October 25; Is Competition The Surest Path To Enlightened Profitability? What Is The Rate of Return? MANAGEMENT BY THE BOOK: 365 Daily Bible Verse & One-Minute Management Lessons For The Busy Faithful
Chapter Ten: Deciding 25 October
“I am the way and the truth and the life.
No one comes to the Father
except through me.
|Is Competition The Surest Path To Enlightened Profitability?|
Your Business Professor was searching to work with another start-up. I was looking in the healthcare industry for a private company with a product protected by outrageously broad patents or proprietary technology.
In a word, I decided to look for a monopoly. There is really only one path to enlightened earthly riches and value creation.
Peter Thiel, founder of PayPal, explains this business model in his must read book Zero to One: Notes on Startups, or How to Build the Future,
…we’re not interested in illegal bullies or government favorites: by “monopoly,” we mean the kind of company that’s so good at what it does that no other firm can offer a close substitute.
Google is a good example of a company that went from 0 to 1: it hasn’t competed in the search since the early 2000s, when it definitively distanced itself from Microsoft and Yahoo!
Americans mythologize competition and credit it with saving us from socialist bread lines. Actually, capitalism and competition are opposites. Capitalism is premised on the accumulation of capital, but under perfect competition all profits get competed away.
The lesson for entrepreneurs is clear: if you want to create and capture lasting value, don’t build an undifferentiated commodity business. Thiel, Peter; Masters, Blake (2014-09-16). Zero to One: Notes on Startups, or How to Build the Future (Kindle Locations 284-290). Crown Publishing Group. Kindle Edition.
Competition American way is strive to build a better mouse trap and the world will beat a path to you door.
This is, of course, a lie. As Peter Thiel says, businesses create customers and find monopolies. This is source of real wealth and value. Not necessarily competition.
Thiel’s advice is timeless and existed at the beginnings of the Republic.
Every young man should emulate one of the USA’s Founding Fathers, Doctor Benjamin Franklin.
Except for maybe that “whoring across Europe” part…
Philadelphia is Ben Franklin’s hometown and is proud of his many achievements. So I packed up wife and Penta Posse and headed to The City of Brotherly Love to check out the B F deal with a site visit. And learn a lesson for business.
It happens that Franklin and Your Business Professor have a couple of things in common: we both worked start-up businesses; we both served in government.
But Franklin was able to cash in, well beyond today’s politico-turn-lobbyist-turned-consultant-professor.
Two dates on Ben’s lengthy resume stand out. 1729 — buys the Pennsylvania Gazette. 1737 — Appointed Postmaster of Philadelphia.
Then retires. Rich.
It appears that these two positions are connected with Franklin’s personal wealth generation. And the country profited as well. Franklin’s printing press was dependent upon selling newspapers, which depended upon news from the distant colonies.
Richard Koch wrote The 80/20 Principle and quotes Peter Drucker,
A database, no matter how copious, is not information. It is information’s ore…The information a business most depends on is available, if at all, only in a primitive and disorganized form. For what a business needs the most for its decisions—especially its strategic ones—are data about what goes on outside of it. It’s only outside the business where there are results, opportunities, and threats. (Drucker 1995)
So Franklin set up a Postal Service to move mail. As the post workers traveled far and wide, they transmitted much more than letters. As was common in the day, travelers would gather and recount news as they moved about. The postal workers were travelers but with a new mission. They would be reporters for Ben Franklin’s newspapers. A new way of doing business that produced monopoly profits.
News was not passed along by word of mouth. Franklin organized data into useful information in a more efficient, frictionless format: a newspaper.
The Gazette got news. The colonies got mail. Franklin got Benjamin’s.
Those profits funded Ben’s other interest in kites and keys. Both Thiel and Franklin found and founded businesses that were near monopolies.
And the country was made a better place, with only a single path; one outlet providing the goods.
Now that’s a business model.
Jesus answered, “I am the way and the truth and the life. No one comes to the Father except through me. John 14:6