Gonna just start referring to Russell Westbrook as a rent seeker whenever he does something hoggish.
Coincidentally recently read the part of Book IV in "Progress and Poverty" where George examines this issue. My sense is that these companies are good for much of their lifecycle but eventually need a little pruning.
Why does showing higher productivity in more-concentrated industries support the "superstar" explanation? If marginal productivity is *decreasing* in each input to production, and oligopoly distorts the economy by producing too little of a good, then we should expect more concentrated industries to have higher average productivity. I'm not sure what empirical strategy one could use to tease out these two effects since both imply a causal relationship from higher concentration to higher productivity.
Companies seem to go through a life cycle. The ones that get big almost always had some kind of advantage. Sometimes it was intellectual property like Microsoft or Apple. Sometimes it was a good throwing hand with the dynamite like Standard Oil. Sometimes it was industrial efficiency like MacDonald's or Ford.
The problem is that once a company gets big, it doesn't need to become more efficient. Why compete when you can buy your competitors? Why innovate when you can squash innovation? AT&T, Kodak and IBM were good examples of that. They had a productive edge, but at a certain point it made more sense from a business point of view to focus on market power.
One problem with companies in this state is that they make the economy overall less resilient and less efficient. By the 1960s, Detroit was in its doldrums after decades of innovation, but VW could come in and grab 10% of the market, and the Japanese could come in a bit later and grab even more. To be fair, Detroit is more innovative than it was, but a lot of this has been government pressure on safety, efficiency and so on.
The next stage of the cycle involves politics. The government can just let the company go broke. It can apply pressure to force greater efficiency either through regulation or breakups. Alternatively, it can step back and just prop up the business as it has done with fossil fuels and outfits like Boeing. At this point it's about policy.
I don't know if there is data on this but it seems to me that the interconnectedness and complexity of modern software technology results in strong network effects for large tech companies. For example, it would require building and battle testing a mind boggling amount software systems to reproduce Amazon.
It would take decades of evolution and selection of millions of lines of code to reach the intricate compatibility across systems and the fit with real world complexity.
I'm pretty sure no one inside Amazon understands all of Amazon's systems and how they connect to each other. There's just too much complexity there for mere humans, even ones with deep inside knowledge, to be able to reproduce. If you want to create this types of system without reusing existing code, there is no choice but to slowly evolve the code base again from scratch. Computer code is the genetic material of modern businesses. This makes it very challenging for most companies, even very large ones to challenge an incumbent.
The only difference between large and small companies that are no longer under the founder is that the large ones is available capitol. Capitol which they use to bribe politicians and the court so that they are never actually held responsible for their malevolence. Self regulation is simply corruption at its height.
I have no business weighing in on a topic about which I am a mere fan boy. I had to look up Justice Brandeis, Neo-Brandeisian and Judge Learned Hand, for instance. And that was just in Noah’s very accessible column. In the replies I was even further out of my depth.
However, I am a fan boy with a huge stake in the debate (my quality and “quantity” of life) and one who tends towards the “…from Column A…Column B” with sliding scales that are based on the size/importance to the economy and, more importantly, humanity’s future.
Like I encouraged my addiction clients to do, I like to try and “think it through!” Do not just define the problem based on the obvious issue at hand (paying your bills). Set about solving the underlying problem: Alcohol and other drug addiction.
Like the addict “You’re concentrating on the wrong item!”
And…corporations might not even be the biggest threat to our future.
Individuals pursuing their own dreams with "billions and billions” of dollars might easily take humanity along with them, headlong into disastrous “Unintended Consequences.” Sound far-fetched? One *young* male was just looking for a way to meet hot chicks, but it snowballed into a platform with effects on humanity that even he could not begin to predict or control.
Amazonian serfs don’t care if Bezos gets to Mars ahead of Musk and Branson. If an alien civilization came along as the pyramids were being built and asked the slaves, “Would you rather take part in the construction of enduring monuments to the Pharaoh, quite possibly getting crushed in the process, or have small plot of land that would feed you and generations of your family?”
“Gee, I don’t know…can I think about it?”
But nobody ever asks the serfs, who are conned and forced by necessity into “voting” with their hard-earned money for individuals and politicians who bought their way to the top with the serf's hard-earned money.
I’m barely scratching the surface of the underlying problem here, but I’m having a cash flow problem, so I need to go to work to help support my great-grands…
Gonna just start referring to Russell Westbrook as a rent seeker whenever he does something hoggish.
Coincidentally recently read the part of Book IV in "Progress and Poverty" where George examines this issue. My sense is that these companies are good for much of their lifecycle but eventually need a little pruning.
Why does showing higher productivity in more-concentrated industries support the "superstar" explanation? If marginal productivity is *decreasing* in each input to production, and oligopoly distorts the economy by producing too little of a good, then we should expect more concentrated industries to have higher average productivity. I'm not sure what empirical strategy one could use to tease out these two effects since both imply a causal relationship from higher concentration to higher productivity.
Companies seem to go through a life cycle. The ones that get big almost always had some kind of advantage. Sometimes it was intellectual property like Microsoft or Apple. Sometimes it was a good throwing hand with the dynamite like Standard Oil. Sometimes it was industrial efficiency like MacDonald's or Ford.
The problem is that once a company gets big, it doesn't need to become more efficient. Why compete when you can buy your competitors? Why innovate when you can squash innovation? AT&T, Kodak and IBM were good examples of that. They had a productive edge, but at a certain point it made more sense from a business point of view to focus on market power.
One problem with companies in this state is that they make the economy overall less resilient and less efficient. By the 1960s, Detroit was in its doldrums after decades of innovation, but VW could come in and grab 10% of the market, and the Japanese could come in a bit later and grab even more. To be fair, Detroit is more innovative than it was, but a lot of this has been government pressure on safety, efficiency and so on.
The next stage of the cycle involves politics. The government can just let the company go broke. It can apply pressure to force greater efficiency either through regulation or breakups. Alternatively, it can step back and just prop up the business as it has done with fossil fuels and outfits like Boeing. At this point it's about policy.
I don't know if there is data on this but it seems to me that the interconnectedness and complexity of modern software technology results in strong network effects for large tech companies. For example, it would require building and battle testing a mind boggling amount software systems to reproduce Amazon.
It would take decades of evolution and selection of millions of lines of code to reach the intricate compatibility across systems and the fit with real world complexity.
I'm pretty sure no one inside Amazon understands all of Amazon's systems and how they connect to each other. There's just too much complexity there for mere humans, even ones with deep inside knowledge, to be able to reproduce. If you want to create this types of system without reusing existing code, there is no choice but to slowly evolve the code base again from scratch. Computer code is the genetic material of modern businesses. This makes it very challenging for most companies, even very large ones to challenge an incumbent.
The only difference between large and small companies that are no longer under the founder is that the large ones is available capitol. Capitol which they use to bribe politicians and the court so that they are never actually held responsible for their malevolence. Self regulation is simply corruption at its height.
This discussion has been bothering me for days.
I have no business weighing in on a topic about which I am a mere fan boy. I had to look up Justice Brandeis, Neo-Brandeisian and Judge Learned Hand, for instance. And that was just in Noah’s very accessible column. In the replies I was even further out of my depth.
However, I am a fan boy with a huge stake in the debate (my quality and “quantity” of life) and one who tends towards the “…from Column A…Column B” with sliding scales that are based on the size/importance to the economy and, more importantly, humanity’s future.
Like I encouraged my addiction clients to do, I like to try and “think it through!” Do not just define the problem based on the obvious issue at hand (paying your bills). Set about solving the underlying problem: Alcohol and other drug addiction.
Like the addict “You’re concentrating on the wrong item!”
And…corporations might not even be the biggest threat to our future.
Individuals pursuing their own dreams with "billions and billions” of dollars might easily take humanity along with them, headlong into disastrous “Unintended Consequences.” Sound far-fetched? One *young* male was just looking for a way to meet hot chicks, but it snowballed into a platform with effects on humanity that even he could not begin to predict or control.
Amazonian serfs don’t care if Bezos gets to Mars ahead of Musk and Branson. If an alien civilization came along as the pyramids were being built and asked the slaves, “Would you rather take part in the construction of enduring monuments to the Pharaoh, quite possibly getting crushed in the process, or have small plot of land that would feed you and generations of your family?”
“Gee, I don’t know…can I think about it?”
But nobody ever asks the serfs, who are conned and forced by necessity into “voting” with their hard-earned money for individuals and politicians who bought their way to the top with the serf's hard-earned money.
I’m barely scratching the surface of the underlying problem here, but I’m having a cash flow problem, so I need to go to work to help support my great-grands…
Dylan: “Money doesn’t talk, it swears.”
Productivity has no constituency these days
This was all known 45 years ago. Michael Porter.
It's a basic of market economics that the highest market share players make vastly higher cash flow. Experience curve
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