[rayiner]

My developing theory is that monopolies can be great for innovation. What do ATT, Google, Xerox, and the old HP have on common? They are/were, if not outright monopolies, insulated from competition by virtue of network effects, brand or trademark monopolies, or simply a lack of competent competition. They weren't like the Acers of world, in highly competitive markets, struggling to make 1-2% profits on their revenues. They had steady sources of cash from products that had little market competition.

This allowed them to bankroll things like Bell Labs and Xerox PARC. Freed from living on the margin, they had the security to invest in blue sky projects.

[punkghetto]

What do ATT, Google, Xerox, and the old HP have on common? - They wer innovative market leaders of there time. They invested further in monetizing their successful business models. ATT&T has managed to continue to be a big player in telecoms and Google, much younger than the others is still incredibly relevant. But being a monopoly does not encourage innovation, although it can provide the financing. being a monopoly instead incentives protectionist behaviour to maintain the status quo 'cash cow'. Eventually however, unless protected by government intervention, monopolies fall or shift to new entrants. The only way to combat that is to look to the future and try and ride the next wave. Google's support of investing in 'moonshots' is really necessary to ensure they stay relevant, otherwise at some point they will become irrelevant.

[rayiner]

> They wer innovative market leaders of there time.

Since adding the "innovative" begs he question, let's rephrase it to "They were market leaders of their time." But lots of companies are market leaders. HP of today and Dell are market leaders of the PC industry, yet show almost no innovation.

My point is that competition, in the sense of the economic force that drives marginal profits towards zero, discourages innovation, at least in the short term, because it forces companies to be preoccupied with immediate survival, instead of allowing them to plan ahead to the future.

[Nimi]

I thought it's part of established economic theory that monopolies have an incentive to invest in infrastructure, as they are best positioned to reap the results.

Explains Google's Internet balloons, and many other investments.

[amitagrawal]

Adam Smith would disagree.