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« Will magic technology be revolutionary? | Main | Where to Start »

September 16, 2006

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Nato Welch

I think you're absolutely right, although this is a somewhat different formulation of the problem than I'm used to.

I think unemployed is definitely the answer, and that's why I tend to advocate guaranteed incomes. Otherwise, the majority of us unemployed end up on the dole anyway - in prison, rather than in the marketplace.

Although, at times, I tend to think that IP policies are the ones that contribute most significantly to the concentration of wealth. The restrictions inherent in IP controls are the most important barriers to entry. Agile competitors would create a lot more competition if they weren't barred from doing so by patents or copyright. Copyrights are effectively forever even today; thirty years for patents will be the same in the blindingly accelerated technodevelopmental landscape only a decade or two hence.

Jan-Willem Bats

"Will we be retired, or unemployed?"

Who cares. As long as we won't be stuck in wage-slavery anymore...

mova

Has anyone ever make an analysis on the downfall of the current economic system due to the invention of MM? I mean, once MM is created and is publicly announced it will undoubtedly shake the market. Can the current economy sustain for a while until MM production gets stabile? (1) How big will the shake be, (2) what sectors will be severely injured, (3) what measures can be taken for the transition period?

Chris Phoenix, CRN

Jan-Willem, debtor's prison is worse than wage slavery. And now, in the US, debtors *can* be sent to prison.

Guaranteed income has a lot in common with "found money." I think it would take a world-class combination of sociology, psychology, and economics to understand the effects of guaranteed income--which would differ from society to society, and also depending on how it was presented to the recipients. Compare and contrast the difference between Social Security payments and welfare.

Chris

Chris Phoenix, CRN

Mova, I'm not sure MM will be believed even once it's announced. There are three different timelines:

1) Negative impact of MM on current economy
2) Perception of future negative impact (prediction, acceptance)
3) Positive impact of MM on people's economic state

Of course, #3 may never happen, depending on administration. In that case, we get into deep wealth concentration.

If we don't go that route, then a rollout of MM fast enough to create effect #1 on a large scale can also be fast enough to create effect #3 before effect #2 comes into play. Companies can stumble forward for many months, losing money and hiding it (or making optimistic noises about it) before they actually go bankrupt--and even then, the big ones frequently get bailed out.

Chris

Tom Craver

I won't dispute that MNT might allow wealth concentration to continue - though I'd greatly prefer to see civilization shift to de-massification, decentralization, etc, so that wealth slowly re-distributes.

I doubt that internet service is as cheap and profitable as you think - network costs aren't currently determined by Moore's law.

Internet service could become overpriced, just as long distance service became over priced. If entry barriers are high, and all existing players feel they deserve a certain level of profit (based on the value of past investments, and historical returns), prices might remain high even if the replacement cost of the existing network drops radically.

However, in such a case I'd expect some competition to arise that will use the old network where necessary, and route around it where possible, much as Skype does.

Also, purely volunteer efforts are not impossible - consider the example of FidoNet, preceding the extension of the Internet to consumers.

Chris Phoenix, CRN

Tom, what does determine network costs? Last I heard (admittedly a year or two ago) we still had lots of dark fiber, and AFAIK almost all the data processing is digital and thus should be subject to Moore's Law.

I'm curious about your framing, "If entry barriers are high, and all existing players feel they deserve a certain level of profit (based on the value of past investments, and historical returns)..."

If entry barriers are high, why wouldn't companies feel they should have the highest available profit, whether they "deserve" it or not? You seem to be assuming that companies will pass up potential profit to only take what they think they have earned; if so, please support that somehow!

I agree that volunteer efforts and competition can arise despite barriers to entry. But I've read that even without barriers to entry, a new technology has to be an order of magnitude better in order to displace an existing technology. If prices are an order of magnitude too high, which certainly seems supportable, then 90% of a company's sales are pure profit. What company structure can deal sanely with that?

Hm, random thought, thinking about barriers to entry: Skype and other VOIP depends on a fairly smooth "pipe" for good voice quality. Anyone want to take odds that telcos are deliberately sending "bursty" data over the Internet backbones in order to keep the voice quality of VOIP low? It'd take clever analysis to detect even circumstantial evidence, because IP traffic is inherently bursty... but it might be interesting to see whether the traffic coming from telcos is more bursty than expected.

Chris

Tom Craver

Chris -
I think you've taken a few of my comments in the opposite sense than I meant.

When I say a company thinks they "deserve" a certain level of profit, I mean that they know how much they invested, and how much they've been making for many years - and so assume their profits "should" be (at least) that much, and so don't decrease their pricing in proportion to the actual replacement costs of their infrastructure (i.e. what a competitor getting into the business would need to pay).

Network costs tend to have a major service-cost component (installation, line maintenance, call-centers, etc), which is roughly proportional to number of customers. Service costs can decrease (more reliable technology, outsourcing, etc), but generally won't change like Moore's Law. So costs per customer tend to stay about the same, though things like bandwidth may improve.

WRT needing an order of magnitude improvement for something new to catch on - I think that's mostly due to the 'barrier' that people (suppliers and customers) have invested in equipment and training, and don't want to throw that investment away. So if there's a 10% faster network modem, you'd have a hard time using that to woo customers who've already paid for the old modem and installation. That's one reason that a free cellphone when you switch services has been common - eliminating that barrier to accepting a modest improvement.

BTW - in your final paragraph, your're talking about a core issue of "network neutrality".

mova

"So the only thing left to do with the money is to pay it to the executives. And that is wealth concentration. No one has been cheated; the company has created lots of value, and its customers and employees and stockholders are all better off than they were."

Then it is possible that hunger will remain a problem, although MM is already available. How bout a progressive taxation? If a nanofactory is used for basic needs, then the tax imposed is zero. If MM is used for consumer goods other than basic needs, the tax should be progressive.

Mova

Chris Phoenix, CRN

Tom, I agree that the profit a company figures they "deserve" usually sets a floor for price. I thought you were implying it also set a ceiling--that companies would actually set prices according to that figure. I think they will set prices at what the market will bear, even if it's an order of magnitude higher than what they "deserve."

If customer service is a large fraction of network provision costs, why does more bandwidth cost so much more?

Mova, I hope there will be a business model that encourages people to obtain and use (relatively safe) nanofactories widely. One way of implementing the "progressive" pricing is: The blueprint maker and the nanofactory owner split the profits. If someone gives away a blueprint for free, the nanofactory owner gets nothing. The promise of "free stuff" should drive the rapid widespread adoption of nanofactories, leading to a fast ramp-up of income from brand-name goods. But I don't know if businesses will instead be satisfied with modest growth/adoption and income, and fail to have the vision to let some money go in order to make more.

Chris

Tom Craver

Chris - do you mean, for example, why does internet over cable TV or DSL cost much more than dialup over analog modem?

1) Higher bandwidth to the home means higher bandwidth from the head-end to the network, hence network costs of the long-haul internet come into play in your increased bandwidth at home.

2) Dial-up internet's low cost is effectively subsidized by phone service, which independently covers most of the cost of the last-mile connection.

The right cost comparison would be phone service and dial-up internet (where you never use the phone service), vs internet over cable (where you don't buy other cable services). Rates vary, but it'll usually come out somewhere around $30 vs $45, for a ~60x increase in bandwidth.

Chris Phoenix, CRN

No, I meant that telcos will sell me varying amounts of DSL bandwidth at varying prices. Exact same hardware.

Isn't long-haul internet bandwidth cost largely a function of Moore's Law? The smarter your silicon, the more efficient you can be with pipes and power.

Chris

Tom Craver

Chris:

I'm not arguing that ISPs won't charge as much as the market will bear - just that cost factors are not much determined by Moore's Law, and ISPs can't afford to charge much less than a certain amount per customer.

The ISP's costs wouldn't drop by half if you offered to take half the bandwidth of their basic service, so they'd end up losing money on that deal. Equally, when Moore's Law or other factors allow them to double their bandwidth, it doesn't mean they can afford to give you the same bandwidth you had before, for half the price.

Maybe some future combination of technical or business improvements will allow them to offer a half-price service - but that change hasn't happened over the last 3 years, which would be the Moore's Law rate. On the other hand, I have seen my bandwidth approximately double in that time, for the same service price.

ed

I think the major problem we have is a lack of corporate governance by the stockholders. Any publicly traded company is owned by the stockholders who select a board of directors to look out for their interests. The biggest problem is mutual funds and retirement funds acting as passive investors. The management of these funds only care about return on investment. If a company makes 100mm while expenses are only 10mm, the only rightful recipeints of that difference are the stockholders. However, when a windfall like this occurs, if the board does not oversee executive compensation with an eye to the stockholders, then the executives will pocket a large faction of the difference.

My solution....
1) If you own a mutual fund which owns a stock, you get voting rights on that stock.
2) If you are a retiree, and your retirement fund owns a stock, you get voting rights, not the pension fund manager.
3) All executive compensation for the top ten officers in a company must be approved by a vote of the stockholders and approval can not be delegated to a compensation committee.
4) To simplify matters, a compensation policy can be approved by a stock holder in liue of a direct vote for each stock. Specifically, a stockholder can state that they will automatically approve any compensation package less than 1.5mm/yr with a % bonus tied to capital growth + dividends to the stockholder.

There are a lot of games that can be played by executives including foreign incorporation, moving stock listing and even taking a firm private, but at least this would be a start.

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