Peter Thiel & The Disregard For Competition
Peter Thiel is somewhat of a mainstream contrarian. A prominent member of the so-called ‘Paypal mafia’; Donald Trump and America first cheerleader; Stanford law graduate; Funder of people to drop out of university; Decentralised Finance enthusiast (despite the fact he owned a high-finance hedge fund) and a self-proclaimed believer in monopolies, Mr Thiel has mastered the art of personal-branding, and, perhaps, more importantly, of making money. That Mr Thiel knows a thing or two about making money and entrepreneurship means that there's proof in the pudding and that his word has some potential worth. A keen explorer of the philosophy of luck and determinism, Mr Thiel is keen to emphasise in his book Zero To One, that impressive results are never the product of luck. Rather, insofar as business success is concerned, Mr Thiel appears to hold that success lies in creating a product that is technologically superior, or different, but nevertheless valuable. This, at least, at first sight, appears intrinsically rational. That is until Mr Thiel embarks on pooh-poohing competition per se.
The idea that ‘competition is for losers’ best sums up Mr Thiel’s sentiment that competition is a fruitless and pointless endeavour. For Mr Thiel, the logic of competition as something that is good starts in the hallways and classrooms of junior schools, is subsequently continued, and indeed intensified in universities, especially elite ones, to the point of continuation wherein we see competition hailed as the hallmark of healthy industries and capitalism more generally. Putting aside the mass speculation and unsubstantiated nature of the Thielian narrative, the idea that competition is not entirely positive in some cases is not new. JS Mill made the argument in his book, The principles of political economy, that competition may be antithetical to market efficiency. He gave the example of railroads in Victorian Britain that, in the absence of minor market actors, could be constructed with more ease and at greater speed. But Mr Thiel appears to hold that competition is on a net consideration, negative for consumers, market participants and society as a whole. This is misguided.
At the heart of Mr Thiel’s view that competition is for losers is an elevation of the value of innovation, something that is nevertheless of undeniable importance in ensuring societal progress. For Mr Thiel, any company that wants to make itself a success should do so with the primary objective of innovating to the point of monopolisation. Google and Facebook are prime examples that Mr Thiel himself picks out, and the fact that he does appears, in retrospect, to only strengthen the claims made by anti big-tech activists who are queuing up to bring forward antitrust lawsuits before the courts. But the more fundamental point to this claim, namely that monopolisation is a virtue, is problematic insofar as consumers and the health of markets are concerned.
In praising monopolies to the extent to which he does, Mr Thiel explicitly challenges the normative view that innovation is hampered by monopolies, rather than advanced by such instances of market concentration. Those of a progressive stripe may point to the issues surrounding the enforceability of the consumer welfare standard and the implications of it for individuals as ‘prosumers’ when using tech platforms such as Google, Facebook and Amazon. It appears that Mr Thiel, all in the name of innovation, is willing to advocate a risk-all, and care-free approach to good market structures and the negatives of market monopolies. But, this is espoused with no real consideration of the costs. Rather, as it seems, Mr Thiel is only alive to the benefits of such to the entrepreneur who can amass vast wealth by virtue of the fact that in owning their company, they effectively own an industry.
This is no way to go about things, and policy should be in dogmatic opposition to it. Mr Thiel is alive to one thing, that is the value of a Unique Selling Point (USP) when seeking to create a successful enterprise. But it would be a mistake to gamble everything away in the hope that bigger companies, and consequently, bigger individual winnings will be beneficial for society as a whole. Indeed, as a former hedge fund manager, Mr Thiel ought to be alive to this fact.