Tag Archives: Connectivity

How Platform Monopolies Fail

Technology platform tend towards monopoly. Whether physical or virtual, platforms provide a level playing field for other actors to use to their advantage. The predictability of monopolies allows other actors to plan for the future, and the technological stabilization they present make the road ahead a lot less frightening for most involved. Monopolies cannot and do not “charge whatever they want” — they price their goods so that they capture a portion of the value they provide that is still low enough to deter other potential competitors from entering the market.

Markets fail through either lack of empathy or lack of understanding. Lack of empathy occurs when the monopoly is blind to the political concerns of other stakeholders, and they therefore use their power to break the monopoly. For instance, in the United States, the left-of-center turned strongly against the physical sciences after the Vietnam War, at the same time at the right-of-center was agitating against government control. The Bell System, by continuing to fund physics research while relying on government control of rates, thus back unempathetic to other actors, and was broken up.

General Motors was a much more empathetic monopoly. They encouraged the growth of the United Auto Workers, allowing both the capital and labor sides of the organization to strongly influence the Republican and Democratic parties, respectively. GM cleverly overcharged for their products, allowing niche competitors such as Ford and Chrysler to survive (and providing a veneer of competition), while keeping those marginal companies captive through the threat of lower prices. Indeed, GM as an organization was so empathetic that management and labor was bailed out by the Bush and Obama administrations! Unfortunately for GM,the shock of high oil prices lead to a decline nonetheless.

In the US education system, the Teachers Front Organizations operated as a monopoly for nearly a century, until being replaced by the federal-academic complex.The reason was both lack of empathy and an external shock. The lack of empathy was exhibited primarily from the Teachers Front Organizations’ lack of concern with State power or Employer’s seeking workers that can be hired. The external shock was first the sexual integration of the American workplace, followed by globalization.

I imagine that if either of these things had not been there — if the Teachers Front Organizations had not been lacking in empathy, if the workplace had not been integrated, or if globalization had not occured, the Teachers Front Organizations would stil be the platform monopoly in the US educational system. If the workforce had not been integrated, teaching would not have suffered from the lobotomy of low wages, as the sexism discount would have still brought many high-performing women into teaching. Likewise, if globalization had not occured, large employers would not have faced the stress of tring to hire a proportionate fraction of their labor force in the United States while facing a disproportionate incompetent labor force in the form of public school graduates.

The consequences of this failed monopoly are as hard for teachers as the failure of the Bell System or GM where for their stakeholders. The teacher leadership in the United States has left everyone — including teachers — down.

Monopolies do not last forever. And monopolies are not all bad. But the Teachers Front Organizations died as a monopoly because it was bad at its most basic job: survival

Be Resilient, Part II: How to Measure Agility

In the previous post, I measured resilience by the amount of effort required to perturb a system. In this page I will discuss a related element, agility, which is shown by systems that do not experience perturbation in spite of risk factors. For instance, an economy that is extremely dependent to variation in the flow of capital would be a capital-wise non resilient economy. A person who is extremely dependent on nurse for support would be labor-wise a non resilient person. A household that required their home not to be destroyed by a hurricane would be land-wise a non-resilient home.

Yet each of these resilience-challenged entities express agility if they continue successful operation in spite of a perturbation. If the economy keeps humming, if the patient stays alive, if the home does flood in spite of storms, all of them demonstrate agility.

Given that, I will use the following definition

agility, n:
the capacity to enforce the presence or flow of land, labor, or capital such that system perturbations do not result in system transformations

Agility can thus be seen as a form of power over circumstances. A capital-dependent economy can have agility through contracts or a powerful friends (a pillaging army). A labor-dependent patient can have agility through contracts or powerful friends (mafia buddies). A land-dependent family have have agility through contracts or powerful friends (guys strong enough to lift sandbags).

It follows that agility is by nature a social phenomenon that is dependent on the quality of the relationships between an entity and others.

A nation suffering an oil-shock that responds by successfully occupying the striking oil fields, however, would demonstrate agility. (Of course, if that nation occupies the oil wells clumsily and stupidly such that the system changes from one state to another, then no agility is demonstrated).

To measure agility, we take the minimum amount of capital, land, or labor that is required to enforce the flow or presence of the perturbing fluctuation in capital, land, or labor from the amount possessed. For instance, a house during Katrina would not have agility, because it is impossible to trade labor or capital to make up for the fluctuation in land. We might approximate this from a pattern of responses to perturbations. If a patient has experienced a number of nursing strikes, for instance, but has maintained care for himself, then he has a historic record of agility.

Of course, one can have agility but not resiliency, though that is a post for another time…


Be Resilient, a tdaxp series
1. How to Measure Resilience
2. How to Measure Agility
3. How to Measure Resiliency
4. The Importance of Measurement

Inside the Black Gangster Disciple Nation Crack Cocaine Gang-Corporation

In less than 24 hours I completed Freakonomics: A Rogue Economist Explains the Hidden Side of Everything. Mark Safranski already summarized Freakonomics better than I could, so my “buy this book” post will be a graphical summary of one of the chapters: Why Do Drug Dealers Still With Their Moms?

A heroic grad student named Sudhir Venkatesh worked with a crack cocaine gang — the Black Gangster Disciple Nation — for several years. After attempting to pass out a survey, which began

How do you feel about being black and poor?

(a) Very bad
(b) Bad
(c) Neither bad nor good
(d) Somewhat Good
(e) Very good

Which, besides displaying a lack of symmetry between (b) and (d), left off the correct answer ((f) Fuck you) and almost got young Sudhir killed.

Slowly, though, Sudhir gained their trust, and discovered the corporate structure of the street toughts.

At the top of the pinacle where the Board of Directors, whose twenty boardmen each earned half a million dollars a year. Life was good for a Director

bgdn_board_of_directors_md
20-man Board of Directors, at $500,000 per annum = $10,000,000 annual expense for BGDN

Below the Board of Directors are the regional Franchisees. Operating like Sheiks, they grossed around $400,000 a year. However, with the Franchisee’s autonomy comes fiscal responsibility. Most of the franchisee’s income has to be spent on expenses, letting the franchisee net $100,000 a year.

bgdn_franchisee_md
100 Franchisees, at $100,00 per annum = $10,000,000 annual expense for BGND

The Franchise of the Black Gangster Disciple Nation studied then had three officers: An Enforcer, who shared acted like Barnett’s SysAdmin, maintaining peace from internal threats

bgdn_enforcer_md
The SysAdmin

A treasurer who, just like in Hall Governments, kept charge of the organization’s money

bgdn_treasurer_md
The Money Man

And a Runner, in charge of logistics.

bgdn_runner_md
Amateurs Talk Strategy, Professionals Talk Logistics

The annual salary of three officers was $8,000 per year each.

bgdn_officers_md
$8000 / officer / year * 3 officers / franchise * 100 franchises = $2,400,000 / year expense for BGDN

Below the officers were 500 Foot Soldiers. But like the groundtroops of the System Administrator, their job is not violence. As the local Franchisee reported:

We try to tell these shorties that they belong to a serious organization… It ain’t all about killing. They see these movies and shit, and they think it’s all about running around tearing shit up. But it’s not. You’ve got to learn to be part of an organization; you can’t be fighting all the time. It’s bad for business.

Like Barnett’s SysAdmin, the foot soldiers are mostly “private sector” — their true job is salesman. Each of the 50 Foot Soldiers earned $3,960 (yes, much less than minimum wage) every year.

bgdn_foot_soldier_md
$3,960 / foot soldier / year * 50 foot soldiers / franchise * 100 franchises = $19,800,000 annual expense for BGDN

Below the Foot Soldiers are 200 “rank and file.” These interns wish to rise to the level of Foot Soldier, and pay dues for the chance to one-day rise up the corporate ladder.

bgdn_rank_file_md
$25.50 / R&F / year * 200 R&F / franchise * 100 franchises = $510,000 annual revenue for BGDN

To graph annual income, for an average Director, an average Franchisee, and average Officer, an average Foot Soldier, and an average Rank & File:

Graphically, we can chart the organization structure as:

bgdn_hierarchy
Corporate Hierarchy

Or more traditionally, looking at the organizational structure as a “flow of security”

bgdn_security
Flow of Security

Realizing we can look at the “hierarchy” as just one type of flow, it becomes obvious we can chart the “flow of capital” as well:

bgdn_capital
Flow of Capital

Which opens questions about the political economy of crack cocaine gangs…

bgdn_rich
Suffocated by Fat Cats…

However, in Black Gangster Disciple Nation’s defense, foot soldiers do make up the single largest payroll expense for their gang

bgdn_payroll_md
…Or Starved By Labor?

One might note that if the Black Gangster Disciple Nation is typical of corporate-style crime, John Robb’s suggestions are dangerously wrong.

Interested in learning more? Buy the book.

Update: Stephen J. Dubner, a highly respected journalist and co-author of Freakonomics, was kind enough to link to me on the Freakonomics blog

Dr. Steven D. Levitt, Professor of Economics at the University of Chicago, as well as the other co-author of Freakonomics, was kind enough to comment below.

Update: Over at John Robb, Jamie links to this critique of this gangster of Freakonomics

They do present some anecdotal evidence that the gangsters were not well paid that doesn’t depend on the notebooks, but it’s if anything even weaker. The simple fact that someone lives with his mother is not actually knockdown proof that he is strapped for cash; something like thirty per cent of young Italian men do it for the simple reason that it’s better than cooking and cleaning for yourself. I also think it’s quite naïve to assume that when the gang members (who were, we shall remember, full-time drug dealers) asked Venkatesh to try and get them a janitorial job at the university, this showed that anything, even cleaning toilets on minimum wage, was a better life than the Gangster Disciples. I am hardly the most streetwise guy around, but even I can work out a couple of other possible reasons why a full time drug dealer might want a job which allowed him to wander round a university campus more or less at will. Students buy drugs[5].

Furthermore, even if we take the numbers in the notebooks as reliable, we are faced with the observable fact that crack dealers (even street soldiers) have expensive tastes and hobbies. Even leaving aside the question of trainers and jewelery (on which I have no hard data about ownership to argue against Levitt), it is an undeniable fact that even the most junior members of the Gangster Disciples were able to engage in the hobby of pistol shooting, a popular but expensive middle-class pastime which I would consider to normally be beyond the means of a burger-flipper at McDonalds. The non-salary compensation of JT’s street dealers might be really quite high; access to guns, free admission to nightclubs, favorable deals on stolen goods and clothing, regular social events with local rappers, it all adds up and compares really quite well to the fast food trade, and as far as I can see the informal healthcare plan was also quite generous compared to most mainstream employers in that it covered family members and had substantial death-in-service benefits which would have been worth quite a lot in a neighborhood that was not exactly Hampstead even for non-gang members. I find the seeming absence of any analysis of the non-salary component of compensation quite strange, particularly since the underlying work was done working with a sociologist who would at least have some analytical framework which one might use to measure the value of the benefit to the gang member of being in a gang and thus having some degree of status in a community where status mattered.

Read the whole thing

Interested in the graphics used in this post? Inkscape, OpenClipart, OpenOffice Draw, and Paint.Net are all free — as in speech!

Real Humans Try to Stop Imaginary Plague in Imaginary Lands

Virtual plague spreading like wildfire in World of Warcraft,” by Jeremy Reimer, ars techncia, 21 September 2005, http://arstechnica.com/news.ars/post/20050921-5337.html.

One word: WOW

Players of Blizzard’s incredibly popular World of Warcraft are reporting the outbreak of a virtual plague that is spreading across major cities in the virtual land of Azeroth, infecting player characters at an alarming rate.

The trouble started when Blizzard programmers added a new instance, which is a separate area connected to the outside world that players can enter and attempt unique quests. One of these instances, Zul’Grub, contained the god of blood, Hakkar. Hakkar was a powerful foe that could cast spells of his own, including a spell called Corrupted Blood. This spell did a large amount of damage to any player within the vicinity of the casting, and the effects lingered on after the spell was over.

What happened next was something Blizzard did not expect. Some of the players who had gone into the instance emerged back into the main world of Azeroth, and started spreading the Corrupted Blood disease to others who they came into close contact with. The infection soon spread into many of the cities and towns in the virtual world. Since the disease was intended to be a danger to powerful players, it tended to kill those less than level 50 almost instantly.

Game masters (GMs) tried to quarantine certain players from moving into new areas, but they kept escaping the quarantine and moving on to infect other people. A patch was issued to try and mitigate the damage, but it did not have the desired effect. According to a Blizzard poster on the WoW forums:

It appears that the hotfix remedy concocted to combat the recent Azerothian outbreak has not yielded desired results. At this time, our medical staff is continuing to develop an effective cure. We look forward to ensuring the health and vitality of the citizens of Azeroth in the near future.

The most interesting thing about this “outbreak” is perhaps the reaction it has provoked among WoW players. Instead of being angry about the deleterious effects of a bug, many are treating this as an exciting and unprecedented event in the WoW universe. It would be even more interesting if epidemiologists in the real world found that this event was worthy of studying as a kind of controlled experiment in disease propagation.

tdaxp readers are already familiar with World of Warcraft