Category Archives: business economics

Business advice from Balaji Srinivasan

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He says,

So product is merit and distribution is connections. And so for example, a great blog post that nobody sees is a great product with terrible distribution. Conversely, a really dumb article, or whatever, that is a piece of content that is in a feed that is seen by millions is a terrible product with great distribution, right?

From an interview of Balaji Srinivasan by Tim Ferriss. Pointer from Tyler Cowen. Balaji, Tim, and Tyler were all picked early in the version 1.0 FITs draft.

Set aside time to read the transcript. Balaji certainly scores a Thinking in Bets point, but it is hard for any scoring system to do justice to this piece.

Here’s another Balaji line:

it’s futile to try to argue with someone who has way more distribution and is hostile, you just need to build your own distribution, which is much more possible in the internet age.

And another:

I think we’ve just begun the global internet Cold War, where all of the social networks, currency networks compete for ideological and economic dominance around the world, because it can just spread virally back and forth like this. And everyone will be trying to cancel each other and whatnot, it’s going to be this crazy, crazy thing.

…pseudonymity stops both discrimination and cancellation. So it’s not ideal, but it is accepted and widely used by people of all political persuasions. And so it’s sort of like a mutual disarmament where you can’t cancel somebody.

and another:

when the internet disruptor comes in, variance increases, there’s more downside and more upside, more amazing outcomes and more really bad outcomes in all kinds of ways.

Unwalling the gardens

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A reader points me to something that Gray Mirror wrote last year.

Let’s call a protocol transparent if anyone can send or read a message in the protocol. In a transparent protocol, the whole public has both the technical information and the legal right to encode or decode messages in a transparent protocol, at every layer of the protocol stack. The opposite is opaque.

His proposal is to require that protocols be transparent. Anyone should be able to write an application that uses the protocol. This would change Facebook from a walled garden to an open database.

Here is an example, using Fantasy Intellectual Teams. Suppose that I maintain the definitive database for keeping score, and a schematic of the file format looks like this:

var teams = [
{
teamname: “Clan Graham”, owner: “Geoff”, players:
[
{name: “Joe Rogan”, Bets: 0, Memes: 1, Steelmans: 0},
{name:”Matt Ridley”, Bets:0, Memes:2, Steelmans:0}
]
},

{teamname: “Tim the Enchanter”, owner: “Jon T”, players:
[
{name: “Tyler Cowen”, Bets: 1, Memes: 3, Steelmans:2}
]
}
]

In the walled-garden model, only I know the file format, and thus only I can write reports based on the data. In a transparent-protocol model, pretty much anyone who has ever composed code could write reports based on the data. Gray Mirror would force me to use the transparent-protocol model. As an aside, if a team owner wants to keep his name secret, this is something that could be accommodated in the transparent-protocol model. Data security and protocol transparency are different features, and they are not incompatible.

In the walled-garden model, since I control the reporting, I can sell advertising to be placed on the reports. In the transparent-protocol model, I would have to sell subscriptions to the database. The transparent-protocol model still allows me to have a monopoly, but it strictly limits the uses that I can make of that monopoly.

Would you go to the trouble to create the data protocol for Facebook and, most importantly, undertake the effort to induce people to enter data into your database, if you knew that sooner or later you would be forced to make the protocol transparent? If the answer is “yes,” then Gray Mirror’s suggestion might be a good one.

Joe Rogan and the anti-Straussians

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I was puzzling over some of the early picks of the FITs draft. I don’t have a problem with anyone picking Joe Rogan, Steve Sailer, Joel Kotkin, or John Cochrane, but elevating them to the first round? What is it about this blog that attracts readers who would do that?

One hypothesis is that my readers are anti-Straussians. They want forthrightness, not strategic ambiguity. Some of the top picks may not score many points in the game, but they are certainly forthright.

My readers probably associate Straussianism with careerism. The careerist is careful not to say something right when it is the wrong thing to say. Fauci is a careerist. The Zvi (pick 106) isn’t. As Scott Alexander (pick 4) has pointed out, if you want accurate advice about the virus, go with The Zvi.

I could see myself attracting anti-careerists, because there is a fair amount of that in me. I think of careerists as having giving us the Vietnam war, from which many tragic consequences followed. There have been times when my own career-limiting behavior, such as making a sarcastic comment very loudly in Stan Fischer’s class expressing what I thought of the material on his MIT graduate syllabus in monetary economics, seemed to help me in the end, by sending my life in different directions.

One more story. When you can’t stand your boss, my advice is to quietly find a different situation as quickly as you can. Don’t do what I did.

This was more than 30 years ago, and my memory is dim and probably distorted by self-serving bias. But as I recall, a woman on my staff was on maternity leave and she came in to the office for a visit. I was not around. My boss called her into his office to tell her that because of headcount constraints (we had staffing quotas imposed from on high), she would not have a position when her leave was finished.

I think what especially ticked me off when I found out about it was that he had never discussed it with me beforehand. He also did not give me the courtesy of being the one to break the news to her.

I went into his office and threw a tantrum. After a while, he said, “I don’t want to do this, Arnold, but you’re giving me no choice but to fire you.”

The end result was that I changed divisions within the company. It worked to my long-term advantage, just as it worked to my advantage a few years later when I was relieved of a position in a humiliating way, driving me to quit and start my own business. But I would advise my children, my grandchildren, and my blog readers to take better control of their emotions than I did in those days.

Monopoly power or minority power?

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Cameron Harwick writes,

We do not see predatory pricing, collusion, or cartelization among the tech giants. What we do see are those giants acting as vehicles for the ideological rents being sought and extracted by the specialized labor cultures they employ. Economically this counts as market power just the same, but the mode of exercise is quite different.

Pointer from Megan McArdle’s column.

He argues that tech workers are progressive, and they have power over their employers, which enables them to force employers to cater to progressive demands, including cancellation of conservatives.

But my guess is that the majority of workers in tech firms are not progressive. Instead, we are seeing what Nassim Taleb calls minority power. If a minority feels strongly about something, and the majority does not feel strongly in the opposite direction, the minority wins. For example, most people do not care if the food they buy has a “heckscher,” a symbol that the food has been deemed kosher by an authority (there are actually something like 600 different authorities). But it is easier for big food manufacturers to pay an authority to inspect themselves and provide a heckscher than it is to blow off the relatively small number of Orthodox Jews who want only kosher food.

Getting back to corporate wokeness in response to employees, I think that the problem is that the employees who are not into enforcement of extreme progressive orthodoxy are like the people who do not care about buying kosher food. They do not feel strongly enough, so that it is the intense minority that has the power.

Another idea for the intellectual space

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The goals are to:

  • Reward old-fashioned shoe-leather journalism. Find the next James Fallows, the next Chris Arnade, the next Sam Quinones.
  • Reward people who serialize major projects on line, rather than going through the book process
  • Reward people who engage in high-level discourse, fighting the trend toward what Tyler calls “Twitter economics”
  • Discover, promote, and compensate talented commentators. Find the next Scott Alexander, the next Matt Yglesias, the next Coleman Hughes

Think of this idea as a cross between a multi-author Substack and Tyler’s Emergent Ventures. Think of a producer/editor (me, for example) having a stable of 100 contributors, each of whom contributes on average one essay or podcast about every 20 days, for a total across all contributors of about 5 a day. All contributions would sit behind a single paywall, as in a newspaper subscription. Perhaps it could run on Substack, with the editor handling the administration involved in managing and compensating the contributors.

Each day, a subscriber would receive a newsletter with 200-word summaries of each of the daily contributions, along with a link to each contribution. Assuming 100,000 subscribers each paying $100 a year, that would allow for average compensation of $100,000 a year to each contributor (less after paying for overhead expenses, such as payments to Substack if we were to use that platform).

At first, we would have to get some established contributors to bring in subscribers. These contributors would have to be willing to be paid less than the value of the subscriber base they pull in, so that there would be funds for the new talents.

The editor’s job is to filter contributors, not each individual contribution. As a contributor, you produce your essay or your podcast without interference. The editor acts as an adviser. I would be willing to be an editor without monetary compensation, but as the project scales up there would be paid editors.

I do not have the connections to be able to find enough contributors to pull this off myself. But I think I could with the help of others (Reihan Salam? Tyler?)

It is a project that could scale up with more editors. It is hard to know in advance whether revenue is maximized with one giant bundle or with different bundles based on topics or channels or user-defined packages (it’s like the Cable TV pricing problem in that sense).

At sufficient scale, this project could invade the space of major news media, the advertising-based models of news provided by Google/Twitter/Facebook, and university presses.

VC’s and non-profits

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Jeffrey Funk writes (American Affairs Journal, only one free article for non-subscribers),

In total, 2020 set a new record for the number of companies going public with little to no revenue, easily eclipsing the height of the dot-com boom of telecom companies in 2000.

He says that Internet start-ups are not undertaking any technological innovation.

Ridesharing and food delivery use the same vehicles, driv­ers, and roads as previous taxi and delivery services; the only major change is the replacement of dispatchers with smartphones.

Twenty years ago, I wrote a book advising Internet entrepreneurs not to seek venture capital. “Fundraising is for charities,” I sniffed. I was probably wrong–we would not have Amazon or Google today if everyone had listened to me. But if Funk is correct, then the VC industry may have gotten too big and too warped in its approach. He writes,

The poor performance of VCs and start-ups and the corresponding sense that they are mostly trend-chasing copycats are both indirect results of superficial training, and so part of the blame for these prob­lems must fall on business schools and universities. In recent decades, business schools have dramatically increased the number of entrepreneurship programs—from about sixteen in 1970 to more than two thousand in 201426—and have often marketed these programs with vacuous hype about “entrepreneurship” and “technology.”27 A recent Stanford research paper argues that such hype about entrepreneurship has encouraged students to become entrepreneurs for the wrong rea­sons and without proper preparation, with universities often presenting entrepreneurship as a fun and cool lifestyle that will enable them to meet new people and do interesting things, while ignoring the reality of hard and demanding work necessary for success.

Funk sees too much focus on business strategy (“build a platform!”) and not enough on science and engineering.

technologies, not business models, enabled many of the successful start-ups of the previous generation to succeed.

Funk points out that corporate research labs pre-1970 seemed better at producing technological breakthroughs than our current system of government-funded research at universities. I do think that government money has corrupted universities.

Lost his Waze

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Noam Bardin writes,

When Waze was acquired by Google, most of the people who know me did not believe I would last 7 weeks, let alone 7 years

When the web site I founded was acquired by Homestore.com, I lasted about 7 weeks. I wrote an email to the CEO of Homestore saying that I thought he was trying to make the company seem much more valuable than it was. I was immediately fired. He was eventually convicted of securities fraud and sentenced to prison.

I view Bardin’s tale as quite different. The way I see it, he went from a sub-Dunbar organization to a super-Dunbar organization. The latter needs many more formal processes and controls. As he puts it,

Working as an independent start-up is fundamentally different from a corporation and it is much more nuanced and deep than I had understood.

If you strongly prefer informal processes and fewer controls, stick with start-ups.

Is prestige a danger sign?

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Paul Graham writes,

the most important thing I learned, and which I used in both Viaweb and Y Combinator, is that the low end eats the high end: that it’s good to be the “entry level” option, even though that will be less prestigious, because if you’re not, someone else will be, and will squash you against the ceiling. Which in turn means that prestige is a danger sign.

He worked at Interleaf, which produced high-end publishing software. I think that if A serves the high end of the market and B serves the low end of the market, if one of them takes over the other’s market, it is more likely that B will move into the high end.

But prestige brands still have value.

Pointer from Tyler Cowen. Reading Graham’s whole essay is worth your time.

The masculine/feminine dimension in culture

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The late Geert Hofstede wrote,

Masculinity describes a society in which emotional gender roles are clearly distinct – men are supposed to be assertive, tough and focused on material success, women are supposed to be more modest, tender and concerned with the quality of life – versus Femininity, a society in which emotional gender roles overlap – both men and women are supposed to be modest, tender, and concerned with the quality of life . . .The Masculinity/Femininity dimension is the only one of the four in which gender affects the scores: women on average score higher in Femininity than men

Lotta Stern pointed me to Hofstede’s work as relevant to my thoughts on emasculated culture. His work seems fascinating, and all of his cultural dimensions appear to be relevant to my distinction between the older culture and the newer culture. Here is his Wikipedia entry. Here is his web site, now maintained by Hofstede the younger.

Stern herself has written,

These differences between men and women in competitiveness, personality, IQ, and preferences are common findings in some parts of sociology and in neighboring fields. All of them are reported as stable results over time and contexts. Yet in sociological studies of labor market differences between men and women, they are ignored.

She points out that one can have a libertarian feminism that supports equal rights and opportunity for women without embracing the view that all inequalities in labor market outcomes between men and women ought to be eliminated.