Category: Economics, Business, & Work

Source: Say Hello to $3 Trillion in Forgotten Debt | Bloomberg Gadfly, by Chris Bryant Andrea Felsted

New accounting rules called IFRS 16 will force companies to include operating lease commitments as part of their reported debt and assets. U.S. companies will apply a new FASB standard that’s broadly similar to IFRS 16, albeit not in all respects.
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At the very least, the rule change should give armchair investors, not to mention a company’s customers, employees and suppliers, a much better idea of how risky a business is compared to rivals.

Accounting reform can also affect corporate behavior. When British companies had to start recognizing the full liability for defined benefit pensions on financial statements, a lot of those “final salary” plans ended up closed.

It’s conceivable therefore that IFRS 16 will affect corporate decisions on whether to rent or purchase an asset. Consider sale and lease-back arrangements. These were once a popular way for companies to get their hands on some cash and a quick chance for executives to make themselves look like geniuses. All of a sudden, return on assets improved.

Now, if all that rented floor space has to sit on the balance sheet anyway, selling off the corporate silverware might become less attractive. Buying big ticket assets, rather than leasing, is also cheaper now because of low interest rates.

Source: Business questions engineers should ask when interviewing at ML/AI companies

But really the questions are broadly applicable.

1. Why does anyone need this?
2. How was this problem being solved before?
3. How many users have you spoken to? What have you learned from them?
4. How do you make money?
5. How will you grow? How will anyone find out about you?
6. How big is this market?
7. What is defensible about the business?

Source: After Universal Basic Income, The Flood – Simon Sarris – Medium

What if we implement UBI and it makes everything worse?

Large systems have difficulty adapting quickly, or at all, and miss the nuance of local conditions. Large systems failing could fail millions or billions of people.

If your small hippie commune fails, you can always rejoin the capitalist hellscape, or whatever everybody did in the 80’s. On the other hand, if UBI has been running for 20 years and fails…

How do you make it flexible and easy to replace if it isn’t working, a few decades on? You don’t build a nuclear power plant (or even a dam) without a plan for what to do if it goes critical. Any serious UBI plan needs the same thing, a contingency for what to do if they run out of money, or cannot distribute the money, or need to somehow draw down and close doors.

The absence of contingency is a fatal design flaw. Top-down complexity has a cost. If UBI fails 10–30 years into the future we may have a non-trivial population percentage that has never done any work and suddenly needs to. Since any UBI program failure would mean something like “we ran out of money”, failure may be catastrophic for some communities which produced nothing and have no means of even trucking in subsistence food.

For grand schemes, good intentions are not enough. Contingency plans are a must and robust or anti-fragile plans are preferred.

Source: The world’s most valuable resource is no longer oil, but data

The data economy demands a new approach to antitrust rules

The case for being sanguine about competition in the tech industry rests on the potential for incumbents to be blindsided by a startup in a garage or an unexpected technological shift. But both are less likely in the data age. The giants’ surveillance systems span the entire economy: Google can see what people search for, Facebook what they share, Amazon what they buy. They own app stores and operating systems, and rent out computing power to startups. They have a “God’s eye view” of activities in their own markets and beyond. They can see when a new product or service gains traction, allowing them to copy it or simply buy the upstart before it becomes too great a threat.

The first is that antitrust authorities need to move from the industrial era into the 21st century. When considering a merger, for example, they have traditionally used size to determine when to intervene. They now need to take into account the extent of firms’ data assets when assessing the impact of deals. The purchase price could also be a signal that an incumbent is buying a nascent threat. … The second principle is to loosen the grip that providers of online services have over data and give more control to those who supply them.

Rebooting antitrust for the information age will not be easy. It will entail new risks: more data sharing, for instance, could threaten privacy. But if governments don’t want a data economy dominated by a few giants, they will need to act soon.

Source: There’s precedent for Amazon competing with so many companies. It doesn’t end well. — Quartz

Amazon is falling into the same trap as GE. Or is it? … For business historians, Amazon is starting to look like the sprawling conglomerates of the past century. History has some bad news, says MIT’s Cusumano. “Eventually, Bezos is going to be, if he’s not already, a sample of the US or world economy,” he says. When that happens, Amazon’s equity growth rate will mirror that of the broader economy itself.
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General Electric (GE) fell into this trap after World War II. As GE brought hundreds of industries under its roof, the company’s stock began to track US booms and busts.

Amazon is betting it will be different.

Anti-competitive behavior is at the core of Amazon’s growth. Kahn states that many of the practices that make Amazon the behemoth it is today would have been considered illegal a few decades ago. The nature of predatory pricing, prohibited under earlier, more expansive views of antitrust law, is changing as commerce moves online, but the effect is the same. … The structural advantages Amazon wields over competitors gives its the ability to price products below cost and restrict access to customers. Over time, Amazon’s stranglehold on the market may degrade product quality, variety, and innovation, and enable exploitive pricing after competitors are eliminated.