🔴 Capitalism is Corrupted in the USA | Full Interview | Real Vision Classics


Jonathan welcome back to real vision. Thank you so much I think we last had you on I think it was March April of 2018 when you’d been Working on you quite a long way through the sort of basic framework of your book I mean for capitalism that got published I think at the beginning of December and So we’re going to have a discussion and a chat about Where you think? Kaplan maybe has gone wrong but first I just like to sort of go into Kind of a thing that’s in the front of your book where you say that first of all Capitalism is the greatest economic system in history. You are a great believer in capitalism So before we go into where it’s gone wrong Can you maybe just outline how it works or how it should work what capitalism should really be certainly. So one of the Quotes that I use in the book comes from GK Chesterton, and he said the problem with capitalism is not too many capitalists But too few and I think the the real problem that we see right now is essentially that we don’t have enough capitalism Meaning there’s not enough competition people have said that capitalism itself is a false of Piketty for example says that capitalism has within itself an internal contradiction and when growth is low returns on capital or high and this creates inequality and potentially revolutions if you look at Capitalism it’s by far the best system that we’ve seen in terms of generating Wealth and progress and when we have seen open competitive markets What we’ve seen is a lot of innovation and the argument that I make in the book is the title Myth of capitalism itself comes from the idea that this current system that we’re seeing is is indeed capitalist I argue that in many industries there actually is very little competition. So you could say that capitalism has two central elements one is private property so Marxists define themselves in opposition to private property so they wanted all property to be owned by the state and that battle broadly was won in 1989 with the fall of the Berlin Wall even China which is supposedly communist, you know In fact does have large elements of private property and that’s one reason why it’s been a success and then if you look at the other element of capitalism is competition and the reason that competition is important is that You need to have clear price signals that would be able to induce changes in supply and demand and that that side in many industries I argue has been deteriorating if not disappearing and After I finished writing the book fortunately, it hadn’t yet gone to press and I was able to Get it to my editor But I found this wonderful quote by a Polish economist and make I collec II and he did some great work on Essentially national accounts and he was writing about the same time as Keynes. So even though he was a neo-marxist He was a great mind, but he said while perfect competition he said is maybe useful as a starting point you know, in fact the capitalist system tends towards monopolies and competition itself is a myth and I thought this is a great quote to put in there and it’s essentially the Loss of competition that creates the problem in capitalism, so it’s not capitalism itself It’s what Stiglitz calls ersatz capitalism it sort of looks like capitalism but isn’t isn’t quite so I mean what went wrong? What has it gone wrong with capitalism? Sure. So one of the big Problems that you see in the United States and many industries. Is that over the last 40 years? It really started in 1982 with the change of the merger guidelines under the Reagan administration Companies were allowed to buy each other and so you ended up with a system that was fairly open and competitive and if you think of the World Cup or you think Of the sweet 16 in the US you start out with 16 players. Then you go into 8 And then for so many industries now basically have fewer and fewer players. So the and fewer that matter so for example the beer industry the United States now dominated by two companies if you look at Airlines for example we’ve gone down to four, but actually if you look at the what are known as the fortress hubs There’s almost no competition. So American will have Charlotte United will have Houston and Delta has Atlanta and so they basically been carving up the US and if you’re looking at you know Cable and high-speed Internet 75% of Americans don’t have any choice at all It’s oh, it’s a local monopoly and then the US healthcare system Basically, if you’re looking at over 20 states, you essentially have a duopoly, you know There’s only real to really two companies that you can buy from and so in many of these Big decisions about spending. The average American actually has no real competition that they can then choose from and you mentioned their Competition in the sports analogy and I mean isn’t competition Always going to have a victor and surely if you have competition shouldn’t the victor can reap the spoils And so where does that contradiction in terms of we want competition, but we don’t want perfect competition We want something slightly less. How is that going to sort of build into into this? So the the question is a very important one I think it ties into one of the reasons why there’s quite a lot of dissatisfaction and Why a broken economy essentially creates broken politics. So if you have a company and you’re doing very very well I’m going to be attracted to the earnings that you have and I’m gonna want to go in and compete with you and so in theory you shouldn’t necessarily have one victor, you know most industries don’t have Extraordinarily high barriers to entry you know, most of them are not natural monopolies yet. What we’re seeing essentially is monopolies and oligopolies Even in industries that should have competitors and the reason is that often you end up with what I call the crony capitalism and essentially regulation and legislation that supports Unnatural monopolies or unnatural oligopolies, you know and agriculture in the u.s Is a classic one where you know? There’s no reason why for example three companies should control 80% of the potato chip and potato markets right The main reason that that’s done is one to be able to have market power over the farmers to be able to have power relative to Supermarkets, but you could go I can go industry after industry pointing out you know, if or if you look at let’s say local regulations regarding Funeral Homes, right many of them are local monopolies held by service corporation. There are laws basically that would prevent you and me from going into these industries to compete same things true for You know a broad variety of industries. I talked about Moody’s and S&P in the book, right? It’s easier to raise an armed militia in the US than it is to start a rating agency You have essentially Act which created a special category called the NRA SRO the National recognized statistical rating organization and that if you don’t have that you can’t then write bonds and those ratings essentially go into sort of how the Fed and other These look at risk and so much of these barriers to entry that essentially you know are created are through regulation and Lobbying a lot of that. It’s obviously crony capitalism, but I have no problem with a company Acquiring monopolies by being the best but generally what happens is they merge to get bigger and then to they corrupt the political process essentially to keep to erect regulatory barriers around the industry And as an investor, some people would say the classic moat system is an investor actually, these are fantastic companies and you want to chase the monopolies because If I have no moral compass, all I wanted is good returns, and these companies probably have good returns But you’ve done quite a lot of work showing that yes, you know, these companies are successful Relative to others, but they are causing De-stresses elsewhere they are causing a breakdown potential social fabric I think you highlight maybe five different areas ranging from income inequality to lack of diversity so you can explain Maybe before we sort of go on to your whether as an investor We should care could at you explain what those real issues are when you kind of underlie go underlying in these in these kinda monopolies oligopolies and Joe Oppel is certainly so I start the book with Warren Buffett, and you know Buffett Ultimately, you know, he’s probably a very decent person based on everyone I’ve spoken to who’s met him, but he’s monopolist at heart and he likes monopolies And so he looks for these two moats and generally he’s buying a monopoly a duopoly or you know in the worst case an oligopoly He you know That’s that’s where he hunts But he talks about pricing power and that’s the ability of a company to raise prices on consumers and he loves those companies But what’s very interesting is if you think if a company really has that kind of power to raise prices on consumers Why would they not then have that power? Let’s say to Not raise wages unemployed on their employees, right so they would have power relative to workers Why would they not have power to squeeze suppliers, right? So like the the the power on the consumer side is they also have in other areas of the economy And so what I point out in the book is that there’s an increasing body of research showing that Wages in highly concentrated commuting areas are much lower than they are in Concentrated commuting areas a bit. Therefore there is a squeeze that happens to workers and if you look at for example monopsony, which is the opposite of a monopoly so monopoly is one seller but you could have one buyer and a classic example would be A coal town in Virginia where one company employs everyone This is quite rare in the US, but you do have what you could call What’s a metaphorical monopsony right where the company can fire the worker at will but the companies that impose? Non-compete swear that the employee can actually go out and search for another job So you’ve effectively narrowed down who they can possibly work for and over. One-fifth of US workers are now covered by non-competes so you’ve seen a collapse in unionization an increase in concentration a huge shift in the imbalance of power and so The ability for companies to impact workers is leading to a squeeze in wages. So that’s that the first one the second one essentially comes from a reduction in productivity and spending an R&D broadly and the Endless economic. Dynamism what’s quite clear is the argument big versus small I think is a red herring You know big is certainly good and often better. There are economies of scale So I’m not getting into the argument of big versus small necessarily but the point is that research shows that companies in highly concentrated industries do spend less on R&D and innovation and you end up with less economic dynamism and fewer startups so I’m not suggesting in MA. No causal link. It’s not like this is the only factor but it is certainly a factor That is damaging to the US economy when you end up with you know A few companies and they have an interest in essentially restricting supply and the startups at the same time what we’ve seen is a broadly Fewer companies are existing in sort of smaller to mid-sized cities moving to the very large cities. So you have a loss of economic dynamism and In the book, I’d point out that in the Ireland you had the potato famine She only had one potato and that was a disastrous. What’s happening in the u.s. Is that many industries? We’re now getting down to very few players and in the case of for example inter Venus Fluids a saline solution To companies control that for the US market and they put their production facilities in Puerto Rico So when Hurricane Maria hit the US had shortages of a saline solution, which is just you know Mind-blowing and so we’re basically ending up with a lot less diversity in terms of supply of many key Drugs or other products and that really is not very efficient You know, what we need actually is a fair degree of diversity and that comes through competition. So those are some of the problems in terms of less economic dynamism productivity lower wages, and obviously the inequality angle is that companies are Essentially very efficient mechanisms for transferring wealth from the middle and lower class to people who own stock and most Americans don’t own almost any stock or don’t own it directly and the the very wealthy do and so to the extent that everyday people are going about their daily lives paying a toll and the term robber baron itself comes from The Middle Ages where you had barons in Europe who would charge told across their lands, but they wouldn’t keep the lands up You know in terms of maintaining the roads So it was just a way of passing money from the poor to the Barons and in the u.s right Now if you think of one of the toll roads in people’s lives every day They’re transferring a little bit of their wealth to people who are much wealthier than them and so it’s not surprising that inequality is increased in the US and ultimately, I think that leads to populism and it you know, very poor outcomes for everyone and you Talk about inequality is not unfair. In fact, we should be clear that inequality is probably the good things that creates dynamism But you think we pretty gone past optimal inequality to the point where it’s become distorted and grotesque Yeah, so I think that you have to distinguish between a sort of inequality and unjust inequality, sir Angus Deaton a Nobel Prize winner has done a lot of work on development and inequality and Inequality itself is essentially an outcome. It’s a a symptom. It’s not the underlying cause the underlying cause is that the It’s this lack of competition means that people are able to have pricing power relative to the consumer or have power over wages and and This would not be happening if you actually have competition and so it’s a sense that this is an unjust Inequality due to competition. That’s what creates the problem I have. Absolutely no problem with people Gaining market share through innovation. I have no problem with patents. The problem comes when you erect regulatory and legal barriers to protect those Businesses, you know and prevent competition and when we know you see an abuse of the patent system in the United States You know through reformulations endlessly extending patents and copyrights and things like that. And so I would put those in the unjust inequality category where people are clearly extracting economic rents, you know without improving production or you know, Providing any new or better products and it also seems that in this sort of system You can have I mean one of the great debates is this inflation and other people say, you know There’s deflation but actually what we’re saying, what sounds at what you’re saying here is actually both camps put could be right But these people in the middle they potentially take in the deflation and they don’t pass it on to the end user they create deflation of wages, but relative inflation of the output of their good and so they take this fat margin and so This is where you know everyone could be right about inflation and deflation because it’s happening in both ends Well, so I started looking at this very question of competition essentially by looking at very perception leading indicator for US wages, and I thought that Was our indicator was pointing to very high very big increase in wages We had a relatively tight labor market all the inputs in terms like the quick rate and others were pointing higher But wages weren’t going up. And at first I thought you know, just give it time these are long leading indicators and they’ll go up and they did never time and I thought it was very troubling one because I was They don’t like things being broken and our indicator was clearly broken But two I thought that if I don’t if I can understand what’s going on with this, I’ll also understand the profit side. So The leading indicator for wages if you invert it because the wage bill is the biggest part of corporate spending Would lead roee and corporate profits and so when I started looking into this I realized that actually it’s the decline in competition and in a large barriers entry that’s creating these abnormally high profit margins and so from the macro Standpoint it matters quite a lot because if you what you want to do is to increase wages and you start you know Trying to shift the aggregate demand curve, which is that the Fed is trying to do via easy money policy But actually the microstructure doesn’t really permit that you know Meaning that companies do have power over their workers and wages are going to go up Then you’re not really going to achieve your goal of you know, raising wages by shifting Aggregate demand, you know through sort of loose or financial conditions. And so, you know some macro economists have pointed out that Pursuing a macro strategy that takes doesn’t take into account the micro is not going to solve the problem and sure enough with what’s happened is You’ve ended up with sort of pricing power on the side of the corporations and they you know, fatten their margins as wages Stay low. So it’s been tremendously good for anyone who’s owned asset prices over the last couple years It’s been very good for owners of stocks and bonds. But ultimately he hasn’t done very much for workers so obviously this this Environment is good for the investor lease to short term investor the person who’s making the Prophecy’s who’s kind of gaining from that but in the word you talk about how the this overall outlook is Causing a deterioration and kind of not just the social fabric but really in the economic fabric if we think of this longer term That it’s going to cause this decline in productivity you got evidence for that you you cite some data. What are those data points? and one of those things you really look at to show that this is actually going to be a Long-term negative negative for the economy and therefore the investing outlook certainly So in in the book we start out looking at for example over the last 20 years half of all public stocks disappeared now clearly the Tech bust in 2000 2002 is a factor The financial crisis in onine was a factor But the broad trend though has been a decline in public stocks and a lot of that has come from murders And essentially a loss in dynamism also if you look at the number of IPOs there been fewer IPOs that have been issued and it’s not just a matter of Regulation like sarbanes-oxley even after the JOBS Act which made it easier for small companies to list We haven’t seen a surge in in listings and at the same time you look at the private companies We’ve also seen a fairly steady number of exits Even as the number of new entrants is collapsed So this broad economic dynamism is bad But there is the issue that as these monopolies become much more extractive and sometimes it’s through patents Sometimes it’s through regulation But they end up killing the sort of goose that lays the golden eggs and if you think of for example the US healthcare system and pharma in You know Everyone can raise prices as much as they like Right, and they have the power to do so due to patents and the lack of competition but ultimately they’re just going to move closer and closer towards a government-run system essentially where You know their entire market will probably be taken away You move towards a British NHS type system, you know or something else But clearly you can’t have private monopolies and duopoly ‘he’s endlessly raising prices without having some sort of backlash and you can look at that in sector after sector and I guarantee you that you’re going to see antitrust reform in the united states and it may in fact be the big issue of the 2020 election from what people are telling me and in some ways you have this sort of continuum where if you get extreme capitalism It’s almost the same as communism because you have a very very gilded elite But a potentially quite an inefficient system below that and use of do you draw those sorts of comparisons? I don’t think there’s anything inevitable about Industrial concentration. I think that ultimately markets are a construct of common law and then legislation what I do think happens is that there there is a pendulum that swings and so you had a very high concentration in the Late 19th century in the United States in response. You got the Sherman Act and in 1890 in the Clayton Act in 1914 And then we’ve had this the pendulum has swung back and forth where in the post-war period there were very few Mergers that were allowed from direct competitors. So you ended up with bizarre Conglomerates essentially where you would have a Hollywood studio That would also be part of the conglomerate that had an auto parts company and a cigar company and none of these made any sense From a business standpoint, but because they couldn’t buy the direct competitors. They ended up doing odd acquisitions. What happened in the 1960s and early 70s was the Robert Bork and the Chicago school economists Argued that, you know, you needed mergers to create efficiency And then that efficiency would be transmitted to the consumer and the term in terms of lower prices And while the pendulum would probably move too far and preventing almost any mergers and now 40 years later The pendulum has gone to the other end, you know where basically that they’re allowing Drug companies to buy generic competitors a completely eliminate competition or allowing two companies to control the beer market you know and to have Essentially monopolies at the local level in hospitals. So Now we’ve gone so far to the other end I think the pendulum is going to swing and you know these things are Multi-year in even multi-decade Affairs and I guarantee you that the pendulum is gonna swing back the other direction and when you get these mergers people always talk about merging to talk about Efficiencies and cost-cutting and we’ll pass them on but they rarely do in fact Isn’t it the case that after most mergers prices go up? Yes. So the the consumer welfare argument it reminds me of once a Journalist asked Gandhi what he thought about Western civilization, and he said that he thought it would be a good idea The consumer welfare itself would be a good idea if genuinely all these mergers actually did create more consumer welfare the problem, is that the studies that have been done Overwhelmingly show that mergers lead to higher prices So it doesn’t matter whether you’re looking at the cement industry whether you’re looking at funeral homes Whether you’re looking at hospitals Whether you’re looking at cable and telecoms mergers lead to higher prices so that that’s the the evidence and the book has Extensive footnotes and all of this so on its own terms the the it’s failed, you know Meaning that the consumer welfare standard is not broadest lower prices and then beyond that you throw in all the other problems and it’s quite clear that what we need is a reform of the laws because the there the current FTC DOJ people running it and the sort of K Street law firms and private sector economists are Involved in this very cozy revolving door and I’m written a piece which will appear in the American conservative Probably be out by the time people watch this video but basically what you have is, you know, Wall Street itself has made 21 billion dollars this year on mergers the Firm’s like compass Lexecon and Charles Rivers associates make loads and loads and money arguing in favor of mergers and the Projections for synergies and mergers are so absurd in 2015 Deloitte looked at all the promised synergies and mergers and they mounted about two trillion dollars, you know which is an absurd amount of money on a global basis and Almost none of these actually happened and generally in fact prices went up and often prices go up as studies show even before Moore just go through so the the promise of lower prices has not materialized and what we’ve ended up with instead has been less competition and if you talked to any people in US administration was sort of on the lawmaker side in the u.s And sort of engaged them with this and started sort of explaining the framework of the u.s system and other systems as well and has there been any kind of interest in sort of think people sub stroking the bids and going Well, we know this is quite serious Yeah so there’s quite a lot of interest in the House representatives and in the Senate, so there’s many senators who want reform if you look at the house representatives, they’re people who have got in touch and there there’s going to be hearings on the legislative side So clearly there’s a desire for change and a realization that something is very wrong and broken But if you look at the FTC itself and the part of Justice, they think everything is absolutely fine of course because you know this they they get paid in that revolving door and they get paid millions of dollars to go work for Law firms that then push from the mergers since and many of them have done it two and three and even four times Over the last 30 to 40 years, so they think it’s fine but everyone else in the world recognize that there’s a major problem with that chain mean it’s gonna need a catalyst is the catalyst going to be Slow change slow burning chains people like yourself raising this or is there going to require you know? the peasants to revolt with their axes and their pitchforks because It’s something which has been brewing for a long time since 1982 as you say it’s coming to an extreme But the legal side takes a very very long time and or less Everybody is up in arms and says, you know, hey, this is wrong But that’s kind of often social unrest how did you see that casas? When could that happen? So I don’t think that people will be going to the streets and you know Taking to the barricades and you know burning things. It’s not really very American or early snot recently But I think that the thing that’s driving it much more right now is the realization particularly that Facebook and Google essentially have a duopoly and online ads and one has a monopoly in search any other as a monopoly and social networks and So in a way, it’s the backlash against tech that these companies are now so big and so powerful That’s leading people to focus on it. And then when you look at Donald Trump and you look at brexit, whatever you might think about You know the merits of either vote It’s quite clear that technology has played a much bigger part than it did in previous elections and so people are now waking up to the fact that Two companies essentially control what we find they control the algorithms in terms of what gets shown to us Whether it’s on the you know on YouTube or whether it’s on the Facebook feed and so I think these are essentially the lightning rods Of attention and because of that people are starting to focus on other things, but it’s interesting I wrote the book, you know and wrote it fairly quickly That’s just the way I work, but I didn’t know what other books were coming out you know at around the time the book was coming out and The Tim will just wrote the curse of bigness And so there are this really is the zeitgeist where other people are thinking and writing about this I’m not the only person I’m one of many and And I think that it tells you that in what you’re talking about in terms of their social mood it is changing And it’s not just me It was a bit danger that the people Some of these companies it would be kind of useful for them to shine the spotlight on Google on Facebook Which are it’s the social ills it’s and it’s people say well, you know You’ve chosen that we’re not sure what we should be really focusing on is the food companies The people are destroying agriculture to make a massive profit. These guys will hide under the spotlights focused on the tech so initially broad-based you think this will be broad-based or do you think it’ll be a tech break but not a I am I think I Suspect the monopolies will turn on each other. I Read an article last week. That was hilarious. It was in a conservative Website and it was written by essentially an academic who had been paid by Google To write positive studies about Google in the past and he was like look, you know Please leave the innovative tech giants alone go after these horrible old economy monopolies, you know, it’s sort of those like You know pick on them not us And so I suspect that you’ll see quite a lot of that you know, which is that some people they’re monopolies the good one It’s the other ones that are the bad ones and you know People will hope that they’re they can be a little faster than whoever is the slowest runner and gets eaten by the line When you talk about the sort of the changes that could come through you got you say the regulation is actually a barrier So it’s not achieve regulation It’s it’s other means to try and break these down but firstly if we just go into Regulation and antitrust and all these things in the same way that too much competition leads to a single winner potentially Which is seen to be bad too much regulation can go the other way I think in the 1960s it went to the extreme where small companies couldn’t merge How did you find that optimal level where you get sufficient? Let’s call it regulation antitrust legislation That just kept the wing so you don’t have too much competition because in red what happens we go too far That way we go too far that way we’re just caught in this never-ending Swing so one of the things that I talked about in the book is the analogy of chemotherapy there’s a regulation is chemotherapy and If you think of chemotherapy people generally think that it just attacks cancer, whereas in that it’s a selectively toxic. I Spoke to a friend of mine who is a one of the world cancer Specialists and the MD Anderson clinic one of the best clinics in the world and I asked him to sort of you know walk me through chemotherapy and you know, he pointed out that it’s actually much more interesting than Chemotherapy exclusively attacking cancers Basically, what happens is you and I have stopped growing so our cells all the energy that we have is dedicated to cell repair Cancers cancerous cells essentially are have been genetically programmed in a way to only grow that’s what they do They’re sort of like startups right like they’re in growth mode and they don’t really use their energy to repair themselves They just use it to grow. And so what chemotherapy does is it essentially attacks healthy and unhealthy cells But the healthy cells can repair themselves and the unhealthy cells when they start to Replicate and divide they do so with damaged DNA and then they die And so if you think of regulation what it does is it’s essentially attacking large companies and small companies in terms of imposing compliance burdens Accounting and tax burdens the big companies those they stopped growing They’ve got loads of energy to spend and money to spend on compliance tax and so on startup stone and so there’s quite a lot of studies that I cite in the book showing the the more highly regulated the sector generally the more concentrated it is and that’s One reason why the US health care system for example is highly concentrated in many areas Because it’s much more highly regulated the alcohol sector for example is very regulated, you know Due to sort of prohibition and post prohibition the idea that you want to make sure people aren’t drunk and killing themselves Driving or is the restaurant sector it’s not so you have two companies with 90 percent market share and alcohol But you you it’s inconceivable that McDonald’s or Burger King could ever get to 90 percent of the restaurant market, right? And so Regulation often does lead to more concentration and and it’s because it wrecks Regulatory barriers and if you think of banking for 70 years you had the glass-steagall Act. It was 35 pages Very simple, very clear principles and that worked very well Once dodd-frank came in it was 2200 pages with a thousand pages more Delegated to rule writing committees and there have been almost no new banks that have been created since dodd-frank was passed. And so Extensive regulation essentially is tends to favor incumbents. And so I think that Increasing competition is not just about antitrust. It’s actually about having Principles-based regulation more sensible regulation that favors competition and has clear principles based rules rather than extensive rules, so That I think is one of the things that I’m sure like the the left will love the argument of you know break up the big companies in the book and the the right way some people on the right will hate that and then I think People on the left will hate my deregulation arguments, you know, and no one’s gonna be happy reading the book But but I hope though that it makes people think of the problem in a more nuanced way with the the companies themselves there’s always a sort of talk and you’ve seen in the tech sector where the tech giants they buy up the competition and Half the time they buy them up and then they just let them die within their own behemoth cells and so this is sort of but there’s this thought that if you get the regulation It’s going to be really bad for the tech companies But but it’s Standard Oil that when you actually split it up the some of the parts the individuals was much more valuable so as it Rockefeller became richer yes not poorer effectively when so if people along all these monopolies They should just stay long because when they get broken up and they get the individual bits But they actually be better off what you think is gonna be a big downward pressure on the market So a stall comes in so there’s quite a lot of research that’s been done on spin-offs and generally they tend outperform their parents I think when Greenblatt wrote that book, unfortunately, then it’s not the trend came to an end, but people started spinning off What are known as like garbage barges, you know? So you take your terrible division and spin it off? but generally spin-offs with them better historically and part of that is that they can develop and so for example I was in San Francisco speaking to a friend of mine who works at Google and he was saying look unless product reaches a billion people Google has no interest and so because of that often you have companies that have like you know need massive addressable markets or they You know, like Google does search ads if you’re not in the ad business like forget about it right and What you find out is many of these smaller companies essentially or innovative activities within larger companies are not pursued or followed or developed because they don’t fit that central mission of the company and so Standard Oil similar 18t when it’s broken up the world and many of the parts ended up becoming worth far more And and you ended up with innovation in telecommunications so I think breaking up some of the large monopolies today would in fact be very good and would Improve competition significantly and you would probably see a lot more startups and Google itself There’s a website which you can find called Google Cemetery and it has an extensive list of all the companies that Google is essentially either Shut down or ended some of them were internally generated others were bought in But that’s what tends to happen with large companies often that buy smaller companies I was seeing the death of competition in a way or reduced competition because of this as you mentioned earlier we’ve had a significant reduction in the number of listed shares since some ways with yeogi and it seems that the growth of Passive investing in this of dying off of active investing is partly explained by this and actually passive investing in some way There’s a logical response to this reduction in available shares But then passive investing itself perpetuates the benefits for these large corporates because all capsule is going to them Directly indirectly. So is that is that fair to say that passive investing is? Almost a logical result of this process. So the asset management industry itself has also become a highly concentrated So if you’re looking at you know, whether it’s Blackrock State Street, what you’ve seen is some of its passive, you know They’re not taking an active role but you’ve ended up with very few people having all the assets this is pretty bad because in the old days, you know if they were let’s say for Probably they’re more than for Airlines But eight Airlines you would own an airline and you would want your airline to do well and the gain market share you didn’t want A competitor to get a dollar, right? because that was not your dollar you wanted to capture that dollar in the market the problem that happens is when you get It’s known as horizontal shareholdings where you know in the old days JPMorgan would own five railroads They might have different names, but they were all ultimately JP Morgan’s railroads, right? And so he didn’t care you know, he didn’t want a competition because you know he wanted to make sure that you know each dollar that the sure that the railroads had was ultimately his and what happens with the Current horizontal shareholdings is essentially it reduces the impetus for competition So Buffett rather than by one airline when they all merged bought them All right And the clear message was he did not want all the airlines competing against each other Right, and and therefore we know when he owns one The dollar of earnings for the other airline is also very good and he doesn’t want an any way compete for that dollar He’s having it let them have their local hub. And that’s the problem that we see right now, which is that If you look at the you know major banks and you look at many sectors the top ten shareholders are the same Across all competitors, right? It’s not like you have boards that are actively pushing for companies to expand or take market share or invest So in the old days this is called Organizing where you’d have one main guy or own lots of companies now Essentially you could argue that Blackrock State Street and others in Berkshire Hathaway have essentially an organized America and within that as well when you see this, it may be An oligopoly maybe four or five companies Although they don’t link each other up and fix prices. There is a sort of sense almost by osmosis There will be a price leader. So prices are fixed, even though they’re not physically discussing it So once you get to a certain level is it that that the pricing power is there? even if there’s not the illegal actual physical verbal agreements Yes, so in chapter 2 in the book I go into quite a lot of detail that there’s there been Hundreds of cases of prosecutions for collusion. This is you know where I would call you up and we would secretly agree You know what, you know, the price of widgets should be next year But what actually happens much more often is essentially that there’s tacit collusion meaning that the the industry has relatively few players And that’s the key. So the Oligopoly a problem. Is that once you get very few players? you end up in these repeated games where it makes sense not to compete with your competitor and And then what generally happens you have one firm that? Be the biggest then they then become the price leader and no one tries to take market share, right? So you they hike prices and it’s not like the rest of them keep price is the same and try to capture some market share everyone immediately hikes prices in lockstep And if you look at for example the the market for insulin, you know It’s uncanny over the last decade basically have two companies moving prices in lockstep You know down to the day Over a long period of time but this happens in many different industries and so the the move to oligopoly the oligopoly problem itself creates essentially tacit collusion where Airline CEOs can go on the conference calls and say you know what? We don’t plan on expanding more than one percent this year, right and what they’re really doing is telling their competitors Look, we’re not going to go after your market. Share. This is what we’re doing just to let you know And it really goes back to I point out the minimax theory that john von neumann Articulated which essentially is people. Don’t try to maximize their maximum gain. They try to minimize the maximum loss right and the analogy is of a mother with two kids gives them one piece of cake and says You know to one child you cut the cake and the other one chooses it right ultimately You’re not cutting it to get the biggest piece You’re trying to make sure that you don’t end up with the smallest one and you mentioned that regulation is an issue lobbying is an issue a share buybacks part of this problem of a Part of the problem creating the problem with another symptom so many people think that share buybacks are the problem itself. I Argue that in the book my career and I re that the share buybacks essentially are a symptom. They’re not the disease The question is why do what a company has have so much cash, why are corporate profit margins so high? And in in the book I go through many of the studies why you end up with higher profits and are more concentrated industries But the whether you paid out dividends or share buybacks, you know It’s just a financial engineering question the buybacks essentially are the symptom not the cause and if you did have More competition you would have more mean reverting profit margins. You’d have lower profit margins in many industries. You wouldn’t have these abnormal Monopoly profits and therefore you wouldn’t end up with the extreme share buybacks and obviously if you have little competition you also end up with less investment and no it’s sort of covered in other parts of the book But you know when you when you’re not investing and you sit on that cash you have to do something with it Neither you’ll dividend it or do share buybacks. So it’s the symptom not the disease And when you look at that this sort of the histories, let’s see going back to the 1800 the robber barons than the Sherman Act 1890 and so on you had this sort of decline into this what you might call the golden period of antitrust, and then that died in 1982 in that golden period Walking at you point in that period that says look he was better then because again if I’m an investor and I’m concentrated investor I’ll probably be a bit worried about going back to that period and the first antitrust laws really only focused on trade unions, so Does he sort of this period where you know, was it good? Was it better? Can we actually sort of say look he was better for these reasons? So good companies tend to do well in almost any environment and one of the reasons why stocks did poorly in the 70s? I don’t think had anything to do with antitrust and had much more to do with high inflation You know That is is it a killer for stock markets? So I know people would say well the 70s were bad for stock the stock market. Therefore. We can’t go back to that You know, I think it’s very misguided view. But if you’re looking at the overall economy the 60s and 70s were certainly a much more equal society in terms of looking at sort of labor share of GDP And you also had higher Real economic growth and you had higher productivity growth which has basically been on the decline And so I think that when you’re looking at some of the more macro outcomes those were certainly better in the 1960s and 70s Well 50s 60s and 70s and so those are the things that I would point to and you know, the the problem is basically once the Merger guidelines were changed in the 80s And then you had an also an explosion of patents essentially in the 1980s and 90s and then it’s continued and gotten even worse You you essentially have more and more parts of the economy are essentially Monopolies created by patents and copyright and you have essentially increasing concentration and so it’s no surprise that you know Pekinese book was as well received as it was because he was pointing out that this is Leading to essentially a much higher level of inequality but good stocks tend to do. Well, you know no matter what You know, it’s the the problem the 70s was really inflation And in terms of the the actual seconds we mentioned a few you talked about the funeral sacks. He talks about tech In particular, which is obviously their headline but within the US Which of the industries which are really really kind of should be in the spotlight? and also there’s this difference between a lot of people look at this and say well that’s not a monopoly but you make the very Clear distinction that local monopolies do exist So you might have the four or five railroad companies which yes an oligopoly but actually lots of local monopolies So which are the ones in which the industry is in the US which have really been at this game for the longest I go Through the book monopolies do appellees and oligopolies And as you pointed out you have things that may appear competitive but actually your local monopolies So for example, like aggregates, you know or waste management, you know Generally, like if you have a contract for waste management for a town, you know There’s only one company doing it or if you have a local Aggregates pit and a cement those aren’t big transported for and you have a local monopoly a likewise Funeral Homes For example, I point out that people don’t generally shop for for funerals for obvious reasons They’re in great distress. And generally the body is going to be taken care of relatively close to the hospital and so within that you’d have essentially a local monopoly first for funerals and so Service Corporation, for example you know has their funerals are about 30% higher than independent operators and they have actually local monopolies in many parts of the US, but Hospital markets ninety percent of US hospital markets in this urban hospital markets are highly concentrated So you generally don’t have almost any competition when it comes to going to a hospital, right? And then I point out that in the book is well that if you’re looking at drugstores, right you essentially have a duopoly Between CVS Walgreens right and if you look at a drug wholesalers There’s three drug wholesalers right there three former benefit managers So the US healthcare system is among the worst and I certainly hope that you end up with more competition the local insurance markets They basically are highly concentrated almost all or duopoly in terms of its the state level and so these are the ones I think that should be most ripe for a reform there are obviously vast powers of lobbying allied against it, but the insurance markets, for example have their their state little fiefdom built through the mccarran-ferguson act and I think would take quite a lot to change that but the book goes through many many of these that you might not have even considered as Monopolies and I certainly hope they get broken up and changed. There was the five areas which you identified as being problems productivity She was startups your jobs lower investment Less diversity wages and inequality but what you see is the solutions that how what are the things that we’re going to see that really changes that and and These things often take place over five to ten years the big changes that we see but how we going to get them sooner in a meaningful way, I Don’t think that antitrust itself will solve all these problems But I certainly think that it can contribute to an improvement and I think that antitrust is broken But I think that the loss of competition also is broader and encompasses regulations So in the last chapter of the book, I point out that you know, a few solutions are one of preventing future mergers You know, we shouldn’t allow industries to get down to three and two, you know Or even one player. So we have to make sure that we’re not allowing for more concentration There are many mergers that have happened that have reduced competition Those should be broken up, you know and and reversed many come to mind. Like for example Google buying double-click, right? That’s not one that should have ever been allowed or Facebook buying Instagram and whatsapp, but you could go into many other Industries, so you have breaking up past mergers, but then on the regulation side I think what we have to do is to regulate more intelligently, and so I think that for example Dodd-frank itself should be reformed and made simpler. I Do like many of the ideas behind it? You know, we should have lower levels of leverage We know you make sure that banks are safer but all this could be done in a much simpler way that you know does not create an insurmountable barriers to entry and so Regulation is also a part. I think for example if you’re looking at some of the large tech platforms Interoperability, right and what when people could port their phone numbers, you know in many countries suddenly Prices started falling and telecoms, right? So allowing the customer not to be locked in is another key issue So I think that it’s not just antitrust, but when you think very broadly about how do you restore competition? I think you know on the medical side Patents should not be endlessly extended through, you know reformulations Rugs they go into that and the book and so it’s a it’s a wide array of potential solutions But all of which I think would make everyone better off Obviously, they’ll be fought because people who are currently gouging consumers and enjoying these set profits are not going to want it lawyers probably in the most to gain out of this but another group that Has probably been Behind a lot of the moves that have created the unwanted competition is economists Particularly Chicago School, you mentioned Bork and you say that capitalism is too important to be left to economists Why is it that economists we then end up sort of being on the wrong side of this versus what sort of feels much more? Natural and kind of correct in the marketplace. So I think many economists are actually doing a wonderful job of highlighting these problems so there’s they’re like loads of new studies coming out and it’s a very Sort of it’s a growth area to look into the problems of concentration When I say that, it’s too important to be left to the economists I think part of it is that the antitrust laws were written by Congress and were meant to be Implemented to you know to pursue the way we wanted markets in the economy to run What’s ended up happening is essentially that all these decisions on who should merge and who should not merge? These are now in the hands of bureaucrats essentially in terms of the FTC working in close collaboration with economists Right who have a vested interest in making sure that mergers get through and as you know talked about earlier Most of the merger models and simulations in terms of these price savings that are going to happen or total bullshit and so when I say that should be allowed to the economists is ultimately the the acts were meant to Reduce concentration to avoid monopolies and effectively what’s happened is we sort of out sourced mergers to People going through the revolving door or the K Street law firms in the economist like Charles rivers associating compass Lexecon and others So I don’t think the problem is all economists But certainly when you end up with a very small group of people who stand to benefit greatly, you know They’ll defend their area and they want all the sort of non specialists to stay out And so the irony is that you know, the book was endorsed by Mike Spence who’s a Nobel Prize winner or Angus Deaton? Who’s a Nobel Prize winner Kenneth Rogoff, right? So economists outside of the antitrust world see that there’s a very clear problem people within the antitrust Who you know are looking for what Nassim Taleb calls the retrospective bribe, right? They want to get hired by, you know, the compass and Charles River will work, you know carry law firms. They think everything’s fine, right? With the with the sort of us and you’ve been talking specifically about the u.s Firstly is this only a u.s. Male or is it global is a global issues it in the UK? Is it in Europe? Is it in Australia and secondly? Is it likely that the US is going to break up? it’s it’s kind of monopolist because If you look at it from a kind of global perspective the US had done pretty well over the last ten years US equity market, and yes, it’s been concentrate. But again it goes back to If you came in from the outside world and you saw as you go the u.s. Looks great Monopolies look great because the US has outperformed almost everywhere. So isn’t that good thing in some ways and Will the US authorities really wants to break what looks like a relatively good system. Would you need other regions to say? Hey, you know, this is a problem. So one of the reasons that I focused on the US was the u.s In a way is the the leader and the most advanced right? So for the u.s First created antitrust and exported it to the rest of the world and then the u.s Essentially had the counter-revolution and exported that to the rest of the world. So I think that whatever battles happening in the u.s That’s going to end up playing out elsewhere the u.s Certainly is the most advanced in terms of going down. The consolidation route Europe is less consolidated in many ways than the u.s Is some emerging markets are highly concentrated. They also interestingly tend to be the most unequal in terms of Gini coefficients. So I Chi lays known as the Chicago experiment essentially where a lot of the University Chicago people went down and advised Pinochet, right? So they have very high industry concentration and extremely high inequality. So when you look around the world you often do find these very interesting relationships Some countries like Australia are highly oligopolistic and monopolistic and it’s not surprising also that you end up with sort of a higher degrees of profitability in some of the sectors and very large transfers of wealth from people who are outside the sector to the sector and the financial industry in particular, you know due to the the four banks, so That’s you know, one of the problems other countries like can Australia which are very oligopolistic often have higher tax rates And so they don’t deal with they don’t have antitrust to increase competition what they’re doing is saying, okay You can pay people very very well in these industries We’re just gonna tax you to a pretty high rate, but my view is you know Rather than go for the very high tax route. Which Piketty argues this let’s create Let’s increase competition to make sure that you don’t have like some very fat Monopolies or duopoly ‘z and so it does go go around the world the u.s Just happens to be sort of the farthest along and what is the perfect? environment do you think where where this kind of really works because it still goes back to put regulation or antitrust laws in place and we clip that top end of Competition, but how what what are the features that you envisage would be? Perfect competition. We know what perfect Aldean should look like but real-world perfect competition. How’d you get it? So I I’m not precise. I’m not in favor of a perfect competition, which is also like another textbook extreme, right? I’m very much in favor of you know, people who come up with great ideas get patents they can then you know have Very high profitability for a period I’m not against that at all if you happen to create a new market You should enjoy that, you know Until you get competitors, you know and that creates essentially monopoly type profits until competitors emerge I don’t have a problem with that. My problem is essentially with mergers that reduce competition materially so taking out competitors from the market, but what’s interesting in the book I talk about You know earlier chatting about prices going up There’s a lot of work that’s been done by John Koch at Northeastern University showing that when you get below six players in an industry you end up with price increases and a pricing power and so I Argue that we shouldn’t allow for mergers and industries below six players, right? And now if you want to increase your market share by being better go for it You know try to become number one and you know, take everyone else’s market share But we shouldn’t have mergers between players and under six industries. Sorry six players per industry. So that that is what I wear I think you know you can draw the line in terms of mergers But it doesn’t mean that you couldn’t have one company dominating an industry if they’re doing it through best service The problem is when I talk to people almost no one can point to industries like well They have a monopoly because there the very best right? Generally what happens is companies merge, even in the case of Google and Facebook The reason you have a duopoly in the ad market is due to purchases of direct competitors Do you have a view code? Does this have any impact on princes the bond market? Because it feels like over the last twenty years Thirty years when this has been in place or affected been seeing that sort of eating away at potential economic growth In order to fuel excess profits. So the long equity long bond trade which has worked pretty well over the last thirty years We’re just coming in for a little bit of a little bit of us a tricky patch now But if this doesn’t get broken up, does that suggest that bond yields should actually stay relatively symmetry you’re not saying they stay down but Relatively subdued so I’m not certain how this plays out in terms of the level of bond yields, but what’s certainly interesting? Is that the real rate of interest has an enormous impact on? Collusion, you know between market players and the ability of companies to buy each other So when debts cheap, you know company a can buy Company B And so you’ve ended up with merger waves so merger waves tend to happen during bubbles people can use their stock is acquisition currency It also happens when rates are relatively low and people companies can then borrow money cheaply to buy competitors So those are two things driving merger waves and then also when real rates are low It means that the payoff period can be longer in terms of collusion When real rates are very high companies generally don’t want to collude because you need a very high initial payoff you know to make that collusion work and so that’s the Very interesting thing. I have a chart in there on global Real rates which of course have been very low which encourages collusion, you know and allows companies to borrow to buy each other So I think to the extent that you end up with higher bond yields higher rates going forward that would Make it more difficult for companies to merge and would be a damper on on the collusion aspect. You’ve shown that from your own work The concentration of industries outperforms the broad index and I think it was strategy gas You did the lobbyists index where those companies Allah be the most outperforms the broad index And until we see any major changes in this structure Would you recommend basically still be the hyung concentration and long the lobbyist as an investor? Would you still kind of take you? As I want to be a moral here and sure mo Grandin and continue with those comes to try I think you’d have to do it on a selective basis I think that certainly unfortunately what we see in our last couple years is that Sort of growth versus value stocks or high quality versus low quality stocks have reached extremes and you know as we’re seeing this year a lot of the tech stocks are getting beaten up people are waking up to the fact that Facebook might be broken up. Certainly. There’s a move in Congress to do that and also What you’re finding out is that you ultimately can kill the goose that lays the golden eggs and some of the pharma companies that discovered This where you know, like for example valiant you can hike prices You know quite a lot when you have a monopoly, right? They have some say in patents on a particular drug or a monopoly on that truck Ultimately, though there’s a backlash and ultimately you can only take that so far and so I think that investors need to think very hard About what you know, what is the source of that sort of dominance? They’re getting is it natural? Is it unnatural and and are they essentially going to raise the ire of? regulators or not and at the end of the book you talk about ways that we can Try and make a difference. I mean, there’s small ways between a from a corn you get the oak tree What are the things that you think can be done? So this shift brought them going on the street to our pickaxes and our sides and all the rest of it You think there are a few things that we can do everyone can do slowly but surely to sort of just start chipping away what are those things so in some cases the consumer has no choice when it comes to like high-speed Internet in the US or you know, it comes to Insurance markets, but there are many places in the US economy where you can decide every day. It’s an election You can decide where you spend your money. I would recommend that investors and consumers Back David versus Goliath, you know that you can decide we know where you spend your money That’s a choice that you can make every day in terms of search. For example, I personally use DuckDuckGo I have no interest in the surveillance capitalism of Google and Facebook, you know Which basically appear free but you’re handing over very valuable personal data. So there there are alternatives to you know, some of the Programs and companies that essentially are built on surveillance of the user and obviously you know people need to get politically active and let their congressman and Representatives know that this is something that they care about and I think they already are coming to that view and I think that we’re gonna hear a lot more from Congress on this bring the mint why would you think How long from now what’s your what’s your timeframe what you think? It’s gonna all happen what and so you know if you think of World War two, for example There was the Battle of Midway was essentially the turning point, right and that was, you know, very early on in the war Essentially, but but once once that had happened it was quite clear that Japanese it couldn’t win in the Pacific and then the question was What kind of loss were they going to take and I think that if you look at antitrust right now all the money is stacked on one side of the table and you know, but I think the it’s extremely popular to Get some reform and if you’re looking at the pop culture or you look at John Oliver is running segments on antitrust, you know The show Netflix Patriot Act. Basically that pop culture is moving and ultimately the regulators and Congressmen are gonna want to get ahead and pretend that they’re leading the parade rather than be run out of town It’s the great thing is what you’re saying is that capitalism is good capitalism works It’s become a bit grotesque, but it will probably self correct rather than implode. So therefore it’s actually quite an optimistic outlook we’ve got yes the us in the past and other countries there there been moments where things have been extreme and you’ve had People like Teddy Roosevelt, and I certainly think that we’re going to see more of that You know, we’re gonna see a reform, you know, rather than a revolution Jonathan thank you very much indeed. Well, thank you. Thank you




Comments
  1. Real Vision Classics are the best videos from our premium subscription service released free, often a few months after the original air date. The original air date is in the top left corner as the video starts. Film date is located in the description.

  2. We need more intelligent discussions by competent people to reform US competition. The leftist solutions are a recipe for disaster. And the leftists are not competent people; they have no understanding of economics, accounting, finance, project planning.

  3. the thing is that this pure capitalism as imagined by capitalist ideologists has never existed. it's nowhere to be found. fr east India company to standard oil to google, every global ndustry eventually monopolizes and the only way for society at large to benefit from it is to impose legal constraints on capital and redistribute the profits back into society.

  4. 3:15 spelling error. Also, would like to see this debate tied in with current debates on China, to give a full 360º overview.

  5. There is nothing wrong with capitalism. It is just that our current system is not capitalism. We have big government central planning instead. 40% of our income goes to local and federal governments. If somebody takes 40% of your income, how can you save money? If you cannot save money, how can you have capital? We dont have any capital. We are broke. There is no capitalism.

  6. Nothing wrong with honestly gained monopoly status. State supported monopoly status is morally wrong though.

  7. Correction, there is no private property in China. You get a lease for a set number of years.The government owns all the land. China is a socialist not a capitalist state.

  8. sounds like what you have said is that the free market economy is the best economy to have.Which is also capitalistic according to competition available

  9. EXCELLENT Presentation, to the point and insightful. Too bad it is a "No Win" subject matter.
    RE: Warren Buffet. You may think he is a descent man, He is the one of the most EVIL men on earth. Not that he is horrible as in a monster of criminal activity, but because he has done more to transfer Wealth to the ULTRA Wealthy than any other person on earth. Buffet is a "ROBBER BARON". He has too much power and influence. That power is abused for his personal gain. Nice demeanor doesn't make for a nice person. He is responsible for MEGA wealth, and super consecrations of wealth to a hand full. This will lead to a failure in this country. The un-equilibrium can't continue without nutters going crazy and the outcome unpredictable. When the masses get to the point they have nothing too loose, usually very serious negative repercussions happen.
    There won't be any Anti-trust issues.
    The wealthy are simply too powerful.
    The Wealthy buy their way into office then give themselves huge tax breaks like the current Crusty the Clown that is President.
    We don't live in a Democracy. US is an Oligarchy. The system is being abused by the wealthy who change laws in their favor because only the wealthy have access to the entities than can make change.
    Sometimes the pendulum doesn't swing back. Sometimes the Pendulum swings so hard it continues and tips over. That is likely the current condition. The USA is headed to tipping over.
    DuckDuckGo. My exclusive.
    Chrome. No Google Chrome product on my computer.
    Chromium Ungoogled
    Firefox
    anything but "The Evil Empire".

  10. Late stage Capitalism alway ends in oligarchy because the only "Capitalists" left at the end. Look at what they have done in the US. The corporations and the billionaires own the politicians and the politicians do their bidding. The government used to represent the people and enforce the laws to prevent monopolies. Now the monopolies own everything and the working class are slaves to these few companies/families.

  11. Do a video on p3. Private investment in infrastructure underperforms relative to public management across asset classes.

  12. As a capitalist my job is to maximize market share and profit – of course I am going to try to limit competition as much as possible. More competition hurts my bottom and introduces uncertainty. Shareholders hate uncertainty as it signals risk, and risk is bad for business.

  13. It's terrible when a Capitalist pundit comes on to explain Marxism, they always seem to get it wrong regarding the role of the state.

    That and the monopolies syndrome IS a symptom of Capitalism, there will always be winners and losers, as the winners get stronger they use their wealth to influence the state in favour of their own profits! Surely you can see that will always be the outcome unless the state can regulate the market.

  14. >"Regulations increase the number of monopolies" (correct)
    >"The solution is more regulation" (…)

    Genius.

    Free the markets.

    PS.: Intelectual "property" shouldn't exist.

  15. No company ever gets a monopoly by being 'the best'… there is no such thing. A even if there were, a monopoly would be very bad… because even at the semblance of a monopoly, the company wouldn't stay 'best'. So, plurality is essential.

  16. 1984:Trump fathered affirmative action. By 2019 %98 of Germans have been sent to college. Sounds like facism to me.
    Affirmative action 1984-2019 still killing america.

  17. Whats wrong with "capitalism"? It scarcely exists, save a few segments of any black market that doesn't revolve around slavery.

  18. yea… we don't have capitalism at all. We have corruption just like all the other countries, but capitalism is not one of our qualities. Did you just hear about the U.S.A or have you worked and lived here?

  19. Capitalism isn't corrupted because Capitalism doesn't exist anywhere in the Western World.
    Fascism is not Capitalism

  20. The problem is the state that should act as the referees have been bought off..neo feudalism coming to a poor community near you.

  21. Some of the main benefits of capitalism are because of economies of scale but the major benefits of economies of scales leads to oligopolies and monopolies.

  22. as a analyst and commentator in a small financial firm around 2005 many times i quoted that the whole thing behind mergers and aquisitions that was the trend at the time is motivated by what i called THE HIGHLANDER SYNDROME..whitch is exactly the same like the driving force of totalitarianism..the hunger for more and then even more and then even more power and control untill there is only one..can some right winger from the followers of this channel ,explain how can a massive consetratation of wealth and political power create anything other ,than a third world oligarchy at best or a straight forward tyrrany..is massive inequality of the sort we experience right now compatible to democracy? its cool to blame the monopolies as the cause but the monopolies are just the symptome..it is really laughable that the speaker doesnt mention once the trickle down privatisation deragulation orthodoxy that dominated the western world the last 50 years since reagan and produced this particular outcome, while in many other cases(scandinavian model), where the application of capitalism with a generous dose of socialism had very different results.. every failed orthodoxy is defended by its apologists that always claim that it was not the idology to blaim but some short of distortion from its pure form, due to this or that reason..just imagine that a few years ago some even claimed the end of history whitch if extended means that all possible civilisations in eternity ever will completely stop evolving their economic theories once they hit neoliberal laissez faire capitalism because this is the best possible answer to all possible problems..the mixture of unlimited zealotry ,unlimited greed and unlimited power is the most self destructive force in the human history so far and it will be a miracle if we will survive it…

  23. Anyone whom thinks "economic systems" really matter long term are fooling themselves…. you need virtuous societies based on truth and they will flourish. I used to be a very naive "ancap" type, but then you learn that Communism and Capitalism are two sides of the same coin.

  24. Capitalism is corrupted? No. Crony capitalism is always the goal of the semi-feudalistic elite* and through socialism is the easiest way to get it. Minimal or no middle class and state sponsored super rich elite*. They are very much anti-capitalist that is well seen in the mainstream media controlled by them.

  25. Of course legislators favor more regulation of mergers and acquisitions because the threat of adverse regulation provides powerful incentive for large companies to donate money to members of congress on both sides of aisle in order to influence the regulation. Needless to say, resulting regulation will actually favor the monopolists and increase barriers to entry by potential competitors. As long as government has extreme, concentrated power, that power will be exploited to benefit monopolists and others who have the influence.

  26. I’m a Chilean and the “Chicago Boys” who were Chilean under Friedman trend of thought , save the country and reduce poverty almost completely. Nonetheless we do have an inequality issue.

  27. One of the best and straight forward guests I have ever seen that can put a face on what the US is facing and what congress is ignoring. I am impressed and will buy the book.

  28. We don’t have capitalism we have creditism. When we went of sound money we no longer had capitalism. Banks can create as much money as they want out of thin air. This leads to expanding money and debt. There is no longer sound money there is no longer away for trade to be balanced.

  29. Problem: How do we prevent the oligopolies and monopolies from capturing government essentially removing political will to regulate? Obviously, that is the situation today. How do we change it? This seems to be the inherent flaw in capitalism.

  30. Any economic system humans could devise would probably suffice but for the "Lord of the Flies" aspect of human nature.

  31. Capitalism is no different from feudal system, it is based on exploitation of man . The ultimate goal of a capitalist is the maximization of profit where the human element almost nonexistent. The only thing that keep capitalism afloat is the fake credit system create a by the bourgeoisie to control the means of production. I can't wait for the collapse of capitalism , it is an inhumane system based only on profit.

  32. Just look at the price of entry into becoming a capitalist in order to serve capitalism. At one hand, the cost has drastically being reduced because of technology. On the other hand, the cost has being dramatically being raised because of technology.

  33. One hundred years ago a lot happened in the USA and the people were overwhelmed by it I imagine. The one thing never mention is the Peoples right of Representation in the government was stopped at 435 members. Why 435? I don't know but I think they felt no more could fit in the building the Congress provided. Wioth the use of the internet it is time to get the House out of DC and back into their districts and increase the size from the current 1 per 800,000, closer to 1 per 30,000 the Constitution allows. This is a right much more important than the so called Bill Of Rights.

  34. People don't trust new products and services and new companies. A lot of services must build an organic and realiable ecosystem in order to attract a lot of consumers. People rather pay premium to save time and energy in trusting brand names. Also, for a lot of technology, the price of entry is very high. Try to have entrepreneurs compete with AT%T, Verizon, and Comcast.

  35. I was surprised you didn't say anything about the worse monopoly that controls all the others. The American Bar Association.

  36. That's not new. Look at the Rail Road Companies in the past? That's right, the government had to go in there and break them up.

  37. An interesting discussion about the current situation of capitalist economies, but it seems very naïve to believe that Capitalism is the end of History… «Reform, not revolution»… Some thinkers seem to wish that Capitalism could go back to its imagined original roots of idyllic free competition and some kind of enlightened regulator (the mythical «invisible hand»?…) What is clearly missing here is the historical perspective of Capital-ism. But, unfortunately (…), time is not reversible…

  38. going to the streets not recently??? ummm hello what do you call occupy wall street? that was exactly the agenda and it accomplished absolutely nothing. If an organized event of that magnitude cannot illicit any changes than what chance does a guy like this and his book have?

  39. Capitalism has not existed in America for over 100 years, what we have is corporatism and crony capitalism which is not capitalism at all.

  40. I laugh when the Left says that TRUMP is a threat to OUR democracy … for once THEY are not lying 😉
    OUR > YOUR

  41. In the US, more companies had excess cash due to increased debt, rather than from earnings. Many companies used this cash to buy back its own shares, in effect creating a highly leveraged very risky company. Its earnings per share improved mathematically due to the same or even less earnings being divided by a lower number of shares. This "financial engineering" actually weakened the company. This is yet another example of corruption of capital.

  42. Maybe this guy does better later on, but not even 2 minutes in he goes full strawman/failed definition on socialism, so it really hurts his credibility. How can his opinion matter when he gets basic facts wrong??

    For the record, anyone who says Marxism (even taken to Maoist extremes) is opposed to private ownership in general is either totally ignorant and therefore not credible or lying through their teeth and therefore full of bull.

    Marxist-socialists oppose private ownership of the means of production – that is, factories, infrastructure, and hardware – not all private ownership like a house or your car. You could own stuff in Soviet Russia and Maoist china, nobody advocates for state ownership of everything.

  43. Using airlines as an example of oligopoly is a thorny issue imo, because of the safety issue. Too many players coming in and out of the market drove down wages and decreased safety as pilots were pushed hard and low experience pilots were hired in a race to the bottom as major airlines outsourced most of their flying to come and go contractors and bibd them against one another in Walmart fashion. The result was the Continental/Colgan Air crash which killed all onboard and which prompted a backlash and a requirement for 1500 hr flgiht time experience over the previously 250 hrs. This combined with a wave of pilot retirements gave pilots pricing power and forced the Walmart model to dissipate, but also decreased competition.

  44. Excellent discussion. Very intelligent guy. Everybody talks about great capitalism is, but most corporations do everything that they can, legal and sometimes illegal, to prevent competition. Our political financing system is a big part of the problem, since they buy politicians so they can pass legislation to prevent competition.

    Absolute power corrupts absolutely!

  45. When people talk about competition in capitalism they fail to acknowledge that competitions have winners and losers. The whole point of the competition is to eliminate competition. If 10 companies compete to make a particular product, says cars for example, 2 of the companies emerge the big winners and the other 8 goes out of business leaving the consumer with only 2 supplier who have complete monopoly on car manufacturing. Capitalism is inherently flawed, it breeds inequality. Humans will have to do better than capitalism, we need a better economic system than this if humans are to ever be truly successful as a species.

  46. I work for a certain soda company and if I told you the insanity inside this company you wouldn't even believe me.

  47. Seperate cash from political influence (lobbying) and pay those in politics the average wage of the majority of workers. (Not the average income of all people inc million and billion airs)

  48. There will not be a march with pitchforks and scythes because the Monopoly system is fine-tuned to wait out generational change. Meaning, people in their 30s who are angry can be waited out until they are 55 and thinking about retirement and more focused on their own end games. So when you discuss 1982 as pivotal year, it's been 35+ years. That is more than a full generation. The companies have a life of Their Own, their CEOs feel like passing on a monopoly is better than concern for their own Karma. They can wait people like me out.

  49. If Dodd-Frank replaced glass-steagall and made the creation of new Banks less likely, then as with prohibition, won't there eventually become a black market in loans? Won't we go back to the days of the loan shark?

  50. You may get to this, but the 50s and 60s world was 1 in which the other economies were just rebuilding. The second thing is that as much as today's regulatory environment is not as Optimum for competition, real poverty has then halved or more, no? of course, that comes down to socialism and redistribution and keeping the poor people happy with bread and circuses, but how many people in the United States lack air conditioning and a cell phone plan? Hi-C rather than pitchforks and axes, wouldn't the answer be for people simply to consume less? Granted, it won't happen in our gluttonous age, but if people where to fly less, then the airlines would have to peed in other regions, no?

  51. I'm reasonably educated, reasonably analytical, and reasonably plugged in, but this hour-long video is clearly for insiders. The problem? You'll never have a peaceful alternative to pitchforks and axes without simplifying this for the masses. Most folks can't get past a Sunday afternoon football game without feeling a brain freeze. If you were to make videos from this that were no more than eight to 10 minutes, the average person might watch. Then, of course, you'd be targeted like anybody else on the right. However, if you want Grassroots change, you have to mow the lawn really short.

  52. It’s about time this is exposed! Thank you for pressing this truth. Why isn’t this a huge topic on everyone’s lips?

  53. We need a restricting of markets that does not favor “Morganizing” corporate competitors through oligopolies in the investment concentration.

  54. It's neo-feudalism and it will not stop. It will coalesce into heavily top down socialist model for which we cannot pay. If you are rich guard your value. If you are poor guard your means to resist.

  55. People keep talking and acting as if we live in a laissez faire, free market, system.
    But…
    We don't.
    Everything is controlled by the government.
    Follow that line of thought, and see where you end up. 😉

  56. Monopolies and duopolies are the way of the future. Of course you need the possibility of an innovator to beat them, but in industries with low innovation or any industry, its best to dominate these industries globally with a company from your country, as that will drastically help your economy.

  57. Capitalism is corrupt by it's nature, any system based on greed must be corrupt and corrupting. The problem is capitalism and democracy parted company the day Jimmy Carter signed an open ended trade deal with a tyrannical empire that can and did call on a billion slaves, communism loves capitalism both being corrupted by nature . Never make the mistake in thinking democracy invented capitalism or that corporate interest cares anything for national politics or systems, capitalism serves only the bottom line

  58. Go read Carlos the Jackal for his opinion of how to bring down the west. He acknowledged that Marxism by itself could not bring down the west , nor could islam; but an alliance, a coalition of the two could.
    This was the root objective of the Obama administration. He ran jihad from 1600 Pennsylvania.
    This takes us right into the UN and the EU.

  59. It's nice to finally hear someone else say that what we have now is not capitalism, especially someone who is way smarter than me. At best I would call this corporatism, at worst fascism

  60. Put a cap on personal ownership!
    Say max $100 million per individual.
    … plenty to live a carefree life of extreme luxury.
    But not enough to single handedly control mega corporations, media and banks, or "buy" the political-/justice system.

    Just think about it … over a decade+, the consequences would be a massive democratization of ownership and economic power, plus a cool-down of bribery and "the revolving door" … without any real victims.

  61. POEPLE CREATE INMEQUALITY NOT FAIRLY WRITTEN SYSTEMS. BUT UNFAIRLY WRITTEN ONES WITH UNFAIR POEPLE FOLLOWING ENFORCING MAINTAINING THEM. THE WORLD COMPETITION DOES NOT EXIST DUE TO THOSE MANTRA TOUTING

  62. capitalism is monopoly and subdues innovative enterprise … private property rights works when middle class and working class own stuff without govt interference nor monopoly capitalism … middle class technocrats invented everything and the middle class and working class assemblers put it together, without these two nothing happens … NOTHING. If the technocrats had access to the capital, tooling, legislation, marketing they could generate great society innovations ….instead the technocrats have their inventions moved offshore for cheap labour profit motive which will destroy domestic society….. there are benchmarks to an advanced society that should belong to the people and not politicians and available to all at cost REGARDLESS OF WEALTH….these benchmarks should not be on the stock market: health, education, communications, basic insurance (house, car …) mass transit, pharma, pensions ….

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