Capitalists who are afraid of competition

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Question to W.C. Fields during a poker game, “Is this a game of chance?” Response from Fields, “Not the way that I play it.”

Imagine for a moment how history would have been different if…

  • Horse and buggy companies had successfully lobbied against those noisy, polluting new automobiles
  • Movie companies had lobbied against television, and gotten laws enacted requiring that it only be shown in movie theaters
  • Railroads had stopped airlines from taking off because they might crash and could even fall onto buildings and the people below.

That’s not so different from what is going on today in many industries: capitalists who are afraid of competition.

  • They’re car dealers who don’t want Tesla to be able to sell cars directly to you, but rather want to require them to sell only through – wait for it – car dealerships.
  • They’re hotels that want laws or regulations making it difficult or impossible for Airbnb and similar companies to exist
  • They’re taxi cab companies that want regulations to stop Uber and its ilk from operating. (And don’t get me started on the whole thing about a limited number of taxi cab medallions…)
  • They’re liquor store owners and restaurant owners with liquor licenses who want to keep the number of licenses restricted so they have less competition and the licenses that they own are worth hundreds of thousands of dollars.
  • And, probably the grandest irony/hypocrisy of all, uber conservative Sheldon Adelson is against government doing anything… except protecting his huge casino empire by banning online gambling.

Just this week in Connecticut 15 taxi cab companies filed suit against Uber and Lyft, and in Boston taxi cab drivers drove their cabs around Uber headquarters for an hour while honking their horns.

Now I would love government to shut the door on my competition – once I’m inside the door, of course. But I actually don’t think it’s the role of government to protect legacy industries from disruptive technologies.

In all of these cases the legacy industry comes up with some excuse for why enacting these laws and regulations to restrict competition are needed, and they always couch it as being in the public’s interest. But of course these are just ways of protecting their businesses, and it’s the public that loses out with less choice, a lack of innovation and higher prices.

No doubt some of these new industries need some regulation. Airbnb and Uber could conceivably have people operating unsafely, although given the social reviews built into those systems it’s unlikely they would continue to operate for long. So a few regulations are fine. But not to the point where you’re using regulation to stop innovation and competition.

Call me old fashioned, but that’s what I thought capitalism was all about.

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