Thread

1. throwaway13337 · 1789952505 · focus · HN ↗

   There's a pattern to the kinds of companies PE buys and I think it points to the real problem.

   They like companies with some kind of moat that makes it hard to unseat them. Basically, companies where there is no alternative for the consumer. That way, they can inflict abuse but know there will be nowhere to run.

   There are two different ways to achieve this. Monopoly and regulation. Hospitals have both government granted locational monopoly and tons of regulations that make it impossible to compete.

   Private equity is the symptom, not the disease.

   Until we get at the disease, new monsters will be born with different name filling the same ecological niche. It's economic natural selection played out in the environment we created.

   1. ip26 · 1789963037 · focus · HN ↗

      Regulation is usually what you accept in exchange for a monopoly. I would argue a granted monopoly without any regulation is evidence of regulatory capture.

      If you want to argue from first principles, and we accept for a moment that granted monopoly is the system we are working in (whether or not you feel it's the optimal regime) then I'd argue there's a clear gap in regulation, as flagrant abuse of the consumer has not been prevented.

      1. Nifty3929 · 1789963725 · focus · HN ↗

         Not really. Monopolies are an invitation to competition: Your margin is my opportunity, as it were. They are therefore hard to maintain absent some kind of external force to support it: Regulations (regulatory capture), licensing, explicit grant from the government, intellectual property laws, or some kind of collusion or market manipulation (more leading to oligopolies rather than monopolies).

         This is how industrial barons of the early-mid 20th century operated, as an example, with collusion and price fixing type things. Or hospitals and medical facilities today with certificate-of-need laws enforced by the government.

         1. dregitsky · 1789965117 · focus · HN ↗

            This is inaccurate - natural monopolies are a thing.

            Monopolies happen due to barriers to entry, and not all barriers to entry are government-created or illegal: network effects, big upfront costs, economies of scale, control of a scarce resource, etc.

            Regulation can produce a monopoly, but lots of regulations also exist to keep natural monopolies in check.

            1. throwaway13337 · 1789966535 · focus · HN ↗

               True. Though I don't like the term 'natural monopoly'. Most natural monopolies aren't - or don't have to be.

               Maybe a term like 'natural markets' captures it better? The property being that natural markets/monopolies provide some sort of substrate on which a market can exist.

               Good regulations seem to be ones that force open protocol and interoperability of these platforms that get large. This creates a new marketplace abstraction layer that enables new innovation to thrive.

               I'm certainly glad that I'm not on AOL's internet. And also glad that internet exists in part due to Bell's telephone system being forced open.

               Bad regulations do not seem to have that characteristic. It's too bad we do not have vocabulary to tell them apart. Public good type regulations are more muddy and can be used as a weapon more often than not.

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