[geoffbrown2014]

One minor point of clarification on airline profitability. It wasn't competition that bankrupt them it was government regulation. Airlines were heavily regulated for many years and their ticket prices were set by regulators. Huge incentives were created for executives to not invest in fuel efficient new planes and capital equipment. When labor union contracts exploded with benefits and deregulation came, the legacy airlines could not compete with the new arrivals.

Technically speaking several airlines have remained profitable for many years without going bankrupt. Southwest comes to mind with a 40+ year profitability streak. Even if they went bankrupt now I would consider them a financial success.

I find him an engaging speaker and I'm not even refuting his point, but perhaps a better choice of industries would make his point clearer.

[tim333]

>several airlines have remained profitable

Thiel's point is that the industry as a whole in not especially profitable if at all. This has been true in most countries where there is free competition. In a competitive market you would expect the best companies to to make money and the least good to lose it or go bust.

Here's some Buffett quoteing on the matter:

>Back in ’95 in an interview with UNC TV, Buffett pointed out that the airline business in the U.S. “has made no money.”

>Thanks to Wilbur and Orville Wright and their adventures on the Outer Banks, North Carolina is known as “first in flight.” But Buffett didn’t let that history stop him from making a sarcastic remark about investors’ attitude toward the Wrights.

>“If there had been a capitalist down there, the guy would have shot down Wilbur,” Buffett said. “One small step for mankind, and one huge step for capitalism.”

He was joking or course. Interestingly Buffett has returned to aviation but with a business that is what Thiel would call a monopoly - Netjets. They have the vast majority of the fractional private jet rental business.

[geoffbrown2014]

For airlines it must have been hard to capture much of the x value they created when someone else was in control of their y. ;)

I think computer hardware (especially memory or hard drives) would be a better historical industry to point to for incredible value created and precious little retained due to a hyper competitive market.

[ThomPete]

I am always reminded of Branson being asked about how to become a millionaire to which he replied "You start as a billionaire and then buy an airline"

I think Theils point was that even those airlines that do survive makes no profit.

[geoffbrown2014]

This reminds me of the old farmer saw. A farmer was asked what he would do with a millions dollars. His answer: Keep farming until it was gone. :)