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March 31, 2006 - Freedomain Radio - Stefan Molyneux
57:59
168 The State and Monopolies
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Good afternoon, everybody.
I hope you're doing well.
It is quarter past five.
Oh my god, I'm here past five o'clock!
You'd think I'd work in the software industry or something.
And I'm just heading home through a nice driving bit of rain that is going on up here in Canada, which means that you better strap yourselves in, brothers and sisters, because this might be quite a long podcast.
It seems that pretty much
whenever rain occurs in Canada or any sort of conditions other than pure sunshine that people they sort of forget how to drive I mean people have a tough time remembering how to drive to begin with and I'm still working on a finding a way to pin that on public roads I'm working on it there is actually I think it's in Denmark there's a set of roads oh look look at that I have a tangents on it but not even a minute into my podcast I already have a tangent
Yes, indeed, it's going to be a bumpy ride.
But there's a road in Denmark where there were way too many accidents occurring.
So, of course, one of these mad libertarian kind of guys came along and said, you know what we need to do?
Is we need to get rid of all of the lane markers.
We need to get rid of all of the stop signs.
We need to get rid of all of the speeding signs.
And, basically, they got rid of everything.
No traffic lights, no nothing.
And, of course, as you can well imagine, now that you're becoming somewhat acquainted, if you weren't already well acquainted with the theory, that the number of traffic accidents has gone down precipitously, right?
And in Canada, here, we had a very bad blackout a couple of years ago, where all of the traffic lights across the entire city, Southern Ontario, it all went down.
And what happened was, of course, that everybody ended up without traffic lights, just sort of navigating the roads themselves.
Without street lights, without traffic lights, or anything like that.
And, of course, it was a pure riot of peaceful intentions.
And, therefore, this is sort of the spontaneous order that comes about.
People don't just become sort of deranged and insane because, oh my god, there's no traffic lights!
I don't know what to do!
I'm just going to close my eyes and drive!
People don't do that, right?
They try and come up with a better way of doing things, so I think that's sort of interesting.
All right, that killed two minutes, and I'm sure it's only going to be an hour drive, so what else can I think of?
Let me tell you about my day.
What I'd like to talk about today is the problem of monopolies.
And monopolies, as you know, is the plural of the board game that we all enjoyed as children.
And we want to make sure that monopolies in a free market have negative incentives for being created, right?
And people have this fear of monopolies, which is kind of funny, you know, obviously.
I mean, it's kind of funny for me, because the government is the biggest and most coercive monopoly, but that is the agency that we turn to to protect ourselves from monopolies.
I just think that's very, very funny.
You really can't invent this stuff.
Like, if you were a comedian with a sixth sense of humor, you just could not invent what people pass off as philosophy and political theory these days.
I just think that's just hilarious.
I mean, we have, I think it's at Harvard, we have this thing called the Kennedy School of Government.
The Kennedy School of Government.
Now, of course, the Vietnam War that Kennedy, an Eastern liberal, that Kennedy started resulted in the deaths of millions of people.
And it's going to be as funny and as sad in future generations for them to look back upon us and see this Kennedy School of Government as it would be for us to look back and see, you know, the Pol Pot Institute for Human Rights or, you know, the Stalin Institute of a well-fed population.
Or the Hitler studies for world peace.
I mean, it is just going to be very funny.
Now, before you get all crazy and say to me, are you comparing Kennedy to Hitler?
And the answer is, yes, I absolutely am comparing Kennedy to Hitler.
And I'm sorry if you don't like it, but you sort of have to tell me then exactly how I'm supposed to differentiate the different gangs of thugs that are around.
And if one thug, one mafia head, is somewhat more constrained in his ability to brutalize his domestic population because of a historic and largely spread out set of gun ownerships, then I'm not sure that I'm going to ascribe any specific virtue to that mafia head.
I'm just going to say, well, he's not as bad as the other one because his own population hasn't been legally disarmed.
You know, just in case you were wondering where I was going with that, to call a Kennedy... A Kennedy only doesn't look like a genocidal murderer if you don't happen to live in Vietnam or, I guess, certain parts of Cambodia.
Then, you know, he looks like a chiseled-jawed, thatch-headed fellow with a pretty wife who sadly died in mysterious circumstances.
But if you're one of our poor brothers and sisters out there over in Cambodia, or over in Vietnam, or, of course, if you're one of the soldiers who was dragged over there by force to kill or die, then he probably has a slightly different aspect to you, right?
It's this... Can you hear the rain?
Man, oh man!
This is quite something!
I love this rain in Canada that comes along in spring.
It's really fairly close to driving through a car wash, so...
I'm sorry if you can hear this in the background, but I'm sure it makes a nice change from the sound that suddenly has been coming up recently, and I'm not sure why.
It sounds sort of like a castanet-bearing rat gnawing at the wires, and I'm not sure exactly why it's occurring.
It's something to do with the wires rubbing against the headset, but you know.
I'm sure that my little technical difficulties are the main reasons that you tuned in to these podcasts, just so you can hear me ramble on about, oh, I did this during the day, and now I'm having a problem with my sound.
So let me return to something slightly more interesting, which is back to monopolies.
Can you feel the padding in this podcast?
Can you feel it?
This is going to end up looking like the Michelin Man, right?
My podcast, normally lean like a gymnast, but this one's going to be overfed to bursting.
So, monopolies in the free market, everybody's worried about them and of course that's one of the reasons that we turned to government to save us from the problems of monopolies.
But I sort of want to go through the economic stuff of this because, you know, I've had some requests for some more economics articles like Somehow, me pitting you against your family doesn't seem to be quite as exciting to people as me talking about abstract economics, which I can completely and totally understand and sympathize with.
It's nice to take a break from family stuff and from personal stuff and to look into abstracts.
So let's do that today, and I promise not to bring up your family.
Okay, well, maybe yours, but not yours for sure.
But looking at monopolies in the free market, let's look at some of the trends.
Now, some of the famous quotes that you probably know of, and I can't repeat them verbatim because I don't speak Enlightenment, but Adam Smith said something like, there is no gathering of manufactural concerns which is not put together for the express purpose of cheating the public, right?
This is sort of one of these quotes that people put.
Okay, last segue.
Okay, for the moment.
It's just so funny to me and sad that people Quote Adam Smith like they're proving something.
Or quote Murray Rothbard like they're proving... Well, Murray Rothbard said, or Steffs said, you know, to put a pygmy next to a giant, right?
Or Steffs said this, or Von Mises said that, or, you know, the Marxists say... Well, in Marx you read and the Christians do this all the time.
And I was just listening to a Christian podcast by a Christian anarcho-capitalist I'm not torturing both Christianity and anarcho-capitalism to make the two fit together for some rather interesting psychological reasons that I hope someday to ask him about directly, because I do find that quite a fascinating juxtaposition.
I'm a pilot and I also fly a magic carpet.
So you'd think the one would sort of preclude the knowledge of the other, but you know, I could be wrong.
Certainly always, always, always happy to be corrected.
So let's have a look at the free market, its tendencies in regards to monopoly.
Let's say that you, I, and five other guys have carpets.
All we do is manufacture carpets.
We're big in the carpet industry.
And we get together, and we're the only people in the carpet industry, let's say.
We'll make this as simple as possible.
We're the only people in the carpet industry.
And lo and behold, we get together in some shady nook, and we say, OK, we're going to double the prices of carpets.
And this is the predation that we anticipate bringing to bear on the public interest.
We are just going to hose everybody for everything that we can get a hold of from their pockets, because we're going to double the price of carpets.
Now, some of this stuff is pretty obvious.
Some of it, at least for me, wasn't.
So I'll spend a brief bit of time on the obvious stuff, and then we'll go into the not-so-obvious stuff.
Well, the first and most obvious thing here is that somebody's going to import carpets.
So if the price of carpets doubles, like Monday morning, $20 carpets are now $40 carpets.
Why?
Because we're in 1942.
I don't know where to get these prices from.
The last carpet I bought from Christina's office was $500.
was $500.
But, okay, so it's gone from $20 to $40.
So the first thing that the people who buy carpets, The people who make carpets and the people who... the middlemen and then the people who buy the carpets because you don't buy a lot of carpets from eBay.
So...
The first thing that the middlemen are going to do is they're going to phone these guys up and say, well, what the hell are you doing?
And they're going, well, sucks to be you.
We're, like, assuming there's no sort of antitrust laws, no Sherman antitrust laws or whatever.
They're going to say, sucks to be you.
Ha ha.
They're going to rub their evil little capitalist mustaches and say, like, Mr. Burns, excellent.
Excellent.
We're doubling the price of carpets.
Excellent.
Actually, that just sounds like a vaguely fruity Bond villain, doesn't it?
Got to work on my Mr. Burns!
You can't talk about capitalism unless you can imitate Mr. Burns, because sadly, that's where the majority of people get their ideas about capitalists from.
Then the middlemen are going to say, well, we don't like that.
And you say, well, sucks to be you.
We're the manufacturers.
We have everything.
So we're going to double your prices.
Well, of course, the first thing that any competent middleman is going to do is going to appeal to friendship.
He's going to whatever, right?
But let's say that all five of us stand firm and we're going to shaft the public with carpet prices.
And then they're going to make a phone call overseas.
So they're going to call up to Canada.
And they're going to talk to some guy.
And he's going to say, Yeah, my carpets are $20.
I guess with shipping it might be like $25.
I mean, let's just say it's very expensive shipping.
Maybe the government is still running the shipping.
We don't know.
So then they're going to say, okay, well you guys are $40 and you guys are $25.
So we're going to pull all of our orders from you guys charging $40 and then we are going to go to the Canadian guy who with shipping and all that is going to charge $25.
Now, there is going to be a short-term shortage as this sort of realigns itself, because the Canadian guy is going to have a heck of a lot more orders than he can stand, right?
So he's going to have to ship stuff in from overseas.
He's going to have to hire, I guess, additional capitalist street urchins with blistered fingers to work all night under oil lamps to produce more carpets.
Because, you know, that's really what's going to happen.
And then he's going to ship these carpets down to the States or wherever for $25.
So there's a price increase.
There's a shortage of carpets, $25, so, so, so.
Now, of course, anybody who is going to be selling the raw materials to these carpets, the wool or, I don't know what the heck, carpets or the alpaca, alpaca, I don't know what carpets are made of, really.
But whoever is selling the raw materials to us, the U.S.
carpet manufacturers, is going to be fairly nonplussed, because our sales are going to plummet.
So the guy who sells us the raw carpet bits, to use a technical phrase, is going to be kind of numb.
He's going to say, like, cut your prices.
I'm not happy.
You're not moving any product.
And so I'm not selling to you.
Our employees are going to get unhappy because we're not able to sell product and so on.
And of course, everybody who supplies the carpet bits to us, powdered carpet, I think that, yeah, that's right, powdered carpet, who sells that to us is immediately going to start shipping it to the guy in Canada because he's going to have a huge demand for powdered carpets so that he can make them.
And, you know, actually, come to think of it, he's probably going to ship the powdered carpets while I run water down here.
Oh, economics is so complicated, isn't it?
So, basically, our whole chain here is going to be messed up, right?
So the guys who supply us the raw materials for the carpets are going to be shipping them to Canada.
The people who take our trucks of carpeting to sell them in the stores or wherever are now going to be taking shipments from Canada.
And, of course, the Canadian guy is going to be hiring like crazy.
And the first thing he's going to do, of course, now he recognizes that there's this enormous opportunity in the States because people are still grumbling that they have to pay $25 rather than $20 for a carpet.
So the first thing he's going to do is open up a store in the United States.
And so the price is going to go right back to $20.
We're going to be out of business and this guy's going to pick up pre-trained employees, which we had to pay to train, right?
We hired these people off the streets.
We trained them how to make carpets.
Now this new competitor is going to come in with all of our pre-trained employees and all of our pre-setup value-added resellers and shipment lines and all that.
And relationships with stores who are all, you know, everything that we built up slowly and painfully.
And I know this.
I've done this a couple of times in software.
It is a long and painful process to get people, to get the right channels opened up to get your stuff out to market.
So we're going to give all of that stuff up.
this other guy is going to come down from Canada.
Just blow us away.
Now, of course, we could say to this guy in Canada, hey, you know what?
You join with us and you charge $40 and we're all going to make a killing.
And the guy from Canada is going to say, I don't really think so because in three weeks you guys are out of business and I'm going to inherit all of your pre-built relationships and customer bases and supply chains and manufacturing bases and so on.
In fact, I can even buy your factories pretty cheap because it's not like Somebody who's going to want to convert them to some other use is going to be able to pay more because they're going to have to pay for the cost of converting it.
So it's that much less valuable.
And so there's tons and tons and tons of reasons as to why this stuff is just not going to hold.
It's just not going to hold.
That is, of course, In a free market.
In the state-run society.
Oh, my friends, there are so many dark tales that can be told about the problems of monopoly and how they get solved by a state-run system.
Oh, it is a tale full of woe and blistered consumer wallets.
And so let's start talking about, and we'll get to the sort of internal problems, even if you can get rid of external competition in a sec, but if you have a state society, right, then the first thing that you're going to want to do is you're going to want to restrict people from entering into your marketplace, right?
So you're going to start to put on these things, like when the guy from Canada starts to Undercut you, as you've doubled your price from $20 to $40.
The guy from Canada starts to undercut you, and suddenly you're going to be all going off to Washington and saying, oh, these American jobs, these fine American citizens, they're going to lose their jobs.
And, you know, these Canuck bastards up there with their igloos and their elk and their beer that doesn't taste like water, and they're going to be taking away American jobs.
And then you sort of fly the flag, and you buy American, proud Americans, and all this kind of stuff.
And of course, all you're trying to do is shaft the American consumer, right?
I mean, these economic patriots are always, you know, they use the flag to cover up a rather unpleasant maneuver with the consumer underneath the flag, right?
Ooh, that flag is rippling very rhythmically.
It's like, yes, that's because the consumer is getting done in.
And so they go running off to Washington.
They want to keep the exports out.
They want to do this.
They want to do that, and so on.
So let's say that they can do that.
They can ban all the exports, or they can put some prohibitive tax, right?
So we double our prices, but we get a 200% tax put on carpet imports to save American jobs.
And lo and behold, no imports come in, and so now it's just we five who have a monopoly on the carpet prices.
Now, of course, there's absolutely no reason why this stuff should come from outside.
Because, you see, the guys who make the base, whatever it is, to make carpets, the thread, the orphans, I can't remember, but the people who make the carpet bits are going to need some place.
And, of course, now that carpet prices have gone double, the demand for carpets has gone down considerably.
Because people are like, oh, well, let's just, you know, wait it out.
Especially in goods, which is an optional purchase, right?
I mean, gasoline, you've got a car, you've got to get to work, you've got to drive your kids from here to eternity, it seems.
And so you can't really do much to avoid buying gas, right?
You can do a little bit.
But something like a carpet, well, you know, you can make the existing one do for a while.
I guess if you're buying a new house, you kind of have to have something.
It's going to be a lot of optional purchases.
I guess we can live with slippers and socked feet for a while.
We don't need a carpet.
I can live with that stain.
We can rearrange the furniture.
So when the price of carpets goes up by double, people are just going to buy fewer, right?
So, of course, the people who are selling you the manufacturing bits for carpets are going to want someone to buy more because their demand for their stuff has gone down.
So then Joe American is going to stand up there somewhere in Utah and say, hey, I'm going to now make carpets and I'm going to charge $20.
And he might be able to charge even less, right?
Because the people who are supplying all of the supply chains are all pretty desperate at this point, right?
The salesmen, and the carpet cleaners, and the carpet installers, and those who make the manufacturing bits for carpets, and the supply chain, and the truck drivers who drive carpets around, they're all going to be pretty desperate because they're facing a pretty catastrophic decline in demand for their services.
So they're probably going to offer you some pretty good cut rates.
So I think that it's actually quite likely that you could sell a carpet as an entrepreneurial Joe American new guy carpet on the block fella.
You're going to be able to sell your carpets for $15, $16, $17.
And, you know, the price will then slowly creep up as this new supply chain asserts itself and so on.
So that's great.
You're all happy, right?
Now, of course, if you are a monopoly, this is what happens again in a free market.
So if you're some evil monopolistic guy and there's a state around, Well, what do you want to do?
Well, the first thing that you want to do is you want to make sure that carpets are licensed.
Carpet selling, carpet making, carpet distribution, whatever it is, it's licensed.
And, of course, the way that you do that is you just come up with some scare stories, you know?
Children drowned in plush carpets!
You know?
Pets lost forever!
It's like going down a staircase, walking into this carpet.
I can't find anything!
You know, I keep snagging my toenails, and then I get fungal rot.
You know, this is going to be something.
They're going to make carpets and carpet fibers cause X, Y, and Z when not properly installed by a government-licensed mechanic, or something like that.
You know, I really should have picked something not like carpets, but something that actually understood, because these metaphors are quite silly.
But I think you get the idea.
So, they're gonna come up with scare stories about carpets are dangerous unless licensed by qualified trains, blah blah blah, right?
Like plumbing.
You gotta have a license for plumbing.
Because it's only been around since the Roman times and, you know, you need to buy those special pants that hang halfway down your butt.
They're going to need to get licensing in place.
And the way that they do that is all these scare stories.
They leak them to the media.
They get this.
They get the government.
Or what they'll do is they'll find some place which, you know, there's been an industrial accident in some store or some place that manufactures carpets or, you know...
Substandard carpets give newlyweds rug burn!
Or something like that.
They're going to come up with some horrifying scare story about why carpets are just way more dangerous than anybody ever thought of before, and the only way to protect the gullible public from the massive, genocidal, WMD-style dangers of unlicensed carpets is to regulate and get licenses and have training courses that go on forever.
I know someone who knows someone who's trying to get a job as a forklift operator, and they have to go literally through 1,500 hours of training.
1,500 hours of training to run a forklift.
I mean, what is it, 20 minutes?
Don't run anything over and turn around when you back stuff up?
You don't need that to drive a car, for God's sakes.
Or a plane, I bet.
You could probably get into a plane and drive it your own with less than 1,500 hours of training.
Training!
Not even operating.
But this is how people keep other people out of the industry, right?
You can't do it without the government.
So, of course, you're going to want everything to be licensed.
And then you're going to want the licensing process to be very expensive, very bureaucratic, very Byzantine.
And then, hopefully, if all goes well, if you can really get the miracle of state violence to work on your behalf, then you're going to want to get a professional association put together that has the right to license practitioners that you, as an industry, are in control of.
And, you know, the AMA, the plumbers, you know, the unions, and these kinds of things, or trades, trade unions, and so on.
Because if licensing is something that the government controls, then the government's people are going to be bribed, right?
You're going to lose control of that whole process.
There's still going to be some economic thing at work.
So what you're going to want to do is create a licensing that is then controlled by you as a professional body.
And that is going to be just magic.
That is going to be sweet magic and money in your wallet.
Because now nobody can come and compete with you unless they apply to you for a license.
And all you do is you say, oh yeah, carpet manufacturing.
Oh, man, it makes brain surgery look like playing the spoons.
So you've got to do 1,500 hours of training, and you've got to put up a license for $50,000, and you've got to do this, and you have to have this, and you have a union, and you've got to have the health and safety and environmental regulations.
Oh, I'm getting ahead of myself.
Sorry, that's for all manufacturing, which is why people who used to be in manufacturing are now in dumpsters, and cardboard boxes, and welfare offices.
And so you're going to want all of this stuff to keep potential competitors at bay.
To keep everybody out there who might conceivably be able to come in and undercut you.
You're going to want to keep those people out of the market.
And your friendly neighborhood government will be more than happy.
more than happy to comply.
Well, why?
Well, because the government gets a pretty good deal out of these licensing things too.
Some of the licensing fees go to the government.
The government gets all of the wonderful world of inspectors, right?
So even if you do manage to buy a carpet license or whatever to manufacture and transport carpeting, then the government has to go and inspect these things, you see, because a license just isn't enough.
You have to have inspectors.
You have to have bureaucracies.
You have to have legal cases.
You have to have paperwork.
It has to go into the Federal Registry.
Oh, man, it just makes... You know, I think it actually spontaneously gives bureaucrats erections, even the female ones.
It's very subtle, but if you look closely.
And this is... It just makes them drool.
It makes them happy.
I think it is the wind beneath their wings, this kind of stuff.
And so very quickly you get this slow and suffocating layer of difficulty that comes along that just makes it like, it's like, you know, those dreams where you're trying to get somewhere and there's no gravity and you're bouncing a lot, or dreams where you're sort of trying to run in water and it's just, it's tiring and it's exhausting and it feels futile.
Well, you know, this is the sort of Little landmines of boredom and frustration and irritation and expense that litter the road to riches that you could get to very easily in the free market by setting up some sort of competition.
This is what companies do.
It's so important to understand that we don't have anything to do with capitalism anymore.
Except in certain pockets, like there's some of it in the software sector.
I don't know, maybe biochemical.
I don't know what's in the other sectors.
Maybe some... I actually can't think of the medical sector has really got much of it at all.
But what we talk about, whether it's defense contracting, or it is some sort of union thing, or it's something to do with preferential legislation, or something to do with corporate taxes, or something to do with corporate welfare, or keeping exports out.
I mean, there's so little left in any transaction of the free market anymore that you'd be kind of surprised.
What I've been meaning to do for a while, I don't know if it's out there anywhere, But I'd sure appreciate it if you could let me know.
I've been meaning to for a while.
Try and figure out that when you buy something for a dollar, how much is actually going In overhead, bureaucratic tax, political overhead, and how much is actually being transferred from one person to another, like to their bank account.
I gotta think it's no more than a quarter on the dollar, but I could be wrong, right?
So, we're down somewhere low along those lines, because, you know, when I buy a comb for a buck, okay, let me pick something more likely that I'm going to buy for a buck, if you've ever seen my picture.
If I'm going to buy some chrome polish for a buck, then I've got to pay the corporate taxes of the person I'm buying the chrome polish from.
I've got to pay the income tax for their workers.
I've got to pay the social security tax for their workers.
I've got to pay all of the inflated energy costs for their heating because we can't drill in the Arctic and there's all these restrictions on creating refineries in America or wherever.
I've got to pay for the environmental legislation compliance.
I've got to pay for health and safety compliance.
I've got to pay for their bribes to the Government officials, I've got to pay, either in terms of campaign contributions or wherever.
I've got to pay for all of that stuff.
So the amount of money that's going, and of course, what I'm paying with is everything that's had that deducted from my pay.
So I've got to think that no more.
I would be surprised if it was more than a dime to 25 cents.
And I would say probably on the lower end of that.
I could be wrong.
And count the national debt in all that too, right?
And so, there's just very little left of what we call the free market.
I mean, the only thing that's left is the innovation from the past, right?
So, when you talk about what we have as an economic system right now, it's pure mechanicalism.
It's pure, pure, pure mechanicalism.
It's pure state manipulation.
It's pure, everybody's grabbing at the gun in the room, right?
Everybody's grabbing it, turning it, pointing it, and, you know, I mean, They were pointing it mostly at us, right?
Occasionally they pointed at each other, but there's very, very little left of what we would actually call capitalism left in this.
So this is sort of where we're at now.
We're a lot further along than what I'm talking about in this kind of continuum.
So you've got your nice, juicy licensing, and you've got all of these restrictions, and you've got an industry sector or an industry organization that controls the licensing, so the Carpet Union or the Carpet Manufacturers Association or whatever, and now you've got a lot of money coming in because you've finally achieved this nirvana which allows you to charge 40 bucks a sweater.
And yes, you've had to spend some money to bribe the politicians and get where you need to get in terms of legislation.
But you don't have any of the costs of enforcement, right?
The consumers are hosed in so many ways it's ridiculous, right?
I mean, sort of four main ways that I can think of.
I mean, the first is obviously the price has gone up.
The second is there's just less innovation and there's less competition and there's less whatever, right, going on because nobody has any incentive really to do that because competition is down.
The third is that they have to pay for the costs I mean, there's insult to injury, right?
Not only are you screwing them for higher prices, but you're also screwing them through the tax system to pay for the enforcement to keep everybody else out.
All these licensing restrictions and tariffs on foreign goods and so on.
And you're charging them for all of that.
And there was number four, which I can't quite recall.
Maybe it'll come to me later.
You never know.
So, the other thing that is happening, once you get this in place, once you get this system in place, and it's going to take constant monitoring, it's going to take constant bribery, and of course you're going to have other areas of interest that are going to be competing for the politicians' time and energy, but this is where you get just these amazing monopolies.
If you look in pretty much every western economy, you can see these unbelievable monopolies.
I mean, obviously, farming is one of them, and steel and oil production.
Areas of food production like sugar is a huge one.
The import duties on sugar are enormous, which is, as I mentioned before, one of the reasons why everybody's had to switch to corn syrup and crap like that, which is much worse for your body and much harder for your system to shuck out without complaint.
So it's another reason why people are getting kind of chunky.
So you get this kind of stuff going on in the economy.
But then, let's say that there's five people left standing after this elaborate and choking web of state violence has settled on all potential competitors, because you've got this licensing situation and all that, you still have a problem.
Even with all of that state protection, you still have a problem.
And this is your problem.
There are five of us.
There are five of us.
And I don't know What you are charging.
Right?
So we all say, ah, let's clap hands, my brothers, and let us shaft the consumer and charge $40 a carpet, even though our costs, including all our political mumbo-jumbo, is only $25.
Haha, we will retire to Spain and feast upon wine and kumquats for the rest of our life.
Well, that's all well and good, but when you and I and the other three guys go back to their offices, oh my heavens, is there a temptation afoot for them?
And the temptation is simply this.
Okay, we've all made an agreement to do $40 for carpets.
Do you know, if I go to $39, I am going to make a killing.
Because I know, I know that everybody else is selling it at $40.
So I sell it for $39, $38, something like that.
My God, am I ever going to make a killing?
Because I know what the price of my competitors is now.
And that is an enormous problem.
This is the fog of war, which I mentioned in a couple of podcasts ago.
This is the problem with the fog of war.
I know this because I do a lot of competitive bids, a lot of competitive presentations.
And the fact that you don't know what your competitor is charging is pretty important.
And it's really good for the client, because you're going to err on the side of caution.
So I sold a software system recently.
It was pretty good, I guess.
I mean, I got a pretty good price for it.
It was about $150,000 all told.
But then I found out that it was replacing a system that was $300,000.
So I knew, you know, I found out sort of afterwards that there was wiggle room, right?
That I could have charged more.
As they say in the business, I left some money on the table.
So, you know, I look at it as plus 150, not minus 150 from 300, but you could look at it the other way, and it's important to know.
But, of course, when you say to the client, how much is the system that I'm replacing, they're not going to tell you.
And it was a custom-built system, so I couldn't even find out through market research.
So you're not going to get those kinds of answers.
And so not knowing your competitor's pricing, or not knowing the cost benefits of you relative to everybody else, It's kind of important to keep that stuff close to your chest while you're negotiating.
And so, to me, it's important to have, as a price mechanism that benefits the consumer, a lack of knowledge about your competitor's pricing.
If you know exactly what your competitor It's charging.
Then, of course, you'll charge them minus 5% and knock them out of business and match their feature sets and tell your strengths of their weaknesses.
I mean, there's a reason why you don't get all the answers from a software company right up front, because they don't want you blabbing to competitors.
And, you know, there's a problem, right?
There's a problem with this kind of stuff when you're in the business.
And it's delicate, because you've got to give enough information that people want to buy your system.
But not so much that your competitors can figure out exactly what it does and either reproduce it or just knock you out relative to selling their strengths to your weaknesses.
And this is all very exciting stuff in the business world.
I love it to death.
I think it's very interesting.
And sometimes you make the right guesses and other times you just go over, right?
I mean, it's a gut instinct thing.
So, I mean, the other thing, I mean, you, of course, part of the license fee you're just selling to try and get the repetitive revenue in terms of support fees and maintenance contracts and so on.
But there are other times where you guess over, right?
There are times where I've put in contracts more early in my career before I learned all of this stuff, but there's times when I put contracts in where, yeah, I put them in for a hundred grand and our competitor is like 30, 35k.
Well, you know, we may be a good system, but that's a pretty hard sell.
And then you've wasted time, right?
Because you haven't spent your time replying to or submitting an RFP or hopefully politically negotiating an RFP through, because of course if you don't actually You don't have any input to the RFP before it comes out.
You have like a 3% chance of winning.
It's lunatic how bad that is.
So you've not been putting your efforts in the right direction.
You've actually been going in the wrong direction, which is a double negative, right?
You didn't get what you wanted and you didn't get something else that you could have got if you'd gone in the right direction.
So anyway, the philosophy of software sales is probably not also what you have tuned into these podcasts for, although I think of sales as an endlessly fascinating topic, but that may just be me, so I'm not going to talk about it anymore, other than to say that the fog of prices, the fog of war in regards to prices, is really essential, and really benefits the consumer, because people are constantly concerned about overpricing themselves relative to competitors, so they aim a little bit lower, and that benefits the consumer.
Now, if all five of us carpet manufacturers have gone in and said, We're gonna charge 40 bucks, then of course we each know what the other one is charging.
Which is fantastic for the consumer.
We each know what the other is charging.
And so there is an enormous temptation to undercharge just a little bit, because that is going to scoop you so much business, it's ridiculous.
Now, everybody who's in that professional association, as they clap hands and swear an eternal fealty blood oath of brotherhood in manufacturing and predation on the consumer, then they each know as they leave the room that there's an enormous incentive for the other guy then they each know as they leave the room that there's an enormous incentive for the other guy to screw them, and there's an enormous
Now, I don't really believe there's that much screwing in capitalism unless you can prostitution, but in this particular instance where you're trying to get this whole monopoly thing going, there's a lot of screwing going on, right?
I mean, it really is a den of thieves at this point, only because of the political aspect, not because they all want to get together and raise prices, which is just a great way to destroy a business, as I talked about earlier.
But each of these people are now in a blood-oath, den of thieves, evil cabal situation because they have conspired to keep other people out of the market.
They have conspired to bribe politicians and to get their way politically.
They have got licensing.
They have got unions.
They have got just everything that you could get, everything that they could get their hands on.
They have made it as difficult as possible, through the force of the state, to get anybody to charge a reasonable price for carpets, and they've screwed the consumer, and they've screwed potential competitors, and they've screwed their employees, and, you know, this, that, and the other, right?
So this is a black gang.
A gang of black guards, for sure.
And some pirates.
Pirates without the cap and the sea shanties.
As they walk out, they all know that they're a bunch of crooks that have leaned upon the state to do their dirty work and shafted the consumer.
Now, given that this is the company that you're keeping, that all five of you have decided to take this route of screwing the consumer through politics, of course there's not a lot of trust in the room, right?
And there's even less trust when people leave the room, because everybody knows that everyone else is going to go back and say to some supplier or some Walmart guy that they know, it's like, yeah, okay, we're talking $40, and I'm going to keep it at $40 for the most part.
But for you, my friend, for you, just you, we are going to give you just a little discount.
Just, you know, we're old friends.
We're college roommates.
We, you know, whatever.
We were in the same commune.
Let's get together on this.
So I'm going to give it to you for 38 bucks.
And you will not get that deal from any of my other competitors.
Now, of course, this crack in the wall is all that the potential purchaser needs to know.
Because, of course, if you've got these five monopolies all protected by the state, and one guy says, I'm willing to undercut this, then all you do is you go to the other guy, and you say, I'm going to offer you $37 for this.
And they say, no, no, no.
The price is $40.
I'm standing firm with my brothers in crime, and the price is $40 for these carpets.
On this carpet, I guess.
Let's not get completely... Let's go even further back in time.
And then, we know, if somebody decides not to buy it from us for $40, that one of the other four guys is screwing us.
Because, of course, if everybody's selling it at $40, then you can sell it for $40, and nobody's going to walk away from a $40 deal, because they're not going to get anything better anywhere else.
But the moment you say, oh, Mr. Purchaser, the carpet is $40, and he says, you know, I'll offer you $37.
And you say, no, no, the price is $40, and he walks away.
You know exactly, he's going across the street to the other competitive guy, your former brother-in-arms, and now your blood brother of betrayal, whatever it be, so we can use as far as that goes.
And he's going to go straight over that guy and offer him $38.
Say, well, I couldn't get $37, so $38 is fine.
So, and you also know what the competitor is offering.
Because, you said $40 straight, this guy, your competitor has said, yeah, I'll give it to you for $38.
Just trust me, we'll keep this on the lowdown.
We'll keep this on the QT.
And so when this vendor comes to you and says, I'll offer you $37, you know that it's less than $38.
Sorry, that it's $38 or more.
It's certainly more than $37, right?
Because if the guy wanted to buy it for $38, then he would simply buy it from the competitor who's undercutting your sort of supposed monopoly.
So the fact that he's offering $37 means that you instantly know.
See, this is the amazing stuff that gets communicated through prices, right?
You instantly know that you're being undercut by something more than $37.
So, of course, if you say 37, the guy says, you say, OK, I'm going to break ranks because this other guy screwed me.
So I'm going to break ranks, and I'm going to go with this guy who's going to offer me 37 because, OK, it's still more than 20, which was my original cost, 25 with the political shenanigans.
So I'm still going to make good money.
Now, of course, the guy who's buying the carpets now knows that there's going to be a bidding war, and he's only going to benefit.
So he's then going to go and say, back to the guy who offered 38, and say, OK, I'll give you 36.
So this is exactly how stuff gets whittled down.
And then the heads of the manufacturers are going to scream at each other.
They're going to get on the spittle-laced video conference call from hell, and they're going to be all screaming at each other.
And of course, each of the heads of these carpet manufacturers is going to say, huh?
Oh no!
It's not me!
Someone in my organization must have gone, you know, it's some old roommate thing.
We'll tack it down.
We'll sort of put our finger in the dike and we'll deal with this and we'll, you know, we'll staunch up the wound and we'll go back to 40 bucks, right?
And they'll probably make some great show of trotting some guy out and firing him for something or other.
You know, he was undercutting or whatever.
I mean, they'll do this sort of internally, right?
Like the way that the Mafia verify bodies, right?
They don't sort of put them on eBay and say, hey, he's dead, right?
So they'll do something like this.
Oh, now we stand together.
We have rooted out all of the bad people who were undercutting us, even within our own organizations, for reasons that we knew not what for, and so on.
And all this sort of smiles and air kisses all around.
And then they go back.
And, of course, exactly the same thing's going to happen again.
The first guy to step below 40 makes a killing.
And the first guy who steps below 40 has to then say to the guy, look, I will sell it to you for 38, but you cannot go for a competitive quote.
I will sell it to you for $38, but you have got to not go to my competitors, because you wouldn't believe the amount of crap I get into when you go to my competitors and say you're $37 or whatever.
So there has to be a secret agreement.
Now, these secret agreements are pretty cool.
I mean, just in terms of economic advantage, because generally, these secret agreements last for a certain amount of time, right?
If you can get it for $38, and of course, if you don't buy it for $38, then they all get together on this spittle-laced video conference and yell each other back up to $40, and you have problems with delays and extra costs and so on.
So you can get some of these subterranean pipes.
See how pipes work so beautifully with rolled up carpets as a transportation device?
So you get some of these subterranean pipes of carpet transactions going on and so on.
And there's constant stress and strain.
So it's a lot of work and it's a lot of problems.
And of course, you're now subject to the political process, so there's a lot of politics.
Which, you know, if it's not your cup of tea, it's going to be pretty horrible for you.
And most manufacturing people, if they wanted to be in politics, well, they probably would have gone into politics.
But, you know, they probably had a shred of self-respect that led them away from politics, which is now being whittled down to a fine toothpick that's bound to be burst into flames.
So, the problem is that you just don't know what's going on.
You're pretty sure that people are undercutting you, and you can figure that out based on your sales, right?
So, if you sell 10,000 carpets one month, when everybody's at $40, and then you sell 5,000 carpets next month, when everyone's at $40, but your competitor seems to be selling more, you're pretty sure that there's an underground pipe of transactions going on that's below $40, but you can't prove it, and you might hire someone to go in and pretend to be... Like, it's an enormous amount of time and effort and waste, you know, like, why not just sell the consumer what they want at a decent profit and you want to let everyone do their own thing.
So then you get to the final, the holy grail, the nirvana, shall we say, of corrupt and evil cabals of manufacturing mercantilists.
Boy, this is, what is that?
Oh man, I know this word.
When everything starts off the same.
I'm thinking onomatopoeic, but that's when the sound is the same as a thud, right?
The sound is the same as the whatever, right?
You know what?
I'm going to get 12 emails about it, and I'm going to thump myself on the head.
I can't remember it right now.
So you're going to get all of these guys who are going to finally achieve, if they can finally do it, they're going to get the Holy Grail, which is they are going to get the state to regulate pricing.
They are going to have an open book pricing policy.
They are going to force every competitor to publish the price.
Not the book price, not the list price, but the price that they are legally selling at.
And you'll see all of this, right?
You'll see all of this kind of stuff going on all the time.
And it's always, you know, the appeal, the argument for morality, the appeal to the consumer.
We need open pricing to protect the American consumer from gouging and we need this and we need that and we don't want people blah blah blah.
And so what you get then is you start to... The first thing you get is open pricing.
So people have to publish what they sold stuff for.
You can see this all throughout the 19th century.
Whenever people in the States tried to get monopolies going, they always faced this problem.
So you want this open book pricing.
And once you've got the open book pricing, then you can make sure that nobody's selling.
And if they do sell, it has to be on the gray market, which has its own costs.
You can't have court systems.
You can't have open contracts.
You know, there's lots of overhead going in the gray market or the black market.
So you've kind of nailed the problem.
And then the last thing that you want is you want legislated pricing.
So you want to go open book and then you want to go legislated pricing and then you don't have to worry about this cabal having to meet to set prices and you've basically got like dental work, right?
Everybody's got to charge the same and you can't sort of put in any reductions and you've got to do this and you got to do that and some medical stuff was like this for a while and So, everything then has a fixed price.
And then, my friends, you have arrived.
You have arrived.
You now have the license to print the money using the consumer's blood as your ink.
And you have achieved, Nirvana, you have achieved absolute, predatory, parasitical, perfectly adapted, evil social organism status.
And you're a happy guy!
And this all lasts until the state collapses, right?
You get maybe a generation of this, right?
Like, once this becomes perfectly optimized, and it's pretty close to being optimized in the West, for sure.
And so you get, you know, maybe a generation of this.
I don't mean a generation from now.
I mean, I think we're no more than 10 to 15 years away from a significant reallocation of capital within society, let's say, which I think will be a fantastic and wonderful and good thing.
So, you have arrived there, so let's just quickly go through the steps.
Not for padding, but it's worth a review, and it's a challenge for me to see if I can think of it.
I can't think of that fourth thing, and I can't remember that word that means the syllables at the beginning of every word sound the same, so maybe it'll come to me as I go forward.
So the first thing you have, you all want to get together and collude.
You've got to ban foreign imports.
And then you've got to put the chill on domestic production.
You've got to get licensing going.
You've got to get that licensing then transferred to your own organization.
And then you've got to start getting open book pricing.
And then you've got to start getting legislated pricing.
And then, oh, you have finally arrived at the place where you can print all the money you want and be as evil as you want.
You hear a lot about these robber barons in the 19th century, and there's certainly some truth in that a lot of the people who did make these fortunes did do so through government coercion.
A lot of railway lands were taken from government through government coercion and so on, and subsidies and that.
A lot of fortunes are founded on this kind of stuff, because it really is a license to print money.
It really is just winning the lottery every month for like 40 years.
It's just, it's so much money, it's obscene, right?
And of course, this is why people say, well, capitalism doesn't work, because they look at this stuff and say, ah, it's capitalism, it doesn't work!
When it's not capitalism at all.
I mean, it's mercantilism, right?
It's just state.
State.
Fascism is actually the closest model, right?
Fascism is the public ownership of the right to use property with the private ownership of property, sort of nominally, and handed over by the state and maintained by the state and all that.
And so that's, I mean, that's really what people are talking about.
And it's got nothing to do with the free market, nothing to do with anarchy, and there's precious little left of it in the modern world.
But don't worry, my friends.
It will return.
It will survive!
So...
Don't worry about that.
We're going to triumph.
We're going to do all the juicy, tasty, anarcho-capitalist stuff that we can think of, because we're getting these ideas out there.
We're getting a great conversation going here.
Everything that I'm saying is enormously fleshed out and prodded to greatness, to whatever greatness it contains, by the people who write to me and the people who are on the board.
So we will prevail.
The important thing is just to get the argument for morality out of these situations, to get the sentimentality out of these situations, To get rid of the idea that there's anything to do with consumer protection out of these situations, just to recognize this stuff for what it is, right?
It's just, it's mercantilist do-goodery, sort of under the cloak of do-goodery.
It's mercantilist predations in the old style, where you used to have an empire that was overseas, and now you have a domestic empire that is composed of coolies, also known as your fellow citizens, right?
This is class warfare at its finest.
And class warfare is certainly not endemic to human nature, but it is absolutely endemic to a mercantilist system.
For reasons that I've just spent the last while, quite a long time actually, talking about.
So, in summation, there's really no reason whatsoever to worry about Monopolies in a free market?
I mean, there's just no reality to this threat at all.
And the only time that we get monopolies is through the harnessing of state power at the same time as you are offloading the costs of that enforcement.
to the general citizenry in the form of taxation.
You're not going to hire your own border guards to patrol the Canadian border to stop people from shipping carpets over the border.
That would never be cost effective.
Let's just compete openly.
We already have an advantage because our carpets have to be transported to fewer places.
You're not going to hire your own border guards to do all of this.
You're not going to hire your own inspectors.
And, of course, people aren't going to stop for them anyway.
You set up your little sort of Joe's McCantalist house of custom inspections for carpets.
Then, you know, people aren't going to stop.
They're just going to say... Well, first of all, the guy who's got the private road is going to say, I don't think so, because if I allow people to stop for you, then my road is going to be really slow and people are going to take my competitor's road or use the Jean-Luc Picard teleporter.
Or whatever.
And so I'm not going to let you do it.
So nobody's going to bother stopping.
You can put up your flimsy little thing, but people are just going to drive right through.
I mean, who's going to care, right?
I mean, you have to get the government to do these things.
You have to get the government to enforce all these things.
And so you're never going to want to do it from a private standpoint.
I mean, regulations, if you come up with your own licensing scheme, I mean, I tell you what, everybody, I've now created, magically, a licensing scheme for Libertarian Podcasts.
So if you want to do Libertarian Podcasts, you have to pay me $500 a month.
There's my licensing.
I'm just going to wait for the checks to start rolling in.
Because, you know, if you give bad libertarian podcasts, you're setting back the cause of freedom, which could result in more people going to the library because they don't like podcasts, getting paper cuts, getting gangrene, losing their arm, and thus, that is a workplace injury.
So we need licensing to ensure the continued quality of libertarian podcasts.
Because think of the poor people with their fingers!
So, you just... I mean, I can't do that, right?
I mean, I can, but nobody's gonna care or listen.
They probably think it's funny.
I hope you think it's funny.
Is it funny?
I think it's funny.
So this licensing thing, nobody's going to listen to a bunch of carpet manufacturers coming up with their licensing unless they get the awesome and bloodied hand of the state to wrap around the throat of anybody who disagrees with them and then get those victims to pay for that to boot.
So there's just no economic way that you're going to be able to Get this kind of licensing and tariffs and inspections and keeping foreign goods out of your market and all that.
I mean, they can come from anywhere.
I mean, that's why you need the hand of the state to enforce this kind of stuff.
And so there's just no way to be able to afford this kind of stuff in the absence of the state, right?
So everything that we're talking about here, every single bit of evil economic trickery that we're talking about here, is entirely predicated and absolutely requires The existence of a centralized state with a monopoly on physical force that is funded coercively by taxpayers.
If you don't have that, none of these tricks are going to work.
I remember the fourth one!
I'm not even going to try and go through the third one.
The fourth one, about how the consumer gets shafted, is that All of the goods that could have been produced by the money, the capital, the time, the labor, the focus, the everything, that is being pushed into getting these sort of coerced state solutions, is not available to the consumer.
So everybody who's now an inspector of carpet safety production or whatever, could have been doing something useful that the consumer would actually want, and that would have driven down the prices somewhere else, or that guy might have invented a magic carpet that the consumer is not going to get anymore.
And so, the fourth way in which the consumer suffers is all of the misdirection of capital, labor, and energy that goes into getting everybody to obey this silly made-up nonsense about carpet licensing and all that.
The consumer doesn't get all of those, all the opportunity costs, all the missed opportunity, and all of the stuff that was never created, the prices that never went down, all of the goodies that they never got a hold of because of all of this Redirection of labor and energy into this other sort of nonsense.
I mean this is a huge cost and it's a cost that can never be calculated.
I mean it just can't be calculated because you're trying to measure the absent creation of something which could have been.
I mean you just can't do that.
I mean there's just no way.
You can probably come up with something right?
Look at less regulated industries.
Look at the growth of innovation and the growth of opportunity and the creation of jobs.
Then look at more regulated industries and come up with some sort of rough measure.
And I'm sure that's been done about a bazillion times by people who are interested in libertarian economics.
So I'm sure you can find those things.
But it really is just abominable what kind of stuff goes on.
I mean, if you didn't have the FDA, I mean, we might have had a cure for cancer by now.
I mean, if you didn't have all of these health and safety regulations, we might have robots by now.
I mean, you wouldn't have any possibility of people getting injured on the job, except maybe carpal tunnel syndrome while they play Unreal Tournament while watching the robots do their thing.
So...
Those opportunity costs are very important, very significant, catastrophic to the economy.
I mean, you just can't measure this kind of stuff.
But if you want to have a look at the real effects of opportunity costs in this kind of way, look at a situation where There was not this kind of capital optimization because of too many regulations and too many price controls and too many unions and too many this and that.
And, you know, we'll call it basically all of human history up until the late 18th, early 19th century.
That's what society looks like when you have these kinds of opportunity costs in an omnipresent fashion.
When capital, labor, energy, time, resources, and all are continually misallocated or non-allocated because of extensive regulation and state control and violence and so on.
I mean, you have 10,000 years of human beings living in absolute squalor and misery, even those who are supposedly at the top of the social heap.
I mean, I'd rather be a homeless man in the modern world than the king of France or Genghis Khan.
You know, what's going to happen when you have a toothache?
At least you can go to a free clinic here, but there, your toes are going to die.
Or, you know, childbirth.
I mean, so 10,000 years of human misery is what happens when capital and resources and labor and all that get misallocated to that degree, and so even to a smaller degree.
And this is why this stuff overwhelms the free market and destroys productivity.
Every amount of labor and energy and time and, you know, all human life spent lobbying and writing regulations and enforcing them and chasing people around.
It's just so depressing and so sad.
And that's something which just can't be calculated.
But if you want to see the effects of it, just look at the Middle Ages.
Look at human history.
That is the effect of this kind of stuff.
Absolute endless squalor.
And the degree to which, you know, wages have stagnated or declined for the last 25 years is entirely around this.
Smart people are going into lobbying, are going into the government, are going into not improving their processes and improving their products, but into lobbying people to keep out competition.
And that is just The Calamity.
I mean, if there was some alternate universe where this wasn't occurring, I wish we could visit there for like 30 seconds.
And just look through the yellow pages and see the teleportation devices, and see the cures for cancer, and see the cures for AIDS, and see the cures for all of these sorts of things, which, you know, we just don't have right now, because these mercantilist pigs are taking advantage of the state, and it's the state's fault, fundamentally.
I mean, you can't blame people for maximizing their economic advantage to some degree, even if it's through evil things like running the state.
But you can certainly blame the state for existing, and for everyone who supports it, for continuing to support it.
So I hope this has been enjoyable.
Thank you so much for listening.
And if you did enjoy the podcast, be sure to thank the rain, because otherwise it would have been about half the length.
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