Markets are rarely, if ever free.
Truly free markets are a theoretical concepts like zero or infinity.
We can imagine them, but they may not actually exist. Monopolies
form. Government interferes. Supply can be cut off. New
technologies can violently disrupt society. Imbalances in other
markets can interrupt distribution.
Markets are many and diverse. Markets can be
found in the parking lot swap meet or a professional trading floor.
Free markets are thought to find the optimal price and best distribution of goods and services.
Free markets are uncontrolled by
government.
Free markets have no monopolies.
Mark the monopolist wanna-be |
Managing Markets
I once was manager of products and
services in markets. My job was to find out what people's wants and
needs were, find a solution, then deliver it to them. For several
years I specialized in the real estate industry providing technology and
processes. The real estate markets spanned multiple countries and
cultures.
I worked for corporations.
Corporations are a legal tool owned by people. I was labor. I worked
for other people. Someone else owned the capital and resources. If
I did well at my job, owners made millions in profits. If I failed,
owners lost millions. A salary was my compensation for pieces of my
life's time.
We built databases of properties for
sale. We had databases of transactions. We created and maintained
records of government property tax roles. Marketing materials to
help sellers find buyers. Catalogs to help buyers find sellers.
Accounting software to optimize costs. Estimating software to
predict individual transactions, local markets and national trends.
Tools and training to automate business processes. Information about
the market and where the best deals where. Software to help local
governments predict revenue.
Modeling market data |
Finding out what peoples wants and
needs are is the hard part. What people say they need and what they
actually need often don't match up. Of course I would listen to what
people said and ask many questions. I also followed people, watching them. Observing their
behavior and taking notes often revealed unexpressed needs. Watching
closely provided deeper insight to the nature of their activity. I
studied their suppliers and customers. I followed the paths of their
resources from creation to destruction. I came to understand the structure and flows of each market I competed in.
Designing solutions is more my suit.
Doing studies and creating graphs. Designing structure and process . Long arguments in front of white boards building models of market behavior. Taking those models “out into the field” for testing
to see if they worked. Revising and editing the models until the
product or service became as profitable as they could be.
Controlling local supply of resources |
Building Monopolies
Designing a product is by definition an
anti-free-market activity. One must engage in thinking like a socialist dictator in order to control a market. Every day I tried to figure out how we
could monopolize markets. Corporations want high, steady income.
Getting a monopoly on a market is the best way to ensure that.
Finding a resource to control helped
build a monopoly. If you can control a fundamental resource in one
market, you can monopolize many markets. Being the entry point for
the supply of a resource is a common method. Data about the market is
one of the best resources to conquer.
Dreams of monopoly |
We spent a lot of effort making the
best data entry systems possible. The easier it was to put data in
our system, the more the market did it. The more data they gave us,
the greater the control we had in the market. At one point, well
over half of the U.S. property market came into systems we
controlled.
My labor was not in a free market. I
had signed away my right to compete with the owners. They wanted my
labor as a steady, high resource. The corporation had a monopoly on
my labor. Luckily the market for my labor was made free. I could
wait a year and the contractual provision would expire. Signing a
new contract with a competitor was a good move for my income. It
still cost me a year of my life to buy that market freedom.
Monopolies typically maximize their
profit. A corporation with a monopoly wants to produce fewer goods
and selling them at higher prices. Monopolies destroy free markets.
In a free labor market children are a resource |
The Real "Monopoly"
Real estate brokers have taken control
the market data since I left the industry. Real estate brokers are
“middle-men” standing between the buyer and the seller. They
have an effective monopoly on the information about the supply of
goods in that industry. Claiming they provide a better service, they
have built up barrier to entry requiring you to belong to their trust (monopoly). You must sign away your free market rights to be able to
participate in the property market.
It is possible to use For Sale By Owner
(FSBO) methods to sell or buy houses. This is a small niche of the
market however. Individual experience may vary, but it is generally
more difficult to sell your house. Real estate brokers will
typically not work with FSBO. Real estate brokers work hard at
keeping FSBO to a minimum through laws and the control of
information.
A home is the single largest purchase
most people make in their life times. Most middle class citizens buy
two or three homes in their lifetimes. Typically we buy a home when
our children are born or we retire. Most real estate market transactions go
through the broker's monopoly. One group or another has monopolized
the real estate data market for so long, we accept the monopoly as
normal and are unaware of how much it costs us.
Cheating unbalances markets |
Free Market Myth
The idea that we can just “free”
our markets and they will we will all prosper runs against my
experienced in business. Free markets are often more myth than
reality. Many of our markets are operated by or as monopolies.
Disruptive technologies like the
printing or the internet have broken information monopolies. A wise
owner looks for such technologies and tries to monopolize them before
they disrupt the market. With the financial power coming from the
monopoly, this happens frequently and the monopoly continues on.
Trade associations are often used for
groups of owners to control markets. The National Association of Realtors is a very powerful organization that does this for real
estate. They have been actively involved in keeping control of the
data about real estate for over a century now.
Government is One Answer
We can use our government to break up
monopolies. The power of government is used to force those who would
control a market to let go of it. Government is often the proper
tool to keep markets free from monopoly.
Teddy is still rock solid |
Teddy Roosevelt was a progressive Republican who had his face put on Mount Rushmore because he broke up
monopolies. Teddy was known as the “trust buster”. He offered a
“Square Deal” that regulated the business practices of monopolies
to guide markets toward more freedom. He facilitated negotiations between labor and owners to break up monopolies on labor.
There are those among us today who
think “markets should be free”. They operate under the idea that
perfect competition can exist. My experience of reality indicates
this is not so. The people who want this may well just be trying to
monopolize markets. I can not prove that all business people want to
have a monopoly. I have met enough of them to believe many do.
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