Friday, March 8, 2013

Entrepreneurs or thieves?

David Henderson has a good article on the so-called robber barons, a derogative term that became popular only in the 1930s. He notes that those who complained about Rockefeller and Carnegie were not their consumers but their competitors.

The technological breakthroughs of the second half of the 19th century created economies of scale in petroleum, railroads, and steel production. Someone was going to take advantage of these economies, and it turned out that Rockerfeller and Carnegie were the people at the right place with the right skills. But if they had not been there, someone else would have done something similar. Bill Gates in the 20th century is similar case, though it was network economies that he exploited rather than economies of scale. It was inevitable that the business world would standardize on some operating system, and if Microsoft had not offered one, someone else would have developed or offered one. (IBM totally bungled the introduction of their PC--they did not realize it at the time, but they destroyed themselves when they did not control both chips and operating system.) Microsoft has kept its dominance by being smart enough to copy Apple--many others would quickly have lost dominance by being less astute than Microsoft has been.


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