Statistically, my most popular essay on Medium. I have no idea who pushed it. Continue reading
Category Archives: business economics
Telepresence
[Note: I originally scheduled this post to be published next week, but I moved it up after listening to the conversation between Mark Zuckerberg, Tyler Cowen, and Patrick Collison. In the transcript, Zuckerberg says
So rather than people moving–inventing a new hyperloop or cars, I tend to think the set of technologies around–whether it’s augmented reality or virtual reality or video presence that just lets people be where they wanna be physically and feel present with other people wherever they need to be to do their job, to connect with the people they care about–that feels to me the better long-term solution.
Those are the thoughts I express and elaborate on below.]
I remember hearing Robert Metcalfe (link goes to Wikipedia) speak about twenty years ago, and when he was asked what he thought was the killer application for the Internet, he said “telepresence.”
I thought of this when I saw the paper on mobility in the United States by Kyle Mangum and Patrick Coate, pointer from Tyler Cowen.
repeat mobility is common. That is, people living in their “home” locations are far less likely to migrate than those away from home.
My train of thought went as follows.
1. I view the paper as showing that many people come to like where they live. The repeat movers are either innately restless or experimenting.
2. When people my age talk about their children’s work lives, a sentence that comes up frequently is, “They let him (her) work remotely.” Of my three daughters, one works in Boston for an organization based in Maryland, one works from home three days a week, and the third probably could continue to work remotely if her husband moves.
3. In fact, a lot of married couples have job opportunities in different cities.
4. Recall that Patrick Collison said that his firm set up a department that he calls “Remote.”
5. As Patrick pointed out in that same conversation with Reid Hoffman, Zoom Meeting is quite a step forward in the videoconferencing arena. I can’t really articulate what makes it better than Skype or Google Hangouts, but it just feels more conference-y.
6. If I were in the venture capital business, I would make a bet that remote work will grow exponentially, and I would assemble a portfolio of companies based on that bet. Will more people wear body cameras? Do small companies need better support for interstate human resource functions? What are the needs of the home-office worker? What sorts of meeting-scheduling systems address the challenges posed by remote work forces?
7. I think that blue-collar work may be an overlooked opportunity for telepresence. Techies talk about telemedicine, but it seems to me that it is much harder to remotely work on someone’s body than it is to do other tasks remotely. So blue-collar telepresence may come first. Professor Daniel Markovitz, author of the Meritocracy Trap (in another conversation I plan to annotate) says that Amazon warehouse workers already are subject to remote monitoring.
–How about tele-sanitation? Bathrooms at places like airports and hospitals have to be cleaned and re-stocked very often, and robots could do that. But the robots might not be able to operate completely independently. A remote operator could help the robot be more adaptable to situations.
–How about tele-chauffer? Even if self-driving cars are not ready for the road, who says that the driver has to be in the car? In the case of truck driving, the number one source of job dissatisfaction is being away from home all the time Telepresence could solve that problem. Perhaps a co-pilot does not have to be on the plane (assuming you want the pilot to be there).
–The highway construction workers who operate machines. Do they need to be there?
–The workers building skyscrapers. Could they operate by managing robots remotely?
8. Think of what Zoom Meeting and other telepresence apps will be able to do when 5G is ubiquitous.
Reid Hoffman and Patrick Collison
I annotated their conversation. I think Tyler Cowen for the pointer.
An excerpt of my essay:
In short, you could say that we are in a crisis of social epistemology. The heuristic of “trust the credentialed expert” no longer works in the age of the Internet. But what does work?
Facebook and countervailing power
A reader of my post on the podcast with George Will who listened to the podcast asked how I would answer the podcaster’s question of why Facebook is not a power to be checked just as a branch of government is a power to be checked.
1. Facebook’s power is not established by the Constitution. It is a power that emerged from market activity.
2. What the market gives, the market eventually takes away. Only with government protection are monopolies sustained.
3. The history of using government as a “countervailing power” to the private sector is mixed at best. Probably the most positive example one could give is AT&T, which was a regulated monopoly and eventually broken up by a court case. We don’t know what the alternate history would have been had the government stayed out of the telephone market from the beginning, but consumers were generally happy with their phone service before the breakup, and the breakup helped speed the modern communications revolution.
4. There are other prominent cases of government “going after” leading tech companies whose market positions were being undermined by technological forces. For example, the anti-trust case against IBM was launched at the onset of the personal computer revolution, which diminished the importance of the mainframe computer market that IBM dominated. The anti-trust case against Microsoft was launched just as the central role played by the personal computer operating system was diluted because of the Internet.
Systems invite gaming
Back in March, Zack Kanter wrote,
Amazon has opened itself up to inevitable ‘gaming’ by sellers. Another way of saying this: as soon as a system’s rules are understood, it will be gamed according to the rules that have been created.
Pointer from Tyler Cowen.
He alleges that Amazon is allowing sellers to buy or manipulate their way into top spots in Amazon’s rankings. There is much more in Kanter’s essay, but I will just focus on the issue of gaming the system.
Any system invites gaming. If you run a sales force and give bonuses based on a formula, your sales people will game the system. If you reward volume, they will make concessions on price. If you reward sales revenue this year, they will invest less in building long-term relationships. If it costs you more to service some customers than others, then unless you can figure out how to build that into the sales formula, they will sell more to the high-maintenance accounts.
Government regulations invite gaming. I have often used risk-based capital requirements for banks as an example.
Search engines invite gaming. The phrase “search engine optimization” still grates on my nerves.
All rating systems invite gaming. Don’t think that we won’t see bots writing book reviews and product reviews, if that isn’t happening already.
There are many stories and jokes about gaming under central planning. If the planners reward the number of nails manufactured, they get a lot of little nails. If they reward the weight of nails manufactured, they get one giant nail.
Systems for compensating doctors will be gamed. If you reward them for seeing many patients, then they won’t spend time on the hard cases. If you reward them for doing certain procedures, then they will do more of those procedures. If you reward them based on outcomes, they will select patients that they know will recover easily. Etc.
If you have ever wondered why your organization rolls out a new compensation system every few years, gaming is the reason. When a system is new, it usually takes employees a while to figure out how to game it. After it has been around awhile, they have become experts at getting the maximum reward for the minimum effort. So the organization revamps its compensation system to try to induce more constructive effort and less gaming.
Libra’s red flags
1. Many large, established firms involved, before it even gets off the ground. How many successful innovations can you name that began with that organizational structure?
2. No clarity on what is the consumer’s pain point. For payments, cash still works well. Credit cards are so efficient these days that for many transactions they have replaced cash. And payment apps on phones are quite popular, particularly outside the U.S.
3. An apparent fascination with the solution. There is a lot of technical jargon floating around, which creates some buzz within a niche of software engineers. But if you think that they are a representative market segment, then you probably predicted that Unix would out-sell Windows in the market for home computers.
My impression is that the Libra project simply assumes that if you put together a reliable new digital currency, then the world will beat a path to your door. But nobody needs a reliable new digital currency per se. Show me a class of transactions that I want to undertake for which a reliable new digital currency is likely to be significantly more efficient than the next best alternative.
Regarding non-profits
A reader asks my thoughts on these remarks by Russ Roberts.
As much as I like the nonprofit world as an alternative to government and business, in my experience, they often tend toward mission creep, to expand budget rather than to achieve what was their original goal and the problem they were trying to solve.
That’s a tragedy. It’s evidently a very human tragedy. It’s very hard to avoid that, so I think that’s a very good reason for philanthropists to sunset their foundations and have them die after a certain amount of time.
The reader asks whether this also might apply to think tanks. Perhaps. I don’t know enough about the inner workings of think tanks. I’ve never had an office at one or been on salary at one. I’ve only had “adjunct” status, and that is a comparable to being an adjunct professor.
My general view on non-profits is that their status is too high relative to profit-seeking firms. In the for-profit sector, I think of the example of Elizabeth Holmes, the founder of Theranos. The company had a noble vision, and she made compelling presentations, but the product didn’t work. Because she claimed that the product worked better than it did, she got in trouble. She was ousted as CEO, and she faces a lot of legal jeopardy.
In the non-profit world, there are no end-users to hold you accountable if what you are doing doesn’t work. Just having the noble mission and being able to make compelling presentations to donors is sufficient.
I think that on the margin out society should invest less money in non-profits and more money in profit-seeking enterprises. and we should have fewer people making a living at non-profits and more people making a living in profit-seeking enterprises.
Social media platforms as utilities
imagine electric companies stood up for progressive values by cutting off power to homes with pro-Trump yard signs. Even staunch supporters of free markets would likely object to these restrictions on expression by privately owned enterprises. When we examine why power companies shouldn’t be able to make service contingent on not violating political sensibilities, we see that analogous arguments should stop social media giants from exiling political dissidents.
. . .if an electric utility decided to just exclude a few customers, it would be extremely costly for a competing power company to sell energy to those people and the former customers would likely go unpowered.
Similarly, he argues that if your speech is cut off by Facebook, no competitor is going to jump in and offer you equivalent service. The network effect gives Facebook monopoly power.
My thoughts:
1. What Google or Facebook can take away from you is your ability to easily reach certain audiences. That does not interfere with your right to free speech. Just because you have a right to free speech does not mean that you are entitled to the listeners you may desire.
2. I think it is the wrong business model for Google or Facebook to shut people down. I think it would be better to allow each listener to decide who he or she wants to hear. If I had sufficient control over my Facebook account, I would not see anybody’s political posts. (As it is, the best I can do is unfollow somebody who goes overboard with political posts. I done that.)
3. If I were in charge of Facebook, I would run it very differently. As I’ve said on a number of occasions, I would aim toward a subscription model, not an advertising model. This in turn would facilitate another major difference, which is that instead of having what you see determined by a secret algorithm, I would give you tools to set your own priorities.
4. Assigning Facebook or Google the status of utilities would only serve to entrench them, making it less likely that my ideas in (3) or any other major innovations will ever be seen.
Erik Torenberg’s podcast with me
Is here. It’s long. I thought it was pretty good. He prepared very well, having read more of my work than I could even remember. Perhaps he should have interrupted more.
Hiring miscalculations
The recruiting and hiring function has been eviscerated. Many U.S. companies—about 40%, according to research by Korn Ferry—have outsourced much if not all of the hiring process to “recruitment process outsourcers,” which in turn often use subcontractors, typically in India and the Philippines. The subcontractors scour LinkedIn and social media to find potential candidates. They sometimes contact them directly to see whether they can be persuaded to apply for a position and negotiate the salary they’re willing to accept. . .
The big problem with all these new practices is that we don’t know whether they actually produce satisfactory hires. Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees; few of them do so carefully, and only a minority even track cost per hire and time to hire.
Pointer from Timothy Taylor.
The article suggests that modern firms are leaving $20 bills on the sidewalk, in that there are better hiring practices that could easily be adopted. Perhaps.
But I want to emphasize that this reinforces a key point that I make in The Great Miscalculator: In business, it is very difficult to measure the performance of employees.
The measurement challenge is bound to create discrepancies between pay and marginal product. And it is bound to make the hiring process quite error-prone.