Image from walmart.com
Is a monopoly bad?
I think that many people associate a negative connotation with the word monopoly, whether they are thinking of the board game or the economic term. However, I appreciated Dr. Bylund’s process of breaking down the negative stigmas surrounding the term by providing a definition and giving examples of monopolies that many people may not have considered before. According to Dr. Bylund, a monopoly takes place when there is only one entity selling a specific good or service. Following this definition, Dr. Bylund provides two examples of entities that hold monopolies that most people may not think of. These examples were individuals and innovators. Each individual has a monopoly on their own labor. This means that we are able to choose who we work for and what we work on. Each innovator has a monopoly on their new creations. Until another entity produces the same creation, that innovator is the only entity that can sell their creation. With these two examples, it seems evident that monopolies are not all bad all the time. This logic can be extended to multiple entities working together. Groups of people still have full agency over their labor, and groups of innovators still have full control over their creations. Therefore, removing the abilities for “monopolies” to exist would be detrimental to value creation in society.
Is power bad?
A company’s power is very closely associated with that company’s value to consumers. A company has more power or sway over consumers if the goods or services they produce have higher value in the eyes of consumers. Just like monopolies, power is not always a bad thing, but it can be abused in the business world and elsewhere. I think it is important to distinguish between power and coercion. Except for extreme cases, very powerful companies are not able to coerce consumers into purchasing their products simply because of their status of power. Consumers will almost always have other options beside those offered by the powerful company. To use one of Dr. Bylund’s examples, Apple is not coercing or forcing its customers to wait in line for hours on end just to buy the new iPhone model. Customers are choosing to do this because of the immense value placed on the phone by Apple and by other customers. All people have the options of buying a different brand of smartphone, buying an older iPhone model, keeping their current phone, or not using a phone at all. Coercion and the true abuse of power really takes place when these options are removed by the entity selling relevant goods.
What is the real enemy?
From Dr. Bylund’s point of view, the real enemy of value creation in society is government regulation. He argues that the bad cases of monopoly power quickly arise when the government becomes involved in business dealings. First, the government is the only entity capable of preventing new competitors from entering a market by allowing only one company to sell or manufacture a particular product. Second, when the government starts to regulate businesses, it opens the door for companies to “purchase” politicians in order to earn looser regulations for themselves or to impose stricter regulations on their competitors. In addition, any money that is spent to try and earn favor with government officials is money that is not spent to improve their product or lower their prices. Thus, there are multiple ways in which government regulations can stifle the creation of value in society.
The barrier of entry and competition:
One term that Dr. Bylund mentioned multiple times throughout his talk was barrier of entry. This is one item that I did not fully agree with him on. He made the argument that no barriers of entry exist for entrepreneurs wanting to enter a specific market segment with the exception of segments restricted by government regulations. I understand his point that no complete barriers exist, but I feel that some barriers still exist that are effectively insurmountable for new competitors in many industries. Dr. Bylund specifically makes a point that the stupidest thing anyone can do when starting a business is compete with another business who is producing the same goods or services as you. To me, this seems like a very obvious barrier to entry for new competitors. For example, a new social media platform would be very difficult to create because there are so many major players in that field already. Also, starting a new social media platform requires a large amount of users to start because without users there is no social interaction to be had on the platform.
