Here's what a bossless workplace looks like

Slashdot examines the software design company Valve, which is apparently a non-hierarchical organization. I have yet to read up on this, but it has been covered by Library of Economics and Liberty (Brian Caplan's site, I believe).

I'd like to compare it to more traditional coops, such as the Cheese Board in Berkeley.

Life as a start up

A fairly new book about the "networking economy" is getting some press -- "The Start Up of You", essentially encouraging college-educated professionals to treat their careers like a startup... which includes using a lot of professional networking to find new opportunities. Appropriately, it is written by the founder of LinkedIn. Based on the reviews at Amazon, it seems to be a little bit stuck in the Silicon Valley experience, and is probably targeted at white-collar corporate workers.

One commenter recommended "My Start Up Life" as a more "real" alternative.

Of course, the problem with reading a book by a big-shot Silicon Valley CEO is that not all of us want that type of life, and even for those of us who want that life, we won't be able to achieve it. One of the ideas that really bothers me (based on a superficial exposure to the book) is the notion that we need to work harder and take more risks. That works fine for some people, but most of us have obligations and lives outside of our professional activities.

My other concern is that this will be another sort of "Who Moved My Cheese"-type book -- encouraging workers to take control of their jobs, even though there are a lot of very real obstacles to doing so. Kevin Carson has expounded on these issues before.

Finally, this also brings to mind what I read in Jack Welch's book "Winning" -- that workers are completely dependent upon their employer for good recommendations. Since your boss may be a jerk, it is a good strategy to cultivate several "employment" relationships and build a network that can substitute for that reference letter from your old boss. Relying on one person (or company) may appear to be the route to economic stability, but such small, narrowly focused groups can often fail in the blink of an eye.

In defense of networking

I've been defending the social value of professional networking over at the anagorism blog, and wanted to make a comment here. The argument (as I understand it) is about how much of a role direct social interactions should play in the establishment of economic relationships, and how much this match-making process can be formalized.

My belief is that there are situations where formalization (e.g. credentials, match-making services) can be useful, but that such situations should be viewed as the exception rather than the rule. Rather, in my vision of a "good society", most relationships (including economic relationships) would be established by networking (e.g. recommendations from trusted sources). I view this as the contrast between a mass-society on one hand, and a personal society on the other. In one society, humans are commodities to be fit into predefined categories by managers, while in the other society, humans define their own needs and pursue these needs with their friends and trusted colleagues.

There are all types of problems with the formalized society, ranging from its inability to innovate to the problem of establishing universal trust in the managers. Granted, the network society can have its own problems -- two of them being wasteful competition and nepotism. I won't address the former, because I don't think it is really solved by formalization. While the later (nepotism) isn't solved by formalization either, the anagorist position provides a clear challenge for finding ways to minimize it in a network society.

The main way to accomplish this is to identify socially privileged networks (e.g. government, academia), and assure that they have some sort of open access point by which outsiders can gain access. In academia, there is a semi-formalized admission process for university, after which students can approach professors and try to develop relationships. I am usually up for establishing new access points, but am opposed to proposals that would formalize the entire system from top to bottom.

The thing that really bugs me about anti-networking critiques is that they build on the corporatist assumption that jobs are something that a deity-like employer creates, and then bestows upon an imbecile worker. In the world I live in, and the wold I want to live in, the worker plays an equal role in creating the job. I think this is undeniably true in an abstract sense (supply and demand together determine the quantity produced), but I also see it in the individual hiring decisions of managers. Managers do not necessarily decide to hire a person and then go seeking a person to fill that slot -- often they hire employees opportunistically; it is only after a prospective employee approaches them and says "here I am, here's what I can do" that the employer decides to take on the project that the employee can work on. There are a lot of pieces that have to come together to make a project work, and it takes efforts to bring them together. If you can bring your skills to someone who has the complementary pieces already, you can make things happen.

Market Communism

NPR's "All Things Considered" aired an inspiring story about and Indian medical charity and how they manage to fund eye surgery for patients without the means to pay (India Eye Care Center Finds Middle Way To Capitalism : NPR). Basically, they charge the market rate to the rich, which in turn subsidies the poor:

That high quality allows Aravind to attract patients who are willing to pay market rates. Then it takes the large profit made on those surgeries to fund free and subsidized surgeries for poor people — like K. Karuthagangachi....

it's only possible to provide free surgeries on the scale that Aravind does by running an operating surplus, like a profit-making company. That's what Aravind manages to do, even though it's legally a charitable trust.

On one hand, this is not all that surprising--American hospitals (and often lawyers) operate on a similar principle. My fear is that, like their American counterparts, these organizations may eventually turn into "profit-making" enterprises for their highly paid managers, while using their supposed "non-profit" status as a way of winning special privileges from the local community.

Anyway, this story shows the stereotypical Indian twist -- finding a way to radically reduce the cost of a service:

Fifteen years after it was founded, Aravind's ability to provide free and subsidized surgeries was being limited by the high cost and availability of the intraocular lenses needed for cataract surgery. That's not a problem most charitable organizations could overcome...

But Aravind attacked the problem with the help of an American social entrepreneur named David Green. Green had been helping Aravind collect donated lenses to be implanted in their cataract patients. But donations were averaging only about 25,000 a year. That wasn't nearly enough to meet Aravind's needs, and the lenses cost several hundred dollars to buy. So Green helped Aravind set up its own lens manufacturer on-site, a subsidiary named Aurolab.

"Now today Aurolab sells, I think this year it will be 1.8 million lenses," he says. "So you can see that when you have a business model, an economic model, it enables something to scale because it's not dependent upon charity, which is fickle."

And even more remarkable: By squeezing out profits made by middlemen in the production and distribution chain, Aurolab is now providing some lenses at the astoundingly low price of just $2.

This is a refreshing story showing how a "communist-minded" person can leverage "capitalist" processes to transform the lives of many who have been left out of the system. This isn't traditional philanthropy -- since the market service and the charitable service are intimately connected. We could even say that the charitable impulse came first, and the marketing impulse followed in its wake. The desire to help the poor inspired a business model that may not have occurred to a person who was only looking for profit. In contrast to the doctrinaire bickering that I always read on the web (touting the primacy of profit-driven capitalism or charity-driven communism), it is nice to see that in some situations, charity can drive advances in productivity and market savvy can help those who are incapable of helping themselves. Maybe there is hope for humanity.

Books: Inside Wikileaks

Daniel Domscheit-Berg (DDB), a hacker and member of the Chaos Computer Club, had been keeping an eye on Wikileaks for over a year, nursing a suspicion that it was some sort of front for an intelligence agency. That suspicion fell away in November of 2007, when Wikileaks published the Guantanamo Bay handbooks. Shortly thereafter, DDB invited Julian Assange to speak at the December meeting of the Chaos Computer Club, and began collaborating with Assange on the Wikileaks project, becoming a major coordinator of Wikileaks activities in Europe. By September of 2010, DDB had fallen out with Assange, and left Wikileaks to establish a competing system, called OpenLeaks (I've added the blog to my list).

This book is a description of DDB's experience working with Wikileaks. The main theme of the book is the unstable genius of Assange, which provides the context within which all of the technical, administrative, and political problems of Wikileaks had to be addressed.

DDB obviously has a bone to pick with Assange, and is using this book to publicize his own competing project. Like everything, it should be read with a skeptical eye -- this is simply the story that one man is telling. I actually had trouble finding independent information about DDB. His Wikipedia entry is sparse, and I only found one news article describing the release of this book. (ForeignPolicy.com has posted a video of a recent interview.)

Anyway, this book provides some insight into what drives an entrepreneur like Assange. Wikileaks was a visionary project, and perhaps such a project can only be pushed through by someone with an exaggerated sense of his own importance. Based on DDB's story, not only did Assange essentially dedicate his life to this high-risk project, but he also had the charisma to convince several volunteers and journalists to make substantial contributions to Wikileaks. This type of achievement is not possible for people with a healthy sense of their own limits.

DDB's thesis is that Assange's egocentrism* is destroying the project. DDB presents Assange as insisting of keeping total control over the project, while also being a completely inept administrator. I suspect that many visionary projects encounter this type of problem. The entrepreneur basically has to get the project off of the ground on his own because no-one else understands what he is trying to achieve, or they doubt that it is possible. Once the project has demonstrated success, the visionary entrepreneur will suddenly have collaborators, but he will not necessarily have any ability to manage a team. Even worse for a visionary project like Wikileaks, the entrepreneur cannot assume that his team-mates actually have a clear understanding of his own goals for the project -- after all, there are no examples from which they can derive shared expectations or even terminology. The visionary project has to deal with all of the problems of any start-up, plus the additional burden of having to deal with issues that no-one has dealt with before.

DDB sees three major core objectives for a project like Wikileaks:

1. Maintain the anonymity of the source (while possibly enabling further communication)
   
2. Organize and filter the documents, perhaps removing information about private persons.
3. Publicize the documents.
   

These objectives can conflict with each other, especially when resources are scarce. DDB describes these conflicts, how Wikileaks tried to balance these objectives, and how the conflicts led to arguments among volunteers on the project.

Ultimately, DDB decided to start a competing institution, OpenLeaks. I wish him luck in this endeavor. This represents a maturation of the industry that Wikileaks established. Now we know what an institution like Wikileaks can accomplish. Now some people (like DDB) have first-hand experience tackling the problems of these anonymous leak systems. The only question now is how many of these institutions can be supported, and how will the public interact with them. Should a leak-source provide documents to both Wikileaks and OpenLeaks? Will that increase the chance of being identified? Will it assure prompt publication, or would it just waste resources with duplicate effort? How can a new institution gain the trust of potential sources? How does it demonstrate its ability to maintain anonymity?

It appears that the Wikileaks revolution has only just begun, and at some point it may be able to continue even if Wikileaks itself fails.


*my word, not DDB's; not meant as a psychological diagnosis

Hyper-competition

Our economic opinions are often influenced by our perceptions of how our decisions will influence the competitive environment faced by ourselves and others as producers. The nature of the competition that we face not only influences our productivity, but also influences our personal lives and social structures.

I'd like to see greater consideration of the impact of competition on our lives, but that seems to be difficult in the absence of a formal description of the competitive environments that we may face. If you, dear reader, are familiar with any writings on these issues, please point me to where I may find them. Otherwise, please consider the following analysis and provide any feedback that you may have.

I think that our competitive environments can be described by a point along a spectrum, ranging from monopoly, to competition, to hyper-competition. These environments are described in detail below, but I am specifically interested in hyper-competition, since I have never seen a discussion of this environment*, despite it's widespread occurrence in our economy.

Monopoly (including self-sufficiency): The condition where an actor's welfare is not influenced by competition. Economically, this arises when demand is satisfied by a single producer. The simplest example is an individual producing a good for his own use. However, producers can increase demand for (and hence, the value of) their produce by engaging in markets with others. The standard definition of "monopoly" applies to this condition, where a market is supplied by a single producer, who typically sees very large returns on his productive labors.

Competition: The condition where an actor's welfare is primarily determined by his own actions, but the benefit is limited by others seeking to access to the same resource. Economically, this arises in markets where multiple producers are satisfying the cumulative demand of consumers. Consumers are free to choose among the producers, meaning that producers will be unable to sell their produce unless they compete effectively with the other producers. This is the competitive structure that is typically studied in introductory Economics courses, where market prices tend towards the cost of production.

Hyper-competition: A competitive structure where an actor's welfare is solely determined by his performance relative to others. Hyper-competition is characterized by "winner-take-all" dynamics, and epitomized by sports and politics. Economically, this may take many forms, but it may arise from intense competition for access to monopoly benefits. A good example of this is our patent system, where "inventors may work independently for years on the same invention, but one will beat the other to the patent office by an hour or a day and will acquire an exclusive monopoly, while the loser's work will then be totally wasted."**

Many parts of economy seem to share this structure, to a lesser extent. I propose three ways that hyper-competition may arise:

1. From inflexible demand, such that productive innovations do not expand the market--they only displace other producers.
   
2. From formal bottle-necks in market-entry. One example would be an educational system where school admission is very competitive, but once accepted, students are almost guaranteed to succeed.
   
3. From informal bottle-necks in market entry, arising from bounded rationality (limited information processing ability). This may arise from a positive-feedback loop where successful exploitation of one opportunity produces a reputation that leads to greatly expanded opportunities.
   

Along this competitive spectrum, I expect to see a change in how much reward a person receives for each unit of good that he produces. Under monopolistic conditions, the law of diminishing returns dominates, and rewards decrease with each unit of production. In competitive conditions, market prices are independent of one's own produce, so the producer gains a constant reward for each unit produced. In hyper-competitive conditions, the producer's reward per unit increases as total production increases (this increase may be continuous, or involve thresholds).

Overall, hyper-competition might be expected to produce Pareto distributions in human achievement, where success is not directly proportional to skill, but instead increases as a power function of skill. Conversely, the reduction of hyper-competition would put greater emphasis on the "long-tail". It's interesting to note that a progressive income tax may counter-act the influence of hyper-competition on income.

Any thoughts are appreciated.

Footnotes:
*A Google search for "hyper-competition" turned up two concepts. Most prominently, a business-school professor has been using the term to describe a gradual erosion of market imperfections, thereby eliminating many semi-monopolistic advantages held by assorted producers; this is not what I'm talking about. My concept is most closely reflected by the writings of some random blogger, who discusses "winner take all" market conditions, specifically with respect to high-tech entrepreneurship.

**This quote is from Ayn Rand's essay on Patents and Copyrights, which I remember as the epitome of what I dislike about Rand. Her rejection of this "objection to patent laws" is quite dismissive, even as it exhibits glaring circular logic.