13 September 2014

The real world economics behind capitalism.

I wrote up a few worthless thoughts recently on the accepted disgust of internet carriers and the recent (though, likely short term) success of one mobile carrier. This might have been misinterpreted as a commercial or hate mail for this or that company, but it was really a personal exploration of our free market economy. This system was invented so competition would always give “the people” what they wanted - that we would choose the winner and loser. Though sometimes the winners have little to do with consumer desires.

One of the biggest success stories of "Capitalism" is that little Communist land across the pond. China’s mixed nuts version of picking the best parts and leaving the ugly ones in the bowl has ushered in a rapid transformation into, arguably, a better version of our darling market. Through heavy handed government involvement (“boo!”, “hiss!”), they have been able to infuse their society with whatever they need to compete while locking down anything that brushes them the wrong way. Yes, the First Amendment may be something the wipe their backside with, but their control has been financially extraordinary at giving the people exactly what they want.

It is safe to say that at least half of our political system would rather live through a nuclear winter than live with those “nasty Commies” forcing their desires down our throat. (Please ignore the fact that their citizens are far happier with their government than we are.) However, some of America’s biggest triumphs in recent years have been due to similar meddling.

The biggest star of the American auto world today is Tesla where their stock is charging faster than their high speed battery stations. Their technology might not exist, and certainly would not be clogging up Seattle freeways, were it not for the generous American greenback printing machine. Some elephants might be happy to see Elon Musk and his treehugging visions of our future locked in a server rack in Silicon Valley, but there is no question how they were able to give the long waiting list of Model S customers their dream vehicle.

New companies, like Tesla, are born out of a vision of what customers need, but older companies, like G.M. can sometimes need a bigger catalyst. Maybe Government Motors should have been left for dead on the deserted streets of Motown (they certainly dug their own grave) but we chose to give them a new life. GM is financially stronger than they have been since James Brown was climbing the charts. Sure, they have a billion recalls of vehicles assembled almost entirely prior to their gravestone chizzling project during the Great Recession, but our silly Feds made a profit on a company that now produces autos as good as anything manufactured by the competition.

As I alluded to in previous rants, the technology world has numerous stories of forces outside shopping malls delivering the ideal product. It was only a few years back when iPhone cell plans cost more than a Benjamin a month and AT&T was attempting to use their profits to suck up one of the only three true competitors. T-Mobile was a doomed company with customers fleeing their ranks due to a spotty mobile network that was ill equipped for the new rapid broadband world and AT&T was going to “save” them. Fortunately for iPhone owners everywhere, the FCC and their BlackBerry carrying neighbors in D.C. put a stop to the acquisition. T-Mobile was left to their own devices, and a funny thing happens when a company is staring at their own death: They (finally) listen to potential customers and force their competition to do the same.

Sometimes it is fear of the competitive future that lights a fire under a corporation to do the right thing. Only a decade ago, Verizon saw a world where their competition would deliver all services through a single fiber optic pipe and decided they wanted to get their first. They constructed fiber to homes in numerous pockets of the country because they expected cable companies to start doing the same thing. The lucky few who were the beneficiaries received an internet connection rivaling anything in the world. Unfortunately, because the competition did not follow suit, Verizon exited the game to focus on the highly lucrative cellular industry.

Competition alone delivers fantastic products and most of the organizations out there are doing just fine focusing on delivering the best product at the best price. However, it is also true that sometimes an old titan or a new cutting edge concept will need a little assistance to get a solid footing. The American economy is in a better place today thanks to companies like Tesla, T-Mobile and GM, even if old-fashioned competition alone was not entirely responsible for their present-day success.