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Larry Page is right: internal problems dominate large companies. Microsoft is more "mature" corporation and they have much more severe internal problems.

jacques_chester 15y ago
Economists talk about this under the heading of transaction costs. That is, if a perfectly free market is the ideal way to allocate resources, how do we wind up with companies? Remember, a company is essentially a little island of command economics in the wider sea of the market. In the 30s Coase proposed that companies form because it is cheaper to do some things in a command fashion than to pay the "transaction cost" of continuously searching the market for an optimal solution to your problem. For example, it might be cheaper and easier to hire a programmer than to continuously manage a set of programming contractors working on a dozen different little projects. The interesting thing is that it's not a fixed relationship. Information technology reduces the cost of both internal and external transactions: thus we get larger megacorps and more entrepreneurs.
- lionhearted 15y ago
  > Remember, a company is essentially a little island of command economics in the wider sea of the market. There's some truth in there, but it's a stretch. In a true command economy, you can't opt out of the command economy without defecting/revolution/violence. In a company, you can quit and take your labor elsewhere. Likewise, suppliers can stop supplying and buyers can stop buying. Not so with the Commissar's Shoe Producing Command Division.
  - jacques_chester 15y ago
    I'm not sure. You might be conflating command economics with totalitarianism. I'm not an economist so I can't be sure. In terms of historical examples of command economies, yes, they've lacked the ability of labour to walk away. Indeed one of the first things the USSR did was reintroduce a form of serfdom -- workers were bonded to their enterprise and couldn't move without permission. A good pop-econ/narrative read on the history of Soviet economics is Red Plenty by Francis Spufford.
    - joelhaus 15y ago
      Calling a company an "island of command economics" is really just a harsh way of calling out the overly bureaucratic nature of many larger organizations, but the idea that a perfectly free market exists now or can ever come into existence is really just a fairy tale. The primary purpose of the notion of a perfectly free market is to make it easier for economists to publish theoretic papers and so politicians have economic issues to demagogue. It might also help to distinguish between the micro-economic and macro-economic issues raised above. While the two are dependent, they tend to approach problems from opposite ends of the transactional chain. Generally, a company's goal is micro-economic (to maximize profits), while governments are more concerned with macro-economic issues like employment and inflation (via fiscal/monetary policy). That said, IMO, the transaction costs are a symptom of the corporate rot that we see when a company rests too much on its laurels. Your point about the relationship between technology and company formation is also very well taken... it does seem that we are at a tipping point where technology is having a very pronounced impact on business decisions.
      - jacques_chester 15y ago
        You may have noticed that in my grandparent post I did not posit whether or not a "perfect free market" exists. Indeed the existence of the firm is seen as evidence that it does not, which is how Coase came to think about the origins of the firm in the first place. I don't think any serious economist has ever said a perfect market exists. But lots of folk sure like to beat that strawman up.
tlogan 15y ago
That is not true. Why internal problems don't dominate Amazon? Why interal problems don't dominate Oracle (100K+ people)? Google is not so big and old to claim that is the problem. I think Google's problem is lack of leadership and vision.
- dennisgorelik 15y ago
  Why do you think internal problems are not dominant in Amazon and Oracle?
  - tlogan 15y ago
    First hand experience (not very recent, but I doubt it changed a lot). For example, Oracle is very customer focused in many teams. I heard many times: "The only person responsible your salary is customer". That really keeps things moving smooth. I understand problem with Google: all these products and projects are free, so it is really hard to put $$ sign on them. Politics emerges because it is hard to decide when a paying customer is not your main objective.

jacques_chester 15y ago

Economists talk about this under the heading of transaction costs. That is, if a perfectly free market is the ideal way to allocate resources, how do we wind up with companies? Remember, a company is essentially a little island of command economics in the wider sea of the market. In the 30s Coase proposed that companies form because it is cheaper to do some things in a command fashion than to pay the "transaction cost" of continuously searching the market for an optimal solution to your problem. For example, it might be cheaper and easier to hire a programmer than to continuously manage a set of programming contractors working on a dozen different little projects. The interesting thing is that it's not a fixed relationship. Information technology reduces the cost of both internal and external transactions: thus we get larger megacorps and more entrepreneurs.

lionhearted 15y ago
> Remember, a company is essentially a little island of command economics in the wider sea of the market. There's some truth in there, but it's a stretch. In a true command economy, you can't opt out of the command economy without defecting/revolution/violence. In a company, you can quit and take your labor elsewhere. Likewise, suppliers can stop supplying and buyers can stop buying. Not so with the Commissar's Shoe Producing Command Division.
- jacques_chester 15y ago
  I'm not sure. You might be conflating command economics with totalitarianism. I'm not an economist so I can't be sure. In terms of historical examples of command economies, yes, they've lacked the ability of labour to walk away. Indeed one of the first things the USSR did was reintroduce a form of serfdom -- workers were bonded to their enterprise and couldn't move without permission. A good pop-econ/narrative read on the history of Soviet economics is Red Plenty by Francis Spufford.
  - joelhaus 15y ago
    Calling a company an "island of command economics" is really just a harsh way of calling out the overly bureaucratic nature of many larger organizations, but the idea that a perfectly free market exists now or can ever come into existence is really just a fairy tale. The primary purpose of the notion of a perfectly free market is to make it easier for economists to publish theoretic papers and so politicians have economic issues to demagogue. It might also help to distinguish between the micro-economic and macro-economic issues raised above. While the two are dependent, they tend to approach problems from opposite ends of the transactional chain. Generally, a company's goal is micro-economic (to maximize profits), while governments are more concerned with macro-economic issues like employment and inflation (via fiscal/monetary policy). That said, IMO, the transaction costs are a symptom of the corporate rot that we see when a company rests too much on its laurels. Your point about the relationship between technology and company formation is also very well taken... it does seem that we are at a tipping point where technology is having a very pronounced impact on business decisions.
    - jacques_chester 15y ago
      You may have noticed that in my grandparent post I did not posit whether or not a "perfect free market" exists. Indeed the existence of the firm is seen as evidence that it does not, which is how Coase came to think about the origins of the firm in the first place. I don't think any serious economist has ever said a perfect market exists. But lots of folk sure like to beat that strawman up.

tlogan 15y ago

That is not true. Why internal problems don't dominate Amazon? Why interal problems don't dominate Oracle (100K+ people)? Google is not so big and old to claim that is the problem. I think Google's problem is lack of leadership and vision.

dennisgorelik 15y ago
Why do you think internal problems are not dominant in Amazon and Oracle?
- tlogan 15y ago
  First hand experience (not very recent, but I doubt it changed a lot). For example, Oracle is very customer focused in many teams. I heard many times: "The only person responsible your salary is customer". That really keeps things moving smooth. I understand problem with Google: all these products and projects are free, so it is really hard to put $$ sign on them. Politics emerges because it is hard to decide when a paying customer is not your main objective.