From [Marc Abrams (950905.0020)]
Great Post Bill. Thanks for taking the time to formulate this post.
Without splitting hairs. I seem to disagree with you on one main point
Actually I'am not sure at this point if it is a disagreement.
[From Bill Powers (950904.0810 MDT)]
.... What happens is that the shop owners try to _avoid_ direct competition,
at least with respect to the main items that might bring people into the
I think shop owners are trying to both avoid _conflict_ and provide "more" of
what the customers want. I do not believe you can _eliminate_ competition. To
me competition is far more then simply competing for the "same" customers with
the "same goods". Ship Cruise lines are "competing" with other sources of
"vacation" and amusement sources, Not only other shipping lines. Providing
unique value DECREASES the chance for conflict but INCREASES the competitive
nature of the market place by having other firms scrambling to find a way to
provide unique values to the same set of customers or coming up with something
unique that would allow them to serve a segment that is either currently not
being served, or being served poorly.
Your definition of competition and mine seem to represent different things. I
could never equate your simple model, ie. All businesses compete with same
products for the same customers, with anything remotely resembling the real
world to me. From a modeling standpoint I could see why you would need to
define it that way. I just don't think it represents the real world.
My definition would in fact be "successful" competition = avoidance of
not conflict = competition.
The case of the Chinese restaurants illustrates the point. There were
four in Durango, each offering rather similar food, but with significant
variations: one was fast and cheap, another was slow but had a bigger
menu, another offered Korean food, too, and the fourth was more
expensive but had better food. Then a fifth restaurant opened much
farther from the center of town. It carried all the same food that the
others carried, more or less; it was cheap and fast; it offered some
non-Chinese food; and it had some gourmet specials at higher prices. It
went out of business because it was competing directly with four other
restaurants, and just being equal to them in their various specialties
wasn't enough to steal enough customers away. At least that's my guess.
How would one "know" that 4, not 5 or 3 would be the "optimum" number of
Resteraunts in town". What if a Vegatarian chinese restauraunt opened. Are
ther enough veggies in Durango to support it? what about others who out of
curiousity try it and like it and most of these people normaly would NOT eat
chinese food. You make the assumption that EVERYONE already eats in one of the
four existing restauraunts. I'am not saying your wrong. You very probably ARE
right, but you MAY not be. What if people like and go to more then one
restaurant. Not an uncommon thing to happen. Are THESE restaurants "competing"
for your business ? Yep. are they in conflict with one another? Maybe, but not
In technical terms, a given environment has only a certain number of
degrees of freedom in which it can be controlled by the actions we can
produce -- or rather, only a certain number that can be independently
controlled at the same time. If the number of independent controllers is
equal to or less than the available degrees of freedom, it is possible
for the controllers to select independent mixes of environmental
variables to control, with exactly the right mixes resulting in total
freedom from conflict. However, if there is just one more control system
than degrees of freedom, conflict is inevitable. The last system to be
added, the surplus one, finds itself in conflict with ALL the other
systems no matter how it tries to adjust the mix of variables it is
controlling. I think that could be what happened to the fifth Chinese
Please describe this in the context of the Chinese restaurants. If degrees of
freedom indicate "choices" on the part of potential customers, having multiple
choices sorta screws up the model doesn't it ? If your model does not account
for this possibility it certainly doesn't reflect "reality".
When you said that no company could be all things to all people, and
that companies looked for the needs of customers that they could meet,
you were implying a certain degree of flexibility in what a company
could claim as its product. A company will become successful when it
finds a mix of products that fits a certain segment of the demand.
Or finds a segment of demand and then produces a product or service. Either
But the unspoken aspect of this is that finding this particular
successful mix is largely a matter of discovering potential conflicts
and avoiding them.
Its not simply avoiding conflicts. The FOCUS, at least from my perspective is
providing VALUE. There is very little I can do about what anyone else does. I
Believe that if I do MY job (ie staying on top of what the customer wants and
providing it) There is very little I have to fear.
If a company finds itself in direct item by item
competition with another company, then everything I said about
competition would be true: for one company to win, the other must lose.
All successful businesses learn, whether they want to or not, that this
is a situation to be avoided unless what is wanted is an all-out war. An
all-out war will most likely put one company out of business and
possibly both. A company will enter into such a war only if it is sure
it will be the one that is left operating.
Yep, No argument here.
The point is not to compete, but to avoid
competing with the other companies. The one variable that would lead to
direct competition, price, is never mentioned in ads, and not only
because prices can change. Price wars have killed off enough gas
stations to make the operators avoid them by any means possible,
including collusion. Let just one station operator advertise gas for 10
cents per gallon less than the next guy, and disaster is around the
corner -- or arson.
Gee I hope you don't live near one of those Price wars have killed off any
number of businesses. Again, I believe you can avoid conflict (i.e. at least
most of the time). I do not believe you can avoid competing.
What the free market system offers is an opportunity for an entrepreneur
to find a niche by offering a mix of products and services that
satisfies the needs of some part of the population. But the
entrepreneur, to be successful, has to avoid direct competition as much
as possible. It isn't competition that makes the system work; it's the
ingenuity of people in finding combinations of goods and services to
sell which, ideally, are not to be found anywhere else -- certainly not
At another level, of course, the competition is always there. It can be
avoided only if the number of independent businesses remains below a
certain number. The staggering failure rate of new businesses, however,
shows that there are always more entrepreneurs trying to enter the
market than the market can sustain. There are not enough degrees of
freedom that actually matter to people to let everyone who wants to
start a small business (or probably a large one) find a niche without
coming into direct competition with another business that already
occupies an almost identical niche. And at a still higher level, the
Composite Consumer can spend only as much as it earns (in the long run),
and that is the pie that has to be divided among the entrepreneurs.
I don't believe that it is a matter of "degrees of freedom". I believe most
new business owners do NOT spend enough time researching thier prospective
customers and HOW they need to be serviced, if at all. Other then that How do
we disagree ?
Most of what I've been saying here is built on second-level facts and
until someone does the required research can be argued with. But I think
that the principles of control theory do have an application in economic
matters and could even teach us some things that haven't been understood
clearly before. The main new notion here is that the health of the
business community depends on the avoidance of direct competition,
because direct competition is simply conflict, and conflict prevents
control systems from working properly. There are many other
considerations involved in economic health, but I think this is a major
Again, I do not disagree, if our definitions of competition are the same.
Does "direct" competition and "not directly" competing "mean" the same thing?
Thanks again for a great Post.