Lessons from Peter Thiel's Class On Startups(forbes.com)
forbes.com
Lessons from Peter Thiel's Class On Startups
http://www.forbes.com/sites/ryanmac/2012/06/07/ten-lessons-from-peter-thiels-class-on-startups/
5 comments
Can you add some detail? Isn't it true that in a competitive market the actual profit tends to 0, in the long term? (whatever you call it; the actual money you make at the end of the day). From what I understand in your message, this is not true, but the truth is that there is a different value, "economic profit", that tends to 0. Is that right? If so, why doesn't the actual profit tend to 0?
Edit: most importantly, how can the economic profit include a term for opportunity cost, isn't the opportunity cost different for every person / company?
Edit: most importantly, how can the economic profit include a term for opportunity cost, isn't the opportunity cost different for every person / company?
It's been a while since I took micro, but from what I recall...
In a competitive market, the "actual" (IIRC, the term you want is "accounting") profit doesn't tend toward zero, no. If it falls low enough that more accounting profit could be had elsewhere, firms will move to that elsewhere, supply will be reduced while demand stays the same, and firms will see more accounting profit.
In a competitive market, the "actual" (IIRC, the term you want is "accounting") profit doesn't tend toward zero, no. If it falls low enough that more accounting profit could be had elsewhere, firms will move to that elsewhere, supply will be reduced while demand stays the same, and firms will see more accounting profit.
Even as a theoretical concept, perfect competition doesn't have to always make profits approach zero. It's true that competition produces a race to the bottom on price, but there is also a race to the top on quality / innovation. As new innovations occur, they increase profit. In the absence of innovation, perfect competition would drive profits down.
I'm very grateful for Blake Masters taking the time to type up his essays on his class notes for the rest of the world that didn't get to sit in on this class. If he wants to get his name out there more with your typical 4 page/3 bullet points per page/10 point lesson that is on Forbes.com then that's fine.
It's an alright article but don't let that take away from what he did over the last 10 weeks
It's an alright article but don't let that take away from what he did over the last 10 weeks
Blake did indeed a great job typing up his notes in these very enlightening essays. Always enjoyed reading them. Glad to see that his sharing efforts get fully credited by Forbes/Ryan and not just the typical aggregation recycling write-ups.
Very grateful to Blake and all the work he's done translating his notes into comprehensive posts that he shared with everyone else. Very informative.
Kudos!
Kudos!
Way to condense what, going by the one on founder/heroes, is an awesome series of insightful lectures, into a crappy set of ten platitudes.
Forbes! Congrats to Blake. Only spotted the notes on his blog via HN. Now guest blogger on Forbes. One good motivation for writing notes in class!
This is incorrect. Competition drives economic profit to zero in the long run, but!
First, there's also the short run - "in the long run, we're all dead", etc - where gobs of money could be made.
More importantly, economic profit includes a term for opportunity cost - money you'd be making with your next best option. So if you have an alternative that would also be making you lots of money, and your economic profit is zero, you're making lots of money.