When markets are viewed as being produced rather than acquired (Marketing) an Objectivist entrepreneur’s view of competition changes dramatically from the norm. Competitors are not viewed as enterprises one attempts to destroy but rather surpass and potentially replace. This may or may not result in another enterprise failing. This is sometimes referred to as “creative destruction”, a phrase coined by Joseph A Schumpeter in reference to Capitalism.
“At the heart of Capitalism is creative destruction. “
Joseph A. Schumpeter
However, destroying competitors is not the Objectivist entrepreneur’s goal. Even the phrase “creative destruction” isn’t entirely correct. Creative indifference would be a more appropriate phrase. By creating new products that are better, cheaper, and faster or through innovation entirely different the entrepreneur’s objective is not to destroy other enterprises. They are simply pursuing their own creative ambitions indifferent to the impact it may have on other enterprises.
This was the theme of the movie “Other People’s Money” when Danny DiVeto spoke about the end of buggy whip manufacturers. Long ago there was no doubt numerous buggy whip manufacturers. And no doubt the last one made a better buggy whip than anyone else. But when that last one went out of business as well it wasn’t because their buggy whip wasn’t the best. Their business was replaced not destroyed by the innovation of automobiles, indifferent to the fact it was rendering buggy whips for horse carriages redundant.
An even more important point to recognize, when a new innovative enterprise replaces another, is that new innovative enterprise is not even the actual cause of that enterprise failing and should not be the focus of any criticism if other enterprises do fail. Here is a case in point. Amazon is often criticized for the failing of “brick and mortar” businesses they have replaced through Internet sales. But such criticism is undeserved. In a free market, customer choice determines which businesses survive and which fail, not Amazon. The same applies for any entrepreneur with a new innovative enterprise. It is customers who have decided to buy one product in lieu of other alternatives that result in those businesses failing when customers no longer choose to buy them.
This does not mean an entrepreneur should ignore potential competition. An entrepreneur should never ignore the possibility that some other entrepreneur has created or will create a product that is not just superior but perhaps entirely different to what they have produced and replace it. Innovation and innovators never rest. When it occurs an Objectivist entrepreneur does not hate competition for doing so but admires it, learns from it, and seeks to outperform it yet again. Perhaps they will recognize a way to do it better and thus improve their product. But this usually results in a small temporary gain. It is far superior, as Steve Jobs said, “to do it differently.” Again, markets are produced; they are not acquired. An entrepreneur that produces a new and innovative product produces a new market for which there is no competition.
“You can’t look at the competition and say you’re going to do it better. You have to look at the competition and say you’re going to do it differently.”
Steve Jobs
Even for the most innovate product, for which there are no initial competitors there always remains one. As customers assess and choose from all the products available to them they can always decide to not choose it. Customers deciding not to buy the product an entrepreneur has created because they do not value it sufficiently is the potential competitor no entrepreneur can escape from. Ultimately this means there is only one real competitor to an entrepreneur, them self and their ability to create a products of sufficient value to customers they will purchase it.
“I am not in competition with anyone by myself. My goal is to improve myself continuously.”
Bill Gates
Unfortunately, when an enterprise fails to produce products of sufficient value, they often lobby governments for subsidies and regulations to limit competition rather than compete with it. Also lobbying politicians is often considered less expensive than innovating new products. Subsidies give unfair price advantage to favored enterprises creating a barrier to entry for more innovative ones. And regulations create another barrier to entry through a morass of conflicting and confusing articles difficult for an entrepreneur to even comprehend yet alone comply with. Both cripple innovation and produce stagnation.
“You’re gouging on you prices if you charge more than the rest, but it’s unfair competition if you thinking you can charge less. But just in case there’s any doubt, and to help avoid confusion, don’t try to charge the same price, as that would be collusion.”
R.W. Grant “The Incredible Bread Machine”
As tempting as it might be and as beneficial as subsides and regulations might appear, all such attempts to stifle competition ultimately fail. Innovation ultimately prevails because customers always seek out and ultimately demand better products. But more importantly, the real danger of pursuing such privileges is, favors that are arbitrarily granted by government can be just as arbitrarily withdrawn. An enterprise that depends on subsidies or regulations to remain viable may suddenly collapse if those subsidies are removed. For both reasons continuously innovating products that customers want is a far more reliable means for achieving long term success and viability.
An Objectivist Entrepreneur continuously seeks to innovate new products by not just being better but different, thereby creating new products in new markets for which there are no competitors. As Individualists in pursuit of their own rational self-interests they are not concerned about the failure of other enterprises they replace. They are indifferent to them, realizing that success is determined by the choices customers make in a free market. A choice they have earned and strive to retain, not through government subsidies and regulations but through continuous innovation. By so doing they realize the only real competitor they have is them self.
“Productive work is the road of man’s unlimited achievement and calls upon the highest attributes of his character: his creative ability, his ambitiousness, his self-assertiveness, his refusal to bear uncontested disasters, his dedication to the goal of reshaping the earth in the image of his values.”
Ayn Rand