6 ms·

That's more dependent on a firm's monopoly power than scale or wealth. If you're in a competitive market you're forced to innovate. If you're a monopolist you

That's more dependent on a firm's monopoly power than scale or wealth. If you're in a competitive market you're forced to innovate. If you're a monopolist you can just sit there and extract wealth. Which Intel was for a while. By the way, your little theory has support and a name, it's the resource curse in political economics.

dash2 6y ago
I think scale might matter too. Companies are partly public goods problems. Each individual's hard work benefits the whole company. As a result they will undersupply hard work. If the company is size N, they only share 1/N of the total benefit they provide. So, the public goods problem bites harder when companies get big - even holding the level of competition in the market constant.
- robocat 6y ago
  > If the company is size N, they only share 1/N The graph of the distribution for value per person must be wierd, and definitely not flat. Maybe based on a power law, but I am unsure how to model the people that provide negative value, for example bad managers.
  - pclmulqdq 6y ago
    Supposedly, in knowledge work like programming, the distribution follows a pareto distribution: for n people, sqrt(n) produce half the productive output.
  - dash2 6y ago
    Well, the question is how much of the output they get :-) Though actually note that the classic Mancur Olson result is "the exploitation of the strong by the weak". That is, the person who has the largest share of output contributes disproportionately much to the public good. Simple proof: write individual i's marginal benefit from the company's total effort X as s_i f(X) - x_i where s_i is i's share of the output f(X), and x_i is i's own effort. Taking everyone else's effort as given, i will equate marginal benefit of own effort to marginal cost, so that total effort solves s_i f'(X) = 1 equivalently f'(X) = 1/s_i Now suppose the person with the largest share satisfies the above. Then everyone with a smaller share must have f'(X) < 1/s_i and therefore, if they are contributing more than the minimum possible, they have an incentive to reduce their contribution. So, this extreme version has that only the largest "shareholder" does any work. (A more realistic model has a convex cost of effort, so smaller shareholders do something, but they still contribute less than their output share.)
    - robocat 6y ago
      Your assumption is that the organisation is a cooperative - the employees get a share of the output of the organisation. Intel is not a cooperative. Fungible employees (the majority?) are paid a market clearing price (salary) for their effort. The company can derive much more value from an employee and the employee earns very little of the excess (perhaps bonuses to align working incentives).
BurningFrog 6y ago
Also wanted to mention the resource curse. When billions are raining from the sky, whether you do good work or not, the rational plan is to fight over those free resources, rather than work to create new ones.
- FabHK 6y ago
  Aka "Dutch disease" > coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959 https://en.wikipedia.org/wiki/Dutch_disease https://en.wikipedia.org/wiki/Dutch_disease
vagrantJin 6y ago
Countries with lots of minerals in Africa/ South America can tell you stories about the resource curse.
- samsonradu 6y ago
  The 'resource curse' might have the causality wrong though in many circumstances. Maybe those countries would find themselves in a similarly bad state (or worse) without those resources. Maybe their bad state is due to historical reasons - being former colonies with very little power on the world stage - and resources just couldn't help much.
  - nickik 6y ago
    The resources curse really is about staying bad, not turning bad. We must realize that all countries 300-400 years ago were 'bad' by out perspective. Countries with a dominant resources that only found them when they were already developed don't suffer from the 'resource curse'. In such cases not having resources doesn't mean you turn into Switzerland or Canada rather it means that it will be harder for one dominant dictator to hold on to power. In some African countries that are now proto-democracies, dictators simply couldn't hold on to power without easily available resource base. Bruce Bueno de Mesquita work in 'The Logic of Political Survival' and ' The Dictator's Handbook' is quite interesting.
    - tehjoker 6y ago
      Having a certain superpower send funds, training, and arms to right wing militias and established dictators certainly helps maintain the resource curse.
- sgt101 6y ago
  this is a common trope - but Canada has lots and seems ok. Also the USA is the poster child for this; it's arguable that without the California gold rush there would be no USA as this is what is thought to have capitalised the federal government sufficiently to impose order on the west and fight the south.

dash2 6y ago

I think scale might matter too. Companies are partly public goods problems. Each individual's hard work benefits the whole company. As a result they will undersupply hard work. If the company is size N, they only share 1/N of the total benefit they provide. So, the public goods problem bites harder when companies get big - even holding the level of competition in the market constant.

robocat 6y ago
> If the company is size N, they only share 1/N The graph of the distribution for value per person must be wierd, and definitely not flat. Maybe based on a power law, but I am unsure how to model the people that provide negative value, for example bad managers.
- pclmulqdq 6y ago
  Supposedly, in knowledge work like programming, the distribution follows a pareto distribution: for n people, sqrt(n) produce half the productive output.
- dash2 6y ago
  Well, the question is how much of the output they get :-) Though actually note that the classic Mancur Olson result is "the exploitation of the strong by the weak". That is, the person who has the largest share of output contributes disproportionately much to the public good. Simple proof: write individual i's marginal benefit from the company's total effort X as s_i f(X) - x_i where s_i is i's share of the output f(X), and x_i is i's own effort. Taking everyone else's effort as given, i will equate marginal benefit of own effort to marginal cost, so that total effort solves s_i f'(X) = 1 equivalently f'(X) = 1/s_i Now suppose the person with the largest share satisfies the above. Then everyone with a smaller share must have f'(X) < 1/s_i and therefore, if they are contributing more than the minimum possible, they have an incentive to reduce their contribution. So, this extreme version has that only the largest "shareholder" does any work. (A more realistic model has a convex cost of effort, so smaller shareholders do something, but they still contribute less than their output share.)
  - robocat 6y ago
    Your assumption is that the organisation is a cooperative - the employees get a share of the output of the organisation. Intel is not a cooperative. Fungible employees (the majority?) are paid a market clearing price (salary) for their effort. The company can derive much more value from an employee and the employee earns very little of the excess (perhaps bonuses to align working incentives).

BurningFrog 6y ago

Also wanted to mention the resource curse. When billions are raining from the sky, whether you do good work or not, the rational plan is to fight over those free resources, rather than work to create new ones.

FabHK 6y ago
Aka "Dutch disease" > coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959 https://en.wikipedia.org/wiki/Dutch_disease https://en.wikipedia.org/wiki/Dutch_disease

vagrantJin 6y ago

Countries with lots of minerals in Africa/ South America can tell you stories about the resource curse.

samsonradu 6y ago
The 'resource curse' might have the causality wrong though in many circumstances. Maybe those countries would find themselves in a similarly bad state (or worse) without those resources. Maybe their bad state is due to historical reasons - being former colonies with very little power on the world stage - and resources just couldn't help much.
- nickik 6y ago
  The resources curse really is about staying bad, not turning bad. We must realize that all countries 300-400 years ago were 'bad' by out perspective. Countries with a dominant resources that only found them when they were already developed don't suffer from the 'resource curse'. In such cases not having resources doesn't mean you turn into Switzerland or Canada rather it means that it will be harder for one dominant dictator to hold on to power. In some African countries that are now proto-democracies, dictators simply couldn't hold on to power without easily available resource base. Bruce Bueno de Mesquita work in 'The Logic of Political Survival' and ' The Dictator's Handbook' is quite interesting.
  - tehjoker 6y ago
    Having a certain superpower send funds, training, and arms to right wing militias and established dictators certainly helps maintain the resource curse.
sgt101 6y ago
this is a common trope - but Canada has lots and seems ok. Also the USA is the poster child for this; it's arguable that without the California gold rush there would be no USA as this is what is thought to have capitalised the federal government sufficiently to impose order on the west and fight the south.