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Good businesspeople oppose free markets

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.

In Praise of the Corporation

I’m in awe. Normally, I’m not a huge fan of big corporations. I think they often (but not always) dehumanize the people who work there. They can ruin communities in the name of efficient and cost-cutting, and they distribute wealth in truly bizarre ways. But… But… They’re amazing! Not just a little amazing; they’re frickin’ mind-blowing amazing!

Today I was getting lunch at Subway and the regional manager was there helping them tune up their processes so they can deliver the same quality as measured by customer feedback as several thousand other franchises. Not only do they do it today but they will do it every day going forward, rain or shine.

Have you ever thought about that? How incredible it is? There’s never before been a civilization that could do that on such a scale once, much less thousands of times. And we take it for granted that any large company will be able to scale like that.

And the things we do… Building the ancient pyramids is considered a Wonder of the Ancient World. We build buildings that are a thousand times more complex and sophisticated, on a regular basis. We rarely even ask “is a half-mile high building feasible?” Of course it is. We’ll find a way to do it; the limitation we focus on is funding. We know we can master the technological challenges. We know we can get the supplies made to spec. We know that we can coordinate the hundreds or thousands of people it will take to pull it together. And that’s unprecedented in human history.

The modern corporation has taught us to create systems larger than any one person could ever create. It has taught us to create flows of materials and information that span the globe, enabling us to coordinate people and projects on a level that can change the whole planet. And most astonishing, these organizations keep working even though the people who comprise them come and go. Popular business mythology aside, our ability to create and share process has made our achievements largely independent of any single person. The skills and abilities reside in the structure of the systems as much as (or more than) the individuals.

Tomorrow I’m sure I’ll be back to battling the not-so-nice parts of business. But today, I celebrate the corporation, an invention that has raised the human race to levels of accomplishment we have never before dreamt of. Savour it. Appreciate it. Enjoy it. Because it has enabled you to live in the most extraordinary time ever in human history.