> Not to me confused with the Soviet shoe factories that produced only one type and orientation of shoe - with the other half of the pair being shipped in from 500 miles away.
This reminded me of something our anti-counterfeiting startup learned when integrating into manufacturing for a high-end outdoor apparel brand.
There are efficiencies that the factory gets by, say, parallelizing work on the sleeves of a jacket, while other parts are also worked on. But each batch of dyed outer material may have slight variation in color, no matter how hard they calibrate.
So, their processes are designed to ensure that, when the jacket pieces come together, they all came from the same dyed batch of outer material.
(There were many interesting tidbits like that, and those were just the ones relevant to us, in terms we could understand. I'm sure the factory also knew a million other things.)
Probably the Soviet shoes of TFA had worse problems than slightly mismatched color.
I remember my mum (tailor) telling me that even different sections of the same roll of cloth wouldn't match color precisely enough on many rolls they worked with. Colors are deceptively hard.
Interesting. This factory might've also had to dealt with that degree of variation. IIRC (unless I'm thinking of a factory for a different customer), their processes include a per-unit container that moves through the production line, and the container starts with various materials that will go into that unit. So I guess that's one way they could ensure that all the outer fabric came from the same part of the same roll.
A similar thing I've noticed in the last ~6 years is in regards to smartphones, and in particular their cameras.
Android is pretty standardized these days, and even a fairly cheap Android phone will probably do most smartphone things (make calls, send texts, watch YouTube, etc.) reasonably well, but a corner that seems to be cut in cheaper phones is almost always the camera, and that kind of makes sense.
If you're buying your phone online, you can look at the more-or-less objective specs of the phone like how much RAM it has, or how fast the CPU is, but you can't really tell how the photos will look [1], and as such it's easy to put a cheaper sensor or lens in there, especially in the cheaper phones which (I think) have lower margins.
[1] Even if the listing has sample pictures, you don't know how representative they are of the actual experience; they could just have taken the sample photos with ideal lighting, with a tripod, in a controlled studio, for example.
I realized exactly this after some frustration with a few phones. I found GSMArena that has extensive reviews including sample standardized photos.
GSMArena is such a valuable resource.
And with a history at that. They have reviews dating back to 2004. It's fun to check out what were the biggest concerns throughout the years.
It is easy for programmer-types to think that pixel counts are objective, simply because familiarity with units, or perhaps because pixels are discrete countable physical locations on a sensor.
An optical system composed of multiple lenses doesn't obviously correspond to a certain resolution, but the confusion is merely the literature taken at hand: instead of obsessively comparing smartphone advertisements, it is physically possible to read books and course notes on physics, optics, ...
There is nothing impossible about publishing spatial frequency responses etc, or legally mandating such information to be present on any advertising materials as soon as the MPixel counts are advertised.
> pixel counts are objective
Pixel counts are objective. But the problem is that while the pixel count sets the upper bound on the image quality, all cameras don't achieve that upper bound - especially due to the Bayer color filter matrix.
To hit this point home, try taking a photo on a smartphone with a 12-megapixel camera. Now take the same photo on a professional camera, say the Canon EOS R5 with an expensive L-series prime lens. The R5 photo has 45 megapixels, so go and downsample that to 12 megapixels to match the phone photo. The pro camera photo will look much better than the phone photo, thus demonstrating that the phone camera is not maximizing the limits of the 12 MP picture format.
(Also, to make the comparison fairer, take a landscape photo of faraway scenery and buildings so that there are no effects of focus blur from having a large lens aperture. Everything in the photos should be in sharp focus.)
Yes, and those crappy sensors will still be 200 megapixels (which will be used as an advertising point), as most people don’t realize that a fantastic 24 MP camera is better than a crummy 200 MP one.
Those 200 MP sensors are 200 MP in name only. They're so small the individual pixels are smaller than the wavelength of light they're trying to capture. That's why when you use them, the max image size is usually around 50MP because binning is required physically
Worse; the crappy sensors will be only 8 megapixels or less, but the camera software will inflate that with AI to 200 megapixels.
This has been happening for ages in the trail camera market.
I'm happy that the new metric is sensor size. A bit of an upgrade in metric that mildly correlates to picture quality.
That's good as long as they quote the sensor size in millimetres for the width and height (e.g. 36 mm × 24 mm "full frame").
What is atrocious is the inch format - e.g. 1 inch sensor, 1/2.2" (decimal and fraction!). It somehow refers to the diagonal length of the vacuum tube and not even the active image area. https://en.wikipedia.org/wiki/Image_sensor_format#Table_of_s... , https://en.wikipedia.org/wiki/Video_camera_tube#Size
True, the lens is usually more important than the sensor, remember that the hubble space telescope is only one megapixel.
Yeah, definitely; megapixels are a more or less objective metric, but they're only one factor to image quality, and nowadays not even really the most important one.
Pixel count is objective, but never meant much. Sensor area is much more important, but doesn't make for a sexy number, and it often doesn't make it into the spec sheet.
Pixel 7 pro phones latest camera was the biggest disappointment for me. I usually have been happy with pixels but it has trouble focusing on infinity, and the image stabilization on the 5x zoom lens is so jumpy it's worse than nothing at all. I thought about trying to get it warrantied or something but was already sick of spending hours at the Verizon store trying to get my trade-in credit.
And to get the full advertised resolution (which you have to enable in the photo toggles) you have to tolerate a delayed shutter button and a "long exposure" for it to do the computational photography or something. So it's useless to expect full resolution with kids or action.
The camera (and/or the camera software) was awful. There was no way to get a good photo out of it, even with 3rd party apps. And so many cameras now won't allow 3rd party apps access to the full data either, so you are stuck with the junk-ridden garbage that comes with the phone.
The Pixel 7 Pro was the worst phone I've ever owned. The battery was terrible, the camera was terrible, sometimes it just wouldn't boot up, everything about it was awful. I swore an oath that I wouldn't buy a Pixel phone ever again.
I've heard that the Pixel 8 was better, but I'll never know.
Fellow P 7 Pro owner here: yeah the 8 Pro is better. Still wish I'd got something else, but at least audio through the USB-C port doesn't have a buzzing caused by the clock on the chip.
I just went back to iPhone for the time being. When this phone breaks I might give Android another try but it will definitely not be a Pixel.
The most blatant example of this is Samsung phones artificially replacing photos of the Moon with a high-resolution composite.
What gets measured gets done.
But, Goodhart's Law "When a measure becomes a target it ceases to be a good measure."
That is interesting as the definition of a KPI is a metric with a target as a goal.
> What gets measured gets done.
Sometimes. Other times...just look at the US public education system.
What gets measured _and_ the organization is a whole focused on improving such measure they mean.
This is one of the reasons ML benchmarks are most useful soon after their creation. Once they become a target, they cease to meaningfully measure quality.
The corollary for the Soviet shoe factory is you need incentives that propagate to guide production. You need the market to guide you in all the little details and you have to discover little by little what it is actually demanding.
For ML, we need something similar if not the same.
The market is notorious for creating a lot of distortions. I don't think the answer is 'let the market guide you'. Externalities are a known but huge problem with markets as evidenced by the insane amount of pollution we produced.
Tangentially, I think the mostly attribution-free discussion style of the C2 wiki has some merit. It's nice to read opinions and contributions on a topic without the cognitive noise of associated user accounts and reaction counts.
I do sometimes get confused when reading it, since the markers for main post, replies, etc are not super intuitive to me. Feels like a stereotype of a multiple personality disorder before you figure it out.
Is there a guide for the markup somewhere?
This has been talked about endlessly so why don't we skip to the conclusion. To avoid the problem of gaming metrics you either need to
1. Spend a lot of time and thought into developing ungameable(whether this is possible is unclear) metrics and ways to measure these metrics.
2. Admit defeat and not be transparent with evaluations and/or go off of vibes.
3. Align incentives of the judges and the judged, reducing the pressure on metrics (ex. shared fate, belief in the cause, personal growth and fulfillment)
This is the answer. The higher performance orgs I’ve worked for have had excellent incentive alignment and cohesion. The metrics were there, but fairly mediocre.
Places with robust metrics ranged from excellent to meh. One place had a sales team that was owning it, and the leadership was shoveling cash into wheelbarrows. But the company was losing a fortune because the sales metrics were precisely stupid.
I don't think this is possible. In a sufficiently large organization, however much you try to prevent it, some employees will be "psychopaths" (going by Hintjens's definition) looking to game the system. Whatever the metrics are, they will put in only enough effort to advance their own interests, and assuming they succeed (and at least some will) at getting raises/promotions, the org is then at risk of (legitimate) legal action from other employees who put in more actual work and get lower compensation.
It's not even that there are pyschos, it's that incentives wane with scale because individuals have less control over outcomes.
That is still an alignment problem. Psychopaths can be good for the org, you just need better mapping of the game and reality.
You get what you measure. Measure what you want to get.
So first be really sure what it is you want to get.
What you want to get will be hard to measure. Accept that as truth. However accept no proxy measures.
Measure only the specific outcomes you want.
Or - stop with the evaluation nonsense and utilize your energy into pushing business goals. Metrics should be used to inform, not as targets.
> All features as found on the specification are included, but the user interface is awkward. The vendor can claim, "we have all the features you need; thus, pick us."
Describes every Enterprise software I've ever used.
It's a nice anecdotes, and maybe that works in some places, but in my experience selling to Enterprise, software quality is pretty low on their check list.
Generally speaking, they're more concerned with the supplier than the product. Yes, it must (generally speaking) meet their requirements, but its also important that they -believe- the supplier can roll it out, and will be around in 10 years still supporting it.
In other words Enterprise doesn't just want software. They want a stability of supply, so suddenly they're looking at things like Support levels, customability and so on.
"You never get fired for buying IBM (a reference likely lost on you if you're a bit younger than me) wasn't about quality, but about longevity.
with one key difference that the people doing procurement only have the spec sheet, and never actually use the software. They also frequently never actually interact with any of the humans that do use the software, and have formed an opinion that "those people only ever complain whatever we buy". So there is never any feedback cycle pushing the software to be better.
This reminds me of a brilliant Soviet satirical cartoon that illustrated the same principle with hats instead of shoes: https://youtu.be/gSpjDi2BrQk?si=CtJwQTHkm0HfNrxx
This principle, as well as related principles, like the McNamara Fallacy and Goodhart's Law essentially boil down to one lesson I've come to realize in life: "numbers", "metrics" or even a "system" are never a substitute for actual humans caring about doing the right thing. If the humans involved care to do the right thing, they will do it, even without a system (although some systems make it easier). If they don't care about doing the right thing, no system or data-driven approach can fix that.
Which is also why I have a sneaking suspicion that most economic theory is complete bullshit. All the debates over privatization vs. public services, monopoly vs. competition, autocratic vs. democratic styles of leadership etc. are mostly irrelevant. Both can work. It all boils down to whether you have good human stakeholders who have the integrity and agency to do the right thing. Counter to most economic theories, for example, a monopoly that is run by people who actually care about doing the right thing might be better run than fiercely competitive startups who just want to make a quick buck.
>Which is also why I have a sneaking suspicion that most economic theory is complete bullshit. All the debates over privatization vs. public services, monopoly vs. competition, autocratic vs. democratic styles of leadership etc. are mostly irrelevant. Both can work. It all boils down to whether you have good human stakeholders who have the integrity and agency to do the right thing.
I don't think this is some gotcha, but basic economic understanding for at least the last hundred years. Fundamentally, much of economic theory acknowledges these questions. This brings you full circle, given inconsistent humans with individual values, how do different systems and rulesets perform.
I can recommend the book Red Plenty, if you want to learn more about the successes and failures of Soviet economy:
https://chris-said.io/2016/05/11/optimizing-things-in-the-us...
Turns out that $ profit is one of the least gameable metrics.
Not completely ungameable, but for a consumer product manufacturer in a free market it's the least gameable metric invented so far.
Short term profits are easily gameable. And before the long-term issues hit you you can simply leave the company or find someone to buy it ( and you will, because of the "high" profits). That is how modern economics actually works.
I've seen companies actively, knowingly, and purposely trade future growth, user experience, and user retention for immediate profits.
I've seen governments do the same. Many times.
Explain Amazon then, a company notorious for being unprofitable yet producing a great experience.
Markets are kind of a dumb thing if you think about it. You take all the qualities of an item and project them into a single scalar we call 'price'. Then use that scalar as a form of comparison.
It's comical when you think about it. Seems we need a better technology now that we have computers.
Amazon invested profits. For many years ago they could turn a switch and become profitable.
The share price kept rising while they were investing profits in expanding.
It's far from a fool proof way of doing things, many companies that prioritise growth over profitability wind up with neither, but Amazon managed it.
As for prices, no computer can work out my preference or not for a Mac over a PC, or a iPhone over an Android, or how much quality I will pay for in a bike. Prices reveal this.
Ludwig von Mises said this was why Communism wouldn't work in 1920. He was right.
You misunderstood what I meant about prices. My point is prices compress everyone's preferences and ability to pay into a single scalar. It seems we can do better no?
1. Oh, you'd be surprised.
2. "Free" and "market" are fundamentally contradictory terms. But that point is irrespective of the difficulty of quantifying complexity/heft of tasks and goals.
In Soviet Russia, shoe principles you
The corporate world generally resembles Soviet culture a lot to me.
> The corporate world generally resembles Soviet culture a lot to me.
The problems of Soviet culture are really the problems of bureaucracy.
The way this is intended to be addressed in free markets is through competition. If your employer sucks, go work somewhere else. If their product sucks, buy it from someone else. This works pretty damn well as long as the company doesn't find a way to insulate itself from competition. But if that happens, it stops working, and then you're back to an unaccountable bureaucracy and all that entails.
This has been happening increasingly in the US because corporations capture the government, and then they do two things: Weaken antitrust laws/enforcement, and "strengthen" other laws that raise market barriers to entry which are then sold to the public under the subterfuge of some kind of safety/security/labor protection/etc., because the public rightly wouldn't accept their true motivation as a valid justification.
This also tends to feed on itself. Some industry captures the government, constrains competition, becomes abusive so people start demanding something be done about it. Instead of addressing the root of the problem (regulatory capture and insufficient competition), the incumbents propose a rule to reduce competition even more. So you get housing construction constrained by zoning, but instead of addressing that, the proposal is something like rent control, which disincentivizes construction even more and then long-term rents get even higher.
Overall I agree: I think a big root cause of current woes is that companies have grown too large and competition is broken. Not only that, but larger entities have more leverage to tilt the playing field and become even more anticompetitive.
There is another issue: collusion. If every company requires binding arbitration in their contracts (of adhesion), do I just opt out of having a cell phone, internet service, etc.?
See also: RealPage's rent-fixing.
> The way this is intended to be addressed in free markets is through competition
"Free market competition" is an ideological construct. Collectively (and sometimes even personally), we can't "go work somewhere else" - and we certainly can't not-work at all. Moreover, if an "employer sucks", it may suck in multiple ways - environmental impact, social impacting where it operates, impact of its products and services on society etc. None of that changes even if you do go "work something else". What's necessary is improving things, not finding another 'stall' in the 'market'.
> This has been happening increasingly in the US because corporations capture the government,
The government exists to serve the interests of property owners, and more so, the larger ones - enforcing the social order and protecting their minority control of economic forces, the means of producing and distributing goods and services, from the rest of surrounding society.
Capture by certain corporation is an attempt to tug at that common blanket to favor them specifically rather than keep the system somewhat stable and functional.
> Collectively (and sometimes even personally), we can't "go work somewhere else"
If Company A sucks and there are many other companies that don't, every single employee at Company A could quit and go work somewhere else, and then Company A can go out of business. That's a completely reasonable outcome for a company that sucks, and is what happens when there is actually competition.
> and we certainly can't not-work at all.
No known system satisfies the criterion that we all collectively don't have to work.
> Moreover, if an "employer sucks", it may suck in multiple ways - environmental impact, social impacting where it operates, impact of its products and services on society etc. None of that changes even if you do go "work something else". What's necessary is improving things, not finding another 'stall' in the 'market'.
These are not the "Soviet Shoe Factory" issue, they're externalities. If the company tries to make only baby shoes to save material but people want adult shoes and competition exists then people buy adult shoes from somewhere else and the shoe factory making unnecessary baby shoes goes out of business or doesn't have the perverse incentive to do that to begin with.
If the company is dumping toxins in the river, that isn't one of the problems that competition is expected to fix, in the same way that it isn't expected to prevent thefts or murders. And it's also not a problem the Soviets fixed either.
Parent mentioned that not everyone can just swap.
Like if company A is on NY but 20 competitors are better and all but only have the work available in L.A.
You are not going to just quit and move.
Hence efficient market might be so on scale that is not available for that employee.
It's a question of degree yes people aren't going to move across the country for a slightly better job but if the difference becomes big enough they do.
Not only that, for it to even happen you'd need one of two things:
1) You have a very specific skillset which has such a high market value that you're not willing to change roles, but is esoteric enough that there are no other local employers for that skillset even though there are plenty of local employers in general. This is obviously not the common case, and is generally not a huge problem, because the "victim" is someone who can still command high wages and extract concessions from the monopolist because they still have the ability to switch roles and get a job doing something else for someone else.
2) There are not plenty of local employers in general. This is the aforementioned problem case where the incumbents capture the government and use it to inhibit competition, which must be prevented.
> No known system satisfies the criterion that we all collectively don't have to work.
The current system nearly satisfies that criterion. We'd just have to accept 1700s average living standards.
Turns out in practice if you give people a day of free time they spend it bettering their lives by working instead of being happy with nothing.
> "Free market competition" is an ideological construct.
Sure, but is competition an ideological construct? Even the Soviet Union had competition between companies and institutions – without any free market.
It had a market where consumers could choose to spend their money on particular brands of consumer goods, with varying degrees of quality.
There weren't a lot of different brands, but there were some, and they were in direct competition with eachother. The bigger issue was overall low productivity and high logistics friction, which leads to shortages (and a MIC that sucked up half the country's productive output didn't help matters).
It's so funny that we still have to debate these things when Lenin wrote "Imperialism: The Highest Form of Capitalism" over a hundred years ago about a society that was far less concentrated than what we have today. Capitalism trends towards consolidation with the exception of a "new market" environment where it appears more in its Adam Smith sense. This rapidly melts away into oligopoly as weaker firms lose to stronger firms. Eventually, the domestic market is not enough to sustain growth and firms induce politicians to carve up the world for them to divide the world into intentionally underdeveloped areas of cheap production and areas of consumption.
The trouble with this critique is that it takes as a premise that you have a government which is enforcing at least contracts and property rights, but not antitrust laws. Without the former you can't have a monopoly because people would just take the monopolist's stuff (though of course then you have different problems). With the latter, contracts for anti-competitive mergers are illegal and consolidated markets get broken up.
The general problem, which is not limited to capitalism, is that organizations try to consolidate power. So you need something to inhibit that. What this is supposed to look like is a limited government that can enforce antitrust laws against other organizations, but is constrained from itself becoming an organization that consolidates power. This requires strong checks and balances, and they clearly need to be more robust than the ones currently in place. Not least because several of the ones originally in place under the US constitution have been removed through amendments (e.g. 17th) or creative interpretation (e.g. Wickard).
>Free market competition" is an ideological construct. Collectively (and sometimes even personally), we can't "go work somewhere else" - and we certainly can't not-work at all. Moreover, if an "employer sucks", it may suck in multiple ways - environmental impact, social impacting where it operates, impact of its products and services on society etc. None of that changes even if you do go "work something else". What's necessary is improving things, not finding another 'stall' in the 'market'.
In a natural world, "collectively" is easier than "personally". You might have some reason that you absolutely can't quit, but there will be other employees who don't have that handicap. Their pressure will be enough to keep the employer reasonable for you too, since there are probably more of them than there are people who can't leave like you. But even if no one can realistically go get another job, that's not the true pressure... the true pressure is that they're so awful you'd all just quit despite how awful that will be for you, despite your inability to get a new job.
In a natural world with well-cultivated libertarian tendencies, the threshold for "fuck you I'd rather starve than put up with your bullshit" is pretty low. This is why companies (and government) are so eager to do everything they can to undermine libertarian tendencies... it makes everyone more vulnerable. Not that anyone understands this. The modern impulse when abuse takes place is to try to goad mommy government into coming to the rescue, which further erodes libertarian attitudes. They need you vulnerable, they need it to be such that if you have problems only they can solve them. If they can contrive that to be the case, they get to decide whether or not they want the problems solved at all.
Except we have thousands of competing Soviets keeping the system healthy.
As an American, I would not call our system healthy from a practical sense; certainly not for society, if this past decade of mounting instability, distrust, and profiteering is any indication.
It's easy to get discouraged by The News, which will always focus on things going badly. That generates clicks, but it's not a neutral sample of larger trends.
The last decade has increased US GDP per person by more than 50% (yes, adjusted for inflation), and launched many innovations making live better and safer.
> The last decade has increased US GDP per person by more than 50% (yes, adjusted for inflation), and launched many innovations making live better and safer.
I think what you're referring to is the calculation of US GDP per capita, which is an average. However, this doesn't mean that the typical individual has experienced a 50% improvement in their income or well-being. The distribution of economic gains matters, and GDP per capita doesn't capture that. This is a significant difference.
In theory, you could be right. In practice, it's hard to make the math come out that way.
Basic facts: GDP is how much value a country produces. It is also close to how much it consumes, aside from some marginal adjustments, which I doubt have changed much over this decade.
If income distribution had changed drastically, it could still be true that average people didn't see any of that 50% increase, but I don't see any signs of change on such dramatic scale.
So yes, I do think the typical individual has experienced a 50% improvement in their income.
For "well being", the change is probably much smaller. Happiness doesn't come from money...
I agree, but it's still better, and there's an unusually clear-cut natural experiment to prove it: East and West Germany after WWII.
Or South Korea vs. North Korea
Interestingly, North Korea had a higher GDP per capita than South Korea until the 1970s.
Do you consider the current state of things healthy? By what metric?
It produces steady progress on most any important metric.
Compared with the Soviet system, that makes it vastly superior.
Compared to an imagined perfect system, it has many flaws, but that's how the real world is.
> It produces steady progress on most any important metric
Some metrics I care about are income equality, homelessness, school shootings, level of education. What are the metrics you care about that you see improving?
> Compared with the Soviet system, that makes it vastly superior.
I'm sure it's also superior to the feudal system and hunter-gatherer systems. The Soviet system has been gone for three decades, I don't see why we would care to compare the current system to the effects of a system operating in a vastly different economic and political reality, more than 30 years ago.
> Compared to an imagined perfect system, it has many flaws, but that's how the real world is.
Well sure, that's a truism. That doesn't preclude the existence of realistic more effective or healthy systems.
Sure. But I was commenting on this:
> The corporate world generally resembles Soviet culture a lot to me.
Alrighty. I'm still really keen to find out what metrics you personally care about.
Communism is functionally societal-level Taylorism, which I believe is the dominant corporate management style.
Hayek said that the reason Communist economies failed was that the center could not get accurate information on what the leaves needed/wanted, so there was always a supply/demand problem. Market economies use prices to automatically convey this information. It seems like as companies get towards nation-state sizes they tend to have a similar problem: management is completely out of touch with what the people doing the work need (and/or out of touch with the customer base, market situation, etc.).
Fortunately, leaving companies is a lot easier than Communist countries. Also disagreement is a lot less dangerous, and the consequences of being on the receiving end of political backstabbing are a lot more tolerable. Maybe most importantly, corporations don't tend to be founded on a lie like Communist governments (see the Charter 77 essay [1]).
[1] https://hac.bard.edu/amor-mundi/the-power-of-the-powerless-v...
Hierarchical structure with basically powerless bottom, strong blindly believed unaccountable top that is primary rewarded for looking certain way.
There is going ro be a sociological rule that this thing always leads to similar dysfunctions.
Totally. I visited East Germany a few times when the wall was still up. The communist planned economies were a lot like corporations: 5 year plans, lots of internal propaganda, power struggles in leadership, total distortion of reality, sociopaths making their way to the top, no acceptance of dissent, metrics that make no sense.
The nice thing about corporations is that they have to be able to make payroll at the end of every month, otherwise they go bankrupt relatively quickly.
Things can get much uglier and be much more protracted for governments.
Unless they get bailed out by the government, or get tax breaks, or do mass layoffs. All of which seem to happen a lot.
I will say that perhaps Lina Khan was on the right track to benefit tech and the US economy overall by breaking up sclerotic corporate behemoths
That's over for the next years.
With you on the bailing out and tax breaks. Mass layoffs though? That's an appropriate response to being uncompetitive.
It's 2025: Many corporations are more funded by investors and lenders, rather than by income from servicing customers on the free market. The investor and lender money is conjured up out of thin air by a Central Committee, oops I mean by capitalistic bankers.
I've annoyed so many people by pointing this out: that anyone who says "free market solves all problems" misses that within that market we just embed thousands of tiny centrally planned economies, and there have been in fact numerous experiments trying to "free market within the free market" that lead to high profile disasters (i.e. Sears).
I would never say that "free markets solve all problems".
But I would strongly argue that the failure of Sears is an example of free market success.
Sears failed because a venture capitalist realized they could buy Kmart, use it as collateral to buy Sears and drive both into bankruptcy and sell off after plundering all the assets for the shareholders.
How is that a success of the free market? 2 old companies destroyed because someone got enough money to run them into the ground and make a killing doing it?
Are MLMs also a free market success story?
PE machinations aside, Sears and Kmart were dead for a long time before they closed the last stores.
Their failures are free market successes, because the free market is all about vendors serving customers. Vendors that fail to do so, are expected to die. Sears grossly failed to do so, for a decade or two before being financially zeroed.
If there's any argument for market failure in the Sears case, it is that the death took soo long to be finalized.
The issue here is that both Sears and Kmart were large players in a tight market with low competition. Both of their demises ultimately have allowed further consolidation of the market into fewer players.
The fewer the players on the market, the more likely collusion and monopolistic behaviors start to form.
But I also do not buy your premise that both companies were "dead companies lurching forward." Both companies had GOBS of assets that they could have liquidated and used to restructure into success. Those gobs of assets WERE liquidated but instead of being used to serve vendors or customers, they were used to enrich the shareholders.
The failure here is that this behavior of pillaging a company to it's detriment is something that could happen to any business. It wasn't done out of stupidity or ignorance, it was a malicious act of greed.
The problem I have with the free market hypothesis is it works only when there are many players on the market. However, entry into the market is by it's nature expensive and the economies of scale practically guarantee monopolistic end-states.
Consider, for example, the current state of the semiconductor industry. If Intel fails, would that be a free market success story? I would argue no because the market, particularly around fabrication, is already hugely concentrated into very few key players. We are not going to see a new cutting edge fab company (barring trust busting).
This consolidation action is happening up and down the market in everything from food to healthcare. We are actively seeing the death of small time farmers because of consolidation in meatpacking, groceries, and milling. Because a big mill doesn't want to deal with some 100acre farmer, they are actively locking them out of participation. And because a company like Nestle doesn't want to deal with 100 mills, smaller mills are being locked out of the market. These actions are all free market.
I call the death a Sears a failure in the market because it kills off competition. The only time it could be a market success story is if we had an actively competitive market with a large number of players.
I agree with the bulk of this!
But I maintain that the failure of Sears, Roebuck & Co. was the free market doing exactly what it's supposed to do.
Market distortions due to consolidation are a huge problem. But Sears was not fit for survival and there's no reason to believe that cash-for-assets could have been turned into a new viable business of any kind.
There was nothing to salvage out of the business model, vendor relationships, retail locations, consumer brand equity. Nothing. They abused their brand (and their Craftsman etc house brands!) for years. Some macro events and shifts were clearly out of their control and might have been insurmountable anyway, but the brand damage was entirely self-inflicted, and ultimately the only thing that might have saved the rest.
There was nothing left except lease obligations, slow-moving inventory, and nostalgia.
But enough about Sears. Your point, IIMBSB, is that the free market doesn't necessarily produce the most viable ecosystem. No argument there -- the natural end state of a free market appears to be 85+% monopoly or duopoly, and this is harmful to consumers and the economy!
> There was nothing to salvage out of the business model, vendor relationships, retail locations, consumer brand equity. Nothing.
I have to somewhat disagree here.
Amazon purchased wholefoods in 2017 to bootstrap their own distribution system. One year after sears went under.
My point is that sears had room and time for years to pivot their business model into something more profitable. They had the land, warehouses, and distribution system bigger than what amazon paid $13 billion to acquire. Heck, for fairly little money, sears could have entered or expanded into the shipping industry to compete with FedEx and UPS. They could have partnered with Amazon to handle their shipping.
The free market failure here is that the management team did nothing wrong by shareholders which in turn killed the company. They didn't die because they were being out competed, they died because management valued the next quarters profits over the long term success of the business.
The fact that the free market doesn't really care if a business does that is where it fails. The negative social impacts of large companies failing is tremendous and another problem with the free market. While business failing is value neutral for the free market, it's economically and socially a disaster.
Interesting point, but I'll push back a bit.
Whole Foods was a standalone viable business with high-quality retail locations. Sears was neither.
But I'll certainly grant you that with the resources, a fantastic new model, and lots of luck, there were better outcomes possible. Not sure about likely.
As for the free market failure, I do think Sears was out competed, by a wide margin. By Target, Best Buy, Amazon, Home Depot, etc. New (ish), smarter, more nimble retail without the lethargy that had been inside Sears since the 1990s at least.
I agree that there's something wrong with the fact that management can do right by shareholders but simultaneously wrong by consumers. I don't know if I'd call that a free market failure though. Some kind of corporate governance discontinuity perhaps?
But the "market" as I think of it is strictly the retail consumer market, so when Sears failed the consumers, they were removing themselves from the retail gene pool. It would not be healthy for the market for them to continue operating.
> I don't know if I'd call that a free market failure though. Some kind of corporate governance discontinuity perhaps?
How could this corporate governance discontinuity be resolved?
The reason I call it a failure of the free market is because the corporate governance model is something born from free market fundamentals, not from any sort of government regulation.
IMO, the fix to such problems is government intervention. In the case of consumer retail, I think governments should be MUCH more aggressive using anti-trust to break up large companies to actually start competition.
I'm with you 100% here.
Unbridled capitalism, especially on the scale possible today, is anti-competitive and consumer-hostile. And economically and socially destructive in the medium-to-long term.
I am not confident I have a good solution. All models impose some arbitrary metrics that are probably wrong (even if they are an improvement!).
But I agree that some form of anti-trust regulation and enforcement is the only possible structure for it.
My deepest relevant experience is in broadcast media, and I strongly believe that relaxed ownership restrictions and the outright repeal of the Fairness Doctrine were economic and social mistakes that we are paying for dramatically today. The issues are complicated, but the results are bad.
You made me read the history of Sears on Wikipedia and the story seems much more complicated than you describe. It's not very clear who took a loss and by how much, and who gained and by how much, but overall it seemed to be the usual story of distracted mismanagement unable to keep up with changing competition and going into a death spiral. In other words, just another slow inevitable boom-bust-style cycle that's constantly happening everywhere around us.
No I worked at Sears and it was driven into the ground by an idiot PE fund manager and his arrogant consultants.
Sears had one big problem when Eddie took over: it was out of step with the then-current retail format (big box stores). Its stores were heavily situated in enclosed malls that were out of fashion. The solution was straightforward if expensive: reformat the business (Sears had already done this twice before).
But then Eddie rolled into town with his genius consultants and a galaxy brained idea: Kmart has stand-alone stores that kinda look like big box if you squint. So let's just merge the brands together! Then Sears ends up in big boxes without expensive reformatting!
The fact that the brands were completely incompatible was pointed out by everyone who knew anything, but those weren't people in Eddie's inner circle so their opinions meant nothing.
By the way I don't think ESL Investments ended up making money on Sears. They stripped the company of assets yes, but most of those assets were distressed by the collapse of Sears. Like a lot of real estate was in struggling malls that had Sears as the anchor tenant. ISTR some of ESL's LPs suing Eddie.
Eddie made money the way all PE fund managers make money even when everyone else involved loses their shirt: by charging fees.
I did not work at Sears, but from the retail customer side, Sears was dead for a decade or two before it died. You might be able to imagine pivots that could have brought the company back to life, but none of them were guaranteed, or, from my perspective, even remotely likely.
Sears was dead dead. Too ossified, too big, too out of touch. Just like Kmart. And Radio Shack. And Circuit City. JC Penney. The stores were dead, the products were marginal or worse, the prices were out of line. Retail staff was sparse and generally not great. The house brands were eroded. The national brands were overpriced. Sears had no reason to live. And it died, whatever the corporate machinations were to attempt to extract every last bit of residual/perceived value beforehand.
The PE machinations were not a success, but the ultimate death was the correct and expected result for a free market.
It was sad to lose a brand and a community fixture like that. But it was gone for so long before it finally went away that there was zero surprise, except the duration of the death throes. IMHO of course!
David Graeber's book "Bullshit Jobs" does a great job going deep into why this is.
>The corporate world generally resembles Soviet culture a lot to me.
that is the Marx's law from Das Kapital which in modern language can be stated as "the larger the entropy of the ownership distribution - the more socialism inside". The smallest entropy - one owner, classic capitalism, the largest - everything belongs to everybody, ie. government property, the socialist state, etc. The large publicly owned corporations are more toward the large entropy values, thus a lot of socialism inside.
Is there any evidence for this story?
I don't know about Soviet manufacturing but there are a couple pics going around of people claiming their pair of shoes were made in two different countries: https://www.reddit.com/r/Sneakers/comments/ho1tj8/my_left_an...
https://www.reddit.com/r/mildlyinteresting/comments/6iewhc/t...
Commenters claim it is done so that people in the factories won't steal shoes since they can't get both left and right shoes.
The first link has two different color insoles present, they might be different productions runs from different factories.
The second link has labels stuck to the insole but they look like off a hand held label printer, not the mandated COO label so I am a little skeptical.
Are you asking if there is evidence that the described story was told in Soviet Russia, or are you asking if there is evidence that the obvious parable is an actual factual account?
I would like to know if there was a shoe factory in Soviet Russia that produced superfluous shoes for children during a shortage of shoes for adults. I am familiar with the problems of centrally planned economies and with the Soviet economies in general. I am wondering if there was an actual instance of this happening with shoes.
These memes tend to propagate and mutate through the minds of those who are keen to believe things without evidence.
> These memes tend to propagate and mutate through the minds of those who are keen to believe things without evidence.
There is definitely evidence of shoe shortages in the Soviet Union - enough that it's a running joke.
A quick Google turned up this post:
https://www.econlib.org/archives/2009/09/soviet_shoes.html
which cites this book:
https://www.amazon.com/Dismantling-Utopia-Information-Ended-...
I'm not sure if there will be better evidence, given the USSR's propensity to pad their stats.
This is great. Thanks.
“ In Soviet Russia there is a story”
This is explicitly labeled as a story. It is a parable used to illustrate a point. Do you also demand evidence of the boy who cried wolf? Or little red riding hood who strayed from the safe path? These are the same kind of things.
I would understand your question maybe if the article would purport the existence of the shoe factory. But it doesn’t. And that is not the point of it.
Half the comments here are talking about this story as if it's a piece of factual evidence that proves an ideological point, so it seems valuable to ask if the story actually happened.
I am not demanding anything. I am very curious for real stories from the Soviet Union relevant to economics.
Here's a whole youtube channel for you: https://www.youtube.com/@UshankaShow
My last company started stack ranking people on number of GitHub commits - as if each commit is equivalent and the only thing that mattered is the quantity.
Soon enough, we started seeing lots of politics, cutthroat environment, management pressure, management meetings looking at dashboards of commits, stack ranks, PIPs and firings, but also a significant rise in the number of commits.
One year later, commits metric won. But the business lost customers tired of buggy software.
You got what you measure but quantity does not substitute quality.
A Soviet cartoon with similar story - a greedy customer wants a fur hat from a sheepskin, and he asks whether the hat tailor can make 2 hats from the same skin, and the tailor says sure he can ... that goes to 7 hats, and when the customer comes to receive the completed order he receives the 7 hats as ordered https://youtu.be/gSpjDi2BrQk?t=193
This is based on an old Russian tale, so the story itself is not specifically Soviet.
Measurement Dysfunction is a better name for this, tho less colorful and insulting
See also VO2 max
The Theranos Startup Model is just the capitalist equivalent of SSFP: Instead of making useless shoes, they make useless software or fake hardware. Instead of meeting state quotas, they hit VC funding goals. Instead of the government propping them up, investors keep them afloat.
2. Theranos as a “Startup Shoe Factory”
Theranos is the perfect capitalist version of the Soviet Shoe Factory:
Soviet Model == Theranos Model (Capitalist Equivalent) Shoe factories produced small sizes to meet quotas. Theranos faked blood test results to meet investor expectations. Factories cut material costs and quality to meet output goals. Theranos lied about its technology because real innovation was too slow. Central planners rewarded metrics over reality. VC investors rewarded hype over real products. Factories looked productive on paper, even if they made useless products. Theranos looked like a billion-dollar startup, even though it had no working product. The economy was distorted by planned quotas. The startup world is distorted by fake valuations and exit-driven funding.
Nah. Theranos was a fraud that survived for 15 years (fewer if you count their active period). "Capitalism" killed it off when the fraud became public and investors stopped giving them money.
Capitalism isn't magic, humans can still be fooled. The nice thing about capitalism is that I personally didn't have to give them money. Caveat investor.
They weren't operating as a fraud in the beginning. I'd give the benefit of the doubt that Holmes was just naive about the technical issues given her inexperience. They switched to fraud to buy time for the intended product.
Is it acceptable business practice (aka not fraud) to take money from people when an even laymen in the field can detect the level of lies. Rational human beings don't like being tricked, she was a magician of medicinal claims and knew the showmanship requirements.
Extraordinary claims require some kind of data and facts to back the claim, which there was none. There is no evidence to believe they could develop this technology, optimism yes, but evidence no. It was fraud from the start.
You do know the Soviet System also had money and had the equivalent of 'investors' giving said money to institutions. Money and markets is not what makes capitalsim unique. Hint, it's in the name.