Bubbles set a Schelling point for talent and capital

Friday, March 17th, 2023

Just as credit produces bubbles in financial markets, Dwarkesh Patel says, talent accelerates bubbles in technology:

During a bust, a highly leveraged hedge fund can experience a death spiral, where people react to bad financial news by calling in their loans, which forces the fund to sell its positions in a weak market, causing lenders to pull back further, and so on. Something very similar happens when you hire superstar employees. By virtue of their talent, these people have lots of options. As soon as you run into trouble and stop being the best place in the world for them to work, some of these 10x’ers will leave (remember, one of the things that makes them 10x is their ambition). And once their peers leave, the remaining A players will scatter too. The leverage you get from hiring really talented people is a huge risk during rough times, because these people have lots of other options and the ambition to pursue them.

Leverage is also a serious risk during a boom. Hedge funds like Tiger Management saw the late 90s Dot-com crash coming. But when they tried to short the tech market, some of their investors asked for their money back, which forced the fund to liquidate its short in a bullish market, which caused even more lenders and investors to pull out, causing further losses.

[…]

In The Alchemy of Finance, George Soros explains market bubbles with his theory of reflexivity. Bubbles shouldn’t exist in an efficient market, because speculators will bet against any asset whose price rises above its fundamental value. But bubbles are a common and recurring phenomenon in financial history.

Soros explains that the efficient markets hypothesis does not map onto actual markets, because it treats price simply as the output of market forces despite the fact that price also acts as an input. If a company’s stock quote increases, it will be able to raise more capital from investors, and on the basis of the money it just raised, its value will rise even further. Through this feedback loop, the prevailing bias is reinforced.

Reflexivity is at work in talent markets as well. Say that you manage to convince a few A players that your startup is extremely promising. Now, you can go to investors and say, “I’ve got the beginnings of an amazing startup — look at this awesome team I’m putting together.” And now you can hire even more 10x engineers by telling them, “Hey, we just raised our seed round on a 50 million dollar valuation. How can you not join this rocketship?”

But if this self-reinforcing cycle is not backed up by a legitimate and scalable vision which can make use of the influx of talent, then you have a bubble. Theranos founder Elizabeth Holmes recruited highly credentialed biotech talent, and then advertised this team to raise billions in capital, which helped her get more clout and attention, which she used to recruit even more superstars, and so on.

Leverage tends to accelerate bubbles, because it allows people to throw more money into an already inflated asset. Similarly, extremely talented people accelerate tech bubbles. No prospect is more attractive to a 10x engineer than working with other 10x engineers, and no opportunity is more irresistible to an investor than funding a team of 10x engineers. The positive spin on this is the Byrne Hobart view, that bubbles set a Schelling point for talent and capital. A founder quality person can quit his job and start a new company in Web3 or biotech because he think he’ll get funded, and investors are willing to fund him since they expect that he will be able to recruit 10x engineers, who are comfortable making a career pivot because they find the founder’s vision exciting.

If any of of the people in this chain stop believing the hype around which their project is organized, then the hype becomes unjustified. So the con view of tech bubbles is that the entire party crashes if one person leaves early. And once the bubble starts to wobble, 10x employees will move on to the next compelling tech vision, causing the leveraged death spiral mentioned in the last section. Leveraging your company with talent increases your volatility — either you orchestrate a revolution, or you implode.

Technology, more than any other sector, seems to have this strong pattern of producing bubbles, where one hype train follows another. Perhaps this is because the smartest, most talented people go to work in tech, and just as credit produces bubbles in financial markets, talent accelerates bubbles in technology.

Posted in Business, Economics | 3 Comments »

The idea of a joint stock company was one of Tudor England’s most brilliant and revolutionary innovations

Thursday, March 2nd, 2023

The idea of a joint stock company was one of Tudor England’s most brilliant and revolutionary innovations, William Dalrymple’s suggests, in The Anarchy:

The spark of the idea sprang from the flint of the medieval craft guilds, where merchants and manufacturers could pool their resources to undertake ventures none could afford to make individually. But the crucial difference in a joint stock company was that the latter could bring in passive investors who had the cash to subscribe to a project but were not themselves involved in the running of it. Such shares could be bought and sold by anyone, and their price could rise or fall depending on demand and the success of the venture.

Such a company would be ‘one body corporate and politick’ — that is, it would be a corporation, and so could have a legal identity and a form of corporate immortality that allowed it to transcend the deaths of individual shareholders, ‘in like manner’, wrote the legal scholar William Blackstone, ‘as the River Thames is still the same river, though the parts which compose it are changing every instance’.

Forty years earlier, in 1553, a previous generation of London merchants had begun the process of founding the world’s first chartered joint stock company: the Muscovy Company, or to give it its full and glorious title, The Mysterie and Companie of the Merchant Adventurers for the Discoverie of Regions, Dominions, Islands and Places Unknown.

Posted in Business, Economics, Policy | 2 Comments »

Why does it feel like Amazon is making itself worse?

Monday, February 27th, 2023

Let’s say you’re a regular Amazon shopper, John Herrman suggests, in need of a spatula:

You might start your journey by typing the word “spatula” into the search box with a qualifier or two (“silicone,” “fish,” “magenta”). In response, Amazon will produce a very large list presented in a large paginated grid or, on a phone, a bottomless scroll. You have, it is implied, thousands of options within immediate reach; Amazon presents them to you in a particular but mostly unexplained order. Some of the spatulas you encounter first will carry brand names you’ve heard of before, like KitchenAid or Rubbermaid, while others will have names like IOCBYHZ, BANKKY, or KLAQQED. Some of them will appear identical to one another or even share the same product photos with different names and prices. Other listings will disclose, usually in small gray text, that they’re “sponsored.” (Of the 81 clickable, buyable products on my first page of search results for “spatula” — product listings, banners, and recommendation modules — 29, or more than a third, were some form of ad.)

Many products will be described in SEO-ese: “Silicone Spatula Turner, VOVOLY 3-Pack Spatula Set for Nonstick Cookware, BPA Free Rubber Spatulas, Heat Resistant Kitchen Utensil, No Scratch or Melting, Ideal for Egg, Cookie, Crepe, Burger, Pancake.” Most, maybe all, will be eligible for Prime.

You’ll have options! So many options that, unless you have strongly held preferences about spatula brands — unlikely, given that you just typed “spatula” into Amazon — you’re going to need some guidance. BANKKY or KLAQQED? Should you give IOCBYHZ a look or just pay extra for the Oxo? Your eyes are drawn to the only relevant, useful information on the page: star ratings. On this first page, sponsored or not, they’re all hovering between 4 and 5 stars and mostly between 4.6 and 4.9: 403 ratings, 4.7 stars; 10,845 ratings, 4.8 stars; 27 ratings, 4.7 stars; 20,069 ratings, 4.7 stars. (Stars, according to Amazon, are calculated using “machine-learned models instead of a simple average.” Not that it matters — however they’re allocated, they’re what you’re working with. Efforts to find independent reviews of Amazon-exclusive products rarely turn up high-quality content; many sites just summarize Amazon reviews in an effort to collect search traffic from Google and eventually affiliate commissions from Amazon itself.)

You read a little feedback to quell your doubts or ease your mind, then eventually, or quickly, you pluck a spatula out of the cascade. There’s a good chance, however, that it won’t actually be sold by Amazon but rather by a third-party seller that has spent months or years and many thousands of dollars hustling for search placement on the platform — its “store,” to use Amazon’s term, is where you will have technically bought this spatula. There’s an even better chance you won’t notice this before you order it. In any case, it’ll be at your door in a couple of days.

The system worked. But what system? In your short journey, you interacted with a few. There was the ’90s-retro e-commerce interface, which conceals a marketplace of literally millions of sellers, each scrapping for relevance, using Amazon as a sales channel for their own semi-independent businesses. It subjected you to the multibillion-dollar advertising network planted between Amazon users and the things they browse and buy. It was shipped to you through a sprawling, submerged logistics empire with nearly a million employees and contractors in the United States alone. You were guided almost entirely by an idiosyncratic and unreliable reputation system, initially designed to review books, that has used years of feedback from hundreds of millions of customers to help construct an alternative universe of sometimes large but often fleeting brands that have little identity or relevance outside of the platform. You found what you were looking for, sort of, through a process that didn’t feel much like shopping at all.

This is all normal in that Amazon is so dominant that it sets norms. But its essential weirdness — its drift from anything resembling shopping or informed consumption — is becoming harder for Amazon’s one-click magic trick to hide.

Interacting with Amazon, for most of its customers, broadly produces the desired, expected, and generally unrivaled result: They order all sorts of things; the prices are usually reasonable, and they don’t have to think about shipping costs; the things they order show up pretty quickly; returns are no big deal. But, at the core of that experience, something has become unignorably worse. Late last year, The Wall Street Journal reported that Amazon’s customer satisfaction had fallen sharply in a range of recent surveys, which cited COVID-related delivery interruptions but also poor search results and “low-quality” items. More products are junk. The interface itself is full of junk. The various systems on which customers depend (reviews, search results, recommendations) feel like junk. This is the state of the art of American e-commerce, a dominant force in the future of buying things. Why does it feel like Amazon is making itself worse? Maybe it’s slipping, showing its age, and settling into complacency. Or maybe — hear me out — everything is going according to plan.

Posted in Business, Technology | 2 Comments »

Soon, governments across Africa and elsewhere were knocking on their doors

Friday, February 17th, 2023

After completing his education at Eton College and the Royal Military Academy Sandhurst and serving in the Scots Guards and the SAS, Simon Mann decided to try his luck in Africa:

In 1993, Mann went to Angola to seek fortune in the oil industry with his friend Tony Buckingham. Within months of their arrival, the oil-producing city of Soyo was captured by anti-government rebels. It seemed like their oil venture was doomed — until, as Mann tells the story, he proposed a solution: reconquer Soyo. Mann and Buckingham called upon South African contacts, most of whom had backgrounds in the South African Defence Force and the shadowy Civil Cooperation Bureau (CCB), an apartheid-era counterinsurgency unit. One of these contacts, Eeben Barlow, was a former South African military officer who had seized the opportunity of apartheid’s collapse to recruit compatriots into a private military company (PMC) called Executive Outcomes (EO).

Together, they secured Angolan government contracts for EO to reconquer Soyo, and eventually help the government win the civil war. Their success in achieving an Angolan victory put Mann and his friends on the map. Soon, governments across Africa and elsewhere were knocking on their doors.

EO soldiers have since taken part in conflicts across the continent, and Mann has gone on to many more adventures. In 1997, his own PMC, Sandline International, was involved in the controversial Sandline affair in Papua New Guinea. In 2004, Mann was arrested for organizing a failed coup in Equatorial Guinea, and spent the next five and a half years in some of Africa’s most notorious prisons. He was released in 2009 after a pardon. His memoir, Cry Havoc, was published in 2011.

The meaning of “mercenary” gets torturous, he notes:

For example, if I joined the British army today, am I joining it because I wish to fight for democracy? No, I’m not. Nobody in the British Army that I ever met was doing it for queen and country. They’re doing it because they see it as an exciting lifestyle and the money is okay. Sometimes, it’s the best job they can get. But the motivation is, at least in part, financial. It is unlikely, really, to be patriotic. That doesn’t mean to say that we’re not patriotic. But that is not the prime motivation.

He mentions Operation Storm and the war in Oman in the 1970s:

It was an insurgency coming through Yemen, a serious attempt to overthrow the ruler of Oman.

Nominally communist insurgents, right?

Nominally. The original ruler of Oman was not nominally, but actually a tyrant. Then he was replaced. It’s known as the British Foreign Office’s last coup d’etat. He was replaced by his son, who was much more reasonable. And then a long, hard-fought campaign was conducted against the insurgents. I was around at that time, and I very nearly did go to Oman.

Now, as a young officer in the British army, I could have been attending that conflict in three different ways. One, I could have been a British officer on secondment—an officer in Oman’s armed forces, but still a British officer. Route two: I leave the British army, and go to the Sultan’s armed forces as a contracting officer.

And route three, which actually happened: the SAS was secretly deployed in Oman to fight that engagement. In any one of those three routes, I could have found myself in exactly the same firefight. But is any one of those a mercenary? A lot of people will say that the second one, the contracting officer, is a mercenary. But really, he is contracted with the Sultan’s armed forces, the national military. And he’s just doing the same job as anybody else who is on secondment.

According to the 1977 Organization of African Unity Convention for the Elimination of Mercenarism in Afric, he never quite qualified as a mercenary:

What I’ve done is, I was a general in the Angolan army for a short while when there was a war. We fought it and we won. That was for the recognized government of Angola, and I was enrolled in their armed forces. I’m quite proud of what we did. And I’m very proud of the guys that we did it with, both Angolan and South African.

In Sierra Leone, it was very similar. The RUF [Revolutionary United Front] were the masters of atrocities. If you’ve seen the movie Blood Diamond, you know that they used to go around chopping people’s arms off. They used to bet on whether a woman’s fetus was male or female and open her up to have a look. They were pretty easy to fight against, quite honestly. But again, we were part of the properly formed armed forces of Sierra Leone. So that technically is not a mercenary.

And then, I was involved with Papua New Guinea, remotely. But there was no war going on there. So it was more of a sort of civil contract.

The next thing is Equatorial Guinea, my attempt to overthrow the government—where again, no shot was actually fired. And the plan very much was that no shot would be fired. There was certainly no war going on. So again, if you go back to this convention, one of the things that is stipulated is that there has to be a war going on for you to be a mercenary. There has to be a war going on and you have to fight in it. If you’re a transport airplane pilot and you happen to carry a handgun for your personal safety, you’re not a mercenary according to that convention.

He describes his time with Executive Outcomes by analogy:

Well, look, if I’m walking along the street, and a guy’s house is on fire, I’m going to help him. He says, “Have you got some men, and some firefighting equipment?” and I say, “Yeah, I have got loads of them, but it’s going to cost you. We’re going to charge you because I’m going to get my men and equipment in here. And we’re firefighters, you’re gonna have to pay us.” But that doesn’t mean that I think that private little firefighting companies are the way to go. I think the municipality should produce a proper firefighting force and it should be them putting the fires out. And in this case, that should be the UN or somebody like it. But if the UN is there, as they were in Angola and in Sierra Leone, and they are absolutely and completely failing to put the fire out, then it’s better that we put it out rather than watch it go on burning.

He visited the famously chaotic Moscow of the 1990s:

I just came up from Angola with this shopping list. I didn’t really understand what was going on. But there were a lot of banking and high finance people in Moscow who were basically trying to buy things cheap. That is the process that led to the oligarchs, or people who basically managed to buy for rubles—play money—things that were real, hard dollar-earning assets. That is how the oligarchs, most of them, came into being. They basically stole extremely valuable assets, on the pretext that they were buying them with rubles.

Now, when I was there, I think the realization had dawned that other people were coming into Russia to do the same thing—foreigners, that is. There was a sense that they were being raped. And on the one hand, you had people who were all in favor of being raped, because they just wanted the money. But on the other hand, you had a real resistance building. Around 1993 or ’94, something like twenty Western bankers were murdered in Moscow. I mean, it was really not a good place to be. And it wasn’t safe, because the gloves were off. It was a sort of semi-anarchy, I think, whereby certain Russian agencies were on a mission to stop things. But as mavericks—I mean, I don’t think they’d been told to do this by anybody. They had decided whether this was going to happen, or this was not going to happen. And they were making sure of that, sometimes by recourse to violence. So this stuff was sort of going on.

We were there for several months, so we started to pick up the vibe. And it became really quite frightening. Then, when I met the general, he said, “Well, you know, you’re right to be frightened, because all sorts of shit is going on here. And foreign agencies are here. And they are operating in a way that is not appropriate in a foreign country. They’re taking the law into their own hands.” If you remember, at this time there were all these nuclear and chemical worries going on in the West, that weapons and capabilities could be going into the wrong hands. Everyone knew that Russia was for sale. And you know, it was a real mess. Very dangerous.

His Angolan operations ended up including diamond mining:

We had actually no intention of getting involved with diamond mining until we were asked to by the senior Angolans. And the reason they asked this was because the mining companies—especially De Beers—were applying force majeure to the mining concessions [not fulfilling obligations due to circumstances outside their control, i.e. the war]. So they were not mining.

And once we got to the end of the fighting, the Angolans were very anxious to try and get people back to work. They had to try and create jobs. And they were very anxious to get the mining industry restarted. So what they did was, they told us, “Look, we could set up a joint venture mining company with you. It will be very profitable because we’re the generals and we’ll make sure the company gets the best concessions. And we can then use you as a stick to beat up the other companies. Then we can say, ‘Hey, these guys are mining, so why can’t you?’”

[…]

Well, De Beers doesn’t want to do mining. They don’t want to produce diamonds. They want the price to go up. And that was why they wanted out. I mean, Angola is a very important country when it comes to diamonds. Ideally, no production at all from Angola would have suited them just fine, even though they were buying diamonds from UNITA. So it was better to continue the war. There were very powerful forces backing UNITA.

Executive Outcomes was racially mixed:

Well, there’s a very simple answer to that, which is that the black soldiers in Executive Outcomes were all ex-SADF. There was an organization called 32 Battalion. Very famous. They’re also known as Buffalo Battalion because their camp was called Buffalo Camp. And these were people who had been recruited by the South Africans to fight the Angolans, mostly. And they were very often of the Ovambo tribe. And so for those people, it was a very natural state of affairs that the officers they had would be the officers, and they were the men. That was normal for them. 32 Battalion was highly regarded during the South African frontier wars era.

[…]

We didn’t need to take other people. We didn’t take British people! I mean, I got flack from some of my old comrades-in-arms, who said, “Hey Simon, what the hell’s going on here? You guys have this amazing thing, and you’ve made all this money. You didn’t ask us?” I said, “Well, no, I didn’t need you.” Because the South Africans were much better and much cheaper. They know Africa, they know the climate, and they know the health issues. And they were pretty desperate, because it was a desperate time in South Africa.

And, you know, the thing with any kind of force is that, obviously, morale is an issue. And cultural cohesion is required. Now, if everyone comes from the same military background, the same army, then they all understand one another perfectly. And in fact, in Executive Outcomes, the recruits had to actually—when they signed up to say that they were joining Executive Outcomes—they had to sign up and agree that they would abide by the rules, traditions, and customs of the SADF. And if a corporal told them to get their hair cut, they had to go and get their hair cut. They couldn’t say “I’m a civilian now, you can’t tell me what to do.” No, no, you don’t understand, we will tell you what to do. This is the old way.

Posted in Business, Policy, War | 1 Comment »

Installing batteries is similar to high frequency trading (HFT)

Wednesday, February 15th, 2023

Installing batteries on the grid is similar to high frequency trading, Casey Handmer argues:

Mismatch between supply and demand in the grid is signaled via tiny shifts in frequency. Coupled to this, local energy spot price has historically been manipulated by gas peaker plants to maximize revenue generation. For example, in Australia prior to the installation of the Horndale (Tesla) battery, the spot price routinely climbed to the cap of $14000/MWh as gas generators delayed ramping up to maximize revenue.

Installing batteries is similar to high frequency trading (HFT) in that it exploits market inefficiencies to both improve the functioning of the market, provide liquidity, and generate revenue.

It is different to HFT in several important ways, however.

There is an advantage to geographic collocation for battery services adjacent to areas of variable supply and demand, due to the fixed and variable costs of long distance power transmission. It’s not quite as extreme as installing the HFT server directly adjacent to the stock exchange, though!

The fixed frequency of the power grid (60 Hz in the US) does not demand incredibly sophisticated high speed electronics, like that used in financial HFT. In other words, the fixed frequency of the grid means that the first generation of batteries will not be rendered obsolete by a subsequent arms race as seen in financial HFT.

Combined, these two key differences to financial HFT mean that there is a strong first mover advantage in the battery grid stabilization space. I contend that this advantage outweighs the risk of future battery systems delivered at lower cost. In fact, the EROI on battery system is so short, and their revenue so high, that the only practical constraint to their deployment today is, and has been for several years now, manufacturing capacity no matter how fast it ramps.

Posted in Business, Technology | 6 Comments »

Name, Image, and Likeness

Monday, January 30th, 2023

The world of “amateur” college sports is going through its biggest change since the inception of the NCAA in 1905, thanks to NIL:

Since state laws and NCAA rule went into effect on July 1, 2021, student-athletes can profit off their Name, Image and Likeness for the first time in the history of college athletics.

[…]

Players can profit off endorsements, signing autographs, selling apparel, corporate partnerships, charitable appearances, teaching camps and starting their own businesses, among other things. They can also hire professional service providers for NIL activities.

The NCAA released updated NIL guidance in early May, stating collectives – groups of boosters and businesses – are not to be involved in the recruiting process or in the transfer portal. However, there are a number of states that have recently passed legislation that remove the prohibition of schools from directly or indirectly arranging for a third party to provide compensation to a student-athlete through NIL.

The origin of NIL traces back to the late 2000s when former UCLA basketball player Ed O’Bannon and 19 others sued the NCAA, arguing the organization violated United States antitrust laws by not allowing athletes to make a share of the revenues generated from the use of their in broadcasts and video games. A judge later ordered the NCAA to pay $44.4 million in attorney fees along with another $1.5 million in costs to lawyers for the plaintiffs in O’ Bannon’s class-action lawsuit.

California then pushed the NCAA to make a move in 2019 when state legislators enacted the Fair Pay to Play Act. Similar legislation started to pop up in other states across the nation.

The Supreme Court of the United States unanimously upheld a district court’s rule on the NCAA v. Alston, delivering a major blow to amateurism in June 2020. The ruling stated the NCAA was violating antitrust law by placing limits on the education-related benefits schools can provide to athletes. The decision made it known NCAA restrictions — including on NIL activity — could face serious legal challenges in the future.

And in the summer of 2021, the NCAA’s Board of Directors adopted an interim rule opening the opportunity for NIL activity.

Players across college athletics have tapped into the potential to pocket cash off of their Name, Image and Likeness since last summer. There have also been plenty of untraditional deals made. The On3 NIL Deal Tracker lists all partnerships across the NCAA for college and high school athletes being reported by players, collectives, agents and media.

A protein bar company in Utah, which is a large supporter of BYU athletics, agreed to pay the tuition of all 36 football walk-ons. McKenzie Milton and D’Eriq King signed on as co-founders of Dreamfield, an NIL-based platform focusing on booking live events for student athletes.

Quinn Ewers enrolled at Ohio State a year early to land a deal with GT Sports Marketing worth $1.4 million because the state of Texas does not allow high school players to be compensated off NIL. LSU gymnast Oliva Dunne, who has over five million social media followers, inked a mid six-figure deal with activewear brand Vuori.

The role of NIL in college athletics has completely changed the transfer portal, especially with the one-time transfer rule. Following his commitment to Miami, Nijel Pack signed the largest LifeWallet NIL deal to date – a two-year deal worth $800,000 which includes a car. Isaiah Wong’s agent gave an ultimatum to Miami, threatening to enter the transfer portal if his NIL compensation was not increased. He ultimately decided to stay and walked back his agent’s comments.

And NIL has created major ramifications in recruiting. An unnamed five-star prospect in the Class of 2023 has signed a contract with an unnamed school’s collective that could pay him more than $8 million by his junior year of college. It’s widely believed that Tennessee quarterback commit Nico Iamaleava is the recruit.

There is also a multi-million market rate for blue-chip quarterback recruits since the deal, too.

If you glance at the On3 NIL 100, you’ll see that the fifth most valuable college athlete is a female gymnast named Livvy Dunne:

Olivia Dunne is known as the “most followed NCAA athlete on social media” with more than 9 million followers, including 330,000,000 likes on her TikTok account. Dunne is originally from Hillsdale (New Jersey) Abeka Academy and trained at Eastern National Academy of Paramus. She qualified for the 2020 Nastia Liukin Cup and competed at the 2016 and 2017 P&G Championship and 2017 U.S. Classic before arriving at LSU in 2021. During her freshman season at LSU, she earned All-America honors on the uneven bars, including a 9.90 score at the NCAA championships and a career-best 9.925 on the event. She is also quite successful on the NIL front with big sponsorships from Vuori Clothing, American Eagle, Plant Fuel, Bartleby and others.

They estimate her annual value at $3.2 million. Judging by her Instagram account, her appeal might not be purely athletic.

Posted in Business, Education | 3 Comments »

Accounting is a wonderful tool for converting tautologies into useful information

Wednesday, January 25th, 2023

Accounting is a wonderful tool for converting tautologies into useful information:

Here, for example, is a tautology: when a company spends money, somebody receives that money. And here is a useful mental model that helps investors think about booms and busts, time industry cycles, and spot second- and third-order outcomes of news: one company’s expenditures are, very often, another company’s revenue.

[…]

Higher returns to capital are a subsidy for reinvestment, and economies require a lot of reinvestment to keep going. Roads, railroads, ports, airports, power plants, factories, and homes are all long-lived assets with high upfront costs. For a country to have a lot of them, a smaller share of national income has to go to consumption so a larger share can go to investment instead. Importantly, shifting more returns to capital does not necessarily make all the capitalists rich (though it can have that effect!). It means there’s a race to identify good investments fast since there’s more money chasing them, and when this kind of policy continues for too long, the wave of capital looking for a return can end up subsidizing spending that simply doesn’t make economic sense. For example, in China circa 1980, pretty much any piece of physical infrastructure was probably worth either fixing up or tearing down and rebuilding entirely, so the country got good returns from holding wages down while reinvesting the proceeds of exports. Now that China is a richer country, with lots of infrastructure, it’s harder to find good homes for incremental money — but the money continues to flow.

[…]

High-income workers tend to save more money, and their savings rate goes up when they experience windfall gains. Lower-income workers are usually scrimping, deferring some purchases, and missing out on things they’d like to spend on, so higher wages for them tend to increase consumer spending.

[…]

When fab utilization is low, new demand just means that existing fabs need to run extra shifts. But when utilization gets high enough, it means the world needs more fabs, and needs more $200m-apiece EUV lithography machines to fill them.

This tends to be the big takeaway from looking at the world from a supply-chain perspective. When there’s slack in the system, or an ability to immediately respond to incremental spending, we see a pretty steady impact on every link in the supply chain: a surprise 1% increase in datacenter spending produces a 1% increase in spending on datacenter chips, which also leads the replacement of chipmaking equipment to tick up by about 1% — not because additional equipment was needed to increase supply, but because more is in use, which means more will need to be replaced.

But when there isn’t slack in the system, a small incremental increase in final demand can produce massive changes in total production capacity. The rough way to approximate this is to look at the useful life of the relevant investment, invert it into a depreciation rate, and then compare changes in demand to that depreciation rate. So if there’s some kind of asset that lasts for 10 years, another way to look at it is that in a given year, 10% of those assets are getting replaced as they wear out. A 2% increase in demand for whatever those assets produce, if they’re all being used at full capacity, means a 20% increase in demand for the assets.

Posted in Business, Economics | 2 Comments »

This is James Daunt’s super power

Sunday, January 8th, 2023

Ted Gioia recently visited a Barnes & Noble store for the first time since the pandemic, saw a lot of interesting books, and bought a couple:

I plan to go back again.

But I’m not the only one.

The turnaround has delivered remarkable results. Barnes & Noble opened 16 new bookstores in 2022, and now will double that pace of openings in 2023. In a year of collapsing digital platforms, this 136-year-old purveyor of print media is enjoying boom times.

How did they fix things?

It’s amazing how much difference a new boss can make.

I’ve seen that firsthand so many times. I now have a rule of thumb: “There is no substitute for good decisions at the top—and no remedy for stupid ones.”

It’s really that simple. When the CEO makes foolish blunders, all the wisdom and hard work of everyone else in the company is insufficient to compensate. You only fix these problems by starting at the top.

In the case of Barnes & Noble, the new boss was named James Daunt. And he had already turned around Waterstones, a struggling book retailing chain in Britain.

Back when he was 26, Daunt had started out running a single bookstore in London—and it was a beautiful store. He had to borrow the money to do it, but he wanted a store that was a showplace for books. And he succeeded despite breaking all the rules.

For a start, he refused to discount his books, despite intense price competition in the market. If you asked him why, he had a simple answer: “I don’t think books are overpriced.”

After taking over Waterstones, he did something similar. He stopped all the “buy-two-books-and-get-one-free” promotions. He had a simple explanation for this too: When you give something away for free, it devalues it.

But the most amazing thing Daunt did at Waterstones was this: He refused to take any promotional money from publishers.

This seemed stark raving mad. But Daunt had a reason. Publishers give you promotional money in exchange for purchase commitments and prominent placement—but once you take the cash, you’ve made your deal with the devil. You now must put stacks of the promoted books in the most visible parts of the store, and sell them like they’re the holy script of some new cure-all creed.

Those promoted books are the first things you see when you walk by the window. They welcome you when you step inside the front door. They wink at you again next to the checkout counter.

Leaked emails show ridiculous deals. Publishers give discounts and thousands of dollars in marketing support, but the store must buy a boatload of copies—even if the book sucks and demand is weak—and push them as aggressively as possible.

Publishers do this in order to force-feed a book on to the bestseller list, using the brute force of marketing money to drive sales. If you flog that bad boy ruthlessly enough, it might compensate for the inferiority of the book itself. Booksellers, for their part, sweep up the promo cash, and maybe even get a discount that allows them to under-price Amazon.

Everybody wins. Except maybe the reader.

Daunt refused to play this game. He wanted to put the best books in the window. He wanted to display the most exciting books by the front door. Even more amazing, he let the people working in the stores make these decisions.

This is James Daunt’s super power: He loves books.

“Staff are now in control of their own shops,” he explained. “Hopefully they’re enjoying their work more. They’re creating something very different in each store.”

This crazy strategy proved so successful at Waterstones, that returns fell almost to zero—97% of the books placed on the shelves were purchased by customers. That’s an amazing figure in the book business.

On the basis of this success, Daunt was put in charge of Barnes & Noble in August 2019.

I almost never need a new book right now, so it feels wrong to pay full price, when I could so easily “get the second marshmallow” by waiting — but I must admit that I enjoy browsing physical books.

What always struck me about bookstores was how random the inventory seemed, especially in a section like Sci-Fi and Fantasy, where you’d find books two and five of a nine-part series and no guidance as to where to start in the genre.

Posted in Business | 3 Comments »

TurboTax for customs paperwork

Saturday, November 12th, 2022

Ryan Petersen’s entire life seems to be a series of entrepreneurial experiments in ferrying items from Point A to Point B, culminating in Flexport:

The son of entrepreneurs, Petersen earned pocket money delivering sodas to his mother’s food safety business. After graduating from college in 2002, he worked alongside his older brother, David, re-selling Chinese scooters and motorcycle parts in the United States. As that business gathered steam, the younger Petersen moved to China in 2005 to monitor local operations. The disorganization the duo encountered inspired their next company.

In 2007, Ryan Petersen headed to Columbia for business school. The same year, he, David, and Michael Kanko – one of David’s former roommates – started a new endeavor: ImportGenius. The business collects data associated with global trade, organizing import and export records. This information is extremely useful for those searching for suppliers within a specific industry or looking for better visibility into a competitor’s supply chain. Over the following six years, the Brothers Petersen and Kanko developed ImportGenius into a profitable business, albeit one with a capped upside. Today, it is under Kanko’s stewardship and reportedly does millions in revenue.

Recognizing ImportGenius’s limitations and feeling ready for a new challenge, David Petersen applied to Y Combinator in 2013 with BuildZoom, a platform to initiate and manage the home remodeling process. Ryan reportedly “grabbed an air mattress and tagged along.”

Rather than becoming part of David’s startup, Ryan spent his stint in California developing an idea of his own. While he initially conceived of it being an extension of ImportGenius, he soon realized it was a much larger idea than simply searching trade documentation – trade itself was broken. After making his pitch for a “TurboTax for customs paperwork” in the spring of 2013, he was accepted into the following year’s Y Combinator batch. His acceptance afforded him the chance to work under the mentorship of the accelerator’s founder, Paul Graham.

When I asked Petersen what it had been like working with arguably one of the most influential thinkers of the last two decades, he noted that Graham remained an active counselor before highlighting his particular genius. “Paul is probably the best in the world at asking what’s possible rather than what’s likely.”

In Petersen, Graham saw someone willing to dream audaciously and endure discomfort to bring those dreams to reality. “Ryan is an armor-piercing shell,” Graham previously commented, “a founder who keeps going through obstacles that would make other people give up.”

With Graham’s support and Y Combinator’s signaling power, Petersen ended his time at the accelerator by closing a $4 million seed round with backing from Initialized Capital and Rugged Ventures.

In the years that followed, Petersen succeeded in expanding Flexport’s scope and growing revenue. What began as an ambition to improve global trade through a smoother customs process transformed into a fully-fledged freight forwarder with software at its heart.

It came with bumps in the road. Perhaps the largest arrived after raising $1 billion from Softbank in 2019. As well profiled by Forbes, Petersen revved up the company’s hiring – and burn rate – as if Masayoshi Son’s pockets would remain ever-full. After WeWork’s disastrous collapse, Softbank changed its approach, slowing investments and forcing Flexport to adjust. The company cut 3% of its team (fifty employees) and shifted from hypergrowth to chasing profitability.

It wouldn’t take long. The pandemic set shipping prices skyrocketing, pushing Flexport to a profit of $37 million. The company achieved new relevance during this period, with Petersen becoming an influential voice on various logistical crises. Though Flexport briefly looked to be on rocky footing a couple of years earlier, it entered 2022 with earned self-assurance and $3.2 billion in annual revenue.

Posted in Business | No Comments »

Is the Albanian Army going to take over the world?

Saturday, October 29th, 2022

Back in December 2010, Jeffrey Bewkes, CEO of Time Warner, told the New York Times what he thought about the hype surrounding Netflix: “It’s a little bit like, is the Albanian Army going to take over the world? I don’t think so.”

It was the shot heard round the entertainment world:

By buying House of Cards, Netflix would change the market’s perception of what internet video businesses did. “Up until the moment we launched House of Cards,” Holland recalls, “everything that was made for the internet was webisodes — Funny or Die, people falling off horses or getting kicked in the nuts.” Other streamers like Hulu, says Holland, were making early investments in original programming, but it was what she considered “the Comedy Central space” — in other words, low rent. Netflix, they agreed, ought to begin by aiming high.

Because HBO was in hot pursuit, the only way Netflix was going to win was to make an astounding offer. At the time, in keeping with the new paradigm of tech investing, Netflix was selling its story to Wall Street based on rapid customer growth, not bottom-line performance.

The most important thing, according to the prevailing market view, was for tech disrupters to crush the incumbents. Wooing new customers with ludicrous prices that made little long-term economic sense beyond undermining competitors was not only tolerated, it was expected and rewarded. Traditional publicly traded media companies, by contrast, enjoyed no such leeway.

“There’s a thousand reasons not to do this at Netflix,” Sarandos told Fincher. “I want to give you one reason to say yes.” Sarandos and Holland outlined their plan to Fincher and MRC executives: Not only would there be no pilot required, but Netflix would commit to a two-season, 26-episode guarantee, which was unheard of. They also promised Fincher that they would not bog him down with any notes. He could make the show any way he saw fit. And then Netflix offered a staggering amount of money: $100 million for the two-season commitment.

“We made the richest offer that had been seen for something that hadn’t been made yet,” Holland says.

Their sales pitch worked. Fincher’s team chose to go with the streaming newcomer over HBO, the reigning king of home entertainment. Plepler and the programming team were stunned at Netflix’s two-year commitment. “We couldn’t do that,” Plepler says. “We didn’t have the financial flexibility to make that commitment.”

(From It’s Not TV: The Spectacular Rise, Revolution, and Future of HBO.)

Posted in Business, Media | No Comments »

That’s ten times the population-to-restaurant ratio

Wednesday, October 26th, 2022

Thai restaurants are everywhere in America, but why?

With over 36 million Mexican-Americans and around five million Chinese-Americans, it’s no surprise that these populations’ cuisines have become woven into America’s cultural fabric. Comparatively, according to a representative from the Royal Thai Embassy in DC, there are just 300,000 Thai-Americans — less than 1 percent the size of the the Mexican-American population. Yet there are an estimated 5,342 Thai restaurants in the United States, compared to around 54,000 Mexican restaurants; that’s ten times the population-to-restaurant ratio. So, why are there so many Thai restaurants in the US?

[…]

Using a tactic now known as gastrodiplomacy or culinary diplomacy, the government of Thailand has intentionally bolstered the presence of Thai cuisine outside of Thailand to increase its export and tourism revenues, as well as its prominence on the cultural and diplomatic stages. In 2001, the Thai government established the Global Thai Restaurant Company, Ltd., in an effort to establish at least 3,000 Thai restaurants worldwide. At the time, Thai deputy commerce minister Goanpot Asvinvichit told the Wall Street Journal that the government hoped the chain would be “like the McDonald’s of Thai food.” Apparently, the government had been training chefs at its culinary training facilities to send abroad for the previous decade, but this project formalized and enhanced these efforts significantly.

[…]

At the time of the Global Thai program’s launch, there were about 5,500 Thai restaurants beyond Thailand’s borders; today there are over 15,000. The number in the US increased from around 2,000 to over 5,000.

[…]

Inspired by Thailand’s success, South Korea, for example, has earmarked tens of millions of dollars beginning in 2009 for its Korean Cuisine to the World campaign. Taiwan has followed suit, as has Peru with its Cocina Peruana Para el Mundo (“Peruvian Cuisine for the World;” quite creative) initiative, as well as Malaysia (“Malaysia Kitchen for the World 2010” — clearly there’s a pattern here).

Posted in Business, Policy | No Comments »

The firm took four non-consensus positions

Saturday, October 8th, 2022

Y Combinator is not really a VC firm:

Depending on how you parse it, you can make a case that it’s any one of these five things:

  1. A university that treats companies, not people, as the atomic unit
  2. A startup that monetizes through an uncapped income share agreement
  3. A for-profit college that scales (and is not a scam)
  4. A social network for some of the world’s best entrepreneurs
  5. An industrialized venture firm

[…]

It does not seem hyperbolic to suggest it may be among the most consequential entities across industries of the last twenty years. Not only did YC support Airbnb, Stripe, Coinbase, DoorDash, Flexport, Rappi, Reddit, Vanta, and many others, it popularized a now-ubiquitous philosophy of company building. “Make something people want,” “do things that don’t scale,” and “getting to default alive” are gospels that owe their proliferation to YC. Over time, it has turned its success into a series of compounding advantages that make it look very different than anyone else in the market.

[…]

None of YC’s founders had ever been venture capitalists before. To learn as quickly as possible, they landed on the idea to fund a “batch” of companies, all at once. Rather than learning from ten startups stretched over an investment period of three years, they’d follow that many over just three months.

[…]

In hindsight, many of YC’s core innovations were visible in this first class. The firm took four non-consensus positions:

  1. Investing terms needed to be standardized. Seed funding was immature when YC got started. As a result, there were no benchmarks for typical deal terms. Founders often cobbled together cash from family and friends. YC decided to standardize the process by offering $20,000 for roughly 6% equity.
  2. Entrepreneurship is teachable. Innovation is often depicted as resulting from a single stroke of genius rather than a concerted process. YC’s curriculum challenged this notion by teaching new founders how to build a business, step by step.
  3. Hackers make for better founders than suits. YC is optimized for a different kind of entrepreneur. Rather than pursuing grey-haired executives ready to leave the bower of big business, it sought technologically-gifted youngsters. Over the next two decades, this would become the prototypical profile for tech entrepreneurs.
  4. Startups can be funded synchronously. Venture capital firms traditionally funded companies one at a time. By experimenting with funding ten businesses at once, YC uncovered a crucial lesson: connecting early-stage entrepreneurs to one another is extremely valuable. This marked the beginning of YC’s network effects.

Reddit proved to be the breakout winner of the batch, though it took some time for it to fully play out. Several other startups, including Parakey and TextPayMe, were acquired.

On an individual level, the caliber of talent assembled was extremely impressive. YC’s summer 2005 batch (abbreviated to “S05”) included Sam Altman, Alexis Ohanian, Steve Huffman, Aaron Schwartz, Brett Gibson, Blake Ross, Joe Hewitt, Emmett Shear, and Justin Kan. Outside of Reddit, that constellation has been involved with the creation of companies and funds including Twitch, Firefox, Initialized Capital, Seven Seven Six, and OpenAI.

[…]

Many connections within the YC community occur on the internal platform, Bookface, which grew out of one of the accelerator’s creations: Hacker News. In 2006, Paul Graham launched Hacker News (then called Startup News) as a way for YC founders to communicate, connect, and ask for help. The following year, it was opened up to the public. Eventually, in 2013, YC formally bifurcated the platform: the external forum retained the Hacker News name while the internal version became Bookface. Today, it acts as a place for YC’s 7,000 founders to connect, ask questions, and learn from one another — a private social network for some of the world’s best entrepreneurs. Many end up partnering or selling their products to one another.

Posted in Business | 2 Comments »

It turns out there wasn’t a next Palantir or SpaceX

Friday, October 7th, 2022

Anduril is a rare, paradoxical creation, Mario Gabriele argues: a defense contractor that moves like a startup, a software business disguised as a seller of hardware, and a weapons manufacturer, in pursuit of peace:

Anduril is a company that few in Silicon Valley thought needed to exist. Because of the foresight of Trae Stephens and Palmer Luckey, America and its allies have a software-first defense provider capable of impacting current conflicts.

[…]

Before joining Palantir in 2008, Stephens had spent time at the offices of Ohio congressman Rob Portman and the Afghan embassy in Washington D.C. His public sector work seemed to skew towards the technical, with Stephens “building enterprise solutions to Arabic/Persian name matching” for the Intelligence community. Stephens used and bolstered this experience as part of his six-year stint at Palantir.

While venture capital rarely draws from defense backgrounds, there is an exception: Founders Fund. Established by Peter Thiel, Ken Howery, and Luke Nosek in 2005, Founders Fund holds a unique position at the nexus of Silicon Valley and Washington D.C, thanks to Thiel’s co-founding of Palantir and particular geopolitical worldview. The firm was early to back SpaceX (one of the few recent startups to secure meaningful governmental contracts), while Ken Howery went on to serve as ambassador to Sweden during Donald Trump’s presidency.

Stephens was a neat fit at Founders Fund, as was his mission to find the next great defense business. SpaceX and Palantir had made significant impacts, but they were the rarest of exceptions. By and large, venture-backed startups had failed to disrupt the established patterns of the public sector in general and military in particular. Stephens was hopeful a new generation of entrepreneurs would change that.

Despite his best efforts, Stephens came up empty-handed. “I didn’t find anything,” he said. With the benefit of hindsight, the investor noted there wasn’t a business he had overlooked: “There was nothing to miss. It turns out there wasn’t a next Palantir or SpaceX.”

Though Stephens didn’t find a ready-made defense startup during this period, he did meet a founder who would play a starring role in Anduril’s creation: Palmer Luckey.

A year before Stephens started his venture career, Luckey set out to raise a Series A for his virtual-reality startup, Oculus. He found a willing partner in Founders Fund, who became the company’s “first institutional investor,” per Stephens.

It took little time for that faith to pay off. By March the following year, Facebook announced it had acquired Oculus for approximately $2 billion in a mix of cash and stock. Barely twenty years old, Luckey was suddenly a wealthy man.

Around the time of that acquisition, Stephens and Luckey got to know one another, discovering themselves to be somewhat kindred spirits. “He was super interested in national security,” Stephens said of Luckey. That fascination pre-dated Luckey’s creation of Oculus. Indeed, while working at Bravemind, an organization that uses VR to treat veterans with PTSD, Luckey first created a prototype of his revolutionary headset.

For the next three years, Stephens and Luckey stayed in touch. By 2017, much had changed for them both. In March of that year, Facebook fired Luckey, a decision he claimed was politically motivated, catalyzed by a $10,000 donation he had made to pro-Trump “shitposting” organization, Nimble America.

Meanwhile, Stephens had reached an impasse in his search for a modern defense prime contractor (a “prime”). It was increasingly clear that if he wanted such an organization to emerge, he would have to build it himself. He made his pitch to Luckey, explaining the status quo as he saw it. In particular, Stephens saw two major shifts to which America’s military had failed to adapt:

  1. The shift to software. Defense technology had traditionally been hardware first. Stephens was confident that future wars would be defined by software that worked in concert with intelligent devices and machinery.
  2. The brain-drain. In previous eras, the military could reliably attract the best technical talent. Historic minds like John von Neumann lent their abilities to branches of the armed forces. That is no longer the case. Today, many of the best technologists work at companies like Google and Meta. “We’re not in a position where our best and brightest are working on national security,” Stephens said.

Luckey was impressed with Stephens’ diagnosis and proposed cure. “He was super excited about it,” the investor recalled. The two began work on the company that would come to be called “Anduril.” As with many Thiel-affiliated entities (see: Palantir, Valar, Mithril), the business took its moniker from Lord of the Rings. In Tolkien’s books, “Andúril” is the name of a mythical sword which means “Flame of the West” in elven tongue.

[…]

On June 6, 2017, Anduril’s founders officially set to work on its first product: a sentry tower that leverages artificial intelligence to monitor border crossings. “It was totally Palmer’s idea,” Stephens said, noting that Luckey had sketched prototypes before Anduril had gotten off the ground. It can take years for a defense contractor to ship a new product; Anduril had its sentry tower in the field within six months.

[…]

Despite the unpopularity of its work, Anduril kept shipping. It followed the sentry tower with sensors, drones, and autonomous submarines. Though these products represented hardware innovations, the heartbeat of Anduril’s work was its orchestrating software system, Lattice.

[…]

The software system acts as a command hub, pulling in information from sensors, drones, and other field assets. Using artificial intelligence and computer vision, Lattice constructs a live, detailed view of a battlefield, accessible via computer, tablet, or VR headset. Critically, Lattice is built such that it can sync with assets made by other companies. It is an open system that seeks to play nicely with third parties.

In addition to intuitively presenting important information, Lattice streamlines decision-making. It does so by offering potential next moves. For example, if a field sensor identifies an enemy drone, it will show up on Lattice along with a prompt to intercept it. In the push of a button, an operative can decide to send an asset to meet and disable it.

Posted in Business, Technology, War, Weapons | 4 Comments »

Talent and not money is the truly scarce variable

Tuesday, October 4th, 2022

Rob Henderson finds Tyler Cowen’s latest book, written with Daniel Gross, thorough yet breezy, providing useful tips for how to develop a talent-spotting mindset with insights from psychometrics, management, economics, and sociology:

Cowen and Gross note that in the U.S., from 1980 to 2000, the main cause of income inequality was whether a person graduated from college. But from 2000 to 2017, income inequality primarily existed within educational groupings. In other words, talent appears to be more responsible than education for economic returns.

Cowen and Gross each describe how often they reject proposals, and they conclude that “talent and not money is the truly scarce variable.” But where does it come from? They acknowledge that talent can differ between individuals, but they also stress the importance of practice. Indeed, those with the potential to cultivate serious talent sometimes practice to the point of obsession. Discussing which attributes predict eminence in a field, psychology professor David Lubinski has said that passion for work is key, and that highly creative people tend to be “almost myopically” fixated on work.

Relatedly, Cowen and Gross observe, “If you are hiring a writer, look for signs that the person is writing literally every day. If you are hiring an executive, try to discern what they are doing all the time to improve networking, decision-making, and knowledge of the sectors they work in.” Developing the habit of practice and self-discipline — the authors describe it as “sturdiness” — is critical for talent acquisition. “Sturdiness is the quality of getting work done every day, with extreme regularity and without long streaks of non-achievement,” they write. “If you are a writer, sturdiness is a very powerful virtue, even if you do not always feel you are being extremely productive.”

Accordingly, the book cites research indicating that perseverance is a stronger predictor than passion for success. When it comes to achievement, persistence pays off more than pure passion.

The authors’ favorite interview question about browser tabs is meant to tap into this question about whether a person spends his or her free time practicing. What the book describes as “downtime revealed preferences” are more interesting than “stories about your prior jobs.” For instance, asking what newsletters or subreddits a person reads is often more illuminating than asking what a person did at their previous job.

The book is very much about identifying high performers, as opposed to average workers. This is particularly true of its interview section, which gives guidance on unstructured, as opposed to structured, interviews. Most research indicates that interviews are more effective for higher-level jobs.

Talent provides several fascinating questions designed to yield interesting answers. How did you prepare for this interview? What’s a story one of your references might tell me when I call them? Which of your beliefs are you most likely wrong about? Whether the candidate can draw on intellectual and emotional resources to answer is a sign of broader stores of intellect and energy that he or she will bring to the job. The authors suggest that interviewers should not be afraid to let a question hang in the air after asking it; better to hold the tension to make clear you expect an answer.

The authors suggest using challenging and unusual questions to identify those with more style than substance. As they put it, “Beware of verbally adept storytellers.” Most of us have a bias toward well-spoken and articulate individuals. Bear this in mind, for it can lead you to hire what the authors describe as “glib but unsubstantial people.” They conclude this line of advice with, “Do not overestimate the importance of a person’s articulateness.”

Posted in Business, Economics, Education | No Comments »

The military can’t afford iPhone-level software

Tuesday, August 30th, 2022

As consumers, we are spoiled by how easy our phones are to use, Austin Vernon notes, and critics expect the military to have software as capable as our phones:

If you examine the numbers, it quickly becomes apparent that the military can’t afford iPhone-level software. Apple, Google, Microsoft, and Facebook had combined operating expenses of over $600 billion in 2021. The military’s total budget is around $750 billion.

The mass of all the physical products these companies sell is probably less than one Ford-class aircraft carrier, and the number of SKUs is relatively limited. And remember, a defining feature of the software business is that marginal cost is near zero. It costs about the same to design high-quality software for 100 F-35s as for 200 million copies of the plane.

Posted in Business, Technology, War, Weapons | No Comments »

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