My degree is in marketing, but I took a number of economics courses in college as part of the curriculum. We were taught that free markets are characterized by level playing fields, equal opportunity, and that people make rational choices based on their own best interest. Even then, I wondered if economists had ever actually run a business, participated in the free market, or associated with real human beings. Now that I’ve been running businesses of my own for the last 15 years, I know that most have not.
There’s one thing you need to know about markets, above all else, if you’re going to start a business (online or off): markets are brutal. Free markets aren’t characterized by level playing fields or equal opportunity. They’re characterized by survival of the fittest. In the free market, advantage almost always goes to those with the most money and power. There is opportunity for all, and ideas do matter. But it’s very heavily skewed in favor of entrenched players. For the little guy, an uphill battle is often fought against the big guy running downhill.
Markets vs. Government
I was having an email conversation with someone who said the choice between Obama and Romney is a choice based on one’s faith in either government or the market. He said more or less, if you’ve got more faith in government, Obama is your man. If you’ve got more faith in the free market, Romney is your man.
I don’t have faith in anything, much less government or the free market. But I do know that markets don’t care. Markets don’t care if a kid’s parents don’t have enough money to buy him an education. Markets don’t care if you get sick and don’t have money or insurance. And they don’t care if you were born in a poor, uneducated family. In the survival-of-the-fittest nature of markets, if you’re not born in the right family, right place, and right time, the odds are against you. Markets don’t give a shit.
In the free market, money and power rule. Those with the most money and power control the game and how it’s played. At least in theory, in a democratic society, government is controlled equally by all people, regardless of money or power. One person, one vote. Of course that’s not exactly how it works in reality. Those with money and power buy control of government, too. But governments are different. Governments do care. They do provide education (poor as it often may be) that the markets will not…for those with little to no money. They do provide health care and food for those where markets would not. And so on.
The free market is brutally competitive. People and companies will step on you, steel your ideas, and rip you off. If you list your products for sale on Amazon for example, they’ll use your data to see what’s selling, go direct to the source and sell as your competitor, then undercut your prices and sell at a loss just to drive you out of business. And when you’re gone, they’ll bring the prices right back up to where you were selling.
I’ve got a GoPro Camera and love it. What a great idea. The other day I went to an electronics store and saw two knock offs that looked exactly the same other than having one button in a different place and a different brand name. The free market doesn’t give a shit.
Only a person who has never actually participated in the market would want society to be governed by market forces. Survival of the fittest is anarchy.
David vs. Goliath
There is a way for small players to win in a market often dominated by big brands. The tagline for this site, “nibble your way to the top”, hints at it. Small players are more mobile, can usually move quicker, and adapt quicker. Small players can keep their expenses down and minimize risk in a way that big players can’t. With low expenses and high flexibility, we can move from one thing to the next as doors open and close around us. But most people won’t do this. Most small businesses will fail quickly.
Sun Tzu says you need to know your enemy and yourself, and you need to know the terrain. The playing field isn’t level. It’s massively slanted. But there are some paths that aren’t blocked by the big guys, and those are the paths you need to find. It’s easier to run past Goliath and let some other David fight him while you continue running further and further towards the top.
If you work hard and get lucky you may be able to get so far up that field that you end up in a rich-get-richer re-enforcing circle. Just remember what it took to get there, the people that helped you along the way, and those who can’t get there, too. If you do get to the point of massive scale and riches, you won’t be earning your money anymore. Others will be helping to earn it for you. No one does it alone.