Permission to Compete

In 2014 the Wall Street Journal published Peter Thiel under the headline “Competition Is for Losers.” The advice: build a monopoly. The essay came from Zero to One, startup culture’s nearest thing to scripture, which holds that monopoly is the condition of every successful business. Every founder I know has read it. Most of us believed it.

The book it argues with came out in 1776. We remember Adam Smith as the prophet of the free market. But the villain of The Wealth of Nations is not the state, it is the seller who no longer has to compete. People of the same trade seldom meet, he wrote, without the conversation ending in a conspiracy against the public. He spent the book on a chartered monopoly.

We swapped that enemy for a more convenient one. Capitalism’s opposite became communism, so a market’s health read off how little the state sat in it. One test breaks the framing. Ask which of the two largest economies follows Thiel’s advice. The country whose industries have concentrated for a quarter century, whose courts just declined to break up its search monopoly, is the capitalist one. The other makes 32% of the world’s manufactured goods to America’s 15%.

Americans prefer three explanations: cheap labor, stolen designs, state money. All three are real. None explains why the money built companies instead of monuments. Chenggang Xu found the answer in a structure. Beijing controls promotions. Provinces, cities and counties run the economy and compete for performance rankings. Hongbin Li and Li-An Zhou checked every provincial leader from 1979 to 1995: promotion rose with growth, dismissal fell with it. A Chinese mayor runs on a regional sales manager’s incentive.

China treats competition as infrastructure. Wanting electric cars, Beijing declined to pick a champion. It spent $231 billion between 2009 and 2023 on rebates, tax breaks, chargers and research, and let anyone who could raise money enter. More than 500 startups registered. By 2024, 129 brands sold cars. Then Beijing let them fight. In May 2025 BYD cut prices on 22 models by up to 34%, dropping its cheapest car to $7,800. Of thirty dedicated EV makers, three made money last year.

Solar ran the script a decade earlier. China makes more than 80% of the world’s panels, and module prices fell 89% between 2010 and 2024. The world got cheap electricity and the shareholders paid for it. Then the state came for its winners. In November 2020, two days before the largest IPO in history, regulators suspended Ant Group’s listing. Five months later Alibaba paid $2.8 billion for forcing merchants onto its platform alone. Ask when Washington last did that to a company it liked.

America ran the experiment the other way. Over 75% of US industries have grown more concentrated since the late 1990s, and the firms in them earn higher margins with no gain in efficiency. In 1978, 13.7% of American firms were less than a year old. By 2010, 7.6%. The pandemic produced a record 5.7 million business applications in 2025 and far fewer actual employers.

Thomas Philippon moved from France and watched the two countries trade places. He puts American prices 7% above where competition would hold them, costing the median household $300 a month. His earlier work killed the standard defense: concentrated industries invest less. In September 2025 the judge who found Google guilty of monopolizing search declined to make it sell Chrome, writing that the government had overreached. A communist state cut down its own monopoly. A capitalist court left one standing.

The usual word for China’s advantage is deregulation. Wrong word. China regulates plenty. What it declines to charge for is the right to exist. The American variable is the same one, moving the other way. In 1978 new plants were 10.9% of American manufacturing establishments. In 2023, 6.9%, against 10.6% economy-wide. Manufacturing firms fell from 285,962 in 2000 to 220,696 in 2023.

Procedure closed part of the door. The environmental review a large plant triggers averaged 4.5 years between 2010 and 2018. A chip fab took 665 days to build here in the 1990s and 918 in the 2010s, while China’s fell to 675. Intel announced Ohio fabs for 2025 and now expects 2030. Help closed the rest. In June 2025 the tariff on steel and aluminum doubled to 50%, four months after the exemption process closed. It protects the firm making steel and taxes every firm building with it.

So who gets in? The American manufacturers everyone can name did not start with a loan and a lease. Hadrian, which makes aerospace parts, raised $1.37 billion in August. Anduril, which makes weapons, raised $5 billion in May. You have to arrive the size of the incumbent to compete with it, and a market whose only entrants are monopolies in waiting will produce monopolies.

If any industry was going to be a natural monopoly, this was it. Training GPT-4 cost an estimated $78 million, Gemini Ultra $191 million, Grok 4 about $500 million last year. Four or five labs could pay that, one company made the chips they paid with, and America’s plan for AI was Thiel’s plan: a moat wide enough to end the question.

Then on January 20, 2025, a Chinese company that began as a hedge fund’s side project released a reasoning model with open weights. A week later Nvidia lost $589 billion in a day, the largest loss any company has taken. For a fixed level of capability, running a language model gets ten times cheaper each year. Alibaba’s open Qwen models passed Meta’s Llama in downloads that September, and Chinese models took 41% of all downloads on Hugging Face last year. The country supposedly incapable of the frontier made the product a commodity.

When intelligence costs what electricity costs, its value moves to whatever stays scarce beside it. An open market competes that away too, and the gain lands in the price the customer pays. A closed market keeps it scarce by law: the license, the permit, the default placement. Whoever holds one takes the dividend. The lawyer whose signature the filing requires keeps the hour the model saved. AI does not decide who gets its value. The market it lands in decides.

Beijing now thinks it went too far. The Chinese word is involution: everyone runs harder, nobody moves. In June 2025 the People’s Daily gave its front page to breaking involution-style competition, and Beijing has since drafted a ban on selling below cost. The auto industry’s margin hit 2.4% in July. About thirty EV makers have gone bankrupt. In January the same government blocked the polysilicon industry’s plan to idle a third of its capacity, calling it a cartel.

Competition without a floor destroys profit as surely as monopoly destroys everything else. The question is who captures the surplus. China’s answer: the customer, at the shareholder’s expense. America’s: the shareholder, at everyone else’s.

Two kinds of market remain. The first you can enter and cannot hold. Software is the extreme case, where anyone with a laptop builds in a weekend what took a funded team a year. The second you could hold and cannot enter: manufacturing, healthcare, anything behind a license. The barrier is already built. Find a market you can monopolize is the disease talking, and every founder who takes the advice is one more reason the next one cannot get in.

You sell in one market and you buy in a thousand. The rule that protects your job raises the price of everything you buy. The software to file your return costs almost nothing to run, and your fee has not moved. No competitor was allowed to undercut it. In 2025 the IRS ran a free filing service. 296,531 people used it and 94% rated it excellent or above average. That November the government shut it down, the year Intuit and H&R Block spent a record $7.1 million lobbying. You pay for that in a tax-prep fee.

The same rule sets your pay. It depends on how many employers compete for you. More than half of America’s local labor markets count as highly concentrated, and more than one in eight has a single dominant employer. Heavy concentration cuts posted wages 5% to 17%. The raise rarely comes from doing the job better. It comes from someone else bidding for your work, and one in five American workers has signed a paper promising to stop them.

None of this is a consumer choice. You cannot shop your way out of a market with one seller, or negotiate your way out of a town with one employer. Prices and wages are set before you reach them, by who was allowed in. When the cost of making something falls and the price does not, someone has permission to stop competing. Capitalism’s enemy is not the state, and it is not the other side of the world. It is the seller who no longer has to compete, and the permission that lets him stop.