Why Do Kids Do What Their Parents Do?

Why do so many children follow in their parents professional footsteps?  Investigate professional sports, or entertainment, or entrepreneurship, and you’ll find a large percentage of those making a living there had parents who did the same.  I do not discount the role played by heredity.  Nor do I overlook the effects of learning from parents how to ply the craft, or connections parents can provide.  But I think there’s something else going on as well.  Kids who grow up with parents that do X do not feel the need to seek permission to pursue a career in X.

If I asked you in all seriousness if you want to change life direction and become a rock star you’d probably laugh.  You’d laugh because you see rock star as something outside the realm of possibility for you.  Even if you have some musical interest or talent, you’d feel sheepish about attempting to reach rock star status.  You’d probably want to hone your skills in private for a very long time before unveiling them to the world, and even then rock star might seem too distant a target.

But I bet your response would be different if you had a parent who was a rock star.  Even if you’d not spent much time on music or asked your rock star parent for advice and connections, you’d view a music career as a real possibility.  The things you’ve seen people close to you do are possible.  They’re matter of fact things that don’t seem all that lofty.  Kids who grow up around actors aren’t embarrassed to make head-shots or go to auditions.  Kids with athlete parents aren’t intimidated by tryouts or the idea of being team captain.  I suspect it’s more for this reason than pure nepotism that even mediocre performers often have careers in entertainment when they’re related to a star.  They simply don’t fear the things required to step out and give it a try.

Most kids feel the need to ask for permission pursue big dreams.  They think they need to be invited or discovered.  If you’ve never seen someone who does it except on TV it seems far-off.  If you’re familiar with it, it automatically becomes a part of your set of options and you need no one’s permission to pursue it.

The first hurdle to doing anything is knowing you don’t need permission.  Bring your heroes down to earth.  Remember they’re just fallible, searching people.  Imagine what their kids must think of them, as kids always see the weak and mundane side as well as the great.  Expand your set of options beyond that which is familiar; or rather, make all options familiar.

Markets in Everything and not Just in Theory

The main arguments for government intervention center around public goods and collective action problems.  These arguments are weakening.  Far from being the sole domain of bureaucracies, these are the areas with the most opportunity for innovation.  We see more of it every day, and there is more to come.

Scholars in the classical liberal tradition have argued on ethical and efficiency grounds for markets in everything.  Odd as it may at first strike us the commodification of everything from vital organs to votes allows for freer, fairer allocation and coordination and reduces waste.  Many people will debate the desirability and possibility of markets in everything.  These are interesting discussions but the great thing is no one needs to win them.  We can create markets in everything right now.

Consider AirBnB or Uber as a first step.  People have unused resources like a spare room or a car.  Technology reduces transaction costs associated with simultaneous coordination among thousands of people.  We can turn our unused resources into valuable commodities to buy and sell.  Take it a step further and consider what else we could do.  Why not solve collective action problems that plague community projects with Kickstarter or Groupon like mechanisms?  Want a new park in the neighborhood, setup the campaign and don’t break ground until enough people have voluntarily pledged.  Those who don’t will be easily seen and neighbors can try to convince them to join.  No one’s taxes or HOA dues go up across the board or against their will.  No simple majority can force everyone to their preferred allocation of resources.

There is nothing inherently noble about the political means of allocating resources and addressing collective action problems.  In fact, it comes with a whole heap of unique problems.  Opportunity exists all around us to move more and more processes out of arbitrary first-come-first-serve and political machinations and into the dynamic, voluntary marketplace.

In fact, the less of a market you see in a good, service, or industry, the greater the opportunity.  I launched Praxis because higher education had become more and more cartelized.  There’s not enough of a market.  I want to bring higher ed back into a more competitive market.  Health care, transportation, and finance are top candidates for major disruption.  They’ve become stagnant and further and further removed from the open market process.  That creates wedges of opportunity.  From the major to the mundane, technology allows us instant, decentralized communication and reduces transaction costs associated with large groups with diverse desires.  These means we can bring just about anything into the world of free exchange and enjoy all the advantages and flexibility of the price mechanism.

What can you bring to the market?  I’m excited to see what’s next.

What Does a Degree Signal?

There are plenty of critics of college.  It’s not uncommon to hear prominent pundits challenge the prevailing narrative that everyone should go to college.  Many contrarians say that too many young people are going to college, not too few.  They say that higher education is well-suited for the smart, hard-working, above average types, but too many mediocre students are attending.  They say it works better when only the best and brightest attend.  I think most of these critics have it backwards.

A degree is a signal.  It is well established that higher education’s primary value, and hence business model, is as a sorting mechanism rather than a forming mechanism.  Sure, you learn and change and gain things through the typical four year experience.  But all of those things could be had without being a registered student.  The only reason people keep paying to make the experience official is because of the signalling value of a transcript.  Given this fact, it follows that the signal would provide the most value for the marginal students, and the least value for the smartest, hardest working, highest achieving (not merely academic achievement, which doesn’t always mirror what matters in the world outside the walls of the classroom).  In other words, college is far more valuable to an average person who is content to put in less effort it than an above average talent who is very ambitious.

Considering how widespread the granting of degrees is, and considering the talent level of the typical college classroom, the degree doesn’t signal much.  It signals that you are average.  You’re like most other people.  If you’re at or below average, it can be valuable to have a way to let people know this.  If you’re above average, you want signals that demonstrate that you are, not merely those that lump you in with average.  Look around a college classroom and remember; what you’re purchasing is a signal that says, “I’m about the same as these people.”  For many of the sharpest, hardest working students, a degree signal greatly undersells them.

So much so that degrees have actually become a reverse signal in some circles.  In the venture capital world, it’s not uncommon for investors to count skipping or dropping out of college as a big plus for founders they want to invest in.  Entrepreneurs who have the courage to pursue their vision in the face of social pressure signal something really powerful.  Some of the most interesting people and opportunities in the world want an answer to the question, “Why did you go to college?”, rather than why didn’t you.  If you’ve got drive, creativity, and smarts above average, why did you choose the relatively easy, prevailing path?  Why did you wait four years to get started on the really good stuff?

Like most critics, I agree that college is not for everyone.  Where I disagree is that I think those who benefit least from it are those who are smartest and hardest working and most able to do more without it.  College is a least common-denominator signal.

Should You Study the Greats, or Just Improvise?

It’s not uncommon for the most devoted students of personal health, or business startups, or filmmaking, or success more generally to be only moderately successful themselves. We’ve all met people who have read every “7 Ways”, and, “10 Tips” book on the market, yet still haven’t really gotten off the ground personally. So is greatness just too unique and context-dependent for useful road maps?

Most classes and books and seminars on how to succeed are run by those who have succeeded in some field or another. While their track record may be impressive, I always feel a little bit like successful people make up a lot of rules and patterns that helped them succeed in retrospect, and only some of them are real and valuable. If you’re too serious about it, it can make you feel like you can’t succeed unless you follow such rules or have great formmulae in place. In reality, those come later. First comes just doing stuff.

I think most endeavors in real life are more like bike riding than the checkbox tests in schools. If you wanted to be great at cycling, what would you do? Would you start with a seminar on bike riding? Best case, maybe you’d gain 5% of what’s needed from theory and experienced riders – like why a helmet might be a good idea – but you have to get 95% from just doing it.

This doesn’t mean experts and books are useless. Once you are an avid rider, only then do tips and techniques from Lance Armstrong really help you. It’s hard to even know what they’re talking about before that.

A lot of people in business school or getting MBA’s or at entrepreneurship conferences are like an aspiring cyclist spending years studying inside tips for winning the Tour de France and drafting and advanced specialized techniques for hill climbing, etc. before ever getting on a bike. Hop on and ride. A lot. Enter a few small races. Then whip out the books.

You don’t have the master something before studying it, but to really benefit from the insights of experts, you have to know what they’re talking about on a gut level. You have to be doing the stuff they’re teaching.

Glean what you can, but don’t ever let the quest for more knowledge on how to do something get in the way of just doing it.

Stay in Touch with the Future

There was a great Super Bowl ad that showed a now famous clip of two newscasters discussing the internet and email in 1994.  It was only 21 years ago, and already the thing they were so helpless to define or understand has completely redefined our world in a way all of us tacitly understand from birth. (You should see my kids with an iPad).

I’m an optimist and a big believer in the possibilities of tech and progress, yet too often this belief is just theoretical.  It’s easy to get a little impatient.  Yes, I know what’s possible in theory, but why don’t I see marvelous advances in practice?  Looking to the recent past is a great reminder of how much radical progress has happened in my lifetime alone.  Looking to the cutting edge of the present is even more exciting.

I try to read or watch something at least every few weeks about some area of science or technology that is a new frontier.  Whether checking on the latest in 3D printing, taking a peek at what’s going on at the Large Hadron Collider, or reading up on Bitcoin and its implications, I’ve discovered my sense of wonder is stirred by frequent updates from the fringes.  Every time I poke around new research and discoveries I wonder why I don’t do it more often.

If you’re looking for some crazy new stuff, here’s one I watched yesterday.  In addition to discussing some specific new technologies, Jose Cordeiro mentions four ways to deal with the future: Passive (bury your head like an Ostrich), Reactive (respond to it like a fire-fighter), Preactive (hedge against it like an insurer), and Proactive (create it like a builder).

Idea Mensch Interview

An interview I did with Idea Mensch on Praxis, entrepreneurship, and an assortment of other things.

Where did the idea for Praxis come from? What does your typical day look like?

Praxis is really the culmination of a lot of ideas and experiences, beginning with my time in college when I felt like given the time and money, I wasn’t learning nearly as much as I wanted to and I was getting better experience working than in school. Through many ups and downs and steps in my career path over the past decade, I finally pulled the pieces together and created the kind of educational experience I wished I’d had. The idea of work with entrepreneurs, the best of liberal arts, business, and hard skills training, and a largely self-directed program packed into ten months for net-zero cost was the realization of a long held dream and the answer to my own and many other students’ frustrations.

A typical day for me begins with a swim, breakfast, shower, and then a half hour or so of reading a few blogs and catching up on social media. Then I dive into my to-do list, which involves a lot of phone calls, emails, and Skype meetings with entrepreneurs in the Praxis business partner network, interviews with applicants, catch-up calls with participants, programmatic stuff with our Education Director, marketing plans and tactics (which are highly variable) with our Marketing Director, reviews and updates to financials, and many other interactions with many other people. I plow through a lot of emails, as I have a zero inbox policy and respond to just about every serious email I get.

I like to get outside for at least half an hour each day to break things up, sometimes just to walk, sometimes while making phone calls. I also work in at least thirty minutes to write pretty much every day, and time to read whatever book I’m on. I find that if I don’t make time for writing and reading, my mind begins to feel empty, and my energy soon follows. I need to feed on new ideas constantly to stay charged.

How do you bring ideas to life?

Action. I am heavily action biased, which can certainly get me in to trouble, but I find that any idea I analyze for too long without moving forward in some way inevitably dies an ignoble death. I need to see progress, so I push things and move them, even if just a little bit every day. From the moment the idea for Praxis came together in my mind, I began hashing and rehashing it, contacting people I’d need to help build it, buying domain names, doing informal market research, and anything I could to keep moving the inertia. If I do at least one thing every single day to get an idea closer to life, it has a far higher likelihood of success than if I wait around for a time when I can make one big move. I see it like exercising. If the idea is a healthy body, you’re better off doing one thing every day, even if it’s just twenty push-ups, then waiting for the perfect day to spend two hours in an elaborate workout at the gym.

What’s one trend that really excites you?

The massive reduction in transaction costs due to technology. There are so many underutilized resources out there – both people and goods – because traditionally it’s been really hard to gather the right information at the right time to make the right connections. Smartphones, location services, massive amounts of digital data and other technology have made valuable information readily accessible and seamless. We’re just seeing the beginning of the efficiencies and opportunities this creates with things like Uber, AirBnB, and other ways people can find what they need in places previously unavailable to them because of prohibitive transaction and information costs. Everything from specialized skills and knowledge from experts, to the best brunch joint in town can be accessed instantly, where you once had to know a trivia king or read a phonebook.

What is one habit of yours that makes you more productive as an entrepreneur?

Delete, shred, destroy. I am a minimalist. I try to clear out any and everything that is nonessential. I condense and combine wherever I can. I go paperless with everything, and if important things are sent to me in physical form, I snap a picture and store it in the cloud so I can throw out the paper copy. I keep my desk, my inbox, and my life in general as clutter free as possible. I used to collect things I thought would someday be useful, but I found the mental space required to have so much stuff around (both physical things and facts and tasks in my head) was immense, and reduced my productivity. I now record crucial info and to-do’s and rely on my calendar and list to remind me so I don’t have to remember, and I purge all that is not needed, and even some things that are if they’re easily replicable!

What was the worst job you ever had and what did you learn from it?

Bagging groceries when I was 14-15. I hate to even call it the worst, because I actually enjoyed it and have enjoyed every job I’ve had, but compared to all the rest, it was definitely the least pleasant and rewarding. I learned several valuable things. First, that time moves really slowly when you’re not in “flow”. When we were humming and lines were long, hours passed like minutes as I frantically bagged and carried groceries out. It was actually a rush and I’d give myself challenges to see how fast I could bag the groceries without damaging them. When we were slow, the minutes crept by slower than anything I’ve ever experienced. This is why I actually loved working busy holidays.

Another powerful lesson was just how hard good help is to find. Nearly all of my colleagues stole items from the store. I even had a book stolen from the break room. Many were fun to talk to, but not at all trustworthy or hard working. Just by showing up on time for every shift, I quickly become one of the most valued employees even though the youngest. It was a sad dose of reality, but helped me temper my expectations for a working world in which most people simply aren’t that good as employees.

Finally, I learned that those who hated their jobs did worse and were less happy than those who didn’t, and that it was largely a choice. Some of my coworkers and managers were always unhappy clock-watchers. They didn’t perform well and didn’t value their own work. Some took pride in it. It wasn’t a difference in ability or position, but a difference in outlook. Some had fun with work and treated it like a playful experience and one they could always improve in. They excelled and were generally happy. Others saw it as a necessary burden and did the bare minimum. They had little pride in themselves and were generally unhappy. It became clear that belief trumped external circumstance when it came to fulfillment.

If you were to start again, what would you do differently?

Take bigger risks sooner. It took me too long to realize that what everyone else says, does, and believes is not as important as my gut. I may fail more going that route, but failure is the best way forward, and it took me too long to not be afraid of it. I would try to get some of my earlier, crazier ideas of the ground instead of waiting for validation.

As an entrepreneur, what is the one thing you do over and over and recommend everyone else do?

Constantly force yourself to put into words – written and spoken – your vision and value proposition as concisely as possible. Whether for your company or product, or just for your life in general. What are you trying to build? Why does it matter? What will be the outcome? It’s incredibly hard to understand and articulate, even for those in the middle of successful ventures! But it’s crucial self-knowledge and it brings about crucial self-honesty.

What is one strategy that has helped you grow your business? Please explain how.

Our business is brand new, so the only growth we’ve experienced this far is going from zero to one and getting our first class off the ground. The biggest aid to that was probably cashing in tons of accumulated social capital. I’d spent ten years doing favors for people, making connections, sharing information, ideas, and feedback generously, mentoring, and generally trying to be kind, helpful, responsive, and someone who gets things done. This built up a lot of goodwill with a wide network. When Praxis get going we needed as much as we could get, because there are some things you can’t do with money, time, or individual effort alone. We needed expertise, media exposure, connections, and much more, and it was only by cashing in on that accumulated social capital that we were able to grow from seed to sapling.

What is one failure you had as an entrepreneur, and how did you overcome it?

My original business plan for Praxis was essentially a work for free arrangement that I felt was really groundbreaking and beneficial to all parties. I was quite far along in the process when it dawned on me to check into current labor laws and regulations, only to discover that what I had in mind was basically illegal. You can’t work for free unless you actually destroy value at a company, according to current regulations. My initial reaction was resigned indignation. I was ready to give up on the whole idea altogether until my brother, a seasoned and successful entrepreneur and a close friend and mentor, just laughed when I shared it with him. He said, “That’s great! That’s what’s kept everyone else with this idea from moving forward, so it means less competition for you!” He assured me there’s always another way to get at the same end goal, and with some creative thought and effort, we found one.

I will never forget that phone conversation, or the non-threatened, playful approach my brother brought to the situation. He had been through things like this and had internalized the lesson that there are no obstacles that a good idea can’t overcome somehow. That was huge for me.

What is one business idea that you’re willing to give away to our readers?

Rental everything. I don’t want to have to own and maintain a weed Wacker, lawnmower, suits for formal occasions, golf clubs I seldom use, a boat, camping gear, etc. But I do want to have access to these things, either regularly or infrequently, and in quality and quantity it wouldn’t make sense for me to buy and maintain myself. A combination of businesses and individual owners on a one-stop peer-to-peer platform where prices, location, ratings and availability were open and accessible could make my life a lot easier and make use of a lot of underutilized assets sitting in garages, warehouses, or stores. Sure, it’s a logistical challenge, but you figure that out and you’ve got at least one customer for life!

Tell us something about you that very few people know?

I can clap with one hand. On both hands.

What software and web services do you use?

Google. Praxis uses Google apps for business, and the combination of my iPhone hardware with Gmail and Drive apps is unbeatable.

It’s simple, clean, has tons of storage space, and intuitive search function, and it’s the industry standard. I have no particular brand loyalty, so as soon as I use something I like a lot better, I’m happy to switch. Right now, nothing comes close.

What is the one book that you recommend our community should read and why?

The Act of Creation, by Arthur Koestler. This lesser known gem is quite an amazing book, jam packed with insight about what human creativity looks like and how it happens. It’s a powerful reminder of the value of daydreaming and subconscious activity. It’s empowering and humbling at the same time, like all great truths.

What people have influenced your thinking and might be of interest to others?

In terms of contemporaries, I like to read Fred Wilson’s blog AVC.com, I enjoy Seth Godin’s blog as well, and I love consuming nerdy economics stuff from EconlogEcontalk, and The Freeman. If we’re talking all time, I’ve always appreciated deep insights on the human condition from Mark Twain, Albert Jay Nock, C.S. Lewis, Frederic Bastiat, Benjamin Franklin, Adam Smith, and Socrates.

Don’t Go to College

Good friend and collaborator T.K. Coleman invited me on his show, “Conversations with FiFi & T.K.” to talk about Praxis and why traditional education doesn’t cut it any more.  We had a great conversation and I got to field some good questions about the Praxis idea.  Made me all the more excited for the start of our first class in February!  Hope you enjoy the interview.

You Were Born an Entrepreneur

Have you ever watched a baby with a goal?  They know what they want, but they don’t know how to get there.  They have limbs they can barely control and a variety of toys, tools, and furniture around them.  They collect information by watching others.  They test and explore, flailing their limbs until they invent their own kind of motion to get from point A to point B.  It’s remarkable when you think about it.  None of the adults around them are crawling, but babies find this solution on their own.  They will not be denied.

It takes years in a conformity-based education system to train that kind of initiative out of us.  In fact, conformity was one of the primary goals of the education system when it was established.  Experts believed that people needed to be molded into uniform widgets, then plugged into an assembly line like spare parts, ready to take orders.  It wasn’t a great model then, and it’s even worse for the world today.

Despite the slower economy, opportunity abounds.  Cloud-computing and other innovations have dramatically reduced the cost of creating, collaborating, and starting a business.  The best businesses are struggling to find people who can come in and add value, out-of-the-box thinking, and innovation.  The market is full of unmet needs, but there aren’t enough entrepreneurs to solve them.

Now is not the time to wait around for more jobs to open up.  Now is not the time to wander aimlessly through a status quo education, or sit in classrooms struggling to stay awake.  Now is the time to rediscover your inner entrepreneur.  Break free.  Pick goals, even if they’re notional, and think clearly about the best way to achieve them.  Test different approaches.  Is the well-worn path really the best option?

Ask Where Things Come From

Yesterday, I came across this quote:

“America: Less than 5% of the world’s population, consumes over 25% of the world‟s resources.”

This is meant to shock and shame.  How selfish of the people living within this geographical area to consume so much!  That sentiment may be warranted if life were some kind of reality TV show with everyone stuck in a house with a fixed pool of resources, but it’s not.  If we really want to understand the world, we need to ask a key question: where do those resources come from?

They come from production and trade.  Everything that is consumed must first be produced.  There ain’t no such thing as a free lunch.  In order for people in the borders of America to consume stuff, they must obtain it.  They can produce it themselves or trade something else they have produced for it.  In a free market, every exchange is voluntary.  In order for both parties to agree to trade, both must consider themselves better off after than before.  Because economic value is subjective, both walk away wealthier than before because they gave up something they valued less than what they got.

Now that we know some basic economics, what does the statistic about consumption tell us?  It tells us that, in order to consume a lot, American’s must have produced a lot.  It means what they produce must be more valuable to their trading partners than what they consume.  In other words, it means they are creating value for the world.

There is an exception to the rule that more consumption happens after more value creation.  Consumption can also happen after resources are taken by force, outside the operations of the market.  This fact is illustrated by another quote I came across yesterday on a list of common economic fallacies.  The commenter said a common fallacy is,

“Not asking where ‘G’ comes from.”

In macroeconomics, wealth is often measured (somewhat dubiously) in GDP.  The typical formula for measuring a nation’s GDP is: C+I+G+(X-M).  In this equation, C means private consumption, I is investment, G is government spending, X is exports and M is imports.

There are plenty of problems with this formulation, but leaving those aside, the math tells you that increasing any of these addends increases total wealth.  This is what leads many to advocate for increased government spending as a way to grow the economy.  To the true believers, any spending will do.  John Maynard Keynes famously suggested that the Treasury should stuff jars with bank notes and bury them in abandoned coal mines to be dug up again.

But where does G come from?  Government produces nothing, it only takes.  Every penny in the G category was taken from C or I.  This would not seem problematic at first for the economy as a whole, much as individual taxpayers may not like it, because the sum would remain unchanged.  Except that, as we have been reminded, economic value is subjective.

A dollar taken from someone and spent on her behalf is less valuable to her than keeping that dollar.  If this were not so, she would have given it up voluntarily.  People put their resources to their highest valued use, according to their own scale of value.  Any time resources are taken by force, value is destroyed.  Further, the choices people would have made would send signals rippling through the economy, telling entrepreneurs and producers what to produce more and better of.  When government puts resources to their uses, it signals entrepreneurs and producers to create more of what government wants, which diverts production and innovation away from the areas most valued by the citizenry.

The common problem in both scenarios – assuming the a high rate of US consumption means less for everyone else; and assuming an increase in government consumption means more for everyone else – is a failure to examine causal connections.  Static snapshots of data – whether a percentage of world consumption or GDP – tell us nothing about the ongoing relationships in our world.

These relationships have patterns and feedback and adaptations.  The data comes from somewhere, and it’s more than a simple path; it’s the result of a complex and constant churning of causes producing effects.  Freezing this dynamic process in time and measuring where a bunch of stuff is can’t tell you whether the process is just or efficient, or what the results will be over time.

Before you make data-based judgments about systems in the world, understand where the data come from.  What does the process look like that produced it?  What are the causal relationships?  What happens to the data through time?  Citing a lot data might make you feel smart, but if you accept data alone as proof of cause, it’s only a feeling.

Monopoly Is Everywhere; Monopoly Is Impossible

Concern over the power of “monopoly” is often given as justification for government intervention in the economy. It shouldn’t be. There is no logically consistent definition of monopoly that warrants interference in market. Furthermore, government efforts to disperse market power tend rather to concentrate it, particularly among those best at playing politics, rather than helping consumers.

What is this monopoly thing that is so feared?

Monopoly is often described as two-pronged: complete control over a unique resource, and the ability to be a “price maker”. (“Price maker” means to set the price you want to sell at rather than responding to market conditions and being a “price taker”). Once you define monopoly, you realize what a meaningless concept it is. One of the two prongs is inevitable; the other is impossible.

If monopoly means control over a unique resource that no competitors can sell, everything is a monopoly. Every single product is unique. I have a complete monopoly on the product “public appearances by Isaac Morehouse”. No one else can offer it. What kind of power does this give me?

Sadly, I cannot charge whatever I want for public appearances simply because I have a monopoly. I’ve tried, and so far no one has been willing to pay $50,000 for this unique good over which I have sole control. (Email me if you’re interested.) In other words, I (and everyone and everything else) satisfy the first prong of the definition of monopoly, but that doesn’t help me with the second prong. I’m not a price maker.

In fact, no one is a price maker. OK, I suppose anyone can make any price they want to, but in order to actually sell something – no matter how valuable – they’re constrained. Think of a product that you need badly and can’t really live modern life without. How about gasoline. Why doesn’t Exxon start charging $20, $100, $1 million per gallon at the pump? What would happen?

Life would change pretty dramatically for some people, maybe just at the margin for others, but almost no one would pay that price. Even if all the oil in the world were controlled by one company (a scenario almost impossible to imagine absent government intervention), they still would not be a price maker.

Even complete control over a resource that people really need does not a price maker make. The firm faces substitute goods as a very real form of competition. McDonald’s burgers are not competing only against Wendy’s burgers. They are competing against Subway’s subs, mom’s PB&J, or going without lunch altogether. Firms are held in check not just by substitute goods, but by potential competition. If gas is too costly, new or old technologies become more profitable. Bicycles and solar cars both take a chunk of consumers.

So the first prong of monopoly, control over a unique resource, is everywhere. The other prong, the ability to be a price-maker, is impossible. In reality, firms and consumers are constantly moving up and down to varying degrees on being price takers and makers. There is no complete maker or taker. The market is a process of discovery, and if we want the best outcomes, we need to worry about keeping the process free and unencumbered, rather than the particular distribution of resources among firms at any given snapshot in time.

Efforts to fight the myth of monopoly and make the market look more like make-believe “perfect competition” make things worse. They often result in the one kind of monopoly that is dangerous; the one maintained by force. Forced monopoly, or forced price floors or ceilings, or the breakup of firms or the prevention of mergers, or any other intervention creates artificial markets. They shift entrepreneurial activity away from innovation to serve consumers and towards efforts to ensure regulation benefits me and harms my competitors.

We’re all monopolists, yet none of us are price makers. Stop worrying about it.

When to not Play the Game

Yesterday, I talked about seeing life as full of overlapping and complex games.  Doing what is socially acceptable in certain contexts is part of the game.  Playing it is fine, so long as it’s not confused with real life.  Getting bitter at is is not usually productive.  But when is opting out a good idea?  The short answer is, only you can decide for yourself.

Russ Roberts and Bryan Caplan have been discussing being “weird”, the pressure to conform, and the costs and benefits of non-conformity.  At Cafe Hayek, Roberts is more optimistic about the rewards gained by breaking free from status quo games.  At EconLog, Caplan seems to think it rarely pays off.  Both offer valuable considerations.  It is very costly to opt out of social games and prevailing narratives.  But the biggest rewards often come to those who don’t just play games and win, but who “change the game”, to use some business buzz-wordage.

Peter Thiel discusses the common traits of weirdos and great individuals in this fascinating lecture.  Thiel seems to think innovators share traits from both tails of the distribution curve of “normal” people.  He channels the ideas of philosopher René Girard, particularly his idea of Scapegoats.  Girard claims that societies tend to focus all of their violence or conflict (born of envy) on a few individuals, and destroy them as a form of sacrifice while alternately worshiping them.  This deification and sacrifice is seen in religious beliefs and rituals throughout history, as well as the treatment of celebrities by major media.

It seems realizing that a dominate game is immoral or inefficient and refusing to play has the potential to make you a criminal outcast or an innovative hero, possibly both.  There may be ways of opting out of social games in quiet fashion without incurring too much cost, but is there any way to change games, create new games, and achieve greatness while avoiding the wrath of the mob?  I’d like to think so, but I’m not sure.