> But in most industries, economists Germán Gutiérrez and Thomas Philippon believe, this process has broken down. In a new paper, they attempted to measure how much new business entry responded to the market opportunity available in an industry. Gutiérrez and Philippon used a measure called Tobin’s Q, which represents the ratio of a company’s market value to the book value of the company's assets. When Q is high, it should mean that new competitors have an opportunity to come in and take some of the profits in that industry, thus reducing existing companies’ price premium and bringing Q down. Indeed, the authors found that this was common up until the late 1990s. But after 2000 -- right around the same time that profits started to rise to unprecedented levels -- the relationship broke down. High Q levels no longer seem to attract new market entrants.
It's the ratio of market value to book value. Hasn't book value become less reliable in the age of software? They mention 2000 as the somewhat mysterious starting point of unprecedented profit levels. Doesn't seem so mysterious if 2000 was when companies starting adopting technology more intensively.
Untrue if you're entering say the car repair, grocery stores, heavy machinery, food production, etc etc.
So many days business are branded and everything that isn't has had it's margins shrunk to zero. You can't drop in replacements for FAANG or Microsoft or a whole lot of consumer products because they aren't and can't be commodities as they have set themselves up as walled gardens.
Good for business, investors, and valued employees. Bad for consumers.
Lack of interoperability or replacibility is the monopoly of the 21st century and when we get past it we'll be in the beginnings of a post scarcity economy.
Closed Data - controlled by monopolies, and generated by the enclosure and privatisation of user activity - is far more of an issue than Closed Source ever was.
How much of that is due to robots doing more work? Modern solutions like mostly automated server farms, factories and warehouses generates quite a lot of value. Who enjoys the fruits of robot labor? The people who owns the robots. Robots are not means of production, they don't make people more efficient, they just replaces people.
Example: we replace all cashiers at McDonalds with robots, does that make every other worker more productive? No. The people who own those robots reaps the profits. Can't the workers strike to get better wages now that there is more profits to go around? No, we happen to have a lot of newly unemployed cashiers who would gladly take your job from you!
The point of this article is to complicate that very narrative by identifying how increased regulations actually serve the interests of concentrated wealth.
First, it shows that corporate profits fluctuate between 5-10% of GDP since 1947? The article paints that as "less for everyone else"--but it seems like a lot for everyone else.
Second, it cites a study, but then immediately admits it "should be taken with a grain of salt" because it refers to a hypothetical model without necessarily connecting it to the actual economy or ruling out alternative explanations. But then it proceeds to take the assumption that corporations are "extracting economic rents" as a given.
It cites the decline in labor share of income: https://www.kansascityfed.org/~/media/images/publications/re.... It tries to link that to rent extraction, but the timing is peculiar: https://www.mckinsey.com/featured-insights/employment-and-gr....
Given the narrative of rent extraction, you'd expect the declines in labor share of income to have happened during the long period of deregulation, reduced antitrust enforcement, etc., starting in the 1970s. But labor share of income was 65% in 1950, and 63% in 2000. It's 57% today, and the vast majority of the decline happened in the last two decades.
Most of the decline is the result of a handful of sectors: https://www.mckinsey.com/featured-insights/employment-and-gr.... Half of them are ones where technology has turned workers into commodities, like retail, or where technology enables massive productivity without much labor, like internet or software.