Thread by @hughhowey

A thread to address Drew's very important question here. He's asking this in response to my claim that competition is a temporarily necessary evil that we should do away with as soon as possible.

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https://twitter.com/DrewMelbourne/status/1638215952725581831

Competition has served a vital role in determining prices, demand, levels of service, etc. for a long time. It's been so useful in so many ways that it has become entrenched as an Objectively Good Thing.

But it's not. Competition is a stopgap until better tools emerge.

The end of competition will be better data. For a long time, the only way to determine messy and complex factors like optimal pricing and what services to offer has been to fill the market with options and see which ones get more votes in the form of dollars.

Ten restaurants open in town on the whims and tastes of the owners and based on their informed (or uninformed) speculation about size, location, offerings, staffing, etc. Time passes and eight of the restaurants fail. New entrants emerge. Only the best survive.

We focus on the winners, but the cost to the losers is enormous. Competition is the old dog-eat-dog canard, and who wants to see dogs die? If there's a better way than watching EIGHTY PERCENT of restaurants fail in the first five years, we will adopt it.

cnbc.com/2016/01/20/her….

In the very near future, we will have data tools that drastically cut these failure rates and reduce competition. You will ask these tools what kind of restaurant is most likely to succeed. It will look at bookings in your area, takeout and delivery data, google searches, etc.

It will know what property is available for lease, what the profit margins on the menu will be, what the staff costs will be, how much runway you have personally for risk, how best to market, and also how many people are using the same tools at the same time to prevent overlap.

The people who use these tools will have greater success than the people who open a business based on their whims, personal tastes, advice from friends and family, etc. The data will just be BETTER. Eventually, no one will consider NOT using these tools.

An example I often give is GPS. Even if you know your hometown, you are a fool to drive a long distance through it without turning on this amazing data dispensing device. It knows if there's a wreck or slowdown for construction. You will get there faster if you use the tool.

This is one of many ways that we've handed over our decision making to machines that have access to better data. Once we know they do it better, we stop attempting to go the messy ways of old. This is how we will eventually get a planned economy.

Planned economies are anathema due to their past failures, but they were attempted in an age of poor data combined with overconfidence of engineering. And yet, the foundational idea was sound: if you know the optimum price, you don't need businesses to fail in order to find it.

Folks who adhere to competition as the best and only way to discover optimum prices are saying that even with a billion computers all more powerful than the human brain, there is no distant future in which pricing models will get better than an 80% fail rate. Which is absurd.

The adoration of competition points to a wider problem in general: our belief that great tools can't be improved upon. Capitalism and democracy are other examples. They solved enormous problems. The idea that we should stop progress is more than funny, it's ironic.

The truth is that competition will be its own demise. A better way will emerge, and the messiness of competition as it is employed today will not survive.

What I find funny is that those who adore competition are the first to abhor any other entrant into its sphere. 😂

/END