brock on Nostr: No I don’t…that’s one of the biggest knocks against deflation and a fully ...
No I don’t…that’s one of the biggest knocks against deflation and a fully competitive market. It doesn’t encourage investors to take on the upfront investment in projects, new technologies, ventures.
In the corporate world, you make every operational decision on a “money forward” basis. It doesn’t matter that you built an apartment complex for $50M and need $3000/mo for rent to pay back the investors. If the market can’t support $3000/mo but instead offers $2500/mo, the operator of that facility (in consultation with the investors) will charge $2500/mo.
Another example, railroads. If a company owns the only line from A-B, it has a geographically protected monopoly and has a huge windfall. If a competitor comes in to build a competitive line A-B, not only is the monopoly destroyed but the value either can charge is determined by the cost charged by the other company.
We see the same dynamic around gas stations.
Once the capital is spent, it is mostly irrelevant to the operational decisions going forward.
In the corporate world, you make every operational decision on a “money forward” basis. It doesn’t matter that you built an apartment complex for $50M and need $3000/mo for rent to pay back the investors. If the market can’t support $3000/mo but instead offers $2500/mo, the operator of that facility (in consultation with the investors) will charge $2500/mo.
Another example, railroads. If a company owns the only line from A-B, it has a geographically protected monopoly and has a huge windfall. If a competitor comes in to build a competitive line A-B, not only is the monopoly destroyed but the value either can charge is determined by the cost charged by the other company.
We see the same dynamic around gas stations.
Once the capital is spent, it is mostly irrelevant to the operational decisions going forward.