On Why The Market Can Never Be Truly Transformative

In an expanded 'Spark in the Summer' interview with Tim Wu the issue of the cycle of monopolization was raised.  Wu made the argument that technologically based business cycles have a reliably predictable progression, from outsider innovation to a dominant market share, to beneficial 'golden age' monopoly, and finally to the kind of suppressive, exploitative monopoly more commonly understood by the term.  The interview is quite interesting, not least for bringing a few little tidbits to the attention that people might not otherwise know about.  For instance, the reason Bell initially tried to suppress the tape recorder and the answering machine; it's not for the reason you might think.

Did they see him coming?  Listen, and find out!

But what really caught my ear were Wu's comments about the non-profit and public sectors' roles in innovation and creation.  While acknowledging that 'golden age' monopolies have a great deal of money to spend on R&D, potentially making their service faster/cheaper/more efficient/smell like new car/etc., he also points out that universities and government-funded non-profit groups can do that sort of research just as well, and that those groups aren't limited by the overarching identity of their employer.  Businesses have their own market share to worry about, and little interest in introducing transformative technologies, because those are exactly the kinds of technologies that disrupt that very market share.  If a petrochemical company researcher discovered, by accident, a way to power an engine purely on potato peelings and dryer lint that company would sit on that technology until doomsday if it could.  Not because it's nefarious, but simply because it's entirely outside the scope of their business plan.  It would be silly to expect them to want to publicize that sort of research, as silly as expecting politicians to volunteer information about the 'other women' they've been seeing or the military to start handing out pamphlets outlining the strong and weak points on their APCs.  It's just fundamentally contrary to their purpose.

Which is not to say, however, that the only other answer is to somehow abolish capitalism, Star Trek-style.  Given that some resources must always be finite, even if it's just time and interest, there simply has to be a mechanism in place to direct the most efficient possible distribution of those resources.  You can usually tell a rather lazy science fiction writer by the absence of either the private sector (in a post-scarcity utopian system) or the government (in a grim and commercialized dystopian system).  To fully function, modern human society requires both of these things; heck, anything past basic hunter-gatherer society requires both these things, and even there you might need a kind of private sector to have someone making spears and arrowheads and flint knives and the like.

The world's first entrepreneur?  Or just a really bored caveman?  You decide!

The market is a strange beast.  It's impossible to argue, with any kind of intellectual honesty, that it hasn't done an amazing job of introducing, streamlining, perfecting and then replacing all manner of technologies and services.  To have gone from a steam engine so inefficient it was only worthwhile sitting at the mouth of a coal mine to nuclear technology, from the hand-delivered 'pony express' to email and FedEx, from computers that were just people with adding machines to computers that let a single person create an entire film on their own, from horses to electric cars, all in such an unbelievably short amount of time, societally speaking, is nothing less than a tribute to the sheer power and ingenuity a free market makes available.  At the same time, however, many of the most fundamentally transformative technologies were either first invented by the non-profit sector or made possible only by government grants and guarantees, simply because nobody else would fund things with so little obvious potential pay-off.  The market has a great eye for tomorrow, as it were, but can't for the life of it see next week.