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All failed companies are the same
What monopoly means
Monopoly here means a company so good at what it does that no other firm can offer a close substitute. It has nothing to do with Cornelius Vanderbilt owning all the ships and charging whatever he liked to get across a river. A creative monopoly adds entirely new categories of abundance to the world, and its profits last.
The substitute test
A company in a competitive industry could vanish without the world noticing, because some undifferentiated competitor would take its place. The test is whether somebody else could pick up where you left off if you stopped. Edwin Land, who founded Polaroid, lived by the motto don't do anything someone else can do.
The pull of rivalry
Rivalry pulls the other way. Inside a firm, people become obsessed with their competitors for career advancement, and then the firms themselves become obsessed with their competitors in the marketplace. People lose sight of what matters, overemphasize old opportunities, and slavishly copy what has worked in the past. The history of progress is a history of better monopoly businesses replacing incumbents.
How did Polaroid's instant film work?
Edwin Land announced instant photography in February 1947, and the first Polaroid camera, the Model 95, went on sale in Boston in November 1948. Each exposure was paired with a pod of chemical reagent. Pulling the print through rollers spread the reagent across the negative and developed it in about a minute. Land held more than 500 patents by the end of his career.
Why do competitive industries earn thin profits?
Economists describe a perfectly competitive market as one where many sellers offer identical goods, so no seller can charge more than the going price. New firms keep entering while profits look attractive. Their entry pushes the price down toward the cost of making one more unit. In the long run, economic profit, meaning earnings above what the owners could make elsewhere, falls toward zero.
Why do rivals become an obsession?
French thinker René Girard argued that people learn what to want by watching what others want, a pattern he called mimetic desire. He laid out the idea in Deceit, Desire, and the Novel in 1961, drawing on Cervantes, Stendhal, Proust, and Dostoevsky. In his account, rivals grow more alike as they fight, because each becomes a model for the other's desires. Girard taught at Stanford University from 1981 to 1995.
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