Category: Economics, Business, & Work

Source: The blockchain paradox: Why distributed ledger technologies may do little to transform the economy — Oxford Internet Institute, by Vili Lehdonvirta

In economic organization, we must distinguish between enforcing rules and making rules. Laws are rules enforced by state bureaucracy and made by a legislature. The SWIFT Protocol is a set of rules enforced by SWIFTNet (a centralized computational system) and made, ultimately, by SWIFT’s Board of Directors. The Bitcoin Protocol is a set of rules enforced by the Bitcoin Network (a distributed network of computers) made by — whom exactly? Who makes the rules matters at least as much as who enforces them. Blockchain technology may provide for completely impartial rule-enforcement, but that is of little comfort if the rules themselves are changed. This rule-making is what we refer to as governance.

Using Bitcoin as an example, the initial versions of the protocol (ie. the rules) were written by the pseudonymous Satoshi Nakamoto, and later versions are released by a core development team. The development team is not autocratic: a complex set of social and technical entanglements means that other people are also influential in how Bitcoin’s rules are set; in particular, so-called mining pools, headed by a handful of individuals, are very influential. The point here is not to attempt to pick apart Bitcoin’s political order; the point is that Bitcoin has not in any sense eliminated human politics; humans are still very much in charge of setting the rules that the network enforces.

blockchain technologies cannot escape the problem of governance. Whether they recognize it or not, they face the same governance issues as conventional third-party enforcers. You can use technologies to potentially enhance the processes of governance (eg. transparency, online deliberation, e-voting), but you can’t engineer away governance as such. All this leads me to wonder how revolutionary blockchain technologies really are. If you still rely on a Board of Directors or similar body to make it work, how much has economic organization really changed?

And this leads me to my final point, a provocation: once you address the problem of governance, you no longer need blockchain; you can just as well use conventional technology that assumes a trusted central party to enforce the rules, because you’re already trusting somebody (or some organization/process) to make the rules.

If we can align the incentives of the players involved, we can build infrastructure that is actually necessary and while doing it quicker and at lower prices than we do now.

Source: This is why infrastructure is so expensive — Strong Towns

One of Goldhill’s key devices is to place the language and values of the health care industry on a metaphorical island. He constantly talks about life “on the island” and “on the mainland.” For example, on the island, nobody ever talks about prices, they only talk about costs. This is not a subtle nuance. …

Does it really matter to you how much it costs the grocery store to provide that twelve pack of your favorite beverage? Of course not. It’s only matters to you — someone living on the mainland — what the price is to you. Price is how you determine your preferences among competing items. Profit is how the market receives feedback on those preferences. High prices invite substitution. High profits invite competitors. This is all basic and obvious to us on the mainland.

Which is why, on the healthcare island, the conversation is about costs. … Just like on Healthcare Island, on Infrastructure Island we have our own way of talking about things. And we never talk about prices, only about costs.

RE: The U.S. Has Forgotten How to Do Infrastructure – Bloomberg, by Noah Smith

That suggests that U.S. costs are high due to general inefficiency — inefficient project management, an inefficient government contracting process, and inefficient regulation. It suggests that construction, like health care or asset management or education, is an area where Americans have simply ponied up more and more cash over the years while ignoring the fact that they were getting less and less for their money.

Source: Antitrust and Aggregation – Stratechery by Ben Thompson

The European Commission’s antitrust case against Google is likely to be the first of many against aggregators, because the end game of Aggregation Theory is monopoly.

To briefly recap, Aggregation Theory is about how business works in a world with zero distribution costs and zero transaction costs; consumers are attracted to an aggregator through the delivery of a superior experience, which attracts modular suppliers, which improves the experience and thus attracts more consumers, and thus more suppliers in the aforementioned virtuous cycle. It is a phenomenon seen across industries … The first key antitrust implication of Aggregation Theory is that, thanks to these virtuous cycles, the big get bigger; indeed, all things being equal the equilibrium state in a market covered by Aggregation Theory is monopoly: one aggregator that has captured all of the consumers and all of the suppliers. … One more implication of aggregation-based monopolies is that once competitors die the aggregators become monopsonies — i.e. the only buyer for modularized suppliers. And this, by extension, turns the virtuous cycle on its head: instead of more consumers leading to more suppliers, a dominant hold over suppliers means that consumers can never leave, rendering a superior user experience less important than a monopoly that looks an awful lot like the ones our antitrust laws were designed to eliminate.

interoperability and API disclosure — could be solutions when it comes to defusing the market power of aggregators

the broader point underlying Aggregation Theory holds: the (metaphorical) rules have changed, and it’s fair to believe that at some point the laws may have to as well. It won’t be easy, though, and the possibility of unintended consequences will be strong, particularly given the self-corrective resiliency tech has shown to date that provides a compelling argument for leaving well enough alone.

Source: Tulips, Myths, and Cryptocurrencies – Stratechery by Ben Thompson

enough people believe that gold is worth something, and that is enough to make it so, and I suspect we are well past that point with Bitcoin … The problem, of course, is that while blockchain applications make sense in theory, the road to them becoming a reality is still a long one. That is why I suspect the better analogy for blockchain-based applications and their associated cryptocurrencies is not tulips but rather the Internet itself, specifically the 1990s. Marc Andreessen is fond of observing, most recently on this excellent podcast with Barry Ritholtz, that all of the dot-com failures turned out to be viable businesses: they were just 15 years too early

As the aphorism goes, being early (or late) is no different than being wrong, and that’s true in a financial sense. As I noted above, I would not be surprised if the ongoing run-up in cryptocurrency prices proves to be, well, a bubble. However, bubbles of irrationality and bubbles of timing are fundamentally different

Eighty years later this work schedule – originally designed for the endurance constraints of railroad depot workers – has become so ingrained that we rarely question it, regardless of profession.

Which is crazy.

The traditional eight-hour work schedule is great if your job is repetitive, customer-facing, or physically constraining. But for the large and growing number of “knowledge jobs,” it might not be.

Source: The Advantage Of Being A Little Underemployed · Collaborative Fund

 

the only way to do great work, in any field, is to find time to consider the larger questions

Source: You’re Too Busy. You Need a ‘Shultz Hour.’ – The New York Times

 

“the secret to doing good research is always to be a little underemployed. You waste years by not being able to waste hours.”

— Amos Tversky