That is, there is a kind of natural selection at work, and corporations – especially those in expensive developed countries – without some special insulation from upstart competition, or benefiting from barriers to entry, will not be able to stay strongly profitable, because some cheaper copycat abroad will be able to arbitrage and eat their lunch.
So, the survivors will all have a special something. A good and classic candidate for one of those special somethings is “positive economies of scale / scope” which includes matters related to “network effects.”
In addition, we should consider the “social norms” multiplier effect on networks.
By this I mean, not doing things because of connections/compatibility (network effects) but doing things (buying particular products) because your community, peer group, etc. do. Or using a particular service out of habit (see amazon prime…)
Girard would say that we want things because our peers want them. The trick for the business offering X is to convince you that all of your peers really want X. Tesla has been successful at that among the tech crowd.
Also, I think that high-quality management is a source of competitive advantage. And that tends to promote concentration, because the firms that are less well managed fall by the wayside.
“Get Rents or Die” is a good slogan for the concept.
That may be an accurate statement about Girard, but I think it’s not a fully accurate description of what’s going on.
Let’s say you notice everyone in a crowd facing the same way. If all you could observe was the fact of the crowd coordination – say, a photo taken of the crowd with the camera pointed away from the object of focus – then you could interpret that as being due to the object’s inherent character which even a solitary individual would stare at in the same way (say, an entertaining fireworks display), or Girardian social imitation, almost arbitrary and entirely dependent on social context. A foreign traveler on a short business trip might join the crowd for a good fireworks display, not because of the crowd, but because of the fireworks.
When it comes to bandwagon social psychology and the “bootstrapping cool” marketing strategy, it’s not just about manufacturing perceptions of what ones peers want, because those common wants are a consequence of common agreement regarding what’s cool. There is a subtle but important distinction here, because what’s cool isn’t entirely dependent on one’s reference social group unless it’s extremely insular and isolated. There are also something like giant signal flares going up, in terms of constant exposure to signals of what is high status in the broader culture and society.
So, the general idea is to convince people that those signal flares about what high status people consume have already gone up, they are “genuine”, and that all the people the members of the target audience want to impress have already seen and been influenced by them.
I think that high-quality management is a source of competitive advantage.
That doesn’t seem like a falsifiable hypothesis, unless you have some definition of “high-quality management” that is distinct from “management of a company that performs well, thereby demonstrating competitive advantage”.
My default assumption is that to the extent that good managers can be identified and/or trained, they already are (i.e. that the market for management skill is approximately efficient). Do you suspect otherwise? If so, why?
“Corporate profits as percentage of Gross Domestic Profit (GDP) are near record highs and labor’s share of GDP is near record lows. ” <<
To shareholder decision makers, corporate profits are the key way to judge the quality of management, because that's also the goal of management. For all other goals, the long term reason this alternative goal is "good" is because of higher profits.
The failure, if any, is that more people are looking to be top & middle executives, which they feel will be lower risk, than starting new businesses.
If we need changes, and I think some would improve the situation, they should be aimed at increasing the attractiveness of starting your own small business. Yet one of the key ways is … the hope of being bought out by an already existing monster company.
I *think* there is more at work here than what Girard (or Veblen) would imply.
In particular, changes have costs. And if the costs – be they monetary, time, mental, social, whatever – outweigh the perceived benefits, there will be resistence to the change.
This resistence to change can create a kind of self imposed rent lock in.
Which might be summed up as “I bought an iphone because the person I want to date bought an iphone, and later, learning android was way too much effort, so I bought another iphone. Then apple started charging me $1 per month to keep using what I’d already paid for, but it was so little money I just paid it rather than learn android.”