Why does it seem like everything is the same these days (cue old man voice)?
Why do Burger King and McDonald’s offer indistinguishable chicken salads—often right across the street from each other? Why do Home Depot and Lowe’s outlets huddle near each other like lovelorn teenagers? Why is Coke so much like Pepsi?
They’re just obeying Hotelling’s Law. Stanford University economist Harold Hotelling posited back in 1929 that rival sellers tend to gravitate toward each other—in location, price, and product offerings—because otherwise they risk losing some of the broad mainstream of customers. In other words, if your competitor has found something that sells or a way to sell it, the easiest way to horn in on their market share is to sell the same thing in the same way.
His insight, also known as the “principle of minimum differentiation,” is still widely used by economists and often applied to politics: candidates leaning too far left or right risk losing the essential moderate vote, so both Republicans and Democrats are pulled to centrist positions.
