It’s because capitalism assumes a free market with competition. If you allow monopolies to thrive, you will not get those benefits. It’s just that some of these types of markets have different dynamics due to their structure. E.g. natural monopolies where the barrier to entry is huge up front costs. Interestingly the AI startup ecosystem is raising enough money to surpass the barrier of needing a ton of data to train AI.

That's true but it's not just monopolies per se. Another big part of it is information flow. The kind of idealized free markets that "work" involve relatively transparent interactions between buyers and sellers. Sort of like, well, a market --- an old-fashioned bazaar-type market with sellers offering their wares. You can walk down the line and see 10 people are selling apples or saddles or whatever and you can compare the prices and the products and make your decision.

Even in that setup, people can try to game the market. They can make something that looks like a good saddle and sell it to you and then it falls apart not too long afterward. They can get you to agree to a price but then tell you the stirrups aren't included even though they're attached to the demo model. They can ask for half payment up front while they custom make your item, then skip town.

And mechanisms sprung up to prevent this: regulation. Some are market-internal (reputation) and some are enforced (people can report you to the authorities for selling fraudulent goods, and you can be jailed or whatever).

The problem is mainly that nowadays companies have turned the majority of their innovation energy towards this kind of market-gaming meta-activity. It's no longer about goods, services, buyers, sellers, or any of those things. It's just about finding new ways to manipulate the market itself.

This is what the article seems to be saying, and I agree. I'm not sure I'd call it "hype", though. It's not that "the hype is the product", it's that the market activity is not oriented towards products at all. Products have become like abstract proxy tokens that are moved around to simulate what we think of as market activity, but all the real activity is happening in the meta-market.

> It’s because capitalism assumes a free market with competition

But even in the cases where we do have a free market, we're often seeing one company fiddle with quality, maybe drop the price a little, then the rest quickly follow and price goes right back up across the board.

not attacking your thinking, but the terms "capitalism" and "free market" aren't consistently well enough defined to capture the nuances of what this type discussion requires. At a minimum, capitalism is the right/ability to own something without others taking it from you, and free markets are markets you can participate in if you would like without asking permission from the govt or belonging to a guild.

capitalism works best for everybody on average when free markets are competitive, but when they are not, markets still work, they just work better for some, worse for others but better than nothing, and also overall worse for everybody because markets are not zero sum. The problem with a lot of what-turns-out-to-be left-wing and or populist thinking on markets is the assumption that markets are zero sum, "if there is a winner, there must be a loser", which while an attractive idea turns out to be false.

same is true of the completely overblown idea that people are not rational. people are not perfectly rational, but when it comes to parting with their money they are much more rational than they are not. If it were not true, people wouldn't be living rationally measurably better lives today than 100, 200, etc. years ago. there are many other sources of noise in measuring that swallow irrationality up with the noise. (yes, selling gambling to gambling addicts is an irrational money printing machine, but civilization has not collapsed)

For centuries as capitalism developed from more primitive systems (like feudalism and mercantilism), goods and services that gain value from social network effects were well beyond anyone's imagination. The printing press survived the church's attempts at suppression, but nobody back then could have conceived of a service that automatically distributed copies of your books to your friends — much less one that could profit from knowing who your friends are, rather than from explicitly charging you for the service.