I'll need to write more about innovation. As well as the existing methods (publicly funded R&D, prizes, patents and so on), we'd need a public analogue of the venture capital model, where startups are funded to the point where (if successful) they can be acquired by a large corporation.
It is definitely inaccurate that "only Apple has ... produced anything truly innovative". Google Search was very innovative, as was Amazon's AWS, and all of those companies have produced significant innovation internally in smaller or non-customer-facing areas.
Google's search technology was an incremental advance on existing search engines. It was just in the right place at the right time to establish a near-monopoly based on network effects. - if it had never existed, we wouldn't miss it. Same for AWS, AFAICT
There is a sense in which every technological advance is an incremental advance on the prior state of technology. But apart from that trivial sense, Google's search technology was very much not an incremental advance, but instead a new idea that produced results qualitatively better than previous search engines. It is of course not clear that the corporate form is what led to these ideas, since the relevant ideas were initially developed while Brin and Page were at Stanford, but most of the subsequent work to make the ideas practical were done after they started Google. But it is not correct to describe the technological changes as you did.
For AWS, obviously the concept of selling server space on an incremental basis existed before AWS. However, actually solving the problems of large-scale shared tenancy systems in practice had not been done, and was very valuable.
I think we are using terms differently. Having lived with computers and the Internet for 40 years or so, I can think of dozens of advances that made more of a difference to me than Google's replacement of Altavista and Looksmart. Similarly, improving the management of an existing technology like web hosting. By contrast, MacOS was revolutionary for me, as were innovations that didn't make anyone rich, like the Internet, World Wide Web and blogs
Neither of these (or the other innovations you mention) justifies a trillion dollar valuation in my view.
I think the spreadsheet was the most innovative piece of software made for personal computers, and it may well be true that Apple would not have succeeded without it. This was not invented by a big corporation. Dan Bricklin's story is very interesting. Key innovations not necessarily made by big Corporations.
Microsoft also does service work (like IBM). For Google I would add Maps, Android (which absolutely drove down the cost of smartphones and pushed significant innovations of its own), YouTube (which absent advertising would obviously not exist at all), and a wealth of distributed-computing stuff. Amazon’s logistics and warehousing is second-to-none (even if it comes at a painful human cost).
android is little more than one of many versions of Linux which itself is a free open source OS based on Unix. Unix was developed by AT&T in 1969 so they should get the credit rather than google.
Without wishing to get into a prolonged argument, if all there was to making a modern smartphone OS was minor changes to Linux, there would have been no reason for Apple to create iOS, and there would have been dozens of successful Linux-based smartphone systems before Android got out the door. In reality there have been many thousands of person-years of work put into it on top of the work on Linux that predated and accompanied it. Similarly for iOS. There is a reason there are no other competing smartphone OSes and it’s not lack of interest in trying or even just platform lock-in.
This isn’t to say anything about their valuations or business practices, but that those companies are a source of concentrated innovation is undeniable, even if not every aspect of it is visible to lay people, or even if they may exert monopolistic power that squashes other entrants.
I can easily imagine California’s dire quasi-private utility PG&E being replaced with a more effective public utility, because those kinds of utilities exist elsewhere, and PG&E has no reputation for innovation. But there is no public-sector equivalent to Amazon’s AWS, or Google’s whole infrastructure, or Apple’s chip development, or even just Windows.
"no public-sector equivalent to Amazon’s AWS, or Google’s whole infrastructure, or Apple’s chip development, or even just Windows." Not counting the Internet, or the Web, or the computer itself, of course.
National governments should invest heavily in the scientific discoveries and technical developments that will massively increase the efficiency with which we use everything - labour, land, fuel, minerals, water. Efficiency gains are the best way of reducing the cost of living - and they ultimately come from advances in science and technology. In addition to making their own investments in science and technology, national governments should use regulatory and fiscal policy to create conditions that encourage private sector firms to invest in technological improvements. Lifting the minimum wage to where it would be had it kept pace with productivity growth over the past 50 years, and mandating annual minimum wage increases in line with productivity growth from now on, would spur firms to invest in automation. This would be a good thing because it would increase productivity and enable us to deploy workers to where they can do the most good. With appropriate use of fiscal policy there will be no technological unemployment. Currency-issuing governments can always create public sector jobs on demand to accommodate displaced workers, can pay displaced workers a wage to retrain for a new career, can invest in sectors of the economy that need more development. It isn’t a bad thing for some jobs to be automated out of existence if the displaced workers are taken care of.
The mediocre productivity growth rates of the past 40 years are due in large part to wages being too low and unions being too weak. When labour is cheap and compliant, firms lack incentives to invest heavily in automation. Firms become lazy and complacent when they know they can exploit a desperate, underpaid workforce devoid of bargaining power. We need a higher minimum wage, stronger workers’ rights, and constant full employment so that firms can’t take workers for granted. In those conditions workers get a better deal and firms invest heavily in labour-saving technology.
According to Coase, more or less, corporations are ships of socialism in a sea of capitalism. Why, exactly, would it be better to replace this form of central planning with a different form? What, exactly, would public ownership fix?
Would public ownership somehow improve steering? Is Equinor steered by more voters than Exxon? Personally I'm pretty sure that there's more than enough evidence, such as Boaty Mcboatface, that the more voters participating the lower the common denominator.
Make a list of 100 random books and have different groups of people use voting to rank the books. All else being equal, the trashiest book will be highest ranked by the largest group of people. As Youtube proves, with democracy garbage quickly floats to the top... ie PewDiePie. In order for cream to quickly float to the top, replace voting with donating.
All corporations should be steered by donations. Then corporations would be ships of capitalism in a sea of capitalism.
Supplementary thought. Innovation requires discretionary time and commonly, a relative absence of imperatives (pressure) to produce routine work. This would seem to be a principle that applies to any organisation, regardless of ownership. But again, it can't be absolute. Some authors require deadlines to produce the best work. In fact, some authors don't produce any work unless there is a deadline to meet. How can this trait be modelled?
Thanks for this thoughtful piece, Prof John. Referring to the challenge of incentivising innovation:
1. It's probably correct to say that the profit motive can be a strong driver of innovation, but it's not necessary to have corporations in order to animate the profit motive. A system of patent-like reimbursement can potentially achieve that.
2. The profit motive is not the only driver of innovation. The scholarly journals are filled with articles written by researchers animated by reputation or the excitement of producing something original, without any thought of pecuniary reward.
3. Competition between corporations can drive innovation especially in a field ripe for innovation such as IT. But competition can so often and so quickly degenerate into destructive competition whereby firms destroy each other by slimming their margins, reducing expenditure on training and professional development et cetera. Airlines for example. A challenge is to devise a theory to explain how to define the threshold between competition that stimulates innovation and investment; and competition that snuffs it out. The two poles are identifiable but is there a formula to manage the progressive and regressive tendencies.
4. Similar logic applies within public authorities. The motivation to produce something good for the community or even their public organisation can be very powerful, even if no benefit accrues to the individual public servant beavering away at creating something new. But there comes a stage in the life of a public authority subject to restructure, downsizing, politicisation, and simply poor management practice when the public servant who could do something new throws in the towel, retires, takes redundancy or simply enters passive mode. So many departments have got rid of the people in their blue sky team,no longer fund professional development or overseas travel, or have simply downsized so much that the best operatives are too busy fighting bushfires to innovate. Again, is there a theory that can define a threshold or is there a genuine continuum with too many variables to model the likelihood of innovation in advance?
I'll need to write more about innovation. As well as the existing methods (publicly funded R&D, prizes, patents and so on), we'd need a public analogue of the venture capital model, where startups are funded to the point where (if successful) they can be acquired by a large corporation.
It is definitely inaccurate that "only Apple has ... produced anything truly innovative". Google Search was very innovative, as was Amazon's AWS, and all of those companies have produced significant innovation internally in smaller or non-customer-facing areas.
Google's search technology was an incremental advance on existing search engines. It was just in the right place at the right time to establish a near-monopoly based on network effects. - if it had never existed, we wouldn't miss it. Same for AWS, AFAICT
There is a sense in which every technological advance is an incremental advance on the prior state of technology. But apart from that trivial sense, Google's search technology was very much not an incremental advance, but instead a new idea that produced results qualitatively better than previous search engines. It is of course not clear that the corporate form is what led to these ideas, since the relevant ideas were initially developed while Brin and Page were at Stanford, but most of the subsequent work to make the ideas practical were done after they started Google. But it is not correct to describe the technological changes as you did.
For AWS, obviously the concept of selling server space on an incremental basis existed before AWS. However, actually solving the problems of large-scale shared tenancy systems in practice had not been done, and was very valuable.
I think we are using terms differently. Having lived with computers and the Internet for 40 years or so, I can think of dozens of advances that made more of a difference to me than Google's replacement of Altavista and Looksmart. Similarly, improving the management of an existing technology like web hosting. By contrast, MacOS was revolutionary for me, as were innovations that didn't make anyone rich, like the Internet, World Wide Web and blogs
Neither of these (or the other innovations you mention) justifies a trillion dollar valuation in my view.
I think the spreadsheet was the most innovative piece of software made for personal computers, and it may well be true that Apple would not have succeeded without it. This was not invented by a big corporation. Dan Bricklin's story is very interesting. Key innovations not necessarily made by big Corporations.
AWS and similar offerings are merely a return to computing-as-a-service, which was the default on time-share mainframes in the 1960s.
Done on a larger scale, but certainly not a new idea.
Microsoft also does service work (like IBM). For Google I would add Maps, Android (which absolutely drove down the cost of smartphones and pushed significant innovations of its own), YouTube (which absent advertising would obviously not exist at all), and a wealth of distributed-computing stuff. Amazon’s logistics and warehousing is second-to-none (even if it comes at a painful human cost).
android is little more than one of many versions of Linux which itself is a free open source OS based on Unix. Unix was developed by AT&T in 1969 so they should get the credit rather than google.
Without wishing to get into a prolonged argument, if all there was to making a modern smartphone OS was minor changes to Linux, there would have been no reason for Apple to create iOS, and there would have been dozens of successful Linux-based smartphone systems before Android got out the door. In reality there have been many thousands of person-years of work put into it on top of the work on Linux that predated and accompanied it. Similarly for iOS. There is a reason there are no other competing smartphone OSes and it’s not lack of interest in trying or even just platform lock-in.
This isn’t to say anything about their valuations or business practices, but that those companies are a source of concentrated innovation is undeniable, even if not every aspect of it is visible to lay people, or even if they may exert monopolistic power that squashes other entrants.
I can easily imagine California’s dire quasi-private utility PG&E being replaced with a more effective public utility, because those kinds of utilities exist elsewhere, and PG&E has no reputation for innovation. But there is no public-sector equivalent to Amazon’s AWS, or Google’s whole infrastructure, or Apple’s chip development, or even just Windows.
"no public-sector equivalent to Amazon’s AWS, or Google’s whole infrastructure, or Apple’s chip development, or even just Windows." Not counting the Internet, or the Web, or the computer itself, of course.
And NASA did much of the heavy lifting in the invention of software. Then there's all the non-profit stuff like blogs and wikis.
National governments should invest heavily in the scientific discoveries and technical developments that will massively increase the efficiency with which we use everything - labour, land, fuel, minerals, water. Efficiency gains are the best way of reducing the cost of living - and they ultimately come from advances in science and technology. In addition to making their own investments in science and technology, national governments should use regulatory and fiscal policy to create conditions that encourage private sector firms to invest in technological improvements. Lifting the minimum wage to where it would be had it kept pace with productivity growth over the past 50 years, and mandating annual minimum wage increases in line with productivity growth from now on, would spur firms to invest in automation. This would be a good thing because it would increase productivity and enable us to deploy workers to where they can do the most good. With appropriate use of fiscal policy there will be no technological unemployment. Currency-issuing governments can always create public sector jobs on demand to accommodate displaced workers, can pay displaced workers a wage to retrain for a new career, can invest in sectors of the economy that need more development. It isn’t a bad thing for some jobs to be automated out of existence if the displaced workers are taken care of.
The mediocre productivity growth rates of the past 40 years are due in large part to wages being too low and unions being too weak. When labour is cheap and compliant, firms lack incentives to invest heavily in automation. Firms become lazy and complacent when they know they can exploit a desperate, underpaid workforce devoid of bargaining power. We need a higher minimum wage, stronger workers’ rights, and constant full employment so that firms can’t take workers for granted. In those conditions workers get a better deal and firms invest heavily in labour-saving technology.
Publicly owned housing or NFP co-ops, allowing long term leases, 5- 10+ years. This ought to be an Oz policy now.
According to Coase, more or less, corporations are ships of socialism in a sea of capitalism. Why, exactly, would it be better to replace this form of central planning with a different form? What, exactly, would public ownership fix?
Would public ownership somehow improve steering? Is Equinor steered by more voters than Exxon? Personally I'm pretty sure that there's more than enough evidence, such as Boaty Mcboatface, that the more voters participating the lower the common denominator.
Make a list of 100 random books and have different groups of people use voting to rank the books. All else being equal, the trashiest book will be highest ranked by the largest group of people. As Youtube proves, with democracy garbage quickly floats to the top... ie PewDiePie. In order for cream to quickly float to the top, replace voting with donating.
All corporations should be steered by donations. Then corporations would be ships of capitalism in a sea of capitalism.
Supplementary thought. Innovation requires discretionary time and commonly, a relative absence of imperatives (pressure) to produce routine work. This would seem to be a principle that applies to any organisation, regardless of ownership. But again, it can't be absolute. Some authors require deadlines to produce the best work. In fact, some authors don't produce any work unless there is a deadline to meet. How can this trait be modelled?
It is already modelled in arts funding.
Thanks for this thoughtful piece, Prof John. Referring to the challenge of incentivising innovation:
1. It's probably correct to say that the profit motive can be a strong driver of innovation, but it's not necessary to have corporations in order to animate the profit motive. A system of patent-like reimbursement can potentially achieve that.
2. The profit motive is not the only driver of innovation. The scholarly journals are filled with articles written by researchers animated by reputation or the excitement of producing something original, without any thought of pecuniary reward.
3. Competition between corporations can drive innovation especially in a field ripe for innovation such as IT. But competition can so often and so quickly degenerate into destructive competition whereby firms destroy each other by slimming their margins, reducing expenditure on training and professional development et cetera. Airlines for example. A challenge is to devise a theory to explain how to define the threshold between competition that stimulates innovation and investment; and competition that snuffs it out. The two poles are identifiable but is there a formula to manage the progressive and regressive tendencies.
4. Similar logic applies within public authorities. The motivation to produce something good for the community or even their public organisation can be very powerful, even if no benefit accrues to the individual public servant beavering away at creating something new. But there comes a stage in the life of a public authority subject to restructure, downsizing, politicisation, and simply poor management practice when the public servant who could do something new throws in the towel, retires, takes redundancy or simply enters passive mode. So many departments have got rid of the people in their blue sky team,no longer fund professional development or overseas travel, or have simply downsized so much that the best operatives are too busy fighting bushfires to innovate. Again, is there a theory that can define a threshold or is there a genuine continuum with too many variables to model the likelihood of innovation in advance?