Who Doesn’t Want a Drawbridge Sometimes?—Aaron Miller

 

In Ed Driscoll’s latest podcast, James briefly describes what he calls “the drawbridge effect”: successful business owners using their acquired power and resources to prevent others from following their success. Is this scenario truly common? If it is common, is it as selfish as it first appears?

Imagine that you could afford to build a house on a beautiful secluded beach. Soon others discover that shore and more houses are built. Then the condos and hotels come, along with little tourist shops and restaurants. Eventually, home owners are driven out by rising property taxes. Those that remain are faced with a very different beach experience than the one they bought into.

Those early home owners were not buying just any beach. The seclusion was what attracted them. They wanted to sit on their balconies and admire nature, not tourists strolling by. They wanted to casually stroll the sand in search of shells, not race out at sunrise to compete with other shell hunters. They wanted to drive a quiet, uninterrupted road surrounded by dunes and sea oats, not a road packed with traffic and stoplights amid skyscrapers and shopping malls. Most of all, they wanted somewhere they could afford to remain (remember those property taxes). 

A simpler example might be a swimming pool. After a point, the more people who use the pool simultaneously, the less attractive it becomes.

When others mimic our accomplishments or activities, those enjoyments do not always remain unchanged. The nature of what we have acquired or built can become very different than the goal we pursued.

I suspect that is as true of business ventures as of property ownership. I welcome examples from your own experience.

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  1. user_1184 Member
    user_1184
    @MarkWilson

    Aaron Miller: Is this scenario truly common? If it is common, is it as selfish as it first appears?

    Whether it is natural is a different question from whether it is selfish.  I agree with your post that it’s perfectly natural to sometimes want exclusivity.  But for something like a beach, of which there are a finite number in the world, you have no right or, arguably, even a reasonable expectation that you should be able to have it to yourself unless you own it outright.  The price of exclusivity is rightly higher.

    • #1
  2. Mike H Coolidge
    Mike H
    @MikeH

    Our country has a major drawbridge most people approve of: immigration regulation.

    As for the business drawbridge effect; it is greatly enhanced by government intervention. It’s really difficult to stop others from competing with you when you don’t have the government to regulate them out of business.

    If you own 100% market share, and a competitor comes along to take 1%, leaving you with 99%, you may have the resources to take a loss, but it hurts you proportionally. If you sell your widget for $1 below cost to try to put them out of business, you lose $99 for every $1 of the startup. This is unsustainable over a long enough time frame, and often the competitor could simply lower/stop production temporarily while you bleed money.

    That is, unless government comes along and enforces standards and licensing regulations (to protect consumers of course), in which case the large company is safe from most competition. And the consumers are saved from choice, improvement, and downward price pressure.

    • #2
  3. user_240173 Contributor
    user_240173
    @FrankSoto

    I have nothing to add, I’m just getting into the habit of commenting when I  read something I like, so that the author gets some positive feedback.

    • #3
  4. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Aaron Miller:

    Those early home owners were not buying just any beach. The seclusion was what attracted them.

    Wanting exclusivity and seclusion is perfectly natural, but, as Mark said, guaranteeing it comes at a price – or perhaps more vividly, a risk.

    Early beachfront owners could have secured seclusion by buying huge swaths of the beach and then enforcing his right against trespassers. If this was unaffordable for prospective owners individually, prospective owners could have banded together to purchase the land as a corporation, making their own private, secluded park or rustic development. Of course, in buying up extra land like this, early settlers run the risk of having wasted money if this particular beachfront never attracts later settlers. 

    The flipside of this is that early settlers who don’t buy up extra property in order to secure their seclusion run the risk of later settlers spoiling their seclusion – but they also pay a discounted price relative to those who buy large swaths of land in order to secure their seclusion.

    It’s a gamble either way. You decide with the resources and information you have available to you at the time and hope for the best.

    • #4
  5. Percival Thatcher
    Percival
    @Percival

    …and a barbican, and a bent entrance, and a portcullis, and a couple of towers supporting the gatehouse…

    • #5
  6. Mike H Coolidge
    Mike H
    @MikeH

    Midget Faded Rattlesnake: The flipside of this is that early settlers who don’t buy up extra property in order to secure their seclusion run the risk of later settlers spoiling their seclusion – but they also pay a discounted price relative to those who buy large swaths of land in order to secure their seclusion.

     Not to mention, when the area is “ruined,” their property values have probably skyrocketed, giving them the opportunity to cash out and move to another secluded beach.

    • #6
  7. user_1184 Member
    user_1184
    @MarkWilson

    Mike H: Not to mention, when the area is “ruined,” their property values have probably skyrocketed, giving them the opportunity to cash out and move to another secluded beach.

    Or move to Colorado and pay cash over market value for their new house, inflating the local market for all those people who just wanted a “secluded” place in view of the Rocky Mountains.

    • #7
  8. user_1938 Inactive
    user_1938
    @AaronMiller

    As usual, I’ve distracted from my main point by lingering too long on an example.

    Agreed, there is no right to seclusion except by acquiring surrounding properties. There is no right to a secluded pool except by buying the pool. Though, in either case, one may request consideration from other potential users. Laws are not the sum of civilization.

    We might consider how this relationship changes in regard to public vs private property. It’s generally agreed among conservatives that our national government currently declares parkland too commonly, for the wrong reasons, and with too harsh restrictions (sometimes to the point of making “public” a misnomer). Yet the general concept of nature parks remains popular on both sides of the aisle.

    That said, my primary interest is how this general idea about the subjectively negative effects of widespread participation might apply to business development.

    We accept that, however unfortunate for others, a property owner may ethically prevent surrounding development by purchasing those properties as well. Is it ever acceptable for a business owner to similarly deter access to his “turf”? Or is product/service competition too different from property competition for a similar scenario to arise?

    Does this tie into monopoly regulations? I have long thought that behaviors which get massive corporations into trouble are often accepted on a smaller, more local scale.

    • #8
  9. user_1184 Member
    user_1184
    @MarkWilson

    Aaron Miller: “the drawbridge effect”: successful business owners using their acquired power and resources to prevent others from following their success.

    Are you talking about rent-seeking?  Or something else?

    • #9
  10. Midget Faded Rattlesnake Contributor
    Midget Faded Rattlesnake
    @Midge

    Aaron Miller:

    We accept that, however unfortunate for others, a property owner may ethically prevent surrounding development by purchasing those properties as well. Is it ever acceptable for a business owner to similarly deter access to his “turf”? Or is product/service competition too different from property competition for a similar scenario to arise?

    You mean in the form of intellectual property rights (copyrights and patents)? Yes, absolutely. There is some dispute over where, exactly, it’s optimal to put the boundaries of intellectual property, especially when it comes to patents. But that there should be some boundaries defining intellectual property is not too controversial, I think.

    • #10
  11. user_1938 Inactive
    user_1938
    @AaronMiller

    Mark Wilson:

    Aaron Miller: “the drawbridge effect”: successful business owners using their acquired power and resources to prevent others from following their success.

    Are you talking about rent-seeking? Or something else?

    Midget Faded Rattlesnake: You mean in the form of intellectual property rights (copyrights and patents)?

    I didn’t have anything particular in mind. I just figured it’s human nature to seek control of one’s environment (political, natural, economic, you name it) and other people frequently spoil those plans.

    Ricochetti come from such a variety of experiences and perspectives that I was sure y’all would respond to a general challenge with plenty of specifics.

    • #11
  12. user_92524 Member
    user_92524
    @TonyMartyr

    Aaron Miller: I have long thought that behaviors which get massive corporations into trouble are often accepted on a smaller, more local scale.

     Absolutely right – the urge to lock others out of the nice thing we’ve found goes very deep in all of us.   While the distinctions can sometimes be arguable (Intellectual Property, mentioned above, is a good example), and we need to have due regard to important concepts like “private property”, we all need to look closely at our motives whenever we start getting too precious about “our” ideas, places and things.

    • #12
  13. user_1184 Member
    user_1184
    @MarkWilson

    You mean in the form of intellectual property rights (copyrights and patents)? Yes, absolutely. There is some dispute over where, exactly, it’s optimal to put the boundaries of intellectual property, especially when it comes to patents. But that there should be some boundaries defining intellectual property is not too controversial, I think.
    (C) 2014 Mark Wilson

    • #13
  14. Jimmy Carter Member
    Jimmy Carter
    @JimmyCarter

    To hell with a drawbridge. I prefer armed turrets for My castle. That would deter the condos, hotels, tourist shops, restaurants….

    • #14
  15. user_92524 Member
    user_92524
    @TonyMartyr

    …and if you want large scale examples, the Common Agricultural Policy of the EU, which almost single-handedly keeps Africa in poverty to protect the lifestyle of French & German farmers.
    On the more personal scale, we moved about 3 years ago into a nice hills suburb, lots of vacant bush – lovely.   But more and more of that vacant land is being built on, and I look around and lament my amenity.  Then I wake up, and get over it.

    • #15
  16. user_11047 Inactive
    user_11047
    @barbaralydick

    Mike H: If you sell your widget for $1 below cost

     That’s called Planned Bankruptcy and anyone engaged in this is fated to break even when hell freezes over.

    And you are correct about large businesses lobbying for (actually, writing) regs that would put smaller competition out of business.  It has become one helluva’ marketing tool. 

    • #16
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