Deregulation

Deregulation is the lifting or easing of government regulations in a given industry. Usually this is done to make that industry more competitive, and to boost economic growth. It was needed because...well...we had abusers.

Take monopolies, for example. The common wisdom among most voting public kind of people is that monopolies are bad and evil and awful.

Why?

Because they can charge anything they want for whatever product they have with no competition to, uh…keep ‘em honest. Microsoft via their Windows operating system was the greatest monopoly in history, and for a long time, the company had massive profit margins…until the internet more or less became the operating system along with all the tools needed, pretty much for free.

The entropy it took to maintain the Windows monopoly along with regulatory friction killed Microsoft’s monopoly, and that was that. But for a while, Microsoft had some 50 percent net profit margins…about 5 times the margins of even the best S&P 500 companies. It's worth noting that Coca-Cola and Pepsi have what is called a duopoly; the two of them together would be essentially a monopoly of soda, but they collude on pricing and terms and elbow out any would-be third competitor.

So their margins are high… about 25%, or about half of what monopoly profit margins give. So that’s the "bad stuff" a monopoly brings: unfair advantage. But if you were a shareholder of Microsoft in the 80s and the first half of the 90s, you’d be tickled. Had you owned 100 shares of that awesome monopoly in 1984 and held them 15 years, your original investment of $1,000 would have turned into something like half a million bucks.

So…monopolies…what's so bad about making big money? Oh, and here’s another thing to think about. AT&T. The big T on the Big Board. T was the big monopoly before Microsoft, and it owned local and long distance carriage of phone calls for half a century, give or take. It had obscene profits in large part by virtue of the U.S. Government granting them federal licenses to operate in various areas in whatever form they needed to wire our country.

But a number of good things came from this monopoly—one thing being that AT&T never cut its dividend like most of the other companies did during the Great Depression, and not cutting that dividend literally saved the lives of hundreds of thousands of Americans who lived on it for luxuries like heat, food, rent, and so on.

Additionally, as part of the monopoly handshake, AT&T was required to wire rural America. Remote farmers. If even one home existed 40 miles from pretty much nowhere, ATT had to string wires on poles allllll the way to DeadEndsVille and get that home wired. Without monopoly level profits gained from more dense population areas, AT&T never would have had the money-or-desire to spend the few hundred grand it took to connect that lone farm house in the boonies to The Grid.

Why was that so important?

Well, eventually that lone farm house mated with another farm house and there were 2, then 5, then 20, then 300. Having ubiquitous connection of every living human being in the country “said something” about the U.S. of A…that we took care of all of our people, whether city slicker or redneck…and allowed everyone to share in the opportunities provided by a fancy, new technological marvel like the telephone.

So are monopolies good? Bad? Lukewarm? Hard to say.