Every business that is made is made with the purpose of making a product, or performing a service, in order to make money and become successful. Success however, is hard to measure and so most companies try to grow as large and make as much money as they possibly can. So at one end of this spectrum there is of course a company with a product/service (or maybe more than one), yet with no clientele, and, therefore, no money. On the other end is a company with products/services, all of the clientele available for their goods, and, therefore, as much money as they wish to make. The latter company was allowed to exist in decades past as monopolies and trusts such as AT&T, Microsoft,and RCA. However, the government would end up finding them in violation of anti-trust laws and proceed to break them apart. With these companies as examples, the goal of big business is to get as close to a monopoly or trust as possible while still having enough inter-company competition to be deemed legal.
Tim Wu, the author of The Master Switch: The Rise & Fall of Information Empires, writes about such companies as AT&T and RCA and their histories. These companies were founded upon innovations and inventions such as the telephone and radio respectively. While they were founded on innovation, once in operation these companies demonstrated that they would attempt to stifle any so called "disruptive technology" that came about. As David Sarnoff, president of RCA, said to the inventor of FM radio as he persuaded him to keep quiet about the new technology, "...this is no ordinary invention. This is a revolution." (Wu, pg. 127)
So my question is, why would a company founded on, and made successful by, a certain innovation then refuse to continue to innovate? Obviously there are some advantages, in the business sense, to holding a technology back for a little while in order to fully reap the rewards of an older technology. But the thing is, when is the perfect time to introduce a new product? Is it as soon as it is invented in order to capitalize on the exclusivity of the good or is it 60 years after the discovery (as was the case with answering machine and magnetic storage)?
It would seem that there are really two options then for companies, refuse to innovate and allow a technology to go, fundamentally, unchanged for decades or continue to develop new technology and adapt along with it. As is seen in Wu's description of "the Cycle" an un-innovative company, in the end, does not survive. AT&T allowed no outside tampering any aspect of its phone service, even suing a company over the production of a plastic cup telephone silencing device. In the end, the company was broken apart into many pieces.
While RCA was also an example of a monopoly and they too refused to innovate on some things (FM radio), Sarnoff and company made the wise decision of incorporating television into its business instead of keeping it off the market altogether. Because they did not come up with the technology first (not the case with FM radio) they ended up having to fight off many other companies for the ability to be the major distributor of televisions and its service in the country, delaying the broad use of television by several years and HD quality television for many, many, more.
So as is seen with both examples, the company that innovates generally succeeds and the one that doesn't general dies away. However, it can be noted that society is hurt by both of these options. In both, historically significant technologies are not developed for decades, hindering the overall technological growth of a nation. The way that the United States tries to insure this does not happen is to promote, and institute, a capitalistic economy.
The capitalistic style economy that the Unites States offers helps with the development of new technology, that monopolies tend to stifle, in that companies are forced (sometimes literally) to compete with other companies. This competition leads to these new technologies and discoveries so that one company can get a leg up on the other. The older, outdated, un-innovative companies are forced out of business and the world goes on, better without them.
Still, even though we do not think of any of today's companies as being a monopoly, there are industries where there are only a few very large companies who control and entire product/service and share some similarities with trusts. For example telephone service is mainly controlled by AT&T, Verizon, Sprint, and T-Mobile (the first three being the largest). With so few companies controlling so much there really isn't a lot of competition that can take place, and therefore not a lot of innovation. Will Wu's "Cycle" go around?
Interesting post, I really liked how you broadened your argument to the multiple firms that Wu presents in his book. I'm also enjoyed reading your paragraph on how these preactices still affect us today (3nd to last) and your conclusion about competition being the reason for Americas growth today. I do slightly disagree with your final point in your last paragraph about todays telephone companies however. Even though they are corporate giants, I still feel there is healthy technology growth and competition between them. Phone netword today are constantly expanding and look at the smart phone growth under the industry, even if there wasn't and industry defining inventions under them.
ReplyDeleteYou asked, "why would a company founded on, and made successful by, a certain innovation then refuse to continue to innovate?"
ReplyDeleteTelecom companies fear that demon from their own labs overturning billions in previously made investments. It makes a sort of twisted sense. I suppose I like Google so much because they try just about anything and only kill projects, like their virtual world Lively, when the product patently fails in the marketplace.
Brett is correct...for now. We have a good range of competitors for phone service. My fees from Verizon are reasonable for phone and FIOS.
My fear is that we only have two choices for high-speed Internet because of the cable or fiber infrastructure: Comcast and Verizon in this part of the US. Some places only have one high-speed provider.
One wonders if a really fast wireless service would ever come out of their labs, if it has been invented. It would make FIOS and cable technologies quickly obsolete.
I'd argue that we'd never know until a disruptive challenger shook things up, much as Japan's automakers shook up Detroit. Our Telecom giants could then unleash those discoveries waiting in their R&D shops.
It took millions of Prius and Ford Escape hybrids to get GM to launch the Volt, and even Toyota held back on plug-in Prius cars until Nissan stole a march on them with its Leaf.