> Maybe.. and "a few" was pulled out of thin air, but these machines were national treasures with immense R&D expense. Think rockets, heavy aircraft, and lithography.. not commodities or software.

Things with a large R&D expense are exactly like software. They have that specific problem with copying. If one company pays to do R&D and the others copy them, the one doing it can get out-competed because they have higher costs, and then there is a lower incentive to do it.

The problem comes after the government barges into the market and tries to address that problem with its inverse by granting the first company a monopoly. Then you have more incentive to do R&D, but only by trading the market for a czar.

The problem you have isn't that economies of scale couldn't support more manufacturers, it's that now other companies aren't allowed to make the product until the patent expires, and in many industries the incumbent will then use the profits from an existing patent to buy up other companies and patents and perpetuate a monopoly that was supposed to be temporary.

We don't currently solve that problem well, but the problem isn't that some things require too much scale. Markets where each of the patents required for a product are developed by more smaller entities who then license them like a patent pool is one structure that works as an alternative.

The actual problem is that governments are too shy about enforcing antitrust laws in patent cases, in part because it's counterintuitive to grant a monopoly on purpose and then prosecute over it. But the way it's supposed to work isn't that. Antitrust isn't about having a monopoly, it's about abusing one, e.g. leveraging a patent on one technology into a separate monopoly on an ancillary technology by tying the purchase of the patented product the other one. Or uncompetitive mergers, e.g. a company that already has a dominant market position in one market buying or exclusively (rather than non-exclusively) licensing patents that give it control over a different one.

We could definitely mess that up less than we currently do.

> The more that come (think of a gold rush), the potential returns diminish so it will eventually be hard to either acquire revenue/customers or funding for speculative approaches if they are capital intense.

"Nobody goes there anymore, it's too crowded."

If it's hard for new entrants to compete only because there are already so many incumbents, that's fine, because the number of existing suppliers is already large. The problem comes only when there is some artificial barrier to new entrants in a market that doesn't have enough providers as it is.