Thursday, March 19

The Vanderbilt Axiom

The easiest competition to compete against is a government subsidized one. This might seem counter intuitive since your competition is either getting preferential treatment, subsidies or both, yet the truth continues to make itself felt even today. GM and Chrysler both got bailout money. Ford turned in down. Who is in the best position? Ford.

This is the Vanderbilt Axiom. In the 1800s Vanderbilt took on government granted ferry and train monopolies. In almost every instance he beat them by offering better service for less cost. He was a strong supporter of the free market and would often start business initiatives just to prove his point that individuals work better than the government in running businesses. 

The reason for this is evident in the recent outrage over AIG bonuses. The company is probably right in needing to give out large bonuses to keep many of its talented employees, but once you are a government business (AIG is 80% owned by the government) or even get large government funds, you have to follow the rules of government bureaucracy. Government bureaucrats are not paid according to ability, but by rules of equality. The objectives are driven by polls. The difference is GM vs. Ford today.