Thinking about the effect of competition on our business

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Just started Peter Thiel’s book about start-ups.

Among the more interesting arguments in the book is about competition. Thiel argues that competition is a bad thing for businesses, because economic theory teaches us that, in competitive markets, profit is competed down to zero.

Instead of entering into competitive markets, Thiel advises striking out into new territory, with the aim of building a monopoly business, the kind that reliably generates excess profits.

We’re in an incredibly competitive market. Anyone can just jump right in and compete with me for deals, driving up the prices I have to pay. And obviously there are thousands of apartments competing with my buildings for occupants, driving down the rent I can charge.

Still, so far, we’ve been able to generate excess profits, but I have no idea whether that is a sustainable state-of-affairs.

So I’m going to spend some time over the next few weeks thinking about whether there are opportunities to erect some additional barriers to entry around our business.

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