One of the reasons Freedom Fest is my favorite center-right conference is because the event is headlined with people who are not shills or talking heads, but are industry leaders who solve problems and deal in reality. The conference has panels with people who DO THINGS and MAKE THINGS HAPPEN, and are not just around to sell some talking points on the issue of the day. (There are a few shills here too, to be fair.)
This morning’s debate was between John Mackey, CEO of Whole Foods, and Peter Thiel, founder of PayPal and Palantir and a well-known venture capitalist with a book out called One to Zero: Notes on Startups, or How to Build the Future. He was also the inspiration for a character on the HBO show Silicon Valley.
The topic of the debate was “Are Monopolies and Competition Oversold?”
Thiel spoke first. Now Thiel is the personification of a paradigm shift and his worldview is both unique and refreshing to the point where you can easily see why he is an industry leader and successful businessman. Thiel said that competition is oversold and overrated and that competition doesn’t make money. He gave North Korea as an example, where there is so much competition to acquire basic goods and services because there is a scarcity. He offered up Steve Jobs and Apple who did not create the iPhone as part of a competition as it was the only phone of its kind when it was introduced to the market.
These things seems strange to say as a libertarian, but what I think Thiel was getting at is that hyper-focusing on direct competition excludes a focus on innovation. He gave as an example that many tech CEOs have Asperger’s syndrome or exhibit Asperger’s-like symptoms and are able to ignore certain social cues that indicate disapproval to new and different ideas. But the market and the consumer benefit from innovation — and since these CEOs are tone-deaf to such disapproval, they create new and innovative products that lead to their success.
So Thiel therefore is pro-monopoly in the sense that the innovators and the creators have a specific product that is unique and therefore that monopoly leads to their success. He said having a monopoly is a reward for success — or, as he called it, “a creative monopoly.”
Mackey, on the other hand, is pro-competition and anti-monopoly, primarily because he doesn’t want Whole Foods hauled into a congressional hearing on anti-trust issues. (The audience laughed at this point.) He pointed out that the enemies of business use the claim of monopolies to crush business and introduce regulation into industry. Mackey said that when Thiel spoke about monopoly he was really referring to a “competitive advantage” in business. Mackey said real monopolies are what the government creates in areas like education and government-owned airlines.
Thiel responded by saying that it maybe politically incorrect to use the term monopoly, but that Whole Foods and Google are both monopolies. He seemed to say that both companies are leaders in their industries and in that sense have a monopoly. To be fair, there are other stores that model themselves after Whole Foods and there are other search engines and email services that compete with Google.
Mackey responded that Thiel would make a good witness for the government (that garnered some laughs) and that for the record Whole Foods was not a monopoly. He addressed Thiel’s claim that competition doesn’t make money by offering the example of Starbucks. Starbucks is in the business of coffee, one of the most widely available retail items in the world, and yet Starbucks is engaged in competition and makes plenty of money.
I think Thiel would respond that Starbucks is at the top of the industry because when it started it had an innovative way of serving and presenting coffee drinks, a more boutique, fancy way of serving a drink than what was widely available at McDonald’s and gas stations. And now McDonald’s offers some fancy coffee drinks to compete with Starbucks. Perhaps Thiel would say McDonald’s should come up with a totally innovative item that no one else has to succeed in the market — after all there is only one BigMac.
At the end, the audience was asked to vote on who won the debate. The winner, measured by applause, was John Mackey.
Overall, it was an interesting discussion with both successful businessmen offering up some good food for thought. Afterwards the line was long to get a book signed by Thiel and they ran out of books before I could get one. I’ll order from Amazon — it’s cheaper there anyway.