Magazine

Table: Practice Won't Make Perfect


Here's what can go wrong in industries with increasing returns to scale, such as telecom, airlines, and utilities

WINNER-TAKE-ALL INVESTING

In the boom phase, businesses race each other to build capacity, hoping dominance will eventually translate into profits.

MARKET-SHARE WARS

In the transitional phase, prices begin to fall as companies seek higher sales volumes. It's tempting to cut prices because the cost of producing additional units is very low. But prices become too low to cover huge fixed costs.

BANKRUPTCIES

In the bust phase, bankers and shareholders pull the plug on companies that can't make money. Even well-run, promising businesses can't get funded. Capacity falls to the point where prices rise. The cycle is ready to repeat itself.


Race, Class, and the Future of Ferguson
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