> Free markets always tend towards monopoly/oligopoly/cartel structures in the long term - because the firms that do so retain their pricing advantage (profits) and the firms that don't - die.

This might be true, but short term profits are still attractive to people who want to disrupt the industry. If I discovered a significant diamond mine in my backyard, I'd undercut the inflated prices of the current cartel before attracting attention from the big boys. [1] The only way to disrupt the diamond market is to invent a replacement product that is accepted by all females/males that want diamonds.

[1]every single startup on HN that is "disruptive" and pining to be acquired

I completely agree. But you'll become the next De Beers eventually - if you want to survive.

"You either die a hero or live long enough to see yourself become the villain."

-- Batman

> Free markets always tend towards monopoly/oligopoly/cartel structures in the long term - because the firms that do so retain their pricing advantage (profits) and the firms that don't - die.

Can you give any example?

> Free/natural markets are probably one of the greatest lies ever sold.

What do you mean? Free markets are not a lie. There are tons of free markets. If I buy bread at the supermarket, I can choose among multiple brands.

Any industry that makes money will tend towards this in one form or another. This does not mean that there are no competitors or independents not making money - it merely means the vast majority of the market is consumed by a few companies/brands who set the prices and keep price floors.

Bread is an example of a cartel structure reinforced with marketing, economies of scale (monopoly) and previous consumer buy in. You can choose from multiple brands - but you'll notice the price of bread isn't falling very quickly - it's an implicit pricing pact - you can undercut your competitors - but not for long, and definitely not forever.

Oh, I see you're using a definition of Cartel that's rather different than the standard one[1]. If you just mean that commodity producers more or less converging around a price without an explicit agreement between them to inflate that price than of course every commodity ends up being a "cartel" and you'd have a hard time finding an economist who would disagree with you.

[1]http://en.wikipedia.org/wiki/Cartel

I think you've got this wrong. Any firm that defects from the cartel will tend to gain market share at the expense of all the firms that remain in the cartel. Thus, its really the firms in that remain in the cartel that die. So the whole thing looks a lot like a Prisoner's Dilemma game played between the firms looking to cartelize.

Now, they might do things like sign contracts between each other to prevent defection, or buy each other's stock to make defection less profitable than profitable than playing along, but then you have to worry about disruption from outside the cartel. Or you could forcibly cartelize industries like FDR tried to do with the National Recovery Administration if the government really wants an industry to be profitable when it wouldn't otherwise be.

And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.

Any defecting firm will also lose a great deal even with the market share gain - hence why there were so few long term winners after the dot com boom. You'll notice that a lot of the firms that did this have survived and raised prices above inflation utilizing monopoly power - just like I stated above.

> And when I think of successful cartels in history I think of DeBeers and OPEC and... well, those are the only two I could name that lasted longer than a few years.

Another would be drug cartels. They keep prices artificially high so that everyone gets a share of the profits. But cartels in general always have players that "cheat" by independently lowering/raising the price. If a player is caught cheating, the cartel usually punishes the rogue player by excluding them from future pricing meetings and use their market share to kill the player both figuratively and literally when drugs are involved.

Nah, the problem with drug cartels is that they aren't cartels, as can be seen by the body count they're racking up against each other south of the border. They aren't cartels at all in the economic sense of the term, but rather firms competing against each other.

The term "cartel" arguably did apply up until around the death of Pablo Escobar, and the subsequent usurpation of power from the Colombian producers by the Mexican distributors. For the most part, the drug trade really was a single, multinational, price-fixing monopoly (or at least a cooperative oligopoly) under Pablo's reign.

[I'm not trying to give the guy any credit or praise for his actions, though.]