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Mika Achieving Sustainable Margins Through Monopoly In general, in business strategic thinking, sustainably high margins are thought to be achieved through monopoly status. Famously, Peter Thiel has said that companies should strive to monopolize a market in order to capture a high percentage of the value they produce. There is still an implied denial of this as a truth when people criticize companies as services companies to imply that margins will not be high sustainably even though the company in question has some kind of monopoly. One example of this is Palantir in the years before 2024, which was a monopoly, but many did still not expect them to have high margins long-term. I agree that having something approximating a monopoly is a necessary but not sufficient condition for sustainably high margins: Looking at this from the perspective of the Austrian school of economics and especially Rothbard's Man, Economy and State, this becomes clear. The book states, correctly, that all income from the sale of a product is split between land (permanent resources) and labor factors, interest (uniform across the economy) and entrepreneurial profit and loss. The most confusing feature about this is that entrepreneurial profit and loss is not defined as profits in the sense of accounting (Revenue - Cost), but as the gain or loss through good or bad foresight and risk taking. This means that when someone has good foresight and reveals an unmet market need other capitalists (in the case of a natural monopoly only the initial capitalist) will increase the supply of the product until their margin reaches the uniform interest rate, because the increased supply still produces more profit for the entrepreneur than any other investment, so it is only rational to suppress margins to increase profits. Then the question becomes: If profits are transitory and the interest rate is uniform across the economy, how can a companies like Google or Apple have sustained high margins above the interest rate? The answer is that their profits in the sense of accounting come mainly from produced land. Land in the economic sense is defined as a valuable asset, which does not need maintenance to be valuable. The easiest examples of this are network effects and switching costs, but I could go into more detail on all of Helmer's 7 powers. Now in order for this produced land to be extraordinarily valuable (e.g. Google, Apple), as is the case with any asset, the supply of this type of land or relatively close substitutes has to be limited. And this is where the Thiel's monopoly feature or Helmer's powers come in. This means that companies looking for sustainably high margins have to create (or buy at a cheap price) a permanently productive asset, which doesn't need maintenance, and which by the structure of the industry makes competing exceedingly difficult (network effects etc.).

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