The Nature of the Firm

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pages: 265 words: 69,310

What's Yours Is Mine: Against the Sharing Economy by Tom Slee

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4chan, Airbnb, Amazon Mechanical Turk, asset-backed security, barriers to entry, Berlin Wall, big-box store, bitcoin, blockchain, citizen journalism, collaborative consumption, congestion charging, Credit Default Swap, crowdsourcing, data acquisition, David Brooks, don't be evil, gig economy, Hacker Ethic, income inequality, informal economy, invisible hand, Jacob Appelbaum, Jane Jacobs, Jeff Bezos, Khan Academy, Kibera, Kickstarter, license plate recognition, Lyft, Mark Zuckerberg, move fast and break things, natural language processing, Netflix Prize, Network effects, new economy, Occupy movement, openstreetmap, Paul Graham, peer-to-peer lending, Peter Thiel, pre–internet, principal–agent problem, profit motive, race to the bottom, Ray Kurzweil, recommendation engine, rent control, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, software is eating the world, South of Market, San Francisco, TaskRabbit, The Nature of the Firm, Thomas L Friedman, transportation-network company, Uber and Lyft, Uber for X, ultimatum game, urban planning, WikiLeaks, winner-take-all economy, Y Combinator, Zipcar

National Bureau of Economic Research, January 2015. http://www.nber.org/papers/w20830. O’Neill, Maura, and Kat Townsend. “Food Security Open Data Challenge | USAID Impact.” USAid Blog. Accessed May 20, 2015. http://blog.usaid.gov/2012/05/food-security-open-data-challenge/. Open Knowledge Foundation. “What Is Open?” Open Knowledge Foundation. Accessed May 18, 2015. https://okfn.org/opendata/. O’Reilly, Tim. “Networks and the Nature of the Firm.” Medium, August 14, 2015. https://medium.com/the-wtf-economy/networks-and-the-nature-of-the-firm-28790b6afdcc. Ostrom, Elinor. Governing the Commons: The Evolution of Institutions for Collective Action. The Cambridge Series on the Political Economy of Institutions. Cambridge University Press, 1990. Owyang, Jeremiah. “The Collaborative Sharing Economy Has Created 17 Billion-Dollar Companies (and 10 Unicorns).” Web Strategist. Accessed June 21, 2015. http://www.web-strategist.com/blog/2015/06/04/the-collaborative-sharing-economy-has-created-17-billion-dollar-companies-and-10-unicorns/.

Who would have thought even five years ago that a world-class operating system could coalesce as if by magic out of part-time hacking by several thousand developers scattered all over the planet, connected only by the tenuous strands of the Internet? 2 The success of Linux and other open source software projects spurred a wave of optimism about a fundamentally new way of creating complex products by relying on networks of peers. Yochai Benkler made an academic case for peer networks in his essay “Coase’s Penguin: Linux and the Nature of the Firm” and then in his influential book The Wealth of Networks, holding up Linux as the archetype of a new form of production that could reshape economies.3 The traditional economy is driven, in this view, by markets and by hierarchical firms or state organizations, but Benkler saw a third possibility, which he labeled “commons-based peer production.” “Commons-based” because the result is not owned by anyone; “peer production” because those who take part do so as peers.

“‘This Is What Modern Deregulation Looks like’: Co-Optation and Contestation in the Shaping of the UK’s Open Government Data Initiative” 8, no. 2 (2012). http://ci-journal.net/index.php/ciej/article/view/845/916. Benjamin, Solomon, Bhuvaneswari Raman, P. Rajan, and B. Manjunath. “Bhoomi: ‘E-Governance’, Or, An Anti-Politics Machine Necessary to Globalize Bangalore?” CASUM-M Working Paper. Bangalore: International Institute of Information Technology, 2005. Benkler, Yochai. “Coase’s Penguin, or Linux and the Nature of the Firm.” Computing Research Repository cs.CY/0109 (2001). ———. The Wealth of Networks: How Social Production Transforms Markets and Freedom. New Haven; London: Yale University Press, 2006. Bercovici, Jeff. “Uber’s Ratings Terrorize Drivers And Trick Riders. Why Not Fix Them?” Forbes, August 14, 2014. http://www.forbes.com/sites/jeffbercovici/2014/08/14/what-are-we-actually-rating-when-we-rate-other-people/.


pages: 379 words: 113,656

Six Degrees: The Science of a Connected Age by Duncan J. Watts

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Berlin Wall, Bretton Woods, business process, corporate governance, Drosophila, Erdős number, experimental subject, Frank Gehry, Geoffrey West, Santa Fe Institute, invisible hand, Long Term Capital Management, market bubble, Milgram experiment, Murray Gell-Mann, Network effects, new economy, Norbert Wiener, Paul Erdős, rolodex, Ronald Coase, Silicon Valley, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, Toyota Production System, transaction costs, transcontinental railway, Y2K

A precursor to Coase’s theory of transaction costs was Frank Knight’s claim that firms exist to reduce uncertainty: Knight, F. H. Risk, Uncertainty, and Profit (London School of Economics and Political Science, London, 1933). And Ronald Coase’s original argument of transaction costs as the basis for the firm is explicated in Coase, R. The nature of the firm. Economica, n.s., 4 (November 1937). Several decades later, Coase is still trying to get his ideas accepted by mainstream economics. His latest attempt is Coase, R. The Nature of the Firm (Oxford University Press, Oxford, 1991). The chief proponent of the hierarchical structure of firms is Oliver Williamson, whose views are expressed comprehensively in Williamson, O. E. Markets and Hierarchies (Free Press, New York, 1975). A shorter version is Williamson, O. E. Transaction cost economics and organization theory.

Devil Take the Hindmost: A History of Financial Speculation (Farrar, Straus and Giroux, New York, 1999). Chandler, A. D. The Visible Hand: The Managerial Revolution in American Business (Belknap Press of Harvard University Press, Cambridge, MA, 1977). Clippinger, J. (ed.) The Biology of Business: Decoding the Natural Laws of the Enterprise (Jossey-Bass, San Francisco, 1999). Coase, R. The nature of the firm. Economica, n.s., 4 (November 1937). ———. The Nature of the Firm (Oxford University Press, Oxford 1991). Cohen, R. Who really brought down Milosevic? New York Times Magazine, November 26, 2000, p. 43. Cohen, R., Erez, K., ben-Avraham, D., and Havlin, S. Resilience of the Internet to random breakdowns. Physical Review Letters, 85, 4626–4628 (2000). ———. Breakdown of the Internet under intentional attack. Physical Review Letters, 86, 3682–3685 (2001).


pages: 242 words: 68,019

Why Information Grows: The Evolution of Order, From Atoms to Economies by Cesar Hidalgo

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Ada Lovelace, Albert Einstein, Arthur Eddington, Claude Shannon: information theory, David Ricardo: comparative advantage, Douglas Hofstadter, frictionless, frictionless market, George Akerlof, Gödel, Escher, Bach, income inequality, income per capita, invention of the telegraph, invisible hand, Isaac Newton, James Watt: steam engine, Jane Jacobs, job satisfaction, John von Neumann, New Economic Geography, Norbert Wiener, p-value, phenotype, price mechanism, Richard Florida, Ronald Coase, Silicon Valley, Simon Kuznets, Skype, statistical model, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, working-age population

Transaction cost theory, or new institutional economics, is the branch of economics that studies the costs of transactions and the institutions that people develop to govern them. In simpler terms, it is the branch studying the cost of economic links and the ways in which people organize to deal with commercial interactions. The origins of transaction cost theory can be traced back to a 1937 paper by Ronald Coase, “The Nature of the Firm.”4 As a young scholar, Coase realized that the descriptions of the economy that were prevalent at the time tended to overlook one aspect of the economy that seemed obvious to him: the fact that economic transactions are costly. As a student at the London School of Economics, Coase attended a seminar organized by Arnold Plant, who had been recently appointed as a professor of commerce.5 It was there that Coase heard a description of the economy that contradicted his intuition and would accompany his thoughts throughout his life.

The size of most firms is constrained by other forces that are much simpler to understand, the most prominent one being the number of people they can afford. Yet, even firms with infinitely deep pockets will at some point bump into a finite knowledge carrying capacity, which (in agreement with Ronald Coase’s theory of the firm, which we will review later in this chapter) will be expressed in the price difference between doing an activity internally and hiring it from the market. 4. Ronald H. Coase, “The Nature of the Firm,” Economica 4, no. 16 (1937): 386–405. We could also use as a starting point John R. Commons’ “Institutional Economics,” American Economic Review 21 (1931): 648–657. Transaction cost theory, institutional economics, and its younger and uninspiredly named cousin, new institutional economics, study the interactions between economic agents, the decisions that push agents to interact, and the contracts and governance structures mediating those interactions.

., xvi–xvii Medicinal pills, context and value of, 63–64 Melanesians, 170 Message, minimum volume of data needed to specify, xvii, 13–15 Microsoft, 95 Microstates, entropy and, 16, 17 Minsky, Marvin, 7 MIT Media Lab, 52, 61, 62, 73 Mozart, Wolfgang, 84, 124 Multiplicity of a state, entropy and, 16–17 Music genetic factors in musical ability, 84 instruments and access to knowledge, 66–67 National Bureau of Economic Research, 113 Natural sciences, xviii “The Nature of the Firm” (Coase), 90 NEC, 95 Negroponte, Nicholas, 61–62 Nestedness of industry-location matrices, 132–136, 139, 142–143 Netgear, 92 Netherlands, exports, 132 Networks accumulation of knowledge and knowhow in, 106–108 complex computation and, 179 limits on ability to form, 74–75 personbytes accumulated in, 88–89 transferral of productive, 143 transition points in structures of, 107 See also Firms; Manufacturing networks; Professional networks; Social networks Network size, familial societies vs. high-trust societies and, 115–116 Networks of firms, 92–93 social capital and, 152 New institutional economics, 89–91, 117, 123 Newton, Isaac, 25, 40 New York Times (newspaper), 92, 113 Nicolis, 32–33 Nigeria, 161 Non-equilibrium systems life and, 32–33 steady state of, 29–30 Nonequilibrium thermodynamics, 28 Nonspecific recurrent transactions, 94 Nortel, 95 Nova Lima (Brazil), 139, 141 Nyquist, Harry, xvii Object-oriented programming, 120, 142 Objects as crystallized imagination, 44, 178–180 information embedded in, 5–6, 8, 11–13, 43–44, 45, 178 knowledge and knowhow and, 41 See also Products; Solids Observatory of Economic Complexity, 52 Occasional and specific transactions, 94 On Competition (Porter), 147–148 Optogenetics, 51, 61 Order emerging in out-of-equilibrium systems, 29–30 functions and, 63 growth of, 26–28 See also Physical order Ordered states, entropy and, 17–19, 21 Out-of-equilibrium systems computation and, 37 information emerging from, 175 information-rich steady states and, 29–31 Page, Jimmy, 70 Pakistan, economic complexity of, 157–159 Palo Alto Research Center (Xerox PARC), 119–120, 142 Panel Study of Income Dynamics, 113 Past, unreachableness of, 40 Personal computer production by network of firms, 92, 105 professional networks and, 119–120 Personbytes, 83–84, 107, 180 accumulated in networks, 88–89 available in large networks with bureaucratic burden, 103–104 defined, 82 industrial development/diversification and, 139, 142–144 migration of manufacturing and, 161–162 required to produce cars, 88 ubiquity of products and nestedness of industry-location matrices, 135 Phenotypes/genotypes analogy, 130–131, 136 Physical capital, 152 export data and diversity of, 154–156 measuring, 153–154 Physical embodiment of knowledge and knowhow, 73–74.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

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additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, crony capitalism, deskilling, disintermediation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, Martin Wolf, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, Plutocrats, plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey

If Weber helped us understand the rationale and workings of bureaucracy in the exercise of power, the British economist Ronald Coase helped us understand the economic advantages that they conferred on companies. In 1937, Coase produced a conceptual breakthrough that explained why large organizations were not just rational according to a certain theory of profit-maximizing behavior but, indeed, often proved more efficient than the alternatives. It was no coincidence that, while still an undergraduate, in 1931–1932, Coase carried out the research for his seminal paper, “The Nature of the Firm,” in the United States. Earlier he had flirted with socialism, and he became intrigued by the similarities in organization between American and Soviet firms and, in particular, by the question of why large industry, where power was highly centralized, had emerged on both sides of the ideological divide.20 46 Coase’s explanation—which would help earn him the Nobel Prize in economics decades later—was both simple and revolutionary.

Scaff, Max Weber in America, p. 45. 14. Ibid., p. 45. 15. Weber, Economy and Society: An Outline of Interpretive Sociology, p. 973. 16. Weber, “Unequalled Models,” in Essays on Sociology, p. 215. 17. Weber, “Politics as a Vocation,” in Economy and Society, p. 223. 18. McNeill, The Pursuit of Power, p. 317. 19. The information in this paragraph is drawn from Zunz, Philanthropy in America: A History. 20. Coase, “The Nature of the Firm.” The author describes his motivation for this research in his Nobel Prize lecture, which is available online at http://www.nobelprize.org/nobel_prizes/economics/laureates/1991/coase-lecture.html. 21. A more modern rendition of the transaction cost approach was offered by Coase’s student Oliver Williamson in his important book Markets and Hierarchies: Analysis and Antitrust Implications.

Luisa Kroll, “Forbes World’s Billionaires 2012,” Forbes, March 7, 2012, http://www.forbes.com/sites/luisakroll/2012/03/07/forbes-worlds-billionaires-2012/. 20. Ibid. 21. Rajeshni Naidu-Ghelani, “Chinese Billionaires Lost a Third of Wealth in Past Year, Study Shows,” CNBC.com, September 17, 2012, http://www.cnbc.com/id/49057268/Chinese_Billionaires_Lost_a_Third_of_Wealth_in_Past_Year_Study_Shows. 22. Coase, “The Nature of the Firm.” 23. This is a straightforward index but it does not capture, for instance, whether there are major differences in market share within this subset—that is, whether one or two firms are especially dominant. The Herfindahl-Hirschman Index, named after the economists Orris C. Herfindahl and Albert O. Hirschman, partially remedies this measurement flaw by giving extra weight to the biggest players.


pages: 400 words: 94,847

Reinventing Discovery: The New Era of Networked Science by Michael Nielsen

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Albert Einstein, augmented reality, barriers to entry, bioinformatics, Cass Sunstein, Climategate, Climatic Research Unit, conceptual framework, dark matter, discovery of DNA, double helix, Douglas Engelbart, en.wikipedia.org, Erik Brynjolfsson, fault tolerance, Fellow of the Royal Society, Firefox, Freestyle chess, Galaxy Zoo, Internet Archive, invisible hand, Jane Jacobs, Jaron Lanier, Kevin Kelly, Magellanic Cloud, means of production, medical residency, Nicholas Carr, publish or perish, Richard Feynman, Richard Feynman, Richard Stallman, semantic web, Silicon Valley, Silicon Valley startup, Simon Singh, Skype, slashdot, social web, statistical model, Stephen Hawking, Stewart Brand, Ted Nelson, The Death and Life of Great American Cities, The Nature of the Firm, The Wisdom of Crowds, University of East Anglia, Vannevar Bush, Vernor Vinge

Its only drawback is that it’s becoming a little dated (2004), but there is much in the book that is relatively timeless. Going even further back, there is Eric Raymond’s famous essay “The Cathedral and the Bazaar” [178]. Raymond’s essay is what first got me (and many others) interested in open source, and it remains well worth reading. Yochai Benkler’s insightful “Coase’s Penguin, or, Linux and The Nature of the Firm” [12] and The Wealth of Networks [13] have strongly influenced much thinking about open source, especially in the academic community. Finally, I recommend Ned Gulley and Karim Lakhani’s fascinating account [87] of the Mathworks programming competition. Limits to collective intelligence: Informative summaries are Cass Sunstein’s Infotopia [212] and James Surowiecki’s The Wisdom of Crowds [214].

p 37 What makes prices useful is that . . . they aggregate an enormous amount of hidden knowledge: [93]. p 38: The “dumb question” was posed by Polymath participant Ryan O’Donnell: [159]. p 39: On the point that online tools are subsuming and extending both conventional markets and conventional organizations: a related point has been made by the theorist Yochai Benkler in his article “Coase’s Penguin, or, Linux and The Nature of the Firm [12].” Benkler has a different focus, being concerned not so much with the solution of creative problems as with the production of goods. He proposes that online collaboration has enabled a third form of production, beyond markets and conventional organizations, which he calls “peer production.” I believe this is too narrow a point of view, both for creative problem solving and for the production of goods.

Jordan Raddick, Anze Slosar, Alex Szalay, Daniel Thomas, and Jan Vandenberg. Galaxy Zoo: Reproducing galaxy morphologies via machine learning. Monthly Notices of the Royal Astronomical Society, 406(1):342–353, July 2010. eprint arXiv:0908.2033. [11] J. Battelle. The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture. Boston: Nicholas Brealey, 2005. [12] Yochai Benkler. Coase’s penguin, or, Linux and The Nature of the Firm. The Yale Law Journal, 112:369–446, 2002. [13] Yochai Benkler. The Wealth of Networks. New Haven: Yale University Press, 2006. [14] Tim Berners-Lee. Weaving the Web. New York: Harper Business, 2000. [15] Tim Berners-Lee and James Hendler. Publishing on the semantic web. Nature, 410:1023–1024, April 26, 2001. [16] Tim Berners-Lee, James Hendler, and Ora Lassila. The semantic web.


pages: 319 words: 89,477

The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion by John Hagel Iii, John Seely Brown

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Albert Einstein, Andrew Keen, barriers to entry, Black Swan, business process, call centre, Clayton Christensen, cleantech, cloud computing, corporate governance, Elon Musk, en.wikipedia.org, future of work, game design, George Gilder, Isaac Newton, job satisfaction, knowledge economy, knowledge worker, loose coupling, Louis Pasteur, Malcom McLean invented shipping containers, Maui Hawaii, medical residency, Network effects, packet switching, pattern recognition, pre–internet, profit motive, recommendation engine, Ronald Coase, shareholder value, Silicon Valley, Skype, smart transportation, software as a service, supply-chain management, The Nature of the Firm, too big to fail, trade liberalization, transaction costs

First, during the Depression in the 1930s, business leaders in major developed economies around the world were motivated to exploit the capabilities of new communication and transportation infrastructures more effectively to harness scalable efficiency and compete during a period of stagnant or declining demand. Second, during the 1950s, another generation of business leaders broadened their horizons to scale push programs beyond national boundaries to take advantage of trade liberalization and to serve global markets. It is no coincidence that the famous British economist Ronald Coase wrote his path-breaking essay, “The Nature of the Firm,” in 1937.4 He effectively captured the primary thrust of institution-building during this period, arguing that firms existed to reduce the transaction costs that made coordinating activity across independent entities difficult. For this insight, he won the Nobel Prize in Economics. As firms deployed these new push-based approaches, other institutions underwent similar transformations.

Chapter 1 1 Timothy Ferris, The Four-Hour Work Week (New York: Crown, 2007). 2 A Gallup poll found that 55 percent of all U.S. employees are bored at least part of the time they’re at work. See Heath Row, “Yawn and Guarded,” Fast Company Member Blog, February 8, 2008, http://www.fastcompany.com/blog/heath-row/yawn-and-guarded. 3 See for instance, Alfred D. Chandler Jr., Scale and Scope: The Dynamics of Industrial Capitalism (Cambridge: Harvard University Press, 1994). 4 Ronald Coase, “The Nature of the Firm,” Economica 4, no. 16 (November 1937): 386-405. 5 For more about the role of real-time information in the Saffron Revolution, as well as in other political crises, see Nik Gowing, “‘Skyful of Lies’ and Black Swans: The New Tyranny of Shifting Information Power in Crises,” Reuters Institute for the Study of Journalism, May 2009, http://reutersinstitute.politics.ox.ac.uk/fileadmin/documents/Publications/Skyful_of_Lies.pdf. 6 Ibid. 7 See, for instance, “‘Neda’ Becomes Rallying Cry for Iranian Protests,” CNN, June 22, 2009, http://www.cnn.com/2009/WORLD/meast/06/21/iran.woman.twitter/index.html?

Microsoft as example of shaping view motivates third-party investments Mindsets for management of collaboration of control, threatened by change Minnick, Mary Mirabilis Mobile phone industry Modular design of pull platforms described Li & Fung’s specific activities, outputs motivates passionate individuals to success Moore’s Law Mor ville, Peter Motorola Mousavi, Mir-Hossein Myanmar (Burma) Saffron Revolution National Scholastic Surfing Association “The Nature of the Firm” essay (Coase) NetWeaver Networks types of, described Newspapers 9/11 attacks Noll, Greg Nonprofit organizations experiencing performance pressures shaping strategies in Novell Oahu, Hawaii Obama, Barack Obstfeld, David The Office television program Old-boy networks Online communities. See Online social networks Online role-playing games as creation spaces Online social networks attracting, sustaining, quality attention complementary talent generated by serendipity with edge connections as environments for serendipitous encounters and findability See also Social networks; World of Warcraft (WoW) Open innovation beyond, to broad forms of collaboration defined model of product development catalyzed by shaping Shai Agassi pulls SAP and Web 2.0 into teams emerge naturally Open innovation platforms form teams offline to research solutions as specialized, connecting people unknown to each other See also InnoCentive open innovation platform Open-source software sites Orbitz Ortolano, Glauco Outsourcing Pace accelerated by technology, social networking as actions and assets for shaping strategies amplified by outside-in IT architectures amplified through IT investment amplified through mindset as element of journey toward pull igigig individualized as maximizing return on attention Page, Larry Participants as element in creation spaces as influencers in shaping platforms persuaded by shaping actions roles for pursuing shaping strategies See also Individuals Passion defining professions as of employees pursuing, with questing dispositions shared within geographic spikes as transforming, motivating Pasteur, Louis Payne, Dusty with edge connections becoming part of core network introduced wins Kustom Air Strike Payne, Lisa Payne, Wendell Peres, Shimon Perez, Carlota Performance declines of corporations Performance improvement in digital infrastructures driven, increased, by new knowledge flows and experience curves through pull techniques Performance measures.


pages: 313 words: 95,077

Here Comes Everybody: The Power of Organizing Without Organizations by Clay Shirky

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Andrew Keen, Berlin Wall, bioinformatics, Brewster Kahle, c2.com, crowdsourcing, en.wikipedia.org, hiring and firing, hive mind, Howard Rheingold, Internet Archive, invention of agriculture, invention of movable type, invention of the printing press, invention of the telegraph, jimmy wales, Kuiper Belt, lump of labour, Mahatma Gandhi, means of production, Merlin Mann, Nash equilibrium, Network effects, Nicholas Carr, Picturephone, place-making, Pluto: dwarf planet, prediction markets, price mechanism, prisoner's dilemma, profit motive, Richard Stallman, Ronald Coase, Silicon Valley, slashdot, social software, Stewart Brand, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, transaction costs, ultimatum game, Yogi Berra

The problems inherent in managing these transaction costs are one of the basic constraints shaping institutions of all kinds. This ability of the traditional management structure to simplify coordination helps answer one of the most famous questions in all of economics: If markets are such a good idea, why do we have organizations at all? Why can’t all exchanges of value happen in the market? This question originally was posed by Ronald Coase in 1937 in his famous paper “The Nature of the Firm,” wherein he also offered the first coherent explanation of the value of hierarchical organization. Coase realized that workers could simply contract with one another, selling their labor, and buying the labor of others in turn, in a market, without needing any managerial oversight. However, a completely open market for labor, reasoned Coase, would underperform labor in firms because of the transaction costs, and in particular the costs of discovering the options and making and enforcing agreements among the participating parties.

Alternatively, they can limit themselves to deeper interactions with a few people (in which case we call them cliquish or standoffish). At the extremes they are forced to adopt both strategies, to limit both the number and the depth of interactions. A wedding reception is a localized version of this trade-off. The bride and groom gather a room full of people they could talk to for hours, then talk to most of the guests for just a few minutes each so as not to be rude. Why Would Anyone Bother? Coase’s logic in “The Nature of the Firm” suggests that in organizing any group, the choice is between management and chaos; he assumes that it’s very difficult to create an unmanaged but nonchaotic group. But lack of managerial direction makes it easier for the casual contributor to add something of value; in economic terms, an open social system like Wikipedia dramatically reduces both managerial overhead and disincentives to participation.

Page 29: The Mythical Man-Month: Essays on Software Engineering, Frederick P. Brooks, Jr., Addison-Wesley (1975). Though this book is filled with interesting general observations about the design of software, the observation that adding more programmers to a late project makes it later is by far Brooks’s most famous observation, and the one with the broadest applicability beyond the world of software engineering. Page 30: “The Nature of the Firm,” R. H. Coase, Economica 4(16), November 1937, pp. 386-405, also at www.cerna.ensmp.fr/Enseignement/CoursEcoIndus/SupportsdeCours/COASE.pdf. This short work comes from an era when economics papers were readable, and the clarity and elegance of the argument makes the paper relevant even today. Page 31: Leading Teams: Setting the Stage for Great Performances, J. Richard Hackman, Harvard Business School Press (2002).


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

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affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Corn Laws, corporate governance, corporate social responsibility, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

Although the influence of companies as a species has never been more widespread, the clout of individual big companies has arguably declined. The much-vaunted idea that companies are now bigger than mere governments is, as we shall see, statistically fraudulent. Big companies are giving way to small ones, so much so, in fact, that an old question is now more pressing: What is the point of companies? That question was most succinctly answered back in 1937 by Ronald Coase, a young British economist. In an article called “The Nature of the Firm,” he argued that the main reason why a company exists (as opposed to individual buyers and sellers making ad hoc deals at every stage of production) is because it minimizes the transaction costs of coordinating a particular economic activity. Bring all the people in-house, and you reduce the costs of “negotiating and concluding a separate contract for each exchange transaction.” But the gains from reducing transaction costs that companies deliver have to be balanced against “hierarchy costs”—the costs of central managers ignoring dispersed information.

Three works published in the 1930s and 1940s asked fundamental questions about this awkward institution: Why did companies exist? Whom were they run for? And what about the workers? The most basic of these three works began as a lecture in 1932 to a group of Dundee students by a twenty-one-year-old economist just back from a tour of American industry. Five years later, Ronald Coase published his ideas in a paper in Economica called “The Nature of the Firm.” Coase tried to explain why the economy had moved beyond individuals selling goods and services to each other. The answer, he argued, had to do with the imperfections of the market and particularly to do with transaction costs—the costs sole traders might incur in getting the best deal and coordinating processes such as manufacturing and marketing. The history of the company since 1850 validated Coase’s point.

State-Building: Governance and World Order in the 21st Century by Francis Fukuyama

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Asian financial crisis, Berlin Wall, Bretton Woods, centre right, corporate governance, demand response, Doha Development Round, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, George Akerlof, Hernando de Soto, Nick Leeson, Potemkin village, price stability, principal–agent problem, rent-seeking, road to serfdom, Ronald Coase, structural adjustment programs, technology bubble, The Market for Lemons, The Nature of the Firm, transaction costs, Washington Consensus

., Tullock, Gordon, et al. 1980. Toward a Theory of a Rent-Seeking Society (College Station, TX: Texas A&M Press). Carpenter, Ted Galen. 1997. Delusions of Grandeur: The United Nations and Global Intervention (Washington, DC: CATO Institute). Chandler, Alfred D. 1977. The Visible Hand: The Managerial Revolution in American Business (Cambridge, MA: Harvard University Press). Coase, Ronald H. 1937. “The Nature of the Firm,” Economica 6: 386–405. Cohen, Michael D., and March, James G., et al. 1972. “A Garbage Can Model of Organizational Choice,” Administrative Science Quarterly 17(1): 1–25. Cohen, Theodore. 1987. Remaking Japan: The American Occupation As New Deal (New York: Free Press). Cowhey, Peter F., and Haggard, Stephan. 2001. Presidents, Parliaments, and Policy (Cambridge, England: Cambridge University Press).

“A Double Security: Federalism as Competition,” Cato Journal 990: 39–58. Williamson, John. 1994. The Political Economy of Policy Reform (Washington, DC: Institute for International Economics). 132 bibliography Williamson, Oliver E. 1975. Markets and Hierarchies: Analysis and Antitrust Implications (New York: Free Press). ——. 1985. The Economic Institutions of Capitalism (New York: Free Press). ——. 1993. The Nature of the Firm: Origins, Evolution and Development (Oxford, England: Oxford University Press). Williamson, Roger. 1998. Some Corner of a Foreign Field: Intervention and World Order (New York: St. Martin’s Press). Wilson, James Q. 1989. Bureaucracy: What Government Agencies Do and Why They Do It (New York: Basic Books). Woolcock, Michael, and Pritchett, Lant. 2002. Solutions When the Solution is the Problem: Arraying the Disarray in Development (Washington, DC: Center for Global Development Paper 10).


pages: 518 words: 147,036

The Fissured Workplace by David Weil

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accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, banking crisis, barriers to entry, business process, call centre, Carmen Reinhart, Cass Sunstein, Clayton Christensen, clean water, collective bargaining, corporate governance, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, declining real wages, employer provided health coverage, Frank Levy and Richard Murnane: The New Division of Labor, George Akerlof, global supply chain, global value chain, hiring and firing, income inequality, intermodal, inventory management, Jane Jacobs, Kenneth Rogoff, law of one price, loss aversion, low skilled workers, minimum wage unemployment, moral hazard, Network effects, new economy, occupational segregation, performance metric, pre–internet, price discrimination, principal–agent problem, Rana Plaza, Richard Florida, Richard Thaler, Ronald Coase, shareholder value, Silicon Valley, statistical model, Steve Jobs, supply-chain management, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, ultimatum game, union organizing, women in the workforce, Y2K, yield management

Growth in its market gave it greater clout to negotiate lower prices with food suppliers, further expanding its cost advantages, allowing A&P to grow and capture substantial market share across the country.5 In so doing, A&P changed the nature of the food retailing industry and the way companies needed to organize themselves to compete. As a result, the boundary of firms in the industry came to incorporate many of the functions that, before A&P’s ascendency, would have been undertaken through market transactions. Defining Enterprise Boundaries Ronald Coase argued in “The Nature of the Firm” (one of the most famous essays in the history of economics) that the boundaries of a business enterprise could not be understood without thinking about the decision of when work should be done inside versus outside of the organization. Many of the activities of corporations involve the allocation of resources across different activities. This is precisely what markets do. Coase asked, If this is the case, why are organizations superior?

The Coming of Managerial Capitalism: A Casebook on the History of American Economic Institutions. Homewood, IL: Irwin. Christensen, Clayton. 2006. The Innovator’s Dilemma. New York: Harper Business. Cleeland, Nancy. 2009. “Dark and Bitter.” American Prospect, October 2 (available at http://prospect.org/article/dark-and-bitter-0). Cline, William. 1997. Trade and Income Distribution. Washington, DC: Institute for International Economics. Coase, Ronald. 1937. “The Nature of the Firm.” Economica 4: 386–405. Cohan, William. 2009. House of Cards: A Tale of Hubris and Wretched Excess on Wall Street. New York: Doubleday. Commons, John R. 1904. “The New York Building Trades.” Quarterly Journal of Economics 18, no. 3: 409–436. ______. 1935. History of Labor in the United States, 1896–1932. Vol. 3. New York: Macmillan. Computer Economics. 2000. 1999 Outsourcing Trends and Outsourcing Statistics.

Hallock, Kevin. 2009. “Job Loss and the Fraying of the Implicit Employment Contract.” Journal of Economic Perspectives 23, no. 4: 69–93. ______. 2012. Pay: Why People Earn What They Earn and What You Can Do Now to Make More. New York: Cambridge University Press. Hart, Bob. 1984. The Economics of Non-wage Labor Costs. London: George Allen and Unwin. Hart, Oliver, and John Moore. 1990. “Property Rights and the Nature of the Firm.” Journal of Political Economy 98, no. 6: 1119–1158. Hayes, Robert, and William Abernathy. 1980. “Managing Our Way to Decline.” Harvard Business Review, July–August, 67–77. Hellerstein, Judith, Melissa McInerney, and David Neumark. 2011. “Neighbors and Coworkers: The Importance of Residential Labor Market Networks.” Journal of Labor Economics 29, no. 4: 659–695. Hirsch, Barry, David Macpherson, and Michael DuMond. 1997.


pages: 585 words: 165,304

Trust: The Social Virtue and the Creation of Prosperity by Francis Fukuyama

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barriers to entry, Berlin Wall, blue-collar work, business climate, capital controls, collective bargaining, corporate governance, deindustrialization, Deng Xiaoping, deskilling, double entry bookkeeping, equal pay for equal work, European colonialism, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Gilder, glass ceiling, global village, hiring and firing, industrial robot, Jane Jacobs, job satisfaction, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, labour market flexibility, labour mobility, land reform, low skilled workers, manufacturing employment, mittelstand, price mechanism, profit maximization, RAND corporation, rent-seeking, Ronald Coase, Silicon Valley, Steve Jobs, Steve Wozniak, The Death and Life of Great American Cities, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, transaction costs, transfer pricing, traveling salesman, union organizing

Whitley, “East Asian Enterprise Structures and the Comparative Analysis of Forms of Business Organization,” Organization Studies 11 (1990): 47-74. 10For an account, see Masaru Yoshimori, “Source of Japanese Competitiveness, Part I,” Management Japan 25 (1992): 18-23. 11Ronald H. Coase, “The Nature of the Firm,” Economica 4 (1937): 386-405. 12See inter alia Oliver E. Williamson, “The Economics of Organization: The Transaction Cost Approach,” American Journal of Sociology 87 (1981, hereafter 1981a): 548-577; The Nature of the Firm: Origins, Evolution, and Development (Oxford: Oxford University Press, 1993); and “The Vertical Integration of Production: Market Failure Considerations,” American Economic Review 61 (1971): 112-123. 13Oliver Williamson, “The Modern Corporation: Origins, Evolution, Attributes,” Journal of Economic Literature 19 (1981, hereafter 1981b): 1537-1568. 14According to Williamson, “The human agents that populate the firms and markets with which I am concerned differ from economic man (or at least the common caricature thereof) in that they are less competent in calculation and less trustworthy and reliable in action.

., Marriage, Divorce, Remarriage (Cambridge: Harvard University Press, 1981). Cherrington, David J., The Work Ethic: Working Values and Values that Work (New York: Amacom, 1980). Clegg, Stewart R. and Redding, S. Gordon, Capitalism in Contrasting Cultures (Berlin: Walter de Gruyter, 1990). Clifford, Mark L., Troubled Tiger: Businessmen, Bureaucrats and Generals in South Korea (Armonk, N.Y.: M. E. Sharpe, 1994). Coase, Ronald H., “The Nature of the Firm,” Economica 6 (1937): 386-405. Cohen, Daniel, “The Fall of the House of Wang,” Business Month 135 (1990): 22-31. Coleman, James S., “Social Capital in the Creation of Human Capital,” American Journal of Sociology, 94 Supplement (1988): S95-S120. Congleton, Roger D., “The Economic Role of a Work Ethic,” Journal of Economic Behavior and Organization 15 (1991): 365-385. Conroy, Hilary and Wray, Harry, eds., Japan Examined: Perspectives on Modern Japanese History (Honolulu: University of Hawaii Press, 1983).

. -----, “Protestantism as a Factor of Culture Change in Brazil,” Economic Development and Cultural Change 3 (1955): 321-333. Williamson, Oliver E., Corporate Control and Business Behavior (Englewood Cliffs, N.J.: Prentice-Hall, 1970). -----, Oliver E., “The Economics of Organization: The Transaction Cost Approach,” American Journal of Sociology 87 (1981): 548-577. -----, “The Modern Corporation: Origins, Evolution, Attributes,” Journal of Economic Literature 19 (1981): 1537-156. -----, The Nature of the Firm: Origins, Evolution and Development (Oxford: Oxford University Press, 1993). -----, “The Vertical Integration of Production: Market Failure Considerations,” American Economic Review 61 (1971): 112-123. Wilson, James Q., “The Family-Values Debate,” Commentary 95 (1992): 24-31. -----, The Moral Sense (New York: Free Press, 1993). -----, Negro Politics: the Search for Leadership (Glencoe, Ill.: Free Press, 1960).


pages: 299 words: 91,839

What Would Google Do? by Jeff Jarvis

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23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, barriers to entry, Berlin Wall, business process, call centre, cashless society, citizen journalism, clean water, connected car, credit crunch, crowdsourcing, death of newspapers, disintermediation, diversified portfolio, don't be evil, fear of failure, Firefox, future of journalism, Google Earth, Googley, Howard Rheingold, informal economy, inventory management, Jeff Bezos, jimmy wales, Kevin Kelly, Mark Zuckerberg, moral hazard, Network effects, new economy, Nicholas Carr, PageRank, peer-to-peer lending, post scarcity, prediction markets, pre–internet, Ronald Coase, search inside the book, Silicon Valley, Skype, social graph, social software, social web, spectrum auction, speech recognition, Steve Jobs, the medium is the message, The Nature of the Firm, the payments system, The Wisdom of Crowds, transaction costs, web of trust, Y Combinator, Zipcar

The agency and advertising need to get out of the way in the relationship between companies and customers. Agencies may help solve problems—teaching companies how to build networks with customers, assisting them with product launches—but once the consultation is done, the good consultant leaves town. Tobaccowala suggested agencies remake themselves as networks. He quoted University of Chicago economist Ronald Coase in his seminal 1937 essay, “The Nature of the Firm”—which is also quoted in Wikinomics, Here Comes Everybody, and, it would seem, half the business books published lately. Coase reasoned that firms exist and grow when internal friction is less than external friction, when it is easier and cheaper to deal with insiders than with outsiders. “In a networked world, it’s easier for us to work with outside people than inside people,” Tobaccowala said.

., 63–67 Masters, George, 150 Mayer, Marissa, 31, 34, 87–88 innovation and, 111–12 on iterations, 93–94 McCain, John, 136 McIntosh, Neil, 214 Mechanical Turk, 72 media buying, 150 fragmentation of, 65 mistrust of, 83 revenue plan, 143–44 Meetup, 50 Menchaca, Lionel, 17–18 Meredith, Scott, 139 meritocracies, 99 Meyer, Philip, 125 microloans, 196 Microsoft, 16, 35 middlemen, 73–76 military, 225 Miller, Robert, 138–40 The Mining Company, 41 mistakes, 91–93 MLS. See multiple-listing service “&”, 179 mobs, 106–8 Moore, Gordon, 133 Moore’s Law, 133 Motley Fool, 197 movies, 133–35 multiple-listing service (MLS), 75, 186 Murdoch, Rupert, 129 music industry, 110 Mutuelle Assurance Instituteur France (MAIF), 204, 208 MyStarbucksIdea.com, 60–62 National Association of Broadcasters, 167 “The Nature of the Firm” (Coase), 151 Netflix, 160 Netscape, 67 networks, 4 advertising agencies as, 151 on airlines, 183–85 insurance as, 206 joining, 27–32 open, 29–30 on platforms, 32–33 social, 231 specialization and, 154 universities and, 212–13 network theory, 28 “New Economics of Media” (Haque), 64 Newmark, Craig, 38–39, 47, 116–18 newness, 146 newspaper ads, 38–39, 125–26 craigslist v., 148 decline of, 76 newspapers, 3, 123–30 New York Angels, 193 New York Times, 41 API of, 127 free content and, 78 niches mass market v., 63–67 newspapers and, 129 Nike, 112 9/11, 24–25 Nisenholtz, Martin, 37 Nocera, Joe, 100 Nothing Sacred: The Truth About Judaism (Rushkoff), 226 NPR, 127 The Numerati (Baker), 159 Obama, Barack, 51, 220–21, 232 101 Wines Guaranteed to Inspire, Delight and Bring Thunder to Your World (Vaynerchuk), 157 OnStar, 177 Oodle.com, 39 openness, 236 Apple and, 227 ownership v., 4 PR and, 224 open-source, 59–63 Apple and, 227 automobile industry and, 174–75 Coelho and, 142–43 fashion, 180 religion and, 226 restaurants and, 154 Open-Source Judaism, 226 O’Reilly, Tim, 79 organization, elegant, 48–53 airlines and, 182 newspapers and, 129 Orkut, 50 Osnos, Peter, 140 Outside.in, 191 ownership, 4, 28 Owyang, Jeremiah, 172–73 Page, Larry, 85 on environment, 162–64 on evil, 99 Gore v., 217 on mistakes, 94 telecommunications and, 166 PageRank, 85 partnering, 22–23, 151 passion, 217 passivity, 116–18 patents, 224 Paterson, David, 96 PatientsLikeMe, 200 PayPal, 86, 197–98 Peapod, 179 peer-to-peer lending, 176–77 personal liberty, 238 personal political pages (PPPs), 219 Picasa, 33, 81, 193 piracy, as marketing, 141–42 platform(s), 32–36 craigslist as, 117–18 newspapers and, 126–27 Platial.com, 33–34 politics, 51, 217–21 trust and, 83 Pope, Ivan, 206 populism, 84–85 pornography, 225 PornTube, 225 portfolios, 214 post-scarcity economy, 57–59 Potts, Mark, 56 PowerPoint, 64 Poynter, Don, 137 PPPs.

The Darwin Economy: Liberty, Competition, and the Common Good by Robert H. Frank

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carbon footprint, carried interest, Cass Sunstein, clean water, congestion charging, corporate governance, deliberate practice, full employment, income inequality, invisible hand, Plutocrats, plutocrats, positional goods, profit motive, Ralph Nader, rent control, Richard Thaler, Ronald Coase, Ronald Reagan, sealed-bid auction, smart grid, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, trickle-down economics, ultimatum game, winner-take-all economy

Barriers to Negotiation Consider first the charge that Coase had written government out of the picture. Again, his claim that an efficient solution would be achieved irrespective of whether polluters were held liable for damages was quite explicitly predicated on an assumption that anyone familiar with his earlier work would know he believed to be unrealistic. Coase’s first significant paper, “The Nature of the Firm,” published in 1937, was in fact inspired by his observation that practical difficulties often prevented people from negotiating efficient contracts with one another.10 This paper was based on field research he had conducted in 1932, when as an undergraduate he received a fellowship to travel to the United States to observe the operations of large American corporations. The specific question he tackled in the 1937 paper was, why do firms exist in the first place?

Ibid., p. 27. 7. http://econc10.bu.edu/economic_systems/Theory/Contemp/Coase.htm# Stigler. 8. Ronald H. Coase, “The Problem of Social Cost,” Journal of Law and Economics 3, October 1960: 1–44. 224 NOTES TO PAGES 89–106 9. See, for example, A. M. Diamond, “Most Cited Economic Papers and Current Research Fronts,” Journal of Citation Studies 50, Part 2, 1989: 10–15. 10. Ronald H. Coase, “The Nature of the Firm,” Economica, New Series, 4(16), November 1937: 386–405. 11. See, for example, Armen Alchian and Harold Demsetz, “Production, Information Costs, and Economic Organization,” American Economic Review 62, December 1972: 777–795; Richard M. Cyert and James G. March, A Behavioral Theory of the Firm, Englewood Cliffs, NJ: Prentice-Hall, 1963; Michael Jensen and William Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,” Journal of Financial Economics 3(4), 1976: 305–360; Sanford Grossman and Oliver Hart, “Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation,” Bell Journal of Economics 11, Spring 1980: 42–64; and Oliver Williamson, Markets and Hierarchies: Analysis and Antitrust Implications, New York: Free Press, 1975. 12.


pages: 375 words: 88,306

The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism by Arun Sundararajan

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3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, autonomous vehicles, barriers to entry, bitcoin, blockchain, Burning Man, call centre, collaborative consumption, collaborative economy, collective bargaining, corporate social responsibility, cryptocurrency, David Graeber, distributed ledger, employer provided health coverage, Erik Brynjolfsson, ethereum blockchain, Frank Levy and Richard Murnane: The New Division of Labor, future of work, George Akerlof, gig economy, housing crisis, Howard Rheingold, Internet of things, inventory management, invisible hand, job automation, job-hopping, Kickstarter, knowledge worker, Kula ring, Lyft, megacity, minimum wage unemployment, moral hazard, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, profit motive, purchasing power parity, race to the bottom, recommendation engine, regulatory arbitrage, rent control, Richard Florida, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, smart contracts, Snapchat, social software, supply-chain management, TaskRabbit, The Nature of the Firm, total factor productivity, transaction costs, transportation-network company, two-sided market, Uber and Lyft, Uber for X, universal basic income, Zipcar

Ibid., 12. 18. Yochai Benkler, “‘Sharing Nicely’: On Shareable Goods and the Emergence of Sharing as a Modality of Economic Production,” http://benkler.org/SharingNicely.html. First published in Yale Law Journal 114 (2004): 273–358, 278. 19. Ibid. This observation built on Benkler’s earlier notion of “commons-based peer production,” introduced in his essay “Coase’s Penguin, or, Linux and the Nature of the Firm,” Yale Law Journal 112 (2002): 369, where he discusses the peer production that characterizes, for example, open-source information projects like Wikipedia or open-source software like Linux. Benkler situates these as a third alternative to market-based and hierarchy-based forms of organizing economic activity, one that creates sufficient gains (in information and in allocation) that compensate sufficiently for the “information exchange costs due to the absence of pricing and managerial direction and the added coordination costs created by the lack of property and contract.”

See also BlaBlaCar; Getaround; Lyft; Turo; Uber data science and, 157 La’Zooz, 94–95 local network effects, 119–120 regulatory challenges, 135 trust and, 98 Cartagena, Juan, 65 Castor, Emily, 9 Center for Global Enterprise, 119 Centers for Disease Control Chain, 86–87, 91 Chandler, Alfred, 4, 69, 71–72 Chase, Robin, 27, 66 Chen, Edward M., 160 Cheng, Denise, 184 Chéron, Guilhem, 16 Chesborough, Henry, 75–76 Chesky, Brian, 1, 7–9, 113, 122, 125, 131 Chhabra, Ashwini, 136 Chhabria, Vince, 160, 177 Choukrun, Marc-David, 16, 17 Clark, Shelby, 190 Clinton, Hillary, 161 Clothing and accessories rentals, 15–16 “Coase’s Penguin, or, Linux and the Nature of the Firm” (Benkler), 210n19 Cohen, Molly, 139, 153 Coleman, James, 60 Collaborative consumption, 28, 82 Collaborative economy, 25–28 Collaborative Economy Honeycomb, 82–84 Collaborative-Peer-Sharing Economy Summit, 105, 114–115 Commercial exchange, history of peer-to-peer, 4–5 Commons-based peer production, 30–32, 210n19 Community accommodation platforms and, 38–43 creation of, 36 funding, 41–43 human connectedness and, 44–46 service platforms and, 43–44 Congressional Sharing Economy Caucus, 137, 182 Consumer Electronic Show, 100 Consumerization of the digital, 54–55 Contractor dependent contractor, 183–184 versus employee, 159–160, 174–175, 178–182 Cooperatives; platform cooperativism, 19, 106, 178, 196–198 Couchsurfing, 38–40, 45, 121.


pages: 872 words: 135,196

The Market for Force: The Consequences of Privatizing Security by Deborah D. Avant

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barriers to entry, corporate social responsibility, failed state, hiring and firing, interchangeable parts, Mikhail Gorbachev, Peace of Westphalia, private military company, profit motive, RAND corporation, rent-seeking, rolodex, the market place, The Nature of the Firm, trade route, transaction costs

Robert Bates, Avner Greif, and Smita Singh, “Organizing Violence,” Journal of Conflict Resolution Vol. 46, No. 5 (October 2002): 599–629. 19 Oliver Williamson, “Public and Private Bureaucracies: A Transaction Cost Economics Perspective,” Journal of Law, Economics and Organization, Vol. 15, No. 1 (1999). 20 See Oliver Williamson, Markets and Hierarchies: Analysis and Anti-Trust Implications (New York: Free Press, 1975). See also, R. H. Coase, “The Nature of the Firm,” Economica Vol. 4, No. 16 (November 1937); H. A. Simon, Administrative Behavior (New York: Macmillan 1961); A. A. Alchian and H. Demsetz, “Production, Information Costs, and Economic Organization,” American Economic Review Vol. 62 (December 1972). 21 Williamson, Markets and Hierarchies, pp. 8–10. 22 In such a complex market, bureaucracies facilitate adaptive decision making that can respond to change.

Clark, Wesley, Waging Modern War: Bosnia, Kosovo, and the Future of Conflict (New York: Public Affairs, 2001). 272 Bibliography Clarke, S. J. G., The Congo Mercenary ( Johannesburg: SAIIA Press, 1968). Clynes, Tom, “Heart Shaped Bullets,” Observer Magazine (24 November 2002), 34. Coase, Ronald, “The Regulated Industries: Discussion,” American Economic Review Vol. 54 (May 1964), 192–197. Coase, R. H., “The Nature of the Firm,” Economica Vol. 4, No. 16 (November 1937), 386–405. Cobb, Charles, Jr., “Chad–Cameroon Pipeline Considered by Congressional Subcommittee,” allAfrica.com NEWS (18 April 2002) (available at http:// allafrica.com/stories/printable/200204180864.html). Cock, Jacklyn and Peggie Mckenzie, From Defense to Development: Redirecting Military Resources in South Africa, (Ottowa: International Development Research Centre, 1998).


pages: 586 words: 159,901

Wall Street: How It Works And for Whom by Doug Henwood

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accounting loophole / creative accounting, affirmative action, Andrei Shleifer, asset allocation, asset-backed security, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, capital asset pricing model, capital controls, central bank independence, corporate governance, correlation coefficient, correlation does not imply causation, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, debt deflation, declining real wages, deindustrialization, dematerialisation, diversification, diversified portfolio, Donald Trump, equity premium, Eugene Fama: efficient market hypothesis, experimental subject, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, George Gilder, hiring and firing, Hyman Minsky, implied volatility, index arbitrage, index fund, interest rate swap, Internet Archive, invisible hand, Isaac Newton, joint-stock company, Joseph Schumpeter, kremlinology, labor-force participation, late capitalism, law of one price, liquidationism / Banker’s doctrine / the Treasury view, London Interbank Offered Rate, Louis Bachelier, market bubble, Mexican peso crisis / tequila crisis, microcredit, minimum wage unemployment, moral hazard, mortgage debt, mortgage tax deduction, oil shock, payday loans, pension reform, Plutocrats, plutocrats, price mechanism, price stability, prisoner's dilemma, profit maximization, Ralph Nader, random walk, reserve currency, Richard Thaler, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, shareholder value, short selling, Slavoj Žižek, South Sea Bubble, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, transcontinental railway, women in the workforce, yield curve, zero-coupon bond

"The Role of Accounting in the Debt Crisis," paper delivered at the European Institute for Advanced Studies in Management conference, Madrid (University of Manchester mimeo). Clarke, Simon (1993). Marx's Theory of Crisis (London: Macmillan). Cleaver, Harry (1995). "The Subversion of Money-as-Command In the Current Crisis," in Bonefeld and HoUoway 1995, pp. 141-177. Coakley, Jerry, and Laurence Harris (1983). City of Capital (Oxford: Basil Blackwell). Coase, Ronald H. (1937). "The Nature of the Firm," Economica 4, pp. 386-405, reprinted in Williamson and Winter (1993), Chapter 2. Cochrane, James L. (1991). "The Internationalization of Trading," speech delivered to a Financial Times conference, London, April 22. Cockburn, Alexander (1995). The Golden Age Is In Us (New York and London: Verso). Cohen, Darrel, Kevin Hassett, and Jim Kennedy (1995). "Are U.S. Investment and Capital Stocks at Optimal Levels?

The Economics of Investment in R&D," Finance and Economics Discussion Series (FEDS) No. 95-39 (Washington: Federal Reserve Board, Division of Research and Statistics, August). Williamson, Oliver E. (1988). "Corporate Finance and Corporate Governance,"/ourna/ of Financed (July), pp. 567-591. — (1993). "The Logic of Economic Organization," in Williamson and Winter (1993), pp. 90-116. Williamson, Oliver E. and Sidney G. Winter, eds. (1993). The Nature of the Firm: Origins, Evolution, and Development Wev^ York and Oxford: Oxford University Press). Wilmsen, Steven (1991). Silverado: Neil Bush and the Savings & Loan 5c«n<i«/(Washington: National Press Books). Winslow, Ted (1992). ""Psychoanalysis and Keynes's Account of the Psychology of the Trade Cycle," in Gerrard and Hillard (1992), pp. 212-230. Wohlstetter, Charles (1993). "Pension Fund Socialism: Can Bureaucrats Run the Blue Chips?


pages: 606 words: 157,120

To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov

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3D printing, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, augmented reality, Automated Insights, Berlin Wall, big data - Walmart - Pop Tarts, Buckminster Fuller, call centre, carbon footprint, Cass Sunstein, choice architecture, citizen journalism, cloud computing, cognitive bias, crowdsourcing, data acquisition, Dava Sobel, disintermediation, East Village, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, Firefox, Francis Fukuyama: the end of history, frictionless, future of journalism, game design, Gary Taubes, Google Glasses, illegal immigration, income inequality, invention of the printing press, Jane Jacobs, Jean Tirole, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Kickstarter, license plate recognition, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Narrative Science, Nicholas Carr, packet switching, PageRank, Paul Graham, Peter Singer: altruism, Peter Thiel, pets.com, placebo effect, pre–internet, Ray Kurzweil, recommendation engine, Richard Thaler, Ronald Coase, Rosa Parks, self-driving car, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Slavoj Žižek, smart meter, social graph, social web, stakhanovite, Steve Jobs, Steven Levy, Stuxnet, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, the medium is the message, The Nature of the Firm, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, transaction costs, urban decay, urban planning, urban sprawl, Vannevar Bush, WikiLeaks

Anderson, “The Difference between Online Knowledge and Truly Open Knowledge,” The Atlantic, February 3, 2012, http://www.theatlantic.com/technology/archive/2012/02/the-difference-between-online-knowledge-and-truly-open-knowledge/252516 . 39 “At the very same time [that “the Internet” is blamed]”: Weinberger, Too Big to Know, xii. 40 Here Comes Everybody: Clay Shirky, Here Comes Everybody: The Power of Organizing without Organizations (New York: Penguin, 2009). 40 Susanne Lohmann’s explanation of the 1989 protests in East Germany: Susanne Lohmann, “The Dynamics of Informational Cascades: The Monday Demonstrations in Leipzig, East Germany, 1989–91,” World Politics 47, no. 1 (October 1, 1994): 42–101. 40 Ronald Coase’s theory of the firm: Ronald Coase, “The Nature of the Firm,” Economica, 4 (1937): 386–405. 40 in order to explain the 1989 protests: Lohmann, “The Dynamics of Informational Cascades.” 41 “Generalizing about social movements”: Stephen Kotkin, Uncivil Society: 1989 and the Implosion of the Communist Establishment (New York: Random House Digital, Inc., 2009), 147. 41 “behavior is motivation that has been filtered through opportunity”: Clay Shirky, Cognitive Surplus: How Technology Makes Consumers into Collaborators, reprint ed.

(New York: Penguin Books, 2011), 195. 41 “share a propensity to engage in method-driven research”: Ian Shapiro, The Flight from Reality in the Human Sciences (Princeton, NJ: Princeton University Press, 2007), 68. 41 “it may be shaped by enthusiasm for the collective objectives”: ibid., 76. 42 “a dispassionate search for the causes”: ibid., 88. 43 Yochai Benkler also draws heavily on Coase: Yochai Benkler, “Coase’s Penguin, or, Linux and ‘The Nature of the Firm,’” Yale Law Journal 112, no. 3 (December 1, 2002): 369–446. 43 “the Internet not only drops transaction and collaboration costs in business”: “Don Tapscott: Four Principles for the Open World,” TED, June 2012, http://www.ted.com/talks/don_tapscott_four_principles_for_the_open_world_1.html?quote=1723. 44 “a historical break, the dawn of a new era”: Gabrielle Hecht, The Radiance of France: Nuclear Power and National Identity after World War II (Cambridge, MA: MIT Press, 2009), and Paul N.


pages: 675 words: 141,667

Open Standards and the Digital Age: History, Ideology, and Networks (Cambridge Studies in the Emergence of Global Enterprise) by Andrew L. Russell

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barriers to entry, borderless world, Chelsea Manning, computer age, Edward Snowden, Frederick Winslow Taylor, Hacker Ethic, Howard Rheingold, Hush-A-Phone, interchangeable parts, invisible hand, Joseph Schumpeter, means of production, Menlo Park, Network effects, new economy, Norbert Wiener, open economy, packet switching, pre–internet, RAND corporation, RFC: Request For Comment, Richard Stallman, Ronald Coase, Ronald Reagan, Silicon Valley, Steve Crocker, Steven Levy, Stewart Brand, technoutopianism, Ted Nelson, The Nature of the Firm, Thomas L Friedman, Thorstein Veblen, transaction costs, web of trust

Usselman, Regulating Railroad Innovation: Business, Technology, and Politics in America, 1840–1920 (New York: Cambridge University Press, 2002). 5 Annual Report of the Directors of American Telephone and Telegraph Company to the Stockholders for the Year Ending December 31, 1909 (Boston: Geo. H. Ellis Co., Printers, 1910), 18. 6 Walter G. Vincenti, What Engineers Know and How They Know It: Analytical Studies from Aeronautical History (Baltimore: The Johns Hopkins University Press, 1990), 7–9. 7 Ronald H. Coase, “The Nature of the Firm,” Economica 4 (1937): 386–405. 8 The Bell Telephone Company was incorporated in 1877, and kept that name until 1879. From 1879 to 1880 it was the National Bell Telephone Company, which was reincorporated as the American Bell Telephone Company (1880–1899). The American Telephone and Telegraph Company was incorporated as a long-distance firm in 1885, and became the parent company for the Bell interests on December 31, 1899.

., The Mythical Man-Month: Essays on Software Engineering Anniversary Edition (Boston: Addison-Wesley, 1995), 42. 7 Henry Demarest Lloyd, Wealth against Commonwealth (New York: Harper & Brothers Publishers, 1894), 498. 8 Louis Galambos, “The Emerging Organizational Synthesis in Modern American History,” Business History Review 44 (1970): 279–290; Louis Galambos, “Technology, Political Economy, and Professionalization: Central Themes of the Organizational Synthesis,” Business History Review 57 (1983): 473–491; Louis Galambos, “Recasting the Organizational Synthesis: Structure and Process in the Twentieth and Twenty-First Centuries,” Business History Review 79 (2005): 1–37; Louis Galambos, The Creative Society – And the Price Americans Paid for It (New York: Cambridge University Press, 2012). 9 Stephen Skowronek, Building a New American State: The Expansion of National Administrative Capabilities, 1877–1920 (New York: Cambridge University Press, 1982); Brian Balogh, “Reorganizing the Organizational Synthesis: Federal-Professional Relations in Modern America,” Studies in American Political Development 5 (1991): 119–172; James C. Scott, Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (New Haven, CT: Yale University Press, 1999); Timothy Schoechle, Standardization and Digital Enclosure: The Privatization of Standards, Knowledge, and Policy in the Age of Global Information Technology (Hershey, PA: IGI Global, 2009). 10 Ronald H. Coase, “The Nature of the Firm,” Economica New Series, 4 (1937): 386–405; Oliver E. Williamson, “Transaction Cost Economics: The Natural Progression,” in Karl Grandin, Les Prix Nobel (Stockholm: Nobel Foundation, 2010); Naomi R. Lamoreaux, Daniel M. G. Raff, and Peter Temin, “Beyond Markets and Hierarchies: Toward a New Synthesis of American Business History,” American Historical Review 108 (2003): 404–433; Naomi R. Lamoreaux, Daniel M.


pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, corporate governance, corporate social responsibility, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, Network effects, new economy, Oculus Rift, pattern recognition, peer-to-peer lending, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, X Prize, Y2K, Zipcar

So why would any established firm—particularly ones that make their money off other people’s data, operate largely behind closed doors, and suffer surprisingly little in data breach after data breach—want to leverage blockchain technologies to distribute power, increase transparency, respect user privacy and anonymity, and include far more people who can afford far less than those already served? Transaction Costs and the Structure of the Firm Let’s start with a little economics. In 1995, Don used Nobel Prize–winning economist Ronald Coase’s theory of the firm to explain how the Internet would affect the architecture of the corporation. In his 1937 paper “The Nature of the Firm,” Coase identified three types of costs in the economy: the costs of search (finding all the right information, people, resources to create something); coordination (getting all these people to work together efficiently); and contracting (negotiating the costs for labor and materials for every activity in production, keeping trade secrets, and policing and enforcing these agreements). He posited that a firm would expand until the cost of performing a transaction inside the firm exceeded the cost of performing the transaction outside the firm.5 Don argued that the Internet would reduce a firm’s internal transaction costs somewhat; but we thought, because of its global accessibility, it would reduce costs in the overall economy even more, in turn lowering barriers to entry for more people.

Coase wrote: “A firm has a role to play in the economic system if . . . [t]ransactions can be organized within the firm at less cost than if the same transactions were carried out through the market. The limit to the size of the firm [is reached] when the costs of organizing additional transactions within the firm [exceed] the costs of carrying the same transactions in the market.” As cited in Oliver Williamson and Sydney G. Winter, eds., The Nature of the Firm (New York and Oxford: Oxford University Press, 1993), 90. 6. Oliver Williamson, “The Theory of the Firm as Governance Structure: From Choice to Contract,” The Journal of Economic Perspectives 16(3) (Summer 2002) 171–95. 7. Ibid. 8. Peter Thiel with Blake Masters, Zero to One: Notes on Startups, or How to Build the Future (New York: Crown Business, 2014). 9. Lord Wilberforce, The Law of Restrictive Trade Practices and Monopolies (Sweet & Maxwell, 1966), 22. 10.


pages: 236 words: 66,081

Cognitive Surplus: Creativity and Generosity in a Connected Age by Clay Shirky

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Andrew Keen, Brewster Kahle, Burning Man, citizen journalism, corporate social responsibility, Dean Kamen, experimental economics, experimental subject, fundamental attribution error, invention of movable type, invention of the telegraph, Kevin Kelly, means of production, meta analysis, meta-analysis, New Urbanism, Nicholas Carr, social software, Steve Ballmer, The Nature of the Firm, the scientific method, ultimatum game

Mencken, A Mencken Chrestomathy: His Own Selection of His Choicest Writings (New York: Vintage, 1982): 617. 114 Behlendorf was the primary programmer for Apache: “Brian Behlendorf, Founding Member of the Apache Software Foundation Speaks on How Open Source Developers Can Save the World,” Bitsource, October 6, 2009, The Bitsource, http://www.thebitsource.com/2009/10/06/brian-behlendorf-apachecon-keynote (accessed January 9, 2010). 116 People do get paid to work on it: John Naughten, “The High Tech Gift Culture,” A Brief History of the Future: Origins of the Internet (New York: The Overlook Press, 2000); also at http://www.briefhistory.com/pages/extract4.htm (accessed January 9, 2010). 119 upended the idea that humans always determine value rationally: Dan Ariely, Predictably Irrational: The Hidden Forces That Shape Our Decisions (New York: Harper, 2008). 119 commons-based peer production: Yochai Benkler, “Coase’s Penguin, or, Linux and the Nature of the Firm,” Yale Law Journal 112 (2002): 371-99. 120 Napster users could share a list of the songs: Spencer E. Ante, “Napster’s Shawn Fanning: The Teen Who Woke Up Web Music,” BusinessWeek, April 12, 2000, Bloomberg, http://www.businessweek.com/ebiz/0004/em0412.htm (accessed January 9, 2010). 120 Napster acquired tens of millions of users in less than two years : Benny Evangelista, “News Analysis: Internet Music Will Still Play on Despite Napster’s Uncertain Future,” San Francisco Chronicle, February 18, 2001, Hearst Communications, http://www.sfgate.com/c/a/2001/02/18/BU39387.DTL (accessed January 9, 2010). 124 “He who receives ideas from me”: Quoted in John Pitman, “Open Access to Professional Information,” IMS Bulletin 36.8 (2007): 13. 125 “Triumph of the Default”: Kevin Kelly, “Triumph of the Default,” The Technium, June 22, 2009, Creative Commons, http://www.kk.org/thetechnium/archives/2009/06/triumph_of_the.php (accessed January 9, 2010). 126 tired of their country’s divisive politics: Sabrina Tavernise, “Young Pakistanis Take One Problem into Their Own Hands,” The New York Times, May 18, 2009, http://www.nytimes.com/2009/05/19/world/asia/19trash.html (accessed January 9, 2010).


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

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Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, Hugh Fearnley-Whittingstall, information retrieval, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Parkinson's law, peer-to-peer lending, Ponzi scheme, pre–internet, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, Zipcar

Collapse of “Transaction Costs” When we asked Beal which are the most commonly listed items on Freecycle, he explained that “there isn’t one particular thing” but instead massive categories of “inconvenient things” (old pianos, sofas, and televisions) and “unusual items” (disco balls, fish tanks, and even stuffed animals). These are the items that would have been a pain to lug to the dump (and sometimes you would even have to pay to dispose of them) or tricky to unload on a neighbor. The transaction costs to ensure they were kept in use, not in landfill, would have been high. In his paper “The Nature of the Firm,” economist and Nobel laureate Ronald Coase coined the term “transaction costs” to refer to the cost of making any form of exchange or participating in a market.3 If you go to the supermarket, for example, and buy some groceries, your costs are not just the price of the groceries but the energy, time, and effort required to write your list, travel to and from the store, wheel around your cart and choose your products, wait in the checkout line, and unpack and put away the groceries when you get back home.


pages: 238 words: 73,824

Makers by Chris Anderson

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3D printing, Airbnb, Any sufficiently advanced technology is indistinguishable from magic, Apple II, autonomous vehicles, barriers to entry, Buckminster Fuller, Build a better mousetrap, business process, crowdsourcing, dark matter, David Ricardo: comparative advantage, death of newspapers, dematerialisation, Elon Musk, factory automation, Firefox, future of work, global supply chain, global village, industrial robot, interchangeable parts, Internet of things, inventory management, James Hargreaves, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, Kickstarter, Lean Startup, manufacturing employment, Mark Zuckerberg, means of production, Menlo Park, Network effects, profit maximization, race to the bottom, Richard Feynman, Richard Feynman, Ronald Coase, self-driving car, side project, Silicon Valley, Silicon Valley startup, Skype, slashdot, South of Market, San Francisco, spinning jenny, Startup school, stem cell, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, transaction costs, trickle-down economics, Whole Earth Catalog, X Prize, Y Combinator

Chapter 9 The Open Organization To make things a new way, you need to make companies a new way, too. In the mid-1930s, Ronald Coase, then a recent London School of Economics graduate, was musing over what to many people might have seemed a silly question: Why do companies exist? Why do we pledge our allegiance to an institution and gather in the same building to get things done? His eventual answer, which he published in his landmark 1937 article “The Nature of the Firm,”33 was this: companies exist to minimize “transaction costs”—time, hassle, confusion, mistakes. When people share a purpose and have established roles, responsibilities, and modes of communication, it’s easy to make things happen. You simply turn to the person in the next cubicle and ask that individual to do his or her job. But in a passing comment in a 1990 interview, Bill Joy, one of the cofounders of Sun Microsystems, revealed a flaw in Coase’s model.


pages: 678 words: 216,204

The Wealth of Networks: How Social Production Transforms Markets and Freedom by Yochai Benkler

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affirmative action, barriers to entry, bioinformatics, Brownian motion, call centre, Cass Sunstein, centre right, clean water, dark matter, desegregation, East Village, fear of failure, Firefox, game design, George Gilder, hiring and firing, Howard Rheingold, informal economy, invention of radio, Isaac Newton, iterative process, Jean Tirole, jimmy wales, market bubble, market clearing, Marshall McLuhan, New Journalism, optical character recognition, pattern recognition, pre–internet, price discrimination, profit maximization, profit motive, random walk, recommendation engine, regulatory arbitrage, rent-seeking, RFID, Richard Stallman, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, shareholder value, Silicon Valley, Skype, slashdot, social software, software patent, spectrum auction, technoutopianism, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs

Gulick, Can Distributed Volunteers Accomplish Massive Data Analysis Tasks? ‹http://www.clickworkers.arc.nasa.gov/documents› /abstract.pdf. 24. J. Giles, "Special Report: Internet Encyclopedias Go Head to Head," Nature, December 14, 2005, available at ‹http://www.nature.com/news/2005/051212/full/438900a.html›. 25. ‹http://www.techcentralstation.com/111504A.html›. 26. Yochai Benkler, "Coase's Penguin, or Linux and the Nature of the Firm," Yale Law Journal 112 (2001): 369. 27. IBM Collaborative User Experience Research Group, History Flows: Results (2003), ‹http://www.research.ibm.com/history/results.htm›. 28. For the full argument, see Yochai Benkler, "Some Economics of Wireless Communications," Harvard Journal of Law and Technology 16 (2002): 25; and Yochai Benkler, "Overcoming Agoraphobia: Building the Commons of the Digitally Networked Environment," Harvard Journal of Law and Technology 11 (1998): 287.

Gulick, Can Distributed Volunteers Accomplish Massive Data Analysis Tasks? ‹http://www.clickworkers.arc.nasa.gov/documents› /abstract.pdf. 24. J. Giles, "Special Report: Internet Encyclopedias Go Head to Head," Nature, December 14, 2005, available at ‹http://www.nature.com/news/2005/051212/full/438900a.html›. 25. ‹http://www.techcentralstation.com/111504A.html›. 26. Yochai Benkler, "Coase's Penguin, or Linux and the Nature of the Firm," Yale Law Journal 112 (2001): 369. 27. IBM Collaborative User Experience Research Group, History Flows: Results (2003), ‹http://www.research.ibm.com/history/results.htm›. 28. For the full argument, see Yochai Benkler, "Some Economics of Wireless Communications," Harvard Journal of Law and Technology 16 (2002): 25; and Yochai Benkler, "Overcoming Agoraphobia: Building the Commons of the Digitally Networked Environment," Harvard Journal of Law and Technology 11 (1998): 287.


pages: 281 words: 95,852

The Googlization of Everything: by Siva Vaidhyanathan

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1960s counterculture, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application

., The PageRank Citation Ranking: Bringing Order to the Web, Technical Report, Digital Libraries Project, Stanford University, 1999, http://ilpubs.stanford.edu:8090/422/. 18. John Battelle, The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture (New York: Portfolio, 2005). 19. Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom (New Haven, CT: Yale University Press, 2006). 20. Yochai Benkler, “Coase’s Penguin, or, Linux and the Nature of the Firm,” Yale Law Journal 112, no. 3 (2002): 369–446. 21. Daniel O. O’Connor and Henry Voos, “Laws, Theory Construction and Bibliometrics,” Library Trends 30, no. 1 (1981): 9–20; see also Christine Kosmopoulos and Denis Pumain, “Citation, Citation, Citation: Bibliometrics, the Web and the Social Sciences and Humanities,” Cybergeo: European Journal of Geography 411 (December 17, 2007), www.cybergeo.eu.


pages: 791 words: 85,159

Social Life of Information by John Seely Brown, Paul Duguid

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AltaVista, business process, Claude Shannon: information theory, computer age, cross-subsidies, disintermediation, double entry bookkeeping, Frank Gehry, frictionless, frictionless market, future of work, George Gilder, global village, Howard Rheingold, informal economy, information retrieval, invisible hand, Isaac Newton, Just-in-time delivery, Kevin Kelly, knowledge economy, knowledge worker, loose coupling, Marshall McLuhan, medical malpractice, moral hazard, Network effects, new economy, Productivity paradox, rolodex, Ronald Coase, shareholder value, Silicon Valley, Steve Jobs, Superbowl ad, Ted Nelson, telepresence, the medium is the message, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, Turing test, Vannevar Bush, Y2K

Epistemic Cultures: How the Sciences Make Knowledge. Cambridge: Harvard University Press. Chandler, Alfred D. 1977. The Visible Hand: The Managerial Revolution in American Business. Cambridge: Harvard University Press. Chellappa, Ramanath, Anitesh Barua, and Andrew B. Whinston. 1997. "E3: An Electronic Infrastructure for a Virtual University." Communications of the ACM 40 (9): 56 58. Page 292 Coase, Ronald H. 937. "The Nature of the Firm." Economica NS 4 (16): 386 405. Coffman, K.G., and Andrew M. Odlyzko. 1998. "The Size and Growth Rate of the Internet." FirstMonday [Online] 3 (10). Available: http://www.firstmonday.dk/issues/issue3_10/coffman/ [1999, July 21]. Cole, Robert. 1999. Managing Quality Fads. New York: Oxford University Press. Council on Environmental Quality. 1993. Environmental Quality: The Twenty-fourth Annual Report of the Council on Environmental Quality.

Remix: Making Art and Commerce Thrive in the Hybrid Economy by Lawrence Lessig

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Amazon Web Services, Andrew Keen, Benjamin Mako Hill, Berlin Wall, Bernie Sanders, Brewster Kahle, Cass Sunstein, collaborative editing, disintermediation, don't be evil, Erik Brynjolfsson, Internet Archive, invisible hand, Jeff Bezos, jimmy wales, Kevin Kelly, late fees, Netflix Prize, Network effects, new economy, optical character recognition, PageRank, recommendation engine, revision control, Richard Stallman, Ronald Coase, Saturday Night Live, SETI@home, sharing economy, Silicon Valley, Skype, slashdot, Steve Jobs, The Nature of the Firm, thinkpad, transaction costs, VA Linux

See Tim O’Reilly, “What Is Web 2.0: Design Patterns and Business Models for the Next Generation of Software,” O’Reilly, September 30, 2005, available at link #68. As Mary Madden summarizes the idea, it is “utilizing collective intelligence, providing networkenabled interactive services, giving users control over their own data.” Mary Madden and Susannah Fox, Riding the Waves of Web 2.0 (Washington, D.C.: Pew Internet Project, 2006), 1. 30. Ronald H. Coase, “The Nature of the Firm,” Economica 4 (1937): 386–405. 31. Benkler, The Wealth of Networks, 59–60. 32. Lawrence Lessig, The Future of Ideas (New York: Random House, 2001) 35–36. 33. Clayton M. Christensen, The Innovator’s Dilemma (Boston, Mass.: Harvard Business School Press, 1997), 228. 34. Benkler, “Sharing Nicely,” 282. 35. This is the phenomenon of “crowding out” described extensively by Professor Benkler in The Wealth of Networks.


pages: 209 words: 89,619

The Precariat: The New Dangerous Class by Guy Standing

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8-hour work day, banking crisis, barriers to entry, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional

Chan, W. (2010), ‘The Path of the Ant Tribe: A Study of the Education System That Reproduces Social Inequality in China’, paper presented at the Seventh East Asia Social Policy Conference, Seoul, 19–21 August. Chellaney, B. (2010), ‘China Now Exports Its Convicts’, Japan Times Online, 5 July. Available at http://search.japantimes.co.jp/print/eo20100705bc.html [accessed 2 December 2010]. Choe, S.-H. (2009), ‘South Korea Fights Slump through Hiring, Not Firing’, International Herald Tribune, 2 April, pp. 1, 4. 184 BIBLIOGRAPHY 185 Coase, R. H. (1937), ‘The Nature of the Firm’, Economica, 4(16): 386–405. Cohen, D. (2009), Three Lectures on Post-Industrial Society, Cambridge, MA: Massachusetts Institute of Technology Press. Cohen, N. (2010), ‘Now, More than Ever, the Poor Need a Voice’, Observer, 7 October, p. 33. Coleman, D. (2010), ‘When Britain Becomes “Majority Minority”’, Prospect, 17 November. Collison, M. (1996), ‘In Search of the High Life’, British Journal of Criminology, 36(3): 428–43.


pages: 326 words: 106,053

The Wisdom of Crowds by James Surowiecki

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AltaVista, Andrei Shleifer, asset allocation, Cass Sunstein, Daniel Kahneman / Amos Tversky, experimental economics, Frederick Winslow Taylor, George Akerlof, Howard Rheingold, I think there is a world market for maybe five computers, interchangeable parts, Jeff Bezos, Joseph Schumpeter, knowledge economy, lone genius, Long Term Capital Management, market bubble, market clearing, market design, moral hazard, new economy, offshore financial centre, Picturephone, prediction markets, profit maximization, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, The Nature of the Firm, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Toyota Production System, transaction costs, ultimatum game, Yogi Berra

There’s a good discussion of Zara’s logistical wizardry in David Bovet and Joseph Martha, Value Nets (New York: John Wiley & Sons, 2000). See Ronald Coase, The Firm, the Market, and the Law (Chicago: University of Chicago Press, 1988); the D. H. Robertson quote is on page 35. See also Oliver Williamson, Markets and Hierarchies: Analysis and Antitrust Implications (New York: The Free Press, 1975); Williamson, “Calculativeness, Trust, and Economic Organization,” Journal of Law and Economics 36 (1993): 453–86; and The Nature of the Firm, edited by Oliver Williamson and Sidney Winter (New York: Oxford University Press, 1991), which includes the original Coase essay. Alfred Chandler Jr.’s histories of the rise of corporate capitalism are essential. See Chandler, The Visible Hand (Cambridge: Belknap/Harvard University Press, 1977); and Chandler, Scale and Scope (Cambridge: Belknap/Harvard University Press, 1990). His earlier books, Strategy and Structure (Cambridge: MIT Press, 1969 [1962]) and Pierre S.


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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3D printing, Airbnb, American energy revolution, autonomous vehicles, Bakken shale, barriers to entry, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

When elite interests are powerful and aligned, labour scarcity tends to result in repression. 16. Smith, The Wealth of Nations. 17. Acemoglu, Daron, and Robinson, James A., Why Nations Fail: The Origins of Power, Prosperity, and Poverty (London: Profile Books, 2012) 5. The Firm as an Information-Processing Organism   1. OECD, Entrepreneurship at a Glance 2015, August 2015.   2. Coase, R. H., ‘The Nature of the Firm’, Economica, Vol. 4, No. 16 (Nov. 1937).   3. Ocean Tomo, ‘Annual Study of Intangible Asset Market Value’, LLC, 2015.   4. Clayton M. Christensen (1952–), Kim B. Clark Professor of Business Administration at the Harvard Business School, and author of The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Cambridge, MA: Harvard Business Review Press, 1997).   5. 


pages: 350 words: 103,988

Reinventing the Bazaar: A Natural History of Markets by John McMillan

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accounting loophole / creative accounting, Albert Einstein, Andrei Shleifer, Anton Chekhov, Asian financial crisis, congestion charging, corporate governance, crony capitalism, Dava Sobel, Deng Xiaoping, experimental economics, experimental subject, fear of failure, first-price auction, frictionless, frictionless market, George Akerlof, George Gilder, global village, Hernando de Soto, I think there is a world market for maybe five computers, income inequality, income per capita, informal economy, invisible hand, Isaac Newton, job-hopping, John Harrison: Longitude, John von Neumann, land reform, lone genius, manufacturing employment, market clearing, market design, market friction, market microstructure, means of production, Network effects, new economy, offshore financial centre, pez dispenser, pre–internet, price mechanism, profit maximization, profit motive, proxy bid, purchasing power parity, Ronald Coase, Ronald Reagan, sealed-bid auction, second-price auction, Silicon Valley, spectrum auction, Stewart Brand, The Market for Lemons, The Nature of the Firm, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, War on Poverty, Xiaogang Anhui farmers, yield management

Journal of Financial Economics 58, 81–112. Claffy, K., Monk, Tracie E., and McRobb, Daniel. 1999. “Internet Tomography,” Nature (January 7). http://helix.nature.com/webmatters/tomog/tomog.html. Clark, Gracia. 1988. “Price Control of Local Foodstuffs in Kumasi, Ghana, 1979.” In G. Clark, ed., Traders versus the State: Anthropological Approaches to Unofficial Economies. Boulder, Colo., Westview Press. Coase, R. H. 1937. “The Nature of the Firm.” Economica 4, 386–405. ————. 1960. “The Problem of Social Cost.” Journal of Law and Economics 3, 1–44. Cockburn, Iain, and Henderson, Rebecca. 1997. “Public-Private Interaction and the Productivity of Pharmaceutical Research” Working paper no. 6018, National Bureau Economic Research, Cambridge, Mass. Collier, Paul, and Gunning, Jan Willem. 1999. “Explaining African Economic Performance.”


pages: 330 words: 91,805

Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism by Robin Chase

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3D printing, Airbnb, Amazon Web Services, Andy Kessler, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business climate, call centre, car-free, cloud computing, collaborative consumption, collaborative economy, collective bargaining, congestion charging, crowdsourcing, cryptocurrency, decarbonisation, don't be evil, Elon Musk, en.wikipedia.org, ethereum blockchain, Ferguson, Missouri, Firefox, frictionless, Gini coefficient, hive mind, income inequality, index fund, informal economy, Internet of things, Jane Jacobs, Jeff Bezos, jimmy wales, job satisfaction, Kickstarter, Lean Startup, Lyft, means of production, megacity, Minecraft, minimum viable product, Network effects, new economy, Oculus Rift, openstreetmap, optical character recognition, pattern recognition, peer-to-peer lending, Richard Stallman, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, smart cities, smart grid, Snapchat, sovereign wealth fund, Steve Crocker, Steve Jobs, Steven Levy, TaskRabbit, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, Turing test, Uber and Lyft, Zipcar

Disrupting the status quo in urban transportation and collaborating with people driving their own cars as taxis, Uber raised $3 billion and Lyft raised $250 million. In total, companies building platforms to tap into excess capacity raised more than $5.5 billion that year, which was close to four times what had been raised by similar companies in 2013, which was again more than double what had been raised in 2012.5 What is happening? The Internet has eliminated a key corporate competitive advantage. In 1937, in the influential essay “The Nature of the Firm,” British economist Ronald Coase wrote that the corporation was invented to do things that individuals and small companies couldn’t do. In particular, small companies would choose to become larger companies whenever it was cheaper to hire than to outsource. What would make hiring cheaper than outsourcing? Transaction costs (a term Coase invented). Finding, monitoring the quality of, and managing many discrete individuals was expensive.

Frugal Innovation: How to Do Better With Less by Jaideep Prabhu Navi Radjou

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3D printing, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, barriers to entry, Baxter: Rethink Robotics, Bretton Woods, business climate, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, cloud computing, collaborative consumption, collaborative economy, connected car, corporate social responsibility, crowdsourcing, Elon Musk, financial innovation, global supply chain, income inequality, industrial robot, Internet of things, job satisfaction, Khan Academy, Kickstarter, late fees, Lean Startup, low cost carrier, M-Pesa, Mahatma Gandhi, megacity, minimum viable product, more computing power than Apollo, new economy, payday loans, peer-to-peer lending, Peter H. Diamandis: Planetary Resources, precision agriculture, race to the bottom, reshoring, ride hailing / ride sharing, risk tolerance, Ronald Coase, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, software as a service, Steve Jobs, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, transaction costs, unbanked and underbanked, underbanked, women in the workforce, X Prize, yield management, Zipcar

., CEO, InProcess, interview with Navi Radjou, March 14th 2014. 14“Philips Introduces ‘Lighting as a Service’”, SustainableBusiness.com, January 23rd 2014. 15“Meet Simple; A Worry-Free Alternative To Traditional Banking”, TraxonTech, March 14th 2013. 6Principle five: co-create value with prosumers 1Von Hippel, E., Democratizing Innovation, MIT Press, 2006. 2“Samsung ranks second in R&D spending for 2013”, GS Marena Blog, October 24th 2013. 3Dunn, E. and Norton, M., Happy Money: The Science of Smarter Spending, Simon & Schuster, 2013. 4Norton, M., Ariely, D. and Mochon, D., “The IKEA effect: When labor leads to love”, Journal of Consumer Psychology, Vol. 22, 2012, pp. 453–60. 5Coase, R., “The Nature of the Firm”, Economica (Blackwell Publishing), Vol. 4, Issue 16, 1937, pp. 386–405. 6White House, “Remarks by the President at the White House Maker Faire”, Office of the Press Secretary, June 18th 2014. 7Dutcher, J., “Massimo Banzi: How Arduino is Open-Sourcing Imagination”, DataScience@Berkeley, April 22nd 2014. 8European Commission, “The Sharing Economy: Accessibility Based Business Models for Peer-to-Peer Markets”, Business Innovation Observatory, September 2013. 9Cortese, A., Locavesting: The Revolution in Local Investing and How to Profit from It, John Wiley, 2011. 10Nussbaum, B., Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire, HarperBusiness, 2013. 11“Giffgaff”, World Heritage Encyclopedia, November 25th 2009. 7Principle six: make innovative friends 1Safian, R., “Generation Flux: Beth Comstock”, Fast Company, January 2012. 2Comstock, B., senior vice-president and chief marketing officer, GE, interview with Navi Radjou, April 7th 2014. 3Groth, O., “Hacking Wicked Social Problems With Renaissance Thinkers and Gamers”, Huffington Post, February 18th 2014. 4Martin, T., “The (Un)examined Organization”, The Alpine Review, Issue No. 2, 2014. 5Martin, T., CEO, Unboundary, e-mail exchange with Navi Radjou, August 18th 2014. 6“Four Disruption Themes for Business”, The Altimeter Group, April 2013. 7Groth, op. cit. 8Marks & Spencer’s Plan A Report, 2014. 9Mulcahy, S., senior vice-president and managing director of financial services industry, Salesforce.com, interview with Navi Radjou, March 6th 2014. 10Rebours, C., CEO, InProcess, interview with Navi Radjou, March 14th 2014. 11Gertler, N., “Industrial Ecosystems: Developing Sustainable Industrial Structures”, MIT master’s thesis, Smart Communities Network, 1995. 12Corkery, M., and Silver-Greenberg, J., “Lenders Offer Low-Cost Services for the Unbanked”, New York Times Dealbook, July 22nd 2014. 13Fera, R.A., “American Express Spotlights the Issue of Financial Exclusion in Davis Guggenheim Doc ‘Spent’”, Fast Company, March 2014. 14Birol, J., serial entrepreneur and strategy consultant, interview with Navi Radjou, August 25th 2014. 15Wiseman, L., Thinkers50-ranked leadership expert, interview with Navi Radjou, August 18th 2014. 16“Pearson debuts new global accelerator class”, Pearson News, June 16th 2014. 17Coughlin, B., CEO, Ford Global Technologies, e-mail exchange with Navi Radjou, August 2014. 18Radjou, N., “Innovation Networks: Global Progress Report 2006,” Forrester Report, June 2006. 19Vandebroek, S., chief technology officer, Xerox, interview with Navi Radjou, August 25th 2014. 20Musk, E., “All Our Patent Are Belong To You”, Tesla Blog, June 12th 2014. 21Litzler, J-B., “Sébastien Bazin divise Accor en deux pour mieux le réveiller”, Le Figaro, November 27th 2013. 22Lacheret, Y., senior vice-president, entrepreneurship advocacy, Accor Group, interview with Navi Radjou, July 7th 2014. 8Fostering a frugal culture 1Hall, J., “Sir Stuart Rose on the ethical spirit of Marks & Spencer”, Daily Telegraph, February 1st 2009. 2Vasanthakumar, V., Senior Associate, Office of the Chief Education Adviser at Pearson, interview with Jaideep Pradhu, August 28th 2014. 3Datta, M., head of Plan A delivery, Marks & Spencer’s worldwide properties, interview with Jaideep Prabhu, May 9th 2014. 4Marks & Spencer’s Plan A Report, 2014. 5Faber, E., CEO, Danone, e-mail exchange with Navi Radjou, August 2014. 6Lawrence, J., senior sustainability adviser and in-house counsel to Kingfisher Group’s Net Positive strategy, interview with Jaideep Prabhu, February 21st 2014. 7Kingfisher, Net Positive Report, 2013/14. 8Ibid. 9Marks & Spencer, op. cit. 10Radjou, N., Prabhu, J. and Ahuja, S., L’Innovation Jugaad: Redevenons Ingénieux!


pages: 629 words: 142,393

The Future of the Internet: And How to Stop It by Jonathan Zittrain

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A Declaration of the Independence of Cyberspace, Amazon Mechanical Turk, Andy Kessler, barriers to entry, book scanning, Brewster Kahle, Burning Man, c2.com, call centre, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, corporate governance, Daniel Kahneman / Amos Tversky, distributed generation, en.wikipedia.org, Firefox, game design, Hacker Ethic, Howard Rheingold, Hush-A-Phone, illegal immigration, index card, informal economy, Internet Archive, jimmy wales, license plate recognition, loose coupling, mail merge, national security letter, packet switching, Post-materialism, post-materialism, pre–internet, price discrimination, profit maximization, Ralph Nader, RFC: Request For Comment, RFID, Richard Stallman, Richard Thaler, risk tolerance, Robert X Cringely, SETI@home, Silicon Valley, Skype, slashdot, software patent, Steve Ballmer, Steve Jobs, Ted Nelson, Telecommunications Act of 1996, The Nature of the Firm, The Wisdom of Crowds, web application, wikimedia commons

forum_id=425379 (Nov. 23, 2004) (“The viral nature of open source quickly became apparent when we first opened the site to the public. Since 1999 our biggest challenge has been trying to stay ahead of the growth curve. Today we have close to 1,000,000 users and 100,000 projects.”). As of September 2007, the SourceForge front page reported that there were 158,761 projects. SourceForge.net, http://sourceforge.net (last visited Sep. 29, 2007). 45. See generally Yochai Benkler, Coase’s Penguin, or, Linux and the Nature of the Firm, 112 YALE L.J. 369, 371 (2002) (“At the heart of the economic engine of the world’s most advanced economies,… we are beginning to take notice of a hardy, persistent, and quite amazing phenomenon. A new model of production has taken root, one that should not be there, at least according to our most widely held beliefs about economic behavior. The intuitions of the late twentieth century American resist the idea that thousands of volunteers could collaborate on a complex economic project….


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

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airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K

shoddy building practices Heather Timmons (25 Apr 2003), “Shoddy Building in the Housing Boom?” Bloomberg BusinessWeek. used to be smaller John Stopford (1998), “Multinational Corporations,” Foreign Policy, 113:12–24. Gardiner C. Means (1931), “The Growth in the Relative Importance of the Large Corporation in American Economic Life,” The American Economic Review, 21:10–42. Ronald Coase first Ronald Coase (1937), “The Nature of the Firm,” Economica, 4:386–405. Nick Leeson's Richard W. Stevenson (28 Feb 1995), “The Collapse of Barings: The Overview: Young Trader's $29 Billion Bet Brings down a Venerable Firm,” New York Times. Erik Ipsen (19 Jul 1995), “Bank of England Cites Fraud in Barings Collapse,” New York Times. Peter Culshaw (8 Jan 2009), “Nick Leeson: How the Original Rogue Trader at Barings Bank Is Thriving in the Credit Crunch,” The Telegraph.


pages: 574 words: 164,509

Superintelligence: Paths, Dangers, Strategies by Nick Bostrom

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agricultural Revolution, AI winter, Albert Einstein, algorithmic trading, anthropic principle, anti-communist, artificial general intelligence, autonomous vehicles, barriers to entry, bioinformatics, brain emulation, cloud computing, combinatorial explosion, computer vision, cosmological constant, dark matter, DARPA: Urban Challenge, data acquisition, delayed gratification, demographic transition, Douglas Hofstadter, Drosophila, Elon Musk, en.wikipedia.org, epigenetics, fear of failure, Flash crash, Flynn Effect, friendly AI, Gödel, Escher, Bach, income inequality, industrial robot, informal economy, information retrieval, interchangeable parts, iterative process, job automation, John von Neumann, knowledge worker, Menlo Park, meta analysis, meta-analysis, mutually assured destruction, Nash equilibrium, Netflix Prize, new economy, Norbert Wiener, NP-complete, nuclear winter, optical character recognition, pattern recognition, performance metric, phenotype, prediction markets, price stability, principal–agent problem, race to the bottom, random walk, Ray Kurzweil, recommendation engine, reversible computing, social graph, speech recognition, Stanislav Petrov, statistical model, stem cell, Stephen Hawking, strong AI, superintelligent machines, supervolcano, technological singularity, technoutopianism, The Coming Technological Singularity, The Nature of the Firm, Thomas Kuhn: the structure of scientific revolutions, transaction costs, Turing machine, Vernor Vinge, Watson beat the top human players on Jeopardy!, World Values Survey

Clark, Andy, and Chalmers, David J. 1998. “The Extended Mind.” Analysis 58 (1): 7–19. Clark, Gregory. 2007. A Farewell to Alms: A Brief Economic History of the World. 1st ed. Princeton, NJ: Princeton University Press. Clavin, Whitney. 2012. “Study Shows Our Galaxy Has at Least 100 Billion Planets.” Jet Propulsion Laboratory, January 11. CME Group. 2010. What Happened on May 6th? Chicago, May 10. Coase, R. H. 1937. “The Nature of the Firm.” Economica 4 (16): 386–405. Cochran, Gregory, and Harpending, Henry. 2009. The 10,000 Year Explosion: How Civilization Accelerated Human Evolution. New York: Basic Books. Cochran, G., Hardy, J., and Harpending, H. 2006. “Natural History of Ashkenazi Intelligence.” Journal of Biosocial Science 38 (5): 659–93. Cook, James Gordon. 1984. Handbook of Textile Fibres: Natural Fibres. Cambridge: Woodhead.


pages: 565 words: 151,129

The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism by Jeremy Rifkin

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3D printing, additive manufacturing, Airbnb, autonomous vehicles, back-to-the-land, big-box store, bioinformatics, bitcoin, business process, Chris Urmson, clean water, cleantech, cloud computing, collaborative consumption, collaborative economy, Community Supported Agriculture, computer vision, crowdsourcing, demographic transition, distributed generation, en.wikipedia.org, Frederick Winslow Taylor, global supply chain, global village, Hacker Ethic, industrial robot, informal economy, intermodal, Internet of things, invisible hand, Isaac Newton, James Watt: steam engine, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Julian Assange, Kickstarter, knowledge worker, labour mobility, Mahatma Gandhi, manufacturing employment, Mark Zuckerberg, market design, means of production, meta analysis, meta-analysis, natural language processing, new economy, New Urbanism, nuclear winter, Occupy movement, oil shale / tar sands, pattern recognition, peer-to-peer lending, personalized medicine, phenotype, planetary scale, price discrimination, profit motive, RAND corporation, randomized controlled trial, Ray Kurzweil, RFID, Richard Stallman, risk/return, Ronald Coase, search inside the book, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, smart cities, smart grid, smart meter, social web, software as a service, spectrum auction, Steve Jobs, Stewart Brand, the built environment, The Nature of the Firm, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, too big to fail, transaction costs, urban planning, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog, Whole Earth Review, WikiLeaks, working poor, Zipcar

Ibid. 41. Jonathan Rowe, “The Hidden Commons,” Yes! Magazine, June 30, 2001, http://www.yes magazine.org/issues/reclaiming-the-commons/the-hidden-commons (accessed June 16, 2013). 42. Mike Bergan, “The American Commons,” 10,000 Birds, August 6, 2007, http://10000birds .com/the-american-commons.htm (accessed July 2, 2013). 43. Yochai Benkler, “Coase’s Penguin, or, Linux and The Nature of the Firm,” Yale Law Journal 112(369) v.04.3 (August 2002): 1–2, http://www.benkler.org/CoasesPenguin.PDF (accessed June 26, 2013). 44. Peter Barnes, Capitalism 3.0: A Guide to Reclaiming the Commons (San Francisco: Berrett-Koehler Publishers, 2006), xiv. Chapter 12 1. Yochai Benkler, The Wealth of Networks: How Social Production Transforms Markets and Freedom (New Haven, CT: Yale University Press, 2006), 470. 2.


pages: 504 words: 143,303

Why We Can't Afford the Rich by Andrew Sayer

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accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate social responsibility, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, Goldman Sachs: Vampire Squid, high net worth, income inequality, investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, means of production, moral hazard, mortgage debt, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Plutocrats, plutocrats, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, Winter of Discontent, working poor, Yom Kippur War

Long-term investment strategies that deferred gains became liabilities. Companies had to post good results in every quarter. Aggressive cost cutting – including job cutting – took priority over long-term investment. Wealth extraction outweighed long-term wealth creation. In the US, it was only the top 2% who had a significant share of this non-wage income.31 Whatever the consequences, the shareholders had to be fed. The shareholder value movement changed the nature of the firms. Instead of coherent groups of activities required for producing particular goods and services for profit, companies came to be treated as bundles of assets to be bought, dismembered and sold off in pieces, in whatever way delivered short-term profits for shareholders. It’s tempting to liken the situation to a protection racket in which those who do not pay their protectors enough face the threat of being taken over by other, more demanding protectors.


pages: 413 words: 117,782

What Happened to Goldman Sachs: An Insider's Story of Organizational Drift and Its Unintended Consequences by Steven G. Mandis

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algorithmic trading, Berlin Wall, bonus culture, BRICs, business process, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, disintermediation, diversification, Emanuel Derman, financial innovation, fixed income, friendly fire, Goldman Sachs: Vampire Squid, high net worth, housing crisis, London Whale, Long Term Capital Management, merger arbitrage, new economy, passive investing, performance metric, risk tolerance, Ronald Reagan, Saturday Night Live, shareholder value, short selling, sovereign wealth fund, The Nature of the Firm, too big to fail, value at risk

The pursuit of profit is portrayed as virtuous, and hard work is viewed as a kind of, for lack of a better phrase, religious duty. The idea of a corporate culture having the characteristics of religious belief only works as a kind of general parallel. And my use of religious terms or phrases should be understood only as analogy, to help explain the ethos. Employees at Goldman do even often use religious terms to describe the nature of the firm’s work, and there is the element of something like blind allegiance, or faith, in the devotion of employees to the firm. A religious-like work ethic is an important force behind Goldman’s relentless pursuit of excellence and its people’s devotion. Goldman’s atmosphere is one in which the pursuit of excellence is seen as the good and right thing to do, and its success (including economic gain) is well deserved.

Common Knowledge?: An Ethnography of Wikipedia by Dariusz Jemielniak

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Andrew Keen, barriers to entry, citation needed, collaborative consumption, collaborative editing, conceptual framework, continuous integration, crowdsourcing, Debian, deskilling, digital Maoism, en.wikipedia.org, Filter Bubble, Google Glasses, Hacker Ethic, hive mind, Internet Archive, invisible hand, Jaron Lanier, jimmy wales, job satisfaction, Julian Assange, knowledge economy, knowledge worker, Menlo Park, moral hazard, online collectivism, pirate software, RFC: Request For Comment, Richard Stallman, Silicon Valley, Skype, slashdot, social software, Stewart Brand, The Nature of the Firm, The Wisdom of Crowds, transaction costs, WikiLeaks, wikimedia commons

Group and Organization Management, 27(1), 14–49. Beneito-Montagut, R. (2011). Ethnography goes online: Towards a user-centred methodology to research interpersonal communication on the Internet. Qualitative Research, 11(6), 716–735. Benevolent dictator. (2013, April 27). Wikimedia. Retrieved August 23, 2013, from http:// meta.wikimedia.org/wiki/Benevolent_dictator Benkler, Y. (2002). Coase’s penguin, or, Linux and “the nature of the firm.” Yale Law Journal, 112(3), 369–446. Benkler, Y. (2006a). Extracting signal from noisy spin. The Edge. Retrieved from http:// www.edge.org/discourse/digital_maoism.html Benkler, Y. (2006b). The wealth of networks: How social production transforms markets and freedom. New Haven, CT: Yale University Press. Benkler, Y. (2011). The penguin and the leviathan: How cooperation triumphs over selfinterest.


pages: 397 words: 110,130

Smarter Than You Think: How Technology Is Changing Our Minds for the Better by Clive Thompson

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3D printing, 4chan, A Declaration of the Independence of Cyberspace, augmented reality, barriers to entry, Benjamin Mako Hill, butterfly effect, citizen journalism, Claude Shannon: information theory, conceptual framework, corporate governance, crowdsourcing, Deng Xiaoping, discovery of penicillin, Douglas Engelbart, Edward Glaeser, en.wikipedia.org, experimental subject, Filter Bubble, Freestyle chess, Galaxy Zoo, Google Earth, Google Glasses, Henri Poincaré, hindsight bias, hive mind, Howard Rheingold, information retrieval, iterative process, jimmy wales, Kevin Kelly, Khan Academy, knowledge worker, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Netflix Prize, Nicholas Carr, patent troll, pattern recognition, pre–internet, Richard Feynman, Richard Feynman, Ronald Coase, Ronald Reagan, sentiment analysis, Silicon Valley, Skype, Snapchat, Socratic dialogue, spaced repetition, telepresence, telepresence robot, The Nature of the Firm, the scientific method, The Wisdom of Crowds, theory of mind, transaction costs, Vannevar Bush, Watson beat the top human players on Jeopardy!, WikiLeaks, X Prize, éminence grise

To organize a widespread group around a task in the pre-Internet period, you needed a central office, staff devoted to coordinating efforts, expensive forms of long-distance communication (telegraphs, phone lines, trains), somebody to buy pencils and paper clips and to manage inventory. These are known as transaction costs, and they’re huge. But there was no way around them. As Shirky points out, following the analysis of economist Ronald Coase’s 1937 article “The Nature of the Firm,” you either paid the heavy costs of organizing or you didn’t organize at all and got nothing done. And so for centuries, people collaborated massively only on tasks that would make enough money to afford those costs. You could work together globally at building and selling profitable cars (like the Ford Motor Company) or running a world religion (like the Catholic Church), or even running a big nonprofit that could solicit mass donations (like UNICEF).

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

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Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, haute couture, illegal immigration, income inequality, invention of the telephone, invention of the wheel, invisible hand, John Nash: game theory, John von Neumann, Kevin Kelly, knowledge economy, labour market flexibility, late capitalism, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, The Market for Lemons, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Washington Consensus, women in the workforce, yield curve, yield management

E. 1997. The Political Economy of the Common Market in Milk and Dairy Products in the European Union. Rome: Food and Agriculture Organization of the United Nations. Williamson, 0. E. 1975. Markets and Hierarchies. New York: Free Press. ---. 1985. The Economic Institutions of Capitalism: Firms, Markets, Relational Contracting. New York: Free Press. Williamson, 0. E., and S. G. Winter, eds. 1991. The Nature of the Firm: Origins, Evolution and Development. New York: Oxford University Press. Wilson, E. 0. 1971. The Insect Societies. Cambridge, Mass.: Harvard University Press. ---. 1975. Sociobiology, the New Synthesis. Cambridge, Mass.: Belknap Press of Harvard University Press. WM Company. 2002. A Comparison of Active and Passive Management of Unit Trusts. Edinburgh: Virgin Money Personal Finance. Wolff, M. 1998.


pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

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affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income

Hirschman, Exit, Voice, and Loyalty (Cambridge: Harvard University Press, 1969), p.81. 17. Tom Peters and George Gilder, "City vs. Country: Tom Peters & George Gilder Debate the Impact of Technology on Location," Forbes, February 1995. 18. Weber, op. cit., p.21. 19. Ibid., p.46 for London, p.73 for Paris. 20. Ibid., p.120. 21. Ibid., p.95. 22. Ibid., p.84. 23. Ibid., p.119. 24. Ibid., p.101. 25. Ibid., p.5. 26. See Ronald Coase, "The Nature of the Firm," reprinted in Louis Putterman and Randall S. Kroszner, eds., The Economic Nature of the Firm: A Reader 2nd ed. (Cambridge: Cambridge University Press, 1996), pp.89-104. 27. Quoted by West, op. cit., p.58; see also Oliver E. Williamson, "The Organization of Work: A Comparative Insititutional Assessment," Journal of Economic Behaviour and Organisation, vol.1, no.1. 28. Quoted by West, op. cit., p.59; see also Williamson, op. cit. 29.


pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

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3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Berlin Wall, big-box store, blood diamonds, borderless world, British Empire, call centre, carbon footprint, Clayton Christensen, cleantech, cognitive dissonance, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, interchangeable parts, intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Kangaroo Route, knowledge worker, kremlinology, labour mobility, Marshall McLuhan, Masdar, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, savings glut, Seaside, Florida, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, stem cell, Steve Jobs, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, Yogi Berra

The trend is to keep going, flinging ourselves ever farther into space, until we scatter completely, forming what Melvin Webber might have called companies without propinquity—maybe the next step in corporate evolution. Corporations have struggled with how and where to best arrange themselves since Henry Ford built the world’s biggest factory outside Detroit, then changed his mind and started taking it apart. In 1937, the economist Ronald Coase wrote “The Nature of the Firm,” exploring just how big a vertically integrated one like Ford’s might get. Not much bigger, he argued, because beyond a certain point, the drag of managing huge organizations over long distances would offset any advantages of scale. Size mattered, however, if advances in transportation, communication, and management techniques could shrink these distances and di-minish the drag. This is exactly what happened.


pages: 741 words: 179,454

Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

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affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial independence, financial innovation, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, labour market flexibility, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, merger arbitrage, Mikhail Gorbachev, Milgram experiment, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Naomi Klein, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, pets.com, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Richard Thaler, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond

GE sold buildings in the final weeks of a quarter to help meet its earning projections. GE was increasingly a product of financial engineering. The size and complex structure of GE made it difficult to understand and analyze—should GE be classified as an industrial or a financial firm? GE studiously maintained a constructive ambiguity, increasing the lack of transparency and making detailed like-for-like comparisons difficult. The nature of the firm made the relatively few investment analysts who covered the company reliant on management, especially Welch, who was GE’s best share salesman. In analyst briefings, Welch typically replied to questions identifying each analyst by their first name. As The Economist noted: “[GE treats] analysts, journalists and other outsiders as if they either belong to the family and are believers, or do not.”22 Investors, reassured by a word from Jack and the company’s capability to meet or marginally beat carefully cultivated earnings expectations, bought GE shares unquestioningly.


pages: 935 words: 267,358

Capital in the Twenty-First Century by Thomas Piketty

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accounting loophole / creative accounting, Asian financial crisis, banking crisis, banks create money, Berlin Wall, Branko Milanovic, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation coefficient, David Ricardo: comparative advantage, demographic transition, distributed generation, diversification, diversified portfolio, European colonialism, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, German hyperinflation, Gini coefficient, high net worth, Honoré de Balzac, immigration reform, income inequality, income per capita, index card, inflation targeting, informal economy, invention of the steam engine, invisible hand, joint-stock company, Joseph Schumpeter, market bubble, means of production, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, open economy, pension reform, purchasing power parity, race to the bottom, randomized controlled trial, refrigerator car, regulatory arbitrage, rent control, rent-seeking, Robert Gordon, Ronald Reagan, Simon Kuznets, sovereign wealth fund, Steve Jobs, The Nature of the Firm, the payments system, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade liberalization, very high income, We are the 99%

To be sure, one could in theory experiment by trying out several CFOs, each for several years, in order to determine what impact the choice has on the firm’s total revenue of 10 billion euros. Obviously, such an estimate would be highly approximate, with a margin of error much greater than the maximum salary one would think of paying, even in a totally stable economic environment.34 And the whole idea of experimentation looks even more hopeless when one remembers that the environment is in fact changing constantly, as is the nature of the firm and the exact definition of each job. In view of these informational and cognitive difficulties, how are such remunerations determined in practice? They are generally set by hierarchical superiors, and at the very highest levels salaries are set by the executives themselves or by corporate compensation committees whose members usually earn comparable salaries (such as senior executives of other large corporations).