There’s book from the 2000’s called “The Management Myth” by Stewart on my bookshelf. It didn’t sell all that well, but it’s an important book because it explains what management science is really about.

Stewart was a consultant, he reported from the belly of the beast.

Here’s the short of it: while Economics is crap, it is right about a few things, and one of those is that actual competitive markets have almost no profits.

A competitive market has:

  • low barriers to entry
  • many buyers and sellers
  • no one with pricing power,
  • and products are similar, meaning not identical but that competitors can quickly catch up with any advances.

If you’re a businessman, you don’t want to be in a market like this. You won’t make much money. Nor do you want to be in a regulated market where they attempt to make sure that anyone who has pricing power or another “moat” as they like to call it these days doesn’t make huge profits although more than in a competitive market. This is how the West was run between about 1933 to 1979. If your market was competitive, other than baseline rules, you were left alone. If it wasn’t, you were regulated. The most extreme case was usually utilities, which made x% (usually about five percent) profit a year. Not more. Not less.

Anyway, this sucks ass if you want to be as filthy rich as mud wrestlers are dirty.

So what Western businessmen (and a few women, but mostly men) did was take over government and dismantle all the rules and regulations intended to make sure that monopolies and oligopolies and so on didn’t form, and that if they did, they were regulated to protect consumers.

And now companies make MASSIVE profits. It’s sweet.

Except in China, where they mostly don’t. China’s notorious for having a low ROI.

That’s because China runs competitive markets or regulated markets, and very little in between. The CPC is on this like Nancy Pelosi trading inside information. They put CEOs in prison. They execute them. They regulate. You will compete, and if you disobey the law in a way that becomes big enough to notice, they will suggest you come in for a nice little chat.

There’s some talk that China’s low ROI is a “crisis”. And it could maybe bit a little higher. But only a little, to help avoid a deflationary depression trap (see “Great Depression.”)

But if China tackles this by allowing competitive markets to become un-competitive they’ll lose the juggernaut that is crushing industries in the rest of the world. People buy Chinese because it’s cheaper, and sometimes better. Product cycles are blazing fast, everyone’s cutting prices and improving models. This is why China has cars for under $20K—they aren’t able to charge oligopoly pricing. This is also why you can’t buy Chinese cars in America or much of Europe, because Western car makers would wind up like Carthage: burned to the ground, with the earth salted.

To simplify, but not to over-simplify, America and the West lost their lead because their businesses wanted to make lots and lots of money, so they destroyed competitive markets. This is also why you see this happening as the wave of MBAs and quants and other people who know nothing about product but have studies management science take over from the Engineers as CEOs.

Your economy can make lots of profits, or it can be competitive and thus keep prices low for consumers. It cannot do both. Pick one.

BYD also sells a LOT more cars, their revenue is only comparable with Tesla because Teslas cost MUCH more.

Anyway, if you want the details, read the book, though it’s somewhat out of date now, it gets the basics down better than any other one I’ve read. And since prices keep going up, and since this blog is free to read, perhaps consider subscribing or donating. I promise the money is only, occasionally, wasted on eating something nice and buying books. No I don’t have a book problem. Why are you looking at me like that?