Aging Capriciously

For the past fifty years, American business has been quietly—but steadily—consolidating.   Companies have merged, industries have shrunk in number, and economic power has increasingly concentrated in fewer hands.   To many Americans, this trend is largely invisible.  After all, prices at Walmart seem reasonable, Amazon delivers quickly, and the shelves are still full.

So, what’s the problem?

To understand it, we need to look not at spreadsheets or stock prices—but at something far more familiar: a glass of beer.

The Beer Lesson

There was a time—not that long ago—when beer in America was dominated by just a few giants: Budweiser, Miller, and Coors.  Through decades of consolidation, these companies perfected large-scale brewing.  They made beer cheaper, more consistent, and widely available.  Before these decades of consolidation, we once had regional or even local brewers.  In RI, I remember Narragansett Brewery; in Texas, I remember the Lone Star Brewery; in Washington, I remember the Olympia Brewery and in Minnesota, I remember the Hamm’s Brewery.  These were not just names to me since each place was somewhere I was stationed while in the military.  Furthermore, being a dedicated beer drinker, I toured each of these breweries and got my free samples of beer.  Later on, I used to take my students to visit the Summit Brewery on 7^th street in St. Paul.  After a tour of the brewery, those who were old enough would be given three or four wooden nickels to “buy” a free beer with.  My students loved going on tours like this where they could experience reality.

Getting back to the consolidations and looking at them from a purely economic standpoint, this was a success story.  Economies of scale were working exactly as intended.

But something else happened.

Beer became… predictable.

Light.  Uniform.  Interchangeable.  I used to call them “piss” beers.  As all they were good for was pissing out after you drank too much and had a hangover.  If there was ever any proof needed, that Americans could be brainwashed, the beer commercials selling these “piss” beers should convince any skeptics.  Big macho football players selling Bud Light, Coors Light and Miller Light to legions of football fans to swill down while watching NFL games on Sunday.

In short, beer became a commodity.

Then, something interesting occurred.  Small, independent brewers began popping up across the country.  They experimented.  They took risks.  They brewed bold IPAs, rich stouts, sour ales—beers with character, identity, and local flavor.  I started drinking some of these in the mid-seventies at a local pub where I was living in River Falls, Wisconsin.  The more craft beers I drank, the more I liked them.  Not only was I drinking a wide variety of craft beers, but I started sampling beers from every country in the world.  On my last count, I have drank beer from over 80 countries.

And consumers responded. People who wanted beer with taste and variety.

The craft beer industry exploded—not because it was cheaper, but because it was better, more interesting, more alive.

Innovation did not come from the large, consolidated brewers.  It came from the margins.

A Pattern Bigger Than Beer

What happened in the beer industry is not an exception.  It is a pattern.  During my twenty years of management consulting, I watched this pattern reoccur many times in many different industries.

Across American business, we often see the same cycle:

1. Fragmentation – Many small players innovate and experiment
2. Consolidation – Larger firms absorb competitors and scale operations
3. Commoditization – Products become standardized and indistinguishable
4. Disruption – New entrants emerge with fresh ideas and restart the cycle

This pattern has played out in:

• Retail
• Technology
• Agriculture
• Media
• Healthcare

In each case, consolidation brings efficiency—but often at the cost of innovation and diversity.  Furthermore, efficiency is not always a sibling to effectiveness.  The cheapest cars may not be the most effective.  Efficiency comes from doing things right, but effectiveness comes from doing the right things.  Regard the prices of a vehicle today.  When are 500 hp vehicles effective?  There is a direct correlation with the HP of vehicles today and their prices.  The data shows that:

In statistical terms:

• Correlation: moderate to strong (≈ 0.6–0.8)
• But non-linear

What this means is that generally you are going to pay more for a vehicle with more HP.  The exceptions to this lie at the extremes.  Exotic cars will probably give you more HP, but you will pay more for the exclusivity of the vehicle than you do for the HP.  At the budget end of the spectrum, you get the most for your money.  Cars like: Ford Mustang GT and Chevrolet Camaro SS  Offer:

• ~450 hp
• ~$40k–$50k

These give the lowest cost per horsepower in the market.

The Illusion of “Low Prices”

Modern economic thinking tends to judge success by one primary measure: price.

If goods are cheaper, the system is working.
If prices are stable, consumers are benefiting.

But this way of thinking has a blind spot.

Low prices do not necessarily mean high value.

A system can produce:

• cheaper goods
• fewer choices
• less innovation
• weaker resilience

And still be considered “successful.”

This is the trade-off we rarely discuss.

What Changed in American Policy

In the early 20th century, antitrust laws were designed to prevent excessive concentration of power.  The concern wasn’t just about prices—it was about preserving competition itself.

Over time, that philosophy shifted.

Today, regulators tend to ask:

“Are prices low?”

Instead of:

“Is the market competitive?”

That change matters.

Because consolidation can suppress competition long before it raises prices.  By the time prices rise, the damage is already done.  What we have seen is the power of the modern corporation/conglomerate to manipulate economic policy so that they benefit in terms of being able to deliver low costs but not the innovation or effectiveness that consumers might need.  Unfortunately, people are more concerned with low prices than innovation or effectiveness.  Dr. Deming always said that people never asked for calculators or computers.  People generally cannot be good predictors of the future technologies that will someday become commodities.  All that the public wants and even demands is low prices.  If prices and inflation stay low, people are happy.  As soon as they start to go up, people want the heads of the politicians in office.  Economics becomes driven by political policies rather than economic choice.

A Systems View: Efficiency vs.  Vitality

From a systems perspective, consolidation does something very specific.

It optimizes for:

• efficiency
• consistency
• cost reduction

But it often weakens:

• adaptability
• creativity
• resilience
• effectiveness

In other words, the system becomes highly efficient—but less effective

And living systems—whether biological, social, or economic—depend on diversity and variation to remain healthy.

Innovation Lives at the Edges

The lesson from beer—and many other industries—is simple:

When economies of scale dominate a system, innovation migrates to the margins.

Large organizations are excellent at refining and scaling existing ideas.  But truly new ideas—disruptive, risky, unconventional—almost always come from smaller players operating outside the dominant system.

This is not a flaw.  It is a natural dynamic.

The problem arises when consolidation becomes so extensive that the margins themselves begin to disappear—or are quickly absorbed.

So, What Should We Care About?

This is not an argument against large companies.  Scale has real benefits:

• lower costs
• global reach
• investment in research and infrastructure

The issue is balance.

A healthy economy needs:

• large firms for efficiency
• small firms for innovation

When one side overwhelms the other, the system drifts out of balance.

A Different Way to Measure Success

Perhaps the deeper issue is how we define economic success.

For decades, we’ve asked:

• Are prices low?
• Are profits high?
• Is growth steady?

But maybe we should also be asking:

• Is the system innovative?
• Is it resilient?
• Does it offer meaningful choice?
• Is it alive with new ideas?
• Are our systems effective in providing the goods and services that people need and not just want
• Because an economy that is efficient but not effective is not truly healthy.

An efficient system that produces the wrong outcomes is not a success—it is a highly refined failure.  Progress demands effectiveness first, efficiency second, and both in balance.

I refer you back to my comments about HP and cars.  The amount of HP in most cars has steadily risen over the past twenty years.  Over the last 20 years:  We didn’t just make cars more efficient—we used much of that efficiency gain to increase power instead of fuel economy.  There is nothing effective about a 780 HP truck or a 550 HP sedan.  We have seen the rate of speeding continually increase on our highways as more powerful vehicles pay no attention to posted speed limits.  The true cost of 500 hp sedans and 800 hp trucks is not paid at the dealership—it’s distributed across society in fuel, infrastructure, safety, and environmental externalities.  Here are some of the real costs to society:

Direct Consumer Costs (Visible, but Incomplete)

High-horsepower vehicles cost more to own:

• Fuel: typically 20–50% higher consumption
• Insurance: higher risk → higher premiums
• Tires, brakes, maintenance: faster wear

Over a vehicle lifetime:

• +$5,000–$15,000 per vehicle vs moderate-power alternatives

Fuel & Energy System Costs (Shared by Everyone)

• More horsepower → heavier vehicles → more fuel burned.

Across millions of vehicles:

• Increased national fuel demand
• Greater exposure to oil price shocks
• Higher dependency on energy infrastructure

Societal impact:

• Billions annually in additional fuel consumption
• Hidden costs in energy security and volatility

Environmental Externalities

Higher horsepower vehicles typically produce more emissions (even with efficiency gains):

• Increased CO₂ emissions → climate impact
• More particulate pollution (especially from heavier vehicles and tires)

These costs show up as:

• Healthcare burdens
• Climate adaptation costs (fires, heat, storms)

Estimated societal cost:

• $50–$200+ per ton of CO₂ (social cost of carbon)
• Multiplied across millions of vehicles = tens of billions annually

Safety & Public Health Costs

High horsepower enables:

• Faster acceleration
• Higher crash severity

Heavier, more powerful vehicles (especially trucks) increase:

• Fatality risk for pedestrians and smaller cars

Outcomes:

• Higher medical costs
• Emergency response burden
• Insurance system strain

Infrastructure Wear & Public Spending

More powerful vehicles tend to be:

• Heavier
• Larger

This contributes to:

• Faster road degradation
• Higher maintenance costs for taxpayers

Final Thought

Most Americans are not taught to think about economics in this way.  We learn about supply and demand, inflation, and interest rates—but not about system dynamics, concentration of power, or the long-term effects of consolidation.

Yet these forces shape our lives every day.

The next time you walk into a store, browse online, or even order a beer, it’s worth asking:

Are we choosing from a vibrant system—or a consolidated one?

And more importantly:

What kind of system do we want to live in?

Because in the end, the health of an economy is not just about how cheap things are—

It’s about how alive it is.