I can't turn my hobby/side gig into a small business without navigating a bunch of bureaucracy to obtain 9001 permits, some of which are inevitable "may issue". Assuming I made it through that I'd be subject to all sorts of government oversight to the point where I either have to sink all the resources I would spend growing my business on compliance or just not think about it and hope that by the time anyone notices my business is big enough to afford the cost of compliance. For programmers, lawyers and other occupations that don't deal with physical things the issue isn't as big but for blue collar businesses this is a big deal. You literally cannot hope to comply with everything when you're in the boostrap phase and that dissuades a lot of people from striking out on their own.
The fundamental problem here is that laws and regulations written to deter some mega-corp from systemically being sleazy to make a buck apply equally to small businesses. turns out it's only the mega-corps that have the economics of scale to make compliance possible while still making a profit.
> I can't turn my hobby/side gig into a small business without navigating a bunch of bureaucracy to obtain 9001 permits
Have you experienced this first hand? In my experience, this gets overstated by those who think any regulation is burdensome. Even the crazy regulatory environments I've been in (like the CO marijuana industry requires separate, complete audit trails of each individual plant "from seed to sale"), the regulations really aren't that bad to comply with. The same people who were complaining about the regs were also complaining about how they had to have benefits for full time employees and the like. There's a very vocal "society shouldn't stop me from making a buck" crowd.
And on top of that, I'm afraid that these people will remove a lot of the good regulation we've built up over the past century as new ways to screw over the public have been discovered.
On the other hand, small business owners shouldnt be allowed to be sleazy either.
Maybe to stimulate small businesses, the government could advise business owners how to navigate these regs, something like a social worker for a business?
The classic example would be food companies requiring the use of a commercial kitchen for selling food to the general public. There are a lot of fledgling businesses that have been shut down immediately because they cannot build capital while they are still in their cottage stage. While it is perfectly fine to invite my neighbors over and cook for them, it immediately crosses the line when I want to sell to them. I think it would be smarter to have progressive laws based on the number of servings instead of immediate high barriers to entry. So you still need to use a commercial kitchen, but only once you serve more than say 5,000 customers per annum. I think most people would believe that this is reasonable. There are countless industries that I think should have similar cottage exceptions.
Stimulate is the wrong word here. To avoid harming small businesses regulations usually need to exclude them completely or at least don't put the same regulatory burden on them. But with all that lobbying and regulatory capture harming small businesses is the whole point of regulations.
>The fundamental problem here is that laws and regulations written to deter some megacorp from systemically being sleazy to make a buck apply equally to small businesses.
I don't think that's the _fundamental_ problem, because there are problems leading to that. Capitalism strongly incentivizes against respecting externalities, and regulations are the only effective tool we've found to stop us from (more aggressively) killing ourselves for profit.
That regulations have a cost and this strangles smaller businesses is a serious problem, but the regulations are usually solving an even more serious problem. A more fundamental issue is simply that capitalism left unchecked incentivizes behaviours which are crippling, while checking capitalism to prevent this causes powerful inefficiencies to form.
I don't know if there's a good answer here. Having regulations not apply to small businesses doesn't work, because small businesses are not intrinsically more likely to act against their own financial interests in order to respect externalities than large businesses are.
Then you will have big players like Uber that abuse subcontractors who are small businesses.
Perhaps the model of "run a business" is wrong altogether?
Or maybe a simple check... Margin cap.
Capping margins is liable to not harm efficiency at all but might instead freeze out some sectors from the market... Hard choices.
Big Corporations helped introduce/fuel more Rules & Regulations to impede smaller rivals who could less afford them.
The Government comes out with some new Rules and Regulations that become Law and will cost you a substantial amount of money year after year creating a more difficult business environment and directly affecting your profitability. In most cases Big Corp will actually support and help implement these new Rules and Regulations knowing full well they can shoulder the additional expense and you can't. Eventually driving you out of the market. This happens with a lot of small businesses. The cost of entry is prohibitive.
How competitive is capitalsim anyway? What's the best measure for it?
When I look out in the economy I see massive industries that are being protected by their governments for various reasons: some of it political, some of it effective lobbying.
In many sectors private companies are building off of a platform that their government has provided for them. For instance, the NIH is a major contributor to pharmaceutical research, yet once a new drug comes to market, the profits all go to the private company and the tax payer is essentially charged twice for access to the drug (cost of research and cost to buy the drug).
I had one idea of what a free market was growing up, but as I've learned more about the global economy it seems like the idea of a free market was just a clever ruse.
"How competitive is capitalsim anyway? What's the best measure for it?"
I look at stuff like this among a group of suppliers:
1. What suppliers offer in terms of product, capabilities, etc should be going up.
2. If comparing two versions of something in No 1 overtime, then...
2.1. Quality/reliability/security should go up over time.
2.2. Price should go down.
3. Customer service should improve over time given it's an easy differentiator.
4. Convenience of any aspect of the business should go up over time. Low-hassle in general.
You'll find in monopolies or cartelized oligopolies that these are all bad or move super slowly in a way that keeps everyone high margin. In highly competitive industries, things move fast with many players having low margin.
In general the lower, the more competitive. Historical average in US is 8.5%, 9-10% more recently. This is pretty competitive! Although a bit less recently because profit margins went up ~1.5%.
This is also, generally, why different industries have different profit margins. Here, its even more obvious.
Google/Amazon/Facebook/Netflix/Microsoft can drop a few million bucks on a team of developers trying to squeeze some lemon for an additional drop of juice. I've been on teams before where a 1% increase in success of our software would pay for the team twice over. There were dozens of teams beside us all doing the same thing.
A small business competing in the same market cannot do that, and so they find themselves fighting a far more efficient giant.
Interesting article. I wonder if anything major happened in the world around the early 90's that could help explain why the big winners around the world were suddenly able to use their economies of scale to grow even larger over the next three decades...
At its best, regulatory capture is a mean to achieve basic quality assurance; at its worst, it is a fence to protect the richest. Our mileage may vary, we see the world through our own experience and rightly so.
Some people's core ideological beliefs are structured around the idea that free market capitalism is the best economic system, and they perhaps find it uncomfortable when those beliefs are challenged.
How much of a role does secret government intervention play?
That is, we know the US government interferes in markets in secret. There have been lots of revelations in the past few years about how the CIA boosted jazz and modern art during the 50s to appear new and modern relative to communist countries of the day. The NSA advised the creators of DES about how to make it better. There have almost certainly been other secret and larger interventions.
Has the CIA/NSA/whatever intervened to an extent that the resulting markets are inefficient?
We'll probably never know, but my guess would be that at least secret interventions have favored certain companies to the detriment of others in the same market.
Readit News
I can't turn my hobby/side gig into a small business without navigating a bunch of bureaucracy to obtain 9001 permits, some of which are inevitable "may issue". Assuming I made it through that I'd be subject to all sorts of government oversight to the point where I either have to sink all the resources I would spend growing my business on compliance or just not think about it and hope that by the time anyone notices my business is big enough to afford the cost of compliance. For programmers, lawyers and other occupations that don't deal with physical things the issue isn't as big but for blue collar businesses this is a big deal. You literally cannot hope to comply with everything when you're in the boostrap phase and that dissuades a lot of people from striking out on their own.
The fundamental problem here is that laws and regulations written to deter some mega-corp from systemically being sleazy to make a buck apply equally to small businesses. turns out it's only the mega-corps that have the economics of scale to make compliance possible while still making a profit.
Have you experienced this first hand? In my experience, this gets overstated by those who think any regulation is burdensome. Even the crazy regulatory environments I've been in (like the CO marijuana industry requires separate, complete audit trails of each individual plant "from seed to sale"), the regulations really aren't that bad to comply with. The same people who were complaining about the regs were also complaining about how they had to have benefits for full time employees and the like. There's a very vocal "society shouldn't stop me from making a buck" crowd.
And on top of that, I'm afraid that these people will remove a lot of the good regulation we've built up over the past century as new ways to screw over the public have been discovered.
Maybe to stimulate small businesses, the government could advise business owners how to navigate these regs, something like a social worker for a business?
I don't think that's the _fundamental_ problem, because there are problems leading to that. Capitalism strongly incentivizes against respecting externalities, and regulations are the only effective tool we've found to stop us from (more aggressively) killing ourselves for profit.
That regulations have a cost and this strangles smaller businesses is a serious problem, but the regulations are usually solving an even more serious problem. A more fundamental issue is simply that capitalism left unchecked incentivizes behaviours which are crippling, while checking capitalism to prevent this causes powerful inefficiencies to form.
I don't know if there's a good answer here. Having regulations not apply to small businesses doesn't work, because small businesses are not intrinsically more likely to act against their own financial interests in order to respect externalities than large businesses are.
Perhaps the model of "run a business" is wrong altogether? Or maybe a simple check... Margin cap. Capping margins is liable to not harm efficiency at all but might instead freeze out some sectors from the market... Hard choices.
Big Corporations helped introduce/fuel more Rules & Regulations to impede smaller rivals who could less afford them.
The Government comes out with some new Rules and Regulations that become Law and will cost you a substantial amount of money year after year creating a more difficult business environment and directly affecting your profitability. In most cases Big Corp will actually support and help implement these new Rules and Regulations knowing full well they can shoulder the additional expense and you can't. Eventually driving you out of the market. This happens with a lot of small businesses. The cost of entry is prohibitive.
Dead Comment
When I look out in the economy I see massive industries that are being protected by their governments for various reasons: some of it political, some of it effective lobbying.
In many sectors private companies are building off of a platform that their government has provided for them. For instance, the NIH is a major contributor to pharmaceutical research, yet once a new drug comes to market, the profits all go to the private company and the tax payer is essentially charged twice for access to the drug (cost of research and cost to buy the drug).
I had one idea of what a free market was growing up, but as I've learned more about the global economy it seems like the idea of a free market was just a clever ruse.
I look at stuff like this among a group of suppliers:
1. What suppliers offer in terms of product, capabilities, etc should be going up.
2. If comparing two versions of something in No 1 overtime, then...
3. Customer service should improve over time given it's an easy differentiator.4. Convenience of any aspect of the business should go up over time. Low-hassle in general.
You'll find in monopolies or cartelized oligopolies that these are all bad or move super slowly in a way that keeps everyone high margin. In highly competitive industries, things move fast with many players having low margin.
In general the lower, the more competitive. Historical average in US is 8.5%, 9-10% more recently. This is pretty competitive! Although a bit less recently because profit margins went up ~1.5%.
This is also, generally, why different industries have different profit margins. Here, its even more obvious.
Google/Amazon/Facebook/Netflix/Microsoft can drop a few million bucks on a team of developers trying to squeeze some lemon for an additional drop of juice. I've been on teams before where a 1% increase in success of our software would pay for the team twice over. There were dozens of teams beside us all doing the same thing.
A small business competing in the same market cannot do that, and so they find themselves fighting a far more efficient giant.
1 - https://news.ycombinator.com/newsguidelines.html
That is, we know the US government interferes in markets in secret. There have been lots of revelations in the past few years about how the CIA boosted jazz and modern art during the 50s to appear new and modern relative to communist countries of the day. The NSA advised the creators of DES about how to make it better. There have almost certainly been other secret and larger interventions.
Has the CIA/NSA/whatever intervened to an extent that the resulting markets are inefficient?
We'll probably never know, but my guess would be that at least secret interventions have favored certain companies to the detriment of others in the same market.