Competition is for losers

In Thiel's article, he articulates that a good company has to find ways of capturing its value because creating value isn't just enough for sustainability in the environment of competition and openness in innovation. It is therefore relevant to analyze the different types of markets with their characteristics. Thiel indicates that monopolies are good for society. In a situation where there is a pure monopoly, the firm is the sole producer of that particular commodity, and there is no close substitute. The monopoly can charge any price that is suitable to maximize its profits. It is logical to argue that as long as monopolies consider the financial interests of the consumers, monopolies can be good for the economy. In the US it was found out that corporations with monopoly power create standardization in the market place which immensely contributes to technological efficiency as well as creating a smoother consumer experience.

A monopoly would not operate on the inelastic portion of its demand curve because increasing the price beyond a certain point will cause the quantity to be consumed to be lower thus reduces its efficiency in the market. The opposite of a monopoly is a firm that operates in perfect competition. The characteristics are directly opposite to that of a monopoly. Thiel in his article poses the question, how much of the world is monopolistic? He says that for any observer, one would perceive many businesses as the same as it is easy to perceive only small differences. The reality is that there is a very big difference between them. Thiel states that both monopolies and competitive markets are incentivized to bend the truth.

Monopolies try to hide the truth by trying to reveal some competition that they claim to be facing. On the other hand, now, monopolistic firms tend to understate the level of competition to dominate the market by definition. In so doing, a monopoly will employ few workers thus fewer factors of production. Monopoly in the labor market arises when workers can collectively act as a bargaining unit (Wiley 8). The most common way is through labor unions. Using this monopoly power, firms may be compelled to pay wages, benefits and create conditions that are higher in standard compared to that of a competitive outcome. Under a collective bargaining agreement, firms may agree not to hire non-union workers hence workers are likely to get more wages.