winner-take-all economy

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The Winner-Take-All Society: Why the Few at the Top Get So Much More Than the Rest of Us by Robert H. Frank, Philip J. Cook

accounting loophole / creative accounting, air freight, Alvin Roth, Apple's 1984 Super Bowl advert, business cycle, Daniel Kahneman / Amos Tversky, delayed gratification, global village, haute couture, income inequality, invisible hand, labor-force participation, longitudinal study, Marshall McLuhan, medical malpractice, Network effects, positional goods, prisoner's dilemma, rent-seeking, rising living standards, Ronald Reagan, school choice, Shoshana Zuboff, Stephen Hawking, transaction costs, trickle-down economics, winner-take-all economy

But it also says, by implication at least, that if people generally overestimate their prospects in winner-take-all markets, the resulting career choices will not be socially (or even indi­ vidually ) optimal. W hatever its ultimate source, the Lake Wobegon ef­ fect describes just such a bias, for it makes participation in winner-take-all markets seem misleadingly attractive. 106 The Winner-Take-All Society A Simple Winner-Take-All Economy Free marketeers will not be surprised that we get inefficient outcomes when people make career choices on the basis of inaccurate informa­ tion. OUf claim, however, is that even in a world of complete foresight and full rationality, too many people would still compete in winner­ take-all markets. To grasp the reasoning behind this claim, we find it helpful to exam­ ine the career choice that confronts people in a very simple hypotheti­ cal economy.

Thus the availability of additional cable television channels might change the market for stand-up comedy from one served by only a few comedi­ ans, each performing similar material, to a more highly fragmented market with perhaps a dozen performers, each aiming for a narrower market niche. What happens if instead of one large winner-take-all market we have, say, ten smaller ones, each with a prize equal to one-tenth of the original? If people are willing to take fair gambles, contestants will enter each of these smaller winner-take-all markets until the expected return in each is the same as could have been earned elsewhere. The efficiency losses will thus be exactly the same as in the single winner­ take-all market. The entire value of the services generated in the larger Too Many Contestants? 1 19 number of smaller winner-take-all markets will be dissipated by exces­ sive entry into those markets. Although partitioning a large winner-take-all market into many smaller ones does not affect the overcrowding problem, it may have significant effects on the distribution of incomes among contestants.

In return, we would get additional output of much greater value. In short, private market incentives lead too many contestants to enter winner-take-all markets, often at high cost in terms of forgone output in other markets. A More Realistic Economy Our hypothetical winner-take-all economy is obviously a stick-figure caricature. Its simplicity is useful, however, insofar as it enables us to see more clearly the forces that give rise to overcrowding in winner­ take-all markets. With this picture in mind, we can now flesh out the example to see how career decisions might play out under conditions more like the ones that exist in complex modern economies. Future Opportunities Perhaps the most patently unrealistic aspect of our hypothetical econ­ omy was that aspiring singers had to devote their whole careers to the singing contest before discovering whether they had won.


pages: 361 words: 81,068

The Internet Is Not the Answer by Andrew Keen

"Robert Solow", 3D printing, A Declaration of the Independence of Cyberspace, Airbnb, AltaVista, Andrew Keen, augmented reality, Bay Area Rapid Transit, Berlin Wall, bitcoin, Black Swan, Bob Geldof, Burning Man, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, cloud computing, collective bargaining, Colonization of Mars, computer age, connected car, creative destruction, cuban missile crisis, David Brooks, disintermediation, disruptive innovation, Donald Davies, Downton Abbey, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, Frank Gehry, Frederick Winslow Taylor, frictionless, full employment, future of work, gig economy, global village, Google bus, Google Glasses, Hacker Ethic, happiness index / gross national happiness, income inequality, index card, informal economy, information trail, Innovator's Dilemma, Internet of things, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, Joi Ito, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kickstarter, Kodak vs Instagram, Lean Startup, libertarian paternalism, lifelogging, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Metcalfe’s law, move fast and break things, move fast and break things, Nate Silver, Nelson Mandela, Network effects, new economy, Nicholas Carr, nonsequential writing, Norbert Wiener, Norman Mailer, Occupy movement, packet switching, PageRank, Panopticon Jeremy Bentham, Paul Graham, peer-to-peer, peer-to-peer rental, Peter Thiel, plutocrats, Plutocrats, Potemkin village, precariat, pre–internet, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Robert Metcalfe, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, smart cities, Snapchat, social web, South of Market, San Francisco, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, TaskRabbit, Ted Nelson, telemarketer, The Future of Employment, the medium is the message, the new new thing, Thomas L Friedman, Travis Kalanick, Tyler Cowen: Great Stagnation, Uber for X, uber lyft, urban planning, Vannevar Bush, Whole Earth Catalog, WikiLeaks, winner-take-all economy, working poor, Y Combinator

“What seems clear is that Amazon is using its market power,” a June 2014 New York Times editorial notes about Amazon’s decision to unstock Hachette’s books, “to get the best deal for itself while it squeezes publishers, annoys its customers and hurts authors by limiting their sales.”56 “Amazon’s Power Play” is how the New York Times summarized this bullying behavior. This is an accurate summary not only of the Internet’s winner-take-all economy, but also of Amazon’s dominant place in it. So much for those “decentralizing, globalizing, harmonizing and empowering” qualities that Nicholas Negroponte promised would be a “force of nature” of the digital age. Jeff Bezos would, of course, disagree, arguing, no doubt, that such a generalization is a narrative fallacy. But he’d be wrong. The real force of nature in the digital age is a winner-take-all economy that is creating increasingly monopolistic companies like Amazon and multibillionaire plutocrats like Bezos himself. The Code Is Cracked Despite the metaphysical promises of digital prophets like Nicholas Negroponte and Kevin Kelly, the early generation of Internet businesses in what is now called the “Web 1.0” age, such as Amazon, Netscape, Yahoo, and eBay, weren’t very innovative.

Unfortunately, the supposed “new rules” for this new economy aren’t very new. Rather than producing more jobs or prosperity, the Internet is dominated by winner-take-all companies like Amazon and Google that are now monopolizing vast swaths of our information economy. But why has this happened? How has a network designed to have neither a heart, a hierarchy, nor a central dot created such a top-down, winner-take-all economy run by a plutocracy of new lords and masters? Monetization In The Everything Store, his definitive 2013 biography of Amazon founder and CEO Jeff Bezos, Brad Stone recounts a conversation he had with Bezos about the writing of his book. “How do you plan to handle the narrative fallacy?” the Internet entrepreneur asked, leaning forward on his elbows and staring in his bug-eyed way at Stone.9 There was a nervous silence as Stone looked at Bezos blankly.

“It’s the obvious destination for the work-hard-play-hard set.”13 Like an express suddenly roaring past a freight train, the second version of the Internet replaced the first with remarkable speed. What is particularly striking is how few people successfully jumped from one train to the other. But one person who did make the leap was Marc Andreessen. Indeed, more than any other single individual, Andreessen was responsible for transforming the nonprofit Internet into a winner-take-all economy. Andreessen had become familiar with the World Wide Web in the early nineties as a computer science student at the University of Illinois, where he was also earning $6.85 an hour working as a programmer at the National Center for Supercomputing Applications (NCSA), a National Science Foundation–funded research center attached to the university. The major problem with Berners-Lee’s WorldWideWeb browser, he recognized, was that it was forbiddingly hard for anyone without advanced programing skills to use.


pages: 339 words: 88,732

The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies by Erik Brynjolfsson, Andrew McAfee

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, access to a mobile phone, additive manufacturing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, American Society of Civil Engineers: Report Card, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, barriers to entry, basic income, Baxter: Rethink Robotics, British Empire, business cycle, business intelligence, business process, call centre, Charles Lindbergh, Chuck Templeton: OpenTable:, clean water, combinatorial explosion, computer age, computer vision, congestion charging, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, digital map, employer provided health coverage, en.wikipedia.org, Erik Brynjolfsson, factory automation, falling living standards, Filter Bubble, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, Freestyle chess, full employment, G4S, game design, global village, happiness index / gross national happiness, illegal immigration, immigration reform, income inequality, income per capita, indoor plumbing, industrial robot, informal economy, intangible asset, inventory management, James Watt: steam engine, Jeff Bezos, jimmy wales, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Khan Academy, knowledge worker, Kodak vs Instagram, law of one price, low skilled workers, Lyft, Mahatma Gandhi, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Mars Rover, mass immigration, means of production, Narrative Science, Nate Silver, natural language processing, Network effects, new economy, New Urbanism, Nicholas Carr, Occupy movement, oil shale / tar sands, oil shock, pattern recognition, Paul Samuelson, payday loans, post-work, price stability, Productivity paradox, profit maximization, Ralph Nader, Ray Kurzweil, recommendation engine, Report Card for America’s Infrastructure, Robert Gordon, Rodney Brooks, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Simon Kuznets, six sigma, Skype, software patent, sovereign wealth fund, speech recognition, statistical model, Steve Jobs, Steven Pinker, Stuxnet, supply-chain management, TaskRabbit, technological singularity, telepresence, The Bell Curve by Richard Herrnstein and Charles Murray, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, total factor productivity, transaction costs, Tyler Cowen: Great Stagnation, Vernor Vinge, Watson beat the top human players on Jeopardy!, winner-take-all economy, Y2K

But what if a technology arises that lets each seller cheaply replicate his or her services and deliver them globally at little or no cost? Suddenly the top-quality provider can capture the whole market. The next-best provider might be almost as good, but it will not matter. Each time a market becomes more digital, these winner-take-all economics become a little more compelling. Winner-take-all markets were just coming to the fore in the 1990s, when Frank and Cook wrote their remarkably prescient book. They compared these winner-take-all markets, where the compensation was mainly determined by relative performance, to traditional markets, where revenues more closely tracked absolute performance. To understand the distinction, suppose the best, hardest-working construction worker could lay one thousand bricks in a day while the tenth-best laid nine hundred bricks per day.

Like low marginal costs, network effects can create both winner-take-all markets and high turbulence.18 The Social Acceptability of Superstars In addition to the technical changes that have increased digitization, telecommunication, networks, and other factors that create superstar products and companies, there are more aspects at work in boosting superstar compensation for individuals. In some cases, cultural barriers to very large pay packages have fallen. CEOs, financial executives, actors, and professional athletes may be more willing to demand seven- or even eight-figure compensation deals. As more people get those deals, a positive feedback loop emerges: it becomes easier for others to make similar requests. In fact, the concentration of wealth itself can create what Frank and Cook call “deep pocket” winner-take-all markets. As the great economist Alfred Marshall noted, “a rich client whose reputation or fortune or both are at stake will scarcely count any price too high to secure the services of the best man he can get.”19 If mass-market media enables an athlete like O.

As we’ve seen, however, opportunities to create new products don’t necessarily come with big paychecks. A superstar or long-tail economy with low barriers to entry is still one with far more inequality. The Power Curve Nation An economy dominated by winner-take-all markets has very different dynamics than the industrial economy to which we are accustomed. As we discussed at the beginning of the chapter, the earnings of bricklayers will vary a lot less than the winner-take-all earnings of app developers, but that’s not the only difference. Instead of stable market shares, where revenues and income correspond proportionally to differences in talent and effort, competition in winner-take-all markets will be much more unstable and asymmetrical. The great economist Joseph Schumpeter wrote of “creative destruction,” where each innovation not only created value for consumers but also wiped out the previous incumbent.


pages: 452 words: 110,488

The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead by David Callahan

1960s counterculture, affirmative action, business cycle, corporate governance, corporate raider, creative destruction, David Brooks, deindustrialization, East Village, fixed income, forensic accounting, full employment, game design, greed is good, high batting average, housing crisis, illegal immigration, income inequality, job satisfaction, mandatory minimum, market fundamentalism, McMansion, microcredit, moral hazard, new economy, New Urbanism, offshore financial centre, oil shock, old-boy network, plutocrats, Plutocrats, postindustrial economy, profit maximization, profit motive, RAND corporation, Ray Oldenburg, Robert Bork, rolodex, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Steve Jobs, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, Thorstein Veblen, War on Poverty, winner-take-all economy, World Values Survey, young professional, zero-sum game

No stock analyst wants to go on CNBC and hype a stock that every insider knows is a piece of junk. No chief financial officer wants to cook earnings reports, and no accountant wants to rubber-stamp these reports. No journalist wants to make up her sources. But when you look at the effects of inequality in our society, you can understand why respectable people consistently do all of these things. The winner-take-all economy has loaded up the rewards for those who make it into the Winning Class, and left everyone else with little security and lots of anxiety. Inequality has also pulled us apart, weakening our faith that others follow the same rules that we do. Unfortunately it gets worse. Two decades of change in American economic life—and a steady string of victories for laissez-faire ideologues—hasn't just shifted the financial incentives for individuals or the operating strategies of business organizations.

In the same year, Tufts University rejected one in three valedictorians who applied, as well as a number of applicants with perfect 1600 scores on the SAT.14 College admissions directors at the best schools talk about the immense challenge of winnowing down large applicant pools filled with one perfect candidate after the other. Many people scoff at the importance attached to name-brand schools, and it's easy to condemn the less savory motives of parents who want a Harvard kid. But the reality is that in a winner-take-all economy, and a society increasingly obsessed with "branding," a degree from a prestigious college matters more than ever. For example, many recruiters for America's best companies focus their search for entry-level professionals exclusively on the top schools in the nation, and for good reason. As any headhunter will explain, hiring personnel is extremely time consuming and fraught with risk. Because so many hires do not work out, as many as half in some settings, employers are essentially playing a numbers game; the higher the ratio of good hires to bad hires, the less time and money that gets wasted.

Danny may yet make it to the majors one day.12 If he does, he will leave behind one of the most impoverished neighborhoods in one of the most unequal cities in America—and join a profession where men feel poor on $200,000 a year and the inequalities between sluggers and benchwarmers are comparable to the contrast between Harlem and the Upper East Side. He will meet a lot of guys from humble backgrounds similar to his own who are under intense pressure to perform at a very high level and keep their toehold in the Winning Class. Danny will also enter a world so rife with cheating that his own past sins will seem laughable in comparison. Consider the San Francisco Giants as one example of the winner-take-all market in sports. On opening day in spring 2002, the Giants paid its starting roster of twenty-six players a total team salary of $78.3 million. Almost a fifth of this pie went to one player: left fielder Barry Bonds, who took home $15 million during the season. Over half of the total team salary in 2002 went to five of the Giants' top players. At the bottom of the salary pyramid were seven team members with salaries of $300,000 or less.


pages: 283 words: 85,824

The People's Platform: Taking Back Power and Culture in the Digital Age by Astra Taylor

A Declaration of the Independence of Cyberspace, American Legislative Exchange Council, Andrew Keen, barriers to entry, Berlin Wall, big-box store, Brewster Kahle, citizen journalism, cloud computing, collateralized debt obligation, Community Supported Agriculture, conceptual framework, corporate social responsibility, creative destruction, cross-subsidies, crowdsourcing, David Brooks, digital Maoism, disintermediation, don't be evil, Donald Trump, Edward Snowden, Fall of the Berlin Wall, Filter Bubble, future of journalism, George Gilder, Google Chrome, Google Glasses, hive mind, income inequality, informal economy, Internet Archive, Internet of things, invisible hand, Jane Jacobs, Jaron Lanier, Jeff Bezos, job automation, John Markoff, Julian Assange, Kevin Kelly, Kickstarter, knowledge worker, Mark Zuckerberg, means of production, Metcalfe’s law, Naomi Klein, Narrative Science, Network effects, new economy, New Journalism, New Urbanism, Nicholas Carr, oil rush, peer-to-peer, Peter Thiel, plutocrats, Plutocrats, post-work, pre–internet, profit motive, recommendation engine, Richard Florida, Richard Stallman, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley ideology, slashdot, Slavoj Žižek, Snapchat, social graph, Steve Jobs, Stewart Brand, technoutopianism, trade route, Whole Earth Catalog, WikiLeaks, winner-take-all economy, Works Progress Administration, young professional

Networked technologies do not resolve the contradictions between art and commerce, but rather make commercialism less visible and more pervasive. The Internet does not close the distance between hits and flops, stars and the rest of us, but rather magnifies the gap, eroding the middle space between the very popular and virtually unknown. And there is no guarantee that the lucky few who find success in the winner-take-all economy online are more diverse, authentic, or compelling than those who succeeded under the old system. Despite the exciting opportunities the Internet offers, we are witnessing not a leveling of the cultural playing field, but a rearrangement, with new winners and losers. In the place of Hollywood moguls, for example, we now have Silicon Valley tycoons (or, more precisely, we have Hollywood moguls and Silicon Valley tycoons).

Thus an independent musician like Rebecca Gates is squeezed from both sides. Off-line, local radio stations have been absorbed by Clear Channel and the major labels control more of the music market than they did before the Internet emerged. And online Gates has to position herself and her work on a monopolists’ platform or risk total invisibility. Monopolies, contrary to early expectations, prosper online, where winner-take-all markets emerge partly as a consequence of Metcalfe’s law, which says that the value of a network increases exponentially by the number of connections or users: the more people have telephones or have social media profiles or use a search engine, the more valuable those services become. (Counterintuitively, given his outspoken libertarian views, PayPal founder and first Facebook investor Peter Thiel has declared competition overrated and praised monopolies for improving margins.30) What’s more, many of the emerging info-monopolies now dabble in hardware, software, and content, building their businesses at every possible level, vertically integrating as in the analog era.

“In theory you can have a few very successful individuals controlling hundreds of millions of people. You can become big fast, and that favors the domination of strong people.” Preferential attachment, network effects, and the power laws they produce matter, in part, because they intensify and epitomize the old inequities we hoped the Internet would overthrow, from the star system to the hit-driven manufacturing of movies, music, and books. Winner-take-all markets promote certain types of culture at the expense of others, can make it harder for niche cultures and late bloomers to flourish, and contribute to broader income inequality.26 More specifically, where cultural production is concerned, the persistence of power laws refutes the myth of independent creators competing on even ground. The most vocal proponent of this myth, Chris Anderson, has declared the end of the “water cooler era” when we “listened, watched, and read from the same relatively small pool of mostly hit content,” for an age when “we’re all into different things.”


pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

accounting loophole / creative accounting, active measures, affirmative action, asset allocation, barriers to entry, Bonfire of the Vanities, business climate, business cycle, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Powell Memorandum, Ralph Nader, Ronald Reagan, shareholder value, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

How much, in other words, did they really benefit from the winner-take-all economy? The evidence can be summarized in a two-word answer: Not much. When we look at the DNA evidence on U.S. incomes, we find that most Americans experienced extremely modest gains over the era in which the rewards at the top multiplied. This is true, surprisingly and revealingly, even for the mostly highly skilled individuals just below the very top rungs of the income ladder. But the evidence on income gains actually understates the case—by a lot. When we expand our view beyond income to take in the broader canvas of the winner-take-all economy, the argument for thinking that the gains of America’s top-heavy economic growth “trickled down” becomes even weaker. This is not just a story of relative income erosion. The fallout of the winner-take-all economy has reached broadly and deeply into the security of the middle class—and, as recent events reveal, the entire American economy.

Executives in Quebec do not appear to be competing in the same common labor market that has allowed American pay levels at the top to diffuse to the rest of Canada. Chapter 2 How the Winner-Take-All Economy Was Made The winner-take-all economy—the hyperconcentration of rewards at the top that is the defining feature of the post-1970s American economy—poses three big mysteries: Who did it? How? And why? We have seen that the main suspect fingered by most investigators, Skill-Biased Technological Change, is at most a modest accomplice. Now, it is time to turn to the unusual suspect, American government and politics. No less important, it is time to ask, if American government and politics did it, how? Only after understanding the basic, powerful ways in which government fueled the winner-take-all economy will we be in a position to delve into the “Why” questions: What were the motives behind the public policies that fostered winner-take-all?

United States—Politics and government—1989–. I. Pierson, Paul. II. Title. HN89.S6H33 2010 306.3'42097309045—dc22 2010014515 ISBN 978-1-4165-8869-6 ISBN 978-1-4165-9384-3 (ebook) To our children—Ava and Owen, Sidra and Seth— inheritors of a hopefully stronger America Contents Introduction: The Thirty-Year War Part I: The Puzzling Politics of Winner-Take-All 1 The Winner-Take-All Economy 2 How the Winner-Take-All Economy Was Made 3 A Brief History of Democratic Capitalism Part II: The Rise of Winner-Take-All Politics 4 The Unseen Revolution of the 1970s 5 The Politics of Organized Combat 6 The Middle Goes Missing Part III: Winner-Take-All Politics 7 A Tale of Two Parties 8 Building a Bridge to the Nineteenth Century 9 Democrats Climb Aboard 10 Battle Royale Conclusion: Beating Winner-Take-All Acknowledgments Notes Index About the Authors Introduction The Thirty-Year War For those working on Wall Street, 2009 was a very good year.


pages: 269 words: 70,543

Tech Titans of China: How China's Tech Sector Is Challenging the World by Innovating Faster, Working Harder, and Going Global by Rebecca Fannin

Airbnb, augmented reality, autonomous vehicles, blockchain, call centre, cashless society, Chuck Templeton: OpenTable:, cloud computing, computer vision, connected car, corporate governance, cryptocurrency, data is the new oil, Deng Xiaoping, digital map, disruptive innovation, Donald Trump, El Camino Real, Elon Musk, family office, fear of failure, glass ceiling, global supply chain, income inequality, industrial robot, Internet of things, invention of movable type, Jeff Bezos, Kickstarter, knowledge worker, Lyft, Mark Zuckerberg, megacity, Menlo Park, money market fund, Network effects, new economy, peer-to-peer lending, personalized medicine, Peter Thiel, QR code, RFID, ride hailing / ride sharing, Sand Hill Road, self-driving car, sharing economy, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart transportation, Snapchat, social graph, software as a service, South China Sea, sovereign wealth fund, speech recognition, stealth mode startup, Steve Jobs, supply-chain management, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, urban planning, winner-take-all economy, Y Combinator, young professional

Table 2-1 The BAT and FANGs Target Southeast Asia RIDE-HAILING Tencent Led $1.1 billion co-investment in Ola in India, 2017 Led $1.2 billion co-investment in Go-Jek in Indonesia in 2017 US Brands Uber was acquired by Grab Singapore, and Uber got a 27.5% stake in Grab in 2018 Google co-invested $1.2 billion in Go-Jek in Indonesia in 2017 E-COMMERCE Alibaba, Ant Financial Invested $4 billion in Lazada Group, Singapore, 2016–2018 Led two $1.1 billion co-investments in Tokopedia in Indonesia, 2017 and 2018 Co-Invested $1.3 billion in Paytm in India, 2015–2018 US Brands Amazon invested $5 billion in India since 2014 Walmart spent $16 billion to acquire a 77% stake in Indian e-commerce leader Flipkart in 2018 Sources: Silicon Dragon research, S&P Global Intelligence, annual reports, news releases To fortify its stronghold, Alibaba has paid big sums for chunks of Southeast Asian regional tech leaders, notably spending $4 billion for a controlling stake in Singapore-based e-commerce leader Lazada and co-investing a total of $2.2 billion in Indonesian mobile payment service Tokopedia. See table 2-2. Tencent is also hunting in the region and has invested in fast-growth ride-hailing and e-commerce leaders in India and Indonesia plus startups in Vietnam and Thailand. China’s BAT Push Outward Despite the growing frictions and challenges on the US-China trade and tech fronts, China tech companies are ambitiously pushing to go global in a winner-takes-all economy. The three Chinese high-tech titans are each pursuing investments beyond national borders and original business sectors. Let’s look at the strategies of each of these titans, in order of their place in the BAT league. Buffing Up Baidu Baidu is betting its future squarely on diversifying beyond search and into artificial intelligence technologies for self-driving, smart transport and voice-assisted smart home devices.

Of the Chinese tech entrepreneurs I’ve met, smartphone maker Lei is the closest to the legendary Jobs. And now, Apple is copying Xiaomi by integrating more revenue-producing, subscription-based entertainment and news content into iPhones—something that China’s Xiaomi phones have had since day one. The Chinese market demands hyperspeed and precise execution—and an eye on superfast growth before profitability. It can be a winner-takes-all market. A few other Chinese companies have emerged in this league besides Xiaomi with its cool smartphones. They include AI-powered news and video apps Toutiao and TikTok, superapp Meituan, and ride-hailing service Didi. This group, the TMD or Toutiao, Meituan, and Didi, echoes China’s BAT companies. TMD is also slang in Chinese for a rude profanity, so I don’t like to use the acronym much. Instead, let’s call this group of next-generation BAT companies XTMD, adding the X for Xiaomi.


pages: 173 words: 53,564

Fair Shot: Rethinking Inequality and How We Earn by Chris Hughes

"side hustle", basic income, Donald Trump, effective altruism, Elon Musk, end world poverty, full employment, future of journalism, gig economy, high net worth, income inequality, invisible hand, Jeff Bezos, job automation, knowledge economy, labor-force participation, Lyft, M-Pesa, Mark Zuckerberg, meta analysis, meta-analysis, new economy, oil rush, payday loans, Peter Singer: altruism, Potemkin village, precariat, randomized controlled trial, ride hailing / ride sharing, Ronald Reagan, Second Machine Age, self-driving car, side project, Silicon Valley, TaskRabbit, The Bell Curve by Richard Herrnstein and Charles Murray, traveling salesman, trickle-down economics, uber lyft, universal basic income, winner-take-all economy, working poor, working-age population, zero-sum game

FiveThirtyEight, April 25, 2016. http://fivethirtyeight.com/features/universal-basic-income/. Ford, Martin. Rise of the Robots: Technology and the Threat of a Jobless Future. Basic Books, 2016. Frank, Robert H., and Philip J. Cook. The Winner-Take-All Society: Why the Few at the Top Get So Much More than the Rest of Us. Free Press, 1995. Freeland, Chrystia. “The Rise of the Winner-Take-All Economy.” Reuters, June 20, 2013. http://www.reuters.com/article/us-column-freeland/column-the-rise-of-the-winner-take-all-economy-idUSBRE95J0WL20130620. Friedman, Milton. Capitalism and Freedom. The University of Chicago Press, 1962. Furman, Jason. “Is This Time Different? The Opportunities and Challenges of Artificial Intelligence.” July 7, 2016. https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160707_cea_ai_furman.pdf. Giffi, Craig, Jennifer McNelly, Ben Dollar, Gardner Carrick, Michelle Drew, and Bharath Gangula.

The effect of this gargantuan financial sector is that nearly limitless capital is available to young entrepreneurs, regardless of their long-term performance, and less money in the pockets of working people, as we will see. Facebook would not exist, at least in the form it is today, without major advances in technology, globalized markets that made smartphones possible, or venture capital. Alan Krueger, the former chair of the Council of Economic Advisers and an award-winning economist at Princeton, uses the term “winner-take-all” economy to describe the state we live in today. “Over recent decades, technological change, globalization and an erosion of the institutions and practices that support shared prosperity in the U.S. have put the middle class under increasing stress,” Krueger argued in a 2013 speech. “The lucky and the talented—and it is often hard to tell the difference—have been doing better and better, while the vast majority has struggled to keep up.”

Of landing in the seat with the best view of the business? Of having parents who didn’t disinherit me but instead sighed and said “do it if you must”? Of having had that sense of must kindled inside me by a professor of art history at Princeton? Of having been let into Princeton in the first place? Saying people get lucky is not a denial that they work hard and deserve positive outcomes. It is a way of acknowledging that in a winner-take-all economy, small, chance encounters—like who you sit next to at a dinner party or who your college roommate is—have a more significant impact than they have ever had before. In some cases, the collections of these small differences can add up to create immense fortunes. Last spring, Mark Zuckerberg returned to our old stomping grounds to give a commencement speech of his own. He spoke a stone’s throw away from where we had negotiated ownership stakes in Facebook thirteen years before.


Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us About Economics and Life by Alan B. Krueger

accounting loophole / creative accounting, Affordable Care Act / Obamacare, Airbnb, autonomous vehicles, bank run, Berlin Wall, bitcoin, Bob Geldof, butterfly effect, buy and hold, creative destruction, crowdsourcing, disintermediation, diversified portfolio, Donald Trump, endogenous growth, George Akerlof, gig economy, income inequality, index fund, invisible hand, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kickstarter, Live Aid, Mark Zuckerberg, Moneyball by Michael Lewis explains big data, moral hazard, Network effects, obamacare, offshore financial centre, Paul Samuelson, personalized medicine, pre–internet, price discrimination, profit maximization, random walk, recommendation engine, rent-seeking, Richard Thaler, ride hailing / ride sharing, Saturday Night Live, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, ultimatum game, winner-take-all economy, women in the workforce, Y Combinator, zero-sum game

Closing Time In his 1930 essay “Economic Possibilities for Our Grandchildren,” John Maynard Keynes posited that a hundred years hence, the main economic problem confronting people will be what to do with our leisure time: Thus for the first time since his creation man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.17 Most people are not nearly as free of pressing economic concerns as Keynes had envisioned, partly because of the rise in inequality in our increasingly winner-take-all economy, and that situation is unlikely to change in the next decade when we reach Keynes’s one-hundred-year marker. Still, Keynes’s forecast has merit. As Daniel Hamermesh has observed, “Our ability to purchase and enjoy goods and services has risen much more rapidly than the amount of time available for us to enjoy them.”18 Keynes anticipated that “it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the means of life, who will be able to enjoy the abundance when it comes.”

Research has shown that the labor market consequences of graduating from college in a year when the economy is weak are large, negative, and persistent.22 Another study of MBA students found that graduating from business school in a weak year for stocks reduces the chances of getting a high-paying Wall Street job, while graduating in a bull market boosts the chances of landing a high-paying career in investment banking.23 The study concluded that “investment bankers are largely ‘made’ by circumstance rather than ‘born’ to work on Wall Street.” And, as in the music industry, the effect of luck is amplified in a winner-take-all market in the general economy. Consider CEOs. The pay of top executives relative to their workers has soared since the 1980s. In 1978 the average CEO earned about 18 times as much as the average worker; today the average CEO earns more than 250 times as much.24 As in Alfred Marshall’s time, successful executives can now undertake initiatives and new ventures on a much vaster scale, which has undoubtedly played a role in their outsized compensation.


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Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Boris Johnson, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, disruptive innovation, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, starchitect, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

Treasury, crunched the numbers for 2005, they found that even among the top 0.01 percent—true plutocrats who earn at least $10 million a year—wages are far more important than rents. Salary income and business income accounted for 80 percent of their income excluding capital gains and 64 percent including capital gains. And, as with the 1 percent, the shift toward wages has coincided with the emergence of the winner-take-all economy. These figures were a quarter lower in 1979: 61 percent and 46 percent. You can see that change in the life stories of today’s plutocrats. Pete Peterson, for example, is the son of a Greek immigrant who arrived in America at age seventeen and worked his way up to owning a diner in Nebraska; his Blackstone cofounder, Steve Schwarzman, is the son of a Philadelphia-area retailer. Leon Cooperman, a Goldman Sachs veteran and hedge fund billionaire who has become an outspoken critic of the White House, made a point of his own humble background in an open letter to the president that he circulated in the autumn of 2011: “While I have been richly rewarded by a life of hard work (and a great deal of luck), I was not to-the-manor-born.

Economists Thomas Philippon and Ariell Reshef, who have studied the connection between deregulation and soaring incomes in finance, found that the wage premium for a college education increased from 0.382 in 1970 to 0.584 in 2005, an increase of more than 50 percent—a figure that goes a long way in explaining why income inequality has soared. As another economist, Thomas Lemieux, concluded in a 2006 study of the subject, “Most of the increase in wage inequality between 1973 and 2005 is due to a dramatic increase in the return to post-secondary education.” Moreover, broad measures of the return on education understate the rise of the super-smart in one crucial respect. Just as the winner-take-all economy rewards those at the very top much more richly than those one rung beneath them, a super-elite education has outsize rewards. Any middle-class parent living in a city that is home to a significant community of the 0.1 percent—and that means not just the obvious centers of New York, San Francisco, and London, but also emerging metropolises like Mumbai, Moscow, and Shanghai—knows that the perceived high value of an elite education has prompted a Darwinian pedagogical struggle that begins in nursery school.

It is easy to dismiss these contortions as nouveau riche excess or a neurotic example of a child-centered culture run amok. But the reality is more disturbing. In a recent essay, University of Queensland economist John Quiggin calculated that the total first-year class of the Ivy League universities—around twenty-seven thousand—is just under 1 percent of the U.S. college-age population of around three million. And in our education-driven, winner-take-all economy, that 1 percent of eighteen-year-olds has a huge edge in forming the 1 percent as adults. “With those numbers in mind,” Quiggin writes, “the ferocity of the admissions race for elite institutions is unsurprising. Even with the steadily increasing tuition fees, parents and students correctly judge that admission to one of the ‘right’ colleges is a make-or-break life event, far more than a generation ago.”


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Move Fast and Break Things: How Facebook, Google, and Amazon Cornered Culture and Undermined Democracy by Jonathan Taplin

1960s counterculture, affirmative action, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, American Legislative Exchange Council, Apple's 1984 Super Bowl advert, back-to-the-land, barriers to entry, basic income, battle of ideas, big data - Walmart - Pop Tarts, bitcoin, Brewster Kahle, Buckminster Fuller, Burning Man, Clayton Christensen, commoditize, creative destruction, crony capitalism, crowdsourcing, data is the new oil, David Brooks, David Graeber, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, Dynabook, Edward Snowden, Elon Musk, equal pay for equal work, Erik Brynjolfsson, future of journalism, future of work, George Akerlof, George Gilder, Google bus, Hacker Ethic, Howard Rheingold, income inequality, informal economy, information asymmetry, information retrieval, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Joseph Schumpeter, Kevin Kelly, Kickstarter, labor-force participation, life extension, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, Mother of all demos, move fast and break things, move fast and break things, natural language processing, Network effects, new economy, Norbert Wiener, offshore financial centre, packet switching, Paul Graham, paypal mafia, Peter Thiel, plutocrats, Plutocrats, pre–internet, Ray Kurzweil, recommendation engine, rent-seeking, revision control, Robert Bork, Robert Gordon, Robert Metcalfe, Ronald Reagan, Ross Ulbricht, Sam Altman, Sand Hill Road, secular stagnation, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, smart grid, Snapchat, software is eating the world, Steve Jobs, Stewart Brand, technoutopianism, The Chicago School, The Market for Lemons, The Rise and Fall of American Growth, Tim Cook: Apple, trade route, transfer pricing, Travis Kalanick, trickle-down economics, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, We wanted flying cars, instead we got 140 characters, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator

While Google and Facebook use their market power to extract monopoly rents from advertisers that are often 20 percent higher than market price, Amazon uses its monopsony (a market structure in which only one buyer interacts with many would-be sellers) to force authors, publishers, and booksellers to lower their prices, putting many of them out of business. This was not the decentralization that the founders of the Internet imagined, but ironically it was the very design of the Internet, with a set of global standards that allowed for massive scale, that led to the winner-takes-all economy of the Internet age. In another time, Google, Facebook, and Amazon would have been subject to government strictures and might be half the size they are now because much of their growth has been through acquisition, which would have been prevented by strict antitrust-law enforcement. Running for president in 1912, Woodrow Wilson said, “If monopoly persists, monopoly will always sit at the helm of the government.

In other words, one in five movies becomes a big hit. In 2015, in the music business, 80 percent of the revenue came from 1 percent of the products. So Jay Z, Taylor Swift, and a few others got really rich, and most musicians made little or no money from their recordings. It could be that the very nature of search engines, which push the most popular items to the top of the search results, is reinforcing this winner-takes-all economy. Is a tiny percentage of constantly circulating material the rich diversity the Internet has brought us? There is a deeper problem as music moves to an all-streaming format. Because services such as Spotify and YouTube spew out terabytes of data that record companies can analyze, the whole business is becoming ever more data-driven. Data is fabulous for showing people what’s already popular, but it’s terrible for pointing the way toward art—great breakthroughs arising from something that has never been done before.


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

carbon footprint, carried interest, Cass Sunstein, clean water, congestion charging, corporate governance, deliberate practice, full employment, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Paul Samuelson, 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

It’s a matter of simple logic that when people overestimate their chances of winning, too many forsake productive occupations in traditional markets to compete in winner-take-all markets. The Tragedy of the Commons Potential contestants in winner-take-all markets also confront a problem called the tragedy of the commons, an incentive structure that was first invoked to explain overfishing in ocean waters.7 The cod, once abundant in the North Atlantic, saw its population decline by more than 95 percent from overharvesting. The incentives that led to this decline were similar to those that produce excessive entry into many winner-take-all markets. The tragedy of the commons provides a vivid illustration of Darwin’s insight that individual and group interests often diverge sharply. A simple numerical example captures the essence of the conflict.

It’s a feature found to some degree in almost every winner-take-all market. As a practical matter, moreover, almost all markets that generate society’s highest incomes are winner-take-all markets. There are typically a few highly leveraged positions atop each profession—Grammywinning recording artists, all-star shortstops, best-selling novelists, Fortune 500 CEOs, major network news anchors, Academy Award–winning actors, popular radio talk show hosts, leading plaintiffs attorneys, and so on. Because these positions are so lucrative, competition to occupy them is invariably intense. There are literally hundreds—in many cases even thousands—of highly capable, ambitious candidates for each opening. Again, potential contestants in winner-take-all markets tend to overestimate their odds of success and to ignore the fact that their entry into one of these contests would make each existing contestant less likely to succeed.

So if half the people who are currently jockeying for positions in hedge funds and private equity firms were to leave the financial industry tomorrow, there would still be no shortage of extremely qualified candidates to fill those positions. The resulting gains from having more and better engineers, medical researchers, teachers, and family physicians would more than compensate for any lost value from having fewer contestants in winner-take-all markets. If after-tax incomes in winner-take-all markets were lower, fewer THE GREAT TRADE-OFF? 167 contestants would compete for positions in them. So the desired employment shifts could be encouraged simply by raising tax rates on top earners. Referring to proposals to eliminate preferential tax treatment for hedge fund and private equity managers, a finance professor at Columbia Business School objected that “Private equity is a very important part of our economy,” adding that higher taxes will discourage it.9 Others have characterized the proposals as envy-driven class warfare.


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Success and Luck: Good Fortune and the Myth of Meritocracy by Robert H. Frank

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, attribution theory, availability heuristic, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, carried interest, Daniel Kahneman / Amos Tversky, David Brooks, deliberate practice, en.wikipedia.org, endowment effect, experimental subject, framing effect, full employment, hindsight bias, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, invisible hand, labor-force participation, lake wobegon effect, loss aversion, minimum wage unemployment, Network effects, Paul Samuelson, Report Card for America’s Infrastructure, Richard Thaler, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Rory Sutherland, selection bias, side project, sovereign wealth fund, Steve Jobs, The Wealth of Nations by Adam Smith, Tim Cook: Apple, ultimatum game, Vincenzo Peruggia: Mona Lisa, winner-take-all economy

In such markets, the quality difference between best and second best is often barely perceptible, but the corresponding difference in rewards can be enormous. Technology has been creating similar winner-take-all markets in other domains, including law, medicine, sports, journalism, retail, manufacturing, even academia. In these and many other arenas, new methods of production and communication have amplified the effect of chance events, greatly magnifying the gaps between winners and losers. It’s one thing to say that someone who works 1 percent harder than others or is 1 percent more talented deserves 1 percent more income. But the importance of chance looms much larger when such small performance differences translate into thousands-fold differences in earnings. The spread of winner-take-all markets has amplified the importance of chance in a second way. In almost all cases, the prodigious rewards that accrue to a handful of winners in these markets attract enormous numbers of contestants.

Many best sellers are no more worthy, in purely objective terms, than a host of other books that fail to make the list. Winner-take-all markets generally display two characteristic features. One is that rewards depend less on absolute performance than on relative performance. Steffi Graf, one of the best female tennis players of all time, played at a consistently high level throughout the mid-1990s, yet she earned considerably more during the twelve months after April 1993 than during the preceding twelve months. One reason was the absence during the latter period of her rival Monica Seles, who had been forced to leave the tour after being stabbed in the back that April by a deranged fan at a tournament in Germany. Although the absolute quality of Graf’s play didn’t change much during Seles’s absence, her relative quality improved substantially. A second important feature of winner-take-all markets is that rewards tend to be highly concentrated in the hands of a few top performers.

And among that billion minus one Might have chanced to be Shakespeare, another Newton, a new Donne— But the One was Me. Shame to have ousted your betters thus, Taking ark while the others remained outside! Better for all of us, froward Homunculus, If you’d quietly died! —ALDOUS HUXLEY (1920) CONTENTS Preface xi Acknowledgments xix 1 Write What You Know 1 2 Why Seemingly Trivial Random Events Matter 21 3 How Winner-Take-All Markets Magnify Luck’s Role 40 4 Why the Biggest Winners Are Almost Always Lucky 56 5 Why False Beliefs about Luck and Talent Persist 69 6 The Burden of False Beliefs 86 7 We’re in Luck: A Golden Opportunity 109 8 Being Grateful 128 Appendix 1: Detailed Simulation Results for Chapter 4 151 Appendix 2: Frequently Asked Questions about the Progressive Consumption Tax 158 Notes 173 Index 183 PREFACE How important is luck?


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The Four: How Amazon, Apple, Facebook, and Google Divided and Conquered the World by Scott Galloway

activist fund / activist shareholder / activist investor, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Amazon Web Services, Apple II, autonomous vehicles, barriers to entry, Ben Horowitz, Bernie Sanders, big-box store, Bob Noyce, Brewster Kahle, business intelligence, California gold rush, cloud computing, commoditize, cuban missile crisis, David Brooks, disintermediation, don't be evil, Donald Trump, Elon Musk, follow your passion, future of journalism, future of work, global supply chain, Google Earth, Google Glasses, Google X / Alphabet X, Internet Archive, invisible hand, Jeff Bezos, Jony Ive, Khan Academy, longitudinal study, Lyft, Mark Zuckerberg, meta analysis, meta-analysis, Network effects, new economy, obamacare, Oculus Rift, offshore financial centre, passive income, Peter Thiel, profit motive, race to the bottom, RAND corporation, ride hailing / ride sharing, risk tolerance, Robert Mercer, Robert Shiller, Robert Shiller, Search for Extraterrestrial Intelligence, self-driving car, sentiment analysis, shareholder value, Silicon Valley, Snapchat, software is eating the world, speech recognition, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, Stewart Brand, supercomputer in your pocket, Tesla Model S, Tim Cook: Apple, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, undersea cable, Whole Earth Catalog, winner-take-all economy, working poor, young professional

But let’s put “intelligence” on the x axis. How much does a company learn from its customers? What kind of data do these customers provide? How seamlessly and quickly does it improve the user experience, like auto-populate your destination on Uber, or suggest songs you’ll like on Spotify? Over the last five years, only thirteen in the S&P 500 have outperformed the index each year—evidence of our winner-take-all economy.17 What do most of these firms have in common? They use the peanut-butter-and-chocolate combination of receptors (users) and intelligence (algorithms that track usage to improve the offering). This is tantamount to a car that becomes more valuable with mileage. We now have a Benjamin Button class of products that age in reverse. Wearing your Nikes makes them less valuable. But posting to Facebook that you are wearing Nikes makes the network more valuable.

It’s the antithesis of a luxury company—it’s available to everyone, anywhere, whether they are rich or poor, genius or slow. We don’t care how big and dominant Google has become, because our experience of it is small, intimate, and personal. And if it turns those pennies into tens of billions of revenue, and hundreds of billions in shareholder value, we aren’t resentful—as long as it gives us answers and makes our brains seem smarter. It is the winner, and its shareholder benefit stems from the brain’s winner-take-all economy. Google gives the consumer the best answer, for less, more quickly than any organization in history. The brain can’t help but love Google. If Google represents the brain, Amazon is a link between the brain and our acquisitive fingers—our hunter-gatherer instinct to acquire more stuff. At the dawn of history, better tools meant an improved and longer life. Historically, the more stuff we had, the more secure and successful we felt.


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So Good They Can't Ignore You: Why Skills Trump Passion in the Quest for Work You Love by Cal Newport

Apple II, bounce rate, business cycle, Byte Shop, Cal Newport, capital controls, cleantech, Community Supported Agriculture, deliberate practice, financial independence, follow your passion, Frank Gehry, information asymmetry, job satisfaction, job-hopping, knowledge worker, Mason jar, medical residency, new economy, passive income, Paul Terrell, popular electronics, renewable energy credits, Results Only Work Environment, Richard Bolles, Richard Feynman, rolodex, Sand Hill Road, side project, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, web application, winner-take-all economy

Step 1: Decide What Capital Market You’re In For the sake of clarity, I will introduce some new terminology. When you are acquiring career capital in a field, you can imagine that you are acquiring this capital in a specific type of career capital market. There are two types of these markets: winner-take-all and auction. In a winner-take-all market, there is only one type of career capital available, and lots of different people competing for it. Television writing is a winner-take-all market because all that matters is your ability to write good scripts. That is, the only capital type is your script-writing capability. An auction market, by contrast, is less structured: There are many different types of career capital, and each person might generate a unique collection. The cleantech space is an auction market.

career capital markets (introduced in Rule #2): When acquiring career capital in a field, you can envision that you’re acquiring this capital in a specific type of career capital market. There are two types of these markets: winner-take-all and auction. In a winner-take-all market, there is only one type of career capital available and lots of different people competing for it. An auction market, by contrast, is less structured: There are many different types of career capital, and each person might generate their own unique collection of this capital. Different markets require different career capital acquisition strategies. In a winner-take-all market, for example, you need to first “crack the code” on how people master the one skill that matters. In an auction market, by contrast, you might simply emphasize rareness in the skill combinations that you create.

His latest gig was on the stop-motion comedy Glenn Martin, DDS, which he had cocreated with Michael Eisner and had run for two seasons. In other words, there’s no doubt that Alex is an established writer in an industry that allows few through its gates. The question is, how did he do it? How Alex Berger Broke into Hollywood What makes television a hard industry to crack is the fact that it’s a winner-take-all market. There’s only one type of career capital here, the quality of your writing, and there are thousands of hopefuls trying to gain enough of this capital to impress a very small group of buyers. In this respect, however, Alex had an advantage. At Dartmouth College he had been a debater, and a damn good one at that: In 2002 his two-man team arrived at the National Debate Tournament with the country’s highest rank; Alex then went on to win the Best Speaker prize at the tournament.


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Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You by Sangeet Paul Choudary, Marshall W. van Alstyne, Geoffrey G. Parker

3D printing, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, Apple's 1984 Super Bowl advert, autonomous vehicles, barriers to entry, big data - Walmart - Pop Tarts, bitcoin, blockchain, business cycle, business process, buy low sell high, chief data officer, Chuck Templeton: OpenTable:, clean water, cloud computing, connected car, corporate governance, crowdsourcing, data acquisition, data is the new oil, digital map, discounted cash flows, disintermediation, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, financial innovation, Haber-Bosch Process, High speed trading, information asymmetry, Internet of things, inventory management, invisible hand, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, Khan Academy, Kickstarter, Lean Startup, Lyft, Marc Andreessen, market design, Metcalfe’s law, multi-sided market, Network effects, new economy, payday loans, peer-to-peer lending, Peter Thiel, pets.com, pre–internet, price mechanism, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Satoshi Nakamoto, self-driving car, shareholder value, sharing economy, side project, Silicon Valley, Skype, smart contracts, smart grid, Snapchat, software is eating the world, Steve Jobs, TaskRabbit, The Chicago School, the payments system, Tim Cook: Apple, transaction costs, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, winner-take-all economy, zero-sum game, Zipcar

This made Airbnb far easier to use and enabled the platform to rapidly outgrow the erstwhile category leader. WHEN ADVANTAGE IS SUSTAINABLE: WINNER-TAKE-ALL MARKETS In business, no victory is permanent—but on occasion, a particular firm is capable of enjoying a dominant position within its industry for a decade or longer. When this happens, we can say that the company has maintained a sustained advantage. This happens most often in a winner-take-all market. This is a market in which specific forces conspire to encourage users to gravitate toward one platform and to abandon others. The four forces that most often characterize winner-take-all markets are supply economies of scale, strong network effects, high multihoming or switching costs, and lack of niche specialization. As we explained in chapter 2, supply economies of scale are an industrial-era source of market power driven by the massive fixed costs of production in such industries as railroads, oil and gas exploration, mining, pharmaceutical development, and auto and aircraft manufacture.

Among the methods that platforms use to compete with one another are preventing multihoming by limiting platform access; fostering innovation, then capturing its value; leveraging the value of information; nurturing partnerships rather than pursuing mergers and acquisitions; platform envelopment; and enhanced platform design. Winner-take-all markets exist in certain platform markets. They are driven by four main factors: supply economies of scale, network effects, multihoming and switching costs, and the lack of niche specialization. In winner-take-all markets, competition is apt to be particularly fierce. 11 POLICY How Platforms Should (and Should Not) Be Regulated In the fall of 2014, the New York City subways were suddenly filled with ads for a business many city residents were just beginning to learn about—Airbnb. These were not ordinary ads aimed at convincing potential customers to try out the room rental services provided by Airbnb.

The tendency of an idea or brand to be circulated rapidly and widely from one Internet user to another. Virality can attract people to a network, but network effects keep them there. Virality is about stimulating growth among people off-platform, while network effects are about increasing value among people on-platform. Winner-take-all market. A market in which specific forces conspire to encourage users to gravitate toward one platform and to abandon others. The four forces that most often characterize winner-take-all markets are supply economies of scale, strong network effects, high multihoming or switching costs, and lack of niche specialization. NOTES CHAPTER 1: TODAY 1. Bill Gurley, “A Rake Too Far: Optimal Platform Pricing Strategy,” Above the Crowd, April 18, 2013, http://abovethecrowd.com/2013/04/18/a-rake-too-far-optimal-platformpricing-strategy/. 2.


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With Liberty and Dividends for All: How to Save Our Middle Class When Jobs Don't Pay Enough by Peter Barnes

Alfred Russel Wallace, banks create money, basic income, Buckminster Fuller, collective bargaining, computerized trading, creative destruction, David Ricardo: comparative advantage, declining real wages, deindustrialization, diversified portfolio, en.wikipedia.org, Fractional reserve banking, full employment, hydraulic fracturing, income inequality, Jaron Lanier, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, land reform, Mark Zuckerberg, Network effects, oil shale / tar sands, Paul Samuelson, profit maximization, quantitative easing, rent-seeking, Ronald Coase, Ronald Reagan, Silicon Valley, sovereign wealth fund, the map is not the territory, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, Upton Sinclair, Vilfredo Pareto, wealth creators, winner-take-all economy

Which means that, over time, our economic system will necessarily create a small upper crust and a shrunken middle. This is a crucial point. We know that people have different capacities and drives. Some are smarter than others, and some work harder. But those different abilities don’t explain the far greater differences in rewards. Rather, extreme reward differences are driven by the compounding effects of our winner-take-all economy. If extreme inequality is a built-in property of our present economic system, we’ve got some deep thinking to do. For this means that even if we educated our children till the cows came home, inspired or cajoled them to work harder, and got them all jobs, we wouldn’t sustain a large middle class over time. Upward income flow would remain self-reinforcing, ending only when the system crashed (and maybe not even then, as 2008 showed).


Infotopia: How Many Minds Produce Knowledge by Cass R. Sunstein

affirmative action, Andrei Shleifer, availability heuristic, Build a better mousetrap, c2.com, Cass Sunstein, cognitive bias, cuban missile crisis, Daniel Kahneman / Amos Tversky, Edward Glaeser, en.wikipedia.org, feminist movement, framing effect, hindsight bias, information asymmetry, Isaac Newton, Jean Tirole, jimmy wales, market bubble, market design, minimum wage unemployment, prediction markets, profit motive, rent control, Richard Stallman, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, slashdot, stem cell, The Wisdom of Crowds, winner-take-all economy

Traders have been able to bet on the market capitalization that Google will achieve in its initial public offering, the price of Microsoft stock at a future date, and Federal Reserve monetary policy, in addition to the outcomes of a range of U.S. elections.12 For presidential elections—still the most popular markets that IEM operate—traders have recently been permitted to choose from two types of markets. In the “winner-take-all” market, traders win $1 for each “future” in the winning candidate that they own; they receive nothing for shares of the losing candidate. In a “vote-share” market, traders in “candidate futures” win $1 multiplied by the proportion of the popular vote that the candidate receives. Thus, in a winner-take-all market, a “Dukakis future” was worth nothing after the election, whereas in a vote-share market, each Dukakis future paid $0.456. In a winner-take-all market, the market price reflects traders’ perceptions of the likelihood that each candidate will win the election. More interestingly, observers can use the prices in a vote-share market much as they might use a poll.

Consider the 2004 presidential election. On the day of the vote, dramatic news of pro-Kerry exit polls produced not only a huge switch in the conventional wisdom in the media and on blogs, but also a great deal of volatility in election Money, Prices, and Prediction Markets / 141 markets, with a wild swing in the direction of Senator Kerry at the expense of President Bush. “Suddenly, Kerry’s stock in the Winner Take All market shot up to 70 cents and Bush stock was in the cellar.”79 The rumors affected investors, not just onlookers. Large-scale errors are always possible when apparently relevant news leads numerous investors to buy or sell. Indeed, election day in 2004 may well have been a cascade, with investors responding to one another’s judgments, even though they were based on misleading information. But for those enthusiastic about prediction markets, there is some favorable evidence: The erroneous figures were able to last for only a few hours, after which the numbers returned to their previous state of accuracy.


pages: 511 words: 132,682

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants by Maurice E. Stucke, Ariel Ezrachi

affirmative action, Airbnb, Albert Einstein, Andrei Shleifer, Bernie Sanders, Boeing 737 MAX, Cass Sunstein, choice architecture, cloud computing, commoditize, corporate governance, Corrections Corporation of America, Credit Default Swap, crony capitalism, delayed gratification, Donald Trump, en.wikipedia.org, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Google Chrome, greed is good, hedonic treadmill, income inequality, income per capita, information asymmetry, invisible hand, job satisfaction, labor-force participation, late fees, loss aversion, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, market fundamentalism, mass incarceration, Menlo Park, meta analysis, meta-analysis, Milgram experiment, mortgage debt, Network effects, out of africa, payday loans, Ponzi scheme, precariat, price anchoring, price discrimination, profit maximization, profit motive, race to the bottom, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Stanford prison experiment, Stephen Hawking, The Chicago School, The Market for Lemons, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Davenport, Thorstein Veblen, Tim Cook: Apple, too big to fail, transaction costs, Uber and Lyft, uber lyft, ultimatum game, Vanguard fund, winner-take-all economy

The higher the ranking of our child’s school, the better, we think, are the child’s odds for prevailing in an increasingly inequitable, precarious economy. So parents, too, become complicit in the race to the bottom. Why disadvantage our child by having her apply to only two or three universities, based on some ethical principle? And why settle for the local state university? Of course, we know our child can do quite well there. But won’t she have a better chance of withstanding the blows of automation and uncertainty in this winner-take-all economy if she goes to a top-ranked school? In any race to the bottom, we might expect those at the forefront of this frenzy to be the people with the most to fear. So, in the college rankings frenzy, is it the parents in the Appalachian trailer homes who are seeking to push their children up the economic ladder by sending them to Harvard? Or is it the people with the most to lose, the wealthy and upper-middle class, who fear their children will slide down the economic ladder?

Some made their wealth without an Ivy League education. Some may even have skipped college altogether. Well-to-do parents are also likely to be well-informed enough to know about the empirical studies that cast considerable doubt on the economic advantage of attending some of these aspirational schools—as we’ll discuss at the end of this chapter. But the primordial need to ensure their children’s survival in a winner-take-all economy triumphs. For the upper-middle class and wealthy, the race begins not in senior year, but much earlier. To increase the odds of admittance to a top college, parents now compete for entry into elite private and magnet public high schools with the understanding that attendance at these schools gives students a competitive edge at securing placement at the top-ranked national universities and liberal arts colleges.


pages: 463 words: 115,103

Head, Hand, Heart: Why Intelligence Is Over-Rewarded, Manual Workers Matter, and Caregivers Deserve More Respect by David Goodhart

active measures, Airbnb, Albert Einstein, assortative mating, basic income, Berlin Wall, Bernie Sanders, big-box store, Boris Johnson, Branko Milanovic, British Empire, call centre, Cass Sunstein, central bank independence, centre right, computer age, corporate social responsibility, COVID-19, Covid-19, David Attenborough, David Brooks, deglobalization, deindustrialization, delayed gratification, desegregation, deskilling, different worldview, Donald Trump, Elon Musk, Etonian, Fall of the Berlin Wall, Flynn Effect, Frederick Winslow Taylor, future of work, gender pay gap, gig economy, glass ceiling, illegal immigration, income inequality, James Hargreaves, James Watt: steam engine, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labour market flexibility, longitudinal study, low skilled workers, Mark Zuckerberg, mass immigration, new economy, Nicholas Carr, oil shock, pattern recognition, Peter Thiel, pink-collar, post-industrial society, post-materialism, postindustrial economy, precariat, reshoring, Richard Florida, Scientific racism, Skype, social intelligence, spinning jenny, Steven Pinker, superintelligent machines, The Bell Curve by Richard Herrnstein and Charles Murray, The Rise and Fall of American Growth, Thorstein Veblen, twin studies, Tyler Cowen: Great Stagnation, universal basic income, upwardly mobile, wages for housework, winner-take-all economy, women in the workforce, young professional

In his celebrated speech about inequality at Osawatomie, Kansas, President Obama said that “a higher education is the surest route to the middle class.” Left Democrats like Bernie Sanders and Elizabeth Warren go even further and demand “college for all.” Not everyone can be a winner, however you design the game. In some fields such as law, medicine, technology, and some corners of business, “winner-takes-all” markets have provided exceptional rewards to exceptional people—people like Mark Zuckerberg, Jeff Bezos, Elon Musk—who have both high cognitive skills and practical knowledge of something that gives them a big first-mover advantage in new digital markets. Below them is a wider group of highly educated—and highly credentialized—people from top universities who have the intelligence and personality attributes to propel them into the top layer of jobs.

But two aspects of the cognitive takeover story are less visible. First, the extent of the privileging of key cognitive employees that has been emerging in big multinational companies. Second, the extent of the spread of graduate-only jobs in recent years. Higher returns on qualification have also been reinforced by other developments in modern economies, such as the so-called war for talent and winner-takes-all markets. Both are the product of technology and global openness. The war for talent was a phrase coined by Steven M. Hankin of the management consultancy McKinsey in 1997 to describe more intense competition among top companies for recruiting and retaining key knowledge workers. The prediction that the modern market economy combined with certain new technologies would generate a new layer of superstars was made a few years ago by two American academics, Robert H.

The model for this is something like the website designer who requires both technical know-how and some aesthetic-design ability. But hanging over this potentially benign evolution is the specter of inequality. The knowledge economy will lose many of its rank-and-file soldiers but it will still have an officer corps of highly skilled individuals, both those managing the machines of the fourth industrial revolution and the superstar professionals of the winner-takes-all markets. Soaring corporate pay packages in recent decades have already led to chief executives of the top 500 US companies earning on average 379 times more than their average employee; the figure is 149 times for the top 100 companies in the United Kingdom. 44 Some very sober, mainstream commentators, like Adair Turner, former chairman of the Financial Services Authority in London, worry a great deal about the further deep inequality they see built into the economic trends.


pages: 196 words: 54,339

Team Human by Douglas Rushkoff

1960s counterculture, autonomous vehicles, basic income, Berlin Wall, big-box store, bitcoin, blockchain, Burning Man, carbon footprint, clean water, clockwork universe, cloud computing, collective bargaining, corporate personhood, disintermediation, Donald Trump, drone strike, European colonialism, Filter Bubble, full employment, future of work, game design, gig economy, Google bus, Gödel, Escher, Bach, Internet of things, invention of the printing press, invention of writing, invisible hand, iterative process, Kevin Kelly, knowledge economy, life extension, lifelogging, Mark Zuckerberg, Marshall McLuhan, means of production, new economy, patient HM, pattern recognition, peer-to-peer, Peter Thiel, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, Ronald Reagan, Ronald Reagan: Tear down this wall, shareholder value, sharing economy, Silicon Valley, social intelligence, sovereign wealth fund, Steve Jobs, Steven Pinker, Stewart Brand, technoutopianism, theory of mind, trade route, Travis Kalanick, Turing test, universal basic income, Vannevar Bush, winner-take-all economy, zero-sum game

A resource such as a lake or a field, or a monetary system, is understood as a shared asset. The pastures of medieval England were treated as a commons. It wasn’t a free-for-all, but a carefully negotiated and enforced system. People brought their flocks to graze in mutually agreed-upon schedules. Violation of the rules was punished, either with penalties or exclusion. The commons is not a winner-takes-all economy, but an all-take-the-winnings economy. Shared ownership encourages shared responsibility, which in turn engenders a longer-term perspective on business practices. Nothing can be externalized to some “other” player, because everyone is part of the same trust, drinking from the same well. If one’s business activities hurt any other market participant, they undermine the integrity of the marketplace itself.


pages: 209 words: 53,236

The Scandal of Money by George Gilder

Affordable Care Act / Obamacare, bank run, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, Claude Shannon: information theory, Clayton Christensen, cloud computing, corporate governance, cryptocurrency, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, Deng Xiaoping, disintermediation, Donald Trump, fiat currency, financial innovation, Fractional reserve banking, full employment, George Gilder, glass ceiling, Home mortgage interest deduction, index fund, indoor plumbing, industrial robot, inflation targeting, informal economy, Innovator's Dilemma, Internet of things, invisible hand, Isaac Newton, Jeff Bezos, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, Law of Accelerating Returns, Marc Andreessen, Mark Zuckerberg, Menlo Park, Metcalfe’s law, money: store of value / unit of account / medium of exchange, mortgage tax deduction, obamacare, Paul Samuelson, Peter Thiel, Ponzi scheme, price stability, Productivity paradox, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, Ray Kurzweil, reserve currency, road to serfdom, Robert Gordon, Robert Metcalfe, Ronald Reagan, Sand Hill Road, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, secular stagnation, seigniorage, Silicon Valley, smart grid, South China Sea, special drawing rights, The Great Moderation, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, time value of money, too big to fail, transaction costs, trickle-down economics, Turing machine, winner-take-all economy, yield curve, zero-sum game

In a signature appointment, President Obama named as his chief science advisor John Holdren, a population and climate catastrophist who once called for poisoning the water with sterilizers to halt population growth. Importing the Marxian-Malthusian theories of Piketty, Democrats see inequality as stemming from an oppressive and conspiratorial accumulation of wealth. The cause of poverty, the Left tells us, is wealth! Building up faster than wages in accordance with inexorable capitalist logic, the yield of investment exceeds the rate of economic growth. The harvest is an increasingly top-heavy, winner-take-all economy, smothering middle- and lower-class opportunities. President Obama’s friend and counselor Ta-Nehisi Coates, from his perch atop the bestseller lists and at the pinnacle of power in America, denounces the American Dream, in terms that echo Obama’s previous spiritual guide, Pastor Wright in Chicago, as a “genocidal weight of whiteness.”5 Evidence grows that in the United States upward mobility and even geographical mobility are being choked off.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, Plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Silicon Valley, Silicon Valley ideology, smart cities, software patent, too big to fail, total factor productivity, trade liberalization, transaction costs, tulip mania, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

If we can scale back regressive redistribution, we can enjoy more growth and a more equal society. We do not dispute the accuracy of the conventional, market-based narrative of rising inequality—as far as it goes. The progress of information technology (IT) has indeed raised relative demand for highly skilled workers while steadily eliminating jobs in the middle of the skill spectrum. IT, combined with globalization, has given rise to winner-take-all markets with huge windfalls for economic superstars. Rising economic opportunities have created more wage dispersion among women, who have then tended to marry those of similar economic status, further exaggerating income differences between the highly skilled and everybody else. Declining employment in traditionally unionized industries has reduced the degree to which workers are able to demand a share of corporate profits.

The slowdown in the growth of workers’ average years of schooling completed means that the relative supply of skilled workers lags behind relative demand. Mass immigration expands the ranks of low-skill workers even as demand for them has flagged. People increasingly marry within their social class, reducing the marital pathway to social mobility. The factors contributing to outsized gains at the very top are similarly diverse. They include the rise of “winner-take-all” markets produced by information technology’s network effects as well as globalization’s expansion of relevant market size; a huge run-up in stock prices; continuing growth in the size of big corporations (which has helped to fuel rising CEO pay); and a big drop in the top income tax rate (which has facilitated the use of high compensation as a strategy for attracting top managers, professionals, and executives).

As the necessities of food, shelter, and clothing grow ever cheaper, and the array of life-extending technologies continues to expand, people naturally shift their spending toward prolonging their lives and improving their physical well-being. Drug makers (through patent protection) and healthcare professionals (through occupational licensing) have exaggerated their gains from this rising demand by using the political process to constrict supply. In the rapidly growing information technology sector, the presence of strong network effects in information technology guarantees that some industries will feature “winner take all” markets with high levels of concentration. Lobbyists for strong copyright and patent protection for software have further amplified this dynamic by fortifying the winners’ market power with additional barriers to entry. Meanwhile, network effects have also led to geographic concentration, as highly skilled knowledge workers are increasingly congregating together in “human capital hubs.” As a result, a few big coastal cities have come to account for an outsized share of the nation’s productive capacity, as well as its opportunities for upward mobility.


pages: 265 words: 69,310

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

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, Marc Andreessen, Mark Zuckerberg, move fast and break things, move fast and break things, natural language processing, Netflix Prize, Network effects, new economy, Occupy movement, openstreetmap, Paul Graham, peer-to-peer, 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, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, ultimatum game, urban planning, WikiLeaks, winner-take-all economy, Y Combinator, Zipcar

It’s an issue that other industries face, such as construction, and the root cause is always the same: classification as an independent contractor relieves the hiring company (Uber in this case) from having to pay employment insurance premiums, sick leave, and from having to abide by employment standards. The risk is pushed entirely onto the subcontractor. If cities decide to put taxi regulations to one side for ridesharing companies, many important decisions are handed over to the company. As shown in Chapter 7, technology industries are often a winner-take-all market, where the winner has significant market power, so it matters what kind of company Uber is. It’s a company that has experienced a lot of controversy. Among the most high profile events was a dinner in which Uber executive Emil Michael told journalist Ben Smith that he had considered investigating the private life of Sarah Lacy, a journalist who had criticized Uber. (Unlike a driver with a bad rating, Michael was forgiven by the company).78 Uber is a company that spies on its customers using what it calls its “God View” of company data, which it has shown at company events for entertainment79 and posted about on its web site.80 It’s a company whose New York general manager Josh Mohrer is being investigated internally for tracking a female journalist without her consent.81 It’s a company whose employees have warned another female journalist that “company higher-ups might access [the journalist’s] rider logs.” 82 I emphasize “female journalist” here because the culture of the company is a big part of the problem.

As a result, he catches a key aspect of the comparison that Anderson misses: variety in a world subject to “the tyranny of geography” was always supplied by a variety of institutions, each capable of working at different scales. In the world of books, variety was supplied by a combination of chain stores, specialist bookstores who focused on one genre or another (especially in big cities), independent stores, and second-hand stores, whereas in the digital world winner-take-all market structures are more common. By looking only at the big chains and missing these smaller institutions, Anderson guaranteed that his comparisons would show the digital world to be more diverse and full of variety. OPEN DATA Other movements and businesses have been built around digital openness and sharing, such as open access publishing for research journals, open source hardware, and open education (including massively open online courses or “MOOCs”).

One lesson of cultural economics is that creative works for which there is significant demand in a small market can be swamped by near-zero-marginal cost exports from large markets. It is more profitable for TV stations in smaller markets to broadcast cheap American shows than it is to broadcast more expensive home-grown material, even in cases where the latter would draw a bigger audience, because cultural producers seek to cover their costs in their home market and typically sell at discounted rates elsewhere.53 To maintain cultural diversity in the face of winner-take-all markets, governments in smaller countries have designed a toolbox of interventions. The contents include production subsidies, broadcast quotas, spending rules, national ownership, and competition policy. In general, such measures have received support from those with a left-leaning outlook. Unfortunately, the open data movement demands that data be provided without borders and in a uniform way: machine processable, available to anyone, and license-free.


pages: 555 words: 80,635

Open: The Progressive Case for Free Trade, Immigration, and Global Capital by Kimberly Clausing

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, active measures, Affordable Care Act / Obamacare, agricultural Revolution, battle of ideas, Bernie Sanders, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, corporate social responsibility, creative destruction, currency manipulation / currency intervention, David Ricardo: comparative advantage, Donald Trump, floating exchange rates, full employment, gig economy, global supply chain, global value chain, guest worker program, illegal immigration, immigration reform, income inequality, index fund, investor state dispute settlement, knowledge worker, labor-force participation, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, meta analysis, meta-analysis, offshore financial centre, open economy, Paul Samuelson, profit motive, purchasing power parity, race to the bottom, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transfer pricing, uber lyft, winner-take-all economy, working-age population, zero-sum game

Further, such policies respond to only a small fraction of the influences that have caused labor market disruption in recent decades. For example, technological change is an important factor; automation and the rise of computerization and the internet have changed workers lives dramatically. Many other factors are also at work, including evolving social norms, changes in tax policy, the larger role of companies with market power, and the role of “superstars” in winner-take-all markets. Thus, not only are trade and migration barriers likely to generate harmful side effects, but they are also likely to be ineffective in addressing workers’ economic problems. In this fourth part of Open, I put forward a positive policy agenda for responding to the economic stagnation of the middle class and the recent dramatic increases in income inequality. These are not small problems, and they require bold, yet sensible, responses.

But there are also serious downsides. Foremost, the benefits of the global economy and technological change have reached too few in the United States. Technological change and global markets do not lead to one uniform destiny; countries can respond to these challenges in a variety of ways. And, as Chapter 2 described, there is more than technology and trade at the root of our problems: market power, winner-take-all markets, tax policy, social norms, and reductions in labor bargaining power all play important roles. The suggestions of Chapters 9 to 11 respond to middle-class economic concerns in ways that go directly to the problems at hand, modernizing economic policy to make it compatible with a twenty-first century economy. Foremost, we need to avoid damaging policies that hurt the very people we are trying to help.

For example, one important factor is technological change—particularly the rise of automation, computerization, and the Internet. These changes in our economy make it impossible to go back to the labor market of the 1960s and 1970s. And many more factors are at work in shaping labor outcomes, including evolving social norms, changes in tax policy, a larger role of companies with market power, and the role of “superstars” in winner-take-all markets. This book puts forward a positive policy agenda for responding to the economic stagnation of the middle class and the recent dramatic increases in income inequality. These are not small problems; they require big responses. The agenda outlined in Chapters 9, 10, and 11 is not Democratic or Republican, but brings together pragmatic ideas that are pro-growth, pro-jobs, and pro–middle class.


pages: 286 words: 87,401

Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman, Chris Yeh

activist fund / activist shareholder / activist investor, Airbnb, Amazon Web Services, autonomous vehicles, bitcoin, blockchain, Bob Noyce, business intelligence, Chuck Templeton: OpenTable:, cloud computing, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, database schema, discounted cash flows, Elon Musk, Firefox, forensic accounting, George Gilder, global pandemic, Google Hangouts, Google X / Alphabet X, hydraulic fracturing, Hyperloop, inventory management, Isaac Newton, Jeff Bezos, Joi Ito, Khan Academy, late fees, Lean Startup, Lyft, M-Pesa, Marc Andreessen, margin call, Mark Zuckerberg, minimum viable product, move fast and break things, move fast and break things, Network effects, Oculus Rift, oil shale / tar sands, Paul Buchheit, Paul Graham, Peter Thiel, pre–internet, recommendation engine, ride hailing / ride sharing, Sam Altman, Sand Hill Road, Saturday Night Live, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, social graph, software as a service, software is eating the world, speech recognition, stem cell, Steve Jobs, subscription business, Tesla Model S, thinkpad, transaction costs, transport as a service, Travis Kalanick, Uber for X, uber lyft, web application, winner-take-all economy, Y Combinator, yellow journalism

Silicon Valley venture capitalists want entrepreneurs to pursue exponential growth even if doing so costs more money and increases the chances that the business could fail, resulting in a bigger loss. Dropping below even 40 percent annual growth is a warning sign for investors. This mindset can be difficult for people to understand. “Why should I risk it all and potentially blow up what is a successful, growing business?” they might rightfully ask. The answer is that blitzscaling businesses tend to play in winner-take-most or winner-take-all markets. The greater risk for a successful, growing business is to move too slowly and allow its competitors to win market leadership and first-scaler advantage. Nokia is a great example of the cost of caution. In 2007, Nokia was the world’s largest and most successful maker of mobile phones, with a market capitalization of just under $99 billion. Then Apple and Samsung came blazing into the market.

Unlike in the past, when companies needed to offer goods in retail stores or broadcast advertising in order to be visible to customers, today buyers can find whatever they’re looking for on Amazon or other online marketplaces like Alibaba, in app stores, or, when all else fails, by Googling. Because products and services that are already popular will almost always come up first in search results, companies with a competitive advantage can quickly grow to the point where the increasing returns of network effects produce a winner-take-most or winner-take-all market. This also explains why the growth factor of distribution is as or more important to company success as the product itself—without distribution, it is difficult to reach the tipping point. After network effects take hold, the efficiencies enabled by the Networked Age make it easier to sustain the pace of rapid growth. In the past, rapid customer growth inevitably led to rapid organizational growth and to dramatic increases in the overhead required to coordinate a large number of employees and teams.

Of course, it helps that Jeff Bezos and his team are world-class at executing against this strategy. The downside, of course, is that the cost of failure is much higher than if you proceeded with deliberate caution and waited for proof before making commitments. But this additional cost can be dwarfed by the potential benefits of achieving first-scaler advantage in a valuable winner-take-most or winner-take-all market. At the Village (hundreds of employees) and City (thousands of employees) stages, the speeds of competing organizations become much more varied. Some will be content with focusing on optimizing for efficiency (scale-up growth), while others will focus on speed (fastscaling) or speed in the face of uncertainty (blitzscaling). At this stage, blitzscaling is less about raw aggression and more about pursuing a differentiated (but still aggressive) strategy.


pages: 336 words: 90,749

How to Fix Copyright by William Patry

A Declaration of the Independence of Cyberspace, barriers to entry, big-box store, borderless world, business cycle, business intelligence, citizen journalism, cloud computing, commoditize, creative destruction, crowdsourcing, death of newspapers, en.wikipedia.org, facts on the ground, Frederick Winslow Taylor, George Akerlof, Gordon Gekko, haute cuisine, informal economy, invisible hand, Joseph Schumpeter, Kickstarter, knowledge economy, lone genius, means of production, moral panic, new economy, road to serfdom, Ronald Coase, Ronald Reagan, semantic web, shareholder value, Silicon Valley, The Chicago School, The Wealth of Nations by Adam Smith, trade route, transaction costs, trickle-down economics, winner-take-all economy, zero-sum game

My view is that copyright laws can serve valuable purposes: while they do not cause people to create in the first place and do not create economic or critical success, they do ensure that once works are created, those who wish to protect them and economically benefit can. We all should support this goal. At the same time, proponents of ever-expanding rights have greatly over-promised what copyright laws can accomplish, and 12 HOW TO FIX COPYRIGHT hide how copyright inflation adversely affects consumers and other sectors of the economy. My conclusions are that copyright laws successfully support investments in winner-take-all markets dominated by superstars, but do not help the majority of authors and artists in making a living. I also conclude that copyright laws have failed to keep up with fundamental changes in markets and technologies: Revenues for the core copyright industries, studied granularly, show a fundamental shift away from the selling of physical objects as possessions—CDs, DVDs and other hard copies—toward a world in which we listen and watch temporary streams of music and movies, and increasingly read books stored elsewhere.

As Mr. Pareles observed, the purpose of subjecting yourself to such hardships is to be noticed, and to be noticed among everyone else who is vying to be noticed too. There has always been an overabundance of those who wish to make their livelihood from creative endeavors, relative to the opportunities to do so. As Robert Frank and Philip Cook wrote in their book The Winner-Take-All Society: Winner-take-all markets attract too many contestants in part because of a common human frailty with respect to gambling—namely our tendency to overestimate our chances of winning. Becoming a contestant in a winnertakes-all market entails a decision to pit one’s own skills against a large field of adversaries. An intelligent decision obviously requires a well-informed estimate of the odds of winning.Yet people’s assessments of these odds are notoriously inaccurate.13 We ignore the odds not only because the potential payout is so big but also because of the “optimism bias”: the systematic tendency to overestimate the likelihood of positive outcomes and to 82 HOW TO FIX COPYRIGHT downplay the likelihood of negative events, especially failure.14 The market for creative works, like all markets, is structured to take advantage of this phenomenon.

It is a zero sum game, where the more people vie for the top, the fewer make it, but the rewards are disproportionately greater.36 Since rare talent must, by definition, be uncommon, there can only be a few who succeed. Those who succeed take it all: superstars get all the product endorsements, the clothing and perfume lines, the magazine covers, the television appearances, and most of our money. The winner-take-all market dominated by superstars also plays out in the argument that superstars need protection from those WHAT ARE COPYRIGHT LAWS SUPPOSED TO DO? 89 imitators who would, by copying from them, try to pull themselves up by pulling the lone geniuses down. If we permit others to copy from lone geniuses, the argument goes that we will have fewer of them. We therefore need the strongest copyright laws possible in order to provide the strongest protection for our superstars.


Design of Business: Why Design Thinking Is the Next Competitive Advantage by Roger L. Martin

asset allocation, Buckminster Fuller, business process, Frank Gehry, global supply chain, high net worth, Innovator's Dilemma, Isaac Newton, mobile money, QWERTY keyboard, Ralph Waldo Emerson, risk tolerance, six sigma, Steve Ballmer, Steve Jobs, supply-chain management, Wall-E, winner-take-all economy

Part of the Dayton Hudson family of stores, which also once included Marshall Field’s, Target faced a critical inflection point in the mid-1980s, just as Ulrich was named president of Target Stores. As Target was growing across the Midwest, Walmart was aggressively expanding into the region and beyond. In those days, Ulrich must have grown increasingly weary of hearing about the singular brilliance of Walmart. Walmart was so much bigger and more valuable than its rivals that discount retailing became known as a stereotypical “winner take all” market, where one firm is so strong that it slowly crushes every rival. In other words, Walmart was considered a category killer. Walmart chose, then and now, to worship at the altar of reliability. It is all about the algorithm, from the look and feel of the stores, to the mechanics of the distribution system, to the approach of the buyers and merchandisers, to the strategy for expansion. It is not utterly impervious to innovation and change (for instance, its Supercenters now carry groceries), but the basic system is virtually unchanging, and the structure, processes, and norms work against staring into mysteries and developing new heuristics.

“It’s more about price and more about mass quantities. It’s a hell of a competition, but ours is more dependent on innovation, on design, and on quality.” 7 The new heuristic has served Target well. By 2004, Walmart was beginning to bump up against the limits of reliability, and Target for the first time experienced higher same-store sales growth and higher sales per square foot than Walmart. Discount retailing was not, after all, a winner-take-all market. Two giants were duking it out, while two giants of an earlier time—Sears and Kmart, which contributed so much to discount retailing’s dreary image—withered away. Target stayed in the fight through continuous innovation, even as it grew to the scale necessary to become a worthy and meaningful competitor to Walmart. No retailer, including Target, is immune to the hazards of standing still in retail.


pages: 374 words: 111,284

The AI Economy: Work, Wealth and Welfare in the Robot Age by Roger Bootle

"Robert Solow", 3D printing, agricultural Revolution, AI winter, Albert Einstein, anti-work, autonomous vehicles, basic income, Ben Bernanke: helicopter money, Bernie Sanders, blockchain, call centre, Capital in the Twenty-First Century by Thomas Piketty, Chris Urmson, computer age, conceptual framework, corporate governance, correlation does not imply causation, creative destruction, David Ricardo: comparative advantage, deindustrialization, deskilling, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, facts on the ground, financial intermediation, full employment, future of work, income inequality, income per capita, industrial robot, Internet of things, invention of the wheel, Isaac Newton, James Watt: steam engine, Jeff Bezos, job automation, job satisfaction, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, Joseph Schumpeter, Kevin Kelly, license plate recognition, Marc Andreessen, Mark Zuckerberg, market bubble, mega-rich, natural language processing, Network effects, new economy, Nicholas Carr, Paul Samuelson, Peter Thiel, positional goods, quantitative easing, RAND corporation, Ray Kurzweil, Richard Florida, ride hailing / ride sharing, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, Skype, social intelligence, spinning jenny, Stanislav Petrov, Stephen Hawking, Steven Pinker, technological singularity, The Future of Employment, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, universal basic income, US Airways Flight 1549, Vernor Vinge, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, wealth creators, winner-take-all economy, Y2K, Yogi Berra

The technological twist The technological explanation is also straightforward – but with an interesting, and important, twist. The straightforward bit is the continuing economization on the demand for labor, most recently thanks mainly to computers and associated developments. The twist is that the communications revolution has caused the proliferation of so-called “winner-takes-all” markets. In traditional markets remuneration tends to be tied to absolute performance, but in “winner-takes-all” markets it is all about relative performance. One of the key factors that limited the extent of winner-takes-all markets has been distance. This has enabled a second- or even third-rate, or worse, provider of a service to stay in business and even prosper. But now, provided that the service in question can be digitized, then distance is no longer a barrier. This has effectively united the market globally and given access to the very best providers of a service in the world.


pages: 300 words: 78,475

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, post-work, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Closing this outrageous loophole would bring in close to $20 billion in revenue—money desperately needed at a time when teachers and nurses and firemen are being laid off all around the country.48 But the two sets of rules—and the clout of corporate lobbyists—leave even commonsense, who-could-argue-with-that proposals in doubt, and leave the middle class shouldering an unfair share of a very taxing burden. Indeed, the double standard was famously ridiculed by Warren Buffett in 2007 when he noted that his receptionist paid 30 percent of her income in taxes, while he paid only 17.7 percent on his taxable income of $46 million.49 HOMER SIMPSON HAS IT TOO GOOD: SNAPSHOTS FROM THE MIDDLE-CLASS BATTLEFIELD The numbers don’t lie: We increasingly live in a “winner take all” economy. Indeed, we’ve arrived at a point where even Homer Simpson—created as a classic American Everyman character—is now living a middle-class fantasy. After all, how many American middle-class families do you know where the family’s sole breadwinner, a safety inspector at a nuclear power plant, can still comfortably support a family of five on a single income? A more accurate snapshot of a modern middle-class family can be found in Nan Mooney’s book (Not) Keeping Up with Our Parents.50 One person profiled in the 2008 book is Diana, thirty-six, a licensed psychologist with a doctorate in clinical psychology.


pages: 300 words: 76,638

The War on Normal People: The Truth About America's Disappearing Jobs and Why Universal Basic Income Is Our Future by Andrew Yang

3D printing, Airbnb, assortative mating, augmented reality, autonomous vehicles, basic income, Ben Horowitz, Bernie Sanders, call centre, corporate governance, cryptocurrency, David Brooks, Donald Trump, Elon Musk, falling living standards, financial deregulation, full employment, future of work, global reserve currency, income inequality, Internet of things, invisible hand, Jeff Bezos, job automation, John Maynard Keynes: technological unemployment, Khan Academy, labor-force participation, longitudinal study, low skilled workers, Lyft, manufacturing employment, Mark Zuckerberg, megacity, Narrative Science, new economy, passive income, performance metric, post-work, quantitative easing, reserve currency, Richard Florida, ride hailing / ride sharing, risk tolerance, Ronald Reagan, Sam Altman, self-driving car, shareholder value, Silicon Valley, Simon Kuznets, single-payer health, Stephen Hawking, Steve Ballmer, supercomputer in your pocket, technoutopianism, telemarketer, The Wealth of Nations by Adam Smith, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, unemployed young men, universal basic income, urban renewal, white flight, winner-take-all economy, Y Combinator

They also show stagnant median wages, high corporate profitability, low returns on labor, and high inequality, all of which one would expect if technology and automation were already transforming the economy in fundamental ways. As MIT professor Eryk Brynjolfsson puts it: “People are falling behind because technology is advancing so fast and our skills and our organizations aren’t keeping up.” The winner-take-all economy has set us up for what’s coming. But rather than recognize the extent to which economic value is diverging more and more from human time and labor, we essentially keep pretending it’s the 1970s. We’ve been able to get away with this pretense for a few decades by loading up on debt and cheap money and putting off future obligations. That has run its course just as technology is really set to take off and render more of our labor obsolete, particularly for normal Americans.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

"Robert Solow", Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, business cycle, buy and hold, centralized clearinghouse, Chuck Templeton: OpenTable:, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uber lyft, uranium enrichment, Vickrey auction, Vilfredo Pareto, winner-take-all economy

It might help explain why, in the year 2000, nineteen internet start-ups spent millions buying advertising time during the Super Bowl. It’s also telling that eight of the nineteen—including, famously, Pets.com, with its sock puppet mascot—no longer exist. Ironically, their efforts to signal they had the deep pockets and quality offerings that would allow them to be one of the survivors in the internet’s winner-take-all economy may have helped to drive these big spenders into bankruptcy.10 You might think that such a failure rate would discourage a repeat, but the trend is back: during the 2015 Super Bowl, start-ups, including Wix.com (a company that helps users build websites), and Loctite (a glue maker) spent $4.5 million for each thirty-second spot.11 Whether this all has the desired effect on someone in the market for a new truck or soft drink is another matter.


pages: 424 words: 115,035

How Will Capitalism End? by Wolfgang Streeck

accounting loophole / creative accounting, Airbnb, basic income, Ben Bernanke: helicopter money, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, centre right, Clayton Christensen, collective bargaining, conceptual framework, corporate governance, creative destruction, credit crunch, David Brooks, David Graeber, debt deflation, deglobalization, deindustrialization, disruptive innovation, en.wikipedia.org, eurozone crisis, failed state, financial deregulation, financial innovation, first-past-the-post, fixed income, full employment, Gini coefficient, global reserve currency, Google Glasses, haute cuisine, income inequality, information asymmetry, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Rogoff, labour market flexibility, labour mobility, late capitalism, liberal capitalism, market bubble, means of production, moral hazard, North Sea oil, offshore financial centre, open borders, pension reform, plutocrats, Plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, post-industrial society, private sector deleveraging, profit maximization, profit motive, quantitative easing, reserve currency, rising living standards, Robert Gordon, savings glut, secular stagnation, shareholder value, sharing economy, sovereign wealth fund, The Future of Employment, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transaction costs, Uber for X, upwardly mobile, Vilfredo Pareto, winner-take-all economy, Wolfgang Streeck

As pointed out in Chapter 1 of this book, and partly elaborated in the rest of this introduction, I anchor this condition in a variety of interrelated developments, such as declining growth intensifying distributional conflict; the rising inequality that results from this; vanishing macroeconomic manageability, as manifested in, among other things, steadily growing indebtedness, a pumped-up money supply, and the ever-present possibility of another economic breakdown;19 the suspension of post-war capitalism’s engine of social progress, democracy, and the associated rise of oligarchic rule; the dwindling capacity of governments and the systemic inability of governance to limit the commodification of labour, nature and money; the omnipresence of corruption of all sorts, in response to intensified competition in winner-take-all markets with unlimited opportunities for self-enrichment; the erosion of public infrastructures and collective benefits in the course of commodification and privatization; the failure after 1989 of capitalism’s host nation, the United States, to build and maintain a stable global order; etc., etc. These and other developments, I suggest, have resulted in widespread cynicism governing economic life, for a long time if not forever ruling out a recovery of normative legitimacy for capitalism as a just society offering equal opportunities for individual progress – a legitimacy that capitalism would need to draw on in critical moments – and founding social integration on collective resignation as the last remaining pillar of the capitalist social order, or disorder.20 Moving Disequilibrium In my own recent work, much of it assembled in this volume, I have argued that OECD capitalism has been on a crisis trajectory since the 1970s, the historical turning point being when the post-war settlement was abandoned by capital in response to a global profit squeeze.

Another example of corruption can be found among political leaders who upon leaving office sell their inside knowledge and public goodwill, and especially the connections they acquired while presumably serving the public interest, to private consulting, lobbying and, above all, financial firms.54 Corruption is also rampant in professional athletics, which has in recent decades become a huge global industry, financed by mushrooming marketing activities for sports equipment and fashion goods. In major disciplines, including swimming and track and field, not to mention cycling, one can safely assume that top competitors routinely employ the services of expensive specialists providing them with illegal, performance-enhancing treatment. Doping among athletes competing for ever-increasing sums of prize money and even more lucrative advertising contracts in worldwide winner-take-all markets is accompanied by corruption among officials of international sports associations, some of whom are reported to have been paid huge sums by athletes and their management for suppressing the results of positive doping tests, and by corporations and governments for locating events in places they prefer. Officials also own firms that sell television rights in the events their associations organize.55 Finally, take a global corporation like Volkswagen (which, incidentally, around 2010 raised the salary of its CEO, Martin Winterkorn, to an, in German terms, hitherto unimaginable €15 million per annum).

In fact, one can say that even more than capitalism in its heyday, the entropic society of disintegrated, de-structured and under-governed post-capitalism depends on its ability to hitch itself onto the natural desire of people not to feel desperate, while defining pessimism as a socially harmful personal deficiency. This is, thirdly, where doping comes in. Doping helps with both coping and hoping, and it takes many forms. Where it involves substance use and abuse, one may distinguish two kinds, performance-enhancing and performance-replacing. Performance-enhancing drugs are taken whenever the rewards of success are high, obviously in the winner-take-all markets of today’s showbusiness, including sports. But they are also used far down the income scale in middle-class professional and occupational life where competitive pressures have been intensifying for decades, as well as in educational institutions where test results may decide a person’s future career and earnings prospects. Here as elsewhere, doping is closely connected to corruption. Most of the substances used to enhance performance one way or other are highly profitable legal products of the pharmaceutical industry.


pages: 353 words: 81,436

Buying Time: The Delayed Crisis of Democratic Capitalism by Wolfgang Streeck

activist fund / activist shareholder / activist investor, banking crisis, basic income, Bretton Woods, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, corporate governance, creative destruction, David Graeber, deindustrialization, Deng Xiaoping, Eugene Fama: efficient market hypothesis, financial deregulation, financial repression, fixed income, full employment, Gini coefficient, Growth in a Time of Debt, income inequality, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, knowledge economy, labour market flexibility, labour mobility, late capitalism, liberal capitalism, means of production, moral hazard, Myron Scholes, Occupy movement, open borders, open economy, Plutonomy: Buying Luxury, Explaining Global Imbalances, profit maximization, risk tolerance, shareholder value, too big to fail, union organizing, winner-take-all economy, Wolfgang Streeck

Genschel, ‘Taxation and Democracy in the EU’, Journal of European Public Policy, vol. 15, 2008, pp. 58–77; P. Genschel and P. Schwarz, ‘Tax Competition and Fiscal Democracy’, in Schäfer et al. (eds), Politics in the Age of Austerity. 34 Ganghof, Wer regiert in der Steuerpolitik?, esp. pp. 98–117. 35 Hacker and Pierson (Winner-Take-All Politics) examine in impressive detail the role that tax cuts played in shaping the American ‘winner takes all’ economy and the high public debt that came with it in the 1990s and early 2000s. 36 R. Kuttner, Revolt of the Haves: Tax Rebellions and Hard Times, New York: Simon & Schuster, 1980; I. Martin, The Permanent Tax Revolt: How the Property Tax Transformed American Politics, Stanford, CA: Stanford University Press, 2008; D. Tarschys, ‘The Scissors Crisis in Public Finance’, Policy Sciences, vol. 15/3, 1983, pp. 205–24. 37 The German situation is very similar, in that the budget would have been balanced before 2008 had it not been for Schröder’s tax reform.


pages: 72 words: 21,361

Race Against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy by Erik Brynjolfsson

"Robert Solow", Amazon Mechanical Turk, Any sufficiently advanced technology is indistinguishable from magic, autonomous vehicles, business cycle, business process, call centre, combinatorial explosion, corporate governance, creative destruction, crowdsourcing, David Ricardo: comparative advantage, easy for humans, difficult for computers, Erik Brynjolfsson, factory automation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Frank Levy and Richard Murnane: The New Division of Labor, hiring and firing, income inequality, intangible asset, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Khan Academy, Kickstarter, knowledge worker, Loebner Prize, low skilled workers, minimum wage unemployment, patent troll, pattern recognition, Paul Samuelson, Ray Kurzweil, rising living standards, Robert Gordon, self-driving car, shareholder value, Skype, too big to fail, Turing test, Tyler Cowen: Great Stagnation, Watson beat the top human players on Jeopardy!, wealth creators, winner-take-all economy, zero-sum game

Each city might have its own local stars, with a few top performers touring nationally, but even the best singer in the nation could reach only a relatively small fraction of the potential listening audience. Once music could be recorded and distributed at a very low marginal cost, however, a small number of top performers could capture the majority of revenues in every market, from classical music’s Yo-Yo Ma to pop’s Lady Gaga. Economists Robert Frank and Philip Cook documented how winner-take-all markets have proliferated as technology transformed not only recorded music but also software, drama, sports, and every other industry that can be transmitted as digital bits. This trend has accelerated as more of the economy is based on software, either implicitly or explicitly. As we discussed in our 2008 Harvard Business Review article, digital technologies make it possible to replicate not only bits but also processes.


pages: 292 words: 85,151

Exponential Organizations: Why New Organizations Are Ten Times Better, Faster, and Cheaper Than Yours (And What to Do About It) by Salim Ismail, Yuri van Geest

23andMe, 3D printing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, Baxter: Rethink Robotics, Ben Horowitz, bioinformatics, bitcoin, Black Swan, blockchain, Burning Man, business intelligence, business process, call centre, chief data officer, Chris Wanstrath, Clayton Christensen, clean water, cloud computing, cognitive bias, collaborative consumption, collaborative economy, commoditize, corporate social responsibility, cross-subsidies, crowdsourcing, cryptocurrency, dark matter, Dean Kamen, dematerialisation, discounted cash flows, disruptive innovation, distributed ledger, Edward Snowden, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, game design, Google Glasses, Google Hangouts, Google X / Alphabet X, gravity well, hiring and firing, Hyperloop, industrial robot, Innovator's Dilemma, intangible asset, Internet of things, Iridium satellite, Isaac Newton, Jeff Bezos, Joi Ito, Kevin Kelly, Kickstarter, knowledge worker, Kodak vs Instagram, Law of Accelerating Returns, Lean Startup, life extension, lifelogging, loose coupling, loss aversion, low earth orbit, Lyft, Marc Andreessen, Mark Zuckerberg, market design, means of production, minimum viable product, natural language processing, Netflix Prize, NetJets, Network effects, new economy, Oculus Rift, offshore financial centre, PageRank, pattern recognition, Paul Graham, paypal mafia, peer-to-peer, peer-to-peer model, Peter H. Diamandis: Planetary Resources, Peter Thiel, prediction markets, profit motive, publish or perish, Ray Kurzweil, recommendation engine, RFID, ride hailing / ride sharing, risk tolerance, Ronald Coase, Second Machine Age, self-driving car, sharing economy, Silicon Valley, skunkworks, Skype, smart contracts, Snapchat, social software, software is eating the world, speech recognition, stealth mode startup, Stephen Hawking, Steve Jobs, subscription business, supply-chain management, TaskRabbit, telepresence, telepresence robot, Tony Hsieh, transaction costs, Travis Kalanick, Tyler Cowen: Great Stagnation, uber lyft, urban planning, WikiLeaks, winner-take-all economy, X Prize, Y Combinator, zero-sum game

This process of constant learning can be accomplished in just a couple of weeks or months, at minimal cost. Best of all, it usually becomes clear early on if a product is doomed to failure. A good way of looking at this is that when you move from point A to point B, you can then see point C. But you can’t see point C from point A. Iteration/experimentation is the only way. As Eric Ries explains, “The modern rule of competition is whoever learns fastest, wins.” Most digital markets are winner-takes-all markets due to network effects. This makes a culture of continuous experimentation even more important. The Martin Trust Center for MIT Entrepreneurship uses a Lean Startup process for corporate innovation that is similar to the one used at Adobe. It’s called the 5x5x5x5 method (54). Five corporate teams with five complementary team members compete for five weeks (one to two days a week), spending no more than $5,000 to produce one innovation.

This “going digital” is fundamentally shifting the competitive landscape in many sectors, allowing new entrants from unexpected places. In some countries, banks are getting into the travel business. We’re also seeing travel agents moving into insurance and retailers into media (Amazon, Netflix). As a result, whatever business you are in, chances are your competitors are not what they used to be. A final outcome of this trend is that we seem to be entering an era of “winner-takes-all” markets. There’s really only one search engine (Google), one auction site (eBay) and one e-commerce site (Amazon). Network effects and customer experience lock-in seem to be at the root of this fundamental change in the nature of competition. 2. Drive To Demonetization One of the most important—and least celebrated—achievements of the Internet during the last decade was that it cut the marginal cost of marketing and sales to nearly zero.


pages: 352 words: 90,622

Thieves of State: Why Corruption Threatens Global Security by Sarah Chayes

Celtic Tiger, colonial rule, crony capitalism, drone strike, failed state, income inequality, microcredit, offshore financial centre, plutocrats, Plutocrats, structural adjustment programs, trade route, ultimatum game, WikiLeaks, winner-take-all economy, young professional

Nigeria’s manufacturing, like Egypt’s, has also largely died out—victim, say residents, of privatization to cronies under pressure from the IMF, and customs and tariff regimes designed for members of the kleptocratic networks to work around. The Kano State civil servant took me on a tour of shuttered factories and warehouses: Bata shoes, an electronics factory, despairingly empty.* The result of this oil “monoculture” is a winner-take-all economy, in which unemployment and penury rise steadily, while political office guarantees a space at the Nigerian version of Tunisia’s feeding-trough state. The official salary of a senator tops one million U.S. dollars per year. With such fabulous sums in play, Nigerian politics has become a blood sport. For in the view of most Nigerians and country experts, the second tipping point on Nigeria’s path to kleptocracy was—ironically—its conversion to civilian rule in 1999.


pages: 209 words: 89,619

The Precariat: The New Dangerous Class by Guy Standing

8-hour work day, banking crisis, barriers to entry, basic income, 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, mass immigration, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, old age dependency ratio, Panopticon Jeremy Bentham, 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

This can only produce a pandemic of status frustration. At present, the average lifetime monetary gain from going to a college or university is substantial – £200,000 for men in the United Kingdom (Browne, 2010). Imposing high fees may thus seem fair. But fees risk marginalising university subjects that offer no financial return and ignore the fact that the return is a mean average. In a market society, winner-takes-all markets proliferate, which is why income differentials have grown way beyond what would be justifiable on productivity grounds. A shrinking number of students gain the high income returns that produce the mean average. More will gain jobs paying well below the mean. 68 THE PRECARIAT Now factor in what is happening in the labour market. Economies generate new types of job all the time, but we know the direction they are taking.

Scott McNealy, chairman of Sun Microsystems and an investor in the Western Governors University, which delivers degrees online, argued that teachers should re-position themselves as ‘coaches, not content creators’, customising materials to students while piping in others’ superior teaching. This commodification and standardisation is cheapening education, denuding the profession of its integrity and eroding the passing on of informal knowledge. It is strengthening winner-takes-all markets and accelerating the dismantling of an occupational community. A market in human capital will increase emphasis on celebrity teachers and universities, and favour norms and conventional wisdom. The Philistines are not at the gates; they are inside them. International financial institutions such as the World Bank demand that ‘inappropriate curricula’ unrelated to the economy should be removed.


words: 49,604

The Weightless World: Strategies for Managing the Digital Economy by Diane Coyle

"Robert Solow", barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, blue-collar work, Bretton Woods, business cycle, clean water, computer age, Corn Laws, creative destruction, cross-subsidies, David Ricardo: comparative advantage, dematerialisation, Diane Coyle, Edward Glaeser, everywhere but in the productivity statistics, financial deregulation, full employment, George Santayana, global village, hiring and firing, Howard Rheingold, income inequality, informal economy, invention of the sewing machine, invisible hand, Jane Jacobs, Joseph Schumpeter, Kickstarter, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Marshall McLuhan, mass immigration, McJob, microcredit, moral panic, Network effects, new economy, Nick Leeson, night-watchman state, North Sea oil, offshore financial centre, pension reform, pensions crisis, Ronald Reagan, Silicon Valley, spinning jenny, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, Tobin tax, two tier labour market, very high income, War on Poverty, winner-take-all economy, working-age population

Frank and Cook point out that superstar status increasingly applies outside the conventional areas of sport and entertainment. A global brand will make its manufacturer far, far more money than a very similar product that does not achieve the same recognition in the market place. That means that there are superstar product designers, engineers, advertising executives and so on — anybody with a proven record of success will become a celebrity in his or her own field. The authors write: ‘The winner-take-all markets ... have become an increasingly important feature of modern economic life. They have permeated law, journalism, consulting, medicine, investment banking, corporate management, publishing, design, fashion, even the hallowed halls of academe.’ (The two professors modestly omit to mention that they fall into this last category following the success of their book.) In my language, it is the increasing weightlessness of the economy that is taking the superstar phenomenon into ever wider areas of activity.

Technology means I can diagnose and treat patients around the world, and that I will be known around the world. Here I part company sharply with Professors Frank and Cook who go on to argue that this is inefficient in economic terms. They make a series of The Weightless World 116 arguments. First, superstar economies generate income inequality, which is a social bad. True, but not necessarily an economic inefficiency. Secondly, winner-takes-all markets cause effort to be mis-allocated. For everybody wants to be a superstar and therefore too many people pile into professions where the winner-takes-all conditions apply. They write: ‘In increasing numbers our best and brightest graduates pursue top positions in law, finance, consulting and other over-crowded arenas, in the process forsaking careers in engineering, manufacturing, civil service, teaching and other occupations in which an infusion of additional talent would yield greater benefit to society’.


pages: 351 words: 100,791

The World Beyond Your Head: On Becoming an Individual in an Age of Distraction by Matthew B. Crawford

airport security, Cass Sunstein, choice architecture, collateralized debt obligation, creative destruction, David Brooks, delayed gratification, dematerialisation, deskilling, digital Maoism, Google Glasses, hive mind, index card, informal economy, Jaron Lanier, large denomination, new economy, new new economy, Norman Mailer, online collectivism, plutocrats, Plutocrats, Richard Thaler, Rodney Brooks, self-driving car, Silicon Valley, Silicon Valley ideology, Stanford marshmallow experiment, the built environment, the scientific method, The Wisdom of Crowds, theory of mind, Walter Mischel, winner-take-all economy

What is demanded is an all-purpose intelligence, the kind one is certified to have by admission to an elite university, not anything in particular that you might have learned along the way. You have to be ready to reinvent yourself at any time, like a good democratic Übermensch. And while in Calvin’s time the threat of damnation might have been dismissed by some as a mere superstition, with our winner-take-all economy the risk of damnation has acquired real teeth. There is a real chance that you may get stuck at the bottom. MOBILITY AND THE DEMOCRATIC SOCIAL CONDITION When Tocqueville came to America in the 1830s, he was struck by our “democratic social condition,” in which “new families are constantly springing up, others are constantly falling away, and all that remain change their condition.” Social mobility represents a possibility, a powerful idea of equality that carries psychic force even if you find yourself (for now) near the bottom.


pages: 436 words: 98,538

The Upside of Inequality by Edward Conard

affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, assortative mating, bank run, Berlin Wall, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Climatic Research Unit, cloud computing, corporate governance, creative destruction, Credit Default Swap, crony capitalism, disruptive innovation, diversified portfolio, Donald Trump, en.wikipedia.org, Erik Brynjolfsson, Fall of the Berlin Wall, full employment, future of work, Gini coefficient, illegal immigration, immigration reform, income inequality, informal economy, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invisible hand, Isaac Newton, Jeff Bezos, Joseph Schumpeter, Kenneth Rogoff, Kodak vs Instagram, labor-force participation, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, meta analysis, meta-analysis, new economy, offshore financial centre, paradox of thrift, Paul Samuelson, pushing on a string, quantitative easing, randomized controlled trial, risk-adjusted returns, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, selection bias, Silicon Valley, Simon Kuznets, Snapchat, Steve Jobs, survivorship bias, The Rise and Fall of American Growth, total factor productivity, twin studies, Tyler Cowen: Great Stagnation, University of East Anglia, upwardly mobile, War on Poverty, winner-take-all economy, women in the workforce, working poor, working-age population, zero-sum game

It is no surprise, then, to find that as the world’s population has grown, income inequality has grown around the world.11 A more prosperous world values and rewards innovations—a new song or movie, a new technology, or a new insight—more highly than a less prosperous world. That’s a good thing. The growing income of the 1 percent is the result of simple multiplication, not a deduction from the pockets of the less successful. Were it the case that the world was becoming a less competitive “winner take all” economy, as economist Robert Frank postulates, or an increasingly concentrated “superstar economy” with relatively fewer “box office” successes, as economist Sherwin Rosen contends, we would expect the success of the 1 percent to be growing even faster than the success of the most successful corporations.12 That hasn’t been the case. Instead we find that the growth in pay of the highest-paid workers, as large as it is, lags behind the growth of the S&P 500 index.


pages: 372 words: 101,678

Lessons from the Titans: What Companies in the New Economy Can Learn from the Great Industrial Giants to Drive Sustainable Success by Scott Davis, Carter Copeland, Rob Wertheimer

3D printing, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, airport security, barriers to entry, business cycle, business process, clean water, commoditize, coronavirus, corporate governance, COVID-19, Covid-19, disruptive innovation, Elon Musk, factory automation, global pandemic, hydraulic fracturing, Internet of things, iterative process, low cost airline, low cost carrier, Marc Andreessen, megacity, Network effects, new economy, Ponzi scheme, profit maximization, random walk, RFID, ride hailing / ride sharing, risk tolerance, shareholder value, Silicon Valley, six sigma, skunkworks, software is eating the world, strikebreaker, Toyota Production System, Uber for X, winner-take-all economy

And now a recession has put many businesses on the brink of collapse, even businesses that were not all that long ago thought of as invincible. In the stock market, investors have spent much of the last decade bidding up technology giants to levels that make sense only if these firms face limited competition and amazing profitability for decades. Market share has become the primary goal in a winner-take-all economy. Far beyond Silicon Valley, companies have been spending heavily on growth and paying little attention to how they’ll actually make money once they get there. With all the talk about disruption and market dominance, you might think the laws of business had been repealed. It’s as if the hard-learned lessons from the 2008–2009 financial crisis have already been long forgotten, even as we encounter a new crisis that could have even deeper impacts.


pages: 374 words: 97,288

The End of Ownership: Personal Property in the Digital Economy by Aaron Perzanowski, Jason Schultz

3D printing, Airbnb, anti-communist, barriers to entry, bitcoin, blockchain, carbon footprint, cloud computing, conceptual framework, crowdsourcing, cryptocurrency, Donald Trump, Edward Snowden, en.wikipedia.org, endowment effect, Firefox, George Akerlof, Hush-A-Phone, information asymmetry, intangible asset, Internet Archive, Internet of things, Isaac Newton, loss aversion, Marc Andreessen, means of production, minimum wage unemployment, new economy, peer-to-peer, price discrimination, Richard Thaler, ride hailing / ride sharing, rolodex, self-driving car, sharing economy, Silicon Valley, software as a service, software patent, software studies, speech recognition, Steve Jobs, subscription business, telemarketer, The Market for Lemons, transaction costs, winner-take-all economy

See Sharon Farb, “Libraries, Licensing, and the Challenge of Stewardship,” First Monday 11, no. 7 (2006), doi: 10.5210/fm.v11i7.1364. 18. Amy Calhoun and James English, “Library Simplified” (presentation delivered at ALA 2015, San Francisco, CA, June 27, 2015), http://www.slideshare.net/jamesenglish/library-simplified-ala, accessed November 20, 2015. 19. Ava Seave, “Are Digital Libraries a ‘Winner-Takes-All’ Market? OverDrive Hopes So,” Forbes, November 18, 2013, http://www.forbes.com/sites/avaseave/2013/11/18/are-digital-libraries-a-winner-takes-all-market-overdrive-hopes-so/, accessed August 6, 2015. 20. While there hasn’t been a documented case of a library patron having their ebook access cut off, similar situations have arisen for Amazon ebook purchasers. See, e.g., Mark King, “Amazon Wipes Customer’s Kindle and Deletes Account with No Explanation,” Guardian (UK), October 22, 2012, http://www.theguardian.com/money/2012/oct/22/amazon-wipes-customers-kindle-deletes-account, accessed August 6, 2015. 21.


pages: 179 words: 43,441

The Fourth Industrial Revolution by Klaus Schwab

3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, barriers to entry, Baxter: Rethink Robotics, bitcoin, blockchain, Buckminster Fuller, call centre, clean water, collaborative consumption, commoditize, conceptual framework, continuous integration, crowdsourcing, digital twin, disintermediation, disruptive innovation, distributed ledger, Edward Snowden, Elon Musk, epigenetics, Erik Brynjolfsson, future of work, global value chain, Google Glasses, income inequality, Internet Archive, Internet of things, invention of the steam engine, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, life extension, Lyft, mass immigration, megacity, meta analysis, meta-analysis, more computing power than Apollo, mutually assured destruction, Narrative Science, Network effects, Nicholas Carr, personalized medicine, precariat, precision agriculture, Productivity paradox, race to the bottom, randomized controlled trial, reshoring, RFID, rising living standards, Sam Altman, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, smart cities, smart contracts, software as a service, Stephen Hawking, Steve Jobs, Steven Levy, Stuxnet, supercomputer in your pocket, TaskRabbit, The Future of Employment, The Spirit Level, total factor productivity, transaction costs, Uber and Lyft, uber lyft, Watson beat the top human players on Jeopardy!, WikiLeaks, winner-take-all economy, women in the workforce, working-age population, Y Combinator, Zipcar

As discussed further below, a world of greater connectivity and higher expectations can create significant social risks if populations feel they have no chance of attaining any level of prosperity or meaning in their lives. Today, a middle-class job no longer guarantees a middle-class lifestyle, and over the past 20 years, the four traditional attributes of middle-class status (education, health, pensions and house ownership) have performed worse than inflation. In the US and the UK, education is now priced as a luxury. A winner-takes-all market economy, to which the middle-class has increasingly limited access, may percolate into democratic malaise and dereliction which compound social challenges. 3.4.2 Community From a broad societal standpoint, one of the greatest (and most observable) effects of digitization is the emergence of the “me-centred” society – a process of individuation and emergence of new forms of belonging and community.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

"Robert Solow", 3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, British Empire, business cycle, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, disruptive innovation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ethereum, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, longitudinal study, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, Mitch Kapor, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, plutocrats, Plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas Davenport, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, ubercab, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

Other users will also join, and then, later, even if the initial incentive disappears, the users will still find it unattractive to go elsewhere, not only because of the switching costs, but also because of all the other users on the network. These users will be “locked in,” as economists say. By definition, when network effects are important, larger networks are more attractive to new users than smaller networks, so whichever network is largest will have the easiest time attracting even more users, extending its advantage. In other words, there’s a tendency toward winner-take-all markets when network effects are strong. This phenomenon creates yet another incentive for lowering prices, at least initially, when building a networked business. All of these effects can interact, so it can be a delicate balancing act to provide just the right incentives for both sides of the market. If a platform owner tries to extract too much value from one side of the market, the participants on that side might start to leave its network, which, of course, makes it less attractive to the other side of the network.

victory, 17 p53 kinase study, 116–17 recipes invented by, 118 Waze, 162, 218 Wealthfront, 91 wealth management, 91; See also financial services web, See World Wide Web Web 2.0, 242 Wiener, Norbert, 31 Werbos, Paul, 73 WhatsApp, 140–42, 213, 265–66 Whitehead, Alfred North, 69 “Why Fintech Won’t Kill Banks” (Economist article), 202 Wikipedia, 43, 234–35, 246–49, 260 Williams, Walter, 263 Williamson, Oliver E., 313 Wilson, Mark, 118n Wilson, Timothy DeCamp, 45 Windows Phone, 167–68 Windsor, Richard, 203 wine, 38–39 winner-take-all markets, 217 women, automated trading and, 269 World Wide Web and business process reengineering, 33 as crowd-generated library, 231–32 and enterprise systems, 34 expansion of Internet’s capabilities, 33–34 as platform, 138 Wright, Gavin, 21 Wright, Robert, 229–31, 271 writing, AI-generated, 121 Wu, D. J., 33 Wu, Lynn, 39 W. W. Norton, 292–94 Xiaomi, 203 Yahoo, 232–33 Yates, Joanne, 311 Yellow Cab Cooperative, 201 YouTube, 77, 231, 273 Zayner, Josiah, 272 Zervas, Georgios, 223 Zuckerberg, Mark, 8, 10 Also by Andrew McAfee and Erik Brynjolfsson The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies Race against the Machine: How the Digital Revolution Is Accelerating Innovation, Driving Productivity, and Irreversibly Transforming Employment and the Economy Also by Erik Brynjolfsson Wired for Innovation Also by Andrew McAfee Enterprise 2.0: New Collaborative Tools for Your Organization’s Toughest Challenges Copyright © 2017 by Andrew McAfee and Erik Brynjolfsson All rights reserved First Edition For information about permission to reproduce selections from this book, write to Permissions, W.


pages: 409 words: 125,611

The Great Divide: Unequal Societies and What We Can Do About Them by Joseph E. Stiglitz

"Robert Solow", accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, agricultural Revolution, Asian financial crisis, banking crisis, Berlin Wall, Bernie Madoff, Branko Milanovic, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, clean water, collapse of Lehman Brothers, collective bargaining, computer age, corporate governance, credit crunch, Credit Default Swap, deindustrialization, Detroit bankruptcy, discovery of DNA, Doha Development Round, everywhere but in the productivity statistics, Fall of the Berlin Wall, financial deregulation, financial innovation, full employment, George Akerlof, ghettoisation, Gini coefficient, glass ceiling, global supply chain, Home mortgage interest deduction, housing crisis, income inequality, income per capita, information asymmetry, job automation, Kenneth Rogoff, Kickstarter, labor-force participation, light touch regulation, Long Term Capital Management, manufacturing employment, market fundamentalism, mass incarceration, moral hazard, mortgage debt, mortgage tax deduction, new economy, obamacare, offshore financial centre, oil shale / tar sands, Paul Samuelson, plutocrats, Plutocrats, purchasing power parity, quantitative easing, race to the bottom, rent-seeking, rising living standards, Ronald Reagan, school vouchers, secular stagnation, Silicon Valley, Simon Kuznets, The Chicago School, the payments system, Tim Cook: Apple, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Turing machine, unpaid internship, upwardly mobile, urban renewal, urban sprawl, very high income, War on Poverty, Washington Consensus, We are the 99%, white flight, winner-take-all economy, working poor, working-age population

But it is not an easy matter to assess how the time savings implied by online shopping, or the cost savings that might result from increased competition (owing to greater ease of price comparison online), affects our standard of living. Two things should be clear. First, the profitability of an innovation may not be a good measure of its net contribution to our standard of living. In our winner-takes-all economy, an innovator who develops a better Web site for online dog-food purchases and deliveries may attract everyone around the world who uses the Internet to order dog food, making enormous profits in the process. But without the delivery service, much of those profits simply would have gone to others. The Web site’s net contribution to economic growth may in fact be relatively small. Moreover, if an innovation, such as ATMs in banking, leads to increased unemployment, none of the social cost—neither the suffering of those who are laid off nor the increased fiscal cost of paying them unemployment benefits—is reflected in firms’ profitability.


pages: 494 words: 116,739

Geek Heresy: Rescuing Social Change From the Cult of Technology by Kentaro Toyama

Albert Einstein, Berlin Wall, Bernie Madoff, blood diamonds, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, cognitive dissonance, commoditize, computer vision, conceptual framework, delayed gratification, Edward Glaeser, en.wikipedia.org, end world poverty, epigenetics, Erik Brynjolfsson, Francis Fukuyama: the end of history, fundamental attribution error, germ theory of disease, global village, Hans Rosling, happiness index / gross national happiness, income inequality, invention of the printing press, invisible hand, Isaac Newton, Khan Academy, Kibera, knowledge worker, liberation theology, libertarian paternalism, longitudinal study, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, microcredit, mobile money, Nelson Mandela, Nicholas Carr, North Sea oil, Panopticon Jeremy Bentham, pattern recognition, Peter Singer: altruism, Peter Thiel, post-industrial society, Powell Memorandum, randomized controlled trial, rent-seeking, RFID, Richard Florida, Richard Thaler, school vouchers, self-driving car, Silicon Valley, Simon Kuznets, Stanford marshmallow experiment, Steve Jobs, Steven Pinker, technoutopianism, The Fortune at the Bottom of the Pyramid, Upton Sinclair, Walter Mischel, War on Poverty, winner-take-all economy, World Values Survey, Y2K

In short, Amazon and its digital ways are an extrapolation – an amplification – of pre-digital patterns. On the one hand, more books of greater variety are being published. There is a growing population of writers, and publishing is being commoditized.5 On the other hand, the books that receive widespread attention and land on best seller lists are a dwindling proportion of the total. The first trend is sometimes called “the long tail”; the second represents a “winner-take-all” economy.6 Commentators tend to highlight one or the other of these phenomena, but both are happening at once. Together they cause the shrinking middle that is the hallmark of any industry – music, movies, manufacturing – whose product can be replicated and distributed cheaply. Indeed, in the book business it is widely acknowledged that fewer and fewer authors are able to make a living through writing.


pages: 170 words: 51,205

Information Doesn't Want to Be Free: Laws for the Internet Age by Cory Doctorow, Amanda Palmer, Neil Gaiman

Airbnb, barriers to entry, Brewster Kahle, cloud computing, Dean Kamen, Edward Snowden, game design, Internet Archive, John von Neumann, Kickstarter, MITM: man-in-the-middle, optical character recognition, plutocrats, Plutocrats, pre–internet, profit maximization, recommendation engine, rent-seeking, Saturday Night Live, Skype, Steve Jobs, Steve Wozniak, Stewart Brand, transfer pricing, Whole Earth Catalog, winner-take-all economy

Every time you sold a ten-dollar book through Walmart, that would be ten dollars’ worth of investment in this Walmart ecosystem your readers would feel beholden to, even if you and all their other favorite authors were later offered a better deal at Barnes and Noble (meanwhile, you’d only get fifty cents of that ten dollars in royalties, if that!). It’s easy to understand why Walmart would love this—it creates a winner-takes-all market, where a small advantage quickly grows into an unbridgeable gap. The question is, why should authors or publishers want to have anything to do with a scheme like this? Digital locks are roach motels: copyrighted works check in, but they don’t check out. Creators and investors lose control of their business—they become commodity suppliers for a distribution channel that calls all the shots.


pages: 486 words: 150,849

Evil Geniuses: The Unmaking of America: A Recent History by Kurt Andersen

affirmative action, Affordable Care Act / Obamacare, airline deregulation, airport security, always be closing, American ideology, American Legislative Exchange Council, anti-communist, Apple's 1984 Super Bowl advert, artificial general intelligence, autonomous vehicles, basic income, Bernie Sanders, blue-collar work, Bonfire of the Vanities, bonus culture, Burning Man, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, centre right, computer age, coronavirus, corporate governance, corporate raider, COVID-19, Covid-19, creative destruction, Credit Default Swap, cryptocurrency, deindustrialization, Donald Trump, Elon Musk, ending welfare as we know it, Erik Brynjolfsson, feminist movement, financial deregulation, financial innovation, Francis Fukuyama: the end of history, future of work, game design, George Gilder, Gordon Gekko, greed is good, High speed trading, hive mind, income inequality, industrial robot, interchangeable parts, invisible hand, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jeff Bezos, jitney, Joan Didion, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, knowledge worker, low skilled workers, Lyft, Mark Zuckerberg, market bubble, mass immigration, mass incarceration, Menlo Park, Naomi Klein, new economy, Norbert Wiener, Norman Mailer, obamacare, Peter Thiel, Picturephone, plutocrats, Plutocrats, post-industrial society, Powell Memorandum, pre–internet, Ralph Nader, Right to Buy, road to serfdom, Robert Bork, Robert Gordon, Robert Mercer, Ronald Reagan, Saturday Night Live, Seaside, Florida, Second Machine Age, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Stewart Brand, strikebreaker, The Death and Life of Great American Cities, The Future of Employment, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Tim Cook: Apple, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Uber and Lyft, uber lyft, union organizing, universal basic income, Unsafe at Any Speed, urban planning, urban renewal, very high income, wage slave, Wall-E, War on Poverty, Whole Earth Catalog, winner-take-all economy, women in the workforce, working poor, young professional, éminence grise

Because, I think, the economic changes of the 1980s, while not as immediately or spectacularly obvious as those of the ’60s, were in their ways at least as profound. The 1960s had triggered that first nostalgia wave as a soothing counterreaction. A generation later the unpleasant economic changes of the 1980s and ’90s made us retreat even deeper into our havens of the recycled and reassuringly old as a kind of national cultural self-medication. The unavoidable newness disoriented many people—the brutal winners-take-all economy and PCs evolving to supercomputers in every pocket all connected to one another, the easily graspable Cold War replaced by the confusing rise of China and militant Islamism, the influx of immigrants—take your pick. Just as Americans who came of age from the 1960s and after tended to be Peter Pans, fearing or resisting adulthood like no previous generations, trying to stay forever young, we also started fearing the future and resisting the new in general.


pages: 237 words: 64,411

Humans Need Not Apply: A Guide to Wealth and Work in the Age of Artificial Intelligence by Jerry Kaplan

Affordable Care Act / Obamacare, Amazon Web Services, asset allocation, autonomous vehicles, bank run, bitcoin, Bob Noyce, Brian Krebs, business cycle, buy low sell high, Capital in the Twenty-First Century by Thomas Piketty, combinatorial explosion, computer vision, corporate governance, crowdsourcing, en.wikipedia.org, Erik Brynjolfsson, estate planning, Flash crash, Gini coefficient, Goldman Sachs: Vampire Squid, haute couture, hiring and firing, income inequality, index card, industrial robot, information asymmetry, invention of agriculture, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Loebner Prize, Mark Zuckerberg, mortgage debt, natural language processing, Own Your Own Home, pattern recognition, Satoshi Nakamoto, school choice, Schrödinger's Cat, Second Machine Age, self-driving car, sentiment analysis, Silicon Valley, Silicon Valley startup, Skype, software as a service, The Chicago School, The Future of Employment, Turing test, Watson beat the top human players on Jeopardy!, winner-take-all economy, women in the workforce, working poor, Works Progress Administration

A 2005 University of Pennsylvania research report discusses how grocery store loyalty card programs offer differently valued discount coupons at checkout depending on such factors as how brand-loyal you appear to be.5 In other words, if you were inclined to buy the item anyway, why almost literally give away the store? The problem here is that all this wonderful laissez-faire is a prelude to à prendre ou à laisser—take it or leave it.6 The free flow of information around the Internet creates winner-take-all markets, and online retailing is no exception.7 Before the Internet, there were two points of friction that enabled a retailing market vigorous enough to profitably accommodate multiple sellers of identical goods. The first was information. How much more difficult was it to comparison shop, when you had to drive to a competitor’s store or search for their ads in the local newspaper, hoping to find the same item?


Deep Work: Rules for Focused Success in a Distracted World by Cal Newport

8-hour work day, Albert Einstein, barriers to entry, business climate, Cal Newport, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, David Brooks, David Heinemeier Hansson, deliberate practice, disruptive innovation, Donald Knuth, Donald Trump, Downton Abbey, en.wikipedia.org, Erik Brynjolfsson, experimental subject, follow your passion, Frank Gehry, informal economy, information retrieval, Internet Archive, Jaron Lanier, knowledge worker, Mark Zuckerberg, Marshall McLuhan, Merlin Mann, Nate Silver, new economy, Nicholas Carr, popular electronics, remote working, Richard Feynman, Ruby on Rails, Silicon Valley, Silicon Valley startup, Snapchat, statistical model, the medium is the message, Watson beat the top human players on Jeopardy!, web application, winner-take-all economy, zero-sum game

(This reality does matter, however, to the less-skilled local programmers living in Des Moines and in need of a steady paycheck.) This same trend holds for the growing number of fields where technology makes productive remote work possible—consulting, marketing, writing, design, and so on. Once the talent market is made universally accessible, those at the peak of the market thrive while the rest suffer. In a seminal 1981 paper, the economist Sherwin Rosen worked out the mathematics behind these “winner-take-all” markets. One of his key insights was to explicitly model talent—labeled, innocuously, with the variable q in his formulas—as a factor with “imperfect substitution,” which Rosen explains as follows: “Hearing a succession of mediocre singers does not add up to a single outstanding performance.” In other words, talent is not a commodity you can buy in bulk and combine to reach the needed levels: There’s a premium to being the best.


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

active measures, affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, disruptive innovation, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shared worldview, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor, zero-sum game

Gary Becker, awarded a Nobel Prize for his work on human capital, has highlighted what he sees as the “upside of income inequality,” arguing that the earning gap has widened “because the demand for educated and other skilled persons is growing.”27 These inequalities, he argues, reflect the new realities of a global economy that offer exceptional rewards to those with scarce skills, knowledge, and talent at the same time as penalizing those with poor marketable skills or mediocre records of performance. In The Winner-Takes-All Society, Frank and Cook are less sanguine about widening income inequalities in America, as they 122 The Global Auction believe them to be unjust and a cause of economic inefficiency. They explain these inequalities in terms of winner-takes-all markets because they make “the most productive individuals more valuable, and at the same time have led to more open bidding for their services.”28 In line with Becker, they take for granted that the market value of the most talented is worth more due of their contribution to productivity. The problem with this approach is that it continues to peddle the view that those who receive huge salaries deserve them, and the only thing stopping other people from doing the same thing is their failure to invest in their employability or to up their game.


pages: 240 words: 73,209

The Education of a Value Investor: My Transformative Quest for Wealth, Wisdom, and Enlightenment by Guy Spier

Albert Einstein, Atul Gawande, Benoit Mandelbrot, big-box store, Black Swan, Checklist Manifesto, Clayton Christensen, Daniel Kahneman / Amos Tversky, Exxon Valdez, Gordon Gekko, housing crisis, information asymmetry, Isaac Newton, Kenneth Arrow, Long Term Capital Management, Mahatma Gandhi, mandelbrot fractal, Nelson Mandela, NetJets, pattern recognition, pre–internet, random walk, Ronald Reagan, South Sea Bubble, Steve Jobs, winner-take-all economy, young professional, zero-sum game

At the time, he was researching K-Swiss, a manufacturer of athletic shoes. I had done a lot of research into Nike and had looked at the impact of its sponsorship on tennis and soccer. Instead of telling Shai that I thought K-Swiss was an also-ran in the sneaker business, I suggested that he produce a list of the top 20 tennis players, see who sponsored them, then estimate which of those players attracted the most viewers in what is typically a winner-take-all market. In the process, he discovered that K-Swiss had only one player on the list, while Nike had six or seven—an indication that K-Swiss faced an all but insuperable challenge to win market share away from Nike. At no point did we discuss whether Shai already owned the stock or was thinking of buying it. But I’m guessing that our discussion helped to clarify that it wasn’t the best place for him to invest.


pages: 561 words: 157,589

WTF?: What's the Future and Why It's Up to Us by Tim O'Reilly

4chan, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, barriers to entry, basic income, Bernie Madoff, Bernie Sanders, Bill Joy: nanobots, bitcoin, blockchain, Bretton Woods, Brewster Kahle, British Empire, business process, call centre, Capital in the Twenty-First Century by Thomas Piketty, Captain Sullenberger Hudson, Chuck Templeton: OpenTable:, Clayton Christensen, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, commoditize, computer vision, corporate governance, corporate raider, creative destruction, crowdsourcing, Danny Hillis, data acquisition, deskilling, DevOps, Donald Davies, Donald Trump, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Filter Bubble, Firefox, Flash crash, full employment, future of work, George Akerlof, gig economy, glass ceiling, Google Glasses, Gordon Gekko, gravity well, greed is good, Guido van Rossum, High speed trading, hiring and firing, Home mortgage interest deduction, Hyperloop, income inequality, index fund, informal economy, information asymmetry, Internet Archive, Internet of things, invention of movable type, invisible hand, iterative process, Jaron Lanier, Jeff Bezos, jitney, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kevin Kelly, Khan Academy, Kickstarter, knowledge worker, Kodak vs Instagram, Lao Tzu, Larry Wall, Lean Startup, Leonard Kleinrock, Lyft, Marc Andreessen, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, McMansion, microbiome, microservices, minimum viable product, mortgage tax deduction, move fast and break things, move fast and break things, Network effects, new economy, Nicholas Carr, obamacare, Oculus Rift, packet switching, PageRank, pattern recognition, Paul Buchheit, peer-to-peer, peer-to-peer model, Ponzi scheme, race to the bottom, Ralph Nader, randomized controlled trial, RFC: Request For Comment, Richard Feynman, Richard Stallman, ride hailing / ride sharing, Robert Gordon, Robert Metcalfe, Ronald Coase, Sam Altman, school choice, Second Machine Age, secular stagnation, self-driving car, SETI@home, shareholder value, Silicon Valley, Silicon Valley startup, skunkworks, Skype, smart contracts, Snapchat, Social Responsibility of Business Is to Increase Its Profits, social web, software as a service, software patent, spectrum auction, speech recognition, Stephen Hawking, Steve Ballmer, Steve Jobs, Steven Levy, Stewart Brand, strong AI, TaskRabbit, telepresence, the built environment, The Future of Employment, the map is not the territory, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thomas Davenport, transaction costs, transcontinental railway, transportation-network company, Travis Kalanick, trickle-down economics, Uber and Lyft, Uber for X, uber lyft, ubercab, universal basic income, US Airways Flight 1549, VA Linux, Watson beat the top human players on Jeopardy!, We are the 99%, web application, Whole Earth Catalog, winner-take-all economy, women in the workforce, Y Combinator, yellow journalism, zero-sum game, Zipcar

And when the market gets excited, those people get paid in a currency that appreciates at a rate far in excess of anything possible in the real economy. The amount of supermoney created out of thin air simply by issuing new options to employees is staggering. In 2015, for instance, Google’s stock-based compensation was $5.2 billion. The ability to print supermoney is proportional to your size, further accelerating the winner-takes-all economy. For a company the size of Google, whose market capitalization at the end of that year was more than $500 billion, that $5.2 billion in stock compensation represented only a 1% dilution of existing shareholders. For a smaller company, like Salesforce, with a market capitalization closer to $50 billion, 1% would only be $500 million—so Salesforce can afford only a tenth as much to hire engineers even though it has a third as many employees as Google.


pages: 383 words: 81,118

Matchmakers: The New Economics of Multisided Platforms by David S. Evans, Richard Schmalensee

Airbnb, Alvin Roth, big-box store, business process, cashless society, Chuck Templeton: OpenTable:, creative destruction, Deng Xiaoping, disruptive innovation, if you build it, they will come, information asymmetry, Internet Archive, invention of movable type, invention of the printing press, invention of the telegraph, invention of the telephone, Jean Tirole, John Markoff, Lyft, M-Pesa, market friction, market microstructure, mobile money, multi-sided market, Network effects, Productivity paradox, profit maximization, purchasing power parity, QR code, ride hailing / ride sharing, sharing economy, Silicon Valley, Snapchat, Steve Jobs, Tim Cook: Apple, transaction costs, two-sided market, Uber for X, uber lyft, ubercab, Victor Gruen, winner-take-all economy

The Betamax, which some claim was the better technology, was left in the dustbin of history. Many writers on business strategy took this apparent lesson to heart and emphasized the importance of first-mover advantages in industries with network effects.5 They drew two conclusions. The first was that network effects meant that one firm, or standard, would control the market, since bigger was always better in the eyes of consumers. These were, therefore, winner-take-all markets. The second was that, if you wanted to be the winner who took all, you had better start first and keep your lead. Since direct network effects would magnify the effects of even the slightest of leads, there’s always a first-mover advantage. One can see the influence of this work from a Google Ngram that shows the frequency of these phrases in books published after 1950. There was a surge in the term network effects in the early 1970s following the publication of Rohlfs’s paper, references died down, and then grew explosively after 1995 (see figure 2-1).6 References to the first-mover advantage started increasing rapidly in the early 1990s and then grew explosively after 1995 as well.


pages: 322 words: 84,580

The Economics of Belonging: A Radical Plan to Win Back the Left Behind and Achieve Prosperity for All by Martin Sandbu

"Robert Solow", Airbnb, autonomous vehicles, balance sheet recession, bank run, banking crisis, basic income, Berlin Wall, Bernie Sanders, Boris Johnson, Branko Milanovic, Bretton Woods, business cycle, call centre, capital controls, carbon footprint, Carmen Reinhart, centre right, collective bargaining, debt deflation, deindustrialization, deskilling, Diane Coyle, Donald Trump, Edward Glaeser, eurozone crisis, Fall of the Berlin Wall, financial intermediation, full employment, future of work, gig economy, Gini coefficient, hiring and firing, income inequality, income per capita, industrial robot, intangible asset, job automation, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liquidity trap, longitudinal study, low skilled workers, manufacturing employment, Martin Wolf, meta analysis, meta-analysis, mini-job, mortgage debt, new economy, offshore financial centre, oil shock, open economy, pattern recognition, pink-collar, precariat, quantitative easing, race to the bottom, Richard Florida, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, social intelligence, TaskRabbit, total factor productivity, universal basic income, very high income, winner-take-all economy, working poor

For the amazing story of how the shipping container transformed trade, see Tim Harford, “50 Things That Made the Modern Economy: The Simple Steel Box That Transformed Global Trade,” BBC World Service, 9 January 2017, https://www.bbc.co.uk/news/business-38305512. 9. Martin Sandbu, “How Blue-Collar Aristocracy Was Laid Low,” Financial Times, 19 November 2018, https://www.ft.com/content/b336e428-e8e5-11e8-a34c-663b3f553b35. 10. Krauss, “Texas Oil Fields.” 11. Martin Sandbu, “Place and Prosperity,” Financial Times, 16 December 2016, https://www.ft.com/content/63f71020-c21f-11e6-9bca-2b93a6856354. 12. Robert Frank and Philip Cook, “Winner-Take-All Markets,” Studies in Microeconomics 1, no. 2 (December 2013): 131–54, https://doi.org/10.1177/2321022213501254. 13. Jason Furman, “Forms and Sources of Inequality in the United States,” VoxEU, 17 March 2016, https://voxeu.org/article/forms-and-sources-inequality-united-states. 14. Ben Ansell and David Adler, “Brexit and the Politics of Housing in Britain,” Political Quarterly 90, no. 52 (April 2019): 105–16, https://doi.org/10.1111/1467-923X.12621. 15.


pages: 332 words: 91,780

Starstruck: The Business of Celebrity by Currid

"Robert Solow", barriers to entry, Bernie Madoff, Donald Trump, income inequality, index card, industrial cluster, Mark Zuckerberg, Metcalfe’s law, natural language processing, place-making, Ponzi scheme, post-industrial society, prediction markets, Renaissance Technologies, Richard Florida, Robert Metcalfe, rolodex, shareholder value, Silicon Valley, slashdot, transaction costs, upwardly mobile, urban decay, Vilfredo Pareto, winner-take-all economy

DiMaggio, “Classification in Art.” 18. Haden-Guest, True Colors, p. 151. 19. Galenson’s research shows that Richter is the number one artist whose artwork consistently sells for over $1 million. He does not, however, reach the auction price heights of Hirst or Koons. So while Richter will certainly be considered one of the greatest artists of his time, he is not a celebrity who reaps the rewards of the winner-takes-all market. Richter’s work is revered by those who know art, the way a Booker Prize winner is lauded by book readers while the masses read Katie Price’s latest biography. As Galenson remarks, “Richter has a massive influence on young artists, even if not a household name.” 20. “Postwar & Contemporary Art at Christie’s Totals $430.8 Million,” editorial, Antiques and the Arts, May 20, 2008, antiquesandthearts.com/Antiques/AuctionWatch/ 2008-05-20__13-38-28.html. 21.


pages: 302 words: 87,776

Dollars and Sense: How We Misthink Money and How to Spend Smarter by Dr. Dan Ariely, Jeff Kreisler

accounting loophole / creative accounting, Airbnb, Albert Einstein, bitcoin, Burning Man, collateralized debt obligation, Daniel Kahneman / Amos Tversky, delayed gratification, endowment effect, experimental economics, hedonic treadmill, IKEA effect, invisible hand, loss aversion, mental accounting, mobile money, placebo effect, price anchoring, Richard Thaler, sharing economy, Silicon Valley, Snapchat, Stanford marshmallow experiment, Steve Jobs, TaskRabbit, the payments system, Uber for X, ultimatum game, Walter Mischel, winner-take-all economy

To be fair, I always tell people up front that the game is for real, and I always take their money in the end. I figure they’re more likely to learn their lesson that way, and moreover, I have to keep my reputation.” In Dan’s game/experiment/scam, the effect of sunk costs quickly turned his students’/subjects’/marks’ potential 95-euro gain (100 euro minus the 5-euro starting bid) into a 490-euro loss. This is just like a contest between two companies in a winner-takes-all market. In general, one company will get all the sales or at least the vast majority, and the other will get nothing. Every quarter, each company must decide whether to invest more in research and development and advertising or to give up the competitive project. At some point, it should be clear that if the two companies perpetually try to outbid each other, they’ll both end up losing lots of money.


pages: 324 words: 92,805

The Impulse Society: America in the Age of Instant Gratification by Paul Roberts

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, 3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, American Society of Civil Engineers: Report Card, asset allocation, business cycle, business process, Cass Sunstein, centre right, choice architecture, collateralized debt obligation, collective bargaining, computerized trading, corporate governance, corporate raider, corporate social responsibility, creative destruction, crony capitalism, David Brooks, delayed gratification, disruptive innovation, double helix, factory automation, financial deregulation, financial innovation, fixed income, full employment, game design, greed is good, If something cannot go on forever, it will stop - Herbert Stein's Law, impulse control, income inequality, inflation targeting, invisible hand, job automation, John Markoff, Joseph Schumpeter, knowledge worker, late fees, Long Term Capital Management, loss aversion, low skilled workers, mass immigration, new economy, Nicholas Carr, obamacare, Occupy movement, oil shale / tar sands, performance metric, postindustrial economy, profit maximization, Report Card for America’s Infrastructure, reshoring, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, shareholder value, Silicon Valley, speech recognition, Steve Jobs, technoutopianism, the built environment, The Predators' Ball, the scientific method, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, Walter Mischel, winner-take-all economy

We can no longer ignore the absurdity that, in the richest nation in history, the average citizen is increasingly insecure and fearful of being left behind. Nor can we any longer persuade ourselves that our market and political systems will somehow reform themselves: the system is so broken that we no longer have the luxury of denial and apathy. More and more of us recognize that the pessimistic story lines that make the Impulse Society seem so intractable—the entrenched political dysfunction, the permanently myopic winner-take-all market, the chronic self-absorption of individuals—are themselves part of the Impulse Society, a meta brand that has made real reform seem impossible. But more of us see through this brand and know that reform is possible. Now, even as technocrats and academics and a few reform-minded politicians and businesspeople grapple with the myopia of the political system and the business world, the rest of us need to put that knowledge into action and step into the fray.


pages: 297 words: 89,206

Social Class in the 21st Century by Mike Savage

call centre, Capital in the Twenty-First Century by Thomas Piketty, Clapham omnibus, Corn Laws, deindustrialization, deskilling, Downton Abbey, financial independence, gender pay gap, Gini coefficient, income inequality, liberal capitalism, Mark Zuckerberg, megacity, moral panic, New Urbanism, Occupy movement, old-boy network, precariat, psychological pricing, Sloane Ranger, The Spirit Level, unpaid internship, upwardly mobile, very high income, winner-take-all economy, young professional

This is because when there is a highly competitive education system and labour market, it is those who can maximize every possible advantage and who start from the most advantaged positions who are best able to succeed within this meritocratic structure. We see this syndrome operating very actively in the search for ‘talent’ embarked upon by leading companies and organizations acting to ‘hothouse’ their star performers in ‘Winner takes all’ markets. Meritocracy is not a curb to escalating inequality; it is actually implicated within it. In this respect, conventional images of George Osborne and David Cameron in their Bullingdon Club Oxford days, with the implication that the closed, old-fashioned elite world continues to look after its own, are misleading. Such images – for instance of an ‘Establishment’ – can be mobilized to suggest that if only we could have ‘true’ meritocracy and break down those remaining status barriers at the top, then we might be able to address the inequities of social class.


pages: 299 words: 92,782

The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing by Michael J. Mauboussin

Amazon Mechanical Turk, Atul Gawande, Benoit Mandelbrot, Black Swan, Checklist Manifesto, Clayton Christensen, cognitive bias, commoditize, Daniel Kahneman / Amos Tversky, David Brooks, deliberate practice, disruptive innovation, Emanuel Derman, fundamental attribution error, Gini coefficient, hindsight bias, hiring and firing, income inequality, Innovator's Dilemma, Long Term Capital Management, loss aversion, Menlo Park, mental accounting, moral hazard, Network effects, prisoner's dilemma, random walk, Richard Thaler, risk-adjusted returns, shareholder value, Simon Singh, six sigma, Steven Pinker, transaction costs, winner-take-all economy, zero-sum game, Zipf's Law

In the era before recording technology was developed, the singers would have earned a comparable sum from their concerts, with the superior singer perhaps earning a modest premium consistent with the difference in skill. But once recording technology was introduced, consumers would no longer have to settle for the lesser of the two and would buy the record of the better singer almost every time. So her earnings would soar relative to her rival. Despite the similarity of talent, this becomes a winner-take-all market. In their book The Winner-Take-All Society, Robert Frank and Philip Cook suggest that increased competition for talent is another factor that creates outsized pay for top performers. Frank offers the example of a board of directors that must select between two candidates to become the next CEO of a company that earns $10 billion a year in profits. If one candidate can make better decisions than the other, Frank argues, the company's profits may be 3 percent higher than they would be otherwise, creating an additional $300 million in income.


pages: 364 words: 102,528

An Economist Gets Lunch: New Rules for Everyday Foodies by Tyler Cowen

agricultural Revolution, big-box store, business climate, carbon footprint, cognitive bias, creative destruction, cross-subsidies, East Village, en.wikipedia.org, food miles, guest worker program, haute cuisine, illegal immigration, informal economy, iterative process, mass immigration, oil shale / tar sands, out of africa, pattern recognition, Peter Singer: altruism, price discrimination, refrigerator car, The Wealth of Nations by Adam Smith, Tyler Cowen: Great Stagnation, Upton Sinclair, winner-take-all economy, women in the workforce

I am a relatively active cook, experimenting with a wide diversity of dishes and cuisines, and still well over half of my cooking equipment sits dormant. I don’t use the plastic bowl or that whisk or that CorningWare tray. I would throw them away, except that my wife does not like it when I throw things away. Second, most people have a few favorite items which they use again and again and again, until they wear them out and have to buy new ones. Most kitchens function as a “winner-take-all” market, where a few items receive all the use and most are neglected and left alone. For me, the winning items are a very-good-at-conducting-heat frying pan, a wok, a large blue casserole, a small pot for cooking rice, an all-purpose Cuisinart/spice grinder, a large boiling pot for pasta, and a baking tray. Add a few sharp knives to that list and two long wooden spoons for tossing in the wok.


Cultural Backlash: Trump, Brexit, and Authoritarian Populism by Pippa Norris, Ronald Inglehart

affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Berlin Wall, Bernie Sanders, Boris Johnson, Cass Sunstein, centre right, cognitive dissonance, conceptual framework, declining real wages, desegregation, Donald Trump, eurozone crisis, Fall of the Berlin Wall, feminist movement, first-past-the-post, illegal immigration, immigration reform, income inequality, job automation, knowledge economy, labor-force participation, land reform, liberal world order, longitudinal study, low skilled workers, mass immigration, meta analysis, meta-analysis, obamacare, open borders, open economy, post-industrial society, post-materialism, precariat, purchasing power parity, rising living standards, Ronald Reagan, sexual politics, Silicon Valley, statistical model, stem cell, War on Poverty, white flight, winner-take-all economy, women in the workforce, working-age population, World Values Survey, zero-sum game

Protests have mobilized enormous crowds; for example, the January 2018 women’s march on the anniversary of Trump’s inauguration drew an estimated 2.67 million people onto the streets across America.40 What matters for reversing effective action, however, is whether these energies can be transferred from the streets and Twitter feeds to the ballot box and elected office. Reducing Economic Inequality Western societies have increasingly become winner-take-all economies dominated by a small minority, while the overwhelming majority have precarious jobs. If left to market forces, this tendency will prevail. But government can be a countervailing force that reallocates resources for the benefit of society as a whole. In recent decades, neo-liberal policies of deregulation and austerity cuts in social welfare have mainly had the opposite effect, fueling growing insecurity.


pages: 401 words: 115,959

Philanthrocapitalism by Matthew Bishop, Michael Green, Bill Clinton

Albert Einstein, anti-communist, barriers to entry, battle of ideas, Bernie Madoff, Bob Geldof, Bonfire of the Vanities, business process, business process outsourcing, Charles Lindbergh, clean water, cleantech, corporate governance, corporate social responsibility, Dava Sobel, David Ricardo: comparative advantage, don't be evil, family office, financial innovation, full employment, global pandemic, global village, God and Mammon, Hernando de Soto, high net worth, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Dyson, John Harrison: Longitude, joint-stock company, knowledge economy, knowledge worker, Live Aid, lone genius, Marc Andreessen, market bubble, mass affluent, microcredit, Mikhail Gorbachev, Nelson Mandela, new economy, offshore financial centre, old-boy network, peer-to-peer lending, performance metric, Peter Singer: altruism, plutocrats, Plutocrats, profit maximization, profit motive, Richard Feynman, risk tolerance, risk-adjusted returns, Ronald Coase, Ronald Reagan, shareholder value, Silicon Valley, Slavoj Žižek, South Sea Bubble, sovereign wealth fund, stem cell, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade liberalization, transaction costs, trickle-down economics, wealth creators, winner-take-all economy, working poor, World Values Survey, X Prize

Frank and Philip Cook observe in their 1996 book, The Winner-Take-All Society, new technology, globalization, and market economics have changed the structure of many industries in such a way that their star performers now earn vastly more than the average performer. As they explain, these are markets where “the value of what gets produced in them often depends on the efforts of only a small number of top performers, who are paid accordingly.” A booming world economy combined with winner-take-all markets resulted in an increase in the number of billionaires that might have shocked even Carnegie. In 2009, even after the financial crisis, Forbes magazine’s annual survey of the richest people in the world listed 793 billionaires. When Forbes first entered the rich-list business in 1982 with an annual ranking of America’s 400 wealthiest families, the threshold for inclusion was a net worth of $90 million.


pages: 523 words: 111,615

The Economics of Enough: How to Run the Economy as if the Future Matters by Diane Coyle

"Robert Solow", accounting loophole / creative accounting, affirmative action, bank run, banking crisis, Berlin Wall, bonus culture, Branko Milanovic, BRICs, business cycle, call centre, Cass Sunstein, central bank independence, collapse of Lehman Brothers, conceptual framework, corporate governance, correlation does not imply causation, Credit Default Swap, deindustrialization, demographic transition, Diane Coyle, different worldview, disintermediation, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Financial Instability Hypothesis, Francis Fukuyama: the end of history, George Akerlof, Gini coefficient, global supply chain, Gordon Gekko, greed is good, happiness index / gross national happiness, hedonic treadmill, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, income inequality, income per capita, industrial cluster, information asymmetry, intangible asset, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jane Jacobs, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, low skilled workers, market bubble, market design, market fundamentalism, megacity, Network effects, new economy, night-watchman state, Northern Rock, oil shock, Pareto efficiency, principal–agent problem, profit motive, purchasing power parity, railway mania, rising living standards, Ronald Reagan, selective serotonin reuptake inhibitor (SSRI), Silicon Valley, South Sea Bubble, Steven Pinker, The Design of Experiments, The Fortune at the Bottom of the Pyramid, The Market for Lemons, The Myth of the Rational Market, The Spirit Level, transaction costs, transfer pricing, tulip mania, ultimatum game, University of East Anglia, web application, web of trust, winner-take-all economy, World Values Survey, zero-sum game

So these performers will be much more popular than the next rank than any objective difference in their talents might justify. Demand to see the top rank feeds on itself. Modern technologies also amplify the potential reach of talented people—the best performers are in demand not only for live performance but for CDs and downloads too. Both technology and globalization increase hugely the potential demand for talent. These “winner take all” markets have spread superstar pay to many other sectors of the economy, outside sport and the performing arts where they were originally observed.35 Moreover, this trend means that the increase in inequality due to skills and technology has what is known as a “fractal” character, which means that it is occurring within categories as well as in the overall income distribution: top lawyers’ pay has risen relative to those on low incomes; but the top top lawyers have pulled further ahead of the average top lawyer too.36 So to sum up, structural changes in the economy driven by new technologies are the fundamental driver of greater inequality, in much the same way that the wave of innovation of early capitalism in the nineteenth century led to great inequality until the workforce as a whole developed the new skills that were needed.


pages: 387 words: 119,409

Work Rules!: Insights From Inside Google That Will Transform How You Live and Lead by Laszlo Bock

Airbnb, Albert Einstein, AltaVista, Atul Gawande, Black Swan, book scanning, Burning Man, call centre, Cass Sunstein, Checklist Manifesto, choice architecture, citizen journalism, clean water, correlation coefficient, crowdsourcing, Daniel Kahneman / Amos Tversky, deliberate practice, en.wikipedia.org, experimental subject, Frederick Winslow Taylor, future of work, Google Earth, Google Glasses, Google Hangouts, Google X / Alphabet X, Googley, helicopter parent, immigration reform, Internet Archive, longitudinal study, Menlo Park, mental accounting, meta analysis, meta-analysis, Moneyball by Michael Lewis explains big data, nudge unit, PageRank, Paul Buchheit, Ralph Waldo Emerson, Rana Plaza, random walk, Richard Thaler, Rubik’s Cube, self-driving car, shareholder value, side project, Silicon Valley, six sigma, statistical model, Steve Ballmer, Steve Jobs, Steven Levy, Steven Pinker, survivorship bias, TaskRabbit, The Wisdom of Crowds, Tony Hsieh, Turing machine, winner-take-all economy, Y2K

* The same pattern holds for Oscars, Man Booker Prize nominations, Pulitzer Prize nominations, Rolling Stone Top 500 Songs, and thirty-six other awards. † The same pattern holds in US state and Canadian provincial legislatures, the parliaments of Denmark, Estonia, Finland, Ireland, the Netherlands, and the United Kingdom, and in the New Zealand legislature. lv Clear exceptions include Frank and Cook’s “winner-take-all markets,” where the differences between the very best people and the next best are more readily observable, like professional sports, music, or acting. In those markets you see top pay in the tens of millions. And it follows a power law distribution. The Screen Actors Guild (SAG), for example, hasn’t released member compensation statistics since 2008, but it’s possible to piece together the distribution from various articles.


pages: 550 words: 124,073

Democracy and Prosperity: Reinventing Capitalism Through a Turbulent Century by Torben Iversen, David Soskice

Andrei Shleifer, assortative mating, augmented reality, barriers to entry, Bretton Woods, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, centre right, cleantech, cloud computing, collateralized debt obligation, collective bargaining, colonial rule, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, deskilling, Donald Trump, first-past-the-post, full employment, Gini coefficient, hiring and firing, implied volatility, income inequality, industrial cluster, inflation targeting, invisible hand, knowledge economy, labor-force participation, liberal capitalism, low skilled workers, low-wage service sector, means of production, mittelstand, Network effects, New Economic Geography, new economy, New Urbanism, non-tariff barriers, Occupy movement, offshore financial centre, open borders, open economy, passive investing, precariat, race to the bottom, rent-seeking, RFID, road to serfdom, Robert Bork, Robert Gordon, Silicon Valley, smart cities, speech recognition, The Future of Employment, The Great Moderation, The Rise and Fall of American Growth, too big to fail, trade liberalization, union organizing, urban decay, Washington Consensus, winner-take-all economy, working-age population, World Values Survey, young professional, zero-sum game

But can we expect this symbiosis to continue if new technology increasingly concentrates the benefits of the new economy in the top end of the distribution while substituting for workers in perhaps a majority of occupations? While still a hypothetical question, what would happen if the substitution effects of new technology affected a majority? This, and not whether globalization will undermine the power of the nation-state or suborn democracy, strikes us as the more salient political question to ask about the future. We first note that even if winner-take-all markets become more pervasive, this does not eliminate the need for a large-scale higher education system. As long as the productivity of workers in their thirties cannot be confidently predicted from observable traits when they are in their teens, the economy will continue to depend on educating large numbers of young people. The critical question is whether such a system will produce democratic majorities for policies and institutions that sustain the system.


pages: 476 words: 125,219

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy by Robert W. McChesney

2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, Albert Einstein, American Legislative Exchange Council, American Society of Civil Engineers: Report Card, Automated Insights, barriers to entry, Berlin Wall, business cycle, Cass Sunstein, citizen journalism, cloud computing, collaborative consumption, collective bargaining, creative destruction, crony capitalism, David Brooks, death of newspapers, declining real wages, Double Irish / Dutch Sandwich, Erik Brynjolfsson, failed state, Filter Bubble, full employment, future of journalism, George Gilder, Gini coefficient, Google Earth, income inequality, informal economy, intangible asset, invention of agriculture, invisible hand, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, means of production, Metcalfe’s law, mutually assured destruction, national security letter, Nelson Mandela, Network effects, new economy, New Journalism, Nicholas Carr, Occupy movement, offshore financial centre, patent troll, Peter Thiel, plutocrats, Plutocrats, post scarcity, price mechanism, profit maximization, profit motive, QWERTY keyboard, Ralph Nader, Richard Stallman, road to serfdom, Robert Metcalfe, Saturday Night Live, sentiment analysis, Silicon Valley, single-payer health, Skype, spectrum auction, Steve Jobs, Steve Wozniak, Steven Levy, Steven Pinker, Stewart Brand, Telecommunications Act of 1996, the medium is the message, The Spirit Level, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, Upton Sinclair, WikiLeaks, winner-take-all economy, yellow journalism

Information networks, in particular, generate demand-side economies of scale, related to the capture of customers, as opposed to supply-side economies of scale (prevalent in traditional oligopolistic industry) related to reduction in costs as scale goes up.11 The largest firm in an industry increases its attractiveness to consumers by an order of magnitude as it gets a greater market share, and makes it almost impossible for competitors with declining shares to remain attractive or competitive. Wired’s Anderson puts the matter succinctly: “Monopolies are actually even more likely in highly networked markets like the online world. The dark side of network effects is that rich nodes get richer. Metcalfe’s law, which states that the value of a network increases in proportion to the square of connections, creates winner-take-all markets, where the gap between the number one and number two players is typically large and growing.”12 Bob Metcalfe, inventor of the Ethernet protocol that wires computers together, regarded the network effect as so prevalent that he formulated the law that goes by his name: the usefulness of a network increases at an accelerating rate as you add each new person to it.13 Google search is an example; the quality of its algorithm improves with more users, leaving other search engines with a less effective and attractive product.


pages: 1,164 words: 309,327

Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris

active measures, Andrei Shleifer, asset allocation, automated trading system, barriers to entry, Bernie Madoff, business cycle, buttonwood tree, buy and hold, compound rate of return, computerized trading, corporate governance, correlation coefficient, data acquisition, diversified portfolio, fault tolerance, financial innovation, financial intermediation, fixed income, floating exchange rates, High speed trading, index arbitrage, index fund, information asymmetry, information retrieval, interest rate swap, invention of the telegraph, job automation, law of one price, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, market clearing, market design, market fragmentation, market friction, market microstructure, money market fund, Myron Scholes, Nick Leeson, open economy, passive investing, pattern recognition, Ponzi scheme, post-materialism, price discovery process, price discrimination, principal–agent problem, profit motive, race to the bottom, random walk, rent-seeking, risk tolerance, risk-adjusted returns, selection bias, shareholder value, short selling, Small Order Execution System, speech recognition, statistical arbitrage, statistical model, survivorship bias, the market place, transaction costs, two-sided market, winner-take-all economy, yield curve, zero-coupon bond, zero-sum game

. ◀ * * * Trading systems are networks that link many potential buyers to many potential sellers. The more buyers and sellers who participate in the system, the more valuable it is to everyone who uses it. Network externalities can create tremendous barriers to entry. Usually, one trading system grows large, and no other system can become large enough, quickly enough, to be a viable economic competitor. Markets with network externalities are winner-take-all markets. Without government regulation, new entrants often cannot get a toehold. The U.S. government requires that all phone companies allow all other phone companies to access their networks. Without such linkages, new phone companies could not compete with existing companies. The cellular telephone, telephone-over-cable, and telephone-over-Internet industries would not exist today were it not for these open access regulations.

See volume-weighted average price Wall Street Journal, 587 warrant, 44 Warsaw Stock Exchange, 50 wash trade, 259 weak-form efficient market, 240 welfare economics, 203–5, 216 well-informed speculators, 5, 6 well-informed traders. See informed traders WFE. See World Federation of Exchanges wheat, 183–85, 215, 255, 335, 352 wholesalers, 282 wide spread, 280 width, 398, 399 Winans, Foster, 587 winner’s curse, 338, 340, 341–43 winner-take-all markets, 536 winning, 475, 476 wirehouses, 34, 329 wolf detectors, 328 wolves, 328 wolves in sheep’s clothing, 327 working orders, 71 World Federation of Exchanges (WFE), 48, 66 wrap accounts, 151 writers, 42, 75 Wunsch, R. Steven, 121 Yahoo.com, 99 yen-euro, 357 yield curve spread, 358 zero-coupon bonds, 40, 206 zero downtick, 81 zero net supply, 41, 44, 225, 354 zero-sum game, 6, 8, 176, 205, 206, 458, 479, 488 zero tick, 81 Zip drive, 568


pages: 455 words: 133,322

The Facebook Effect by David Kirkpatrick

Andy Kessler, Burning Man, delayed gratification, demand response, don't be evil, global village, happiness index / gross national happiness, Howard Rheingold, Jeff Bezos, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Network effects, Peter Thiel, rolodex, Sand Hill Road, sharing economy, Silicon Valley, Silicon Valley startup, Skype, social graph, social software, social web, Startup school, Steve Ballmer, Steve Jobs, Stewart Brand, the payments system, The Wealth of Nations by Adam Smith, Whole Earth Review, winner-take-all economy, Y Combinator

But the reason it’s funny is that it evokes a surprising truth. Zuckerberg realized a long time ago that most users are not going to take the time to create multiple profiles for themselves on multiple social networks. He also knew from his endless bull sessions at Harvard and in Palo Alto about “network effects” that once consolidation begins on a communications platform it can accelerate and become a winner-take-all market. People will join and use the communications tool that the largest number of other people already use. He therefore made it a goal to create a tool not for the United States but for the world. The objective was to overwhelm all other social networks wherever they are—to win their users and become the de facto standard. In his view it was either that or disappear. Other social networks have more users than Facebook in a number of key countries, including Brazil, China, Japan, Korea, Russia, and a few other places.


pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, business cycle, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

This is because the economies of some big poor countries (China and India, above all) grew faster than high-income countries, offsetting the general rise in inequality within almost all countries. Indeed, it appears from work at the World Bank that the clear losers from the economic developments of the last three decades have been the lower and middle classes of the high-income countries, whose incomes fall between the 75th and 95th percentiles from the bottom of the global income distribution.59 The forces driving the rise in inequality are complex. Technology helped create ‘winner-takes-all markets’ in which the most successful and productive participants could reap the lion’s share of the gains. This became notably true in the high-tech sector and in finance, which emerged as the most dynamic industries in high-income economies. Technology also increased the relative demand for skilled workers and lowered the demand for less-skilled ones. Globalization directly affected the supply of relatively high-waged, but only modestly skilled jobs, particularly in manufacturing.


pages: 543 words: 153,550

Model Thinker: What You Need to Know to Make Data Work for You by Scott E. Page

"Robert Solow", Airbnb, Albert Einstein, Alfred Russel Wallace, algorithmic trading, Alvin Roth, assortative mating, Bernie Madoff, bitcoin, Black Swan, blockchain, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Checklist Manifesto, computer age, corporate governance, correlation does not imply causation, cuban missile crisis, deliberate practice, discrete time, distributed ledger, en.wikipedia.org, Estimating the Reproducibility of Psychological Science, Everything should be made as simple as possible, experimental economics, first-price auction, Flash crash, Geoffrey West, Santa Fe Institute, germ theory of disease, Gini coefficient, High speed trading, impulse control, income inequality, Isaac Newton, John von Neumann, Kenneth Rogoff, knowledge economy, knowledge worker, Long Term Capital Management, loss aversion, low skilled workers, Mark Zuckerberg, market design, meta analysis, meta-analysis, money market fund, Nash equilibrium, natural language processing, Network effects, p-value, Pareto efficiency, pattern recognition, Paul Erdős, Paul Samuelson, phenotype, pre–internet, prisoner's dilemma, race to the bottom, random walk, randomized controlled trial, Richard Feynman, Richard Thaler, school choice, sealed-bid auction, second-price auction, selection bias, six sigma, social graph, spectrum auction, statistical model, Stephen Hawking, Supply of New York City Cabdrivers, The Bell Curve by Richard Herrnstein and Charles Murray, The Great Moderation, The Rise and Fall of American Growth, the rule of 72, the scientific method, The Spirit Level, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, urban sprawl, value at risk, web application, winner-take-all economy, zero-sum game

Empirically, the models differ in how much and what part of the variation in income they can explain. For the upper end of the income distribution, the empirical evidence most strongly supports the models that rely on technological change.16 For over twenty years, the IRS has tracked the highest 400 incomes. Those at the top of the distribution come from technology, mass retail, and finance, three industries that can scale quickly. That high growth rate could stem from winner-take-all markets for search engines (Google) or social networking sites (Facebook). These models tell us little about the lower end of the income distribution. Nor do they say much about income mobility, or explain why CEO pay in the United States far exceeds that in other countries. To explain these other features of the data, we need the other models, such as the income mobility model, Durlauf’s persistent inequality model, and the spatial voting model.


pages: 554 words: 149,489

The Content Trap: A Strategist's Guide to Digital Change by Bharat Anand

Airbnb, Benjamin Mako Hill, Bernie Sanders, Clayton Christensen, cloud computing, commoditize, correlation does not imply causation, creative destruction, crowdsourcing, death of newspapers, disruptive innovation, Donald Trump, Google Glasses, Google X / Alphabet X, information asymmetry, Internet of things, inventory management, Jean Tirole, Jeff Bezos, John Markoff, Just-in-time delivery, Khan Academy, Kickstarter, late fees, Mark Zuckerberg, market design, Minecraft, multi-sided market, Network effects, post-work, price discrimination, publish or perish, QR code, recommendation engine, ride hailing / ride sharing, selection bias, self-driving car, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, social graph, social web, special economic zone, Stephen Hawking, Steve Jobs, Steven Levy, Thomas L Friedman, transaction costs, two-sided market, ubercab, WikiLeaks, winner-take-all economy, zero-sum game

It cross-promoted its games on its IM platform—a user could launch the game directly from her IM screen rather than be directed to a separate site to play. It bundled its services effectively—its chat service could be used within a game, and a gamer could import her avatars. And it transferred the strength of its network effect in one product to others—with the click of a button, a user could import her social graph from QQ into a Tencent game in order to play with her friends. Tencent was doing something many companies that compete in winner-take-all markets struggle with: It successfully created connections across different products—IM, games, microblogs—where each relied on connecting users. In effect, it shifted its strength from just one network to a portfolio of connected networks. To monetize these advantages, Tencent turned again to price discrimination. Borrowing from a trend started by Korean game companies, it offered games free but charged for features that would enhance the playing experience.


pages: 918 words: 257,605

The Age of Surveillance Capitalism by Shoshana Zuboff

Amazon Web Services, Andrew Keen, augmented reality, autonomous vehicles, barriers to entry, Bartolomé de las Casas, Berlin Wall, bitcoin, blockchain, blue-collar work, book scanning, Broken windows theory, California gold rush, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, citizen journalism, cloud computing, collective bargaining, Computer Numeric Control, computer vision, connected car, corporate governance, corporate personhood, creative destruction, cryptocurrency, dogs of the Dow, don't be evil, Donald Trump, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, facts on the ground, Ford paid five dollars a day, future of work, game design, Google Earth, Google Glasses, Google X / Alphabet X, hive mind, impulse control, income inequality, Internet of things, invention of the printing press, invisible hand, Jean Tirole, job automation, Johann Wolfgang von Goethe, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, knowledge economy, linked data, longitudinal study, low skilled workers, Mark Zuckerberg, market bubble, means of production, multi-sided market, Naomi Klein, natural language processing, Network effects, new economy, Occupy movement, off grid, PageRank, Panopticon Jeremy Bentham, pattern recognition, Paul Buchheit, performance metric, Philip Mirowski, precision agriculture, price mechanism, profit maximization, profit motive, recommendation engine, refrigerator car, RFID, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Mercer, Second Machine Age, self-driving car, sentiment analysis, shareholder value, Shoshana Zuboff, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, slashdot, smart cities, Snapchat, social graph, social web, software as a service, speech recognition, statistical model, Steve Jobs, Steven Levy, structural adjustment programs, The Future of Employment, The Wealth of Nations by Adam Smith, Tim Cook: Apple, two-sided market, union organizing, Watson beat the top human players on Jeopardy!, winner-take-all economy, Wolfgang Streeck

Economic historians describe the dedication to lawlessness among the Gilded Age “robber barons” for whom Herbert Spencer’s social Darwinism played the same role that Hayek, Jensen, and even Ayn Rand play for today’s digital barons. In the same way that surveillance capitalists excuse their corporations’ unprecedented concentrations of information and wealth as the unavoidable result of “network effects” and “winner-take-all” markets, the Gilded Age industrialists cited Spencer’s specious, pseudoscientific “survival of the fittest” as proof of a divine plan intended to put society’s wealth in the hands of its most aggressively competitive individuals.29 The Gilded Age millionaires, like today’s surveillance capitalists, stood on the frontier of a vast discontinuity in the means of production with nothing but blank territory in which to invent a new industrial capitalism free from constraints on the use of labor, the nature of working conditions, the extent of environmental destruction, the sourcing of raw materials, or even the quality of their own products.