Re: [unrev-II] Digest Number 11

From: Eric Armstrong (
Date: Mon Jan 24 2000 - 19:15:20 PST

From: Eric Armstrong <>

Mike Taylor wrote:

> In response to Eric Armstrong:
> >if one is competing for respect and pride
> >of place, rather than for food and shelter, one "wins" by >publishing
> and contributing more, rather than less.
> >That appears to be true for individuals, at least...
> >Perhaps there is a way to foster that same kind of
> >attitude among corporations?

> Well I have heard Eric Raymond's theories on this subject too. But I
> think the people who compete for recognition as open-source
> competitors also have
> their day jobs ...

Yes. As discussed in another thread, much of the B work occurs over the
net, by individuals, without an official sanction. That's possible
because they have the freedom -- unlike in a sweat shop -- and are able
to avoid the "produce or die" mentality endemic to such situations. The
question is: Why are virtually all corporations so much different, and
is there anything that would give them the freedom to act differently?
I'm exploring that terrain in this discussion, as we go along. Half of
the solution seems to be reducing the short term profit motive --
reducing the size of the carrot, as it were. I'm not sure if there is an
option that would reduce the size of the stick (going under), but
perhaps that would be a good thing.

> >(Along those lines, I keep wondering: What happens to the world if
> all corporations are required to be "non-profit"?
> Well today there are three basic business models in the world:
> 1. The "commercial" business model where people voluntarily pay for
> products and services which they consume hemselves.
> 2. The "nonprofit" business model where people voluntarily pay for
> products and services which are consumed by others.
> 3. The "government" business model where people are coerced to pay for
> products and services which are consumed by others.

The "non-profit" model above refers to contribution-financed
But there is another model.

In my early career, I worked in an insurance company. It was pointed out
to me that banks and insurance companies are, by law, not allowed to
show a profit. Hence the lavish investments in furnishings, especially
at year end. On a good year, we could get pretty much anything we wanted
in the way of computer equipment.

The good news was the money went back into the economy. The bad news,
come to think of it, was the company's are *rabidly* competetive. There
is a limit to how much they can keep in reserve to pay salaries, so they
are tightly focused on A-activities that contribute directly to the
bottom line.

On reflection, it may be that "profit prevention" is not the best
strategy to encourage B-C thinking in organizations. However, there may
be *some* strategy which be effective, if we are clever enough to see

> Models 2 and 3 exist only because Model 1 permits a small number of
> people to amass enough money to support them.

Granted that the contribution-funded organization tends to benefit when
individuals have money to burn. But those individuals also drive up
prices all around, which contributes to a "produce or die" (or, at
least, "produce or fall behind") mentality that may actually discourage
many lower-income people from feeling safe enough to make donations. Is
the overall impact positive or negative? That's a tough one to measure.
But predictive models, measurements, and feedback are needed. Your
understanding of economics may well be the more accurate. Or mine may
be. We need a better way to judge.

> Remember that 1% of the population accounts for 40% of federal income
> tax revenues and 10% account for 80% of
> revenues. If you eliminate the amassing of money by those folks then
> the other models will collapse. The reason that they collapse is
> because there is no feedback between the "paying" and "consuming"
> parts to regulate their
> actions by eliminating businesses that do not add value.

The conclusion follows logically from the premise. But the premise
doesn't account for competition among banks, insurance companies, and
other "non profit" organizations of that type. Moot point, though, since
I have less hope for "profit prevention" as a workable policy than I did

> All the oil has owners, ...(to) start sucking up oil, you need to
> obtain the right to do so from the owner. That takes it our of the
> tragedy of the commons situation... The owner is motivated to maximize
> the present value of the oil in the ground (or tank or wherever) which
> means conservation if he or she thinks it will be worth more in the
> future.

That makes a lot of sense.

> If roads were priced and treated as any other market good, we would be
> much better off. Nobody is motivated
> to manage their use of the roads cost-effectively and so they are
> treated as a free good, when they are not. This means that
> supply/demand management is suppressed and we have unmitigated demand
> and arbitrary supply. Central
> planning doesn't work!

Have to agree with this. Whether we are talking about higher fuel prices
or paying for road use, the bottom line is that costs have to go up.

> >What will the oil supply curve look like in the future?
> >My mental simulation suggests that market forces drain it
> >at a steady rate right up to almost the end, when there
> >is a sharp drop off in supply and prices skyrocket. >Disagreements
> erupt. Economic retaliation and wars ensue.
> >If not oil, such a scenario might develop over water,
> >food, or some other critical resource.
> Well people keep predicting this and it hasn't happened. I think you
> underestimate the power of markets as a tool for collective
> intelligence.

Possibly. But I think that "collective intelligence" may be overrated as
a tool for predicting abrupt change. Have to argue from analogy here,
for lack of good models. I'll use the Titanic as an example. The
planning was excellent for a steady-state environment. But there were
too few lifeboats for an emergency.

We are approaching a novel situation: an absolute limit to the amount of
available oil, with no serious alternatives to replace the shortfall.
I'm not convinced that the situation is one the "market" understands. It
certainly does not appear to proacting at a startling rate. What will
the reactions be, when they occur?

As an example, consider rats in a ship's hold when the wheat starts to
run out.
Wheat suddenly becomes more valuable, and the strongest get it. This
Darwinian situation makes healthy rats. But does it work in a world
where every 3rd country has their finger on the trigger of a nuclear

More importantly, how can we couch our respective assertions in more
testable, verifiable manner? How can we turn what we think we understand
into real knowledge, and use that to achieve some good?

> >The alternative, in my mind, is a forward-looking
> >government that sees the problem on the horizon,
> >and begins working proactively -- raising prices
> >(for example)...
> Well this might achieve something except that the government could not
> resist the temptation to tax the profits ...the net result
> still run out of oil but develop no alternatives. You've got to let
> the
> market work.

Granted the system as it currently stands would run into that exact
problem, if not one of several others. But is there a system that is
capable of avoiding such problems?

> > Alan Greenspan appears to have a magnificent grasp on how
> > seemingly minor "anticipatory" adjustments can prevent
> > major swings in the country's economic fortunes.
> Huh. Wait and see. Alan Greenspan has laid the foundation for a
> worldwide depression. Save this for future reference. As a scholar,
> Alan Greenspan did good analysis on the causes of the 1929 crash and
> subsequent depression. He has repeated virtually all the mistakes he
> pointed out, that
> were originally made by his predecessor, Andrew Mellon. When Herbert
> Hoover became President in March of 1929, he reappointed the
> 76-year-old Mellon, who was dubbed 'the greatest Secretary of the
> Treasury since Alexander
> Hamilton'. Just call me Mikey-the-Bear.

Ouch. I'm hoping your expectations are in error, but I have no basis for
arguing otherwise!

> >Granted that an organization has a much keener interest
> >in developing such a thing (DKR). Hopefully we can get
> >General Motors to build one that improves it's
> >automobile developing capabilities, while at the same
> >time producing the means for governments to function
> >with a simulation of intelligence.
> >
> There is hope for the former. Better co-operation and teamwork on
> complex projects can lead us all to great things. But not for the
> latter. All IMO.

Heck, if we can produce a DKR that businesses can use to operate
intelligently, I'll settle for that! The real question is, how do
businesses play the Prisoner's Dilemma? (The Prisoner's Dilemma is a
game where both sides win if they cooperate, each side stands to win the
other's share if they betray the other, and no one wins anything if both
attempt betrayal.)

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