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competition

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What’s your industry? The answer may surprise you.

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The way people define industries is really quite interesting. I’ve once again been asked to be a judge for the Harvard Business School New Venture Competition. They asked what industries I’m comfortable commenting on. It’s a surprisingly hard question to answer, because it’s quite unclear what an “industry” is. Here are a sample of a few things that people call industries:

  • B2C internet
  • B2B internet
  • Health Care
  • Medical Devices
  • Energy
  • Financial Services

What makes these an industry? Is it that all members of the same industry share the same markets? Is it that all members of the same industry share the same employee skill sets? Is it that all members of the same industry produce the same kind of products?

Every definition I’ve tried has glaring exceptions, which makes me wonder whether thinking in terms of “industries” really makes as much sense as I’ve always assumed.

Perhaps it makes more sense to think in terms of:

  • companies/products who serve a given market
  • companies/products that require certain kinds of distribution
  • companies/products that require certain specialized knowledge on the part of employees

What do you think?

Good businesspeople oppose free markets

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A friend on Facebook posted an article about New Jersey outlawing Tesla’s direct-to-consumer car sales. My friend was decrying how Gov. Christie is being anti-free-market. And I agree 100%.

From what I’ve been able to see, it’s pretty clear that the big conservative political donors hate free markets. What they love is whatever give them, personally, the ability to get more wealth. By “free market” they mean “don’t do anything that interferes with my personal ability to make money.” For example, the Koch brothers compete by using their money to alter laws so they win. They don’t compete by being better businessmen.

When it comes to competition, they hate it and undermine it at every opportunity, unless they’re the winner.

When it comes to level playing fields (supposedly the bedrock of markets), they hate it.

When it comes to producing the best product at the lowest cost, they hate it.

When it comes to contributing to the infrastructure they use freely that was funded by the public, they hate it.

Business People Should Loathe Competition

It’s a real education to go to business school and ask: how much of this education is devoted to finding ways to gain a market advantage without actually having to do a better job? The answer: most of it. It’s called “business strategy.” We teach our students how to be anti-competitive and anti-free-market, all in the name of free markets.

This works, however. It works because with the right playing field, pitting anti-free-market forces against each other results in more efficient companies through market selection of companies that are fundamentally better than other companies. This produces better ultimate outcomes for the consumers and society who created the markets to begin with.

But never miss the critical point: free markets work because the players are all trying to gain market advantage by doing a better job than each other. The players themselves are not striving to have a fair market, they’re striving to win and eliminate the competition (and thus the market).

It’s the job of government to make sure the playing field is level enough to keep enough market participants that the market continues to function. Players all want monopoly, government wants thriving market participation.

Mr. Christie’s error is that he’s acting as a businessman. That’s not his job. His job is to take care of all his constituents overall, not just the business ones.