Honestly, me. If someone creates an obscene amount of value, I see nothing inherently obscene about them trading it for an obscene amount of money. As for the inequality point..I care more about absolute levels of wealth. And if I knew I'd be a relatively poor person a hundred years from now, I'd rather be born into a society that for the next hundred years let people becomes obscenely rich through their productive efforts given how much cheaper that will make so many things as a side effect
Yeah. And I'm saying I don't think that will benefit the common good. Over any meaningfully long time horizon. For basically any income level, I would make the same trade (from desperately poor to moderately poor to 'American poverty line', etc)
I have no idea who that is. I just look around at how the average dollar in hands of government and in hands of self made billionaires is spent, and it seems obvious to me both that the billionaires invest that money much more efficiently in a way that causes new technological advances reducing costs across the board, and that if they didn't have the opportunity to play with those billions/influence, they'd invest that money a lot more conservatively and take much fewer risks in their lives. If billionaires were taxed much more heavily, they would be much less able to reinvest the money from their first big success into making it a bigger success or funding their next big ideas. I can see what the government does with my tax dollars. I'd much rather I could donate it to bezos or musk instead.
I do. I've heard this argument for 50 years, and I find it less attractive and less intelligent than I ever did. Indeed, I would say it's nothing more than envy and selfish self-interest dressed up in fancy words. I would work actively to destroy the career of any politician who came within shouting distance of these concepts.
Yes, progressivity in taxation is obscene, a policy driven entirely by political convenience and demagogues fostering economic envy for their own selfish purposes. It's little different from Roman Emperors buying off the plebes with the corn dole, and has similarly corrosive effects on society. We now have enormous chunks of the population who have zero skin in the tax game, and have been led to believe the universe owes them a living at someone else's expense, and we have other chunks who have nothing but contempt for a system that sees them as milch cows for the vote-buying schemes of legislators. Not a recipe for long-term stability of the social contract.
The rest of your reply is just tediously unimaginative ad hominem strawmanning, with a soupcon of tribal othering. If you can come back with some more creative insult or contemptuous barb, that would be helpful.
>It is especially obscene when the whole world doesn't have basic needs met: water, food, sanitation, housing, healthcare, education.
So people in sub-saharan Africa deciding to have kids they can't support means I'm on the hook? Why? Because they exist? And then they grow up and have kids of their own they can't support, and more wealth has to be diverted from productive ends towards supporting more unproductive people? Yes, I have a problem with this.
You also imagine that your totalitarian redistribution scheme will have no negative impacts, as if the economy will still chug along as it was before, with the same level of investment and entrepreneurship and value creation. This is not a rational belief.
I don't see why anyone should need to put forth a "defense" of billionaires. It's like asking if you are "pro-Israel" or "pro-Palestine", labels that are akin to waving little flags but have little to no semantic content.
We didn't appear on this earth with all property equally divided among individuals and peace and love in our hearts. Many billionaires' wealth is rooted in war and conquest, legal oppression of genders, ethnicities, or other arbitrary classifications of humans, and other forms of non-consensual or fraudulent transactions.
On one side of this, we say "Oops! Clean slate! From NOW onward, we will use a non-collectivist libertarian ideology. But everyone can keep all the shit they stole beforehand." This is notably unpopular among those who were stolen from.
On the other side, we can say "Alright, we're coming in with Tanks to take all private property. The People's Dictatorship will equally divide everything among all people." This is notably unpopular among those who did the stealing (or who merely bought or inherited stolen property), and also, there's never been a successful People's Dictatorship that actually followed through instead of being just a normal Dictatorship.
"Tax rich people and give money to people or to fund social services" is the middle way through.
All wealth is derived through illegitimate means. From whom and to whom do we redistribute wealth stolen during the religious warfare of medieval Europe? From whom and to whom do we redistribute wealth stolen during European colonization? From whom and to whom do we redistribute wealth stolen during the Second World War?
The whole of history is a wash of blood and theft, on the grandest to the smallest scales. To require proof that wealth was built on theft is simply to advantage those who stole so comprehensively or long enough ago that their crimes are invisible or their victims’ blood diluted across nations.
You don’t have to accept tanks, or even taxes, but do so with the following fact clear in your mind, noticing the trade off you’re making and accepting it as worth it, instead of pretending it doesn’t exist: a libertarian fantasy is a jubilee for the war crimes of the inheritees of the wealthy.
If someone stole all of my money, and spent it on a luxurious life, and finally died penniless having spent all of it, I would not be satisfied with a system that said “well, all the money is in the hands of people who didn’t steal from you, they were just making voluntary transactions, you’ve done nothing wrong but we have no mechanism to give you anything.”
I don’t think that the chefs who cooked the thief’s food are morally blameworthy. I don’t think the landlords of the mansions where the thief lived are morally blameworthy. I don’t think the driver of the limousine the thief rode in is morally blameworthy. But it was my goddamn money, and I want it back.
I have a feeling that if we took the route of "Let's come in with tanks to take all private property, redistribute it equally among the people, but THEN it's a clean slate and we have free-market capitalism" would result in a very similar wealth distribution to the one we have now within a few years, and a lot of people would be just as unhappy with it as they are the current system. Their problem is not with the starting conditions, it's with the rules of the game themselves (i.e. economic freedom).
I don’t dispute that, but I attribute it more to the fact that wealth and poverty compound in a way that I find distasteful. A rich person will *always* be better equipped to hide from the consequences of crimes, and therefore crimes which produce increased wealth compound on themselves, resulting in a endless flow of money to those who would unethically use that money to maintain their wealth, which is why a one-time redistribution would only work to solve this problem if people really could be Lawful Good Libertarians.
The other reason I believe in constant redistribution via taxes is not an argument I included in the above post, because I don’t think it’s as compelling to a libertarian audience, is that—well, I feel bad about condemning people to suffer for the rest of their life for bad decisions early on in it. If someone orphaned at the age of 18 puts their entire inheritance in the lottery and loses, I would consider it a failure of society to let them die of a curable disease at the age of 30 because of a bad choice made 12 years past, even if it was fully consensual and non-fraudulent. And as someone who is part of the 1%, I’m happy to sacrifice some of my wealth to systems that would protect people in those situations.
There's no way to even have a meaningful discussion *unless* the option to take someone's property by force is on the table. So a sine qua non of the discussion is a belief that that property (or some big part of it) is in fact by some clever philosophical judo actually the property of the collective, i.e. you must accept major tenets of a collectivist worldview.
How you get there --- well, there are a million ways, history is stuffed full of erudite rationalizations of this point of view.
*Why* you get there, well, I nominate the familiar green-eyed monster of envy and jealousy. As old as cavemen, I expect. 50,000 years ago I've no doubt if one Cro-Magnon by luck or cleverness acquired 50 sweet melons while the rest of the tribe had one apiece, then many (perhaps most) of the tribe rationalized why Mr. Fifty was actually, when you think about it correctly, only entitled to an equal share of the melons that were actually, when you think about it correctly, the property of the whole tribe.
Technology changes, people don't. We can construct much more elaborate rationalizations for our base urges, but the base urges haven't changed a particle. So it goes.
You could say the same thing about any human right.
"Bodily autonomy is some clever philosophical Judo. Bodily autonomy rights only exist because the government enforces them - there's no fundamental right not to be raped."
Uh, yes? Even if you’re a moral realist, it’s not like there’s a pile of human rights in my backyard and I can go and pick up the ones labeled “property” and “bodily autonomy”.
You have to actually argue for how and why they exist! Otherwise I can just win any argument by saying “X is a human right”.
Yes, of course, human rights are not physical objects.
"You have to actually argue for how and why they exist! Otherwise I can just win any argument by saying 'X is a human right'."
Right, and what Carl Pham pointed out is that a question like "How should 'We' distribute the stuff?" presupposes something to the effect of "We, The Collective, have an inherent right to all the stuff, so it is up to The Collective to determine how we want to distribute that stuff and to what degree we want to let individuals keep 'their own' stuff."
Instead of trying to bake an assumption of collectivism or property rights into the framing of the discussion, we should leave both options on the table and debate their merits.
Weird. I think I see where our miscommunication stems from:
I don’t understand why “How should ‘We’ distribute the stuff” sneaks in a connotation of collectivism but “ ‘We’ should leave both options [for distributing the stuff] on the table and debate their merits” doesn’t.
I don't think so. First of all, there *are* quite a lot of atoms that are clearly owned by me, because they are literally what constitutes me, and this is where our idea of owning our own bodies comes from. It's an intellectual step we take at approximately age 2, when our brain learns to segment ourselves from everything else, and starts to become resentful at impositions on our ability to control our body for ourselves.
Property -- in terms of things in our actual grasp at the time -- follows soon after. There does not live a 4-year-old who does not resent his lolly being taken by force.
To be sure, there are elaborate extension of these core natural concepts -- we have to invent the idea of being able to "own" something when it is not in your immediate control, and we need a whole appartus of deeds and ownership certificates and what not. We need a cadre of philosophers to rationalize these base drives post-facto, and another larger cadre of lawyers to hammer out agreements that function in all the weird edge cases.
But this is all just superstructure, as fundamentally inessential as the rules of marriage in a species wired to be sexually jealous. The core of these ideas, of bodily autonomy and property, are apparently baked into our DNA and arise in us naturally at an exceedingly young age. It's probably why attempts to undo them -- to impose some kind of alternate formulation of social living -- have been uniform and often spectacular failures.
If you mean to say that some other species, on some other planet, could have different DNA and come up with different basic working concepts of community life, then sure. If you're asserting that *human beings* could live differently by mere conscious choice -- no way. We are who we are, and these ideas are inextricably part of who we are. That's as close to "natural law" as one can imagine.
Okay, then let's make it a proper hunt. Governments don't get to seize his wealth and Bezos gets to keep every cent of the putative $200 billion or whatever Amazon is valued at today.
But right from the start, all entrepreneurs and innovators and value-creators are working under the conditions back in the day. You take on all the risk, and if it works out you get very, very rich, and if it doesn't, you lose your shirt.
No tax breaks. No loans at favourable rates. No incentives to come set up in our state and we cut you a deal. No bail-outs for being 'too big to fail'. NO LOBBYING OR LOBBYISTS.
Jeff (or Elon, or Richard, or Tom, Dick and Harry) want to set up their own business, let them go right ahead. But they don't get handouts (unless from friends/family who want to invest in the start-up) or leg-ups or special considerations, even if they do make it to be mega-big. They get taxed like you and I and the rest of the working joes do, they want to squirrel money away in Swiss bank accounts or Caribbean tax havens, sure go ahead, they can play spy vs spy with the government on that as always.
If Jeff wants a mega-mega-yacht, he can earn and keep the money to pay for it. But he can't shop around for "so who is gonna offer me the biggest bribe to set up in their city?" for his second headquarters, he has to abide by tax and labour laws and all the rest of it.
If you don't want government sticking its fingers in your business pie, fine. But you don't get any favours from government either. Just be treated like every other citizen living and working in the country. And then I'm happy for you and your hundreds of billions. There's that (in)famous quote from Warren Buffett about 'my secretary pays more tax than I do'. Let Warren have his riches - and let Warren pay much more tax than his secretary on them. 'Oh I only get paid a peppercorn salary, that's what I pay tax on' and the bulk of the income comes from dividends etc. managed so he pays little to no tax but has the benefit of hte money? Then if he gets the benefit, he also gets the liability.
Set things up that way, and I think there would be far fewer people talking about "deserving" and calls for seizure and redistribution.
I actually think that "very big online retailer" is a big enough niche that we can be pretty sure someone would have invented it anyway. As people have brought up in the comments, many inventions are invented independently several times within a few months of each other and it's a question of who makes it to the patent office first; I think by studying these cases we can determine that most (though not all) inventions are usually replaceable within a few years.
I'm not sure what you mean about the narcissists - if you're a narcissist who invents a $200 billion dollar idea, I think you start the company and collect the $200 billion. I have no idea if Jeff Bezos is a nice guy or a narcissist or whatever, it doesn't matter to his success and it doesn't matter to me.
I disagree on the inevitability of the “very big online retailer” at least one big enough to drive the changes necessary to compete at scale with large store front retail.
In a world without Jeff Bezos, I could easily see the second runner up settling for being the worlds largest online book store while another founder duplicates big box hardware store model, but skips all clothing because they don’t have a solution or resources to manage returns, etc, etc. this much more fragmented online world would lack the volume to drive affordable next day shipping, one click purchasing or many of the other things that make buying from Amazon so beneficial (or addictive) to consumers.
I don't think neoliberals credit the founder alone. They do certainly credit the founder(s) at an outsized value compared to other individuals at the company. They may even do so at a level that is above some optimum number, but that's not the same thing.
Amazon has over 1.6 million employees. If their average total compensation were $50,000/year, that would be $80 billion dollars *per year* going to the employees. The median pay is about $30,000 apparently, with an average that's higher (a core group of very highly paid employees).
My guess would be that the number is a good bit higher than that, after factoring in benefits and taxes paid by the company. So let's round that up to an easy $100 billion dollars per year. Jeff Bezos has made about $200 billion since 1994. His employees make about half that every year the company continues to exist (and the number of employees is going up very rapidly, so this number is going up as well). If anything, the employees are making much more from this enterprise than Jeff is.
Neoliberals definitely credit the employees with their portion of the success of the business - and generally assume (may or may not be true) that the compensation these employees receive is just compensation for their efforts. More skilled employees, as well as founding employees and management, tend to make a lot of money. Warehouse employees who are interchangeable with millions of other people tend to make much less money.
If employees are getting $100 billion a year, and Bezos is getting $5 billion (his total worth averaged over the time spent working on Amazon), then he's worth 5% of all value. That may or may not be too much, but that's certainly closer to the ballpark than 50%. If Amazon continues to expand and employees get $200 billion or $300 billion a year, Bezos may be looking at "only" capturing 2% of the value. I don't think I have enough information to take a strong stand on whether 5% is a good number, too high, or too low. I doubt anyone has a justifiable claim to the correct formulation of that number, but I'd love to be wrong about that.
Very few executives are paid in exorbitant amounts of straight up cash, a lot of execution compensation is in the form of restricted stock and stock options, which is what makes them share in the gains *and* the losses.
You're conflating several different things, gains from owning the stock, and compensation for work.
Bezos the founder/shareholder's net worth gains when the stock price increases and incurs losses when the stock price decreases.
Bezos the CEO gets paid a cash salary which doesn't increase or decrease with the stock price.
Some other executives at Amazon get compensated in restricted stock which also increases and decreases with the stock.
There are only very rare cases where someone is paid in a way that increases with the stock price but doesn't decrease when the stock drops, and that is performance-based bonuses (e.g. "you'll get a $X million bonus if the stock price hits Y within Z months").
In which case do you think someone should be "pursued" and owe money for stock losses? Keep in mind executives are just employees, and shareholders already suffer losses when the stock price drops.
Those people aren't billionaires. In exchange for having their losses capped, they accept much lower gains than the founder CEOs. They are usually millionaires, but they are not billionaires.
We're talking about billionaires here, which means we're basically just talking about founder CEOs, a few of their heirs, and some princes and oligarchs. And we're really not talking about the princes and oligarchs.
I don't think there's any way that founding Amazon could have cost Jeff Bezos $200 billion dollars. I suppose it could have caused him to make $200 billion and then lose it if Amazon suddenly goes bust, but I expect that for most kinds of bust he is still pretty rich.
Founding Amazon did not cost Jeff Bezos $200 billion, but many decisions made after the the initial company launch could have cost a large portion of that fortune. If his wealth was capped by policy or taxes at say $10 billion, would he and people like him continued to take the risks necessary to grow the company knowing he had very limited up side potential? Would investors trust them?
The question about incentives asked many time is, isn’t $10 billion enough to get people to start businesses? This the wrong question. The question should be, what happens when people approach the cap?
Wrong. AWS was mostly Bezos. Even the engineers/PMs who pitched it to him pitched it as an internal product. He was the one who pushed it to become its own entity and public facing. There are numerous documented accounts of this. He also had a lot of internal hurdles to overcome and had to create a culture change at his own company that took a lot of effort to make it happen. The Steve Yegge Google platforms rant references this (https://gist.github.com/chitchcock/1281611).
I think you're missing something here. Sure, if every worker refused to work for Amazon, Amazon would go out of business. And if every entrepreneur went on strike, we'd all be vastly poorer.
None of that is relevant here. The question is, what is irreplaceable? What is unique? Workers are replaceable. Is Bezos? Would Amazon have been started two days later if he hadn't? If so, the value he contributed was very little. Would it have been started two years later? Then he contributed significant value. Would it never have existed in the form we know it, meaning many goods would now be more expensive? Would AWS not yet have existed except as an internal product? Then he has earned every penny of his wealth.
If every power plant decided to stop producing electricity tomorrow, a lot of businesses would be in trouble. I don't think that we should conclude from this that power plants create most of the value in society.
> If every Amazon worker on Earth agreed to walk out tomorrow and never work for Amazon again, the shares would plummet and his wealth would disintegrate overnight. This suggests to me that a good share of his wealth is not dividends on the idea of Amazon but directly tied to the ongoing labor of his workers
But you've based that on a silly hypothetical; the whole world isn't going to refuse to work at Amazon, and any employee who leaves can be more-or-less fungibly replaced by another one.
Labour is just one of many, many raw products that Amazon buys. What about screws? Let's suppose that all the world's screw manufacturers got together and agreed that they would never sell another screw to Amazon. Amazon couldn't screw servers into racks, they couldn't hold their warehouse robots together, they couldn't fix their delivery vehicles, and sure enough they'd be forced to go out of business for want of screws.
Does it follow from this that the world's screw manufacturers ought to get a greater share of Amazon's worth? I think it doesn't. Screw manufacturers get paid whatever the market price for screws is, and they should be happy with that.
Imagine you have a chain holding up a heavy object. Every link in the chain is necessary to hold up the object, and if you removed any link in the chain, the object would fall. But it does not follow that every link in the chain is equally valuable. Some of those chain links may be be stronger than others, or harder to build, or more expensive, etc.
The fallacy is essentially the idea that "the value of X = how bad it would be if X did not exist", i.e. "the value of X is the demand for X". The problem with this is that it clearly ignores half of the equation for value - supply. The value of something is a result of both the supply and demand for something.
It's trivially true that if an entire profession or class of people stopped doing their job, things would get bad, since jobs are done because people have some need for them. If we removed receptionists at hospitals, that would mean doctors wouldn't know who to prioritize or know the medical history of their patients, and a lot more people could die. But does it then follow that the receptionist is just as important as the doctor? Taken to an extreme, let's say there's someone operating a dead man's switch - a job where all you do is press a button once every 10 minutes to prevent nukes from firing off and ending the world - and if you stop pressing the button, the nukes will automatically fire. If this person went on strike, the world would literally end - but does it follow that that person is particularly skilled, or non-fungible, or deserving of $400 trillion because without them all the wealth in the world would be destroyed? No, it's a very easy job that requires almost no skill, and there is a huge supply of people who could be button-pressers, so button-pressers as a class of people are not "just as important" as brain surgeons even if the world would end without them.
I'd say, "some combination of both". There are several built-in assumptions in your statement, and I disagree with all of them:
1). "Most relevant business/innovation ideas are so obvious as to not be worth mentioning" -- if that were true, we'd be awash in continuous innovation, but we're not. Sure, incremental improvements to existing technologies occur all the time, but genuinely transformative inventions are few and far between.
2). "Management is not work" -- but it is. Those 200 workers cannot all work together in a happy family, making every little decision unanimously or by popular vote or whatever. Maybe 5 people could work together that way, but not 200. They'd either be spending all their time on decision-making, or just doing things at random, and neither option gets you that $200B car. Management is a full-time position; and, as such, it can be performed poorly (and often is). However, good management can be the difference between a new type of car, and a pile of broken dreams.
3). "Investment should not be rewarded" -- then where will the money come from ? The whole point of investment is that you assume the risk, in exchange for a monetary reward. The expected value of this reward is proportional to the risk -- and the risk can be quite large, especially in cases of radically new technologies. Without the startup investment, all those clever and hard-working people would likely have an empty warehouse and a torque wrench, not a car factory.
The difference, obviously, is that a state can use violent force to coerce people to do things, but all a corporation can do is offer you a voluntary contract to work there or to buy goods and services from them.
What you want to do is use the violent force of the state to make it illegal for workers to voluntarily enter certain agreements, e.g. to work in exchange for a wage.
> So you think that democracy doesn't work, and that (at least in the workplace) autocracy is the only effective form of leadership?
But those are not the only two options ! In any large organization (one that survives for some time, anyway), you will see small groups of people managed by middle managers; who are in turn managed by higher-level managers, etc., in a hierarchical tree structure. Such managers might be chosen by vote, or by autocratic decree, or by word of God or whatever; but they will nonetheless exist -- because they reduce the communication overhead from O(N^2) to O(logN). This has nothing to do with morality or liberty; it's just math.
> Why not have workers elect their managers?
There are companies that do work that way, but they tend to be less successful overall. The ability to manage is a combination of talent and skill just like the ability to weld metal or write software; and so is the ability to choose the right man for the job.
> Maybe a democratic process, instead of the investments being decided by a small group of wealthy VCs?
The reason these VCs are wealthy is (primarily) that they have the skill and talent to select good investments among bad ones. This skill is not uniformly distributed throughout the population. Let me put it this way: let's say you have to go to the hospital for some life-saving surgery. Would you choose Hospital A, where surgeons are chosen based on performance, and only the best or the best are retained; or hospital B, where surgeons are chosen by popular vote ?
The process doesn't end up making the final decisions, the elected individuals do. What's the ratio of members of Congress you respect? 80%? Higher, lower? Personally, as someone who pays very little attention, I wouldn't go above 60%.
Democracy is described as the least bad system of government, but part of it is that government is necessarily a monopoly. Their job is to create and enforce public policies; it would be very hard to enforce laws if there were multiple sets of laws in a location, with citizens free to switch between the sets as they saw fit.
But businesses don't have to create and enforce public policies; the public has to come to them first. So there's no issue with having a whole bunch of them in the same place, trying every possible model. We don't need to employ the least bad option as a failsafe, we can try every option at once and see which ones people prefer, based on which ones succeed and which ones fail.
We sort of have that with the States system; there are 50 sets of State law, and people can move from State to State at will. It just requires uprooting every part of your life, which is too expensive for a lot of people.
The people with democratic control over a company are the financial stakeholders such as stock owners or partners, because the financial stakeholders the ones out if the company goes under (some companies can work with the workers as the financial stakeholders and democratic management, but only in ideal circumstances). There's a very good reason we give that democratic control to the investors rather than the workers, especially with high-risk start-ups.
Suppose you and your friends want to start a company. You're all workers, and you actually know better than the people that used to manage you. So you evenly pool your money and get the expensive factory, machines, stock of raw materials, and so forth... you do have a lot of money just sitting around, right? After all, the workers that built the factory, made the machines, and refined the raw materials need to get paid. Assuming you get this far, your problems are just beginning. What happens when somebody gets sick and can't work for an extended period of time. Do they still get a vote? What happens when someone retires... where does their payout for their initial contribution come from? What happens when you need to hire someone new... how much do they need to pay to contribute? What happens if your company fails (as most do)... do you all just starve in the streets?
To put this into comparison: Boeing has a net value of $140 billion in assets (based on a casual online search), and 140,000 employees. In other words, the company has a value of $1 million per employee. If the money for Boeing is to come from employees, which you so easily suggest, I would need to be able to pay a $1 million buy-in to start a job at Boeing, and I would be out $1 million if the company goes bankrupt while I am employed there.
Your perspective is interesting, but it doesn't answer @Civilis's question. If investors cannot expect a payout on their investment if things go well, then what is their incentive to contribute money to the creation and expansion of a company ? I understand that giving rich people power in exchange for money sounds distasteful; but where is the money going to come from ? Workers don't have it, since, in your scenario, they're barely making ends meet. Should we just give up on starting new companies, and expanding existing ones ?
And, of course, our public servants (and "servants") in such a scenario are especially out of luck, with either nothing to invest in or investments riding entirely out of their control.
Of course, there is a solution to this. Just switch 'worker control of the means of production' to 'public control of the means of production'! The ultimate in democracy! The public decides what should be invested in and controls the company! And this will never ever be manipulated by politicians (that is, the individuals most skilled at manipulating votes). Never. Especially once they realize that democracy only says that people get a vote; it doesn't say that they get a choice, at least in a "Democratic Republic".
Part of it is that a country requires a fair number of companies that produce necessities like fuel and power to keep functioning; if the workers running those think that they have a say in whether the lights stay on, they have another thing coming. Obviously those workers are enemies of the people. Kulaks, wreckers, and hoarders, the lot of them. This is how the ideals of 'worker ownership of the means of production' when implemented always end up as what we saw in the USSR and the People's Republic of China.
In your hypothetical, are the Tesla workers better at their work than the workers at the previous companies that the new company is $200 billion better than? EG are they better than Ford workers, GM workers, or the workers of some terrible car company that went bankrupt? If so, what would explain why all the good workers are at one company and all the bad workers are at another? How did they get to be $200 billion better than all other car company workers?
From the hypothetical it sounds like in his example the workers have created the better car on their own, but then were bought by someone with excess wealth. This is not a realistic scenario, as far as I'm aware the people assembling a product are rarely if ever responsible for innovation, but this does occur with people slightly higher up the ladder such as engineers or researchers. Sometimes the innovations that improve a company's comparative advantage are created not by leadership but in the design process, and I imagine much of the time those people do not share in wealth creation. This speaks to some existing flaw in the distribution of wealth.
If tesla started chronically losing money, are we going to start charging the workers money to work at the factory (or at least stop paying them)? If the only source of a companies value is through the labor performed, are the workers to blame when the company has negative value? You want to have your cake and eat it too. And tell me, are Tesla workers any better than Ford workers? No? Then the difference has to be the company, in which case it's strange to suggest Tesla workers should be paid any more than equally skilled auto workers at other companies.
>this random apartheid scion named Elon who came up with some pretty obvious ideas and had access to enough capital to buy the factory
Oh noes, not apartheid! Do you speak this way about Zulu people? You know, the ones who treated the actually native south africans much, much worse than anything that ever happened under apartheid? Or is that cool because their skin is dark brown?
Notice that countless people with much more capital than Musk never successfully implemented this "obvious" idea. And the idea you or any other "random" person could pull it off with access to the same capital is a sick joke.
What musk did that created vast amounts of value is not just making some EVs. He has almost single-handedly made EVs cool and desirable, which in turn has sparked untold billions of dollars in investment in EVs at many companies other than Tesla.
But the workers couldn't do their work without raw materials. So clearly, the answer should be that the benefit should accrue to the owners of the iron mines that create the ore that is turned into the steel to make the cars.
No, that's silly. Iron ore is a commodity, just like labour. Both raw materials and labour should be bought at whatever the market price is.
I'm not sure "liquidity is finite and generally trading volume is a small proportion of the value of an entire company" is really that interesting. They can certainly access a significant number of billions with no issue, whether they do so via the open market or OTC with (or in Elon's case, I suppose often without) the proper disclosures, it just takes time.
And it's not like any billionaire needs all his money in cash all at once. Selling a $billion or two annually is enough to satisfy virtually any desire. And once your portfolio is diversified, you actually *could* convert the entire portfolio to cash with minimal losses, and with lower taxes than than Warren Buffet's secretary pays. The only reason billionaires don't do that is because it's worse than staying invested.
>Getting Bezos to where he is did not require that, and in fact, AWS was a spinoff that happened well after Bezos was the richest man in the world. My point stands.
Not even close to true, AWS was founded in 2006, in which Bezos was tied for the 147th richest person in the world with a net worth of 4.3 billion, while the richest was Bill Gates at 50 billion. (https://stats.areppim.com/listes/list_billionairesx06xwor.htm)
>In the case of Amazon, many and various, but some include the pricing model of Amazon Prime and using its market share to intentionally drive up prices for literally everyone selling what it sells, including Walmart.
How are either of those "loopholes"? The first is just a business model and the second doesn't even make any sense, increasing your prices makes you *less* competitive, it doesn't force your competitor to match.
Amazon Prime is only a year older than AWS. If you only care about how Bezos became a billionaire, you shouldn't care about Prime. If you care about how he became the richest man in the world, you should care about both.
Counterexample - Google's search engine as well as adsense (the innovation of which was in fact making ads less annoying). Twitch. YouTube.
Apple also does not seem to have a tollbooth, or even a monopoly on anything major.
As for your specific claim that manufacturing never makes billionaires: Morris Chang, founder of TSMC, currently has a net worth of approximately 2.8 billion.
There are many many more counter examples to your claim, but I feel that your statement was so strongly worded that even one would be enough.
Neither Apple or Google or any of the tech giants are monopolies in the sense that their existence prevents others from competing. The fact that all Apples products compete in highly competitive mobile / computer segments is self evident. Nobody buys an Apple phone because it's the only option - there are literally dozens of competitors. But Apple has been historically the best for many customers. You have a very inaccurate view of competition and what makes a monopoly.
Having high market share because your product is good does not make you a monopoly mate or a rent seeker.
Then your argument makes even less sense. You are talking about monopolies and antitrust yet can't actually explain how any of these companies are a monopoly? A person can't be a monopoly so if you can enlighten me, that would be great.
Markets and competition do a great job in dynamically coordinating supply and demand especially of scarce resources. But like in every competition or game there need to be rules that are binding for every one. As soon as somebody tricks the rules or cheats, the market doesn't work as well as it could.
"It is categorically impossible to make a billion dollars without recognizing, or worse yet, creating, a bottleneck or tollbooth in an otherwise functional system and extracting rents from its operation. We call these tollbooths "monopolies," and their operation "exploitation" of people, economies, systems, and societies."
Couldn't be more wrong. The way to make a billion dollars is to create a lot of value for other people. The whole concept of antitrust is mostly a farce. The only real monopolies are government created- historically, anyway. All the non-government-created monopolies that were broken up were crushed because they were creating too much value for consumers by lowering prices and driving other companies out of business (i.e. standard oil). The theory made up after the fact that at some point they would raise prices has been proven false time and again. The original purpose of anti-trust was explicitly to protect other businesses against competition.
Fact free assertion much? Like your original post in fact. Others in the threads have pointed out several counter examples, and you're responding without engaging
How could he present examples where you're wrong, when all you're saying is he's categorically wrong? There's nothing to argue with when you don't engage and just tell people to read so-and-so.
I disagree. Others have provided specific counter examples that show you're incorrect. You're not engaging there either. And far from being a Gish gallop, the comment you're responding to is quite tightly focused on responding to your statement.
No single person can possibly create value worth a billion. If you would say a million I would think about it...
a monopoly is basically a situation there is no real competition. This can be caused by government willingly or not, but there are definitely many other reasons and situations too.
"The original purpose of anti-trust was explicitly to protect other businesses against competition" please give any prove for this, as most people see it differently.
"No single person can possibly create value worth a billion"
Why would you believe that? What about song writers who are super popular and bring joy to billions? Paul McCartney?
"please give any prove for this, as most people see it differently."
Not people who are actually familiar with the history. Like I said, it's not some kind of secret. They were quite open about the purpose being to stop the monopolies from driving smaller companies out of business.
Why could Paul McCartney reach and bring joy to millions? Definitely not on his own. This was only possible by a lot of technology work and resources the society provided. Also if he wouldn't have this reach, there would have been smaller stars in all counties. The key effect that so many people could enjoy music was technology because otherwise they had to attend a live concert everytime.
"Protecting business from competition" is not the same as "stop the monopolies from driving smaller companies out of business". In the latter case its more about protecting the public from the bad effects a monopoly has by ensuring competition on a equal playing field. "Driving companies out of business" usually means other means than fair comptition. So this was not caring about the single protected business that could still loos the market in to one of many competitors.
That's obviously true of everything, but without McCartney all that enjoyment would not exist so it was solely due to him. Music is non-rivalrous so if he didn't exist we wouldn't have that wonderful music and it would not have been replaced by other music.
As far as your last paragraph it's dead wrong. Unfair competition had nothing to do with it at all, just efficiency and lower prices.
We wouldn't have had 'that' wonderful music. But we would have enjoyed other wonderful music that also exists. The point of people have joy is more connected to the access to good music in general than to this particular artist.
Well, yes. efficiency and lower prices are ear exactly the main reasons why we want to have a fair competition and prevent a monopoly then and now. It was and is always about preventing big players form misuse of power, not about protecting some business from competition as your first suggested.
I think your point's on the right track, Mr. Rollins. I'd add to it by pointing out that Amazon is simply one form of exploiting (in a value-neutral sense) the Internet, the outcome of a series of inventions that each seem at least as substantial as anything Bezos contributed, and many of them were developed with tax-payer supported government funding.
It's neither surprising nor necessarily a negative feature that the Internet attracted rent seekers who monetized its potential. One of the Internet's obvious social benefits is its potential to stimulate transactions that produce economic growth: jobs, further investment, and also some concentrations of individual wealth. But if we're considering fairness as an ethical, rather than a political or legal category in the scale of individual wealth, it seems misguided to treat all the socially sunk costs that lie behind the opportunities presented to Bezos as vaporized to zero, although laws and regulatory regimes may allow rent seekers to operate as though they were.
This is just a version of Obama's garbled "You-Didn't-Build-That" semi-misstatement: the accrued basis of public and private infrastructure for all corporate activity forms a sedimentary continent on which individual market accomplishments rise and fall. Capitalist theory concerns the hidden hand that rewards the commonweal by incentivizing individual profit (whether in manufacturing or marketing), but when the social basis of corporate success becomes a hidden factor, the scale of individual profit can exceed anything benefiting the commonweal, and the ethical basis of capitalism becomes harder to defend. The comment of metaphysiocrat (about an hour earlier than this one) gets to the heart of this by pointing out that when wealth reaches a certain scale it translates into a significant pivot of individual social/political/economic power that can be destabilizing.
So I agree that Scott has probably started from the wrong place, treating an economic playing field that includes an array of never-fully-compensated investments and innovations as a tabula rasa. (And this doesn't even get into the manner in which Amazon's semi-monopoly status allows it to wring rents out of every manufacturing and service vendor for which it has become an indispensable middle man.)
Look, whatever you meant what you actually said is "Manufacturing does not make billionaires." The reasonable thing to do when confronted with empirical proof that this is false is to say "Oh, huh, interesting. Well, I appear to be wrong about that -- but it doesn't take away from my main point, which is..."
The move to AWS was extremely unpopular and management had to give and follow through on crazy "become a microservice or we fire the whole team" style threats to get the company on board. Really think that call was a unique, extraordinarily valuable one that should be chalked up to a visionary CEO earning his whole paycheck.
I completely agree. It was also probably even more incredible than "sell products on the internet" given how it drove down the cost of a lot of activity, and wasn't remotely as obvious to laypeople.
There is a restaurant here in San Francisco called Just Desserts (which serves desserts). I imagine a lot of people get the joke, but without realizing that the spelling is different!
1 and 4 are half-cognate, but not in the way you might think! I thought maybe “dessert” was what you deserved for finishing a meal. But actually “deserve” comes from the Latin for “serve well”, while “dessert” comes from the French for “de-serve”, i.e. what you have after the table is cleared 😅
I had misinterpreted dessert as a doublet of desert (that is, a word that was borrowed into English multiple times from the same root, with different meanings for each borrowing).
It's relatively rare and possibly old-fashioned. Now I'm wondering how much of my vocabulary is from reading fantasy (possibly written pre-1960 or so) where older words were used for flavor.
same here, and it's been 25 years (or 40?) -first encountered not today but in another ACX (or) SSC-post. “I am learning all the time. The tombstone will be my diploma.”
Danke! This helps me a lot! We only have dessert - pronouncing it /dəˈzɝɝɝ/ or sth, cuz: crazy French ... - and many prefer to write or say "Nachtisch" ("after table" - sweet meal) not to get the writing resp. pronouncing wrong. Had to google: Das Dessert ( [dɛˈseːɐ̯], [dɛˈsɛːɐ̯], [dɛˈsɛʁt] oder [ˈdɛsɛːr], von französisch dessert) lol, 4 ways to say one word - we really don't know Francaise.
I am so glad to know that ethnic Germans hate French borrowings into German as much as English-speaking learners of German.
(Most of the French borrowed by English was borrowed from Norman French before the Great Vowel Shift of Middle English, so the pronunciations at least *sound* English.)
"We're sorry, Amazon.com has reached its daily sales quota as determined by the US Department of Profit Control. You are being redirected to Jet.com" You can't regulate or tax incompetence into relevance, and a $1.3trillion market cap isn't unreasonable for a company that does half that many deliveries in retail sales alone every year, say nothing of all the other sectors they're involved in and actively improving. I trust even Bezos to spend the profits more effectively than Bernie, by far.
Precisely because Amazon has such low prices, as Scott mentioned, I expect the monopoly rents are being paid for by the employees more than the customers in the form of harsh working conditions created by what amounts to intentional understaffing combined with quotas so that each warehouse employee is performing more than one person's 'sustainable workload'.
Monopoly rents come from increasing the price above the marginal costs. Do you really think Amazon's success could be built on paying their workers less than other wholesalers or retailers? You must think those other workers are making a *lot* of money!
It's actually the opposite - Amazon workers make far more than their direct competitors pay at Walmart and other retail locations. That said, a big reason Amazon pays more is that they employ them as warehouse workers instead of retail sales employees, which is typically a higher-paid field.
The real question is whether Amazon employs fewer people per sales dollar - which is likely true, and a sign of efficiency. If Amazon pays their employees well (compared to alternative options at least), but hires fewer of them than Walmart or another competitor would have to in order to push the same number of sales, I'm having trouble with the idea that Amazon is acting immorally. They charge less than typical retail locations, and in large part that's because they don't have to pay for the retail storefront. Retail storefronts haven't been good careers since at least the 1990s, and even then weren't great careers.
Well, Amazon isn't the only company acting immorally, but working people hard enough to destroy their health without EXTREME need strikes me as immoral. It's not a "people/sales dollar" question. That's essentially irrelevant. Being an "efficient slave driver" doesn't make you moral, just both immoral and efficient.
You're using evocative language. Let's use more sober terms.
- For one thing, in my opnion it is totally out of play to compare workers at Amazon warehouses to slaves. I think that would only be OK if these people could literally not find any other work, but that is certainly not true.
- Next, most people who work in Amazon warehouses don't die decades earlier as a result of overwork, and so they aren't all "destroying their health". Perhaps they accept a modest decrement in health in exchange for higher wages. Moreover, as you say, they aren't all in EXTREME need. They simply choose to take the tradeoff. Don't young people engage in high risk behavior all the time, for a whole host of reasons?
Do you think companies should not permit people to engage in riskier forms of work? And if so, don't you have to draw a totally arbitrary line between acceptable and excessive risk? It seems awfully presumptuous to claim to know where that line is for the entire human race.
You know what? I had a long ass reply to this comment typed up and I was going to link this (admittedly a couple years old) gizmodo article as a source, but after rereading it to make sure I didn't mess anything up, I realized the article said it better than I could have. So here: https://gizmodo.com/i-tried-to-block-amazon-from-my-life-it-was-impossible-1830565336
Tl:dr Amazon makes its money from webhosting, internet infrastructure, and by being basically completely unavoidable and by being thiiiiiiiis close to being indispensable in regards to keeping the modern internet functioning properly.
Are you implying that the entire telecoms industry collapsed after Bell was broken up or that anti-monopoly laws, which are largely unenforced, do not work and all exist for no reason? This is rather a silly notion and ignores all of the harms to society and consumers and innovation which arise from the stagnant fearful monopolies who seek rent. It is silly and very straw-man to imagine some horrible alternative reality as the only possible alternative.
In most industries we see price gouging, abuse of workers, anti competitive tactics (many of which are also illegal), and reduced quality of service over time. It makes a lot of sense to break up any company which comes to dominate any industry.
D-Jimmy Carter's judge broke Bell Labs when he broke up Bell. D-JFK immiserated Baltimore and Gary when he broke US Steel. The Democrats turned the industrial Midwest into the Rustbelt. When the Clinton Foundation took a half-billion from Microsoft's competitors and the Clintons sent the Justice Department after Microsoft they broke the dot-com boom
Anti-monopoly laws exist for reasons as corrupt and feckless as the rest of US politics.
I don't say Bell Labs was the end of research. I say it was hugely valuable, decades of huge, continuous R&D spend into existing ideas if you will, and fecklessly broken by D-Jimmy Carter's judge.
Microsoft opened a billion dollar office in DC because of the trial, which followed a half-billion dollar bribe laundered through the Clinton Foundation. Only the big boys can pay big bribes. Small startups were crushed by the chilling effect of the corrupted Justice Department. Crush the small startups, crush the boom.
This is sort of the argument for Jeff Bezos ""actually earning"" $200 billion -- Amazon made a very long series of strategic and tactical decisions right, during a time when nearly all important decisions in Amazon flowed through Jeff.
Most critically to all of them, Jeff found a way to prioritize growth over short-term profitability, successfully earning Amazon decades of time to constantly plough nearly every penny of free cash flow directly back into investing in the business.
There's a quote I can't find on Google at the moment where a ?Walmart? executive in ?charge of building out their internet-sales-portal? talked about competing with Amazon and said something like "We constantly had to skim off chunks of our operating margin to pay dividends, they didn't. They started smaller but got to fight with 100% of their resources, while we were essentially starved of oxygen by the demands of our shareholds."
Even if the Microsoft monopoly getting addressed killed the dot-com boom, it also saved Apple, which subsequently became the most valuable tech company in the world, created the IPod (breaking the music industries backwards attitude in the process) and the IPhone (which revolutionized the smartphone approach and made it useful for the masses). It also made Android phones relevant, instead of torturing us some more with those half-assed Windows phones. So even your own examples don't demonstrate what you actually advertise them to demonstrate ...
Apple had been ‘doomed’ for at least a decade prior. Apple didn’t need saving and was not saved by antitrust. Arguably it didn’t even remove Microsoft as a competitor. The browser antitrust case was a complete boondoggle that accomplished little to nothing, and Microsoft didn’t even have a monopoly.
Of course it was saved by Antitrust, but not the way you chose to interpret my injection. Apple was saved from certain bankruptcy by Microsoft specifically because they feared anti trust law. Microsoft needed a showcase competitor ...
Just saw this, but had to comment how ironic it is that you open with a strawman (where did I mention "collapse", say nothing of an antitrust case from 40 years ago before the www even existed), then proceed to call the wholecloth things I never said a silly strawman. Amazon is not stagnant. They're not price gouging. They treat workers well according to someone I know who works there as a side gig and loves it. They're not reducing quality of service, in fact most would say it's getting better every year. If they're broken up, people would pay more and get less. If that weren't the case, then maybe you'd have one, but until then their existence is a net benefit from the majority's pov, which is why millions work there and billions buy from them. That's why the antitrust laws aren't regularly used - because most voters don't want them to be.
The point isn't to allow competitors; it's to prevent monopoly rent collection. Taxing Amazon's profits and redistributing them would solve the problem even without allowing competition. So, in theory, would fixing Amazon's prices lower than what they are now, but in practice fixing prices is hard.
In my opinion, every major financial power needs AT LEAST 6 competitors approximately equal in size/efficiency for optimal results. This isn't necessarily true during the development phase, but it's true once development peaks. If there are fewer than 6, or one is considerably more successful than the others, then government regulation is needed. Ideally by breaking the largest entity into smaller entities. (And the smaller entities need independent ownership! Alphabet over Google should not be considered an answer.)
I thought the evidence from telecoms markets was that there were benefits from going from 3 to 4 major competitors but very few markets with more than 4 major competitors?
The fewer competitors, the easier it is to set up a "gentlemen's agreement" to control prices.
I'm quite willing to believe that the evidence that is shown matches what you've said, but that's not sufficient. There have been multiple instances of collusion to fix prices in the past, but with more groups needing to agree, the chance that one of them will break the agreement for individual profit increases.
Sure, but where are you getting "there should be at least 6" from? It seems very hard to maintain that metric for a reasonable definition of "approximately equal"
Which Telecoms markets? I was under the impression that in most of the USA other than the biggest cities a given area is under a local telecoms monopoly.
Here in Aus thinks work very differently, All the infrastructure is owned by one of 2 companies (one of which was government owned, relatively recently went private) but they're legally obligated to rent that infrastructure at fair prices to any and all competitors.
I was thinking of cell-phone signal providers (Verizon, AT&T, T-Mobile+Sprint, in the US). For cell-phone towers, nearly all of the US has coverage from all three of those physically distinct networks of towers.
They are also required to rent those towers to sub-players at fair prices AFAIK.
Yes, indeed. Thats the reason why any government should be effectively controlled by the citizens. This is why Democracy is valued so high.
So I fully follow your argument, but my conclution is not that government or taxes are evil, but that any monopoly has to be democratically controlled. Tell the big corporations: allow competition or adopt democratic leadership and give you monopoly rent for the public good. (This does not have to be the state)
I don't know, I think if a corporation exerted a coercive monopoly over important services, didn't allow competitors, and demanded payment regardless of quality of service with threat of locking you away for failure to pay, people wouldn't suddenly say it's cool if the corporation gave them 1 share out of hundreds of millions to make their voice heard.
Is not any Amazon "rent collection" currently reinvested into Amazon business, based on their best idea of how to create further value? So taxing or price controls just changes the benefit to go to consumers in the form of cheaper products rather than investment into a growing business? I don't see a clear reason why this is necessarily good. Maybe consumers would like to see better Amazon-produced movies rather than cheaper Prime subscriptions?
Why regulate or tax it away? Why not just regulate or tax it enough to make it not collect monopoly rents (or to collect much less)? I feel like it isn't proportional to kill it.
This is what QL is saying. There isn't a missing punctuation mark between "rents" and "that"; the monopoly rents are the thing being taxed/regulated away.
If you regulate or tax it, why does that guarantee the monopoly rent is what is lost? It is still a monopoly. Seems more likely that quality would be reduced in order to maintain monopoly rent despite the tax. That would not be a benefit to the public.
It's not a guarantee but if you structure the regulation or tax well it tends to work pretty well. I think you may be making the perfect the enemy of the good here.
Monopolies - other than legally-enforced monopolies, and to some extent even those* - have a limited amount of headroom. If Amazon raised the prices on all its goods by 100x, it would go out of business; 100x the prices is higher than what a competitor could offer.
If you tax the monopoly distributor by the amount of headroom, it can't compensate to retain its profits, because it would then be subject to competition (at least, if you design the tax so that a competitor wouldn't be subject to it).
*The issue here is that running a criminal enterprise incurs large *but finite* overhead. If you have a legally-enforced monopoly on wine, and you raise the price to a billion dollars a bottle, you will get undercut by people illegally making/smuggling wine for a lot less than a billion dollars a bottle (even factoring in risk premium). You could probably get to $200 a bottle or so without too much trouble, though, assuming the law was semi-reliably enforced.
By your theory Walmart.com’s prices must be rock bottom beneath Amazon, right? Because Amazon occupies an unassailable monopoly position from which it extracts terrific rents?
Likewise, AWS must be much more expensive than Azure…
You have accidentally created an empirically testable proposition, but I’m not sure you’re going to like it.
I think steel manning the parent argument, I'd say that the first mover advantage allowed Amazon to get to a scale where its profits are higher than the 2nd mover even if the prices are the same. If there were 2 companies with the same efficiency of scale as Amazon, the prices would be lower, but you can't see that counterfactual because Amazon's monopolized this position.
I don't quite buy the argument that someone else would've done it a small N years later in this case. It may be closer to Musk/SpaceX and I don't know how to tel for sure.
I think it’s weird to say that Walmart doesn’t have the demonstrated capacity to operate at Amazon’s scale… Walmart has been operating at Amazon’s scale for many many years before Amazon existed.
Walmart is operating at the same scale in some ways, but not others . Walmart's efficiency is pretty different from Amazon when it comes to home delivery logistics, online product selection, customer service, etc. Walmart's not at the same scale in those.
I don’t know, they look pretty obviously comparable to me when it comes to end-consumer service. Have you ever used Walmart.com the way you might use Amazon.com? Huge selection, quick delivery, fast customer service options. I’m not going to pretend that they’re exactly equal in offerings, but that’s not the point. The point is that they’re a legit competitor at enormous scale, and the idea that Amazon is simply operating at a level Walmart can’t is not obvious.
I recommend pointing out some specific things that Amazon can do in online retail which Walmart cannot due to issues of unassailable scale. Then we can discuss at an objective level whether Amazon occupies a position where it can deny Walmart the market.
And you’re ignoring obvious benefits to the consumer and the marketplace which are made even more obvious by the stunning popularity of the services and goods provided. Shrug.
Actually, I'm not. I agree that there are lots of advantages to having a monopoly marketplace. It's easier to get a wide variety of goods, etc. But I think that such a thing needs to be regulated as a utility.
I.e. I think the internet marketplace is a "weak natural monopoly". Weak because there don't need to be strong barriers to entry, and "natural monopoly", because it's difficult for small sellers to subscribe to multiple markets.
(Note that I'm not sure that there aren't strong barriers to entry. Amazon lost money for over a decade before it started turning a profit. Just that they aren't required for this to be true.)
Why do you think financial results are what determines whether it is a monopoly or not? To me it's a combination of what proportion of the market it controls and how difficult it is for someone else to enter that market.
Consider, suppose Apple didn't make any money off their app store. Would that mean that Apple didn't have monopoly control over the applications available in their app store ? Monopoly is an enabler of high profits, but it neither requires nor ensures that. (And it's not the only enabler.)
“ because it's difficult for small sellers to subscribe to multiple markets.”
You keep saying these things that by looking at the market are obviously untrue. Again, there are tons, simply scads, of competitors in the internet marketplace.
Amazon lost money for years because it made the conscious decision to sacrifice its profits for growth, not because it couldn’t figure out a way to turn a profit—it’s weird to me that you have such strong opinions about this without being informed about basic facts of which any shareholder was made aware in quarterlies.
The barriers to entry are so very low that you can spin up a free storefront with less investment than it takes to open a physical storefront, something that should be pretty obvious to almost anybody by now.
This does not cotradict Ch Hi. Yes, Amazon did sacrifice the short term profits for growth. But why was growing so important? Because Jeff Bezos and the other Venture Capitalists realized that once you are big enough the network effect gives you kind of monopoly and that a monopoly is highly profitable once you have them. And as long as the VC believes that you will be highly profitable in the future, they give you money to grow, to run on low margins to case off competitors or just to buy competitors that could pose a risk in the future as facebook did with Instagram or WhatsApp.
This game is just a little more complex than just getting high prices from the customers.
There are countless competing online storefronts of all sizes, so it seems very hard to call Amazon's storefront a monopoly. To be fair, there are anticompetitive features in their ability to leverage their control over the distribution channel between the buyer and the seller, but that's far from being a monopoly.
To be blunt: if Amazon has monopoly pricing power, then why do its financial results indicate that it is demonstrably terrible at using this power to goose profits? It has a net profit margin of ~2.4% and a net return on book equity of ~9.4%.
Nobody but a state with political and military power can afford to operate at a loss over the medium term. And even states can't 'afford' it in the long term.
Does this mean that Amazon sets prices lower than they would have been or higher? If lower, then that's an odd way to extract a Monopoly rent; it sounds more like Amazon driving down prices through competition. If they are setting prices higher, then why can't others undercut them?
Profit is more than one thing. Amazon's declared, taxable profits are.low (hence the annoying fact that it was little taxes) because it reinvests a lot of the money it makes into growth, and governments don't tax investment because the like growth. But if you don't think monopolies are good , maybe you shouldn't encourage unlimited growth.
It's what they used to call a natural monopoly. Having one central provider flows from the structure of the business. Amazon has built an amazing fulfillment empire, but it also runs a marketplace where competes with its sellers. It's like the NYSE operating mutual funds or packaging ETFs. Like the railroads, Amazon controls an outsized chunk of the online marketplace and uses its position as one might expect.
The railroads were controlled the structure of commerce in the US. Their tariffs enforced an industrial north and agricultural south. Railroads were as despised as cable companies or ISPs. Regulation helped a bit, but only a bit. Then the government built the interstate highway system and industry was dramatically restructured.
The last big antitrust case involved Microsoft. When IBM got sick of antitrust fights, they decided to outsource the operating system for their PCs. This was like throwing a monopoly bouquet at a wedding and Bill Gates was the bridesmaid who jumped highest and snatched the prize. His plan was to leverage this operating system monopoly into an internet monopoly, and the scheme was working before the Clinton administration sued. The reason I am writing this on Substack and not some Microsoft comment board is because of an antitrust lawsuit.
Railroads tried to cartelize transportation. Microsoft supposedly tried to turn their dominance of personal computer operating systems into a monopoly on browser software. Exactly what product or service are Amazon monopolizing?
They run the dominant online marketplace. There are competitors like eBay and Shopify, but unless you can build your own store and fulfillment system at scale, you either have to stay small or accept that Amazon can put you out of business in a heartbeat. They can delist you without so much as a word of explanation and there is no clear process for finding out what happened let alone getting reinstated. They can simply start selling their own set of products modeled on yours and undercut you on price and deprecate your listings. Even if you are a big company with lots of lawyers and an established brand, Amazon will allow other vendors to sell counterfeit versions of your products for extended periods and your brand will take the knocks if those products are inferior.
I do see some competitors out there. Shopify is the most visible for smaller outfits, but there are also specialty groups like Goldbelly for food items. There are definite counterforces, but Amazon has a huge market presence and lot of resources. A formal antitrust case may not be necessary, but a serious threat of one would make a difference.
It was a simple question. Can you give a simple answer?
It sort of sounds like you mean to say that Amazon provides a service for small retailers that no one else can provide. Not clear what aspect cannot be duplicated. Maybe the “at scale” aspect?
Or maybe you are just talking about network effects? I guess that would mean they are monopolizing the customers.
If an artist makes art that people will pay more for, do we call them monopolists? How much more do they get to charge before they should face an antitrust suit?
I guess what I am saying is, nothing is stopping anyone from providing an Amazon service for people who have been rejected by Amazon or who just hate Amazon. But you could say that about Microsoft, too. MacOS and Linux exist, but are they enough?
So what's the solution, make them a public utility? Did the suit against M$ solve that problem?
I am talking about network effects. Amazon does monopolize customers by providing a central place to start searching for goods. Have you heard of The Street of the Carpet Sellers? That's about what economists call central place theory. Good luck selling carpets if you don't have a shop on that street. Amazon owns that street. They have the critical mass of user reviews. In many ways, Amazon is the new Yellow Pages. If you want to reach customers, you have to deal with Amazon. Ben Thompson goes on about this over at Stratechery.
Sure, nothing is stopping you from XXX, but that's not the way it works in real life. No one made you buy telephone service from AT&T in its monopoly days. No one makes you shop at Walmart though Walmart pushed out every other grocery store for 50 miles. No one makes you buy tortillas from Gruma, but unless you live in a Mexican neighborhood, that means a long drive or mail order. There is such thing as market power. If there are only a handful of art galleries and they only sell art from a handful of artists, they aren't stopping you from buying art from someone else, but they can make you work hard to do so and they can use their market power to stifle new galleries.
One solution is to break up Amazon into a sales company, a network services company and a marketplace and to regulate that marketplace to make sure it stays competitive. Another solution is to require Amazon to offer set terms and due process for vendors. Yet another is to require Amazon to unbundle its sales and fulfillment support services and advertising. How about requiring Amazon to open its database so that others can develop competing search engines without adversarial tactics? These kinds of remedies have worked in past antitrust cases. There is no reason similar remedies couldn't work for Amazon.
Microsoft was a good example. Their intention was to place their idiosyncratic browser between users and the internet. I knew friends working at Microsoft, and they were given explicit instructions not to look at industry standards when they implemented browser components. The idea was that their implementation would become the industry standard. Since they controlled the dominant operating system, they could leverage that to control access to the internet.
Yes, people could install alternate browsers, at least they could at the time, but who was going to even know that this was a possibility? What was going to stop Microsoft from sabotaging them by providing its own browser with a better network API? By the early 2000s, more and more websites were being written to Microsoft's non-standard specifications for HTML and Javascript. Their strategy was working, and we would have a very different internet today without that antitrust suit.
The government lawsuit put Microsoft under the spotlight. Depending on where you lived, your new system would ask you to choose a default browser with Microsoft's Explorer as just one of several options. There was a renewed push to enforce web standards. Microsoft invested in Apple so it plausibly claim that it had a competitor. This created space for companies like Google, Facebook, Netflix and others.
Antitrust has worked very well over the years. The Standard Oil case lowered fuel prices and gave the US better strategic options thanks to competition in that area. One of many IBM cases led to competing platforms and compatible peripherals and software. The Xerox case led to more widespread innovation in copying technology. The Kodak case opened its C1 (?) film processing technology. There's a long list. The last thing dominant companies want is innovation, and they often have the power to crush it. Antitrust is one of the few counter-mechanisms.
I thought a bit about credit allocation (mostly from an effective altruism point of view).
I think you're missing the next important step which is that people who would counterfactually do Bezos' work presumably also have good next-best options. So Bezos1 taking the Amazon niche means Bezos2 is free to do their next great project. So Bezos1 + Bezos2 combined created utility equal to Bezos' apparent utility minus Bezos2's counterfactual utility (if Bezos2 were to create Amazon instead) plus Bezos2's apparent utility minus Bezos3's counterfactual contribution plus Bezos3's....
In the EA space I have a moderately strong intuition that a lot of this adds up to normality so people should mostly just do what their naive highest impact is. I'm less sure how it applies to the (substantially more competitive and less coordinated) moneymaking world.
I think part of Scott's point that this does not address is that certain niches are vastly more valuable than others. So Bezos1 takes the "online market" idea, and leaves Bezos2 with something far less valuable. He's almost as capable as Bezos1, but is worth a tiny fraction of Bezos1, even if he works harder and also has great ideas.
Sure, but each later Bezos’ ‘next-best option’ which they’d counterfactually be giving up is whatever they’re actually doing in the real world. If Bezos2 got removed from the rest of the workforce to found Amazon instead of Bezos1, the cost would be something less than or equal to Bezos2’s actual lifetime output, since each later Bezos would only change jobs if it benefited someone. And Bezos2’s lifetime salary feels negligible compared to $200 billion.
... which would seem to imply Bezos1's marginal productivity is equal to the productivity of the marginal, worst-paid Bezos. This analysis is hard to run in practice, though, since people are *partially* fungible in really complex ways.
This is especially true if Bezos 2 was Travis Kalanick and he made an online store instead of Uber. If I remember right, ride sharing has lowered drunk driving deaths by something like 30% for young people, and every year that innovation is delayed, many thousands of people die. Or maybe it's Elon Musk. He's moved the timetable for electric cars up at least a decade. How much is that decade of lower emissions worth?
Scott, the argument you're making rhymes a *lot* with the argument put forward by Anne Margrethe Brigham and Jonathon W. Moses in their article "Den Nye Oljen" (Norwegian for "The New Oil")
Their observation is that when access to something is gated either by nature or by political regulation, you get what's called a "resource rent" -- a superabundance of profit that isn't a return for effort or investment, but purely from economic leverage -- a reward simply for "getting there first." Norway's solution to this in two of their most successful industries (hydropower and oil prospecting) was to apply heavy taxation to the monopolies, and treating the people at large as the natural legal owner of the monopolized resource.
(To address Bryan Caplan's argument about disincentives to explore and invest, you can just subsidize those directly -- a perpetual monopoly should not be the carrot we use to encourage development, and Norway's success over the past few decades bears this out IMHO).
The Oil & Hydropower systems aren't perfect, and there's plenty of debates (especially lately) about what we should *do* with the publicly-owned profits from the monopoly taxation, but it's clear that without them Norway would be in a much worse place.
The thing the authors warn about in the article is that all the hopes for new resources on the horizon to be the "new oil" (Salmon aquaculture, Wind & Solar Power, Bio-prospecting) are likely to be dashed, because Norway has lost touch with its traditional solutions, and so new monopolies are likely to arise uncontested, allowing private (and often foreign) countries to siphon money out of the country.
> I'd also note that most of the time "getting there first" itself requires investment or effort; e.g. oil exploration is not costless!
Correct! This is explicitly addressed by the Norwegian system, and why they specifically subsidize R&D and investment, in order to ensure a return on investment and effort. The insight here is not to make monopoly the natural carrot we give to private interests as the inducement for development.
> The problem with this kind of argument is that it only works if you refuse to apply it to people's natural talents. Your intelligence or conscientiousness, at least most of them, are not returns for effort or investment either.
It's true that it's not fair that some people are smarter, stronger, and more agreeable than others, but the fact that a policy doesn't solve literally everything doesn't mean it doesn't improve the status quo. I don't see how raising this point is a persuasive argument for what I see as inefficient natural resource policy.
I guess you're accusing me of hypocrisy. I personally find it perfectly consistent to draw a sharp line at internal personal characteristics that are difficult to quantify, and lean on the well established economic literature on the subject, and the empirical results from the Norwegian results which speak for themselves.
I don't think they're the same category of thing at all, when we're talking about internal characteristics, rather than domination of natural resources or monopolization of the market (artificially or naturally) through first mover advantages -- that's much more of a concern for me than the fact that individuals are born with different natural proclivities. I think you've mistaken one of many justifications for my chosen policies as the sole and primary motivating force.
But if we want to bite your bullet anyway, aren't you just making a case for progressive taxation here? You're right we can quantify unearned advantages to people who are taller, more attractive, etc, and they certainly didn't do any work to achieve that. There are a million other such things, some known, some not known, that surely work that way. And the conclusion to what to do about that seems to just be ... progressive taxation, or some flavor of it.
As a matter of practical policy, if we tax monopoly power to ensure equal access and opportunity to the bounties of nature for all people, we can provide the basis for a more just society *and* efficient society without having to go full Harrison Bergeron, which seems to be what you're implying the natural conclusion of my principles is.
Someone being more intelligent then someone else is not a private tax on others. The nature of rent-seeking as zero-sum taking is central to the ethical case for Georgism.
If you want to argue that someone deciding to use their intelligence for their own benefit instead of working for you constitutes stealing from you, you are free to make that argument of course.
Yes, a baron on the Rhine charging people tolls for using a river is structurally identical to someone deciding not to work for you. There is no difference between these two scenarios. Good job.
To be clear I'm not 100% sure if this argument is perfectly applicable to Amazon specifically, but this is the kind of argument I think Scott is making so I wanted to point it out. It would fit in the case of a company that relies on a large war chest of patents (and Amazon certainly owned the 1-click checkout patent for ages). There's a case to be made that large networks with strong lock-in and sticky network effects are monopolistic in nature and should be tackled with these kinds of tools, but my own personal theory / understanding of that is admittedly undercooked at the moment.
The thing I mostly look for is: has one company eliminated its competition because they're just *so dang good* or because others are effectively forbidden from even *trying* to compete with them, through natural or artificial means?
My guess is that Amazon has taken advantage of more traditional economies of scale compared to other other modern tech giants. Like, it's just really hard to run a postal service, and once one of a certain size exists, it's impossible to compete with as a new entrant in the market. Probably why a national postal service was so important to the framers, now that I think about it.
"Network effects" in general are overestimated as one of the roots of big tech monopolies, probably because it makes them sound natural, rather than the inevitable consequence of modern IP policy. If network effects really did matter so much, we'd all still by using Myspace. Cory Doctorow at the EFF has written at length about it.
I think people underestimate the impact of Facebook being started at Harvard. It is almost a meme at this point that half the point of going to Harvard is to network with the kind of people who get themselves into Harvard. Zuckerburg made that work for him in many ways.
Second, Facebook really was better than MySpace. You had responsive and well designed pages (no autoplaying videos on someone's page...) and all sorts of better features than MySpace.
Finally, and probably the nail in the coffin: MySpace missed the take-off of smartphones. Just like Google+ did, but in the other direction. Google+ was, iirc, better than Facebook, but they were too late and the network effects were too strong at that point.
Except Amazon didn't discover online retail. It wasn't even the first mover. Nor does it have any kind of exclusive right over online retail. (Except patents which might be a good area for reform.) While I think there's serious problems with Amazon I don't think it's at all analogous to something like land rents or an oil field.
To be clear I'm not sure the analogy fits with the specific case of Amazon myself either (see the other parallel replies), but I think this is the general structure of the argument Scott is making.
I'm undecided on the issue of lock-in (AWS is notorious for that) and network effects as it relates to the question of monopoly / dampening of competition.
Lars, in my experience the average person is convinced that building and running something like AMZ is utterly trivial, and that they could get easily do it if they just worked hard for a week or so.
There's a fundamental disconnect between people like me (and some others here) who see the kinds of people CAPABLE of creating billion-dollar enterprises as fundamentally rare and unusual, and most people who seem to imagine that anyone can do it (which is much of the tone of Scott's second half argument).
I'm not sure how you resolve this, especially since people have extremely strong opinions about this based on essentially zero knowledge of anything relevant to the issue; what you are seeing is some sort of poll as to "beliefs regarding human nature", not any sort of reasoned, evidence based analysis of just how many potential billionaires are out there ready to create companies should one of the current giants fail.
For example in the case of AMZ, did they succeed because they were "so much better" or because of various nefarious nastiness like one-click patents? I'd say "so much better than the alternative", but it's hard to *prove* that (especially when you're arguing with a kid who wasn't even born when AMZ was founded, and has no clue how frustrating and incompetent retail was in the early 1990s...)
Yeah. Maybe taking Amazon off the table clarifies things a bit. How about digital distribution of Video Games? This seems like a thing that wasn't invented by anyone in particular, and Steam wasn't "first", they were just the first to establish a tight market niche.
I got so tired of people pitching their Steam competitor startups to me I wrote a blog post about all the reasons they were going to utterly fail:
I said, the only way you can ever do this is if you have TRUCKLOADS of money and just dump it into user and developer acquisition.
...which is exactly what Epic Games did a few years later. They've carved out a niche, but they've yet to give Steam a real run for their money. But realistically, only EGS could do it, because the network effects are that tough to overcome. Every other would-be Steam competitor I've seen (and I've seen so many I've lost count) has failed before they even started. (GOG was already established by this time FWIW, and they've remained tiny).
But if Steam hadn't made Steam, would someone else have? And would it have been as good?
My answer is "probably" (but not a 100% certain yes).
I think a lot of these debates hinge on the particular example you pick, which can distract us from the underlying ideas.
Of course the other way to look at it is "what's the business"? Should Coke care about Pepsi, or about "share of throat"?
Steam is in the business of games, and maybe the winner/only serious competitor there if you care only about a particular type of game, but if the space is "entertainment in the 21st C" then they are in competition with tiktok and Netflix, both of whom are doing a lot better.
Perhaps the Steam space is just as large as it gets, and there are multiple alternatives (like Apple Arcade) that are just not interested in EXACTLY the same space as Steam.
So I don't know. Is your argument that Steam is the winner because they were first, rather than because they are better than anyone else? I don't know enough of the space to comment.
The one thing I will say is that video games seem to be extremely dysfunctional as a business community, presumably because so many people enter it based on passion rather than business sense (see, eg, the history of basically everyone ever associated with Id). So they're kinda the worst case opposite version of the AMZ problem!
............................................
I'd say a better example is Intel, who very definitely sat on their laurels (driven by massively incompetent management) for fifteen years, and we're now seeing that play out.
As Adam Smith said, "There is a great deal of ruin in a company", so it will take time for the denouement, but I don't see a turnaround ahead of them. Or IBM as an earlier example, ruined in the same way.
And MS as the rare example where the right person (and those are so rare) really could right the ship. Still to be seen whether Satya is the Tim Cook or the Louis Gerstner of MS...
Intel is also interesting because, before Apple achieved their miracle, everyone in the know would have told you that "a modern CPU is built upon so many patents that no-one can possibly compete with Intel; the best achievable is weak parity by the existing companies". And yet that was not true.
Monopolies were not the barrier they were believed to be... at least not in the US, in a space where the law and the system mostly worked the way it's meant to and politics did not weigh down the scales in any particular direction.
As someone who *has* gotten a (small) business up and running, this times 10. It is unbelievably difficult to succeed, which is why something like 90% of new businesses don't. There are whole classes of problems to be solved that the naive don't even realize exist. Succeeding at the Amazon level requires throwing natural 7s like 100 times in a row, a huge bucket of luck and decision-making that is almost supernatural in its ability to be right over and over again.
For what it's worth I've gotten several small businesses up and running too and very much agree, which is why I think society should reward the effort and the the taking risks and the investment and the being right, but not so much the huge buckets of luck.
"There's a fundamental disconnect between people like me (and some others here) who see the kinds of people CAPABLE of creating billion-dollar enterprises as fundamentally rare and unusual, and most people who seem to imagine that anyone can do it (which is much of the tone of Scott's second half argument). "
There is a broad range of intermediate possibilities. Perhaps one person in a thousand could do it, perhaps one in a million. In the usa alone, that would yield somewhere between 300,000 and 300 such possible people. But at any given time, I doubt that there are 300 unoccupied potential billion dollar niches for new corporations - so potential founders could be quite rare, yet _also_ plentiful enough to saturate their possible niches.
OTOH, the fact that future billionaires often first moved to America does suggest that billionaire-size niches are limited and more plentiful in America than elsewhere
OTOH, that doesn't guarantee that billionaire niches are naturally more plentiful in America; it could also be the case that our markets are more billionaire niche creation friendly thanks to current policy conditions and so changing those conditions could destroy the billionaire niches without capturing the windfall (deadweight loss)
To use a trivial example, Europe really wishes that Alphabet/Apple/Microsoft/Meta/Amazon were headquartered there.
What is the value of having billionaires or billion dollar sized enterprises for the society as a whole? Wouldn't it be better to have 100 medium sized companies occupying the same field? This way there would be real natural competition, the profits would be distributed wider in the society and no single business has the power and money to influence legislation in their favor.
> There's a fundamental disconnect between people like me (and some others here) who see the kinds of people CAPABLE of creating billion-dollar enterprises as fundamentally rare and unusual, and most people who seem to imagine that anyone can do it...
One would think that once the resource is tapped and the profits start to flow, it would be possible to find someone to help with the details. Like scaling the business up, introducing relevant processes and so on.
But from what you wrote, it looks as if you believe that some people are somehow predisposed for this whole scaling up business and they must be matched with the opportunity via prospecting instead of labor market.
I have strong opinions about this actually. Maybe I'll expand it elsewhere. But basically Amazon is a monopoly not due to lock-in or network effects (neither of which exist as much as critics want it to) but because of blatant anti-competitive behavior being used as a way to extract rents from things other than value creation. Amazon Basics alone should be triggered anti-trust in my opinion.
It's actually an example of bundling a video service and a delivery loyalty club that's run below cost to drive out competition while being subsidized by a successful web services company. But largely you're correct. This is part of the argument.
I'm rather convinced that network effects are a large part of Amazon's success, but it network effects among the suppliers rather than network effects among the customers.
If you want to buy a book by a particular author, a particular vitamin, a pair of socks, and a keto-friendly snack, where else would you go? What if you don't have that list when you start, just the book in mind, but since you're there, you might as well order enough to get free shipping? I note that in India where WalMart had a head start, Amazon is having a tough time competing. I suspect that it's because WalMart is carrying a better selection of merchandise for that market, or perhaps has a better delivery system. Both of which are facilitated by being the first-mover (in that market).
This goes even further on the supplier side: We produce a special innovative food product so it's still quite a small niche. We have our own online shop, but there are so many people out there were online shopping means Amazon as people say 'to google' if they mean searching the web' generically. And for everyone else, finding something special is easiest on Amazon with it's vast amount of products and vendors. So we have little choice but to also sell through Amazon too. I can tell you it's not only quite expensive, but also complicated to use the back-end and real ban support. They can just afford not to care about my opinion because of their market share.
So one of their business models is selling customers to vendors and manufacturers not only by their regular fees, but also by nudging you into payed ads.
Technically no, but Amazon has such a decisive strategic advantage they may as well be described that way. It's not illegal to compete with Amazon, but in practice its basically impossible. Even a revolutionary retail technology that is potentially and eventually disruptive to Amazons business model is just going to be bought out by Amazon (or copied) long before any Amazon executive comes close to losing sleep.
And all of this has snowballed from having a slightly better website than its competitors 25 years ago. The brilliant people who built Amazon would have otherwise worked at Amazon's competitor.
Wait, "practically impossible"? I can only imagine you're thinking of Amazon's core business, and they have competitors now, whether you think of their core business as online retail or simply retail - the foremost among them being Wal-Mart. Despite having a fifth or sixth of Amazon's online market share, they are doing quite well and, more importantly, poised to jump on any sustained missteps
Shopify is an increasingly good competitor. I don’t use Amazon retail and these days I tend to buy things direct from niche brands and the service is as good and cheap as Amazon, and I know money goes to the brand to develop better products.
What field or fields do you think Amazon has locked down such that no one else can compete?
Walmart may not be your favorite alternative, but they have a very strong online presence and a complete logistics network.
It would be very difficult for another competitor to break into online retail sales right now, but I think you very much underestimate how hard it was for Amazon to break into that spot as well! The first 10-15 years of Amazon were certainly not an example of easy money from a first mover.
>Norway's solution to this in two of their most successful industries (hydropower and oil prospecting) was to apply heavy taxation to the monopolies, and treating the people at large as the natural legal owner of the monopolized resource.
Given that those are both natural resources derived from land collectively owned by the people, is that really comparable with the value created in getting stuff to people more quickly and conveniently? There's probably an argument to be made but it'll require a lot of abstraction.
Mostly pointing out the structure of the argument that Scott is making here, undecided about whether it applies specifically to Amazon. The real test is whether Amazon (and Bezos) gets such a return because they're *SO DANG GOOD* or because others are effectively forbidden from competing with them, whether that's by natural or artificial means.
"Natural" means, when speaking about resources, usually refers to the resource's own scarcity, but there's a case to be made about natural lock-in effects and first mover advantages in Amazon's case (perhaps). "Artificial" usually means government regulation. A good example would be my Narcolepsy medication, which is a tightly regulated drug because it's also abused as a street drug. So the government in its infinite wisdom grants a monopoly to one company to manufacture it, and the list price is like $60K a year (in practice this is insurance fiction, but in a fair market it would be muuuuch cheaper).
>The real test is whether Amazon (and Bezos) gets such a return because they're *SO DANG GOOD* or because others are effectively forbidden from competing with them, whether that's by natural or artificial means.
Amazon has a lot of fairly successful competitors in their main sectors - in online retail you've got Walmart/Jet.com, Target, eBay, AliExpress, Shopify, etc., and in cloud computing there's Google Cloud and Azure.
None of them are quite as successful as Amazon but I don't think that's a consequence of them being forbidden from competing effectively, that plus personal experience makes me lean towards a combination of getting there first and the services just being better (on the retail side at least; AWS products can be pretty frustrating to deal with but I haven't worked with the competing products, they may just be worse).
Yeah the real test of a standard monopoly is, if this company just sits on its laurels for like a decade, is it still mostly fine and unthreatened. I think that's clearly not Amazon.
There's a more nuanced argument that Amazon gets a little monopoly power, as a treat, by virtue of sticky network effects and first-mover advantage, and so long as they put in a modicum of effort, their moat stays full of alligators, but everybody else has a much harder time, and it's always Amazon's game to lose. I guess it's a question about barriers to entry and if society should do anything to lower them or not, and if so, how much.
I don't know much about oil exploration and development, but I have direct experience with mineral exploration and if its anything like that, it's extremely costly and risky. Much exploration is done by dedicated exploration companies that frequently go broke and cost investors all their capital(or they hit something big and win big). The land may belong to the people, but the resources aren't just sitting there waiting to be produced.
So the Norwegian insight in particular acknowledges three things that makes it hard to fit into the the standard model of either capitalist / socialist thought with regards to mineral rights:
1) Scarce natural resources are prone to private monopolization, which has bad consequences
2) State ownership & management of natural resources (read: naive nationalization) leads to stagnation, underinvestment, and the flight of competence from the sector
3) Natural resource exploration usually has huge up front capital costs and large risks, but also huge potential windfall profits
The Norwegian model is to tax the monopoly and subsidize the exploration/development risk. Based on the results of the last century, it seems to work pretty well.
Here's an idea I have, let's call it gradual socialism, open to hear criticisms:
Have ownership degrade with time. It could mean something like: the company is completely owned by shareholders during the first 10 years of existence. Then every year the government gets 2.5% of the company, until after 50 years it becomes a government owned company. Of course we would need some checks to avoid government mismanagement.
Another milder possibility is have the transfer of ownership happen only when the company pays dividends. So, as long as the company is reinvesting the profits, they remain private. Whenever profits go to investors, the government gets a little bit of the company. I don't know how to calculate how much would be transfered in this scenario.
Or if you prefer have the transference be to a union, that would slowly become a worker's cooperative.
This addresses the problem at hand, of disincentiving rent seeking, while not disincentiving investment too much. And of course the numbers could be adjusted if investment is too penalized.
If shareholders had 2.5% of their shares forcibly taken away every year and given to employees, then nobody would bother investing because in the long run they will own nothing. Wanting startup capital to fund innovation while also wanting the funders to keep nothing in the long run is fundamentally incompatible, it's wanting to have your cake and eat it too. If this kind of confiscatory policy is implemented it would serve to socialize existing businesses (the merit of which is also questionable - do worker owned businesses generally perform better? If not, what is the merit?), but also immediately put the brakes on any future investment.
Now, Amazon actually *voluntarily* distributes some shares to employees as part of their annual compensation, which won't ever turn the company into a fully worker owned coop, but does make the workers somewhat invested in the long term well being of the company. Interestingly, 1) some employees who are compensated with shares sell them immediately, with the logic that their financial wellbeing is already sufficiently tied to the company by virtue of their continued employment, and 2) warehouse workers lost the stock compensation when the starting wage was raised to $15/hr. These both suggest workers actually prefer a stable income rather than ownership in the company, which makes the government forcing them to be paid in ownership with the goal of eventually turning all businesses into worker coops even more questionable - do workers even *want* to be paid entirely in ownership such that they eventually end up taking on all the risks as well? To answer that we could imagine that today, workers take their paycheck and immediately convert most of their discretionary income into shares of the company they work for, regardless of how well it's performing. That seems like an exceedingly poor financial strategy, most people would rather diversify.
Sure it's probably better than the state seizing all enterprises, but why propose it when it's still worse than what we already have, i.e. mostly just letting the market do its thing?
We already have the far and away best solution - let the company earn money, and then tax it and use the funds for public spending. This isn't rocket science - we don't need to reinvent a worse wheel.
Could you perhaps first point to a large consumer-serving function that the government does very well, as a confidence booster? Let's see...the Post Office? Amtrak? The DMV (at the state level)? VA hospitals? Medicare? Project Artemis?
Your examples seem to be drawn from a specific region where half the population take it as an article of faith that it is impossible for organisations not built on the profit motive to effectively serve the public.
The thing is, without a profit motive, and competition, it is extremely difficult to say what is 'effective' and what 'serves the public'. We have very good theoretical models and empirical evidence for this. Theories of value, information and incentives, and evidence from every country that has ever tried to provide private goods without a market mechanism. (Spoiler alert, they failed miserably)
And so...? Why would the faith of the consumers be necessary for the organization to do a good job? That sounds more like a religion than a corporation (or government). I don't see how I need to have faith that Microsoft makes a good operating system for Windows 11 to work.
On the other hand, if one dwells in a region where people *do* take it as an article of faith that whatever government does it does well, then of course they will probably be at least partially blind to its failures, in the same way that the faithful of any religion are blind to its logical contradictions or practical failures.
So I would say, as is very often the case, it's skepticism that is the better guarantor of accurate evaluation.
I don't understand why your argument doesn't apply in both directions. If it's an important ideological marker of community membership that government does a bad job of running stuff, then government organisations won't get as many good opportunities, it'll struggle to get good talent to staff the opportunities it has, and when it does do a good job it won't be acknowledged, and will be reliably underfunded.
And that's leaving aside the most nefarious versions where being right about this topic is so important that people will deliberately try to sabotage any successful government run organisation.
Any kind of strong culture that government is bad, or that socialism is good will distort the ability of a government run organisation to succeed. To take examples only from a region that has an unusual approach to this topic (as your earlier post seemed to) is a great way to end up with poor conclusions.
Mostly because the fact that you can make an argument the English syntax of which scans doesn't mean it makes any empirical sense at all, and none of those you present here do. Nor can I think of any that aren't equally strained.
For example, the idea that if half the country thinks government does a poor job means they will sturggle to get good talent fails the test of common sense. The Federal government doesn't employ half the adult workforce in the US, it employs about 1.5% of it. The idea that it would "struggle" to find talent for its 2 million employees when it "only" has the 80 million who aren't skeptical about its success to pick from is just silly.
For that matter, people generally pick jobs based on how much money it pays, and their interest in their particular job -- perceptions of how well the whole organization is doing in random other fields have little effect. Why would they? If I'm a aero/astro engineer and decide to work for SpaceX, I'm going to do it because (1) the money is good, and (2) the problems I'll be working on are interesting. I might very well think Elon Musk is kind of a blowhard and FSD for the Tesla the biggest scam ever, but that isn't going to stop me -- not unless I'm some kind of diehard ideologue, and in that case it's not likely I'm an engineer in the first place.
And how exactly would people who distrust the government "sabotage" what it does? Someone is so passionate about making the point that government doesn't work well that, rather than, say, waiting for events to prove him right, he...puts his own career on hold, goes into government service, spend years climbing to a position of trust and influence -- and *then* craftily sabotages what government does? This is spy-thriller stuff, real people don't behave that way.
As I said, belief that the faith of the citizenry (or consumers) that the an organization is good is key to it actually doing good belongs in a church, as far as I am concerned, and I don't think it has much application outside of faith-healing and Ponzi schemes. If I hire a plumber, I may believe he'll do a good job, or I may be deeply skeptical -- and neither thing affects the factual outcome of whether he fixes the drains. The strength of my faith doesn't change the octane rating of the gas I buy, doesn't change whether my phone battery lasts 2 years or 6 months, doesn't affect whether FedEx reliably delivers my packages or loses it 20% of the time.
Not familiar with the USA-specific details. But in the UK, there were a lot of national industries and services privatised in the 1980s-1990s, and the general sense among large chunks of the population is that they work rather less well now they're privatised and were better when nationalised. Royal Mail are doing pretty well, but privatised rail, electricity, gas are a disaster. And of course we've doggedly held on to the NHS which, at least until COVID, was still delivering world-class, free healthcare.
My experience with both Amtrak and the Post office has been very positive over the years. Problems with Amtrak cross country for me were delays due to freight having priority. Medicare? Just fine. And then there's TVA. Also does a good job. Not so thrilled with the airlines. And since we're on the subject of Amazon, PO has never lost my packages. Can't say the same for Amazon.
Good for you. There has to be at least one good story out there, so I guess you're it. On the other hand, I have never taken an Amtrak train without it being 50% late (i.e. on one-hour trip it will be 30 min late, and on a 2-day trip it will be 24 hours late).
More interestingly, if we depart the realm of deueling anecdata, we have the difficult facts to explain that ever since it became possible (in ~1980 if memory serves) for private firms to compete with the Post Office, they have exploded in size and reach, and the USPS has lost huge amounts of money. If people generally thought the USPS was doing a fine job, why are they paying premium prices to use UPS or FedEx instead?
And the same can be said about the trains: who actually takes trains? Hardly anybody, even when the time it takes (including TSA and airport-parking time) is comparable to the time of flying, and cheaper, and faster than driving. Plus there's the view! Et cetera. Sounds great. And yet...outside of the Acela/NE Corridor, just about nobody is willing to take the train, even over the modest distances that are successful in Europe. For that matter, having taken trains in both Europe and the US, it's not hard to see why. I would quite happily take an SNCF or Bundesbahn train -- which will be almost always on time, speedy, efficient, safe, and well-run -- but you'd have to pay me to endure Amtrak, which as far as I can tell must have some secret upper (two-digit) IQ cutoff for hiring.
There are plenty of stories from at least all over Europe, that people regretting privatization of former municipal services like water supply, hospitals, local transport etc. First it looked like success, they saved a lot of money so they could keep the prices stable and still make profits, but after several years it came out that they were just under-investing and the infrastructure was starting to erode. So the people had the choice to subsidize the necessary investments or accept much higher consumer prices. This is an example were you only realize how good it was when you are shown otherwise.
Is Europe not generally filled with democracies? If a majority of people regretted those privatizations, why are they not voting to re-nationalize the industries in question?
Well, they all call it democracies, but it doesn't always work to the extent it should. If there is no one in the election that has this agenda, you can't vote for it, as referendums are hard to get and usually not legally binding.
Many municipalities are doing so or trying to do so, but at high losses as usually the only way is to buy it back, what does not feel fair and you still have to be able to afford it.
Hmm, well, I believe the more parsimonious explanation is that while there may well be stories all over Europe of people regretting privatization, there isn't actually a solid majority of people who think that way in any country. Else the laws would change, at least somewhere. I haven't noticed Europeans being reluctant to express themselves or politically incompetent, and we're not talking Russian politics where you might "fall" out of a window if you annoy the powers that be with your talk of reform.
>Of course we would need some checks to avoid government mismanagement.
Therein lies the rub. There were several such experiments in the past century in Russia and China, and they turned out terrible because they were inevitably mismanaged.
>Another milder possibility is have the transfer of ownership happen only when the company pays dividends. So, as long as the company is reinvesting the profits, they remain private. Whenever profits go to investors, the government gets a little bit of the company.
> and they turned out terrible because they were inevitably mismanaged.
Lots of privately owned enterprises are mismanaged and that's OK because they get replaced by well managed alternatives as long as the barriers to entry are low. I quite like the idea of degrading ownership, and the possibility that it might lead to giants ultimately becoming poorly managed and opening up the niche for new competitors actually seems like a feature rather than a bug.
Disagree, having competent, well-run companies slowly get taken over by the government just so they would be worse run to encourage new competition would be awful for consumers.
Having competent well run companies become so large as to get significant political power and create barriers to entry is also bad for consumers. Where the balance lies is a tricky question. Besides, having worked in a few large private organisations, the idea that government owned organisations are necessarily run worse doesn't seem obviously true to me.
Yeah but here's an idea - use what political power you have to block other people from abusing their political power. Don't jump to abusing it yourself
A great idea here might be to actually prohibit government from picking winners and losers rather than accelerating the rate of their picking winners and losers.
The same case could be made with natural monopolies which have been privatized in the past. All over Europe lots of things have been privatized during the neoliberal agenda of the 90s. There is almost no sector which turned out to work better than before. The one exception being telecommunication services, and this is only due to strong anti-monopoly work being put in and technological advances which made it possible to untangle the physical line from the service sold over those physical connections.
Considering that dozens of countries have made that experiment for a few decades now; and that it failed in every single one of them, I wonder what the lesson we learn from this could be ;-)
So basically then if US now < Europe of today < Europe in the 70s, we should have some data which confirms this decades-long backwards slide into poverty, poor health outcomes, economic stagnation, and despair in both Europe and America, right? We should be able to compare say 70s era Europe and see on some objective measure that all of its services are far superior. Lives should be shorter, the trains run far behind time, wealth and standards of living lower, etc. Right?
This already exists, only it's called capitalism. The returns we're seeing are to innovation, not to ownership of capital. As the ideas and models get older, the returns reduce.
That's interesting. The linked page talks a bit about how controversial they were, but doesn't give much information on exactly what people were upset about. Do you have more information?
It had a crushing effects on small business-owners, and caused giant protests.
You need to understand that the Social Democratic party had a very odd view on corporations. It could stand the large ones, because those they felt that they could handle, through lawfare and indirect pressure. But they _hated_ small businesses. Post-war politics deliberately gave large corporations preferential treatment, and large corporations could (and did) handle the situation by restructuring their ownership and moving it abroad (which in turn hurt taxes), but small companies were brutally victimized. But since a _lot_ of people run small businesses, or know people who do, it was fairly easy to organize against. Then came the devastation of the 90's economic crisis, they were abolished, and since then only the lunatic fringe has talked about reinstating them.
It's not rocket science to realize that crushing businesses won't be a good thing for the economy.
Jeff Bezos only has billions of dollars because he owns a large portion of a company that's worth billions of dollars. If he doesn't actually own it, but is instead leasing it from the government (which I think is a fair way to look at this in the long run), then his incentives change. He can't sell it, because no one will buy a short term and diminishing product. His incentive becomes to wring it out for everything he can while he still controls it. Instead of making a company that will provide maximum long term value (and in the process raise the value of his stake in the company), he will pay himself as much of the profit as he can. This will cripple the company, so that in 50 years, the government will get a worthless hull, stripped of all value.
In fact, the best way to game this system would likely be to start killing off your own company after about 15-20 years and starting a new company in the same field that you can out-compete. If you set the seeds of failure well enough, you can hand the government a frustrating and incompetent organization right around the time your new-and-improved company is going into full swing.
Worst of all, this helps no one and is incredibly inefficient.
That would probably kill long term capital accumulation and would leave the firm undercapitalized by the time it is received by the government:
Shareholders would push management to pay out as much as soon as possible, revenue would not be reinvested. Even with the addition of "if dividents paid" it could be concentrated into the first couple of divident paying years, after which they may just close the company altogether.
It also does not solve the principal-agent problem better than older versions of socialism.
To "solve" socialism, I think this principal-agent alignment should be worked on, to have a solution that is approximately equal to the market solution. (which is not perfect either, but is much better for private goods than government solutions)
This was briefly done in Sweden under the name of "löntagarfonder". It was an absolute disaster - unsurprisingly, no-one is going to take risk and work their ass off to start a company that will just be confiscated by the government (or in this case. by the unions), even if slowly. Corporations reacted in the utterly predictable and rational way, by fleeing the country. It was a part of the massive economic malaise of the 1980s that lead to the severe economic crisis of the 90's.
As many commenters point out, this disincentives long term investment, so we would need some adjustments to set the incentives right:
1) we want to prevent monopolies, especially not by companies that are too big as they can defend their monopoly unfairly by subsidising from another field, buying emerging compeditors before they get dangerous or even by corruption or influencing legislation.
We could counter this, if we allow only a certain market share beeing in the hand of one set of investors. And this only kicks in for big companies e.g. worth more than 100,000 $. So a small company can have a monopoly. Companies also can grow big, but they'll not crush their competitors, because as soon as they dominate the market they have to give shares to the state or some other form of public ownership.
2) we want to encourage entrepreneurs, not building of family fortunes ever growing. So I would propose to introduce a high inheritance tax of e.g. 50% for fortunes bigger than 100,000 $ but it does not have to be payed in actual money but the state also accepts shares. So the company can work on like before but a company working well over generations will end up in public ownership.
> to explore and invest, you can just subsidize those directly
We have that here in Europe. Companies can apply for subsidies from the European Union when they do innovative work. Inside such companies we tend to be rather cynical about the value of those subsidies.
For starters, the subsidies mostly go to large established corporations, because those are the ones that can handle the administrative bureaucracy needed to qualify for those grants. People running small startup companies mostly aren't even aware that those subsidies exist, and even if they did, they have too many other things on their hands to make time for filling out the million forms needed to qualify. So it's mostly a free bonus for companies which should already be large and self-sufficient enough to bankroll their own research projects without taxpayer help.
And of course there's a lot of grift, with companies doing pointless proof-of-concept projects just to grab the subsidies, while the *actually* innovative and speculative ideas don't qualify for subsidies because it's too hard to convince the government bureaucrat of their value.
You described the situation in Europe but it's also the case up in Canada with the SR&ED program. It ends up a mix of keeping broken businesses alive (those whose research hasn't and won't go anywhere) and and subsidizing shareholders of successful ones (because we don't have to raise as much outside funding and get diluted when the government is paying for 1/3 of applicable salaries).
To be clear, this is not a general argument for "subsidies good."
The situation I'm talking about specifically is in industries prone to monopolization, where the barriers to entry are so naturally high that only extremely capital-intensive efforts are able to get people to engage in the business, and without them you don't get the exploration, and, once success has been achieved, absent severance taxes the companies achieve massive windfall profits based on limited access granted either by nature of by regulation.
I think we have good evidence that Amazon doesn't count as "discovering" a "naturally profitable" niche, because Amazon needed lots of very expensive investment in warehouse automation and many other system to build their niche, and their reward for all of that was a still fairly low profit margin on that core business. A different tax policy that was less friendly to investment could have prevented that complex warehouse automation machine from forming.
By contrast, search engines to appear to be "naturally profitable" niches since Google was massively profitable from very early in its existence without much work after the "core idea" that gave them first mover advantage.
How does this analysis apply to businesses like Apple, which are clearly not monopolies (too small a market share of the global smartphone market) but rather some combination of ultra-strong brand stacked on top of internal-to-the-brand monopoly markets (30% fee to access the app store)?
Do we have a way to test the "if x inventor wouldn't have existed, some other inventor would have done the same thing a little bit later" argument for validity?
It does seem intuitively correct to me, though: most progress is about being on the shoulders of giants and a slow progression of collective knowledge, and individuals serve more to jump the process forward and affect its trajectory (e.g. which of multiple solutions to a given problem becomes widespread seems to often to just depend on historical quirks), more than unlocking technologies through unique esoteric insights.
The time when one invention corresponded to a product ended, I don't know, 100 years ago, around the time that single inventors ended and industrial labs took over.
Amateurs think that "one single discovery" corresponds to WiFi or flatscreens or the iPhone. This is absolute nonsense. In the modern world it's about tying together a vast network of inventions, and the extent to which single inventions are duplicated is absolutely uninteresting, since the critical resource is not the isolated inventions, it's all the pieces required to tie them together. Which has technical elements, yes, but also personal elements, business elements, political elements, etc.
That's irrelevant as well, the *network* itself, considered as a single entity, is an artifact that evolves piece-wise and independently in parallel, in a way that plausibly doesn't depend on personally-unique ingenuity.
To take the example I'm most knowledgeable about, the iPhone didn't spring from the mind of Apple's engineers or business execs fully formed. Smartphones trace back to the PDAs of the 1990s, a long lineage of smartish phones follow, most notably the blackberries. Every single idea that the iPhone uses but was originally developed by those predecessors is an unfairness as well as a market inefficiency, they are information gone unrewarded, pieces of the puzzle solved for Apple's benefit but met with ingratitude. Android was originally intended for digital cameras but Google bought the startup in 2005 and by 2006 they were already taking about a "handset alliance".
The iPhone, considered as a network of ideas and artifacts as components, wasn't original, plenty of similar networks preceded it, the components and all the ways they can be brought together were fairly obvious to those who thought about it (1960s scifi, at least), what made it the first successful?
The single biggest idea that made the iPhone the iPhone is, I humbly think, probably the app store, and it was, wait for it, not an original idea, and was refused at first by none other than Jobs himself, so not only did Apple hit luck by chance, they didn't even recognize the luck they hit in the face. Add in all the countless other effects : computers in 2007 hitting *just* the right point in the cost-mobility-power consumption-performance curve (as well as a myriad of other factors), the rise of social media just a 3-5 years before making a good killer app for the new, very inferior still, computing platform, etc. It would be preposterous to suggest that all of this was due to Jobs or his engineers or even the entirety of Apple, they probably didn't even recognize it was happening as it was happening.
To add insult to injury: the Apple appstore wasn't even the first of its kind. There were dozens out there already. I even wrote my diploma thesis on how dependencies could be managed in those app stores to avoid installing them twice before the iPhone was even announced. The iPhone is simply a better executed version of the Openmoko platform. Even the phone design is strikingly similar. Apple simply happened to have the resources (due to booming iPod sales) and confidence to execute it. There isn't a single original idea build into the iPhone 1; and if we are being serious here, the first version wasn't even usable. It became a functional device with version 3 only. But it rode on the wave of the iPod and was a lifestyle product which people wanted to have to flex with out, so it became successful despite all its shortcomings.
The iPhone was introduced in January 2007 and released in June 2007. The first Openmoko device released in July 2007, but the “consumer launch” was really half a year later.
This was “kinetic scrolling” on the Openmoko device:
And no: I didn't insinuate that Apple "stole" from that platform. Nor did I insinuate that Openmoko was as well executed UI wise.
But a smooth UI, while important for usability, on its own is literally just that: life style. You couldn't even copy&paste on that supposed "smart" phone.
Apple engaged in innovation when it comes to creating a keyboard on a touchscreen that's useable without a stylus. Ideas such as making the clickable area of letters you are likely to type next bigger while letting the visible area of the letter stay the same aren't very intuitive.
Providing haptic feedback that people don't notice consciously but that makes it more clear that one presses a button makes a phone easier to use.
There are likely lots of other ideas that went into the iPhone that were new and nonobvious.
The fact that to launch the iPhone without an app store was a conscious decision and it might have been a good decision by Jobs as it made the first iPhone a lot more straightforward to use (even when it reduced choices).
"How revolutionary is X" is not a metric that matters. What matters is solving the bottlenecks that prevent a new technology from being viable.
The thing that's new with the iPhone was that it was entirely centered on a touchscreen that's used with the fingers and without a stylus.
Apple made the bet that this is how you are supposed to build a phone and managed to work through the bottlenecks that prevented that approach from working.
"Do we have a way to test the 'if x inventor wouldn't have existed, some other inventor would have done the same thing a little bit later' argument for validity?"
I don't know how to TEST it, but there are a number of examples of the same thing getting independently discovered:
*) Edison and Swan for light bulbs.
*) Bell and Gray for the telephone
*) The Wright Brothers and Santos-Dumont for flight
*) There are several credible inventors of the microprocessor (including some folks working on a classified implementation for the F-14 aircraft).
*) Newton and Liebniz for calculus
*) Writing seems to have been invented independently multiple times (but also NOT invented in some places/times ...)
But there was actually nothing "discovered" here per se, was there? There was just fantastically good execution and management. Jobs didn't really invent anything as far as I know, he just built a trillion dollar company because he was so good at management, essentially, right? If we waited long enough would another person have come along and built Apple? I doubt it. Without him Apple didn't find another Jobs, it just failed.
Freedom: "But there was actually nothing "discovered" here per se, was there?"
Pepe wrote, "Do we have a way to test the 'if x inventor wouldn't have existed, some other inventor would have done the same thing a little bit later' argument for validity?"
I responded to that.
To what "here" has nothing been discovered are you referring?
Ah. I don't consider Amazon to have been invented or discovered. Selling things via a catalog was quite old. And lots of other companies tried to sell things over the internet. Without Amazon we'd still have those.
Would they have been as SUCCESSFUL???? That is a separate question. One could make a good argument that the answer is, "no." Logistics is difficult and non-sexy. Sears couldn't pull this off (on the internet). Wal-mart is awesome at logistics but pretty late to the party.
Inventions often are "in the air." But a particular good implementation most certainly does not have to be.
Are there any that are not design patents? Although in the U.S. designers are called "inventors" this to me does not seem to be true invention in the normal use of the word. He may have been a great designer, and no doubt design contributed to Apple's success, but I think his management was more important.
There are also examples of stuff remaining weirdly uninvented for many years after it could have been invented. Stirrups, horse collars that didn't choike the horse, the wheel in the Americas (they had toys with wheels but no tools with them), etc. It seems like the cases where something waited aroumd amother century or two waiting to be invented are examples of what happens with the Bezos or Jobs or whomever doesn't show up.
That's actually not true. Before 2001 the internet lacked the critical mass for wikipedia to become useful. Wikis have actual draw backs, whereas their advantages only become apparent when the amount of users surpasses a certain point.
Your counterargument only makes sense if we assume that all those 10 million users were potential Wikipedia contributors. Which they were clearly not.
Wikipedia came about when the combination "number of people browsing the web, but ignoring news groups", "costs for servers and storage" and "people with a vision" was just right. The vision alone didn't change the world.
I don't want to diminish the amount of work that went into setting up what eventually became Wikipedia. But a lot of such projects popped up around this time. I myself maintained several of them. It simply became feasible around that time; and that's why people with a vision could do it.
Also, Wikipedia only became feasible once server costs, bandwidth, storage space, etc, became cheap enough for a nonprofit to run a project at that scale.
The best example of this is the compound bow. The bow has been around for 10,000 years before someone thought of putting pulleys on the limbs to significantly increase power generation.
There are good reasons not to do that. Many native tribes to this day don't use them and are better off without it. The problem wasn't that the compound bow would have been too difficult to invent; but that it has serious short comings which weren't balanced with actual advantages back then. They became useful due to other advancements in weapons technology.
They didn't use wheels outside of toys in Pre-Columbian Americas because they didn't have a draft animal large enough to pull carts. The larger animal domesticated was the lama, which is very small and weak compared to the horse, and was used in the Andeans mountains. It can't be mounted or pull a cart, especially in the mountains.
Wheelbarrows and dollies are extremely useful, especially in the mountains -- also carts can be pulled by, y'know, *people*; this is very handy if you are trying to move something too heavy to be carried by that same amount of people. Large stone blocks maybe?
Wheelbarrows and wagons are useful even with only human power. You can tell because all kinds of worksites now with only muscle power are using wheelbarrows.
Today a wheelbarrow seems obvious, like a bicycle, but for this technology to take 1,000 years to spread from China to Europe shows that, like for the bicycle, there are hidden complexities that prevented it to be invented easily.
If the Europeans didn't have the wheelbarrow before the 12th century, it seems plausible that the Mayas, Aztecs and Incas just didn't get the idea.
As for the hand carts, I agree with you, it's a mystery why they didn't use them...
Stirrups aren't as simple as they seem. Well, the stirrup itself is simple, but it's only useful in combination with a good saddle tree. The saddle tree is the part of the saddle that fits properly over the horse's spine to keep the saddle in place and to distribute the rider's weight. Without it, as soon as you put your weight on the stirrup, the saddle would slide off and you'd be lying on the ground if you're lucky, or dragged behind a bolting horse if you're not. Or even if you manage to avoid that, you'll be creating unpleasant friction and pressure points which will irritate the horse and could even cause permanent injuries.
Inventing a good saddle tree required some nontrivial wood- and leatherworking techniques, and was probably a process of incremental improvement with long feedback cycles. Once a sufficiently sturdy and comfortable (for the horse) saddle tree existed, probably the stirrup was invented later that same week.
I draw a distinction between "could have been invented and wasn't" which would include horse collars and stirrups and "was invented but no one could see the point other than as a toy" which includes the wheel in the Americas and the steam engine in classical Greece.
The latter usually has a story around it. The former tends not to because how can you explain how nobody noticed a possibility.
Then we have things that we invented or *almost* invented and then forgotten. Calculus is an example of this.
The Wright Brothers' plane (when demonstrated in France) was much more maneuverable than anything else, including Santos-Dumont. However, they never didn't really manage to make a big successful business out of their invention. Aircraft production today is dominated by totally different corporations than those founded prior WW1.
Edison's competition with all the other light bulbs and electricity companies contributed to consumer value from light bulbs, and general overall electrification. The first iteration of light bulb and means to provide electricity to power it would have been unimpressive to us. (Edison was a proponent of DC.)
Or, let's take cars. Ford Model T wasn't the first car. Ford wasn't even first to use assembly line (which go back to Marc Isambard Brunel) nor first to use it for making cars (that was Oldsmobile). Ford was the first one who could make the assembly line car production work and immensely profitable at scale. Billionaires are not made by inventions but success at industrial production of value to consumers.
The idea that you could let inventors be paid only for their labor and that progress would occur regardless of the specific individual was the explicit theory of Soviet Marxism and was put into practice in the Soviet Union and other Communist states. It did not work out. And while I'm not sure this is the last word, "The Soviets had this as official doctrine for almost a century" seems like it's at least gesturing towards being a huge empirical experiment.
There are plenty of inventions that didn’t happen, or at least not until too late.
China didn’t have the wheelbarrow (at least not the nice stable 3-point one you push from behind).
If you row like a water bug swims, instead of all pulling at once, you go faster. Nobody ever does this.
The compound bow wasn’t invented until 1966.
I hear the Aztecs didn’t even have wheeled transport or hauling at all.
Somebody in North America discovered how to work bronze, and spread nice bronze artifacts all over the place, but by the time Columbus arrived, the art had been lost.
Sometimes, we just don’t invent the thing at all — or the “some other inventor” is hundreds of years later, or in another civilization.
Many of these examples simply do not analogize to modern day innovations, whether it be due to material conditions (Aztecs did not live in a place that would have made wheeled transport useful enough early on to then invest into the sorts of roads wheeled transport demands in order to be effective) or using alternative versions (the traditional Chinese wheelbarrow has the wheel in the middle of the platform, which is less stable when set down, but easier to carry very large loads with thanks to a balance weight distribution relative to ground contact area), but most importantly because modern innovations take place in a vastly different informational environment, and many of the low-hanging fruit have already been picked.
I suspect virtually all of those there's some other obstacle other than just a lack of an inventor with the Spark of Genius to come up with the idea - either a missing technological prerequisite or some aspect of the context of their situation where the invention is less helpful.
For the first (missing technological prerequisite): compound bows are made of fiberglass - the concept of a pulley wasn't hard, but a material that could take that much stress and not break is a pretty recent development. Also "expensive, complex bow" might be good for an archery contest, but less good for the historically common usages of bows: equipping an army or a peasant hunting for dinner.
For the second (wrong context), it seems Aztecs didn't use wheeled transport much because the geography was wrong (they lived on a giant lake surrounded by mountains: neither is a good place to use a wheel), and because the Americas lacked beasts of burden, like oxen and horses, which were a big driver of wheeled transport.
I'd also take "nobody ever rowed a boat this way" with a huge grain of salt: we often have less knowledge about how people used to do things than we think. How would we know if people used to row boats that way? A big problem is that people tended to not write books about "obvious, daily life" things. (Or at least not ones that survive to today)
Yes, bows with pulleys could have been around forever, and if you count catapults they have been. I wonder why nobody invented the velocipede in Ancient Egypt for that matter.
TIL you can make a compound bow out of wood: but isn't the limiting factor of a bow the strength of its limbs? If I understand the physics, a pulley doesn't add power to the bow, it just makes it easier to draw.
And easier to draw is an advantage, but I also suspect even wooden compound bows are a lot harder to mass produce to make an army of them. It's possible in the past 4000 years of using pulleys and bows nobody ever thought to combine them... but it seems more likely that somebody did and it turned out to not be a good idea.
I've got some experience making bows and one important principle you need to follow is to minimise the mass at the tips of the limbs, otherwise the bow wastes a lot of energy propelling itself and not the arrow. Metal pulleys would be very heavy, so I'm sceptical you those kind of compounds would outperform normal self bows.
There are videos on YouTube where not only are tribes in Africa presented with compound bows, but where their hunters also demonstrate how those bows are cool for trick shooters, but actually inferior when hunting ...
I shoot a recurve, but also have a compound bow. My recurve is 55 lbs, which is hunting weight but by no means comparable to the 100 lbs war bows used in the middle ages (which took years of training to be able to shoot). Nevertheless, the range of the compound is so much farther than my recurve, that the hunting advantage is obvious. There is a reason most hunters use compound bows these days and why traditional bows are viewed as a specialist pursuit for masochists (even though I personally prefer them for aesthetic reasons).
Well, you should see those tribes hunt. Nobody cares about the better range when hunting for rabbits. What they do care about is how fast they can acquire their target and shoot after wandering around for minutes or hours searching for something to shoot at.
"There is a reason most hunters use compound bows these days and why traditional bows are viewed as a specialist pursuit for masochists (even though I personally prefer them for aesthetic reasons)."
You mean "people hunting for sports". Because I don't know of a single hunter tribe, still living a traditional live, which would have adopted them. And it's not for a lack of knowing about them. Granted: I'm no expert and such tribes could exist. I've just never heard about those.
The excuses for the Aztecs I've heard before, and have always rung hollow to me. Didn't they build really big pyramids out of stone? Even on the side of a mountain or near a lake, I'd much rather have the wheel than not, if I had to build one of those. They moved a lot of stone, without wheels; I don't see how we wouldn't consider that a huge hundred-dollar bill left on the table.
> If you row like a water bug swims, instead of all pulling at once, you go faster. Nobody ever does this.
There *has* to be something missing from this story. Are you saying that a rowing team which would adopt this technique, would easily beat its rivals -- turning a mediocre team into a national champion team, or a national champion team into Olympic Gold -- and they just ... don't?
People know about this technique (after all, *you* know about it) and they just leave the hundred-dollar bill on the table without bothering to stretch out their hand and grab it?
I am not an expert in this; I heard it in a lecture long ago. I think you’d need different oars and it requires more fine coordination?
But yes, it seems like there are often lots of hundred-dollar bills lying on tables, technology-wise, that people don’t take, and to assert otherwise involves making a lot of unlikely-sounding excuses.
Has that technique ever been demonstrated in practice? Or did some mathematician or physicist just calculate that it would work in theory, given a bunch of simplifying assumptions such as assuming finer coordination than any team of real-world humans will ever be capable of?
If a large number of smart and greedy people have walked past the table without picking up the $100 bill, and your evidence for the bill’s existence is a lecture you heard once but can’t remember the details of, I’m going to go with "the bill doesn’t actually exist" as my default assumption..
"But yes, it seems like there are often lots of hundred-dollar bills lying on tables, technology-wise, that people don’t take, and to assert otherwise involves making a lot of unlikely-sounding excuses."
My (limited) experience with obvious technological improvements that people don't take in a competitive environment are that the improvements often aren't. Frequently because of implementation details or path dependencies.
One example of this is designing chips with asynchronous logic. Everyone agrees that the chips would be either faster or use less power. The catch is that getting them to actually WORK is much harder because we have so much accumulated knowledge and tooling to debug clocked logic. So almost no one actually does this in practice.
I tend to be skeptical about low-hanging fruit in a competitive environment. Occasionally you will find some, but often the benefits are less than expected and often non-existent when everything else is considered.
I tried it (in my horse rotator) and the problem is that the oars clash. The reason the vikings in my imagination row in unison is because there are too many oars along the side of the boat for them to go out of sync; they will simply tangle. But I'm just an idle ponderer so I welcome your input on this - how are you even imagining out of sync rowing? Is the boat just awesomely long, giving each set enough room to wag back and forth?
Think about it. Air and water resistance vary with the cube of velocity. So you want a more constant velocity. If all of the rows go at once followed by a long delay then you have a large peak of velocity followed by a decay down to some final velocity. The midpoint is the average speed.
This ripple (peak speed minus trough speed) is proportional to the time between strokes and the strength of strokes. If every oar goes independently then (for 6 oars operated in pairs) it would be 1/3 the strength and 1/3 the delay between strokes. (If you could actually do 1 oar a time it would be 1/6 and 1/6. (It seems like the wiggle from this would outweigh the benefits)
It seems like this might force your boat to be longer or perhaps you could find some low-loss energy storage method that allowed simultaneous rowing but the oars moved sequentially....
I agree skepticism is a natural reaction here, but a word of caution in using professional competitions as a evidence: in most sports rules have become fossilized over the centuries, to ensure I suppose that the winners get there by human factors -- training, strength, et cetera -- and not by technological invention.
Examples abound: it's well known recumbent bikes (particularly with windshields) can go faster than standard bicycles, and use human power more efficient, but you will absolutely never see one in the Tour de France. Certified "Ironman" triathlons ban drafting (even off team-mate) in the cycling leg, even though drafting is a major strategy in regular road racing and would be a considerable advantage over such a long course. Sailboat and motor-car racing have very strict rules, which typically ban any significant technological innovations, e.g. you can't use electric motors in a drag race in part because they would always win. The international body that governs swimming banned "low drag" technical swimsuits as soon as they were invented. Et cetera.
So I would guess the rules for international competition in rowing are likewise fossilized, and any significant departure from the way it's done now would be prohibited.
But your point still stands at least partially, in that you'd expect to see some brilliant innovation in rowing in various unofficial competitions, just like you see recumbent bikes and electric cars in unofficial competitions, and technical suits in non-FINA events.
Indeed that's a plausible answer to my question of why this technique isn't used if it is known to be objectively better. Maybe an even more relevant example in swimming is the underwater dolphin kick, which broke world records when people started using it and which led to the introduction of rules on how long you are allowed to stay underwater after the start.
But still, if the answer is "people agree it's faster but the standard rules for competition rowing forbid it", then it doesn't really fit in a list of inventions like the stirrup and the compound bow, for which the (very debatable) claim is that they could have been introduced centuries earlier, but nobody thought of them even though the necessary preconditions were already in place.
The original claim was just "nobody ever does this", like it's a hundred-dollar bill just lying there on the table and nobody bothers to walk up and grab it. If it's actually a case of "people tried it and it works, but it's not allowed by standard competition rules", that's a very different matter, and less relevant for the current topic of discussion.
It would be relevant to deciding whether the reason we seem to need Bezos types is that they think up the invention, or whether what they actually do is grab an existing unused efficiency and break the rules (or other factors) preventing its use. Which might help decide whether any particular Bezos type person was just lucky and another will come along any minute if he fails, or if each Bezos type is a once in a thousand years chance for humanity to advance.
Yes, I generally agree with you, but I would still suggest a little caution. It's possible for things to get fossilized on a culture-wide basis, sort of a autologous version of the FINA rule-making, and sometimes you do need some kind of visionary to break This Is How We've Always Done It.
I'm reminded of Henry Ford supposedly saying that if he'd *asked* people what they wanted, they'd have said "faster horses." Sometimes the market, and people, just lack imagination. Consider Tesla: one would have thought naively that they could never have succeeded without a network of dealerships, which they could never have built up in a short enough time to avoid burning up all Elon Musk's cash -- and maybe this is one of the best reasons why it took so long for anyone to even imagine inventing a whole new car and a new way of buying them.
But it turned out there wasn't any technical limitation stopping it from being done another way (at least not after the Web became ubiquitous), it just took someone visionary who said screw all the voices of experience who say no can do, I'm going to make it work anyway.
As I said, I would generally agree with you that if it were possible to do better, in almost any random area well within the current scope of technology, than the reasonable default assumption is someone would have done it. Humans are inquisitive, energetic, and greedy. But...not *always*. There's enough contingency to keep things interesting.
Seems to be a lot of interest in this point, so I’ll record what I know in case anybody wants to research further.
There’s an insect that swims on water and has many legs, where the legs don’t all stroke at once, but the stroke starts at the front and propagates back. I’ve seen it many times in creeks on the east coast of the US, around Maryland, but can’t seem to find it on Google.
The lecture was at St. John’s College in Annapolis, MD, one of the Friday lectures, sometime from 2001-2005. The topic was inventions that the ancients could have invented, but didn’t. The lecturer described this hypothetical method of rowing, the compound bow, and at least one other which I don’t remember.
It seemed reasonable to me because of having seen the water bug in action myself. The librarians at the St. John’s College library would be able to supply more details about the lecture; they keep good records.
It sounds a little speculative. The first objection that comes to my mind is that insects act in a regime of much lower Reynolds number than human rowers, and we already know the best propulsive method varies radically with Reynolds number -- this is why bacteria use corkscrewing flagella instead of an oar or swimming motion.
The other version of this is that sometimes the idea is all that's needed. Sequoyeh didn't know how to read or write in any language, but had the idea of phonetic languages explained to him, and he invented a phonetic writing system for Cherokee. Presumably someone with the right insight for this 5000 years earlier could have done the same thing, but nobody with the right insight/opportunity managed it anywhere close to there. (There were writing systems in South and Central America, but they weren't phonetic and they didn't reach nearly that far north.)
Another classic example: Left and right shoes. Presumably, they could have been invented soon after the invention of shoes, but they weren't.
Also, we have no idea how much "obvious" stuff we're failing to see, but I'm willing to bet future people will be sneering at us, not that the bet can be judged.
Looks like they actually were invented many times throughout history: https://hsm.stackexchange.com/a/13734. I'm hardly an expert on footwear, but it seems unlikely to me that this was a case of "this is a great idea just waiting for a visionary to imagine it".
Instead, I would guess that there's a balance between the type of shoe you're making, the material you're making it out of, and how sophisticated your ability to make them is. If the shoe is simple or soft enough, there's not enough advantage to bother making them asymmetrical.
>If you row like a water bug swims, instead of all pulling at once, you go faster. Nobody ever does this.
Assuming it is so (I really have no idea), I'd wager you go faster *for a given amount of rowers*. But the number of rowers you can fit on a boat is much greater if they row all at once, so that the rows are parrallels, rather than like a water bug, which would require considerable space between rowers to avoid hitting each other's rows.
My recollection is that anthropologists believe fire was discovered once. Some isolated people group lost the ability to make fire a long time ago, and never rediscovered on their own how to make it again.
Lots of things that seem obvious in retrospect, aren't.
At the same time, there are instances of parallel development (calculus, maybe pyramids?).
In short, I don't think we can know which inventions would have been invented counterfactually with any kind of certainty.
I don't think this is correct, at least as far as ancient fire starting technology is concerned. For example, Asian tribes used the fire saw, while Native Americans used the hand drill or the bow drill. Lest you think the boomerang is another good example, wiki says: "Although traditionally thought of as Australian, boomerangs have been found also in ancient Europe, Egypt, and North America."
Innovations on better fire-starting mechanisms (or better suited to your new environment) is much easier than inventing man-made fire from scratch.
Given how long fire has been with us, and given that there is at least once instance of people losing the ability to make fire, it seems more plausible to me that man-made fire was not invented multiple times in different places.
As I understand it, the current thinking is that human harnessing of fire came in three stages: opportunistic use and redirection of natural fires, maintaining long-term hearth fires originally kindled with brands or embers from natural fires (similar in operation to, and possibly ancestral to Zoroastrian fire temples), and finally techniques for deliberate fire-starting. It could have been the first or second stage that's thought to have occurred only once (the second stage feels more likely to me, since opportunistic use in inherently situational) rather than the third.
Your position is not unreasonable, but I do think the third stage is most likely the unique event. I think this for a few reasons:
1. I don't thinks humans could have successfully migrated to colder climates without the ability to deliberately make fires.
2. The relationship between friction and fires does not strike me as obvious, and not likely something that would be asily replicated. However once this relationship was understood, finding better ways to create that friction seems reasonable.
People underestimate what it actually means that ancient people weren't less intelligent than we were, but less knowledgeable about the world and technologies. But they had a LOT of time at their hands. That's why a lot of stuff certainly has been invented over and over again as people had to adapt to their environment.
I've read through a lot of comments about why certain things weren't invented in culture X. People seem to not understand that those things didn't exist for a reason. The most obvious example being the compound bow, which is very nice for archery competitions, but inferior in actual day to day use to people who actually use bows to survive to this day. The same goes for the wheel in an environment, where no infrastructure existed to make use of it, or where the geography made it outright useless.
That we see the connection now, given that we grew up in a society with that knowledge, does not mean that our ancestors would have made that connection.
I think it is quite obvious how much of a creative leap (or an extraordinary coincidence if discovered accidentally) it had to have been for them to start fire with friction.
There is a big jump from friction that creates heat and a usable coal. If you've ever tried to make a hand drill fire, you can appreciate the difference.
How do they know they made their first fires themselves rather than using a tree that had been struck by lightning or something? Starting a fire is a lot more nonobvious and difficult than keeping one going.
I don't think so, but i don't think this is important.
And as we have no chance to find out what inventions were not made or used by now because of the way our society and economy works. Who knows what people in the future see what could have been invented by now.
In the context of this discussion, his implies that
1) the inventors are the people that get rich from application of the inventions
2) the inventions would not have been made if you coudn't get rich from them
which i think both is not necessarily true.
What we can do not to miss any fist or second inventors, are giving everyone the chance to develop, publish and test their new ideas without too many obstacles like access to funding and workshops. Most real inventors are intrinsically motivated not by getting rich, but they fave to have the resources (and be it only time) to work on it and here it starts were the prospect of getting rich is important to get the funding. So its not the inventor that needs the hope to get rich, but the investors that usually are well of already and are a completely different kind of person.
Of cause the big things happen when the inventor also has the economic talent and resouces themselves. Examples include Edison, Robert Bosch or Arthur Fischer (https://en.wikipedia.org/wiki/Artur_Fischer). But if we wait for these types to appear, chances are high that we miss many inventions. It is important also to use the ideas of all other people even if they lack the resources and the marketing talent to convince some VC to invest.
"I’m not sure anyone else would have started SpaceX if Musk hadn’t" seems wrong to me. While it's clear that SpaceX is the most successful private spaceflight company, there are many many others. Wikipedia's list (https://en.wikipedia.org/wiki/List_of_private_spaceflight_companies) is long, and SpaceX has competitors in every type of spaceflight they work on. So I think SpaceX is pretty similar to Amazon. If Musk hadn't started SpaceX, Blue Origin or Northrop Grumman or someone else would have filled that natural niche.
I disagree. I can’t imagine a way for Northrop to get to fail early and often. That takes nearly messianic levels of leadership ability and salesmanship.
While I 100% agree with BZC here, I also think it's noting that "fail early, fail often" is a lot easier when the capital stock of the company is a bunch of code rather than $BIGNUM rocket engines, parts, infrastructure and fuel. The cost of failure really is much higher in aerospace, it just turns out that Musk (correctly) determined that making spaceflight sexy and running it like a startup in spite of the capital losses risked by failure paid dividends greater than the costs. All the other private spaceflight initiatives appear to be both slower and more in the vein of pure vanity projects (Virgin Galactic, Blue Origin) or else poster children for the feather-bedding, slow, plodding, overpromise-and-under-deliver spaceflight industrial complex (Boeing,, Northrop Grumman).
There were earlier attempts. Beal Aerospace tried to drive costs down by making expendable vehicles light & cheap using composites & plastic, but the tech wasn't mature enough and the then-eyepopping $250M check from its founder turned out to still be far too small.
Back in the Space Race, when time was actually considered an important cost, national aerospace agencies were willing to fail occasionally and made much more progress as a result. The monetary cost of taking a mission form a 90% chance of success to a 99% chance of success is often larger than the cost of launching 2 of them, but NASA became unwilling to suffer the PR hit of rockets blowing up (perhaps correctly - the irrationality could lie with congress or the public rather than NASA leadership and still explain the results)
I agree - it's very hard to imagine spaceflight stays public-only forever: even if we take a fairly dismal view on spaceflight and don't assume that things like astroid mining will eventually be a very profitable business, it seems like it's already a profitable economic niche from things government contracts alone.
It may be the case that this is above-average acceleration: maybe Bezos invented Amazon 2 years earlier than Bezos Prime, but Musk invented SpaceX a decade before someone else would have invented SpaceY, but private-space-flight is an incredibly obvious (if difficult) economic niche.
"If Musk hadn't started SpaceX, Blue Origin or Northrop Grumman or someone else would have filled that natural niche."
Blue Origin was started BEFORE SpaceX (year 2000 vs 2002) so Blue Origin doesn't seem like a good example of a SpaceX replacement. Northrop Grumman is even older.
As nearly as I can tell, almost everyone believed that re-usable rockets could not be made to work economically. Now ... it is clear that disposable rockets are tough to make competitive with a rival who doesn't throw out his rocket after one use. But until SpaceX made it work it was almost heretical. No, I don't know why ... re-use of the expensive thing seems pretty obvious ...
Lol, what "natural niche"? Sure someone has to be the "most successful" but the reality is if Musk wasn't here, SpaceX wouldn't be here either and those other companies would be just like they are now but shittier because they would have less competition.
There's no real reason to believe they'd be shitter. It's just as plausible that whatever subsidies or contracts SpaceX has received might have gone to them instead, allowing them sufficient funding to improve in possible quite substantial ways. Quality of product/service is only one element of a company's success - the ability to acquire funding is huge and largely unrelated to actual market-oriented quality early on in a company's life, with present financial institutions and investment practices being what they are - capacity for monetization (that is, theoretical profitability if the product quality is good), charisma/persuasiveness, and plain old luck all factor into it as well.
But the companies named in this thread's OP ("Blue Origin", "Northrop Grumman") *were* there before SpaceX, Northrop Grumman long before. They had far more funding than SpaceX did and they were free to compete for the same subsidies and contracts that SpaceX won.
Of course it's plausible that if SpaceX hadn't been around, another company would have won the contracts it did—someone had to win them. But private companies had been given aerospace contracts for many years without any resultant improvement in the cost of spaceflight. Part of the problem was the "cost plus" system of contracting, where the contractors were free to pass along any unexpected costs to their clients with no accountability—but without a competitor to prove that a fixed-cost model could work, and work much better, I believe the fixed-cost experiment would have failed and the government would have returned to cost-plus.
In short, it's your second step, "allowing them sufficient funding to improve in possible quite substantial ways", that I find implausible. The incumbents for decades had all the government funding to themselves, profiting handsomely from it, but not improving, which goes to show that funding isn't the only ingredient in the recipe for improvement.
I don't think date of founding affects my point. SpaceX outcompeted Blue Origin despite being founded later. There were several online stores before Amazon; Amazon was just more successful. If SpaceX hadn't existed, maybe Blue Origin would have been able to do more of what SpaceX did, without SpaceX eating their lunch.
The re-usable rockets example is a great point, and makes me think Musk/SpaceX advanced things significantly. But still, if SpaceX hadn't existed, maybe it would have taken 10, 20 years for someone else to do something similar? Not forever.
Rocketry and space in general needs a big upfront capital investment. Musk was willing to make that, and to make it in an industry regarded as unprofitable. So basically you need someone else who is rich enough and willing to do it. Bezos has, Richard Branson kind of has. So its not unreasonable to think someone else would have done similar within a few years anyway.
The development cost of the Falcon 1, SpaceX's first orbital rocket, was about $100M. That's a lot of money, but I notice that Virgin Galactic (founded 18 years ago) and Blue Origin (founded 22 years ago) have each spent many times more than that without reaching orbit. There's more going on here than just being able to pay big up-front capex.
Virgin Galactic spawned Virgin Orbit, which has launched satellites into orbit. But both Virgin and Blue took a detour into the suborbital tourism business, which costsl ~$100M on its own and doesn't run entirely in parallel with orbital launch.
Also, neither of them hired Gwynne Shotwell, and there were some other questionable decisions along the way. $100M gets you a seat at the table, it doesn't guarantee success.
A lot of it hinges on what if call industry inertia. If the industry is built on the idea that everything has to go perfectly the first time and the only way to get reusability to work is to fail early and often, then that road block could stick around for a while.
SpaceX would be completely bankrupt without government contracts (and they are not cheap in that regard), they were so behind on their launch schedules that a lot of private customers jumped ship. And reusable rockets are still not the great success everyone claims. They are not as cheap as promised, the savings are generally not that much when compared to the whole costs of a launch and satellite operation, and it lowers productivity (because you have to keep your rocket engineers on a paycheck, but they build fewer rocket stages because of lower demand thanks to refurbished rockets). SpaceX is - despite the few successes - not the great shining example of a profitable private space company.
Honestly it's completely absurd that people are still running with this line now. 2013 wants its talking points back.
SpaceX is *selling* their launches for $60M. That's building in a massive profit margin to pay back their engineering work on reusability; their costs on a Falcon 9 launch are probably more like $30M. The best available competitors are still over $100M, IIRC.
SpaceX is probably the leading space power in the world right now, on its own, beating out every other space company and every other *country*. They are the shining example if anything ever was.
It's not clear that SpaceX is profitable. The rocket industry in general is small and hard to make much money from. SpaceX have captured most of that market, but it does not seem to be growing by much. SpaceX do launch a lot, but the majority of their launches are for Starlink, which is an internal project. Indeed, Starlink is where the potential profits lie, not in rockets. As for leading space power, by the numbers it is China (if you separate the US and SpaceX as individual powers). The US with SpaceX is still number one, but SpaceX does not beat China by itself.
To be honest its all a bit moot: the vast majority of Musk's wealth comes from Tesla, not SpaceX.
"By the numbers" depends on which number you look at. In the last four quarters China beats SpaceX in number of orbital launches, but SpaceX launches put up more than twice as much mass with nearly an order of magnitude more independent satellites. Imagine SpaceX retires the Falcon 9 but resumes launching Falcon 1, and does so twice as often. Would it be beating China, then? If not, then it's beating China now. China is improving fast enough that I'll expect them to pass SpaceX if Starship doesn't work out, though.
SpaceX almost certainly has grossly negative cash flow right now when you count Starship R&D and Starlink buildout, despite marginal profit margins on each Falcon launch. That could be a problem for them later, depending on what happens with the business cycle and how well those investments turn out. But that brings us back to Bezos, in a way - the first time I heard the "they're not *really* making a profit, they're just dumping all their revenue back into the business" argument was 25 years ago with respect to Amazon, and in hindsight I probably shouldn't have paid attention to it back then.
It's certain that the Falcon 9 line, as of now, is massively profitable on a marginal basis (probably something like 100% margin). This can't tell you much about profitability on a whole-company basis, because we don't know fixed costs, full R&D costs, etc.
Indeed, it would be surprising if SpaceX were profitable on a whole-company basis at this point, because they're currently plowing every bit of money they can find into Starship R&D, and raising more money as they can. But this is kind of a distortion of what we mean by "profitable". The service that SpaceX provides to outsiders is generating revenue massively over its costs; the fact that they're using that money internally on other projects, rather than keeping it in a bank account or returning a dividend, doesn't change the fact that they are "profitable" in a colloquial sense.
Re: China, I'm pretty sure SpaceX is ahead of them by many metrics, at least. For instance, in 2Q 2022 SpaceX launched about 4X what China did (in terms of mass), and in fact about double what *the entire rest of the world* did. https://twitter.com/SciGuySpace/status/1557083663120072705
And, re: Tesla, it's true that most of Musk's paper net worth is Tesla stock; however, this is honestly kind of silly. It's driven by (kindly) large-scale very speculative demand, or (unkindly) a bubble. Tesla is subject to this happening, because it's a publicly traded stock; SpaceX isn't. But that isn't a commentary on the actual objective relative worth of the two companies.
>But still, if SpaceX hadn't existed, maybe it would have taken 10, 20 years for someone else to do something similar?
Or maybe 100, 200 years, if everyone knows that if they make the reusable rocket finally *work*, lion's share of all the profits will be distributed to those who didn't make it work, but maybe could have made it work later?
There's an awful lot hiding in the phrase "just more successful." In context it reads like you're saying they got lucky. In practice, it reads like really intelligent people spending countless hours working on a tough problem and coming up with a novel solution. At the very least the catalyst of "bring a bunch of really intelligent people together and incentivize them to work wholly on [particular goal/challenge]" would be necessary to make it work. That takes money and vision, neither of which are a given in any particular field.
> As nearly as I can tell, almost everyone believed that re-usable rockets could not be made to work economically
People have absolutely believed that reusable rockets could be made to work economically *someday* - Musk's bet was just that "someday" was actually "today". The idea that if not for Musk, nobody would ever have tried reusable rockets just seems absurd.
(Or rather, tried reusable rockets *again*. If you Endeavor to remember you may Discover that Musk was not the first to Challenge the Enterprise of reusable rockets... atlantiscolumbia)
"(Or rather, tried reusable rockets *again*. If you Endeavor to remember you may Discover that Musk was not the first to Challenge the Enterprise of reusable rockets... atlantiscolumbia)"
Many Thanks! I kept reading comment after comment in this thread and was wondering how everyone had forgotten about the shuttle...
Agreed. I was just citing it as a precedent on attempting reusable space vehicles. As you said, it wound up failing to improve the economics of space flight. ( I vaguely recall that when all was said and done, the full cost of each shuttle launch wound up in the hundreds of millions of dollars - in the same ballpark as a Saturn V launch. )
I think you're discounting how hard rocket science is in your analysis (I mean, it's the one thing that you can't say isn't rocket science). Musk's team was really inspired on the business, engineering and science. When you look at how Northrup and Blue Origin have attempted to compete with them it really comes out clear. Those guys said that what SpaceX did could not be done, until they did it.
Those companies are older than SpaceX. There is no "natural niche". The only reason they're doing anything noteworthy today is because SpaceX proved this was all economically possible which made investments by those companies feasible. I dont think things would have stayed underdeveloped forever but SpaceX absolutely moved things along in a huge way.
I think you underestimate how hard the early days of SpaceX were and how much Musk's vision and leadership were crucial. Read Eric Berger's book _Liftoff!_, about the Falcon 1: even before they tried to make their rockets reusable, they'd taken on an incredible challenge by founding a rocket startup. Before SpaceX, there were three types of rocket company:
- big government contractors like Northrop Grumman, high on cost-plus contracts;
- hobby businesses like Blue Origin;
- failures.
"Successful rocket startup" didn't exist as a category before SpaceX, and even since then, no company has got to orbit as quickly as them. Yes, SpaceX succeeded through an enormous amount of work by extremely talented engineers. But without Musk's vision, intense focus and ability to recognise and inspire talent, those engineers would never have been gathered together in one place and enabled/forced to do such high-impact work. Seriously, read the book.
I don't think anyone knowledgeable in this field agrees with this.
There were many other failed companies as evidence .. Andrew Biel's co, Blue Origin, Virgin Galactic ... SpaceX succeeded where many others failed.
NOW there are many private space companies, *but they are offshoots of the SpaceX example* (and often founded by former SpaceXers). Firefly, Relativity, RocketLab. These companies all have copied various examples set by SpaceX.
I'm quite familiar with the list of private spaceflight companies. It's a long list of companies that have all failed to demonstrate a semi-reusable orbital launch system, even though some of them were trying long before Elon Musk got into that business.
And the reason they all failed, is that none of them were run by billionaires (well, except for Andy Beal but he was trying something different and he wimped out anyway). Building a reusable of semi-reusable orbital launch system requires hundreds of millions of dollars, spent over a decade or more during which you will have many spectacular failures, and during which almost every respected expert in the aerospace will tell all your potential investors or patrons that what you are doing is stupid and can't work and wouldn't have a viable market even if it did work.
Now that SpaceX has actually *done it*, the respected experts are changing their tune, and the investors are following suit.
But Northrop Grumman was never going to "fill that natural niche", because Northrop Grumman is run by a committee which will follow expert opinion and pre-SpaceX expert opinion was that the niche didn't exist. Blue Origin has been around for twenty-two years and still hasn't managed even an expendable orbital launch system. And the rest, could never have afforded it.
Building the first reusable orbital launch system, in the world created by the godawful "space race" of the 1960s, requires a person capable of writing checks for hundreds of millions of dollars without asking permission. Because the people you would have to ask for permission, will have been told by the experts that this was a stupid idea that you should never be allowed to waste the taxpayers/investors/whoever's money on.
I was there. This is how it was. The options were Elon Musk, or some other billionaire, or *maybe* a tight group of hundred-millionaire venture capitalists with a common vision. Or being stuck on Earth watching a handful of designated Space Hero Astronauts flying propaganda missions at exorbitant public expense.
I think it may be important to realize the Musk was NOT a billionaire when he founded SpaceX. Estimates of his share of the PayPal sale seem to hover around $180M. Some of the $180M went into Tesla (which was also not profitable ...) and Musk was pretty close to bankruptcy just before SpaceX had its first successful Falcon-1 (not 9!) launch which resulted in enough NASA money to survive.
So a mere hundred millionaire who is/was willing to bet EVERYTHING pulled this off. I'm not convinced that "some other billionaire" would have made this work. Musk did the equivalent of burning his boats with the money he poured into SpaceX compared to how much he had at the time. More sane billionaires would have bailed earlier ...
For the record, Elon was a low-hundred-millionaire when he founded SpaceX (& heavily invested in starting Tesla at the same time). He didn't become a billionaire until 2012.
Of course, I'm sure some other investors helped over time; still, the man is quite capital-efficient, compared to the competition 😁
And Falcon 1 wasn't a reusable orbital launch vehicle. In order to develop a reusable orbital launch vehicle, Elon had to invest a hundred million or so dollars developing a minimum viable product that would put him in a position to invest billions of dollars while laughing off the experts telling him to just stick to launching satellites and stop wasting money on those stupid droneship-landing experiments that kept failing.
If he'd been capped at or taxed into oblivion at say half a billion, lest we ever have any unsightly billionaires in our economy, SpaceX would just be another small launch provider.
That's the part Scott and so many others miss. It isn't "lone genius has a clever idea, hires a bunch of people to Make It So under his management, and collects his billions". It's an iterative process, with each step increasing revenues, increasing costs, and increasing benefits. The no-billionaires version means SpaceX exists, but it never built anything bigger than the Falcon 5. Tesla exists, and produces a few thousand Roadsters a year. Amazon exists, and sells books. Apple exists, and sells Macintosh desktop computers.
This is a very important point , and to expand on a bit, I think most people fail to understand that very rich people don't think the same way as the rest of us do about money. For us, it's a consumption good. Oh yay! I can not owe the bank money, I can eat Wagyu steak every night, ski St. Moritz. For the very rich, money represents the power to do things, to call their visions into life -- and they wouldn't *be* wealthy unless they were stuffed with visions, unless they had an unholy drive to see something new brought to life. So without the ability to accumulate enormous capital, you are shutting off some very creative people from toying around with trying to create entire new industries, or ways of doing things -- stuff that no committee, and no government agency responsive to the Conventional Wisdom and the wishes of the political majority, could even think about. What is the value of that?
Well, in defense of Bezos, look at Walmart's website. It's an obvious knockoff of Amazon, and, presumably designed by people who used the Amazon website as a pattern, and yet, it is still a piece of junk, and a pain in the neck to use. So, at least one 'next guy to come along' still couldn't quite pull it off, even with Amazon actually already there as an example.
walmart has spent what 20 billion trying to replicate amazon and they have a knockoff version that isn't horrible. no other company has come close, because most companies don't have 20 billion laying around to try. not sure if this is an argument for amazon being special or an argument they need to be regulated out of existence
Was gonna say the same thing. I know it’s kinda beside the point to this post, but from a usability perspective Amazon definitely wins in recommendations but isn’t that much better / more intuitive to me. And Walmart is catching up heavily to Amazon in e-commerce as some evidence it’s not really quite true (will presumably catch up and surpass within 5-10’years)
Again: kinda beside the point of the post. No one else did create it per se. But I’d argue that’s more because economics to scale is hard to hit in this space, and really only Amazon & Walmart can conceivably compete (and Walmart is catching up)
Because they started with books, Amazon's website has taken over library catalogs. As a library catalog, Amazon's website really sucks. Now all library catalogs feel they have to imitate Amazon because that's what people are used to, so now they suck too.
I agree. I will sometimes type in the name of a specific (albeit obscure) book and have to click through multiple pages in order to find that book listed on the site. This is after checking "Book" for the category!
I am frankly astonished that Amazon has been so unassailable for so long with such a poor UI and search functionality. However, given the recent news about Bed Bath and Beyond crippling itself because it minimized search friction and streamlined offerings -- not understanding that its customers preferred the "treasure hunt" of expending effort to find what they wanted -- I wonder whether a similar dynamic doesn't apply to Amazon.
> ...recent news about Bed Bath and Beyond crippling itself because it minimized search friction and streamlined offerings -- not understanding that its customers preferred the "treasure hunt" of expending effort to find what they wanted...
Where is the best place to read about this? I found two recent articles but wasn't entirely able to connect their contents to your interpretation.
This is very got but not so obvious point in the economics of scale, Thank you for that.
I've seen this pattern before but didn't connect to economics of scale: when there is one big successful company in the market the others and the newcommers tend to imitate it because it obviously worked. But perhaps the secret to success was something completely different than the UI they imitate. This way there is a standard established, the people get used to it and soon will expect it not because it is the best, but simply because it was the choice of the first successful company.
If people have the choice between good service and good UI of cause they learn to deal with the bad UI and the next generation of customers get used to that bad UI so much, that learning something else seems like a considerable effort especially if you have low reason to expect it to be better once you are used to it.
Yea, Amazon and Bezos aren't rich so much because they were first, but because they have remained dominant in that field over a long period of time.
I think this is actually a significant problem w/ Scott's last argument - the founders of Friendster and Myspace aren't infamously super-rich, because unlike Zuck, they were not able to keep their thing going strong, in the face of competition, over a long period of time. Getting in first is a huge advantage - but then competition comes in and challenges you. If you don't rise to that challenge, you may walk away with some I-did-it-first money, but the competition will wind up getting the big pot. If you consistently whoop the competition, it's either because you're providing better value, or because you're shrewder at business (this latter part is something the left can perhaps legit complain about, but it's a hard thing to correct accurately). To the extent you're providing better value than all the other competitors who come along over the years, you should reap proportionate rewards. So it is w/ amazon - no one else has 2 day shipping afaik. This accords w/ a general statement about profit margins and competition - low competition should naturally lead to high profit margins, because you're apparently doing something so hard or risky that hardly anyone else can manage to pull it off (this argument falls apart completely when you have low competition because you're exploiting regulation, e.g. IP laws, or when you have a true monopoly).
Speaking of monopolies, they're the big exception to all this - true monopolies can win forever against any competition despite having a mediocre product. FB has a true monopoly because of network effects (a social network has no value unless everyone is on it, so it's hard for there to be two dominant social networks in the same space, winner takes all), but I dont think any of the other big tech companies have that. Amazon has a lot of competitors, they just haven't made themselves as attractive to customers as amazon has. And FB faces the Thielian issue of serial monopoly, where the true monopoly gets free cash for a long time but eventually gets beat out by a new monopoly in an adjacent, but different space (e.g. snapchat or tiktok).
This even proves that (monolithic) social networks are kind of a natural monopoly. If there is no space for Facebook, Instagram, WhatsApp, Tiktok and Snapchat, to live well along each other, but if it is always an existential question to dominate or to give up. Perhaps the market of social networks doesn't have to be like this and could be organized differently with working competition when there would be federation and no user lock in. But the reactions of facebook you described, proof that at least facebook sees this as a monopoly market.
They became dominant because of their early success. They had a slightly better website than their competitors 20 something years ago, and its all snowballed from there. Yeah, it took a lot of work from a lot of brilliant people, but Amazon were only able to hire said people because of their early success. If they didn't, these people would have worked somewhere else.
"Well, in defense of Bezos, look at Walmart's website. It's an obvious knockoff of Amazon, and, presumably designed by people who used the Amazon website as a pattern, and yet, it is still a piece of junk, and a pain in the neck to use. So, at least one 'next guy to come along' still couldn't quite pull it off, even with Amazon actually already there as an example."
Also, Sears started with a successful mail order business. You can't put your catalog on the internet????? For Sears, the answer was, "no, we can't."
Sears started with a successful mail order business *and its own ISP*. And then instead of Prodigy becoming their new mail order storefront, they tried to increase revenues by charging $0.25 (in early 1990s dollars, even!) per *email*.
Yeah. Sears *could* have become Amazon (in some other universe ...). Sears/Prodigy could have become AOL. Sony should have been the one to invent the iPod ...
IBM figuring out that it needed to do a personal computer is kinda an outlier of an successful entrenched player realizing that the game was changing and they needed to change with it.
I agree with your point, but I'd add an additional point:
Is AMZ's website good? No, OMG no, it is TERRIBLE. It was amazing in 2000, it was dated in 2010, it's embarrassing in 2020.
Some examples:
- try to order anything technical, like a hard drive. The categories it offers to clarify your search are insane. In 2022, would you like to buy hard drive between 81 and 120GB? Well, then, AMZ is your site!
- have you ever tried to buy anything by color (clothes? soft furnishings?) or by size (furniture?). It's endless frustration.
It's simple. AMZ is not interested in applying ML technology to their site. They SHOULD be weighing and photographing (from multiple angles) EVERYTHING they sell, so that searches by color/size/weight are trivial. They should be learning natural clusters of objects (like hard drives) so that ways to clarify your search are based on constantly evolving criteria, not what some human thought were a good set of categories somewhere around 2007.
So it's certainly FEASIBLE for someone to disrupt AMZ, for example by creating a vastly superior shopping engine (think Google vs Alta Vista) and selling it to someone with the capital to do the retail part (possibly an existing retailer like Target, possibly an unexpected competitor like Facebook). But that hasn't happened. Yet. Why? Because the kinds of people who can make these sorts of huge changes, who have all the elements concentrated in one person (or perhaps two close friends), both the technical skills and the rest of the business-side package, are very very very rare.
'the rest of the business-side package' is doing an egregious amount of heavy lifting in your claim there, because a not insignificant part of said package is 'sufficient wealth and/or connections to wealthy individuals to get the business off the ground and overcome significant barriers to entry due to network effects, a situation in which they're comfortable risking failure if they try, and enough interest to think making the attempt would be worth it, over the multiple years it would take to even get a real test of viability'. And sure, people with all those things are rare, but that's in part because of how concentrated wealth is. Honestly for all we know maybe someone *is* already trying, and it'll just be another few years til we see results, or maybe Bezos will do something financially shady to sabotage or consume that nascent business. It's impossible to say - which means any claim that it's just because Bezos is personally exceptional is itself an exceptional claim.
Amazon's website is also awful from a usability perspective (though less bad since Bezos relinquished personal control over every pixel on the front page). I don't go there because I expect a pleasant user experience, I go there because I expect that I'll (eventually) be able to find any random item I want at a reasonable price.
I know someone working for someone like Bezos. They have proven that they can solve a lot of new Bezos’s problems. They also let it be known that they aren’t quite sure if they can continue in that role without new Bezos giving them some of his equity. In this case 3%.
How this all shakes out depends on the regulatory environment. CA famously only allows non-competes on very limited circumstances. That’s why the “traitorous eight” who founded Intel were able to tell their old boss to f-off.
A world were new Bezos can force all his 22 year old employees to sign a non-compete is going to be different from one where anyone can walk about the door at any time and walk across the street to a competitor.
TL:DR a lot of this has to do with fine tuning the relationship between capital and labor.
The other common argument from the left about this kind of thing is: if Jeff Bezos were to stop doing any work now, then Amazon's share price might drop a bit, and perhaps there'd be some temporary chaos at the upper levels of the company for a bit while his work is reallocated, and *maybe* in the future the company will miss out on some innovation or good decision he might have made, but it would otherwise continue to function and produce value; but if all the warehouse and fulfilment workers were to quit, there would be chaos and the whole thing would collapse. So who is generating the value right now?
Jobs died, and Apple has continued to be profitable and successful, but it seems clear that it will probably never again achieve the innovation and insight of its glory days.
And the "if all workers quit" argument is kind of weak, because it assumes like, all workers _worldwide_ quit. If all _current employees_ quit, there would be chaos for a few weeks, and then all the positions would be filled from the millions of people whose job opportunities are generally much worse than those at amazon, generally people from less affluent countries.
I'm willing to bet that even given these stipulations, the loss in value for the "workers quit" case is orders of magnitude greater than that for the "Bezos quits" case. And it's relative value that we're talking about.
All workers quitting would pretty much necessarily be a political boycott. If Bezos were to quit as part of a political boycott, the numbers change again.
That's an odd argument to make, because it's definitely true that 1.6 million people all quitting is more important than one person quitting, but that doesn't lead to the kind of conclusion you seem to think. Those 1.6 million people make a *lot* more money than Jeff Bezos does, collectively. They are already valued at many multiples of what Jeff is valued. One for one, almost every other employee in the company can quit any time and nobody beyond their closest coworkers would even notice. Jeff quitting is major international news.
My friends and I have run into this question so often we have a name for it: the left foot problem. How much of a sprinter's speed is the left foot responsible for? If you cut it off, he can barely walk, so in some sense 90+%. But if you cut off the right foot, or the head, you get similarly huge drop-offs.
You can try to square this by giving every remove-it-and-we-can't-operate part an equal share, but then this turns into a gerrymandering game. What's the smallest part you can (cut off, unionize) that's critical enough to threaten the whole system? A toe wouldn't do it, but half a foot might. Just bezos wouldn't do it, but ten properly chosen execs at the top might.
Some folks in our indefinite politics chat are still trying to derive a fair distribution based on how much slower you run if you cut it off, but I came down on "pay market value."
I think not quite, JT makes this problem more interesting than attributing value to a set of agents: if you consider "brain and feet" they would get 0.5 each, but if you decide to think of brain, left foot and right foot, brain gets less credit.
I do not know of a framework that generalized Shapley Values to such case. (And would love to hear if there is something)
It’s true one executive could quit and then be replaced, but the same is true of workers.
If all executives quit, and weren’t replaced, the company would cease to exist just as surely as if all the workers quit. There might be exceptions to this, like small worker’s co-ops, but without authoritative decision makers any reasonable-sized company would collapse.
This is fair. So seeing as the initial discussion was about distribution of profits, a better argument would be to 1) bucket groups of employees/execs by total remuneration then 2) measure the effect of losing say 100M/y of warehouse staff vs. ~100M/y of execs. Interestingly, because of externalities, the relative effect might shift quite a lot depending on the size of the bucket - e.g. thousands of warehouse staff would probably have a greater effect on the national warehouse-staff employment market than a few execs would have on the large-corp-exec market.
I don't think "all the workers combined are generating more value than Bezos" is a surprising result, and I think it's already priced in to the salaries.
How much does Bezos make? A quick google says Bezos makes ~1.6 million dollars a year, total compensation. Alternatively, if we divide his total net worth ~150 billion over 30 years of being CEO, we could also say he's made about 5 billion a year, historically: if you think that is a more fair "income".
How much do Amazon warehouse workers make as a whole? Google tells me that Amazon has ~1.5 million employees worldwide. Not all of those are warehouse workers: apparently Amazon has 185 of those globally, and "more than 1,500 full-time employees" is what their docs say (https://www.aboutamazon.com/workplace/facilities), and Glassdoor says ~$40K is an average annual salary. 40K * 1500 * 185 is $11 Billion.
In other words, $11 Billion for warehouse workers, which is more than double the high-ball estimate for Bezos's annual "earnings", and 7000 times his actual total compensation.
So, yeah, firing 11 Billion dollars worth of employees, unsurprisingly would do more damage than firing a single 2 Million dollar employee. The sleight of hand is, of course, to treat the value of the individual workers collectively, but compare their salaries individually.
Thanks for doing the maths! I think my comment to SS covers a more nuanced take. But I do absolutely count the rise in his net worth held as Amazon stock as income for these purposes (otherwise any argument about billionaires is worthless, because how many billionaires got there on salary alone?). So we're comparing $5B with $11B, which are the same order-of-magnitude. I still suspect the difference in effect would be orders of magnitude apart.
I gave the $5 Billion for the sake of having an upper bound, but it is a pretty extreme figure to actually use: it's 100% of his net worth, which includes, among other things, founding two other companies, and all other investments that he's made.
But more importantly, I *don't* think counting stock appreciation is relevant here: we're talking about how much he's worth to Amazon as reflected in how much they compensate him. If they pay him a million dollars worth of stock in 1998, then the price increases 100x by 2020... yes, he has 100 million dollars of net worth, but Amazon didn't value him at a hundred million, they valued him at one million.
In essence, the other 99 million dollars came from other people who thought that stock was worth 100x more than what it used to be worth, not from Amazon.
> we're talking about how much he's worth to Amazon as reflected in how much they compensate him
That's not how I read it - all that Scott talks about the proportion of the total value of Amazon that Bezos owns. He consistently talks about Bezos' net worth, not some imaginary number which is "that part of his net worth which is due to his salary rather than his stock holdings".
I guess I'm just not sure how you can make any useful comparisons between Bezos and warehouse workers if you include stock appreciation.
If the argument you want to make is "the government should try to stop people from making significant money from the stock market", well, that's a whole different conversation and I'm not sure where the warehouse workers in Amazon distribution centers come into it.
If, on the other hand, you want to have an apples-to-apples comparison of how much Amazon compensates its CEO vis-a-vis its warehouse workers, it seems you have to talk about how much Amazon actually pays, and not factor in three decades of extreme stock appreciation. That's not the framing of Scotts whole argument, but it was the framing of this comment chain, as I understood it.
That's part of the issue here - amount of the value you can destroy is a proxy for how much you can negotiate for. Amount you can destroy legally is maybe a better proxy. Armies certainly can negotiate for a lot more value than they can create, especially if we're discounting "creating value" by providing for defense.
> if Jeff Bezos were to stop doing any work now, then Amazon's share price might drop a bit...but it would otherwise continue to function and produce value
This argument assumes that the only thing Bezos brings to the table is his work, but that's not true. What Bezos brings to the table is also the capital the owns. "Taking his ball and going home" for Bezos would be to deprive Amazon of that capital.
I don't know how that would work in the context of abstract stock ownership, but certainly we could imagine a 19th century capitalist burning their own factory to the ground (just the factory, not the workers).
The problem is that “should Bezos own this much” is exactly the issue being discussed.
To put in another way, there’s no inherent merit in owning something. If Bezos could give away everything at no cost to the company or society, then that would be a strong reason to say Bezos shouldn’t have that stuff to begin with. I don’t think anyone really agrees with that, though.
The ability for him to quit with the business being able to continue is of extreme value that he engineered.
All parts of a business ceasing to function (you just picked employees but you could have said all of their vans suddenly cease working and need a 1 to 1 replacement) will make the business stop earning money. But all of those things working together Bezos can take a lot of credit for.
First, you assume a perfect government that taxes and redistributes fairly to everyone worthy and deserving. Second you assume that the environment that billionaires can innovate and flourish in would magically exist when government has a heavy hand on the scales of reward and penalty.
Innovators take massive personal risks to fill that ecological niche. America has been uniquely successful in producing those innovators for 200 years in large part due to its outsize freedoms and rewards for success and meritocracy. The government’s heavy and arbitrary hand on the scales of freedoms ineluctably drives away innovators and depresses productivity. It is the invisible hand of the market rewarding and penalizing according to clear and transparent rules that creates the ecosystem for innovators to thrive and yes, greatly earn money in. The government takes in trillions of dollars and yet you worry about the billionaires and not the trillionaires who do not innovate and only earn by taking money from others’ hard work and creativity.
Yes. There is a very important role for government - Step 1. Create the fair and transparent rule based system that curtails use of power and allows markets to function. Step 2. Don't try to game it afterwards.
"America has been uniquely successful in producing those innovators for 200 years in large part due to its outsize freedoms and rewards for success and meritocracy."
Initially, sure, but it's now surpassed it. I'd argue that "open-source software" was the more fundamental innovation, and that's American (RMS at MIT).
"Television" and "computer" were both arguably invented in the UK (Logie Baird's TV in 1926; the first stored-program computer was the Manchester Baby, and the first commercially-available general-purpose digital computer was the Ferranti Mark 1).
The computer was co-invented in a lot of countries. Google for Zuse, and why Germany claims the invention of the (digital) computer for itself ;-)
Carl's list is highly debatable anyways. Attributing the plane to the US for example is a gross oversimplification of what actually happened.
Edit (the following statement is non-sense. I only leave it here, so that the following thread still makes sense to future readers): Even more grotesque is the idea of Carl to attribute Nylon to the US only. I mean: it's literally in the name "New York London => nylon" ...
> Google for Zuse, and why Germany claims the invention of the (digital) computer for itself ;-)
You're right, I should have mentioned Zuse. But if we're going to allow partial credit, the first design for a digital programmable computer was Babbage's Analytical Engine in the 1830s :-)
> Even more grotesque is the idea of Carl to attribute Nylon to the US only. I mean: it's literally in the name "New York London => nylon" ...
Oh come on. Nylon 66 was invented by Wallace Carothers at Du Pont in 1935, as part of a long-standing research project in polymers. The name has absolutely nothing to do with either New York or London, I can't imagine why you think it might.
It's certainly not the worst idea I've ever heard of, even though it comes with its own challenges. Not the least of it being that making an invention and successfully commercializing it not being the same thing. Nobel prizes often acknowledging achievements only decades later being another issue.
And regardless of the metric chosen: the US will likely come out on top, due to it being an economic powerhouse. And rightfully so, I'm not disputing that.
However: I'd argue that there would be little to learn here, as an experiment with a sample size of one is of little use. I'd argue for example that the US was as least as innovative in the 40th, 50th and 60th; despite having had various issues back then and also having had a wide variety of fiscal policies back then as well as a much stronger antitrust law enforcement than today.
Per-capita the USA is fifteenth, behind noted innovation powerhouses like the Faroe Islands and Saint Lucia (and also the UK, Denmark, Germany, Sweden etc): https://en.m.wikipedia.org/wiki/List_of_countries_by_Nobel_laureates_per_capita Restricting to scientific prizes only bumps them up to twelfth. Where a laureate was born in one country, has citizenship in another, and is resident in a third, that's counted for all three countries; it would be interesting to see a table ranked by country of birth only.
No, they're not. I'm not straining at weird little precursors, I'm choosing the people and places that made the invention broadly successful. For both the TV and computer, that was the US. It's the same reason I credit antibiotics to the Brits, although some Germans had been using a few compounds in a few cases earlier. Fleming and penicillin were the first widespread clear success.
You clearly did, as demonstrated by attributing planes to the US, even though they were made broadly successful by WW1 before the US ever decided to take part in it ;-)
Logie Baird's TV is a weird precursor, sure. But I think the Ferranti Mark 1 is a good argument that a lot of innovations that happened in the USA would have happened elsewhere without the USA. Univac won thanks to the USA's larger internal market and some boneheaded decisions by the British government - without that, Ferranti (or some later imitator) could well have won.
Also HTTP was invented by a Brit, but he did it when working for the CERN. Now: do we attribute that to Britain, or to whatever entity one wants to attribute CERN to ;-)
Those lists are pretty pointless as they remove too much context to learn anything from them ...
True, but Carl did specify "twentieth century"; that excludes everything on your list apart from the hovercraft, which has alas not lived up to early predictions that it would change the world.
(I took a hovercraft ferry across the English Channel once. It was awesome.)
Thank you for taking the time to read and reply. In my view, the USA has strayed far from a market-based economy in the last fifty years, and the government has been increasingly responsible for stifling creativity through growing and contorted forms of regulation and taxation. I also do not see an easy comparison between a resource-rich, highly homogeneous country the population of New York City and one 35 times its size. That graphic doesn’t do a great job in my view of defining its measurements, and despite all that the US still ranks as high, which I find remarkable given its size and relative complexity.
I’m not convinced there are that much greater intra-country network effects vs inter-country between like-minded individuals and companies. The USA is a huge and diverse place and while interstate commerce works very well, we also work very well with many other countries.
I'm guessing you've never tried to sell a good or service across an international border :-) Look at the chaos being caused by Brexit to see how damaging it can be to leave a shared customs/regulatory area, and by implication how beneficial it can be to be part of one. But you're right that varying laws, taxes etc between States blunt the US's potential advantage here compared to a completely uniform internal market.
> America has been uniquely successful in producing those innovators for 200 years in large part due to its outsize freedoms and rewards for success and meritocracy.
To what extent is that "America creates more innovation", and to what extent is it "ambitious and innovative people move to America because they know they can get greater rewards there, but if America hadn't existed they would have founded companies at home"? Surely a bit of both - many innovative American companies were founded by immigrants, but there are beneficial network effects from having lots of innovative people in one place.
And I'd say that probably the biggest reason that they moved to America is its unique geographic advantage. While Europe and Asia were endlessly mired in wars between more-or-less equal in power neighbours, USA was able to pick and choose its wars for about as long as it existed, and so never lost one.
What time period are we talking about? AIUI the USA overtook its European rivals in the second half of the 19th century; the only big European war in that period was the Franco-Prussian war in 1870-71. It's a much stronger argument for why the Industrial Revolution started in the UK, though! The obvious reasons for why the USA drew ahead are immense natural resources, "free" land, a large internal market, and disproportionately attracting entrepreneurial and ambitious people from other countries. But there are some more interesting proposed theories, like "labour was scarce in the C19 USA, so it was more worthwhile to invest in automation there than it was in Europe, where skilled workers were more available." There's a great post about it in this month's Works in Progress: https://www.worksinprogress.co/issue/the-decline-and-fall-of-britain/
> and so never lost one.
Not in the relevant period, but the Vietnam War is the obvious counterexample. I'd also argue that the US failed to achieve its war aims in the War of 1812.
Well, my understanding is that USA became the clear leader in the aftermath of WW1, and WW2 sealed the deal for the global hegemony. As for the arguably failed adventures like Vietnam or Afghanistan, they weren't really wars in the historical sense. Team World Police's modus operandi is basically trying to convert foreign societies to its values without even bothering to annex them, then eventually becoming bored and giving up. Maybe it's fair to call those defeats, but not the kind which can significantly hurt the homeland, which is evidenced by America's continued appetite for them.
Was it mainly due to innovations, or the size? My understanding was that 19th century American universities were second-tier, but I guess it's possible that faster improvements were happening independently of academia.
To make sure I have this right, your claim is "the innovations that happened in America would have eventually happened somewhere else" - is that right?
Well, they did happen somewhere else. A lot of the inventions people in the US claim for themselves are claimed for their own country in many other countries. Those "who invented what" lists are often pretty arbitrary. "Who invented what" often hinges on the definition of what exactly counts as the actual invention, and what only lead up to it.
Just look into the history of the invention of planes, computers, electrical light, fission, transistors and lots of other revolutionary things which shaped the 20th century.
Perhaps! Some of them surely would have (and indeed many were independently created elsewhere but beaten in the market by the American version, as noamik notes). My actual stronger claim is "some of them would have happened in other places at roughly the same time if America wasn't hoovering up talent". But America's talent-hoovering must have had *some* net beneficial effect, because having lots of innovative people together in one place makes it easier to be innovative - it's easier to meet co-founders, easier to find skilled employees, easier to get funding, etc.
I feel as if the main advantage of the US is the availability of free capital. So the question Scott poses is actually the truly important one: "How much return of investment is necessary to not stifle innovation, and at what point does the creation of monopolies hurts innovation more, than the expected return of investment helps society?"
The 1950s for example saw high taxes at the margins in the US, but still had the US dominate innovation and production. So it seems to me as if the claim that taxing those earning would stifle innovation immediately isn't substantiated by actual historic evidence. However: what we have seen in that historic precedent was that gap between rich and poor was closing back then, and has been opening up since.
Speed matters. If one country consistently brings innovation and discovery to market effectively then cumulatively it will race ahead of others. Arguably the English empire was highly successful at this (along with imperialism) and punched well above its weight per capita until world war 2 drained its talent and population.
And money: we spent all our money in WW2, then pissed our Marshall Plan money up the wall trying to hang on to the remnants of Empire rather than rebuilding our industrial base.
Worse than that. The UK spent the capital of the entire Victorian era during WW2, and gave away 50 years worth of technical advantage via the Tizard Mission - https://en.wikipedia.org/wiki/Tizard_Mission
That's not obvious to me. It's easier to capture a large share of the surplus generated by your innovation in America than elsewhere, but you'd still be incentivized to create the innovation if your captured share is enough to compensate you for the costs and risks incurred. As a toy example, suppose you're an inventor in Kafiristan, and you have a great idea for a new product. Wonderful! Except the government will take 99.99% of the producer surplus, leaving you merely comfortably well-off. But if you can get to the US and develop your product there, your investors will merely take 99% of the producer surplus, leaving you rich beyond the dreams of avarice. Clearly it's a good idea for you to move to the US, even though the total amount of innovation generated is the same. Now, clearly this is not the only effect in play; network effects make it easier to develop and market your product in the US than in Kafiristan. My point is, you have to consider both effects. But I might be misunderstanding you: are you saying that "innovator captures more of the surplus" is *caused by* "more innovation happens in the US"? If so, what's the mechanism? The causality in the other direction is clear, but I don't see why it would work that way round.
It isn't just about the innovation or the hard work - it's also about risk. If a business tanks, employees at that business can generally find another similar job. If you start/own a business and it tanks, you lose a lot more.
i agree with this, except that rich and powerful people often harness the law to minimize their actual risk, e.g. declaring bankruptcy and stuff. I think this is true in theory but less true in practice
I suppose my perspective comes from the business owners that I know personally. Even declaring bankruptcy wouldn't save most of their loss - it would be devastating in a way that wouldn't apply to the employees, although losing a job is devastating in its own way. Might I inquire as to what you mean by "harness"? Are they doing something illegal to make bankruptcy laws work better for them?
no, i don't mean doing anything illegal, i just mean doing what _is_ legal, which is a lot easier for someone who can afford to hire a decent lawyer, than it is for a typical working class person.
I didn't really mean to minimize the dificulties of declaring bankruptcy, but it is one of the govt provided mechanisms by which the risk equation is altered from whatever it might look like in theory.
Purely anecdotal but the amount of emotion, time, outside work sacrifices, etc that get put into a startup outsize the personal financial risk. Add on the responsibility of handling others investment money, and, yeah, no amount of legal or illegal tricks to get out of a failed businesses financial responsibilities comes even remotely close to balancing the pain and loss of the failure. Personally the finances are the smallest loss (even when they were for me all of my saving plus some debt), seeing something you put everything into fail, feeling like you let down investors who believed in you, etc are by far the biggest losses. Which is all to say those "risks" exist regardless of your wealth and, unless you're a psychopath, can be just as brutal.
This might be true of businesses with a smaller difference in wealth between the owner and employees. But if Amazon were to tank then yes Bezos would lose billions of notional dollars, and still be a very rich man. Many (most?) of his employers would face losing their livelihoods, their homes, their healthcare, etc., and in the glut of fellow workers suddenly looking for a new job I don't think it would be as easy to get new employment as maybe you think. "Risk" is difficult to measure on a dollar scale.
This is true today. For a large part of Amazon's existence, it would not have been. If you play around with the results, don't be surprised if you lose the process.
If you start/own a business and it tanks, the worst case scenario is that you - gasp - have to get a job, like all of those dirty peasants you used to employ. Reduced to their level! The horror!
I think a lot of small businesses have every penny of their owner's money invested in them, so that when the business goes down, the owner is out his life's savings, too. I don't think this is so true with startups, but for pizza parlors, independent coffee shops, beauty salons, and the like, I think it is very often the case.
This argument falls apart if you use the CEO of AirBnB as an example. The tech for Airbnb existed for a decade and several inferior and not-very-usable versions of Airbnb existed (and still exist). But the huge network of hosts and guests is a cultural phenomenon that wouldn’t have happened without Airbnb. It’s possible that without Amazon, today you’d have 20 Jet.coms, which will never reach the massive scale and selection that Amazon has. AWS is even more likely to not have existed- and that spawned an entire separate industry.
There's an argument to be made that having that larger variety of options may be preferable from multiple perspectives - not only in a market competition sense, but because companies with the size and scale of Amazon tend to result in a few specific companies and/or individuals having disproportional influence on the market/politics/etc. And that's before acknowledging the possibility that the may be accumulating value to themselves (and/or their customers) without actually generating value per se by outsourcing the costs (such as the effects AirBnB has anecdotally had on housing affordability).
First, I think most of the intuitions here are captured well by the economics of natural (or in the case of patents, unnatural) monopolies. If Amazon were not a natural monopoly then the advantages of being first would only persist until a competitor entered the market, and Bezos would only earn those extra two (or whatever) years.
Second, I think the political critique of billionaires (and other capitalists) really has to be understood as a critique of power inequality rather than consumption inequality. The intuition “inequality isn’t that important, it’s absolute poverty that’s a problem” is pretty good as far as consumption goes but doesn’t capture most of what wealth can do - from control within workplaces to political influence to control through investment on path-dependent questions about how/whether we’ll pursue space colonization, AI, and responses to climate change. More concentration of wealth means more direction by either whatever happens to be profitable or whatever particular billionaires happen to like.
That is true. But also what is the solution? There are some very reasonable things such as cap political donations, which a lot of countries do. You can also take steps to reduce lobbying. But that still leaves the private power billionaires have. The solution people give is to give more power to government. But then you are just concentrating power in a different place. I'm not sure I trust politicians more than billionaires. I certainly trust Bill Gates more than Biden.
The fear people have is technofeudalism. A new social structure where a small class have all the power and use that power to perpetuate themselves in power. While that might be a plausible fear, it's not what's happening. Many billionaires are self made (meaning didn't inherited most of their wealth). We rarely have fortunes doing back many generations as we had in feudalism. Meaning, billionaires are not using their power to perpetuate their family in power.
I think all of these fears could be dealt with a large inheritance tax. Which is not politically feasible. But let billionaires enjoy their meritocracly earned money and take it all from heirs who did nothing. Or a small wealth tax, which would be small enough for a productive investor to keep their wealth, while a baseline investor to slowly lose it.
Mostly agree with what you say, just a few points:
1) Why don't you trust politicians? This means you don't trust in democracy. Do You think it's fundamentally wrong, or it just doesn't work at the moment? If it is corruption, lobbying and other interests that make then to make bad policies, the real cause is too much power concentration in the private economy again.
2) That most of the current tech billionaires worked their way up, there is many other people that have been rich for generations, the fortune just got divided by heritage and they learned more to hide their real worth. This old money is for sure also invested in the current tech giants, and the power and information concentrations are adding very powerful tools to the already powerful.
My conclusions are:
- we need to fix democracy, that politicians act in the interest of all citizens again.
- we have to avoid any concentrations of power. Any position of power has to prove its benefits for society and needs some effective mechanisms to control it. This doesn't have to be the government.
Amazon isn't a natural monopoly though. There's no reason why "selling stuff online" should have become as monopolised (in the US) as it did, it's just that Amazon apparently managed to be that much better at it than everyone else.
Well they managed to become dominant. This does not mean it's only about better serving the customer, there are also other factors like luck, access to capital, the right time...
Just the fact that they managed to dominate the market some 10 years ago, doesn't mean that it serves the society today to have a player that is so hard to compete with just because of the economy of scale and because people are used to it.
I agree, that it's not an natural monopoly so even more it's important to restore a working market with competition. When there emerges a monopoly were it isn't naturally, yes, somebody did a good job in growing a company and yes some competitors were probably sleeping. But still this is one of the main failure modes of a market economy ans we should take care that equal competition is restored again.
> But suppose that we go back in time and prevent Jeff Bezos from ever being born. Does this mean Amazon wouldn’t exist today? Probably not by that name. But does it mean that we wouldn’t be buying things online today?
In the case of buying things online? sure we definitely would be. but for instance AWS, arguably amazon's biggest contribution to the world? that definitely didn't have to happen the way that it happened, and if it it had happened for instance 5 years later, countless startups wouldn't have been born.
Assuming another Bezos comes along and builds another Amazon seems like a big assumption.
And what would you do in the case where the founder only owns a small percentage of the billion dollar company and most of the equity is spread between many investors and institutions?
In terms of someone else would have done it. There is an old economist joke that goes, two economists were walking down the street and they saw $100 lying on the ground. And one economists goes to the other, “There can’t be $100 lying on the ground, if there was someone would have grabbed it.”
I don't know about Amazon. But part of Bill Gates fortune comes from making the internet worse. When you are the first. When you get out infront. You can use your surplus, your fortune to keep anyone from competing with you. Microsoft did that. I remember them doing that. Bill Gates made his fortune by grabbing a monopoly and he kept his monopoly but destroying innovation he did not own. They destroyed surplus value.
I suspect other billionaires do similar things but I don't knowhow and where.
Removing COVID vaccine patents always seemed populism for me. Pharmaceutical companies did an amazing job creating vaccines very quickly. And took a large risk as well, as many vaccines did not pan out. We need to keep incentives so that good behavior is rewarded. Otherwise next pandemic there would be way fewer vaccines and they would probably take longer to be produced modulo technlogical changes. On top of that vaccine production was not capped by patents, but by materials. And as Bill Gates said, opening patents would create many bad copies who could do more harm than good.
Correct me if I'm wrong, but didn't a huge amount of public funding go into the MRNA vaccines?
> And took a large risk as well, as many vaccines did not pan out.
Wasn't this the whole point of operation warp speed? Eat the risk for the companies by footing the bill publicly, pay a huge amount for the vaccines so that the companies can afford to have a bunch of duds, because we need the progress NAOW?
But, funding wasn't just in operation warp speed, but a bunch of the underlying basic research, too?
"didn't a huge amount of public funding go into the MRNA vaccines?"
Sure. And pharmaceutical companies also invested a lot. Was the public funding a strong enough incentive? I don't know, but if it were so, governments should have put the patents in the deal for receiving such funds and not changed the rules of the game in the middle.
"But, funding wasn't just in operation warp speed, but a bunch of the underlying basic research, too?"
These arguments are true, but don't prove too much. It was never an argument of "Big Pharma did everything therefore they deserve everything". That's a straw man.
The argument is companies invested with the expectation of patents. Patents were part of the incentives. Would they have done the same without that expectation? I don't think anyone knows, but predictability is a great part of a good incentive structure, so don't change the rules of the game in the middle
I guess we just have to agree to disagree on this particular one. I think you could use the same line of reasoning to justify the paywalling of publicly funded research by journals like Elsevier.
I think if we operate on the principle that the person who pays for something should be considered an owner of it, then publicly funded research and something like operation warp speed should at the very least get a share in dividends derived from those patents, if not have them invalidated entirely.
"I think you could use the same line of reasoning to justify the paywalling of publicly funded research by journals like Elsevier."
I all in favor of changing the rules moving forward. I'm all in favor of creating new journals with a different incentive structure that would make Elsevier and cia obsolete. Which is already happening slowly.
The Oxford group wanted to donate the patents, but Bill Gates convinced them to let AZ have a monopoly. And yet this is the vaccine that did get transferred to India, not the MRNA vaccines. Maybe if one or the other group released their patents it would have been faster, but I doubt it. It looks like the public statements by Bill Gates linked above were correct.
It's not clear what Gates's private argument was. If the deal was that AZ got a monopoly in rich countries in return for advising India, that sounds win-win. But it's not clear what happened.
This is part of where I think looking at this through the framing Scott uses goes awry. You can start with a brilliant idea, execute it well, but as some point, it's likely your ideas will be poor or benefit yourself at the expense of others. Once you get super rich, you're cut off from most people and have a reward system that gives you flattering feedback even when your ideas are terrible. The worst case scenario are authoritarians, but I think there are studies showing business leaders tend to make worse decisions as they're in the role longer. Not to mention the pressure from both ego and investors to pursue monopolies, monopsonies, and other strategies to curtain competition, which very large companies often succeed in.
Internet retail was already a race in 1994. Amazon won the race but it was through business acumen, not because of a particularly novel idea. Amazon Web Services, which launched in 2006 and now earns more profit than the retail side, really was a completely novel idea and I’m not sure how long it would have taken another entrepreneur to come up with the concept.
But isn't this exactly the whole thing behind 'ideas are easy, execution is hard'? It's exactly why innovation is not as inevitable as Scott makes it out to be.
AIUI, AWS as a product was a direct result of Amazon's retail success. They would get hammered by so much traffic on Black Friday that they needed to invest in a ton of infrastructure that would then sit idle for the rest of the year; what started as just squeezing a few extra bucks out of stuff they had lying around anyway turned into the juggernaut we see today.
This is a question of mechanism design, right? Like markets are great at solving the problem of how much do you reward people who make and sell identical goods with decreasing returns to scale. But for increasing returns to scale we may need a tweak.
One example would be, say we knew in 1998 there would only be one Amazon, we (the government) could auction off the right to be Amazon. Every year you have another auction and whoever wins gets to be Amazon.
Now this is crazy for many reasons, but you get the idea, right? You take a natural-monopoly market and allocate the right to the monopoly in a way where the public keeps all the surplus except for the value that the top guy provides over the next guy down the list. This used to be much more common — governments would grant monopolies to fund innovation or infrastructure development instead of using cash.
I don’t think that “MV=MC” markets are some sort of natural law that needs to govern all commerce, it’s just a mechanism that has gotten so ubiquitous we assume it’s what God intended.
If the company is publicly traded, isn't it almost always up for auction? There's a reason that Amazon doesn't get sold to someone else every year, the $1.3 trillion price tag. If you're looking to sell the rights to run the company for far less than that, what you're actually doing is selling the rights to loot the company for a year. If I had control of a $1.3 trillion dollar company for a year, I would sell off their best assets (to myself or friends maybe) for cheap or liquidate for a nice chunk of cash and pay myself huge sums - then the next guy buys it.
Jacob was talking auctioning the right to use the monopoly Amazon currently fills with your own company. So you wouldn't get a company handed over that you could loot. And amazon would have to pay every year to keep it's monopoly so the government would extract the monopoly surplus profits.
A more consequentialist approach to private property law would dissolve this question and replaces it with a more interesting one: What is the socially optimal strategy for rewarding innovation?
Why just innovation? If we're designing (and presumably implementing via legal means) socially optimal strategies for rewarding success, why just innovative success, and not, say, plumbing success or short-order cooking success? Why set government-mandated wages for certain kinds of private-sector labor but not others?
If you manage to achieve the socially optimal strategy for plumbing, that is presumably a one time thing until innovation makes it possible to again do better plumbing. Though successfully achieving a socially more optimal strategy for plumbing would surely count as an innovation were it not happening before‽
We already have a set of strategies for rewarding success, implemented via legal means:
- Intellectual property law: If you invent something you can patent it, and then the courts and the police will help you collect license fees for some period of time. The size of this reward can be increased or decreased by adjusting the duration and scope of patents.
- Private property law: If you start a business that does something innovative and useful, and then that business makes lots of money, then the courts and the police will help you keep most of it. If you make too much money then maybe the antitrust people will come along and take it away. The size of this reward can be increased or decreased by adjusting tax rates and the scope of antitrust law.
- Regulatory law: If you start a business that does something innovative, you will often find yourself in a position to influence the regulatory environment faced by both yourself and future competitors. You can use this power to crush competition and make more money than the people trying to copy your innovative idea. The size of this reward can be increased or decreased by adjusting the power of regulatory agencies or by adjusting how responsive to industry influence they are.
Note that #1 works well for legible innovations, which would otherwise be easily copied, while #2 works well for illegible innovations that are difficult to copy.
Monopolistic power usually does not function as a reward for innovation: The easiest way to become a monopoly is to have lots of money, not to be first. #3 sometimes has a similar problem where regulators are influenced by whichever firm is politically well-connected rather than first (e.g. Kalshi vs PredictIt). If PredictIt were a real company rather than primarily an academic exercise, perhaps they would have anticipated the threat and done a better job of hiring the well-connected lobbyists who now work for Kalshi.
Hire entrepreneurs. Offer the lowest compensation rate that gets you enough people who meet your quality standards. Not getting enough good quality applicants? Offer higher pay. Suspect you're into diminishing returns from having too many entrepreneurs? Raise your quality standards.
In a capitalist country like we have, this policy wouldn't work since the best entrepreneurs would prefer a chance at outsized returns to capital ownership. In a capitalist country with very high taxes on returns to capital, or in an honest-to-god market socialist economy (i.e. where firms are either co-ops or publicly owned) it should work ... in the absence of emigration. But really the best entrepreneurs would tend to relocate to the more lucrative capitalist countries.
Considering competition between nations, the optimal strategy for a polity may be to pay the most successful entrepreneurs a heckuva lot, as we do.
>But really the best entrepreneurs would tend to relocate to the more lucrative capitalist countries.
This is why, if pressed, socialists tend to admit that socialism would have to (somehow) be global to work. Socialist nations just wouldn't be able to compete with capitalist ones.
Which is a crazy thing to admit, because it means they are willing to stifle growth significantly in order to try to equalize the profits. The conclusion seems to me that they would rather live at the standard of living of the middle class in 1880 than the lower classes in the 1980s (or pick you date), despite the later date having significantly better outcomes on any absolute metric you can name (live longer, better food, better housing, better and more abundant clothing, etc.).
Worse, actually, because doing so in the 1st world relegates the 3rd world to far lower standards of living as well, but they started at far less. If Socialists were splitting the produce of a less productive older society across the whole world, then the average would in fact be far far less than they expect from a 1st world perspective.
Well, I'm not a socialist, but I can point out something obvious they're missing: there's an equal-and-opposite migration option! Just as a low-tax capitalist countries can in practice siphon off the would-be entrepreneurs from other countries, perhaps market socialist (and high-tax capitalist) countries could in theory try to siphon off the working classes of other countries via mass migration. If I may put the idea poetically by stealing the words on the Statue of Liberty: "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore."
Mass emigration from low-tax capitalist countries would induce a labor shortage and thereby undercut their ability to direct most of the social surplus to the wealthy. Capitalist countries would basically have two options: retain their migratory freedom and pro-market convictions and start directing more of the social surplus to labor instead of the entrepreneurs, or lock down their poor.
Of course I must comment on the obvious: There aren't any market socialist countries. If there were, they probably wouldn't be politically willing to promote mass immigration. If they were willing, they'd have to be able to offer a better quality of life than the poor had available in the rich capitalist countries, meaning they'd have to be a rich country themselves, which seems unlikely at best. If they were able, it would be logistically quite difficult to pull off. Though I said at the start it was an equal-and-opposite migration option, in reality poaching a tiny number of entrepreneurs is easier, so the low-tax capitalist countries' strategy on this matter is more effective.
I wonder. I suppose (early stage) entrepreneurs would have to tend toward the risk neutral or actively risk seeking side of the spectrum — on the other hand, each individual entrepreneur undoubtedly takes on concentration risk, whereas an entity taking on multiple such risks would experience lower variance, assuming those risks are not perfectly correlated. Is there enough difference to go on here? Or, assuming they're risk seeking, can we even charge them now for the promise of lower (or even negative!) taxes in the future and increase uptake? Are there policies we can take to increase the pool of people with appropriate risk preferences (so basically changing the risk preferences of a population)? There are also, of course, innovations coming from existing companies, which have different risk preferences, so most likely require different policies.
Elsewhere in the thread someone else also mentions non-competes, and how that interacted with the establishment of Intel. Would that be a positive overall? I suppose successful entrepreneurs would benefit from believing in themselves, but does that translate to getting greater benefits from reducing friction for the leaving employees than the harm from the obviously missed chance of rewards for Shockley, or more generally, the original entrepreneur?
Entrepreneurs, by definition, don't work for wages and can't be hired. They can only be encouraged, or stifled.
Saying "you'll never be allowed to make it big as an entrepreneur; have you seen the tax code? Come work for Genericorp and manage our XYZ division, make it massively profitable for us", counts as stifling.
I feel that this overly downplays the role entrepreneurial risk plays in all of this. Focusing on billionaires shows a survivor bias; all the companies that go under every year aren't receiving some sort of entrepreneur compensation. Bezos certainly had capital to give Amazon a go when many others didn't, but his success wasn't guaranteed. And say an online bookseller rose to the top instead of Amazon; it probably wouldn't have branched out into different products as aggressively (certainly no other rival bookseller did in our timeline), nor would this hypothetical winner have probably gone into cloud computing the way Amazon did. I don't think risk is the entirety of the payout picture, but it's an important component.
A good observation. Entrepreneurs are doing an EV calculation in their head when they start a company; 1/X chance of being a unicorn, * (my shares %). If we tax billionaires then we decrease the EV of all startup founders by reducing the expected benefits of winning big.
The second-order effects might end up being weird though; if there's no incentive to 10x your company size to go from a $1B payout to $10B, does that mean there's room for 10 more successful companies for each eschewed-$10B company, and so the likelihood of a smaller (but still life-changing) payout goes up? That could be a net positive outcome for entrepreneurs.
Money beyond a certain point is no longer valuable as money; it's valuable as status and power. It's not clear to me that somebody in a system where rewards cap out at $10 million would be less interested in starting a new venture than in one where it caps out around $200 billion.
If Steve Jobs wouldn't have ever another penny coming back to Apple, I suspect he'd still have been there because that was his first and only true love. Zuck didn't know he'd get rich. Musk didn't form SpaceX to get rich…
You’re making some unstated assumptions. I’m pretty sure that if you limit the upside and leave the downside where it is, you will cause people to change their behavior.
And how likely is it? The US government is known for socializing the downside, not the upside.
Money is always only valuable as status and power; nobody likes green papers or debased metal disks for their own sake.
SpaceX is an interesting counterexample, though, if you think there's no upper bound on power as an incentive. $10M from Zip2 would have been enough for Musk to retire young and party; it would not have been enough to try to electrify the auto industry or enable cities on Mars.
I agree. Also I now wonder: given that our moral intuitions often stem from hunter-gatherer adaptations: How do hunter-gatherers split the meat in case clearly just one of them killed the animal? Do they split it between everybody who tried? Or let him keep it? Intuitively we want the system to be stable over years, in particular not to lead to tensions and wasting energy on internal fights...
He's talking about "fairness" and "deservedness". I'm puzzled that many people seem to think this piece is talking about something else. What did *you* think OP was talking about?
Or maybe you're saying that if two entrepreneurs are equally talented and skilled, and start pretty much the same business, the guy who starts his company one year earlier and ends up with 90% market share does in fact deserve 90 times more money than the one-year-later guy who ends up with 1% market share.
As for branching into new products, it's not like no other entrepreneur would have thought "well we're selling books... but why not try selling other stuff?" or "well we build a couple of datacenters... why not rent out computers in our datacenters?" These are obvious things to do, and frankly Amazon AWS is expensive and shitty — I have little doubt DigitalOcean earns far less money, but their product is clearly superior IMO. And heck, it's not hard to imagine an online store that is better than Amazon, although I am impressed with their fast deliveries.
Well, yes, I’m saying that in a market environment, the firm with 90% market share is entitled to that market share. That’s really not the point of my post though, which is about deservedness and distribution within a firm. I’m saying that a founder/original investors, are entitled to a certain level (which is open to discussion) of potential return on the money that they risked. That’s typically different than the average employee of the firm, who is not putting in a financial stake (this doesn’t include employees who themselves are being paid in equity rather than cash up front). I’m turn, there’s a more watered down version that pertains to taxation and how that applies to people working for more profitable businesses/endeavors vs less profitable ones.
I was suggesting that there’s some optimal balance to be found for what founding investors receive and non-equity employees receive. That’s the central distribution question, to me, in market economies. I don’t believe the original post took risk into account of deservedness - I think it is a component, but not the entirety. If the number you feel should be assigned to the risk premium is less than 1% or even 0, then that’s that. I personally think it should be higher, and moreover, that it’s a relevant part of the conversation.
If startups were paying out "too much" reward when successful, more people would start them and invest in them. Indeed more people have started doing that and it's actually quite difficult to make money that way. If there were *much* higher taxes on successful startups, than less startups would be formed and we would get lower quality results overall. Maybe there could be a slightly higher capital gains tax above a certain income point, since it probably wouldn't disincentivize startups that much. But note that most super wealthy people anyways give most of their money back to society as charity, so I'm not sure why the government specifically needs to take control of it.
- Sure, $50 billion would have been enough to incentivize someone to found Amazon, he wouldn't "need" $200 billion
- The problem is that Bezos doesn't have $200 billion in income, he has stock in Amazon
- It's hard to tax unrealized capital gains
- If you try, you are basically taking his company away from him by forcing him to sell shares to pay tax (I suppose he could borrow against shares to pay tax, but that's obviously risky). Whether he deserves this or not, it becomes a good argument for founding your giant multinational in a country that doesn't tax unrealized capital gains.
- For the reasons above, the consequentialist in me lets Bezos keep his stock. "Deserve got nothing to do with it."
Much easier to punish Bezos than to deal with inflation, central banking, mass immigration of low skill labor and laws favoring Wall Street over Main Street.
Not terribly relevant to this discussion, but Denmark does, in fact, tax (some) unrealized capital gains. Mutual fund unrealized capital gains are one such example in Denmark (though, strangely, not unrealized capital gains in individual stocks ...). This implies an upper limit on how difficult it can be to tax unrealized capital gains.
I only know about this because the subject came up in a discussion thread on a personal finance site I visit.
My *guess* is that they don't remit for losses, but that losses can be carried forward an applied against future gains. But that is a guess.
It does lead to strange behavior, though, where Danish investors are dis-incentivized to use well diversified mutual funds because individual stocks don't have this bad tax property. There *are* ways to bundle a lot of stocks together to get around this, but I don't know if this is common in Denmark (it was tried in the US around the 2000s and wasn't popular ... but the US doesn't have this tax behavior).
Good point. I actually don't care about theoretically potential worth, whart counts is real income and even more: real power that comes from the absolute size of the company he owns and additionally from the almost monopoly he controlls.
So let's just tax realised capital gains quite high. Or even cap it at a certain point so there is incentive to build stable lasting enterprises. Bezos could get 1 million $ per year as personal passive income for the rest of his life, but would profit less from looting or selling the company.
The question of power is harder, the main point is to have strong regulatory bodies that can't be influenced too easy and to have proper and enforced anti trust laws taking care that no singe company can get too big and preventing monopolies where ever possible.
What's the argument for treating the question, "how much is it fair to pay billionaires for their entrepreneurship?" as a public policy question, but not the question, "how much is it fair to pay plumbers for their labor?"
Both are public policy questions. Public policy determines how much plumbers as well as entrepreneurs pay.
In fact, to go one step further, I believe they should be treated exactly the same. Entrepreneurs who make $100k a year should be taxed at exactly the same marginal rates as plumbers who make $100k a year. And entrepreneurs who make $10 million or $10 billion a year should be taxed the same as plumbers who make $10 million or $10 billion year.
Now, where there is disagreement, is about what these rates should be. I happen to believe the marginal rates should be very high as you go up the income ladder, although I get that not everyone feels the same.
I agree that taxation in general is a public policy question, and that reasonable people can differ as to appropriate marginal tax rates. But what Scott seems to be considering a public policy question is "fairness of compensation" measured in terms of value provided by labor--i.e., effective wage-setting by government fiat for each occupation. I don't think that makes sense for plumbers, entrepreneurs or anyone else.
Fair point. Here is why I think it makes sense. For people, like me, who believe that those earning huge amounts of money should be charged very high marginal rates, I think it's reasonable for people to ask why we think these rates makes sense. And for people to push back because they believe these rates are unfair or bad for society. I think it's important to respond to both of these complaints, which I think Scott does a reasonable job of doing.
The usual argument for progressive taxation--which I basically agree with--is that the marginal utility function of income (and everything else) decreases, making a fixed-percentage tax on the billionth dollar earned *much* less onerous than the same percentage tax on the thousandth dollar earned. Hence the percentage income tax rate on dollars earned above one billion should be *much* higher to make the burden "equal" in marginal utility terms. Not only is that argument more persuasive than the "income as payment for value to society" argument, but it avoids the latter argument's drawback of opening the door to general wage-fixing as public policy, and thus to general government micromanagement of the economy.
I'm certainly partly with you ICouldBeWrong. Much of my support for progressive taxation is based on the utilitarian belief that society as a whole is better off with some redistribution through taxes because the value of a million dollars spread across a wide range of "ordinary people" is more than the value of that same million dollars to Bill, Elon, Jeff, etc.
But not all. I also believe in progressive taxation on a fairness basis. I think Warren's "you didn't build that" speech is roughly correct. I think the outsized rewards that Bill, Elon,Jeff reap (as well as Steph and LeBron, Adele and Beyonce, Tom & Nicole, Warren and Schwartzman, Gurley and Meeker, etc) is partly a function of their skills, work ethics, and savvy but mostly the result of a "winner take most" system that rewards the folks at the top of the pyramid in ways that are completely out of proportion with their skills, work ethic, brains, etc.
Having said that, I agree with you that I don't want government (or anyone else) in the business of trying to calculate who deserves what. I agree that the question is practically unanswerable, and it would be enormously wasteful (and divisive) to try. So my answer is just to have a progressive taxation system that treats all outsize winners the same regardless of their field.
But my ideal progressive taxation plan would be much closer to the one that we had in the U.S. from the 1940s-1970s with top rates between 70-94%. I not only believe those rates would be better for society and fairer, but I believe they would have zero impact on making society as a whole less productive.
"So my answer is just to have a progressive taxation system that treats all outsize winners the same regardless of their field."
While I would probably ultimately stick with the philosophy above, I could definitely be tempted me by a system with even higher taxation rates on folks working in finance. While I I think all the folks I named above earn outsized rewards, I do think they contribute a lot to society in their respective fields. I think that is less true for folks in fields like finance and real estate, where I think more of the financial gains come from rent seeking behavior that contributes little to society. So I would be tempted by a system that offered less incentive for the best/brightest/hardest working to enter those fields, although I'm not sure that could be done in a way that doesn't have negative side effects.
I will go one step further than that, and say that everyone should be taxed the same dollar amount, like a "membership fee" for being part of the country. For the US right now that amount would need to be about $24K a year to cover Federal government expenditures.
Of course people who didn't earn substantially more than this would leave the country; since these people tend to be net-negative the country would overall improve.
Heh Melvin. A step too far for me. You would have gotten along great with Margaret Thatcher in the 90's, but I don't think a poll tax is the way to go.
And I suspect that you wouldn't find a country where everyone who currently makes less than $50k a year emigrates quite the paradise you're expecting.
That seems to me to be an argument for limiting the public influence of billionaires, not for gating billionaire-ship based on arbitrary measures of value provided to the public.
> But this model convinces me that “taxing billionaires a lot” and “taxing billionaires not at all” are at least two different unfair failure modes with their own advantages and disadvantages from a desert point of view.
What's wrong with the status quo of taxing them a normal amount? Is the argument that if and when they realize their gains and pay their taxes, they end up with more than X in liquid wealth, that is also a failure mode?
You're approaching the question from entirely the wrong angle. This isn't a moral problem; it's an engineering problem: What kind of rewards need to be offered to founders and investors in order for them to bother innovating and founding new companies? The answer has been worked out many times before--every time a company is started. It isn't fundamentally different, nor more or less just, than the way that the wages of janitors vs. engineers vs. blog authors is worked out. It's just more complicated.
Perhaps legislation could intervene to increase social benefits... but trying to "fix" an economic situation by forcing a "just" distribution of wealth tends to degrade or break the system.
The simple and effective answer is to increase estate taxes. Anybody who tries to get a social-justice movement to focus on any mechanism of wealth distribution other than estate taxes, is probably funded by somebody trying to distract people from imposing higher estate taxes. I'm pretty sure that most of the money for the Social Justice movement today comes from large foundations like the Ford, Hewlett, Packard, Rockefeller, and Kellogg Foundations, which are usually run by people connected to the family in question, with its enormous inherited estate.
BTW, it's pretty unusual for the founders of a large company to get such large fractions of the stock. It probably happens more often in tech due to low startup costs. But even in tech, it's rare. See https://priceonomics.com/how-much-equity-do-founders-have-when-their/ for a list of recent tech startups and how much equity their founders had at IPO. Median was 2 founders who collectively held 15% of the stock.
My uneducated assumption is that family wealth probably plays a very big role (statistically) in how much equity a founder has at IPO. Those entrepreneurs who start with significant wealth can keep higher stakes, don't have to seek dilutative funding. So that circles around nicely again to your point about inheritance taxes. Point well made.
And how do you measure 'improve society'? Many here think that the mere fact of building a giant corporation and dominating one or several markets prove that they improved society. I see such power concentrations as a worsening of society. If there were valuable benefits for society on the way getting there is totally unrelated. This can have happened and if so should be rewarded, but not more than other improvements to society that didn't fit in an lucrative business case.
Power concentrations do cause problems, and not all companies get rich by improving society. Figuring how to handle these problems in a complicated industrial society is hard. However, most companies do improve society because creating what people want that they couldn't get before, or creating something more efficiently than elsewhere, is an important service.
Thanks for the link, but it wasn't news for me, and I'm not against business or industry in general. But it has to be judged by the value it provides to society and I think size and profit margins are a poor metric. I see that very kind of industrial plant needs a certain size to work economically and with technological development progressing this size gets bigger all the time. But there is no intrinsic value in having corporations several orders of magnitude bigger than that or spanning many unrelated fields of the economy.
There are also too many ways to optimize a business for profits that are actually hurting the environment or the society that profits and especially big profits are no sign of value production.
Adding in that living now in the developed world what we need to improve life is not more stuff or services but less stress. So economic growth is key to a certain point but when all physical needs are more than filled, there is not much to win by more growth. Now we have to think what we want and what is next instead just following the path that was right for the last 200 years.
I understand that the current consensus among the polsci types (or whoever it is that studies these things) is that an inheritance tax is notoriously unpopular and basically political poison. I suppose it can't hurt to keep trying to build support for it though, and maybe we'll eventually figure out an implementation that works well and isn't going to be repealed come the next few elections. Break down the unpalatability from both ends, so to speak.
Its a moral problem and an engineering problem , because we are not pursuing growth and innovation as ends in themselves. There's profit in slavery but we don't want it.
In the big picture, yes. As always, stating my opinion accurately would have taken so many words that few people would have read the comment, and would probably have generated more confusion than it cleared up. But I'll try to explain more in this sub-comment:
The social utility of a policy is non-linear in any numeric evaluation of its morality. There will be local maxima and minima. Suppose that we believe the most-just distribution of wealth generated by start-ups is X, and the free-market distribution, which produces a much higher total but less-evenly distributed social utility, is Y. We probably can't split the difference by using the distribution (X+Y)/2, because that high total utility is generated by the free market, which is a *machine*. The output of a machine doesn't change linearly as you move its internal parts around. The market is a more-flexible than a car, but markets still break down outside their operating parameters.
There are a number of well-known possible general economic systems, including barter tribalism, monarchy, military empires, feudalism, and free-market-type systems. Each of these has social operating parameters outside of which it breaks down. My earlier comment presumed that we already used our moral sense to choose the general economic family of free-market systems, because they seem more able to provide peoples' needs and desires. Once we've committed to that general type of system, the answer to the engineering question gives us bounds on the operating parameters. There might be ways to make trade-offs in some other part of the machine that will allow us to adjust founder-profits downwards if our morality inclines us to do so. But Scott's approach was to simply ignore the machine's operating parameters, an approach which, if used regularly, would certainly break the machine.
Labor is paid whatever their leverage yields them. So if it’s $50k at one company then it’s likely $50k at another. That has no relationship to the value they create except they probably don’t get paid more than they produce.
I say leverage because being a productive worker is only one way people get paid. There’s also nepotism, sexual favors, just being likable, blackmail, convincing your boss you’re worth more than you are, your union’s threat to strike, the effort of hiring a replacement, etc.
To illustrate: a friend of mine worked a role in Amazon where if he messed up his job, Amazon would lose hundreds of millions of dollars of value. He was paid extremely well for labor, which is nowhere remotely close to the value he preserved and created. As valuable as he was, he was replaceable so his leverage went only so far.
So I wouldn’t attribute any notion of fairness to how much janitors are paid. There isn’t any.
Fairness is a metaphysical concept, not an empirical one. This implies that the meaning of "fairness" is a cultural construct. This means that to endorse the idea that the government should promote "fairness", you must renounce multiculturalism, which forbids the government from promoting any one culture above another.
I have my own preferred definition of "fairness", which is important to me; and I also value multi-culturalism. But logically, when it comes to politics, you've got to pick one or the other.
Not that the government already doing something is relevant to whether the government *should* do that thing, but... what fraction of the law decides what's fair, without regard either to what's pragmatic, or to providing incentives in order to do some social engineering? There are some: the civil rights amendment, for instance. But criminal law and contract law are driven by pragmatics, and tax law is driven by social engineering. And the Civil Rights Amendment certainly requires the renunciation of multi-culturalism, since just about every culture in history before 1960, and probably most cultures today, would consider some part of it morally reprehensible.
First, I think in a democracy the government has no choice but to try to incorporate some approximate sense of "average acceptable fairness" into it's policies. If people are going to vote, part of what they will vote on is their concept of what is fair. It's very important to humans on an emotional level, very ingrained in us, and I don't think you can take it out. Most policies affect different groups of people in different ways that are going to trigger some segment of voter's to think "that's not fair", and you have to account for that in representative government.
Second, yes, there are different conceptions of fairness, but why should that mean we just throw the whole concept out? It's just another thing that requires compromise, and shifts overtime with the will of the people, similar to human rights (which is deeply embedded in concepts of "fairness"). To forbid the government in dealing with the idea of what is fair would be to remove some human rights protections that have been hard won over the last centuries. You could argue they are entirely separate concepts I suppose, but I wouldn't find that very convincing. Fairness is intimately tied to rights.
Ultimately people are messy, emotions matter a whole lot, and you have to deal with them whether you want to or not. There's no useful conclusion that can be drawn by excluding these emotions, because that's a false world that can never exist and will not satisfy the actual real human beings that live here.
I think that we could go much further in the direction of a computational government in which cultural questions were not set into the legal code, but decided by individual voters.
For instance, our laws could explicitly state that punishments in criminal justice should be calculated so as to maximize social utility, rather than to give the criminals what they "deserve". Social utility would be computed as a function of some set of values, and the numeric weights of those values would be set, and continually updated, by the voters.
I agree that it would be extremely difficult not to embed any conception of fairness into our laws. But I never said we shouldn't embed any conception of fairness into our laws. I said that either we shouldn't embed any conception of fairness into our laws, or we should reject multi-culturalism.
The only radical thing about this claim is its honesty. No one really wants multi-culturalism. Anyone who thinks the entire United States must do things their way regarding gun laws, the legality of abortion, or any other controversial subject, is against multi-culturalism. The democrats and the republicans in the US are two cultures more similar to each other than they are to any non-Western culture. Once they learn to live side-by-side in peace, neither trying to interfere with the other, then they can claim to be capable of some degree of multi-culturalism.
Multi-culturalism doesn't mean eating Cajun food, listening to rap music, and reading books by people with a diversity of skin colors who all attended the best colleges in Boston. It means allowing people to act on different cultural values. That means allowing people to be homophobic, racist, and sexist; allowing government officials to take most of their pay in bribes; allowing nepotism in business and government; endorsing religious censorship, honor killings, and warfare; and many other such things.
The standard trick is to take all *your* cultural values and call them "reason". When Plato invented structural racism, when St. Augustine endorsed torturing heretics, when St. Aquinas endorsed killing them, when the Nazis built death camps, when Mao murdered forty million of his own people, they all called it "reason". It's embarrassing to me as a human that this trick still works. Post-modernists rightly pointed out that other people were using this trick, but they and their political offspring think this discovery gives them the right to deny that they ever use it themselves.
It may be possible, someday, to devise a multi-cultural polity, but it would resemble the world of Snow Crash more than ours today. I think it's a good thing that we abolished slavery, allowed women into the workplace, frown on nepotism and bribery, have enough of a sense of honor that colleges can operate on an honor code, and allow freedom of speech and freedom from religion. Anyone who says any one of those things is good is against multi-culturalism. It's important to understand that, so that people can no longer use the word "multi-culturalism" dishonestly, to conceal their own mono-cultural agenda.
I can see the argument that *Aristotle* invented scientific racism with his infamous declaration that some non-Greek ethnic groups were 'natural slaves', but I don't recall Plato ever saying anything derogatory about ethnic groups.
One of the keys of the polis Plato presents as his Utopia in /Republic/ is the use of a secret breeding program to breed the original founding population into separate races, of workers, soldiers, and rulers, like in /Brave New World/. People were to be told their sex partners were being assigned by lot, but behind the scenes, the philosopher-kings were to choose who had sex with whom.
Plato took maintaining the purity of the master race to be the most-difficult task for the state, because his ontology says that everything in the physical world decays from generation to generation, including humans themselves. (He would have been correct, if not for natural selection.) IIRC he dealt with this problem in book 8. His solution was that he claimed to have discovered the numerological "marriage number", an integer with occult powers such that knowledge of it would enable him to predict before-hand what the offspring from any particular union of man and woman would be like. The fact that he never told anyone what the marriage number was, suggests he meant to keep it secret so that people trying to carry out his scheme would have to appoint him as the first philosopher-king.
I spent some time thinking about this "compensate the hypothetical competition" model a few years ago. I eventually decided that it was a bad idea. Finding the hypothetical competitors is very difficult. How do you know that the next company was really just as good but just a bit slower? By redistributing profits among the competition, you throw away a lot of the incentive to innovate. A bad actor could game the system by waiting for someone to do all the work to figure out an innovative product, copy them, and claim that they deserve some profit too. Further, it is worth noting that these large companies *do* innovate to maintain their lead, and they do so by reinvesting a slice of their profit into new ventures, better infrastructure, etc. In a sense, they are *continually earning* a speed premium. The market price of Amazon stock is due to investor expectations that they will continue to earn it.
The hypothetical competition is likely to be found in the executive offices of the winning company, helping make the idea work. In which case they're already compensated.
Honestly, me. If someone creates an obscene amount of value, I see nothing inherently obscene about them trading it for an obscene amount of money. As for the inequality point..I care more about absolute levels of wealth. And if I knew I'd be a relatively poor person a hundred years from now, I'd rather be born into a society that for the next hundred years let people becomes obscenely rich through their productive efforts given how much cheaper that will make so many things as a side effect
Yeah. And I'm saying I don't think that will benefit the common good. Over any meaningfully long time horizon. For basically any income level, I would make the same trade (from desperately poor to moderately poor to 'American poverty line', etc)
I have no idea who that is. I just look around at how the average dollar in hands of government and in hands of self made billionaires is spent, and it seems obvious to me both that the billionaires invest that money much more efficiently in a way that causes new technological advances reducing costs across the board, and that if they didn't have the opportunity to play with those billions/influence, they'd invest that money a lot more conservatively and take much fewer risks in their lives. If billionaires were taxed much more heavily, they would be much less able to reinvest the money from their first big success into making it a bigger success or funding their next big ideas. I can see what the government does with my tax dollars. I'd much rather I could donate it to bezos or musk instead.
Helping more people in Africa grow up and reproduce is almost certainly net negative for the common good
I do. I've heard this argument for 50 years, and I find it less attractive and less intelligent than I ever did. Indeed, I would say it's nothing more than envy and selfish self-interest dressed up in fancy words. I would work actively to destroy the career of any politician who came within shouting distance of these concepts.
Yes, progressivity in taxation is obscene, a policy driven entirely by political convenience and demagogues fostering economic envy for their own selfish purposes. It's little different from Roman Emperors buying off the plebes with the corn dole, and has similarly corrosive effects on society. We now have enormous chunks of the population who have zero skin in the tax game, and have been led to believe the universe owes them a living at someone else's expense, and we have other chunks who have nothing but contempt for a system that sees them as milch cows for the vote-buying schemes of legislators. Not a recipe for long-term stability of the social contract.
The rest of your reply is just tediously unimaginative ad hominem strawmanning, with a soupcon of tribal othering. If you can come back with some more creative insult or contemptuous barb, that would be helpful.
>It is especially obscene when the whole world doesn't have basic needs met: water, food, sanitation, housing, healthcare, education.
So people in sub-saharan Africa deciding to have kids they can't support means I'm on the hook? Why? Because they exist? And then they grow up and have kids of their own they can't support, and more wealth has to be diverted from productive ends towards supporting more unproductive people? Yes, I have a problem with this.
You also imagine that your totalitarian redistribution scheme will have no negative impacts, as if the economy will still chug along as it was before, with the same level of investment and entrepreneurship and value creation. This is not a rational belief.
Yeah, reading the first sentence "The typical neoliberal defense of self-made billionaires goes..." made me think of this post: https://slatestarcodex.com/2014/11/04/ethnic-tension-and-meaningless-arguments/ (see section II)
I don't see why anyone should need to put forth a "defense" of billionaires. It's like asking if you are "pro-Israel" or "pro-Palestine", labels that are akin to waving little flags but have little to no semantic content.
We didn't appear on this earth with all property equally divided among individuals and peace and love in our hearts. Many billionaires' wealth is rooted in war and conquest, legal oppression of genders, ethnicities, or other arbitrary classifications of humans, and other forms of non-consensual or fraudulent transactions.
On one side of this, we say "Oops! Clean slate! From NOW onward, we will use a non-collectivist libertarian ideology. But everyone can keep all the shit they stole beforehand." This is notably unpopular among those who were stolen from.
On the other side, we can say "Alright, we're coming in with Tanks to take all private property. The People's Dictatorship will equally divide everything among all people." This is notably unpopular among those who did the stealing (or who merely bought or inherited stolen property), and also, there's never been a successful People's Dictatorship that actually followed through instead of being just a normal Dictatorship.
"Tax rich people and give money to people or to fund social services" is the middle way through.
All wealth is derived through illegitimate means. From whom and to whom do we redistribute wealth stolen during the religious warfare of medieval Europe? From whom and to whom do we redistribute wealth stolen during European colonization? From whom and to whom do we redistribute wealth stolen during the Second World War?
The whole of history is a wash of blood and theft, on the grandest to the smallest scales. To require proof that wealth was built on theft is simply to advantage those who stole so comprehensively or long enough ago that their crimes are invisible or their victims’ blood diluted across nations.
You don’t have to accept tanks, or even taxes, but do so with the following fact clear in your mind, noticing the trade off you’re making and accepting it as worth it, instead of pretending it doesn’t exist: a libertarian fantasy is a jubilee for the war crimes of the inheritees of the wealthy.
If someone stole all of my money, and spent it on a luxurious life, and finally died penniless having spent all of it, I would not be satisfied with a system that said “well, all the money is in the hands of people who didn’t steal from you, they were just making voluntary transactions, you’ve done nothing wrong but we have no mechanism to give you anything.”
I don’t think that the chefs who cooked the thief’s food are morally blameworthy. I don’t think the landlords of the mansions where the thief lived are morally blameworthy. I don’t think the driver of the limousine the thief rode in is morally blameworthy. But it was my goddamn money, and I want it back.
I have a feeling that if we took the route of "Let's come in with tanks to take all private property, redistribute it equally among the people, but THEN it's a clean slate and we have free-market capitalism" would result in a very similar wealth distribution to the one we have now within a few years, and a lot of people would be just as unhappy with it as they are the current system. Their problem is not with the starting conditions, it's with the rules of the game themselves (i.e. economic freedom).
I don’t dispute that, but I attribute it more to the fact that wealth and poverty compound in a way that I find distasteful. A rich person will *always* be better equipped to hide from the consequences of crimes, and therefore crimes which produce increased wealth compound on themselves, resulting in a endless flow of money to those who would unethically use that money to maintain their wealth, which is why a one-time redistribution would only work to solve this problem if people really could be Lawful Good Libertarians.
The other reason I believe in constant redistribution via taxes is not an argument I included in the above post, because I don’t think it’s as compelling to a libertarian audience, is that—well, I feel bad about condemning people to suffer for the rest of their life for bad decisions early on in it. If someone orphaned at the age of 18 puts their entire inheritance in the lottery and loses, I would consider it a failure of society to let them die of a curable disease at the age of 30 because of a bad choice made 12 years past, even if it was fully consensual and non-fraudulent. And as someone who is part of the 1%, I’m happy to sacrifice some of my wealth to systems that would protect people in those situations.
There's no way to even have a meaningful discussion *unless* the option to take someone's property by force is on the table. So a sine qua non of the discussion is a belief that that property (or some big part of it) is in fact by some clever philosophical judo actually the property of the collective, i.e. you must accept major tenets of a collectivist worldview.
How you get there --- well, there are a million ways, history is stuffed full of erudite rationalizations of this point of view.
*Why* you get there, well, I nominate the familiar green-eyed monster of envy and jealousy. As old as cavemen, I expect. 50,000 years ago I've no doubt if one Cro-Magnon by luck or cleverness acquired 50 sweet melons while the rest of the tribe had one apiece, then many (perhaps most) of the tribe rationalized why Mr. Fifty was actually, when you think about it correctly, only entitled to an equal share of the melons that were actually, when you think about it correctly, the property of the whole tribe.
Technology changes, people don't. We can construct much more elaborate rationalizations for our base urges, but the base urges haven't changed a particle. So it goes.
Seems like a wise choice. Also, thank you -- now I don't have to pay the criminally violent mobs overtime. Win-win!
I mean, atoms don’t have “owned by Carl” tags on them. Property itself is some clever philosophical Judo.
You could say the same thing about any human right.
"Bodily autonomy is some clever philosophical Judo. Bodily autonomy rights only exist because the government enforces them - there's no fundamental right not to be raped."
Uh, yes? Even if you’re a moral realist, it’s not like there’s a pile of human rights in my backyard and I can go and pick up the ones labeled “property” and “bodily autonomy”.
You have to actually argue for how and why they exist! Otherwise I can just win any argument by saying “X is a human right”.
Yes, of course, human rights are not physical objects.
"You have to actually argue for how and why they exist! Otherwise I can just win any argument by saying 'X is a human right'."
Right, and what Carl Pham pointed out is that a question like "How should 'We' distribute the stuff?" presupposes something to the effect of "We, The Collective, have an inherent right to all the stuff, so it is up to The Collective to determine how we want to distribute that stuff and to what degree we want to let individuals keep 'their own' stuff."
Instead of trying to bake an assumption of collectivism or property rights into the framing of the discussion, we should leave both options on the table and debate their merits.
Weird. I think I see where our miscommunication stems from:
I don’t understand why “How should ‘We’ distribute the stuff” sneaks in a connotation of collectivism but “ ‘We’ should leave both options [for distributing the stuff] on the table and debate their merits” doesn’t.
I don't think so. First of all, there *are* quite a lot of atoms that are clearly owned by me, because they are literally what constitutes me, and this is where our idea of owning our own bodies comes from. It's an intellectual step we take at approximately age 2, when our brain learns to segment ourselves from everything else, and starts to become resentful at impositions on our ability to control our body for ourselves.
Property -- in terms of things in our actual grasp at the time -- follows soon after. There does not live a 4-year-old who does not resent his lolly being taken by force.
To be sure, there are elaborate extension of these core natural concepts -- we have to invent the idea of being able to "own" something when it is not in your immediate control, and we need a whole appartus of deeds and ownership certificates and what not. We need a cadre of philosophers to rationalize these base drives post-facto, and another larger cadre of lawyers to hammer out agreements that function in all the weird edge cases.
But this is all just superstructure, as fundamentally inessential as the rules of marriage in a species wired to be sexually jealous. The core of these ideas, of bodily autonomy and property, are apparently baked into our DNA and arise in us naturally at an exceedingly young age. It's probably why attempts to undo them -- to impose some kind of alternate formulation of social living -- have been uniform and often spectacular failures.
If you mean to say that some other species, on some other planet, could have different DNA and come up with different basic working concepts of community life, then sure. If you're asserting that *human beings* could live differently by mere conscious choice -- no way. We are who we are, and these ideas are inextricably part of who we are. That's as close to "natural law" as one can imagine.
Okay, then let's make it a proper hunt. Governments don't get to seize his wealth and Bezos gets to keep every cent of the putative $200 billion or whatever Amazon is valued at today.
But right from the start, all entrepreneurs and innovators and value-creators are working under the conditions back in the day. You take on all the risk, and if it works out you get very, very rich, and if it doesn't, you lose your shirt.
No tax breaks. No loans at favourable rates. No incentives to come set up in our state and we cut you a deal. No bail-outs for being 'too big to fail'. NO LOBBYING OR LOBBYISTS.
Jeff (or Elon, or Richard, or Tom, Dick and Harry) want to set up their own business, let them go right ahead. But they don't get handouts (unless from friends/family who want to invest in the start-up) or leg-ups or special considerations, even if they do make it to be mega-big. They get taxed like you and I and the rest of the working joes do, they want to squirrel money away in Swiss bank accounts or Caribbean tax havens, sure go ahead, they can play spy vs spy with the government on that as always.
If Jeff wants a mega-mega-yacht, he can earn and keep the money to pay for it. But he can't shop around for "so who is gonna offer me the biggest bribe to set up in their city?" for his second headquarters, he has to abide by tax and labour laws and all the rest of it.
If you don't want government sticking its fingers in your business pie, fine. But you don't get any favours from government either. Just be treated like every other citizen living and working in the country. And then I'm happy for you and your hundreds of billions. There's that (in)famous quote from Warren Buffett about 'my secretary pays more tax than I do'. Let Warren have his riches - and let Warren pay much more tax than his secretary on them. 'Oh I only get paid a peppercorn salary, that's what I pay tax on' and the bulk of the income comes from dividends etc. managed so he pays little to no tax but has the benefit of hte money? Then if he gets the benefit, he also gets the liability.
Set things up that way, and I think there would be far fewer people talking about "deserving" and calls for seizure and redistribution.
I actually think that "very big online retailer" is a big enough niche that we can be pretty sure someone would have invented it anyway. As people have brought up in the comments, many inventions are invented independently several times within a few months of each other and it's a question of who makes it to the patent office first; I think by studying these cases we can determine that most (though not all) inventions are usually replaceable within a few years.
I'm not sure what you mean about the narcissists - if you're a narcissist who invents a $200 billion dollar idea, I think you start the company and collect the $200 billion. I have no idea if Jeff Bezos is a nice guy or a narcissist or whatever, it doesn't matter to his success and it doesn't matter to me.
I disagree on the inevitability of the “very big online retailer” at least one big enough to drive the changes necessary to compete at scale with large store front retail.
In a world without Jeff Bezos, I could easily see the second runner up settling for being the worlds largest online book store while another founder duplicates big box hardware store model, but skips all clothing because they don’t have a solution or resources to manage returns, etc, etc. this much more fragmented online world would lack the volume to drive affordable next day shipping, one click purchasing or many of the other things that make buying from Amazon so beneficial (or addictive) to consumers.
I don't think neoliberals credit the founder alone. They do certainly credit the founder(s) at an outsized value compared to other individuals at the company. They may even do so at a level that is above some optimum number, but that's not the same thing.
Amazon has over 1.6 million employees. If their average total compensation were $50,000/year, that would be $80 billion dollars *per year* going to the employees. The median pay is about $30,000 apparently, with an average that's higher (a core group of very highly paid employees).
My guess would be that the number is a good bit higher than that, after factoring in benefits and taxes paid by the company. So let's round that up to an easy $100 billion dollars per year. Jeff Bezos has made about $200 billion since 1994. His employees make about half that every year the company continues to exist (and the number of employees is going up very rapidly, so this number is going up as well). If anything, the employees are making much more from this enterprise than Jeff is.
Neoliberals definitely credit the employees with their portion of the success of the business - and generally assume (may or may not be true) that the compensation these employees receive is just compensation for their efforts. More skilled employees, as well as founding employees and management, tend to make a lot of money. Warehouse employees who are interchangeable with millions of other people tend to make much less money.
If employees are getting $100 billion a year, and Bezos is getting $5 billion (his total worth averaged over the time spent working on Amazon), then he's worth 5% of all value. That may or may not be too much, but that's certainly closer to the ballpark than 50%. If Amazon continues to expand and employees get $200 billion or $300 billion a year, Bezos may be looking at "only" capturing 2% of the value. I don't think I have enough information to take a strong stand on whether 5% is a good number, too high, or too low. I doubt anyone has a justifiable claim to the correct formulation of that number, but I'd love to be wrong about that.
Almost all of Bezos' net worth is in Amazon shares, so if Amazon failed he absolutely would have lost the equivalent amount.
Very few executives are paid in exorbitant amounts of straight up cash, a lot of execution compensation is in the form of restricted stock and stock options, which is what makes them share in the gains *and* the losses.
You're conflating several different things, gains from owning the stock, and compensation for work.
Bezos the founder/shareholder's net worth gains when the stock price increases and incurs losses when the stock price decreases.
Bezos the CEO gets paid a cash salary which doesn't increase or decrease with the stock price.
Some other executives at Amazon get compensated in restricted stock which also increases and decreases with the stock.
There are only very rare cases where someone is paid in a way that increases with the stock price but doesn't decrease when the stock drops, and that is performance-based bonuses (e.g. "you'll get a $X million bonus if the stock price hits Y within Z months").
In which case do you think someone should be "pursued" and owe money for stock losses? Keep in mind executives are just employees, and shareholders already suffer losses when the stock price drops.
Those people aren't billionaires. In exchange for having their losses capped, they accept much lower gains than the founder CEOs. They are usually millionaires, but they are not billionaires.
We're talking about billionaires here, which means we're basically just talking about founder CEOs, a few of their heirs, and some princes and oligarchs. And we're really not talking about the princes and oligarchs.
I don't think there's any way that founding Amazon could have cost Jeff Bezos $200 billion dollars. I suppose it could have caused him to make $200 billion and then lose it if Amazon suddenly goes bust, but I expect that for most kinds of bust he is still pretty rich.
Founding Amazon did not cost Jeff Bezos $200 billion, but many decisions made after the the initial company launch could have cost a large portion of that fortune. If his wealth was capped by policy or taxes at say $10 billion, would he and people like him continued to take the risks necessary to grow the company knowing he had very limited up side potential? Would investors trust them?
The question about incentives asked many time is, isn’t $10 billion enough to get people to start businesses? This the wrong question. The question should be, what happens when people approach the cap?
Wrong. AWS was mostly Bezos. Even the engineers/PMs who pitched it to him pitched it as an internal product. He was the one who pushed it to become its own entity and public facing. There are numerous documented accounts of this. He also had a lot of internal hurdles to overcome and had to create a culture change at his own company that took a lot of effort to make it happen. The Steve Yegge Google platforms rant references this (https://gist.github.com/chitchcock/1281611).
Dude, you can wander the Internet and get 10,000 ideas, all purportedly amazing.
Having ideas is easy. Telling good ideas from bad is hard.
I think you're missing something here. Sure, if every worker refused to work for Amazon, Amazon would go out of business. And if every entrepreneur went on strike, we'd all be vastly poorer.
None of that is relevant here. The question is, what is irreplaceable? What is unique? Workers are replaceable. Is Bezos? Would Amazon have been started two days later if he hadn't? If so, the value he contributed was very little. Would it have been started two years later? Then he contributed significant value. Would it never have existed in the form we know it, meaning many goods would now be more expensive? Would AWS not yet have existed except as an internal product? Then he has earned every penny of his wealth.
If every power plant decided to stop producing electricity tomorrow, a lot of businesses would be in trouble. I don't think that we should conclude from this that power plants create most of the value in society.
> If every Amazon worker on Earth agreed to walk out tomorrow and never work for Amazon again, the shares would plummet and his wealth would disintegrate overnight. This suggests to me that a good share of his wealth is not dividends on the idea of Amazon but directly tied to the ongoing labor of his workers
But you've based that on a silly hypothetical; the whole world isn't going to refuse to work at Amazon, and any employee who leaves can be more-or-less fungibly replaced by another one.
Labour is just one of many, many raw products that Amazon buys. What about screws? Let's suppose that all the world's screw manufacturers got together and agreed that they would never sell another screw to Amazon. Amazon couldn't screw servers into racks, they couldn't hold their warehouse robots together, they couldn't fix their delivery vehicles, and sure enough they'd be forced to go out of business for want of screws.
Does it follow from this that the world's screw manufacturers ought to get a greater share of Amazon's worth? I think it doesn't. Screw manufacturers get paid whatever the market price for screws is, and they should be happy with that.
I call this the chain link fallacy.
Imagine you have a chain holding up a heavy object. Every link in the chain is necessary to hold up the object, and if you removed any link in the chain, the object would fall. But it does not follow that every link in the chain is equally valuable. Some of those chain links may be be stronger than others, or harder to build, or more expensive, etc.
The fallacy is essentially the idea that "the value of X = how bad it would be if X did not exist", i.e. "the value of X is the demand for X". The problem with this is that it clearly ignores half of the equation for value - supply. The value of something is a result of both the supply and demand for something.
It's trivially true that if an entire profession or class of people stopped doing their job, things would get bad, since jobs are done because people have some need for them. If we removed receptionists at hospitals, that would mean doctors wouldn't know who to prioritize or know the medical history of their patients, and a lot more people could die. But does it then follow that the receptionist is just as important as the doctor? Taken to an extreme, let's say there's someone operating a dead man's switch - a job where all you do is press a button once every 10 minutes to prevent nukes from firing off and ending the world - and if you stop pressing the button, the nukes will automatically fire. If this person went on strike, the world would literally end - but does it follow that that person is particularly skilled, or non-fungible, or deserving of $400 trillion because without them all the wealth in the world would be destroyed? No, it's a very easy job that requires almost no skill, and there is a huge supply of people who could be button-pressers, so button-pressers as a class of people are not "just as important" as brain surgeons even if the world would end without them.
Nice. +1 to you.
Heinlein called this view "functionalism."
I'd say, "some combination of both". There are several built-in assumptions in your statement, and I disagree with all of them:
1). "Most relevant business/innovation ideas are so obvious as to not be worth mentioning" -- if that were true, we'd be awash in continuous innovation, but we're not. Sure, incremental improvements to existing technologies occur all the time, but genuinely transformative inventions are few and far between.
2). "Management is not work" -- but it is. Those 200 workers cannot all work together in a happy family, making every little decision unanimously or by popular vote or whatever. Maybe 5 people could work together that way, but not 200. They'd either be spending all their time on decision-making, or just doing things at random, and neither option gets you that $200B car. Management is a full-time position; and, as such, it can be performed poorly (and often is). However, good management can be the difference between a new type of car, and a pile of broken dreams.
3). "Investment should not be rewarded" -- then where will the money come from ? The whole point of investment is that you assume the risk, in exchange for a monetary reward. The expected value of this reward is proportional to the risk -- and the risk can be quite large, especially in cases of radically new technologies. Without the startup investment, all those clever and hard-working people would likely have an empty warehouse and a torque wrench, not a car factory.
Okay, you keep wishing for a system you admit will produce worse results while the rest of us will keep enjoying modern standards of living.
The difference, obviously, is that a state can use violent force to coerce people to do things, but all a corporation can do is offer you a voluntary contract to work there or to buy goods and services from them.
What you want to do is use the violent force of the state to make it illegal for workers to voluntarily enter certain agreements, e.g. to work in exchange for a wage.
> So you think that democracy doesn't work, and that (at least in the workplace) autocracy is the only effective form of leadership?
But those are not the only two options ! In any large organization (one that survives for some time, anyway), you will see small groups of people managed by middle managers; who are in turn managed by higher-level managers, etc., in a hierarchical tree structure. Such managers might be chosen by vote, or by autocratic decree, or by word of God or whatever; but they will nonetheless exist -- because they reduce the communication overhead from O(N^2) to O(logN). This has nothing to do with morality or liberty; it's just math.
> Why not have workers elect their managers?
There are companies that do work that way, but they tend to be less successful overall. The ability to manage is a combination of talent and skill just like the ability to weld metal or write software; and so is the ability to choose the right man for the job.
> Maybe a democratic process, instead of the investments being decided by a small group of wealthy VCs?
The reason these VCs are wealthy is (primarily) that they have the skill and talent to select good investments among bad ones. This skill is not uniformly distributed throughout the population. Let me put it this way: let's say you have to go to the hospital for some life-saving surgery. Would you choose Hospital A, where surgeons are chosen based on performance, and only the best or the best are retained; or hospital B, where surgeons are chosen by popular vote ?
>Why not have workers elect their managers?
Because there's absolutely no reason to expect workers to be competent at doing so.
Also, its not an autocracy. A CEO is beholden to the board of directors, and the board are beholden to shareholders.
But even if you call this autocracy, it simply works. There's no evidence of democracy working.
It works in the10% of successful businesses and fails on the rest. Meanwhile, most democratic states are older than most corporations.
I am glad to.hear that no state can just collapse ,.or "fail to work". But then every democratic state must work.
"So you think that democracy doesn't work"
Democracy gets us all 535 members of Congress. How many members of Congress do you respect?
"Why not have workers elect their managers?"
How about democracy in the other direction; all the managers vote on which employees get hired and fired.
The process doesn't end up making the final decisions, the elected individuals do. What's the ratio of members of Congress you respect? 80%? Higher, lower? Personally, as someone who pays very little attention, I wouldn't go above 60%.
Democracy is described as the least bad system of government, but part of it is that government is necessarily a monopoly. Their job is to create and enforce public policies; it would be very hard to enforce laws if there were multiple sets of laws in a location, with citizens free to switch between the sets as they saw fit.
But businesses don't have to create and enforce public policies; the public has to come to them first. So there's no issue with having a whole bunch of them in the same place, trying every possible model. We don't need to employ the least bad option as a failsafe, we can try every option at once and see which ones people prefer, based on which ones succeed and which ones fail.
We sort of have that with the States system; there are 50 sets of State law, and people can move from State to State at will. It just requires uprooting every part of your life, which is too expensive for a lot of people.
The people with democratic control over a company are the financial stakeholders such as stock owners or partners, because the financial stakeholders the ones out if the company goes under (some companies can work with the workers as the financial stakeholders and democratic management, but only in ideal circumstances). There's a very good reason we give that democratic control to the investors rather than the workers, especially with high-risk start-ups.
Suppose you and your friends want to start a company. You're all workers, and you actually know better than the people that used to manage you. So you evenly pool your money and get the expensive factory, machines, stock of raw materials, and so forth... you do have a lot of money just sitting around, right? After all, the workers that built the factory, made the machines, and refined the raw materials need to get paid. Assuming you get this far, your problems are just beginning. What happens when somebody gets sick and can't work for an extended period of time. Do they still get a vote? What happens when someone retires... where does their payout for their initial contribution come from? What happens when you need to hire someone new... how much do they need to pay to contribute? What happens if your company fails (as most do)... do you all just starve in the streets?
To put this into comparison: Boeing has a net value of $140 billion in assets (based on a casual online search), and 140,000 employees. In other words, the company has a value of $1 million per employee. If the money for Boeing is to come from employees, which you so easily suggest, I would need to be able to pay a $1 million buy-in to start a job at Boeing, and I would be out $1 million if the company goes bankrupt while I am employed there.
Your perspective is interesting, but it doesn't answer @Civilis's question. If investors cannot expect a payout on their investment if things go well, then what is their incentive to contribute money to the creation and expansion of a company ? I understand that giving rich people power in exchange for money sounds distasteful; but where is the money going to come from ? Workers don't have it, since, in your scenario, they're barely making ends meet. Should we just give up on starting new companies, and expanding existing ones ?
And, of course, our public servants (and "servants") in such a scenario are especially out of luck, with either nothing to invest in or investments riding entirely out of their control.
Of course, there is a solution to this. Just switch 'worker control of the means of production' to 'public control of the means of production'! The ultimate in democracy! The public decides what should be invested in and controls the company! And this will never ever be manipulated by politicians (that is, the individuals most skilled at manipulating votes). Never. Especially once they realize that democracy only says that people get a vote; it doesn't say that they get a choice, at least in a "Democratic Republic".
Part of it is that a country requires a fair number of companies that produce necessities like fuel and power to keep functioning; if the workers running those think that they have a say in whether the lights stay on, they have another thing coming. Obviously those workers are enemies of the people. Kulaks, wreckers, and hoarders, the lot of them. This is how the ideals of 'worker ownership of the means of production' when implemented always end up as what we saw in the USSR and the People's Republic of China.
In your hypothetical, are the Tesla workers better at their work than the workers at the previous companies that the new company is $200 billion better than? EG are they better than Ford workers, GM workers, or the workers of some terrible car company that went bankrupt? If so, what would explain why all the good workers are at one company and all the bad workers are at another? How did they get to be $200 billion better than all other car company workers?
From the hypothetical it sounds like in his example the workers have created the better car on their own, but then were bought by someone with excess wealth. This is not a realistic scenario, as far as I'm aware the people assembling a product are rarely if ever responsible for innovation, but this does occur with people slightly higher up the ladder such as engineers or researchers. Sometimes the innovations that improve a company's comparative advantage are created not by leadership but in the design process, and I imagine much of the time those people do not share in wealth creation. This speaks to some existing flaw in the distribution of wealth.
If tesla started chronically losing money, are we going to start charging the workers money to work at the factory (or at least stop paying them)? If the only source of a companies value is through the labor performed, are the workers to blame when the company has negative value? You want to have your cake and eat it too. And tell me, are Tesla workers any better than Ford workers? No? Then the difference has to be the company, in which case it's strange to suggest Tesla workers should be paid any more than equally skilled auto workers at other companies.
>this random apartheid scion named Elon who came up with some pretty obvious ideas and had access to enough capital to buy the factory
Oh noes, not apartheid! Do you speak this way about Zulu people? You know, the ones who treated the actually native south africans much, much worse than anything that ever happened under apartheid? Or is that cool because their skin is dark brown?
Notice that countless people with much more capital than Musk never successfully implemented this "obvious" idea. And the idea you or any other "random" person could pull it off with access to the same capital is a sick joke.
What musk did that created vast amounts of value is not just making some EVs. He has almost single-handedly made EVs cool and desirable, which in turn has sparked untold billions of dollars in investment in EVs at many companies other than Tesla.
But the workers couldn't do their work without raw materials. So clearly, the answer should be that the benefit should accrue to the owners of the iron mines that create the ore that is turned into the steel to make the cars.
No, that's silly. Iron ore is a commodity, just like labour. Both raw materials and labour should be bought at whatever the market price is.
Whatever the contract they both voluntarily signed says.
I'm not sure "liquidity is finite and generally trading volume is a small proportion of the value of an entire company" is really that interesting. They can certainly access a significant number of billions with no issue, whether they do so via the open market or OTC with (or in Elon's case, I suppose often without) the proper disclosures, it just takes time.
And it's not like any billionaire needs all his money in cash all at once. Selling a $billion or two annually is enough to satisfy virtually any desire. And once your portfolio is diversified, you actually *could* convert the entire portfolio to cash with minimal losses, and with lower taxes than than Warren Buffet's secretary pays. The only reason billionaires don't do that is because it's worse than staying invested.
>Getting Bezos to where he is did not require that, and in fact, AWS was a spinoff that happened well after Bezos was the richest man in the world. My point stands.
Not even close to true, AWS was founded in 2006, in which Bezos was tied for the 147th richest person in the world with a net worth of 4.3 billion, while the richest was Bill Gates at 50 billion. (https://stats.areppim.com/listes/list_billionairesx06xwor.htm)
>In the case of Amazon, many and various, but some include the pricing model of Amazon Prime and using its market share to intentionally drive up prices for literally everyone selling what it sells, including Walmart.
How are either of those "loopholes"? The first is just a business model and the second doesn't even make any sense, increasing your prices makes you *less* competitive, it doesn't force your competitor to match.
Amazon Prime is only a year older than AWS. If you only care about how Bezos became a billionaire, you shouldn't care about Prime. If you care about how he became the richest man in the world, you should care about both.
Counterexample - Google's search engine as well as adsense (the innovation of which was in fact making ads less annoying). Twitch. YouTube.
Apple also does not seem to have a tollbooth, or even a monopoly on anything major.
As for your specific claim that manufacturing never makes billionaires: Morris Chang, founder of TSMC, currently has a net worth of approximately 2.8 billion.
There are many many more counter examples to your claim, but I feel that your statement was so strongly worded that even one would be enough.
Neither Apple or Google or any of the tech giants are monopolies in the sense that their existence prevents others from competing. The fact that all Apples products compete in highly competitive mobile / computer segments is self evident. Nobody buys an Apple phone because it's the only option - there are literally dozens of competitors. But Apple has been historically the best for many customers. You have a very inaccurate view of competition and what makes a monopoly.
Having high market share because your product is good does not make you a monopoly mate or a rent seeker.
Then your argument makes even less sense. You are talking about monopolies and antitrust yet can't actually explain how any of these companies are a monopoly? A person can't be a monopoly so if you can enlighten me, that would be great.
Why should I care about cheating?
I understand why I should care about monopoly. TSMC violating IP is breaking tollbooths.
If IP is an unethical monopoly, is it ethical to respect it?
Anyhow, you made a factual claim that billionaires are created via tollbooths. IP violation is a counterexample to that, regardless of the ethics.
Markets and competition do a great job in dynamically coordinating supply and demand especially of scarce resources. But like in every competition or game there need to be rules that are binding for every one. As soon as somebody tricks the rules or cheats, the market doesn't work as well as it could.
"It is categorically impossible to make a billion dollars without recognizing, or worse yet, creating, a bottleneck or tollbooth in an otherwise functional system and extracting rents from its operation. We call these tollbooths "monopolies," and their operation "exploitation" of people, economies, systems, and societies."
Couldn't be more wrong. The way to make a billion dollars is to create a lot of value for other people. The whole concept of antitrust is mostly a farce. The only real monopolies are government created- historically, anyway. All the non-government-created monopolies that were broken up were crushed because they were creating too much value for consumers by lowering prices and driving other companies out of business (i.e. standard oil). The theory made up after the fact that at some point they would raise prices has been proven false time and again. The original purpose of anti-trust was explicitly to protect other businesses against competition.
Fact free assertion much? Like your original post in fact. Others in the threads have pointed out several counter examples, and you're responding without engaging
How could he present examples where you're wrong, when all you're saying is he's categorically wrong? There's nothing to argue with when you don't engage and just tell people to read so-and-so.
I disagree. Others have provided specific counter examples that show you're incorrect. You're not engaging there either. And far from being a Gish gallop, the comment you're responding to is quite tightly focused on responding to your statement.
Major warning (50% of ban): Low content high temperature comment.
No single person can possibly create value worth a billion. If you would say a million I would think about it...
a monopoly is basically a situation there is no real competition. This can be caused by government willingly or not, but there are definitely many other reasons and situations too.
"The original purpose of anti-trust was explicitly to protect other businesses against competition" please give any prove for this, as most people see it differently.
"No single person can possibly create value worth a billion"
Why would you believe that? What about song writers who are super popular and bring joy to billions? Paul McCartney?
"please give any prove for this, as most people see it differently."
Not people who are actually familiar with the history. Like I said, it's not some kind of secret. They were quite open about the purpose being to stop the monopolies from driving smaller companies out of business.
Why could Paul McCartney reach and bring joy to millions? Definitely not on his own. This was only possible by a lot of technology work and resources the society provided. Also if he wouldn't have this reach, there would have been smaller stars in all counties. The key effect that so many people could enjoy music was technology because otherwise they had to attend a live concert everytime.
"Protecting business from competition" is not the same as "stop the monopolies from driving smaller companies out of business". In the latter case its more about protecting the public from the bad effects a monopoly has by ensuring competition on a equal playing field. "Driving companies out of business" usually means other means than fair comptition. So this was not caring about the single protected business that could still loos the market in to one of many competitors.
That's obviously true of everything, but without McCartney all that enjoyment would not exist so it was solely due to him. Music is non-rivalrous so if he didn't exist we wouldn't have that wonderful music and it would not have been replaced by other music.
As far as your last paragraph it's dead wrong. Unfair competition had nothing to do with it at all, just efficiency and lower prices.
We wouldn't have had 'that' wonderful music. But we would have enjoyed other wonderful music that also exists. The point of people have joy is more connected to the access to good music in general than to this particular artist.
Well, yes. efficiency and lower prices are ear exactly the main reasons why we want to have a fair competition and prevent a monopoly then and now. It was and is always about preventing big players form misuse of power, not about protecting some business from competition as your first suggested.
I think your point's on the right track, Mr. Rollins. I'd add to it by pointing out that Amazon is simply one form of exploiting (in a value-neutral sense) the Internet, the outcome of a series of inventions that each seem at least as substantial as anything Bezos contributed, and many of them were developed with tax-payer supported government funding.
It's neither surprising nor necessarily a negative feature that the Internet attracted rent seekers who monetized its potential. One of the Internet's obvious social benefits is its potential to stimulate transactions that produce economic growth: jobs, further investment, and also some concentrations of individual wealth. But if we're considering fairness as an ethical, rather than a political or legal category in the scale of individual wealth, it seems misguided to treat all the socially sunk costs that lie behind the opportunities presented to Bezos as vaporized to zero, although laws and regulatory regimes may allow rent seekers to operate as though they were.
This is just a version of Obama's garbled "You-Didn't-Build-That" semi-misstatement: the accrued basis of public and private infrastructure for all corporate activity forms a sedimentary continent on which individual market accomplishments rise and fall. Capitalist theory concerns the hidden hand that rewards the commonweal by incentivizing individual profit (whether in manufacturing or marketing), but when the social basis of corporate success becomes a hidden factor, the scale of individual profit can exceed anything benefiting the commonweal, and the ethical basis of capitalism becomes harder to defend. The comment of metaphysiocrat (about an hour earlier than this one) gets to the heart of this by pointing out that when wealth reaches a certain scale it translates into a significant pivot of individual social/political/economic power that can be destabilizing.
So I agree that Scott has probably started from the wrong place, treating an economic playing field that includes an array of never-fully-compensated investments and innovations as a tabula rasa. (And this doesn't even get into the manner in which Amazon's semi-monopoly status allows it to wring rents out of every manufacturing and service vendor for which it has become an indispensable middle man.)
+2
-1000
You can't get fabulously rich in manufacturing? Andrew Carnegie? Henry Ford?
Wikipedia has anticipated your skepticism:
https://en.wikipedia.org/wiki/List_of_wealthiest_historical_figures
Their estimates of wealth in 2021 dollars are: Henry Ford $35 billion, and Andrew Carnegie $16 billion.
Look, whatever you meant what you actually said is "Manufacturing does not make billionaires." The reasonable thing to do when confronted with empirical proof that this is false is to say "Oh, huh, interesting. Well, I appear to be wrong about that -- but it doesn't take away from my main point, which is..."
Which otherwise-functional system did Rihanna create a bottleneck in?
The move to AWS was extremely unpopular and management had to give and follow through on crazy "become a microservice or we fire the whole team" style threats to get the company on board. Really think that call was a unique, extraordinarily valuable one that should be chalked up to a visionary CEO earning his whole paycheck.
I completely agree. It was also probably even more incredible than "sell products on the internet" given how it drove down the cost of a lot of activity, and wasn't remotely as obvious to laypeople.
So non-obvious that probably most people don’t know about it, and under appreciated by many who do.
Yup.
No he's referring to moral desert, not culinary dessert.
Ah all these years I actually thought moral desert was spelled the food way! TIL
Yeah it's a confusing word!
Extra-confusing is that we have two spellings and two pronunciations, for four different meanings:
desert /dəˈzɝt/ - what one deserves
desert /dəˈzɝt/ - to abandon
desert /ˈdɛzɚt/ - a dry place
dessert /dəˈzɝt/ - sweet meal
What?! I always that the first one was with 2 s's! Mind blown
There is a restaurant here in San Francisco called Just Desserts (which serves desserts). I imagine a lot of people get the joke, but without realizing that the spelling is different!
1 and 4 are half-cognate, but not in the way you might think! I thought maybe “dessert” was what you deserved for finishing a meal. But actually “deserve” comes from the Latin for “serve well”, while “dessert” comes from the French for “de-serve”, i.e. what you have after the table is cleared 😅
I had misinterpreted dessert as a doublet of desert (that is, a word that was borrowed into English multiple times from the same root, with different meanings for each borrowing).
https://en.wikipedia.org/wiki/Doublet_(linguistics)#English
But as you point out, it's not! Thanks.
I have never seen that first meaning in my entire 12 years of reading and listening to English.
It's relatively rare and possibly old-fashioned. Now I'm wondering how much of my vocabulary is from reading fantasy (possibly written pre-1960 or so) where older words were used for flavor.
I think it is most often encountered these days as part of the phrase "to get your just deserts."
same here, and it's been 25 years (or 40?) -first encountered not today but in another ACX (or) SSC-post. “I am learning all the time. The tombstone will be my diploma.”
I think it's almost a fossil word: https://en.wikipedia.org/wiki/Fossil_word
The only time I can think of anyone using it is in the phrase "just deserts."
Danke! This helps me a lot! We only have dessert - pronouncing it /dəˈzɝɝɝ/ or sth, cuz: crazy French ... - and many prefer to write or say "Nachtisch" ("after table" - sweet meal) not to get the writing resp. pronouncing wrong. Had to google: Das Dessert ( [dɛˈseːɐ̯], [dɛˈsɛːɐ̯], [dɛˈsɛʁt] oder [ˈdɛsɛːr], von französisch dessert) lol, 4 ways to say one word - we really don't know Francaise.
I am so glad to know that ethnic Germans hate French borrowings into German as much as English-speaking learners of German.
(Most of the French borrowed by English was borrowed from Norman French before the Great Vowel Shift of Middle English, so the pronunciations at least *sound* English.)
see how you have to eat your words
Agh! And here I was thinking of moral desserts (rewards for being Good) and moral deserts (dry unlivable places devoid of morality).
Never thought "deserve" has anything to do with it, I thought it was some kind of metaphor.
When a business occupies that kind of niche it collects monopoly rents that should be taxed or regulated away.
"We're sorry, Amazon.com has reached its daily sales quota as determined by the US Department of Profit Control. You are being redirected to Jet.com" You can't regulate or tax incompetence into relevance, and a $1.3trillion market cap isn't unreasonable for a company that does half that many deliveries in retail sales alone every year, say nothing of all the other sectors they're involved in and actively improving. I trust even Bezos to spend the profits more effectively than Bernie, by far.
Precisely because Amazon has such low prices, as Scott mentioned, I expect the monopoly rents are being paid for by the employees more than the customers in the form of harsh working conditions created by what amounts to intentional understaffing combined with quotas so that each warehouse employee is performing more than one person's 'sustainable workload'.
Monopoly rents come from increasing the price above the marginal costs. Do you really think Amazon's success could be built on paying their workers less than other wholesalers or retailers? You must think those other workers are making a *lot* of money!
It's actually the opposite - Amazon workers make far more than their direct competitors pay at Walmart and other retail locations. That said, a big reason Amazon pays more is that they employ them as warehouse workers instead of retail sales employees, which is typically a higher-paid field.
The real question is whether Amazon employs fewer people per sales dollar - which is likely true, and a sign of efficiency. If Amazon pays their employees well (compared to alternative options at least), but hires fewer of them than Walmart or another competitor would have to in order to push the same number of sales, I'm having trouble with the idea that Amazon is acting immorally. They charge less than typical retail locations, and in large part that's because they don't have to pay for the retail storefront. Retail storefronts haven't been good careers since at least the 1990s, and even then weren't great careers.
Well, Amazon isn't the only company acting immorally, but working people hard enough to destroy their health without EXTREME need strikes me as immoral. It's not a "people/sales dollar" question. That's essentially irrelevant. Being an "efficient slave driver" doesn't make you moral, just both immoral and efficient.
You're using evocative language. Let's use more sober terms.
- For one thing, in my opnion it is totally out of play to compare workers at Amazon warehouses to slaves. I think that would only be OK if these people could literally not find any other work, but that is certainly not true.
- Next, most people who work in Amazon warehouses don't die decades earlier as a result of overwork, and so they aren't all "destroying their health". Perhaps they accept a modest decrement in health in exchange for higher wages. Moreover, as you say, they aren't all in EXTREME need. They simply choose to take the tradeoff. Don't young people engage in high risk behavior all the time, for a whole host of reasons?
Do you think companies should not permit people to engage in riskier forms of work? And if so, don't you have to draw a totally arbitrary line between acceptable and excessive risk? It seems awfully presumptuous to claim to know where that line is for the entire human race.
You know what? I had a long ass reply to this comment typed up and I was going to link this (admittedly a couple years old) gizmodo article as a source, but after rereading it to make sure I didn't mess anything up, I realized the article said it better than I could have. So here: https://gizmodo.com/i-tried-to-block-amazon-from-my-life-it-was-impossible-1830565336
Tl:dr Amazon makes its money from webhosting, internet infrastructure, and by being basically completely unavoidable and by being thiiiiiiiis close to being indispensable in regards to keeping the modern internet functioning properly.
Are you implying that the entire telecoms industry collapsed after Bell was broken up or that anti-monopoly laws, which are largely unenforced, do not work and all exist for no reason? This is rather a silly notion and ignores all of the harms to society and consumers and innovation which arise from the stagnant fearful monopolies who seek rent. It is silly and very straw-man to imagine some horrible alternative reality as the only possible alternative.
In most industries we see price gouging, abuse of workers, anti competitive tactics (many of which are also illegal), and reduced quality of service over time. It makes a lot of sense to break up any company which comes to dominate any industry.
D-Jimmy Carter's judge broke Bell Labs when he broke up Bell. D-JFK immiserated Baltimore and Gary when he broke US Steel. The Democrats turned the industrial Midwest into the Rustbelt. When the Clinton Foundation took a half-billion from Microsoft's competitors and the Clintons sent the Justice Department after Microsoft they broke the dot-com boom
Anti-monopoly laws exist for reasons as corrupt and feckless as the rest of US politics.
Sin taxes, hyperregulation, and moral panics are a ridiculous industrial policy. It was ridiculous to lose the industrial Midwest.
You are right about Bethlehem Steel. A different fiasco.
If the trial ended the dotcom bubble it ended it by popping a bubble and bringing things down to earth.
It's plausible that this happened and if it happened it was likely very good.
I don't say Bell Labs was the end of research. I say it was hugely valuable, decades of huge, continuous R&D spend into existing ideas if you will, and fecklessly broken by D-Jimmy Carter's judge.
Microsoft opened a billion dollar office in DC because of the trial, which followed a half-billion dollar bribe laundered through the Clinton Foundation. Only the big boys can pay big bribes. Small startups were crushed by the chilling effect of the corrupted Justice Department. Crush the small startups, crush the boom.
This is sort of the argument for Jeff Bezos ""actually earning"" $200 billion -- Amazon made a very long series of strategic and tactical decisions right, during a time when nearly all important decisions in Amazon flowed through Jeff.
Most critically to all of them, Jeff found a way to prioritize growth over short-term profitability, successfully earning Amazon decades of time to constantly plough nearly every penny of free cash flow directly back into investing in the business.
There's a quote I can't find on Google at the moment where a ?Walmart? executive in ?charge of building out their internet-sales-portal? talked about competing with Amazon and said something like "We constantly had to skim off chunks of our operating margin to pay dividends, they didn't. They started smaller but got to fight with 100% of their resources, while we were essentially starved of oxygen by the demands of our shareholds."
Bezos is a really, really good businessman.
Even if the Microsoft monopoly getting addressed killed the dot-com boom, it also saved Apple, which subsequently became the most valuable tech company in the world, created the IPod (breaking the music industries backwards attitude in the process) and the IPhone (which revolutionized the smartphone approach and made it useful for the masses). It also made Android phones relevant, instead of torturing us some more with those half-assed Windows phones. So even your own examples don't demonstrate what you actually advertise them to demonstrate ...
Apple had been ‘doomed’ for at least a decade prior. Apple didn’t need saving and was not saved by antitrust. Arguably it didn’t even remove Microsoft as a competitor. The browser antitrust case was a complete boondoggle that accomplished little to nothing, and Microsoft didn’t even have a monopoly.
Of course it was saved by Antitrust, but not the way you chose to interpret my injection. Apple was saved from certain bankruptcy by Microsoft specifically because they feared anti trust law. Microsoft needed a showcase competitor ...
Just saw this, but had to comment how ironic it is that you open with a strawman (where did I mention "collapse", say nothing of an antitrust case from 40 years ago before the www even existed), then proceed to call the wholecloth things I never said a silly strawman. Amazon is not stagnant. They're not price gouging. They treat workers well according to someone I know who works there as a side gig and loves it. They're not reducing quality of service, in fact most would say it's getting better every year. If they're broken up, people would pay more and get less. If that weren't the case, then maybe you'd have one, but until then their existence is a net benefit from the majority's pov, which is why millions work there and billions buy from them. That's why the antitrust laws aren't regularly used - because most voters don't want them to be.
The point isn't to allow competitors; it's to prevent monopoly rent collection. Taxing Amazon's profits and redistributing them would solve the problem even without allowing competition. So, in theory, would fixing Amazon's prices lower than what they are now, but in practice fixing prices is hard.
In my opinion, every major financial power needs AT LEAST 6 competitors approximately equal in size/efficiency for optimal results. This isn't necessarily true during the development phase, but it's true once development peaks. If there are fewer than 6, or one is considerably more successful than the others, then government regulation is needed. Ideally by breaking the largest entity into smaller entities. (And the smaller entities need independent ownership! Alphabet over Google should not be considered an answer.)
I thought the evidence from telecoms markets was that there were benefits from going from 3 to 4 major competitors but very few markets with more than 4 major competitors?
The fewer competitors, the easier it is to set up a "gentlemen's agreement" to control prices.
I'm quite willing to believe that the evidence that is shown matches what you've said, but that's not sufficient. There have been multiple instances of collusion to fix prices in the past, but with more groups needing to agree, the chance that one of them will break the agreement for individual profit increases.
Sure, but where are you getting "there should be at least 6" from? It seems very hard to maintain that metric for a reasonable definition of "approximately equal"
Which Telecoms markets? I was under the impression that in most of the USA other than the biggest cities a given area is under a local telecoms monopoly.
Here in Aus thinks work very differently, All the infrastructure is owned by one of 2 companies (one of which was government owned, relatively recently went private) but they're legally obligated to rent that infrastructure at fair prices to any and all competitors.
I was thinking of cell-phone signal providers (Verizon, AT&T, T-Mobile+Sprint, in the US). For cell-phone towers, nearly all of the US has coverage from all three of those physically distinct networks of towers.
They are also required to rent those towers to sub-players at fair prices AFAIK.
Government taxes are monopoly rent collection.
Yes, indeed. Thats the reason why any government should be effectively controlled by the citizens. This is why Democracy is valued so high.
So I fully follow your argument, but my conclution is not that government or taxes are evil, but that any monopoly has to be democratically controlled. Tell the big corporations: allow competition or adopt democratic leadership and give you monopoly rent for the public good. (This does not have to be the state)
I don't know, I think if a corporation exerted a coercive monopoly over important services, didn't allow competitors, and demanded payment regardless of quality of service with threat of locking you away for failure to pay, people wouldn't suddenly say it's cool if the corporation gave them 1 share out of hundreds of millions to make their voice heard.
Is not any Amazon "rent collection" currently reinvested into Amazon business, based on their best idea of how to create further value? So taxing or price controls just changes the benefit to go to consumers in the form of cheaper products rather than investment into a growing business? I don't see a clear reason why this is necessarily good. Maybe consumers would like to see better Amazon-produced movies rather than cheaper Prime subscriptions?
Why regulate or tax it away? Why not just regulate or tax it enough to make it not collect monopoly rents (or to collect much less)? I feel like it isn't proportional to kill it.
This is what QL is saying. There isn't a missing punctuation mark between "rents" and "that"; the monopoly rents are the thing being taxed/regulated away.
If you regulate or tax it, why does that guarantee the monopoly rent is what is lost? It is still a monopoly. Seems more likely that quality would be reduced in order to maintain monopoly rent despite the tax. That would not be a benefit to the public.
It's not a guarantee but if you structure the regulation or tax well it tends to work pretty well. I think you may be making the perfect the enemy of the good here.
Monopolies - other than legally-enforced monopolies, and to some extent even those* - have a limited amount of headroom. If Amazon raised the prices on all its goods by 100x, it would go out of business; 100x the prices is higher than what a competitor could offer.
If you tax the monopoly distributor by the amount of headroom, it can't compensate to retain its profits, because it would then be subject to competition (at least, if you design the tax so that a competitor wouldn't be subject to it).
*The issue here is that running a criminal enterprise incurs large *but finite* overhead. If you have a legally-enforced monopoly on wine, and you raise the price to a billion dollars a bottle, you will get undercut by people illegally making/smuggling wine for a lot less than a billion dollars a bottle (even factoring in risk premium). You could probably get to $200 a bottle or so without too much trouble, though, assuming the law was semi-reliably enforced.
How are they doing that? Which prices did they jack up?
By your theory Walmart.com’s prices must be rock bottom beneath Amazon, right? Because Amazon occupies an unassailable monopoly position from which it extracts terrific rents?
Likewise, AWS must be much more expensive than Azure…
You have accidentally created an empirically testable proposition, but I’m not sure you’re going to like it.
I think steel manning the parent argument, I'd say that the first mover advantage allowed Amazon to get to a scale where its profits are higher than the 2nd mover even if the prices are the same. If there were 2 companies with the same efficiency of scale as Amazon, the prices would be lower, but you can't see that counterfactual because Amazon's monopolized this position.
I don't quite buy the argument that someone else would've done it a small N years later in this case. It may be closer to Musk/SpaceX and I don't know how to tel for sure.
I think it’s weird to say that Walmart doesn’t have the demonstrated capacity to operate at Amazon’s scale… Walmart has been operating at Amazon’s scale for many many years before Amazon existed.
Walmart is operating at the same scale in some ways, but not others . Walmart's efficiency is pretty different from Amazon when it comes to home delivery logistics, online product selection, customer service, etc. Walmart's not at the same scale in those.
I don’t know, they look pretty obviously comparable to me when it comes to end-consumer service. Have you ever used Walmart.com the way you might use Amazon.com? Huge selection, quick delivery, fast customer service options. I’m not going to pretend that they’re exactly equal in offerings, but that’s not the point. The point is that they’re a legit competitor at enormous scale, and the idea that Amazon is simply operating at a level Walmart can’t is not obvious.
I recommend pointing out some specific things that Amazon can do in online retail which Walmart cannot due to issues of unassailable scale. Then we can discuss at an objective level whether Amazon occupies a position where it can deny Walmart the market.
A fair point, I just looked it up and Walmart ($519B) actually has more annual revenue than Amazon ($470B), which surprised me.
You're ignoring various network effects.
And you’re ignoring obvious benefits to the consumer and the marketplace which are made even more obvious by the stunning popularity of the services and goods provided. Shrug.
Actually, I'm not. I agree that there are lots of advantages to having a monopoly marketplace. It's easier to get a wide variety of goods, etc. But I think that such a thing needs to be regulated as a utility.
I.e. I think the internet marketplace is a "weak natural monopoly". Weak because there don't need to be strong barriers to entry, and "natural monopoly", because it's difficult for small sellers to subscribe to multiple markets.
(Note that I'm not sure that there aren't strong barriers to entry. Amazon lost money for over a decade before it started turning a profit. Just that they aren't required for this to be true.)
Amazon's financial results are not at all consistent with it being monopoly.
Its profit margin (net income / revenue) is ~2.4% and return on equity (net income / book equity) is ~9.4%.
Why do you think financial results are what determines whether it is a monopoly or not? To me it's a combination of what proportion of the market it controls and how difficult it is for someone else to enter that market.
Consider, suppose Apple didn't make any money off their app store. Would that mean that Apple didn't have monopoly control over the applications available in their app store ? Monopoly is an enabler of high profits, but it neither requires nor ensures that. (And it's not the only enabler.)
“ because it's difficult for small sellers to subscribe to multiple markets.”
You keep saying these things that by looking at the market are obviously untrue. Again, there are tons, simply scads, of competitors in the internet marketplace.
Amazon lost money for years because it made the conscious decision to sacrifice its profits for growth, not because it couldn’t figure out a way to turn a profit—it’s weird to me that you have such strong opinions about this without being informed about basic facts of which any shareholder was made aware in quarterlies.
The barriers to entry are so very low that you can spin up a free storefront with less investment than it takes to open a physical storefront, something that should be pretty obvious to almost anybody by now.
This does not cotradict Ch Hi. Yes, Amazon did sacrifice the short term profits for growth. But why was growing so important? Because Jeff Bezos and the other Venture Capitalists realized that once you are big enough the network effect gives you kind of monopoly and that a monopoly is highly profitable once you have them. And as long as the VC believes that you will be highly profitable in the future, they give you money to grow, to run on low margins to case off competitors or just to buy competitors that could pose a risk in the future as facebook did with Instagram or WhatsApp.
This game is just a little more complex than just getting high prices from the customers.
There are countless competing online storefronts of all sizes, so it seems very hard to call Amazon's storefront a monopoly. To be fair, there are anticompetitive features in their ability to leverage their control over the distribution channel between the buyer and the seller, but that's far from being a monopoly.
To be blunt: if Amazon has monopoly pricing power, then why do its financial results indicate that it is demonstrably terrible at using this power to goose profits? It has a net profit margin of ~2.4% and a net return on book equity of ~9.4%.
Nobody but a state with political and military power can afford to operate at a loss over the medium term. And even states can't 'afford' it in the long term.
Does this mean that Amazon sets prices lower than they would have been or higher? If lower, then that's an odd way to extract a Monopoly rent; it sounds more like Amazon driving down prices through competition. If they are setting prices higher, then why can't others undercut them?
Profit is more than one thing. Amazon's declared, taxable profits are.low (hence the annoying fact that it was little taxes) because it reinvests a lot of the money it makes into growth, and governments don't tax investment because the like growth. But if you don't think monopolies are good , maybe you shouldn't encourage unlimited growth.
Monopoly is already illegal. Why tax their investment more than others?
It doesn't have to be a thing just for Amazon...although I am not saying I know exactly how it would work.
"maybe you shouldn't encourage unlimited growth"
Making more stuff with less inputs seems good.
It's what they used to call a natural monopoly. Having one central provider flows from the structure of the business. Amazon has built an amazing fulfillment empire, but it also runs a marketplace where competes with its sellers. It's like the NYSE operating mutual funds or packaging ETFs. Like the railroads, Amazon controls an outsized chunk of the online marketplace and uses its position as one might expect.
The railroads were controlled the structure of commerce in the US. Their tariffs enforced an industrial north and agricultural south. Railroads were as despised as cable companies or ISPs. Regulation helped a bit, but only a bit. Then the government built the interstate highway system and industry was dramatically restructured.
The last big antitrust case involved Microsoft. When IBM got sick of antitrust fights, they decided to outsource the operating system for their PCs. This was like throwing a monopoly bouquet at a wedding and Bill Gates was the bridesmaid who jumped highest and snatched the prize. His plan was to leverage this operating system monopoly into an internet monopoly, and the scheme was working before the Clinton administration sued. The reason I am writing this on Substack and not some Microsoft comment board is because of an antitrust lawsuit.
Railroads tried to cartelize transportation. Microsoft supposedly tried to turn their dominance of personal computer operating systems into a monopoly on browser software. Exactly what product or service are Amazon monopolizing?
They run the dominant online marketplace. There are competitors like eBay and Shopify, but unless you can build your own store and fulfillment system at scale, you either have to stay small or accept that Amazon can put you out of business in a heartbeat. They can delist you without so much as a word of explanation and there is no clear process for finding out what happened let alone getting reinstated. They can simply start selling their own set of products modeled on yours and undercut you on price and deprecate your listings. Even if you are a big company with lots of lawyers and an established brand, Amazon will allow other vendors to sell counterfeit versions of your products for extended periods and your brand will take the knocks if those products are inferior.
I do see some competitors out there. Shopify is the most visible for smaller outfits, but there are also specialty groups like Goldbelly for food items. There are definite counterforces, but Amazon has a huge market presence and lot of resources. A formal antitrust case may not be necessary, but a serious threat of one would make a difference.
It was a simple question. Can you give a simple answer?
It sort of sounds like you mean to say that Amazon provides a service for small retailers that no one else can provide. Not clear what aspect cannot be duplicated. Maybe the “at scale” aspect?
Or maybe you are just talking about network effects? I guess that would mean they are monopolizing the customers.
If an artist makes art that people will pay more for, do we call them monopolists? How much more do they get to charge before they should face an antitrust suit?
I guess what I am saying is, nothing is stopping anyone from providing an Amazon service for people who have been rejected by Amazon or who just hate Amazon. But you could say that about Microsoft, too. MacOS and Linux exist, but are they enough?
So what's the solution, make them a public utility? Did the suit against M$ solve that problem?
I am talking about network effects. Amazon does monopolize customers by providing a central place to start searching for goods. Have you heard of The Street of the Carpet Sellers? That's about what economists call central place theory. Good luck selling carpets if you don't have a shop on that street. Amazon owns that street. They have the critical mass of user reviews. In many ways, Amazon is the new Yellow Pages. If you want to reach customers, you have to deal with Amazon. Ben Thompson goes on about this over at Stratechery.
Sure, nothing is stopping you from XXX, but that's not the way it works in real life. No one made you buy telephone service from AT&T in its monopoly days. No one makes you shop at Walmart though Walmart pushed out every other grocery store for 50 miles. No one makes you buy tortillas from Gruma, but unless you live in a Mexican neighborhood, that means a long drive or mail order. There is such thing as market power. If there are only a handful of art galleries and they only sell art from a handful of artists, they aren't stopping you from buying art from someone else, but they can make you work hard to do so and they can use their market power to stifle new galleries.
One solution is to break up Amazon into a sales company, a network services company and a marketplace and to regulate that marketplace to make sure it stays competitive. Another solution is to require Amazon to offer set terms and due process for vendors. Yet another is to require Amazon to unbundle its sales and fulfillment support services and advertising. How about requiring Amazon to open its database so that others can develop competing search engines without adversarial tactics? These kinds of remedies have worked in past antitrust cases. There is no reason similar remedies couldn't work for Amazon.
Microsoft was a good example. Their intention was to place their idiosyncratic browser between users and the internet. I knew friends working at Microsoft, and they were given explicit instructions not to look at industry standards when they implemented browser components. The idea was that their implementation would become the industry standard. Since they controlled the dominant operating system, they could leverage that to control access to the internet.
Yes, people could install alternate browsers, at least they could at the time, but who was going to even know that this was a possibility? What was going to stop Microsoft from sabotaging them by providing its own browser with a better network API? By the early 2000s, more and more websites were being written to Microsoft's non-standard specifications for HTML and Javascript. Their strategy was working, and we would have a very different internet today without that antitrust suit.
The government lawsuit put Microsoft under the spotlight. Depending on where you lived, your new system would ask you to choose a default browser with Microsoft's Explorer as just one of several options. There was a renewed push to enforce web standards. Microsoft invested in Apple so it plausibly claim that it had a competitor. This created space for companies like Google, Facebook, Netflix and others.
Antitrust has worked very well over the years. The Standard Oil case lowered fuel prices and gave the US better strategic options thanks to competition in that area. One of many IBM cases led to competing platforms and compatible peripherals and software. The Xerox case led to more widespread innovation in copying technology. The Kodak case opened its C1 (?) film processing technology. There's a long list. The last thing dominant companies want is innovation, and they often have the power to crush it. Antitrust is one of the few counter-mechanisms.
I thought a bit about credit allocation (mostly from an effective altruism point of view).
I think you're missing the next important step which is that people who would counterfactually do Bezos' work presumably also have good next-best options. So Bezos1 taking the Amazon niche means Bezos2 is free to do their next great project. So Bezos1 + Bezos2 combined created utility equal to Bezos' apparent utility minus Bezos2's counterfactual utility (if Bezos2 were to create Amazon instead) plus Bezos2's apparent utility minus Bezos3's counterfactual contribution plus Bezos3's....
In the EA space I have a moderately strong intuition that a lot of this adds up to normality so people should mostly just do what their naive highest impact is. I'm less sure how it applies to the (substantially more competitive and less coordinated) moneymaking world.
Interesting thought, and I intuitively agree.
I think part of Scott's point that this does not address is that certain niches are vastly more valuable than others. So Bezos1 takes the "online market" idea, and leaves Bezos2 with something far less valuable. He's almost as capable as Bezos1, but is worth a tiny fraction of Bezos1, even if he works harder and also has great ideas.
Sure, but each later Bezos’ ‘next-best option’ which they’d counterfactually be giving up is whatever they’re actually doing in the real world. If Bezos2 got removed from the rest of the workforce to found Amazon instead of Bezos1, the cost would be something less than or equal to Bezos2’s actual lifetime output, since each later Bezos would only change jobs if it benefited someone. And Bezos2’s lifetime salary feels negligible compared to $200 billion.
... which would seem to imply Bezos1's marginal productivity is equal to the productivity of the marginal, worst-paid Bezos. This analysis is hard to run in practice, though, since people are *partially* fungible in really complex ways.
This is especially true if Bezos 2 was Travis Kalanick and he made an online store instead of Uber. If I remember right, ride sharing has lowered drunk driving deaths by something like 30% for young people, and every year that innovation is delayed, many thousands of people die. Or maybe it's Elon Musk. He's moved the timetable for electric cars up at least a decade. How much is that decade of lower emissions worth?
Scott, the argument you're making rhymes a *lot* with the argument put forward by Anne Margrethe Brigham and Jonathon W. Moses in their article "Den Nye Oljen" (Norwegian for "The New Oil")
I translated it a few months ago and Slime Mold Time Mold graciously hosted it on their blog, where I posted the english version and a short preface: https://slimemoldtimemold.com/2022/05/17/norway-the-once-and-future-georgist-kingdom/
Their observation is that when access to something is gated either by nature or by political regulation, you get what's called a "resource rent" -- a superabundance of profit that isn't a return for effort or investment, but purely from economic leverage -- a reward simply for "getting there first." Norway's solution to this in two of their most successful industries (hydropower and oil prospecting) was to apply heavy taxation to the monopolies, and treating the people at large as the natural legal owner of the monopolized resource.
(To address Bryan Caplan's argument about disincentives to explore and invest, you can just subsidize those directly -- a perpetual monopoly should not be the carrot we use to encourage development, and Norway's success over the past few decades bears this out IMHO).
The Oil & Hydropower systems aren't perfect, and there's plenty of debates (especially lately) about what we should *do* with the publicly-owned profits from the monopoly taxation, but it's clear that without them Norway would be in a much worse place.
The thing the authors warn about in the article is that all the hopes for new resources on the horizon to be the "new oil" (Salmon aquaculture, Wind & Solar Power, Bio-prospecting) are likely to be dashed, because Norway has lost touch with its traditional solutions, and so new monopolies are likely to arise uncontested, allowing private (and often foreign) countries to siphon money out of the country.
> I'd also note that most of the time "getting there first" itself requires investment or effort; e.g. oil exploration is not costless!
Correct! This is explicitly addressed by the Norwegian system, and why they specifically subsidize R&D and investment, in order to ensure a return on investment and effort. The insight here is not to make monopoly the natural carrot we give to private interests as the inducement for development.
> The problem with this kind of argument is that it only works if you refuse to apply it to people's natural talents. Your intelligence or conscientiousness, at least most of them, are not returns for effort or investment either.
It's true that it's not fair that some people are smarter, stronger, and more agreeable than others, but the fact that a policy doesn't solve literally everything doesn't mean it doesn't improve the status quo. I don't see how raising this point is a persuasive argument for what I see as inefficient natural resource policy.
I guess you're accusing me of hypocrisy. I personally find it perfectly consistent to draw a sharp line at internal personal characteristics that are difficult to quantify, and lean on the well established economic literature on the subject, and the empirical results from the Norwegian results which speak for themselves.
I don't think they're the same category of thing at all, when we're talking about internal characteristics, rather than domination of natural resources or monopolization of the market (artificially or naturally) through first mover advantages -- that's much more of a concern for me than the fact that individuals are born with different natural proclivities. I think you've mistaken one of many justifications for my chosen policies as the sole and primary motivating force.
But if we want to bite your bullet anyway, aren't you just making a case for progressive taxation here? You're right we can quantify unearned advantages to people who are taller, more attractive, etc, and they certainly didn't do any work to achieve that. There are a million other such things, some known, some not known, that surely work that way. And the conclusion to what to do about that seems to just be ... progressive taxation, or some flavor of it.
As a matter of practical policy, if we tax monopoly power to ensure equal access and opportunity to the bounties of nature for all people, we can provide the basis for a more just society *and* efficient society without having to go full Harrison Bergeron, which seems to be what you're implying the natural conclusion of my principles is.
Someone being more intelligent then someone else is not a private tax on others. The nature of rent-seeking as zero-sum taking is central to the ethical case for Georgism.
If you want to argue that someone deciding to use their intelligence for their own benefit instead of working for you constitutes stealing from you, you are free to make that argument of course.
Yes, a baron on the Rhine charging people tolls for using a river is structurally identical to someone deciding not to work for you. There is no difference between these two scenarios. Good job.
To be clear I'm not 100% sure if this argument is perfectly applicable to Amazon specifically, but this is the kind of argument I think Scott is making so I wanted to point it out. It would fit in the case of a company that relies on a large war chest of patents (and Amazon certainly owned the 1-click checkout patent for ages). There's a case to be made that large networks with strong lock-in and sticky network effects are monopolistic in nature and should be tackled with these kinds of tools, but my own personal theory / understanding of that is admittedly undercooked at the moment.
The thing I mostly look for is: has one company eliminated its competition because they're just *so dang good* or because others are effectively forbidden from even *trying* to compete with them, through natural or artificial means?
My guess is that Amazon has taken advantage of more traditional economies of scale compared to other other modern tech giants. Like, it's just really hard to run a postal service, and once one of a certain size exists, it's impossible to compete with as a new entrant in the market. Probably why a national postal service was so important to the framers, now that I think about it.
"Network effects" in general are overestimated as one of the roots of big tech monopolies, probably because it makes them sound natural, rather than the inevitable consequence of modern IP policy. If network effects really did matter so much, we'd all still by using Myspace. Cory Doctorow at the EFF has written at length about it.
I think people underestimate the impact of Facebook being started at Harvard. It is almost a meme at this point that half the point of going to Harvard is to network with the kind of people who get themselves into Harvard. Zuckerburg made that work for him in many ways.
Second, Facebook really was better than MySpace. You had responsive and well designed pages (no autoplaying videos on someone's page...) and all sorts of better features than MySpace.
Finally, and probably the nail in the coffin: MySpace missed the take-off of smartphones. Just like Google+ did, but in the other direction. Google+ was, iirc, better than Facebook, but they were too late and the network effects were too strong at that point.
Except Amazon didn't discover online retail. It wasn't even the first mover. Nor does it have any kind of exclusive right over online retail. (Except patents which might be a good area for reform.) While I think there's serious problems with Amazon I don't think it's at all analogous to something like land rents or an oil field.
To be clear I'm not sure the analogy fits with the specific case of Amazon myself either (see the other parallel replies), but I think this is the general structure of the argument Scott is making.
I'm undecided on the issue of lock-in (AWS is notorious for that) and network effects as it relates to the question of monopoly / dampening of competition.
Lars, in my experience the average person is convinced that building and running something like AMZ is utterly trivial, and that they could get easily do it if they just worked hard for a week or so.
There's a fundamental disconnect between people like me (and some others here) who see the kinds of people CAPABLE of creating billion-dollar enterprises as fundamentally rare and unusual, and most people who seem to imagine that anyone can do it (which is much of the tone of Scott's second half argument).
I'm not sure how you resolve this, especially since people have extremely strong opinions about this based on essentially zero knowledge of anything relevant to the issue; what you are seeing is some sort of poll as to "beliefs regarding human nature", not any sort of reasoned, evidence based analysis of just how many potential billionaires are out there ready to create companies should one of the current giants fail.
For example in the case of AMZ, did they succeed because they were "so much better" or because of various nefarious nastiness like one-click patents? I'd say "so much better than the alternative", but it's hard to *prove* that (especially when you're arguing with a kid who wasn't even born when AMZ was founded, and has no clue how frustrating and incompetent retail was in the early 1990s...)
Yeah. Maybe taking Amazon off the table clarifies things a bit. How about digital distribution of Video Games? This seems like a thing that wasn't invented by anyone in particular, and Steam wasn't "first", they were just the first to establish a tight market niche.
I got so tired of people pitching their Steam competitor startups to me I wrote a blog post about all the reasons they were going to utterly fail:
https://www.fortressofdoors.com/so-you-want-to-compete-with-steam/
I said, the only way you can ever do this is if you have TRUCKLOADS of money and just dump it into user and developer acquisition.
...which is exactly what Epic Games did a few years later. They've carved out a niche, but they've yet to give Steam a real run for their money. But realistically, only EGS could do it, because the network effects are that tough to overcome. Every other would-be Steam competitor I've seen (and I've seen so many I've lost count) has failed before they even started. (GOG was already established by this time FWIW, and they've remained tiny).
But if Steam hadn't made Steam, would someone else have? And would it have been as good?
My answer is "probably" (but not a 100% certain yes).
I think a lot of these debates hinge on the particular example you pick, which can distract us from the underlying ideas.
Of course the other way to look at it is "what's the business"? Should Coke care about Pepsi, or about "share of throat"?
Steam is in the business of games, and maybe the winner/only serious competitor there if you care only about a particular type of game, but if the space is "entertainment in the 21st C" then they are in competition with tiktok and Netflix, both of whom are doing a lot better.
Perhaps the Steam space is just as large as it gets, and there are multiple alternatives (like Apple Arcade) that are just not interested in EXACTLY the same space as Steam.
So I don't know. Is your argument that Steam is the winner because they were first, rather than because they are better than anyone else? I don't know enough of the space to comment.
The one thing I will say is that video games seem to be extremely dysfunctional as a business community, presumably because so many people enter it based on passion rather than business sense (see, eg, the history of basically everyone ever associated with Id). So they're kinda the worst case opposite version of the AMZ problem!
............................................
I'd say a better example is Intel, who very definitely sat on their laurels (driven by massively incompetent management) for fifteen years, and we're now seeing that play out.
As Adam Smith said, "There is a great deal of ruin in a company", so it will take time for the denouement, but I don't see a turnaround ahead of them. Or IBM as an earlier example, ruined in the same way.
And MS as the rare example where the right person (and those are so rare) really could right the ship. Still to be seen whether Satya is the Tim Cook or the Louis Gerstner of MS...
Intel is also interesting because, before Apple achieved their miracle, everyone in the know would have told you that "a modern CPU is built upon so many patents that no-one can possibly compete with Intel; the best achievable is weak parity by the existing companies". And yet that was not true.
Monopolies were not the barrier they were believed to be... at least not in the US, in a space where the law and the system mostly worked the way it's meant to and politics did not weigh down the scales in any particular direction.
As someone who *has* gotten a (small) business up and running, this times 10. It is unbelievably difficult to succeed, which is why something like 90% of new businesses don't. There are whole classes of problems to be solved that the naive don't even realize exist. Succeeding at the Amazon level requires throwing natural 7s like 100 times in a row, a huge bucket of luck and decision-making that is almost supernatural in its ability to be right over and over again.
For what it's worth I've gotten several small businesses up and running too and very much agree, which is why I think society should reward the effort and the the taking risks and the investment and the being right, but not so much the huge buckets of luck.
"There's a fundamental disconnect between people like me (and some others here) who see the kinds of people CAPABLE of creating billion-dollar enterprises as fundamentally rare and unusual, and most people who seem to imagine that anyone can do it (which is much of the tone of Scott's second half argument). "
There is a broad range of intermediate possibilities. Perhaps one person in a thousand could do it, perhaps one in a million. In the usa alone, that would yield somewhere between 300,000 and 300 such possible people. But at any given time, I doubt that there are 300 unoccupied potential billion dollar niches for new corporations - so potential founders could be quite rare, yet _also_ plentiful enough to saturate their possible niches.
OTOH, the fact that future billionaires often first moved to America does suggest that billionaire-size niches are limited and more plentiful in America than elsewhere
OTOH, that doesn't guarantee that billionaire niches are naturally more plentiful in America; it could also be the case that our markets are more billionaire niche creation friendly thanks to current policy conditions and so changing those conditions could destroy the billionaire niches without capturing the windfall (deadweight loss)
To use a trivial example, Europe really wishes that Alphabet/Apple/Microsoft/Meta/Amazon were headquartered there.
What is the value of having billionaires or billion dollar sized enterprises for the society as a whole? Wouldn't it be better to have 100 medium sized companies occupying the same field? This way there would be real natural competition, the profits would be distributed wider in the society and no single business has the power and money to influence legislation in their favor.
> There's a fundamental disconnect between people like me (and some others here) who see the kinds of people CAPABLE of creating billion-dollar enterprises as fundamentally rare and unusual, and most people who seem to imagine that anyone can do it...
One would think that once the resource is tapped and the profits start to flow, it would be possible to find someone to help with the details. Like scaling the business up, introducing relevant processes and so on.
But from what you wrote, it looks as if you believe that some people are somehow predisposed for this whole scaling up business and they must be matched with the opportunity via prospecting instead of labor market.
What leads you to this conclusion?
I have strong opinions about this actually. Maybe I'll expand it elsewhere. But basically Amazon is a monopoly not due to lock-in or network effects (neither of which exist as much as critics want it to) but because of blatant anti-competitive behavior being used as a way to extract rents from things other than value creation. Amazon Basics alone should be triggered anti-trust in my opinion.
Interesting! I'd love to read a treatment on that.
Amazon prime video is fairly obviously an example of anticompetitively bundling an unsuccessful video service with a successful delivery loyalty club.
It's actually an example of bundling a video service and a delivery loyalty club that's run below cost to drive out competition while being subsidized by a successful web services company. But largely you're correct. This is part of the argument.
I'm rather convinced that network effects are a large part of Amazon's success, but it network effects among the suppliers rather than network effects among the customers.
If you want to buy a book by a particular author, a particular vitamin, a pair of socks, and a keto-friendly snack, where else would you go? What if you don't have that list when you start, just the book in mind, but since you're there, you might as well order enough to get free shipping? I note that in India where WalMart had a head start, Amazon is having a tough time competing. I suspect that it's because WalMart is carrying a better selection of merchandise for that market, or perhaps has a better delivery system. Both of which are facilitated by being the first-mover (in that market).
This goes even further on the supplier side: We produce a special innovative food product so it's still quite a small niche. We have our own online shop, but there are so many people out there were online shopping means Amazon as people say 'to google' if they mean searching the web' generically. And for everyone else, finding something special is easiest on Amazon with it's vast amount of products and vendors. So we have little choice but to also sell through Amazon too. I can tell you it's not only quite expensive, but also complicated to use the back-end and real ban support. They can just afford not to care about my opinion because of their market share.
So one of their business models is selling customers to vendors and manufacturers not only by their regular fees, but also by nudging you into payed ads.
Technically no, but Amazon has such a decisive strategic advantage they may as well be described that way. It's not illegal to compete with Amazon, but in practice its basically impossible. Even a revolutionary retail technology that is potentially and eventually disruptive to Amazons business model is just going to be bought out by Amazon (or copied) long before any Amazon executive comes close to losing sleep.
And all of this has snowballed from having a slightly better website than its competitors 25 years ago. The brilliant people who built Amazon would have otherwise worked at Amazon's competitor.
Wait, "practically impossible"? I can only imagine you're thinking of Amazon's core business, and they have competitors now, whether you think of their core business as online retail or simply retail - the foremost among them being Wal-Mart. Despite having a fifth or sixth of Amazon's online market share, they are doing quite well and, more importantly, poised to jump on any sustained missteps
Shopify is an increasingly good competitor. I don’t use Amazon retail and these days I tend to buy things direct from niche brands and the service is as good and cheap as Amazon, and I know money goes to the brand to develop better products.
What field or fields do you think Amazon has locked down such that no one else can compete?
Walmart may not be your favorite alternative, but they have a very strong online presence and a complete logistics network.
It would be very difficult for another competitor to break into online retail sales right now, but I think you very much underestimate how hard it was for Amazon to break into that spot as well! The first 10-15 years of Amazon were certainly not an example of easy money from a first mover.
>Norway's solution to this in two of their most successful industries (hydropower and oil prospecting) was to apply heavy taxation to the monopolies, and treating the people at large as the natural legal owner of the monopolized resource.
Given that those are both natural resources derived from land collectively owned by the people, is that really comparable with the value created in getting stuff to people more quickly and conveniently? There's probably an argument to be made but it'll require a lot of abstraction.
See my reply to Harold below downthread.
Mostly pointing out the structure of the argument that Scott is making here, undecided about whether it applies specifically to Amazon. The real test is whether Amazon (and Bezos) gets such a return because they're *SO DANG GOOD* or because others are effectively forbidden from competing with them, whether that's by natural or artificial means.
"Natural" means, when speaking about resources, usually refers to the resource's own scarcity, but there's a case to be made about natural lock-in effects and first mover advantages in Amazon's case (perhaps). "Artificial" usually means government regulation. A good example would be my Narcolepsy medication, which is a tightly regulated drug because it's also abused as a street drug. So the government in its infinite wisdom grants a monopoly to one company to manufacture it, and the list price is like $60K a year (in practice this is insurance fiction, but in a fair market it would be muuuuch cheaper).
>The real test is whether Amazon (and Bezos) gets such a return because they're *SO DANG GOOD* or because others are effectively forbidden from competing with them, whether that's by natural or artificial means.
Amazon has a lot of fairly successful competitors in their main sectors - in online retail you've got Walmart/Jet.com, Target, eBay, AliExpress, Shopify, etc., and in cloud computing there's Google Cloud and Azure.
None of them are quite as successful as Amazon but I don't think that's a consequence of them being forbidden from competing effectively, that plus personal experience makes me lean towards a combination of getting there first and the services just being better (on the retail side at least; AWS products can be pretty frustrating to deal with but I haven't worked with the competing products, they may just be worse).
Yeah the real test of a standard monopoly is, if this company just sits on its laurels for like a decade, is it still mostly fine and unthreatened. I think that's clearly not Amazon.
There's a more nuanced argument that Amazon gets a little monopoly power, as a treat, by virtue of sticky network effects and first-mover advantage, and so long as they put in a modicum of effort, their moat stays full of alligators, but everybody else has a much harder time, and it's always Amazon's game to lose. I guess it's a question about barriers to entry and if society should do anything to lower them or not, and if so, how much.
I don't know much about oil exploration and development, but I have direct experience with mineral exploration and if its anything like that, it's extremely costly and risky. Much exploration is done by dedicated exploration companies that frequently go broke and cost investors all their capital(or they hit something big and win big). The land may belong to the people, but the resources aren't just sitting there waiting to be produced.
You're correct!
So the Norwegian insight in particular acknowledges three things that makes it hard to fit into the the standard model of either capitalist / socialist thought with regards to mineral rights:
1) Scarce natural resources are prone to private monopolization, which has bad consequences
2) State ownership & management of natural resources (read: naive nationalization) leads to stagnation, underinvestment, and the flight of competence from the sector
3) Natural resource exploration usually has huge up front capital costs and large risks, but also huge potential windfall profits
The Norwegian model is to tax the monopoly and subsidize the exploration/development risk. Based on the results of the last century, it seems to work pretty well.
Here's an idea I have, let's call it gradual socialism, open to hear criticisms:
Have ownership degrade with time. It could mean something like: the company is completely owned by shareholders during the first 10 years of existence. Then every year the government gets 2.5% of the company, until after 50 years it becomes a government owned company. Of course we would need some checks to avoid government mismanagement.
Another milder possibility is have the transfer of ownership happen only when the company pays dividends. So, as long as the company is reinvesting the profits, they remain private. Whenever profits go to investors, the government gets a little bit of the company. I don't know how to calculate how much would be transfered in this scenario.
Or if you prefer have the transference be to a union, that would slowly become a worker's cooperative.
This addresses the problem at hand, of disincentiving rent seeking, while not disincentiving investment too much. And of course the numbers could be adjusted if investment is too penalized.
If shareholders had 2.5% of their shares forcibly taken away every year and given to employees, then nobody would bother investing because in the long run they will own nothing. Wanting startup capital to fund innovation while also wanting the funders to keep nothing in the long run is fundamentally incompatible, it's wanting to have your cake and eat it too. If this kind of confiscatory policy is implemented it would serve to socialize existing businesses (the merit of which is also questionable - do worker owned businesses generally perform better? If not, what is the merit?), but also immediately put the brakes on any future investment.
Now, Amazon actually *voluntarily* distributes some shares to employees as part of their annual compensation, which won't ever turn the company into a fully worker owned coop, but does make the workers somewhat invested in the long term well being of the company. Interestingly, 1) some employees who are compensated with shares sell them immediately, with the logic that their financial wellbeing is already sufficiently tied to the company by virtue of their continued employment, and 2) warehouse workers lost the stock compensation when the starting wage was raised to $15/hr. These both suggest workers actually prefer a stable income rather than ownership in the company, which makes the government forcing them to be paid in ownership with the goal of eventually turning all businesses into worker coops even more questionable - do workers even *want* to be paid entirely in ownership such that they eventually end up taking on all the risks as well? To answer that we could imagine that today, workers take their paycheck and immediately convert most of their discretionary income into shares of the company they work for, regardless of how well it's performing. That seems like an exceedingly poor financial strategy, most people would rather diversify.
Sure it's probably better than the state seizing all enterprises, but why propose it when it's still worse than what we already have, i.e. mostly just letting the market do its thing?
We already have the far and away best solution - let the company earn money, and then tax it and use the funds for public spending. This isn't rocket science - we don't need to reinvent a worse wheel.
Could you perhaps first point to a large consumer-serving function that the government does very well, as a confidence booster? Let's see...the Post Office? Amtrak? The DMV (at the state level)? VA hospitals? Medicare? Project Artemis?
Your examples seem to be drawn from a specific region where half the population take it as an article of faith that it is impossible for organisations not built on the profit motive to effectively serve the public.
The thing is, without a profit motive, and competition, it is extremely difficult to say what is 'effective' and what 'serves the public'. We have very good theoretical models and empirical evidence for this. Theories of value, information and incentives, and evidence from every country that has ever tried to provide private goods without a market mechanism. (Spoiler alert, they failed miserably)
And so...? Why would the faith of the consumers be necessary for the organization to do a good job? That sounds more like a religion than a corporation (or government). I don't see how I need to have faith that Microsoft makes a good operating system for Windows 11 to work.
On the other hand, if one dwells in a region where people *do* take it as an article of faith that whatever government does it does well, then of course they will probably be at least partially blind to its failures, in the same way that the faithful of any religion are blind to its logical contradictions or practical failures.
So I would say, as is very often the case, it's skepticism that is the better guarantor of accurate evaluation.
I don't understand why your argument doesn't apply in both directions. If it's an important ideological marker of community membership that government does a bad job of running stuff, then government organisations won't get as many good opportunities, it'll struggle to get good talent to staff the opportunities it has, and when it does do a good job it won't be acknowledged, and will be reliably underfunded.
And that's leaving aside the most nefarious versions where being right about this topic is so important that people will deliberately try to sabotage any successful government run organisation.
Any kind of strong culture that government is bad, or that socialism is good will distort the ability of a government run organisation to succeed. To take examples only from a region that has an unusual approach to this topic (as your earlier post seemed to) is a great way to end up with poor conclusions.
Mostly because the fact that you can make an argument the English syntax of which scans doesn't mean it makes any empirical sense at all, and none of those you present here do. Nor can I think of any that aren't equally strained.
For example, the idea that if half the country thinks government does a poor job means they will sturggle to get good talent fails the test of common sense. The Federal government doesn't employ half the adult workforce in the US, it employs about 1.5% of it. The idea that it would "struggle" to find talent for its 2 million employees when it "only" has the 80 million who aren't skeptical about its success to pick from is just silly.
For that matter, people generally pick jobs based on how much money it pays, and their interest in their particular job -- perceptions of how well the whole organization is doing in random other fields have little effect. Why would they? If I'm a aero/astro engineer and decide to work for SpaceX, I'm going to do it because (1) the money is good, and (2) the problems I'll be working on are interesting. I might very well think Elon Musk is kind of a blowhard and FSD for the Tesla the biggest scam ever, but that isn't going to stop me -- not unless I'm some kind of diehard ideologue, and in that case it's not likely I'm an engineer in the first place.
And how exactly would people who distrust the government "sabotage" what it does? Someone is so passionate about making the point that government doesn't work well that, rather than, say, waiting for events to prove him right, he...puts his own career on hold, goes into government service, spend years climbing to a position of trust and influence -- and *then* craftily sabotages what government does? This is spy-thriller stuff, real people don't behave that way.
As I said, belief that the faith of the citizenry (or consumers) that the an organization is good is key to it actually doing good belongs in a church, as far as I am concerned, and I don't think it has much application outside of faith-healing and Ponzi schemes. If I hire a plumber, I may believe he'll do a good job, or I may be deeply skeptical -- and neither thing affects the factual outcome of whether he fixes the drains. The strength of my faith doesn't change the octane rating of the gas I buy, doesn't change whether my phone battery lasts 2 years or 6 months, doesn't affect whether FedEx reliably delivers my packages or loses it 20% of the time.
Not familiar with the USA-specific details. But in the UK, there were a lot of national industries and services privatised in the 1980s-1990s, and the general sense among large chunks of the population is that they work rather less well now they're privatised and were better when nationalised. Royal Mail are doing pretty well, but privatised rail, electricity, gas are a disaster. And of course we've doggedly held on to the NHS which, at least until COVID, was still delivering world-class, free healthcare.
My experience with both Amtrak and the Post office has been very positive over the years. Problems with Amtrak cross country for me were delays due to freight having priority. Medicare? Just fine. And then there's TVA. Also does a good job. Not so thrilled with the airlines. And since we're on the subject of Amazon, PO has never lost my packages. Can't say the same for Amazon.
Good for you. There has to be at least one good story out there, so I guess you're it. On the other hand, I have never taken an Amtrak train without it being 50% late (i.e. on one-hour trip it will be 30 min late, and on a 2-day trip it will be 24 hours late).
More interestingly, if we depart the realm of deueling anecdata, we have the difficult facts to explain that ever since it became possible (in ~1980 if memory serves) for private firms to compete with the Post Office, they have exploded in size and reach, and the USPS has lost huge amounts of money. If people generally thought the USPS was doing a fine job, why are they paying premium prices to use UPS or FedEx instead?
And the same can be said about the trains: who actually takes trains? Hardly anybody, even when the time it takes (including TSA and airport-parking time) is comparable to the time of flying, and cheaper, and faster than driving. Plus there's the view! Et cetera. Sounds great. And yet...outside of the Acela/NE Corridor, just about nobody is willing to take the train, even over the modest distances that are successful in Europe. For that matter, having taken trains in both Europe and the US, it's not hard to see why. I would quite happily take an SNCF or Bundesbahn train -- which will be almost always on time, speedy, efficient, safe, and well-run -- but you'd have to pay me to endure Amtrak, which as far as I can tell must have some secret upper (two-digit) IQ cutoff for hiring.
Is the post office in the USA having problems?
There are plenty of stories from at least all over Europe, that people regretting privatization of former municipal services like water supply, hospitals, local transport etc. First it looked like success, they saved a lot of money so they could keep the prices stable and still make profits, but after several years it came out that they were just under-investing and the infrastructure was starting to erode. So the people had the choice to subsidize the necessary investments or accept much higher consumer prices. This is an example were you only realize how good it was when you are shown otherwise.
Is Europe not generally filled with democracies? If a majority of people regretted those privatizations, why are they not voting to re-nationalize the industries in question?
Well, they all call it democracies, but it doesn't always work to the extent it should. If there is no one in the election that has this agenda, you can't vote for it, as referendums are hard to get and usually not legally binding.
Many municipalities are doing so or trying to do so, but at high losses as usually the only way is to buy it back, what does not feel fair and you still have to be able to afford it.
Hmm, well, I believe the more parsimonious explanation is that while there may well be stories all over Europe of people regretting privatization, there isn't actually a solid majority of people who think that way in any country. Else the laws would change, at least somewhere. I haven't noticed Europeans being reluctant to express themselves or politically incompetent, and we're not talking Russian politics where you might "fall" out of a window if you annoy the powers that be with your talk of reform.
>Of course we would need some checks to avoid government mismanagement.
Therein lies the rub. There were several such experiments in the past century in Russia and China, and they turned out terrible because they were inevitably mismanaged.
>Another milder possibility is have the transfer of ownership happen only when the company pays dividends. So, as long as the company is reinvesting the profits, they remain private. Whenever profits go to investors, the government gets a little bit of the company.
They already do, dividends are taxed.
> and they turned out terrible because they were inevitably mismanaged.
Lots of privately owned enterprises are mismanaged and that's OK because they get replaced by well managed alternatives as long as the barriers to entry are low. I quite like the idea of degrading ownership, and the possibility that it might lead to giants ultimately becoming poorly managed and opening up the niche for new competitors actually seems like a feature rather than a bug.
Disagree, having competent, well-run companies slowly get taken over by the government just so they would be worse run to encourage new competition would be awful for consumers.
Having competent well run companies become so large as to get significant political power and create barriers to entry is also bad for consumers. Where the balance lies is a tricky question. Besides, having worked in a few large private organisations, the idea that government owned organisations are necessarily run worse doesn't seem obviously true to me.
Yeah but here's an idea - use what political power you have to block other people from abusing their political power. Don't jump to abusing it yourself
A great idea here might be to actually prohibit government from picking winners and losers rather than accelerating the rate of their picking winners and losers.
The same case could be made with natural monopolies which have been privatized in the past. All over Europe lots of things have been privatized during the neoliberal agenda of the 90s. There is almost no sector which turned out to work better than before. The one exception being telecommunication services, and this is only due to strong anti-monopoly work being put in and technological advances which made it possible to untangle the physical line from the service sold over those physical connections.
Considering that dozens of countries have made that experiment for a few decades now; and that it failed in every single one of them, I wonder what the lesson we learn from this could be ;-)
Europe must be a very poor and backward place due to all these rampant failures across broad segments of vital services.
Well, level of service for all those I mentioned still surpasses what you can get in the US. It's just that they have become worse than before ;-)
So basically then if US now < Europe of today < Europe in the 70s, we should have some data which confirms this decades-long backwards slide into poverty, poor health outcomes, economic stagnation, and despair in both Europe and America, right? We should be able to compare say 70s era Europe and see on some objective measure that all of its services are far superior. Lives should be shorter, the trains run far behind time, wealth and standards of living lower, etc. Right?
Or are these assertions somehow intangible?
This already exists, only it's called capitalism. The returns we're seeing are to innovation, not to ownership of capital. As the ideas and models get older, the returns reduce.
Sweden tried this: https://en.wikipedia.org/wiki/Employee_funds
It was very unpopular, and the Social Democrats have never re-introduced the idea.
That's interesting. The linked page talks a bit about how controversial they were, but doesn't give much information on exactly what people were upset about. Do you have more information?
It had a crushing effects on small business-owners, and caused giant protests.
You need to understand that the Social Democratic party had a very odd view on corporations. It could stand the large ones, because those they felt that they could handle, through lawfare and indirect pressure. But they _hated_ small businesses. Post-war politics deliberately gave large corporations preferential treatment, and large corporations could (and did) handle the situation by restructuring their ownership and moving it abroad (which in turn hurt taxes), but small companies were brutally victimized. But since a _lot_ of people run small businesses, or know people who do, it was fairly easy to organize against. Then came the devastation of the 90's economic crisis, they were abolished, and since then only the lunatic fringe has talked about reinstating them.
It's not rocket science to realize that crushing businesses won't be a good thing for the economy.
Jeff Bezos only has billions of dollars because he owns a large portion of a company that's worth billions of dollars. If he doesn't actually own it, but is instead leasing it from the government (which I think is a fair way to look at this in the long run), then his incentives change. He can't sell it, because no one will buy a short term and diminishing product. His incentive becomes to wring it out for everything he can while he still controls it. Instead of making a company that will provide maximum long term value (and in the process raise the value of his stake in the company), he will pay himself as much of the profit as he can. This will cripple the company, so that in 50 years, the government will get a worthless hull, stripped of all value.
In fact, the best way to game this system would likely be to start killing off your own company after about 15-20 years and starting a new company in the same field that you can out-compete. If you set the seeds of failure well enough, you can hand the government a frustrating and incompetent organization right around the time your new-and-improved company is going into full swing.
Worst of all, this helps no one and is incredibly inefficient.
That would probably kill long term capital accumulation and would leave the firm undercapitalized by the time it is received by the government:
Shareholders would push management to pay out as much as soon as possible, revenue would not be reinvested. Even with the addition of "if dividents paid" it could be concentrated into the first couple of divident paying years, after which they may just close the company altogether.
It also does not solve the principal-agent problem better than older versions of socialism.
To "solve" socialism, I think this principal-agent alignment should be worked on, to have a solution that is approximately equal to the market solution. (which is not perfect either, but is much better for private goods than government solutions)
This was briefly done in Sweden under the name of "löntagarfonder". It was an absolute disaster - unsurprisingly, no-one is going to take risk and work their ass off to start a company that will just be confiscated by the government (or in this case. by the unions), even if slowly. Corporations reacted in the utterly predictable and rational way, by fleeing the country. It was a part of the massive economic malaise of the 1980s that lead to the severe economic crisis of the 90's.
As many commenters point out, this disincentives long term investment, so we would need some adjustments to set the incentives right:
1) we want to prevent monopolies, especially not by companies that are too big as they can defend their monopoly unfairly by subsidising from another field, buying emerging compeditors before they get dangerous or even by corruption or influencing legislation.
We could counter this, if we allow only a certain market share beeing in the hand of one set of investors. And this only kicks in for big companies e.g. worth more than 100,000 $. So a small company can have a monopoly. Companies also can grow big, but they'll not crush their competitors, because as soon as they dominate the market they have to give shares to the state or some other form of public ownership.
2) we want to encourage entrepreneurs, not building of family fortunes ever growing. So I would propose to introduce a high inheritance tax of e.g. 50% for fortunes bigger than 100,000 $ but it does not have to be payed in actual money but the state also accepts shares. So the company can work on like before but a company working well over generations will end up in public ownership.
> to explore and invest, you can just subsidize those directly
We have that here in Europe. Companies can apply for subsidies from the European Union when they do innovative work. Inside such companies we tend to be rather cynical about the value of those subsidies.
For starters, the subsidies mostly go to large established corporations, because those are the ones that can handle the administrative bureaucracy needed to qualify for those grants. People running small startup companies mostly aren't even aware that those subsidies exist, and even if they did, they have too many other things on their hands to make time for filling out the million forms needed to qualify. So it's mostly a free bonus for companies which should already be large and self-sufficient enough to bankroll their own research projects without taxpayer help.
And of course there's a lot of grift, with companies doing pointless proof-of-concept projects just to grab the subsidies, while the *actually* innovative and speculative ideas don't qualify for subsidies because it's too hard to convince the government bureaucrat of their value.
You described the situation in Europe but it's also the case up in Canada with the SR&ED program. It ends up a mix of keeping broken businesses alive (those whose research hasn't and won't go anywhere) and and subsidizing shareholders of successful ones (because we don't have to raise as much outside funding and get diluted when the government is paying for 1/3 of applicable salaries).
To be clear, this is not a general argument for "subsidies good."
The situation I'm talking about specifically is in industries prone to monopolization, where the barriers to entry are so naturally high that only extremely capital-intensive efforts are able to get people to engage in the business, and without them you don't get the exploration, and, once success has been achieved, absent severance taxes the companies achieve massive windfall profits based on limited access granted either by nature of by regulation.
I think we have good evidence that Amazon doesn't count as "discovering" a "naturally profitable" niche, because Amazon needed lots of very expensive investment in warehouse automation and many other system to build their niche, and their reward for all of that was a still fairly low profit margin on that core business. A different tax policy that was less friendly to investment could have prevented that complex warehouse automation machine from forming.
By contrast, search engines to appear to be "naturally profitable" niches since Google was massively profitable from very early in its existence without much work after the "core idea" that gave them first mover advantage.
How does this analysis apply to businesses like Apple, which are clearly not monopolies (too small a market share of the global smartphone market) but rather some combination of ultra-strong brand stacked on top of internal-to-the-brand monopoly markets (30% fee to access the app store)?
By George!
Do we have a way to test the "if x inventor wouldn't have existed, some other inventor would have done the same thing a little bit later" argument for validity?
You could maybe come up with some probabilistic argument based on the frequency of Multiple Discovery (https://en.wikipedia.org/wiki/Multiple_discovery).
It does seem intuitively correct to me, though: most progress is about being on the shoulders of giants and a slow progression of collective knowledge, and individuals serve more to jump the process forward and affect its trajectory (e.g. which of multiple solutions to a given problem becomes widespread seems to often to just depend on historical quirks), more than unlocking technologies through unique esoteric insights.
The time when one invention corresponded to a product ended, I don't know, 100 years ago, around the time that single inventors ended and industrial labs took over.
Amateurs think that "one single discovery" corresponds to WiFi or flatscreens or the iPhone. This is absolute nonsense. In the modern world it's about tying together a vast network of inventions, and the extent to which single inventions are duplicated is absolutely uninteresting, since the critical resource is not the isolated inventions, it's all the pieces required to tie them together. Which has technical elements, yes, but also personal elements, business elements, political elements, etc.
That's irrelevant as well, the *network* itself, considered as a single entity, is an artifact that evolves piece-wise and independently in parallel, in a way that plausibly doesn't depend on personally-unique ingenuity.
To take the example I'm most knowledgeable about, the iPhone didn't spring from the mind of Apple's engineers or business execs fully formed. Smartphones trace back to the PDAs of the 1990s, a long lineage of smartish phones follow, most notably the blackberries. Every single idea that the iPhone uses but was originally developed by those predecessors is an unfairness as well as a market inefficiency, they are information gone unrewarded, pieces of the puzzle solved for Apple's benefit but met with ingratitude. Android was originally intended for digital cameras but Google bought the startup in 2005 and by 2006 they were already taking about a "handset alliance".
The iPhone, considered as a network of ideas and artifacts as components, wasn't original, plenty of similar networks preceded it, the components and all the ways they can be brought together were fairly obvious to those who thought about it (1960s scifi, at least), what made it the first successful?
The single biggest idea that made the iPhone the iPhone is, I humbly think, probably the app store, and it was, wait for it, not an original idea, and was refused at first by none other than Jobs himself, so not only did Apple hit luck by chance, they didn't even recognize the luck they hit in the face. Add in all the countless other effects : computers in 2007 hitting *just* the right point in the cost-mobility-power consumption-performance curve (as well as a myriad of other factors), the rise of social media just a 3-5 years before making a good killer app for the new, very inferior still, computing platform, etc. It would be preposterous to suggest that all of this was due to Jobs or his engineers or even the entirety of Apple, they probably didn't even recognize it was happening as it was happening.
To add insult to injury: the Apple appstore wasn't even the first of its kind. There were dozens out there already. I even wrote my diploma thesis on how dependencies could be managed in those app stores to avoid installing them twice before the iPhone was even announced. The iPhone is simply a better executed version of the Openmoko platform. Even the phone design is strikingly similar. Apple simply happened to have the resources (due to booming iPod sales) and confidence to execute it. There isn't a single original idea build into the iPhone 1; and if we are being serious here, the first version wasn't even usable. It became a functional device with version 3 only. But it rode on the wave of the iPod and was a lifestyle product which people wanted to have to flex with out, so it became successful despite all its shortcomings.
The iPhone was introduced in January 2007 and released in June 2007. The first Openmoko device released in July 2007, but the “consumer launch” was really half a year later.
This was “kinetic scrolling” on the Openmoko device:
https://www.youtube.com/watch?v=sOnvyXowa1U
This was scrolling on an iPhone:
https://www.youtube.com/watch?v=FSv5x3V_KHY
I was a Symbian developer at that time and every other smartphone sucked.
It became available in Nov. 2006.
And no: I didn't insinuate that Apple "stole" from that platform. Nor did I insinuate that Openmoko was as well executed UI wise.
But a smooth UI, while important for usability, on its own is literally just that: life style. You couldn't even copy&paste on that supposed "smart" phone.
Apple engaged in innovation when it comes to creating a keyboard on a touchscreen that's useable without a stylus. Ideas such as making the clickable area of letters you are likely to type next bigger while letting the visible area of the letter stay the same aren't very intuitive.
Providing haptic feedback that people don't notice consciously but that makes it more clear that one presses a button makes a phone easier to use.
There are likely lots of other ideas that went into the iPhone that were new and nonobvious.
The fact that to launch the iPhone without an app store was a conscious decision and it might have been a good decision by Jobs as it made the first iPhone a lot more straightforward to use (even when it reduced choices).
Honestly: swipe was a lot more revolutionary to make keyboards on touch screens useful ...
"How revolutionary is X" is not a metric that matters. What matters is solving the bottlenecks that prevent a new technology from being viable.
The thing that's new with the iPhone was that it was entirely centered on a touchscreen that's used with the fingers and without a stylus.
Apple made the bet that this is how you are supposed to build a phone and managed to work through the bottlenecks that prevented that approach from working.
"Do we have a way to test the 'if x inventor wouldn't have existed, some other inventor would have done the same thing a little bit later' argument for validity?"
I don't know how to TEST it, but there are a number of examples of the same thing getting independently discovered:
*) Edison and Swan for light bulbs.
*) Bell and Gray for the telephone
*) The Wright Brothers and Santos-Dumont for flight
*) There are several credible inventors of the microprocessor (including some folks working on a classified implementation for the F-14 aircraft).
*) Newton and Liebniz for calculus
*) Writing seems to have been invented independently multiple times (but also NOT invented in some places/times ...)
But I don't know how to test ...
But there was actually nothing "discovered" here per se, was there? There was just fantastically good execution and management. Jobs didn't really invent anything as far as I know, he just built a trillion dollar company because he was so good at management, essentially, right? If we waited long enough would another person have come along and built Apple? I doubt it. Without him Apple didn't find another Jobs, it just failed.
Freedom: "But there was actually nothing "discovered" here per se, was there?"
Pepe wrote, "Do we have a way to test the 'if x inventor wouldn't have existed, some other inventor would have done the same thing a little bit later' argument for validity?"
I responded to that.
To what "here" has nothing been discovered are you referring?
Amazon
Ah. I don't consider Amazon to have been invented or discovered. Selling things via a catalog was quite old. And lots of other companies tried to sell things over the internet. Without Amazon we'd still have those.
Would they have been as SUCCESSFUL???? That is a separate question. One could make a good argument that the answer is, "no." Logistics is difficult and non-sexy. Sears couldn't pull this off (on the internet). Wal-mart is awesome at logistics but pretty late to the party.
Inventions often are "in the air." But a particular good implementation most certainly does not have to be.
Based on a very cursory search, it looks like Steve Jobs had about 150 patents.
Are there any that are not design patents? Although in the U.S. designers are called "inventors" this to me does not seem to be true invention in the normal use of the word. He may have been a great designer, and no doubt design contributed to Apple's success, but I think his management was more important.
There are also examples of stuff remaining weirdly uninvented for many years after it could have been invented. Stirrups, horse collars that didn't choike the horse, the wheel in the Americas (they had toys with wheels but no tools with them), etc. It seems like the cases where something waited aroumd amother century or two waiting to be invented are examples of what happens with the Bezos or Jobs or whomever doesn't show up.
That's actually not true. Before 2001 the internet lacked the critical mass for wikipedia to become useful. Wikis have actual draw backs, whereas their advantages only become apparent when the amount of users surpasses a certain point.
Your counterargument only makes sense if we assume that all those 10 million users were potential Wikipedia contributors. Which they were clearly not.
Wikipedia came about when the combination "number of people browsing the web, but ignoring news groups", "costs for servers and storage" and "people with a vision" was just right. The vision alone didn't change the world.
I don't want to diminish the amount of work that went into setting up what eventually became Wikipedia. But a lot of such projects popped up around this time. I myself maintained several of them. It simply became feasible around that time; and that's why people with a vision could do it.
Also, Wikipedia only became feasible once server costs, bandwidth, storage space, etc, became cheap enough for a nonprofit to run a project at that scale.
True
The best example of this is the compound bow. The bow has been around for 10,000 years before someone thought of putting pulleys on the limbs to significantly increase power generation.
There are good reasons not to do that. Many native tribes to this day don't use them and are better off without it. The problem wasn't that the compound bow would have been too difficult to invent; but that it has serious short comings which weren't balanced with actual advantages back then. They became useful due to other advancements in weapons technology.
They didn't use wheels outside of toys in Pre-Columbian Americas because they didn't have a draft animal large enough to pull carts. The larger animal domesticated was the lama, which is very small and weak compared to the horse, and was used in the Andeans mountains. It can't be mounted or pull a cart, especially in the mountains.
How on Earth did that happen man? I've seen double posts but this seems like a little much
Wheelbarrows and dollies are extremely useful, especially in the mountains -- also carts can be pulled by, y'know, *people*; this is very handy if you are trying to move something too heavy to be carried by that same amount of people. Large stone blocks maybe?
Wheelbarrows and wagons are useful even with only human power. You can tell because all kinds of worksites now with only muscle power are using wheelbarrows.
"The current consensus among technology historians is that the wheelbarrow was invented in China around 100 AD and spread to the rest of world"
"The first wheelbarrows in medieval Europe appeared sometime between 1170 and 1250" https://en.wikipedia.org/wiki/Wheelbarrow
Today a wheelbarrow seems obvious, like a bicycle, but for this technology to take 1,000 years to spread from China to Europe shows that, like for the bicycle, there are hidden complexities that prevented it to be invented easily.
If the Europeans didn't have the wheelbarrow before the 12th century, it seems plausible that the Mayas, Aztecs and Incas just didn't get the idea.
As for the hand carts, I agree with you, it's a mystery why they didn't use them...
Stirrups aren't as simple as they seem. Well, the stirrup itself is simple, but it's only useful in combination with a good saddle tree. The saddle tree is the part of the saddle that fits properly over the horse's spine to keep the saddle in place and to distribute the rider's weight. Without it, as soon as you put your weight on the stirrup, the saddle would slide off and you'd be lying on the ground if you're lucky, or dragged behind a bolting horse if you're not. Or even if you manage to avoid that, you'll be creating unpleasant friction and pressure points which will irritate the horse and could even cause permanent injuries.
Inventing a good saddle tree required some nontrivial wood- and leatherworking techniques, and was probably a process of incremental improvement with long feedback cycles. Once a sufficiently sturdy and comfortable (for the horse) saddle tree existed, probably the stirrup was invented later that same week.
I draw a distinction between "could have been invented and wasn't" which would include horse collars and stirrups and "was invented but no one could see the point other than as a toy" which includes the wheel in the Americas and the steam engine in classical Greece.
The latter usually has a story around it. The former tends not to because how can you explain how nobody noticed a possibility.
Then we have things that we invented or *almost* invented and then forgotten. Calculus is an example of this.
The Wright Brothers' plane (when demonstrated in France) was much more maneuverable than anything else, including Santos-Dumont. However, they never didn't really manage to make a big successful business out of their invention. Aircraft production today is dominated by totally different corporations than those founded prior WW1.
Edison's competition with all the other light bulbs and electricity companies contributed to consumer value from light bulbs, and general overall electrification. The first iteration of light bulb and means to provide electricity to power it would have been unimpressive to us. (Edison was a proponent of DC.)
Or, let's take cars. Ford Model T wasn't the first car. Ford wasn't even first to use assembly line (which go back to Marc Isambard Brunel) nor first to use it for making cars (that was Oldsmobile). Ford was the first one who could make the assembly line car production work and immensely profitable at scale. Billionaires are not made by inventions but success at industrial production of value to consumers.
More examples from computer science: the FFT algorithm, LZW compression, and public key cryptography were all independently reinvented multiple times.
The idea that you could let inventors be paid only for their labor and that progress would occur regardless of the specific individual was the explicit theory of Soviet Marxism and was put into practice in the Soviet Union and other Communist states. It did not work out. And while I'm not sure this is the last word, "The Soviets had this as official doctrine for almost a century" seems like it's at least gesturing towards being a huge empirical experiment.
There are plenty of inventions that didn’t happen, or at least not until too late.
China didn’t have the wheelbarrow (at least not the nice stable 3-point one you push from behind).
If you row like a water bug swims, instead of all pulling at once, you go faster. Nobody ever does this.
The compound bow wasn’t invented until 1966.
I hear the Aztecs didn’t even have wheeled transport or hauling at all.
Somebody in North America discovered how to work bronze, and spread nice bronze artifacts all over the place, but by the time Columbus arrived, the art had been lost.
Sometimes, we just don’t invent the thing at all — or the “some other inventor” is hundreds of years later, or in another civilization.
I am not 100% sure of any of these, except for the compound bow, which I just Googled.
Hah, I see you beat me to this example. Well done.
Many of these examples simply do not analogize to modern day innovations, whether it be due to material conditions (Aztecs did not live in a place that would have made wheeled transport useful enough early on to then invest into the sorts of roads wheeled transport demands in order to be effective) or using alternative versions (the traditional Chinese wheelbarrow has the wheel in the middle of the platform, which is less stable when set down, but easier to carry very large loads with thanks to a balance weight distribution relative to ground contact area), but most importantly because modern innovations take place in a vastly different informational environment, and many of the low-hanging fruit have already been picked.
I suspect virtually all of those there's some other obstacle other than just a lack of an inventor with the Spark of Genius to come up with the idea - either a missing technological prerequisite or some aspect of the context of their situation where the invention is less helpful.
For the first (missing technological prerequisite): compound bows are made of fiberglass - the concept of a pulley wasn't hard, but a material that could take that much stress and not break is a pretty recent development. Also "expensive, complex bow" might be good for an archery contest, but less good for the historically common usages of bows: equipping an army or a peasant hunting for dinner.
For the second (wrong context), it seems Aztecs didn't use wheeled transport much because the geography was wrong (they lived on a giant lake surrounded by mountains: neither is a good place to use a wheel), and because the Americas lacked beasts of burden, like oxen and horses, which were a big driver of wheeled transport.
I'd also take "nobody ever rowed a boat this way" with a huge grain of salt: we often have less knowledge about how people used to do things than we think. How would we know if people used to row boats that way? A big problem is that people tended to not write books about "obvious, daily life" things. (Or at least not ones that survive to today)
You can make the pulley wheel out of metal. You don't need polymers. As for the limbs, you can make them out of wood. Google "all wood compound bow."
Yes, bows with pulleys could have been around forever, and if you count catapults they have been. I wonder why nobody invented the velocipede in Ancient Egypt for that matter.
TIL you can make a compound bow out of wood: but isn't the limiting factor of a bow the strength of its limbs? If I understand the physics, a pulley doesn't add power to the bow, it just makes it easier to draw.
And easier to draw is an advantage, but I also suspect even wooden compound bows are a lot harder to mass produce to make an army of them. It's possible in the past 4000 years of using pulleys and bows nobody ever thought to combine them... but it seems more likely that somebody did and it turned out to not be a good idea.
I've got some experience making bows and one important principle you need to follow is to minimise the mass at the tips of the limbs, otherwise the bow wastes a lot of energy propelling itself and not the arrow. Metal pulleys would be very heavy, so I'm sceptical you those kind of compounds would outperform normal self bows.
There are videos on YouTube where not only are tribes in Africa presented with compound bows, but where their hunters also demonstrate how those bows are cool for trick shooters, but actually inferior when hunting ...
I shoot a recurve, but also have a compound bow. My recurve is 55 lbs, which is hunting weight but by no means comparable to the 100 lbs war bows used in the middle ages (which took years of training to be able to shoot). Nevertheless, the range of the compound is so much farther than my recurve, that the hunting advantage is obvious. There is a reason most hunters use compound bows these days and why traditional bows are viewed as a specialist pursuit for masochists (even though I personally prefer them for aesthetic reasons).
Well, you should see those tribes hunt. Nobody cares about the better range when hunting for rabbits. What they do care about is how fast they can acquire their target and shoot after wandering around for minutes or hours searching for something to shoot at.
"There is a reason most hunters use compound bows these days and why traditional bows are viewed as a specialist pursuit for masochists (even though I personally prefer them for aesthetic reasons)."
You mean "people hunting for sports". Because I don't know of a single hunter tribe, still living a traditional live, which would have adopted them. And it's not for a lack of knowing about them. Granted: I'm no expert and such tribes could exist. I've just never heard about those.
The excuses for the Aztecs I've heard before, and have always rung hollow to me. Didn't they build really big pyramids out of stone? Even on the side of a mountain or near a lake, I'd much rather have the wheel than not, if I had to build one of those. They moved a lot of stone, without wheels; I don't see how we wouldn't consider that a huge hundred-dollar bill left on the table.
> If you row like a water bug swims, instead of all pulling at once, you go faster. Nobody ever does this.
There *has* to be something missing from this story. Are you saying that a rowing team which would adopt this technique, would easily beat its rivals -- turning a mediocre team into a national champion team, or a national champion team into Olympic Gold -- and they just ... don't?
People know about this technique (after all, *you* know about it) and they just leave the hundred-dollar bill on the table without bothering to stretch out their hand and grab it?
I am not an expert in this; I heard it in a lecture long ago. I think you’d need different oars and it requires more fine coordination?
But yes, it seems like there are often lots of hundred-dollar bills lying on tables, technology-wise, that people don’t take, and to assert otherwise involves making a lot of unlikely-sounding excuses.
Has that technique ever been demonstrated in practice? Or did some mathematician or physicist just calculate that it would work in theory, given a bunch of simplifying assumptions such as assuming finer coordination than any team of real-world humans will ever be capable of?
If a large number of smart and greedy people have walked past the table without picking up the $100 bill, and your evidence for the bill’s existence is a lecture you heard once but can’t remember the details of, I’m going to go with "the bill doesn’t actually exist" as my default assumption..
"But yes, it seems like there are often lots of hundred-dollar bills lying on tables, technology-wise, that people don’t take, and to assert otherwise involves making a lot of unlikely-sounding excuses."
My (limited) experience with obvious technological improvements that people don't take in a competitive environment are that the improvements often aren't. Frequently because of implementation details or path dependencies.
One example of this is designing chips with asynchronous logic. Everyone agrees that the chips would be either faster or use less power. The catch is that getting them to actually WORK is much harder because we have so much accumulated knowledge and tooling to debug clocked logic. So almost no one actually does this in practice.
I tend to be skeptical about low-hanging fruit in a competitive environment. Occasionally you will find some, but often the benefits are less than expected and often non-existent when everything else is considered.
I tried it (in my horse rotator) and the problem is that the oars clash. The reason the vikings in my imagination row in unison is because there are too many oars along the side of the boat for them to go out of sync; they will simply tangle. But I'm just an idle ponderer so I welcome your input on this - how are you even imagining out of sync rowing? Is the boat just awesomely long, giving each set enough room to wag back and forth?
Think about it. Air and water resistance vary with the cube of velocity. So you want a more constant velocity. If all of the rows go at once followed by a long delay then you have a large peak of velocity followed by a decay down to some final velocity. The midpoint is the average speed.
This ripple (peak speed minus trough speed) is proportional to the time between strokes and the strength of strokes. If every oar goes independently then (for 6 oars operated in pairs) it would be 1/3 the strength and 1/3 the delay between strokes. (If you could actually do 1 oar a time it would be 1/6 and 1/6. (It seems like the wiggle from this would outweigh the benefits)
It seems like this might force your boat to be longer or perhaps you could find some low-loss energy storage method that allowed simultaneous rowing but the oars moved sequentially....
Beautiful theory. So what's the reason that professional-level competition rowers do not actually use this method in reality?
I agree skepticism is a natural reaction here, but a word of caution in using professional competitions as a evidence: in most sports rules have become fossilized over the centuries, to ensure I suppose that the winners get there by human factors -- training, strength, et cetera -- and not by technological invention.
Examples abound: it's well known recumbent bikes (particularly with windshields) can go faster than standard bicycles, and use human power more efficient, but you will absolutely never see one in the Tour de France. Certified "Ironman" triathlons ban drafting (even off team-mate) in the cycling leg, even though drafting is a major strategy in regular road racing and would be a considerable advantage over such a long course. Sailboat and motor-car racing have very strict rules, which typically ban any significant technological innovations, e.g. you can't use electric motors in a drag race in part because they would always win. The international body that governs swimming banned "low drag" technical swimsuits as soon as they were invented. Et cetera.
So I would guess the rules for international competition in rowing are likewise fossilized, and any significant departure from the way it's done now would be prohibited.
But your point still stands at least partially, in that you'd expect to see some brilliant innovation in rowing in various unofficial competitions, just like you see recumbent bikes and electric cars in unofficial competitions, and technical suits in non-FINA events.
Indeed that's a plausible answer to my question of why this technique isn't used if it is known to be objectively better. Maybe an even more relevant example in swimming is the underwater dolphin kick, which broke world records when people started using it and which led to the introduction of rules on how long you are allowed to stay underwater after the start.
But still, if the answer is "people agree it's faster but the standard rules for competition rowing forbid it", then it doesn't really fit in a list of inventions like the stirrup and the compound bow, for which the (very debatable) claim is that they could have been introduced centuries earlier, but nobody thought of them even though the necessary preconditions were already in place.
The original claim was just "nobody ever does this", like it's a hundred-dollar bill just lying there on the table and nobody bothers to walk up and grab it. If it's actually a case of "people tried it and it works, but it's not allowed by standard competition rules", that's a very different matter, and less relevant for the current topic of discussion.
It would be relevant to deciding whether the reason we seem to need Bezos types is that they think up the invention, or whether what they actually do is grab an existing unused efficiency and break the rules (or other factors) preventing its use. Which might help decide whether any particular Bezos type person was just lucky and another will come along any minute if he fails, or if each Bezos type is a once in a thousand years chance for humanity to advance.
Yes, I generally agree with you, but I would still suggest a little caution. It's possible for things to get fossilized on a culture-wide basis, sort of a autologous version of the FINA rule-making, and sometimes you do need some kind of visionary to break This Is How We've Always Done It.
I'm reminded of Henry Ford supposedly saying that if he'd *asked* people what they wanted, they'd have said "faster horses." Sometimes the market, and people, just lack imagination. Consider Tesla: one would have thought naively that they could never have succeeded without a network of dealerships, which they could never have built up in a short enough time to avoid burning up all Elon Musk's cash -- and maybe this is one of the best reasons why it took so long for anyone to even imagine inventing a whole new car and a new way of buying them.
But it turned out there wasn't any technical limitation stopping it from being done another way (at least not after the Web became ubiquitous), it just took someone visionary who said screw all the voices of experience who say no can do, I'm going to make it work anyway.
As I said, I would generally agree with you that if it were possible to do better, in almost any random area well within the current scope of technology, than the reasonable default assumption is someone would have done it. Humans are inquisitive, energetic, and greedy. But...not *always*. There's enough contingency to keep things interesting.
Seems to be a lot of interest in this point, so I’ll record what I know in case anybody wants to research further.
There’s an insect that swims on water and has many legs, where the legs don’t all stroke at once, but the stroke starts at the front and propagates back. I’ve seen it many times in creeks on the east coast of the US, around Maryland, but can’t seem to find it on Google.
The lecture was at St. John’s College in Annapolis, MD, one of the Friday lectures, sometime from 2001-2005. The topic was inventions that the ancients could have invented, but didn’t. The lecturer described this hypothetical method of rowing, the compound bow, and at least one other which I don’t remember.
It seemed reasonable to me because of having seen the water bug in action myself. The librarians at the St. John’s College library would be able to supply more details about the lecture; they keep good records.
It sounds a little speculative. The first objection that comes to my mind is that insects act in a regime of much lower Reynolds number than human rowers, and we already know the best propulsive method varies radically with Reynolds number -- this is why bacteria use corkscrewing flagella instead of an oar or swimming motion.
The other version of this is that sometimes the idea is all that's needed. Sequoyeh didn't know how to read or write in any language, but had the idea of phonetic languages explained to him, and he invented a phonetic writing system for Cherokee. Presumably someone with the right insight for this 5000 years earlier could have done the same thing, but nobody with the right insight/opportunity managed it anywhere close to there. (There were writing systems in South and Central America, but they weren't phonetic and they didn't reach nearly that far north.)
Another classic example: Left and right shoes. Presumably, they could have been invented soon after the invention of shoes, but they weren't.
Also, we have no idea how much "obvious" stuff we're failing to see, but I'm willing to bet future people will be sneering at us, not that the bet can be judged.
Looks like they actually were invented many times throughout history: https://hsm.stackexchange.com/a/13734. I'm hardly an expert on footwear, but it seems unlikely to me that this was a case of "this is a great idea just waiting for a visionary to imagine it".
Instead, I would guess that there's a balance between the type of shoe you're making, the material you're making it out of, and how sophisticated your ability to make them is. If the shoe is simple or soft enough, there's not enough advantage to bother making them asymmetrical.
>If you row like a water bug swims, instead of all pulling at once, you go faster. Nobody ever does this.
Assuming it is so (I really have no idea), I'd wager you go faster *for a given amount of rowers*. But the number of rowers you can fit on a boat is much greater if they row all at once, so that the rows are parrallels, rather than like a water bug, which would require considerable space between rowers to avoid hitting each other's rows.
My recollection is that anthropologists believe fire was discovered once. Some isolated people group lost the ability to make fire a long time ago, and never rediscovered on their own how to make it again.
Lots of things that seem obvious in retrospect, aren't.
At the same time, there are instances of parallel development (calculus, maybe pyramids?).
In short, I don't think we can know which inventions would have been invented counterfactually with any kind of certainty.
I don't think this is correct, at least as far as ancient fire starting technology is concerned. For example, Asian tribes used the fire saw, while Native Americans used the hand drill or the bow drill. Lest you think the boomerang is another good example, wiki says: "Although traditionally thought of as Australian, boomerangs have been found also in ancient Europe, Egypt, and North America."
Innovations on better fire-starting mechanisms (or better suited to your new environment) is much easier than inventing man-made fire from scratch.
Given how long fire has been with us, and given that there is at least once instance of people losing the ability to make fire, it seems more plausible to me that man-made fire was not invented multiple times in different places.
As I understand it, the current thinking is that human harnessing of fire came in three stages: opportunistic use and redirection of natural fires, maintaining long-term hearth fires originally kindled with brands or embers from natural fires (similar in operation to, and possibly ancestral to Zoroastrian fire temples), and finally techniques for deliberate fire-starting. It could have been the first or second stage that's thought to have occurred only once (the second stage feels more likely to me, since opportunistic use in inherently situational) rather than the third.
Your position is not unreasonable, but I do think the third stage is most likely the unique event. I think this for a few reasons:
1. I don't thinks humans could have successfully migrated to colder climates without the ability to deliberately make fires.
2. The relationship between friction and fires does not strike me as obvious, and not likely something that would be asily replicated. However once this relationship was understood, finding better ways to create that friction seems reasonable.
People underestimate what it actually means that ancient people weren't less intelligent than we were, but less knowledgeable about the world and technologies. But they had a LOT of time at their hands. That's why a lot of stuff certainly has been invented over and over again as people had to adapt to their environment.
I've read through a lot of comments about why certain things weren't invented in culture X. People seem to not understand that those things didn't exist for a reason. The most obvious example being the compound bow, which is very nice for archery competitions, but inferior in actual day to day use to people who actually use bows to survive to this day. The same goes for the wheel in an environment, where no infrastructure existed to make use of it, or where the geography made it outright useless.
That we see the connection now, given that we grew up in a society with that knowledge, does not mean that our ancestors would have made that connection.
I think it is quite obvious how much of a creative leap (or an extraordinary coincidence if discovered accidentally) it had to have been for them to start fire with friction.
There is a big jump from friction that creates heat and a usable coal. If you've ever tried to make a hand drill fire, you can appreciate the difference.
How do they know they made their first fires themselves rather than using a tree that had been struck by lightning or something? Starting a fire is a lot more nonobvious and difficult than keeping one going.
I'm suppose I wasn't clear, but when I said "discovered fire" I was thinking of when we discovered how to make fire.
I don't think so, but i don't think this is important.
And as we have no chance to find out what inventions were not made or used by now because of the way our society and economy works. Who knows what people in the future see what could have been invented by now.
In the context of this discussion, his implies that
1) the inventors are the people that get rich from application of the inventions
2) the inventions would not have been made if you coudn't get rich from them
which i think both is not necessarily true.
What we can do not to miss any fist or second inventors, are giving everyone the chance to develop, publish and test their new ideas without too many obstacles like access to funding and workshops. Most real inventors are intrinsically motivated not by getting rich, but they fave to have the resources (and be it only time) to work on it and here it starts were the prospect of getting rich is important to get the funding. So its not the inventor that needs the hope to get rich, but the investors that usually are well of already and are a completely different kind of person.
Of cause the big things happen when the inventor also has the economic talent and resouces themselves. Examples include Edison, Robert Bosch or Arthur Fischer (https://en.wikipedia.org/wiki/Artur_Fischer). But if we wait for these types to appear, chances are high that we miss many inventions. It is important also to use the ideas of all other people even if they lack the resources and the marketing talent to convince some VC to invest.
"I’m not sure anyone else would have started SpaceX if Musk hadn’t" seems wrong to me. While it's clear that SpaceX is the most successful private spaceflight company, there are many many others. Wikipedia's list (https://en.wikipedia.org/wiki/List_of_private_spaceflight_companies) is long, and SpaceX has competitors in every type of spaceflight they work on. So I think SpaceX is pretty similar to Amazon. If Musk hadn't started SpaceX, Blue Origin or Northrop Grumman or someone else would have filled that natural niche.
I disagree. I can’t imagine a way for Northrop to get to fail early and often. That takes nearly messianic levels of leadership ability and salesmanship.
> takes nearly messianic levels of leadership ability and salesmanship.
No it doesn't, almost the entirety of the tech industry works this way.
But we’re talking about the aerospace industry.
While I 100% agree with BZC here, I also think it's noting that "fail early, fail often" is a lot easier when the capital stock of the company is a bunch of code rather than $BIGNUM rocket engines, parts, infrastructure and fuel. The cost of failure really is much higher in aerospace, it just turns out that Musk (correctly) determined that making spaceflight sexy and running it like a startup in spite of the capital losses risked by failure paid dividends greater than the costs. All the other private spaceflight initiatives appear to be both slower and more in the vein of pure vanity projects (Virgin Galactic, Blue Origin) or else poster children for the feather-bedding, slow, plodding, overpromise-and-under-deliver spaceflight industrial complex (Boeing,, Northrop Grumman).
There were earlier attempts. Beal Aerospace tried to drive costs down by making expendable vehicles light & cheap using composites & plastic, but the tech wasn't mature enough and the then-eyepopping $250M check from its founder turned out to still be far too small.
Back in the Space Race, when time was actually considered an important cost, national aerospace agencies were willing to fail occasionally and made much more progress as a result. The monetary cost of taking a mission form a 90% chance of success to a 99% chance of success is often larger than the cost of launching 2 of them, but NASA became unwilling to suffer the PR hit of rockets blowing up (perhaps correctly - the irrationality could lie with congress or the public rather than NASA leadership and still explain the results)
I agree - it's very hard to imagine spaceflight stays public-only forever: even if we take a fairly dismal view on spaceflight and don't assume that things like astroid mining will eventually be a very profitable business, it seems like it's already a profitable economic niche from things government contracts alone.
It may be the case that this is above-average acceleration: maybe Bezos invented Amazon 2 years earlier than Bezos Prime, but Musk invented SpaceX a decade before someone else would have invented SpaceY, but private-space-flight is an incredibly obvious (if difficult) economic niche.
"If Musk hadn't started SpaceX, Blue Origin or Northrop Grumman or someone else would have filled that natural niche."
Blue Origin was started BEFORE SpaceX (year 2000 vs 2002) so Blue Origin doesn't seem like a good example of a SpaceX replacement. Northrop Grumman is even older.
As nearly as I can tell, almost everyone believed that re-usable rockets could not be made to work economically. Now ... it is clear that disposable rockets are tough to make competitive with a rival who doesn't throw out his rocket after one use. But until SpaceX made it work it was almost heretical. No, I don't know why ... re-use of the expensive thing seems pretty obvious ...
Lol, what "natural niche"? Sure someone has to be the "most successful" but the reality is if Musk wasn't here, SpaceX wouldn't be here either and those other companies would be just like they are now but shittier because they would have less competition.
There's no real reason to believe they'd be shitter. It's just as plausible that whatever subsidies or contracts SpaceX has received might have gone to them instead, allowing them sufficient funding to improve in possible quite substantial ways. Quality of product/service is only one element of a company's success - the ability to acquire funding is huge and largely unrelated to actual market-oriented quality early on in a company's life, with present financial institutions and investment practices being what they are - capacity for monetization (that is, theoretical profitability if the product quality is good), charisma/persuasiveness, and plain old luck all factor into it as well.
But the companies named in this thread's OP ("Blue Origin", "Northrop Grumman") *were* there before SpaceX, Northrop Grumman long before. They had far more funding than SpaceX did and they were free to compete for the same subsidies and contracts that SpaceX won.
Of course it's plausible that if SpaceX hadn't been around, another company would have won the contracts it did—someone had to win them. But private companies had been given aerospace contracts for many years without any resultant improvement in the cost of spaceflight. Part of the problem was the "cost plus" system of contracting, where the contractors were free to pass along any unexpected costs to their clients with no accountability—but without a competitor to prove that a fixed-cost model could work, and work much better, I believe the fixed-cost experiment would have failed and the government would have returned to cost-plus.
In short, it's your second step, "allowing them sufficient funding to improve in possible quite substantial ways", that I find implausible. The incumbents for decades had all the government funding to themselves, profiting handsomely from it, but not improving, which goes to show that funding isn't the only ingredient in the recipe for improvement.
I don't think date of founding affects my point. SpaceX outcompeted Blue Origin despite being founded later. There were several online stores before Amazon; Amazon was just more successful. If SpaceX hadn't existed, maybe Blue Origin would have been able to do more of what SpaceX did, without SpaceX eating their lunch.
The re-usable rockets example is a great point, and makes me think Musk/SpaceX advanced things significantly. But still, if SpaceX hadn't existed, maybe it would have taken 10, 20 years for someone else to do something similar? Not forever.
Rocketry and space in general needs a big upfront capital investment. Musk was willing to make that, and to make it in an industry regarded as unprofitable. So basically you need someone else who is rich enough and willing to do it. Bezos has, Richard Branson kind of has. So its not unreasonable to think someone else would have done similar within a few years anyway.
The development cost of the Falcon 1, SpaceX's first orbital rocket, was about $100M. That's a lot of money, but I notice that Virgin Galactic (founded 18 years ago) and Blue Origin (founded 22 years ago) have each spent many times more than that without reaching orbit. There's more going on here than just being able to pay big up-front capex.
Virgin Galactic spawned Virgin Orbit, which has launched satellites into orbit. But both Virgin and Blue took a detour into the suborbital tourism business, which costsl ~$100M on its own and doesn't run entirely in parallel with orbital launch.
Also, neither of them hired Gwynne Shotwell, and there were some other questionable decisions along the way. $100M gets you a seat at the table, it doesn't guarantee success.
A lot of it hinges on what if call industry inertia. If the industry is built on the idea that everything has to go perfectly the first time and the only way to get reusability to work is to fail early and often, then that road block could stick around for a while.
SpaceX would be completely bankrupt without government contracts (and they are not cheap in that regard), they were so behind on their launch schedules that a lot of private customers jumped ship. And reusable rockets are still not the great success everyone claims. They are not as cheap as promised, the savings are generally not that much when compared to the whole costs of a launch and satellite operation, and it lowers productivity (because you have to keep your rocket engineers on a paycheck, but they build fewer rocket stages because of lower demand thanks to refurbished rockets). SpaceX is - despite the few successes - not the great shining example of a profitable private space company.
Honestly it's completely absurd that people are still running with this line now. 2013 wants its talking points back.
SpaceX is *selling* their launches for $60M. That's building in a massive profit margin to pay back their engineering work on reusability; their costs on a Falcon 9 launch are probably more like $30M. The best available competitors are still over $100M, IIRC.
SpaceX is probably the leading space power in the world right now, on its own, beating out every other space company and every other *country*. They are the shining example if anything ever was.
It's not clear that SpaceX is profitable. The rocket industry in general is small and hard to make much money from. SpaceX have captured most of that market, but it does not seem to be growing by much. SpaceX do launch a lot, but the majority of their launches are for Starlink, which is an internal project. Indeed, Starlink is where the potential profits lie, not in rockets. As for leading space power, by the numbers it is China (if you separate the US and SpaceX as individual powers). The US with SpaceX is still number one, but SpaceX does not beat China by itself.
To be honest its all a bit moot: the vast majority of Musk's wealth comes from Tesla, not SpaceX.
"By the numbers" depends on which number you look at. In the last four quarters China beats SpaceX in number of orbital launches, but SpaceX launches put up more than twice as much mass with nearly an order of magnitude more independent satellites. Imagine SpaceX retires the Falcon 9 but resumes launching Falcon 1, and does so twice as often. Would it be beating China, then? If not, then it's beating China now. China is improving fast enough that I'll expect them to pass SpaceX if Starship doesn't work out, though.
SpaceX almost certainly has grossly negative cash flow right now when you count Starship R&D and Starlink buildout, despite marginal profit margins on each Falcon launch. That could be a problem for them later, depending on what happens with the business cycle and how well those investments turn out. But that brings us back to Bezos, in a way - the first time I heard the "they're not *really* making a profit, they're just dumping all their revenue back into the business" argument was 25 years ago with respect to Amazon, and in hindsight I probably shouldn't have paid attention to it back then.
It's certain that the Falcon 9 line, as of now, is massively profitable on a marginal basis (probably something like 100% margin). This can't tell you much about profitability on a whole-company basis, because we don't know fixed costs, full R&D costs, etc.
Indeed, it would be surprising if SpaceX were profitable on a whole-company basis at this point, because they're currently plowing every bit of money they can find into Starship R&D, and raising more money as they can. But this is kind of a distortion of what we mean by "profitable". The service that SpaceX provides to outsiders is generating revenue massively over its costs; the fact that they're using that money internally on other projects, rather than keeping it in a bank account or returning a dividend, doesn't change the fact that they are "profitable" in a colloquial sense.
Re: China, I'm pretty sure SpaceX is ahead of them by many metrics, at least. For instance, in 2Q 2022 SpaceX launched about 4X what China did (in terms of mass), and in fact about double what *the entire rest of the world* did. https://twitter.com/SciGuySpace/status/1557083663120072705
And, re: Tesla, it's true that most of Musk's paper net worth is Tesla stock; however, this is honestly kind of silly. It's driven by (kindly) large-scale very speculative demand, or (unkindly) a bubble. Tesla is subject to this happening, because it's a publicly traded stock; SpaceX isn't. But that isn't a commentary on the actual objective relative worth of the two companies.
Wait till you find out about Boeing...
>But still, if SpaceX hadn't existed, maybe it would have taken 10, 20 years for someone else to do something similar?
Or maybe 100, 200 years, if everyone knows that if they make the reusable rocket finally *work*, lion's share of all the profits will be distributed to those who didn't make it work, but maybe could have made it work later?
There's an awful lot hiding in the phrase "just more successful." In context it reads like you're saying they got lucky. In practice, it reads like really intelligent people spending countless hours working on a tough problem and coming up with a novel solution. At the very least the catalyst of "bring a bunch of really intelligent people together and incentivize them to work wholly on [particular goal/challenge]" would be necessary to make it work. That takes money and vision, neither of which are a given in any particular field.
> As nearly as I can tell, almost everyone believed that re-usable rockets could not be made to work economically
People have absolutely believed that reusable rockets could be made to work economically *someday* - Musk's bet was just that "someday" was actually "today". The idea that if not for Musk, nobody would ever have tried reusable rockets just seems absurd.
(Or rather, tried reusable rockets *again*. If you Endeavor to remember you may Discover that Musk was not the first to Challenge the Enterprise of reusable rockets... atlantiscolumbia)
"(Or rather, tried reusable rockets *again*. If you Endeavor to remember you may Discover that Musk was not the first to Challenge the Enterprise of reusable rockets... atlantiscolumbia)"
Many Thanks! I kept reading comment after comment in this thread and was wondering how everyone had forgotten about the shuttle...
Agreed. I was just citing it as a precedent on attempting reusable space vehicles. As you said, it wound up failing to improve the economics of space flight. ( I vaguely recall that when all was said and done, the full cost of each shuttle launch wound up in the hundreds of millions of dollars - in the same ballpark as a Saturn V launch. )
That's why they made the space shuttle. It's pretty hard to sell an idea as revolutionary which just failed and didn't deliver on its promises ;-)
I think you're discounting how hard rocket science is in your analysis (I mean, it's the one thing that you can't say isn't rocket science). Musk's team was really inspired on the business, engineering and science. When you look at how Northrup and Blue Origin have attempted to compete with them it really comes out clear. Those guys said that what SpaceX did could not be done, until they did it.
Those companies are older than SpaceX. There is no "natural niche". The only reason they're doing anything noteworthy today is because SpaceX proved this was all economically possible which made investments by those companies feasible. I dont think things would have stayed underdeveloped forever but SpaceX absolutely moved things along in a huge way.
I think you underestimate how hard the early days of SpaceX were and how much Musk's vision and leadership were crucial. Read Eric Berger's book _Liftoff!_, about the Falcon 1: even before they tried to make their rockets reusable, they'd taken on an incredible challenge by founding a rocket startup. Before SpaceX, there were three types of rocket company:
- big government contractors like Northrop Grumman, high on cost-plus contracts;
- hobby businesses like Blue Origin;
- failures.
"Successful rocket startup" didn't exist as a category before SpaceX, and even since then, no company has got to orbit as quickly as them. Yes, SpaceX succeeded through an enormous amount of work by extremely talented engineers. But without Musk's vision, intense focus and ability to recognise and inspire talent, those engineers would never have been gathered together in one place and enabled/forced to do such high-impact work. Seriously, read the book.
I don't think anyone knowledgeable in this field agrees with this.
There were many other failed companies as evidence .. Andrew Biel's co, Blue Origin, Virgin Galactic ... SpaceX succeeded where many others failed.
NOW there are many private space companies, *but they are offshoots of the SpaceX example* (and often founded by former SpaceXers). Firefly, Relativity, RocketLab. These companies all have copied various examples set by SpaceX.
I'm quite familiar with the list of private spaceflight companies. It's a long list of companies that have all failed to demonstrate a semi-reusable orbital launch system, even though some of them were trying long before Elon Musk got into that business.
And the reason they all failed, is that none of them were run by billionaires (well, except for Andy Beal but he was trying something different and he wimped out anyway). Building a reusable of semi-reusable orbital launch system requires hundreds of millions of dollars, spent over a decade or more during which you will have many spectacular failures, and during which almost every respected expert in the aerospace will tell all your potential investors or patrons that what you are doing is stupid and can't work and wouldn't have a viable market even if it did work.
Now that SpaceX has actually *done it*, the respected experts are changing their tune, and the investors are following suit.
But Northrop Grumman was never going to "fill that natural niche", because Northrop Grumman is run by a committee which will follow expert opinion and pre-SpaceX expert opinion was that the niche didn't exist. Blue Origin has been around for twenty-two years and still hasn't managed even an expendable orbital launch system. And the rest, could never have afforded it.
Building the first reusable orbital launch system, in the world created by the godawful "space race" of the 1960s, requires a person capable of writing checks for hundreds of millions of dollars without asking permission. Because the people you would have to ask for permission, will have been told by the experts that this was a stupid idea that you should never be allowed to waste the taxpayers/investors/whoever's money on.
I was there. This is how it was. The options were Elon Musk, or some other billionaire, or *maybe* a tight group of hundred-millionaire venture capitalists with a common vision. Or being stuck on Earth watching a handful of designated Space Hero Astronauts flying propaganda missions at exorbitant public expense.
I think it may be important to realize the Musk was NOT a billionaire when he founded SpaceX. Estimates of his share of the PayPal sale seem to hover around $180M. Some of the $180M went into Tesla (which was also not profitable ...) and Musk was pretty close to bankruptcy just before SpaceX had its first successful Falcon-1 (not 9!) launch which resulted in enough NASA money to survive.
So a mere hundred millionaire who is/was willing to bet EVERYTHING pulled this off. I'm not convinced that "some other billionaire" would have made this work. Musk did the equivalent of burning his boats with the money he poured into SpaceX compared to how much he had at the time. More sane billionaires would have bailed earlier ...
Wow ... you beat me to it!
I'm hoping John Schilling doesn't feel picked on.
John is correct in that you can't do this on the cheap.
For the record, Elon was a low-hundred-millionaire when he founded SpaceX (& heavily invested in starting Tesla at the same time). He didn't become a billionaire until 2012.
Of course, I'm sure some other investors helped over time; still, the man is quite capital-efficient, compared to the competition 😁
And Falcon 1 wasn't a reusable orbital launch vehicle. In order to develop a reusable orbital launch vehicle, Elon had to invest a hundred million or so dollars developing a minimum viable product that would put him in a position to invest billions of dollars while laughing off the experts telling him to just stick to launching satellites and stop wasting money on those stupid droneship-landing experiments that kept failing.
If he'd been capped at or taxed into oblivion at say half a billion, lest we ever have any unsightly billionaires in our economy, SpaceX would just be another small launch provider.
That's the part Scott and so many others miss. It isn't "lone genius has a clever idea, hires a bunch of people to Make It So under his management, and collects his billions". It's an iterative process, with each step increasing revenues, increasing costs, and increasing benefits. The no-billionaires version means SpaceX exists, but it never built anything bigger than the Falcon 5. Tesla exists, and produces a few thousand Roadsters a year. Amazon exists, and sells books. Apple exists, and sells Macintosh desktop computers.
This is a very important point , and to expand on a bit, I think most people fail to understand that very rich people don't think the same way as the rest of us do about money. For us, it's a consumption good. Oh yay! I can not owe the bank money, I can eat Wagyu steak every night, ski St. Moritz. For the very rich, money represents the power to do things, to call their visions into life -- and they wouldn't *be* wealthy unless they were stuffed with visions, unless they had an unholy drive to see something new brought to life. So without the ability to accumulate enormous capital, you are shutting off some very creative people from toying around with trying to create entire new industries, or ways of doing things -- stuff that no committee, and no government agency responsive to the Conventional Wisdom and the wishes of the political majority, could even think about. What is the value of that?
Great point and something that I haven’t often heard in the conversations.
Well, in defense of Bezos, look at Walmart's website. It's an obvious knockoff of Amazon, and, presumably designed by people who used the Amazon website as a pattern, and yet, it is still a piece of junk, and a pain in the neck to use. So, at least one 'next guy to come along' still couldn't quite pull it off, even with Amazon actually already there as an example.
walmart has spent what 20 billion trying to replicate amazon and they have a knockoff version that isn't horrible. no other company has come close, because most companies don't have 20 billion laying around to try. not sure if this is an argument for amazon being special or an argument they need to be regulated out of existence
The giant retailers have that kind of money. There's no monopoly here, Amazon just does online retail well and they do it not so well.
Can't say that I find Walmart's website any worse than Amazon. Then again, I never buy anything from Amazon.
Was gonna say the same thing. I know it’s kinda beside the point to this post, but from a usability perspective Amazon definitely wins in recommendations but isn’t that much better / more intuitive to me. And Walmart is catching up heavily to Amazon in e-commerce as some evidence it’s not really quite true (will presumably catch up and surpass within 5-10’years)
Again: kinda beside the point of the post. No one else did create it per se. But I’d argue that’s more because economics to scale is hard to hit in this space, and really only Amazon & Walmart can conceivably compete (and Walmart is catching up)
Because they started with books, Amazon's website has taken over library catalogs. As a library catalog, Amazon's website really sucks. Now all library catalogs feel they have to imitate Amazon because that's what people are used to, so now they suck too.
Huh. I used to be really impressed with Amazon's awesome book search. For the last couple years at least it just plain sucks.
I agree. I will sometimes type in the name of a specific (albeit obscure) book and have to click through multiple pages in order to find that book listed on the site. This is after checking "Book" for the category!
I am frankly astonished that Amazon has been so unassailable for so long with such a poor UI and search functionality. However, given the recent news about Bed Bath and Beyond crippling itself because it minimized search friction and streamlined offerings -- not understanding that its customers preferred the "treasure hunt" of expending effort to find what they wanted -- I wonder whether a similar dynamic doesn't apply to Amazon.
> ...recent news about Bed Bath and Beyond crippling itself because it minimized search friction and streamlined offerings -- not understanding that its customers preferred the "treasure hunt" of expending effort to find what they wanted...
Where is the best place to read about this? I found two recent articles but wasn't entirely able to connect their contents to your interpretation.
This is very got but not so obvious point in the economics of scale, Thank you for that.
I've seen this pattern before but didn't connect to economics of scale: when there is one big successful company in the market the others and the newcommers tend to imitate it because it obviously worked. But perhaps the secret to success was something completely different than the UI they imitate. This way there is a standard established, the people get used to it and soon will expect it not because it is the best, but simply because it was the choice of the first successful company.
If people have the choice between good service and good UI of cause they learn to deal with the bad UI and the next generation of customers get used to that bad UI so much, that learning something else seems like a considerable effort especially if you have low reason to expect it to be better once you are used to it.
Yea, Amazon and Bezos aren't rich so much because they were first, but because they have remained dominant in that field over a long period of time.
I think this is actually a significant problem w/ Scott's last argument - the founders of Friendster and Myspace aren't infamously super-rich, because unlike Zuck, they were not able to keep their thing going strong, in the face of competition, over a long period of time. Getting in first is a huge advantage - but then competition comes in and challenges you. If you don't rise to that challenge, you may walk away with some I-did-it-first money, but the competition will wind up getting the big pot. If you consistently whoop the competition, it's either because you're providing better value, or because you're shrewder at business (this latter part is something the left can perhaps legit complain about, but it's a hard thing to correct accurately). To the extent you're providing better value than all the other competitors who come along over the years, you should reap proportionate rewards. So it is w/ amazon - no one else has 2 day shipping afaik. This accords w/ a general statement about profit margins and competition - low competition should naturally lead to high profit margins, because you're apparently doing something so hard or risky that hardly anyone else can manage to pull it off (this argument falls apart completely when you have low competition because you're exploiting regulation, e.g. IP laws, or when you have a true monopoly).
Speaking of monopolies, they're the big exception to all this - true monopolies can win forever against any competition despite having a mediocre product. FB has a true monopoly because of network effects (a social network has no value unless everyone is on it, so it's hard for there to be two dominant social networks in the same space, winner takes all), but I dont think any of the other big tech companies have that. Amazon has a lot of competitors, they just haven't made themselves as attractive to customers as amazon has. And FB faces the Thielian issue of serial monopoly, where the true monopoly gets free cash for a long time but eventually gets beat out by a new monopoly in an adjacent, but different space (e.g. snapchat or tiktok).
This even proves that (monolithic) social networks are kind of a natural monopoly. If there is no space for Facebook, Instagram, WhatsApp, Tiktok and Snapchat, to live well along each other, but if it is always an existential question to dominate or to give up. Perhaps the market of social networks doesn't have to be like this and could be organized differently with working competition when there would be federation and no user lock in. But the reactions of facebook you described, proof that at least facebook sees this as a monopoly market.
They became dominant because of their early success. They had a slightly better website than their competitors 20 something years ago, and its all snowballed from there. Yeah, it took a lot of work from a lot of brilliant people, but Amazon were only able to hire said people because of their early success. If they didn't, these people would have worked somewhere else.
This doesn't explain why Walmart (or any other large retailer) didn't kick their ass. Amazon was not rich in 2001.
"Well, in defense of Bezos, look at Walmart's website. It's an obvious knockoff of Amazon, and, presumably designed by people who used the Amazon website as a pattern, and yet, it is still a piece of junk, and a pain in the neck to use. So, at least one 'next guy to come along' still couldn't quite pull it off, even with Amazon actually already there as an example."
Also, Sears started with a successful mail order business. You can't put your catalog on the internet????? For Sears, the answer was, "no, we can't."
Sears started with a successful mail order business *and its own ISP*. And then instead of Prodigy becoming their new mail order storefront, they tried to increase revenues by charging $0.25 (in early 1990s dollars, even!) per *email*.
Yeah. Sears *could* have become Amazon (in some other universe ...). Sears/Prodigy could have become AOL. Sony should have been the one to invent the iPod ...
IBM figuring out that it needed to do a personal computer is kinda an outlier of an successful entrenched player realizing that the game was changing and they needed to change with it.
The Innovators Dilemma is real :-)
I agree with your point, but I'd add an additional point:
Is AMZ's website good? No, OMG no, it is TERRIBLE. It was amazing in 2000, it was dated in 2010, it's embarrassing in 2020.
Some examples:
- try to order anything technical, like a hard drive. The categories it offers to clarify your search are insane. In 2022, would you like to buy hard drive between 81 and 120GB? Well, then, AMZ is your site!
- have you ever tried to buy anything by color (clothes? soft furnishings?) or by size (furniture?). It's endless frustration.
It's simple. AMZ is not interested in applying ML technology to their site. They SHOULD be weighing and photographing (from multiple angles) EVERYTHING they sell, so that searches by color/size/weight are trivial. They should be learning natural clusters of objects (like hard drives) so that ways to clarify your search are based on constantly evolving criteria, not what some human thought were a good set of categories somewhere around 2007.
So it's certainly FEASIBLE for someone to disrupt AMZ, for example by creating a vastly superior shopping engine (think Google vs Alta Vista) and selling it to someone with the capital to do the retail part (possibly an existing retailer like Target, possibly an unexpected competitor like Facebook). But that hasn't happened. Yet. Why? Because the kinds of people who can make these sorts of huge changes, who have all the elements concentrated in one person (or perhaps two close friends), both the technical skills and the rest of the business-side package, are very very very rare.
'the rest of the business-side package' is doing an egregious amount of heavy lifting in your claim there, because a not insignificant part of said package is 'sufficient wealth and/or connections to wealthy individuals to get the business off the ground and overcome significant barriers to entry due to network effects, a situation in which they're comfortable risking failure if they try, and enough interest to think making the attempt would be worth it, over the multiple years it would take to even get a real test of viability'. And sure, people with all those things are rare, but that's in part because of how concentrated wealth is. Honestly for all we know maybe someone *is* already trying, and it'll just be another few years til we see results, or maybe Bezos will do something financially shady to sabotage or consume that nascent business. It's impossible to say - which means any claim that it's just because Bezos is personally exceptional is itself an exceptional claim.
Amazon's website is not their moat. Their moats are
- extreme logistical competency
- oceans of cash from AWS
- everyone already thinks of them as the place where you can find whatever you're looking for.
Dunno, I buy all my furniture from Ikea and many clothes from Zalando, both provide better experience than Amazon for their respective products.
Amazon's website is also awful from a usability perspective (though less bad since Bezos relinquished personal control over every pixel on the front page). I don't go there because I expect a pleasant user experience, I go there because I expect that I'll (eventually) be able to find any random item I want at a reasonable price.
I know someone working for someone like Bezos. They have proven that they can solve a lot of new Bezos’s problems. They also let it be known that they aren’t quite sure if they can continue in that role without new Bezos giving them some of his equity. In this case 3%.
How this all shakes out depends on the regulatory environment. CA famously only allows non-competes on very limited circumstances. That’s why the “traitorous eight” who founded Intel were able to tell their old boss to f-off.
A world were new Bezos can force all his 22 year old employees to sign a non-compete is going to be different from one where anyone can walk about the door at any time and walk across the street to a competitor.
TL:DR a lot of this has to do with fine tuning the relationship between capital and labor.
Non competes absolutely discourage competition and are inherently anti-competitive. the FTC is working on curtailing them.
The other common argument from the left about this kind of thing is: if Jeff Bezos were to stop doing any work now, then Amazon's share price might drop a bit, and perhaps there'd be some temporary chaos at the upper levels of the company for a bit while his work is reallocated, and *maybe* in the future the company will miss out on some innovation or good decision he might have made, but it would otherwise continue to function and produce value; but if all the warehouse and fulfilment workers were to quit, there would be chaos and the whole thing would collapse. So who is generating the value right now?
(Genuine question, I don't know the answer)
Jobs died, and Apple has continued to be profitable and successful, but it seems clear that it will probably never again achieve the innovation and insight of its glory days.
And the "if all workers quit" argument is kind of weak, because it assumes like, all workers _worldwide_ quit. If all _current employees_ quit, there would be chaos for a few weeks, and then all the positions would be filled from the millions of people whose job opportunities are generally much worse than those at amazon, generally people from less affluent countries.
I'm willing to bet that even given these stipulations, the loss in value for the "workers quit" case is orders of magnitude greater than that for the "Bezos quits" case. And it's relative value that we're talking about.
All workers quitting would pretty much necessarily be a political boycott. If Bezos were to quit as part of a political boycott, the numbers change again.
That's an odd argument to make, because it's definitely true that 1.6 million people all quitting is more important than one person quitting, but that doesn't lead to the kind of conclusion you seem to think. Those 1.6 million people make a *lot* more money than Jeff Bezos does, collectively. They are already valued at many multiples of what Jeff is valued. One for one, almost every other employee in the company can quit any time and nobody beyond their closest coworkers would even notice. Jeff quitting is major international news.
My friends and I have run into this question so often we have a name for it: the left foot problem. How much of a sprinter's speed is the left foot responsible for? If you cut it off, he can barely walk, so in some sense 90+%. But if you cut off the right foot, or the head, you get similarly huge drop-offs.
You can try to square this by giving every remove-it-and-we-can't-operate part an equal share, but then this turns into a gerrymandering game. What's the smallest part you can (cut off, unionize) that's critical enough to threaten the whole system? A toe wouldn't do it, but half a foot might. Just bezos wouldn't do it, but ten properly chosen execs at the top might.
Some folks in our indefinite politics chat are still trying to derive a fair distribution based on how much slower you run if you cut it off, but I came down on "pay market value."
Shapley Value is the best answer to this question I’ve seen.
I think not quite, JT makes this problem more interesting than attributing value to a set of agents: if you consider "brain and feet" they would get 0.5 each, but if you decide to think of brain, left foot and right foot, brain gets less credit.
I do not know of a framework that generalized Shapley Values to such case. (And would love to hear if there is something)
It’s true one executive could quit and then be replaced, but the same is true of workers.
If all executives quit, and weren’t replaced, the company would cease to exist just as surely as if all the workers quit. There might be exceptions to this, like small worker’s co-ops, but without authoritative decision makers any reasonable-sized company would collapse.
This is fair. So seeing as the initial discussion was about distribution of profits, a better argument would be to 1) bucket groups of employees/execs by total remuneration then 2) measure the effect of losing say 100M/y of warehouse staff vs. ~100M/y of execs. Interestingly, because of externalities, the relative effect might shift quite a lot depending on the size of the bucket - e.g. thousands of warehouse staff would probably have a greater effect on the national warehouse-staff employment market than a few execs would have on the large-corp-exec market.
That’s a really interesting point. I’ll have to think about it more.
My gut reaction was that the higher cost of the execs was just a function of supply demand, but I’m not really sure how that fits in.
I don't think "all the workers combined are generating more value than Bezos" is a surprising result, and I think it's already priced in to the salaries.
How much does Bezos make? A quick google says Bezos makes ~1.6 million dollars a year, total compensation. Alternatively, if we divide his total net worth ~150 billion over 30 years of being CEO, we could also say he's made about 5 billion a year, historically: if you think that is a more fair "income".
How much do Amazon warehouse workers make as a whole? Google tells me that Amazon has ~1.5 million employees worldwide. Not all of those are warehouse workers: apparently Amazon has 185 of those globally, and "more than 1,500 full-time employees" is what their docs say (https://www.aboutamazon.com/workplace/facilities), and Glassdoor says ~$40K is an average annual salary. 40K * 1500 * 185 is $11 Billion.
In other words, $11 Billion for warehouse workers, which is more than double the high-ball estimate for Bezos's annual "earnings", and 7000 times his actual total compensation.
So, yeah, firing 11 Billion dollars worth of employees, unsurprisingly would do more damage than firing a single 2 Million dollar employee. The sleight of hand is, of course, to treat the value of the individual workers collectively, but compare their salaries individually.
Thanks for doing the maths! I think my comment to SS covers a more nuanced take. But I do absolutely count the rise in his net worth held as Amazon stock as income for these purposes (otherwise any argument about billionaires is worthless, because how many billionaires got there on salary alone?). So we're comparing $5B with $11B, which are the same order-of-magnitude. I still suspect the difference in effect would be orders of magnitude apart.
I gave the $5 Billion for the sake of having an upper bound, but it is a pretty extreme figure to actually use: it's 100% of his net worth, which includes, among other things, founding two other companies, and all other investments that he's made.
But more importantly, I *don't* think counting stock appreciation is relevant here: we're talking about how much he's worth to Amazon as reflected in how much they compensate him. If they pay him a million dollars worth of stock in 1998, then the price increases 100x by 2020... yes, he has 100 million dollars of net worth, but Amazon didn't value him at a hundred million, they valued him at one million.
In essence, the other 99 million dollars came from other people who thought that stock was worth 100x more than what it used to be worth, not from Amazon.
> we're talking about how much he's worth to Amazon as reflected in how much they compensate him
That's not how I read it - all that Scott talks about the proportion of the total value of Amazon that Bezos owns. He consistently talks about Bezos' net worth, not some imaginary number which is "that part of his net worth which is due to his salary rather than his stock holdings".
I guess I'm just not sure how you can make any useful comparisons between Bezos and warehouse workers if you include stock appreciation.
If the argument you want to make is "the government should try to stop people from making significant money from the stock market", well, that's a whole different conversation and I'm not sure where the warehouse workers in Amazon distribution centers come into it.
If, on the other hand, you want to have an apples-to-apples comparison of how much Amazon compensates its CEO vis-a-vis its warehouse workers, it seems you have to talk about how much Amazon actually pays, and not factor in three decades of extreme stock appreciation. That's not the framing of Scotts whole argument, but it was the framing of this comment chain, as I understood it.
Easier to destroy than to build. By that logic, armies create all value.
That's part of the issue here - amount of the value you can destroy is a proxy for how much you can negotiate for. Amount you can destroy legally is maybe a better proxy. Armies certainly can negotiate for a lot more value than they can create, especially if we're discounting "creating value" by providing for defense.
> if Jeff Bezos were to stop doing any work now, then Amazon's share price might drop a bit...but it would otherwise continue to function and produce value
This argument assumes that the only thing Bezos brings to the table is his work, but that's not true. What Bezos brings to the table is also the capital the owns. "Taking his ball and going home" for Bezos would be to deprive Amazon of that capital.
I don't know how that would work in the context of abstract stock ownership, but certainly we could imagine a 19th century capitalist burning their own factory to the ground (just the factory, not the workers).
The problem is that “should Bezos own this much” is exactly the issue being discussed.
To put in another way, there’s no inherent merit in owning something. If Bezos could give away everything at no cost to the company or society, then that would be a strong reason to say Bezos shouldn’t have that stuff to begin with. I don’t think anyone really agrees with that, though.
The ability for him to quit with the business being able to continue is of extreme value that he engineered.
All parts of a business ceasing to function (you just picked employees but you could have said all of their vans suddenly cease working and need a 1 to 1 replacement) will make the business stop earning money. But all of those things working together Bezos can take a lot of credit for.
The majority of the value remains with Bezos.
Good lord, where to start:
First, you assume a perfect government that taxes and redistributes fairly to everyone worthy and deserving. Second you assume that the environment that billionaires can innovate and flourish in would magically exist when government has a heavy hand on the scales of reward and penalty.
Innovators take massive personal risks to fill that ecological niche. America has been uniquely successful in producing those innovators for 200 years in large part due to its outsize freedoms and rewards for success and meritocracy. The government’s heavy and arbitrary hand on the scales of freedoms ineluctably drives away innovators and depresses productivity. It is the invisible hand of the market rewarding and penalizing according to clear and transparent rules that creates the ecosystem for innovators to thrive and yes, greatly earn money in. The government takes in trillions of dollars and yet you worry about the billionaires and not the trillionaires who do not innovate and only earn by taking money from others’ hard work and creativity.
Yes. There is a very important role for government - Step 1. Create the fair and transparent rule based system that curtails use of power and allows markets to function. Step 2. Don't try to game it afterwards.
Step 3. Watch as society becomes prosperous
"America has been uniquely successful in producing those innovators for 200 years in large part due to its outsize freedoms and rewards for success and meritocracy."
That statement is trying to do a lot of work without the definitions and evidence to back it up. I think you need to at least define what you mean by "innovator" and the time period you claim. For example, in this ranking, "socialist" Sweden beats out the US: https://www.visualcapitalist.com/national-innovation-the-most-innovative-countries-by-income/
Hmm, an interesting assertion. Off the top of my head, the most consequential inventions of the 20th century and their country of origin:
airplane (US)
jet engines (Britain)
radar (Britain)
the laser (US)
radio (Italy)
transistor radio (Japan)
TV (US)
transistor (US)
integrated circuit (US)
computer (US)
TCP/IP (US)
HTTP (Britain)
nylon (US)
antibiotics (Britain)
genetic engineering (US)
immunosuppressive drugs for transplants (US)
balloon angioplasty (Germany)
MOSFET (US)
cell phones (Japan)
smartphone (US)
Haber process (Germany)
fission power (US)
(practical) lithium-ion battery (Japan)
(practical) solar cell (US)
CCD (US)
Unix (US)
Linux (Finland aha!)
compilers (US)
Algol 60 (Netherlands)
C (US)
So my personal invention index count is US 18, Britain 4, Japan 3, Germany 2, everyone else 1.
Having a hard time coming up with anything really big out of Sweden on my own, but sweden.se says the zipper and pacemaker, so there's that.
Initially, sure, but it's now surpassed it. I'd argue that "open-source software" was the more fundamental innovation, and that's American (RMS at MIT).
"Television" and "computer" were both arguably invented in the UK (Logie Baird's TV in 1926; the first stored-program computer was the Manchester Baby, and the first commercially-available general-purpose digital computer was the Ferranti Mark 1).
The computer was co-invented in a lot of countries. Google for Zuse, and why Germany claims the invention of the (digital) computer for itself ;-)
Carl's list is highly debatable anyways. Attributing the plane to the US for example is a gross oversimplification of what actually happened.
Edit (the following statement is non-sense. I only leave it here, so that the following thread still makes sense to future readers): Even more grotesque is the idea of Carl to attribute Nylon to the US only. I mean: it's literally in the name "New York London => nylon" ...
> Google for Zuse, and why Germany claims the invention of the (digital) computer for itself ;-)
You're right, I should have mentioned Zuse. But if we're going to allow partial credit, the first design for a digital programmable computer was Babbage's Analytical Engine in the 1830s :-)
> Even more grotesque is the idea of Carl to attribute Nylon to the US only. I mean: it's literally in the name "New York London => nylon" ...
This is an urban myth, sadly: https://en.wikipedia.org/wiki/Nylon#Origin_of_the_name
My bad. Thanks for correcting me on this one. I never questioned it and had it in the back of my had for decades now.
Oh come on. Nylon 66 was invented by Wallace Carothers at Du Pont in 1935, as part of a long-standing research project in polymers. The name has absolutely nothing to do with either New York or London, I can't imagine why you think it might.
It's a widespread urban myth - I think I first saw it in Ripley's Believe It Or Not! in about 1989.
How about a count of Nobel prizes by country as a proxy for innovation? On a per capita basis it would be a useful metric.
It's certainly not the worst idea I've ever heard of, even though it comes with its own challenges. Not the least of it being that making an invention and successfully commercializing it not being the same thing. Nobel prizes often acknowledging achievements only decades later being another issue.
And regardless of the metric chosen: the US will likely come out on top, due to it being an economic powerhouse. And rightfully so, I'm not disputing that.
However: I'd argue that there would be little to learn here, as an experiment with a sample size of one is of little use. I'd argue for example that the US was as least as innovative in the 40th, 50th and 60th; despite having had various issues back then and also having had a wide variety of fiscal policies back then as well as a much stronger antitrust law enforcement than today.
Per-capita the USA is fifteenth, behind noted innovation powerhouses like the Faroe Islands and Saint Lucia (and also the UK, Denmark, Germany, Sweden etc): https://en.m.wikipedia.org/wiki/List_of_countries_by_Nobel_laureates_per_capita Restricting to scientific prizes only bumps them up to twelfth. Where a laureate was born in one country, has citizenship in another, and is resident in a third, that's counted for all three countries; it would be interesting to see a table ranked by country of birth only.
No, they're not. I'm not straining at weird little precursors, I'm choosing the people and places that made the invention broadly successful. For both the TV and computer, that was the US. It's the same reason I credit antibiotics to the Brits, although some Germans had been using a few compounds in a few cases earlier. Fleming and penicillin were the first widespread clear success.
You clearly did, as demonstrated by attributing planes to the US, even though they were made broadly successful by WW1 before the US ever decided to take part in it ;-)
Logie Baird's TV is a weird precursor, sure. But I think the Ferranti Mark 1 is a good argument that a lot of innovations that happened in the USA would have happened elsewhere without the USA. Univac won thanks to the USA's larger internal market and some boneheaded decisions by the British government - without that, Ferranti (or some later imitator) could well have won.
Also HTTP was invented by a Brit, but he did it when working for the CERN. Now: do we attribute that to Britain, or to whatever entity one wants to attribute CERN to ;-)
Those lists are pretty pointless as they remove too much context to learn anything from them ...
But "making commercially viable" isn't what usually meant by invention, cd..patent law.
Also the steam-engine, spinning Jenny (and a bunch of other agriculltural machinery) vaccination, hovercraft.
Also ,three people,all British invented the light bulb before Edison.
True, but Carl did specify "twentieth century"; that excludes everything on your list apart from the hovercraft, which has alas not lived up to early predictions that it would change the world.
(I took a hovercraft ferry across the English Channel once. It was awesome.)
Thank you for taking the time to read and reply. In my view, the USA has strayed far from a market-based economy in the last fifty years, and the government has been increasingly responsible for stifling creativity through growing and contorted forms of regulation and taxation. I also do not see an easy comparison between a resource-rich, highly homogeneous country the population of New York City and one 35 times its size. That graphic doesn’t do a great job in my view of defining its measurements, and despite all that the US still ranks as high, which I find remarkable given its size and relative complexity.
The larger country should have a huge advantage due to network effects. And the USA is not exactly resource-poor!
I’m not convinced there are that much greater intra-country network effects vs inter-country between like-minded individuals and companies. The USA is a huge and diverse place and while interstate commerce works very well, we also work very well with many other countries.
I'm guessing you've never tried to sell a good or service across an international border :-) Look at the chaos being caused by Brexit to see how damaging it can be to leave a shared customs/regulatory area, and by implication how beneficial it can be to be part of one. But you're right that varying laws, taxes etc between States blunt the US's potential advantage here compared to a completely uniform internal market.
I have, at a startup no less. It’s not that bad, though the red tape exists and is growing.
In terms of founding valuable companies, Sweden does well but is still easily bested by the US after controlling for population size and GDP:
(data from https://www.cbinsights.com/research-unicorn-companies)
-------------------------------------------------
Number of unicorns per 100 million people
-------------------------------------------------
1. Israel: 247
2. Singapore: 230
3. United States: 194
4. Ireland: 123
5. Norway: 94
6. Hong Kong: 93
7. Sweden: 78
8. Finland: 72
9. Switzerland: 70
10. United Kingdom: 69
----------------------------------------------
Number of unicorns per $1 trillion GDP
----------------------------------------------
1. Israel: 69
2. Singapore: 43
3. United States: 34
4. India: 30
5. Hong Kong: 21
6. Ireland: 19
7. United Kingdom: 17
8. Finland: 16
9. Sweden: 15
10. China: 15
-------------------------------------------
$ of total unicorn value per person
-------------------------------------------
1. United States: $6335
2. Israel: $5405
3. Singapore: $3679
4. United Kingdom: $3091
5. Hong Kong: $2731
6. Sweden: $2321
7. Finland: $2259
8. Australia: $2177
9. Ireland: $2064
10. Switzerland: $1444
----------------------------------------------
$ of total unicorn value per $1000 GDP
----------------------------------------------
1. Israel: $151
2. United States: $111
3. India: $89
4. United Kingdom: $77
5. Singapore: $69
6. Hong Kong: $63
7. China: $60
8. Finland: $52
9. Sweden: $45
10. Australia: $45
> America has been uniquely successful in producing those innovators for 200 years in large part due to its outsize freedoms and rewards for success and meritocracy.
To what extent is that "America creates more innovation", and to what extent is it "ambitious and innovative people move to America because they know they can get greater rewards there, but if America hadn't existed they would have founded companies at home"? Surely a bit of both - many innovative American companies were founded by immigrants, but there are beneficial network effects from having lots of innovative people in one place.
And I'd say that probably the biggest reason that they moved to America is its unique geographic advantage. While Europe and Asia were endlessly mired in wars between more-or-less equal in power neighbours, USA was able to pick and choose its wars for about as long as it existed, and so never lost one.
What time period are we talking about? AIUI the USA overtook its European rivals in the second half of the 19th century; the only big European war in that period was the Franco-Prussian war in 1870-71. It's a much stronger argument for why the Industrial Revolution started in the UK, though! The obvious reasons for why the USA drew ahead are immense natural resources, "free" land, a large internal market, and disproportionately attracting entrepreneurial and ambitious people from other countries. But there are some more interesting proposed theories, like "labour was scarce in the C19 USA, so it was more worthwhile to invest in automation there than it was in Europe, where skilled workers were more available." There's a great post about it in this month's Works in Progress: https://www.worksinprogress.co/issue/the-decline-and-fall-of-britain/
> and so never lost one.
Not in the relevant period, but the Vietnam War is the obvious counterexample. I'd also argue that the US failed to achieve its war aims in the War of 1812.
Well, my understanding is that USA became the clear leader in the aftermath of WW1, and WW2 sealed the deal for the global hegemony. As for the arguably failed adventures like Vietnam or Afghanistan, they weren't really wars in the historical sense. Team World Police's modus operandi is basically trying to convert foreign societies to its values without even bothering to annex them, then eventually becoming bored and giving up. Maybe it's fair to call those defeats, but not the kind which can significantly hurt the homeland, which is evidenced by America's continued appetite for them.
> Well, my understanding is that USA became the clear leader in the aftermath of WW1, and WW2 sealed the deal for the global hegemony.
I think the World Wars allowed the USA to become the dominant *geopolitical* power, but it was already the leading *industrial* power by around 1900.
Was it mainly due to innovations, or the size? My understanding was that 19th century American universities were second-tier, but I guess it's possible that faster improvements were happening independently of academia.
To make sure I have this right, your claim is "the innovations that happened in America would have eventually happened somewhere else" - is that right?
Well, they did happen somewhere else. A lot of the inventions people in the US claim for themselves are claimed for their own country in many other countries. Those "who invented what" lists are often pretty arbitrary. "Who invented what" often hinges on the definition of what exactly counts as the actual invention, and what only lead up to it.
Just look into the history of the invention of planes, computers, electrical light, fission, transistors and lots of other revolutionary things which shaped the 20th century.
Perhaps! Some of them surely would have (and indeed many were independently created elsewhere but beaten in the market by the American version, as noamik notes). My actual stronger claim is "some of them would have happened in other places at roughly the same time if America wasn't hoovering up talent". But America's talent-hoovering must have had *some* net beneficial effect, because having lots of innovative people together in one place makes it easier to be innovative - it's easier to meet co-founders, easier to find skilled employees, easier to get funding, etc.
I feel as if the main advantage of the US is the availability of free capital. So the question Scott poses is actually the truly important one: "How much return of investment is necessary to not stifle innovation, and at what point does the creation of monopolies hurts innovation more, than the expected return of investment helps society?"
The 1950s for example saw high taxes at the margins in the US, but still had the US dominate innovation and production. So it seems to me as if the claim that taxing those earning would stifle innovation immediately isn't substantiated by actual historic evidence. However: what we have seen in that historic precedent was that gap between rich and poor was closing back then, and has been opening up since.
> I feel as if the main advantage of the US is the availability of free capital.
Agreed. Anecdotally, I've heard it's *much* easier to get a tech startup funded in the USA than in the UK.
Speed matters. If one country consistently brings innovation and discovery to market effectively then cumulatively it will race ahead of others. Arguably the English empire was highly successful at this (along with imperialism) and punched well above its weight per capita until world war 2 drained its talent and population.
And money: we spent all our money in WW2, then pissed our Marshall Plan money up the wall trying to hang on to the remnants of Empire rather than rebuilding our industrial base.
Worse than that. The UK spent the capital of the entire Victorian era during WW2, and gave away 50 years worth of technical advantage via the Tizard Mission - https://en.wikipedia.org/wiki/Tizard_Mission
I... Surely you see that greater rewards wouldn't exist there if they didn't create more innovation?
That's not obvious to me. It's easier to capture a large share of the surplus generated by your innovation in America than elsewhere, but you'd still be incentivized to create the innovation if your captured share is enough to compensate you for the costs and risks incurred. As a toy example, suppose you're an inventor in Kafiristan, and you have a great idea for a new product. Wonderful! Except the government will take 99.99% of the producer surplus, leaving you merely comfortably well-off. But if you can get to the US and develop your product there, your investors will merely take 99% of the producer surplus, leaving you rich beyond the dreams of avarice. Clearly it's a good idea for you to move to the US, even though the total amount of innovation generated is the same. Now, clearly this is not the only effect in play; network effects make it easier to develop and market your product in the US than in Kafiristan. My point is, you have to consider both effects. But I might be misunderstanding you: are you saying that "innovator captures more of the surplus" is *caused by* "more innovation happens in the US"? If so, what's the mechanism? The causality in the other direction is clear, but I don't see why it would work that way round.
> you assume a perfect government that taxes and redistributes fairly to everyone worthy and deserving.
No he doesn't.
It isn't just about the innovation or the hard work - it's also about risk. If a business tanks, employees at that business can generally find another similar job. If you start/own a business and it tanks, you lose a lot more.
i agree with this, except that rich and powerful people often harness the law to minimize their actual risk, e.g. declaring bankruptcy and stuff. I think this is true in theory but less true in practice
I suppose my perspective comes from the business owners that I know personally. Even declaring bankruptcy wouldn't save most of their loss - it would be devastating in a way that wouldn't apply to the employees, although losing a job is devastating in its own way. Might I inquire as to what you mean by "harness"? Are they doing something illegal to make bankruptcy laws work better for them?
no, i don't mean doing anything illegal, i just mean doing what _is_ legal, which is a lot easier for someone who can afford to hire a decent lawyer, than it is for a typical working class person.
I didn't really mean to minimize the dificulties of declaring bankruptcy, but it is one of the govt provided mechanisms by which the risk equation is altered from whatever it might look like in theory.
Purely anecdotal but the amount of emotion, time, outside work sacrifices, etc that get put into a startup outsize the personal financial risk. Add on the responsibility of handling others investment money, and, yeah, no amount of legal or illegal tricks to get out of a failed businesses financial responsibilities comes even remotely close to balancing the pain and loss of the failure. Personally the finances are the smallest loss (even when they were for me all of my saving plus some debt), seeing something you put everything into fail, feeling like you let down investors who believed in you, etc are by far the biggest losses. Which is all to say those "risks" exist regardless of your wealth and, unless you're a psychopath, can be just as brutal.
Yes, the risk isn't all about money.
That's a good point.
This might be true of businesses with a smaller difference in wealth between the owner and employees. But if Amazon were to tank then yes Bezos would lose billions of notional dollars, and still be a very rich man. Many (most?) of his employers would face losing their livelihoods, their homes, their healthcare, etc., and in the glut of fellow workers suddenly looking for a new job I don't think it would be as easy to get new employment as maybe you think. "Risk" is difficult to measure on a dollar scale.
This is true today. For a large part of Amazon's existence, it would not have been. If you play around with the results, don't be surprised if you lose the process.
If you start/own a business and it tanks, the worst case scenario is that you - gasp - have to get a job, like all of those dirty peasants you used to employ. Reduced to their level! The horror!
I think a lot of small businesses have every penny of their owner's money invested in them, so that when the business goes down, the owner is out his life's savings, too. I don't think this is so true with startups, but for pizza parlors, independent coffee shops, beauty salons, and the like, I think it is very often the case.
This argument falls apart if you use the CEO of AirBnB as an example. The tech for Airbnb existed for a decade and several inferior and not-very-usable versions of Airbnb existed (and still exist). But the huge network of hosts and guests is a cultural phenomenon that wouldn’t have happened without Airbnb. It’s possible that without Amazon, today you’d have 20 Jet.coms, which will never reach the massive scale and selection that Amazon has. AWS is even more likely to not have existed- and that spawned an entire separate industry.
There's an argument to be made that having that larger variety of options may be preferable from multiple perspectives - not only in a market competition sense, but because companies with the size and scale of Amazon tend to result in a few specific companies and/or individuals having disproportional influence on the market/politics/etc. And that's before acknowledging the possibility that the may be accumulating value to themselves (and/or their customers) without actually generating value per se by outsourcing the costs (such as the effects AirBnB has anecdotally had on housing affordability).
Two thoughts:
First, I think most of the intuitions here are captured well by the economics of natural (or in the case of patents, unnatural) monopolies. If Amazon were not a natural monopoly then the advantages of being first would only persist until a competitor entered the market, and Bezos would only earn those extra two (or whatever) years.
Second, I think the political critique of billionaires (and other capitalists) really has to be understood as a critique of power inequality rather than consumption inequality. The intuition “inequality isn’t that important, it’s absolute poverty that’s a problem” is pretty good as far as consumption goes but doesn’t capture most of what wealth can do - from control within workplaces to political influence to control through investment on path-dependent questions about how/whether we’ll pursue space colonization, AI, and responses to climate change. More concentration of wealth means more direction by either whatever happens to be profitable or whatever particular billionaires happen to like.
That is true. But also what is the solution? There are some very reasonable things such as cap political donations, which a lot of countries do. You can also take steps to reduce lobbying. But that still leaves the private power billionaires have. The solution people give is to give more power to government. But then you are just concentrating power in a different place. I'm not sure I trust politicians more than billionaires. I certainly trust Bill Gates more than Biden.
The fear people have is technofeudalism. A new social structure where a small class have all the power and use that power to perpetuate themselves in power. While that might be a plausible fear, it's not what's happening. Many billionaires are self made (meaning didn't inherited most of their wealth). We rarely have fortunes doing back many generations as we had in feudalism. Meaning, billionaires are not using their power to perpetuate their family in power.
I think all of these fears could be dealt with a large inheritance tax. Which is not politically feasible. But let billionaires enjoy their meritocracly earned money and take it all from heirs who did nothing. Or a small wealth tax, which would be small enough for a productive investor to keep their wealth, while a baseline investor to slowly lose it.
Mostly agree with what you say, just a few points:
1) Why don't you trust politicians? This means you don't trust in democracy. Do You think it's fundamentally wrong, or it just doesn't work at the moment? If it is corruption, lobbying and other interests that make then to make bad policies, the real cause is too much power concentration in the private economy again.
2) That most of the current tech billionaires worked their way up, there is many other people that have been rich for generations, the fortune just got divided by heritage and they learned more to hide their real worth. This old money is for sure also invested in the current tech giants, and the power and information concentrations are adding very powerful tools to the already powerful.
My conclusions are:
- we need to fix democracy, that politicians act in the interest of all citizens again.
- we have to avoid any concentrations of power. Any position of power has to prove its benefits for society and needs some effective mechanisms to control it. This doesn't have to be the government.
Amazon isn't a natural monopoly though. There's no reason why "selling stuff online" should have become as monopolised (in the US) as it did, it's just that Amazon apparently managed to be that much better at it than everyone else.
Well they managed to become dominant. This does not mean it's only about better serving the customer, there are also other factors like luck, access to capital, the right time...
Just the fact that they managed to dominate the market some 10 years ago, doesn't mean that it serves the society today to have a player that is so hard to compete with just because of the economy of scale and because people are used to it.
I agree, that it's not an natural monopoly so even more it's important to restore a working market with competition. When there emerges a monopoly were it isn't naturally, yes, somebody did a good job in growing a company and yes some competitors were probably sleeping. But still this is one of the main failure modes of a market economy ans we should take care that equal competition is restored again.
> But suppose that we go back in time and prevent Jeff Bezos from ever being born. Does this mean Amazon wouldn’t exist today? Probably not by that name. But does it mean that we wouldn’t be buying things online today?
In the case of buying things online? sure we definitely would be. but for instance AWS, arguably amazon's biggest contribution to the world? that definitely didn't have to happen the way that it happened, and if it it had happened for instance 5 years later, countless startups wouldn't have been born.
Assuming another Bezos comes along and builds another Amazon seems like a big assumption.
And what would you do in the case where the founder only owns a small percentage of the billion dollar company and most of the equity is spread between many investors and institutions?
In terms of someone else would have done it. There is an old economist joke that goes, two economists were walking down the street and they saw $100 lying on the ground. And one economists goes to the other, “There can’t be $100 lying on the ground, if there was someone would have grabbed it.”
I don't know about Amazon. But part of Bill Gates fortune comes from making the internet worse. When you are the first. When you get out infront. You can use your surplus, your fortune to keep anyone from competing with you. Microsoft did that. I remember them doing that. Bill Gates made his fortune by grabbing a monopoly and he kept his monopoly but destroying innovation he did not own. They destroyed surplus value.
I suspect other billionaires do similar things but I don't knowhow and where.
Bill Gates also spoke out against removing the patents on the Coronavirus MRNA vaccines:
https://observer.com/2021/04/bill-gates-oppose-lifting-covid-vaccine-patent-interview/
Removing COVID vaccine patents always seemed populism for me. Pharmaceutical companies did an amazing job creating vaccines very quickly. And took a large risk as well, as many vaccines did not pan out. We need to keep incentives so that good behavior is rewarded. Otherwise next pandemic there would be way fewer vaccines and they would probably take longer to be produced modulo technlogical changes. On top of that vaccine production was not capped by patents, but by materials. And as Bill Gates said, opening patents would create many bad copies who could do more harm than good.
Correct me if I'm wrong, but didn't a huge amount of public funding go into the MRNA vaccines?
> And took a large risk as well, as many vaccines did not pan out.
Wasn't this the whole point of operation warp speed? Eat the risk for the companies by footing the bill publicly, pay a huge amount for the vaccines so that the companies can afford to have a bunch of duds, because we need the progress NAOW?
But, funding wasn't just in operation warp speed, but a bunch of the underlying basic research, too?
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8426978/
And now Moderna is suing everybody?
https://www.bloomberg.com/news/newsletters/2022-08-30/moderna-sues-pfizer-biontech-over-covid-vaccine-despite-pledge
"didn't a huge amount of public funding go into the MRNA vaccines?"
Sure. And pharmaceutical companies also invested a lot. Was the public funding a strong enough incentive? I don't know, but if it were so, governments should have put the patents in the deal for receiving such funds and not changed the rules of the game in the middle.
"But, funding wasn't just in operation warp speed, but a bunch of the underlying basic research, too?"
These arguments are true, but don't prove too much. It was never an argument of "Big Pharma did everything therefore they deserve everything". That's a straw man.
The argument is companies invested with the expectation of patents. Patents were part of the incentives. Would they have done the same without that expectation? I don't think anyone knows, but predictability is a great part of a good incentive structure, so don't change the rules of the game in the middle
I guess we just have to agree to disagree on this particular one. I think you could use the same line of reasoning to justify the paywalling of publicly funded research by journals like Elsevier.
I think if we operate on the principle that the person who pays for something should be considered an owner of it, then publicly funded research and something like operation warp speed should at the very least get a share in dividends derived from those patents, if not have them invalidated entirely.
"I think you could use the same line of reasoning to justify the paywalling of publicly funded research by journals like Elsevier."
I all in favor of changing the rules moving forward. I'm all in favor of creating new journals with a different incentive structure that would make Elsevier and cia obsolete. Which is already happening slowly.
The Oxford vaccine was originally intended to be donated as royalty free, and Gates convinced Oxford otherwise. Moderna was almost entirely funded by the government, though it built on previous joint research <https://www.usatoday.com/story/news/factcheck/2020/11/24/fact-check-donations-research-grants-helped-fund-moderna-vaccine/6398486002/, https://www.forbes.com/sites/judystone/2020/12/03/the-peoples-vaccine-modernas-coronavirus-vaccine-was-largely-funded-by-taxpayer-dollars/>. However, BioNTech did get a good deal of funding from private pharmaceutical companies, which included Pfizer, of course, but also Chinese company Fosun. Much of the remaining funding the EU and German governments, I understand Pfizer declined to join the US program.
The Oxford group wanted to donate the patents, but Bill Gates convinced them to let AZ have a monopoly. And yet this is the vaccine that did get transferred to India, not the MRNA vaccines. Maybe if one or the other group released their patents it would have been faster, but I doubt it. It looks like the public statements by Bill Gates linked above were correct.
It's not clear what Gates's private argument was. If the deal was that AZ got a monopoly in rich countries in return for advising India, that sounds win-win. But it's not clear what happened.
This is part of where I think looking at this through the framing Scott uses goes awry. You can start with a brilliant idea, execute it well, but as some point, it's likely your ideas will be poor or benefit yourself at the expense of others. Once you get super rich, you're cut off from most people and have a reward system that gives you flattering feedback even when your ideas are terrible. The worst case scenario are authoritarians, but I think there are studies showing business leaders tend to make worse decisions as they're in the role longer. Not to mention the pressure from both ego and investors to pursue monopolies, monopsonies, and other strategies to curtain competition, which very large companies often succeed in.
Internet retail was already a race in 1994. Amazon won the race but it was through business acumen, not because of a particularly novel idea. Amazon Web Services, which launched in 2006 and now earns more profit than the retail side, really was a completely novel idea and I’m not sure how long it would have taken another entrepreneur to come up with the concept.
But isn't this exactly the whole thing behind 'ideas are easy, execution is hard'? It's exactly why innovation is not as inevitable as Scott makes it out to be.
AIUI, AWS as a product was a direct result of Amazon's retail success. They would get hammered by so much traffic on Black Friday that they needed to invest in a ton of infrastructure that would then sit idle for the rest of the year; what started as just squeezing a few extra bucks out of stuff they had lying around anyway turned into the juggernaut we see today.
This is a question of mechanism design, right? Like markets are great at solving the problem of how much do you reward people who make and sell identical goods with decreasing returns to scale. But for increasing returns to scale we may need a tweak.
One example would be, say we knew in 1998 there would only be one Amazon, we (the government) could auction off the right to be Amazon. Every year you have another auction and whoever wins gets to be Amazon.
Now this is crazy for many reasons, but you get the idea, right? You take a natural-monopoly market and allocate the right to the monopoly in a way where the public keeps all the surplus except for the value that the top guy provides over the next guy down the list. This used to be much more common — governments would grant monopolies to fund innovation or infrastructure development instead of using cash.
I don’t think that “MV=MC” markets are some sort of natural law that needs to govern all commerce, it’s just a mechanism that has gotten so ubiquitous we assume it’s what God intended.
If the company is publicly traded, isn't it almost always up for auction? There's a reason that Amazon doesn't get sold to someone else every year, the $1.3 trillion price tag. If you're looking to sell the rights to run the company for far less than that, what you're actually doing is selling the rights to loot the company for a year. If I had control of a $1.3 trillion dollar company for a year, I would sell off their best assets (to myself or friends maybe) for cheap or liquidate for a nice chunk of cash and pay myself huge sums - then the next guy buys it.
Jacob was talking auctioning the right to use the monopoly Amazon currently fills with your own company. So you wouldn't get a company handed over that you could loot. And amazon would have to pay every year to keep it's monopoly so the government would extract the monopoly surplus profits.
A more consequentialist approach to private property law would dissolve this question and replaces it with a more interesting one: What is the socially optimal strategy for rewarding innovation?
Why just innovation? If we're designing (and presumably implementing via legal means) socially optimal strategies for rewarding success, why just innovative success, and not, say, plumbing success or short-order cooking success? Why set government-mandated wages for certain kinds of private-sector labor but not others?
If you manage to achieve the socially optimal strategy for plumbing, that is presumably a one time thing until innovation makes it possible to again do better plumbing. Though successfully achieving a socially more optimal strategy for plumbing would surely count as an innovation were it not happening before‽
We already have a set of strategies for rewarding success, implemented via legal means:
- Intellectual property law: If you invent something you can patent it, and then the courts and the police will help you collect license fees for some period of time. The size of this reward can be increased or decreased by adjusting the duration and scope of patents.
- Private property law: If you start a business that does something innovative and useful, and then that business makes lots of money, then the courts and the police will help you keep most of it. If you make too much money then maybe the antitrust people will come along and take it away. The size of this reward can be increased or decreased by adjusting tax rates and the scope of antitrust law.
- Regulatory law: If you start a business that does something innovative, you will often find yourself in a position to influence the regulatory environment faced by both yourself and future competitors. You can use this power to crush competition and make more money than the people trying to copy your innovative idea. The size of this reward can be increased or decreased by adjusting the power of regulatory agencies or by adjusting how responsive to industry influence they are.
Note that #1 works well for legible innovations, which would otherwise be easily copied, while #2 works well for illegible innovations that are difficult to copy.
Monopolistic power usually does not function as a reward for innovation: The easiest way to become a monopoly is to have lots of money, not to be first. #3 sometimes has a similar problem where regulators are influenced by whichever firm is politically well-connected rather than first (e.g. Kalshi vs PredictIt). If PredictIt were a real company rather than primarily an academic exercise, perhaps they would have anticipated the threat and done a better job of hiring the well-connected lobbyists who now work for Kalshi.
Hire entrepreneurs. Offer the lowest compensation rate that gets you enough people who meet your quality standards. Not getting enough good quality applicants? Offer higher pay. Suspect you're into diminishing returns from having too many entrepreneurs? Raise your quality standards.
In a capitalist country like we have, this policy wouldn't work since the best entrepreneurs would prefer a chance at outsized returns to capital ownership. In a capitalist country with very high taxes on returns to capital, or in an honest-to-god market socialist economy (i.e. where firms are either co-ops or publicly owned) it should work ... in the absence of emigration. But really the best entrepreneurs would tend to relocate to the more lucrative capitalist countries.
Considering competition between nations, the optimal strategy for a polity may be to pay the most successful entrepreneurs a heckuva lot, as we do.
>But really the best entrepreneurs would tend to relocate to the more lucrative capitalist countries.
This is why, if pressed, socialists tend to admit that socialism would have to (somehow) be global to work. Socialist nations just wouldn't be able to compete with capitalist ones.
Which is a crazy thing to admit, because it means they are willing to stifle growth significantly in order to try to equalize the profits. The conclusion seems to me that they would rather live at the standard of living of the middle class in 1880 than the lower classes in the 1980s (or pick you date), despite the later date having significantly better outcomes on any absolute metric you can name (live longer, better food, better housing, better and more abundant clothing, etc.).
Worse, actually, because doing so in the 1st world relegates the 3rd world to far lower standards of living as well, but they started at far less. If Socialists were splitting the produce of a less productive older society across the whole world, then the average would in fact be far far less than they expect from a 1st world perspective.
Well, I'm not a socialist, but I can point out something obvious they're missing: there's an equal-and-opposite migration option! Just as a low-tax capitalist countries can in practice siphon off the would-be entrepreneurs from other countries, perhaps market socialist (and high-tax capitalist) countries could in theory try to siphon off the working classes of other countries via mass migration. If I may put the idea poetically by stealing the words on the Statue of Liberty: "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore."
Mass emigration from low-tax capitalist countries would induce a labor shortage and thereby undercut their ability to direct most of the social surplus to the wealthy. Capitalist countries would basically have two options: retain their migratory freedom and pro-market convictions and start directing more of the social surplus to labor instead of the entrepreneurs, or lock down their poor.
Of course I must comment on the obvious: There aren't any market socialist countries. If there were, they probably wouldn't be politically willing to promote mass immigration. If they were willing, they'd have to be able to offer a better quality of life than the poor had available in the rich capitalist countries, meaning they'd have to be a rich country themselves, which seems unlikely at best. If they were able, it would be logistically quite difficult to pull off. Though I said at the start it was an equal-and-opposite migration option, in reality poaching a tiny number of entrepreneurs is easier, so the low-tax capitalist countries' strategy on this matter is more effective.
I wonder. I suppose (early stage) entrepreneurs would have to tend toward the risk neutral or actively risk seeking side of the spectrum — on the other hand, each individual entrepreneur undoubtedly takes on concentration risk, whereas an entity taking on multiple such risks would experience lower variance, assuming those risks are not perfectly correlated. Is there enough difference to go on here? Or, assuming they're risk seeking, can we even charge them now for the promise of lower (or even negative!) taxes in the future and increase uptake? Are there policies we can take to increase the pool of people with appropriate risk preferences (so basically changing the risk preferences of a population)? There are also, of course, innovations coming from existing companies, which have different risk preferences, so most likely require different policies.
Elsewhere in the thread someone else also mentions non-competes, and how that interacted with the establishment of Intel. Would that be a positive overall? I suppose successful entrepreneurs would benefit from believing in themselves, but does that translate to getting greater benefits from reducing friction for the leaving employees than the harm from the obviously missed chance of rewards for Shockley, or more generally, the original entrepreneur?
"Hire entrepreneurs"
Entrepreneurs, by definition, don't work for wages and can't be hired. They can only be encouraged, or stifled.
Saying "you'll never be allowed to make it big as an entrepreneur; have you seen the tax code? Come work for Genericorp and manage our XYZ division, make it massively profitable for us", counts as stifling.
I feel that this overly downplays the role entrepreneurial risk plays in all of this. Focusing on billionaires shows a survivor bias; all the companies that go under every year aren't receiving some sort of entrepreneur compensation. Bezos certainly had capital to give Amazon a go when many others didn't, but his success wasn't guaranteed. And say an online bookseller rose to the top instead of Amazon; it probably wouldn't have branched out into different products as aggressively (certainly no other rival bookseller did in our timeline), nor would this hypothetical winner have probably gone into cloud computing the way Amazon did. I don't think risk is the entirety of the payout picture, but it's an important component.
A good observation. Entrepreneurs are doing an EV calculation in their head when they start a company; 1/X chance of being a unicorn, * (my shares %). If we tax billionaires then we decrease the EV of all startup founders by reducing the expected benefits of winning big.
The second-order effects might end up being weird though; if there's no incentive to 10x your company size to go from a $1B payout to $10B, does that mean there's room for 10 more successful companies for each eschewed-$10B company, and so the likelihood of a smaller (but still life-changing) payout goes up? That could be a net positive outcome for entrepreneurs.
Money beyond a certain point is no longer valuable as money; it's valuable as status and power. It's not clear to me that somebody in a system where rewards cap out at $10 million would be less interested in starting a new venture than in one where it caps out around $200 billion.
If Steve Jobs wouldn't have ever another penny coming back to Apple, I suspect he'd still have been there because that was his first and only true love. Zuck didn't know he'd get rich. Musk didn't form SpaceX to get rich…
They got help from people who want to make money, though.
They'd still get help from people who want to make money. There's nothing about limiting the scale of rewards that stops them from being rewards.
You’re making some unstated assumptions. I’m pretty sure that if you limit the upside and leave the downside where it is, you will cause people to change their behavior.
And how likely is it? The US government is known for socializing the downside, not the upside.
Money is always only valuable as status and power; nobody likes green papers or debased metal disks for their own sake.
SpaceX is an interesting counterexample, though, if you think there's no upper bound on power as an incentive. $10M from Zip2 would have been enough for Musk to retire young and party; it would not have been enough to try to electrify the auto industry or enable cities on Mars.
I agree. Also I now wonder: given that our moral intuitions often stem from hunter-gatherer adaptations: How do hunter-gatherers split the meat in case clearly just one of them killed the animal? Do they split it between everybody who tried? Or let him keep it? Intuitively we want the system to be stable over years, in particular not to lead to tensions and wasting energy on internal fights...
....?
He's talking about "fairness" and "deservedness". I'm puzzled that many people seem to think this piece is talking about something else. What did *you* think OP was talking about?
Or maybe you're saying that if two entrepreneurs are equally talented and skilled, and start pretty much the same business, the guy who starts his company one year earlier and ends up with 90% market share does in fact deserve 90 times more money than the one-year-later guy who ends up with 1% market share.
As for branching into new products, it's not like no other entrepreneur would have thought "well we're selling books... but why not try selling other stuff?" or "well we build a couple of datacenters... why not rent out computers in our datacenters?" These are obvious things to do, and frankly Amazon AWS is expensive and shitty — I have little doubt DigitalOcean earns far less money, but their product is clearly superior IMO. And heck, it's not hard to imagine an online store that is better than Amazon, although I am impressed with their fast deliveries.
Well, yes, I’m saying that in a market environment, the firm with 90% market share is entitled to that market share. That’s really not the point of my post though, which is about deservedness and distribution within a firm. I’m saying that a founder/original investors, are entitled to a certain level (which is open to discussion) of potential return on the money that they risked. That’s typically different than the average employee of the firm, who is not putting in a financial stake (this doesn’t include employees who themselves are being paid in equity rather than cash up front). I’m turn, there’s a more watered down version that pertains to taxation and how that applies to people working for more profitable businesses/endeavors vs less profitable ones.
I was suggesting that there’s some optimal balance to be found for what founding investors receive and non-equity employees receive. That’s the central distribution question, to me, in market economies. I don’t believe the original post took risk into account of deservedness - I think it is a component, but not the entirety. If the number you feel should be assigned to the risk premium is less than 1% or even 0, then that’s that. I personally think it should be higher, and moreover, that it’s a relevant part of the conversation.
If startups were paying out "too much" reward when successful, more people would start them and invest in them. Indeed more people have started doing that and it's actually quite difficult to make money that way. If there were *much* higher taxes on successful startups, than less startups would be formed and we would get lower quality results overall. Maybe there could be a slightly higher capital gains tax above a certain income point, since it probably wouldn't disincentivize startups that much. But note that most super wealthy people anyways give most of their money back to society as charity, so I'm not sure why the government specifically needs to take control of it.
IMHO:
- Sure, $50 billion would have been enough to incentivize someone to found Amazon, he wouldn't "need" $200 billion
- The problem is that Bezos doesn't have $200 billion in income, he has stock in Amazon
- It's hard to tax unrealized capital gains
- If you try, you are basically taking his company away from him by forcing him to sell shares to pay tax (I suppose he could borrow against shares to pay tax, but that's obviously risky). Whether he deserves this or not, it becomes a good argument for founding your giant multinational in a country that doesn't tax unrealized capital gains.
- For the reasons above, the consequentialist in me lets Bezos keep his stock. "Deserve got nothing to do with it."
Much easier to punish Bezos than to deal with inflation, central banking, mass immigration of low skill labor and laws favoring Wall Street over Main Street.
Minor warning (25% of ban): Low content, high temperature comment.
"- It's hard to tax unrealized capital gains"
Not terribly relevant to this discussion, but Denmark does, in fact, tax (some) unrealized capital gains. Mutual fund unrealized capital gains are one such example in Denmark (though, strangely, not unrealized capital gains in individual stocks ...). This implies an upper limit on how difficult it can be to tax unrealized capital gains.
Do they give the money back, with a bonus, when the capital gain turns into a loss?
I don't know.
I only know about this because the subject came up in a discussion thread on a personal finance site I visit.
My *guess* is that they don't remit for losses, but that losses can be carried forward an applied against future gains. But that is a guess.
It does lead to strange behavior, though, where Danish investors are dis-incentivized to use well diversified mutual funds because individual stocks don't have this bad tax property. There *are* ways to bundle a lot of stocks together to get around this, but I don't know if this is common in Denmark (it was tried in the US around the 2000s and wasn't popular ... but the US doesn't have this tax behavior).
Good point. I actually don't care about theoretically potential worth, whart counts is real income and even more: real power that comes from the absolute size of the company he owns and additionally from the almost monopoly he controlls.
So let's just tax realised capital gains quite high. Or even cap it at a certain point so there is incentive to build stable lasting enterprises. Bezos could get 1 million $ per year as personal passive income for the rest of his life, but would profit less from looting or selling the company.
The question of power is harder, the main point is to have strong regulatory bodies that can't be influenced too easy and to have proper and enforced anti trust laws taking care that no singe company can get too big and preventing monopolies where ever possible.
What's the argument for treating the question, "how much is it fair to pay billionaires for their entrepreneurship?" as a public policy question, but not the question, "how much is it fair to pay plumbers for their labor?"
Both are public policy questions. Public policy determines how much plumbers as well as entrepreneurs pay.
In fact, to go one step further, I believe they should be treated exactly the same. Entrepreneurs who make $100k a year should be taxed at exactly the same marginal rates as plumbers who make $100k a year. And entrepreneurs who make $10 million or $10 billion a year should be taxed the same as plumbers who make $10 million or $10 billion year.
Now, where there is disagreement, is about what these rates should be. I happen to believe the marginal rates should be very high as you go up the income ladder, although I get that not everyone feels the same.
I agree that taxation in general is a public policy question, and that reasonable people can differ as to appropriate marginal tax rates. But what Scott seems to be considering a public policy question is "fairness of compensation" measured in terms of value provided by labor--i.e., effective wage-setting by government fiat for each occupation. I don't think that makes sense for plumbers, entrepreneurs or anyone else.
Fair point. Here is why I think it makes sense. For people, like me, who believe that those earning huge amounts of money should be charged very high marginal rates, I think it's reasonable for people to ask why we think these rates makes sense. And for people to push back because they believe these rates are unfair or bad for society. I think it's important to respond to both of these complaints, which I think Scott does a reasonable job of doing.
The usual argument for progressive taxation--which I basically agree with--is that the marginal utility function of income (and everything else) decreases, making a fixed-percentage tax on the billionth dollar earned *much* less onerous than the same percentage tax on the thousandth dollar earned. Hence the percentage income tax rate on dollars earned above one billion should be *much* higher to make the burden "equal" in marginal utility terms. Not only is that argument more persuasive than the "income as payment for value to society" argument, but it avoids the latter argument's drawback of opening the door to general wage-fixing as public policy, and thus to general government micromanagement of the economy.
I'm certainly partly with you ICouldBeWrong. Much of my support for progressive taxation is based on the utilitarian belief that society as a whole is better off with some redistribution through taxes because the value of a million dollars spread across a wide range of "ordinary people" is more than the value of that same million dollars to Bill, Elon, Jeff, etc.
But not all. I also believe in progressive taxation on a fairness basis. I think Warren's "you didn't build that" speech is roughly correct. I think the outsized rewards that Bill, Elon,Jeff reap (as well as Steph and LeBron, Adele and Beyonce, Tom & Nicole, Warren and Schwartzman, Gurley and Meeker, etc) is partly a function of their skills, work ethics, and savvy but mostly the result of a "winner take most" system that rewards the folks at the top of the pyramid in ways that are completely out of proportion with their skills, work ethic, brains, etc.
Having said that, I agree with you that I don't want government (or anyone else) in the business of trying to calculate who deserves what. I agree that the question is practically unanswerable, and it would be enormously wasteful (and divisive) to try. So my answer is just to have a progressive taxation system that treats all outsize winners the same regardless of their field.
But my ideal progressive taxation plan would be much closer to the one that we had in the U.S. from the 1940s-1970s with top rates between 70-94%. I not only believe those rates would be better for society and fairer, but I believe they would have zero impact on making society as a whole less productive.
"So my answer is just to have a progressive taxation system that treats all outsize winners the same regardless of their field."
While I would probably ultimately stick with the philosophy above, I could definitely be tempted me by a system with even higher taxation rates on folks working in finance. While I I think all the folks I named above earn outsized rewards, I do think they contribute a lot to society in their respective fields. I think that is less true for folks in fields like finance and real estate, where I think more of the financial gains come from rent seeking behavior that contributes little to society. So I would be tempted by a system that offered less incentive for the best/brightest/hardest working to enter those fields, although I'm not sure that could be done in a way that doesn't have negative side effects.
I will go one step further than that, and say that everyone should be taxed the same dollar amount, like a "membership fee" for being part of the country. For the US right now that amount would need to be about $24K a year to cover Federal government expenditures.
Of course people who didn't earn substantially more than this would leave the country; since these people tend to be net-negative the country would overall improve.
Heh Melvin. A step too far for me. You would have gotten along great with Margaret Thatcher in the 90's, but I don't think a poll tax is the way to go.
And I suspect that you wouldn't find a country where everyone who currently makes less than $50k a year emigrates quite the paradise you're expecting.
Plumbers barely affect the public sphere, billionaires disproportionately do.
That seems to me to be an argument for limiting the public influence of billionaires, not for gating billionaire-ship based on arbitrary measures of value provided to the public.
> But this model convinces me that “taxing billionaires a lot” and “taxing billionaires not at all” are at least two different unfair failure modes with their own advantages and disadvantages from a desert point of view.
What's wrong with the status quo of taxing them a normal amount? Is the argument that if and when they realize their gains and pay their taxes, they end up with more than X in liquid wealth, that is also a failure mode?
"How much should they keep?"
You're approaching the question from entirely the wrong angle. This isn't a moral problem; it's an engineering problem: What kind of rewards need to be offered to founders and investors in order for them to bother innovating and founding new companies? The answer has been worked out many times before--every time a company is started. It isn't fundamentally different, nor more or less just, than the way that the wages of janitors vs. engineers vs. blog authors is worked out. It's just more complicated.
Perhaps legislation could intervene to increase social benefits... but trying to "fix" an economic situation by forcing a "just" distribution of wealth tends to degrade or break the system.
The simple and effective answer is to increase estate taxes. Anybody who tries to get a social-justice movement to focus on any mechanism of wealth distribution other than estate taxes, is probably funded by somebody trying to distract people from imposing higher estate taxes. I'm pretty sure that most of the money for the Social Justice movement today comes from large foundations like the Ford, Hewlett, Packard, Rockefeller, and Kellogg Foundations, which are usually run by people connected to the family in question, with its enormous inherited estate.
BTW, it's pretty unusual for the founders of a large company to get such large fractions of the stock. It probably happens more often in tech due to low startup costs. But even in tech, it's rare. See https://priceonomics.com/how-much-equity-do-founders-have-when-their/ for a list of recent tech startups and how much equity their founders had at IPO. Median was 2 founders who collectively held 15% of the stock.
My uneducated assumption is that family wealth probably plays a very big role (statistically) in how much equity a founder has at IPO. Those entrepreneurs who start with significant wealth can keep higher stakes, don't have to seek dilutative funding. So that circles around nicely again to your point about inheritance taxes. Point well made.
Yeah. People who improve society should get money from it, but it's crazy to have people become rich because of what someone else did.
And how do you measure 'improve society'? Many here think that the mere fact of building a giant corporation and dominating one or several markets prove that they improved society. I see such power concentrations as a worsening of society. If there were valuable benefits for society on the way getting there is totally unrelated. This can have happened and if so should be rewarded, but not more than other improvements to society that didn't fit in an lucrative business case.
Power concentrations do cause problems, and not all companies get rich by improving society. Figuring how to handle these problems in a complicated industrial society is hard. However, most companies do improve society because creating what people want that they couldn't get before, or creating something more efficiently than elsewhere, is an important service.
Perhaps seeing what things were like before big profitable businesses changed the world for the better would make it more obvious. https://rootsofprogress.org/industrial-literacy
Thanks for the link, but it wasn't news for me, and I'm not against business or industry in general. But it has to be judged by the value it provides to society and I think size and profit margins are a poor metric. I see that very kind of industrial plant needs a certain size to work economically and with technological development progressing this size gets bigger all the time. But there is no intrinsic value in having corporations several orders of magnitude bigger than that or spanning many unrelated fields of the economy.
There are also too many ways to optimize a business for profits that are actually hurting the environment or the society that profits and especially big profits are no sign of value production.
Adding in that living now in the developed world what we need to improve life is not more stuff or services but less stress. So economic growth is key to a certain point but when all physical needs are more than filled, there is not much to win by more growth. Now we have to think what we want and what is next instead just following the path that was right for the last 200 years.
I understand that the current consensus among the polsci types (or whoever it is that studies these things) is that an inheritance tax is notoriously unpopular and basically political poison. I suppose it can't hurt to keep trying to build support for it though, and maybe we'll eventually figure out an implementation that works well and isn't going to be repealed come the next few elections. Break down the unpalatability from both ends, so to speak.
Its a moral problem and an engineering problem , because we are not pursuing growth and innovation as ends in themselves. There's profit in slavery but we don't want it.
In the big picture, yes. As always, stating my opinion accurately would have taken so many words that few people would have read the comment, and would probably have generated more confusion than it cleared up. But I'll try to explain more in this sub-comment:
The social utility of a policy is non-linear in any numeric evaluation of its morality. There will be local maxima and minima. Suppose that we believe the most-just distribution of wealth generated by start-ups is X, and the free-market distribution, which produces a much higher total but less-evenly distributed social utility, is Y. We probably can't split the difference by using the distribution (X+Y)/2, because that high total utility is generated by the free market, which is a *machine*. The output of a machine doesn't change linearly as you move its internal parts around. The market is a more-flexible than a car, but markets still break down outside their operating parameters.
There are a number of well-known possible general economic systems, including barter tribalism, monarchy, military empires, feudalism, and free-market-type systems. Each of these has social operating parameters outside of which it breaks down. My earlier comment presumed that we already used our moral sense to choose the general economic family of free-market systems, because they seem more able to provide peoples' needs and desires. Once we've committed to that general type of system, the answer to the engineering question gives us bounds on the operating parameters. There might be ways to make trade-offs in some other part of the machine that will allow us to adjust founder-profits downwards if our morality inclines us to do so. But Scott's approach was to simply ignore the machine's operating parameters, an approach which, if used regularly, would certainly break the machine.
"Which of these distributions happens depends on competition; if there’s no competition, the company will be able to take the whole surplus"
Only if it can engage in perfect price discrimination or if all consumers value the car the same amount, neither of which is likely.
Labor is paid whatever their leverage yields them. So if it’s $50k at one company then it’s likely $50k at another. That has no relationship to the value they create except they probably don’t get paid more than they produce.
I say leverage because being a productive worker is only one way people get paid. There’s also nepotism, sexual favors, just being likable, blackmail, convincing your boss you’re worth more than you are, your union’s threat to strike, the effort of hiring a replacement, etc.
To illustrate: a friend of mine worked a role in Amazon where if he messed up his job, Amazon would lose hundreds of millions of dollars of value. He was paid extremely well for labor, which is nowhere remotely close to the value he preserved and created. As valuable as he was, he was replaceable so his leverage went only so far.
So I wouldn’t attribute any notion of fairness to how much janitors are paid. There isn’t any.
Fairness is a metaphysical concept, not an empirical one. This implies that the meaning of "fairness" is a cultural construct. This means that to endorse the idea that the government should promote "fairness", you must renounce multiculturalism, which forbids the government from promoting any one culture above another.
I have my own preferred definition of "fairness", which is important to me; and I also value multi-culturalism. But logically, when it comes to politics, you've got to pick one or the other.
The government already decides what’s fair.
Not that the government already doing something is relevant to whether the government *should* do that thing, but... what fraction of the law decides what's fair, without regard either to what's pragmatic, or to providing incentives in order to do some social engineering? There are some: the civil rights amendment, for instance. But criminal law and contract law are driven by pragmatics, and tax law is driven by social engineering. And the Civil Rights Amendment certainly requires the renunciation of multi-culturalism, since just about every culture in history before 1960, and probably most cultures today, would consider some part of it morally reprehensible.
Yeah, it's all in U.S.C. § 9099 title 9, "What's Fair".
First, I think in a democracy the government has no choice but to try to incorporate some approximate sense of "average acceptable fairness" into it's policies. If people are going to vote, part of what they will vote on is their concept of what is fair. It's very important to humans on an emotional level, very ingrained in us, and I don't think you can take it out. Most policies affect different groups of people in different ways that are going to trigger some segment of voter's to think "that's not fair", and you have to account for that in representative government.
Second, yes, there are different conceptions of fairness, but why should that mean we just throw the whole concept out? It's just another thing that requires compromise, and shifts overtime with the will of the people, similar to human rights (which is deeply embedded in concepts of "fairness"). To forbid the government in dealing with the idea of what is fair would be to remove some human rights protections that have been hard won over the last centuries. You could argue they are entirely separate concepts I suppose, but I wouldn't find that very convincing. Fairness is intimately tied to rights.
Ultimately people are messy, emotions matter a whole lot, and you have to deal with them whether you want to or not. There's no useful conclusion that can be drawn by excluding these emotions, because that's a false world that can never exist and will not satisfy the actual real human beings that live here.
I think that we could go much further in the direction of a computational government in which cultural questions were not set into the legal code, but decided by individual voters.
For instance, our laws could explicitly state that punishments in criminal justice should be calculated so as to maximize social utility, rather than to give the criminals what they "deserve". Social utility would be computed as a function of some set of values, and the numeric weights of those values would be set, and continually updated, by the voters.
I agree that it would be extremely difficult not to embed any conception of fairness into our laws. But I never said we shouldn't embed any conception of fairness into our laws. I said that either we shouldn't embed any conception of fairness into our laws, or we should reject multi-culturalism.
The only radical thing about this claim is its honesty. No one really wants multi-culturalism. Anyone who thinks the entire United States must do things their way regarding gun laws, the legality of abortion, or any other controversial subject, is against multi-culturalism. The democrats and the republicans in the US are two cultures more similar to each other than they are to any non-Western culture. Once they learn to live side-by-side in peace, neither trying to interfere with the other, then they can claim to be capable of some degree of multi-culturalism.
Multi-culturalism doesn't mean eating Cajun food, listening to rap music, and reading books by people with a diversity of skin colors who all attended the best colleges in Boston. It means allowing people to act on different cultural values. That means allowing people to be homophobic, racist, and sexist; allowing government officials to take most of their pay in bribes; allowing nepotism in business and government; endorsing religious censorship, honor killings, and warfare; and many other such things.
The standard trick is to take all *your* cultural values and call them "reason". When Plato invented structural racism, when St. Augustine endorsed torturing heretics, when St. Aquinas endorsed killing them, when the Nazis built death camps, when Mao murdered forty million of his own people, they all called it "reason". It's embarrassing to me as a human that this trick still works. Post-modernists rightly pointed out that other people were using this trick, but they and their political offspring think this discovery gives them the right to deny that they ever use it themselves.
It may be possible, someday, to devise a multi-cultural polity, but it would resemble the world of Snow Crash more than ours today. I think it's a good thing that we abolished slavery, allowed women into the workplace, frown on nepotism and bribery, have enough of a sense of honor that colleges can operate on an honor code, and allow freedom of speech and freedom from religion. Anyone who says any one of those things is good is against multi-culturalism. It's important to understand that, so that people can no longer use the word "multi-culturalism" dishonestly, to conceal their own mono-cultural agenda.
Plato invented structural racism?
I can see the argument that *Aristotle* invented scientific racism with his infamous declaration that some non-Greek ethnic groups were 'natural slaves', but I don't recall Plato ever saying anything derogatory about ethnic groups.
One of the keys of the polis Plato presents as his Utopia in /Republic/ is the use of a secret breeding program to breed the original founding population into separate races, of workers, soldiers, and rulers, like in /Brave New World/. People were to be told their sex partners were being assigned by lot, but behind the scenes, the philosopher-kings were to choose who had sex with whom.
Plato took maintaining the purity of the master race to be the most-difficult task for the state, because his ontology says that everything in the physical world decays from generation to generation, including humans themselves. (He would have been correct, if not for natural selection.) IIRC he dealt with this problem in book 8. His solution was that he claimed to have discovered the numerological "marriage number", an integer with occult powers such that knowledge of it would enable him to predict before-hand what the offspring from any particular union of man and woman would be like. The fact that he never told anyone what the marriage number was, suggests he meant to keep it secret so that people trying to carry out his scheme would have to appoint him as the first philosopher-king.
I spent some time thinking about this "compensate the hypothetical competition" model a few years ago. I eventually decided that it was a bad idea. Finding the hypothetical competitors is very difficult. How do you know that the next company was really just as good but just a bit slower? By redistributing profits among the competition, you throw away a lot of the incentive to innovate. A bad actor could game the system by waiting for someone to do all the work to figure out an innovative product, copy them, and claim that they deserve some profit too. Further, it is worth noting that these large companies *do* innovate to maintain their lead, and they do so by reinvesting a slice of their profit into new ventures, better infrastructure, etc. In a sense, they are *continually earning* a speed premium. The market price of Amazon stock is due to investor expectations that they will continue to earn it.
The hypothetical competition is likely to be found in the executive offices of the winning company, helping make the idea work. In which case they're already compensated.