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Competition Demystified by Bruce C. Greenwald
additive manufacturing, airline deregulation, AltaVista, asset allocation, barriers to entry, business cycle, creative destruction, cross-subsidies, deindustrialization, discounted cash flows, diversified portfolio, Everything should be made as simple as possible, fault tolerance, intangible asset, John Nash: game theory, Nash equilibrium, Network effects, new economy, oil shock, packet switching, pets.com, price discrimination, price stability, selective serotonin reuptake inhibitor (SSRI), shareholder value, Silicon Valley, six sigma, Steve Jobs, transaction costs, yield management, zero-sum game
Still, the pursuit of operational effectiveness does not require consideration of all the external interactions that are the essence of real strategy. BARRIERS TO ENTRY AND COMPETITIVE ADVANTAGES The existence of barriers to entry means that incumbent firms are able to do what potential rivals cannot. Being able to do what rivals cannot is the definition of a competitive advantage. Thus, barriers to entry and incumbent competitive advantages are simply two ways of describing the same thing. Entrant competitive advantages, on the other hand, have no value. By definition, a successful entrant becomes the incumbent. It then is vulnerable to the next entrant, who benefits from newer technology, less expensive labor, or some other temporary competitive edge. And because there are no barriers to entry, the cycle doesn’t stop. So it is only in the presence of incumbent competitive advantages that strategy, in our sense of the term, comes to the fore.
In practice, a management that produces a lower rate of return can hang on for many years before the process runs its course, but in the long run—and “normal” implies the average return over a period of years—the company will succumb. BARRIERS TO ENTRY AND COMPETITIVE ADVANTAGES Barriers to entry lie at the heart of strategy. The first task in our simplified approach to strategic thinking is to understand what barriers are and how they arise. It is essential to distinguish between the particular skills and competences that a firm may possess and genuine barriers to entry, which are characteristics of the structural economics of a particular market. The skills and competencies of even the best-run companies are available to competitors, at least in theory. Systems can be replicated, talent hired away, managerial quality upgraded. All these are ultimately parts of the operational effectiveness of the company. Strategy, on the other hand, is concerned with structural barriers to entry. Identifying those barriers and understanding how they operate, how they can be created, and how they must be defended is at the core of strategic formulation.
It is so dominant that leaders seeking to develop and pursue winning strategies should begin by ignoring the others and focus only on it. That force is barriers to entry—the force that underlies Porter’s “Potential Entrants.” If there are barriers, then it is difficult for new firms to enter the market or for existing companies to expand, which is basically the same thing. Essentially there are only two possibilities. Either the existing firms within the market are protected by barriers to entry (or to expansion), or they are not. No other feature of the competitive landscape has as much influence on a company’s success as where it stands in regard to these barriers. If there are no barriers to entry, then many strategic concerns can be ignored. The company does not have to worry about interacting with identifiable competitors or about anticipating and influencing their behavior.
The Politics Industry: How Political Innovation Can Break Partisan Gridlock and Save Our Democracy by Katherine M. Gehl, Michael E. Porter
Affordable Care Act / Obamacare, barriers to entry, business cycle, capital controls, carbon footprint, collective bargaining, coronavirus, COVID-19, Covid-19, David Brooks, deindustrialization, disintermediation, Donald Trump, first-past-the-post, future of work, guest worker program, hiring and firing, illegal immigration, immigration reform, Joseph Schumpeter, Kickstarter, labor-force participation, Menlo Park, new economy, obamacare, pension reform, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Upton Sinclair, zero-sum game
They are the hired guns who pitch ideas to, and even draft bills and talking points for, increasingly overstretched and under-resourced congressional staffs.29 Lobbying has become a huge business in its own right, with reported federal lobbying spending (which significantly understates actual spending) of $3.15 billion in 2016.30 In 2014, when lobbying expenditures reached a recent peak, companies spent more money trying to influence public policy than Congress spent on itself.31 Numerous studies reveal that spending on lobbying often produces a high return on investment for the spender through its influence on legislation and its success in getting adjustments or exemptions in regulation.32 The clout of lobbyists looking out for their clients’ interests, and not for the public interest, distorts legislation and sometimes blurs the line between lobbying and corruption. Barriers to Entry and Substitutes: Colossal and Constrained Industries that fail to serve their customers well are ripe for new entrants that improve value for customers and shake up the market. The barriers to entry determine how easy or hard it is for a new competitor to enter the fray. In the politics industry, the founding of a new party would constitute a new entrant. Substitutes and new entrants are different ways of competing—think of Uber to taxis or Amazon to brick-and-mortar retailers. In the politics industry, substitutes could be independent candidates not affiliated with a party.33 The barriers to entry for new competitors in the politics industry are colossal—and they dramatically constrain substitutes as well. A sure sign of the high barriers to entry is the fact that no major new party has emerged since 1854, when antislavery members of the Whig Party split off and formed the Republican Party.
But party control over the election infrastructure made it almost impossible for nonparty competitors to break into the industry. Barriers to Entry Dismal political outcomes left many Americans grasping for alternatives. In response, new entrants were continuously trying to break in.34 In the 1870s and 1880s, the Greenback Labor Party emerged on the left. On the right, the Republican “Mugwumps” broke away from their party out of disgust with corruption. These anticorruption activists became a critical swing vote, credited with putting Democrat Grover Cleveland into the White House. In the 1890s, the Populist Party emerged, claiming to represent the interests of workers and farmers. While the Populists failed to establish a viable new party, they did create a base within the Democratic Party. Yet the barriers to entry for a new party were too great to overcome. Some barriers, like economies of scale, were natural.
., 99 Moss, David, 204n63 Mounk, Yascha, 196n10 MSNBC, 39 muckrakers, 109, 110 Mugwumps, 104 municipal elections Australian ballot in, 204n61, 206n74 ranked-choice voting in, 128, 212n54 Naismith, James, 44 National Basketball Association (NBA), 44 National Collegiate Athletic Association, 125 National Commission on Fiscal Responsibility and Reform, 87–88 National Conference on Practical Reform in Primary Elections, 111 national debt, 2, 69, 93, 132, 189n25 National Municipal League, 110 National Republican Senatorial Committee, 32 National Rifle Association, 26, 39 Nebraska Model Legislature Committee in, 163–164, 165 party-line votes in, 164, 214n72 term limits in, 215n74 top-two primaries in, 164, 213nn61, 62 unicameral legislature in, 175–176, 213n65, 213–214n66, 68 New Deal era, 139–140 new entrants barriers to entry and, 34 (see also barriers to entry) competition and, 34 Five Forces framework on, 20 healthy competition and, 21 politics industry and, 8, 21, 21, 34 newspapers as channel in politics industry, 28, 30 Gilded Age polarization of, 103–104 government subsidies to, 200n29 historical role in politics of, 28 Jefferson on value of, 30 party affiliations in campaigns reported in, 214n67 party backing of, 104, 109, 200n29 Progressive movement and, 109, 110 New York Times, 43, 134, 150–151, 152, 155, 158 NGP VAN, 32 Nineteenth Amendment, 206–207n76 Nonpartisan Direct Legislation League, 206n71 nonpartisan primaries, 121–122, 123, 150, 189n22 nonvoters, power of, as customers in politics industry, 27 Norris, George, 113, 163, 164, 213n60 North Carolina, election reform in, 209–210n6 Norton, John N., 213n62 Nunemaker, Andy, 157 Obama, Barack, 71, 74, 86, 87, 88, 128, 196–197n18, 197n21 O’Donnell, Christine, 47, 48 Office of Technology Assessment, 59, 162 omnibus bills, 69, 177, 195n2, 213n60 Open Primaries, 175 Oppenheimer, Bruce, 193n64 Orbán, Viktor, 82 Oregon state “primary” for senators in, 112–113, 207n78 U’ren’s state ballot reforms in, 206n71, 207n78 Organisation for Economic Co-operation and Development (OECD), 80–82, 81 Orman, Greg, 32, 52 “outsider” candidates, 36–37 Overacker, Louise, 205n66, 206n69 Page, Benjamin, 28 Paine, Thomas, 165 parties.
Team Geek by Brian W. Fitzpatrick, Ben Collins-Sussman
anti-pattern, barriers to entry, cognitive dissonance, Dean Kamen, en.wikipedia.org, fear of failure, Guido van Rossum, Paul Graham, publish or perish, Richard Stallman, Silicon Valley, Steve Jobs, web application
., the “Author Tags” Issue), It Really Is About the Code After All software engineers, The Genius Myth–Hiding Is Considered Harmful, Hiding Is Considered Harmful, Hiding Is Considered Harmful, Communication Patterns of Successful Cultures–The Mission Statement—No, Really, Communication Patterns of Successful Cultures, The Mission Statement—No, Really, Managing Your Relationship with Users communication patterns, Communication Patterns of Successful Cultures–The Mission Statement—No, Really, Communication Patterns of Successful Cultures, The Mission Statement—No, Really genius myth and, The Genius Myth–Hiding Is Considered Harmful, Hiding Is Considered Harmful offices and, Hiding Is Considered Harmful user relationships and, Managing Your Relationship with Users software usability, Choose Your Audience–Consider Barrier to Entry, Choose Your Audience, Consider Barrier to Entry–Measure Usage, Not Users, Consider Barrier to Entry, Consider Barrier to Entry, Measure Usage, Not Users, Measure Usage, Not Users, Speed Matters–Speed Matters, Speed Matters, Hide Complexity–Managing Your Relationship with Users, Hide Complexity, Managing Your Relationship with Users barrier to entry considerations, Consider Barrier to Entry–Measure Usage, Not Users, Consider Barrier to Entry, Measure Usage, Not Users choosing audience, Choose Your Audience–Consider Barrier to Entry, Choose Your Audience, Consider Barrier to Entry hiding complexity, Hide Complexity–Managing Your Relationship with Users, Hide Complexity, Managing Your Relationship with Users measuring usage, Measure Usage, Not Users speed considerations, Speed Matters–Speed Matters, Speed Matters Speed is a feature saying, Speed Matters Stallman, Richard, The Genius Myth standing meetings, Efficient Meetings Star Trek episode, Don’t Feed the Energy Creature starter culture, What Is Culture?
issue tracking and, Using an Issue Tracker people, Track Happiness poisonous people and, Defining “Poisonous”–Identifying the Threat, Identifying the Threat risk taking in, Be a Catalyst software development and, Culture and People, Culture and People, Culture and People, Communication as Part of Engineering tracking happiness in, Track Happiness–Other Tips and Tricks, Track Happiness, Track Happiness, Other Tips and Tricks teamwork, Hiding Is Considered Harmful, It’s All About the Team–The Three Pillars, It’s All About the Team, The Three Pillars, Antipattern: Ignore Low Performers, Antipattern: Ignore Low Performers bus factor, Hiding Is Considered Harmful low performers and, Antipattern: Ignore Low Performers, Antipattern: Ignore Low Performers software development and, It’s All About the Team–The Three Pillars, It’s All About the Team, The Three Pillars tech lead (TL), “Leader” Is the New “Manager” tech lead manager (TLM), “Leader” Is the New “Manager” techie-celebrity, The Genius Myth technical debt, Learn to Manage Upward testing processes, Have Real Test and Release Processes, Fortifying Your Team text editors, Consider Barrier to Entry–Measure Usage, Not Users, Measure Usage, Not Users Thompson, Ken, The Genius Myth Three Bullets and a Call to Action technique, How to Ask a Busy Executive for Anything … via Email TL (tech lead), “Leader” Is the New “Manager” TLM (tech lead manager), “Leader” Is the New “Manager” Tolstoy, Leo, The Reality: When Your Environment Is an Obstacle to Your Success Torvalds, Linus, The Genius Myth train stopping metaphor, Be Honest TripIt web service, Consider Barrier to Entry trolls, Identifying the Threat, Repel Trolls with Niceness trust (HRT principle), “Leader” Is the New “Manager”, The Office Politician–The Bad Organization, The Office Politician, The Bad Organization, Create Trust and Delight creating for customers, Create Trust and Delight leaders and, “Leader” Is the New “Manager” office politician and, The Office Politician–The Bad Organization, The Office Politician, The Bad Organization Tukey, John, Lose the Ego U usage measurements, Measure Usage, Not Users user interfaces, Choose Your Audience, Consider Barrier to Entry user relationships, How Usable Is Your Software?–Managing Your Relationship with Users, Choose Your Audience, Consider Barrier to Entry, Don’t Be All Things, Don’t Be Lazy, Hide Complexity, Managing Your Relationship with Users–Remember the Users, Managing Your Relationship with Users, Managing Your Relationship with Users, Remember the Users managing, Managing Your Relationship with Users–Remember the Users, Managing Your Relationship with Users, Remember the Users software usability, How Usable Is Your Software?–Managing Your Relationship with Users, Choose Your Audience, Consider Barrier to Entry, Don’t Be All Things, Don’t Be Lazy, Hide Complexity, Managing Your Relationship with Users V version control systems, Choose Your Audience video chats, Working in a “Geographically Challenged” Team Vinter, Steve, The Servant Leader vocal interrupt protocol, Hiding Is Considered Harmful vulnerability, Be Open to Influence, What Is Culture?
If your product is a web application, make sure it loads quickly! We’ve become spoiled about web page speed. When told to check out a new website, if it doesn’t load within three or four seconds, Fitz usually aborts and loses interest. There’s simply no excuse here. When programmers make users wait in line at the entrance, that’s an irritating barrier to entry. The web browser makes it easy to walk away and redirect our attention to 12 other places. We have better things to do than wait for a page to load. A great example of a nearly invisible barrier to entry is the TripIt web service, which is designed to manage travel itineraries. To start using the service simply forward your existing travel-confirmation emails (airplane, hotel, rental car, etc.) to email@example.com. Poof, you’re now using TripIt. The service creates a temporary account for you, parses your emails, creates a gorgeous itinerary page, and then sends an email to tell you it’s ready.
Value Investing: From Graham to Buffett and Beyond by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, Michael van Biema
Andrei Shleifer, barriers to entry, Berlin Wall, business cycle, capital asset pricing model, corporate raider, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, Eugene Fama: efficient market hypothesis, fixed income, index fund, intangible asset, Long Term Capital Management, naked short selling, new economy, place-making, price mechanism, quantitative trading / quantitative ﬁnance, Richard Thaler, shareholder value, short selling, Silicon Valley, stocks for the long run, Telecommunications Act of 1996, time value of money, tulip mania, Y2K, zero-sum game
But we are justified in paying no attention to it because in evaluating companies operating on a level playing field, with no competitive advantages or barriers to entry, growth has no value. The return these companies earn on the capital invested in them just equals the cost of acquiring that capital, and there is nothing left over for the previous investors. Thus, the EPV that equals the asset value defines the intrinsic value of the company, regardless of its growth rate in the future. In the third situation, if the EPV, properly calculated, is significantly higher than the reproduction costs of the assets, then we are looking at an industry setting in which there must be strong barriers to entry. Firms within the barriers will earn more on their assets than will firms exposed to the humbling experience of seeing new entrants join the party with no handicap for arriving late. For the EPV to hold up, the barriers to entry must be sustainable at the current level for the indefinite future.
In the language of modern management theory, Top Toaster must enjoy a competitive advantage over would-be rivals. The newcomer will stay out of the market if it sees that it cannot compete on equal terms. Top Toaster's competitive advantage acts as a barrier to entry and puts a brake on the profit-eroding process that occurs when entrants are able to compete on potentially equal terms. Another way to say the same thing is that the continued existence of Top Toaster's profitable franchise depends on the existence of the competitive advantages it enjoys; these act as barriers to entry and deter competitors. These three concepts-franchises, barriers to entry, and incumbent competitive advantages-amount to the same thing. They are the major sources, in a modern market economy, of any value that exceeds the cost of reproducing a firm's assets. Contrary to popular management discourse, there are only a few types of competitive advantages, and examples of sustained competitive advantages in the business world are uncommon.
The answer looks familiar. If a firm operates in an industry without competitive advantages, where there are no barriers to entry, returns above the cost of capital will attract new entrants whose competition will eliminate those higher rates of return. As we discussed in Chapter 5, without barriers to entry, sooner or later competition will force the rate of return downward until it equals the cost of capital. Since the most common competitive condition is a level playing field, for most firms return on capital will equal the cost of capital, and there will be no value created by growth. For these firms, growth adds zero to the current EPV. For firms that are on the wrong side of barriers to entry, outside and looking in, the cost of capital exceeds the return on capital, and growth destroys value. Only in markets where a company enjoys a sustainable competitive advantage, protected within its franchise by barriers to entry, will returns on capital be greater than the cost of capital.
The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim
additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business cycle, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disintermediation, disruptive innovation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, liberation theology, Martin Wolf, mega-rich, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, plutocrats, Plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game
At the theoretical level, finding a precise definition of barriers to entry has led to considerable hair-splitting among economists. One approach defines barriers to entry as factors that enable firms that are already in the market to command prices that are higher than unfettered competition would produce, yet without inducing new competitors to enter. Another approach identifies barriers to entry as any costs that a new competitor faces prior to entering the market, yet that firms already in the market do not face. In other words, the distinction is between a protected price advantage for firms already in the market and a supplementary cost, such as an entry fee, for would-be competitors. Other economists have more complex definitions still, but nothing in these debates takes away from the core insight that barriers to entry are essential to understanding the dynamics of a marketplace and the use of market power to maximize long-term profits.
Rather, the extent of market power and, with it, the stability of an industry’s structure and the advantage of shelter that its dominant firms enjoy are best gauged by looking at the presence and effectiveness of barriers to entry. And when we do this, a salient trend quickly becomes clear: across the board, the traditional barriers to entry that shaped industry structure for the better part of the twentieth century have grown porous or fallen altogether. Axioms of corporate organization have been overturned. As a result, market power is no longer what it used to be. The antidote to business insecurity and instability is losing its effectiveness. And the advantage long considered to be built into corporate scale, scope, and hierarchy has been blunted, or even transformed into a handicap. BARRIERS ARE DOWN, COMPETITION IS UP The classic barriers to entry in business are well known. Size, for example, prevents smaller companies from taking on larger ones.
From the Chess Board . . . to Everything Around Us What Changed? The Decay of Power: Is It New? Is It True? So What? But What Is Power? The Decay of Power: What’s at Stake? CHAPTER TWO MAKING SENSE OF POWER: HOW IT WORKS AND HOW TO KEEP IT How to Talk About Power How Power Works Why Power Shifts—or Stays Steady The Importance of Barriers to Power The Blueprint: Explaining Market Power Barriers to Entry: A Key to Market Power From Barriers to Entry to Barriers to Power CHAPTER THREE HOW POWER GOT BIG: AN ASSUMPTION’S UNQUESTIONED RISE Max Weber, or Why Size Made Sense How the World Went Weberian The Myth of the Power Elite? CHAPTER FOUR HOW POWER LOST ITS EDGE: THE MORE, MOBILITY, AND MENTALITY REVOLUTIONS So What Has Changed? The More Revolution: Overwhelming the Means of Control The Mobility Revolution: The End of Captive Audiences The Mentality Revolution: Taking Nothing for Granted Anymore How Does It Work?
Quality Investing: Owning the Best Companies for the Long Term by Torkell T. Eide, Lawrence A. Cunningham, Patrick Hargreaves
air freight, Albert Einstein, backtesting, barriers to entry, buy and hold, cashless society, cloud computing, commoditize, Credit Default Swap, discounted cash flows, discovery of penicillin, endowment effect, global pandemic, haute couture, hindsight bias, low cost airline, mass affluent, Network effects, oil shale / tar sands, pattern recognition, shareholder value, smart grid, sovereign wealth fund, supply-chain management
On top of that, we look for oligopolies where the industry structure has been relatively stable over time and where the logic persists for that stability being maintained. Finally, we tend to prefer the leading players in oligopolistic markets – especially in industries where competitive advantages in areas such as R&D and A&P are enhanced by market leadership. Barriers to entry and rationality Some industries or products are more likely to come under competitive attack than others. If an industry has many new players popping up all the time, beware: barriers to entry are low. However, industries with low barriers to entry may still have high barriers to success and scale – just look at the restaurant industry. Still, a regular flow of new small entrants can destroy economics. By the law of large numbers, the sheer frequency of new entrants can eventually lead to one of them becoming successful and disruptive.
Underlining this point, in 2014 Diageo released 160 bottles of Brora 40 Year Old, its most expensive single malt to date. The retail price? More than $10,000 per bottle. This time requirement acts as a powerful barrier to entry. A new entrant wishing to sell aged whiskies must tie up huge amounts of capital before generating a dollar of revenue. And the necessity of intricate forethought to lay down inventory so far ahead of demand means supply is often constrained for older, more profitable Scotch. Consequently, Diageo’s market share in all premium Scotch is approaching 50%. The combination of heritage, strong brand positioning and high barriers to entry confers impressive pricing power on Diageo’s Scotch products. In recent years, Diageo has delivered a 6% compound annual growth in revenues per case of Scotch. Diageo is the world leader in premium spirits, with market shares averaging around 30%.
Sustaining high returns on incremental organic capex in this way yields significant compound growth, making it our preferred use of capital where the right investment opportunities exist. Investment in R&D and advertising and promotion (A&P) Today’s impressive sales of Dove soap, made by Unilever, result largely from decades of historical marketing spending to build the brand. By creating brand awareness, Unilever invested, in effect, in the consumer’s consciousness. It bought a mental barrier to entry, as rivals would need to spend substantial sums to replace the brand in the minds of consumers. While ongoing brand advertising is needed to sustain awareness – an outlay best seen as equivalent to maintenance capital expenditures – a large portion is aimed at influencing new generations of consumers. This is more comparable to growth capex. In many industries, spending on advertising is an important launch pad for a company’s competitive advantage and future growth.
The Gig Economy: A Critical Introduction by Jamie Woodcock, Mark Graham
Airbnb, Amazon Mechanical Turk, autonomous vehicles, barriers to entry, British Empire, business process, business process outsourcing, call centre, collective bargaining, commoditize, corporate social responsibility, crowdsourcing, David Graeber, deindustrialization, disintermediation, en.wikipedia.org, full employment, future of work, gender pay gap, gig economy, global value chain, informal economy, information asymmetry, inventory management, Jaron Lanier, Jeff Bezos, job automation, knowledge economy, Lyft, mass immigration, means of production, Network effects, new economy, Panopticon Jeremy Bentham, planetary scale, precariat, rent-seeking, RFID, ride hailing / ride sharing, Ronald Reagan, self-driving car, sentiment analysis, sharing economy, Silicon Valley, Silicon Valley ideology, TaskRabbit, The Future of Employment, transaction costs, Travis Kalanick, two-sided market, Uber and Lyft, Uber for X, uber lyft, union organizing, women in the workforce, working poor, young professional
Often workers will not be aware of the role they are playing, as the tasks are fractured and stripped of their meaning. Barriers to entry for workers Many platforms operate with limited barriers to entry for workers, in part because of the relatively low levels of formal training needed for workers to engage in the job. What this means is that platforms can quickly scale up their workforces if needed. Taxi and delivery platforms also have relatively low entry requirements for incoming workers. Workers on many of those platforms need to be able to drive and not have any major criminal convictions, but they do need access to a vehicle. Although cleaning and care work tends to require a high level of ability and skill, its manifestation as platform work is likewise characterized by relatively low barriers to entry. Online freelancing can incorporate a diverse range of job types: ranging from jobs characterized by relatively low to extremely high complexity.
Bezos’ letters 87–8, 106 Turkopticon 106–7, 123, 133 Anderson, B. 80 Antunes, Ricardo 36 application programming interfaces (API) 58 apps 5, 51, 52, 133, 138 artificial intelligence 50, 58, 60, 66 Aslam, Yaseen 76 assembly line 24, 94, 117 Australia 127 Australian Independent Contractors Act 128 automation 66–7 Avendano, Pablo 73 B Badger, Adam 86–7 Bangalore (India) 98–9, 102 Barbrook, R. 37 Barry, J. 49 Beck, Ulrich 17 Bent, P. 13, 16 Berg, J. 55 Besant, Annie 14 Bezos, Jeff 87 Bolt 77 Bourdieu, Pierre 17 ‘BrainWorkers’ 33 Braverman, Harry 111 Bryant and May match factory 14 C Californian Ideology 37 call centres 24, 31 outsourcing of 37, 54 Callinicos, Brent 49 Cameron, A. 37 Cant, Callum 40, 96 capitalism cognitive 37 gendered basis of 29 car industry 110 care work 64, 66, 79–83 low barriers to entry 67 and repeat transactions 68 Care.com 80, 80–1 casualization 5, 15 Caviar 73 ‘ChainWorkers’ 33 Cheung, Adora 103 China worker resistance and strikes 100 Christie, N. 73 cleaning work 5–6, 64 low barriers to entry 67 migrant workers 30 cloudworker platforms 6, 43, 53–61, 63, 64, 69, 93 atomization of 92 availability of 56 location of 55, 57 removal of barriers to entry for 69 and resistance 104–8 setting rates of pay 65 and spatial control 63 temporal control 64 cognitive capitalism 37 collaborations 123, 132, 136 collective bargaining 30, 34, 37, 49, 80, 130, 134, 135–6, 143 collective organization 100, 134 commercial content moderation (CCM) 61 computerization 66 consumer attitudes/preferences 27 contingent work 19 Convention on Platform Work, Draft 130, 146–51 cooperatives, platform 138–9 Countouris, N. 129 Craigslist 22 crowdsourcing 58 crowdworkers 55, 90 see also microwork; online freelancing D Dalla Costa, Mariarosa 29 Darcy, Alison 60 data collection 65–6 De Stefano, V. 129 deindustrialization 36, 84 Deliveroo 2, 6, 23, 32, 40, 71–4, 115, 127 experience of working for 7–8, 31, 71, 72–4 self-organization for workers 95 strike action 95–6, 97 delivery work(ers)/platforms 5, 27, 62, 63, 68 and automation 67 and collective organization 134 experiences of workers 71–5 low entry requirements 67 see also Deliveroo democratic ownership 136–40, 141 Denmark 3F trade union 134–5 Desai, Bhairavi 79 developing countries internet penetration rate 25 Didi Chuxing 22, 102 digital divides 25 digital legibility 23–5, 65–7 digital platforms 1, 2, 3, 4, 54–5 Directive on Transparent and Predictable Working Condition in the European Union 129 dock work(ers) 13–14, 15, 38 strike (1889) 15 domestic work(ers) 29–30, 62, 63, 66, 79–83 as central component of capitalism 29 factors determining working conditions 80 numbers 80 positive and negative outcomes for 81 and repeat transactions 68 in South Africa 81–3 Doogan, Kevin 18 E economic crisis (late 1970s) 33 Elance 22 entertainment industries 135 Eurobarometer 40 European Commission 35 Expensify 60 F Facebook 45, 60, 121, 123, 133 factories/factory work 15–16, 94 measuring of factory labour process by Taylor 23–4 Fair Crowd Work website 123 Fairwork Foundation project 121–2, 130, 146–51 Farrar, James 75, 75–6, 77–8, 101 feedback 52, 80, 92, 93 financial crisis (2008) 35 Fiverr 20, 23 flexibility, desire for by workers 4–5, 30–3, 71, 115 flexicurity 35 Flipkart 22 Foodora 127 Fordism 117 fragmented work 5, 40, 114 Freelancer 6, 54, 64, 89 freelancing, online see online freelancing Frey, C.B. 66 G gamification 86 gender and capitalism 29 and relationships of work 28–30 geographically tethered work/platforms 5–6, 7, 34, 50–2, 63 control over workforce 68 forms of resistance in 94–104 setting rates of pay 65 temporal control 64–5 Ghana 8, 64, 92 gig economy advantages 4–5 characteristics 114–15 controversy over classification of people involved 43–4 existence due to digital transformation 114 factors facilitating growth of 19, 114 five principles for ‘fair work’ in 122 future 112–45 governance in 62 meaning of 3–7 numbers working in 1–2 operation of 41–69 origins 11–40 pitfalls 5, 116 preconditions that shape the 19–28 rise of 38–40 ways to bring about change 142–4 gig economy workers barriers to entry for 67–8 communicating with each other 132–4 de-personalization of 118, 120 desire for flexibility 4–5, 31–3, 71, 115 experiences of 70–92 invisibility of 6, 80 lack of collective voice 6, 77 lack of effective regulation for 128–9 misclassified as self-employed 44 numbers 39–40 securing protection through courts 127 working conditions 6, 9 gigs, musical 3 Global North 12, 13, 32, 46 and cloudworkers 55 and microwork 84 and outsourcing 44 size of gig economy 39 Global South 32, 46 internet penetration rate 25 size of gig economy 39 women and online freelancing 90 globalization 19, 37–8 Goodwin, Tom 45, 121 Graeber, David 31 Guru.com 22 H Handy 80 Harvey, David 33, 53 Heeks, Richard 39 Herman, S. 39 Hilfr.dk 134–5 Homejoy 68, 103–4 Howe, J. 58 human intelligence tasks (HITs) 60 Humphries, S. 13–14 Hunt, A. 28, 81, 82 Huws, U. 39–40 I IAEA (International Arts and Entertainment Alliance) 135 Iles, Anthony 32 ILO (International Labour Organization) 16–17, 129 Declaration of Philadelphia (1944) 142 Independent Workers Union of Great Britain see IWGB India delivery drivers 74 strikes by Uber drivers 102 Industrial Workers of the Word see IWW industrialization 16 interface 45 International Arts and Entertainment Alliance see IAEA International Labour Organization see ILO Internet access and penetration rate 25 Irani, Lilly 106 IWGB (Independent Workers Union of Great Britain) 73, 97, 101, 109, 127, 134 IWW (Industrial Workers of the World) 97, 101 J James, Selma 29, 81 job insecurity, growth in 18–19 K Kalanick, Travis 23, 48, 49 Kalleberg, A.L. 18 Kenya Ajira Digital programme 35 Kessler, Sarah 11 L labour law 114, 117, 126, 128, 129 Lagos (Nigeria) 89, 124 Lanier, Jaron 58 LaPlante, Rochelle 60 lean platforms 35, 45 legibility, digital 23–5, 65–7 Li, Qi 100 Limer, Eric 85–6 Living Wage Foundation 122 London taxi arrangement 47 long-term unemployment 18 low-paid work, increase in 35, 139 M Machingura, F. 81, 82 McKinsey 1–2, 39 McKinsey Global Institute 66 Manila (Philippines) 89, 90 Maputo (Mozambique) 26–7 Marsh, Greg 129 Marx, Karl 11–12, 22, 72, 121 Mason, Paul 35 mass connectivity 25–7 Massey, Doreen 63 Matchwoman strike 14 Mateescu, A. 79, 80, 81 Messina, Jim 48–9 microwork 6, 55, 58–61, 62, 83–9, 104 and automation 66–7 experiences of workers 83–9 feelings of alienation 88 numbers engaged in 83–4 wages 84–5 see also Amazon Mechanical Turk 59 migrant workers 30, 80, 90 migration status 30 Mitropoulos, Angela 17, 32 mobile phones 25–6 Mondragon Corporation 138–9 Moody, Kim 40, 111 Moyer-Lee, Jason 98 N Nedelkoska, L. 66 neoliberalism 18, 33–5, 52 characteristics of 34 New York Uber 78–9 NHS (National Health Service) 5 Novogratz, Mike 49–50 O O’Connor vs Uber Technologies Inc. (2015) 124, 126 Ojanperä, Sanna 55 Ola 102 online freelancing 6, 7, 8–9, 43, 55, 62, 141 barriers to entry for workers 67 barriers to organizing 104 experiences of workers 89–92 and feedback 93 reasons for doing 89–90 support forums 104–5 wages 90, 91 and worker resistance 104–5 Osborne, M.A. 66 outcome thinking 118, 124 outsourcing 19, 37–8, 39, 44–5, 51, 54 microwork as extension of 58 P Pandor, Aisha 83 Pasha, Tanveer 102 pay rates, setting of 65 Peck, Jamie 33, 35 Peterloo Massacre (1819) 108 Platform Cooperative Consortium 138 platforms/platform work 2, 4 ability to set pay rates 65 and accountability 125–30 barriers to entry for workers 67–8 as a civic utility 139–40 cloudwork see cloudwork connecting workers and clients 20–1, 22–3, 43, 138 cooperatives 138–9 core functions 23 degree of explicit coordination 68–9 democratic ownership of 136–40, 141 digital legibility 23–5, 65–7 Draft Convention on Platform Work 130, 146–51 early 22 geographically tethered model see geographically tethered model infrastructure 20–3 intermediate function 42–3 lean 35, 45 meaning and operation of 42–6 microwork see microwork negotiation-based matching 22–3 reliance on network effects 45 repeat transactions 68 setting up of ‘counter’ 123 spatial control 62, 63–4 spatiality and temporality of 42–3 spending money on public relations and advertising 28 static-price matching 23 temporal control 64–5 understanding how they work 61–9 Plouffe, David 49 Pollman, E. 49 precariat 18 precarious work(ers) 13–19, 32–3, 38 definition 16–17 two kinds of 33 profitability, crisis of 35, 36, 42 public sector and gig economy 17 and outsourcing 44 Q Quintini, G. 66 R racialization of work 30 racism 30 ratings strategy and transparency 122–3 Ravenelle, Alexandrea 37, 70 Raw, Louise 14 Reagan, Ronald 34 reddit 123 regulation 144 lack of for gig economy workers 128–9 labour law 19, 114, 117, 126, 128 state 19, 33–6 regulatory entrepreneurship 49 repeat transactions and platforms 68 resistance see worker resistance Roberts, Sarah 61 S SAG-AFTRA 135 Samman, E. 28 Schifter, Doug 79 Scholz, Trebor 48, 49, 138, 139 Schor, Juliet 103 Screen Actors Guild (SAG) 135 Second World War 110 self-employment 32, 43–4, 96, 98, 108 Semuels, Alana 84 service industries, growth of 34 Seymour, Richard 18–19 sharing economy 11 Shekhawat, Dushyant 74 ‘shock doctrine’ 34 short term contracts 4 Silberman, Six 106 slavery 30 Slee, Tom 50, 78 soldiering 23 South Africa domestic workers in 81–3 Uber 76, 127–8 worker resistance 99–100 South African Domestic Services and Allied Workers Union (SADSAWU) 82–3 South African Labour Relations Act 128 South Korea 35 South London Gas Workers strike (1889) 14–15 Spain 127 spatial control and platforms 62, 63–4 Srnicek, Nick 4, 42, 45 standard employment relationship 5, 12–13, 16, 18, 32, 33–4 Standing, Guy 17–18, 27 state regulation 19, 33–6 strikes 14–15, 94, 95–6, 99–100, 109, 142–3 preconditions for starting 109 surveillance 24 of delivery drivers 74 Upwork workers’ resistance to 105 Susskind, R. 118 SweepSouth 80, 81–3 Switzerland Notime 102 T TaskRabbit 103 taxi industry 51–2 taxi work(ers) 75–9, 134 and collective organization 134 see also Uber Taylor, Bill 100 Taylor, Frederick 23–4 Taylor, Matthew 129 Taylor Review of Modern Working Practices, The 129 technological changes 19, 21 temporal control and platforms 64–5 temporary work(ers) 3, 17 Thatcher, Margaret 34 Thompson, S. 34 Ticona, J. 79, 80, 81 Tillett, Ben 14 tipping 75 Tolpuddle Martyrs 108–9 trade unions 6, 18, 34, 36, 92–3, 97, 108–9, 134, 135, 143–4 decline of 36, 37 and dock workers 15 early 108–9 and gig economy workers 109–10, 136 and IWGB 97 rise in membership 15 textile 108 Transnational Federation of Couriers 97 transparency 118–24, 141 establishment of ‘counter platforms’ 123 ratings strategy 122–3 Transport for London 28 Turkopticon 106–7, 123, 133 U Uber 2, 4, 20, 23, 25, 32, 44, 45, 46–50, 52, 61, 73–9, 94–5, 108, 115, 121, 124, 139 business model 48 Change.org petition 28 data collection 50, 65–6 drivers’ wages 49–50, 77–8 engagement with regulation and transport policy 48 funding 47–8 and ‘greyballing’ 49 in New York 78–9 O’Connor vs Uber Technologies Inc. (2015) 124, 126 power passengers hold over drivers 75–6 public relations and lobbying campaigns 48–9 rating system 75 safety issues and rising petrol prices for drivers in South Africa 76–7 and self-driving vehicles 50 and tipping 75 Uber International Holding(s) BV 128 Uber Technologies SA 127 UberX 47 worker resistance and strikes 100–2 unfair dismissal 44, 134 United Kingdom employment regulation issues 129 neoliberalism 34 and outsourcing 44–5 worker resistance and strikes 100–1 United Private Hire Drivers (UPHD) 75 United States neoliberalism 34 Uber 47–9 UPHD (United Private Hire Drivers) 76, 101 UpWork 6, 8, 43, 54, 64, 121 resistance of surveillance methods by workers 105 Upwork.com 89, 91 US Chamber of Commerce 108 V van Doorn, Niels 42 Vandaele, Kurt 95, 97 venture capital 36 visibility 136 vWorker 22 W wages microworkers 84–5 online freelancing 90, 91 setting of pay rates 65 Uber drivers 49–50, 77–8 Ward, H. 73 Webster, G.E. 16 Weightman, G.E. 13–14 WhatsApp 95, 99, 123, 132, 133 Williams, Eric 30 women and domestic work 29–30 and online freelancing in the Global South 90 Wood, Alex 95, 104–5, 107 work, transformation of 12–13 worker power 19, 36–7, 130–6, 141 worker resistance 93–111, 113–14 and cloudworkers 104–8 and communication 107 food platform strikes 95–7 formation of networks and meetings 95, 98–9 geographically tethered work 94–104 history of 94 legal battles over employment status 98 and online freelancing 104–5 and self-employment status 98 strikes 14–15, 94, 95–6, 99, 100–1 taking of work off-platform 103 and trade unions 97, 107–11 Uber 101–2 and WhatsApp groups 98, 99, 132 workers’ rights 34, 44, 98, 101, 130, 135, 139, 140, 144 Y YouTube 60 Z Zomato 98–9 POLITY END USER LICENSE AGREEMENT Go to www.politybooks.com/eula to access Polity’s ebook EULA.
For instance, there will undoubtedly be cases of geographically-tethered self-employment with high barriers to entry, or online markets with low abilities of workers to set pay rates. However, we would argue that this broad model applies to the majority of work types within each category. As the geographer Doreen Massey (1984: 8) has argued, organizationally and spatially separating work transformed ‘relations between activities in different places, new spatial patterns of social organization, new dimensions of inequality and new relations of domination and dependence’. In order to make sense of this in the gig economy, we have distinguished between the different kinds of platforms and their relative spatial control, temporal control, ability of workers to set pay rates, task discretion, digital legibility, barriers to entry, complexity of labour process, and the degree of explicit coordination and power asymmetry.
The Myth of Capitalism: Monopolies and the Death of Competition by Jonathan Tepper
Affordable Care Act / Obamacare, air freight, Airbnb, airline deregulation, bank run, barriers to entry, Berlin Wall, Bernie Sanders, big-box store, Bob Noyce, business cycle, Capital in the Twenty-First Century by Thomas Piketty, citizen journalism, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, computer age, corporate raider, creative destruction, Credit Default Swap, crony capitalism, diversification, don't be evil, Donald Trump, Double Irish / Dutch Sandwich, Edward Snowden, Elon Musk, en.wikipedia.org, eurozone crisis, Fall of the Berlin Wall, family office, financial innovation, full employment, German hyperinflation, gig economy, Gini coefficient, Goldman Sachs: Vampire Squid, Google bus, Google Chrome, Gordon Gekko, income inequality, index fund, Innovator's Dilemma, intangible asset, invisible hand, Jeff Bezos, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Rogoff, late capitalism, London Interbank Offered Rate, low skilled workers, Mark Zuckerberg, Martin Wolf, means of production, merger arbitrage, Metcalfe's law, multi-sided market, mutually assured destruction, Nash equilibrium, Network effects, new economy, Northern Rock, offshore financial centre, passive investing, patent troll, Peter Thiel, plutocrats, Plutocrats, prediction markets, prisoner's dilemma, race to the bottom, rent-seeking, road to serfdom, Robert Bork, Ronald Reagan, Sam Peltzman, secular stagnation, shareholder value, Silicon Valley, Skype, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, The Chicago School, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, undersea cable, Vanguard fund, very high income, wikimedia commons, William Shockley: the traitorous eight, zero-sum game
The Dodd–Frank Act has been called the 2010 Full Employment Act for Lawyers, Accountants, and Consultants.55 For large banks that already had armies of compliance workers, the act was burdensome, but not lethal. For small banks, the Act was an insurmountable barrier to entry. Jamie Dimon, the CEO of JP Morgan, has said that Dodd–Frank creates a “moat” around the big banks.56 In 2015 at an investor conference, Lloyd Blankfein, then CEO of Goldman Sachs, explained how higher regulatory costs are killing competition. “More intense regulatory and technology requirements have raised the barriers to entry higher than at any other time in modern history,” said Mr. Blankfein. “This is an expensive business to be in, if you don't have the market share in scale.”57 Big banks have never had it so good. The CEOs of the big banks are laughing.
As the economist Milton Friedman wrote, a monopoly is any concentration of power by a firm that “has sufficient control over a particular product or service to determine significantly the terms on which other individuals shall have access to it.” Today, oligopolies are monopolies under that definition. Oligopolies often act like monopolies. While collusion and cartels between different players are illegal, tacit collusion is normal and rational. The investment firm Marathon Asset Management noted this in their wonderful book Capital Returns, “A basic industry with few players, rational management, barriers to entry, a lack of exit barriers and noncomplex rules of engagement is the perfect setting for companies to engage in cooperative behavior… . and it is for this reason that the really juicy investment returns are to be found in industries which are evolving to this state.”19 It doesn't matter how you look at it, competition is dying in the United States. The collapse in competition is happening across most of the economy.
Among Porter's Five Forces are the threat of established rivals and the threat of new entrants. For a Five Forces–trained MBA, the worst industry you can find yourself in is one where your competitors are strong and anyone can enter the industry and compete. If a CEO can find ways to keep out rivals, they are trained to do so. That is why mergers are so typical to eliminate established rivals. It is also why companies will do all they can to erect regulatory and legal barriers to entry in their industries. This is the MBA gospel. Over the past few decades, MBAs have also learned to specialize and dominate markets. Jack Welch taught managers at General Electric that they should not be third- or four-place players in industries. Only first or second place would do. Since the cult of Welch and GE has taken over, managers have sold smaller competitors to the biggest rivals, and the top firms have gobbled up any small competitor.
The Great Reversal: How America Gave Up on Free Markets by Thomas Philippon
airline deregulation, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, barriers to entry, bitcoin, blockchain, business cycle, business process, buy and hold, Carmen Reinhart, carried interest, central bank independence, commoditize, crack epidemic, cross-subsidies, disruptive innovation, Donald Trump, Erik Brynjolfsson, eurozone crisis, financial deregulation, financial innovation, financial intermediation, gig economy, income inequality, income per capita, index fund, intangible asset, inventory management, Jean Tirole, Jeff Bezos, Kenneth Rogoff, labor-force participation, law of one price, liquidity trap, low cost airline, manufacturing employment, Mark Zuckerberg, market bubble, minimum wage unemployment, money market fund, moral hazard, natural language processing, Network effects, new economy, offshore financial centre, Pareto efficiency, patent troll, Paul Samuelson, price discrimination, profit maximization, purchasing power parity, QWERTY keyboard, rent-seeking, ride hailing / ride sharing, risk-adjusted returns, Robert Bork, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, Snapchat, spinning jenny, statistical model, Steve Jobs, supply-chain management, Telecommunications Act of 1996, The Chicago School, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, Travis Kalanick, Vilfredo Pareto, zero-sum game
Third, and contrary to common wisdom, the main explanation is political, not technological: I have traced the decrease in competition to increasing barriers to entry and weak antitrust enforcement, sustained by heavy lobbying and campaign contributions. I have also tried to give you, the reader, an understanding of how economists think about free markets, regulation, and political economy. I have shown you some of the tools that we use to analyze economic developments. You understand the fundamental law of investment, the dynamics of entry, merger reviews, and the impact of wealth on the price of domestic goods and services (remember, haircuts versus Ferraris). Let’s use these tools to think about a few controversial industries: finance, health care, and the internet giants. In all these cases, we will see the same economic forces at play: lack of competition, barriers to entry, and lobbying. But the details vary, and this is what makes these industries interesting.
This expansion of licensing requirements across occupations explains two-thirds of the growth. Licensing is always “officially” motivated by concerns for health, safety, and consumer protection. And sometimes it is legitimate. Often, however, it is the perfect way for incumbents to protect their rents. Indeed, they actively lobby for the extension of licensing requirements because they understand that these are efficient barriers to entry. We have seen earlier that Europe has reduced barriers to entry in many industries. Some of that decrease was driven by a rollback of unnecessary licensing. There is still much illegitimate licensing in Europe, but at least the trend is in the right direction. Over the same period, however, the US has increased its licensing. Inequality: The Rise of the Club Economy There has been a large increase in inequality in the US economy, and there are many ways to account for it.
I have seen and discussed many papers showing that competition is good for growth (Buccirossi et al., 2013). I have not seen a paper that convincingly shows that protecting incumbents through patents, barriers to entry, or any other stratagem leads to an increase in productivity. It is highly unlikely that no researcher would have found this effect if it was in the data. The dog did not bark; that is the key piece of evidence. But why is it so difficult to find any such example? I think the answer is actually quite simple. The standard theory is incomplete because it ignores the political incentives of incumbents who lobby to weaken competition and erect barriers to entry. They often succeed for the wrong reasons, and this is why free markets are fragile. But in the rare instances in which their arguments have merit, their success is almost assured.
Designing for the Social Web by Joshua Porter
barriers to entry, en.wikipedia.org, endowment effect, Howard Rheingold, late fees, Marc Andreessen, Mark Zuckerberg, Milgram experiment, Paul Buchheit, Ralph Waldo Emerson, recommendation engine, social software, social web, Steve Jobs, web application, zero-sum game
Systems need a way to control the inﬂux of content. Barriers to Entry A hurdle that prevents participation is called a barrier to entry. Barriers to entry are commonly described as beneﬁcial in the business world, as they keep competitors from entering a market. In the social software world, the removal or creation of barriers to entry is crucial to the overall health of the system. Derek Powazek, who wrote the book Design for Community,6 notes that “all communities are exclusionary to some degree.” He distinguishes between three types of barriers to entry: . Informal barriers. Informal barriers are those that exclude subtly, such as design with an aesthetic that attracts a certain type of person, or copywriting that speaks to a speciﬁc audience. . Formal barriers. Formal barriers to entry are things that exclude blatantly, like requiring an account, requiring certain software, or any planned measure that restricts participation. .
This is enough to carry on a conversation with someone over time. With a handle, people can identify each other enough to: . Have a conversation with someone . Build up a history and remember that person over time . Refer to that person when speaking with others 99 100 DESIGNING FOR THE SOCIAL WEB As we mentioned in the last chapter, making accounts mandatory makes the sign-up process more difﬁcult. It acts as a barrier to entry. An account allows the site owner to remove someone from a system when they do bad things. In some cases, however, it can’t stop ne’er-do-wells. People who are really dedicated can simply create a new account. Now, this raises the question, won’t people simply pretend to be somebody else? Actually, people don’t do that very often. Clay Shirky explains one case in particular, in which a woman portrayed a sick teenager2 and was vehemently denounced by the readership she had established: You see things like the Kaycee Nicole story, where a woman in Kansas pretended to be a high school student, and then because the invented high school student’s friends got so emotionally involved, she then tried to kill the Kaycee Nicole persona off.
Formal barriers to entry are things that exclude blatantly, like requiring an account, requiring certain software, or any planned measure that restricts participation. . Extreme barriers. Extreme barriers are those that create exclusivity by only allowing certain people in. The invitation-only social network asmallworld.com, which caters to the rich and famous, is a good example of an extreme barrier to entry. On Digg, like on many social sites, you need an account to submit stories. Then, the process of submitting stories has two steps. The ﬁrst step is to enter the link you’re submitting. This is a normal URL. You also choose the type of content it is: a news story, image, or video. Digg helps people by providing a nice set of guidelines. After you click “Continue” in step 1, Digg takes a moment to analyze the link to see if it’s a duplicate.
The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities by Mancur Olson
"Robert Solow", barriers to entry, British Empire, business cycle, California gold rush, collective bargaining, correlation coefficient, David Ricardo: comparative advantage, full employment, income per capita, Kenneth Arrow, market clearing, Norman Macrae, Pareto efficiency, price discrimination, profit maximization, rent-seeking, Sam Peltzman, selection bias, Simon Kuznets, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, urban decay, working poor
The required resource reallocations will be prevented or delayed by the barriers to entry. Hicks has further demonstrated that the magnitude of the reduction in the growth rate will vary with the extent to which the new pattern of expenditures deviates from the old and on the size of the industries in which resources are wasted because of the changes growing out of the increases in productivity.25 We can conclude that, even if there should be no accumulation of special-interest groups over time, the barriers to resource reallocation that such groups create would lower the rate of growth as well as the absolute level of income. The argument that led to our fourth implication showed that, when there were lobby-induced price changes or other subsidies and no barriers to entry into the favored area, the gains to the special-interest group could be small in relation to the loss to society.
The argument that led to our fourth implication showed that, when there were lobby-induced price changes or other subsidies and no barriers to entry into the favored area, the gains to the special-interest group could be small in relation to the loss to society. We now see that when there are barriers to entry this slows the resource reallocations needed for rapid economic growth. When the slower adoption of new technologies resulting from special-interest groups is also taken into account, the reduction in growth rates can be considerable. The slower adoption of new technologies and barriers to entry can subtract many times more from the society's output than the special-interest group obtains, particularly over the long run. So we now have the seventh implication, the dynamic or growthoriented counterpart to the fourth implication about static efficiency: 7. Distributional coalitions slow down a society's capacity to adopt new technologies and to reallocate resources in response to changing conditions, and thereby reduce the rate of economic growth.
In a casual sense, though, the question is straightforward: What makes the class structure more rigid or exclusive in one country or period than in another'? There may be some ambiguity partly because the word class is sometimes used to refer simply to differences in income or status, almost as a synonym for income brackets or educational levels; but here the concern will be with any exclusivity and barriers to entry in a social structure that at least to some degree limit opportunities and countervail meritocratic tendencies. The word class is used in approximately this sense fairly often in Great Britain, and the model offered in this book has striking implications about one important aspect of the evolution of class structure in that country. Those who believe that class rigidities in the sense described could not occur, or would never have much quantitative significance, will change their view the moment they think of the Indian caste system, an extreme form of class rigidity, which has limited untold millions of people to particular occupations.
The Greed Merchants: How the Investment Banks Exploited the System by Philip Augar
Andy Kessler, barriers to entry, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, business cycle, buttonwood tree, buy and hold, capital asset pricing model, commoditize, corporate governance, corporate raider, crony capitalism, cross-subsidies, financial deregulation, financial innovation, fixed income, Gordon Gekko, high net worth, information retrieval, interest rate derivative, invisible hand, John Meriwether, Long Term Capital Management, Martin Wolf, new economy, Nick Leeson, offshore financial centre, pensions crisis, regulatory arbitrage, Sand Hill Road, shareholder value, short selling, Silicon Valley, South Sea Bubble, statistical model, Telecommunications Act of 1996, The Chicago School, The Predators' Ball, The Wealth of Nations by Adam Smith, transaction costs, tulip mania, value at risk, yield curve
In my opinion, there is no deliberate investment banking cartel in any significant part of the business. But that is not the end of the story. There was no explicit collusion yet no one spoiled the party. The high returns and same old players lingered on and the banks were rarely held accountable for poor advice. It may not be a cartel, but what is it? In economic theory there are three basic states of competition. Perfect competition exists where there are low barriers to entry, falling prices and many suppliers for customers to choose from. It does not appear to fit the investment banking industry as a whole, although it applies to a few product segments within fixed income and currency trading. The second state, monopoly, exists where there is only one dominant supplier. It exists in investment banking only for brief moments early in a new product’s history before competitors replicate the product.
Because what one firm can do depends on what the other firms do, the behaviour of oligopolists is hard to predict. When they do compete on price, they may produce as much and charge as little as if they were in a market with perfect competition.’33 Other terms that are synonymous with oligopoly are ‘monopolistic or imperfect competition’, where ‘there are fewer firms than in a perfectly competitive market and each can differentiate its products from the rest. These small differences form barriers to entry. As a result, firms can earn some excess profits, although not as much as a pure monopoly, without a new entrant being able to reduce prices through competition. Prices are higher and output lower than under perfect competition.’34 In the period under review, this description seems to fit the case of investment banking best. Freeman & Co. have gone so far as to say that ‘An “oligopoly” has emerged, with the top firms getting stronger and capturing a larger proportion of fees.’35 A senior financial services practitioner speaking to my MBA students summed it up very neatly: ‘There is a lot of competition, you can’t deny it.
The oligarchy is protected by brand name and reputation. The top corporate names revert to Goldman Sachs, Merrill Lynch, Morgan Stanley and one or two others every time. There is so much comfort in choosing the big brand – especially if the deal goes wrong.’36 It was a good summary: the investment banks used their power to protect their position and keep others out and the clients went along with it. This had the effect of raising barriers to entry and, in turn, protecting indifferent output from the full blast of open competition. Existing players and aspiring new entrants fought hard to win more business, but with price cutting taboo and ineffective they resorted to other less conventional means of competing. The second half of this book will see how it was all done. PART 3 What Really Goes On 7 The Edge There is a paragraph in James B.
The New Kingmakers by Stephen O'Grady
AltaVista, Amazon Web Services, barriers to entry, cloud computing, correlation does not imply causation, crowdsourcing, David Heinemeier Hansson, DevOps, Jeff Bezos, Khan Academy, Kickstarter, Marc Andreessen, Mark Zuckerberg, Netflix Prize, Paul Graham, Ruby on Rails, Silicon Valley, Skype, software as a service, software is eating the world, Steve Ballmer, Steve Jobs, Tim Cook: Apple, Y Combinator
The success of these projects and others like them is thanks to developers. The millions of programmers across the world who use, develop, improve, document, and rely upon open source are the main reason it’s relevant, and the main reason it continues to grow. In return for this support, open source has set those developers free from traditional procurement. Forever. Financial constraints that once served as a barrier to entry in software not only throttled the rate and pace of innovation in the industry, they ensured that organizational developers were a subservient class at best, a cost center at worst. With the rise of open source, however, developers could for the first time assemble an infrastructure from the same pieces that industry titans like Google used to build their businesses—only at no cost, without seeking permission from anyone.
Choice and Fragmentation Not too long ago, conventional wisdom dictated that enterprises strictly limit themselves to one of two competing technology stacks—Java or .NET. But in truth, the world was never that simple. While the Sun vs Microsoft storyline supplied journalists with the sort of one-on-one rivalry they love to mine, the reality was never so black and white. Even as the enterprises focused on the likes of J2EE, Perl, PHP, and others were flowing like water around the “approved” platforms, servicing workloads where development speed and low barriers to entry were at a premium. It was similar to what had occurred years earlier, when Java and C# supplanted the platforms (C, C++, etc.) that preceded them. Fragmentation in the language and platform space is nothing new: “different tools for different jobs” has always been the developers’ mantra, if not that of the buyers supplying them. But the pace of this fragmentation is accelerating, with the impacts downstream significantly less clear.
With talent markets perpetually short on developers, companies only hiring locally or on a relocation basis are increasingly at a disadvantage relative to competitors that can hire from anywhere in the world. It can be difficult today even to convince developers to commute, let alone relocate to geographies where they’re cut off from friends and family. Adaptive organizations, therefore, are seeking ways to leverage distributed development as a core part of their talent-acquisition strategy. If you’re not, expect to lose talent to competitors who are. Lower the Barriers to Entry Many technologists believe that quality is the most important factor in determining whether a technology is adopted or ignored. And there’s no question that the merits of a given product or project are a vital input into the selection process. That has only become more true as open source has made it easier to use and compare code. But quality is just one factor—and it’s often not the most important one.
From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry by Martin Campbell-Kelly
Apple II, Apple's 1984 Super Bowl advert, barriers to entry, Bill Gates: Altair 8800, business process, card file, computer age, computer vision, continuous integration, deskilling, Donald Knuth, Grace Hopper, information asymmetry, inventory management, John Markoff, John von Neumann, linear programming, longitudinal study, Menlo Park, Mitch Kapor, Network effects, popular electronics, RAND corporation, Robert X Cringely, Ronald Reagan, Silicon Valley, software patent, Steve Jobs, Steve Wozniak, Steven Levy, Thomas Kuhn: the structure of scientific revolutions
These magazines typically sold 50,000–150,000 copies a month.10 As was noted earlier, a crucial differences between a videogame console and a home computer were that the latter could be programmed by the user and that it came equipped with a keyboard and secondary storage. Thus, barriers to entry into software development for home computers were almost non-existent. No additional software development system was needed, there were no proprietary trade secrets to unlock, and programs could be duplicated on the computer itself, with no need for access to a third-party manufacturing plant. The lack of significant barriers to entry led to the phenomenon of the “bedroom coder.” Thousands of would-be software tycoons began to write games in their spare time, selling their programs through small ads in computer magazines. The typical game cost $15 and consisted of a smudgy, photocopied sheet of instructions and a tape cassette or a floppy disk in a plastic bag.
They were established by entrepreneurially minded individuals from the technical computing community who, individually or severally, combined the skills of the technical expert and the business promoter. The skills of the technical expert were the most critical, since a high level of programming competence was the sine qua non of being in the business. In the 1950s, the only way to acquire these skills was to learn them as an employee of a computer manufacturer or user. However, if one had these skills, there were very few other barriers to entry into software business—“all you need is a coding pad and a sharp pencil.”67 Another source put it this way: “All you need is two programmers and a coffee pot. Many don’t even have their own computer, but rent time to debug programs at Origins of the Software Contractor 51 a service bureau.”68 Even better, it was usually possible to use the client’s computer for program development. The Computer Usage Company The Computer Usage Company (CUC), generally agreed to have been the first software contractor, was founded in New York in 1955 by John Sheldon and Elmer Kubie, then in their early thirties.69 Sheldon and Kubie had both got their entrée into computing in IBM’s Technical Computing Bureau.
One indicator, perhaps, is the fact that ADAPSO went from 72 members in 1963 to 235 members by 1970, at which time it claimed to represent “34 percent of the industry’s companies . . . and 48 percent of the estimated sales volume.”15 Though these numbers probably capture the number of processing services, facilities management, and teleprocessing firms accurately, they undoubtedly underestimate the number of programming services firms. Of the four sectors, programming services had by far the lowest barriers to entry; consequently, it attracted the most new entrants. All the evidence on the size of the industry, however, appears to be anecdotal. Perhaps the most reliable source was Larry Welke, founder of International Computer Programs Inc., who testified in the IBM antitrust suit that there were between 40 and 50 independent suppliers of 64 Chapter 3 5 4.5 4 3.5 CSSI ($ billion) Software ($ billion) 3 2.5 2 1.5 1 0.5 74 73 19 19 72 19 71 70 19 69 19 68 19 67 19 66 19 19 65 19 64 63 19 62 19 61 19 19 19 60 0 Figure 3.1 The US computer services and software industries, 1960–1974.
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
In recent years, a small but growing body of academic research has revealed that this inattention, however understandable, has been costly. It turns out that the decentralized, small-scale policy processes of occupational licensing and land-use regulation sum up to weighty national significance. Both impose barriers to entry: mandatory licensing, in the economist’s sense of impeding entry by new firms or individuals into a product market; zoning restrictions, in the literal sense of hindering physical entry into a geographical area. Spreading and growing steeper in recent decades, these barriers to entry now constitute significant constraints on innovation and growth. Licensing blocks competition from the new firms that are frequently the vessels of more productive ways of doing things; zoning, by attenuating urban density, weakens an important catalyst for the creation of new ideas while frustrating efforts to bring those ideas to scale.
Unless we take steps to unrig our liberal democracy, we run a serious risk that the tide of authoritarian populism will extend itself, all the while entrenching the very crony capitalism that it purports to assault. Market rigging by the already powerful is the primary mechanism by which high status is entrenched. While markets naturally produce unequal returns, they also have powerful mechanisms of creative destruction as well. When there are extraordinary returns by a particular firm, a market with low barriers to entry will encourage challengers to undercut incumbents, thereby driving down their rate of return. Challengers, or even the prospect of challenge, can force incumbents to invest their resources in innovation rather than accumulation, thereby driving economic growth. Competition is, in this way, essential to contain inequality as well as produce abundance. Stunted competition is especially problematic, as wealth derived from distorted markets is recycled into influence over government.
But competition is also essential for restraining inequality, by encouraging new firms to enter into the market and undercut or outperform incumbents with abnormally high profits. This has led many to point to the importance of increasing antitrust enforcement, which at the very least is addressing the right problem.24 But an absence of competition also comes from the affirmative use of government power, such as when incumbents are able to fend off challenges by constructing barriers to entry like licenses or intellectual property protection. There is no route to a competitive economy except through finding a way to a more deliberative politics. As we will argue in Chapter 7, rent-seeking is most successful when politics is least deliberative. Political deliberation is not a matter of being more genteel and polite. True political deliberation, in fact, requires political conflict.25 Even a relatively small amount of conflict, generated by a modest amount of organization, can produce enough deliberation to eat away at the political power of the advantaged.26 Only when both sides to an economic question are represented in the political sphere, and when the side of those who pay the costs of regressive regulation can force a dispute to the political surface, is true deliberation on the merits possible.
Makers by Chris Anderson
3D printing, Airbnb, Any sufficiently advanced technology is indistinguishable from magic, Apple II, autonomous vehicles, barriers to entry, Buckminster Fuller, Build a better mousetrap, business process, commoditize, Computer Numeric Control, crowdsourcing, dark matter, David Ricardo: comparative advantage, death of newspapers, dematerialisation, Elon Musk, factory automation, Firefox, future of work, global supply chain, global village, IKEA effect, industrial robot, interchangeable parts, Internet of things, inventory management, James Hargreaves, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, Kickstarter, Lean Startup, manufacturing employment, Mark Zuckerberg, means of production, Menlo Park, Network effects, private space industry, profit maximization, QR code, race to the bottom, Richard Feynman, Ronald Coase, Rubik’s Cube, self-driving car, side project, Silicon Valley, Silicon Valley startup, Skype, slashdot, South of Market, San Francisco, spinning jenny, Startup school, stem cell, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, transaction costs, trickle-down economics, Whole Earth Catalog, X Prize, Y Combinator
Indeed, startup factories such as Y Combinator now coin entrepreneurs first and ideas later. Their “startup schools” admit smart young people on the basis of little more than a PowerPoint presentation. Once admitted, the would-be entrepreneurs are given spending money, whiteboards, and desk space and told to dream up something worth funding in three weeks. Most do, which says as much about the Web’s ankle-high barriers to entry as it does about the genius of the participants. Over the past six years, Y Combinator has funded three hundred such companies, with such names as Loopt, Wufoo, Xobni, Heroku, Heyzap, and Bump. Incredibly, some of them (such as DropBox and Airbnb) are now worth billions of dollars. Indeed, the company I work for, Condé Nast, even bought one of them, Reddit, which now gets more than 2 billion page views a month.
Just add batteries. Disruptive by design Transformative change happens when industries democratize, when they’re ripped from the sole domain of companies, governments, and other institutions and handed over to regular folks. We’ve seen this picture before: it’s what happens just before monolithic industries fragment in the face of countless small entrants, from the music industry to newspapers. Lower the barriers to entry and the crowd pours in. That’s the power of democratization: it puts tools in the hands of those who know best how to use them. We all have our own needs, our own expertise, our own ideas. If we are all empowered to use tools to meet those needs, or modify them with our own ideas, we will collectively find the full range of what a tool can do. The Internet democratized publishing, broadcasting, and communications, and the consequence was a massive increase in the range of both participation and participants in everything digital—the Long Tail of bits.
Burn,” Autodesk now preaches the gospel of “Rip. Mod. Fab” (3-D scan objects, modify them in a CAD program, and print them on a 3-D printer). That ability to easily “remix” digital files is the engine that drives community. What it offers is an invitation to participate. You don’t need to invent something from scratch or have an original idea. Instead, you can participate in a collaborative improvement of existing ideas or designs. The barrier to entry of participation is lower because it’s so easy to modify digital files rather than create them entirely yourself. My grandfather was a lone inventor, not because he was especially solitary but because he had no mechanism for easy sharing. I may be no more extroverted than he was, but because my medium is digital, sharing comes naturally. When you share, community forms. And what community does best is remixing—exploring variation in what a product can be, and in the process improving it and propagating it far faster than any individual or single company could.
Joel on Software by Joel Spolsky
AltaVista, barriers to entry, c2.com, commoditize, George Gilder, index card, Jeff Bezos, knowledge worker, Metcalfe's law, Mitch Kapor, Network effects, new economy, PageRank, Paul Graham, profit motive, Robert X Cringely, shareholder value, Silicon Valley, Silicon Valley startup, six sigma, slashdot, Steve Ballmer, Steve Jobs, the scientific method, thinkpad, VA Linux, web application
Why should we make it easy for customers to leave the service? That's because they are shortsighted. These are not your customers now. Try to lock them in before they become your customers, and you'll just lock them out. But if you make an honest promise that it will be easy to back out of the service if they're not happy, and suddenly you eliminate one more barrier to entry. And, as we learned, eliminating even a single barrier to entry can have a dramatic effect on conversions, and over time, when you knock down that last barrier to entry, people will start flooding in, and life will be good for a while. Until somebody does the same thing to you. thirty-nine STRATEGY LETTER IV: BLOATWARE AND THE 80/20 MYTH FRIDAY, MARCH 23, 2001 Version 5.0 of Microsoft's flagship spreadsheet program Excel came out in 1993. It was positively huge; it required a whole 15MB of hard drive space.
One thing you see a lot during a transition from an old monopoly to a new monopoly is a magic "tipping point": one morning, you wake up and your product has 80 percent market share instead of 20 percent market share. This flip tends to happen very quickly (VisiCalc to 123 to Excel, WordStar to WordPerfect to Word, Mosaic to Netscape to Internet Explorer, dBase to Access, and so on). It usually happens because the very last barrier to entry has fallen, and suddenly it's logical for everyone to switch. Obviously, it's important to work on fixing the obvious barriers to entry, but once you think you've addressed those, you need to figure out what the not-so-obvious ones are. And this is where strategy becomes tricky, because there are some non-obvious things that keep people from switching. Here's an example. This summer I'm spending most of my time in a house near the beach, but my bills still go to the apartment in New York City.
The first thing to ask is: Are you going into a business that has competition, or not? Ben & Jerry's Amazon Lots of established competitors New technology, no competition at first If you don't have any real competition, as with Amazon, there is a chance that you can succeed at a Land Grab—that is, get as many customers as quickly as possible so that later competitors will have a serious barrier to entry. But if you're going into an industry that has a well-established set of competitors, the Land Grab idea doesn't make sense, because you'd need to create your customer base by getting customers to switch over from competitors. In general, venture capitalists aren't too enthusiastic about the idea of going into a market with pesky competitors. Personally, I'm not so scared of established competition, perhaps because I worked on Microsoft Excel during a period when it almost completely took over Lotus 123, which virtually had the market to itself.
The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion by John Hagel Iii, John Seely Brown
Albert Einstein, Andrew Keen, barriers to entry, Black Swan, business process, call centre, Clayton Christensen, cleantech, cloud computing, commoditize, corporate governance, creative destruction, disruptive innovation, Elon Musk, en.wikipedia.org, future of work, game design, George Gilder, intangible asset, Isaac Newton, job satisfaction, Joi Ito, knowledge economy, knowledge worker, loose coupling, Louis Pasteur, Malcom McLean invented shipping containers, Maui Hawaii, medical residency, Network effects, old-boy network, packet switching, pattern recognition, peer-to-peer, pre–internet, profit motive, recommendation engine, Ronald Coase, shareholder value, Silicon Valley, Skype, smart transportation, software as a service, supply-chain management, The Nature of the Firm, the new new thing, too big to fail, trade liberalization, transaction costs
Although this trend may not continue—as we write, in the midst of a global economic downturn, public support for protectionist policies is growing in many parts of the world—these public policy trends have reinforced the profound social and economic effects of the new digital infrastructure. Together, they are the powerful catalysts setting the Big Shift into motion. Economic Impact The Big Shift is still at an early stage of its innovation and dissemination process, but already-visible patterns are nearly certain to persist as digital technologies systematically and substantially reduce barriers to entry and barriers to movement on a global scale. It is now possible for even the smallest vendors to reach a global market of customers using digital networks. The digital infrastructure makes outsourcing more feasible than ever, and this in turn makes it easier for small companies to access and use world-class capability to deliver more value to their markets and to respond more rapidly to unanticipated changes in markets.
In the United States, the exponentially advancing price/performance capability of computing, storage, and bandwidth is driving an adoption rate for the digital infrastructure that is two to five times faster than adoption rates were for previous infrastructures, such as electricity and telephone networks.10 As the price/performance ratio goes down, new capabilities emerge faster than before and disruption occurs frequently rather than in isolated episodes. Fueled by this new digital infrastructure—and public policy changes that overwhelmingly have reduced barriers to entry and movement—U.S. competitive intensity is more than twice what it was in the mid-1960s.11 Declining ROA rates, even as labor productivity rises, suggest that firms are unable to hold onto the financial benefits created by steady gains in labor productivity. Who is capturing the rewards instead? Our metrics suggest that creative talent is one beneficiary—for example, computer engineers, health-care professionals, architects, and managers, whose total compensation has more than doubled during the past five years.12 Consumers are also benefiting, thanks to increasing access to ever-growing numbers of products and services and to information (such as comparative price information) about them and the vendors that offer them.
In order to stay successful in a world of accelerating change, we need to find ways to learn faster, often in areas that we once viewed as quite peripheral to our professions. We can sum it all up with the following statement: Push is no longer the dominant paradigm in business, education, or civic life. Welcome to the foundational change that makes pull the dominant paradigm in our lives. The Second Wave: Knowledge Flows If the Big Shift’s first wave is all about lowering barriers to entry and movement, the second wave shows what happens when those barriers go away: Capital, talent, and knowledge start flowing increasingly rapidly across geographical and institutional boundaries. By our estimation, developed economies today are somewhere in the early part of the second wave of the Big Shift, with the third wave yet to come. Firms have yet to make a meaningful transition into the digital age.
People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz
"Robert Solow", affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, battle of ideas, Berlin Wall, Bernie Madoff, Bernie Sanders, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, central bank independence, clean water, collective bargaining, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crony capitalism, deglobalization, deindustrialization, disintermediation, diversified portfolio, Donald Trump, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, Firefox, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, gig economy, global supply chain, greed is good, income inequality, information asymmetry, invisible hand, Isaac Newton, Jean Tirole, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, labor-force participation, late fees, low skilled workers, Mark Zuckerberg, market fundamentalism, mass incarceration, meta analysis, meta-analysis, minimum wage unemployment, moral hazard, new economy, New Urbanism, obamacare, patent troll, Paul Samuelson, pension reform, Peter Thiel, postindustrial economy, price discrimination, principal–agent problem, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Robert Bork, Robert Gordon, Robert Mercer, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, self-driving car, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, South China Sea, sovereign wealth fund, speech recognition, Steve Jobs, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, two-sided market, universal basic income, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, War on Poverty, working-age population
When the dust settles, firms should only get the normal return on their capital, just the return required to compensate them for the use of their money and the risk they bear. There should be no excess returns. Not surprisingly, this is an outcome that firms don’t like. So an essential part of the strategy of innovative firms is to create barriers to entry—what Warren Buffet called moats—so others won’t come in and compete away their profits. Firms like Microsoft led in the innovation of new forms of barriers to entry and clever ways of driving out existing competitors, late twentieth-century advances building on the shoulders of anticompetitive giants that had gone before them. The saga of the 1990s internet browser wars is instructive. At the time, Netscape was one of the boldest innovators in the sector. Worried that the upstart company might somehow impinge on its near monopoly on operating systems for personal computers, Microsoft sought to drive it out.
Today, it is the new tech giants that abuse market power, with European competition authorities repeatedly finding that companies like Google have engaged in anticompetitive practices, first in favoring its own services in internet searches, and then in abusing its power in the mobile phone market, with the EU levying record-setting fines in the two cases of $2.8 billion and $5.1 billion, respectively. Abusing the patent system is another avenue for reducing competition. Patents are a temporary barrier to entry. No one can produce a product that is identical to a patented good. When most Americans think of how patents are supposed to be used, they may imagine the small-time inventor who gets legal protection in order to prevent big companies from stealing her idea. These days, the situation is not nearly as simple, and patents have often become an effective barrier to entry. Many innovations today require hundreds, if not thousands, of patents. And as a firm creates a new product (say, a new chip) there is a risk of unwittingly intruding on one of a myriad of patents. Only a large firm would have the resources to research all the existing patents.
Yet such price discrimination has become commonplace in our digital economy, as we discuss further in chapter 6. Innovation in creating market power There can be little doubt that there has been an increase in market power. The question then is why. I described earlier Warren Buffett’s view that the best way to ensure sustained profits is for firms to surround themselves with moats that create barriers to entry, preventing profits from being eroded by the competition that new entrants would provide. Among the most profitable recent “innovations” in the United States are those enhancing the ability to create and widen these moats and the ability to exploit the subsequent market power. In the standard economic model, creating a better product does not ensure sustained profits. Others may enter, and compete away those profits.
The Curse of Bigness: Antitrust in the New Gilded Age by Tim Wu
AltaVista, barriers to entry, collective bargaining, corporate personhood, corporate raider, creative destruction, Donald Trump, income inequality, Johann Wolfgang von Goethe, Joseph Schumpeter, Kickstarter, move fast and break things, move fast and break things, new economy, open economy, Peter Thiel, price discrimination, road to serfdom, Robert Bork, Silicon Valley, Snapchat, The Chicago School
Consider that AT&T, for example, ruled its industry for decades, destroying myriad would-be challengers, with the tacit or sometimes active assistance of government. Having waited for several decades, are society and the economy supposed to wait for several more? This line of argument ignores the idea that deliberate investments in building barriers to entry can be effective, and it is often utterly rational for the monopolist to make such investments. Of the great mysteries of the Chicago School was the fact that it posited ultra-rational, profit-seeking monopolists, yet somehow imagined that they would generally leave themselves completely vulnerable to competitive attack. The truth is that investments in barriers to entry are a magnificent investment. It would be crazy, however, to defend every case that was brought as part of the big case tradition. For example, in the 1970s, the Federal Trade Commission went after the cereal industry based on the observation that it was profitable and somewhat concentrated.
See Etsuko Kameoka, Competition Law and Policy in Japan and The EU (2014), pp. 5–6 *In the early 1960s, historian Richard Hofstadter would famously remark that antitrust was no longer a popular movement but that it “now runs its quiet course without much public attention.” *One prominent exception was the iconoclastic economist Joseph Schumpeter, who had championed the entrepreneur in his earlier years, but in his later years grew to admire the large monopolistic corporation and begun to see the lure of monopoly as a principal driver of innovation and “creative destruction.” Schumpeter, however, did not take seriously the problem of investment in barriers to entry, and particularly the power of government to insulate monopolies from creative destruction. See Tim Wu, The Master Switch (2010). *In Bork’s words: “A value will be announced as pertinent with a confidence that is matched only by the mystery that shrouds its derivation. A very specific decision is then whelped from the value premise without benefit of midwifery by any visible minor premise.”
Being big meant being hierarchical, industrial, dinosaurlike in an age of fleet-footed mammals. Better maybe to stay small and stay young, to move fast and break things. All this suggested that in cyberspace, there could be no such thing as a lasting monopoly. The internet would never stand for it. Business was now moving at internet speed: A three-year-old firm was middle-aged; a five-year-old firm almost certainly near death. “Barriers to entry” was a twentieth century concept. Now, competition was always just “one click away.” Even if a firm did manage to gain temporary dominance, there was nothing to be afraid of. We were not speaking of the evil monopolists of old. The new firms were instead devoted to spreading sweetness and light, goodwill toward all men—whether access to information (Google), good books for cheap (Amazon), or the building of a global community (Facebook).
SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi
activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Blythe Masters, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, longitudinal study, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, plutocrats, Plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, social intelligence, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, The Rise and Fall of American Growth, too big to fail, women in the workforce, young professional
Roubini agrees that possessing emotional intelligence is helpful but argues that the power of his ideas is what established him as a thought leader. His business consultancy has likely benefited from both his intellectual and social skills. Consulting is a competitive field as research is generally considered a cost and not a profit center, and the market is flooded with gratuitous high-quality analyses. There are no barriers to entry as it is not a licensed profession, and anyone can call him- or herself a consultant. Therefore, having top academic credentials, policy experience, and access to high-caliber networks provide thought leaders with distinct competitive advantages that propel them into the league of superhubs. Most thought leaders in finance are economists. A select few have become academic celebrities, such as Thomas Piketty, Nassim Taleb, and Paul Krugman, because they have touched the Zeitgeist.
In 2014, hedge fund executive Kenneth Griffin made a donation of $150 million to his alma mater, Harvard, and private equity guru Steve Schwarzman gifted Yale with $150 million in 2015. Over time, an informal system developed in which affiliations ensure that “members of the club” help one another in advancing their interests. They interact at work, golf clubs, think tanks, and any other platforms with high barriers to entry, be they financial, status-wise, or both. The old boys’ network is less conservative and stereotypical than it used to be, but it is still alive and well. Its members have similar social backgrounds and usually live in an exclusive bubble of privilege. Because of their influence, they determine the culture, define norms, and set the tone. The more-senior members recognize themselves in the younger ones and relate to their personal and professional struggles.
Subtle communication nuances such as tone and inflection often get lost in email. Video conferences are the next best thing to face-to-face meetings, but they cannot replace them as participants cannot engage in direct eye contact, exchange handshakes and other personal gestures, or interpret nonverbal cues. Thus, digitized interaction is superficial at best and fragile at worst. Internet-based social networks such as Friendster and Myspace are often fleeting. With no barrier to entry, users have little loyalty and move on when the next best thing comes along. If technology fails, or is blocked by governments, connecting becomes impossible. According to the Pew study Social Isolation and New Technology, people still prefer face-to-face communication as the primary means to stay in touch.7 A deep and trusting relationship is a privilege that must be earned with an investment of time and effort, tested through adversity, and fostered through mutual experiences.
Television disrupted: the transition from network to networked TV by Shelly Palmer
barriers to entry, call centre, commoditize, disintermediation, en.wikipedia.org, hypertext link, interchangeable parts, invention of movable type, Irwin Jacobs: Qualcomm, James Watt: steam engine, Leonard Kleinrock, linear programming, Marc Andreessen, market design, Metcalfe’s law, pattern recognition, peer-to-peer, recommendation engine, Saturday Night Live, shareholder value, Skype, spectrum auction, Steve Jobs, subscription business, Telecommunications Act of 1996, There's no reason for any individual to have a computer in his home - Ken Olsen, Vickrey auction, Vilfredo Pareto, yield management
This data compression technology, and other subsequent compression schemas, cost the dot-com speculators billions of dollars because they created an extraordinary amount of over-capacity on the existing fiber optic networks. There is an important lesson to be learned from this experience. Technology is fleeting. Technological edges or advantages can be extremely short-lived. And, as we all know all too well, the last half mile is the barrier to entry. In other words, getting fiber to the curb is not the same as getting fiber to the premises or fiber to the pillow. Traditionally, innovations in audio have happened about 10 years before their video counterparts. This is just a bit of armchair wisdom, not a trend analysis. Later in this chapter, we will explore some of the profound differences between the audio and video businesses and the technologies that enable them.
All rights reserved. 6-Television.Chap Six v3sp.qxd 3/20/06 7:22 AM Page 75 6 Content, Storytellers, Gatekeepers and Related Skills When people say “Content is king,” they don’t mean your content — unless you happen to be holding the rights to distribute games from major sports franchises, episodes of hit prime time television series or reruns of big off-network sitcoms. Saying content is king is like saying hits are important. It is an absurd, overused, oversimplified way of communicating the idea that good business models revolve around the “business of hits.” However, since the financial barriers to entry of the networked television business are significantly lower then those of the network television business, the economics of the “business of hits” is being redefined. And, the inherent two-way nature of the technology that enables networked television has some added benefits for storytellers. Storytelling Somewhere back in time, we learned how to listen to a speech. And, whenever the concept of an imagined performance first occurred to someone, the concept of an audience sitting quietly and paying attention was not far behind.
told them that what they are eating is called a hamburger, so should we be surprised if they do not recognize ground sirloin on a sourdough bun as the same food-stuff? Or if they do recognize the genus (hamburger), should we be surprised that their tastes have evolved (or devolved) to a point where they will show a marked preference for MickyD’s over a classic “21 Burger?” Who Are the Gatekeepers? Since the advent of technology, there have always been significant monetary barriers to entry for almost every creative outlet. You needed a printing press to make books, a recording studio to make music, a film studio to make films, etc. You also needed crafts-people (back then they were politically incorrectly referred to as craftsmen, but at that time, all u machines, boats and hurricanes were female — Tastes change and art crazy times, they were!). The organizations and evolves, but in the before-time, businesses that could effectively field an infrastruc- they had help and guidance from ture and efficient distribution channels became the gatekeepers.
Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane
"Robert Solow", agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land reform, land tenure, land value tax, Landlord’s Game, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Second Machine Age, secular stagnation, shareholder value, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population
When house prices are rising, developers must compete to secure suitable land, driving greater volatility in land prices. Because land acquisition is usually the largest single cost, and often the first one to be incurred, the price that the developer pays for the land determines much of what happens later in the process (see Box 4.7). The difficulties and costs of securing land also create major barriers to entry for new firms. The combination of high risk, cyclicality and barriers to entry drives concentration in the industry through business failures and mergers. This is only partially offset by the need for detailed local knowledge to secure the best sites at good prices. Because the developer does not retain an interest in the scheme, and because the developer has far more knowledge than the buyer (who is typically the consumer or an amateur investor) there is little incentive on the developer to prioritise quality.
Developers often control strategic land via the use of options agreements, which are private contracts with landowners such as farmers, and are generally not publicly disclosed. This restricts the ability of rivals to acquire suitable development sites, and presents a major barrier to entry into the house building industry, further entrenching the dominance of the existing large firms (Griffith, 2011). These land market conditions effectively give ‘monopoly power to developers who own particular patches of land where large proportions of development [are] being made available’ (Cheshire, 2011). The concentration of the industry and barriers to entry have lowered competitive pressure, and militated against product innovation, with the result that new homes in Britain are widely seen to be unattractive and poor quality, with only 18% rated as being of good or very good design.
This problem is worsened by the near total absence of publicly available data on the value of land or property. Despite a plethora of generalised indices of house prices, the only official index of land prices was discontinued in 2011, and the datasets on the value of commercial property held by the Valuation Office Agency for the levying of business rates are not publicly available. This paucity of market information creates significant inefficiencies and barriers to entry (see Chapter 4) and restricts the ability of public bodies and citizens to scrutinise the activities of landowners and developers (Jefferys, Lloyd, Argyle, et al., 2014). Property prices tend to be a poor proxy for land values since, as mentioned, materials prices and labour costs bear little relation to land values. This makes it impossible for economists to analyse the economic significance of land prices and land rents even if they wanted to.
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
See Celebrity and Power. 6. Both Jeffrey Williams and David Marshall have noted the existence of celebrity outside the conventional Hollywood and political star systems. Both make the point that celebrities exist in autonomous and self-contained systems. See Marshall, Celebrity and Power, and Williams, “Academostars.” 7. Economists call this “barriers to entry.” When they look at markets, the ability to enter them is a function of “high” or “low” barriers. See Demsetz, “Barriers to Entry.” 8. Facebook researchers, for example, have pointed toward the ability of the social-networking site to allow people to “passively” be fed news about their friends. By simply trolling their news feed, members are able to collectively be updated on the extraneous aspects of their various five hundred–plus friends. Social media sites function less as networking conduits than as a means to cultivate public personae.
What makes us want to know more about someone over another? How does celebrity work? Before getting into the different aspects of stardom, it’s worth taking a moment to look at where we are now, which is in a state of unprecedented oversaturation and decentralization. Yes, undoubtedly, in order to be a film star one must pass through Los Angeles. But the deluge of social media has provided a virtual geography with no barriers to entry, such that people like M can permeate a collective consciousness around the world like any other celebrity. No, he will not grace the cover of US Weekly, but his wide and diverse social circle will be aware of all the intimate details of his life and may discuss him just as they would a conventional star. Similarly, Bollywood film stars (and their fans) care not at all about breaking into Western markets, and why would they?
Second, like all forms of celebrity, democratic celebrities run the gamut of talent-driven to all-residual. They may be discovered on American Idol for their beautiful voices or simply famous for being famous, like Goody. Third, democratic stars circumvent the normal vetting process, and that is part of their appeal. The development of technology, the rise of reality TV shows (and their great popularity), and the use of social media to perpetuate all forms of celebrity have reduced barriers to entry unlike at any other point in history. Reality TV stars, popular bloggers, MySpace and Facebook members who have thousands of friends, in another era would not have had the conduits to become mainstream stars. New forms of media and publicity allow individuals to become celebrities without being rejected by an elite Hollywood agent telling them they don’t have what it takes. Consider thirteen-year-old blogger Tavi Gevinson, who stunned the fashion world when she started blogging eloquently at age eleven about high-end designers.
The End of Jobs: Money, Meaning and Freedom Without the 9-To-5 by Taylor Pearson
"side hustle", Airbnb, barriers to entry, Ben Horowitz, Black Swan, call centre, cloud computing, commoditize, creative destruction, David Heinemeier Hansson, Elon Musk, en.wikipedia.org, Frederick Winslow Taylor, future of work, Google Hangouts, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, loss aversion, low skilled workers, Lyft, Marc Andreessen, Mark Zuckerberg, market fragmentation, means of production, Oculus Rift, passive income, passive investing, Peter Thiel, remote working, Ronald Reagan: Tear down this wall, sharing economy, side project, Silicon Valley, Skype, software as a service, software is eating the world, Startup school, Steve Jobs, Steve Wozniak, Stewart Brand, telemarketer, Thomas Malthus, Uber and Lyft, uber lyft, unpaid internship, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog
After the first one was successful, he started marketing the service and launched a productized service39 selling email marketing and conversion consulting to business owners.40 Dan Norris also launched a productized service similar to John with WP Curve, though targeted at a much larger audience and from a lower price point. While all the business models are unique, what’s universal is that the barrier to entry in each is no longer capital or formal credentials. All they needed to get started were free or relatively cheap resources they could buy online, and their own hard work. The entrepreneurial leap has become the entrepreneurial stair step. The latent demand and lower barriers to entry have allowed more people to become entrepreneurs by easing their way into the process. That’s not to say it’s easy—you still have to climb the stairs, but no longer in a single bound. Stair Stepping lets you build momentum behind your trajectory by developing the skills you need to run an entrepreneurial company.
The glut of lawyers in the U.S. may be the most obvious example, but even in the traditional STEM fields (science, technology, engineering, and mathematics), which were long considered lock-ins for employment, people with related degrees are struggling harder to find jobs than they were a decade ago. Jobs in almost all industries are becoming increasingly commoditized. It makes sense to us that low-skilled jobs with lower barriers to entry are being affected by globalization and technology, but why is it affecting the more highly-credentialed ones? The Cynefin Framework and Your Career The Cynefin framework23 (pronounced Kih-neh-vihn) was developed by Dave Snowden after studying the management structure at IBM. The framework became popular, and was featured in publications including the Harvard Business Review.24 It divides work and management up in ways that are more effective given the changing nature of work.
Just as technology made it viable for small bands to sell their records online, it’s also made entrepreneurship more accessible than ever. The Long Tail or What’s Making Entrepreneurship More Accessible Just like scientists sequencing the human genome were unable to predict how fast technology would enable the project to accelerate, the same has occurred with the technology needed to start a business. The barriers to entry have come down dramatically faster than most people have realized. There are three primary forces of the Long Tail which have driven this shift making entrepreneurship more accessible than ever. 1. The Democratization of the Tools of Production: Product Creation Costs Are Decreasing—Just as cheap software let Birdmonster produce music from their laptops, cheap tools have allowed entrepreneurs to start and run a business from anywhere with little to no capital up front.
The View From Flyover Country: Dispatches From the Forgotten America by Sarah Kendzior
"side hustle", Affordable Care Act / Obamacare, American ideology, barriers to entry, clean water, corporate personhood, crowdsourcing, David Brooks, David Graeber, Donald Trump, Edward Snowden, George Santayana, glass ceiling, income inequality, low skilled workers, Lyft, Marshall McLuhan, Mohammed Bouazizi, new economy, obamacare, Occupy movement, payday loans, pink-collar, post-work, publish or perish, Richard Florida, ride hailing / ride sharing, Silicon Valley, the medium is the message, trickle-down economics, Uber and Lyft, uber lyft, unpaid internship, Upton Sinclair, urban decay, War on Poverty, WikiLeaks, women in the workforce
But that misconstrues the goal of unpaid internships: transforming personal wealth into professional credentials. For students seeking jobs at certain policy organizations, the way to get one’s foot in the door is to walk the streets paved in gold. In the post-employment economy, jobs are privileges, and the privileged have jobs. Unpaid and “pay to play” internships have long dominated policy fields, but the $22,000 asking price signified a barrier to entry so galling the UN issued a statement in response. “Internships at the United Nations are not for sale and cannot be put up for auction. We are trying to find out the details of how this came about and have contacted charitybuzz.com,” a UN representative wrote to Inner City Press, who reported on the case. When the story broke, I contacted Charitybuzz, who confirmed the auction’s existence and said they would speak to their “contact at the UN” for details.
When the story broke, I contacted Charitybuzz, who confirmed the auction’s existence and said they would speak to their “contact at the UN” for details. The Robert F. Kennedy Center continues to list the auction under the tagline “Spend six weeks as a United Nations intern with Bruce Knotts and the UN Committee on Human Rights,” while the UN continues to deny it without offering details. It is difficult to tell what is going on. Whatever the end game, someone is willing to drop $22,000 to play it. Barriers to Entry UN internships may not be up for auction, but they are, in essence, for sale. The United Nations does not pay its interns, making it very difficult for someone who is not independently wealthy to take an internship. The only thing that distinguishes the alleged auction from the UN’s normal practice is that the unspoken class discrimination is made blatant. “Given the high cost of living in key UN cities, such as New York and Geneva, undertaking a UN internship is an experience that few can afford, especially those from the very developing countries the organization strives to serve,” wrote the group Unpaid Is Unfair in a 2012 petition calling on the United Nations to stop using free labor.
Jobs are no longer jobs but symbolic positions, indicative of where you come from and determinative of where you go. * * * The job you work increasingly reflects the money you already had. * * * The McDonald’s worker, the argument goes, deserves what she gets because she is a McDonald’s worker. The professional, it is said, deserves her success because she is a professional. But over the last decade, the barriers to entry for white-collar professions have dramatically increased while the pathways out of poverty have eroded. The job you work increasingly reflects the money you already had. Upward mobility was once the hallmark of the American Dream. Downward wages have made that dream unachievable for Americans born poor. One McDonald’s worker, Devonte Yates, is struggling to complete an associate’s degree in criminal justice—the path to a stable life through education so often recommended.
Reinventing Discovery: The New Era of Networked Science by Michael Nielsen
Albert Einstein, augmented reality, barriers to entry, bioinformatics, Cass Sunstein, Climategate, Climatic Research Unit, conceptual framework, dark matter, discovery of DNA, Donald Knuth, double helix, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Erik Brynjolfsson, fault tolerance, Fellow of the Royal Society, Firefox, Freestyle chess, Galaxy Zoo, Internet Archive, invisible hand, Jane Jacobs, Jaron Lanier, Johannes Kepler, Kevin Kelly, Magellanic Cloud, means of production, medical residency, Nicholas Carr, P = NP, publish or perish, Richard Feynman, Richard Stallman, selection bias, semantic web, Silicon Valley, Silicon Valley startup, Simon Singh, Skype, slashdot, social intelligence, social web, statistical model, Stephen Hawking, Stewart Brand, Ted Nelson, The Death and Life of Great American Cities, The Nature of the Firm, The Wisdom of Crowds, University of East Anglia, Vannevar Bush, Vernor Vinge
In the next chapter, chapter 4, we’ll see many collaborative patterns that can help achieve these ends, including: • Modularizing the collaboration, that is, figuring out ways to split up the overall task into smaller subtasks that can be attacked independently or nearly independently. This reduces barriers to entry by new people, and thus broadens the range of available expertise. Modularity is often difficult to achieve, requiring a conscious, relentless commitment on the part of participants. • Encouraging small contributions, again to reduce barriers to entry, and to broaden the range of available expertise. • Developing a rich and well structured information commons, so people can build on earlier work. The easier it is to find and reuse earlier work, the faster the information commons will grow. In chapter 5 we’ll examine the limits to collective intelligence.
Although citizen science is not new, online tools are enabling far more people to participate—think of Galaxy Zoo’s 200,000-plus participants and Foldit’s 75,000-plus participants—and also expanding the range of scientific work those people can do. To be a comet hunter in the 1960s you needed to purchase or build a telescope, learn how to use it, and then spend many, many hours observing the sky. The barriers to entry and to continued contribution were high. By contrast, you can get started on Galaxy Zoo or Foldit in a matter of minutes. It’s even possible to classify galaxies on your smartphone. Aside from dropping barriers to entry, online tools also enable sophisticated interactive training, and bring participants together in communities where they can learn from one another, and support one another’s work. As a result we’re seeing a great flowering of citizen science. As an example of this flowering, comet hunting has been transformed by the internet.
In particular, open source collaborations have been superbly effective at scaling up, and so increasing the cognitive diversity and range of microexpertise available to the collaboration. In this chapter we’ll identify four powerful patterns that open source collaborations have used to scale. (1) a relentless commitment to working in a modular way, finding clever ways of splitting up the overall task into smaller subtasks; (2) encouraging small contributions, to reduce barriers to entry; (3) allowing easy reuse of earlier work by other people; and (4) using signaling mechanisms such as scores to help people decide where to direct their attention. These patterns can be incorporated into any architecture of attention, and so be used to amplify coe intelligence. The Importance of Being Modular To understand how open source collaborations scale, let’s look at a time when the Linux collaboration almost failed to scale, a time when the Linux developer community almost fractured into two separate camps, working on two separate versions of Linux.
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
Artists and writers will thrive without institutional backing, able to reach their audiences directly. A golden age of sharing and collaboration will be ushered in, modeled on Wikipedia and open source software. In many wonderful ways this is the world we have been waiting for. So what’s the catch? In some crucial respects the standard assumptions about the Internet’s inevitable effects have misled us. New technologies have undoubtedly removed barriers to entry, yet, as I will show, cultural democracy remains elusive. While it’s true that anyone with an Internet connection can speak online, that doesn’t mean our megaphones blast our messages at the same volume. Online, some speak louder than others. There are the followed and the followers. As should be obvious to anyone with an e-mail account, the Internet, though open to all, is hardly an egalitarian or noncommercial paradise, even if you bracket all the porn and shopping sites.
Now volunteers scattered across the globe can create one more comprehensive than any the world has ever known. And so on. An amateur paradise is upon us, a place where people are able to participate in cultural production for the pleasure of it, without asking permission first. Social media have enabled a new paradigm of collaboration. The old closed, hierarchical, institutional model is being replaced by a decentralized, networked system open to all. Barriers to entry have been removed, gatekeepers have been demolished, and the costs of creating and distributing culture have plummeted. New tools not only have made cultural production more efficient but have equalized opportunity. NYU professor Clay Shirky, perhaps the leading proponent of this view, calls this process “social production.” Harvard’s Yochai Benkler uses the term “peer production,” business writer Jeff Howe calls it “crowdsourcing,” and Don Tapscott and his coauthor Anthony D.
“Media are the only channels that have the motivation and resources required to have a real impact.” It wasn’t that the WikiLeaks mastermind had lost faith in people to think for themselves; rather, he recognized that they lacked the time the task required and the power to legitimize and publicize the results. Motivation and resources, time and power—these are assets that are not evenly distributed, even if the Internet has removed many of the old barriers to entry. They are inequalities that we must take into account when we talk about the network’s “level playing field.” The desire to transcend earthly inequality has suffused discussions of the Internet for decades. Early techno-utopians long ago declared that even the atom was “past” and promised the “tyranny of matter” overthrown.1 The terrestrial and corporeal, they confidently predicted, would soon be abandoned for the weightless Web.
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
By 1998, the story had largely repeated itself. Microsoft had used its position as the sole provider of the operating system for the PC to establish a monopoly on desktop software. Software applications had become increasingly complex, with Microsoft putting up deliberate barriers to entry against competitors. It was no longer possible for a single programmer or small company to make an impact in the PC software market. Open source software and the open protocols of the Internet were now challenging that dominance. The barriers to entry into the software market were crashing down. History may not repeat itself, but yes, it does rhyme. Users could try a new product for free—and even more than that, they could build their own custom version of it, also for free. Source code was available for massive independent peer review, and if someone didn’t like a feature, they could add to it, subtract from it, or reimplement it.
So when it came time to provide an operating system for the new machine, IBM decided to license it from Microsoft, giving them the right to resell the software to the segment of the market that IBM did not control. The size of that segment was about to explode. Because IBM had published the specifications for the machine, its success was followed by the development of dozens, then hundreds of PC-compatible clones. The barriers to entry to the market were so low that Michael Dell built his eponymous company while still a student at the University of Texas, assembling and selling computers from his dorm room. The IBM personal computer architecture became the standard, over time displacing not only other personal computer designs, but, over the next two decades, minicomputers and mainframes. As cloned personal computers were built by hundreds of manufacturers large and small, however, IBM lost its leadership in the new market.
Because, of course, you are not the only one who can play the patent game. And once the web becomes fenced in by competing patents and other attempts to make this glorious open playing field into a proprietary wasteland, the springs of further innovation will dry up. In short, I think you’re pissing in the well. Patents such as yours are the first step in vitiating the web, in raising the barriers to entry not just for your competitors, but for the technological innovators who might otherwise come up with great new ideas that you could put to use in your own business. It’s a well known technology truism that all of the smart people don’t work for you, and that one of the surest ways to success is to get more ideas and more work out of people outside your own fences. . . . You’ve gained enormous competitive advantage by making use of technologies that were freely given to the world.
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
In similar fashion, Airbnb works to lower the hurdles for its member-hosts by regularly conducting events and programs designed to illustrate and teach its best practices. Uber works to remove economic barriers that might discourage would-be drivers by providing financial incentives like sign-up bonuses. Platforms like Dribbble, Threadless, and 99designs have built large ecosystems of designers, largely owing to the democratization of the tools of design and printing over the last several years—yet another case of barriers to entry being lowered, in part through the help of platform tools. The proliferation of new production technologies further enables the emergence of new groups of producers. Just as the smartphone camera expanded the volume of content on platforms like Instagram and Vine, the spread of 3D printing is likely to lead to a new range of platforms for industry design. However, technology often needs the support of innovative business design to produce massive reconfiguration of value creation.
Porter’s model identifies five forces that affect the strategic position of a particular business: the threat of new entrants to the market, the threat of substitute products or services, the bargaining power of customers, the bargaining power of suppliers, and the intensity of competitive rivalry in the industry. The goal of strategy is to control these five forces in such a way as to build a moat around the business and thereby render it unassailable. Thus, when a firm can erect barriers to entry, it can keep competitors out, and entrants with substitute products cannot storm the castle. When a firm can subjugate suppliers, competition among them weakens their bargaining power so the firm can keep its costs low. When a firm can subjugate buyers by keeping them relatively small, disunited, and powerless, the firm can keep its prices high. In this model, the firm maximizes profits by avoiding ruinous competition for itself but encouraging it for everyone else in the value chain.
Whirlpool competes with GE by engineering differentiated products, squeezing the supply chain, and continually improving its manufacturing efficiencies, thereby constructing a moat that makes it hard for GE to poach Whirlpool’s customers. Later thinkers have added nuance and fresh insights to Porter’s approach. In 1984, MIT’s Birger Wernerfelt first described in detail what he called the resource-based view of the firm, a variation on strategic thinking with roots in the work of several earlier scholars.8 The resource-based view highlights the fact that a particularly effective barrier to entry is control of an indispensable and inimitable resource. A firm with such a resource is safe from new entrants who lack and cannot acquire means to produce it. A simple example is De Beers, whose control of a worldwide diamond marketing cartel enabled it to maintain a near-monopoly over the diamond industry for the entire twentieth century. The De Beers cartel broke down after 2000 when some diamond producers decided to market their product outside the De Beers-controlled system, reducing the cartel’s share of the market from 90 percent in the 1980s to about 33 percent in 2013.9 Until then, however, De Beers’s control of an irreplaceable resource gave it a sustainable advantage that yielded a hundred years’ worth of profits.
Super Thinking: The Big Book of Mental Models by Gabriel Weinberg, Lauren McCann
affirmative action, Affordable Care Act / Obamacare, Airbnb, Albert Einstein, anti-pattern, Anton Chekhov, autonomous vehicles, bank run, barriers to entry, Bayesian statistics, Bernie Madoff, Bernie Sanders, Black Swan, Broken windows theory, business process, butterfly effect, Cal Newport, Clayton Christensen, cognitive dissonance, commoditize, correlation does not imply causation, crowdsourcing, Daniel Kahneman / Amos Tversky, David Attenborough, delayed gratification, deliberate practice, discounted cash flows, disruptive innovation, Donald Trump, Douglas Hofstadter, Edward Lorenz: Chaos theory, Edward Snowden, effective altruism, Elon Musk, en.wikipedia.org, experimental subject, fear of failure, feminist movement, Filter Bubble, framing effect, friendly fire, fundamental attribution error, Gödel, Escher, Bach, hindsight bias, housing crisis, Ignaz Semmelweis: hand washing, illegal immigration, income inequality, information asymmetry, Isaac Newton, Jeff Bezos, John Nash: game theory, lateral thinking, loss aversion, Louis Pasteur, Lyft, mail merge, Mark Zuckerberg, meta analysis, meta-analysis, Metcalfe’s law, Milgram experiment, minimum viable product, moral hazard, mutually assured destruction, Nash equilibrium, Network effects, nuclear winter, offshore financial centre, p-value, Parkinson's law, Paul Graham, peak oil, Peter Thiel, phenotype, Pierre-Simon Laplace, placebo effect, Potemkin village, prediction markets, premature optimization, price anchoring, principal–agent problem, publication bias, recommendation engine, remote working, replication crisis, Richard Feynman, Richard Feynman: Challenger O-ring, Richard Thaler, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Ronald Reagan, school choice, Schrödinger's Cat, selection bias, Shai Danziger, side project, Silicon Valley, Silicon Valley startup, speech recognition, statistical model, Steve Jobs, Steve Wozniak, Steven Pinker, survivorship bias, The Present Situation in Quantum Mechanics, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, transaction costs, uber lyft, ultimatum game, uranium enrichment, urban planning, Vilfredo Pareto, wikimedia commons
Even countries get locked into diplomatic arrangements with high switching costs, as in the case of Brexit. A related pair of concepts resulting from moats are barriers to entry and barriers to exit, which prevent people or companies from either entering or exiting a situation or market. A new mobile operating system wanting to compete with Apple’s iOS or Google’s Android would need to re-create an app store populated with thousands of useful apps, a large barrier to entry. Some careers have high barriers to entry, such as expensive years of schooling required. Similarly, some personal contracts, such as noncompetes, partnership agreements, or even marriage, create significant barriers to exit. As with switching costs, barriers to entry and exit can come in many forms, such as trade secrets, like the Coca-Cola formula; high capital investment, like the cost of a huge factory; and government regulations that protect incumbents.
As with switching costs, barriers to entry and exit can come in many forms, such as trade secrets, like the Coca-Cola formula; high capital investment, like the cost of a huge factory; and government regulations that protect incumbents. A specific model centered on barriers to entry due to regulation is called regulatory capture, in which regulatory agencies or lawmakers get captured by the special interest groups they are supposed to be regulating, ultimately protecting these entities from competition. In 2012, Jeff Donn reported on a year-long Associated Press investigation of the U.S. Nuclear Regulatory Commission [NRC], resulting in a lengthy four-part series that noted: Federal regulators have been working closely with the nuclear power industry to keep the nation’s aging reactors operating within safety standards by repeatedly weakening those standards, or simply failing to enforce them. . . . Examples abound. When valves leaked, more leakage was allowed—up to 20 times the original limit.
A&P, 70 absence of evidence is not the evidence of absence, 167 A/B testing, 136 Accidental Empires (Cringley), 253 accountability, 275 acne, 169–71 activation energy, 112–13 actor-observer bias (self-serving bias), 21, 272 Adams, John, 222 adaptability, 121, 129 ad hominem, 226 adverse selection, 46–47 advertising, 103–4, 120, 262 advisers, 44, 45, 296 Affordable Care Act (ACA), 46, 47 Afghanistan, 54, 243 agent, 44–45 aggregation, 205 aggression, obnoxious, 264 agreeableness, 250 AIDS, 233 Airbnb, 276, 288, 292 air pollution, 41 air travel, 53–54 Aldi, 70 Alexander, Christopher, 92 algorithms, 94, 97 Allen, David, 76 all-nighter, 83 alpha, 161, 182 al-Qaeda, 52, 54 alternative hypothesis, 163, 164, 166, 167 altruism, effective, 80 alumni, 119 Amazon, 61, 70, 95–96, 283, 290, 300 American Revolution, 221–22, 239, 240 American Statistical Association, 168 Amway, 217 analysis paralysis, 60–62, 93 anchoring, 14–15, 30, 199 anecdotal evidence, 133, 139, 146 antibiotics, 37, 47–49 Antifragile (Taleb), 2, 105 antifragility, 2–3, 31–33 anti-patterns, 93 AOL, 106 Apollo 13, 4 appeasement, 237 Apple, 103, 104, 231, 241, 258, 289–91, 305, 309 iPad, 290 iPod, 296–97 Newton, 290 approval ratings, 152–54, 158 arbitrage, 282–83 Archilochus, 254 Archimedes, 78 arguing from first principles, 4–7, 31, 207 Ariely, Dan, 14, 222–23 arithmetic, ix–x, 23–24, 30, 178 arms races, 209–12, 214 Ashley Madison, 229 Associated Press (AP), 306 asymmetric information, 45–47 atomic bomb, see nuclear weapons Atwood, Jeff, 253 authority, 219–20, 226 automation, 95, 310 availability bias, 15–18, 30, 33, 300 average, 146, 187 Avon, 217 Aztecs, 243–44 babies, 198, 279 sleep and, 131–32 babysitters, 222 backfire effect, 26 back-of-the-envelope calculation, 299 bacteria, 47–49, 295 bait and switch, 228, 229 bandwagon effect, 202 barriers to entry and barriers to exit, 305 baseball, 83, 145–46, 289 base rate, 157, 159, 160 base rate fallacy, 157, 158, 170 BATNA (best alternative to a negotiated agreement), 77 Battle of Heraclea, 239 Battle of Tsushima, 241 Bayes’ theorem and Bayesian statistics, 157–60 beachhead, 300–301 Beatles, 105 Beautiful Mind, A, 213 beliefs, 103, 107 bell curve (normal distribution), 150–52, 153, 163–66, 191 Bell Labs, 89 benefit of the doubt, 20 benefits: cost-benefit analysis, 177–86, 189, 194 eliminating, 224 net, 181–82, 184 Berlin, Isaiah, 254 Bernoulli distribution, 152 best practices, 92 beta, 162, 182 Better Angels of Our Nature, The (Pinker), 144 Bezos, Jeff, 61–62, 286–87 bias, 3, 139 availability, 15–18, 30, 33, 300 confirmation, 26–28, 33, 103, 159 disconfirmation, 27 groupthink, 201–3 hidden, 139–43 hindsight, 271–72 nonresponse, 140, 142, 143 observer-expectancy, 136, 139 optimistic probability, 33 present, 85, 87, 93, 113 publication, 170, 173 response, 142, 143 selection, 139–40, 143, 170 self-serving, 21, 272 survivorship, 140–43, 170, 272 Big Short, The (Lewis), 289 bike-shedding, 75, 93 Bird, Larry, 246 birth lottery, 21–22, 69 black-and-white thinking, 126–28, 168, 272 black boxes, 94–95 Black Flags rebellion, 276 blackouts, electric, 120 black swan events, 190–91, 193 Blank, Steve, 294 bleeding them dry, 239 blinded experiments, 136 Blockbuster, 106 blowback, 54 Boaty McBoatface, RSS, 35 body mass index (BMI), 137 body temperature, 146–50 boiling frog, 55, 56, 58, 60 bonds, 180, 184 Bonne, Rose, 58 Boot, Max, 239 boots on the ground, 279 Boston Common, 36–38, 42 Boyd, John, 294 Bradley, Bill, 248 brainstorming, 201–3 Brandeis, Louis, 307 breast cancer, 156–57, 160–61 Breathalyzer tests, 157–58, 160 Brexit, 206, 305 bright spots, 300 bring in reinforcements, 279 British Medical Journal (BMJ), 136–37 broken windows theory, 235–36 Broderick, Matthew, 230 Brody, William, 290–91 Brookings Institution, 306 brute force solution, 93, 97 Bryson, Bill, 50 budget, 38, 74–75, 81, 95, 113 national, 75–76 Buffett, Warren, viii, 69, 286, 302, 317, 318 burning bridges, 243 burnout, 82, 83 Burns, Robert, 49 burn the boats, 244 Bush, George H.
Uberland: How Algorithms Are Rewriting the Rules of Work by Alex Rosenblat
"side hustle", Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, autonomous vehicles, barriers to entry, basic income, big-box store, call centre, cashless society, Cass Sunstein, choice architecture, collaborative economy, collective bargaining, creative destruction, crowdsourcing, disruptive innovation, don't be evil, Donald Trump, en.wikipedia.org, future of work, gender pay gap, gig economy, Google Chrome, income inequality, information asymmetry, Jaron Lanier, job automation, job satisfaction, Lyft, marginal employment, Mark Zuckerberg, move fast and break things, Network effects, new economy, obamacare, performance metric, Peter Thiel, price discrimination, Ralph Waldo Emerson, regulatory arbitrage, ride hailing / ride sharing, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, social software, stealth mode startup, Steve Jobs, strikebreaker, TaskRabbit, Tim Cook: Apple, transportation-network company, Travis Kalanick, Uber and Lyft, Uber for X, uber lyft, union organizing, universal basic income, urban planning, Wolfgang Streeck, Zipcar
Contrary to the company’s marketing, he isn’t “sharing” his spare asset and time with his riders: he is working hard to make ends meet. Uber claims drivers can earn upward of ninety thousand dollars per year doing ridehail work,3 but Freddy’s situation is a far cry from the picture of middle-class comfort promoted by the company. Uber rose to prominence as an employer by providing the masses with low-barrier-to-entry employment opportunities—with little more than a car and a background check, anybody could be on the road driving as much or as little as he or she wanted. At its core, Uber does one thing really well: it organizes work for drivers and rides for passengers through a smartphone app. When it comes to marketing, Uber paints itself as the whole package for would-be drivers, pulling off a clever doublespeak.
They then take their Uber-eligible vehicles to local mechanics to be certified as in good working order and upload their driver’s license numbers and auto insurance policy numbers to their accounts on Uber’s website or through the app (drivers I speak with rarely obtain commercial insurance, unless they are obliged to by regulatory requirements). Then, after consenting to a background check that takes under a week in many places, they’re ready to go. In other words, barriers to entry are very few. Part of what makes platforms so valuable is their ability to provide jobs to anyone and everyone in a decentralized workforce. As economic sociologist Vili Lehdonvirta observes: Piece rates are a substitute for more direct managerial control. Employers who pay hourly rates are pickier about whom they accept into their ranks in the first place, whereas one of the strengths of these platforms is that essentially anyone can sign up and start working right away with minimal hurdles.
In the gig economy model, a top-down hierarchical employer is remade into a platform in the image of open-source software culture, where anyone can contribute or share their code to achieve a superior digital product or service.54 And it’s this very act of sharing that suggests a disruption of role identity, because the line between producers and consumers blurs—some scholars use the term produsers for this combined identity.55 By obscuring the incentives of the market economy, the sharing economy painted a portrait of capitalism that felt community-oriented. As a job with a low barrier to entry, driving for Uber is cast in this image, as an “open-source” opportunity for drivers to contribute their labor and earn “extra” money. Technology often blurs the line between paid and unpaid labor, in much the same way that women’s contributions to work are undervalued. The societal failure to acknowledge some forms of women’s work, such as emotional care, as work is premised on the assumption that they like doing it or that it’s easy for them and therefore not work.
Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism by Robin Chase
Airbnb, Amazon Web Services, Andy Kessler, banking crisis, barriers to entry, basic income, Benevolent Dictator For Life (BDFL), bitcoin, blockchain, Burning Man, business climate, call centre, car-free, cloud computing, collaborative consumption, collaborative economy, collective bargaining, commoditize, congestion charging, creative destruction, crowdsourcing, cryptocurrency, decarbonisation, different worldview, do-ocracy, don't be evil, Elon Musk, en.wikipedia.org, Ethereum, ethereum blockchain, Ferguson, Missouri, Firefox, frictionless, Gini coefficient, hive mind, income inequality, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Jane Jacobs, Jeff Bezos, jimmy wales, job satisfaction, Kickstarter, Lean Startup, Lyft, means of production, megacity, Minecraft, minimum viable product, Network effects, new economy, Oculus Rift, openstreetmap, optical character recognition, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, Richard Stallman, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, smart cities, smart grid, Snapchat, sovereign wealth fund, Steve Crocker, Steve Jobs, Steven Levy, TaskRabbit, The Death and Life of Great American Cities, The Future of Employment, The Nature of the Firm, transaction costs, Turing test, turn-by-turn navigation, Uber and Lyft, uber lyft, Zipcar
Platforms have impressive properties based on their raison d’être: simplifying, standardizing, and easing participation. This means that once you’ve got the elements of the platform exactly right and people are interested in the excess capacity you are offering up, it will grow very quickly. The good platform has reduced the cost and effort of participating to its absolute minimum, making the barriers to entry as low as possible. With growth come all the benefits of economies of scale. Platforms can be expensive to build, but the standardization of service provided, inherent in the platform model, means that each additional peer costs very little to add. At a certain point, the benefits are almost all to the upside. With a good idea, a great user experience, and a large market, platforms offer the biggest possible punch per investment dollar.
Platforms that are open, minimalistic, and decentralized—open APIs, protocols, simple rules—leave users so unconstrained that there is no possible way to have the binding constraint of a monopoly. How a platform was financed, and therefore who owns it, will also dictate its likelihood of exercising monopoly if it has the option. A discussion I had with entrepreneurs on this topic led to a lack of consensus. Some platforms (such as cloud computing, credit card processing, and mail servers) lack barriers to entry or protective intellectual property, and therefore they have competitors. For peers, using these platforms is much cheaper than building those assets on their own. I can attest to this, having built so many pieces for Zipcar and having bought them for my last company. And then, “when we don’t like the platform, we can just go elsewhere because we haven’t invested in the assets—switching costs are much lower than if we’d built it ourselves, and sunk costs are much lower likewise,” one CEO told me.
Zipcar, for example, is useful if there is just one car parked near your house, but when people in another city make it possible for you to rent cars there too, there is added value to you, albeit a marginal one. For BlaBlaCar, on the other hand, all the value is derived from network effects: Ridesharing only works when lots of people are participating. These network effects are powerful and can make it very hard for a new entrant to enter the market and go up against an established company with a very large network. The pinnacle in a pure capitalist economy is creating so many barriers to entry that no one else can really compete. That makes for an effective monopoly, yet one without government intervention or regulation. One way to stave off regulation is to act nice. If your co-creators aren’t complaining because they are fairly treated, well served, and heard from, then maybe the platform won’t need regulation but it truly is self-regulating. As we start to see more mature Peers Inc companies, we are also recognizing the huge problem with old-fashioned but unrecognized monopolies.
Ours to Hack and to Own: The Rise of Platform Cooperativism, a New Vision for the Future of Work and a Fairer Internet by Trebor Scholz, Nathan Schneider
1960s counterculture, activist fund / activist shareholder / activist investor, Airbnb, Amazon Mechanical Turk, barriers to entry, basic income, bitcoin, blockchain, Build a better mousetrap, Burning Man, capital controls, citizen journalism, collaborative economy, collaborative editing, collective bargaining, commoditize, conceptual framework, crowdsourcing, cryptocurrency, Debian, deskilling, disintermediation, distributed ledger, Ethereum, ethereum blockchain, future of work, gig economy, Google bus, hiring and firing, income inequality, information asymmetry, Internet of things, Jacob Appelbaum, Jeff Bezos, job automation, Julian Assange, Kickstarter, lake wobegon effect, low skilled workers, Lyft, Mark Zuckerberg, means of production, minimum viable product, moral hazard, Network effects, new economy, offshore financial centre, openstreetmap, peer-to-peer, post-work, profit maximization, race to the bottom, ride hailing / ride sharing, SETI@home, shareholder value, sharing economy, Shoshana Zuboff, Silicon Valley, smart cities, smart contracts, Snapchat, TaskRabbit, technoutopianism, transaction costs, Travis Kalanick, Uber for X, uber lyft, union organizing, universal basic income, Whole Earth Catalog, WikiLeaks, women in the workforce, Zipcar
Point-to-point urban transportation is a fairly uniform service in an industry with a limited amount of competition. Once the technology associated with “e-hail” and logistics is commoditized, which it will be, the economic fundamentals for the emergence of a platform cooperative would appear to be in place. More important, the network effects associated with ridesharing are geographically concentrated. Thus, unlike platforms such as eBay and Facebook, the barriers to entry posed by an incumbent platform may not be onerous. True, passengers gravitate toward the platforms with more drivers, and vice versa. However, these effects are localized. Most potential passengers in New York care little about the scale of a platform in Los Angeles or Minneapolis. They want the service that has the densest supply in their own city. Furthermore, it is relatively simple for a driver to “multihome,” or be a provider on multiple platforms.
As a consequence, instigating the emergence of a platform cooperative doesn’t involve getting millions or billions of users to switch simultaneously. Rather, it might be seeded simply by signing up a few thousand providers. One such effort under way as of the writing of this essay is Swift in New York, a nascent ridesharing effort that hopes to organize as a driver cooperative. Despite these relatively low barriers to entry, a collective that hopes to build a scalable platform business with a cooperative ownership model faces other challenges. During a panel that Juliet Schor and I participated in at the Platform Cooperativism conference, Schor highlighted an issue her research had uncovered about sharing economy cooperatives: that their value system was often better articulated than their value proposition. Put differently, cooperatives tended to focus too much on how the value would be shared rather than on a compelling offer to create the value in the first place.
MEET YOUR FRIENDLY NEIGHBORHOOD TECH CO-OP MICKY METTS When I joined a web-development tech co-op, it changed my life in wonderful ways. I am now able to bring my whole self to my work and have a life that is not divided between work and play. My drive and passion come from doing what I love—building community, and enabling people to have the technical tools they need to maintain and control their autonomy. It is rapidly becoming easier for someone with a great idea to build a company online without much of a barrier to entry. Websites can be set up for free or minimal cost, and cloud services with online website building tools are plentiful. But sophisticated, cutting-edge platforms still require skilled people to build them. A new generation of platform co-ops will need developers who understand both technology and cooperative enterprise. Nobody is better prepared for this work than tech co-ops. What, you might ask, is the difference between tech co-ops and platform co-ops?
A Time to Build: From Family and Community to Congress and the Campus, How Recommitting to Our Institutions Can Revive the American Dream by Yuval Levin
affirmative action, Airbnb, assortative mating, barriers to entry, Bernie Sanders, conceptual framework, David Brooks, demand response, Donald Trump, hiring and firing, Jane Jacobs, Mark Zuckerberg, Menlo Park, Silicon Valley, Snapchat, Steven Pinker, The Death and Life of Great American Cities, the scientific method
It is not so much the media’s power, or the power of its owners, that makes it hard to trust as it is its lack of evident reliability and integrity. In this regard, today’s media crisis looks more like some challenges that American journalism has confronted at times of fragmentation and fracture, rather than in the peculiar era of consolidation in the middle of the twentieth century. Perhaps above all, the media landscape now resembles the circumstances of journalism in the early republic—when barriers to entry were relatively low and the media environment was teeming with mostly small voices. One telling artifact of that era is a brief essay published anonymously by Benjamin Franklin in 1789 called “An Account of the Supremest Court of Judicature in Pennsylvania, viz., The Court of the Press.” Like much of Franklin’s writing, this short essay is at least partially satirical. But it advances a very serious point: that anyone with access to a printing press can make wild, unfounded accusations and destroy the reputation of anyone he might choose to target.
Under the pressure of industrialization, the influence of progressive politics, and the emergence of genuinely mass media, the scale of American life increased dramatically and drove a consolidation of politics, economics, culture, and national identity. One result was the emergence of national newspapers—and later also radio and television—which gradually spurred the development of a standardized, formalized journalism very different from the sort Franklin had described.10 Barriers to entry, particularly barriers of cost and technological complexity, meant that journalism was no longer accessible to anyone who could write clearly or print pamphlets. It was instead the purview of large, organized corporate entities that insisted on some degree of formal structure. Journalism gradually became a profession—with some broadly accepted general standards, means of training new professionals (as journalism schools popped up throughout the country), and a strong ethic and straightforward set of common commitments.
In 2018, Gallup found that only 32 percent of the public expressed trust in the press. At the same time, journalism, like some other key institutions, has gone through an intense process of deconsolidation. Traditional, formal journalistic institutions have grown fewer (and more concentrated), but nontraditional and informal sources of information have sprouted up everywhere—and have applied intense pressures on traditional journalism. As barriers to entry have fallen dramatically thanks to technology, and as public expectations have shifted, today’s journalistic landscape looks more and more like that of Franklin’s time, with its attendant strengths and weaknesses.12 The fact that the degree to which the public has lost faith in the media is on par with the loss of faith in other key institutions suggests there may be no way to counteract this trend without reversing a far larger set of social forces.
Computer: A History of the Information Machine by Martin Campbell-Kelly, William Aspray, Nathan L. Ensmenger, Jeffrey R. Yost
Ada Lovelace, air freight, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Apple's 1984 Super Bowl advert, barriers to entry, Bill Gates: Altair 8800, borderless world, Buckminster Fuller, Build a better mousetrap, Byte Shop, card file, cashless society, cloud computing, combinatorial explosion, computer age, deskilling, don't be evil, Donald Davies, Douglas Engelbart, Douglas Engelbart, Dynabook, fault tolerance, Fellow of the Royal Society, financial independence, Frederick Winslow Taylor, game design, garden city movement, Grace Hopper, informal economy, interchangeable parts, invention of the wheel, Jacquard loom, Jeff Bezos, jimmy wales, John Markoff, John von Neumann, Kickstarter, light touch regulation, linked data, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, Mitch Kapor, natural language processing, Network effects, New Journalism, Norbert Wiener, Occupy movement, optical character recognition, packet switching, PageRank, pattern recognition, Pierre-Simon Laplace, pirate software, popular electronics, prediction markets, pre–internet, QWERTY keyboard, RAND corporation, Robert X Cringely, Silicon Valley, Silicon Valley startup, Steve Jobs, Steven Levy, Stewart Brand, Ted Nelson, the market place, Turing machine, Vannevar Bush, Von Neumann architecture, Whole Earth Catalog, William Shockley: the traitorous eight, women in the workforce, young professional
(To take one example, while the original VisiCalc had contained about 10,000 instructions, mature versions of the Lotus 1-2-3 spreadsheet contained about 400,000 lines of code.) The second barrier to entry was know-how. The sources of knowledge of how to create personal-computer software with an attractive interface had become locked into the existing firms. This knowledge was not something that could be learned from the literature or in a computer science class. The third, and probably the greatest, barrier was access to distribution channels. In 1983 it was said that there were thirty-five thousand products competing for a place among the two hundred products that a typical computer store could stock—three hundred word-processing packages just for the IBM-compatible PC. A huge advertising expenditure, and therefore a large injection of capital, was needed to overcome this barrier. One might have expected that these barriers to entry would have protected the existing firms such as VisiCorp, MicroPro, and Ashton-Tate, but this was not the case.
A more important source of profit was a greatly increased product range—in some cases the number of lines more than tripling—as a result of checkout automation. Many of these new lines were luxury goods with large margins; these were the real generators of profits. For the food industry itself, there were negative impacts of bar coding, much as the rise of supermarkets in the 1930s spelled an end to the owner-operated grocery store. For example, the barriers to entry into food manufacturing became greater. Not only were there the bureaucratic hurdles of UPC allocation to surmount, but penetrating the retail network of national chains now required at minimum an operation of substantial scale. Indeed, a curious development of the late twentieth century was the emergence of folksy specialty foods—apparently made by small-scale food preparers, but in fact mass-produced and sold by national chains.
ARD was the prototype venture-capital firm, and the development of such financial operations was a key factor responsible for the dynamism of the new high-tech industries in the United States. Most overseas countries found it very difficult to compete with US firms until they established their own venture-funding organizations. Olsen’s aim was to go into the computer business and compete with the mainframe manufacturers. However, in the late 1950s this was not a realistic short-term goal. The barriers to entry into the mainframe business were rising. In order to enter the mainframe business, one needed three things, in addition to a central processing unit: peripherals (such as magnetic tape and disk drives), software (both applications and program development tools), and a sales force. It would cost several hundred million dollars to establish all these capabilities. Because of these formidable barriers to entering the computer industry, Doriot convinced Olsen to first establish the firm with more attainable objectives.
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
Indeed, the price in an oligopolistic industry will tend to gravitate toward what it would be in a pure monopoly, so the contenders are fighting for slices of the largest possible revenue pie.39 At first blush, this is a pretty accurate picture of the commanding heights of the U.S. economy in the twentieth and twenty-first centuries. In few areas have the claims about the Internet been greater than that it would empower consumers, break down barriers to entry, and create much greater market competition in traditional industries and online. Although some industries have been turned upside down, as a rule the digital era has seen a continued, arguably accelerating, rate of monopoly in the economy. One measure for this is demonstrated by industry concentration ratios, meaning the percentage of sales controlled by a small number of firms.40 Chart 5 shows that both the number and percent of manufacturing industries (for example, automobile production) that have a four-firm concentration ratio of 50 percent or more have risen dramatically since the mid-1980s, the digital era.
As Jaron Lanier put it, “the old-media empires were put on a path of predictable obsolescence.”137 The Internet appeared to pose this threat for three reasons. First, it opened the possibility of making it much easier for new players to enter media markets. As the Internet became the dominant platform, prospective entrants would no longer need major capital to get a broadcasting license or buy an existing film studio. With barriers to entry eliminated, the digital era might make it possible for another giant with an enormous bankroll, say a Microsoft or an AT&T, to successfully use the Internet as a platform to get in the media game, whereas it would have been unthinkable otherwise. Like the telephone giants, the media conglomerates and their lobbyists argued that ownership regulations were no longer relevant to their industries and should be abolished.
“I suppose I shouldn’t say this,” Bill Gates acknowledged back in 1996 when discussing the importance of setting industry standards favorable to Microsoft, “but in some ways it leads, in a product category, to a natural monopoly.”17 Microsoft has been able to exploit the dependence of a wide range of software applications on its underlying operating system in order to lock in its system seemingly permanently, allowing it to enjoy long-term monopoly-pricing power. Any competitor seeking to introduce a new, rival operating system, faces an enormous “applications barrier to entry.”18 Some of this goes on beneath the surface. Consider the H.264 codec, owned by the MPEG LA group, with licenses held by Microsoft, Apple, and others. It is quickly becoming the standard for online video, currently getting 66 percent of the market. With a bottleneck on Internet traffic like this, the owners of H.264 can create many “billable moments.” Economists often term shakedowns like this “economic rents,” referring to the undeserved income economic actors receive by virtue of their ownership of a scarce resource, independent of the cost of production or reproduction.19 Or consider wireless powerhouse Qualcomm.
Systematic Trading: A Unique New Method for Designing Trading and Investing Systems by Robert Carver
asset allocation, automated trading system, backtesting, barriers to entry, Black Swan, buy and hold, cognitive bias, commodity trading advisor, Credit Default Swap, diversification, diversified portfolio, easy for humans, difficult for computers, Edward Thorp, Elliott wave, fixed income, implied volatility, index fund, interest rate swap, Long Term Capital Management, margin call, merger arbitrage, Nick Leeson, paper trading, performance metric, risk tolerance, risk-adjusted returns, risk/return, Sharpe ratio, short selling, survivorship bias, systematic trading, technology bubble, transaction costs, Y Combinator, yield curve
Note this is different from earning a liquidity premium by holding illiquid assets for long periods. Liquidity providers behave as market markets, trying to capture the spread that less patient traders don’t mind paying. This is definitely negative skew territory as unforeseen price spikes can quickly wipe out large quantities of patiently accumulated small gains. Barriers to entry, returns to effort and cost Some trading rules have barriers to entry in the form of costs or investments that need to be made to realise profits from them. High frequency strategies require renting expensive servers located physically within exchange buildings, as well as developing specialised software. The returns of such systems need to be high enough to compensate for the investment needed, as well as their much higher costs.
Fast (holding period: microseconds to one day) The final part of the spectrum goes from day trading down to millisecond level high frequency trading and market making. Typical raw Sharpe ratios could be very high due to the number of trades made, but costs will chew up a big chunk of profits. Special execution algorithms are needed to reduce costs below normal levels. Back-testing requires sophisticated models of the evolution of the order book. There are higher barriers to entry than at slower speeds; co-located servers and fully automated software is needed. Also faster strategies are likely to have limited capacity. Capital requirements are small as positions are not held overnight, but there is always the danger of extreme losses due to markets gapping, or systems going rogue. It is impossible for humans to monitor trading activity in real time so you need very tight controls and good monitoring systems.
Non price, fundamental data, comes in two main flavours: micro and macro. Micro data is about a specific asset, for example the yield of a particular bond or the PE ratio of a company. Macro data such as inflation and GDP growth covers entire economies. 43 Systematic Trading I have worked extensively with both fundamental and technical data. Technical systems are easier to build and run, but in another example of barriers to entry the additional effort required for including fundamental rules is usually rewarded with higher returns. The examples in this book are all technical, but only because they are simpler to explain. Portfolio size There are successful traders who only ever trade one futures contract. At the other extreme large equity index funds could have thousands of holdings. Remember that the law of active management shows that diversification is the best source of additional risk adjusted returns.
The Truth Machine: The Blockchain and the Future of Everything by Paul Vigna, Michael J. Casey
3D printing, additive manufacturing, Airbnb, altcoin, Amazon Web Services, barriers to entry, basic income, Berlin Wall, Bernie Madoff, bitcoin, blockchain, blood diamonds, Blythe Masters, business process, buy and hold, carbon footprint, cashless society, cloud computing, computer age, computerized trading, conceptual framework, Credit Default Swap, crowdsourcing, cryptocurrency, cyber-physical system, dematerialisation, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Ethereum, ethereum blockchain, failed state, fault tolerance, fiat currency, financial innovation, financial intermediation, global supply chain, Hernando de Soto, hive mind, informal economy, intangible asset, Internet of things, Joi Ito, Kickstarter, linked data, litecoin, longitudinal study, Lyft, M-Pesa, Marc Andreessen, market clearing, mobile money, money: store of value / unit of account / medium of exchange, Network effects, off grid, pets.com, prediction markets, pre–internet, price mechanism, profit maximization, profit motive, ransomware, rent-seeking, RFID, ride hailing / ride sharing, Ross Ulbricht, Satoshi Nakamoto, self-driving car, sharing economy, Silicon Valley, smart contracts, smart meter, Snapchat, social web, software is eating the world, supply-chain management, Ted Nelson, the market place, too big to fail, trade route, transaction costs, Travis Kalanick, Turing complete, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, universal basic income, web of trust, zero-sum game
These include the domain name system (DNS) managers and hosting service providers, companies whose servers occupy URLs—those specially assigned areas of the World Wide Web around which we navigate our Internet surfing—and host the files that make up the clients’ Web sites that point to those Internet addresses. Anyone who has set up a Web site has dealt with such outfits. All of them charge fees. The more files and pages that need hosting, the more they charge. All these solutions worked for those who could afford them. But, inevitably, the added transaction costs translated into barriers to entry that helped the largest incumbents ward off competitors, limiting innovation and denying billions of financially excluded people the opportunity to fully exploit the Internet’s many possibilities for advancement. It’s how we’ve ended up with Internet monopolies. Those with first-mover advantages have not only enjoyed the benefits of network effects; they’ve been indirectly protected by the hefty transaction costs that competitors face in trying to grow to the same scale.
This low-cost solution to the double-spending challenge launched a factory of ICOs as issuers found an easy way to tap a global investing community. No painful negotiations with venture capitalists over dilution and control of the board. No wining and dining of Wall Street investment banks to get them to put their clients on the order book. No wait for SEC approval. Just go straight to the general public: here are my tokens; they’re cool, buy them. It was a simple, low-cost formula and it lowered the barrier to entry for some brilliant innovators to bring potentially world-changing ideas to market. Unfortunately, it was also a magnet for scammers. The example that shone a light on what was possible with the ERC20 was a notorious one: The DAO, which, as we discussed in the previous chapter, fell prey to a massive token theft in 2016. When Stephan Tual, the founder of Slock.it, the startup that created The DAO, planned an ICO with ERC20 DAO tokens, he figured they’d raise $20 million, maybe, enough money to experiment with this unorthodox new investing model.
If they weren’t part of the same network, the payment couldn’t go through as the respective software would not be interoperable. Other car manufacturers might not want to use a permissioned verification system for which, say, GM, or Ford, is the gatekeeper. And if they instead formed a consortium of carmakers to run the system, would their collective control over this all-important data network create a barrier to entry for newer, startup carmakers? Would it effectively become a competition-killing oligopoly? A truly decentralized, permissionless system could be a way around this “walled-garden” problem of siloed technology. A decentralized, permissionless system means any device can participate in the network yet still give everyone confidence in the integrity of the data, of the devices, and of the value being transacted.
Irresistible: The Rise of Addictive Technology and the Business of Keeping Us Hooked by Adam L. Alter
Alexey Pajitnov wrote Tetris, augmented reality, barriers to entry, call centre, Cass Sunstein, cognitive dissonance, Daniel Kahneman / Amos Tversky, easy for humans, difficult for computers, en.wikipedia.org, experimental subject, game design, Google Glasses, IKEA effect, Inbox Zero, Kickstarter, loss aversion, Mark Zuckerberg, Menlo Park, mental accounting, meta analysis, meta-analysis, Oculus Rift, Richard Thaler, side project, Skype, Snapchat, Steve Jobs, telemarketer
My youngest kid who’s seven years old loves it. It’s incredibly simple and stupid. Do you know Crossy Road?” I told him I didn’t. “See how long it takes you to figure out how to play the game.” It took me three seconds. All your avatar has to do is cross the road without getting run over. He moves with simple taps of the screen. This “simple and stupid” game, like Super Mario Bros., is designed so there are no barriers to entry. The minute you see the screen, you know as much as you need to know to start making progress. “This reminds me of another game . . .” I told Goldhill before he interrupted me: “It reminds everyone of some other game they’ve played.” Crossy Road borrows elements from so many games that, if you’ve played just one or two of them, you’ve effectively played them all. The Game Show Network hosts and produces games, but the organization is best known for its TV game shows.
The Game Show Network hosts and produces games, but the organization is best known for its TV game shows. They work on the same principle. “If you watch a good game show that you’ve never seen before, within a couple of minutes of tuning in the rules will either be clear to you, or they’ll actually be explained to you,” Goldhill said. “Part of the design of a good game show is that there are no barriers to entry. And there’s a worldwide vernacular. No matter where you are, if you tune in to a game show, they share the same set of basic elements. If you look on YouTube, you’ll see fifteen-, sixteen-, seventeen-year-olds designing their own game shows, and they use that same vernacular.” I thought back to the games that had recently occupied my time and attention. Almost without exception, they were remarkably simple.
., Louis, 243 cliffhangers, 191–213 binge-watching and, 208–12, 287–89, 290–91 disarming technique for, 287–89, 291 micro-, 205–8 in songs, 194–96 in The Sopranos, 201–3 unresolved real-life crime documentaries and, 196–201 Zeigarnik Effect and, 193–94 Coca-Cola, 38 cocaine, 29, 32–39, 71 Christison’s discovery of effects of, 32 Freud’s research on and addiction to, 33–36 Pemberton’s French Wine Coca (Coca-Cola) and, 37–38 coca plant, 31, 32 Cognitive Behavioral Therapy for Internet Addiction (CBT-IA), 256–57 cognitive decline, effect of multitasking games on, 312–13 Cohen, Gaby, 115–16 color coding, 157–58 comments, 217 communication skills, 40–41, 242–43 The Company of Others, 269 compulsion, 20–21 compulsive shopping, 205–8 Connolly, Billy, 83–84 Contrera, Jessica, 41–42 Cooper, Grahame, 230–32 cost-benefit calculations, 5 Cow Clicker, 313–14 creation requiring labor and effort, and addictive acts, 173–74 credit cards, 188 Crossy Road (game), 162–63 Csikszentmihalyi, Mihaly, 176 cue, of habits, 268 Cushman, John, 49–50 Dai, Xianchi, 266 Daimler, 277 DANVA2 (Diagnostic Analysis of Nonverbal Behavior), 238–40 Darling Darleen (blog), 206 Davies, Lynn, 99–100 DDB Stockholm, 293–95 Dement, William, 19 Demetricator, 285–86 Demos, Moira, 199 Denby, David, 241 dental hygiene for children, gamification of, 300 destructiveness, and addiction, 76–78 Diagnostic Analysis of Nonverbal Behavior (DANVA2), 238–40 Diagnostic and Statistical Manual of Mental Disorders (DSM), 80, 254–55 digital amnesia, 242 disarming technique, for cliffhangers, 287–89, 291 disguised losses, 133–34 distraction, 267–73 Dixon, Mike, 133–34 Doan, Andy, 230–31, 232, 244 Dollar Auction Game, 149–52 Donkey Kong (game), 148 “Don’t Stop Believin” (Journey), 202 dopamine, 71–72 Berridge’s rat experiments blocking production of, 85–88 Parkinson’s disease treatments, side effects of, 82–85 Dorbowski, Richard, 215 Dorshorst, Ryan, 214, 216 Dredge, Stuart, 142 Duhigg, Charles, 268 Dunning, Dave, 144–45 Durst, Robert, 199 Duval Guillaume Modem, 121–22 early adulthood, as highest risk period for addiction, 74–75 Earth, Wind & Fire, 194 ease, effect of replacing challenges with, 167–69 education, gamification of, 302–5 Edwards, Griffin, 161 email, 4, 23, 109–11 frequency of checking office, and disruptive effect of, 109–10 study preventing workers from accessing, findings of, 110–11 emotional amblyopia, 232 emotions, reading, 238–40 empathy, 40–41 empowering language, and habit formation, 272–73 endless loop, in songs, 194–95 endless runner games, 164 end of history illusion, 318 energy systems, 155–57 Entertainment Tonight, 196 Entertainment Weekly, 197 environment and circumstance, role in addiction of, 4, 46–67 memory and, 57–60 rat experiments, of Olds and Milner and, 52–57 Routtenberg’s monkey experiments and, 57–60 Vaisberg’s World of Warcraft addiction and, 60–66 Vietnam War veterans’ heroin addiction and, 46–52, 59–60 escalation, 167–90 creating something, sense of, 173–74 ease, effect of replacing challenges with, 167–69 flow and, 176–79 hardship and, 168–69 ludic loops and, 177–79 near wins and, 181–83 stopping rules, disruption of, 184–90 in Super Hexagon, 179–81 in Tetris, 170–73, 175–76 zone of proximal development and, 174–76 ether precipitation, 46–47 euphoria, 55 “Evil” (Wonder), 195 exercise addiction, 18–19, 112–16, 185–86, 306 extrinsic rewards, 261 Facebook, 3, 4, 5, 127–28, 216, 217, 318, 319 FaceMash, 224 Facetune, 220 FarmVille (game), 157–58, 164–65, 316 Federal Trade Commission (FTC), 313 feedback, 121–46 button pushing and, 121–25 juice and, 137–39 likes and, 127–29 losses disguised as wins and, 133–34 mapping and, 139 microfeedback, 136–37 motivated perception and, 144–45 near wins and, 145–46 slot machine gambling and, 130–36 unpredictability and, 126–27 variable reinforcement and, 143 video games and, 136–43, 158–59 virtual reality and, 139–43 Ferriss, Tim, 279–80 Feshbach, Seymour, 264 Festinger, Leon, 275–76 Fishbach, Ayelet, 266 Fisher, Helen, 75–76 Fiske, Susan, 305–6 Fitbit, 113–14, 185, 286, 295 fitness trackers, 113–14 fitness watches, 2–3 Fitocracy, 299 Flappy Bird, 42–43 flash-sale websites, 205–7 Fliess, Wilhelm, 34 flow, 176–79 Flow (Csikszentmihalyi), 176 Foddy, Bennett, 16, 136–37, 138–39, 189, 289–90 “For the Love of Money” (Polk), 118 Frances, Allen, 23 FreeRice.com, 296–97 French Wine Coca, 37 Freud, Sigmund, 33–36, 264, 265, 275 friendship formation, 275–77 Fritz, Michelle, 116 The Fun Theory (ad campaign), 293–95 gambling, 129–36, 144–46 Game Boy, 171 Game Show Network, 163 game shows, TV barriers to entry, lack of, 163 Larson’s game show success and addiction to goal-setting, 100–106 gamification, 293–316 cognitive decline, effect of multitasking games on, 312–13 criticisms of, 312–15 DDB Stockholm’s Fun Theory ad campaign and, 293–95 of dental hygiene for children, 300 of education, 302–5 of fitness, 299 health apps and, 300–302 medical benefits of, 309–12 points, badges and leaderboard elements of, 298, 299 of SAT vocabulary learning, 296–97 therapeutic properties of, 309–12 variety and, 299 of workplace, 305–9 Garfors, Gunnar, 112 Gillan, Claire, 71 Gilt, 205–7 Glu Games, 159 Gneezy, Uri, 315 goal-setting, 5–6, 93–120 Beamon’s long-jump record and, 98–100 as biological imperative, 107 email and, 109–11 exercise addiction and, 112–16 Internet and, 111–12 Larson’s game show success and addiction to, 100–106 marathon runners and, 95–97 Parkinson’s patients and, 93–95 rise in, since 1950s, 107–9 social comparison and, 118–19 streaks and, 115–16, 117 systems approach as alternative to, 117–18 Godfather, The (movie), 202 Gold, Lesley, 2 Golden Rule, 268, 269–70 Goldhill, David, 131, 143, 145, 162–63, 169 Goldstein, Dan, 209 Google, 298 Google+, 128 Google Books, 167 Google Cardboard, 141–42 Google Glass addiction, 44–45 Google Trends, 210–11, 212 Graham, Ruth, 200 Griffiths, Mark, 24–26 Groceryships, 119 Grosser, Benjamin, 285–86 Guinness Book of World Records, 111, 171–72 Guinness World Records, 112 habits, 268–73 elements of, 268–69 empowering versus disempowering language and formation of, 272–73 forming new, difficulty of, 271–72 replacing bad routines with good, 268–71 underlying motives, tailoring routine override to, 270–71 Hagtvedt, Henrik, 272 Haier, Richard, 172 HappyBidDay.com, 152 hardship, 168–69 hardship inoculation, 241–42 harmonious passions, 21, 22 Harris, Tristan, 3 Harvest Moon (game), 164 HBO, 199 health apps, gamification of, 300–302 Health Lab, 302 Heath, Robert, 55 Heldergroen, 277 heroin brain patterns and, 71 harm score for, 48–49 military crackdown on use of, 49–50 Robins’ study on relapse rates of returning vets, 51–52 Vietnam War veterans and addiction to, 46–52, 59–60 Hilton Garden Inn, 308 Hipstamatic, 214–17 Hochmuth, Greg, 3 Hodson, Gordon, 265 Holesh, Kevin, 13–15 Hollywood (game), 158–59, 165, 316 Holmes, Emily, 311 Hong, James, 221–24, 226 hooks Dollar Auction Game and, 149–52 penny auction websites and, 152–55 Hot or Not (website), 221–26 How to Fail at Almost Everything and Still Win Big (Adams), 117 Hsee, Chris, 186–87 Huffington, Arianna, 68–69 Hunter, Dan, 298 incomplete tasks, tension arising from, 193–94 infants active engagement versus passive viewing, 247 attention spans of, 39–40 qualities of healthy screen time for, 246–47 recommendations for media consumption by, 245–47 response to screen time of, 244–45 transfer of learning and, 246–47 visual response to contour and motion of, 19–20 infants, visual attention in, 19–20 Instagram, 3, 4, 5, 9, 122, 128, 129, 216–17, 218, 318, 319 instinctive survival behaviors, 73–74 Internet addiction in China, 251–54 DSM recognition of, 254–55 goal-setting and, 111–12 motivational interviewing and, 258–62 scope of, 26 test for, 26–27 treatment approaches, 248–62 Internet Addiction Diagnostic Questionnaire (IADQ), 255–56 Internet Addiction Test, 256 intrinsic rewards, 261 iPad, 1, 4, 165, 241, 244–45, 256 iPhone, 165, 241, 256 iPhone apps, 214–17 Isaacson, Walter, 2 “Is the world’s best-selling P.C. game ever still worth playing today?”
Rigged Money: Beating Wall Street at Its Own Game by Lee Munson
affirmative action, asset allocation, backtesting, barriers to entry, Bernie Madoff, Bretton Woods, business cycle, buy and hold, buy low sell high, California gold rush, call centre, Credit Default Swap, diversification, diversified portfolio, estate planning, fiat currency, financial innovation, fixed income, Flash crash, follow your passion, German hyperinflation, High speed trading, housing crisis, index fund, joint-stock company, money market fund, moral hazard, Myron Scholes, passive investing, Ponzi scheme, price discovery process, random walk, risk tolerance, risk-adjusted returns, risk/return, stocks for the long run, stocks for the long term, too big to fail, trade route, Vanguard fund, walking around money
Why was this important, outside of being the first stock? First of all, this was the first joint-stock company, meaning regular people like middle class merchants were able to invest in a public company. On September 1 the public subscription period was over. Five hundred thirty-eight subscribers, including craftsmen and small entrepreneurs, were given shares that were freely transferable.1 Before this there was a barrier to entry for investments. The idea of selling a piece of a company in order to lower the risk to any one person was not new, but allowing anybody with the money to buy shares was ground breaking. The Amsterdam Stock Exchange was established the same year just so people could trade shares of this new corporation. Why did it take so long for the madness to start? First off, you can’t sell stock to those that have no money, freedom, or laws protecting ownership.
The bottom line is too many people have too much information and all want the same thing—returns that are better than their peers. Put it this way. If more and more people get in the game, there is less for each person to take. The pie can only get cut up so many times. What is worse, the pie may not get bigger as more people take a slice. Nobody knows the future of investing, but as long as electronic trading lowers the barrier to entry, an endless stream of better players will look to take a piece of the action. At least the price of admission to the Magic Kingdom has only increased about 15 times since 1970, not the 60 times increase of the company’s stock. The S&P 500’s 12 times return would have left you a few bucks short of a ticket. Welcome Home, G.I. It’s 1950 and you have $10,000 to invest. Maybe you worked for it, and maybe you inherited the money, but you have it and want to set it aside for the long term.
While I will keep investing in the sector as long as it is profitable, there is a bad taste in my mouth that J.P. Morgan, UBS, Credit Suisse, Morgan Stanley, Cushing, and ALPS all think they can play everyone for a fool and fix the price to trade a MLP index. The Virus Goes Airborne From the humble beginnings of a few major indexes, the ETF industry has been busy providing all things to all people. At first I was excited about the barriers to entry being torn down. Years ago I wanted to make a bet on Malaysia. Due to regulatory issues it was hard to own stocks in that country, but a new ETF that tracked the Malaysian market made exposure easy. From the first U.S. ETF in 1993, then a handful throughout most of the 1990s, the turn of this century saw the explosion. By the end of 2001 there were almost 100, then 600 by 2007, and today we are at well over 1,000 and counting.
The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian
activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, disruptive innovation, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game
In the financial world, as a New York Times article put it, “they are focused on transforming the economics of underwriting and the experience of consumer borrowing—and hope to make more loans available at lower cost for millions of Americans.”8 Together with the expansion of P2P (peer-to-peer) interactions and crowdfunding, these approaches offer the possibility of improving the provision of financial services (especially to badly served segments of the population), lowering barriers to entry, reducing old-style overheads, and broadening sources and uses of loanable funds.9 But it is also an area where regulation is lagging and modes of operation are yet to be properly tested in a general economic downturn; it is also an approach whose collective rigor has yet to be subjected to a full market cycle. Recognizing the ongoing shifts, regulators and supervisors are now playing catch-up, and they are looking to step up their efforts lest they end up fighting the last war.
In the process, finance will be slowly following a path already trodden by technology and, more recently and even less deterministically, by media. And again the tendency will be to transform over time a normal bell-shaped distribution of expected outcomes into more of a bimodal one. The upside of this financial democratization phenomenon is considerable, and it is particularly powerful because it lowers barriers to entry and better-tailored solutions. It widens the sources and uses of loanable funds, reduces overheads and other intermediation costs, and improves the financial terms offered to end users. The influx of greater cognitive diversity makes the industry more dynamic, including by encouraging providers to go beyond their traditional client acquisition and product focus to also encompass more holistic customer-centered solutions.
Though these more comprehensive models have yet to navigate a full economic cycle, a more comprehensive understanding of both financial mindset and behavior is emerging, and they are being enhanced by work on different “financial personalities.” There are also downsides. Some innovation-driven activities resemble the Wild West. Most worrisomely, badly regulated and abused P2P platforms can end up facilitating the financing of illicit activities—from drugs to terrorism. Like many major innovations in history that significantly lowered the barriers to entry, the natural inclination of humans is to initially overproduce and overconsume the now more easily available activity. With time, this converges to a more stable equilibrium—but often only after a process involving quite a few highs and lows, along with a series of improbables and unthinkables. CHAPTER 28 PUTTING IT ALL TOGETHER “Advances in technology have always disreupted the status quo.
Open Standards and the Digital Age: History, Ideology, and Networks (Cambridge Studies in the Emergence of Global Enterprise) by Andrew L. Russell
American ideology, animal electricity, barriers to entry, borderless world, Chelsea Manning, computer age, creative destruction, disruptive innovation, Donald Davies, Edward Snowden, Frederick Winslow Taylor, Hacker Ethic, Howard Rheingold, Hush-A-Phone, interchangeable parts, invisible hand, John Markoff, Joseph Schumpeter, Leonard Kleinrock, means of production, Menlo Park, Network effects, new economy, Norbert Wiener, open economy, packet switching, pre–internet, RAND corporation, RFC: Request For Comment, Richard Stallman, Ronald Coase, Ronald Reagan, Silicon Valley, Steve Crocker, Steven Levy, Stewart Brand, technoutopianism, Ted Nelson, The Nature of the Firm, Thomas L Friedman, Thorstein Veblen, transaction costs, web of trust
The ASA’s clever consensus-building process – a superior alternative to the courts and to commissions, in the eyes of its many advocates – created the basis of widely adopted rules for creating, maintaining, and disputing standards. In other words, the ASA established standards for setting standards.46 A standards process that calls itself open will usually adopt clear rules for consensus and due process, but in recent years standards committees have democratized participation in deliberations by lowering barriers to entry or eliminating membership fees or requirements altogether. The most prominent example of radical openness is the Internet Engineering Task Force, a group that conducts much of its work on public email lists that anyone can join. In practice, discussions tend to focus on specialized topics that require advanced knowledge of computer networking to understand, thus having the effect of excluding substantive contributions from a vast majority of the general public.
In practice, discussions tend to focus on specialized topics that require advanced knowledge of computer networking to understand, thus having the effect of excluding substantive contributions from a vast majority of the general public. In sum, it is possible to distill an ideology of open standards from the spectrum of open standards definitions that presently exist. First, open standards strive to honor the ideals of participatory democracy, including commitments to fairness, transparency, due process, and rights of appeal. Second, open standards embrace the ideal of a vibrant market economy that has negligible barriers to entry and liberal terms for using standardized technologies. Third, proponents of open standards share the implicit conviction – which, in some cases, manifests itself as a religious zeal – that their work is just and that the forces of technological and social progress are on their side.47 They share a common foe – namely, anyone who advocates closed or centralized control over the production and use of standards.
The emergence of the “voluntary consensus” model of committee standardization, significant as it was, begs a related question: How did monopoly firms develop standards, and how did their standardization efforts fit within the collaborative, consensus-based model developed in the late nineteenth and early twentieth centuries within trade associations and engineering societies? Conventional answers to these questions point to the power of the managerial hierarchies that exist within monopoly firms. In the conventional view, monopolies create standards through a hierarchical, closed, and proprietary process as part of a broader strategy to erect barriers to entry and maintain centralized control over a given market or markets. They capture the network effects that standardization generates. Monopolies, in this view, act in a monolithic and almost petulant manner: their goal is to reduce variety, stifle outside innovations, lock in users, and preserve their control.2 From the late nineteenth century to the present day, critics of the monopoly Bell Telephone System have found ample evidence to support this conventional view of monopoly standardization.
Virtual Competition by Ariel Ezrachi, Maurice E. Stucke
Airbnb, Albert Einstein, algorithmic trading, barriers to entry, cloud computing, collaborative economy, commoditize, corporate governance, crony capitalism, crowdsourcing, Daniel Kahneman / Amos Tversky, David Graeber, demand response, disintermediation, disruptive innovation, double helix, Downton Abbey, Erik Brynjolfsson, experimental economics, Firefox, framing effect, Google Chrome, index arbitrage, information asymmetry, interest rate derivative, Internet of things, invisible hand, Jean Tirole, John Markoff, Joseph Schumpeter, Kenneth Arrow, light touch regulation, linked data, loss aversion, Lyft, Mark Zuckerberg, market clearing, market friction, Milgram experiment, multi-sided market, natural language processing, Network effects, new economy, offshore financial centre, pattern recognition, prediction markets, price discrimination, price stability, profit maximization, profit motive, race to the bottom, rent-seeking, Richard Thaler, ride hailing / ride sharing, road to serfdom, Robert Bork, Ronald Reagan, self-driving car, sharing economy, Silicon Valley, Skype, smart cities, smart meter, Snapchat, social graph, Steve Jobs, supply-chain management, telemarketer, The Chicago School, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, Travis Kalanick, turn-by-turn navigation, two-sided market, Uber and Lyft, Uber for X, uber lyft, Watson beat the top human players on Jeopardy!, women in the workforce, yield management
The belief is that companies cannot exercise market power for long when entry into markets would be timely (generally under two years), likely (profitable for the entrants), and sufficient (the entrants would attain sufficient business to prevent the exercise of market power by the incumbent firms).17 If a firm raises prices above, or degrades quality below, competitive levels, entrants and incumbents would seize the opportunity to profit and competition would be fully restored. Whether this is empirically true is another matter.18 But there is little dispute that market power can be sustained in markets with significant barriers to entry and expansion, and that “entry analysis constitutes an important element of the overall competitive assessment.”19 Thus, as entry barriers significantly decrease, so too should concerns about likely anticompetitive effects. In the online world, one doesn’t need brick-and-mortar retail outlets to compete. One can easily design and create a website, offer ser vices online, and reach customers with the help of online advertising and unbiased search engines.
The European Commission recognized in AKZO how discrimination “between similarly-placed Economic and Social Perspectives • • • • 119 customers is expressly prohibited . . . when it places certain firms at a competitive disadvantage.” The anticompetitive effect of AKZO’s differential pricing “involved not so much direct injury to customers but rather a serious impact on the structure of competition at the level of supply by reason of its exclusionary effect.”10 Increase barriers to entry or expansion, by making entry or expansion difficult or excessively costly. The U.K. Competition and Markets Authority, for example, noted that “where a fi rm uses consumer data to separate different groups of customers and offers a different price to each group,” small or new firms “would not have a substantial fixed base of existing customers, and so may be unable to compete as successfully to target customers through offering them lower prices.”11 Deprive smaller rivals or new entrants of attaining sales or distribution sufficient to achieve efficient scale, thereby raising the smaller companies’ costs and thwarting their competitiveness.
When faced with questions about behavioral discrimination, participants were more united in their approach. Some felt manipulated, others exposed. Many indicated lack of belief as to the ease with which their actions may be affected by simple “tricks of the trade.” As companies’ data collection and analytics improve, so too will their ability to discriminate. Targeted pricing may, in particular, be sustainable where a market is stable and exhibits barriers to entry or expansion, limited outside options, heterogeneous or branded goods, imperfect information flows, or the ability to distort or inhibit information exchange. It may also be sustained in markets that attract loyal customers or where companies develop and customize distinguishable products for par ticu lar purchasers.57 Even if companies can discriminate, this does not necessarily mean that they will.
Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson
Albert Einstein, barriers to entry, Bernie Madoff, business cycle, collapse of Lehman Brothers, corporate governance, corporate social responsibility, creative destruction, credit crunch, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, Kickstarter, mass immigration, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, plutocrats, Plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania, Vilfredo Pareto, wealth creators
Ray Kroc sold equipment to the McDonald brothers in their single Californian hamburger restaurant. In the brothers’ fabulous formula, Kroc saw something that even the brothers themselves didn’t see, and he duly developed and franchised the concept elsewhere. A few years later he bought the brothers out for $2.7 million. Before long his purchase was worth billions – built on their brainchild and his execution. Often it is necessary to buy an operation to overcome regulatory barriers to entry: perhaps planning, licences or suchlike. To develop a mine or quarry you will probably have to agree to a lease and rights to extract minerals with a landowner. When I entered the dentistry field in 1996, we had to buy a dental body corporate, which at the time was the only legal way for a non-dentist to trade as a dental practice in the UK. Over the following years, these obscure vehicles multiplied in value tenfold as more entrants bid up their prices.
Both Peter Lynch and Warren Buffett – two of the legendary investors of our time – agree that longer-term investing in outstanding companies produces above-average returns. The effective private investor focuses on a few sound businesses, running winners and dropping losers. Have they found a solid niche? It’s unusual to find big new British companies growing rapidly. I am much more likely to identify opportunities with vast upside among small, specialist companies. Such businesses should possess decent barriers to entry, be it a brand, patent, contracts, franchise or other proprietary situation. Ideally the company should be unique, since it must compete against large competitors who will be better financed. In the real world such companies should have products or services that are evolutionary rather than revolutionary, since markets can take years to accept radical changes. Such drawn-out plays can produce low annualized returns that fail to match those produced by small companies delivering follow-on, adapted technology that is usually quicker to profit.
‘Even these hardships will be grand things to look back on’ Virgil X & Y in a downturn They say the X & Y generations are the most entrepreneurial in history. But none of them have been in business during a recession. This is the service economy era. Younger entrepreneurs I meet are running marketing agencies, web-design firms, recruitment companies, finance businesses, software houses, telecom firms. These operations required limited capital to get going and faced few barriers to entry, compared to periods when heavy industry ruled. The Internet has helped unleash ambition and enterprise in an unprecedented way. But I worry that a lot of these companies are fragile constructs, not built to weather severe conditions. For founders who have only ever known expansion, challenging times are a harsh wake-up call. They will suffer bad debts when customers go bust. They experience real cost inflation for the first time in decades – and desperately try to pass on price rises, just when customers are harder to come by.
Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum, Joshua Pearl, Joseph R. Perella
asset allocation, asset-backed security, bank run, barriers to entry, business cycle, capital asset pricing model, collateralized debt obligation, corporate governance, credit crunch, discounted cash flows, diversification, fixed income, intangible asset, London Interbank Offered Rate, performance metric, shareholder value, sovereign wealth fund, stocks for the long run, technology bubble, time value of money, transaction costs, yield curve
Leading and Defensible Market Positions Leading and defensible market positions generally reflect entrenched customer relationships, brand name recognition, superior products and services, a favorable cost structure, and scale advantages, among other attributes. These qualities create barriers to entry and increase the stability and predictability of a company’s cash flow. Accordingly, the sponsor spends a great deal of time during due diligence seeking assurance that the target’s market positions are secure (and can potentially be expanded). Depending on the sponsor’s familiarity with the sector, consultants may be hired to perform independent studies analyzing market share and barriers to entry. Growth Opportunities Sponsors seek companies with growth potential, both organically and through potential future bolt-on acquisitions. Profitable top line growth at above-market rates helps drive outsized returns, generating greater cash available for debt repayment while also increasing EBITDA and enterprise value.
Strong Asset Base A strong asset base pledged as collateral against a loan benefits lenders by increasing the likelihood of principal recovery in the event of bankruptcy (and liquidation). This, in turn, increases their willingness to provide debt to the target. The target’s asset base is particularly important in the leveraged loan market, where the value of the assets helps dictate the amount of bank debt available (see “LBO Financing” sections for additional information). A strong asset base also tends to signify high barriers to entry because of the substantial capital investment required, which serves to deter new entrants in the target’s markets. At the same time, a company with little or no assets can still be an attractive LBO candidate provided it generates sufficient cash flow. Proven Management Team A proven management team serves to increase the attractiveness (and value) of an LBO candidate. Talented management is critical in an LBO scenario given the need to operate under a highly leveraged capital structure with ambitious performance targets.
See Form 10-K antitrust arranger asset base asset based lending (ABL) facility asset sale gains on limitations on losses on term loan prepayment transaction attorneys auction . See also broad auction and targeted auction B back-end short form merger balance sheet in LBO analysis bank book bank debt bank lenders bank meeting bankruptcy Barra barriers to entry Base Case Base Rate basic shares outstanding basket benchmarking analysis comparable companies analysis precedent transactions analysis benchmark rate. See LIBOR and Base Rate beta (β) relevering unlevering bidders. See prospective buyers bidding strategy Bloomberg board approval board of directors bond investors book value assets equity bookrunners borrower borrowing base breakage costs breakeven pre-tax synergies breakup fee bridge loans bring-down provision broad auction advantages and disadvantages business disruption business profile buy-side advisory C CA.
Flash Boys: Not So Fast: An Insider's Perspective on High-Frequency Trading by Peter Kovac
bank run, barriers to entry, bash_history, Bernie Madoff, computerized markets, computerized trading, Flash crash, housing crisis, index fund, locking in a profit, London Whale, market microstructure, merger arbitrage, prediction markets, price discovery process, Sergey Aleynikov, Spread Networks laid a new fibre optics cable between New York and Chicago, transaction costs, zero day
All you needed to trade electronically was a computer, a network connection, and lots of smarts. For a few brief years, the barriers to entry in the industry were quite low (well, except for the last requirement). At every other time in history, it has been extremely difficult to break into the stock market. Aside from incredibly high trading costs, oligopolistic systems of bequeathed trading privileges made it almost impossible for new participants. If you were one of the lucky few who owned a “seat” at the NYSE, you could trade directly; if not, you had to pay some broker who did own a seat to trade for you. The advent of electronic trading a decade ago eliminated these barriers to entry and created a huge democratization of trading that undermined much of Wall Street’s traditional hold on the markets.
Their transaction costs are down probably 80% in the last ten years.” Chapter 3: Trying to Connect the Dots Co-location Ronan Ryan’s experience at Radianz rings true. As he was plugging in network connections for electronic trading firms, I’m not surprised that he saw gauze wrapped around a co-location cage, or someone leaving Toys “R” Us signs up. There are at least two reasons folks tried to conceal their computer hardware from prying eyes: first, as mentioned earlier, the barriers to entry for electronic trading are ridiculously low and any advantage is significant; second, as demonstrated, guys like Ronan Ryan love to yak about the strange things they’ve seen, so new innovations don’t stay under wraps for long. Incidentally, paranoia has always been the norm everywhere on Wall Street. Hedge funds are constantly fretting that somebody will hear about their great strategy and replicate it, because it’s not that hard to do so.
The Right to Earn a Living: Economic Freedom and the Law by Timothy Sandefur
American ideology, barriers to entry, big-box store, Cass Sunstein, clean water, collective bargaining, corporate governance, corporate social responsibility, creative destruction, Edward Glaeser, housing crisis, joint-stock company, Joseph Schumpeter, minimum wage unemployment, positional goods, price stability, profit motive, race to the bottom, Ralph Nader, RAND corporation, rent control, Robert Bork, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, The Wealth of Nations by Adam Smith, trade route, transaction costs, Upton Sinclair, urban renewal, wealth creators
In a free market, a company that wants to succeed and grow must increase the quality of its products, decrease its prices, or find some other way to appeal to consumer needs. But businesses that cannot or do not want to compete in this way will often try to exploit government authority for their own advantage by illegalizing their competition or by making competition inordinately expensive through the creation of what economists call “barriers to entry”: rules that bar new companies from entering the marketplace. The classic example of a barrier to entry is a tariff: a tax on imports that makes them more expensive than domestic products. Tariffs make it difficult for foreign companies to compete against domestic producers, needlessly increasing costs to consumers and allowing domestic manufacturers to produce lower-quality merchandise, safe from higher-quality imports. Domestic manufacturers, therefore, often favor tariffs but rarely admit that their support is a matter of their own private gain.
., 194 labels, product, commercial free speech, 203–7 labor unions anti-competitive conduct, 62–63, 64 at-will employment and, 232 immunity from antitrust laws, 62–63 job security rules and, 233–34 laissez-faire economics, 6 Gilded Age and, 48–49 law meaning and qualification of, 90–91, 92, 99 permanent and aggregate interests of the community and, 91, 93 procedural overlapping substantive aspects, 96 unqualified legislative acts under due process, 95–96 see also due process of law lawfulness, themes of, 97–98 Lawrence v. Texas, 132, 282 Lawson, Gary, 281, 289 lead paint, public nuisance cases, 239, 244–45 legislative freedom from judicial restraint, 11, 12–13, 109 Index Letwin, William, 20, 285 liberty, 273 charters of power granted by, 10 definition of, 7 European charters of, 10 Jasay on presumption of, 130, 273–74 Locke’s presumption of, 273 licensing, occupational, 23, 99–100 barrier to entry, 63 florists, 133–34, 155 funeral homes and merchandise, 150–55 as protectionism, 145–59, 174 racial bias, 145–49 rational basis test and, 133–34, 148–49, 151 wildlfe control example, 156–59 Liebmann. see New State Ice Co. v. Liebmann limited liability privilege, 33 Lincoln, Abraham, 4, 40, 84 living Constitution theory, 77, 78 Lloyd, Henry Demarest, 45, 46, 49 Loan Association v. Topeka, 97–98 local government abuse of power, 61 contracts clause and, 80–81 formula retail ordinances, 186–89 monopolizing trade, 60–61 Owen and, 267 regulatory takings, 264–68 viewshed ordinances, 264 Local Government Antitrust Act, 61 Lochner v.
Harris, 152–55, 159, 162, 188, 289 predatory pricing schemes, 179–82 price stabilization schemes. see agricultural adjustment programs privacy rights, 282 private agreements monopoly-like, 22–23 see also contracts; specific types of agreements privileges, corporate, 28, 29, 31, 33–35 Privileges and Immunities: A Reference Guide to the United States Constitution (David S. Bogen), 288 privileges and immunities clause, 4 Corfield and, 40–41 dormancy, 43–44 overruling, revival, reversal of, 287–92 right to make and enforce contracts, 288–89 Slaughterhouse and, 41–44 states’ rights and, 40–41 productive work, 3 professions barriers to entry, 63, 141 licensing, 23, 63, 99–100, 145–56 restricted entry, 22, 23 restricting or eliminating competition, 289–90 unskillfulness, 23 Progressive Era, xiv–xv, 44–50 eminent domain and, 32 misconceptions about, 47–49 regulation of business and economy, 13, 15, 123–27, 136–37 Supreme Court, 15, 279. see also specific justices 371 Index Progressivism agenda, ideology, and philosophy, 11, 12–13, 44–50, 279–81 assault on economic liberty, 11–16, 44–50, 279–81, 290, 292 changing American political philosophy, 44–50 criticism of and attack on Lochner, 107–10, 121 doctrines, 279–81 economic freedom argument, 123–27 free speech and, 191–92 majority over individuality, 11, 44–45, 109–10, 121, 279, 292. see also collective decisionmaking notion of individual freedom, 116–17 pro-government presumption, xiii–xiv, 11–13, 44–50 rational basis test and, 125–27 rights as permissions, 95, 109, 116–17, 279, 282–83 socialist nature of, 46, 123–27 visionary zeal to do gooders, 13, 46 Prohibition, legacy of, 183–84 property corporate, 34 regulation as secondary to, 272–73 property redistribution government redistributive programs, 283 Progressivism and, 13 property rights, xvii, 24–25 of criminals, 259 givings theory and, 272–74 land-use regulation, 160. see also zoning laws, protectionism and Locke on, 273 ownership as separate from right to use, 257 partial property rights in other people, 290–91 Rehnquist and Roberts Courts, 277–78 right of use of property or land, 257, 271 see also regulatory takings Property Rights from Magna Carta to the Fourteenth Amendment (Bernard Siegan), 283 Prosser, William, 76 protection of the public. see public interest or public welfare protection of unenumerated rights, 93–94 372 protectionism, xvi, 141–44, 173–74 agricultural adjustment programs, 164–70, 174 barriers to entry, 141 contracts clause and, 154 dormant commerce clause and, 153–54 franchise acts and, 170–73, 174 as legitimate state interest, 289 licensing laws, 145–59, 174 necessity of new business and certificates of necessity, 143–44 public choice theory and, 289–90 tariffs, 141 taxi industry example, xi–xiii, xiv, xv, xvi, 143–44, 286 zoning laws, 159–63, 174 public choice theory, 289–90 public contracts, 69–73 public interest or public welfare contracts clause, 75–81 Liebmann and, 142–43 Munn and Nebbia and, 101, 125–27. see also rational basis test Powers and, 152–55, 159, 162, 289 seizure of property. see eminent domain doctrine; regulatory takings public nuisance, xvii Blackmun on, 240 common or public right definition, 241 reasonable and lawful conduct, 243–45 reasonableness and unreasonableness, 240–41, 242 regulatory takings and, 258 tort law abuse, 239–45 public policy, manipulation of contracts and, 214, 215, 220–24 public use, synonymous with public benefit, 255 Pumpelly v.
The Sushi Economy: Globalization and the Making of a Modern Delicacy by Sasha Issenberg
air freight, Akira Okazaki, anti-communist, barriers to entry, Bretton Woods, call centre, creative destruction, Deng Xiaoping, global supply chain, haute cuisine, means of production, Nixon shock, Saturday Night Live, Silicon Valley, special economic zone, standardized shipping container, telemarketer, trade route, urban renewal
Auction licenses, like taxi medallions, seats on a stock exchange, and liquor licenses, are authorized in limited number. New ones are never produced, and so they are traded on a secondary market created only when a participant chooses to get out of the business and allow someone new to purchase the privilege of entry. The preponderance of family-owned firms like Matsui’s makes such a transfer rare, and presents a potential new tuna buyer with his greatest material barrier to entry. For someone like Matsui, it is the most significant asset his business owns, now worth in the range of $100,000. At the market’s Bubble peak, Tsukiji licenses appreciated as rapidly as Akasaka studio apartments and room-ser vice orange juice at the Hotel Okura. At one point, a license to buy tuna sold for nearly $2 million. Four tuna sat on wheelbarrows in the cluttered alley that ran behind his stall.
In a city on the frontier of the American economy, Mutual Trading’s upgrade of its equipment—adding largescale freezer and refrigeration facilities—would not have attracted much notice, but it presaged a generation of changing American tastes. The pioneers of the pickle trade had acknowledged that the future of Japanese food would not be found in cans and bottles. For sushi, American appetites posed high barriers to entry that nonthreatening ingredients and familiarly hued waitstaff alone could not surmount. While foreign flavors have long seeped into American foodways, sushi had unique challenges. Early Chinese restaurants were true to the motherland’s cuisine, both in terms of recipes and the style of dining. In 1865, newspaper editor Samuel Bowles dined at a San Francisco restaurant banquet that featured as many as three hundred items, including bird’s nest soup, reindeer sinews, fried fungus, and dried Chinese oysters.
It’s ready to go on my truck, and a guy yells out, ‘I’ll give you $24 a pound for that right now!’ I looked at the captain, dropped the fish right down and said, ‘Take your $24.’ The guy hadn’t even looked at the fish.” Rainbow had to break the strong ties dealers like Bob Kliss and Mark Godfried had built over the years with their fishermen. To the dozens of companies like Rainbow—as they would to anyone entering the market—those bonds stand as considerable barriers to entry. “In this business, you either get a shot or you don’t. If they don’t come by your company to give you a chance to bid on their fish, you’re not in the game,” explains Danny Bubb, a Long Islander who came to Gloucester in 1999 and immediately stood out among the city’s old tuna hands, thanks to his rich tan, shaved head, and the giant tuna tattooed on his bicep. The only way for a newcomer to get the opportunity to even see what boats are catching—which is to say, an effective license to compete in the marketplace— is to pay for the access, Bubb says.
Bad Data Handbook by Q. Ethan McCallum
Amazon Mechanical Turk, asset allocation, barriers to entry, Benoit Mandelbrot, business intelligence, cellular automata, chief data officer, Chuck Templeton: OpenTable:, cloud computing, cognitive dissonance, combinatorial explosion, commoditize, conceptual framework, database schema, DevOps, en.wikipedia.org, Firefox, Flash crash, Gini coefficient, illegal immigration, iterative process, labor-force participation, loose coupling, natural language processing, Netflix Prize, quantitative trading / quantitative ﬁnance, recommendation engine, selection bias, sentiment analysis, statistical model, supply-chain management, survivorship bias, text mining, too big to fail, web application
Consider the following: Files Are Simple! Simplicity and ubiquity are virtues that are very hard to find in technology products. There is simply less bureaucracy to deal with when you use files. Files Work with Everything Just about everything will (sort of) know how to process your data. Utilities will need coaching to understand how to extract structure from your files. This is generally not a significant barrier to entry, though. If you stick with a few conventions, such as using common and consistent delimiters, then you will be fine. Compare this to a traditional database system, for which you will often need a specific adapter, which may in turn have its own API. If you’re using an abstraction layer, such as an object-relational mapper (ORM), then you need to understand its unique syntax. Recent databases often provide an HTTP API, but this is still more of a burden than opening and reading a file.
Many such tools are heavily tested (having been run billions of times over the years), reliable, and are generally implemented in C for performance. grep is one of the fastest ways to hunt for things. Remote replication is only an rsync away. A word count for a file takes two characters: wc. A version control system such as Subversion or Git will help you maintain a history of your changes over time. There’s No Install Tax Working with files has a very low barrier to entry. You can eliminate a lot of friction by not needing to install client libraries, compile drivers, or worry about a schema. Files certainly aren’t ideal for every situation. They’re best suited for cases that are read-heavy, require few modifications, and incur minimal cost to translate the data into a typed representation. That means storing logs (such as webserver logs), recorded events, web crawlings, large binary data, and sensor readings, which are all suitable use cases.
The evolution of these two components is important. We, as end users, have been able to publicly broadcast our thoughts from an IP address for nearly 17 years now (since the broader network widely came online). It has been technically possible to set up an HTTP server, routable via public DNS, and publish content to it for public consumption for a long time. Over the years, that process has radically shifted, however, and barriers to entry have changed. 1995: Very hard and expensive. Purchase a server (several thousand dollars), an operating system (hundreds of dollars), and connect it to the network via a hosting provider (several thousands of dollars per month). Purchase an HTTP server (hundreds of dollars). Figure out how to write/publish HTML. Purchase a domain name and tie it to DNS (hundreds of dollars). Publicize your “site” (thousands of dollars in marketing campaigns). 2001: Still difficult, but more affordable.
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
The United States is only the harbinger. The attack on the public sector is part of the post-2008 adjustment across all industrialised countries. In Greece, under a centre-right government, 75,000 civil servants were added to the already huge public sector between 2004 and 2009. Once the crunch came in 2010, the public salariat was slashed, feeding the Greek precariat. The government also announced it would remove barriers to entry to some professions, lowering their wages to reduce public spending. In Italy, pressure on the civil service was also growing. In October 2009, 40,000 police officers marched through Rome to demand better pay and new police cars. Because of a freeze on hiring, the average age of Italian policemen had risen to 45. They were not alone; millions of civil servants were losing employment security.
The modern legal treatment stems from the response to the mass displacement before and during the Second World War, which led to the 1951 UN Convention Relating to the Status of Refugees. The problem was regarded as one of short-run adjustment as people were helped back to their countries or enabled to resettle elsewhere. Now, increasing numbers seeking to escape from degradation, oppression and conflict are running up against rising barriers to entry. Many fall into chronic social and economic insecurity. According to the UN refugee agency, in 2009 there were over 15 million refugees, a majority in Asia and Africa, with another million asylum seekers awaiting decision. And some 27 million people were displaced within their countries as a result of conflict (Internal Displacement Monitoring Centre, 2010). Globally, a tragedy has been unfolding.
The UK Labour government was also planning a points-based system for temporary migrants, restricting work permits for those from outside the European Union and taking some occupations off the list of those deemed to have shortages. In 2010, the new Coalition government tightened the process even further. In sum, because the old queuing system has dissolved, and because governments cannot or do not wish to reverse the labour market reforms they have instituted, they have increasingly sought to raise barriers to entry, make the denizen status of migrants more precarious and encourage or oblige them to leave when no longer needed. This opens up some ugly possibilities. Migrants as cheap labour in developing countries Your labour is glorious and deserves respect from all society. Wen Jiabao, Chinese Prime Minister, June 2010 To die is the only way to testify that we ever lived. Perhaps for the Foxconn employees and employees like us – we who are called nongmingong, rural migrant workers, in China – the use of death is simply to testify that we were ever alive at all, and that while we lived, we had only despair.
No Ordinary Disruption: The Four Global Forces Breaking All the Trends by Richard Dobbs, James Manyika
2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, access to a mobile phone, additive manufacturing, Airbnb, Amazon Mechanical Turk, American Society of Civil Engineers: Report Card, autonomous vehicles, Bakken shale, barriers to entry, business cycle, business intelligence, Carmen Reinhart, central bank independence, cloud computing, corporate governance, creative destruction, crowdsourcing, demographic dividend, deskilling, disintermediation, disruptive innovation, distributed generation, Erik Brynjolfsson, financial innovation, first square of the chessboard, first square of the chessboard / second half of the chessboard, Gini coefficient, global supply chain, global village, hydraulic fracturing, illegal immigration, income inequality, index fund, industrial robot, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Internet of things, inventory management, job automation, Just-in-time delivery, Kenneth Rogoff, Kickstarter, knowledge worker, labor-force participation, low skilled workers, Lyft, M-Pesa, mass immigration, megacity, mobile money, Mohammed Bouazizi, Network effects, new economy, New Urbanism, oil shale / tar sands, oil shock, old age dependency ratio, openstreetmap, peer-to-peer lending, pension reform, private sector deleveraging, purchasing power parity, quantitative easing, recommendation engine, Report Card for America’s Infrastructure, RFID, ride hailing / ride sharing, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, Snapchat, sovereign wealth fund, spinning jenny, stem cell, Steve Jobs, supply-chain management, TaskRabbit, The Great Moderation, trade route, transaction costs, Travis Kalanick, uber lyft, urban sprawl, Watson beat the top human players on Jeopardy!, working-age population, Zipcar
In a word, Uber.3 To be more precise, they were protesting London’s handling of transport start-ups like Uber, whose business model depends on a GPS-enabled smart-phone app that cheaply and efficiently connects riders to drivers and that acts like a taxi meter. Cabbies argue that the city’s Private Vehicles Act bars privately hired vehicles from having taxi meters.4 Advances in digital technology are fueling the rise of new, nimble competitors that have their sights set on a slice of London’s lucrative taxi market.5 Protection from competition and high barriers to entry have allowed London’s cabbies to thrive, even though they’ve been reluctant to embrace new technology: the knowledge obviates the need for GPS, and most taxis only take cash—and keep prices high. The average journey is estimated to cost about £27.6 Hailo, a smart-phone app that allows customers to hail a black cab virtually, did not launch until the end of 2011.7 Drivers of London’s black cabs—along with those in several other European cities that day—were channeling their anger at San Francisco–based Uber.
Advances in technology have always disrupted the status quo. But they have never done so across so many markets and at the speed and scale that is being seen today. As digital platforms reduce to near zero the marginal costs of scaling up business activity, such platforms are enabling new business models, new entrants, and even new market models such as peer-to-peer transactions and the “sharing” economy. With lowered barriers to entry, it is now common to see small companies take on incumbents and gain critical mass in a matter of months. The boundaries separating sectors have become blurred, and digital capabilities are often driving the shift of economic values between players and sectors. While companies struggle with technological churn, consumers are big beneficiaries—far beyond the extent captured in official data releases.
During the pilot phase of the program, patient wait times fell sharply, to less than fifteen minutes.49 “This kind of data is the currency of the future,” notes Ken Riff, vice president of strategy and patient data management at Medtronic.50 Look to Exploit Lower Marginal Costs of Digital Digitization significantly reduces the costs associated with the access, discovery, and distribution of goods and services. More efficient distribution and lower barriers to entry have spurred more individuals, entrepreneurs, and businesses to participate in the digital marketplace and experiment with new business models. Digitization has drastically lowered geographic barriers as well, fueling the growth of micro-multinationals, microwork, and micro supply-chain companies. Kiva, the world’s largest online platform for peer-to-peer microlending, has facilitated loans worth more than $630 million, mostly in the emerging world.51 Kickstarter, a crowd-funding platform that connects entrepreneurs to individuals interested in funding creative projects, has facilitated pledges of more than $1.4 billion to fund 70,000 creative projects since 2009.52 Small or individual registered investment advisors are the fastest-growing segment of the investment advisory business in the United States; they purchase turnkey back-end systems from companies like Fidelity and Charles Schwab to get all the capabilities they need in order to provide direct advice to consumers.53 In markets such as search, e-commerce, social media, and the sharing economy, the low marginal costs of digital infrastructure allow upstarts to build business models with near-limitless scale.
The Future of Technology by Tom Standage
air freight, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, creative destruction, disintermediation, disruptive innovation, distributed generation, double helix, experimental economics, full employment, hydrogen economy, industrial robot, informal economy, information asymmetry, interchangeable parts, job satisfaction, labour market flexibility, Marc Andreessen, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, railway mania, rent-seeking, RFID, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, technology bubble, telemarketer, transcontinental railway, Y2K
Furthermore, a company could not just make handsets: to be taken seriously by the mobile-network operators, and ensure everything worked properly, it also had to manufacture the much larger and more complex base-stations that are used to provide mobile-phone coverage. All these requirements meant that the industry came to be dominated by large, vertically integrated firms such as Nokia, Motorola and Ericsson. “For many firms good at low-cost electronics, the barrier to entry was simply too high,” says Tony Milbourn of ttpCom, a British firm that designs and licenses hardware and software components for mobile phones. But the situation has changed. Radio chips can now be bought off the shelf, as can the software required to make a mobile phone work. Manufacturing can be outsourced to an “electronic-manufacturing services” (ems) firm. Some of these have started to design as well as build 155 THE FUTURE OF TECHNOLOGY handsets; these “original design manufacturers” (odms) sell their finished phones to other firms, which in turn sell them under their own brands.
Some of these have started to design as well as build 155 THE FUTURE OF TECHNOLOGY handsets; these “original design manufacturers” (odms) sell their finished phones to other firms, which in turn sell them under their own brands. Meanwhile, a flourishing ecosystem has sprung up of small firms specialising in areas such as handset design, chip design, testing and software. ttpCom, for example, provides the software that enables Sharp camera-phones and BlackBerry wireless e-mail devices to send and receive data over mobile-phone networks. In other words, the barriers to entry have fallen. Hardware and software have, to some extent, been commoditised, and there is far more scope for outsourcing of design and manufacturing than there used to be. This has allowed odms, consumer-electronics firms and even startups to enter the handset business. “Anybody with the right financial backing can break into the phone business now,” says Ben Wood, an analyst at Gartner, a consulting firm.
In addi10 tion to marketing clout, they own a large back catalogue of 0 Sony/ EMI Universal Warner Indemusic that can be repeatedly BMG pendents reissued. They are also bolSource: International Federation of the Phonographic Industry stered by music-publishing businesses, which collect royalties on already published songs used in recorded music, live performance, films and advertisements. Historically, the majors have controlled physical distribution of cds. Yet that barrier to entry will erode as more music is distributed on the internet and mobile phones. Artists can, in theory, use the internet to bypass record firms, though few have yet done this. The principal reason most have not is that they need marketing and promotion, which the majors also dominate, to reach a wide audience. The majors have a tight hold on radio, for example, by far the most effective medium for promoting new acts.
The Next Factory of the World: How Chinese Investment Is Reshaping Africa by Irene Yuan Sun
barriers to entry, Bretton Woods, capital controls, clean water, Computer Numeric Control, deindustrialization, demographic dividend, Deng Xiaoping, Donald Trump, European colonialism, floating exchange rates, full employment, global supply chain, invisible hand, job automation, low skilled workers, M-Pesa, manufacturing employment, means of production, mobile money, post-industrial society, profit motive, purchasing power parity, race to the bottom, RAND corporation, Ronald Reagan, Shenzhen was a fishing village, Silicon Valley, Skype, special economic zone, structural adjustment programs, Triangle Shirtwaist Factory, union organizing, Washington Consensus, working-age population
It would be nonsensical to design machines to automate the job when the job changes in several unpredictable ways every few months. This is why clothing production is not very automated: the most cost-effective way to make clothing still involves people manually cutting the cloth, arranging the pieces in just the right way and in the right order, and putting them through the machines. Maybe it’s hard for machines, but for humans, it sounds easy. And as Mrs. Shen’s story shows, the barriers to entry are low. Anyone with a propensity for micromanagement and a small amount of money to buy sewing machines can set up shop. But it’s a precarious business. The margins are razor thin and may vanish altogether with something as innocuous as an unfavorable exchange rate fluctuation. Because Mrs. Shen is paid in foreign currency but pays her workers with Lesothan maloti, any appreciation of the local currency works against her.
In short, a host of factors other than labor costs define where and how factories in Africa operate. An entrepreneur’s managerial skill set and access to capital determine the choice of a labor-intensive versus a capital-intensive business model, while market size, infrastructure, and national and global trade policy strongly influence the choice of customers, whether local or global. These factors have significant consequences for African economies in terms of job creation, barriers to entry for local entrepreneurs, and potential risks profile for the host economy. As demonstrated by Mrs. Shen’s factory versus the Formosa denim mill in Lesotho and Baoyao Steel versus the Tung family’s cold-rolled-steel factory in Nigeria, labor-intensive operations tend to create large numbers of jobs for locals, but those jobs may be flighty compared with the ones at more capital-intensive operations.
INDEX accountability, 82 Acemoglu, Daron, 22 Achebe, Chinua, 10 Adams, Luqy, 117–119 adaptation, 146–148 Africa attitudes in toward Chinese businesses, 77–78 attractions of for manufacturing investments, 44–45 Chinese government aid to, 179n7 Chinese immigration to, 32, 123–127, 167–169, 181n1 deindustrialization of, 32, 35 demographics, 92–94 development theories and, 9–10 economic slowing in China and, 171–172 education in, 95 GDP from manufacturing in, 41 governance in, 129–150 health care/disease in, 151–169 industrialization in, 4–6, 8, 32 labor costs in, 23 living standards in, 6 match between China and, 167–168 special economic zones, 137–142 unemployment rates in, 94 uneven industrialization in, 51 African Development Bank, 95 African Governance Initiative, 135–136 African Growth and Opportunity Act (AGOA), 54, 57, 64, 72, 184n3 agency, 102–105 AIDS/HIV, 11, 152–156, 159 Asian Infrastructure Investment Bank, 174 Austria, 147–148, 190n30 automation, 9, 55, 58–61, 172–173 AVIC International, 111, 131, 132–134, 136, 148–150 Baoyao Steel, 61, 64 barriers to entry, 55–56 Belgium, 147–148 Belt and Road Initiative, 173–174 birthrates, 93–94 Blair, Tony, 135–136 Bloom, Ron, 94–95 Bobu Feizhou, 124, 125 bootstrapping development, 132–136, 147–148, 165–166 BP, 35–36 Brazil, 43 Bretton Woods, 174 bribes, 7–8 Britain, 19–20, 98–99, 102 Brookings Institute, 38–39, 95 Bush, George W., 154 business models, 46–47, 50–51, 65–66 global competition and, 74–75 governance and, 133–134 labor- vs. capital-intensive, 51, 52, 54, 57, 64, 65 Campaign for Democratic and Workers’ Rights, 79 capital-intensive production, 51, 52, 54, 58–61, 64.
Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott
Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Blythe Masters, Bretton Woods, business process, buy and hold, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, commoditize, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, disruptive innovation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, information asymmetry, intangible asset, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, money market fund, Network effects, new economy, Oculus Rift, off grid, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, QR code, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social intelligence, social software, standardized shipping container, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, uber lyft, unbanked and underbanked, underbanked, unorthodox policies, wealth creators, X Prize, Y2K, Zipcar
Summoned by an unknown person or persons with unclear motives, at an uncertain time in history, the genie is now at our service for another kick at the can—to transform the economic power grid and the old order of human affairs for the better. If we will it. Let us explain. The first four decades of the Internet brought us e-mail, the World Wide Web, dot-coms, social media, the mobile Web, big data, cloud computing, and the early days of the Internet of Things. It has been great for reducing the costs of searching, collaborating, and exchanging information. It has lowered the barriers to entry for new media and entertainment, new forms of retailing and organizing work, and unprecedented digital ventures. Through sensor technology, it has infused intelligence into our wallets, our clothing, our automobiles, our buildings, our cities, and even our biology. It is saturating our environment so completely that soon we will no longer “log on” but rather go about our business and our lives immersed in pervasive technology.
But as we have pointed out, a majority of the world’s population is still excluded—not just from access to technology but also from access to the financial system and economic opportunity. Moreover, the promise that this new communications medium would bring prosperity to all has rung hollow. Yes, it helped companies in the developed world provide jobs for millions in the emerging economies. It lowered the barriers to entry for entrepreneurs and gave the disadvantaged access to opportunities and basic information. That’s not enough. There are still two billion49 people without a bank account, and in the developed world, prosperity is actually declining as social inequality continues to grow. In developing economies, mobile is often the only affordable means of connecting. Most financial institutions have mobile payment apps that combine cameras and QR codes.
In his 1937 paper “The Nature of the Firm,” Coase identified three types of costs in the economy: the costs of search (finding all the right information, people, resources to create something); coordination (getting all these people to work together efficiently); and contracting (negotiating the costs for labor and materials for every activity in production, keeping trade secrets, and policing and enforcing these agreements). He posited that a firm would expand until the cost of performing a transaction inside the firm exceeded the cost of performing the transaction outside the firm.5 Don argued that the Internet would reduce a firm’s internal transaction costs somewhat; but we thought, because of its global accessibility, it would reduce costs in the overall economy even more, in turn lowering barriers to entry for more people. Yes, it did drop search costs, through browsers and the World Wide Web. It also dropped coordination costs through e-mail, data processing applications like ERP, social networks, and cloud computing. Many companies benefited from outsourcing such units as customer service and accounting. Marketers engaged customers directly, even turning consumers into producers (prosumers).
Messing With the Enemy: Surviving in a Social Media World of Hackers, Terrorists, Russians, and Fake News by Clint Watts
4chan, active measures, Affordable Care Act / Obamacare, barriers to entry, Berlin Wall, Bernie Sanders, Chelsea Manning, Climatic Research Unit, crowdsourcing, Daniel Kahneman / Amos Tversky, Donald Trump, drone strike, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Filter Bubble, global pandemic, Google Earth, illegal immigration, Internet of things, Julian Assange, loss aversion, Mark Zuckerberg, Mikhail Gorbachev, mobile money, mutually assured destruction, obamacare, Occupy movement, offshore financial centre, pre–internet, side project, Silicon Valley, Snapchat, The Wisdom of Crowds, Turing test, University of East Anglia, Valery Gerasimov, WikiLeaks, zero day
But life in Mexico is anything but free, and newspapers with bylines and sources have frequently felt intimidation from drug cartels and the government. Those journalists pushing the envelope of accountability and challenging the strong rarely last long. Nearly one hundred Mexican journalists have been killed in the past two decades covering the life and times of Mexicans. Again, social media lowered the barrier to entry for the common man, and soon an alternative to traditional journalism emerged to account for the state of violence in Mexico. People lacking a way to defend themselves turned to blogs, forums, Facebook, and Twitter to reveal the secret lives, the real world, of Mexico’s drug cartels. Two blogs, Al Rojo Vivo and Blog del Narco, broadcast reports of violent incidents. Another site, Nuevo Laredo en Vivo, detailed the criminality and oppression, exposing what citizens in the region encounter every day trying to survive.
I can counter terrorists or Russia from home better than I could from inside government, and so could most of the great civil servants America has working on counternarratives. I’m not smarter than any of the government folks doing counterinfluence or many of the contractors spread around D.C.’s Beltway. I just have more flexibility, can practice, and am free to fail at my house without scrutiny. There’s no barrier to entry for me as a citizen. I can make a thousand mistakes; I can learn from others and plod away without a manager telling me to stop or change something to make a politician happy. * * * In the end, the most effective way to counter terrorist influence has been to simply kill terrorists. Despite all the calls for American countermessaging, when terror groups wane, their influence evaporates. As the Islamic State’s remnants now run scurrying from Iraq and Syria, the appeal of their social media has declined and the desire for newcomers to join has subsided a bit.
The relentless pursuit of preferences turns smart crowds into dumb mobs, leads to the selection of preferred fictions over actual facts, and creates an environment where humans have access to more information than ever but actually understand less about the physical world. The power of preference now haunts not only al-Qaeda as they’ve been outpaced by the social-media-savvy Islamic State, but America, the land that created social media. No barriers to entry and unlimited preference in the virtual world have overtaken compromise in the real world. Online, the pursuit of comfort and confirmation create an alternative reality. Those researching the internet and social media didn’t expect this deterioration, and even the social media companies are just now beginning to understand what’s happening. In The Long Tail, Chris Anderson predicted that preference would lead to bliss.
The Pirate's Dilemma by Matt Mason
"side hustle", Albert Einstein, augmented reality, barriers to entry, citizen journalism, creative destruction, don't be evil, Donald Trump, Douglas Engelbart, East Village, Firefox, future of work, glass ceiling, global village, Hacker Ethic, haute couture, Howard Rheingold, Internet of things, invisible hand, Isaac Newton, jimmy wales, job satisfaction, John Markoff, Joseph Schumpeter, Kickstarter, Lao Tzu, Marshall McLuhan, means of production, Naomi Klein, new economy, New Urbanism, patent troll, peer-to-peer, prisoner's dilemma, RAND corporation, RFID, Richard Florida, Richard Stallman, SETI@home, Silicon Valley, South China Sea, Stephen Hawking, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, Tim Cook: Apple, urban sprawl, Whole Earth Catalog
The producers, bosses, and owners are the rock stars above, generating the goods, services, salaries, and 18 | THE PIRATE’S DILEMMA content we the fans consume from below the inaccessible stage, singing along obediently with our lighters in the air. Very occasionally a lucky fan is pulled up onstage to give the rest of us something to aspire to, but only very occasionally. You can see that the stage is surrounded by barriers to entry and mean-looking roadies, stopping us from climbing up. These barriers might be a lack of skills or technology; they could be ﬁnancial. But often they’re made of nothing more than our own perception of what’s possible. The mean-looking roadies are the doubts society creates that tell us it’ll never work, managing our ambitions, keeping our aspirations in check. Looking around the stadium, you see the thousands of others who would also like to get up on that stage, and it’s painfully clear you’re just another face in the crowd without a chance.
Instead of worshiping a big-hair rock idol from the cheap seats at the back of the stadium, fans now found themselves crammed into smaller venues interacting with the band, shoving and pushing them like other fans. You got to chuck as many beer bottles at the band as they did at you; everyone was allowed to spit on everyone else; and at the end of the performance you all smashed stuff up together. It was often a violent hate/hate relationship, but it was fair. Our world today is starting to look a lot more like a punk gig (okay, maybe with slightly less spitting). The barriers to entry are being kicked down, and this new breed of fans-turned-performers, including you, is rushing the world stage. Technology is cheap; information is everywhere; and the roadies are gone (who takes advice from roadies anyway?). The only thing left to do is to stop deﬁning ourselves by the old hierarchy and run up onstage. Think about something you have always wanted to do but haven’t. You probably didn’t do it for a good reason; maybe you didn’t know how, couldn’t afford it, or didn’t think you could get your foot in the door.
Some London pirates are now beginning to turn away from pirate radio in favor of podcasts, with several grime MCs and DJs, tired of petty pirate station politics, releasing Internetonly shows for free download (one 2006 offering was imaginatively titled “Fuck Radio”). From the top to the bottom, pirates force the media (and other pirates) to keep up with technological changes, or get left behind. In the same way that pirate DJs are only as hot as their last show, The Tao of Pirates | 55 bloggers are only as hot as their last post, and podcasters are only as cool as their last viral video. With pirates knocking down all barriers to entry, the only way to stay on top is to offer the best content, the most variety, and the latest, most entertaining, and accurate information. Even though anyone can say anything online, with millions of bloggers vetting each other, inaccuracies in stories on the most popular blogs are usually pointed out quickly. Pirates are cracking the whip, and the media is getting leaner and moving faster as a result.
Realtime Web Apps: HTML5 WebSocket, Pusher, and the Web’s Next Big Thing by Jason Lengstorf, Phil Leggetter
The difference between someone using our app and not using our app could be something as simple as how many buttons he has to click to get started. 13 http://oauth.net/about/ 32 Chapter 2 ■ The Tools OAuth provides a great way to get everything we need: • Verify that the person is indeed real: We can reasonably assume that anyone who is signed into a valid Facebook or Twitter account is a real person. • Collect necessary data about the user: For this app, we would really only need a name and e-mail. • Reduce the barrier to entry: By eliminating all the usual steps of creating an account, we could get the user into our app in seconds with just two clicks. What Role Does It Play? OAuth would be the gatekeeper for our app. It would use third-party services to verify the authenticity of a user and gather the necessary information for the app to function. How Does It Work? You’ll find more details on the specifics of OAuth in Appendix A, but at its core, OAuth contacts the service through which we want to authenticate our user and sends a token identifying our app.
Use the following settings: • Font: News Gothic Roman • Size: 24 pt • Tracking: 25 • Color: #1F1B0C Center the headline and copy above the form, and you should now have a finished form for creating a new room (see Figure 6-15). 101 Chapter 6 ■ Designing the App Figure 6-15. The completed create-a-room form for the home view Join-a-Room Form To keep the design consistent, the join-a-room form will be stylistically identical to the create-a-room form; only the inputs and copy will change. In the interest of minimizing the barrier to entry for attendees, the only information required to join a room is the room’s number. 102 1. Jump start this form by copying the create-a-room form into the right half of the page and then eliminating two of the three inputs. 2. Change the headline to read Attending? and the copy at the top to read, Join a room using its ID. 3. The label for the input should change to, What is the room’s ID?
Creating new accounts is a pain for both developers and users, so when the app doesn’t have an explicit need to closely control its own registration process, there are a lot of good reasons to use OAuth rather than implementing something specific to your application. Some of the benefits include these: 264 • One fewer account registration and password for users to deal with, which lowers the barrier to entry for potential new users: getting started means three clicks versus filling out a form, checking their confirmation e-mail, and then logging in. • The app has access to basic user info without asking for any additional input or actions from the user beyond authorization. • The app has access to the service provider’s API and its benefits (such as sharing a user’s app activity on Facebook, if the permissions allow it)
Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs by Andy Kessler
23andMe, Andy Kessler, bank run, barriers to entry, Berlin Wall, Bob Noyce, British Empire, business cycle, business process, California gold rush, carbon footprint, Cass Sunstein, cloud computing, collateralized debt obligation, collective bargaining, commoditize, computer age, creative destruction, disintermediation, Douglas Engelbart, Eugene Fama: efficient market hypothesis, fiat currency, Firefox, Fractional reserve banking, George Gilder, Gordon Gekko, greed is good, income inequality, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, Kickstarter, knowledge economy, knowledge worker, libertarian paternalism, low skilled workers, Mark Zuckerberg, McMansion, Netflix Prize, packet switching, personalized medicine, pets.com, prediction markets, pre–internet, profit motive, race to the bottom, Richard Thaler, risk tolerance, risk-adjusted returns, Silicon Valley, six sigma, Skype, social graph, Steve Jobs, The Wealth of Nations by Adam Smith, transcontinental railway, transfer pricing, wealth creators, Yogi Berra
“Everything is eventually a commodity within its own market. That’s what markets do. The question is how you define the market. The goal of every business is to raise the volume and predictability of its output to the point that it becomes a commodity. This is achieved not by raising prices but by lowering prices and benefiting from the learning curve efficiencies that result from larger volumes. The largest profits and barriers to entry come when the learning curve is steeper than the curve of declining prices. The issue of intellectual property and its ownership is separate from the issue of commoditization. The most profitable companies launch a large number of learning curves and commodities.” Whoa. There’s a lot there to chew on. Profits are best when costs drop faster than prices, as long as prices are dropping. Okay, I get that.
Early TV was radio shows with cameras turned on, much as early movies were Broadway shows with film running. I still fall over laughing at the Marx Brothers’ The Cocoanuts and Animal Crackers, “Hooray for Captain Spaulding . . .”, which were made this way. It took a while, but eventually, production values increased to $2.6 million per TV episode for Friday Night Lights and $100 million-plus movie budgets. This became the barrier to entry. Viewers demanded better quality, better than the cheap stuff they were initially fed. Animal Crackers is a classic, but now quaint. The Web is still back in the pioneer days. Beyond the pirated stuff that leaks out of the moguls’ traditional media pipes, today’s Web content is mainly user-generated: MySpace pages, YouTube videos, podcasts, Facebook walls, all disgustingly cheap to produce (and armchair critics like me go sniff, sniff, and mutter “lame”).
I asked my friend Mark Cuban—who knows a thing or two about both Internet video and owning media franchises, let alone the NBA and Dancing with the Stars—about moguls and their loss of control. He told me to watch for the eventual economic model of this whole thing as production values inevitably go up: “Mashups, hyperlinks?” he said. “We’ve seen it all before in the music business. Anyone can produce and distribute any song they want. We have seen some artists and songs emerge, but very, very few. And that is in an environment where there truly are no digital barriers to entry. Yet the moguls are still the moguls. Not as strong, but still in control. I don’t see them going away. Why? Because in a Long Tail universe, the cost to crawl up the tail to the rat’s ass is more expensive than the production. Which means only the people with the money can make the investment, which brings you back to the moguls.” It’s the Yogi Berra problem—no one goes there anymore, it’s too crowded.
Bitcoin: The Future of Money? by Dominic Frisby
3D printing, altcoin, bank run, banking crisis, banks create money, barriers to entry, bitcoin, blockchain, capital controls, Chelsea Manning, cloud computing, computer age, cryptocurrency, disintermediation, Ethereum, ethereum blockchain, fiat currency, fixed income, friendly fire, game design, Isaac Newton, Julian Assange, land value tax, litecoin, M-Pesa, mobile money, money: store of value / unit of account / medium of exchange, Occupy movement, Peter Thiel, Ponzi scheme, prediction markets, price stability, QR code, quantitative easing, railway mania, Ronald Reagan, Ross Ulbricht, Satoshi Nakamoto, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, Stephen Hawking, Steve Jobs, Ted Nelson, too big to fail, transaction costs, Turing complete, War on Poverty, web application, WikiLeaks
Suddenly, along comes Bitcoin, an open-source currency with no central authority, offering an alternative that could undermine the existing monetary order. Nobody even knows who designed it. It’s by no means the first attempt at digital cash, but it’s the first that works this well. It’s actually more efficient than dollars or pounds. It’s immune to all the manipulation and abuses that go on, there are no barriers to entry, bar internet access, and it has captured a zeitgeist in a way that nobody could have foreseen. If Bitcoin changes the way we transact and the way we store wealth – and it has the potential to do this – the repercussions could be enormous. Think what email did to the postal service, or what the internet did to newspapers, publishing, music and television. With the huge costs involved in the printing and distribution of physical newspapers, news publishing was once the exclusive domain of a few large companies.
With barcodes you can open your wallet on your smartphone, photograph the barcode, hit send and the payment is made. The day is not far off when you will walk into a shop, select an item you wish to buy, photograph the code on the label, payment will be made automatically and off you go. Once you get the hang of it, it is as simple as using a credit card. And, as long as you have internet access, there are no barriers to entry. Cash in my wallet, money in the bank I bet you use different kinds of money all the time, sometimes without even realising it. In various online accounts, I currently have: some dollars, some pounds and some euros. I have some air miles from two different credit card companies. I have some supermarket rewards points from three different companies. In addition, I have some bitcoins in a wallet on my computer.
He used to buy distressed companies, but there are no distressed companies any more. Low interest rates have meant that what should have died lives on. If he wants to set up a fund, the regulation is so onerous that he would need to raise £100 million to make it viable. That’s impossible. Regulation has just re-enforced the monopolies of the banks. Big corporations like regulation because only they can afford it. It’s a great big barrier to entry. ‘But Bitcoin. There’s none of that in Bitcoin. It’s the future,’ he says. He’s been called over to start another auction. A canny East End Jewish lad in his mid-30s, Paul, seems to be running things. I want to talk to him. As the auction begins, Paul offers to buy 100 pounds’ worth of bitcoin at £500 a coin. Wanting an excuse to talk him, I accept. ‘One hundred pounds worth of bitcoin at 500.
Don't Be Evil: How Big Tech Betrayed Its Founding Principles--And All of US by Rana Foroohar
"side hustle", accounting loophole / creative accounting, Airbnb, AltaVista, autonomous vehicles, banking crisis, barriers to entry, Bernie Madoff, Bernie Sanders, bitcoin, book scanning, Brewster Kahle, Burning Man, call centre, cashless society, cleantech, cloud computing, cognitive dissonance, Colonization of Mars, computer age, corporate governance, creative destruction, Credit Default Swap, cryptocurrency, data is the new oil, death of newspapers, Deng Xiaoping, disintermediation, don't be evil, Donald Trump, drone strike, Edward Snowden, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Etonian, Filter Bubble, future of work, game design, gig economy, global supply chain, Gordon Gekko, greed is good, income inequality, informal economy, information asymmetry, intangible asset, Internet Archive, Internet of things, invisible hand, Jaron Lanier, Jeff Bezos, job automation, job satisfaction, Kenneth Rogoff, life extension, light touch regulation, Lyft, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Menlo Park, move fast and break things, move fast and break things, Network effects, new economy, offshore financial centre, PageRank, patent troll, paypal mafia, Peter Thiel, pets.com, price discrimination, profit maximization, race to the bottom, recommendation engine, ride hailing / ride sharing, Robert Bork, Sand Hill Road, search engine result page, self-driving car, shareholder value, sharing economy, Shoshana Zuboff, Silicon Valley, Silicon Valley startup, smart cities, Snapchat, South China Sea, sovereign wealth fund, Steve Jobs, Steven Levy, subscription business, supply-chain management, TaskRabbit, Telecommunications Act of 1996, The Chicago School, the new new thing, Tim Cook: Apple, too big to fail, Travis Kalanick, trickle-down economics, Uber and Lyft, Uber for X, uber lyft, Upton Sinclair, WikiLeaks, zero-sum game
Many people would argue that Google, Facebook, Amazon, and perhaps even Netflix and Apple fit this category (though Apple itself would counter that there are many competitors in its mobile marketplace, most notably Google, which takes a much larger share of the overall mobile market if tallied by percentage of users on the Android system). Natural monopolies are often a product of network effects, meaning that the more users a platform has, the more attractive it is to new users. Barriers to entry, be they capital costs or simply getting there first and controlling the physical or virtual territory, are huge, and prevent others from entering the market in an effective way. That’s how the railroads and the telegraph and telephone companies of the past, and even some of the media giants of today, achieved domination. For such networked businesses, monopoly tends to be less the exception than the rule, unless there is government intervention of some sort to stop it (like the government intervention with railroads and telecoms, or the Microsoft antitrust case of twenty years ago, which allowed Google to rise).41 As sweeping as it is, the transformation I’ve described has only just begun.
I’ve always felt that there was some measure of ingenious scam in the whole paradigm. Still, as Citibank’s former CEO Chuck Prince once quipped, “As long as the music is playing, you’ve got to get up and dance.” Over the past five or so years, there’s been massive growth in the number of these venture-capital-backed “unicorns”—start-ups with a market capitalization of more than $1 billion. Low barriers to entry have resulted in many competitors and a race to spend as much as possible to grab market share. Not only do the private companies that emerge from this unproductive cycle become bloated, so, too, do the venture funds themselves. Billion-dollar venture funds, once unheard of, are now commonplace. Last year, Sequoia raised an $8 billion seed fund, and SoftBank a whopping $100 billion fund. Big, of course, begets big.
(According to the McKinsey Global Institute, industries such as tech, pharma, and finance, which are based on data and intellectual property that can be monopolized and moved anywhere around the world, are the most prone to concentration.)26 It is the economic and political challenge of our time. Jason Furman, the former head of the Council of Economic Advisers, believes concentration is creating barriers to entry in many key markets.27 Academic David Autor has linked the corporate consolidation to workers making less.28 New research from the McKinsey Global Institute has found the same, and has noted in particular the way in which technology has driven down the labor share of the overall economic pie.29 There is also evidence that a small group of “superstar” companies are pulling way ahead of others, not only in terms of profits but also productivity.30 In other words, the biggest companies, particularly in the most digitally connected parts of the economy (tech, finance, and media), are incredibly productive.
The Long Twentieth Century: Money, Power, and the Origins of Our Times by Giovanni Arrighi
anti-communist, Asian financial crisis, barriers to entry, Bretton Woods, British Empire, business climate, business process, colonial rule, commoditize, Corn Laws, creative destruction, cuban missile crisis, David Ricardo: comparative advantage, declining real wages, deindustrialization, double entry bookkeeping, European colonialism, financial independence, financial intermediation, floating exchange rates, income inequality, informal economy, invisible hand, joint-stock company, Joseph Schumpeter, late capitalism, London Interbank Offered Rate, means of production, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, oil shock, Peace of Westphalia, profit maximization, Project for a New American Century, RAND corporation, reserve currency, spice trade, the market place, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, trade route, transaction costs, transatlantic slave trade, transcontinental railway, upwardly mobile, Yom Kippur War
Thus, in March 1987 protests from the Secretary of Defense, Caspar Weinbergen and Secretary of Commerce, Malcom Baldridge, convinced Fujitsu that it would be prudent to withdraw its attempt to take over the Fairchild Semiconductor Corporation. Yet, as Stephen Krasner (1988: 29) remarked: “Fairchild was owned by the French company Schlumberger, so the issue was not simply one of foreign ownership.” What cultural and political barriers could not stop, the barriers to entry built into the very structure of US corporate capitalism did. The complexities of US corporate life proved to be more insurmountable INTRODUCTION 19 barriers to entry for Japanese money than cultural hostility and political mistrust. The biggest ever Japanese takeovers in the United States — Sony’s takeover of Columbia Pictures in 1989, and Matsushita’s takeover of MCA the following year — failed completely in their objective. When the Sony deal was struck, the media over-reacted and Newswee/e‘s cover talked of Japan’s “invasion” of Hollywood.
Expansion abroad further increased the organizational capabilities of US managerial hierarchies, both at home and abroad, to monitor markets and labor processes in the lines and branches of business they targeted for occupation or had already occupied and regulate them to their advantage. Even in industries in which techniques of mass production were crucial to business success, organization rather than technology came to constitute the real barrier to entry: The most imposing barrier to entry in these industries was the organization the pioneers had built to market and distribute their newly mass-produced products. A competitor who acquired the technology had to create a national and often global organization of managers, buyers and salesmen if he was to get the business away from the one or two enterprises that already stood astride the major marketing channels.
Moreover, where the pioneer could finance the building of the first of these organizations out of cash flow, generated by high volume, the newcomer had to set up a competing network before highvolume output reduced unit costs and created a sizeable cash flow. [And he had to do this while facing] a competitor whose economies of speed permitted him to set prices low and still maintain a margin of profit. (Chandler 1977: 299) The spectacular domestic and trans-statal expansion of US multi-unit, vertically integrated business enterprises, and the organizational barriers to entry which they created, were associated with an equally spectacular growth of managerial hierarchies and bureaucratic structures. Once in 250 THE LONG TWENTIETH CENTURY place, these hierarchies and structures themselves “became a source of permanence, power and continued growth”: In Werner Sombart’s phrase, the modern business enterprise took on “a life of its own.” Traditional enterprises were normally short-lived. . . .
Epic Win for Anonymous: How 4chan's Army Conquered the Web by Cole Stryker
4chan, barriers to entry, Berlin Wall, Chelsea Manning, cognitive dissonance, Columbine, commoditize, creative destruction, crowdsourcing, Firefox, future of journalism, hive mind, informal economy, Internet Archive, Julian Assange, Kickstarter, Mark Zuckerberg, Marshall McLuhan, Mason jar, pre–internet, Silicon Valley, slashdot, social web, Stephen Hawking, Steve Jobs, Stewart Brand, technoutopianism, wage slave, We are Anonymous. We are Legion, Whole Earth Catalog, WikiLeaks
An exploitable could be a man’s face with a blank thought bubble overhead; everyone can fill in the bubble with their own text. It’s kind of like the New Yorker caption contest. It becomes a game to creatively fill in the blanks. And it doesn’t stop at text. Photoshop wizards augment the imagery itself, for hilarious results. Exploitables allow anyone to engage in the communal meme pool that is 4chan, with a very low barrier to entry. All you need is some basic image-editing prowess and a sense of humor, and you too can achieve maximum lulz. Some of the comics that come out of these threads surpass anything I’ve seen in the Sunday funnies. A Meme Pool For Participatory Culture There are many words used to describe this kind of interactive entertainment. Some call it riffing; others call it remixing. Media scholar Henry Jenkins calls it participatory culture.
Many of the community’s first users were subscribers to Brand’s Whole Earth Catalog, a magazine devoted to topics like alternative shelter, nomadics, and telecommunications. These subscribers were already on the forefront of technology, and very smart. This early user base would come to have a tremendous influence on the quality of discourse. In 1995, a decade into the WELL’s history, Wired magazine called the WELL the world’s most influential online community. It was a hyperintellectual environment that bore significant structural barriers to entry. It was slow. It was complicated. And perhaps most importantly, it was expensive. Between the monthly fee ($8), the hourly fee ($2), and any additional fees exacted by telephone companies (to say nothing of the cost of a computer and modem in those days), it wasn’t uncommon for power users to burn through $300+ per month. The WELL provided free access to reporters, which not only rewarded the WELL with plenty of press, but also infused the community with a sense of journalistic integrity.
That masked man I saw on the train in Europe? He was part of Project Chanology. Of course, the broader going anti-Scientology movement goes all the way back to Usenet days. Before delving into the early anti-Scientology movement, it’s important to understand something about the ideals of hackers and even general Internet users from that era, all of whom today would be considered extremely tech-savvy given the structural barriers to entry that the Internet imposed. Tech heads were, and still are, drawn to the Internet in part because it promises a level playing field, where all-important information is out in the open. As the WELL’s Stewart Brand famously declared, “Information wants to be free.” Enthusiasts in those days saw the Internet as a utopian future, where one could be taken at his or her word. Usenet was home to a fervent discussion at alt.religion.scientology, started in 1991 by Scott Goehring, a regular guy who wished to expose the hypocrisies and deceptions of the Church of Scientology.
I Live in the Future & Here's How It Works: Why Your World, Work, and Brain Are Being Creatively Disrupted by Nick Bilton
3D printing, 4chan, Albert Einstein, augmented reality, barriers to entry, Cass Sunstein, death of newspapers, en.wikipedia.org, Internet of things, Joan Didion, John Gruber, John Markoff, Marshall McLuhan, Nicholas Carr, QR code, recommendation engine, RFID, Saturday Night Live, Steve Jobs, Steven Pinker, Stewart Brand
I’d return to New York with the secrets of the future of media like a time traveler carrying a winning lottery ticket. Despair It took only a few meetings before I realized that the lottery ticket didn’t exist—or at least that’s what I was told. Despite my excitement about discovering new ideas in the California porn industry, I heard mostly fear and desperation from directors and the people who run production houses. Prices were falling. The barriers to entry had disappeared. Some money was flowing in, but advertising and sales of traditional media were in decline and it wasn’t clear how long even the current business could sustain itself. The industry, I was told, was being attacked by parasitic piracy and file sharing. “It’s tough now,” said one porn purveyor. “We’re dealing with piracy, and we’re dealing with free content on the Internet, which is eroding the normal business models that have been around for many years, like DVDs, magazines.”
Step right up; he’ll be glad to provide whatever people are willing to pay for. These pornography sites charge any number of different prices for their content. But these companies realized that they have to make the content that consumers want, and they have to make it available anywhere, at reasonable prices, any time the consumer wants it. Most important, since production costs and distribution channels no longer create a barrier to entry, if these companies don’t do that, someone else can and will. To bring in revenue, the smaller sites have recognized that advertising can be enough to pay the bills and keep the lights on. But the ads must be relevant to their audience. So if viewers see an advertisement similar and relevant to a clip they are about to watch, there’s a good chance they’ll click through to the ad’s link. But if the consumer is watching porn and the advertisement is for a car, the ad probably won’t generate many clicks.
But these striking numbers underscore that it is less expensive to produce digital copies without the costs of printing, paper, and physical distribution. Of course, there are still costs—highly skilled editors, copy editors, author royalties, and so on—but distribution is drastically less expensive, and the public recognizes this. In the public mind, the product you hold in your hand should cost more than the one that was downloaded—especially if it was downloaded onto an expensive e-reader or another gadget. As technology has demolished barriers to entry, consumers have become much more aware of what it costs to produce new content. Now anyone sitting in her bedroom with a microphone and a laptop can become a music producer. You don’t even need a separate camera and a tripod to create a TV show. Using only the camera built into the computer, young producers have made videos that collectively have reached hundreds of millions of viewers on YouTube and other advertising-based online video outlets.
Empirical Market Microstructure: The Institutions, Economics and Econometrics of Securities Trading by Joel Hasbrouck
Alvin Roth, barriers to entry, business cycle, conceptual framework, correlation coefficient, discrete time, disintermediation, distributed generation, experimental economics, financial intermediation, index arbitrage, information asymmetry, interest rate swap, inventory management, market clearing, market design, market friction, market microstructure, martingale, price discovery process, price discrimination, quantitative trading / quantitative ﬁnance, random walk, Richard Thaler, second-price auction, selection bias, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, two-sided market, ultimatum game, zero-sum game
These processes are usually automatic and routine, and the traders seldom need to concern themselves with the details. It is important, though, that they require some sort of preexisting relationship, possibly one that is indirect and via intermediaries, between the parties. Establishing a brokerage account or clearing arrangement is neither costless nor instantaneous and may therefore create a short-run barrier to entry for a potential buyer or seller not previously known to the market. Trading often involves a broker. A broker may simply provide a conduit to the market but may also act as the customer’s agent. This is a more 9 10 EMPIRICAL MARKET MICROSTRUCTURE substantial role and may involve discretion about how to handle a customer’s trading needs: when to trade, where to trade, what sort of orders to use, and so on.
Finally, interdealer trade in the FX market is typically conducted via a limit order book (such as EBS or Reuters). From the diversity of these examples, it is clear that the interdealer market is defined by its participants, not by the mechanism. Analyses of interdealer markets include Reiss and Werner (1998) and Viswanathan and Wang (2004). 15 16 EMPIRICAL MARKET MICROSTRUCTURE Dealer markets are typically flexible. The fixed technology and infrastructure costs are low. The main barrier to entry is access to a set of customers. Dealing operations are easily scaled up or down. Certain terms of trade and security characteristics may be set to accommodate customer preferences. For example, the equity derivatives desk at a bank might sell a customer a call option for which the underlying strike price, maturity, and size differ from any other option the desk has ever bought or sold. 2.3.2 Dealers in Hybrid Markets Dealers can make markets work where they might otherwise fail.
In a discriminating book, therefore, a limit order is priced at the “tail expectation,” that is, the expected value of the security conditional on an incoming order of a size just sufficient to trigger execution or anything larger. 13.1.3 A Monopolistic Dealer Most security markets are well approximated by the competitive dealer or limit order paradigms just described. But in a market for a thinly traded security or one in which there are regulatory or institutional barriers to entry, a dealer may possess market power. In the third setting we consider a monopolistic dealer. One feature of this situation is the standard result. The monopolist enjoys rents, abnormal profits that are not competed away. A more surprising result is that a monopolistic market may benefit customers (relative to the competitive dealer market). In a competitive dealer market (or in the limit order market, for that matter) each point on the price schedule is a competitive equilibrium, in the sense that it is open to entry by new liquidity suppliers.
The Wealth Dragon Way: The Why, the When and the How to Become Infinitely Wealthy by John Lee
8-hour work day, Albert Einstein, barriers to entry, Bernie Madoff, butterfly effect, buy low sell high, California gold rush, Donald Trump, financial independence, high net worth, intangible asset, Kickstarter, Mark Zuckerberg, negative equity, passive income, payday loans, self-driving car, Snapchat, Stephen Hawking, Steve Jobs, stocks for the long run, stocks for the long term, Tony Hsieh, Y2K
Present yourself in the best possible light. Remember, you need to stand out! Never before has there been such a total meritocratic environment for entrepreneurs. Anyone can launch a website. It's relatively cheap. We can trade on a global scale thanks to credit cards and payment systems such as PayPal. We can market to anyone through the Internet. But a meritocracy is a double-edged sword: It removes barriers to entry whilst increasing competition. And that's why you need to do everything you can to stand out. These days it is not so much about who you know as who knows you! And before anyone knows you, you must know yourself and know what you are selling. Know exactly what skills you are selling, what your strengths and weaknesses are, how you come across in a business meeting, and what value your business adds to the lives of your clients and customers.
Imagine you have L plates on, like a learner driver. Don't worry, you'll get to take them off, but you must psychologically wear them to begin with, to remind yourself, as much as anyone else, that you are still in learning mode. Once you feel you've gained enough knowledge and experience, you can take the L plates off and learn will become earn! People perceive the property business as having very low barriers to entry, in that anyone can get into it. This is true, but it still doesn't mean it's easy or that you don't need to educate yourself first. Mistakes in property investment can be cripplingly costly! Vince: I remember a woman coming to me because she'd inherited £50,000. She wanted to start investing in property. She was interested in taking my course and learning about property investing. At the last minute she pulled out because she said she'd found a portfolio of properties that she could just invest her full £50,000 into through a lease-option deal.
It's win-win however you look at it. People before Property We've said it before and we'll say it again: The property business is a people business, so you need excellent people skills. Whether it's the sellers, the solicitors, or your investment partners, you are dealing with people at every step of the way. Knowing how to deal with people is therefore a key skill you must acquire and hone. Because of the low barriers to entry in property investing, almost everyone assumes they can throw some money down, buy a few houses and rent them out for a nice passive income. But it takes a lot more than that. Yes, it is a meritocracy (i.e., anyone can do it), but property investing comes with a huge amount of responsibility. People often come to us because they have made mistakes and lost money trying their hand at property investing without educating themselves first.
Startup Weekend: How to Take a Company From Concept to Creation in 54 Hours by Marc Nager, Clint Nelsen, Franck Nouyrigat
Amazon Web Services, barriers to entry, business climate, invention of the steam engine, James Watt: steam engine, Mark Zuckerberg, minimum viable product, pattern recognition, Silicon Valley, transaction costs, web application, Y Combinator
But there are plenty of entrepreneurs around the country and the world who need an effective way of connecting with cofounders and colleagues—people who share that startup spirit. The kind of work that goes on at Startup Weekend allows people to form strong bonds that eventually grow into a community. Typically, Startup Weekend organizers have a lot of contacts in their startup, business, and/or tech communities. So, even though the barrier to entry may seem low, the events often turn out to be composed of a very highly motivated and connected group of participants. And Startup Weekend's international outreach has meant that entrepreneurs looking to expand their horizons have a resource for finding like-minded people all over the globe. One Startup Weekend participant launched a company that provided beach lockers and electronic locker solutions in Portugal.
As much as we talk about ingenuity and innovation being part of the United States' DNA, there's still that funny look that some people get when you're introducing your husband or your wife around the circle—in which everybody else is an investment banker or in marketing—and you say something like, “Yeah, he's working on his own thing right now.” It's simply not part of the cultural norm. There are always psychological and social aspects of being an entrepreneur. If we could get a critical mass of people engaged in entrepreneurship, or at least know someone who is an entrepreneur, then the barrier to entry might seem a little lower. Your Next Iteration Startup Weekend serves different functions for different people. Startup Weekend is helping entrepreneurs reach the next step in their respective journeys, wherever they currently are on the startup ladder. For those who know what they're doing, the weekend offers a condensed chronological period in which to get things done. They know they can access people, focus solely on things related to their entrepreneurial vision over that weekend, and actually launch something.
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
The decision by Apple and Google to enter the automotive market shows that a tech company can now transform into a car company. In the future, as the value shifts towards the electronics, the technology and licensing software may prove more strategically beneficial than manufacturing the car per se. The finance industry is going through a similar period of disruptive change. P2P (peer-to-peer) platforms are now dismantling barriers to entry and lowering costs. In the investment business, new “robo-advisory” algorithms and their corresponding apps provide advisory services and portfolio tools at a fraction of the old transaction cost – 0.5% instead of the traditional 2%, thereby threatening a whole segment of the current financial industry. The industry is also aware that blockchain will soon revolutionize the way it operates because its possible applications in finance have the opportunity to reduce settlement and transaction costs by up to $20 billion and transform the way the industry works.
Figure V: Distribution of US Occupational Employment* over the Probability of Computerization * Distribution based on 2010 job mix. Source: Frey, C.B. and M.A. Osborne, “The Future of Employment: How Susceptible Are Jobs to Computerisation?”, 17 September 2013 Positive impacts – Cost reductions – Efficiency gains – Unlocking innovation, opportunities for small business, start-ups (smaller barriers to entry, “software as a service” for everything) Negative impacts – Job losses – Accountability and liability – Change to legal, financial disclosure, risk – Job automation (refer to the Oxford Martin study) The shift in action Advances in automation were reported on by FORTUNE: “IBM’s Watson, well known for its stellar performance in the TV game show Jeopardy!, has already demonstrated a far more accurate diagnosis rate for lung cancers than humans – 90% versus 50% in some tests.
The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments by Pat Dorsey
Airbus A320, barriers to entry, business process, call centre, creative destruction, credit crunch, discounted cash flows, intangible asset, knowledge worker, late fees, low cost airline, low cost carrier, Network effects, pets.com, price anchoring, risk tolerance, risk/return, rolodex, shareholder value, Stewart Brand
But since 2003, shrinking SUV sales and an uncompetitive cost structure have caused losses and crushed returns on capital to single-digit levels. The same story, with minor variations, could be repeated for many auto-parts manufacturers, which operate in a cutthroat industry with truly awful economics. Turning to asset management, Morningstar covers 18 publicly traded asset managers, all of which have economic moats. (In fact, a dozen have wide moats, while the rest have narrow moats.)4 Although the barriers to entry are low in asset management—anyone willing to spend $100,000 or so on lawyers and registration fees can start a mutual fund—the barriers to success are quite high, because it generally takes a large distribution network to really rake in the assets. However, those assets tend to stick around once they’re in the door, which means that money managers that have amassed a good-sized pile of assets under management can generally generate high returns on capital without breaking much of a sweat.
This part of the market also has an outsize number of niche-dominating firms like Stericycle (medical waste), Moody’s Investors Service (bond ratings), FactSet (financial data aggregation), and Blackbaud (fund-raising software for nonprofits). Although business services firms may be further from your everyday radar screen, they’re usually worth the effort it takes to get to know them, given how rich in moats the sector tends to be. The financial-services sector is another great place to look for companies with moats. Barriers to entry are quite high in some areas—who is going to start up a bulge-bracket investment bank to compete with Goldman Sachs, Lehman Brothers, and their ilk?—and switching costs protect the profits of even your most average bank, as we discussed in Chapter 4. Sticky assets lead to very durable returns on capital at almost every asset manager, and financial exchanges like the Chicago Merc and the NYMEX reap huge benefits from the network effect.
We-Think: Mass Innovation, Not Mass Production by Charles Leadbeater
1960s counterculture, Andrew Keen, barriers to entry, bioinformatics, c2.com, call centre, citizen journalism, clean water, cloud computing, complexity theory, congestion charging, death of newspapers, Debian, digital Maoism, disruptive innovation, double helix, Douglas Engelbart, Edward Lloyd's coffeehouse, frictionless, frictionless market, future of work, game design, Google Earth, Google X / Alphabet X, Hacker Ethic, Hernando de Soto, hive mind, Howard Rheingold, interchangeable parts, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jean Tirole, jimmy wales, Johannes Kepler, John Markoff, John von Neumann, Joi Ito, Kevin Kelly, knowledge economy, knowledge worker, lateral thinking, lone genius, M-Pesa, Mark Shuttleworth, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, Mitch Kapor, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Shoshana Zuboff, Silicon Valley, slashdot, social web, software patent, Steven Levy, Stewart Brand, supply-chain management, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Whole Earth Catalog, Zipcar
Boulders and pebbles Imagine surveying the media, information and cultural industries in the mid 1980s, industries that provide most of our information and entertainment and so filter our access to the world around us and shape how we make sense of it. The scene would have resembled a large, sandy beach, with crowds organised around a few very large boulders. These boulders were the big media companies. The boulders came into being because media had high fixed costs – print plants for newspapers and studios for television. They were closely regulated and resources, like broadcast spectrum, were scarce. All that created high barriers to entry. Anyone trying to set up a significant new media business could be seen coming from a long way off. Rolling a new boulder onto the beach took lots of people, money and machinery. In the mid 1980s an entrepreneur called Eddie Shah tried to roll a boulder onto the British beach by setting up a national newspaper based in northern England. That provoked a protracted national strike. Rupert Murdoch caused controversy by moving his boulder – production of his News Corporation newspapers – from one part of London to another.
There are no zoning regulations, fences or white lines to tell you where to go (admittedly this is not true of some beaches in Spain, France and Italy). Order emerges as each family joins the throng. On popular beaches people spend all day in close proximity but generally remain civil and considerate. Precisely because there is no one in control – other than sometimes lifeguards looking after safety – people take it upon themselves to self-regulate. Beaches are generally egalitarian in spirit because barriers to entry are quite low. Normal rules do not apply because there is no private property. A public beach is a commons for pleasure. Many public events and spaces – festivals and carnivals, parks and libraries – thrive on this ethic of mass self-regulation. The web is bringing the spirit of the beach into the sharing of ideas and information. The beach also explains why the enclosure of the cultural commons of Web 2.0 would be such a bad idea.
The battle to bring democracy to repressive states will be fought online through thousands of struggles like those in Shanwei, by people who want simply to be able to think out loud, together. So on balance, will the open web be good for democracy? Yes, it will. Equality The Utopian hopes invested in the web’s democratic potential are matched by claims for its capacity to promote equality by breaking down concentrations of power based on information and knowledge, and lowering barriers to entry into the market-place for ideas. In a global economy that trades information and ideas as much as raw materials and physical goods, anyone with a computer and a modem can become a participant. At least that is the theory. There are serious doubts as to whether the web will do much to make the world less unequal and make any difference to the most pressing problems facing the poorest societies in the developing world.
What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers
Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, buy and hold, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, hedonic treadmill, Hugh Fearnley-Whittingstall, information retrieval, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Parkinson's law, peer-to-peer, peer-to-peer lending, peer-to-peer rental, Ponzi scheme, pre–internet, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, Zipcar
For these services, the peer-to-peer rental companies charge about a 6 percent commission on every transaction. If you need to trim a hedge, do you buy a trimmer from Home Depot for about $140 or rent one for $8? More and more consumers are renting, and when they rent, they experience firsthand that they don’t need to buy and own to have what they want and get what they need. Access becomes the privilege and ownership the burden. Removing Barriers to Entry Another category of usage PSS removes a common barrier to entry, whether that obstacle is price, availability, or even social status. Take public libraries, one of the oldest forms of product service systems. Many of the town libraries of the early 1600s were not open to the general public but were accessible only to scholars, who often had to review books in situ. The Boston Public Library in Massachusetts, opened in 1854, was the first large free municipal library in the United States that allowed people to borrow books and take them home to read.
There are many scenarios where the market is ripe for this type of PSS, including when the product has “high idling capacity” (cars or household tools); when the product has a limited use because of fashion (handbags) or it fulfills a temporary need (baby equipment and maternity clothes); when the product diminishes in appeal and value after usage (a movie); and when high start-up or purchasing costs for products are the barrier to entry (solar panels). The second model is an “extended-life” PSS. Here an after-sales service such as maintenance, repair, or upgrading becomes an integral part of the product’s life cycle, thereby reducing the need for replacement or disposal.9 Products that are expensive or require a specialized knowledge to repair (electronic goods) or products that need to be updated or frequently maintained to preserve their appeal (furniture) are well suited to this type of product service system.
Curation Nation by Rosenbaum, Steven
Amazon Mechanical Turk, Andrew Keen, barriers to entry, citizen journalism, cognitive dissonance, commoditize, creative destruction, crowdsourcing, disintermediation, en.wikipedia.org, future of journalism, Jason Scott: textfiles.com, means of production, PageRank, pattern recognition, post-work, postindustrial economy, pre–internet, Sand Hill Road, Silicon Valley, Skype, social graph, social web, Steve Jobs, Tony Hsieh, Yogi Berra
Says Blau, “It used to be it was expensive to create and expensive to distribute—to amplify speech—was held in very few hands, held to high standards by people, by governments or by societies. That meant that very few people had that opportunity to amplify speech. Now that cluster, that nexus, has been irretrievably broken.” Today publishing tools have been set free, Blau says. Cost, ownership, and barriers to entry are all gone, almost overnight: “The ability to amplify one’s voice, to amplify that beyond the reach of what we have had, reflects a change of course in human history. A lot of the discomfort people have about the kind of current riot of voices is that it’s irresponsible, it’s dumbing us down. What happens when anyone can actually speak to a very large audience? Now the whole dynamic of how stuff gets made and moved and managed has been changed so fundamentally that the gatekeeping function that we’ve come to expect is gone.”
After all, the Web is disintermediating lots of businesses that used to have middlemen. But Jarvis goes on to connect all this to Madison Avenue, seeing a battle ensuing between old-media companies moving online and emerging complete new-media outlets. Says Jarvis, “What excites me most is that reduced cost of production. That’s really what drove Weblogs: history’s cheapest publishing tool reduced the barrier to entry-to-media and allowed anyone to produce and distribute text content. Now this will come to video … A half hour of how-to TV that now costs X hundreds of thousands of dollars to produce can be done quite respectably—and probably with more life and immediacy—for a few thousand dollars. New content producers will pop up all over, just as they did in blogs, and now they can distribute their content freely thanks to BitTorrent.
For Tim O’Reilly, the founder and CEO of O’Reilly Media and a coauthor of The Twitter Book, it’s all about emerging new forms of distribution. “What’s so interesting about Twitter,” O’Reilly says, “is that it reflects all the many, many use cases, including spreading misinformation as well as being the first alert of new information.” No longer is a source trusted because it has the power or money to access the publishing ecosystems of TV, radio, or print. Anyone can use Twitter—there’s no barrier to entry. “I know people like me who are using it as a way of sharing my thought processes—what I’m learning, what I’m reading, what I’m caring about. I’m using it as a publishing medium really,” O’Reilly says. “And I’ve described my own work with Twitter as being the most minimal newspaper. A publisher pays attention to a community, whether it’s a community of authors or a community of newsmakers.
The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel
"Robert Solow", Airbnb, Albert Einstein, American ideology, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, laissez-faire capitalism, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, uber lyft, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra
In a way, Nokia’s fortunes were squandered because it was remarkably good at what it was doing: it ran one of the most efficient production networks in the telecom sector. It was too profitable to abandon. There are companies that manage to combine global scale and specialization with the ethos of creative destruction, but most firms do not. For those that have successfully reached global scale there is usually a far more pressing preoccupation: ensuring that the barriers to entry are so high and thorny that new rivals will not bother to cross into their territory. Protecting markets can be difficult, and big companies can fail to do it even in markets where competition is concentrated among a few big players. Over the last decades, however, firms have become more skilled at market and incumbency protection (see Chapter 5) and they invariably use the same formula as Nokia: increasing production specialization and optimization.
The political opposition to Uber reveals a banal but rarely observed point about regulation: regulated markets do not sit comfortably with innovation and an ambition to contest them. And Uber’s story is a telling example of how regulation – intentionally or not – preserves a particular form of market behavior and puts up barriers to contestable innovation. That is all too often true even with the benign form of regulation. For example, regulation tends to increase the barrier to entry for the simple reason that the cost of regulation per employee or unit of sale is higher for a new small entrant than an incumbent firm. Both economic and social regulations have that effect. A survey by the OECD, for instance, estimated the annual regulatory administration cost per employee to be about nine times higher for a company with fewer than 20 staff than for a company with a workforce of 50–499.12 Less benign regulation preserves an existing market order by protecting investors and labor from competition, including competition from innovation.
And that fits the paradigm of the planning machine, especially its technological determinism and disregard for those factors that govern whether an invention can be turned into market-renewing innovation. In this view, regulators and politicians will embrace the new innovation, regardless of its impact on competition, and allow timely and undisrupted access to consumers. Markets will thus flourish naturally on the back of innovation – and the speed at which innovation can ripple through various markets will not get arrested by policy barriers to entry. Even if there may be some initial resistance, the paradigm of the planning machine holds that technology will inevitably trump politics. In the battle between innovation and existing policy or market hierarchies, innovation will always win. It is a romantic view of politics – and that bee has stung a good part of the tech commentariat. The notion that politics runs on the spirit of bettering the welfare of humankind is not without merit.
The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics by Rod Hill, Anthony Myatt
American ideology, Andrei Shleifer, Asian financial crisis, bank run, barriers to entry, Bernie Madoff, business cycle, cognitive dissonance, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, different worldview, endogenous growth, equal pay for equal work, Eugene Fama: efficient market hypothesis, experimental economics, failed state, financial innovation, full employment, gender pay gap, Gini coefficient, Gunnar Myrdal, happiness index / gross national happiness, Home mortgage interest deduction, Howard Zinn, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, liberal capitalism, low skilled workers, market bubble, market clearing, market fundamentalism, Martin Wolf, medical malpractice, minimum wage unemployment, moral hazard, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, positional goods, prediction markets, price discrimination, principal–agent problem, profit maximization, profit motive, publication bias, purchasing power parity, race to the bottom, Ralph Nader, random walk, rent control, rent-seeking, Richard Thaler, Ronald Reagan, shareholder value, The Myth of the Rational Market, the payments system, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, union organizing, working-age population, World Values Survey, Yogi Berra
This is the case for any non-competitive firm. 1.4 Monopoly Monopoly is the simplest non-competitive market structure since, by definition, there is only one seller. Maintenance of a monopoly position requires barriers to entry associated with: (1) control over at least one crucial input; (2) economies of scale; (3) technological superiority; or (4) a government-created barrier such as patent protection. If the barriers to entry are low, the market may be ‘contestable’, causing the monopoly to behave more like a competitive industry. To keep things simple, we’ll focus on the case where barriers to entry are high. 123 6 | Market structure and efficiency reason for this key feature is that competitive firms take the market price as given, whereas non-competitive firms do not. Competitive firms equate the given price to marginal cost, giving rise to a unique quantity supplied for any given price; whereas non-competitive firms set their prices, and realize that price decreases lead to quantity increases.
The monopolist’s cost structure might be lower, or higher, than the sum of the costs of the competitive firms it replaces. Lower costs are possible if there are synergies or economies of scale or if the monopoly is the result of technological superiority. On the other hand, Leibenstein (1966) has suggested that monopolists may have less incentive to keep costs down. Management may become bloated. Such effects are known in the literature as X-inefficiencies and are particularly likely where barriers to entry are high. 136 Question for your professor: With regard to the deadweight loss supposedly associated with monopoly, is there either evidence or theory to suggest the monopolist would have the same demand and the same costs as the perfectly competitive industry with which it is compared? 137 6 | Market structure and efficiency Historically, economists have recognized that the assumption that costs are independent of the market structure is not true.
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
The 18 domains covered by these areas are: (1) scope of state-owned enterprises (SOEs); (2) government involvement in six network sectors (electricity, gas, rail transport, air transport, postal services, and telecommunication); (3) direct control over business enterprises; (4) governance of state-owned enterprises; (5) price controls; (6) command and control regulation; (7) licenses and permits systems; (8) communication and simplification of government rules and procedures; (9) administrative burdens for corporations; (10) administrative burdens on creating an individual enterprise; (11) entry barriers in services sectors; (12) legal barriers to entry: (13) antitrust exemptions; (14) barriers to entry in network sectors; (15) barriers to FDI; (16) tariff barriers; (17) differential treatment of foreign suppliers; and (18) barriers to trade facilitation (see Koske et al. 2015 for more detail). The summary measure is a weighted average across the three areas and varies between 0 and 6, where 0 is the most procompetition regulatory framework and 6 is the most anticompetition framework.
This is facilitated by high local autonomy in school funding and setting the school curriculum, but it is also affected by city planning and zoning regulations that affect the class composition of school districts. The more differentiated school districts are, the greater the incentive of those families from higher educational backgrounds and with higher income to locate in good school districts, which bids up house prices and creates barriers to entry for families from lower educational backgrounds and with lower income. As the last example suggests, the consequences of these institutional differences are strongly magnified by self-reinforcing strategic complementarities. Class differentiation by the quality of school districts is an example of Tiebout’s (1956) sorting mechanism, and it is reinforced when the income distribution responds to a more unequal skill distribution, strengthening incentives to sort, driving up house prices further, etc.
This would put FDI into conflict with producer interests—employers as well as unions. This does not seem to happen in ACDs. 4. The private versus public shares of this rising investment in education vary across countries. In continental Europe almost all spending is public, whereas in the Anglo-Saxon countries and in Japan and Korea a substantial share is private. Generally speaking, the higher the private share the greater the barriers to entry into tertiary education for low- and lower-middle-income families. In chapter 5 we show that this is an important determinant of the extent to which populist values have taken hold in the transition to a knowledge economy. 5. The economy-wide regulation index is based on more than 700 questions that are asked member governments in 18 regulatory domains, which are aggregated into three broad regulatory areas: (1) state control, (2) barriers to entrepreneurship, and (3) barriers to trade and investment.
Beautiful Testing: Leading Professionals Reveal How They Improve Software (Theory in Practice) by Adam Goucher, Tim Riley
Albert Einstein, barriers to entry, Black Swan, call centre, continuous integration, Debian, Donald Knuth, en.wikipedia.org, Firefox, Grace Hopper, index card, Isaac Newton, natural language processing, p-value, performance metric, revision control, six sigma, software as a service, software patent, the scientific method, Therac-25, Valgrind, web application
Patches can be as small as a one-line fix to documentation. As some people leave the project, others step in to take their places, and this continuous cycle of new developers and casual submitters is what keeps Python alive.* Thus the project’s very existence depends on keeping the barriers to entry low so that those who have a limited interest in contributing to Python aren’t scared away. Comprehensive tests not only protect Python against mistakes that could be made by new contributors who are unfamiliar with the code base, it also helps lower the barrier to entry for these new contributors. It is much more reassuring to make a change to a complex code base if you’re able to run tests against your change and satisfy yourself that your change did not break anything. When you make a change, you can just run the test suite, and if it passes, you can be reasonably sure that you didn’t break other parts of the system.
We eventually gave up on the idea of community-driven ad-hoc testing, and instead focused our efforts on writing better manual test cases. You Are Always Recruiting This is very self-explanatory. Everything you do on your project must be with an aim to build your volunteer base. This means not only being welcoming when you are in a public space, but it also means getting to know people personally. It means unceasingly hunting for ways to lower the barrier to entry on your project. So for every event we did, we always ensured that we gave people a simple, easy-to-understand way to contribute. We always gave plenty of detailed instructions. We always looked at how to make things easier and easier. Our home channel on IRC was more like a giant group of people sitting in a living room around a burning fire than a workplace. While we were all there for the work, it was very important to allow people to connect with each other, and these chats also gave us a chance to connect with them.
Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do by Brett King
3D printing, additive manufacturing, Airbus A320, Albert Einstein, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, asset-backed security, augmented reality, barriers to entry, bitcoin, bounce rate, business intelligence, business process, business process outsourcing, call centre, capital controls, citizen journalism, Clayton Christensen, cloud computing, credit crunch, crowdsourcing, disintermediation, en.wikipedia.org, fixed income, George Gilder, Google Glasses, high net worth, I think there is a world market for maybe five computers, Infrastructure as a Service, invention of the printing press, Jeff Bezos, jimmy wales, Kickstarter, London Interbank Offered Rate, M-Pesa, Mark Zuckerberg, mass affluent, Metcalfe’s law, microcredit, mobile money, more computing power than Apollo, Northern Rock, Occupy movement, optical character recognition, peer-to-peer, performance metric, Pingit, platform as a service, QR code, QWERTY keyboard, Ray Kurzweil, recommendation engine, RFID, risk tolerance, Robert Metcalfe, self-driving car, Skype, speech recognition, stem cell, telepresence, Tim Cook: Apple, transaction costs, underbanked, US Airways Flight 1549, web application
Table 1.1: Comparison of Product Application Approval Times Product 1980 2008 Credit Card 14 days Instant approval Personal Loan 7–14 days Pre-approved, or 24 hours Home Mortgage 30 days+ 24 hours41 These product application approval times are indicative of the pressure on financial service providers to adapt to the changing expectations of customers, and the need to stay competitive. Barriers to entry are lowering, and new innovations in business models are creating pseudo banking services streamed right to our desktop, supermarket or corner 7-Eleven store. Here’s how I articulated this disruption for bankers in my last book, Branch Today, Gone Tomorrow: “Everything about retail financial services that relies on outmoded physical artefacts, proprietary and outdated networks, and processes that are complex and unwieldy—all lend themselves to disruption.
Once a small retailer or local merchant is regularly using his phone to accept “swipe” payments (such as with Square), it’s then a very simple shift for the merchant to accept payments via a consumer tapping their phone (instead of a swipe). Technology such as PayPal and Pay with Square even allow payments just using our phone number or name—no physical interaction required. Once the merchant is accepting payments via a smartphone, there’s virtually no ongoing barrier to entry—i.e. the merchant doesn’t need to invest in a sophisticated POS terminal and such. PayPal has already deployed its supposed “Square competitor”—the triangle—and is aiming to compete in this phone-to-POS space in the near term. In Europe this has spawned iZettle—an EMV equivalent of the Square device in the United States. In October 2011, iZettle raised $11m in a Series A financing deal, supporting its growth plans.16 iZettle is based in Sweden.
The reason for this perspective, particularly in the US, is that right now US mobile carriers are attempting to restrict mobile wallet operations on their networks. Ultimately, these current attempts are likely to end in nought for any number of reasons, but mostly because the mobile payments market will continue to fragment. The number one reason, however, is that, unlike the credit and debit card industry, historically, the barriers to entry are extremely low. Let me explain. When MasterCard and Visa emerged in the 70s and 80s, they had a whole infrastructure to build. Merchants didn’t have point-of-sale capability to capture credit card payments. In those days there weren’t even networks to process those card payments. I’m sure many of us remember those so-called “flatbed manual imprinter” machines. These were known in the old days as “knucklebusters” by many merchants because of their design.
The Code of Capital: How the Law Creates Wealth and Inequality by Katharina Pistor
"Robert Solow", Andrei Shleifer, Asian financial crisis, asset-backed security, barriers to entry, Bernie Madoff, bilateral investment treaty, bitcoin, blockchain, Bretton Woods, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, conceptual framework, Corn Laws, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Donald Trump, double helix, Edward Glaeser, Ethereum, ethereum blockchain, facts on the ground, financial innovation, financial intermediation, fixed income, Francis Fukuyama: the end of history, full employment, global reserve currency, Hernando de Soto, income inequality, intangible asset, investor state dispute settlement, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, land reform, land tenure, London Interbank Offered Rate, Long Term Capital Management, means of production, money market fund, moral hazard, offshore financial centre, phenotype, Ponzi scheme, price mechanism, price stability, profit maximization, railway mania, regulatory arbitrage, reserve currency, Ronald Coase, Satoshi Nakamoto, secular stagnation, self-driving car, shareholder value, Silicon Valley, smart contracts, software patent, sovereign wealth fund, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, trade route, transaction costs, Wolfgang Streeck
Opting out of one and into a different legal regime leaves only a paper or digital trail but will not compromise the code’s power as long as there is at least one state that is willing to back it. This is so because, since Smith’s writing more than two hundred years ago, an empire of law has been built that is made primarily of domestic law but remains only loosely tied to specific states or their citizens. States have actively torn down legal barriers to entry and offered their laws to willing takers and have thereby made it easier for asset holders to pick and choose the law of their liking. Most states recognize foreign law not only for contracts but also for (financial) collateral, corporations, and the assets they issue; they use their coercive powers to enforce it, and they allow domestic parties to opt into foreign law without losing the protections of local courts.
In the past, many countries required a firm to use its domestic corporate c Lo n i n g Lega L P e r so n s 53 law, if this was where the company maintained its headquarters or core business operations. The real seat theory, as this rule has been appropriately labeled, however, was pushed out when the free movement of capital became the overriding concern of policymakers, recasting the imposition of local rules by a sovereign state into barriers to entry.10 Under these conditions, it is difficult for states to sustain rules that impose too high a burden for incorporating a business, or even rules that are at odds with the interests of shareholders. Lehman Brothers, along with other financial intermediaries, developed the legal partitioning of assets with the help of corporate law into an art form. The business operated as a fully integrated global financial services provider, but its operations, liabilities, and profit centers were divided among hundreds of legal entities.11 The assets of the parent company, LBHI, consisted almost entirely of shares held in its subsidiaries, and it derived its income from dividend payments and other transfers the subsidiaries made to the parent.
Jahrhunderts: Der Handel (Social History of the 15th—18th centuries: Trade) (München: Kindler, 1991), p. 248. 26. Anti-usury rules were common in the West until well into the nineteenth century; at first, they were restricted only to transactions with members of the same faith, and over time became rather toothless, as lawyers learned how to transact around them. For a succinct history of the religious origins of usury rules, see Mark Koyama, “Evading the ‘Taint of Usury’: The Usury Prohibition as a Barrier to Entry,” Explorations in Economic History 47, no. 4 (2010):420–442. 27. Geoffrey M. Hodgson, Conceptualizing Capitalism: Institutions, Evolution, Future (Chicago: University of Chicago Press, 2015), chap. 7 at p. 173. 28. Ibid., p. 176, with reference to Adam Smith’s conception of capital. n ote s to c h a P te r 1 237 29. Jonathan Haskel and Stian Westlake, Capitalism without Capital: The Rise of the Intangible Economy (Princeton, NJ: Princeton University Press, 2018). 30.
The End of Work: Why Your Passion Can Become Your Job by John Tamny
Albert Einstein, Andy Kessler, asset allocation, barriers to entry, basic income, Bernie Sanders, cloud computing, commoditize, David Ricardo: comparative advantage, Downton Abbey, future of work, George Gilder, haute cuisine, income inequality, Jeff Bezos, knowledge economy, Mark Zuckerberg, Peter Thiel, profit motive, Saturday Night Live, Silicon Valley, Stephen Hawking, Steve Ballmer, Steve Jobs, There's no reason for any individual to have a computer in his home - Ken Olsen, trickle-down economics, universal basic income, upwardly mobile, Yogi Berra
Back in 1989, a Tandy 5000 desktop computer—touted as the “most powerful computer ever!”—cost $8,499, monitor and mouse not included.38 The smartphone in your pocket today would have qualified as a supercomputer then—if they could have built it, which they couldn’t. The technological advances make programs easier to consume, of course, but they also make it easier to produce, lowering the barriers to entry in the entertainment business. More directors, writers, and actors will get to pursue their passion. Millie’s interest in acting becomes more plausible by the day. Jay Leno retired from hosting NBC’s Tonight Show in 2013. In 2016, he unveiled Jay Leno’s Garage, a show about his love of cars and motorcycles. It began as a web-based series on NBC.com, but has since been picked up by CNBC for prime time.
No one had heard of this profession a few years ago, but Marie Claire magazine’s Jo Piazza reports that influencers can now make “serious bank” for posting their fashion and food likes on Instagram, Twitter, and other social media sites.28 Kylie Jenner launched a line of cosmetics in 2015 and within eighteen months hit $420 million in sales with the help of 99 million followers on Instagram.29 You don’t have to be a celebrity like Kylie to enjoy this lucrative, high-living career. There are no barriers to entry. Giant cosmetics companies are starting to notice what I call “pajama entrepreneurs.” The New York Times reports, “Some cosmetic companies have flown groups of influencers to Bora Bora; Necker Island, the private enclave of Sir Richard Branson in the British Virgin Islands; and Kauai in Hawaii for lavish, all expense paid vacations. In exchange, most influencers agree to post a certain number of YouTube videos or Instagram posts about the company’s products.”30 Chiara Ferragni, the thirty-year-old founder of the influential blog The Blonde Salad, is arguably the queen of this modern profession, which exists solely because the people who populate our increasingly prosperous planet are interested in what she and other influencers wear.
That Used to Be Us by Thomas L. Friedman, Michael Mandelbaum
addicted to oil, Affordable Care Act / Obamacare, Albert Einstein, Amazon Web Services, American Society of Civil Engineers: Report Card, Andy Kessler, Ayatollah Khomeini, bank run, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business process, call centre, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, Climatic Research Unit, cloud computing, collective bargaining, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, delayed gratification, energy security, Fall of the Berlin Wall, fear of failure, full employment, Google Earth, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), job automation, Kenneth Rogoff, knowledge economy, Lean Startup, low skilled workers, Mark Zuckerberg, market design, mass immigration, more computing power than Apollo, Network effects, obamacare, oil shock, pension reform, Report Card for America’s Infrastructure, rising living standards, Ronald Reagan, Rosa Parks, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, the scientific method, Thomas L Friedman, too big to fail, University of East Anglia, WikiLeaks
“We are in business to help other businesses,” explained Lesk, an expert in putting together real estate transactions involving tax credits to generate financing for community-oriented developments, such as low-income housing. “And what we are finding is that the core of American business is changing—the repeat deals, involving similar structures, are fewer and farther between. There is more competition, barriers to entry are lower, our clients are reaching out to us for new ideas now much more frequently.” His law firm therefore has to be more creative and nimble in every way. For instance, says Lesk, his firm was a pioneer in putting together low-income housing credits with solar-energy credits in order to finance affordable housing for low-income people that would also come with solar-powered energy. “A few experienced practitioners in the industry were looking at the base product that we had used for years—the Low-Income Housing Tax Credit—and at the same time we were learning about renewable-energy tax credits,” explained Lesk.
Lesk continued: “Necessity is the mother of invention and we are in the age of great necessity because little that was given in the past is given today—whether it is fees, types of projects, the structure of deals, or availability of financing. I have worked with tax credits and affordable housing for twenty-five years. It was a specialized field and for a long time it had a reasonably limited number of players. Today it changes frequently and the barriers to entry are so low that we have all kinds of new competitors, and not only law firms.” His firm’s new chief innovation officer will lead a program to recruit, coach, and inspire lawyers so that they will not only do today’s standard legal work but also invent tomorrow’s. Those qualifications are already being taken into consideration when the firm determines annual pay and bonuses for its lawyers.
The collective potential of a million garage tinkerers is about to be unleashed on the global markets, as ideas go straight into production, no financing or tooling required. “Three guys with laptops” used to describe a Web startup. Now it describes a hardware company, too. “Hardware is becoming much more like software,” as MIT professor Eric von Hippel puts it … We’ve seen this picture before: It’s what happens just before monolithic industries fragment in the face of countless small entrants, from the music industry to newspapers. Lower the barriers to entry and the crowd pours in. But some people are not risk takers—not resilient or entrepreneurial enough to start a new company from scratch. That’s okay. In that case, though, they need to re-create themselves within their existing company or line of work by taking a routine creator job or routine server job and turning it into something special for which people will want to pay extra. For some that will be providing something sophisticated that a creative creator would do—designing a building, writing an innovative legal brief, inventing a new business, composing an ad, redoing a kitchen, or writing an iPad application.
Masters of Management: How the Business Gurus and Their Ideas Have Changed the World—for Better and for Worse by Adrian Wooldridge
affirmative action, barriers to entry, Black Swan, blood diamonds, borderless world, business climate, business cycle, business intelligence, business process, carbon footprint, Cass Sunstein, Clayton Christensen, cloud computing, collaborative consumption, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate social responsibility, creative destruction, credit crunch, crowdsourcing, David Brooks, David Ricardo: comparative advantage, disintermediation, disruptive innovation, don't be evil, Donald Trump, Edward Glaeser, Exxon Valdez, financial deregulation, Frederick Winslow Taylor, future of work, George Gilder, global supply chain, industrial cluster, intangible asset, job satisfaction, job-hopping, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kickstarter, knowledge economy, knowledge worker, lake wobegon effect, Long Term Capital Management, low skilled workers, Mark Zuckerberg, McMansion, means of production, Menlo Park, mobile money, Naomi Klein, Netflix Prize, Network effects, new economy, Nick Leeson, Norman Macrae, patent troll, Ponzi scheme, popular capitalism, post-industrial society, profit motive, purchasing power parity, Ralph Nader, recommendation engine, Richard Florida, Richard Thaler, risk tolerance, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Social Responsibility of Business Is to Increase Its Profits, Steve Jobs, Steven Levy, supply-chain management, technoutopianism, The Wealth of Nations by Adam Smith, Thomas Davenport, Tony Hsieh, too big to fail, wealth creators, women in the workforce, young professional, Zipcar
Minted does the same thing for high-end stationery. We can expect thousands of imitators in the future: the Threadless model is perfectly suited to an industry with low barriers to entry, large supplies of underemployed designers, and a limitless demand for nanosecond novelty. Don Tapscott and Anthony Williams argue that “crowdsourcing” represents a new phase in business history: by radically reducing the costs of collaboration, the Internet is forcing companies to transform themselves from hierarchies (which point inward and upward) into networks (which point downward and outward). The Web reduces—and often obliterates—barriers to entry by giving amateurs access to world-class tools and worldwide markets; it makes it easy for large groups of people to collaborate; and it supercharges innovation: crowds of people can develop new ideas faster than isolated geniuses and disseminate new products faster than most companies.
Dell spends hundreds of millions of dollars each year in promoting its quality and customer service, but Google quickly directs you to “Dell hell.” Anderson followed The Long Tail with Free: The Future of a Radical Price (2009). Free is essentially an extended meditation on an idea that has long been popular in tech circles—that “information wants to be free”; that digital technology is making it ever easier to store and distribute anything that is “made out of ideas,” smashing barriers to entry, destroying business empires, and driving the price of information down toward zero. Anderson’s take on “free” is a mixture of fatalism and techno-utopianism. His advice to people who worry about piracy is brutal: get over it. Stop fighting the inevitable and start reconceptualizing piracy as a marketing opportunity rather than a threat. To a large extent that is also his take on the entire “free” economy.
Ram Charan has spent his life preaching the virtues of globalization and flexibility, but nobody in the history of humanity has ever lived a life quite like Charan’s. He did not buy his first apartment until he was sixty-seven, spent most of his life living in hotels or bunking down with clients, and got his assistants to keep him supplied with freshly laundered clothes by courier. The gurus’ enormous commercial success and the variability of their output are linked. The combination of easy money and low barriers to entry means that charlatans flock toward the discipline even as genuine scholars flee from it in disgust. So far, management theory has produced only one “great” thinker, Peter Drucker. But Drucker was unique in both his background and his temperament: a Viennese-born intellectual who was introduced to Freud and Wittgenstein in his childhood and who fled Nazi Germany while a young man, he was also an extraordinarily self-contained figure, living most of his life in a modest house in a California suburb.
Lean Analytics: Use Data to Build a Better Startup Faster by Alistair Croll, Benjamin Yoskovitz
Airbnb, Amazon Mechanical Turk, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, barriers to entry, Bay Area Rapid Transit, Ben Horowitz, bounce rate, business intelligence, call centre, cloud computing, cognitive bias, commoditize, constrained optimization, en.wikipedia.org, Firefox, Frederick Winslow Taylor, frictionless, frictionless market, game design, Google X / Alphabet X, Infrastructure as a Service, Internet of things, inventory management, Kickstarter, lateral thinking, Lean Startup, lifelogging, longitudinal study, Marshall McLuhan, minimum viable product, Network effects, pattern recognition, Paul Graham, performance metric, place-making, platform as a service, recommendation engine, ride hailing / ride sharing, rolodex, sentiment analysis, skunkworks, Skype, social graph, social software, software as a service, Steve Jobs, subscription business, telemarketer, transaction costs, two-sided market, Uber for X, web application, Y Combinator
Lean Canvas and relevant metrics Lean Canvas box Some relevant metrics Problem Respondents who have this need, respondents who are aware of having the need Solution Respondents who try the MVP, engagement, churn, most-used/least-used features, people willing to pay Unique value proposition Feedback scores, independent ratings, sentiment analysis, customer-worded descriptions, surveys, search, and competitive analysis Customer segments How easy it is to find groups of prospects, unique keyword segments, targeted funnel traffic from a particular source Channels Leads and customers per channel, viral coefficient and cycle, net promoter score, open rate, affiliate margins, click-through rate, PageRank, message reach Unfair advantage Respondents’ understanding of the UVP (Unique Value Proposition), patents, brand equity, barriers to entry, number of new entrants, exclusivity of relationships Revenue streams Lifetime customer value, average revenue per user, conversion rate, shopping cart size, click-through rate Cost structure Fixed costs, cost of customer acquisition, cost of servicing the nth customer, support costs, keyword costs Sean Ellis’s Startup Growth Pyramid Sean Ellis is a well-known entrepreneur and marketer.
People understand what a penny is. While no business is as clear-cut as the penny machine, every CEO needs to make his business model as straightforward as possible, particularly to outsiders, so it’s painfully obvious why the venture will yield revenues. The entrepreneur had reasonable answers to key questions: how big can the business grow, how good can the margins get, and what kinds of barriers to entry does it have? The presenter engaged the audience, and let them help her tell the story. They were smart people who asked the questions she wanted, and she showed them that she’d anticipated their questions by providing slightly more detail than they asked for without going into too much depth. There was no need for a detailed technical explanation at this stage. Later, the investors would certainly go over the technology carefully to ensure that it wasn’t illegal, immoral, or outright trickery.
Or you could try changing the markets at which your channel is aimed—focusing on government sales, or buyers in higher education, who are better able to serve themselves. These might not seem like Lean pivots, but they’re done with the same kind of discipline and experimentation that informed your earlier product and pricing decisions. If you’re in a good business, you’ll soon have an ecosystem of competitors, channel partners, third-party developers, and more. To thrive, you need to claim your place in this market and establish the kinds of barriers to entry that maintain margins in the face of competition. At this point, you’ve moved beyond the Lean Startup model, but that doesn’t mean you’ve stopped obsessing over iterative learning. Scaling is good if it brings in incremental revenue, but you have to watch for a decrease in engagement, a gradual saturation of the initial market, or a rising cost of customer acquisition. Changes in churn, segmented by channels, show whether you’re growing your most important asset—your customers—or hemorrhaging attention as you scale.
What Would Google Do? by Jeff Jarvis
23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, barriers to entry, Berlin Wall, business process, call centre, cashless society, citizen journalism, clean water, commoditize, connected car, credit crunch, crowdsourcing, death of newspapers, different worldview, disintermediation, diversified portfolio, don't be evil, fear of failure, Firefox, future of journalism, G4S, Google Earth, Googley, Howard Rheingold, informal economy, inventory management, Jeff Bezos, jimmy wales, Kevin Kelly, Mark Zuckerberg, moral hazard, Network effects, new economy, Nicholas Carr, old-boy network, PageRank, peer-to-peer lending, post scarcity, prediction markets, pre–internet, Ronald Coase, search inside the book, Silicon Valley, Skype, social graph, social software, social web, spectrum auction, speech recognition, Steve Jobs, the medium is the message, The Nature of the Firm, the payments system, The Wisdom of Crowds, transaction costs, web of trust, WikiLeaks, Y Combinator, Zipcar
Cable and phone companies hope the internet is just their next pipe to own. They all want to control the internet because that is how they view their worlds. Listen to the rhetoric of corporate value: Companies own customers, control distribution, make exclusive deals, lock out competitors, keep trade secrets. The internet explodes all those points of control. It abhors centralization. It loves sea level and tears down barriers to entry. It despises secrecy and rewards openness. It favors collaboration over ownership. The once-powerful approach the internet with dread when they realize they cannot control it. The internet adds networks of links over society, connecting people with information, action, and each other. It is in those connections that value is created, efficiency is found, knowledge is grown, and relationships are formed.
In film and video, that delta is many times larger, which I believe will lead to even more investment in online shows, as the opportunities are even greater. Revision3 started on a shoestring but received a reported $9 million investment to create more shows, build a studio, and hire its CEO. It’s still run on a shoestring, CEO Jim Louderback told me. “The story of the internet,” he said, “is ruthlessly efficient business models and blowing away barriers to entry and access.” Revision3 saved money on equipment, which Louderback credited to Moore’s Law. Intel’s Gordon Moore decreed in 1965 that the number of transistors and thus the computing power on a chip would double every two years (this law enabled Google and the internet to exist and led to every law in this book). The cost of digital cameras has thus plummeted. Revision3 goes Cadillac with an $8,500 model but I’ve seen newspapers and even TV stations recording high-definition segments with $1,000 handhelds.
It’s also harder to find and evaluate new companies. I get a headache reading the popular blog TechCrunch, which covers new web 2.0 companies, because I can’t hope to keep track of them all: mobile companies, social companies, companies dedicated just to managing blog comments. The low cost of launching and running new enterprises means they can serve niche needs in a small-is-the-new-big age. But the barrier to entry to competitors is also about a millimeter off the ground. It’s harder than ever to figure out which of many competitors in a space will win. So investors need to use a wider network of trusted people to help find and then manage new companies. Taking investment capital from these trusted agents and giving them a share of the profits if their finds pay off could form a network of miniVCs backed by the bigger VC.
Grave New World: The End of Globalization, the Return of History by Stephen D. King
9 dash line, Admiral Zheng, air freight, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Kickstarter, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, plutocrats, Plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, The Rise and Fall of American Growth, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game
It is not so surprising, then, that some of them may abandon ship in the event that a populist party or a charismatic politician comes along promising them something that the mainstream parties had simply not bothered with. No one likes to be ignored forever. Social media cuts both ways. It allows advertisers – and mainstream political parties – to target specific audiences to maximize their goals, whether they happen to be profit or power. Yet it also brings down ‘barriers to entry’, allowing challenger businesses, charismatic political personalities and newly formed political groupings to enter the fray. These new entrants necessarily threaten the existing order not just locally, but also globally. And their quest is likely to be aided by the impact of technology on global supply chains. DIGI-STASIS The more costly the information, the less likely trade will take place.
By reducing the cost of information – and by creating global online ‘hubs’ like Alibaba and Amazon, where buyers and sellers can ‘virtually’ meet one another – the global marketplace should expand, competition should intensify and pricing should become more transparent. All in all, the allocation of resources should improve, leaving output higher, prices lower and everyone – other than inefficient rent-seeking companies – happier. Yet this argument assumes that technology only works by reducing barriers to entry, limiting information asymmetries and encouraging price discovery. That’s much too narrow a view. Technology also fundamentally alters production techniques and hugely skews the distribution of income and wealth. In both cases, technology can be enormously damaging to globalization. The decision on where to locate production facilities ultimately depends on a trade-off between the forces of dispersion and agglomeration.
WHERE OUR OBLIGATIONS BEGIN AND END This ‘Disunited States’ parable reveals many of the fundamental weaknesses associated with blind faith in globalization. Too much economic analysis habitually assumes that whilst human beings may have differing tastes, they are nevertheless all ‘super-rational’ and at all times are trying to ‘maximize their utility’. Any basic microeconomics textbook will argue that utility maximization is most likely to be achieved in a world of perfect competition where there are no ‘barriers to entry’, including, most obviously, the borders that surround sovereign nation states. This is, of course, mostly nonsense. Human beings tend instead to use simple rules of thumb – or, to use the jargon, heuristics – to make decisions. Often, those rules of thumb are so deeply embedded in the subconscious that we are blissfully unaware of what is going on. Our brains may be the biological equivalent of supercomputers, but for much of the time we rely on what might best be described as ‘gut instinct’ or even ‘tribal loyalty’.
A Culture of Growth: The Origins of the Modern Economy by Joel Mokyr
"Robert Solow", Andrei Shleifer, barriers to entry, Berlin Wall, business cycle, clockwork universe, cognitive dissonance, Copley Medal, creative destruction, David Ricardo: comparative advantage, delayed gratification, deliberate practice, Deng Xiaoping, Edmond Halley, epigenetics, Fellow of the Royal Society, financial independence, framing effect, germ theory of disease, Haber-Bosch Process, hindsight bias, income inequality, information asymmetry, invention of movable type, invention of the printing press, invisible hand, Isaac Newton, Jacquard loom, Jacques de Vaucanson, James Watt: steam engine, Johannes Kepler, John Harrison: Longitude, Joseph Schumpeter, knowledge economy, labor-force participation, land tenure, law of one price, Menlo Park, moveable type in China, new economy, phenotype, price stability, principal–agent problem, rent-seeking, Republic of Letters, Ronald Reagan, South Sea Bubble, statistical model, survivorship bias, the market place, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, transaction costs, ultimatum game, World Values Survey, Wunderkammern
Chapter 11 Fragmentation, Competition, and Cultural Change As we have seen, one bias in cultural evolution is what I call coercion bias, the ability of those in power who have a strong stake in the cultural status quo—be it religious, artistic, or scientific—to suppress innovation and persecute heterodox cultural entrepreneurs who deviate from the received wisdom. Innovations can undermine an existing structure of beliefs and in the process “erode beliefs” that provide certain groups with rents and legitimization (Benabou, Ticchi, and Vindigni, 2014). Another way of looking at this bias is to note that incumbents erect high barriers to entry into the market for ideas to protect their monopoly. These barriers often rely on such terminology as “heresy,” “apostasy,” and “blasphemy” and depend on raw political power to prevent new ideas from competing. In other cases, the educational system may have built-in protection for the intellectual status quo, such as the Chinese civil-service examination system or Jewish religious education.
Barnett (2015) has pointed to the Swiss towns as a pivotal location in connecting the Italian Republic of Letters with its Northern counterparts, as well as their polyglot character, which produced a set of translators needed when more and more intellectuals began publishing in their vernacular. Political fragmentation was thus important for more than restrained taxes and effective governance; it was a major factor in the emergence of cultural pluralism. In the sixteenth century, heterodox cultural variants emerged in many fields, meaning that existing barriers to entry were being compromised and penetrated. New people challenged the conventional wisdom in every area of knowledge and thought. To be sure, a variety of conservative bodies made serious attempts to suppress innovators, and some of the most innovative cultural entrepreneurs paid with their lives.17 No European country was completely free of suppression. Protestant nations were at times more intolerant than Catholic ones.
European advances in science did filter into China through the activity of the Jesuits, but apart from recalibrating their calendars and predicting eclipses, their impact was highly selective and not dramatic.24 Had the Chinese authorities allowed other gates of entry for European knowledge besides the Jesuits, it is likely that the new science of Galileo and Newton might have made more of an inroad. In Ming and Qing China there was a market for ideas, but the barriers to entry were high, and the competition between intellectual incumbents and intellectual innovators was biased in favor of the former. This may sound odd in a land where there was no Holy Inquisition (though the Qing emperors at times persecuted intellectuals whom they suspected of subversion), no concepts of blasphemy or sacrilege in the European sense. But perhaps the sharp rise of these institutions in the early modern West was a sign that in Europe the intellectual incumbents felt (justly) that they were under threat.
WikiLeaks and the Age of Transparency by Micah L. Sifry
1960s counterculture, Amazon Web Services, banking crisis, barriers to entry, Bernie Sanders, Buckminster Fuller, Chelsea Manning, citizen journalism, Climategate, crowdsourcing, Google Earth, Howard Rheingold, Internet Archive, Jacob Appelbaum, John Markoff, Julian Assange, Network effects, RAND corporation, school vouchers, Skype, social web, source of truth, Stewart Brand, web application, WikiLeaks
When I attended the ﬁrst face-to-face meeting of the Kos community, at a convention center in Las Vegas in June 2006 where more than two thousand people attended, the main hall felt like a summer camp reunion of people who knew each other personally (either by name or user handle) but had never met before. This style of political organizing is not the monopoly of the left; the Internet itself is just a system that rewards open methods more than closed ones. The Tea Party movement in United States, at least in some of its iterations, is another good example of open source organizing. Instead of having one central address or leader, it has lots of small groups and no real barrier to entry. Thus no one can control it or stop it by delegitimizing a single leader.4 “If you have a machine, you know exactly how to attack it, exactly how to shut it down,” says Keli Carender, an early Tea Party activist from Seattle. “If you have three million machines coming at you, you don’t know where to turn.”5 As Jonathan Rauch wrote in a long article describing the movement’s methods: The tea party began as a network, not an organization, and that is what it mostly remains.
And last but not least, this approach will create a large union of shared interests in the defense of the rights to run an anonymous post-drop in the digital world.14 The battle over WikiLeaks has had another salutary eﬀect: it has delivered a wake-up call to everyone who thought the free and open Internet was already a fact. Freedom of the press is no longer the exclusive province of those who own one, but while the Internet has drastically lowered the barriers to entry into the public sphere, it has not eliminated them. 175 WIKILEAKS AND THE AGE OF TRANSPARENCY Especially when that public sphere is built on privately owned infrastructure. Take Amazon’s hasty decision to kick WikiLeaks oﬀ its cloud servers after a mere phone call from a staﬀer for Senator Joe Lieberman. In its blog post explaining the decision, Amazon says the group was in violation of its terms of service: Our terms of service state that “you represent and warrant that you own or otherwise control all of the rights to the content . . . that use of the content you supply does not violate this policy and will not cause injury to any person or entity.”
The Art of Scalability: Scalable Web Architecture, Processes, and Organizations for the Modern Enterprise by Martin L. Abbott, Michael T. Fisher
always be closing, anti-pattern, barriers to entry, Bernie Madoff, business climate, business continuity plan, business intelligence, business process, call centre, cloud computing, combinatorial explosion, commoditize, Computer Numeric Control, conceptual framework, database schema, discounted cash flows, en.wikipedia.org, fault tolerance, finite state, friendly fire, hiring and firing, Infrastructure as a Service, inventory management, new economy, packet switching, performance metric, platform as a service, Ponzi scheme, RFC: Request For Comment, risk tolerance, Rubik’s Cube, Search for Extraterrestrial Intelligence, SETI@home, shareholder value, Silicon Valley, six sigma, software as a service, the scientific method, transaction costs, Vilfredo Pareto, web application, Y2K
Because the janitors create a clean and safe workplace, fewer germs are transmitted between the engineers, accountants, marketing professionals, and so on. This comparatively germ-free environment results in more time spent at work and more things getting done. Moreover, the cleanliness is done at lower cost than having the other professionals worry about cleaning common areas, and so on. Finally, sensitive documents are shredded by the proprietary janitorial team and as a result fewer trade secrets are lost thereby increasing barriers to entry for competitors. The janitors now have purpose in life and they are significantly happier with their jobs. If we can develop a causal roadmap for janitors, it stands to reason that teams that are closer to the creation of value should be even easier. For instance, an engineer writes and designs the code that creates the product upon which your revenue is predicated. An engineer working within a classic back office IT group is responsible for writing code and developing systems that allow people to be more productive for each hour that they spend at work, thereby decreasing unit cost of work produced and either reducing the total cost structure of the organization or alternatively increasing the throughput at similar cost.
Just as the business executives have not spent as much time understanding how to run technical projects or how to “speak tech” as the technology leaders have spent learning to read financial statements, it is also likely that the technical executive has not spent a lot of time learning what truly drives your business. To be sure, he probably believes he knows. A good test is to have him define the technology metrics in terms of things that are important to your business: revenue, profit, time to market, barriers to entry, customer retention, and so on. It is critical for the technology executive to understand how the business makes money, the drivers of that revenue equation, the current financial reality within the business, and the current year’s financial goals for the business. In AllScale, as discussed in Chapter 2, Roles for the Scalable Technology Organization, the previous CTO was promoted based on his technical acumen.
Beta was arguably a better technology than VHS, yet it still lost. Apple’s Macintosh had a more intuitive interface than the PC, yet the PC won based on the ecosystem of providers and tools available for it. To be able to answer the second question, you really need to be able to explain how, by building the system in question, you are raising switching costs, lowering barriers to exit, increasing barriers to entry, and the like. How is it that you are making it harder for your competitors to compete against you? How does this help you to win new clients, keep existing clients, and operate more cost effectively than any of your competitors? What keeps them from copying what you are doing in very short order? “Not Built Here” Phenomenon If we seem a little negative in this chapter, it is because we are.
The Googlization of Everything: by Siva Vaidhyanathan
1960s counterculture, activist fund / activist shareholder / activist investor, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, creative destruction, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global pandemic, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, moral panic, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, Panopticon Jeremy Bentham, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, Social Responsibility of Business Is to Increase Its Profits, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application, zero-sum game
Back then I took seriously the notion that the world had stepped beyond the stalemate of the Cold War and had settled on a rough consensus on competitive open markets, basic human rights, and liberal democracy—even if the road to those goals was still long and rocky in much of the world.1 I assumed digitization would level the commercial playing ﬁeld in wealthy economies and invite new competition into markets that had always had high barriers to entry. I imagined a rapid spread of education and critical thinking once we surmounted the millennium-old problems of information scarcity and maldistribution. But in the early part of this century, my mood soured and my enthusiasm waned. I saw my great hopes for an open and free Internet corrupted by the simultaneous pressures of inadequate security (in the form of fraud, spam, viruses, and malware) and the attempts at a corporate lockdown of culture and technology.2 I saw that the resistance to openness, transparency, accountability, and democracy was stronger than I had imagined and present in parts of the world—including my own— where I thought the forces of light had triumphed long ago.3 I worried that the environment generated by the global reach of the Internet was pulling us in opposite directions—toward both anarchy and oligarchy— and draining the institutions and environments that would foster more P RE FAC E xiii reasonable, republican virtues, such as measured deliberation, critical thought, and mutual respect.4 I noted the ways in which those who promoted the digitization and networking of all things reverted to simplistic and wrongheaded views of how technology works in society.5 I grew weary of others’ attempts to describe technology as an irresistible force that young people have mastered and old people must conform to or wither away trying to resist.6 And I had an intellectual allergic reaction to the growing notion that one company—Google—could or would solve some of the greatest and most complex human problems simply by applying the principles of engineering.7 So I sought a way to explore both my disenchantment with and my approval of changes in our global information ecosystem.
Many of Google’s positions correspond roughly with the public interest (such as giving empty support to a network neutrality policy and “safe-harbor” exemptions from copyright liability). Others, such as ﬁghting against stronger privacy laws in the United States, do not.13 REN D E R UNTO CA ESA R 19 When confronted with questions about its dominance in certain markets, Google ofﬁcials always protest that, on the Internet, barriers to entry are low, and thus any young ﬁrm with innovative services could displace Google the way Google displaced Yahoo and AltaVista in the early days of the twenty-ﬁrst century. With Google unable or unwilling to leverage its advantages though some sort of lockdown, such as holding users’ content and data hostage with technology or exclusive contracts so that they must continue to use Google services, they point out that users could easily migrate to the next Google-like company.
Being able to use a search engine, click on a link, and even post to Facebook does not require much skill or investment, but producing video, running an inﬂuential blog, participating in the Wikipedia community, hosting a proxy server, and even navigating between links and information sources on the Internet demand much more money and knowledge than most people in the world have. To acquire such skills, people need at least minimal free time and signiﬁcant means, and many with disabilities are excluded regardless of education or means. The barriers to entry for such productions are lower than ever in human history, but they are far from free, open, and universal.57 To consider the prospects for a cosmopolitan global civil society or its cousin, a global public sphere, and the role that Google might play in it, we should consider the role of powerful and ﬂexible communicative technologies in places as dynamic and diverse as China, Russia, and India.
Using Open Source Platforms for Business Intelligence: Avoid Pitfalls and Maximize Roi by Lyndsay Wise
barriers to entry, business intelligence, business process, call centre, cloud computing, commoditize, different worldview, en.wikipedia.org, Just-in-time delivery, knowledge worker, Richard Stallman, software as a service, statistical model, supply-chain management, the market place
In some cases the availability of free source code may not be a benefit due to a lack of internal resources and/or skills to provide all of the development efforts required. Other organizations are using alternate versions of free software to further their business efforts and are open to the concept of expanding their use of OS. With many factors going into the changes surrounding OS adoption, the barriers to entry involving lack of knowledge or IT development infrastructure to deploy solutions are no longer restricting adoption. For companies without supporting BI infrastructures, commercial OS solutions exist that can help them get on track and take advantage of free solutions. The differences between community- and commercial-based OS will be discussed in the next chapter with an overview of the differences between vendor offerings and the various outlooks vendors have on their commercial products and services.
The figure below identifies the average cost of OSBI usage versus traditional BI offerings based on Madsen’s evaluation of the TCO of OSBI versus traditional offerings.4 The deployment size is based on looking at deployments of 25 users, 100 users, and 500 users, respectively. However, these numbers are based on large-scale traditional vendors. As we’ll see later on, newer offerings are minimizing these differences and potential barriers to entry, but OSBI still has the benefit of no-cost software. 4 Lowering the Cost of Business Intelligence With Open Source: A Comparison of Open Source and Traditional Vendor Costs Mark Madsen, Third Nature, Prepared for Pentaho, page 4. 122 CHAPTER 11 Evaluating ROI and TCO Average Cost per User $3,500 $3,000 $2,500 Cost $2,000 $2,500 $1,000 $500 $Small Medium Large Avg Cost Trad. $2,664 $3,103 $3,174 Avg Cost Open $1,200 $870 $174 FIGURE 11-1 Average Cost Per User, Comparing Traditional and Open Source Across Scenarios.
For instance, a number of best-of-breed solutions exist for companies evaluating adding dashboards to their internal reporting needs. Many organizations are moving away from one platform and a standardized approach and integrating diverse offerings to make sure they get the best of everything. This does not mean that one solution outperforms another, but that based on changing price structures and lowering barriers to entry, organizations can develop a piecemeal approach. Within the realm of OSBI, this may mean that OS only represents one portion of BI or that disparate offerings pull data from the same sources or may need to interact in specific ways. For instance, no matter what exists on the backend, business users need a seamless business experience. Once organizations define what they have in-house, they can identify which aspects require OSBI considerations and which don’t.
Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas
"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bernie Madoff, British Empire, buy and hold, central bank independence, collective bargaining, commodity trading advisor, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, law of one price, light touch regulation, Long Term Capital Management, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, rolodex, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, ultimatum game, union organizing, Vilfredo Pareto, working-age population, World Values Survey
The fund was well known for pressing the banks it was working with for hints about market developments, such as big buy and sell orders (Sender 2009). 54 ECONOMISTS AND THE POWERFUL Trading on insider information diminishes the returns of all other investors. The damage to the individual investor from the individual insider deal is minor. However, as we will see, insider dealings and similar strategies are so pervasive in the ﬁnancial industry that the cumulative damage to the individual investor can be sizable. Market power in ﬁnance Two important conditions for the exertion of economic power are the existence of barriers to entry and the power to determine prices. High proﬁts of big investment banks, the constant increase in governmentsponsored ﬁnancial institutions and many examples of extortion, which we will cover below, provide ample proof that competition does not work well to discipline participants in the ﬁnancial sector. Market entry is not free. You need a license to found a bank and there is a signiﬁcant regulatory burden.
Throwing out the neoclassical innovation to theory as faulty leaves classical economics and the notion that the negotiating power of the various social classes determines wages and proﬁts. This is exactly what ﬁrst year classes in practical business skills teach: an overview of the main points of Pierre Bourdieu’s economic sociology (e.g. The Social Structures of the Economy, 2005) and Porter’s ﬁve forces strategic analysis (barriers to entry, threat of substitutes, buyer power, seller power, competitive rivalry). Both are absolutely centered on how negotiating power between economic actors works in the real world. Conclusion Companies make proﬁts beyond the assumed remuneration for taking risks and for the entrepreneur’s work. Mainstream economic theory has no theoretical basis on which to determine how these rents should be distributed among capital owners, management and workers.
G. D. 13 American Economic Association ix, 10, 17, 20, 26–7, 44 American Economic Review 8, 20, 26–7 American International Group (AIG) 70, 90–91 Anglo-Saxon economics ix Arrow, Kenneth 7, 23–4, 212; see also impossibility theorem (Arrow’s) asset bubble 104 asymmetric information: see information, asymmetric AT&T 147 authoritarianism 24, 210 average cost 148, 151 Bank of America 77, 86, 94 barriers to entry 54, 160 Basel III Accord 104–5 Bear Stearns 90, 96, 107, 111 Becker, Gary S. 186 Bemis, Edward 9–10 Bentham, Jeremy 11 Berlin, Isaiah 25 Bernays, Edward 15–17 Bill of Rights (US) 208 Bolsa Família program 41 Boskin Commission 36 Bourdieu, Pierre 25, 115, 160 Bridgestone (tire manufacturer) 163–4, 166–7 British Empire ix, 16, 100 Buchanan, James 23–4 Buffett, Warren 93, 107–9 Bullionists 2 Bureau of Labor Statistics 32–3, 35 capitalism vii–viii, ix, 2, 5–6, 10, 18–19, 21, 31, 46, 142, 153, 158, 165 central bank 43, 67, 79–88, 104–5 CEO: see chief executive ofﬁcer (CEO) Chicago, University of 10, 17, 19, 26, 27, 44, 80, 84, 168, 186, 193 chief executive ofﬁcer (CEO) xi, 16, 47, 61, 70, 93, 95–6, 103, 107–13, 115–27, 132, 138–9, 215, 217 Chrysler xi, 113 Citicorp (bank) 43 Citigroup (bank) xi, 61, 63, 96, 105, 112, 125 Clark, John Bates 6, 10–11, 155, 193 classical value theory 5 Cold War 2, 18, 21, 25–8, 46 collective bargaining 185 Commodity Futures Trading Commission (CTFC) 90, 92 Commons, John R. 8–10 communism xii, 2, 19, 21, 25, 139 comparative advantage 4 Condorcet, Marquis de 23 conﬂict 165 consumption viii, 11, 13, 32, 78, 158, 192, 203, 211 control fraud 94–5 convergence vii 242 ECONOMISTS AND THE POWERFUL cooperation 73–5, 165, 167, 170, 198 cooperative 102 Cornell University 10 corporate elite x, xii, 115, 117, 140 corporate governance 92, 119, 127, 135, 136 corporate government 135 corporate management 109 corporation tax 139 corruption 220 credit x, xi, 29, 48–50, 59–60, 62, 65, 71, 73, 75, 77–84, 90–91, 95–8, 100, 104, 110, 149, 183 credit default swap 91, 93 CTFC: see Commodity Futures Trading Commission (CTFC) Darwinism 167 Debreu, Gerard 7 demand curve 146 democracy 18, 207, 211–13, 220 depreciation 33, 147 derivatives 67, 90–93, 96–7 Deutsche Bank 105, 121 disability adjusted life expectancy vii discrimination 130, 186–7 earnings management 129–30 economic growth xi, 80 economic policy xi, 46, 66, 76, 152 economic utility 4–5, 13 economics, mainstream viii, x–xi, xiii, 1, 29, 47, 136, 145, 164, 170, 208, 211, 214 economics, neoclassical ix, xii, 6, 8, 10–11, 13, 21–2, 25, 30, 38, 42, 45, 141, 143–4, 153–5, 157–60, 163–4, 168, 170–71, 173, 180–82, 188, 191–2, 210, 213 economies of scale 3, 54, 152, 161 economies of scope 54 Edgeworth, Francis Y. 10 efﬁciency vii, x, xi, xii, 13, 19, 25, 39, 43, 48, 62, 73, 101, 108, 136–7, 143, 144, 146–7, 149, 156, 160, 170, 176, 179, 183, 190, 193, 197, 202–4, 216, 219 efﬁcient markets x Ely, Richard T. 9–10 employment protection 188, 200–203, 205 Enron 52, 92, 98, 110, 128, 132, 217 entrenchment 126, 135 equality of opportunity vii–ix, xii, 37, 39–41, 45, 53, 114, 124, 172 equality of outcome vii equilibrium x, 6–7, 37, 47, 146, 159, 161, 181–2, 197, 208 euro ix, 67, 82, 102 European Central Bank 103, 189, 215 European Commission/Union 67, 152 executive compensation 120–21, 138 exploitation 6, 156, 209, 212 exports 2, 34, 180–81 fairness ix, 13, 37, 39–40, 160, 164–6, 169–70, 177, 220 Fannie Mae (US government subsidizer of mortgages) 217 fear, uncertainty, doubt (FUD) 145 Federal Reserve (US) 43–4, 69–70, 85, 87–92, 143, 215 feedback loop 40, 216, 220 ﬁat money 75, 81 ﬁlibuster (US antilegislative maneuver) 218 ﬁnancial industry xi, 44, 46–8, 51, 54–6, 64, 70, 89, 91–2, 121, 129, 217 ﬁnancial markets xi, 47, 92, 108, 110, 128 ﬁnancial rating agencies: see rating agencies ﬁnancial sector xi, 43–4, 47–8, 53–4, 60, 64, 69, 79, 81, 83, 88–9, 100–101, 103, 105 Financial Stability Board 103 First (Workingmen’s) International 5 ﬁrst mover advantage 132 Fisher, Irving 10, 13, 60, 75, 81, 83–4, 214 Fitch (ratings agency) 97 ﬁxed costs 143 INDEX Fortune (magazine) 128 Fortune 500 (index) 49, 139 forwards (ﬁnancial instrument) 67 founding fathers (of the United States) 207, 218 Freddie Mac (US government subsidizer of mortgages) 217 free market 6–7, 24, 46, 84, 147, 188, 193, 209 free riding 24, 37, 164 free trade 3–4, 16, 46, 209 freedom viii, 10, 18, 21, 25, 80, 94, 188, 191, 218 Freud, Sigmund 15 Friedman, Milton 44, 57, 81 front running (trading strategy) 65–6 FUD: see fear, uncertainty, doubt (FUD) fund managers 56–8, 63–4, 68, 134 futures (ﬁnancial instrument) 67 Galbraith, John Kenneth 11, 74 GDP: see gross domestic product (GDP) General Motors xi, 16, 184–5 global ﬁnancial crisis ix, 90; see also Great Financial Crisis God 24 gold 2, 72–7, 79–80, 86–7, 89 golden parachutes 112 Goldman Sachs 47, 49, 54, 56, 63, 66, 69, 88, 93, 105, 121, 215 goodwill 131 Great Depression 11, 70, 80, 138–9, 181, 204 Great Financial Crisis 79, 100, 111, 136; see also global ﬁnancial crisis gross domestic product (GDP) vii–ix, xi, 28–31, 143 growth 27–8, 31, 33, 35, 39, 71, 90, 102, 108, 128, 132, 135, 151, 195, 203–4 Hadley, Arthur 10 happiness 202 Harvard Business Review 17–18 Harvard University 17–18, 26, 109, 208 243 hedge fund 29, 43, 46, 53, 58, 64–8, 92, 96, 101, 107 hedonic method 33–6 Hicks, John 13–14, 21 Homo economicus 164–6, 173 hostile takeovers 126 human capital 128 imports 2, 12, 34, 35 impossibility theorem (Arrow’s) 23–4, 212–13 incentives 39–40, 42–5, 52, 91, 93, 109, 114–15, 129, 132, 140, 172–4, 177, 182, 214 income guarantee 41 incompleteness viii, 12, 49, 145, 169, 184 incumbency 121, 134, 149 index tracking fund 55, 58 indifference 141, 168 industrial goods 2–3, 142 industrial production 2, 179 Industrial Revolution 5, 143, 181 inequality vii, 40, 138, 140 inﬂation 32–3, 36, 50, 78, 81, 104, 109, 120 information advantage 48, 131 information, asymmetric x, 191 information costs 144 information goods 143 information, imperfect x, xii, 142, 145, 149, 220 information technology 34, 218 innovation 34, 43, 147, 150–52, 160, 208 insider information 53–4, 62–3, 131 insider knowledge 131 insider trading 63–4, 131 institutionalism 8, 21 insurance xi, 39, 69, 82, 89–91,152, 189, 198, 204, 210 interest rate, real 50, 159 International Monetary Fund 27, 31, 48, 69, 74 International Workingmen’s Association 5 244 ECONOMISTS AND THE POWERFUL investment 32–3, 37, 41, 51, 56–7, 68, 78, 96–100, 103–4, 128–30, 133, 135, 140, 157, 184, 217 advice 51, 54, 56, 129 banking 29, 43, 47, 51, 52, 54, 55, 60–62, 64, 70–71, 89–90, 93, 94, 96, 97, 101, 107, 111–12, 125, 132 personal viii irrationality vii, 1, 13, 16, 38, 40, 151, 205, 211–12 Ivy League 27 Jevons, William Stanley 5, 16 job security viii, 108, 199–200, 202–4 J.P.
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
In those days, large capital equipment was all the rage in industrials. Most were trying to model themselves on GE with big-ticket items like compressors, turbines, and engines—the belief was that the spare parts and service made up for a lower-margin install price and high capital costs. Business schools and management programs focused on concepts like “Porter’s Five Forces” analysis. Big pieces of capital equipment seemed to offer amazing barriers to entry and power over suppliers, and the power in the sales channel grew with each install, even if it meant sacrificing cash terms in order to close an order. At Ingersoll-Rand, Jellison saw firsthand the obsession that leaders had with this business model. GE’s success was so well established at that point that few questioned any of the basic assumptions. Razor/razorblade was the business model everyone wanted to copy, no matter the cost.
This mentality of driving an appropriate level of value out of every order is ingrained in the product line managers across the company. But how long can annual price increases approaching 5 percent really last? TransDigm’s pricing strategy remains sustainable because of three key factors: (1) regulatory, (2) economic, and (3) customer behavior. On the regulatory front, the time-consuming and costly FAA approval process for new parts creates a high barrier to entry. There are also the simple economic challenges of trying to compete against one of TransDigm’s product lines. Many of TransDigm’s parts are ordered in low and varying volumes and at infrequent intervals. Consequently, third parties often find the cost of investing in capital equipment and engineering expertise not worth the potential return. This dynamic is compounded by airline customer behavior.
The prevailing view is that the industry is a bit like the airline industry from a decade or two ago: the plane is expensive and going to fly no matter what, so you might as well sell tickets cheap to get all the seats filled, especially when demand falls. In a true recession, capital-intensive industries can be an exercise in who can take the most pain while others are shutting down. Rental equipment similarly doesn’t make money if it’s not rented, and rental has lower barriers to entry than do airlines. United Rentals built a towering competitive advantage the hard way. In doing so it raised its margins substantially, widening the gap with competition, creating tens of thousands of good jobs, and professionalizing a scattered and entrepreneurial industry along the way. There is a lesson for the new economy here. Designing a breakthrough software app at Uber created an industry, but managing an extremely large, asset-intensive chain is something else, and the costs of doing so poorly are creeping up.
Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge
affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Charles Lindbergh, Corn Laws, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, industrial cluster, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight
But the gains from reducing transaction costs that companies deliver have to be balanced against “hierarchy costs”—the costs of central managers ignoring dispersed information. In the nineteenth century, the gains to be had from integrating mass production with mass distribution were enormous—as Alfred Chandler, the doyen of business historians, puts it, the “visible hand of managerial direction” replaced “the invisible hand of market mechanisms.” In the twenty-first century, technology and globalization are helping to reduce barriers to entry—and thus helping to unbundle the corporate package. At the touch of a button, a mere journalist can get access to more information than a corporate giant could amass a decade ago. The fashion nowadays is for virtual companies—for airlines that do not own their own planes, for banks that do not have branches, for the invisible hand to claw back ground from the visible one. That should not imply that the company is beginning a slow, inevitable decline.
By July 1932, the Dow Index, which had stood at 386.10 on September 3, 1929, had fallen to 40.56. Industrial output fell by a third. In the Depression, consumers were only willing to part with their surplus cash for genuine novelties (or apparent ones: by the late 1930s, Procter alone was spending $15 million a year on advertising). Yet, throughout this turmoil, the big Sloanist firms held on to their positions. With the barriers to entry in most businesses still high, they were rarely threatened by young upstarts; the main danger was of a neighboring giant diversifying systematically into their territory. The only way a multidivisional firm could get beaten was by another multidivisional firm. THE MANAGERS Behind this success sat a new culture of management. In the late nineteenth century, business education consisted of little more than teaching bookkeeping and secretarial skills.
Startup Communities: Building an Entrepreneurial Ecosystem in Your City by Brad Feld
barriers to entry, cleantech, cloud computing, corporate social responsibility, G4S, Grace Hopper, job satisfaction, Kickstarter, Lean Startup, minimum viable product, Network effects, paypal mafia, Peter Thiel, place-making, pre–internet, Richard Florida, Ruby on Rails, Silicon Valley, Silicon Valley startup, smart cities, software as a service, Steve Jobs, text mining, Y Combinator, zero-sum game, Zipcar
While Silicon Valley is the iconic example, we are seeing success and potential in other places as well, like Washington, D.C.; Chicago; Denver; Boston; Seattle; Portland; Austin; Raleigh; and Nashville. But the startup revolution isn’t limited to these cities—any locality in the United States can build a vibrant startup community if it strategically brings together the key partners who support growth. In fact, the barriers to entry have never been lower for many sectors across the economy. That’s why we launched the Startup America initiative, and that’s why this book is such an important contribution: Brad does a great job using the Boulder, Colorado, regional ecosystem as a blueprint for creating and developing a sustainable startup community in any city. If you want to know how to usher in a new wave of job creation, innovation, and growth in your city, I recommend reading this book.
; and (3) provide a pipeline to the community: The CU New Venture Challenge should be a point of entry for CU students and faculty to get meaningfully involved in the region’s startup scene. These three objectives drove the architecture of the CU New Venture Challenge. First, in order to collapse the campus, the CU New Venture Challenge starts each year with kick-off events that are energetic, informative, and involve few barriers to entry. The goal is to have attendees from all parts of campus to get them interested in entrepreneurship. For content, events included a leading area entrepreneur’s talk about how to pick a business idea worth pursuing, and a pitch night to facilitate team formation. To drive turnout, we assembled an executive committee of student ambassadors, with several students from each department on campus who served as evangelists to get the word out in classrooms and to relevant student groups.
Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan
accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bernie Madoff, Bretton Woods, business climate, business cycle, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, longitudinal study, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, price stability, profit motive, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, school vouchers, short selling, sovereign wealth fund, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey
Film makers such as Kodak, which did not anticipate the speed of this change, have had to struggle to remake themselves. With this kind of growth process in mind, what is loosely termed the institutional school of economists has argued that the role of the government in business is to create the institutional environment for competition and innovation—to establish secure property rights, strengthen patent laws, reduce barriers to entry, and reduce taxes—and then let the private sector take charge. There is a small problem with this view. No large country has ever grown rapidly from poverty to riches with this kind of strategy, in part because poor countries do not have the necessary private organizations to take advantage of such an environment, and the environment, in turn, is not conducive to creating the organizations quickly.
It then supported incumbents by supplying raw cotton to mills directly, advancing them working capital, and buying up the entire production of yarn. It followed a similar approach toward weavers. It also imposed tariffs on imported yarn and cloth and even banned imports when tariffs proved insufficient. As the textile industry boomed, the government encouraged firms to merge so that they could realize economies of scale. More generally, the tools used by governments have included erecting barriers to entry, offering tax breaks so that private firms can generate larger profits and use their retained earnings to fund investment, encouraging close ties between banks and favored firms so that the former lend abundantly (and cheaply) to the latter, providing raw materials at a subsidized price, and imposing tariffs so that foreign competition is not a threat. With subsidies and protection from the government, some favored champions have grown rapidly and profitably, acquiring technology, wealth, organizational capabilities, and stability.
Instead, they tried to remedy a fundamental deficiency: the weakness of existing organizations—even while tackling more traditional development problems like the lack of basic education and skills in the workforce and deficiencies in the health care system. The process of strengthening organizations, in their view, required massive but careful government intervention. Infant firms had to be nurtured. The very real danger, as evidenced in India’s stagnation during the 1960s and 1970s, was that the infant firms would demand permanent protection and then strangle growth. One option was to increase internal competition by reducing barriers to entry and eliminating various subsidies. But governments thought this would waste resources and be potentially harmful to the incumbents who had only recently become profitable. Moreover, the internal market was small, made even smaller by the repression of households in favor of producers. The solution instead was to use the disciplinary power, as well as the attractiveness, of the large global market.
The Future of Money by Bernard Lietaer
agricultural Revolution, banks create money, barriers to entry, Bretton Woods, business cycle, clean water, complexity theory, corporate raider, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, Lao Tzu, Mahatma Gandhi, means of production, microcredit, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, reserve currency, Ronald Reagan, seigniorage, Silicon Valley, South Sea Bubble, The Future of Employment, the market place, the payments system, Thomas Davenport, trade route, transaction costs, trickle-down economics, working poor
This theory works from the assumption that all parties have all the information relevant to optimise a given purchase, that there are zero transaction costs and no barriers to entry for few suppliers. In 'real' world transactions, these conditions are rarely met. Interestingly, the cyber economy could become the first actual large-scale involves information, both of us have it. In buying this book, for instance, Government classifications, trade 'near-perfect market'. Information can definitely be more abundant and accessible to more people in cyberspace. The Net makes transaction costs lower than ever. And many of the usual barriers to entry, such as location, capital requirements, etc., are less applicable. Because comparison- shopping is so easy on the Net, it promises to be a fiercely price-sensitive market.
The most popular form of local currency mutual credit system in the world. Market: Physical or virtual space in which demand and offer of a given product or service interact to create a price. Market economies presuppose price variability, for instance prices dropping automatically to clear what is on offer. Theory shows that true market economies require large numbers of small suppliers and consumers, and low barriers to entry. These perfect conditions are rarely prevailing in today's economy. The opposite of a market price is a price fixed by some authority - individual, government or corporate. Micro-credit: Refers to loans in conventional national currency for small amounts to small-scale entrepreneurs. The Grameen Bank in Bangladesh has been a model of success in such activities. Monetarism: Economic theory which posits that only the quantity of money determines prices, and therefore that it is counterproductive to use monetary adjustment tools for purposes other than inflation control.
The Orbital Perspective: Lessons in Seeing the Big Picture From a Journey of 71 Million Miles by Astronaut Ron Garan, Muhammad Yunus
Airbnb, barriers to entry, book scanning, Buckminster Fuller, clean water, corporate social responsibility, crowdsourcing, global village, Google Earth, Indoor air pollution, jimmy wales, low earth orbit, optical character recognition, ride hailing / ride sharing, shareholder value, Silicon Valley, Skype, smart transportation, Stephen Hawking, transaction costs, Turing test, Uber for X, web of trust
We need an international team of people and organizations to work collaboratively to build backbone platforms that unify efforts across sectors to address and respond to humanitarian needs, quickly and efficiently. Optimally, the structure of such a platform would be completely open, allowing anyone to participate while also enabling the formation of subgroups customized to tackle 92â•… L O O K I N G EARTH WARD specific problems or parts of problems, as needed. A completely open structure lowers barriers to entry and offers the possibility of attracting the largest number of problem solvers and the widest solution sets. The system should bring users that are closest to the problem into the system and ensure that everyone has a voice in the discussion. Such a mechanism requires a collaborative community—â•‰ a community of trust working together with a shared purpose—â•‰and a philosophy of contribution in which people are focused not solely on doing their assigned job well but also on making a good contribution to further the shared overarching goal.
An effective collaborative mechanism would pair challenges with solutions and bring together an international team of people and organizations who will work collaboratively, unifying efforts across sectors to address and respond to humanitarian needs, achieving impact with efficiency and speed. Because there are many efforts to build universal open source platforms, it is critical to align efforts. We need to make sure there’s a path to bring users closest to the problem into the system, lowering barriers to entry to ensure that everyone has a voice in the discussion. This Unity Node would be a collaborative community, 162â•… Co n c l u sio n a community of trust, working together with a shared purpose. As with a hackathon, there would be a philosophy of contribution in which people are focused not solely on doing their assigned job well but also on making a good contribution to furthering the shared, overarching goal.
To Sell Is Human: The Surprising Truth About Moving Others by Daniel H. Pink
always be closing, Atul Gawande, barriers to entry, business cycle, call centre, Cass Sunstein, Checklist Manifesto, choice architecture, complexity theory, Credit Default Swap, Daniel Kahneman / Amos Tversky, disintermediation, future of work, George Akerlof, information asymmetry, Jeff Bezos, Kickstarter, longitudinal study, Marc Andreessen, Menlo Park, out of africa, Richard Thaler, rolodex, Ronald Reagan, Steve Jobs, The Market for Lemons, Upton Sinclair, Wall-E, zero-sum game
As you’ll see in the findings of a first-of-its-kind analysis of people’s activities at work, we’re devoting upward of 40 percent of our time on the job to moving others. And we consider it critical to our professional success. Chapter 2 explores how so many of us ended up in the moving business. The keys to understanding this workplace transformation: Entrepreneurship, Elasticity, and Ed-Med. First, Entrepreneurship. The very technologies that were supposed to obliterate salespeople have lowered the barriers to entry for small entrepreneurs and turned more of us into sellers. Second, Elasticity. Whether we work for ourselves or for a large organization, instead of doing only one thing, most of us are finding that our skills on the job must now stretch across boundaries. And as they stretch, they almost always encompass some traditional sales and a lot of non-sales selling. Finally, Ed-Med. The fastest-growing industries around the world are educational services and health care—a sector I call “Ed-Med.”
Consider Etsy, an online marketplace for small businesses and craftspeople. Begun with essentially no outside investment in 2005, Etsy now has more than 875,000 active online shops that together sell upward of $400 million of goods each year.7 Before Etsy came along, the ability of craft makers to reach craft buyers was rather limited. But the Web—the very technology that seemed poised to topple salespeople—knocked down barriers to entry for small entrepreneurs and enabled more of these craft makers to sell. Ditto for eBay. Some three-quarters of a million Americans now say that eBay serves as their primary or secondary source of income.8 Meanwhile, many entrepreneurs find fund-raising easier thanks to Kickstarter, which allows them to post the basics of their creative projects—films, music, visual art, fashion—and try to sell their ideas to funders.
Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan
algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Gordon Gekko, high net worth, Hyman Minsky, information asymmetry, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail
But they are remarkably well hidden.’7 In finance there seems to be a unique concentration of very smart people who work very hard to make money, and very often succeed. Before 2007, profits of 20–30 per cent, even over 40 per cent, of turnover were not unheard of in finance. After 2009, profits are still very high. Yet according to the theory there should not be such profits in finance. Even if we make adjustments to market-augmenting factors such as barriers to entry (to exist, banks need licences), regulatory interference (rules such as the Basel accord) and other barriers (differences in currency regimes, accounting rules, controls over capital flows, etc.), there is little in the structure of the deep, liquid and globalized markets for capital that can explain the level of superprofits the industry had become accustomed to. So what is the source of those superprofits?
It is much more difficult to start a bank than, say, a restaurant: one not only needs some serious starting capital but, crucially, a set of licences from the state which are very hard to obtain in most jurisdictions. To start trading as a hedge fund, one needs to have a number of well-endowed subscribers, proprietary strategy and, again, starting capital. The insurance sector is heavily regulated too. In other words, theoretically, the apparent high barriers to entry and a degree of market concentration mean that the financial system is not a competitive market. In the real world, however, functionally and geographically, competition in finance is tough. Since the late 1960s, technology has increased the dynamism of the financial dealings and vastly expanded the range and scope of financial institutions. These changes put pressure on the older inhabitants of finance.
Seasteading: How Floating Nations Will Restore the Environment, Enrich the Poor, Cure the Sick, and Liberate Humanity From Politicians by Joe Quirk, Patri Friedman
3D printing, access to a mobile phone, addicted to oil, Affordable Care Act / Obamacare, agricultural Revolution, Albert Einstein, barriers to entry, Branko Milanovic, British Empire, Buckminster Fuller, Burning Man, business climate, business cycle, business process, California gold rush, Celtic Tiger, Charles Lindbergh, clean water, Colonization of Mars, Dean Kamen, Deng Xiaoping, drone strike, Elon Musk, en.wikipedia.org, failed state, financial intermediation, Gini coefficient, happiness index / gross national happiness, income inequality, Intergovernmental Panel on Climate Change (IPCC), joint-stock company, joint-stock limited liability company, Kickstarter, low skilled workers, Machinery of Freedom by David Friedman, Mark Zuckerberg, megacity, minimum wage unemployment, Network effects, new economy, obamacare, offshore financial centre, open borders, paypal mafia, peak oil, Peter H. Diamandis: Planetary Resources, Peter Thiel, price stability, profit motive, Ronald Coase, Ronald Reagan, Shenzhen was a fishing village, Silicon Valley, special economic zone, standardized shipping container, stem cell, trade route, UNCLOS, UNCLOS, undersea cable, young professional
Engerman and Kenneth L. Sokoloff, “The Evolution of Suffrage Institutions in the New World,” Journal of Economic History 65 (2005): 16, http://economics.yale.edu/sites/default/files/files/Workshops-Seminars/Economic-History/sokoloff-050406.pdf. On the frontier, however, things were dynamic: P. Friedman and B. Taylor, “Barriers to Entry and Institutional Evolution” (paper presented at the Association of Private Enterprise Education Conference, Nassau, 2011), www.academia.edu/2748488/Barriers_to_Entry_and_Institutional_Evolution. See also P. Friedman and B. Taylor, “Entry Barriers and Innovation in the Market for Governance” (2011), www.academia.edu/959477/Entry_Barriers_and_Innovation_in_the_Market_for_Governance. See also J. L. Walker, “The Diffusion of Innovations Among the American States,” American Political Science Review 63, no. 3 (1969): 880–99.
“Clearly, electronic communications are more efficient,” Allison continues politely, “but this type of change unfortunately cannot happen as quickly as one would hope in a larger agency like the FDA.” “You have to make the forms shorter,” adds Chris. “If you look at an FDA submission, it’s ridiculous. It takes months to prepare and hundreds of thousands of dollars and lawyers and consultants in order to do it right. That’s a huge barrier to entry.” Allison proposes that the sea should provide a mirror of the FDA that offers a flattering reflection of its potential. “Highlighting the inefficiencies of the current regulatory system by contrasting it with an internal seasteading system that ensures quality, safety, and efficacy may be one way to induce change at the FDA, but seasteading would have to be dramatically, not marginally, better.
Designing Social Interfaces by Christian Crumlish, Erin Malone
A Pattern Language, Amazon Mechanical Turk, anti-pattern, barriers to entry, c2.com, carbon footprint, cloud computing, collaborative editing, creative destruction, crowdsourcing, en.wikipedia.org, Firefox, game design, ghettoisation, Howard Rheingold, hypertext link, if you build it, they will come, Merlin Mann, Nate Silver, Network effects, Potemkin village, recommendation engine, RFC: Request For Comment, semantic web, SETI@home, Skype, slashdot, social graph, social software, social web, source of truth, stealth mode startup, Stewart Brand, telepresence, The Wisdom of Crowds, web application
TripIt, a travel itinerary and planner site, allows users to simply forward the site a recent travel confirmation email and TripIt takes care of the rest. By sucking in all of this content automatically, TripIt removes any effort new users have to put into the first-time experience and can almost immediately present the site’s value. They do have a sign-up process (just an email and password), but it is not required to see their tools in action. This strikingly reduces the barrier to entry and is still rare enough to make a user sit up and take notice. When it originally launched last year, Yahoo!’s Shine, a website for women, had an interesting take on first-time use. Though it is no longer live, Shine’s onboarding process wasn’t directed at recent registrants, but instead was directed at first-time visitors to the site to help orient them to its variety of features. On a user’s first visit, a “Welcome to Shine” layer appeared in the center of the page.
Criticize me, and I may not like you. Ignore me, and I may not forgive you. Encourage me, and I will not forget you. Love me, and I may be forced to love you. —William Arthur Ward Soliciting Feedback Soliciting feedback from people, no matter the form, is one of the easiest ways to engage your community. After all, everyone has an opinion. Giving feedback is also considered one of the lowest barriers to entry for user engagement and is often the first step on the ladder of user participation. User ratings are potentially the easiest item to add to a site to gather user opinions and can start a user down the participation road. Additionally, as you build up the engine around ratings, the information can be used to understand your users and create more value for them through recommendations (see “Recommendations” on page 340) and other socially driven features.
Social games site OMGPOP lets you play with other random people or with your network of friends. Social games are growing in popularity and appeal to all demographics. There is tremendous growth in game use on social networks by women and older people. Social games have an advantage over traditional video games in that they are much more available and can be played anywhere you have a computer or an Internet-enabled mobile device. The barrier to entry is lower, and these new casual users are more likely to play a game on Facebook than install an unknown gaming application on their computer. Download at WoweBook.Com 474 Chapter 18: Other Contexts Developing games within an existing social environment should build upon the tools and experiences that already exist in the host environment. Leverage the user’s existing network of friends, and use that to your advantage to promote and spread your game virally.
eBoys by Randall E. Stross
barriers to entry, business cycle, call centre, carried interest, cognitive dissonance, disintermediation, edge city, high net worth, hiring and firing, Jeff Bezos, job-hopping, knowledge worker, late capitalism, market bubble, Menlo Park, new economy, old-boy network, passive investing, performance metric, pez dispenser, railway mania, rolodex, Sand Hill Road, shareholder value, Silicon Valley, Silicon Valley startup, Steve Ballmer, Steve Jobs, Y2K
When the Benchmark partners gathered at the regular Monday meeting, Harvey sketched the deal for the partners who had not met with the visitors from Houston the previous week. He began by saying, “Rob Shaw, my closest friend,” and dispassionately reviewed the strengths and weaknesses of the business. He was most concerned about Newwatch’s lack of authorization from the major watch companies. Harvey concluded, “I think he who goes biggest and first is going to be one of the few authorized dealers. Then there’s going to be some barrier to entry.” His Houston buddies had half convinced him the distribution rights could be secured. If a sufficiently enticing amount of money were put on the table, the watch manufacturers would be willing to risk the wrath of their existing dealers and sanction a new distribution channel that offered online customers discounts. He told the partners, “They think if they write a big-enough check to purchase some inventory, like half a million bucks, that they can get Rolex.”
So too did Pierre Omidyar, who did not look himself. He was the first to speak, and he smiled winningly, but after he gave a thirty-second introduction, his role was completed. Whitman then took the podium and explained why she left “a six-hundred-million-dollar division, managing some of the great brands in the world, to come to eBay.” She walked through fundamental consumer appeal, profitable business model, barriers to entry, growth. She was poised, well-prepared, animated, and witty. Bengier, who was forty-three and had a salt-and-pepper beard and an engaging smile, appeared to be no less at ease when he ran through the numbers. When your business enjoys 88 percent gross margins, the financials are anything but dreary. What the attendees could not see, nor could any of those interested parties who assembled for identical briefings over the course of the next three weeks, was Omidyar’s dry take on the world of institutional investors and the absurd aspects of the road show, which is to say, virtually all aspects of the road show.
Christopher Byron, a columnist writing for msnbc.com, said eBay showed him the rules had changed so fundamentally that the game had ceased to have any meaning that he could understand: For someone who has covered the day-to-day events of Wall Street for 30 years now, there is, I must confess, something at once awful yet fascinating at bearing witness to a Goldman Sachs–underwritten stock that comes to market at $18 and within six weeks is selling for $126. It’s like watching every mesmerizing, discombobulated absurdity you can possibly think of, all rolled into one colossal Ur-event—like watching Mark McGwire step up to the plate blindfolded and hit 400 home runs in a row. EBay was “a company with trouble written all over it,” Byron said. Barriers to entry in the Internet auction field were nonexistent. The good stuff that people wanted to sell would go to specialty sites, and eBay was going to be left only with junk. The underwriters were engaging in “full-frontal, right-in-your-face stock hyping.” How else could they say, only six weeks earlier, that the price was worth $18 a share, and now say, Oops, we made a mistake, it’s really worth $130.
Economic Gangsters: Corruption, Violence, and the Poverty of Nations by Raymond Fisman, Edward Miguel
accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, barriers to entry, blood diamonds, clean water, colonial rule, congestion charging, crossover SUV, Donald Davies, European colonialism, failed state, feminist movement, George Akerlof, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, mass immigration, megacity, oil rush, prediction markets, random walk, Scramble for Africa, selection bias, Silicon Valley, South China Sea, unemployed young men
Guidolin and La Ferrara argue that the mining companies took a beating from investors because the fortunes they’d made from Angola’s diamond mines relied on the treacherous conditions created by civil war. After Savimbi’s death, while mining companies with Angolan investments saw their stock prices plunge, those without Angolan exposure appreciated in value. In other words, an end to conflict hurt the dominant diamond companies by knocking down barriers to entry for competitors. Most people, including nearly all of Ray’s first-year MBA students, think that the key to business success is cheaply and efficiently producing something people want to buy. If 182 TH E RO A D BA CK F RO M WAR this were the case, then war’s end should have made Angolan miners and their shareholders much richer as production costs plummeted. But the effect of peace on diamond mining in Angola shows that more important than producing something well is doing it better than the competition—and the potential competition.
Not every CEO or shareholder is willing to set up a private army, or partner with a real-life Danny Archer, the mercenary played by Leonardo DiCaprio in the film Blood Diamond about Sierra Leone. But some know how to turn wartime adversity to their advantage. Firms like Mano River Resources, DiamondWorks, and Rex Diamond have operated mines in multiple African war zones over the years, despite the costs and hurdles that drive out everyone else. That is, war acted as a “barrier to entry” that kept other companies out and insiders’ profits high. After 2002, peace 183 CH A PTER SEVEN in Angola presented an opportunity for many new companies to bid for lucrative mining licenses. Guidolin and La Ferrara found that, in fact, most of the wartime-dominant companies kept their mining concessions, and some even expanded their Angolan operations at war’s end. However, the mere presence of potential competitors helped the government to renegotiate its contracts from a position of newfound strength.
Industrial Internet by Jon Bruner
autonomous vehicles, barriers to entry, commoditize, computer vision, data acquisition, demand response, en.wikipedia.org, factory automation, Google X / Alphabet X, industrial robot, Internet of things, job automation, loose coupling, natural language processing, performance metric, Silicon Valley, slashdot, smart grid, smart meter, statistical model, web application
Internet Protocol-based architectures have found their way into industrial plants and have brought about modularity that makes these systems vastly more flexible and easier to update. Richard Ross, the head of IT at Atlas Air, was previously CIO at Hess Oil, where large networks of sensors were integrated with supply-chain systems and personnel databases to schedule preventative maintenance on oil platforms and refineries. “It used to be that the totality of the sensor network was proprietary to a given vendor. Now, with TCP/IP technology, the barriers to entry to put these things in are much lower, the costs to install and maintain them are much lower and there is much more vendor competition,” he says. In airplanes, too, says Ross, “You’re no longer making a commitment to a single vendor for the rest of the life of the plane.” Modularity means that “software can be treated like a part — just like you’d change out an engine part.” Another former oil company CIO says he worked hard to build interoperability between his systems.
Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan
"Robert Solow", affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, business cycle, buy and hold, capital controls, Cass Sunstein, central bank independence, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, libertarian paternalism, low skilled workers, Malacca Straits, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Sam Peltzman, school vouchers, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game
When LeBron James signed a three-year $60 million contract with the Cleveland Cavaliers, I thought to myself, “I need to play basketball for the Cleveland Cavaliers.” I would have gladly played for $58 million, or, if pressed, for $58,000. Several things precluded me from entering that market, however: (1) I’m five-ten; (2) I’m slow; and (3) when shooting under pressure, I have a tendency to miss the backboard. Why is LeBron James paid $20 million a year? Because nobody else can play like him. His unique talents create a barrier to entry for the rest of us. LeBron James is also the beneficiary of what University of Chicago labor economist Sherwin Rosen dubbed the “superstar” phenomenon. Small differences in talent tend to become magnified into huge differentials in pay as a market becomes very large, such as the audience for professional basketball. One need only be slightly better than the competition in order to gain a large (and profitable) share of that market.
Nobody tunes into their second-favorite radio station, so it’s winner-take-all when it comes to listeners and the advertisers willing to pay big bucks to reach them. Many markets have barriers that prevent new firms from entering, no matter how profitable making widgets may be. Sometimes there are physical or natural barriers. Truffles cost $500 a pound because they cannot be cultivated; they grow only in the wild and must be dug up by truffle-hunting pigs or dogs. Sometimes there are legal barriers to entry. Don’t try to sell sildenafil citrate on a street corner or you may end up in jail. This is not a drug that you snort or shoot up, nor is it illegal. It happens to be Viagra, and Pfizer holds the patent, which is a legal monopoly granted by the U.S. government. Economists may quibble over how long a patent should last or what kinds of innovations should be patentable, but most would agree that the entry barrier created by a patent is an important incentive for firms to make the kinds of investments that lead to new products.
The authors of the study recommend that states eliminate entry barriers that keep talented people from becoming public schoolteachers.4 Most states are doing the opposite. Mr. Stigler would have argued that all of this is easy to explain. Just think about how the process benefits teachers, not students. Making it harder to become a teacher reduces the supply of new entrants into the profession, which is a good thing for those who are already there. Any barrier to entry looks attractive from the inside. I have a personal interest in all kinds of occupational licensure (cases in which states require that individuals become licensed before practicing certain professions). My doctoral dissertation set out to explain a seemingly anomalous pattern in Illinois: The state requires barbers and manicurists to be licensed, but not electricians. A shoddy electrical job could burn down an entire neighborhood; a bad manicure or haircut seems relatively more benign.
Stock Market Wizards: Interviews With America's Top Stock Traders by Jack D. Schwager
Asian financial crisis, banking crisis, barriers to entry, beat the dealer, Black-Scholes formula, commodity trading advisor, computer vision, East Village, Edward Thorp, financial independence, fixed income, implied volatility, index fund, Jeff Bezos, John Meriwether, John von Neumann, locking in a profit, Long Term Capital Management, margin call, money market fund, Myron Scholes, paper trading, passive investing, pattern recognition, random walk, risk tolerance, risk-adjusted returns, short selling, Silicon Valley, statistical arbitrage, the scientific method, transaction costs, Y2K
Nevertheless, Watson demonstrates that if risk controls are in place to avoid the open-ended losses that can occur in a short position, shorting can reduce portfolio risk by including positions that are inversely correlated with the rest of the portfolio. On the short side, Watson seeks out high-priced companies that have a flawed business plan—often one-product companies that are vulnerable either because the performance of their single product falls far short of promotional claims or because there is no barrier to entry for competitors. Watson achieves risk control through a combination of diversification, selection, and loss limitation rules. He diversifies his portfolio sufficiently so that the largest long holdings account for a maximum of 2 to 3 percent of the portfolio. Short positions are capped at about 1.5 percent of the portfolio. The risk on long positions is limited by Watson's restricting the selection of companies from the universe of low-priced stocks.
What you are left with is a number of relatively small inefficiencies that are often fairly complex and which you're not likely to find by using a standard mathematical software package or the conventional analytical techniques you might learn in graduate school. Even if you were somehow able to find one of the remaining inefficiencies without going through an extremely expensive, long-term research effort of the sort we've conducted over the past eleven years, you'd probably find that one such inefficiency wouldn't be enough to cover your transaction costs. As a result, the current barriers to entry in this field are very high. A firm like ours that has identified a couple dozen market inefficiencies in a given set of financial instruments may be able to make money even in the presence of transaction costs. In contrast, a new DAVID SHAW entrant into the field who has identified only one or two market inefficiencies would typically have a much harder time doing so. What gives you that edge?
The stocks flagged must meet three additional conditions to qualify for an actual short sale: WIZARD LESSONS >• very high P/E ratio; > a catalyst that will make the stock vulnerable over the near term; > an uptrend that has stalled or reversed. Watson's ideal short-selling candidate is a high-priced, one product company. He looks for companies whose future sales will be vulnerable because their single or primary product does not live up to promotional claims or because there is no barrier to entry for competitors. 62. Use Options to Express Specific Price Expectations Prevailing option prices will reflect the assumption that price movements are random. If you have specific expectations about the relative probabilities of a stock's future price movements, then it will frequently be possible to define option trades that offer a higher profit potential (at an equivalent risk level) than buying the stock. 63.
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
An unprecedented amount of computing power is now available to organizations and individuals. Applications, blank or preconfigured servers, and storage space can all be leased for a long time or rented for a few minutes over the Internet. This cloud computing infrastructure, largely less than a decade old, accelerates the robotic Cambrian Explosion in three ways. First, it greatly lowers barriers to entry, since the kinds of computing resources that were formerly found only in great research universities and multinationals’ R&D labs are now available to startups and lone inventors. Second, it allows robot and drone designers to explore the important trade-off of local versus central computation: which information-processing tasks should be done in each robot’s local brain, and which should be done by the great global brain in the cloud?
For this reason, most companies prefer to operate higher on the demand curve, where prices are greater, even if total demand will be lower. Two forces push prices downward. The first is consumers, who obviously want to pay as little as possible and thus side with platform builders that seek to rapidly grow their networks. The second is that in most markets, many suppliers compete for business, and many other potential suppliers are waiting in the wings. Platforms usually enhance this competition by reducing barriers to entry, and they often commoditize the suppliers, making them more interchangeable to the consumer. Competition and commoditization, of course, tend to drive down prices, and to deliver the business to the companies willing to supply products most cheaply (while maintaining acceptable quality). In short, platform builders and consumers both want low prices, and competition among suppliers tends to result in them.
., 166–67 Angry Birds, 159–61 anonymity, digital currency and, 279–80 Antikythera mechanism, 66 APIs (application programming interfaces), 79 apophenia, 44n apparel, 186–88 Apple; See also iPhone acquiring innovation by acquiring companies, 265 and industrywide smartphone profits, 204 leveraging of platforms by, 331 Postmates and, 173, 185 profitability (2015), 204 revenue from paid apps, 164 “Rip, Mix, Burn” slogan, 144n as stack, 295 application programming interfaces (APIs), 79 AppNexus, 139 apps; See also platforms for banking, 89–90 demand curve and, 157–61 iPhone, 151–53 App Store, 158 Apter, Zach, 183 Aral, Sinan, 33 Archilochus, 60–61 architecture, computer-designed, 118 Aristophanes, 200 Arnaout, Ramy, 253 Arthur, Brian, 47–48 artificial general intelligence (AGI), 71 artificial hands, 272–75 artificial intelligence; See also machine learning current state of, 74–76 defined, 67 early attempts, 67–74 implications for future, 329–30 rule-based, 69–72 statistical pattern recognition and, 72–74 Art of Thinking Clearly, The (Dobelli), 43 arts, digital creativity in, 117–18 Ashenfelter, Orley, 38–39 ASICs (application-specific integrated circuits), 287 assets and incentives, 316 leveraging with O2O platforms, 196–97 replacement by platforms, 6–10 asymmetries of information, 206–10 asymptoting, 96 Atkeson, Andrew, 21 ATMs, 89 AT&T, 96, 130 August (smart door lock), 163 Austin, Texas, 223 Australia, 100 Authorize.Net, 171 Autodesk, 114–16, 119, 120 automated investing, 266–70 automation, effect on employment/wages, 332–33 automobiles, See cars Autor, David, 72, 101 background checks, 208, 209 back-office work, 82–83 BackRub, 233 Baidu, 192 Bakos, Yannis, 147n Bakunin, Mikhail, 278 Ballmer, Steve, 151–52 bandwagon effect, 217 banking, virtualization and, 89–90, 92 Bank of England, 280n bank tellers, 92 Barksdale, Jim, 145–46 barriers to entry, 96, 220 Bass, Carl, 106–7, 119–20 B2B (business-to-business) services, 188–90 Beastmode 2.0 Royale Chukkah, 290 Behance, 261 behavioral economics, 35, 43 Bell, Kristen, 261, 262 Benioff, Mark, 84–85 Benjamin, Robert, 311 Benson, Buster, 43–44 Berlin, Isiah, 60n Berners-Lee, Tim, 33, 34n, 138, 233 Bernstein, Michael, 260 Bertsimas, Dimitris, 39 Bezos, Jeff, 132, 142 bias of Airbnb hosts, 209–10 in algorithmic systems, 51–53 digital design’s freedom from, 116 management’s need to acknowledge, 323–24 and second-machine-age companies, 325 big data and Cambrian Explosion of robotics, 95 and credit scores, 46 and machine learning, 75–76 biology, computational, 116–17 Bird, Andrew, 121 Bitcoin, 279–88 China’s dominance of mining, 306–7 failure mode of, 317 fluctuation of value, 288 ledger for, 280–87 as model for larger economy, 296–97 recent troubles with, 305–7 and solutionism, 297 “Bitcoin: A Peer-to-Peer Electronic Cash System” (Nakamoto), 279 BlaBlaCar, 190–91, 197, 208 BlackBerry, 168, 203 Blitstein, Ryan, 117 blockchain as challenge to stacks, 298 and contracts, 291–95 development and deployment, 283–87 failure of, 317 and solutionism, 297 value as ledger beyond Bitcoin, 288–91 Blockchain Revolution (Tapscott and Tapscott), 298 Bloomberg Markets, 267 BMO Capital Markets, 204n Bobadilla-Suarez, Sebastian, 58n–59n Bock, Laszlo, 56–58 bonds, 131, 134 bonuses, credit card, 216 Bordeaux wines, 38–39 Boudreau, Kevin, 252–54 Bowie, David, 131, 134, 148 Bowie bonds, 131, 134 brand building, 210–11 Brat, Ilan, 12 Bredeche, Jean, 267 Brin, Sergey, 233 Broward County, Florida, 40 Brown, Joshua, 81–82 Brusson, Nicolas, 190 Burr, Donald, 177 Bush, Vannevar, 33 business conference venues, 189 Business Insider, 179 business processes, robotics and, 88–89 business process reengineering, 32–35 business travelers, lodging needs of, 222–23 Busque, Leah, 265 Buterin, Vitalik, 304–5 Byrne, Patrick, 290 Cairncross, Francis, 137 California, 208; See also specific cities Calo, Ryan, 52 Cambrian Explosion, 94–98 Cameron, Oliver, 324 Camp, Garrett, 200 capacity, perishing inventory and, 181 Card, David, 40 Care.com, 261 cars automated race car design, 114–16 autonomous, 17, 81–82 decline in ownership of, 197 cash, Bitcoin as equivalent to, 279 Casio QV-10 digital camera, 131 Caves, Richard, 23 Caviar, 186 CDs (compact discs), 145 cell phones, 129–30, 134–35; See also iPhone; smartphones Census Bureau, US, 42 central bankers, 305 centrally planned economies, 235–37 Chabris, Chris, 3 Chambers, Ephraim, 246 Champy, James, 32, 34–35, 37, 59 Chandler, Alfred, 309n Chase, 162 Chase Paymentech, 171 check-deposit app, 162 children, language learning by, 67–69 China Alibaba in, 7–8 concentration of Bitcoin wealth in, 306–7 and failure mode of Bitcoin, 317 mobile O2O platforms, 191–92 online payment service problems, 172 robotics in restaurants, 93 Shanghai Tower design, 118 Xiaomi, 203 Chipotle, 185 Choudary, Sangeet, 148 Christensen, Clay, 22, 264 Churchill, Winston, 301 Civil Aeronautics Board, US, 181n Civis Analytics, 50–51 Clash of Clans, 218 classified advertising revenue, 130, 132, 139 ClassPass, 205, 210 and economics of perishing inventory, 180–81 future of, 319–20 and problems with Unlimited offerings, 178–80, 184 and revenue management, 181–84 user experience, 211 ClassPass Unlimited, 178–79 Clear Channel, 135 clinical prediction, 41 Clinton, Hillary, 51 clothing, 186–88 cloud computing AI research, 75 APIs and, 79 Cambrian Explosion of robotics, 96–97 platform business, 195–96 coaches, 122–23, 334 Coase, Ronald, 309–13 cognitive biases, 43–46; See also bias Cohen, Steven, 270 Coles, John, 273–74 Collison, John, 171 Collison, Patrick, 171–74 Colton, Simon, 117 Columbia Record Club, 131 commoditization, 220–21 common sense, 54–55, 71, 81 companies continued dominance of, 311–12 continued relevance of, 301–27 DAO as alternative to, 301–5 decreasing life spans of, 330 economics of, 309–12 future of, 319–26 leading past the standard partnership, 323–26 management’s importance in, 320–23 markets vs., 310–11 as response to inherent incompleteness of contracts, 314–17 solutionism’s alternatives to, 297–99 TCE and, 312–15 and technologies of disruption, 307–9 Compass Fund, 267 complements (complementary goods) defined, 156 effect on supply/demand curves, 157–60 free, perfect, instant, 160–63 as key to successful platforms, 169 and open platforms, 164 platforms and, 151–68 and revenue management, 183–84 Stripe and, 173 complexity theory, 237 Composite Fund (D.
Radical Technologies: The Design of Everyday Life by Adam Greenfield
3D printing, Airbnb, augmented reality, autonomous vehicles, bank run, barriers to entry, basic income, bitcoin, blockchain, business intelligence, business process, call centre, cellular automata, centralized clearinghouse, centre right, Chuck Templeton: OpenTable:, cloud computing, collective bargaining, combinatorial explosion, Computer Numeric Control, computer vision, Conway's Game of Life, cryptocurrency, David Graeber, dematerialisation, digital map, disruptive innovation, distributed ledger, drone strike, Elon Musk, Ethereum, ethereum blockchain, facts on the ground, fiat currency, global supply chain, global village, Google Glasses, IBM and the Holocaust, industrial robot, informal economy, information retrieval, Internet of things, James Watt: steam engine, Jane Jacobs, Jeff Bezos, job automation, John Conway, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, joint-stock company, Kevin Kelly, Kickstarter, late capitalism, license plate recognition, lifelogging, M-Pesa, Mark Zuckerberg, means of production, megacity, megastructure, minimum viable product, money: store of value / unit of account / medium of exchange, natural language processing, Network effects, New Urbanism, Occupy movement, Oculus Rift, Pareto efficiency, pattern recognition, Pearl River Delta, performance metric, Peter Eisenman, Peter Thiel, planetary scale, Ponzi scheme, post scarcity, post-work, RAND corporation, recommendation engine, RFID, rolodex, Satoshi Nakamoto, self-driving car, sentiment analysis, shareholder value, sharing economy, Silicon Valley, smart cities, smart contracts, social intelligence, sorting algorithm, special economic zone, speech recognition, stakhanovite, statistical model, stem cell, technoutopianism, Tesla Model S, the built environment, The Death and Life of Great American Cities, The Future of Employment, transaction costs, Uber for X, undersea cable, universal basic income, urban planning, urban sprawl, Whole Earth Review, WikiLeaks, women in the workforce
True to the von Neumannian model, “the number of them in existence and the wealth they produce can grow exponentially.” Bowyer’s vision of a self-replicating future implied not merely an enormous increase in planetary production capacity, but its radical democratization as well. In this conception of things, there may be fairly stark limitations on what can be produced—combine harvesters and pile drivers are out, similarly mobile phones or tablets—but the barriers to entry are lowered to the point that anyone with the requisite will can own the means of production. And because the RepRap’s specifications are open, users are free to tinker and improve upon Bowyer’s original design, free to contribute those improvements back to the informational commons so everyone can benefit from them. Bowyer hoped that the fabricator itself would become “subject to evolution by artificial selection,” as the fruits of constant, iterative enhancement were incorporated into each new generation.
But neither Buterin nor the team around him set out with the intention of designing a general organizational form suitable to the complexities of 21st-century culture. The question they proceeded from was specific, forthright and entirely explicit: “How can revenue be generated within a purely decentralized environment?”21 So let’s take them at their word, and start by considering how the DAO might work in its original intended role, as an investment vehicle. How would this work? While formally open to anyone, a DAO presents would-be investors with barriers to entry only a little less onerous than those of participation in the traditional equities market. One invests in a DAO by purchasing “vote tokens” denominated in whatever cryptocurrency the organization runs on, in most cases Ether, and this means going through all the steps of downloading and setting up a suitable wallet. Once purchased, tokens allow the investor to share in profits realized by the DAO, also denominated in cryptocurrency, and they carry voting rights to a degree proportional to the magnitude of the investment.
Even beyond the question of lock-in, the highly formal quality of the relations inscribed in a DAO makes it completely unsuitable for situations characterized by a shallow gradient of commitment, where participants might prefer to maintain some ambiguity about the nature and degree of their involvement. It turns out that one of the defining characteristics of a commons, in the contemporary political sense, is precisely its lack of a hard boundary, its disinclination to present the newcomer with barriers to entry. National Technical University of Athens professor Stavros Stavrides, author of a well-regarded book on the experience of spatial commoning, argues that it is the fundamental openness and porosity of any true common space—its invitational quality—that enables it to survive as such over time.28 To seal off opportunities for participation is to invite metabolic death. And yet sealing off such opportunities is what a DAO does in a dozen tiny ways, by requiring participants to invest Ether, insisting on interpreting all exchanges as formal contractual obligations, and in general failing to accommodate the suppleness and idiosyncrasy of the arrangements we make to support collective endeavors.
Orwell Versus the Terrorists: A Digital Short by Jamie Bartlett
augmented reality, barriers to entry, bitcoin, blockchain, crowdsourcing, cryptocurrency, Edward Snowden, Ethereum, ethereum blockchain, Kuwabatake Sanjuro: assassination market, Satoshi Nakamoto, technoutopianism, Zimmermann PGP
It’s this type of attack that security services (in the UK and elsewhere) are extremely concerned by: low planning, low preparation, and difficult to prevent. I’m writing this the day after two Islamist radicals shot and murdered twelve people in the offices of the French satirical magazine Charlie Hebdo; as I write these words, another radical Islamist has taken a number of people hostage in a kosher supermarket in Paris (and murdered four people, I learn later). One of the reasons there has been an increase in lone wolves is because the barriers to entry have fallen. According to Jeffrey D. Simon, author of Lone Wolf Terrorism: Understanding the Growing Threat, the lone wolf is ‘the most innovative, most creative and most dangerous’ type of terrorist. Lone wolves aren’t restricted by ideology or hierarchy, and don’t need to worry about alienating their group or organisation. In Simon’s view, the wealth of easy-to-access information online facilitates the rise of lone wolves.
Social Democratic America by Lane Kenworthy
affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, business cycle, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day
But competition can wreak havoc on the lives of particular individuals. Since the 1970s, competition has become a much more pervasive feature of America’s economy. Firms selling goods or services in international markets confront intense foreign rivals. Domestic industries, such as restaurants and hotels, face more competitors too, as technological advances, falling construction and transportation costs, and deregulation have reduced barriers to entry. In addition, shareholders now want rapid appreciation in stock values. Whereas a generation ago they were happy with a consistent dividend payment and some long-term increase in the stock price, they now demand buoyant quarterly profits and constant growth. Robert Reich has an apt label for this new economy: “supercapitalism.” American firms, he notes, “now have little choice but to relentlessly pursue profits.”2 This shift benefits investors, consumers, and some employees.
Yet in another respect, government will be smaller: there will be fewer regulations on firms and individuals. We’ll always need some restrictions to prevent financial excesses, protect worker and consumer safety, safeguard the environment, and more. But we will rely less on specifying what businesses can and can’t do and more on competition coupled with cushions. If we do better at enforcing antitrust rules and scrap or reduce regulations that create barriers to entry, competition will help to align business behavior with the preferences of consumers. Insurance—both compensatory and proactive, both cash payments and services—will cushion those who are victimized by market processes or the vagaries of life. Government also will be more efficient and effective in its administration. Those who favor expanding public insurance ought to be at the forefront of efforts to improve government’s performance.
Dual Transformation: How to Reposition Today's Business While Creating the Future by Scott D. Anthony, Mark W. Johnson
activist fund / activist shareholder / activist investor, additive manufacturing, Affordable Care Act / Obamacare, Airbnb, Amazon Web Services, autonomous vehicles, barriers to entry, Ben Horowitz, blockchain, business process, business process outsourcing, call centre, Clayton Christensen, cloud computing, commoditize, corporate governance, creative destruction, crowdsourcing, death of newspapers, disintermediation, disruptive innovation, distributed ledger, diversified portfolio, Internet of things, invention of hypertext, inventory management, Jeff Bezos, job automation, job satisfaction, Joseph Schumpeter, Kickstarter, late fees, Lean Startup, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, Minecraft, obamacare, Parag Khanna, Paul Graham, peer-to-peer lending, pez dispenser, recommendation engine, self-driving car, shareholder value, side project, Silicon Valley, Skype, software as a service, software is eating the world, Steve Jobs, the market place, the scientific method, Thomas Kuhn: the structure of scientific revolutions, transfer pricing, uber lyft, Watson beat the top human players on Jeopardy!, Y Combinator, Zipcar
The Netscape browser—coupled with Tim Berners-Lee’s invention of HyperText Markup Language (HTML) universal resource locators (URLs), along with a range of complementary innovations—allowed even the layperson to ride the so-called information superhighway. The disruptive effects of this internet-enabling technology reshaped the media business. The first to feel its effects were newspapers. Historically the scale economics of the printing press created significant barriers to entry, resulting in effective natural monopolies in many markets; most US cities had only one or two highly profitable papers. The rise of the commercial internet destroyed this business, with most newspaper companies decimated by 2000. Well, not exactly. Certainly the newspaper companies felt some pain during the 2000–2002 US recession, but the years from 1994 through 2007 were actually quite good for most newspapers.
Instead of rerun after rerun with the occasional Braves game, you would see fresh, original programming and major sporting events. Its online presence grew substantially, and TVinContext received significant industry acclaim as TEN rolled it out. Aetna Harvard economist Michael Porter has made a number of contributions to the field of corporate strategy. One of the most seminal was his theory that outperformance comes from picking industry circumstances in which five forces (barriers to entry, supplier power, buyer power, competitive rivalry, and threat of substitution) support success. In 2011, health insurance companies certainly appeared to have the Porterian wind at their backs. Spending on health care had grown from roughly 6 percent of gross domestic product in the 1960s to almost 20 percent, a number that dwarfs the spending of any other country in both absolute and relative terms.
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
If free enterprise was to be the motor of economic growth, everyone should be institutionally encouraged to pursue their self-interest by extending market competition, consumer choice, and shrinking the safety net provided by the welfare state. Getting the incentives right for business involved reducing all the impediments or rigidities to free market behavior. These included removing trade barriers and attacking the power of trade unions. In the global economy, barriers to entry were seen to protect inefﬁcient businesses while trade unions kept wages artiﬁcially high. 24 The Global Auction At the same time, middle-class families were encouraged to believe that more consumer choice would give them greater control over their lives without government interference. Schools, hospitals, and pension plans were all now a matter of personal choice. In many cases, the promise of choice was and is illusory.
A major problem confronting many of these companies was that “there’s this massive population which we’ve got to get down to a manageable pool.” This HR director recognized that while there may be some good candidates in lower tier universities, the numbers are tiny, as those at elite universities have already gone through a rigorous selection process. “It’s a total numbers game; it’s very frustrating but it’s a total numbers game.” But by choosing to ﬁsh in such a small pool of college graduates, companies are strengthening the barriers to entry. It is as if they are putting a sign out: “Those who are not at top-notch universities need not apply.” What may be considered extraordinary about this strategy is that despite the demand for increased numbers of young managers who can work across the globe, they remain focused on recruiting from the elite universities in each country. The consequence is that many able 94 The Global Auction students will not have the opportunity to get their foot in the door to demonstrate their worth.
How Democracy Ends by David Runciman
barriers to entry, basic income, Bernie Sanders, bitcoin, blockchain, Capital in the Twenty-First Century by Thomas Piketty, centre right, crowdsourcing, cuban missile crisis, Dominic Cummings, Donald Trump, Edward Snowden, first-past-the-post, Francis Fukuyama: the end of history, full employment, Internet of things, Joseph Schumpeter, Kickstarter, loss aversion, Mahatma Gandhi, Mark Zuckerberg, money: store of value / unit of account / medium of exchange, mutually assured destruction, Network effects, Norman Mailer, Panopticon Jeremy Bentham, Peter Thiel, quantitative easing, self-driving car, Silicon Valley, Steven Pinker, The Wisdom of Crowds, Travis Kalanick, universal basic income, Yogi Berra
The more Facebook is able to interpose itself in the relationships that individuals already have, the more need other individuals will have of it if they wish to maintain their existing relationships. This is not the power of brute force. It is simply the weight of numbers. When an upstart network comes along that tempts people away, Facebook buys it (as it has done with Instagram, WhatsApp and others). The bigger Facebook is the bigger it gets because its vast purchasing power puts up huge barriers to entry for anyone else. So Facebook has something to compensate for the absence of the sword. In that picture of the Leviathan (page 128), it is not just the giant looming over the landscape. It is also turning into the town in the foreground. It has started to become the place where people live. If the contest were simply giant v. giant, the state would win. The state doesn’t just have an army, a police force and a judicial system.
Collective decision-making works better than any individual’s choices if our biases are allowed to cancel each other out. This is the wisdom of crowds. The internet age has seen an enormous revival of interest in this idea. Digital technology now enables the pooling of opinions on a vast scale. Collectively we can rate products, predict futures, solve puzzles and even edit an encyclopedia better than any one of us could do on our own. The internet has also dramatically lowered the barriers to entry. To join a group decision there is no longer any need to gather in the market square. We can do little bits of joint decision-making in all sorts of different places: all it needs is a click here, a search there. Why shouldn’t we harness these benefits in politics? The answer takes us back to ancient Athens. Direct democracy is a very difficult form of politics to manage. It only succeeds under carefully controlled conditions.
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
Ted bursts the hitchhiker’s bubble by noting that he could easily be undercut by another would-be fitness mogul selling a “Six Minute Abs” video. To build a profitable business, you need to create something that people want and then make sure there aren’t any copycat competitors. The things that keep others out of Uber’s sandbox, so to speak, aren’t so different from the regulatory shenanigans that its predecessors resorted to. You try to erect what economists call barriers to entry, which are, almost by definition, market frictions. They’re the strategies Uber and every other business employs to try to keep customers from choosing freely among competing options in the marketplace, whether by driving competitors out of business or finding ways of keeping customers from shopping around. Sometimes, as we’ve learned from Uber in recent years, it can be a dirty business.
INDEX Abidjan, Ivory Coast, 167–168 Adfibs.com, 69 adverse selection, 48, 51–55, 57, 59 advertising, as money burning, 70–71 Super Bowl advertising, 70–71 AdWords, 14, 101 Airbnb, 3, 6, 50, 109, 125, 170–172 Akerlof, George, 43–51, 58–59, 64, 112 Alaskoil experiment, 55–57, 58–59 algebraic topology, 44–45 Amazon, 2, 3, 16, 50, 51, 52, 59, 74, 91, 95, 97, 108, 110, 119, 126, 128–129 American Express, 115–116 America’s Second Harvest, 154–160 Amoroso, Luigi, 21 Angie’s List, 120 “animal spirits,” 50 applied theory in economics, 45, 50, 75–76 Arnold, John, 156–158, 160 Arrow, Kenneth, 30–34, 36–37, 40, 76, 117, 180 ascending price English auctions, 83, 100 asymmetric information, 41, 44–55 attribution theory, 177–178 auctions AdWords, 14, 101 auction theory, 82–84 coat hooks, 151–152, 174 design, 14, 101–102 first-price sealed-bid, 86–87, 99–100 first-price (live), 84 internet, 94–97 types of, 81–82 wireless spectrum, 102–103 See also eBay; Vickrey auctions AuctionWeb, 40 Ausubel, Larry, 98 Azoulay, Pierre, 112 Bank of America, 113–115 barriers to entry, in marketplace, 173 baseball posting system, 79–81 Bazerman, Max, 55–57 Becker, Gary, 35, 161–162 Berman, Eli, 67 Berners-Lee, Tim, 41–42 Big Data, Age of, 15 Blu-ray-HD DVD format war, Sony, 125–126 Book Stacks Unlimited, 42–43 Boston public schools, 144–149 Boston University MBA students experiment (Bazerman and Samuelson), 55–57, 58–59 See also Alaskoil experiment bridge design, 141–142 Brown, William P., 83–84 Brownian motion, 28–29 cab drivers, Uber vs., 169–170, 172 Camp, Garrett, 170 candle auctions, 82 capitalism, free-market, 172–173 car service platform, 169–171 cash-back bonus, 116 cash-for-sludge transactions, 167–169 See also Summers, Larry centralized clearinghouses, 140–141 Champagne fairs, 105–106, 126–128 Changi POW camp, 175–177 Le Chatelier, Henry Louis, 29 Le Chatelier’s principle, 29 cheap talk, 62–66, 69 chess, difference between Cold War and, 26 See also poker, bluffing in child labor, 180 cigarettes, as currency in German POW camp, 8–9 Clarke, Edward, 93 Clavell, James, 175 clerkship offers, with federal judges, 140 coat hook, 151–152, 174 Codes of the Underworld (Gambetta), 68 Cold War, difference between chess and, 26 See also poker, bluffing in Collectible Supplies, 128–129 “College Admissions and the Stability of Marriage” (Gale and Shapley), 137 commitment, signs of, 62–63, 69–71, 72–75 community game, 178–179 competition models of, 35, 166, 172–173 platform, 124–126 unethical conduct with, 180–181 “Competition is for Losers” (Thiel), 173 competitive equilibrium, existence of, 29, 31–34, 36–37, 40, 45, 76 competitive markets, 35, 124–126, 172–174, 180–181 See also platforms competitive signaling, 70–71 congestion pricing model, 86, 94 constrained optimization, 85–86, 133 contractorsfromhell.com, 120 copycat competitors, 172–173 corporate philanthropy, 72–75 Cowles, Alfred, 25, 27 Cowles Commission for Research in Economics, 25, 27, 31, 134 “creative destruction,” 50 credit card platforms, 113–116, 123–124 criminal organizations, informational challenges of, 68 currency, at Stalag VII-A POW camp, 8–9 customer feedback, 52, 74–75 Davis, Harry, 154, 157 Debreu, Gérard, 20, 24, 25, 32–33, 36–37 decentralized match, 139–140 deferred acceptance algorithm, 137–141, 145–149 Delmonico, Frank, 164 descending price auctions, 81–82 design, auction, 14, 101–102 Digital Dealing (Hall), 94 Discover card, 115–116 distribution of income, 22 Domar, Evsey, 36–37 Dorosin, Neil, 142–144 Douglas Aircraft Company, 25 Dow, Bob, 1–2 Dow, Edna, 1–2 Drèze, Jacques, 85–86 dumping toxic waste, transactions for, 167–169 Dutch auctions, 81–82 dysfunction, market, 36, 75–77, 143 eBay adverse selection on, 51–55, 57 auction listings, 94–97 concerns on model for, 43, 46, 48 on seller motivation for giving to charities, 73–75 start of, 39–41 as two-sided market, 109, 119 e-commerce, 41–43, 52–55 “The Economic Organization of a P.O.W.
Humans as a Service: The Promise and Perils of Work in the Gig Economy by Jeremias Prassl
3D printing, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, Andrei Shleifer, autonomous vehicles, barriers to entry, call centre, cashless society, Clayton Christensen, collaborative consumption, collaborative economy, collective bargaining, creative destruction, crowdsourcing, disruptive innovation, Donald Trump, Erik Brynjolfsson, full employment, future of work, George Akerlof, gig economy, global supply chain, hiring and firing, income inequality, information asymmetry, invisible hand, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Kickstarter, low skilled workers, Lyft, Mahatma Gandhi, Mark Zuckerberg, market friction, means of production, moral hazard, Network effects, new economy, obamacare, pattern recognition, platform as a service, Productivity paradox, race to the bottom, regulatory arbitrage, remote working, ride hailing / ride sharing, Robert Gordon, Ronald Coase, Rosa Parks, Second Machine Age, secular stagnation, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley ideology, Simon Singh, software as a service, Steve Jobs, TaskRabbit, The Future of Employment, The Market for Lemons, The Nature of the Firm, The Rise and Fall of American Growth, transaction costs, transportation-network company, Travis Kalanick, two tier labour market, two-sided market, Uber and Lyft, Uber for X, uber lyft, union organizing, working-age population
Whilst increased competition is indeed desirable and new platforms are founded (and dispatched into bank- ruptcy) all the time, many of the key actors in the on-demand industry have quickly become Goliaths themselves; others never faced incumbent- friendly regulation in the first place. There is often little that is genuinely disruptive or innovative about most platforms’ business models; instead, ‘dis- ruption’ has increasingly become code for something different altogether: breaking the law. As regards challenges to entrenched economic interests, if existing regu- lation simply serves as a barrier to entry and protects incumbents, an increase in competition should be welcomed by workers and consumers alike. Many will benefit from easier access to labour and service markets: think of poten- tial London cabbies who no longer need to spend years studying the streets of London for ‘The Knowledge’ exam. Ask any consumer who has had to communicate with grumpy Parisian taxi drivers or has struggled to hail a yellow cab on a rainy Friday afternoon in Manhattan for proof of the con- sumer value of these new services.23 Professor Orly Lobel of the University of San Diego has suggested that, in looking at the legal regulation of the platform economy, we should dis- tinguish between hard cases (in which public welfare is at stake) and easy * * * 38 Doublespeak cases (in which legal regulation inhibits competition and creates barriers to entry).
Ask any consumer who has had to communicate with grumpy Parisian taxi drivers or has struggled to hail a yellow cab on a rainy Friday afternoon in Manhattan for proof of the con- sumer value of these new services.23 Professor Orly Lobel of the University of San Diego has suggested that, in looking at the legal regulation of the platform economy, we should dis- tinguish between hard cases (in which public welfare is at stake) and easy * * * 38 Doublespeak cases (in which legal regulation inhibits competition and creates barriers to entry). Questions of employment law, she notes, are hard cases—but the same is not true for traditional taxi regulation: Laws that do not promote welfare but rather protect entrenched interests are easy cases . . . Attempts at extending permit requirements—what industry interests often call ‘leveling the playing field’ between ridesharing companies and taxi companies, or between other platform companies and the businesses they disrupt—are generally harmful to the evolution of the platform and to competitive markets more broadly.24 Most platforms, however, never face such problems: they simply don’t oper- ate in heavily regulated environments.
Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game by Walker Deibel
barriers to entry, Clayton Christensen, commoditize, deliberate practice, discounted cash flows, diversification, Elon Musk, family office, financial independence, high net worth, intangible asset, inventory management, Jeff Bezos, knowledge worker, Lean Startup, Mark Zuckerberg, meta analysis, meta-analysis, Network effects, new economy, Peter Thiel, risk tolerance, risk/return, rolodex, software as a service, Steve Jobs, supply-chain management, Y Combinator
By considering the overall industry, and then a specific business, as it applies to each force, you can begin to understand the state of the industry and the position of the company within that industry. 185 Figure 9.1: Porter’s Five Forces THE THREAT OF NEW ENTRANTS The threat of new entrants refers directly to Warren Buffet’s concept of the “moat.” In other words, does the company provide something that allows it to fend off new companies from entering the market and taking existing market share? Buffet’s long-used example of the ideal business being the only toll 186 road across a river might apply as a good analogy here. Spend time identifying the barriers to entry that exist. If someone else wanted to start a similar business, what would keep them out? The threat of new entrants is typically kept at bay with competitive tools such as differentiation, brand equity, economies of scale, switching costs, cost of starting up, access to distribution channels, geographic restrictions, or the new favorite, network effects. Does the target business hold any protection from this threat?
Ultimately, our relationship evolved into a partnership filled with immense love and respect. My parents sold me the first company I bought. Being on the “same side of the table” as the seller helped me learn the transaction process without having to worry about the potential “getting-ripped-off” component. I’m sure, if I had tried to buy from anyone else in the world I never would have bought a company. This experience gave me great insight as to the barriers-to-entry that exist for would be acquisition entrepreneurs. Perhaps this is all their fault. Finally, to all the entrepreneurs I have met along the way. You make life so rich. 288 ABOUT THE AUTHOR WALKER DEIBEL is an entrepreneur and investor who has cofounded three startups and acquired seven companies. He holds an MBA from the Olin Business School at Washington University in St. Louis, where he received a Declaration of Accomplishment in Entrepreneurship from the Skandalaris Center for Interdisciplinary Innovation and Entrepreneurship.
The Master Switch: The Rise and Fall of Information Empires by Tim Wu
accounting loophole / creative accounting, Alfred Russel Wallace, Apple II, barriers to entry, British Empire, Burning Man, business cycle, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, disruptive innovation, don't be evil, Douglas Engelbart, Douglas Engelbart, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, sexual politics, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning, zero-sum game
In De Forest’s words, radio “is the coming Science, is moving ahead faster, possibly, than any other.”15 He urged young men to “take up Radio work because it offers a means of entertainment second to no other; gives useful instruction that can be made to produce tangible results later on; keeps everyone interested; enables you to get the news of the world by wireless and provides a pastime and hobby that will get the busy man’s mind into other channels.” One must stress that it was not merely technological wizardry that set people dreaming: it was also the openness of the industry then rising up. The barriers to entry were low. Radio in the 1920s was a two-way medium accessible to most any hobbyist, and for a larger sum any club or other institution could launch a small broadcast station. Compare the present moment: radio is hardly our most vital medium, yet it is hard if not impossible to get a radio license, and to broadcast without one is a federal felony. In 1920, De Forest advised, “Obtaining the license is a very simple matter and costs nothing.”
Burch’s Mesa Telephone Company offered its customers daily broadcasts of weather, train wrecks, and murders, the interval of programming announced by ten short rings. As Kline writes, “Every evening at a designated time, usually seven p.m., an operator would call all farms on a line and give the time, weather and market reports, newspaper headlines and local news, ‘with a spicing of gossip.’ ” • • • In the theory of competition that applies to information industries, as to all others, we speak of barriers to entry: the obstacles that a newcomer must overcome to get into the game. But barriers in an information industry, trafficking as it does in expressive content, can represent more than a restraint on commercial aspirations; they can, depending on how crucially the information medium figures in a society’s communications, also restrain free speech. If we want to define how “open” any industry is, we should start with a number: the cost of entry.
Embracing the process of “competition” that was under way, the Bells prepared to make their comeback as a dominant player in a nominally open industry. It was a perfect wedding of a new government ideology and a new corporate calculus when the Bells, AT&T, and the rest of the industry signed on to the Telecommunications Act of 1996.9 The most sweeping legislative overhaul of the business since the Communications Act of 1934 was founded on the principle of “competition everywhere.” The idea was to remove barriers to entry in all segments of the industry, a goal that the Bell companies (Bell Atlantic, Bell South, Pacific Telesis, Verizon, and the rest), the long distance firms (AT&T as well as MCI), and the cable companies all pledged to uphold. The Act was designed to encourage cable companies to enter the phone business, phone companies to offer TV service, long distance firms to build local networks, and so on.
Liars and Outliers: How Security Holds Society Together by Bruce Schneier
airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, longitudinal study, mass incarceration, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson,