“The rational model leads us to get ‘hard’ and ‘soft’ mixed up. . .“

“Economists talk about ‘barriers to entry,’ what it takes to compete in an industry. As is so often the case, the rational model leads us to get ‘hard’ and ‘soft’ mixed up on this one, too. We usually think of principal barriers to entry as concrete and metal—the investment cost of building the bellwether plant capacity addition. . . . However, that‘s usually dead wrong. The real barriers to entry are the 75-year investment in getting hundreds of thousands to live service, quality and customer problem solving at IBM, or the 150-year investment in quality at P&G. These are the truly insuperable ‘barriers to entry,’ based on people capital tied up in ironclad traditions of service, reliability, and quality.”

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“The rational model leads us to get ‘hard’ and ‘soft’ mixed up. . .“

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