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EScroogeJr (< 20)

I love monopolistic profits and free markets

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May 09, 2008 – Comments (11)

Reading the blog posts, I noticed one interesting fact. Everybody here is presenting himself as a free-merketer. Whatever disagreements there may exist are really about the fine gradations of the free market orthodoxy. Everybody agrees that we need maximum economic freedom and minimum interference from the bureucrats.  But when it comes to picking stocks, the tone changes immediately. Nobody wants to have anything to do with companies that operate on that very same free market they praise so ardently (think GM, F, AMR, DAL, XMSR, SIRI). That's a bad business becuause there is too much competition. Everybody wants to own a company insulated from competition, ideally due to the courtesy of bureacrats whose regulations keep competitors away. Something like ISRG, PFE, MRK, OMAB, PAC, MWA, BBBB, MSFT. Maybe SIRI if regulators rid them of the competition. Maybe PHM is enough competing builders go belly up. HAL would be perfect if Cheney could stay in Washington, DC after November. As we know form Buffett, most shareholder profits are made off of companies that have some kind of "moat". Now, when it comes to legitimizing these profits, these same shareholders once again recall their mantra that this is a free country and that profits should not be regulated by the bureucracy. I'm wondering how many proponents of free markets would still be left in the blogosphere if only they realized that a free market means profit margins that hardly ever rise above 5% and that often go negative every other year.

11 Comments – Post Your Own

#1) On May 09, 2008 at 10:43 PM, joeykid13 wrote:

That is completely ridiculous.  In a free market economy...everyone gets a slice...and...to the VICTOR goes the spoils..most of the market.  The VICTOR was better than all of the competition and has reaped the rewards...and the American public has voted to make this so with their wallets.  BUT...beware VICTOR...if you forget who put you there...you will be DISPLACED right readily.  Ahhh...this is the divine inspired beauty of capitalism...I love it.  You must be great to reach the top...and EVEN BETTER...to stay there.  And, in the end...Uncle Ebenezer was as good as his word...and better...and was often seen with tiny Tim on his shoulder...

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#2) On May 09, 2008 at 11:22 PM, EScroogeJr (< 20) wrote:

kid,

your gas station is the perfect example of bona fide free-market capitalism. That's why I promised no to invest a penny into this idea (although as a driver I will greatly appreciate your enterpreunurial effort and the close-out sale that is sure to follow :).  

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#3) On May 10, 2008 at 12:27 AM, FleaBagger (28.76) wrote:

Scrooge -

Patents are not a violation of the principles of free market. Free market means property rights protected by government to the exclusion theft, including patent infringement. Hence moats in a free market. Now I suppose you could define free markets as lawlessness, but it is by no means inherent in the concept to say that if I have a gun and can take your car, that's a free market exchange. Likewise, if I can rip off your cancer treatment and make money selling a generic that benefitted from your millions of dollars of research, that is not necessarily a free market exchange. 

Also, if I pour a lot of money into an infrastructure to serve people's telecom needs, somebody else using that infrastructure without my permission is not an inherently free market ideal. And so forth with rails, payment processing, etc. Even Wal-Mart did not need government favoritism to come up with high profit margins, they just marked down goods and sold more in relation to fixed facility costs.

It is true that we have too much regulation inhibiting free market competition, and that it does inherently favor large, established companies, but there would still be waildly profitable companies even in a free market.

Besides, I thought you were a fan of government regulation and making things "fair" with laws designed to protect the weak. What happened? 

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#4) On May 10, 2008 at 12:38 AM, AnomaLee (28.73) wrote:

The list of companies given weren't very good examples of free-market capitalism or interference...

Regardless, of interference or not there are always good and bad things, ideas, places, people, etc. Being successful or good at what you do and creating a business moat does not prove outside interference. Most of the companies you named are just bad companies executing poorly in a bad environment...

I typically don't see screaming support for Fannie Mae or Freddie Mac...

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#5) On May 10, 2008 at 12:56 AM, dwot (46.92) wrote:

You come up with some interesting things scrooge...

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#6) On May 10, 2008 at 2:08 AM, EScroogeJr (< 20) wrote:

FleaBagger,

My views are not that difficult to understand. I want more regulation where it's needed and less regulation where it's harmful. That means no regulations on the production level (no bureacrat to tell you what you can and cannot build on your land, for instance), and no regulation on the personal level (like what you can and cannot do with your body,  what you should think of religion, etc.). That also means some regulation to protect you from the people who are too eager to use that freedom to regulate things their own way (companies who like to practice discrimination, producers who like to form cartels, neighbors who throw bottles at you for not mowing your lawn the way they want, or God-fearing Christians who want you to live according to the Bible). In a word, I want an unabridged, liberal, free-market capitalism that is 100% competetive on the production level, with the regulations designed to make sure that it stays that way, becuase it won't stay that way for long if left to itself. On the distribution level, I favor some moderate redistribution of income to a) provide a safety net and b) accomplish some tasks that free market is not very efficient at. On the practical level, I understand that my wishes will never be realized because we live in the kind of economy where more profit can be made by non-producing things than by removing barriers to production (for instance, a fully competetive market would ruin stock valuations at once).

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#7) On May 10, 2008 at 10:21 AM, joeykid13 wrote:

Ebby,

 1) I didn't ask you or anyone else to invest in CSG.  If I do it, it will be privately held and funded by me...alone...I have no time to deal with whiney investors, or whiney drivers for that matter.

2) redistribution of income?  you sound like a Nazionale Zocialiste...Heil mein fuhrer!

3) Christians don't fear God...they love God...and at least their God isn't telling them to land boeing 767's in the sky lobby of the world trade center.  If I was Ebenezer Scrooge...I probably would fear God.

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#8) On May 10, 2008 at 11:37 AM, EScroogeJr (< 20) wrote:

kid,

I don't fear God or any other mythical beasts, but when I see people who love God, it's enough to make my hair stand on end in horror :)

 

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#9) On May 10, 2008 at 12:14 PM, leohaas (32.36) wrote:

Scrooge, yet another of your blogs I fully agree with. Amazing.

Don't let you distract by the rants of the usual suspects. They are clueless, especially when they attempt to write in German. Keep on blogging.

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#10) On May 10, 2008 at 12:39 PM, joeykid13 wrote:

I wasn't trying to write in German Haas, I was trying phonetically to get my point across with a Colonel Klink accent.  Ich sprecht Deutsche ser gut und du bist eine grosse swein.  Just kidding...Haas, but really usual suspects rants...clueless...you are just plain mean, which means you are bitter.  Didn't your Mother hug you enough as a child?

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#11) On May 10, 2008 at 12:48 PM, MakeItSeven (31.79) wrote:

Good blog, Scrooge.

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