Clearer Thinking with Spencer Greenberg Why capitalism doesn't live up to its promises (with Martin Schmalz)
Dec 14, 2022
Martin Schmalz, a finance and economics professor at Oxford, delves into capitalism's shortcomings. He discusses how common ownership stifles competition and innovation, using the airline industry as a case study. Schmalz critiques ESG initiatives and argues for stronger regulations to address social issues. The conversation also explores the complexities of corporate responsibility and the pressures facing politicians. Finally, he examines the transformative potential of AI while cautioning against biases inherent in its applications.
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Common Ownership and Competition
- Modern finance allows investors to own stakes in competing firms, hindering traditional competition.
- This common ownership incentivizes companies to behave like divisions of a monopoly, not competitors.
Luxottica Monopoly
- Martin Schmalz encountered an airport full of seemingly different sunglass shops, all owned by Luxottica.
- This illustrates how apparent market diversity can mask underlying monopolies.
Barriers to Entry
- Large companies use vertical integration and regulatory barriers to stifle competition.
- Startups struggle, and when they succeed, they might get acquired, limiting their market impact.