SpaceX is mainly alive because NASA/government poured tons of money in it, so not exactly the best example:
"As a company, their total contracts are worth $12 billion including commercial satellite launches as well as NASA and U.S. government missions. Of that total, $5.5 billion is from government contracts from NASA and the Air Force."
Basically what could have been done (and was done, and reached the moon and built the space bus etc) on government money, is now paid to a private constructor to do (plus profits, minus the patents going to the state).
Indeed, SpaceX nearly went bankrupt in the early days because they couldn't get a contract until they successfully launched a rocket. That first contract after their first successful launch was from NASA.
NASA didn't do that out of the goodness of their hearts though. Pound-for-pound (which, to orbit is pretty pricey), SpaceX was cheaper.
Blue Origin, a different space corporation, was not even in consideration, but if they had something competitive, NASA would have considered their bid as well. (Tbc, Blue Origin isn't shooting for that market at all, so this is in no way a dig at them.)
>NASA didn't do that out of the goodness of their hearts though. Pound-for-pound (which, to orbit is pretty pricey), SpaceX was cheaper
Well, that's how you do it: you mismanage a state organization to make development costlier, and then you give the project + profits to private industry pals...
I knew that but I'm specifically asking about "starting a competitor often requires far more capital than the incumbents needed to reach their position", not where the money is coming from
>I'm specifically asking about "starting a competitor often requires far more capital than the incumbents needed to reach their position"
Well, isn't that self-evident? You can't beat Google or Amazon or Apple starting from the money Apple had at its times, or Amazon had when they started (adjust for inflation).
They have tons of billions of cash at hand to stomp on you, tons of special deals, economies of scale, can buy the best talent undercutting you, have friends in government and media, have huge network systems of third parties, and so on.
>And yet Apple beat IBM, DEC, HP, etc. which nobody anticipated.
In a totally different market. IBM wasn't making Apple I and II equivalents before, or Mac OS equivalents afterwards, and Apple wasn't making mainframes and workstations, and targeting enterprise (in fact, in the 90-96 period that it did try that, it almost tanked).
And the IBM PCs ended dominating the world (market share wise), IBM just didn't have exclusivity on building compatible devices.
But even all of those are beside the point: we're talking about now, not the 80s. At the time the home PC market didn't exist, companies started from scratch. And even enterprise computing (except for the big systems catered by IBM, DEC and co) was the Wild West.
It's like entering the search engine space in 1998 (when there were around 10 competing engines) vs today.
That's more about the poor performance of predictions. And a reminder that companies can and do fade.
Not really relevant as to whether a small company can beat an incumbent in their own game today. If Google fades eventually it wouldn't be because a new search company beat them at search, but because the industry changed and search is not longer as relevant, ad revenues are marginal, etc, for example.
> Not really relevant as to whether a small company can beat an incumbent in their own game today.
Except I've heard that argument for my entire life (I'm old). And it never pans out. Then there's a new crop of companies with "this time it's different". You can go back through a couple centuries of US companies and you'll find endless examples.
Yes that's exactly the point. The fiction under which corporations are granted their strange and powerful place in society, is that the invisible hand of the free market results in the best, floating to the top. Unfortunately, that invisible free hand is more imaginary than real, giving incumbents far more power than intended - assuming that you view pure competition as the ideal state, rather than a malignant state.
But they have to be different - that's how things improve. If they were exactly the same then what difference does it make for the consumer which product they buy? They're identical.
better, yes. the issue is that it has to be monumentally better in order to complete. Say I came up with a new algorithm for search, and an angel funded me at the same level that Google started off at. In order for MyNewSearchCo to be able to competitive, my algorithm needs to be 1,000% better; 10 or 50 or 100 percent isn't enough. Considering that I'd also have to build my own ad-network and crawl all of the Internet, I'm not sure it's even possible to compete at this point. Especially once Google sees me as a threat, the sheer amount of resources (and not just technical) they could bring to bear against a small dozen person start-up is ludicrous.
That is where the harm comes in - as a consumer, I'd love a 50% better search (insofar as thats readily quantifiable), but the current architecture of the market ends up preventing this from happening!
Most corporations aren't big and don't have a lot of power -- laundromats, machine tool manufacturers, and so many other businesses are formed as corporations (and not as sole proprietorships). How fictive is the invisible hand on that scale?
Lots of money confers lots of power, sure, though this is not anything peculiar to corporations. Corporations are a strange kind of ownership -- since shareholders "own" the corporation but have almost no control of it or any direct access to its assets -- but what is the "strange and powerful" place that corporations are granted?
Competing against price-cutting, product-dumping, employee-luring, FUD campaigns, bundling and tying, exclusive dealings arrangements, legislative lobbying, patent lawsuits, bribery, forced acquisitions (e.g., Luxottica & Oakley) and any of the numerous other tactics that are not "pure competition" but are and have been used against challengers, is exceedingly difficult.
Sneaking up under the radar, making a lateral move, or finding a patron or sweetheart deal as an entry into a market is frequently required. Microsoft's break was its exclusive, per-CPU licensing deal with IBM, later extended to other OEMs, and followed by bundling (Office) and tying/dumping (Internet Explorer). Government contracts (national, state, or local) can be a path. Emerging during a period of general economic panic works for others -- both Google and Facebook effectively emerged during financial squeezes (and legal impairments) on incumbents or potential spoilers (2001, 2007-8).
Bernhard J. Stern's "Resistances to the Adoption of Technological Innovations" (1935) details numerous instances and methods of such dirty tricks, and is rapidly becoming among my favourite references to these:
"As a company, their total contracts are worth $12 billion including commercial satellite launches as well as NASA and U.S. government missions. Of that total, $5.5 billion is from government contracts from NASA and the Air Force."
Basically what could have been done (and was done, and reached the moon and built the space bus etc) on government money, is now paid to a private constructor to do (plus profits, minus the patents going to the state).