We see a lot of worship of the market and individualism. But I have argued for years that humans are a social ape that functions with empathy for others. Here is another longish article or video that seems to imply that I may be right and old ways of thinking about the economy are changing at the forefront of economic thinking:
Link.
Opening paragraph:
"[YOCHAI BENKLER]: The big question I ask myself is how we start to think much more methodically about human sharing, about the relationship between human interest and human morality and human society. The main moment at which I think you could see the end of an era was when Alan Greenspan testified before the House committee and said, "My predictions about self-interest were wrong. I relied for 40 years on self-interest to work its way up, and it was wrong." For those of us like me who have been working on the Internet for years, it was very clear you couldn't encounter free software and you couldn't encounter Wikipedia and you couldn't encounter all of the wealth of cultural materials that people create and exchange, and the valuable actual software that people create, without an understanding that something much more complex is happening than the dominant ideology of the last 40 years or so. But you could if you weren't looking there, because we were used in the industrial system to think in these terms."
I found this rather interesting:
"As we're sitting here talking, and GM is teetering on the edge, one of the ways that's interesting to think about it is to see that GM in many of its structural components is the quintessential output of models based on selfish rationality. If we look both at the shop floor structure, at the supply chain structure and at the executive compensation structure, along all three of those dimensions, it's implementing theories of organization that assume shirking unless you get the material incentives just right. At the shop floor level, a lot of process engineering, a lot of monitoring, very precise specification of actions. You basically have to specify the actions, you have to monitor, you have to compensate for successful action and punish for not, and you have to then have the managers have more managers on top of them, until you go all the way up. That's one level in terms of the internal. It's a very monitoring and controlling hierarchy system.
Then starting in the late '80s but really reaching a peak in 1990, we have this invention by Jensen and Murphy of agency theory. The theory there was, everybody's trying to shirk. And the way you solve is somebody above the monitors. Well, who monitors the monitors? Somebody above them. When you get to the very top executives, what do you have to do? You can't monitor them. It straddles all the way down up to a point. The answer is, what you have to do is you have to align the incentives of the person at the top with the company. That way they don't want to shirk, because for every dollar that the company is making, they are making ten cents or however much they're making. The result? Executive compensation packages that emerged in the 1990s. If you look at the U.S. around 1980, its executives are making roughly the same multiple of what an aligned employee is making as European counterparts. Japanese counterparts making somewhat less. This is on the order of 30 to 50 times as much.
Fifteen years later, you see multiples of 200 and 500. Across the board. You get to a point where you look in the mid-2000s, and the CEO of GM is making more than the top 21 executives at Honda put together. But it's theory-driven. You need to align the incentives just right, because otherwise, the person at the top will shirk. Well, the fact of the matter is we didn't get this alignment. In the last five or six years, even Jensen and Murphy themselves in later studies became very cautious about the degree to which they thought that it worked. You had more fraud. The percentage of companies that had questionable tax filings, for example, was correlated to the degree of executive compensation, because you're looking for quick fixes. You are drawing people who are particularly motivated by these high returns, and you're compensating them in ways that allow them to pull out returns very quickly. Essentially you actually didn't get even what you wanted there. You got a mis-alignment of incentives.
And the third is with supplier relations. Again, over the course of the last 20 years there's been a bit of a convergence between the Japanese company's relationship with suppliers and the American company's relationship with suppliers. The Japanese company is becoming a little less tightly bound than they were in keiretsus, and the American firm is becoming more connected with long-term contracts. But again, if you look at the studies of this industry, what you see is that the big three continued to in various ways defect. They would get to a certain point in negotiations, then suddenly they'd demand a five percent reduction. Or suddenly they would take plans for an innovation and give it to a competitor to set up competitive bidding. You had a breakdown of trust.
Japanese companies didn't. The same exact U.S. suppliers working with firms manufacturing in the U.S. produced different levels of technology and different levels of efficiency because of who they were dealing with. At all of these layers you see a company, and in many senses this is true of Detroit more generally, but in GM this is a specific case. There is a theory-driven set of practices that are about monitoring people below, incentivizing people above, and always trying to make sure that you set up the relationships so that you extract everything. Not a big success."
Perhaps the most important concept that occurs to me here is the fact that most of what we believe will one day be known to be wrong, all our cherished beliefs utter nonsense. I believe the deep need to believe in things and to feel you're correct is based on an incorrect centering of the ego. We would be more than happy to be nothing and know we know little if we had never been put down and told such thinking makes you worthless. We all became some ideology to stave off the feeling given to us that we are nothing at all. We don't go anywhere without dragging our certainty blankets with us and sucking our thumbs, no?
Link.
Opening paragraph:
"[YOCHAI BENKLER]: The big question I ask myself is how we start to think much more methodically about human sharing, about the relationship between human interest and human morality and human society. The main moment at which I think you could see the end of an era was when Alan Greenspan testified before the House committee and said, "My predictions about self-interest were wrong. I relied for 40 years on self-interest to work its way up, and it was wrong." For those of us like me who have been working on the Internet for years, it was very clear you couldn't encounter free software and you couldn't encounter Wikipedia and you couldn't encounter all of the wealth of cultural materials that people create and exchange, and the valuable actual software that people create, without an understanding that something much more complex is happening than the dominant ideology of the last 40 years or so. But you could if you weren't looking there, because we were used in the industrial system to think in these terms."
I found this rather interesting:
"As we're sitting here talking, and GM is teetering on the edge, one of the ways that's interesting to think about it is to see that GM in many of its structural components is the quintessential output of models based on selfish rationality. If we look both at the shop floor structure, at the supply chain structure and at the executive compensation structure, along all three of those dimensions, it's implementing theories of organization that assume shirking unless you get the material incentives just right. At the shop floor level, a lot of process engineering, a lot of monitoring, very precise specification of actions. You basically have to specify the actions, you have to monitor, you have to compensate for successful action and punish for not, and you have to then have the managers have more managers on top of them, until you go all the way up. That's one level in terms of the internal. It's a very monitoring and controlling hierarchy system.
Then starting in the late '80s but really reaching a peak in 1990, we have this invention by Jensen and Murphy of agency theory. The theory there was, everybody's trying to shirk. And the way you solve is somebody above the monitors. Well, who monitors the monitors? Somebody above them. When you get to the very top executives, what do you have to do? You can't monitor them. It straddles all the way down up to a point. The answer is, what you have to do is you have to align the incentives of the person at the top with the company. That way they don't want to shirk, because for every dollar that the company is making, they are making ten cents or however much they're making. The result? Executive compensation packages that emerged in the 1990s. If you look at the U.S. around 1980, its executives are making roughly the same multiple of what an aligned employee is making as European counterparts. Japanese counterparts making somewhat less. This is on the order of 30 to 50 times as much.
Fifteen years later, you see multiples of 200 and 500. Across the board. You get to a point where you look in the mid-2000s, and the CEO of GM is making more than the top 21 executives at Honda put together. But it's theory-driven. You need to align the incentives just right, because otherwise, the person at the top will shirk. Well, the fact of the matter is we didn't get this alignment. In the last five or six years, even Jensen and Murphy themselves in later studies became very cautious about the degree to which they thought that it worked. You had more fraud. The percentage of companies that had questionable tax filings, for example, was correlated to the degree of executive compensation, because you're looking for quick fixes. You are drawing people who are particularly motivated by these high returns, and you're compensating them in ways that allow them to pull out returns very quickly. Essentially you actually didn't get even what you wanted there. You got a mis-alignment of incentives.
And the third is with supplier relations. Again, over the course of the last 20 years there's been a bit of a convergence between the Japanese company's relationship with suppliers and the American company's relationship with suppliers. The Japanese company is becoming a little less tightly bound than they were in keiretsus, and the American firm is becoming more connected with long-term contracts. But again, if you look at the studies of this industry, what you see is that the big three continued to in various ways defect. They would get to a certain point in negotiations, then suddenly they'd demand a five percent reduction. Or suddenly they would take plans for an innovation and give it to a competitor to set up competitive bidding. You had a breakdown of trust.
Japanese companies didn't. The same exact U.S. suppliers working with firms manufacturing in the U.S. produced different levels of technology and different levels of efficiency because of who they were dealing with. At all of these layers you see a company, and in many senses this is true of Detroit more generally, but in GM this is a specific case. There is a theory-driven set of practices that are about monitoring people below, incentivizing people above, and always trying to make sure that you set up the relationships so that you extract everything. Not a big success."
Perhaps the most important concept that occurs to me here is the fact that most of what we believe will one day be known to be wrong, all our cherished beliefs utter nonsense. I believe the deep need to believe in things and to feel you're correct is based on an incorrect centering of the ego. We would be more than happy to be nothing and know we know little if we had never been put down and told such thinking makes you worthless. We all became some ideology to stave off the feeling given to us that we are nothing at all. We don't go anywhere without dragging our certainty blankets with us and sucking our thumbs, no?
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