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Comment by jimbokun | Hacker News Reader

Peter Thiel:

"Apple’s iOS at the forefront, the rise of mobile computing has dramatically reduced Microsoft’s decades-long operating system dominance. Before that, IBM’s hardware monopoly of the ’60s and ’70s was overtaken by Microsoft’s software monopoly. AT&T had a monopoly on telephone service for most of the 20th century, but now anyone can get a cheap cell phone plan from any number of providers."

Um, he managed to pick the THREE OF THE MOST FAMOUS EXAMPLES OF GOVERNMENT ANTITRUST ACTIONS, while trying to argue monopolies do not harm innovation.

Doesn't the fact all three of the previously dominant monopolies faced anti-trust decisions against them, before major new competing technologies sprang up, make it clear how important anti-trust actions are for encouraging innovation?

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Seriously; the AT&T monopoly -> "now anyone can get a cheap cell phone" "example" is particularly historically deaf. Does Thiel not realize that the two largest cell providers, making up 66% of the market (AT&T and Verizon), are direct descendants of the baby Bells that the government split up in antitrust action? And that the only reason there are still 4 significant players at all (leading to barely-acceptable service pricing) is because the US government intervened and blocked the purchase of T-Mobile by AT&T, and later Sprint? Much as I love the market, there's no way you can credit it for maintaining the bare minimum level of competition in the cell service industry we have today.

Yeah I still don't get how cingular was let back in

>Does Thiel not realize

Of course he does. While not stated directly, the implied message from Thiel seems to be: monopolies are fantastic, for founders and early investors. Given his own history, is it that surprising he is a proponent? Perhaps in this case, being contrarian might be less about intellectual enlightenment and more of a rationalization for self-serving decisions.

Thiel has stated this directly many times.

Thiel is challenging you to consider that the government's antitrust actions were unnecessary and counterproductive: Unnecessary because eventually upstarts find a way to leverage new technology to open new markets where monopolists' advantages no longer apply. Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition.

You may disagree, but to refute his argument effectively you'll have to do better than merely reassert conventional wisdom about monopolies.

> Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition.

If you have enough resources, it's often it's cheaper to quash-and-copy the competition than innovate. You may start labs to grab up smart minds, but this practice seems to be as much about suppressing competition as culturing innovation. And it seems to more to support the former than the latter. I would love some good examples of how this isn't the case.

> Thiel is challenging you to consider that the government's antitrust actions were unnecessary and counterproductive: Unnecessary because eventually upstarts find a way to leverage new technology to open new markets where the monopolists advantages no longer apply.

But none of the examples he gives demonstrates that, because they are not examples where the monoplist was displaced independently of antitrust actions.

> Counterproductive because monopolists have scale that allows programs and research that cannot develop in companies engaged in perfect competition.

Antitrust action does not occur against benevolent monopolies in the US system, it only occurs when a monopolist illegally leveraged their monopoly, either to prevent being displaced or to monoplize another market. So, even if benevolent monopolies are eventually displaced and good for the research they can produce, the US antitrust system isn't directed at them.

> But none of the examples he gives demonstrates that, because they are not examples where the moboplist was displaced independently of antitrust actions.

IBM and Microsoft weren't dethroned until roughly a decade later, so it's a real stretch to claim any kind of causal relationship. Especially because they maintained — to this day — their monopolies in mainframes and PC operating systems. It's just that technological change made their monopolies less relevant.

There was certainly a causal relationship WRT AT&T, but the conclusion to that tale does not go "and then, American telecommunications companies became well-known for their low prices and excellent customer service."

> Antitrust action does not occur against benevolent monopolies in the US system, it only occurs when a monopolist illegally leveraged their monopoly

That's rather begging the question. The DoJ's cases against IBM and Microsoft, in particular, may have been financial bonanzas for the legal industry, but the central legal claims were Kafkaesque: the supposed "unfair competition" was that IBM bundled support services with its computers and Microsoft bundled software with its operating system. Essentially, the DoJ's claim was that their products offered too good a value to consumers, and ought to have been made worse so their competitors' products would have a better chance.

IBM and Microsoft may well have engaged in genuine anti-competitive practices (ironically, MS' sabotage of OS/2 would be a good example), but those weren't. And maybe the DoJ could have brought cases against them that actually served to the benefit of consumers, but again, those didn't.

> IBM and Microsoft weren't dethroned until roughly a decade later, so it's a real stretch to claim any kind of causal relationship.

Microsoft, strictly speaking, still hasn't been dethroned, it's just the market in which it has its monopoly has itself become less important in the grand scheme of things.

OTOH, it became less important because of other markets to which the government action prevented it from extending it's monopoly, which pretty clearly shows the relevance of the government action.

Likewise, the IBM antitrust action is what created the boom in independent comouter software and services businesses, which directly led to IBM being dethroned because software commoditized the computers running it.

>> IBM and Microsoft weren't dethroned until roughly a decade later, so it's a real stretch to claim any kind of causal relationship.

> Microsoft, strictly speaking, still hasn't been dethroned, it's just the market in which it has its monopoly has itself become less important in the grand scheme of things.

This is literally my next sentence?

> OTOH, it became less important because of other markets to which the government action prevented it from extending it's monopoly, which pretty clearly shows the relevance of the government action.

Smartphones? Somebody should tell Nokia. The only one whose actions prevented them extending their monopoly to that area was Steve Ballmer. (Or Steve Jobs — six of one Steve, half a dozen of the other).

> Likewise, the IBM antitrust action is what created the boom in independent comouter software and services businesses, which directly led to IBM being dethroned because software commoditized the computers running it.

Patently absurd. IBM's fate was sealed a few months after the start of the suit, when Digital introduced its PDP-11 minicomputer, and over the next 13 years, along with others, e.g. Seymour Cray at the high end, proceeded to disprove the DoJ's case in real time, taking huge amounts of market share away from IBM's mainframes the old-fashioned way, by offering a superior product at a (much) lower price. It was on Digital's machines, not mainframes, that software publishing (such as ...AT&T's Unix) first became a major industry.

Al Gore's representations about the internet weren't really all that bad by politician standards, but to claim John Mitchell[1] invented software development is a new one.

Around the time the DoJ dropped its case against IBM, they committed accidental suicide when they released the PC, with someone else's (Intel 8088) proprietary chips and, even more egregiously, someone else's proprietary operating system (DOS, by you-guessed-it), which enabled everyone and their brother to make their own, cut-price copies, and, adding insult to injury, giving their erstwhile chip and OS vendors gazillion-dollar licensing bonanzas that IBM never saw a penny of.

This was IBM's own dumb idea, not John Mitchell's.

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[1] https://en.wikipedia.org/wiki/John_N._Mitchell

I think you're confusing an absolute hermetic market monopoly with anti-trust law.

Anti-trust law doesn't require a total monopoly. It requires evidence of monopolistic practices which adversely affect consumers and customers.

If you're negotiating, it's not a monopoly. If you're negotiating with a gorilla you can't afford to anger, or if you're being told what to buy and when and not negotiating at all, it's a monopoly.

IBM, AT&T, MS all showed clear evidence of anti-trust breaches.

The PDP-11 proves the point. DEC's PDP series was marketed as a Programmed Data Processor and not a Computer because the IBM had a lock on computer sales and rentals. Upper management in most of America would never authorise a computer purchase from anyone other than IBM.

Marketing the series as a PDP meant technicians, scientists, and engineers could buy a computer through a side-channel that bypassed the usual corporate acquisition process.

This wouldn't have been necessary if no lockdown existed.

RCA, Honeywell, and others all tried to break into the computer market directly. Only CDC succeeded, and that was only because Cray gave CDC a lead in HPC that IBM couldn't match.

For bread and butter corporate computing, IBM really did own the market.

> the conclusion to that tale does not go "and then, American telecommunications companies became well-known for their low prices and excellent customer service."

You're kidding, right? Long distance calls during weekday hours used to cost like $6/minute, accounting for inflation. This improved rapidly after the breakup, not solely because of better technology, but because before that long distance was where AT&T was making most of its money and it had little reason to reduce costs or compete on pricing; i.e. it couldn't act competitively basically by definition.

The 80's and 90's saw the introduction of digital signals, computerized switching and fiber-optic cable networks (all Bell Labs inventions), which significantly reduced the cost of landline calls in general, and in particular eliminated the additional complexity associated with providing long-distance service versus local.

This was also the period in which landline started very rapidly losing market share to cell phones (also a Bell Labs invention[1]). Remember when they used to charge you a dollar per text message? Remember when they used to charge you an arm and a leg if you went over your allotted number of minutes? Remember how they still do if you go over your ration of gigabytes?

Telecom has exactly the same razor/blade business model it did 10, 20 or 40 years ago. All that's changed is which services are the loss-leaders and which are the bleeding-edge, desirable features that they charge you a king's ransom for. Normal technological churn.

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[1] https://en.wikipedia.org/wiki/Advanced_Mobile_Phone_System

Your thesis seemed to be that phone service was worse and more expensive due to AT&T being broken up, no? I feel that proposition is absurd and at odds with all available facts. You seem to be saying that competitive pressure has no effect on prices.

I don't think that many people dropped their landlines for cell phones in the 80's, or even the 90's. I find it difficult to believe that fewer or no competitors would lead to the same or lower cell phone bills.

> Your thesis seemed to be that phone service was worse and more expensive due to AT&T being broken up, no?

I have no idea. What I can say is, relative to other countries and taking account of new technologies largely invented by pre-breakup AT&T, there's no clear improvement.

> You seem to be saying that competitive pressure has no effect on prices.

What competitive pressure? A national monopoly was broken up into local monopolies with hardly any more competition. In fact, our local-level cartels make things harder for new competitors than Ma Bell ever could; they have agreements (mostly enforced as part of the AT&T breakup) to share their easements and physical plant with each other as if they were all still part of the same company, but newcomers like Google Fiber have no access, and can be effectively held to ransom on a street-to-street and even building-to-building basis.

> I don't think that many people dropped their landlines for cell phones in the 80's, or even the 90's.

Not many people bought color TVs in the 1960s. Did their availability make black and white TVs cheaper? Hollywood movies better, or at least more spectacular? Not many people traveled by air back then, but did jet airliners make cars better and cheaper? I think the answers are obvious.

> I find it difficult to believe that fewer or no competitors would lead to the same or lower cell phone bills.

Maybe, maybe not. China Mobile is a monopoly but way less expensive than US providers. Europe is an oligopoly like the US but generally less expensive.

I don't think these are as obvious as you might think. Cell phone service is more akin to TV stations or other television service than the hardware used to view it. Black and white hasn't always stayed cheaper: You could buy a "normal" color television cheaper than a small black & white portable, for example. It merely changed.

Hollywood doesn't always do even that bit: I find BBC's "The Hogfather" (based on a Terry Pratchett novel) to be pretty spectacular. I went through a phase of Asian horror films, spectacularly surreal. Bollywood often has some crazy stories. Making cars better is a matter of opinion. Do you have proof that airlines made cars cheaper? Because most of what I find says they've basically stayed the same price for 30 or so years. My understanding was that things like the assembly line and advances in production technology have been the main drivers for vehicle affordability in addition to things like a growing used car market.

> ["The 80's and 90's"] was also the period in which landline started very rapidly losing market share to cell phones (also a Bell Labs invention[1]). Remember when they used to charge you a dollar per text message? Remember when they used to charge you an arm and a leg if you went over your allotted number of minutes?

Funny how the more highly regulated European telecom market saw a huge and rapid adoption of mobile phones compared to the US which lagged by about 15 years.

European telecom regulations also held Europe back in other ways (mainly on the wired side) so I'm not claiming the straw horse that regulations are 100% great or 100% terrible. In fact consider Minitel: everybody could get an inexpensive computer terminal in their home, buy things online, chat, look up data, have set chat etc, starting from the early 80s. Digital lines were common. Yet 25 years later it died a backwater.

You take a very dishonest stance on the charges against microsoft. They actively broke other people's software (Dr DOS) and made APIs that that only they could use which provided enormous, abusable and well abused competitive advantage. They actively interfered with standardization processes.

They did a ton of dishonest, unethical and illegal things. They even had internal memos about doing these things like the famous "Embrace, Extend, Extinguish" memo.

In order to describe these charges as you have one must have a severe lack of information or an equally severe bias.

EDIT - Downvote away, without a thoughtful response it is the equivalent of a throwing a tantrum.

And yet, every time someone tries "a way to leverage new technology to open new markets where monopolists' advantages no longer apply" in the form of a new municipal fiber or wireless internet service, they're shut down by lawsuits on the basis of legislation the monopolists had written, which protect the likes of Comcast and TW from competition.

yes, Peter Thiel is for the most part an incoherent hypocrite. He postures as an ideologue but his own behavior doesn't match his ideology, and he engages in revisionist history to the point of grotesque absurdity, as you correctly point out.

The best strategy for a given business is a different question from what is a good strategy for egulators or society. This was repeatedly emphasized, both in Zero to One and in the many interviews supporting its launch. This blog post quotes a specific passage from the book without this context.

It's true that monopolies often have negative societal consequences but it's also true that building a defensible "monopoly" or "moat", in Buffet's way of saying it, is extremely powerful for a business. It's also true that centuries old econ 101 charts that assume a static world (perfect information, rational actors, etc) is a lousy way to model the prospects of a modern tech company.

Yes. That is exactly the point of the paragraph right under the citation you got from the article. no?

Relevant, and why I am a member of Represent.us

https://promarket.org/argue-government-can-buy-government-qa...

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