The example that people like to talk about is the airline industry, because a lot of what the airlines do to compete with each other is to get more market share by offering lower prices than their competitors. That’s what capitalist businesses are supposed to do. That’s supposed to be a big part of how living standards and productivity are raised under capitalism: businesses try to undercut each other, offer lower prices, better quality, and steal customers from their competitors.

But if they all have the same shareholders, then that behavior, from the shareholder’s point of view, is really counterproductive. Because basically, you’re putting money into the shareholders’ pockets from one of these airlines just by taking it out of their pockets from the other airline.

If you’re a shareholder who owns all of the major airlines, you want them to just divvy up market share in a stable way. The last thing you want is to see them all competing and offering fare cuts that are just going to the customers and not to you.

It seems like this won’t be a problem in the long run to me, who is not an economist, because if such a situation was to arise then being an investor who invests heavily in a single airline and gets them to lower their prices to dominate the market would become a profitable strategy.

As passive investing becomes more and more popular, we should expect that active investing will offer increasingly better returns until active investing is the better strategy. 

there’s an equilibrium point that might be far from optimal though depending on how much capital is available in the system, I think?

Airliners don’t just compete with each other, they also compete with rival goods like trains, cars and tele-commuting.

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