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How is remaining inefficient the ethical outcome? You know what's worse than a few people losing their jobs? Everyone losing their jobs because a competitor is

How is remaining inefficient the ethical outcome? You know what's worse than a few people losing their jobs? Everyone losing their jobs because a competitor is more efficient and drives you out of business.

HarryHirsch 9y ago
Mylan and Shkreli are extraordinarily efficient.
- pg314 9y ago
  No, they aren't. They are just exploiting an (artificial) monopoly. That has nothing to do with efficiency.
  - HarryHirsch 9y ago
    So what?! They are operating within the constraints of the market. Before the vulture capitalists swooped in prices were very reasonable for 30 years, the previous owners chose not to exploit their monopoly, then these two increased their efficiency.
    - forgotmysn 9y ago
      they didn't increase efficiency at all, they just increase the amount they were able to squeeze out of the IP. thats not an efficiency vs inefficiency, its n vs n+1.
      - johncip 9y ago
        I think you could make a case that charging the highest price for something that the market will bear corrects an inefficiency in the market. http://www.investopedia.com/terms/i/inefficientmarket.asp http://www.investopedia.com/terms/i/inefficientmarket.asp It's not that they started producing more units, it's that some folks (the ones using the drugs) were taking advantage of a market inefficiency (the insufficiently low price) which when corrected, meant greater returns for Shkreli et al. Just as when a "retail" day trader hits on a system that enables them to make a large amount of money, they're taking advantage of an inefficiency, and, in a way, helping to correct it. It's not pretty, but being ugly doesn't make it inaccurate.
        forgotmysn 9y ago
        but we're talking about a monopoly. a market inefficiency only occurs if there is competition, a more efficient alternative.
    - valuearb 9y ago
      The patent system is not a free market.
tanderson92 9y ago
Indeed, here is Charlie Munger w/ Jason Zweig: On firms like Berkshire partner 3G Capital, which takes big companies and streamlines them: I’m sensitive to the issue of cutting costs, which usually means a lot of people losing jobs. Rich people end up getting richer and a lot of people get fired. But ultimately, I think we don’t do the world a favor by employing more people than we need for companies to run efficiently. On the whole we advance civilization when companies run better. http://jasonzweig.com/a-fireside-chat-with-charlie-munger/ http://jasonzweig.com/a-fireside-chat-with-charlie-munger/
- munificent 9y ago
  > On the whole we advance civilization when companies run better. I understand that's a tenet of capitalism and is almost a religious belief beyond question. But, empirically, how do we know that this is actually true?
  - Pyxl101 9y ago
    Because efficient companies produce goods and services for lower prices than inefficient companies, which, happening at scale throughout the economy, lowers the cost of living and raises the standard of living for everyone. An increase in the amount of goods and services produced per head is the definition of economic growth, which most of us consider to be a good thing. Improvements to our quality of living essentially require economic growth. Take a listen to this NPR Planet Money podcast (and article) called "The History of Light" [1]. It describes how much it cost to light a room, in terms of a typical day's wages, at various points in history until today: > The history of light is the history of economic growth — of things getting faster, cheaper, and more efficient. In Babylonian times, 4,000 years ago, a day's labor would buy very little light. You could buy enough light to illuminate a room but not for very long. Maybe 10 minutes. It was really expensive. Today, a day's worth of wages can afford to light a room for thousands of hours. This affordability has radically changed our society, mostly for the positive. It's now possible to study and be productive in the evening. Many of the improvements to the efficiency of lighting also enabled cheap heating as well. Another related interesting article is "The $3500 Shirt - A History Lesson in Economics" [2]. This one traces the cost of clothing from the middle ages to today. Consider: why did people used to wear clothing until it became rags? Because clothing was extraordinarily labor-intensive and thus expensive. A single shirt back then might cost $3500 in today's money. Now clothing is a negligible cost for most people in the USA, including the poor. Companies (and individuals) and their desire for efficient production have brought these costs down, and the costs of so many other goods. I've heard it said that today the average person in America has a quality of living substantially better than that of a medieval king. I believe it: with our lighting, heating, and potable water delivered to our homes; sanitary food & restrooms; medical and dental care, etc. -- all available to (mostly) everyone due to low prices. Not to mention the luxuries available to us in our homes like television, music, radio, video games, etc. Cheap spices from everywhere in the world. Food from most everywhere is available at low prices and high quality in local supermarkets. Travel is cheap, and many people can afford to travel virtually anywhere urban in the world within 24 to 48 hours by aircraft - amazing by any historical standard. And it's so reliable we take it for granted. All changes that originate from economic growth. During the industrial revolution, a lot of automation replaced human labor in clothing production. This did have the negative effect of putting the spinsters and weavers and so on out of business, but had the positive effect of making clothing vastly cheaper for everyone. People found new jobs and society continued, and was better off overall. Similarly, the development of the automobile largely put the industry supporting the horse-and-buggy out of business. But everyone was better off overall having fast and cheap transportation. So how do we know that it's true? I suppose we don't have any way of saying in a particular case, but we can look to history to see how innovations that made products and services cheaper have benefited society overall. Perhaps 1000 years in the future, they will trace how much computing a day's wages could buy, and how that went on to transform society too. [1] http://www.npr.org/2014/05/02/309040279/in-4-000-years-one-thing-hasnt-changed-it-takes-time-to-buy-light http://www.npr.org/2014/05/02/309040279/in-4-000-years-one-t... [2] http://www.sleuthsayers.org/2013/06/the-3500-shirt-history-lesson-in.html http://www.sleuthsayers.org/2013/06/the-3500-shirt-history-l... - also discussed on HN [3] [3] https://news.ycombinator.com/item?id=8940950 https://news.ycombinator.com/item?id=8940950
chrisbennet 9y ago
The choice isn't (always) "lay off some workers or go out of business". Instead it's "It's profitable now but it could be even more profitable if we did something that incurred job losses." For example, Carrier was already very profitable when they decided to outsource to Mexico. http://www.salon.com/2016/03/22/snapshot_of_a_broken_system_how_a_profitable_company_justifies_laying_off_1400_people_moved_their_jobs_to_mexico/ http://www.salon.com/2016/03/22/snapshot_of_a_broken_system_... "A look at United Technologies’ annual report reveals even more good news: Commercial and industrial products, Carrier’s category, make up over half of UTC’s $56 billion in net sales. Climate, Controls & Security had 3 percent growth in 2015, the highest in the company; it was the only division to increase its profit margin year-over-year. “Organic sales growth at UTC Climate, Controls & Security was driven by the U.S. commercial and residential heating, ventilation and air conditioning (HVAC) and transport refrigeration businesses,” according to page 14 of the report. In other words, air conditioners – what the workers are making in Indianapolis – drove the growth of the best-performing facet of United Technologies’ business."
- icantdrive55 9y ago
  So more money is always the target? Yea--that's fine, but with these profit moves shouldn't come so dam easy to those in charge. The United States provided relatively safe neighborhoods, schools, could leave the house without fear of kidnapping, blah, blah, etc. Then a company decides to make more money where business can do pretty much whatever they want to the enviorment, pay bribes to officials, hire cheap labor, blah, blah, etc.? (I'm not sure if you're for, or against this profit seeking behavior, and I'm not directing this towards you. That said, what bothers me is when they make their "nut" here; and get greedy. I wish their was a federal law stating if you move your company overseas, you need to move your BOD, and all executives right along to whatever chit hole you decided to make more profits. Point being--don't use this country as your first wife/husband. So--call me a liberal, I believe in company ethics. Something we are losing. Something we assume Berkshire Hathaway has nailed down. The reason why we all like Warren Buffet? And what if they arn't a moral company? I don't know? I just read good things about Warren. I don't know all the dirt in everyone's closet.)
- derefr 9y ago

HarryHirsch 9y ago

Mylan and Shkreli are extraordinarily efficient.

pg314 9y ago
No, they aren't. They are just exploiting an (artificial) monopoly. That has nothing to do with efficiency.
- HarryHirsch 9y ago
  So what?! They are operating within the constraints of the market. Before the vulture capitalists swooped in prices were very reasonable for 30 years, the previous owners chose not to exploit their monopoly, then these two increased their efficiency.
  - forgotmysn 9y ago
    they didn't increase efficiency at all, they just increase the amount they were able to squeeze out of the IP. thats not an efficiency vs inefficiency, its n vs n+1.
    - johncip 9y ago
      I think you could make a case that charging the highest price for something that the market will bear corrects an inefficiency in the market. http://www.investopedia.com/terms/i/inefficientmarket.asp http://www.investopedia.com/terms/i/inefficientmarket.asp It's not that they started producing more units, it's that some folks (the ones using the drugs) were taking advantage of a market inefficiency (the insufficiently low price) which when corrected, meant greater returns for Shkreli et al. Just as when a "retail" day trader hits on a system that enables them to make a large amount of money, they're taking advantage of an inefficiency, and, in a way, helping to correct it. It's not pretty, but being ugly doesn't make it inaccurate.
      - forgotmysn 9y ago
        but we're talking about a monopoly. a market inefficiency only occurs if there is competition, a more efficient alternative.
  - valuearb 9y ago
    The patent system is not a free market.

tanderson92 9y ago

Indeed, here is Charlie Munger w/ Jason Zweig: On firms like Berkshire partner 3G Capital, which takes big companies and streamlines them: I’m sensitive to the issue of cutting costs, which usually means a lot of people losing jobs. Rich people end up getting richer and a lot of people get fired. But ultimately, I think we don’t do the world a favor by employing more people than we need for companies to run efficiently. On the whole we advance civilization when companies run better. http://jasonzweig.com/a-fireside-chat-with-charlie-munger/ http://jasonzweig.com/a-fireside-chat-with-charlie-munger/

munificent 9y ago
> On the whole we advance civilization when companies run better. I understand that's a tenet of capitalism and is almost a religious belief beyond question. But, empirically, how do we know that this is actually true?
- Pyxl101 9y ago
  Because efficient companies produce goods and services for lower prices than inefficient companies, which, happening at scale throughout the economy, lowers the cost of living and raises the standard of living for everyone. An increase in the amount of goods and services produced per head is the definition of economic growth, which most of us consider to be a good thing. Improvements to our quality of living essentially require economic growth. Take a listen to this NPR Planet Money podcast (and article) called "The History of Light" [1]. It describes how much it cost to light a room, in terms of a typical day's wages, at various points in history until today: > The history of light is the history of economic growth — of things getting faster, cheaper, and more efficient. In Babylonian times, 4,000 years ago, a day's labor would buy very little light. You could buy enough light to illuminate a room but not for very long. Maybe 10 minutes. It was really expensive. Today, a day's worth of wages can afford to light a room for thousands of hours. This affordability has radically changed our society, mostly for the positive. It's now possible to study and be productive in the evening. Many of the improvements to the efficiency of lighting also enabled cheap heating as well. Another related interesting article is "The $3500 Shirt - A History Lesson in Economics" [2]. This one traces the cost of clothing from the middle ages to today. Consider: why did people used to wear clothing until it became rags? Because clothing was extraordinarily labor-intensive and thus expensive. A single shirt back then might cost $3500 in today's money. Now clothing is a negligible cost for most people in the USA, including the poor. Companies (and individuals) and their desire for efficient production have brought these costs down, and the costs of so many other goods. I've heard it said that today the average person in America has a quality of living substantially better than that of a medieval king. I believe it: with our lighting, heating, and potable water delivered to our homes; sanitary food & restrooms; medical and dental care, etc. -- all available to (mostly) everyone due to low prices. Not to mention the luxuries available to us in our homes like television, music, radio, video games, etc. Cheap spices from everywhere in the world. Food from most everywhere is available at low prices and high quality in local supermarkets. Travel is cheap, and many people can afford to travel virtually anywhere urban in the world within 24 to 48 hours by aircraft - amazing by any historical standard. And it's so reliable we take it for granted. All changes that originate from economic growth. During the industrial revolution, a lot of automation replaced human labor in clothing production. This did have the negative effect of putting the spinsters and weavers and so on out of business, but had the positive effect of making clothing vastly cheaper for everyone. People found new jobs and society continued, and was better off overall. Similarly, the development of the automobile largely put the industry supporting the horse-and-buggy out of business. But everyone was better off overall having fast and cheap transportation. So how do we know that it's true? I suppose we don't have any way of saying in a particular case, but we can look to history to see how innovations that made products and services cheaper have benefited society overall. Perhaps 1000 years in the future, they will trace how much computing a day's wages could buy, and how that went on to transform society too. [1] http://www.npr.org/2014/05/02/309040279/in-4-000-years-one-thing-hasnt-changed-it-takes-time-to-buy-light http://www.npr.org/2014/05/02/309040279/in-4-000-years-one-t... [2] http://www.sleuthsayers.org/2013/06/the-3500-shirt-history-lesson-in.html http://www.sleuthsayers.org/2013/06/the-3500-shirt-history-l... - also discussed on HN [3] [3] https://news.ycombinator.com/item?id=8940950 https://news.ycombinator.com/item?id=8940950

chrisbennet 9y ago

The choice isn't (always) "lay off some workers or go out of business". Instead it's "It's profitable now but it could be even more profitable if we did something that incurred job losses." For example, Carrier was already very profitable when they decided to outsource to Mexico. http://www.salon.com/2016/03/22/snapshot_of_a_broken_system_how_a_profitable_company_justifies_laying_off_1400_people_moved_their_jobs_to_mexico/ http://www.salon.com/2016/03/22/snapshot_of_a_broken_system_... "A look at United Technologies’ annual report reveals even more good news: Commercial and industrial products, Carrier’s category, make up over half of UTC’s $56 billion in net sales. Climate, Controls & Security had 3 percent growth in 2015, the highest in the company; it was the only division to increase its profit margin year-over-year. “Organic sales growth at UTC Climate, Controls & Security was driven by the U.S. commercial and residential heating, ventilation and air conditioning (HVAC) and transport refrigeration businesses,” according to page 14 of the report. In other words, air conditioners – what the workers are making in Indianapolis – drove the growth of the best-performing facet of United Technologies’ business."

icantdrive55 9y ago
So more money is always the target? Yea--that's fine, but with these profit moves shouldn't come so dam easy to those in charge. The United States provided relatively safe neighborhoods, schools, could leave the house without fear of kidnapping, blah, blah, etc. Then a company decides to make more money where business can do pretty much whatever they want to the enviorment, pay bribes to officials, hire cheap labor, blah, blah, etc.? (I'm not sure if you're for, or against this profit seeking behavior, and I'm not directing this towards you. That said, what bothers me is when they make their "nut" here; and get greedy. I wish their was a federal law stating if you move your company overseas, you need to move your BOD, and all executives right along to whatever chit hole you decided to make more profits. Point being--don't use this country as your first wife/husband. So--call me a liberal, I believe in company ethics. Something we are losing. Something we assume Berkshire Hathaway has nailed down. The reason why we all like Warren Buffet? And what if they arn't a moral company? I don't know? I just read good things about Warren. I don't know all the dirt in everyone's closet.)
derefr 9y ago