You are ignoring the point the hypothetical is attempting to illustrate in order to quibble with practical details of the stories I tell in the post. My point is that new businesses (even productive ones, with few negative externalities) typically make money through siphoning the value of other businesses and also creating value. In some cases the ratio is highly positive (i.e. the companies I list), in most cases it is not.
If you need a more "realistic" example of a business that is almost entirely and clearly predicated on redirecting money from other businesses, see the high frequency trading industry.
Let's say we ban this activity!
I'm not saying we ban this activity! I'm just pointing out inefficiencies in our present society. I actually don't know what the solution to this is.
I disagree with consumers only being "mildly priviledged by competition" because the alternative would be monopoly or oligopoly and arbitrary pricing power by incumbents
Certainly, what I mean to say is that these particular instances of competitive behavior I've highlighted result in little benefit to consumers, not that competitive pressure is useless. But it is the case that a lot of competition in capitalism that is just entrepreneurs wastefully wrestling shareholder value from each other, and I'm not sure why I haven't heard of this criticism before.
The use of the word "extractive" in this post confused me a lot.
Changed "extractive" to "rent-seeking".
That's the value he's providing to customers, and it's enough to account for all the money he's making
I've replaced a sentence; maybe it will make things a bit clearer:
Now, Tom has certainly provided his customers a bit of value, because it is nicer to be closer to the city center. But the marginal value he's provided to Whoville isn't nearly enough to account for the value of the business he now owns.
To be even more explicit: imagine Tom is not even working at the car repair shop; he's just assigning a manager to operate it for him. Now he's reduced the total wealth of whoville in order to transfer wealth from Fred to him, at no benefit to consumers. The Before and After pictures of the town or its finances are virtually the same as if Tom had found a legal loophole for draining Fred's bank account, without all of the hullabaloo of starting a business!
Say Fred has a software company, making some expensive software to do a task. Then Tom, a hobbyist, releases a small piece of open source software that does the same task just as well. He doesn't make any profit from it, but everyone switches to using his software for free. Fred's company goes out of business, the investment is lost and so on. Was Tom's action "extractive"? Should we be sad?
In this scenario, the overall productivity of society has gone up, because people are no longer paying Fred rents for use of equivalent software. That makes it a lot different than what I view as the default case of capitalist entrepreneurship.
I'm saying look at a normie's Twitter feed. The things they like/retweet are completely nonsensical, or just explicitly awful. Hell, lots of what rationalists like/retweet is nonsensical.
If people actually like and agree with the ideas, what's the problem? Maybe we would just be finding things people agree with more efficiently than with human generated content?
People are evil, dude
It's similar but not the same. You can correctly compensate people for innovation and this is still a problem.