Competition Is Actually Good

This article is an answer to “Competition Is Not Good” by Kroc and reading it wouldn’t be comfortable without switching to and from the original article. I wrote it just because I do strongly disagree with Kroc and I believe I can prove that he is not as close to truth as it may seem from the first glance.

With the goal being established this way I chose to keep his sections’ names to avoid citing him and therefor duplicating Your mnemonic load.

‘It drives down prices’

As a matter of fact, the low quality and the lack of interoperability are not directly the costs of competition. Both factors are just the offsprings of commercial nature of vendors: as vendor has to sell his devices to keep himself living, he has to artificially lower their product’s quality just to keep selling them.

Obviously the only reason of existence of each and every vendor is to get revenue, so the income dictates all the rest. Again obvious is the fact, that the income could be calculated as “(price – costs) * customer base / period of use”: if period of use is bigger, the price has to be driven up to keep the income. At the same time, the decision to buy a computer is dictated by financial reasons: $500 PC will be a lot more popular then much better $1000 PC (as evidently follows from computer history, by the way). Therefor any vendor is interested in selling his product as cheap as possible to have more customers, and therefore he has to lower the term of use, that is done the two ways: drawing as much updates as possible (indirectly lowering the quality due to smaller period of testing and development) and directly lowering the quality of product to make the consumer buy his new product several years/months/days earlier.

The role of competition here is to restrain this factor: noticing competitor out there the vendor is forced to keep his products’ quality as close to competitors’ as possible to avoid bad publicity and subsequent reducement of customers base.

‘It gives consumers more choice’

Effectively the choice has the value of its own. As a resident of ex-USSR I know what is the customer appliances with no choice: most customer appliances of the USSR were so bad that getting even the cheapest ‘import’ appliances was an unbelievable luck. The position ‘choice is evil’ is based on false assumption that customers’ demand forms the market in detail. In reality the market works the opposite way: the vendors emerge where the demand exists, but they draw their product lines the way they need, not the customers. Just think for a minute: does the Volvo XC90 V8 EXE cost four times more in assembly then Volvo C30 1.6, or may be the price tag is shaped by some vendor’s own reasons?

Another part of the choice’s value is the design quality. The once-established standart may be so bad that any vendor would have much less revenue pushing forward the solution to the concurrent problem than just leaving out the demand.

The role of competition in this case is again the accelerator: the vendor is interested in pushing forward some new solution because in case of success he’ll gain not only the market share enlargement (and therefore more income), but the patent fees from the competitors who failed to drive their solutions before his solution became the standart. As You might know, such an innovation is the most popular source of technology start-ups.

The price of this acceleration is the period of time when some technologies coexist. But as the history shows us, most problems of a kind are solved in a reasonable period of time (remember the war between DVD-RAM, DVD-R(W) and DVD+R(W)?). This period might be enlarged artificially by the vendors in order to get their revenue, but this problem is driven by the commercial nature of vendors (see the previous section).

‘It pushes technology forward, quicker’

The amount of false innovation is huge and (once again) is mostly driven by the income orientation of the vendors. The vendor is not anyhow interested in fulfilling the needs of hos customers. Actually his best interest is to sell the customer something that would be bought and used as advertised but still would keep the needs. Once I’ve heard from Novell’s representative that they switched to Linux just because their customers didn’t need to upgrade the Netware hosts. Selling the solutions the vendor would prefer to have familiar cases for his solutions.

The role of competition here is once again positive: those, who fulfill the needs of clients more attract more clients.

The very problem of insane technology speed-ups is not the competition, but the lack of expertise on the customers’ side. If You fill comfortable with Amiga and You are not an idiot, there are only two possible reasons for You to waste Your money on upgrading hardware: either Your Amiga box is broken and You have to buy another computer anyway, or most of the people You have to deal with are THAT uncomfortable with Amiga that they had to avoid using it even facing the fact that You’ll feel less comfortable with them due to this decision.

‘Competition sets up non-competition’

The competition definitely doesn’t end when everyone else is beaten: the vendor who doesn’t compete is facing exactly that kind of situation Kroc wants to face – no need to move on, because no reason to waste resources while keeping the revenue 100% of possible.

But in the situation when the competition is legal it will overlive any vendor just because the big stable company would allways fail to follow each and every demand of the market, and even the least effective start-up will gain share enlargement on having introduced the product needed by market but lacking by the winner of the competition. And the patent fees will follow.

‘Competition also sets up anti-competition’

As a matter of fact the anti-competition is the product of the lack of due competition. When there are only three vendors, two of them will easily beat the third one when cheating, but when there are dozens of competitors, they would either fail to deal on cheating rules or get uncovered and killed by the authorities, other vendors, members of the distributions chain or market as whole. There could be no competition on the multi-player market, such as tea market or meat market or screws market.


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