Had to take my car in for service at a dealer the other day and found all the software systems were down and they were doing everything by pen and paper. The service guy said they'd been down for over a week and likely could be down for a few weeks more. A Russian hacker group called BlackSuit is behind the attack, apparently, it's nation wide, no doubt part of Russia's ongoing attack on our economy and elections, and also as it turns out part of the monopolizing private equity termite economics Matt Stoller has been chronicling for awhile now:
Monopolization and vulnerabilities to hacking go together, because monopolies produce poor quality software. And that’s the story with CDK Global and Reynolds [the auto industry data software firms recently hacked and shutdown]. The whole crisis was avoidable, because there were possible entrants into the market that could have forced them to offer better software at cheaper prices. “Anybody who knows anything about the conduct of American business,” historian Richard Hofstadter noted in 1964, “knows that the managers of the large corporations do their business with one eye constantly cast over their shoulders at the antitrust division.”
That’s no longer true. And Wood and Easterbrook, dancing to the tune of Scalia, butchered antitrust law, which led to CDK Global’s investment in lawyers instead of quality assurance engineers. And so now people can’t buy cars.
Bigger backdrop to this monopolizing private equity nightmare we find ourselves in:
Schumpeter hated antitrust law, arguing in his 1942 book Capitalism, Socialism, and Democracy that antitrust was foolish for two reasons. First, monopolists were inherently checked by the ever present potential of disruptive new technology. “A monopoly position is in general no cushion to sleep on,” he wrote, defending then-monopolist Alcoa in its ongoing antitrust litigation. “As it can be gained, so it can be retained only by alertness and energy.” And second, monopolies were the entities who delivered innovation precisely because their market power afforded them the luxury of long-term planning and investment. Big business is “the most powerful engine of progress… not only in spite of, but to a considerable extent through, this strategy which looks so restrictive when viewed in the individual case.”
The logic from Schumpeter to Trinko is direct. And yet, it’s also quite obviously wrong. From Boeing to Too Big to Fail banks, many examples, far beyond the CDK Global and Reynolds situation, where incumbents used their consolidated position to hinder innovation and lower quality, shows that Schumpeter’s thinking about commerce is both old and odd.
In other words, again, it is not the case that free markets, unfettered markets, maximize technological innovation but in fact in an effort to gain and secure market share often discourage or undermine innovation.
A Conservative SCOTUS is why you can't buy a car right now, @ Big by Matt Stoller
