Model, Market, and Monopoly

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 occur whenever we sell a product or a service. 

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.

Myth of the Makers (Part 3)

In this series we are examining the libertarian economic myth that a small number of people are makers and that the rest of the society are takers. It attempts to show that this world view is false and works against society, not for it.

In Part 3 we continue examining the list of assumptions about the superiority of the Makers showing in counter arguments how theses assumptions lead us to false ideas about how society works.

Without Makers Society Collapses

Backyard inventor.

It is true that not everyone can invent the next great thing. Not everyone is able to write new music. Most people are unable to design their own cars. But to suggest that only a select few can do these things is easily disprovable. We have an over abundance of makers.

There are many people who can and do invent. Most inventions are never monetized, made in a factory and reproduced for all. Inventions that never leave the garage, the kitchen table, the hobby room are purely for the local benefit of those who invent and there close associates. Human beings are in fact very creative in finding new ways to solve old problems. Steven Wozniak was not the only computer hobbyist who invented a personal computer.

Land of tinkering.

The number of talented garage and bar bands in my country alone is astounding. Every neighborhood has an aspiring string quartet, guitar hero, or closet rapper. So many more songs are written and performed than go public as to make us literally awash in musical talent. Madonna is not the only creative musical artist to write a catchy tune.

In garages and small commercial buildings all around the land are individuals and small groups who design their own vehicles. From three wheeled custom motorcycles to flying cars, our nations ability to develop new means of moving ourselves around boggles the imagination. To suggest that only Mr Ford, Mr. Oldsmobile, and Mr. Harley are capable of designing vehicles is obviously not so.

Robber barons showing self interest.

It is the access to resources that divides Steve Wozniak, Madonna, and Mr. Ford from the general masses. Many have tried and failed at achieving the level of success enjoyed by people like these. Some fail because of personal inabilities. Most fail for lack of access to resources.

As the Small Business Administration has documented, most business fail because of lack of experience, insufficient money, and poor location. They do not fail because of the people are incapable. Rather, they fail because they have not been given the room to gain experience, have access to resources, and being given access to the right location. Those who control the resources shut out those who do not, unfairly limiting their own competition.

Labor farmed by greed.

Makers know best how to use resources.

Makers make decisions about how to use resources for their own personal interest. Few makers choose to allocate their resources for the greater good. This self interest often leads to a depletion of a shared resources by individuals, acting independently and rationally according to each one's self-interest, despite their understanding that depleting the common resource is contrary to the group's long-term best interests. Makers must be monitored and restrained by society in order to ensure that the Makers self interest does not damage the whole of society. Selfish makers can hurt us all.

The idea that selfishness and greed are a societal good is clearly false.  It is an argument that tries to justify immorality as a virtue.

Those who would tell us that they should get all the results of 'their labors' are actually trying to confuse us.  Ayn Rand's philosophical views has been perverted by a new generation of robber barons.

The division of society in to Makers and Takers is mythic attempt by a few to take even more from the labor of us all.

First - Part 1 – Part 2 – Part 3

Myth of the Makers (Part 2)

In this series we are examining the libertarian economic myth that a small number of people are makers and that the rest of the society are takers. It attempts to show that this world view is false and works against society, not for it.

In Part 2 we examine the first few assumptions and counter arguments in more detail.

U.S. Wealth distribution.

Makers Create Wealth

There are three definitions of wealth: Things that make people better off, the value of things, and the total assets of individuals.

Not all wealth is about money. Wealth is also about life, liberty and happiness. Those who focus only on money as a definition of wealth are limiting the value that human beings have to an arbitrary counting system for their own benefit.

Billion dollar mansion
under construction.

The land a farmer hands on to his children is his wealth, not just the crops he takes from the land. The care a mother gives her children is her wealth, not just the money she spends on them. The labor we give to those challenged by natural disaster is often more about just showing up and lending a hand. Wealth is more than money.

The majority of the wealth in a society is not created by the individuals who control it.  Rather it is inherited.  Huge fortunes made in one generation are handed down from father to son creating an oligarchy of power.  The descendants of wealth benefit from the labor of others without providing in return.  Wealth is concentrated by family more than effort.

Obligation to give back.

Makers Act Alone

No maker became a maker without society. Without their parents Makers would not have been given the basic food, shelter, and clothing necessary to grow up. Without schools provided by the local society they would not have had the chance to be educated enough to become Makers. Without national society Makers would not be safe from enemies. Makers could not exist without the society they come from. Makers have an obligation to that society to return what has been given them.

Making is a team effort.

Most things that are made require many hands of effort in order for the thing to be made. No one Maker designs and builds the radio in your car. No one Maker plants, grows, transports, and sells his food unless they are in a small limited, local market. No one Maker builds their own factory by hand and runs it by themselves. Makers live in an interconnected society. To separate themselves from the society is to act against the society which created them.

Garage inventions

Few People Are Makers

Actually most people are makers to one degree or another. My mom was a maker of meals and households. My Dad made torpedo targets. My wife makes documents so people can learn to use tools made by others. My friend makes clean bathrooms and floors so we remain healthy and feel good about our environment. Each of these people make more than these things. All responsible people make things through effort of labor. Sometimes they are rewarded by money. Sometimes they are rewarded by love, or happiness, or life, or liberty. Almost everyone is a maker of some kind.

Makers Always Benefit Society.

Destruction of the commons.

Many people make things for bad ends, even on purpose. The strip club owner employees girls who may not make money otherwise, but drags down the potential of all the other daughters. The Heroin dealer makes money distributing a product that does evil. Cigarette makers do far more damage than good for society. It is difficult to find an argument why Swastika makers help people. Some makers can hinder society.

Lungs after cigarettes.

Most makers do have a positive good result in what they make. The products and services of many makers have negative side effects that can sometimes over weigh the good that they do. Even those without bad intent can do damage though. When the focus of the maker is on making money and not making good, makers can do great evil.

Next - Part 1 – Part 2 – Part 3

Myth of the Makers (Part 1)

At the heart of the conservative economic argument is the idea that a small number of people make things, while everyone else lives off their ability. These special few who are the designers, inventors and creators that provide the masses with goods and services. The libertarian view expounds that the general public should cater to the needs of these special few so that everyone else can benefit from the their genius.

The selfish man carries the
world on his shoulders?

The basic philosophy of the conservatives is based on the idea of the 'Virtue of Selfishness'.  It argues that  businessmen, innovators and builders are 'Makers'. 

Makers provide things everyone needs. Makers are superior humans due to their skill, talent, and force of will. Makers act in their own self interest using their genius,talent, and creativity to provide things for many other people. Makers add value to their community and are rewarded in return by money and power. When the society diverts resources from the makers, it is essentially an evil that will ruin all.

This view of selfishness as a 'moral good' has as one of its basic ideas that most people are not Makers, rather, most people are 'Takers'. Takers use the things and services given them by the Makers. Takers are inferior humans because they lack skill, talent and/or will. Takers act in their own self interest taking away from the makers, giving nothing in return; essentially stealing from the Makers. Takers drag down society and will ruin it all because they divert the resources of the Makers.

What selfishness means.

There are several assumptions to the Makers argument. They are:

1. Makers create wealth.
2. Makers act alone.
3. Few people are Makers.
4. Makers always benefit society.
5. Without Makers society collapses.
6. Makers know best how to use resources.

Every one of the assumptions about Makers can be challenged using reason. The concept of Makers and Takers can be dis-proven as rationalized myth. These stories about Makers serve only the purpose of allowing a few people with power to maintain that power. The myth of the maker is therefore propaganda.

Unselfish acts of labor.

Here is a brief list of the reasons the assumptions of the makers are false:

1. Wealth is more than money.
2. Makers have an obligation to society
3. Makers are in an interconnected society
4. Everyone is a maker.
5. Makers can hinder society.
6. Makers can do great evil.
7. We have an over abundance of makers.
8. Those who control the resources shut out those who do not.
9. Selfish makers can hurt us all.

Over the next two posts, I'll be examining each one of the assumptions about Makers demonstrating how the logic used in these arguments does not hold up to the facts of the reality we live in.

Next - Part 1 – Part 2 – Part 3

Superhero and Structure

Ronald Reagan as Superman

Much discussion has been had in politics lately about anarchy versus order, individuals versus the collective. Words like 'liberal' and 'conservative', 'socialism' and 'capitalism' are bandied about like so many clouds on a stormy day. Our political discourse seems divided into camps of one form or another, each convinced they have the right answers because of their own personal theories of government, politics, and social organization.

Discussions like this remind me vaguely of arguments about comic book heroes. Both require analysis of myths about where powers come from and how they are used. Neither is grounded in the reality we live. Comic book superheros and political theorists provide us with myths to help us imagine what could be, but should never be confused with what is.

Obama is the Anti-Christ

Imagine two young men in a comic book store arguing things like “Ayn Rand trumps Karl Marx, dude, she has creative people powers!” Or two grumpy old men in a diner debating if Superman could beat Batman in a tug of war. Those may be educational and entertaining, but they are no way to run a society.

These discussions may tell us more about ourselves than about how to make a more perfect union or cool super hero. Plato, the first great political philosopher,viewed society as a reflection of the man. That each man should strive to be good, just as each society should. Men learn and change, so should societies.

Sarah Palin as Wonder Woman

Governmental systems, political organization theory said a different way, are the means by which we design the process and procedures of a society. These structures are the rules and habits the people rely on to get along and get what they want. The needs, wants, resources, and tools available are different in each moment.

Each local society in each time has different requirements. A desert society with great scarcity of resources will most probably need a different form of organization than a river plain society with abundant resources. A society at peace and a society at war will have unique needs.

Ayn Rand has the Right Stuff

The lines of 'anarchy' to 'order' and 'demos' to 'aristo' are not only effected by sustainability issues, but also by the dreams and ambitions of the cultures involved.

I see no historical evidence that any system of political organization that was stable over time. Even the most long lived (Rome or Chinese) societies undergo some pretty radical organizational changes in time.

Perhaps the best organization is that which is adaptable to its environment as a life form.

Even in my father's life time, my own country has morphed from a capitalism (pre-great depression) to a planned economy (world war 2) to various forms social distribution and capitalism (post world war 2). In addition the power structures have shifted from distributed to centralized and back several times. All this is done in a framework that allows power to move from one branch of government (judicial, executive, legislative) to another depending upon the needs of the moment.

I maintain it is not the specific form of government, rather its ability to to adapt that is the key to political success. This adaptability comes from the mechanical structure of its rules rather than its idealized form (anarchy, liberalism, democracy, etc.).

So Batman is not always going to beat Superman, Ayn Rand did not come up with the perfect economic system, Spiderman is not always nice, socialism is not always evil, the Hulk can be a jerk sometimes and free markets can wreck havoc if left unchecked.

Let's ask ourselves the mature question; “What is needed next for this situation at this time?”