This just isn't practical. What if I'm invested in Big Bank and Big Tech Co. but then Big Tech Co. creates a wallet app and credit card -- do I have to sell my ownership in one of these companies?
As an investor I definitely want to own companies that compete because I don't know which one is going to prevail. Owning just one of the companies doesn't really fix the problem either -- if I own only Pepsi does that mean I would want them to get into a price war with Coke?
No, company would have to split itself (create separated business entity) so you would have to sell your competing part of the company.
Such a change can also solve problem of companies using their dominant/monopolistic position in one business area to get unfair advantage in another.
> As an investor I definitely want to own companies that compete because I don't know which one is going to prevail.
That's the problem article describes! Such behavior reduces competition and hurts customers:
>> This line of research began with a 2014 paper about competition among U.S. airlines that quietly shook the fund industry and the antitrust world. José Azar, an economist at the University of Navarra in Barcelona, along with Martin Schmalz and Isabel Tecu, showed that airline ticket prices were 3% to 7% higher because big funds owned stakes in so many airlines.
How about categories that aren't cut and dry? Lets say the tech company develops an AI tool that banks could apply to track delinquent accounts. And a bank develops a regular tool to do the same? Is this something that warrants splitting your business? Do both split or just one of them? which one?
How do you police this? What about small companies? What about international companies? What about public funds that hold a bunch of companies?
I'm sorry but while there is clearly a problem to be solved, what you proposed is definitely not the solution.
This just isn't practical though. Apple/Google/Amazon/etc would have to be broken up for example.
> That's the problem article describes! Such behavior reduces competition and hurts customers.
Hedging shouldn't be illegal though. Let me buy both cows and chickens -- even though I don't know which people will want to eat later.
So happened with Standard Oil and others after antitrust laws were introduced. Was their split bad? Or impractical?
Don't you as a customer want Google and other companies to be splitted to AdWords, GoogleSearch, YouTube, Android, Waymo companies?
IMHO there shouldn't be Apple/Amazon/Google/IBM companies as they are today. I want Google and other companies be splitted to AdWords, GoogleSearch, YouTube, Android, Waymo companies. And they should not use their dominant/monopolistic position in search/ads areas to get unfair advantage in other areas.
So you would have to choose your investment between Android/Apple/WinMobile OS, AdWords/AdMob ads, Waymo/Cruise cars, Google/Yahoo/DuckDuckGo search, YouTube/Vimeo videos.
Is it? Article says that it can be bad for customers:
>> José Azar, an economist at the University of Navarra in Barcelona, along with Martin Schmalz and Isabel Tecu, showed that airline ticket prices were 3% to 7% higher because big funds owned stakes in so many airlines.
Your suggestion is for people to take big risks and put all their eggs in a few baskets. Not only is this totally opposed to why people make multiple investments, but doing so could make the market more volatile because any fluctuation or current event could encourage people to suddenly "switch sides".
> So the way we can solve this problem is to outlaw shares ownership of competing companies? Seems like a fair solution.
Nobody cares about Pepsi and Coca-Cola. Coca-Cola and Apple aren't competing, so if Coca-Cola can somehow be in the same index as Apple, and Apple gets 2x the return as Coca-Cola (which it does), which is what really makes the index look good against an average active picker (who doesn't pick Apple), it's a moot point who's allowed to own which shares in competing companies.
There are two real stories about indices. The first is [1] -- sorting the huge individual winners into different indices so that crappy companies, like Comcast and AT&T, can ride up on the demand for the index they are part of. Then there's [2] -- that most demand for individual stocks is the corporations themselves.
When you buy an individual stock versus an index with that stock, you're really making two bets: (1) a bet that there are an excess of individual stock pickers for this stock than for the indices it is part of, and (2) a bet on how much cash a company can get from consumers (even if it is a B2B company) to spend on buybacks in the long term. When you buy the index, you are betting that an industry or corporate class (e.g. large cap companies) are going to sort winners into the index more favorably and claim large amounts of consumer cash from outside that industry / low camp & mid cap stocks. [3]
There are negative trending industries! See S&P Oil and Gas Exploration. The article is talking about Coca-Cola and Pepsi, which do not create new products, they are marketing companies, it isn't about prices at all for them, it is such an utterly dumb example. She should be talking about two fracking companies, whose stock performance is extremely sensitive to oil prices.
The opposite of what the article thinks is happening: people are exiting common ownership of the companies (e.g. the S&P Oil and Gas Exploration index) that, as common owners, they have the most to gain from anti-trust (e.g. agreeing on a price for gas and oil).
[1] https://en.wikipedia.org/wiki/Communication_services_sector_... [2] https://thesoundingline.com/sp-500-buybacks-now-outpace-all-... [3] there are low and mid cap indices, but nobody ever talks about those outside of trade journals
> She might want Coca-Cola to take big risks to crush Pepsi, and invest capital in new products and markets to do so. An investor who holds both, on the other hand, would prefer that Coke and Pepsi avoid price wars.
So the way we can solve this problem is to outlaw shares ownership of competing companies? Seems like a fair solution.