The Creative Monopoly(nytimes.com)
nytimes.com
The Creative Monopoly
http://nytimes.com/2012/04/24/opinion/brooks-the-creative-monopoly.html?_r=1
11 comments
> sustainable competitive advantage
I think this is what so many commenters struggle with when it comes to "the bubble" so many of us speak of now. We see so many companies' births and deaths without ever having seen a clear "sustainable competitive advantage" and wonder why these companies existed in the first place.
I think this is what so many commenters struggle with when it comes to "the bubble" so many of us speak of now. We see so many companies' births and deaths without ever having seen a clear "sustainable competitive advantage" and wonder why these companies existed in the first place.
Well, from one perspective, each of these failed companies could have been testing their own "sustainable competitive advantage" thesis. A thesis that turned out to be incorrect. After all, you don't know your sustainable competitive advantage really is in fact sustainable and and a competitive advantage until you win. (e.g. Google. They were just another search company, and one that could have failed like so many others.)
From another perspective, each of these companies is wandering through, as the author puts it, the "wildernesses nobody knows" looking for opportunities and either didn't find one or weren't able to grow that opportunity quickly enough.
Some say we're in a bubble. Others say we aren't. Frankly, I don't give a damn. I just see that there's tons of innovation being funded. Some innovations may be evolutionary, others may be revolutionary. Funny thing is: you often don't know what will be evolutionary or revolutionary until you try.
I'm glad many people are trying.
From another perspective, each of these companies is wandering through, as the author puts it, the "wildernesses nobody knows" looking for opportunities and either didn't find one or weren't able to grow that opportunity quickly enough.
Some say we're in a bubble. Others say we aren't. Frankly, I don't give a damn. I just see that there's tons of innovation being funded. Some innovations may be evolutionary, others may be revolutionary. Funny thing is: you often don't know what will be evolutionary or revolutionary until you try.
I'm glad many people are trying.
I'm sorry, I feel I came across as making a broader point than I was. Probably because of the "birth and death" bit which really isn't what I meant to focus on.
I'm talking about a few specific examples that are astonishingly easy to clone yet are being assigned enormous value. Groupon is what I was thinking of especially, but I didn't want to "name names"... which is probably why I came across as making a broad point. Dropbox is now being challenged in this way, and many have been talking a lot about their sustainable competitive advantage since the whole Steve Jobs "feature" quote. Instagram.
I wasn't making a direct comment about tech startups in general, many of which are carving out real markets they want to crush.
I'm talking about a few specific examples that are astonishingly easy to clone yet are being assigned enormous value. Groupon is what I was thinking of especially, but I didn't want to "name names"... which is probably why I came across as making a broad point. Dropbox is now being challenged in this way, and many have been talking a lot about their sustainable competitive advantage since the whole Steve Jobs "feature" quote. Instagram.
I wasn't making a direct comment about tech startups in general, many of which are carving out real markets they want to crush.
What an awful way to phrase a simple concept.
Rather than compete in someone else's market, create your own market. Manufacture, or identify a need that has not been met, and, having been first mover, use that to build an insurmountable lead over any possible competitors.
Whether it's mint toothpaste, or portable digital music players, this has been done for generations.
"Creative Monopoly" is a bizarre term for it.
Rather than compete in someone else's market, create your own market. Manufacture, or identify a need that has not been met, and, having been first mover, use that to build an insurmountable lead over any possible competitors.
Whether it's mint toothpaste, or portable digital music players, this has been done for generations.
"Creative Monopoly" is a bizarre term for it.
Yeah, and economists have had a better word for it since 1933: http://en.wikipedia.org/wiki/Product_differentiation
My issue was more about how many paragraphs the writer wrote to explain what you just did in a sentence (or two).
Kudos.
Kudos.
His point is a little broader because he also questions the shared assumptions that underly our educational systems.
I often hear that American and European schools are produce better students than Asian schools because they place less emphasis on rote learning and more on independent thinking but my impression is that's much less true now than it might have been 20 years ago.
I often hear that American and European schools are produce better students than Asian schools because they place less emphasis on rote learning and more on independent thinking but my impression is that's much less true now than it might have been 20 years ago.
I agree it is a strange term.
I do think however the article is well written and quite insightful based of course on Peter Thiel's ideas.
Inovation always wins, those that focus on just competing will lose. A country has to foster inovation. the countries that innovate in education could be the big winners.
To be fare to the US, some of there big colleges do that, but it does seem at the grass roots of the system it needs change and that applies to a lot of countries.
I do think however the article is well written and quite insightful based of course on Peter Thiel's ideas.
Inovation always wins, those that focus on just competing will lose. A country has to foster inovation. the countries that innovate in education could be the big winners.
To be fare to the US, some of there big colleges do that, but it does seem at the grass roots of the system it needs change and that applies to a lot of countries.
Product differentiation is in every first year university marketing textbook. As much as those textbooks try to use as many words as possible to describe a simple concept, their description of product differentiation is likely to be much shorter than the one in this article.
MBA's might not be good hires in a $100,000 startup, but they know more than we think.
MBA's might not be good hires in a $100,000 startup, but they know more than we think.
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Greed. Torture. Monopoly. Everything that was once a sin or a crime in America is now excused, reinterpreted, and finally praised.
I had the luck to understand this very early (being 17 years old).
I've gone to math and physics competitions, and while I had good results I could see that there are the top level guys who are above my level: there is no point in directly competing with them. So I thought I should do something different and I became a programmer.
Nowadays I also see this in programming. There are markets where competition amongst smart people is too high. Too much smart people want to work for the most famous companies, too much smart people create programming languages and frameworks, too much smart people want to start their indie game studios, too much extremely smart people wanted to win the Netflix prize... While I love these topics, so I sometimes compete in these very competitive markets, I know that it is/(would be) wiser to do someting different where competition/(expected value) ratio is not so high.
Wired's fake McLuhan interview from many moons ago:
What's your take on media juggernauts like Microsoft? Should it be allowed to stranglehold electronic media?
We fear that the owners of the monopoly will crush us, but this never happens. In a flash, the monopolist's products appear out of date, and competition in that particular industry becomes irrelevant because the whole basis of moneymaking has shifted to a new area. As the pace of technological change speeds up, shifts in economic power increasingly seem like magical flipflops produced by luck. The old logic of monopoly - centralized stranglehold - no longer works. The attention of consumers can shift instantly and make the most profound investments obsolete in just a few years, soon to be sped up even further. We will see economic empires crash within hours, and new ones arise just as quickly. _The task of the economic manager now is to try to hold monopolies in place just long enough for economic transactions to occur._ The capitalist understands that to improve competition, he must encourage monopolies.
What's your take on media juggernauts like Microsoft? Should it be allowed to stranglehold electronic media?
We fear that the owners of the monopoly will crush us, but this never happens. In a flash, the monopolist's products appear out of date, and competition in that particular industry becomes irrelevant because the whole basis of moneymaking has shifted to a new area. As the pace of technological change speeds up, shifts in economic power increasingly seem like magical flipflops produced by luck. The old logic of monopoly - centralized stranglehold - no longer works. The attention of consumers can shift instantly and make the most profound investments obsolete in just a few years, soon to be sped up even further. We will see economic empires crash within hours, and new ones arise just as quickly. _The task of the economic manager now is to try to hold monopolies in place just long enough for economic transactions to occur._ The capitalist understands that to improve competition, he must encourage monopolies.
http://www.wired.com/wired/archive/4.01/channeling_pr.htmlWhat he's talking about has already been written about and is taught in many MBA programs.
Blue Ocean Strategy
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
Edit for the tl;dr crowd:
The blue ocean strategy is about creating your own market/niche/space in an new or uncontested area (blue ocean) vs. competing directly with established players in an existing market (red ocean).
The metaphor is the red ocean is full of blood from the sharks fighting over the same profits/market share while the blue ocean is open water full of opportunity.
Blue Ocean Strategy
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy
Edit for the tl;dr crowd:
The blue ocean strategy is about creating your own market/niche/space in an new or uncontested area (blue ocean) vs. competing directly with established players in an existing market (red ocean).
The metaphor is the red ocean is full of blood from the sharks fighting over the same profits/market share while the blue ocean is open water full of opportunity.
This is bizarre. Not for wrongness -- but because it is baffling that what is right about it should not be obvious and taken for granted.
Business is always, and has always been, about avoiding competition. One can start by recalling Adam Smith's comment on any gathering of industrialists inevitably leading to conspiracy against the public. Then simply look at what any business does or tries to do, legal or otherwise -- what is a patent, for example?
Competition between business is supposed to be good for the public, not the competitors themselves -- hence business always wanting to avoid it. Competition is, broadly, destructive. It is only worth it because of other effects (spurring effort, creativity), and when it is limited and substantially supported by other cooperative systems.
Business is always, and has always been, about avoiding competition. One can start by recalling Adam Smith's comment on any gathering of industrialists inevitably leading to conspiracy against the public. Then simply look at what any business does or tries to do, legal or otherwise -- what is a patent, for example?
Competition between business is supposed to be good for the public, not the competitors themselves -- hence business always wanting to avoid it. Competition is, broadly, destructive. It is only worth it because of other effects (spurring effort, creativity), and when it is limited and substantially supported by other cooperative systems.
The central point theme of this piece (creation vs. competition) is the main focus of "The Science of Getting Rich" by Wallace Wattles, if anyone is interested.
Both things are competition. One is competing with established rules while the other is competing creating or changing the rules.
Years ago, I worked briefly for The Southern Company, which is the largest publicly held electric utility in the U.S (Georgia Power, Alabama Power, and a bunch of other ones).
While there was certainly a lot of expertise in electric generation and transmission there, it rapidly became apparent to me that their true core competency was maintaining and exploiting their legal monopoly.
It wasn't a pretty sight.
While there was certainly a lot of expertise in electric generation and transmission there, it rapidly became apparent to me that their true core competency was maintaining and exploiting their legal monopoly.
It wasn't a pretty sight.
Sometimes governments resort to measures like legal monopolies to ensure infrastructure gets built.
Imagine a cash-strapped government 50 years ago in an undeveloped country wanting to build electricity infrastructure. The country's economic growth is stagnating because of a lack of infrastructure and there are few foreign investments because the country's economic growth is stagnating. If a foreign company DID choose to invest in electricity, and the investment was profitable, other foreign companies will jump in to compete; but if the investment was unprofitable, the company would just have lost a large chunk of cash. Therefore it was always more profitable to simply wait for another company to make the investment, and then see if electricity will be a profitable business in the country before making investment itself.
These catch-22's mean the government has little choice but to allow the first foreign company a local monopoly, at least for a limited time.
I'm just theorising all this out of thin air, though.
Imagine a cash-strapped government 50 years ago in an undeveloped country wanting to build electricity infrastructure. The country's economic growth is stagnating because of a lack of infrastructure and there are few foreign investments because the country's economic growth is stagnating. If a foreign company DID choose to invest in electricity, and the investment was profitable, other foreign companies will jump in to compete; but if the investment was unprofitable, the company would just have lost a large chunk of cash. Therefore it was always more profitable to simply wait for another company to make the investment, and then see if electricity will be a profitable business in the country before making investment itself.
These catch-22's mean the government has little choice but to allow the first foreign company a local monopoly, at least for a limited time.
I'm just theorising all this out of thin air, though.
In the U.S., this legal electric company monopolies were more or less granted w/the proviso of providing universal access, sort of the same goal.
The past 20 years, the electric companies are trying to wiggling out from under this, turns out they really don't want to sell electricity to residential users, in a lot of cases their big customers are subsidizing residential users. That is why, despite the hype to the contrary, residential electric rates usually go up under deregulation.
The typical electric company strategy the past 20 years is to try "surrender" their monopoly in unprofitable areas w/a lot of happy talk about competition/choice/consumer benefits and attempt to keep their monopoly in the profitable areas (wholesale transmission, generation/cogeneration for large consumers).
The past 20 years, the electric companies are trying to wiggling out from under this, turns out they really don't want to sell electricity to residential users, in a lot of cases their big customers are subsidizing residential users. That is why, despite the hype to the contrary, residential electric rates usually go up under deregulation.
The typical electric company strategy the past 20 years is to try "surrender" their monopoly in unprofitable areas w/a lot of happy talk about competition/choice/consumer benefits and attempt to keep their monopoly in the profitable areas (wholesale transmission, generation/cogeneration for large consumers).
This article is backwards. As humans, we crave competition. As Humans we crave to be unique. Same concept, two different ways of saying it.
Both mean, "We want to stand out. Be appreciated and recoginized."
We will always seek ways to stand out. Whether its through one upsmanship, or through differentiation.
We see this in marketing. When you are first in a new category in peoples minds. They consider you the best.
Everyone wants to be considered the best. Its up to you how you get there.
Both mean, "We want to stand out. Be appreciated and recoginized."
We will always seek ways to stand out. Whether its through one upsmanship, or through differentiation.
We see this in marketing. When you are first in a new category in peoples minds. They consider you the best.
Everyone wants to be considered the best. Its up to you how you get there.
A better way to put this is to say that the starting point of competitive strategy is to start with a sustainable competitive advantage. "Competition Demystified" by value investing guru Bruce Greenwald covers this point in its first chapter (available free on Google Books -- http://books.google.com/books?id=NZYuAyW8M-sC&printsec=f... and summarized by me in a series on political strategy, where the concept also applies -- http://joshuaspodek.com/north-korea-strategy-primer-strategy and with an important diagram here -- http://joshuaspodek.com/the-first-step-in-strategy)
Finding a sustainable competitive advantage doesn't require creativity, so Brooks's essay went astray at that point. But having a sustainable competitive advantage gives you the local monopoly he alludes to that allows you to avoid competing and, in business, charge higher margins without getting stuck competing on price and efficiency.
I highly recommend "Competition Demystified" to understand strategy.