I wish I had more time to do a thorough blogging and blockquoting of this, but alas: I’ll just say that this long post from Valve’s in-house economist is well worth your time if you’re interested in ways people work together—or ways they could work together—in the 21st century. (For the uninitiated: Valve is a hugely successful video game company that is increasingly well-known for its nonhierarchical, almost anarchist management structure.)
In particular, pay attention to the part where Yanis Varoufakis, the author, mentions
the Coase theorem Ronald Coase’s theory of the firm. (Thanks, Mintie.) In short, Coase says: We establish firms to create zones where negotiation is no longer necessary. Or, in more technical language: …where transaction costs are lower. Imagine you want 1,000 quantum coils attached to 1,000 Zebulon drives. Instead of going through a whole market-based process and like, selecting the independent coil-attachment specialist with the lowest bid… you could just… tell someone who works for you to attach the coils to the drives. It’s easier. It’s faster. There’s less friction.
But the internet, broadly speaking, lowers transaction costs, right? Suddenly you’ve got CoilZone.com, this super-efficient real-time market for coil-attachment services, and it’s like, you sign up and click two buttons and somebody’s coming over on a moped to attach all those coils and you don’t even have to worry about health insurance. That’s awesome, and thus your negotiation-free zone, your little island, gets smaller. This has been happening, over the past few decades, to all companies everywhere—even the very biggest. It’s not just the web that’s small pieces, loosely joined; it’s the whole economy.
There are just tons and tons of internet-based B2B (oh yeah I just typed that) market-makers that are hugely profitable precisely because of Coase’s theory of the firm—because they found a way to lower some transaction cost and shrink the size of those zones, in essence claiming some of that territory for themselves.
But even beyond that, there are ways to lower transaction costs inside a company, too—think of Microsoft Exchange and assure yourself that yes, there are still transaction costs here—and it turns out that’s one of the most interesting implications of Valve’s anarchy. I might write more about this later… in the meantime, read the piece.
Not sure I agree with all of this, but it made my brain zap and crackle—Charlie Stross takes the “if corporations were people, they would be really, really awful people” argument and plays with it a bit:
Corporations do not share our priorities. They are hive organisms constructed out of teeming workers who join or leave the collective: those who participate within it subordinate their goals to that of the collective, which pursues the three corporate objectives of growth, profitability, and pain avoidance. (The sources of pain a corporate organism seeks to avoid are lawsuits, prosecution, and a drop in shareholder value.)
Corporations have a mean life expectancy of around 30 years, but are potentially immortal; they live only in the present, having little regard for past or (thanks to short term accounting regulations) the deep future: and they generally exhibit a sociopathic lack of empathy.
And I like the last line—you could call it the punchline—a lot. It reframes the whole thing in a way that’s weird, fun, and a bit unsettling.
A lot of the big, complicated systems that undergird our economy—banks, airlines, stuff like Social Security—still run on old-fashioned mainframes. There’s still a lot of COBOL code out here. Florian Mueller writes:
At the recent launch of its new mainframe generation — the biggest event of its kind in 20 years — Tom Rosamilia, IBM’s general manager for System z, was so exuberant that he forgot about antitrust and told a group of UK journalists the truth: “Western civilization runs on this system.”
What are some of the key population-scale government computing applications? Other than, e.g., NSA signal processing stuff, I mean. That’s sort of the obvious candidate, and it’s gotten plenty of press. What’s not obvious?
Big ups to the Banksy documentary Exit Through the Gift Shop, which feels very Snarkmarketian to me. The movie unfolds in three distinct chapters, slowly developing an aesthetic and an argument, and finally posing a provocative question, or a few.
The first third of the film uses the lens of aspiring documentarian Thierry Guerra to give us a tour d’horizon of the universe of street art. We hear from a diverse cross-section of street artists from Shepard Fairey to a mosaic artist known as Space Invader to Banksy himself, while we’re watching footage of people taking to rooftops and subway stations to decorate the urban landscape.
Then we delve into the story of Guerra himself – this dude who channels his obsessive impulse to film everything in his life into a thorough record of the street art movement, compiling thousands of hours of footage of artists on the make. For such an ephemeral art form, this archiving is invaluable. Prominent artists cheerfully accommodate Guerra and his omnipresent camera, despite the heightened visibility it brings to activities that might not be entirely licit.
Guerra’s profile rises as the world he’s documenting starts to become more and more celebrated by the mainstream art community, which introduces tension: Street art is almost by definition a critique of mainstream consumer values. The movement rests on this fundamentally anti-consumerist premise of reclaiming private property for public expression. A mural on the side of a building defies our notions of commerce; the canvas can’t easily be carted off and sold, right? So what happens when the art does become property, bought and sold like any other commodity, auctioned off for tens of thousands of dollars at Sotheby’s, pursued by collectors?
The answer: Mr. Brainwash.
Guerra, realizing that his payday is not going to come in the form of a smash hit documentary, decides he’s going to cash in on his work a different way. By now, of course, he’s become a devoted observer of the process by which street artists accrue mountains of hype, use industrial production techniques to replicate their work on a massive scale, and make their subversive and ubiquitous art a sort of viral marketing campaign for their brand. So he takes the logical next step of turning this fundamentally anti-capitalist movement into the ultimate post-industrial capitalist phenom: developing an alter ego he calls “Mr. Brainwash,” who slickly deploys the street art system in a scheme to mint millions overnight.
(Side note: I say “slickly deploys,” but one of the facts the documentary makes hilariously clear is that Guerra is anything but slick. He’s this endearingly inarticulate, possibly kind of dimwitted, organization-challenged geek, basically. In other words, there’s no Evil Genius at work here. Or is there? This is one of the more fun implicit questions the film poses.)
Reviewing the film, a lot of critics have raised the question of whether this is all a monstrous hoax engineered by Banksy. The events in the film – including Mr. Brainwash’s LA art opening – are of course genuine, documented occurrences. But to what extent might Banksy have set up the rules of the game and forced the outcome? Lots of fun speculation to be had there.
If the documentary ended up simply asking “What is art?” it would have been a let-down. (Don’t get me wrong. It gets asked. Warhol comes up more than once.) A more interesting question is, “What is Thierry Guerra’s / Mr. Brainwash’s artistic masterwork?” Is it the footage? The anti-anti-capitalist art opening? The documentary itself, and the worlds it contains?
By the way, Mr. Brainwash lives.
I cite Isaac Asimov’s influence on Paul Krugman a lot, but this is the most complete articulation of it I’ve yet seen—from the New Yorker profile:
Krugman explained that he’d become an economist because of science fiction. When he was a boy, he’d read Isaac Asimov’s “Foundation” trilogy and become obsessed with the central character, Hari Seldon. Seldon was a “psychohistorian”—a scientist with such a precise understanding of the mechanics of society that he could predict the course of events thousands of years into the future and save mankind from centuries of barbarism. He couldn’t predict individual behavior—that was too hard—but it didn’t matter, because history was determined not by individuals but by laws and hidden forces. “If you read other genres of fiction, you can learn about the way people are and the way society is,” Krugman said to the audience, “but you don’t get very much thinking about why are things the way they are, or what might make them different. What would happen if?”
I was an economics major in college, and I’ve been grateful ever since for the few key concepts it drilled into me: things like opportunity cost, sunk cost, and marginal cost. I think about this stuff all the time in my everyday life. Sometimes I consider the marginal cost of, like, making myself another sandwich.
But one of the biggest takeaways was the concept of stock and flow.
Do you know about this? Couldn’t be simpler, and really, it’s not even that much of an a-ha. There are two kinds of quantities in the world. Stock is a static value: money in the bank, or trees in the forest. Flow is a rate of change: fifteen dollars an hour, or three thousand toothpicks a day. Easy. Too easy.
But I actually think stock and flow is the master metaphor for media today. Here’s what I mean:
- Flow is the feed. It’s the posts and the tweets. It’s the stream of daily and sub-daily updates that remind people that you exist.
- Stock is the durable stuff. It’s the content you produce that’s as interesting in two months (or two years) as it is today. It’s what people discover via search. It’s what spreads slowly but surely, building fans over time.
I feel like flow is ascendant these days, for obvious reasons—but we neglect stock at our own peril. I mean that both in terms of the health of an audience and, like, the health of a soul. Flow is a treadmill, and you can’t spend all of your time running on the treadmill. Well, you can. But then one day you’ll get off and look around and go: Oh man. I’ve got nothing here.
But I’m not saying you should ignore flow! No: this is no time to hole up and work in isolation, emerging after long months or years with your perfectly-polished opus. Everybody will go: huh? Who are you? And even if they don’t—even if your exquisitely-carved marble statue of Boba Fett is the talk of the tumblrs for two whole days—if you don’t have flow to plug your new fans into, you’re suffering a huge (here it is!) opportunity cost. You’ll have to find them all again next time you emerge from your cave.
Here’s a case study: my pal Alexis Madrigal here in SF has got the stock/flow balance down. On one end of the spectrum, he’s a Twitter natural and a Tumblr adept. Madrigal’s got mad flow; you plug in, and you get a steady stream of interesting stuff every day. But on the other end of the spectrum—and man, this is just so important—he’s working on a deep, nuanced history of green tech in America. He’s working on a book intended to stand the test of time.
You can tell that I want you to stop and think about stock here. I feel like we all got really good at flow, really fast. But flow is ephemeral. Stock sticks around. Stock is capital. Stock is protein.
And the real magic trick in 2010 is to put them both together. To keep the ball bouncing with your flow—to maintain that open channel of communication—while you work on some kick-ass stock in the background. Sacrifice neither. It’s the hybrid strategy.
So, okay, I was thinking about stock and flow while I was doing the dishes just a second ago, and wondered: Wait. There are all these super-successful artists and media people today who don’t really think about flow. Like, Wes Anderson? Come on. He’s all stock. And he seems to do okay.
But I think the secret is that somebody else does his flow for him. I mean, what are PR and advertising? Flow, bought and paid for. Messages metered out over time. But rewind history and put Wes Anderson on his own—alone in the world—and I don’t think you get the same result. His stock is strong stuff: hugely compelling, utterly unique. But how does he tell people about it?
So if you are in the position to have somebody else handle your flow while you tend to your stock: awesome. But that’s true for almost no one, and will (I think?) be true for even fewer over time, so you need to have your own plan for this stuff.
Anyway: this is not a huge insight, I know. Mostly I just wanted to share the lingo, because it’s been echoing in my head since my first microeconomics course. Today, whenever I put my hands on the keyboard, I’m asking myself: Is this stock? Is this flow? How’s my mix? Do I have enough of both?
Economics has, during its entire history, from the mid-18th century until today, been dominated by only five textbooks. David Warsh lists them and explains:
[F]or the entire history of modern economics, all 250 years of it, from its beginnings during the Enlightenment of the eighteenth century to the present day, the discipline has been dominated by five canonical textbooks — and only five (though, of course, each had many imitators). Those who found compelling the authority of these texts became economists. Those who didn’t became something else — sociologists, political theorists, anthropologists, psychologists, historians, lawyers, reformers, businessmen, religious leaders.
Isn’t that an interesting way of framing it? “Those who found compelling the authority of these texts became economists.” Wonderful phrasing; neat idea, too. The five texts were written by Adam Smith, David Ricardo, John Stuart Mill, Alfred Marshall… and Paul Samuelson, who died recently, and who is the subject of Warsh’s piece.
The piece also includes this fun anecdote, new to me. Samuelson’s epochal text opens with an epigram from Willard Gibbs, a scientist and mathematician: “Mathematics is a language.” The story behind those words, from Muriel Rukeyser:
[Gibbs] would come to meetings — these faculty gatherings so full of campus politics, scarcely veiled maneuvers, and academic obstacle races — and leave without a word, staying politely enough, but never speaking. Just this once he spoke. It was during a long and tiring debate on elective courses, on whether there should be more or less English, more or less classics, more or less mathematics. And suddenly everything he had been doing stood up — and the past behind him, his [philologist] father’s life, and behind that, the long effort and voyage that had been made in many lifetimes — and he stood up, looking down on the upturned faces, astonished to see the silent man talk at last, and he said, with emphasis, once and for all: “Mathematics is a language.”
“And suddenly everything he had been doing stood up.” Jeez. More wonderful language. What an image. “Everything he had been doing stood up.”
I second Nick Kristof’s recommendation of BRAC—the Bangladesh Rural Advancement Committee—as an organization worth giving to. With a name that unsexy, they’ve got to be good, right? In Bangladesh, BRAC is pretty much the government; it provides the support and investment that a good government is supposed to provide, while the “real” government squabbles with itself. Now BRAC is branching out to other countries as well. It’s an amazing organization—and, for good or for ill, I think it’s a peek into the future.
This is terrific: a colorful little map that breaks China down into nine distinct regions. Probably a bit too concise for real China experts, but I found the shorthand revelatory and useful.
And here, the map’s creator slots the regions one-by-one into a list of the world’s most populous countries. Man that is a lot of people.
Here’s the North American analogue for all of Snarkmarket’s Chinese readers! “Ecotopia”—talk about shorthand—but I love it.
Alexis Madrigal has a great piece about warehouse robots over at Wired Science. Here’s a nuance I would not have predicted:
The system adjusts to the nature of the products and workers, too. In a typical [robot warehouse], the humans are placed around the edges of the room. As the robots pick up loads of products and put them back, they adjust the warehouse for greater efficiency. More popular products end up around the edges of the warehouse while more obscure products, like those acid-washed bell bottoms, end up buried deep in the stacks. The self-tuning nature of the system creates big efficiencies.
How cool is that? The warehouse adapts. The physical space becomes a map of the underlying cost of time—which isn’t just about raw distance in this case, but about repetition, too.
I realize this sort of mapping exists elsewhere; I just can’t think of anywhere else where it’s so flexible. For instance, I’m thinking about this view of London that paints both housing cost (in dollars) and travel cost (in minutes) onto the map. Now if only bits of the city could scoot around on robot wheels and rearrange themselves for maximum efficiency…
See also: Matt Jones’ recent talk on time as a material that can be manipulated and designed.