Innovative entrepreneurship is exactly what the American economy desperately needs. You might think that the American innovation system is in great shape because large numbers of highly educated young people are flocking to Silicon Valley to create their own smartphone apps. You’d be wrong. The problem, as Thiel argues, is that although we have large numbers of copycat entrepreneurs, we have very few who are willing to take on the biggest, most difficult challenges. If Amazon weren’t a relentless competitor that threatened the very existence of dozens of hidebound retailers, consumers would endure the same high prices and mediocre service, and shareholders in the various not-Amazons of the world would be sitting pretty. Amazon is the living embodiment of what the mostly forgotten economist Joseph Berliner famously called the “invisible foot” of capitalism.
We’ve all heard of Adam Smith’s “invisible hand” that guides the free market. The invisible foot is the invisible hand’s brutish older brother. It is the force that sees to it that capital gets reallocated from firms that aren’t doing their jobs to firms that are by putting the former out of business. The invisible foot has seen better days. In sector after sector—banking, broadband, and utilities come to mind—large incumbent firms have found new ways to protect themselves from competition, whether through coziness with regulators of sweetheart subsidy deals with politicians on the make to a pathetic lack of imagination among entrepreneurs who refuse to take on the toughest challenges. The sectors that Amazon takes on are the big exception. Instead of damning Amazon, we need to be asking why we don’t have more companies like it.