theory SaaS. Eg, Amazon Prime and YouTube recommendations
[1] https://www.youtube.com/watch?v=T4O5LccxCDo
[2] https://www.youtube.com/watch?v=praQkvivkUE
[3] https://www.youtube.com/watch?v=_IpLJvd_ukw and https://www.youtube.com/watch?v=4sFewhTAdjs
"I think the existence of chain hotels makes it easier to confidently book a safe and clean place to stay in a town you’ve never been to."
One. Thousand. Percent.
I began my defense policy analysis job in the mid-1980s and that required frequent visits to Army posts, mostly in the South. The crappy motels we had to stay at -- my God. Still have some nightmares. The revolution over the next ten years or so that brought Hampton Inns, Holiday Inn Express etc to every corner of the country was such a godsend. (Plus chain restaurants!*)
People who bemoan the spread of that kind of corporate sameness and long for a return to small business owner motels have no idea what they're talking about, because they grew up in a very different world.
* Occasionally you could find a gem of a small family-owned restaurant which offered something different and enjoyable compared to the bland run of chain restaurants, but they were hard to find. No Yelp or Tripadvisor. You either knew or you didn't. We often asked the person at the front desk whose expertise in this area was questionable, to say the least.
And with the chains, if you need to complain to corporate, you might get an actual response. If you stay at a BNB, you're completely at the mercy of the owner if there's any problems.
There’s an interesting way that companies like Airbnb, Stripe, Yelp, etc enable local operations to be quasi-national.
I don't expect everybody to be a full-blown economic neoliberal who supports letting the free market run wild and then doing redistribution at the end, but it is weird to me that there's a group of people that is just pro-regulation regardless of what the regulation is. Would these people invent zoning laws if they didn't already exist? Probably not, but they do exist, so they must be defended.
It reminds me of polling about anti-terror measures post-9/11 where you'd repeatedly see polls asking, "Do you support [freedom-violating security measure]?" with n% responding "yes," followed by, "Do you think [freedom-violating security measure] will make Americans safer?" with n-10% responding "yes." The main takeaway being apparently roughly a tenth of the US population like government oppression for the sake of government oppression.
Putting aside lizardman constant, the more generous interpretation is that they interpret it either as signaling, or pro-social activity. Do I think bowing my head when someone prays before a meeting, or the prayer itself results in better decisions, nope, agnostic, but I do it for social and signaling reasons.
Can't find it but at the time of the "Muslim ban" that either was apr wasn't a Muslim ban depending if you liked the idea (if you like your Muslim ban, you can keep it), I remember seeing some polling data on whether or not there should be a list of Muslims in America. Some 35-40% of people were like "yeah that's a good idea." Then the surveyor asked if there should be a list of Jews too. A smaller, but still significant percentage said yes to that too. Keep running through different religious groups and it seems there's a certain number of people who just like lists.
Clearly they’re all social scientists who would like better data sets to work with.
Maybe they "assume" it's safer first, but when you ask them to reconsider "will this actually make us safer", some of them change their minds.
They’re polarized against Reagan and Clinton. Anything those guys did is ipso facto Bad.
This is an embarrassing straw man
How so?
The cultural sorting since 2015 has broken too many people's brains.
There have always in my lifetime been people who just are on team regulation per se. Blind assumption that more regulation is always better was a part of political debates I've been in since the 90s at least.
If anything, it seems to me that the group of people who draw the distinction between good and bad regulation is larger now.
Eh, ai drift in this direction myself some days due to negative polarization over deregulation as an agenda, as no matter how much it's not thr intent, I hear an asshole whispering 'they just want to shrink government until it's small enough to fit in a bathtub so they can drown it.'
I'm quite sure that's not actually Ezra/Matt's goal, but absent that trust, my knee jerk reaction to 'let's deregulate' is 'let's not'.
I’ve mentioned before but one the foundational moments for me in personal (semi) neoliberal turn was renting off campus housing in college. Consistently, the friends of mine who had the most negative renting experiences were people who rented apartments from “regular” people as opposed to renting in large complexes owned by large businesses? Why? Because for the “regular” people the rental house they owned was not their primary source of income. To be frank, lots of people don’t realize owning a rental property requires some level of expertise*.
I think related to this post is a recent interview Ezra Klein did with two critics of his “Abundance” book. Specifically, one of the interviewees was Zephyr Teachout. And to be frank, her answers were kind of terrible. Every single answer to any question Ezra had was “corporate power”. Like literally everything. As though it was some Rosetta Stone that explained every single negative thing in the world. And Ezra pushed her and essentially intimated that he at least partially agreed that corporate power is part of the problem (I agree by the way*). But she literally couldn’t fathom any other factors going on. I wanted to yell at Zephyr “Ok, you clearly have a semi Marxist view of the world. Fine. You know that Marx wrote extensively about the petty bourgeoisie and their role in society right? You seem incapable of understanding that Ezra is talking about the role of the petty bourgeoisie”.
* I think neoliberals (including Matt) are being too blase about Private Equity buying up houses. It is absolutely true that AS OF NOW, private equity doesn’t own a lot of houses. And yes it’s correct to push back on leftists who say this why rents are “too damn high” RIGHT NOW. But you are thinking long term. It’s very clear the long term plan is to, yes create a monopoly or localized monopoly. Please read about company towns in places like West Virginia. This is clearly the end point or at least a modern version. Do you really think it’s all that great if we we recreate a version of old school company towns? Please think through the likely scenarios if a private equity firm owns all the houses in a small city in the Sun belt.
How exactly is it "very clear" this is their long term plan? Frankly, this sounds like something someone just made up because they don't like private real estate investment funds and misapplied a complaint about some other thing to it.
This is me. https://www.linkedin.com/in/colin-chaudhuri-0bab7a31/ This is a topic I know very well a part of my job. I can tell you I have worked on deals where it was very clear the client's plan was to buy enough properties in a specific location in order to maximize rent increases to the greatest extent possible.
Now the Sponsors who clearly had this as part of their strategy who are now struggling? The ones who bought properties in 2022. Why? In part, the interest rate increases (don't need to be an expert in the industry to figure that out). But the other reason? Competition. Specifically, the flood of new construction product that came to market in 2022-2024 that put downward pressure on rents throughout the Sun Belt.
Which of course supports Ezra and Matt's point. You don't want to Private Equity to become a dominant player in a local market, there's no need to put in rules in place that prevents Private Equity ownership. If anything, that only reduces competition and allows the petite bourgeois to extract additional income through rents (both literal and in the economic sense). No instead, you need to remove the barriers that exist in places like SF and NYC that prevent supply from meeting demand.
My take on that was that private equity somehow forgot the lessons of Berkshire Hathaway post crisis and that buying up all those properties was an incredibly risky play. Like the intent wasn’t good, but it wasn’t going work out for them anyway and wasn’t going to work out looooong before they became an appreciable part of the market.
Every time this Zephyr person comes up they sound like they legitimately have brain damage.
Strong upvote for the petty bourgeoisie point. If dead end antitrusters actually read Marx on this point they would see just how they can often be particularly hostile to the antitrust causes they ostensibly hold. It's a shame that Marx didn't live to see the Sherman Antitrust Act or anything past the end of the Gilded Age, it would have been good to get some of his takes on the record from those times.
Kinda feels like if your parents name you "Zephyr Rain Teachout," the normal thing to do is rebel against them and become an I-banker.
"It’s very clear the long term plan is to, yes create a monopoly or localized monopoly."
You're going to have to put some math behind this one; what sort of concentration is there in *buying power* to justify even the possibility that this outcome occurs, even in a narrow geography?
At most it seems likely to me that you get an oligopoly, of three or four companies owning a chunk of rental properties, rather than one with actual monopoly powers.
To my knowledge there is basically no commodity, the provision of which is *more* fragmented than housing.
There are fewer companies out there milling flour than renting out housing.
I get that someone might have the ambition to reduce a specific sector of a specific market to an oligopoly but I don't even think that's possible, let alone significantly concentrating the housing of an entire city.
Don't US retail investors use professional property managers? In London every real estate office offers that service. That way the retail investor with a "portfolio" of one property doesn't need to personally know every kind of trade professional, they'll just have one they have a relationship with and use them when problems arise.
Only sometimes. The complaint I've heard about using professional property managers is that they eat so much margin that it makes the rental income a wash. All of the non-condo mom and pop landlords I've rented from maintain their own relationships with trade professionals.
I wish I knew how to do that!
The Open Markets Institute is wild. Take a look at "Monopoly by the Numbers", from their "Anti-Monopoly Basics" [https://www.openmarketsinstitute.org/learn/monopoly-by-the-numbers], which enumerates examples of markets threatened by monopoly power.
By my reckoning only 2/36 entries bother to make the case for anticompetitive behavior. The rest just promote a simple idea, "big is bad," using an extremely flexible definition of what constitutes a market:
- Defense Contractors: "Since 1993, consolidation has reduced the number of large defense firms from 107 to five."
Five large firms sounds like a reasonably competitive market (edit: I should have said "is enough to support a competitive market"). Obviously collusion is possible, but that's not alleged here, merely that five (!) competing firms amounts to a monopoly.
- Food Service: "In 2015, the FTC and Justice Department successfully blocked a proposed merger of Sysco and U.S. Foods, the two biggest companies in the food services industry. Since then, the two companies have continued to consolidate nonetheless, as Sysco acquired North Star Seafood and U.S. foods acquired Cara Donna Provision Co."
It's hard to know what threat this poses when there's no denominator, no sense of scale.
- Cowboy Boots: "Four of the biggest brands – Justin Boots, Tony Lama, Nocona, and Chippewa – are all owned by Berkshire Hathaway."
No denominator. Four brands out of how many? What percentage of the market do they take up? WAIT A MINUTE, don't cowboy boots compete against other types of footwear? Are "mystery novel monopolists" a thing too?
- Appliances: "Whirlpool’s takeover of Maytag in 2006 gave it control of 50 to 80 percent of U.S. sales of washing machines, dryers, and dishwashers and a very strong position in refrigerators. Maytag also controls the Jenn-Air, Amana, Magic Chef, Admiral, and KitchenAid brands and holds a dominant position over supply of Sears Kenmore products."
First of all, look at those error bars ("50 to 80 percent"!). More importantly, notice that they're only looking at the US, while appliances are a global market.
I've picked the most egregious examples, but the other bullet points zoom in and out of geographical focus to make their points, carve industries and products up in bizarre ways to do the same, and make their case on short time horizons.
Maybe the OMI does some valuable work fighting anticompetitive behavior, but reading this makes me skeptical.
Defense is possibly the worst example you could have led with, here. The corruption/interest capture is spectacular, the pricing and contracting inflation due to lack of competition widely understood and admitted to by everyone in industry, and the outcomes have degraded a hundredfold since the DoD started pushing mergers on everyone in the early 90's in the name of "capacity retention," while no actual know-how was retained.
Did something happen in the early nineties to structurally reduce demand for defence production? If you turn swords into ploughshares, one consequence is that demand for swordsmiths goes down.
Sure, that's why I referenced the timeframe.
With the benefit of hindsight we understand now that we've caused ourselves some serious problems here.
Yes, that's why I wrote "Obviously collusion is possible, but that's not alleged here, merely that five (!) competing firms amounts to a monopoly."
I would have used stronger language than "possible", but I don't have first-hand exposure to the defense industry these days.
The defense department procures *a lot* of different products. If each of the 5 competitors only offers 40% of what DoD needs, that averages only 2 companies per product. That is bad. And as David R. says above the outcomes seem to be consistent with that.
This seems like a legitimately hard problem since the US DOD is going to be basically the only customer for a lot of this stuff. If you are making a military grade aircraft radar and US DOD doesn't want to buy it, is your company going to continue to work on that product? Its probably also the fact that the US DOD won't buy anything from a company that sells to china and russia (#2 & #3 militaries) so you don't really have any alternative customers.
That's entirely reasonable and I'm not arguing otherwise. OMI also does not make that argument. I encourage you to look at the page I linked to see the context.
Just registering that at least for the sole sourced Electric Boat subs and I imagine probably the HHI carriers too -- I don't think this creates any meaningful cost inflation. The DoD is in EB's ass during the procurement phase and genuinely does their own bottoms-up cost calculations during the negotiation. There's not even close to enough volume to support two players in the space and you can buy stock in both public companies. Their net margins tend to run around 10% and it's not like they have halls full of eng. just sharpening pencils. Electric Boat might have the hardest working team of engineers and I've been lucky enough to work within probably 20 different companies at this point. Their culture was inspiring.
It is entirely possible for the monopolist itself to come to suck so much that it's still barely profitable just because there is *nothing* keeping it honed.
I have no experience in defense so can't suggest that's what happening, but I will say that just because the people are impressive, doesn't mean the organization isn't a complete shitshow that squanders a ton of value. Been there, done that.
I can tell you - emphatically - Electric Boat is massively impressive top to bottom. Literally some of the best welders in the world work there. Probably the worlds best material science and acoustic engineers too. If you're going to point a finger at any waste it's tied to the DoD procurement rules. There's probably 100s of these ideas to use off the shelf tech that get shut down / can't get worked through the cycle.
https://www.wcvb.com/article/navys-new-attack-submarine-uses-xbox-controller/19468244
This, I buy. We are working on DISA IL4 and FedRAMP... and thank God I am only aware of these projects as opposed to being in any way, shape, or form involved with or responsible for them.
(SOB)
The defense market is competitive which is why the modern united states can't make the same amount of 105 artillery shells in a year that WW1 Portugal could make in a week.
I'm skeptical that the inefficiency in the defense industrial base is primarily a result of a lack of competition (though I do think there needs to be more competition) and more a result of (a) poor spending priorities, changing requirements, and bad acquisition processes within government and (b) the same kinds of regulations on atoms that make it hard to build any kind of factory in America.
It's hard to have too much defense competition when you build, e.g., one new major airframe like the F-35 every 20 years or so.
In the 1950s, we produced around 19 different fighter aircraft and variants; in the 2010s, we produced the F-35 (with a couple variants).
https://www.aviamagazine.com/specials/timelines/us-jets
Tbf, in the 1950s, the US spent 5% of gdp (equivalent of $1.7 trillion on defense) and had significantly more robust industrial base. In 2010s, producing that many aircraft variants would be a pain logistically, and the F35 is significantly more technically capable than any jet from the 1950s (and history) and when adjusted for inflation, works out to be cheaper than what older jets were when the were made (F16, F15, F14). And no other country has been able to come even close to produce a jet with that quality and scale - 1200 have been produced, more than all other 5th gen’s combined. The F35 has been a success, even with its problems.
If you want to look at actual military consultation issues, ship building and nuclear silos and missiles are a place to start
Absolutely. My point was more that it was easier to maintain a competitive defense industrial base with lots of companies that could build fighters when you were developing a couple dozen per decade than when you're developing one.
Oh! You’re right! I think for the Air Force, you’ll see unmanned drones play that role and I think there is reasons to be optimistic about the Air Force.
The navy however…
Because the Army's strategy is no longer based on the massed artillery of WW1.
We still don't produce enough munitions, especially smart, guided ones, but that's on Congress and DoD, for whom devoting money for buying war reserve stocks is a very low priority.
For Congress and DoD, the highest priorities are always paying for people (and their healthcare) and for shiny new and cool weapon systems. Building sustainability for any extended conflict? Yawn.
This is a policy failure, but my point is that with robotics and modern production techniques, there is no way that a company that makes bicycle frames on a modern fabrication plant in Wichita couldn't do what, PORTUGAL, one of the poorest and least technologically advanced members of the Entente did in 1916.
The reason they can't is because the procurement contracts aren't there and Raytheon isn't about to let some upstart company hone in on their trough.
This! Sustained, predictable funding is needed for investment!
Ok, so you agree with OMI that any industry with < 6 players is a monopoly.
No, but the way defense procurement works in the US is pure regulatory capture. The lack of players just makes that easier.
I remember reading something years ago about this.
Say you're an air force colonel somewhere involved in procurement.
Lockheed Martin has a very nice half millions a year job just for you when you retire. For this job, your name will be on an office, you won't have to do anything, and you'll be called a consultant or a board member or some such.
Now, Lockheed wouldn't be so impolite as to say that this half million dollar job is dependent on you being friendly to the good folks at Lockheed Martin who are happy to work with the US government to defend freedom.
But it might help.
One of the big five used to boast that they had more generals than the Pentagon.
That's reasonable, and I should have said something like "sounds like enough players to support a competitive market" instead of "sounds like a reasonably competitive market".
They finally opened a new, commercially run plant.
Chippewa does not offer cowboy boots.
> But you could also be making money by just reducing the amount of competition in the locksmith trade, letting yourself increase producer surplus while raising prices. Part of what makes this clever is that regulatory review of mergers normally happens because the dollar value of the acquisition is large. If you’re buying small companies, you can fly below the radar.
This is a little bit true but the typical roll-up is not buying a bunch of locksmiths that directly compete with each other in a small area, and avoiding competition is rarely a goal in anyone's mind. This roll-up makes money trivially because it takes a bunch of things off the table, like payroll, that take up time and money for everyone but a larger company can streamline.
However, the far bigger factor is that the average small business is run terribly and doing a bunch of stupid inefficient things, so just competent management is a huge step up. There's really nothing nefarious about this at all. Small businesses mostly suck as everyone who has worked at one knows.
" the far bigger factor is that the average small business is run terribly and doing a bunch of stupid inefficient things, so just competent management is a huge step up."
My experience has been that big businesses are just as likely if not more to do stupid, inefficient, and wasteful things, but scale is really, really powerful.
I’m somewhat sympathetic to this thinking, but then I wonder why if the advantages of scaling and good management are so obvious, why hasn’t the consolidation happened organically already?
There is no reason a successful locksmith can’t open another store or two, or buy out a competitor, and this was as true 50 years ago as today. And of course, a vast number of large chains, from McDonald’s to Jiffy Lube, did get started this way.
Starting with a large pool of PE capital has some advantages (ability to invest in enterprise-level scalable systems from day one, greater access to top end professional services, generally cheaper access to capital). But it also has clear disadvantages (lack of domain expertise, unproven business model, potentially more short-term focused investors). If the advantage is just better management, as opposed to rent seeking, I don’t see why PE is necessary.
Short answer is it’s a big fucking country and the benefit of buying a lock smith in kernerville Alabama is not worth the cost of running it for a conglomerate. Small businesses that stay small stay open because it’s simply not worth it for a big business to take over.
Wal Mart kind of figured out how to optimally place stores and have people think it was worth it to drive two hours to get their locks at wal mart, but not a ton of success stories for specialized stores,
Automated keysmithing kiosks probably played a role in hurting the independent locksmith business too.
Yeah, I was able to get copies of both my keys and pass cards at an automated kiosk in a 7/11 to give to a friend to water my plants when I was out of town, though they were cheap plastic. Meanwhile, the last time I had a human copy keys for me, he was supposed to make one copy each of three keys, but instead made one of the keys twice and skipped another key. And it took much longer. With that said, the quality of the human-made keys were better.
Funnily enough, my local hardware store guy sells keys faster, cheaper, and higher quality than the kiosks. For purely selfish reasons I hope he stays in business.
Yeah, I haven't used one of the automated ones, but I will say that I've probably had keys duplicated at something like 20+ times the frequency of having any sort of lock replacement/repair performed, so, if that's representative of most people, I suspect that a lot of locksmiths were dependent on key duplication for regular day-to-day revenue.
Well as you said this does happen quite a bit but the skills needed to run one locksmith are not the same skills needed to open and run several of them. But I think the bigger factor is this is not a very easy or obvious thing to do. If you bust your ass 365 days a year to run your shop and at the end of the year take home ~100K yourself, you don't necessarily have the capital or the time to open a second shop. Most small businesses are not great businesses. But if you can buy 10 of them, and pay all those operators 80K while taking a bunch of the work they were doing off the table, it might make sense for both sides.
A lot of small businesses - and locksmiths are a good example of this - are basically one or two skilled persons selling their labour to a lot of different customers rather than a business where there is a clear distinction between capital and labor.
Classically, these are "mixed income" rather than capital or labour income; part of the income of the locksmith is from their capital ownership of the business, and part from their skilled labour put into making keys, picking locks, installing locks, etc. Lots of economic statistics decline to distinguish how much of the mixed income is one or the other (this, btw, is why statistics like "percentage of GDP as labour income" can be of dubious value - if mixed income goes up and both labour and capital go down, it just means more small businesses and fewer large ones).
But a lot of them would be relatively happy to have the whole "running a business" part of the profession taken away from them and let someone else worry about answering the phone, doing taxes, running a calendar, keeping up a website, marketing and advertising, etc, etc.
You can see this same dynamic in white collar professions like doctors and lawyers too: plenty do hang out a shingle, but a lot more prefer to be employed, even though they have their own clients and relationships and can take those clients with them to another employer when they leave.
It's always sad when I see a local business that I like open a second location, then the quality of the second location is worse, but managing that causes the quality of the first location to drop too.
Then you're back to the core argument of the piece - stupid inefficient practices are also jobs programs, and everyone loves jobs programs, even if they're misguided.