Quotulatiousness

February 11, 2021

Tom Brady’s Super Bowl success has outlasted many titans of corporate America

Filed under: Business, Economics, Football, History, USA — Tags: , , , , , — Nicholas @ 05:00

Despite the headline, this isn’t really about the NFL, Tom Brady or the S*per B*wl, it’s about a key factor in free market economies: creative destruction.

“Blockbuster store closing sale” by Consumerist Dot Com is licensed under CC BY 2.0

Consider some of the names that bought Super Bowl airtime during Brady’s first rodeo in January 2002: AOL, Blockbuster, Radio Shack, Circuit City, CompUSA, Sears, Yahoo, VoiceStream Wireless, and Gateway Computers.

The Titans of Yesterday

Notice a theme? That list features some companies we saw in Captain Marvel, the 2019 hit movie that nailed 90s nostalgia and reminded us how fast the world had changed. Like when Blockbuster Video stores were still a thing.

For those who may not recall, when Brady was winning his first Super Bowl, Blockbuster was approaching its peak. In 2004, it operated 9,094 stores and employed some 84,300 people. The company was pulling in $6 billion in revenue annually and looked invincible. Today, a single Blockbuster store remains open — in the world.

Remember RadioShack? Once upon a time, it seemed as if you could find one of their brick-and-mortar stores in every corner of the USA. Not anymore. In 2015, RadioShack filed for Chapter 11 bankruptcy, in large part because of those many store locations, which cannibalized revenues.

Sears, one of the historic giants of retail, managed to make it to 2018 before announcing its bankruptcy. Its stores continue to close so fast, it’s hard to tell how many remain in operation. (The best guess is about 60.)

It’s sometimes difficult to remember that the titans of industry aren’t always the same companies from year to year, and the sector-dominating company today might well be begging for a bailout (or demanding protection from uppity new competitors) only a few years down the way.

Some might see the collapse of Blockbuster, Sears and company as a sign of something terribly wrong with our economic system. After all, Blockbuster alone paid rent at tens of thousands of properties and employed tens of thousands of workers. Sears was the largest American retailer (by far) for decades.

Watching the companies we once shopped at flounder and fail can be surprising, jarring even. But a closer look shows this cycle is not unusual and is actually the sign of a healthy market economy, not a dysfunctional one. What may seem like pure destruction actually clears the way for economic innovation and renewal. “Creative destruction” is how the economist Joseph Schumpeter (1880-1950) characterized business failure in a free market.

As economist Mark Perry points out, companies on top have a very hard time staying on top. Perry, a scholar at the American Enterprise institute and a professor of economics at the University of Michigan’s Flint campus, compared the 1955 Fortune 500 companies to the 2019 Fortune 500. He found that just 52 were still on the list six decades later.

I spent most of my working career in the software business, and many of the companies I’ve worked for over the years aren’t in business any more (my first job out of school was with Northern Telecom … remember them?). Software is a particularly fast-cycling industry, but it’s true of the economy as a whole at a slightly more sedate pace.

December 16, 2020

QotD: Distorting the history of America’s “Gilded Age”

Filed under: Economics, Education, Government, History, USA — Tags: , , , , — Nicholas @ 01:00

We study history to learn from it. If we can discover what worked and what didn’t work, we can use this knowledge wisely to create a better future. Studying the triumph of American industry, for example, is important because it is the story of how the United States became the world’s leading economic power. The years when this happened, from 1865 to the early 1900s, saw the U.S. encourage entrepreneurs indirectly by limiting government. Slavery was abolished and so was the income tax. Federal spending was slashed and federal budgets had surpluses almost every year in the late 1800s. In other words, the federal government created more freedom and a stable marketplace in which entrepreneurs could operate.

To some extent, during the late 1800s — a period historians call the “Gilded Age” — American politicians learned from the past. They had dabbled in federal subsidies from steamships to transcontinental railroads, and those experiments dismally failed. Politicians then turned to free markets as a better strategy for economic development. The world-dominating achievements of Cornelius Vanderbilt, James J. Hill, John D. Rockefeller, and Charles Schwab validated America’s unprecedented limited government. And when politicians sometimes veered off course later with government interventions for tariffs, high income taxes, anti-trust laws, and an effort to run a steel plant to make armor for war — the results again often hindered American economic progress. Free markets worked well; government intervention usually failed.

Why is it, then, that for so many years, most historians have been teaching the opposite lesson? They have made no distinction between political entrepreneurs, who tried to succeed through federal aid, and market entrepreneurs, who avoided subsidies and sought to create better products at lower prices. Instead, most historians have preached that many, if not all, entrepreneurs were “robber barons”. They did not enrich the U.S. with their investments; instead, they bilked the public and corrupted political and economic life in America. Therefore, government intervention in the economy was needed to save the country from these greedy businessmen.

Burton W. Folsum, “How the Myth of the ‘Robber Barons’ Began — and Why It Persists”, Foundation for Economic Education, 2018-09-21.

October 29, 2020

How to fix the CBC

Filed under: Business, Cancon, Government, Media — Tags: , , , — Nicholas @ 03:00

… aside from cutting off the massive subsidies from the federal government, which would be my preferred solution if “nuke it from orbit” isn’t a viable choice. Let it sink or swim as a purely private media entity — I’d be betting on the “sink”, personally because they don’t currently have to compete thanks to their funding from the feds and are not noted for their quick adaptation skills. However, Peter Menzies isn’t quite as anti-CBC as I am:

In a recent piece here at The Line, I lamented the current status of the CBC. That’s easy enough to do, but it’s fair to ask what can actually be done to fix it. These ideas don’t provide all the answers but, implemented with conviction and speed, here’s where to start. Because there are some things that can be done, and relatively quickly, to revitalize the institution: the CBC may well be hell-bent on its own destructive dualism but clarifying its role and purifying its soul are still possible by getting it out of the advertising business and turning it into a proper public media.

Right now, the CBC is neither fish nor fowl. Sometimes, as with radio, it is a popular public broadcaster. At others, with its television channels, it fancies itself a commercial broadcaster, albeit a publicly-funded and relatively unpopular one. It plows both of those personalities into its commercial online operations and supplements them with reportage of the kind traditionally associated with newspapers. Like a creature of mythology, it shape-shifts through all of these roles as best suits its needs and moods.

On top of that, its OMG obsession with Trump’s America has drawn it far away from its content mandate to ensure Canadians learn about each other wherever they live in this vast and beautiful country. While its performance indicates otherwise, CBC’s purpose is not to secure a large audience share in the GTA or, in French, in Montreal, in order to earn more revenue. Nor is CBC News Network’s mandate to compete with CNN. The Corp’s raison d’etre, as defined in legislation, is to tell Canadians each other’s stories — even if the GTA and Montreal don’t care.

The only way to purify the CBC then, is to ban it — once and for all — from collecting advertising revenue from domestic consumption of its product. As its radio operations are already advertising-free this means no more ads on its TV or websites. Done. Finished.

September 3, 2020

Fallen Flag — The Great Northern Railway

Filed under: Business, Cancon, History, Railways, USA — Tags: , , , , , , , — Nicholas @ 05:00

This month’s Classic Trains featured fallen flag is an American railway that definitely deserved to call itself “great”, James J. Hill’s Great Northern Railway. Hill was noteworthy as the only “Robber Baron” of that era who was scrupulous in avoiding government entanglements (including grants, loans, subsidies, and other forms of money-with-political-strings-attached), building his entire railway system using private funds and rational profit-oriented economic decision-making (the other transcontinental lines often over-built to claim higher subsidies or added money-losing branch lines to please powerful politicians). The result was that when economic hard times hit the railway business, his was the only transcontinental that never needed to declare bankruptcy.

In an earlier post, Dane Stuhlsatz summarized the GN’s engineering:

Hill’s line […] was methodically surveyed and built, on the shortest routes possible, with the least gradient possible, and using the best steel and other materials on the market at the time. Rather than political largess, Hill made his decisions based on profit and loss. But, for all the efficiency that Hill built into his line — he was able to transport across the country faster, cheaper, and with less maintenance costs than could the UP and CP — arguably the most important aspect for the viability of his business was the freedom to conduct business untethered by the strings that accompanied government subsidies.

Route map of the Great Northern Railway, circa 1920. Red lines are Great Northern trackage; dotted lines are other railroads.
Map by Elkman via Wikimedia Commons.

George Drury outlines the origins of the railway:

In 1857, the Minnesota & Pacific Railroad was chartered to build a line from Stillwater, Minnesota, on the St. Croix River, through St. Paul and St. Cloud to St. Vincent, in the northwest corner of the state. The company defaulted after completing a roadbed between St. Paul and St. Cloud, Minnesota, and its charter was taken over by the St. Paul & Pacific Railroad, which ran its first train between St. Paul and St. Anthony (now Minneapolis) in 1862.

For financial reasons the railroads were reorganized as the First Division of the St. Paul & Pacific. Both StP&P companies were soon in receivership, and Northern Pacific, with which the StP&P was allied, went bankrupt in the Panic of 1873.

Canadian-born “Robber Baron” James J. Hill (1838-1916) in 1914.

In 1878 James J. Hill and an associate, George Stephen, acquired the two St. Paul & Pacific companies and reorganized them as the St. Paul, Minneapolis & Manitoba Railway (“the Manitoba”). By 1885 the company had 1,470 miles of railroad and extended west to Devils Lake, North Dakota. In 1886 Hill organized the Montana Central Railway to build from Great Falls, Montana, through Helena to Butte, and in 1888 the line was opened, creating in conjunction with the StPM&M a railroad from St. Paul to Butte.

In 1881 Hill took over the 1856 charter of the Minneapolis & St. Cloud Railroad. He first used its franchises to build the Eastern Railway of Minnesota from Hinckley, Minnesota, to Superior, Wisconsin, and Duluth. Its charter was liberal enough that he chose it as the vehicle for his line to the Pacific. He renamed the road the Great Northern Railway; it then leased the Manitoba and assumed its operation.

[…]

Even before completion of the route from St. Paul, the Great Northern opened a line along the shore of Puget Sound between Seattle and Vancouver, British Columbia, in 1891. In the years that followed, Hill pushed a number of lines north across the international boundary into the mining area of southern British Columbia in a running battle with Canadian Pacific. In 1912 GN traded its line along the Fraser River east of Vancouver to Canadian Northern for trackage rights into Winnipeg.

Great Northern gradually withdrew from British Columbia after Hill’s death. In 1909 the Manitoba Great Northern Railway purchased most of the property of the Midland Railway of Manitoba (lines from the U.S. border to Portage la Prairie and to Morden), leaving the Midland, which was jointly controlled by GN and NP, with terminal properties in Winnipeg. The Manitoba Great Northern disposed of its rail lines in 1927. They were later abandoned.

Postcard photo of the Great Northern Railway’s “Empire Builder” streamliner between Everett and Seattle, Washington, circa 1963.
Great Northern Railway postcard via Wikimedia Commons.

The Great Northern and Northern Pacific lines agreed to a merger in 1901 (both lines were controlled by Hill) but the plan was vetoed by the Interstate Commerce Commission. A second attempt in the 1920s after Hill’s death was again turned down by the regulator unless the combined company divested ownership of the Chicago, Burlington & Quincy which was both railways’ connection from Minneapolis to Chicago. It was only on the final attempt in 1970 that the deal gained the government’s grudging approval and the Great Northern, Northern Pacific, and CB&Q merged to form the Burlington Northern.

August 29, 2020

Recreating British Railways?

Filed under: Britain, Business, Economics, Government, Railways — Tags: , , , , — Nicholas @ 05:00

Adrian Quine looks at the long-term results of the partial privatization of British Railways, and the current British government’s options to address some of the problems:

Wikimedia caption – “This is the Bring Back British Rail, a reverse image of the old BR logo, (now used by the TOC’s) to show we are heading the wrong way with Rail in the UK”

If there is one thing free marketeers and large state socialists agree on, it would be the terrible state/private hybrid ownership structure of our railways currently supported by the government. While large state socialists won’t be happy until the private sector is squeezed out of the system, market liberals view the Conservative government’s actions as creeping renationalisation.

The private-sector entrepreneurs that built many of Britain’s railways in the 19th century had – through a process of market discovery – settled on vertical integration, with the same firm owning the track and operating the trains. But, when railways were returned to private sector in the late 1990s, the government created one national infrastructure company (Railtrack), 25 train-operating companies (TOCs), 3 freight operating companies, 3 rolling-stock leasing companies, 13 infrastructure service companies and other support organisations. The Office of Passenger Rail Franchising was tasked with selling franchises to the TOCs, while the Office of the Rail Regulator (ORR) regulated the infrastructure. This artificial and fragmented structure was designed to give the impression of competition.

Despite these constraints, in the early days of John Major’s flawed privatisation some of the more enterprising private train operators managed to bring innovation to the sector, including improved marketing and very low-cost “yield managed” advance fares. Where allowed, competition between different operators brought improved customer service, additional direct trains and lower ticket prices. However, the flaws in the initial privatisation soon became apparent with failed franchises leading to increased government intervention and renationalisation by subsequent governments.

While attempts were made to downplay the significance of July’s decision by the Office of National Statistics to put train operators on the public balance sheet, it is in fact only the latest in a worrying string of signals about the direction in which the railway and Boris Johnson’s government are headed. In June, the transport secretary Grant Shapps announced to a parliamentary select committee plans to introduce concessions across the rail network. Private operators will simply be paid a set fee to provide a basic service – another nail in the coffin for commercial investment or innovation.

Attention is now turning to what the government will do when the current “Emergency Measures Agreements” – hastily put in place to ensure trains kept running when passenger numbers nosedived by 95% as lockdown began – comes to an end in September.

An InterCity 125 power car in British Rail livery at Manchester Piccadilly in October 1976.
Photo by Dave Hitchborne via Wikimedia Commons.

August 20, 2020

QotD: Manipulating minimum wage laws to harm your competitors

Filed under: Business, Economics, Government — Tags: , , , , — Nicholas @ 01:00

I would be very surprised if careful research of the history of this Oregon statute did not reveal a producer group — or producer groups — who benefitted materially from the minimum-wage-induced stifling of competition.

The logic of such rent-creating legislation is plain: producer group A competes for many of the same customers against producer group B. Producer group A, however, uses for its production a mix of inputs (most importantly, capital and labor) that differs from the mix used by producer group B. Also, producer group B might compete most effectively against producer group A not by producing outputs as nearly identical as possible to that of A but, instead, by producing “substitute” goods or services that sell at prices lower than those charged by producer group A.

For example, producer group A might consist of locally owned restaurants with tablecloths and serving food freshly prepared by skilled chefs, while producer group B consists of chain restaurants serving food less exquisite but priced much lower. Members of producer group A are upset that producer group B is competing successfully for some diners who would likely otherwise eat more frequently at the restaurants of producer group A. What are the members of producer group A to do?

They could accept the fact that competition is not tortious — indeed, that economic competition is healthy for the economy at large — and do nothing other than compete harder to win more consumer patronage. That’d be the honest and honorable path to take. But government is in the picture, standing ready to escort those with little interest in honesty and honor down the rent-seeking path.

“So just pass legislation outlawing chain restaurants in our state,” suggests the leader of producer group A.

“Wish I could,” responds Sen. Slimey, “but that’s too blatant. Plus, it might not pass muster with the courts. But I’ve got an alternative plan that’s just as good.”

“Do tell!” exclaims the leader of producer group A.

“Well, I understand,” replies Sen. Slimey, “that the restaurants run by producer group B use many more low-skilled workers in their kitchens than your restaurants use.”

“That’s correct. We serve only fine food, so we hire experienced, high-skilled chefs, whose market wages are high.”

“So,” observes Sen. Slimey, “let’s enact a statute that raises the minimum wage above the average wage now paid to the average worker in producer group B’s restaurants, but lower than the average wage paid to workers in your — producer group A’s — restaurants.”

“Brilliant!” declares the leader of producer group A, who sees immediately that, while the minimum-wage legislation will on its face — de jure — apply to all restaurants, it will in fact have a differentially harsh effect on the restaurants in producer group B. The minimum wage will artificially raise producer group B’s costs of operation, causing them to reduce their outputs. One consequence of producer group B’s reduced outputs will be artificially increased demand for meals served at producer group A’s restaurants.

Sen. Slimey smiles, knowing that the news media, as well as most of the intellectuals in town, will applaud him for his apparent humanity and “Progressive” values. It’s a win-win for Sen. Slimey and for members of producer group A. And too few people will pay close-enough attention to the members, workers, and customers of producer group B to suspect that Sen. Slimey is anything other than a socially conscious public servant.

Don Boudreaux, “Doing Bad By Pretending to Do Good”, Café Hayek, 2018-05-13.

August 2, 2020

QotD: Marx’s imperfect economic understanding

Filed under: Economics, History, Quotations — Tags: , , , — Nicholas @ 01:00

We’re at the 200th anniversary of Karl Marx’s birth – also the 201st of Ricardo’s publication, the 242nd of Smith’s Wealth of Nations. And it has to be said that the latter two were more perceptive analysts of the human condition and also contributed vastly more to human knowledge and happiness. Most of the bits that Marx got right in economics were in fact lifted from those other two. The one big thing he got wrong was not to believe them about markets.

We can find, if we look properly, Marx’s insistences of how appalling monopoly capitalism would be in Smith. They’re both right too, it would be appalling. But we do have to understand what they both mean by this. In modern terms they mean monopsony, more specifically the monopoly buyer of labour. What is it that prevents this? Competition in the market among capitalists for access to the labour they desire to exploit. That very competition decreasing the amount of grinding of faces into the dust they’re able to do. Henry Ford’s $5 a day is an excellent example of this very point.

Ford wanted access to the best manufacturing labour of his time. He also wanted to have a lower turnover of that labour, lower training costs. So, he doubled wages (actually, normal wages plus a 100% bonus if you did things the Ford Way) and got that labour. At which point all the other manufacturers had to try and compete with those higher wages in order to get that labour they wanted to expropriate the sweat of the brow from. Marx did get this, he pointed out that exactly this sort of competition, in the absence of a reserve army of the unemployed, is what would raise real wages as productivity improved.

Smith also didn’t like the setting of wages as it precluded just such competition and such wage rises.

Where Marx went wrong was in not realising this power of markets. He knew of them, obviously, understood the idea, but just didn’t understand their power to ameliorate, destroy even, that march to monopoly capitalism.

[…]

The thing we really need to know on this bicentenary about Karl Marx is that he was wrong. He just never did grasp the power of markets to disrupt, even prevent, the tendencies he saw in capitalism. Specifically, and something we all need to know today, the power of competition among capitalists as the method of improving the lives of all us wage slaves. You know, that’s why we proletariat today, exploited as we are and ground into the dust, are the best fed, longest lived and richest, in every sense of the word, human beings who have ever existed. Something which is, if we’re honest about it, not a bad recommendation for a socio-economic system really. You know, actually working? Achieving the aim of improving the human condition?

Tim Worstall, “Marx At 200 – Yes, He Was Wrong, Badly Wrong”, Continental Telegraph, 2018-05-04.

December 28, 2019

American railways are simultaneously world-beating and terrible

Filed under: Business, Economics, Government, Railways, USA — Tags: , , , , — Nicholas @ 03:00

That’s because, as Sean Smith and Peter Earle point out, there are two very different entities running on America’s rails:

Burlington Northern Santa Fe (BNSF) locomotive 5399, Kansas City Southern (KCS) 4807, and 1890 westbound on the BNSF Emporia Sub near Timberland Blvd West of Northgate Street in Olathe, Kansas.
Photo by Tyler Silvest via Wikimedia Commons.

American railways are the envy of the world.

Many might shake a collective head at that statement. In the case of passenger rail that is an appropriate reaction. Since it was pieced together – a government-constructed Franken-rail system built of numerous bankrupt railways which were essentially nationalized – Amtrak has been a reliable money sink, losing tens of billions of dollars since 1970.

Any traveler that has used Amtrak to any significant extent has firsthand experience with the crumbling infrastructure, frequent delays, and general unpleasantness that accompanies U.S. passenger rail service. Even the oft-cited bright spot of Amtrak, the “high speed” Acela system (which shuttles between Boston and Washington D.C) pales in comparison when compared to high-end passenger rail systems in Western Europe, Japan, and China.

Bullet trains routinely travel at least 200 mph, whereas Acela trundles along at a pedestrian 84 mph, and there is no indication (and probably no intention) of that gap closing anytime soon.

U.S. passenger rail services in general are money-losing and antiquated versus their global counterparts, an inarguable (and to public transport proponents, embarrassing) fact. Passenger rail is just one part of the story, and serves as an excellent example of how not to manage a rail system. In fairness, efforts to turn Amtrak around (mainly through aggressive cost cutting) do seem to be having an impact, as current year losses total a shade under $30 million. It’s an admirable effort to be sure, but decades of losses, poor service, and general mismanagement cannot be ignored.

The U.S. freight railway system, conversely, is the envy of the world, and this is not hyperbole or chest thumping; the facts back it up. Since the Staggers Act of 1980, which deregulated freight rail, improvements have been substantial. U.S. freight railways carry 81% more ton-miles of freight, and costs have fallen 46%. (It isn’t common for an industry to increase its capacity by 81% while reducing costs by nearly half.) That level of success has even been noted by the Community of European Railway and Infrastructure Companies, which might be surprising, given the common assumption that Europe has a monopoly on rail excellence.

Compared side by side, it seems a conundrum: Amtrak limps along, still relying upon billions of dollars worth of taxpayer-financed subsidies, while U.S. freight railways evince growing profitability and capacity amid rapidly falling costs. Why are U.S. freight rails so profitable when U.S. passenger rail – sometimes traveling the same routes, on some of the same rails – remains a perennial money pit?

New Amtrak Viewliner diner Atlanta deadheading on the eastbound Capitol Limited at Point of Rocks in November 2017.
Photo by Mark Levisay via Wikimedia Commons.

November 30, 2019

QotD: Comparative advantage

Filed under: Business, Economics, Quotations, USA — Tags: , , , — Nicholas @ 01:00

Business schools, which focus naturally on the fortunes of the individual firm, teach that “competitiveness” is all. They believe it follows that government, not price signals from the world economy, should choose winners. The economists in the business schools have had hard time persuading their colleagues that the pattern of trade and specialization is determined, on the contrary, by “comparative advantage,” which has nothing to do with absolute advantage, and which professors of management and of history regularly mistake it for. Pakistan exports clothing to the United States, the economists preach (without much effect on editorial boards and politicians), not because it is better per hour at making socks and sweaters but because it is comparatively better at them than at making jet airplanes and farm tractors.

Deirdre McCloskey, Bourgeois Equality, 2016.

May 18, 2019

Tim Worstall lists the benefits of a hard Brexit

Filed under: Britain, Economics, Europe — Tags: , , , , — Nicholas @ 05:00

In the Continental Telegraph, Tim Worstall responds to a demand for a list of the benefits of a hard Brexit:

1) How will you protect UK business from dumping?

We won’t. The aim, purpose and intention of trade is to gain access to those things which Johnny Foreigner makes better, cheaper, faster – pick any two of three – than our own domestic producers do. Given that the aim of an economy is to make the people, consumers, as well off as the constraints of the real world allow, we wouldn’t protect domestic producers from anything. Shape up or go bust.

As even the Treasury’s briefing on the costs and benefits of Brexit said, competition from trade is exactly what incentivises domestic producers to become more productive.

So, we don’t protect from dumping and the people of Britain become richer. The problem with this is?

2) What will you do for those who lose their jobs because the businesses that employ them are undermined by WTO rules?

Exactly the same as we do for anyone else who loses their job for any other reason. The economy destroys some 10% of all jobs every year – some 3 million – and another 10% are generated newly as well. That’s just what labour market churn is. We have a welfare system for the interim and people who lose jobs because of Brexit or WTO do exactly as everyone else, get another job with the welfare state as the backstop.

And it’s important to note how new job creation works. It isn’t that we must plan what those jobs are before the old disappear. It’s the availability of the newly employable labour which generates the testing of what should be done next.

3) What will you do on the Northern Ireland border?

Lie.

We have pointed this out before:

Our answer should be “Yes.” We agree that we are leaving, that we have put in place that hard border. Then we do absolutely nothing above what we already do. People come and go as they wish, carrying what goods they can, and we do nothing. Except, as we already do, we keep an eye on those moving things on an industrial scale and have our little customs and tax chats with them away from that line on the map.

What other people wish to do on their side of that line is entirely up to them. We will do, as we’ve always done when in our right minds, what is useful and beneficial to us. It’s somewhat unfashionable these days to talk of the empire but it’s still true that we had it. Often because we’re rather good at this lying, cheating and dissembling. We should carry on. So, there’s the border, as it is today. And?

May 15, 2019

QotD: Women competing against other women

Filed under: Health, Quotations — Tags: , , — Nicholas @ 01:00

There are women out there who still see dressing to please a man as some sort of Stockholm syndrome thing — participating in your own (flouncy, spaghetti-strapped) subjugation. So, it’s possible that those advising you “Don’t change for a man!” are just trying to help you be a modern and empowered woman. Of course, one could argue that actually being a modern and empowered woman means you don’t have to dress like you’re hoping to get a call to clean out a sewer line.

Maybe those in your advice coven really do believe they’re acting in your best interest. Maybe. Social psychologists Roy Baumeister and Jean Twenge report that it’s widely believed that men drive the “cultural suppression of female sexuality” — which could include shaming women for how they dress. However, in reviewing the research, they make a persuasive case that it’s primarily women (often without awareness of their motives) who work to “stifle each other’s sexuality.”

This is right in keeping with research on female competition. While men fight openly — “Bring it! I will ruin you!” — women take a sneakier approach. As female competition researcher Tracy Vaillancourt explains it, women fight for their interests using “indirect aggression,” like gossip, mean looks, disparaging remarks, and other underhanded tactics to “reduce the mate value of a rival.” Underhanded tactics? You know — like suggesting you’re selling out womankind if you wear a skirt or winged eyeliner.

Amy Alkon, “Casual Coroner”, The Science Advice Goddess, 2016-09-20.

April 4, 2019

Of course Facebook is now in favour of government regulation … it’ll keep out their competition

Filed under: Bureaucracy, Business, Government, USA — Tags: , , , , , — Nicholas @ 05:00

The recent calls for the government to regulate social media got support from Mark Zuckerberg, which seems to have surprised some in the media. It’s not at all uncommon for established firms to not only welcome government oversight but to actively support it — because it’s a highly effective strategy to strangle smaller competitors and keep new competitors from entering the field:

On Saturday, Mark Zuckerberg appealed to the government for increased regulation of the internet including his company Facebook. According to Zuckerberg, increased government action is needed to protect society from harmful content, ensure election integrity, protect people’s privacy, and to guarantee data portability. If enacted, the government would possess a wide range of control over internet businesses. For Zuckerberg, this is for the public’s best interest.

But make no mistake about it, Zuckerberg’s cries for regulation is not an appeal to his humanitarianism. On the other hand, it solves glaring issues that Facebook has faced since the 2016 election.

[…]

With increased government oversight, Facebook’s leadership will finally be able to pass the buck to someone else. The government will provide them with a clear set of rules that they will be accountable for. Any negative press coverage that occurs outside of those guidelines, will not be attributable to their company but to the rule-making body of the government. This will allow Facebook’s leadership to regain credibility within a clearly definable framework that they are not responsible for creating.

But perhaps Zuckerberg’s appeal for regulation is even more cunning. Government regulation will undoubtedly be met with higher costs. Internet companies will have to spend more on staffing to be in compliance with the increased burdens implemented by the rule-making body. We saw this play out in the banking industry after the Great Recession. A study conducted last year found that since 2009, banks have been fined a total of $345 billion dollars in penalties and noncompliance costs. Further, another study found that in 2016 banks spent $100 billion dollars on regulatory compliance alone.

Large internet companies like Facebook and Google will easily absorb the strain of increased regulatory costs. It is the smaller businesses that will feel the financial squeeze. With increased regulatory compliance spending, smaller startups will face an even bigger hill to climb to compete with the likes of Facebook.

Another “feature” of government regulation is what is known as “regulatory capture”, as the regulating body and the regulated organizations, after an initial period of ostentatious “conflict”, settle down into a cosy symbiotic relationship … in only a few years, many of the regulatory staff will find themselves working for one of the regulated organizations, and vice-versa. The regulatory body will — like all bureaucracies — start to care more about keeping itself alive and growing than about the original reason it was set up. Small organizations will stall or go extinct, and only the existing dinosaurs will carry on, protected from competition by their regulator’s powers.

March 3, 2019

QotD: Four ways to corporate monopoly

Filed under: Business, Media, Quotations, Technology — Tags: , , , , , , — Nicholas @ 01:00

1. Proprietary technology. This one is straightforward. If you invent the best technology, and then you patent it, nobody else can compete with you. Thiel provocatively says that your technology must be 10x better than anyone else’s to have a chance of working. If you’re only twice as good, you’re still competing. You may have a slight competitive advantage, but you’re still competing and your life will be nasty and brutish and so on just like every other company’s. Nobody has any memory of whether Lycos’ search engine was a little better than AltaVista’s or vice versa; everybody remembers that Google’s search engine was orders of magnitude above either. Lycos and AltaVista competed; Google took over the space and became a monopoly.

2. Network effects. Immortalized by Facebook. It doesn’t matter if someone invents a social network with more features than Facebook. Facebook will be better than their just by having all your friends on it. Network effects are hard because no business will have them when it first starts. Thiel answers that businesses should aim to be monopolies from the very beginning – they should start by monopolizing a tiny market, then moving up. Facebook started by monopolizing the pool of Harvard students. Then it scaled up to the pool of all college students. Now it’s scaled up to the whole world, and everyone suspects Zuckerberg has somebody working on ansible technology so he can monopolize the Virgo Supercluster. Similarly, Amazon started out as a bookstore, gained a near-monopoly on books, and used all of the money and infrastructure and distribution it won from that effort to feed its effort to monopolize everything else. Thiel describes how his own company PayPal identified eBay power sellers as its first market, became indispensible in that tiny pool, and spread from there.

3. Economies of scale. Also pretty straightforward, and especially obvious for software companies. Since the marginal cost of a unit of software is near-zero, your cost per unit is the cost of building the software divided by the number of customers. If you have twice as many customers as your nearest competitor, you can charge half as much money (or make twice as much profit), and so keep gathering more customers in a virtuous cycle.

4. Branding. Apple is famous enough that it can charge more for its phones than Amalgamated Cell Phones Inc, even for comparable products. Partly this is because non-experts don’t know how to compare cell phones, and might not trust Consumer Reports style evaluations; Apple’s reputation is an unfakeable sign that their products are pretty good. And partly it’s just people paying extra for the right to say “I have an iPhone, so I’m cooler than you”. Another company that wants Apple’s reputation would need years of successful advertising and immense good luck, so Apple’s brand separates it from the competition and from the economic state of nature.

Scott Alexander, “Book Review: Zero to One”, Slate Star Codex, 2019-01-31.

February 26, 2019

Laissez-faire versus “Fairtrade”

Filed under: Africa, Britain, Business, Economics — Tags: , , , , — Nicholas @ 05:00

In the Guardian, a sad tale of the fading bright hopes of the (relatively small number of) affluent westerners who passionately supported the “Fairtrade” movement:

When, in 2017, Sainsbury’s announced that it was planning to develop its own “fairly traded” mark, more than 100,000 people signed a petition condemning the move. Today, on the eve of Fairtrade Fortnight, the fact that most supermarkets have moved away from the standards developed by the Fairtrade Foundation is worrying.

While some grocery chains have sought the foundation’s stamp of approval, many have gone their own way. This means most consumers have little sense of which organisation is doing what to protect the wages and rights of developing world workers. Over the next two weeks, the foundation plans to focus its publicity efforts on cocoa farmers in west Africa and the way the Fairtrade mark can improve their lives.

[…]

That is a sad situation. After the great financial crash of 2008, a commodity boom that lasted from 2013 to 2017 turned into a slump that has robbed farmers and developing world governments of vital cash. Just as they were managing to stabilise their finances and set aside money to invest, the world price tumbled and wiped out their profit. Fairtrade practices protect farmers from this sort of setback and allow them to plan for the future.

Of course they have their critics. These are most mostly from the US – people who favour unfettered markets and seek to undermine the Fairtrade ideal, saying it is a form of protectionism that dampens innovation and ultimately ruins farms.

Theirs is an almost religious adherence to the free market that discounts the gains in stability and security that Fairtrade provides, and the scope of the community premium to promote universal education and the rights of women.

But without large employers making strides to adopt the standardised and transparent Fairtrade practices put forward by the foundation, it will be left to consumers to drive the project forward.

At the Continental Telegraph, Tim Worstall responds:

The Guardian tells us that the Great White Hope of global trade, Fairtrade, isn’t in fact working. On the basis that no one seems to be doing very much of it. To which the answer is great – for the only fair trade is laissez faire.

This does not mean that Fairtrade should not have been tried – to insist upon that would be to breach our basic insistence upon the value of peeps just getting on with doing what they want, laissez faire itself. But the very value of that last is that we go try things out, see whether they work and if they don’t we stop doing them. If they do then great, we do more of them.

[…]

So, trying out Fairtrade, why not? Let’s go see how many other people feel the same way? In exactly the same way we find out whether people like Pet Rocks, skunk or Simon Cowell. Product gets put on the market we see whether it adds to human welfare or not. If people value it – and revealed preferences please, by actually buying it – at more than the use of those scarce resources in other uses then that’s adding to human welfare and long may it thrive. If it doesn’t, if it’s subtracting value from the human experience, then we’ll stop doing it as those trying go bust.

This is not an aberration of the system it is the system and it’s why laissez faire works. Peeps get to do whatever and we keep doing more of what works, less of what doesn’t.

Fairtrade? No, I never thought it was going to work as anything other than virtue signalling for Tarquin and Jocasta but that’s fine. Why shouldn’t Tarquin and Jocasta gain their jollies by virtue signalling? As it turns out, now that we’ve tried it, no one else gives a faeces*. So, we can stop. Except, obviously enough, for those specialist outlets like the Co Op where the odd can still gain their jollies. It being that very mark of a laissez faire, liberal, society that the jollies of the odd are still catered to in due proportion to the desire for them.

*From Gibbon, all the fun stuff’s in Latin.

February 6, 2019

“The haggis croquette is the most London-thing ever done in London”

Filed under: Britain, Economics, Humour — Tags: , , , , — Nicholas @ 05:00

At the IEA, Andy Mayer reports on the first attempted Burns Night Supper in the City of London:

Haggis is a traditional Scottish dish made with sheep’s heart, liver and lungs, and stomach (or sausage casing); onion, oatmeal, suet, and spices. It’s either a local delicacy or an elaborate joke played on the English (take your pick).
Photo by “Lordvolom1” via Wikimedia Commons.

Last week the City of London held their first attempt at a Burns night supper, with the First Minister and representatives of the Scottish Government as guests of honour.

It is a difficult tradition to get wrong. Largely it requires steaming piles of Scotland’s revenge on the sausage, poetry that the English politely pretend to understand while feeling vaguely threatened, and bonhomie to overcome it, enabled through litres of distillate infused with the flavour of an entire peat bog.

The City served haggis croquettes, with wine.

There’s possibly a Glaswegian satirist somewhere who’s just given up. “Ach I canne compete. The sassenach dough-monkeys just served wee Nicola a haggis croquette, on Rabbie Burns night! I’m breaking-me pen.”

Meanwhile in Shoreditch two Millenials have just set up the Haggis Croquette Cafe, serving Organic Iron-Bru made from recycled plastic girders. The haggis croquette is the most London-thing ever done in London.

I spent much of the evening talking to trade officials. Their job is to sell Scottish opportunity around the world and open up its markets.

This was interesting – how would descendants of Adam Smith visiting the birthplace of trade economist David Ricardo define their comparative advantage? What can Scotland do better than anyone else? What might they do well enough that they can carve out positions, despite larger rivals, better off leaving such things to Scotland? Fundamentally, how are they going to compete?

There was an uneasy pause after these questions. And then to paraphrase, “Oh no, we don’t want to compete, we want to cooperate! With everyone! Not being threatening, that’s our advantage!”

I feel very sure that Smith, on hearing this, would have reached out, to extend the invisible hand of history across time, to give this official a mild slap. “Encouraging competition, with and from other places, and then getting out of the way, is the whole point”, he might say.

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