barriers to entry

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Team Geek by Brian W. Fitzpatrick, Ben Collins-Sussman

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anti-pattern, barriers to entry, cognitive dissonance, Dean Kamen, en.wikipedia.org, fear of failure, Guido van Rossum, Paul Graham, publish or perish, Richard Stallman, Silicon Valley, Steve Jobs, web application

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If your product is a web application, make sure it loads quickly! We’ve become spoiled about web page speed. When told to check out a new website, if it doesn’t load within three or four seconds, Fitz usually aborts and loses interest. There’s simply no excuse here. When programmers make users wait in line at the entrance, that’s an irritating barrier to entry. The web browser makes it easy to walk away and redirect our attention to 12 other places. We have better things to do than wait for a page to load. A great example of a nearly invisible barrier to entry is the TripIt web service, which is designed to manage travel itineraries. To start using the service simply forward your existing travel-confirmation emails (airplane, hotel, rental car, etc.) to plans@tripit.com. Poof, you’re now using TripIt. The service creates a temporary account for you, parses your emails, creates a gorgeous itinerary page, and then sends an email to tell you it’s ready.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

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additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disintermediation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, liberation theology, Martin Wolf, mega-rich, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, Plutocrats, plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

At the theoretical level, finding a precise definition of barriers to entry has led to considerable hair-splitting among economists. One approach defines barriers to entry as factors that enable firms that are already in the market to command prices that are higher than unfettered competition would produce, yet without inducing new competitors to enter. Another approach identifies barriers to entry as any costs that a new competitor faces prior to entering the market, yet that firms already in the market do not face. In other words, the distinction is between a protected price advantage for firms already in the market and a supplementary cost, such as an entry fee, for would-be competitors. Other economists have more complex definitions still, but nothing in these debates takes away from the core insight that barriers to entry are essential to understanding the dynamics of a marketplace and the use of market power to maximize long-term profits.

Rather, the extent of market power and, with it, the stability of an industry’s structure and the advantage of shelter that its dominant firms enjoy are best gauged by looking at the presence and effectiveness of barriers to entry. And when we do this, a salient trend quickly becomes clear: across the board, the traditional barriers to entry that shaped industry structure for the better part of the twentieth century have grown porous or fallen altogether. Axioms of corporate organization have been overturned. As a result, market power is no longer what it used to be. The antidote to business insecurity and instability is losing its effectiveness. And the advantage long considered to be built into corporate scale, scope, and hierarchy has been blunted, or even transformed into a handicap. BARRIERS ARE DOWN, COMPETITION IS UP The classic barriers to entry in business are well known. Size, for example, prevents smaller companies from taking on larger ones.

From the Chess Board . . . to Everything Around Us What Changed? The Decay of Power: Is It New? Is It True? So What? But What Is Power? The Decay of Power: What’s at Stake? CHAPTER TWO MAKING SENSE OF POWER: HOW IT WORKS AND HOW TO KEEP IT How to Talk About Power How Power Works Why Power Shifts—or Stays Steady The Importance of Barriers to Power The Blueprint: Explaining Market Power Barriers to Entry: A Key to Market Power From Barriers to Entry to Barriers to Power CHAPTER THREE HOW POWER GOT BIG: AN ASSUMPTION’S UNQUESTIONED RISE Max Weber, or Why Size Made Sense How the World Went Weberian The Myth of the Power Elite? CHAPTER FOUR HOW POWER LOST ITS EDGE: THE MORE, MOBILITY, AND MENTALITY REVOLUTIONS So What Has Changed? The More Revolution: Overwhelming the Means of Control The Mobility Revolution: The End of Captive Audiences 7 The Mentality Revolution: Taking Nothing for Granted Anymore How Does It Work?


pages: 56 words: 16,788

The New Kingmakers by Stephen O'Grady

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Amazon Web Services, barriers to entry, cloud computing, correlation does not imply causation, crowdsourcing, David Heinemeier Hansson, DevOps, Jeff Bezos, Khan Academy, Kickstarter, Marc Andreessen, Mark Zuckerberg, Netflix Prize, Paul Graham, Ruby on Rails, Silicon Valley, Skype, software as a service, software is eating the world, Steve Ballmer, Steve Jobs, Tim Cook: Apple, Y Combinator

The success of these projects and others like them is thanks to developers. The millions of programmers across the world who use, develop, improve, document, and rely upon open source are the main reason it’s relevant, and the main reason it continues to grow. In return for this support, open source has set those developers free from traditional procurement. Forever. Financial constraints that once served as a barrier to entry in software not only throttled the rate and pace of innovation in the industry, they ensured that organizational developers were a subservient class at best, a cost center at worst. With the rise of open source, however, developers could for the first time assemble an infrastructure from the same pieces that industry titans like Google used to build their businesses—only at no cost, without seeking permission from anyone.

Choice and Fragmentation Not too long ago, conventional wisdom dictated that enterprises strictly limit themselves to one of two competing technology stacks—Java or .NET. But in truth, the world was never that simple. While the Sun vs Microsoft storyline supplied journalists with the sort of one-on-one rivalry they love to mine, the reality was never so black and white. Even as the enterprises focused on the likes of J2EE, Perl, PHP, and others were flowing like water around the “approved” platforms, servicing workloads where development speed and low barriers to entry were at a premium. It was similar to what had occurred years earlier, when Java and C# supplanted the platforms (C, C++, etc.) that preceded them. Fragmentation in the language and platform space is nothing new: “different tools for different jobs” has always been the developers’ mantra, if not that of the buyers supplying them. But the pace of this fragmentation is accelerating, with the impacts downstream significantly less clear.

With talent markets perpetually short on developers, companies only hiring locally or on a relocation basis are increasingly at a disadvantage relative to competitors that can hire from anywhere in the world. It can be difficult today even to convince developers to commute, let alone relocate to geographies where they’re cut off from friends and family. Adaptive organizations, therefore, are seeking ways to leverage distributed development as a core part of their talent-acquisition strategy. If you’re not, expect to lose talent to competitors who are. Lower the Barriers to Entry Many technologists believe that quality is the most important factor in determining whether a technology is adopted or ignored. And there’s no question that the merits of a given product or project are a vital input into the selection process. That has only become more true as open source has made it easier to use and compare code. But quality is just one factor—and it’s often not the most important one.

From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry by Martin Campbell-Kelly

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Apple II, Apple's 1984 Super Bowl advert, barriers to entry, Bill Gates: Altair 8800, business process, card file, computer age, computer vision, continuous integration, deskilling, Donald Knuth, Grace Hopper, information asymmetry, inventory management, John Markoff, John von Neumann, linear programming, Menlo Park, Network effects, popular electronics, RAND corporation, Robert X Cringely, Ronald Reagan, Silicon Valley, software patent, Steve Jobs, Steve Wozniak, Steven Levy, Thomas Kuhn: the structure of scientific revolutions

These magazines typically sold 50,000–150,000 copies a month.10 As was noted earlier, a crucial differences between a videogame console and a home computer were that the latter could be programmed by the user and that it came equipped with a keyboard and secondary storage. Thus, barriers to entry into software development for home computers were almost non-existent. No additional software development system was needed, there were no proprietary trade secrets to unlock, and programs could be duplicated on the computer itself, with no need for access to a third-party manufacturing plant. The lack of significant barriers to entry led to the phenomenon of the “bedroom coder.” Thousands of would-be software tycoons began to write games in their spare time, selling their programs through small ads in computer magazines. The typical game cost $15 and consisted of a smudgy, photocopied sheet of instructions and a tape cassette or a floppy disk in a plastic bag.

They were established by entrepreneurially minded individuals from the technical computing community who, individually or severally, combined the skills of the technical expert and the business promoter. The skills of the technical expert were the most critical, since a high level of programming competence was the sine qua non of being in the business. In the 1950s, the only way to acquire these skills was to learn them as an employee of a computer manufacturer or user. However, if one had these skills, there were very few other barriers to entry into software business—“all you need is a coding pad and a sharp pencil.”67 Another source put it this way: “All you need is two programmers and a coffee pot. Many don’t even have their own computer, but rent time to debug programs at Origins of the Software Contractor 51 a service bureau.”68 Even better, it was usually possible to use the client’s computer for program development. The Computer Usage Company The Computer Usage Company (CUC), generally agreed to have been the first software contractor, was founded in New York in 1955 by John Sheldon and Elmer Kubie, then in their early thirties.69 Sheldon and Kubie had both got their entrée into computing in IBM’s Technical Computing Bureau.

One indicator, perhaps, is the fact that ADAPSO went from 72 members in 1963 to 235 members by 1970, at which time it claimed to represent “34 percent of the industry’s companies . . . and 48 percent of the estimated sales volume.”15 Though these numbers probably capture the number of processing services, facilities management, and teleprocessing firms accurately, they undoubtedly underestimate the number of programming services firms. Of the four sectors, programming services had by far the lowest barriers to entry; consequently, it attracted the most new entrants. All the evidence on the size of the industry, however, appears to be anecdotal. Perhaps the most reliable source was Larry Welke, founder of International Computer Programs Inc., who testified in the IBM antitrust suit that there were between 40 and 50 independent suppliers of 64 Chapter 3 5 4.5 4 3.5 CSSI ($ billion) Software ($ billion) 3 2.5 2 1.5 1 0.5 74 73 19 19 72 19 71 70 19 69 19 68 19 67 19 66 19 19 65 19 64 63 19 62 19 61 19 19 19 60 0 Figure 3.1 The US computer services and software industries, 1960–1974.


pages: 370 words: 105,085

Joel on Software by Joel Spolsky

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barriers to entry, c2.com, commoditize, George Gilder, index card, Jeff Bezos, knowledge worker, Metcalfe's law, Network effects, new economy, PageRank, Paul Graham, profit motive, Robert X Cringely, shareholder value, Silicon Valley, Silicon Valley startup, six sigma, slashdot, Steve Ballmer, Steve Jobs, the scientific method, thinkpad, VA Linux, web application

Why should we make it easy for customers to leave the service? That's because they are shortsighted. These are not your customers now. Try to lock them in before they become your customers, and you'll just lock them out. But if you make an honest promise that it will be easy to back out of the service if they're not happy, and suddenly you eliminate one more barrier to entry. And, as we learned, eliminating even a single barrier to entry can have a dramatic effect on conversions, and over time, when you knock down that last barrier to entry, people will start flooding in, and life will be good for a while. Until somebody does the same thing to you. thirty-nine STRATEGY LETTER IV: BLOATWARE AND THE 80/20 MYTH FRIDAY, MARCH 23, 2001 Version 5.0 of Microsoft's flagship spreadsheet program Excel came out in 1993. It was positively huge; it required a whole 15MB of hard drive space.

One thing you see a lot during a transition from an old monopoly to a new monopoly is a magic "tipping point": one morning, you wake up and your product has 80 percent market share instead of 20 percent market share. This flip tends to happen very quickly (VisiCalc to 123 to Excel, WordStar to WordPerfect to Word, Mosaic to Netscape to Internet Explorer, dBase to Access, and so on). It usually happens because the very last barrier to entry has fallen, and suddenly it's logical for everyone to switch. Obviously, it's important to work on fixing the obvious barriers to entry, but once you think you've addressed those, you need to figure out what the not-so-obvious ones are. And this is where strategy becomes tricky, because there are some non-obvious things that keep people from switching. Here's an example. This summer I'm spending most of my time in a house near the beach, but my bills still go to the apartment in New York City.

The first thing to ask is: Are you going into a business that has competition, or not? Ben & Jerry's Amazon Lots of established competitors New technology, no competition at first If you don't have any real competition, as with Amazon, there is a chance that you can succeed at a Land Grab—that is, get as many customers as quickly as possible so that later competitors will have a serious barrier to entry. But if you're going into an industry that has a well-established set of competitors, the Land Grab idea doesn't make sense, because you'd need to create your customer base by getting customers to switch over from competitors. In general, venture capitalists aren't too enthusiastic about the idea of going into a market with pesky competitors. Personally, I'm not so scared of established competition, perhaps because I worked on Microsoft Excel during a period when it almost completely took over Lotus 123, which virtually had the market to itself.


pages: 238 words: 73,824

Makers by Chris Anderson

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3D printing, Airbnb, Any sufficiently advanced technology is indistinguishable from magic, Apple II, autonomous vehicles, barriers to entry, Buckminster Fuller, Build a better mousetrap, business process, commoditize, Computer Numeric Control, crowdsourcing, dark matter, David Ricardo: comparative advantage, death of newspapers, dematerialisation, Elon Musk, factory automation, Firefox, future of work, global supply chain, global village, industrial robot, interchangeable parts, Internet of things, inventory management, James Hargreaves, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, Kickstarter, Lean Startup, manufacturing employment, Mark Zuckerberg, means of production, Menlo Park, Network effects, profit maximization, QR code, race to the bottom, Richard Feynman, Richard Feynman, Ronald Coase, Rubik’s Cube, self-driving car, side project, Silicon Valley, Silicon Valley startup, Skype, slashdot, South of Market, San Francisco, spinning jenny, Startup school, stem cell, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, supply-chain management, The Nature of the Firm, The Wealth of Nations by Adam Smith, transaction costs, trickle-down economics, Whole Earth Catalog, X Prize, Y Combinator

Indeed, startup factories such as Y Combinator now coin entrepreneurs first and ideas later. Their “startup schools” admit smart young people on the basis of little more than a PowerPoint presentation. Once admitted, the would-be entrepreneurs are given spending money, whiteboards, and desk space and told to dream up something worth funding in three weeks. Most do, which says as much about the Web’s ankle-high barriers to entry as it does about the genius of the participants. Over the past six years, Y Combinator has funded three hundred such companies, with such names as Loopt, Wufoo, Xobni, Heroku, Heyzap, and Bump. Incredibly, some of them (such as DropBox and Airbnb) are now worth billions of dollars. Indeed, the company I work for, Condé Nast, even bought one of them, Reddit, which now gets more than 2 billion page views a month.

Just add batteries. Disruptive by design Transformative change happens when industries democratize, when they’re ripped from the sole domain of companies, governments, and other institutions and handed over to regular folks. We’ve seen this picture before: it’s what happens just before monolithic industries fragment in the face of countless small entrants, from the music industry to newspapers. Lower the barriers to entry and the crowd pours in. That’s the power of democratization: it puts tools in the hands of those who know best how to use them. We all have our own needs, our own expertise, our own ideas. If we are all empowered to use tools to meet those needs, or modify them with our own ideas, we will collectively find the full range of what a tool can do. The Internet democratized publishing, broadcasting, and communications, and the consequence was a massive increase in the range of both participation and participants in everything digital—the Long Tail of bits.

Burn,” Autodesk now preaches the gospel of “Rip. Mod. Fab” (3-D scan objects, modify them in a CAD program, and print them on a 3-D printer). That ability to easily “remix” digital files is the engine that drives community. What it offers is an invitation to participate. You don’t need to invent something from scratch or have an original idea. Instead, you can participate in a collaborative improvement of existing ideas or designs. The barrier to entry of participation is lower because it’s so easy to modify digital files rather than create them entirely yourself. My grandfather was a lone inventor, not because he was especially solitary but because he had no mechanism for easy sharing. I may be no more extroverted than he was, but because my medium is digital, sharing comes naturally. When you share, community forms. And what community does best is remixing—exploring variation in what a product can be, and in the process improving it and propagating it far faster than any individual or single company could.


pages: 319 words: 89,477

The Power of Pull: How Small Moves, Smartly Made, Can Set Big Things in Motion by John Hagel Iii, John Seely Brown

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Albert Einstein, Andrew Keen, barriers to entry, Black Swan, business process, call centre, Clayton Christensen, cleantech, cloud computing, commoditize, corporate governance, creative destruction, Elon Musk, en.wikipedia.org, future of work, game design, George Gilder, intangible asset, Isaac Newton, job satisfaction, knowledge economy, knowledge worker, loose coupling, Louis Pasteur, Malcom McLean invented shipping containers, Maui Hawaii, medical residency, Network effects, old-boy network, packet switching, pattern recognition, peer-to-peer, pre–internet, profit motive, recommendation engine, Ronald Coase, shareholder value, Silicon Valley, Skype, smart transportation, software as a service, supply-chain management, The Nature of the Firm, the new new thing, too big to fail, trade liberalization, transaction costs

Although this trend may not continue—as we write, in the midst of a global economic downturn, public support for protectionist policies is growing in many parts of the world—these public policy trends have reinforced the profound social and economic effects of the new digital infrastructure. Together, they are the powerful catalysts setting the Big Shift into motion. Economic Impact The Big Shift is still at an early stage of its innovation and dissemination process, but already-visible patterns are nearly certain to persist as digital technologies systematically and substantially reduce barriers to entry and barriers to movement on a global scale. It is now possible for even the smallest vendors to reach a global market of customers using digital networks. The digital infrastructure makes outsourcing more feasible than ever, and this in turn makes it easier for small companies to access and use world-class capability to deliver more value to their markets and to respond more rapidly to unanticipated changes in markets.

In the United States, the exponentially advancing price/performance capability of computing, storage, and bandwidth is driving an adoption rate for the digital infrastructure that is two to five times faster than adoption rates were for previous infrastructures, such as electricity and telephone networks.10 As the price/performance ratio goes down, new capabilities emerge faster than before and disruption occurs frequently rather than in isolated episodes. Fueled by this new digital infrastructure—and public policy changes that overwhelmingly have reduced barriers to entry and movement—U.S. competitive intensity is more than twice what it was in the mid-1960s.11 Declining ROA rates, even as labor productivity rises, suggest that firms are unable to hold onto the financial benefits created by steady gains in labor productivity. Who is capturing the rewards instead? Our metrics suggest that creative talent is one beneficiary—for example, computer engineers, health-care professionals, architects, and managers, whose total compensation has more than doubled during the past five years.12 Consumers are also benefiting, thanks to increasing access to ever-growing numbers of products and services and to information (such as comparative price information) about them and the vendors that offer them.

In order to stay successful in a world of accelerating change, we need to find ways to learn faster, often in areas that we once viewed as quite peripheral to our professions. We can sum it all up with the following statement: Push is no longer the dominant paradigm in business, education, or civic life. Welcome to the foundational change that makes pull the dominant paradigm in our lives. The Second Wave: Knowledge Flows If the Big Shift’s first wave is all about lowering barriers to entry and movement, the second wave shows what happens when those barriers go away: Capital, talent, and knowledge start flowing increasingly rapidly across geographical and institutional boundaries. By our estimation, developed economies today are somewhere in the early part of the second wave of the Big Shift, with the third wave yet to come. Firms have yet to make a meaningful transition into the digital age.


pages: 831 words: 98,409

SUPERHUBS: How the Financial Elite and Their Networks Rule Our World by Sandra Navidi

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activist fund / activist shareholder / activist investor, assortative mating, bank run, barriers to entry, Bernie Sanders, Black Swan, Bretton Woods, butterfly effect, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, commoditize, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversification, East Village, Elon Musk, eurozone crisis, family office, financial repression, Gini coefficient, glass ceiling, Goldman Sachs: Vampire Squid, Google bus, Gordon Gekko, haute cuisine, high net worth, hindsight bias, income inequality, index fund, intangible asset, Jaron Lanier, John Meriwether, Kenneth Arrow, Kenneth Rogoff, knowledge economy, London Whale, Long Term Capital Management, Mark Zuckerberg, mass immigration, McMansion, mittelstand, money market fund, Myron Scholes, NetJets, Network effects, offshore financial centre, old-boy network, Parag Khanna, Paul Samuelson, peer-to-peer, performance metric, Peter Thiel, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, Renaissance Technologies, rent-seeking, reserve currency, risk tolerance, Robert Gordon, Robert Shiller, Robert Shiller, rolodex, Satyajit Das, shareholder value, Silicon Valley, sovereign wealth fund, Stephen Hawking, Steve Jobs, The Future of Employment, The Predators' Ball, too big to fail, women in the workforce, young professional

Roubini agrees that possessing emotional intelligence is helpful but argues that the power of his ideas is what established him as a thought leader. His business consultancy has likely benefited from both his intellectual and social skills. Consulting is a competitive field as research is generally considered a cost and not a profit center, and the market is flooded with gratuitous high-quality analyses. There are no barriers to entry as it is not a licensed profession, and anyone can call him- or herself a consultant. Therefore, having top academic credentials, policy experience, and access to high-caliber networks provide thought leaders with distinct competitive advantages that propel them into the league of superhubs. Most thought leaders in finance are economists. A select few have become academic celebrities, such as Thomas Piketty, Nassim Taleb, and Paul Krugman, because they have touched the Zeitgeist.

In 2014, hedge fund executive Kenneth Griffin made a donation of $150 million to his alma mater, Harvard, and private equity guru Steve Schwarzman gifted Yale with $150 million in 2015. Over time, an informal system developed in which affiliations ensure that “members of the club” help one another in advancing their interests. They interact at work, golf clubs, think tanks, and any other platforms with high barriers to entry, be they financial, status-wise, or both. The old boys’ network is less conservative and stereotypical than it used to be, but it is still alive and well. Its members have similar social backgrounds and usually live in an exclusive bubble of privilege. Because of their influence, they determine the culture, define norms, and set the tone. The more-senior members recognize themselves in the younger ones and relate to their personal and professional struggles.

Subtle communication nuances such as tone and inflection often get lost in email. Video conferences are the next best thing to face-to-face meetings, but they cannot replace them as participants cannot engage in direct eye contact, exchange handshakes and other personal gestures, or interpret nonverbal cues. Thus, digitized interaction is superficial at best and fragile at worst. Internet-based social networks such as Friendster and Myspace are often fleeting. With no barrier to entry, users have little loyalty and move on when the next best thing comes along. If technology fails, or is blocked by governments, connecting becomes impossible. According to the Pew study Social Isolation and New Technology, people still prefer face-to-face communication as the primary means to stay in touch.7 A deep and trusting relationship is a privilege that must be earned with an investment of time and effort, tested through adversity, and fostered through mutual experiences.


pages: 400 words: 94,847

Reinventing Discovery: The New Era of Networked Science by Michael Nielsen

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Albert Einstein, augmented reality, barriers to entry, bioinformatics, Cass Sunstein, Climategate, Climatic Research Unit, conceptual framework, dark matter, discovery of DNA, Donald Knuth, double helix, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Erik Brynjolfsson, fault tolerance, Fellow of the Royal Society, Firefox, Freestyle chess, Galaxy Zoo, Internet Archive, invisible hand, Jane Jacobs, Jaron Lanier, Kevin Kelly, Magellanic Cloud, means of production, medical residency, Nicholas Carr, publish or perish, Richard Feynman, Richard Feynman, Richard Stallman, selection bias, semantic web, Silicon Valley, Silicon Valley startup, Simon Singh, Skype, slashdot, social web, statistical model, Stephen Hawking, Stewart Brand, Ted Nelson, The Death and Life of Great American Cities, The Nature of the Firm, The Wisdom of Crowds, University of East Anglia, Vannevar Bush, Vernor Vinge

In the next chapter, chapter 4, we’ll see many collaborative patterns that can help achieve these ends, including: • Modularizing the collaboration, that is, figuring out ways to split up the overall task into smaller subtasks that can be attacked independently or nearly independently. This reduces barriers to entry by new people, and thus broadens the range of available expertise. Modularity is often difficult to achieve, requiring a conscious, relentless commitment on the part of participants. • Encouraging small contributions, again to reduce barriers to entry, and to broaden the range of available expertise. • Developing a rich and well structured information commons, so people can build on earlier work. The easier it is to find and reuse earlier work, the faster the information commons will grow. In chapter 5 we’ll examine the limits to collective intelligence.

Although citizen science is not new, online tools are enabling far more people to participate—think of Galaxy Zoo’s 200,000-plus participants and Foldit’s 75,000-plus participants—and also expanding the range of scientific work those people can do. To be a comet hunter in the 1960s you needed to purchase or build a telescope, learn how to use it, and then spend many, many hours observing the sky. The barriers to entry and to continued contribution were high. By contrast, you can get started on Galaxy Zoo or Foldit in a matter of minutes. It’s even possible to classify galaxies on your smartphone. Aside from dropping barriers to entry, online tools also enable sophisticated interactive training, and bring participants together in communities where they can learn from one another, and support one another’s work. As a result we’re seeing a great flowering of citizen science. As an example of this flowering, comet hunting has been transformed by the internet.

In particular, open source collaborations have been superbly effective at scaling up, and so increasing the cognitive diversity and range of microexpertise available to the collaboration. In this chapter we’ll identify four powerful patterns that open source collaborations have used to scale. (1) a relentless commitment to working in a modular way, finding clever ways of splitting up the overall task into smaller subtasks; (2) encouraging small contributions, to reduce barriers to entry; (3) allowing easy reuse of earlier work by other people; and (4) using signaling mechanisms such as scores to help people decide where to direct their attention. These patterns can be incorporated into any architecture of attention, and so be used to amplify coe intelligence. The Importance of Being Modular To understand how open source collaborations scale, let’s look at a time when the Linux collaboration almost failed to scale, a time when the Linux developer community almost fractured into two separate camps, working on two separate versions of Linux.


pages: 406 words: 88,820

Television disrupted: the transition from network to networked TV by Shelly Palmer

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barriers to entry, call centre, commoditize, disintermediation, en.wikipedia.org, hypertext link, interchangeable parts, invention of movable type, Irwin Jacobs: Qualcomm, James Watt: steam engine, Leonard Kleinrock, linear programming, Marc Andreessen, market design, Metcalfe’s law, pattern recognition, peer-to-peer, recommendation engine, Saturday Night Live, shareholder value, Skype, spectrum auction, Steve Jobs, subscription business, Telecommunications Act of 1996, There's no reason for any individual to have a computer in his home - Ken Olsen, Vickrey auction, Vilfredo Pareto, yield management

This data compression technology, and other subsequent compression schemas, cost the dot-com speculators billions of dollars because they created an extraordinary amount of over-capacity on the existing fiber optic networks. There is an important lesson to be learned from this experience. Technology is fleeting. Technological edges or advantages can be extremely short-lived. And, as we all know all too well, the last half mile is the barrier to entry. In other words, getting fiber to the curb is not the same as getting fiber to the premises or fiber to the pillow. Traditionally, innovations in audio have happened about 10 years before their video counterparts. This is just a bit of armchair wisdom, not a trend analysis. Later in this chapter, we will explore some of the profound differences between the audio and video businesses and the technologies that enable them.

All rights reserved. 6-Television.Chap Six v3sp.qxd 3/20/06 7:22 AM Page 75 6 Content, Storytellers, Gatekeepers and Related Skills When people say “Content is king,” they don’t mean your content — unless you happen to be holding the rights to distribute games from major sports franchises, episodes of hit prime time television series or reruns of big off-network sitcoms. Saying content is king is like saying hits are important. It is an absurd, overused, oversimplified way of communicating the idea that good business models revolve around the “business of hits.” However, since the financial barriers to entry of the networked television business are significantly lower then those of the network television business, the economics of the “business of hits” is being redefined. And, the inherent two-way nature of the technology that enables networked television has some added benefits for storytellers. Storytelling Somewhere back in time, we learned how to listen to a speech. And, whenever the concept of an imagined performance first occurred to someone, the concept of an audience sitting quietly and paying attention was not far behind.

told them that what they are eating is called a hamburger, so should we be surprised if they do not recognize ground sirloin on a sourdough bun as the same food-stuff? Or if they do recognize the genus (hamburger), should we be surprised that their tastes have evolved (or devolved) to a point where they will show a marked preference for MickyD’s over a classic “21 Burger?” Who Are the Gatekeepers? Since the advent of technology, there have always been significant monetary barriers to entry for almost every creative outlet. You needed a printing press to make books, a recording studio to make music, a film studio to make films, etc. You also needed crafts-people (back then they were politically incorrectly referred to as craftsmen, but at that time, all u machines, boats and hurricanes were female — Tastes change and art crazy times, they were!). The organizations and evolves, but in the before-time, businesses that could effectively field an infrastruc- they had help and guidance from ture and efficient distribution channels became the gatekeepers.


pages: 421 words: 110,406

Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You by Sangeet Paul Choudary, Marshall W. van Alstyne, Geoffrey G. Parker

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3D printing, Affordable Care Act / Obamacare, Airbnb, Alvin Roth, Amazon Mechanical Turk, Amazon Web Services, Andrei Shleifer, Apple's 1984 Super Bowl advert, autonomous vehicles, barriers to entry, big data - Walmart - Pop Tarts, bitcoin, blockchain, business process, buy low sell high, chief data officer, Chuck Templeton: OpenTable, clean water, cloud computing, connected car, corporate governance, crowdsourcing, data acquisition, data is the new oil, digital map, discounted cash flows, disintermediation, Edward Glaeser, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, financial innovation, Haber-Bosch Process, High speed trading, information asymmetry, Internet of things, inventory management, invisible hand, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, Khan Academy, Kickstarter, Lean Startup, Lyft, Marc Andreessen, market design, Metcalfe’s law, multi-sided market, Network effects, new economy, payday loans, peer-to-peer lending, Peter Thiel, pets.com, pre–internet, price mechanism, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Metcalfe, Ronald Coase, Satoshi Nakamoto, self-driving car, shareholder value, sharing economy, side project, Silicon Valley, Skype, smart contracts, smart grid, Snapchat, software is eating the world, Steve Jobs, TaskRabbit, The Chicago School, the payments system, Tim Cook: Apple, transaction costs, two-sided market, Uber and Lyft, Uber for X, winner-take-all economy, zero-sum game, Zipcar

In similar fashion, Airbnb works to lower the hurdles for its member-hosts by regularly conducting events and programs designed to illustrate and teach its best practices. Uber works to remove economic barriers that might discourage would-be drivers by providing financial incentives like sign-up bonuses. Platforms like Dribbble, Threadless, and 99designs have built large ecosystems of designers, largely owing to the democratization of the tools of design and printing over the last several years—yet another case of barriers to entry being lowered, in part through the help of platform tools. The proliferation of new production technologies further enables the emergence of new groups of producers. Just as the smartphone camera expanded the volume of content on platforms like Instagram and Vine, the spread of 3D printing is likely to lead to a new range of platforms for industry design. However, technology often needs the support of innovative business design to produce massive reconfiguration of value creation.

Porter’s model identifies five forces that affect the strategic position of a particular business: the threat of new entrants to the market, the threat of substitute products or services, the bargaining power of customers, the bargaining power of suppliers, and the intensity of competitive rivalry in the industry. The goal of strategy is to control these five forces in such a way as to build a moat around the business and thereby render it unassailable. Thus, when a firm can erect barriers to entry, it can keep competitors out, and entrants with substitute products cannot storm the castle. When a firm can subjugate suppliers, competition among them weakens their bargaining power so the firm can keep its costs low. When a firm can subjugate buyers by keeping them relatively small, disunited, and powerless, the firm can keep its prices high. In this model, the firm maximizes profits by avoiding ruinous competition for itself but encouraging it for everyone else in the value chain.

Whirlpool competes with GE by engineering differentiated products, squeezing the supply chain, and continually improving its manufacturing efficiencies, thereby constructing a moat that makes it hard for GE to poach Whirlpool’s customers. Later thinkers have added nuance and fresh insights to Porter’s approach. In 1984, MIT’s Birger Wernerfelt first described in detail what he called the resource-based view of the firm, a variation on strategic thinking with roots in the work of several earlier scholars.8 The resource-based view highlights the fact that a particularly effective barrier to entry is control of an indispensable and inimitable resource. A firm with such a resource is safe from new entrants who lack and cannot acquire means to produce it. A simple example is De Beers, whose control of a worldwide diamond marketing cartel enabled it to maintain a near-monopoly over the diamond industry for the entire twentieth century. The De Beers cartel broke down after 2000 when some diamond producers decided to market their product outside the De Beers-controlled system, reducing the cartel’s share of the market from 90 percent in the 1980s to about 33 percent in 2013.9 Until then, however, De Beers’s control of an irreplaceable resource gave it a sustainable advantage that yielded a hundred years’ worth of profits.


pages: 346 words: 90,371

Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane, John Muellbauer

agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land reform, land tenure, land value tax, Landlord’s Game, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Second Machine Age, secular stagnation, shareholder value, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population

When house prices are rising, developers must compete to secure suitable land, driving greater volatility in land prices. Because land acquisition is usually the largest single cost, and often the first one to be incurred, the price that the developer pays for the land determines much of what happens later in the process (see Box 4.7). The difficulties and costs of securing land also create major barriers to entry for new firms. The combination of high risk, cyclicality and barriers to entry drives concentration in the industry through business failures and mergers. This is only partially offset by the need for detailed local knowledge to secure the best sites at good prices. Because the developer does not retain an interest in the scheme, and because the developer has far more knowledge than the buyer (who is typically the consumer or an amateur investor) there is little incentive on the developer to prioritise quality.

Developers often control strategic land via the use of options agreements, which are private contracts with landowners such as farmers, and are generally not publicly disclosed. This restricts the ability of rivals to acquire suitable development sites, and presents a major barrier to entry into the house building industry, further entrenching the dominance of the existing large firms (Griffith, 2011). These land market conditions effectively give ‘monopoly power to developers who own particular patches of land where large proportions of development [are] being made available’ (Cheshire, 2011). The concentration of the industry and barriers to entry have lowered competitive pressure, and militated against product innovation, with the result that new homes in Britain are widely seen to be unattractive and poor quality, with only 18% rated as being of good or very good design.

This problem is worsened by the near total absence of publicly available data on the value of land or property. Despite a plethora of generalised indices of house prices, the only official index of land prices was discontinued in 2011, and the datasets on the value of commercial property held by the Valuation Office Agency for the levying of business rates are not publicly available. This paucity of market information creates significant inefficiencies and barriers to entry (see Chapter 4) and restricts the ability of public bodies and citizens to scrutinise the activities of landowners and developers (Jefferys, Lloyd, Argyle, et al., 2014). Property prices tend to be a poor proxy for land values since, as mentioned, materials prices and labour costs bear little relation to land values. This makes it impossible for economists to analyse the economic significance of land prices and land rents even if they wanted to.


Starstruck: The Business of Celebrity by Currid

barriers to entry, Bernie Madoff, Donald Trump, income inequality, index card, industrial cluster, labour mobility, Mark Zuckerberg, Metcalfe’s law, natural language processing, place-making, Ponzi scheme, post-industrial society, prediction markets, Renaissance Technologies, Richard Florida, Robert Metcalfe, rolodex, shareholder value, Silicon Valley, slashdot, transaction costs, upwardly mobile, urban decay, Vilfredo Pareto, winner-take-all economy

See Celebrity and Power. 6. Both Jeffrey Williams and David Marshall have noted the existence of celebrity outside the conventional Hollywood and political star systems. Both make the point that celebrities exist in autonomous and self-contained systems. See Marshall, Celebrity and Power, and Williams, “Academostars.” 7. Economists call this “barriers to entry.” When they look at markets, the ability to enter them is a function of “high” or “low” barriers. See Demsetz, “Barriers to Entry.” 8. Facebook researchers, for example, have pointed toward the ability of the social-networking site to allow people to “passively” be fed news about their friends. By simply trolling their news feed, members are able to collectively be updated on the extraneous aspects of their various five hundred–plus friends. Social media sites function less as networking conduits than as a means to cultivate public personae.

What makes us want to know more about someone over another? How does celebrity work? Before getting into the different aspects of stardom, it’s worth taking a moment to look at where we are now, which is in a state of unprecedented oversaturation and decentralization. Yes, undoubtedly, in order to be a film star one must pass through Los Angeles. But the deluge of social media has provided a virtual geography with no barriers to entry, such that people like M can permeate a collective consciousness around the world like any other celebrity. No, he will not grace the cover of US Weekly, but his wide and diverse social circle will be aware of all the intimate details of his life and may discuss him just as they would a conventional star. Similarly, Bollywood film stars (and their fans) care not at all about breaking into Western markets, and why would they?

Second, like all forms of celebrity, democratic celebrities run the gamut of talent-driven to all-residual. They may be discovered on American Idol for their beautiful voices or simply famous for being famous, like Goody. Third, democratic stars circumvent the normal vetting process, and that is part of their appeal. The development of technology, the rise of reality TV shows (and their great popularity), and the use of social media to perpetuate all forms of celebrity have reduced barriers to entry unlike at any other point in history. Reality TV stars, popular bloggers, MySpace and Facebook members who have thousands of friends, in another era would not have had the conduits to become mainstream stars. New forms of media and publicity allow individuals to become celebrities without being rejected by an elite Hollywood agent telling them they don’t have what it takes. Consider thirteen-year-old blogger Tavi Gevinson, who stunned the fashion world when she started blogging eloquently at age eleven about high-end designers.


pages: 168 words: 50,647

The End of Jobs: Money, Meaning and Freedom Without the 9-To-5 by Taylor Pearson

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Airbnb, barriers to entry, Black Swan, call centre, cloud computing, commoditize, creative destruction, David Heinemeier Hansson, Elon Musk, en.wikipedia.org, Frederick Winslow Taylor, future of work, Google Hangouts, Kevin Kelly, Kickstarter, knowledge economy, knowledge worker, loss aversion, low skilled workers, Lyft, Marc Andreessen, Mark Zuckerberg, market fragmentation, means of production, Oculus Rift, passive income, passive investing, Peter Thiel, remote working, Ronald Reagan: Tear down this wall, sharing economy, side project, Silicon Valley, Skype, software as a service, software is eating the world, Startup school, Steve Jobs, Steve Wozniak, Stewart Brand, telemarketer, Thomas Malthus, Uber and Lyft, unpaid internship, Watson beat the top human players on Jeopardy!, web application, Whole Earth Catalog

After the first one was successful, he started marketing the service and launched a productized service39 selling email marketing and conversion consulting to business owners.40 Dan Norris also launched a productized service similar to John with WP Curve, though targeted at a much larger audience and from a lower price point. While all the business models are unique, what’s universal is that the barrier to entry in each is no longer capital or formal credentials. All they needed to get started were free or relatively cheap resources they could buy online, and their own hard work. The entrepreneurial leap has become the entrepreneurial stair step. The latent demand and lower barriers to entry have allowed more people to become entrepreneurs by easing their way into the process. That’s not to say it’s easy—you still have to climb the stairs, but no longer in a single bound. Stair Stepping lets you build momentum behind your trajectory by developing the skills you need to run an entrepreneurial company.

The glut of lawyers in the U.S. may be the most obvious example, but even in the traditional STEM fields (science, technology, engineering, and mathematics), which were long considered lock-ins for employment, people with related degrees are struggling harder to find jobs than they were a decade ago. Jobs in almost all industries are becoming increasingly commoditized. It makes sense to us that low-skilled jobs with lower barriers to entry are being affected by globalization and technology, but why is it affecting the more highly-credentialed ones? The Cynefin Framework and Your Career The Cynefin framework23 (pronounced Kih-neh-vihn) was developed by Dave Snowden after studying the management structure at IBM. The framework became popular, and was featured in publications including the Harvard Business Review.24 It divides work and management up in ways that are more effective given the changing nature of work.

Just as technology made it viable for small bands to sell their records online, it’s also made entrepreneurship more accessible than ever. The Long Tail or What’s Making Entrepreneurship More Accessible Just like scientists sequencing the human genome were unable to predict how fast technology would enable the project to accelerate, the same has occurred with the technology needed to start a business. The barriers to entry have come down dramatically faster than most people have realized. There are three primary forces of the Long Tail which have driven this shift making entrepreneurship more accessible than ever. 1. The Democratization of the Tools of Production: Product Creation Costs Are Decreasing—Just as cheap software let Birdmonster produce music from their laptops, cheap tools have allowed entrepreneurs to start and run a business from anywhere with little to no capital up front.


pages: 528 words: 146,459

Computer: A History of the Information Machine by Martin Campbell-Kelly, William Aspray, Nathan L. Ensmenger, Jeffrey R. Yost

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Ada Lovelace, air freight, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Apple's 1984 Super Bowl advert, barriers to entry, Bill Gates: Altair 8800, borderless world, Buckminster Fuller, Build a better mousetrap, Byte Shop, card file, cashless society, cloud computing, combinatorial explosion, computer age, deskilling, don't be evil, Donald Davies, Douglas Engelbart, Douglas Engelbart, Dynabook, fault tolerance, Fellow of the Royal Society, financial independence, Frederick Winslow Taylor, game design, garden city movement, Grace Hopper, informal economy, interchangeable parts, invention of the wheel, Jacquard loom, Jacquard loom, Jeff Bezos, jimmy wales, John Markoff, John von Neumann, light touch regulation, linked data, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Menlo Park, natural language processing, Network effects, New Journalism, Norbert Wiener, Occupy movement, optical character recognition, packet switching, PageRank, pattern recognition, Pierre-Simon Laplace, pirate software, popular electronics, prediction markets, pre–internet, QWERTY keyboard, RAND corporation, Robert X Cringely, Silicon Valley, Silicon Valley startup, Steve Jobs, Steven Levy, Stewart Brand, Ted Nelson, the market place, Turing machine, Vannevar Bush, Von Neumann architecture, Whole Earth Catalog, William Shockley: the traitorous eight, women in the workforce, young professional

(To take one example, while the original VisiCalc had contained about 10,000 instructions, mature versions of the Lotus 1-2-3 spreadsheet contained about 400,000 lines of code.) The second barrier to entry was know-how. The sources of knowledge of how to create personal-computer software with an attractive interface had become locked into the existing firms. This knowledge was not something that could be learned from the literature or in a computer science class. The third, and probably the greatest, barrier was access to distribution channels. In 1983 it was said that there were thirty-five thousand products competing for a place among the two hundred products that a typical computer store could stock—three hundred word-processing packages just for the IBM-compatible PC. A huge advertising expenditure, and therefore a large injection of capital, was needed to overcome this barrier. One might have expected that these barriers to entry would have protected the existing firms such as VisiCorp, MicroPro, and Ashton-Tate, but this was not the case.

A more important source of profit was a greatly increased product range—in some cases the number of lines more than tripling—as a result of checkout automation. Many of these new lines were luxury goods with large margins; these were the real generators of profits. For the food industry itself, there were negative impacts of bar coding, much as the rise of supermarkets in the 1930s spelled an end to the owner-operated grocery store. For example, the barriers to entry into food manufacturing became greater. Not only were there the bureaucratic hurdles of UPC allocation to surmount, but penetrating the retail network of national chains now required at minimum an operation of substantial scale. Indeed, a curious development of the late twentieth century was the emergence of folksy specialty foods—apparently made by small-scale food preparers, but in fact mass-produced and sold by national chains.

ARD was the prototype venture-capital firm, and the development of such financial operations was a key factor responsible for the dynamism of the new high-tech industries in the United States. Most overseas countries found it very difficult to compete with US firms until they established their own venture-funding organizations. Olsen’s aim was to go into the computer business and compete with the mainframe manufacturers. However, in the late 1950s this was not a realistic short-term goal. The barriers to entry into the mainframe business were rising. In order to enter the mainframe business, one needed three things, in addition to a central processing unit: peripherals (such as magnetic tape and disk drives), software (both applications and program development tools), and a sales force. It would cost several hundred million dollars to establish all these capabilities. Because of these formidable barriers to entering the computer industry, Doriot convinced Olsen to first establish the firm with more attainable objectives.


pages: 330 words: 91,805

Peers Inc: How People and Platforms Are Inventing the Collaborative Economy and Reinventing Capitalism by Robin Chase

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3D printing, Airbnb, Amazon Web Services, Andy Kessler, banking crisis, barriers to entry, basic income, Benevolent Dictator For Life (BDFL), bitcoin, blockchain, Burning Man, business climate, call centre, car-free, cloud computing, collaborative consumption, collaborative economy, collective bargaining, commoditize, congestion charging, creative destruction, crowdsourcing, cryptocurrency, decarbonisation, don't be evil, Elon Musk, en.wikipedia.org, ethereum blockchain, Ferguson, Missouri, Firefox, frictionless, Gini coefficient, hive mind, income inequality, index fund, informal economy, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Jane Jacobs, Jeff Bezos, jimmy wales, job satisfaction, Kickstarter, Lean Startup, Lyft, means of production, megacity, Minecraft, minimum viable product, Network effects, new economy, Oculus Rift, openstreetmap, optical character recognition, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, Richard Stallman, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Search for Extraterrestrial Intelligence, self-driving car, shareholder value, sharing economy, Silicon Valley, six sigma, Skype, smart cities, smart grid, Snapchat, sovereign wealth fund, Steve Crocker, Steve Jobs, Steven Levy, TaskRabbit, The Death and Life of Great American Cities, The Future of Employment, The Nature of the Firm, transaction costs, Turing test, turn-by-turn navigation, Uber and Lyft, Zipcar

Platforms have impressive properties based on their raison d’être: simplifying, standardizing, and easing participation. This means that once you’ve got the elements of the platform exactly right and people are interested in the excess capacity you are offering up, it will grow very quickly. The good platform has reduced the cost and effort of participating to its absolute minimum, making the barriers to entry as low as possible. With growth come all the benefits of economies of scale. Platforms can be expensive to build, but the standardization of service provided, inherent in the platform model, means that each additional peer costs very little to add. At a certain point, the benefits are almost all to the upside. With a good idea, a great user experience, and a large market, platforms offer the biggest possible punch per investment dollar.

Platforms that are open, minimalistic, and decentralized—open APIs, protocols, simple rules—leave users so unconstrained that there is no possible way to have the binding constraint of a monopoly. How a platform was financed, and therefore who owns it, will also dictate its likelihood of exercising monopoly if it has the option. A discussion I had with entrepreneurs on this topic led to a lack of consensus. Some platforms (such as cloud computing, credit card processing, and mail servers) lack barriers to entry or protective intellectual property, and therefore they have competitors. For peers, using these platforms is much cheaper than building those assets on their own. I can attest to this, having built so many pieces for Zipcar and having bought them for my last company. And then, “when we don’t like the platform, we can just go elsewhere because we haven’t invested in the assets—switching costs are much lower than if we’d built it ourselves, and sunk costs are much lower likewise,” one CEO told me.

Zipcar, for example, is useful if there is just one car parked near your house, but when people in another city make it possible for you to rent cars there too, there is added value to you, albeit a marginal one. For BlaBlaCar, on the other hand, all the value is derived from network effects: Ridesharing only works when lots of people are participating. These network effects are powerful and can make it very hard for a new entrant to enter the market and go up against an established company with a very large network. The pinnacle in a pure capitalist economy is creating so many barriers to entry that no one else can really compete. That makes for an effective monopoly, yet one without government intervention or regulation. One way to stave off regulation is to act nice. If your co-creators aren’t complaining because they are fairly treated, well served, and heard from, then maybe the platform won’t need regulation but it truly is self-regulating. As we start to see more mature Peers Inc companies, we are also recognizing the huge problem with old-fashioned but unrecognized monopolies.


pages: 283 words: 85,824

The People's Platform: Taking Back Power and Culture in the Digital Age by Astra Taylor

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A Declaration of the Independence of Cyberspace, American Legislative Exchange Council, Andrew Keen, barriers to entry, Berlin Wall, big-box store, Brewster Kahle, citizen journalism, cloud computing, collateralized debt obligation, Community Supported Agriculture, conceptual framework, corporate social responsibility, creative destruction, cross-subsidies, crowdsourcing, David Brooks, digital Maoism, disintermediation, don't be evil, Donald Trump, Edward Snowden, Fall of the Berlin Wall, Filter Bubble, future of journalism, George Gilder, Google Chrome, Google Glasses, hive mind, income inequality, informal economy, Internet Archive, Internet of things, invisible hand, Jane Jacobs, Jaron Lanier, Jeff Bezos, job automation, John Markoff, Julian Assange, Kevin Kelly, Kickstarter, knowledge worker, Mark Zuckerberg, means of production, Metcalfe’s law, Naomi Klein, Narrative Science, Network effects, new economy, New Journalism, New Urbanism, Nicholas Carr, oil rush, peer-to-peer, Peter Thiel, Plutocrats, plutocrats, pre–internet, profit motive, recommendation engine, Richard Florida, Richard Stallman, self-driving car, shareholder value, sharing economy, Silicon Valley, Silicon Valley ideology, slashdot, Slavoj Žižek, Snapchat, social graph, Steve Jobs, Stewart Brand, technoutopianism, trade route, Whole Earth Catalog, WikiLeaks, winner-take-all economy, Works Progress Administration, young professional

Artists and writers will thrive without institutional backing, able to reach their audiences directly. A golden age of sharing and collaboration will be ushered in, modeled on Wikipedia and open source software. In many wonderful ways this is the world we have been waiting for. So what’s the catch? In some crucial respects the standard assumptions about the Internet’s inevitable effects have misled us. New technologies have undoubtedly removed barriers to entry, yet, as I will show, cultural democracy remains elusive. While it’s true that anyone with an Internet connection can speak online, that doesn’t mean our megaphones blast our messages at the same volume. Online, some speak louder than others. There are the followed and the followers. As should be obvious to anyone with an e-mail account, the Internet, though open to all, is hardly an egalitarian or noncommercial paradise, even if you bracket all the porn and shopping sites.

Now volunteers scattered across the globe can create one more comprehensive than any the world has ever known. And so on. An amateur paradise is upon us, a place where people are able to participate in cultural production for the pleasure of it, without asking permission first. Social media have enabled a new paradigm of collaboration. The old closed, hierarchical, institutional model is being replaced by a decentralized, networked system open to all. Barriers to entry have been removed, gatekeepers have been demolished, and the costs of creating and distributing culture have plummeted. New tools not only have made cultural production more efficient but have equalized opportunity. NYU professor Clay Shirky, perhaps the leading proponent of this view, calls this process “social production.” Harvard’s Yochai Benkler uses the term “peer production,” business writer Jeff Howe calls it “crowdsourcing,” and Don Tapscott and his coauthor Anthony D.

“Media are the only channels that have the motivation and resources required to have a real impact.” It wasn’t that the WikiLeaks mastermind had lost faith in people to think for themselves; rather, he recognized that they lacked the time the task required and the power to legitimize and publicize the results. Motivation and resources, time and power—these are assets that are not evenly distributed, even if the Internet has removed many of the old barriers to entry. They are inequalities that we must take into account when we talk about the network’s “level playing field.” The desire to transcend earthly inequality has suffused discussions of the Internet for decades. Early techno-utopians long ago declared that even the atom was “past” and promised the “tyranny of matter” overthrown.1 The terrestrial and corporeal, they confidently predicted, would soon be abandoned for the weightless Web.


pages: 236 words: 77,735

Rigged Money: Beating Wall Street at Its Own Game by Lee Munson

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affirmative action, asset allocation, backtesting, barriers to entry, Bernie Madoff, Bretton Woods, buy low sell high, California gold rush, call centre, Credit Default Swap, diversification, diversified portfolio, estate planning, fiat currency, financial innovation, fixed income, Flash crash, follow your passion, German hyperinflation, High speed trading, housing crisis, index fund, joint-stock company, money market fund, moral hazard, Myron Scholes, passive investing, Ponzi scheme, price discovery process, random walk, risk tolerance, risk-adjusted returns, risk/return, too big to fail, trade route, Vanguard fund, walking around money

Why was this important, outside of being the first stock? First of all, this was the first joint-stock company, meaning regular people like middle class merchants were able to invest in a public company. On September 1 the public subscription period was over. Five hundred thirty-eight subscribers, including craftsmen and small entrepreneurs, were given shares that were freely transferable.1 Before this there was a barrier to entry for investments. The idea of selling a piece of a company in order to lower the risk to any one person was not new, but allowing anybody with the money to buy shares was ground breaking. The Amsterdam Stock Exchange was established the same year just so people could trade shares of this new corporation. Why did it take so long for the madness to start? First off, you can’t sell stock to those that have no money, freedom, or laws protecting ownership.

The bottom line is too many people have too much information and all want the same thing—returns that are better than their peers. Put it this way. If more and more people get in the game, there is less for each person to take. The pie can only get cut up so many times. What is worse, the pie may not get bigger as more people take a slice. Nobody knows the future of investing, but as long as electronic trading lowers the barrier to entry, an endless stream of better players will look to take a piece of the action. At least the price of admission to the Magic Kingdom has only increased about 15 times since 1970, not the 60 times increase of the company’s stock. The S&P 500’s 12 times return would have left you a few bucks short of a ticket. Welcome Home, G.I. It’s 1950 and you have $10,000 to invest. Maybe you worked for it, and maybe you inherited the money, but you have it and want to set it aside for the long term.

While I will keep investing in the sector as long as it is profitable, there is a bad taste in my mouth that J.P. Morgan, UBS, Credit Suisse, Morgan Stanley, Cushing, and ALPS all think they can play everyone for a fool and fix the price to trade a MLP index. The Virus Goes Airborne From the humble beginnings of a few major indexes, the ETF industry has been busy providing all things to all people. At first I was excited about the barriers to entry being torn down. Years ago I wanted to make a bet on Malaysia. Due to regulatory issues it was hard to own stocks in that country, but a new ETF that tracked the Malaysian market made exposure easy. From the first U.S. ETF in 1993, then a handful throughout most of the 1990s, the turn of this century saw the explosion. By the end of 2001 there were almost 100, then 600 by 2007, and today we are at well over 1,000 and counting.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

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activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

In the financial world, as a New York Times article put it, “they are focused on transforming the economics of underwriting and the experience of consumer borrowing—and hope to make more loans available at lower cost for millions of Americans.”8 Together with the expansion of P2P (peer-to-peer) interactions and crowdfunding, these approaches offer the possibility of improving the provision of financial services (especially to badly served segments of the population), lowering barriers to entry, reducing old-style overheads, and broadening sources and uses of loanable funds.9 But it is also an area where regulation is lagging and modes of operation are yet to be properly tested in a general economic downturn; it is also an approach whose collective rigor has yet to be subjected to a full market cycle. Recognizing the ongoing shifts, regulators and supervisors are now playing catch-up, and they are looking to step up their efforts lest they end up fighting the last war.

In the process, finance will be slowly following a path already trodden by technology and, more recently and even less deterministically, by media. And again the tendency will be to transform over time a normal bell-shaped distribution of expected outcomes into more of a bimodal one. The upside of this financial democratization phenomenon is considerable, and it is particularly powerful because it lowers barriers to entry and better-tailored solutions. It widens the sources and uses of loanable funds, reduces overheads and other intermediation costs, and improves the financial terms offered to end users. The influx of greater cognitive diversity makes the industry more dynamic, including by encouraging providers to go beyond their traditional client acquisition and product focus to also encompass more holistic customer-centered solutions.

Though these more comprehensive models have yet to navigate a full economic cycle, a more comprehensive understanding of both financial mindset and behavior is emerging, and they are being enhanced by work on different “financial personalities.” There are also downsides. Some innovation-driven activities resemble the Wild West. Most worrisomely, badly regulated and abused P2P platforms can end up facilitating the financing of illicit activities—from drugs to terrorism. Like many major innovations in history that significantly lowered the barriers to entry, the natural inclination of humans is to initially overproduce and overconsume the now more easily available activity. With time, this converges to a more stable equilibrium—but often only after a process involving quite a few highs and lows, along with a series of improbables and unthinkables. CHAPTER 28 PUTTING IT ALL TOGETHER “Advances in technology have always disreupted the status quo.


pages: 399 words: 155,913

The Right to Earn a Living: Economic Freedom and the Law by Timothy Sandefur

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barriers to entry, big-box store, Cass Sunstein, clean water, collective bargaining, corporate governance, corporate social responsibility, creative destruction, Edward Glaeser, housing crisis, joint-stock company, Joseph Schumpeter, labour mobility, minimum wage unemployment, positional goods, price stability, profit motive, race to the bottom, Ralph Nader, RAND corporation, rent control, Robert Bork, Silicon Valley, The Wealth of Nations by Adam Smith, trade route, transaction costs, Upton Sinclair, urban renewal, wealth creators

In a free market, a company that wants to succeed and grow must increase the quality of its products, decrease its prices, or find some other way to appeal to consumer needs. But businesses that cannot or do not want to compete in this way will often try to exploit government authority for their own advantage by illegalizing their competition or by making competition inordinately expensive through the creation of what economists call “barriers to entry”: rules that bar new companies from entering the marketplace. The classic example of a barrier to entry is a tariff: a tax on imports that makes them more expensive than domestic products. Tariffs make it difficult for foreign companies to compete against domestic producers, needlessly increasing costs to consumers and allowing domestic manufacturers to produce lower-quality merchandise, safe from higher-quality imports. Domestic manufacturers, therefore, often favor tariffs but rarely admit that their support is a matter of their own private gain.

., 194 labels, product, commercial free speech, 203–7 labor unions anti-competitive conduct, 62–63, 64 at-will employment and, 232 immunity from antitrust laws, 62–63 job security rules and, 233–34 laissez-faire economics, 6 Gilded Age and, 48–49 law meaning and qualification of, 90–91, 92, 99 permanent and aggregate interests of the community and, 91, 93 procedural overlapping substantive aspects, 96 unqualified legislative acts under due process, 95–96 see also due process of law lawfulness, themes of, 97–98 Lawrence v. Texas, 132, 282 Lawson, Gary, 281, 289 lead paint, public nuisance cases, 239, 244–45 legislative freedom from judicial restraint, 11, 12–13, 109 Index Letwin, William, 20, 285 liberty, 273 charters of power granted by, 10 definition of, 7 European charters of, 10 Jasay on presumption of, 130, 273–74 Locke’s presumption of, 273 licensing, occupational, 23, 99–100 barrier to entry, 63 florists, 133–34, 155 funeral homes and merchandise, 150–55 as protectionism, 145–59, 174 racial bias, 145–49 rational basis test and, 133–34, 148–49, 151 wildlfe control example, 156–59 Liebmann. see New State Ice Co. v. Liebmann limited liability privilege, 33 Lincoln, Abraham, 4, 40, 84 living Constitution theory, 77, 78 Lloyd, Henry Demarest, 45, 46, 49 Loan Association v. Topeka, 97–98 local government abuse of power, 61 contracts clause and, 80–81 formula retail ordinances, 186–89 monopolizing trade, 60–61 Owen and, 267 regulatory takings, 264–68 viewshed ordinances, 264 Local Government Antitrust Act, 61 Lochner v.

Harris, 152–55, 159, 162, 188, 289 predatory pricing schemes, 179–82 price stabilization schemes. see agricultural adjustment programs privacy rights, 282 private agreements monopoly-like, 22–23 see also contracts; specific types of agreements privileges, corporate, 28, 29, 31, 33–35 Privileges and Immunities: A Reference Guide to the United States Constitution (David S. Bogen), 288 privileges and immunities clause, 4 Corfield and, 40–41 dormancy, 43–44 overruling, revival, reversal of, 287–92 right to make and enforce contracts, 288–89 Slaughterhouse and, 41–44 states’ rights and, 40–41 productive work, 3 professions barriers to entry, 63, 141 licensing, 23, 63, 99–100, 145–56 restricted entry, 22, 23 restricting or eliminating competition, 289–90 unskillfulness, 23 Progressive Era, xiv–xv, 44–50 eminent domain and, 32 misconceptions about, 47–49 regulation of business and economy, 13, 15, 123–27, 136–37 Supreme Court, 15, 279. see also specific justices 371 Index Progressivism agenda, ideology, and philosophy, 11, 12–13, 44–50, 279–81 assault on economic liberty, 11–16, 44–50, 279–81, 290, 292 changing American political philosophy, 44–50 criticism of and attack on Lochner, 107–10, 121 doctrines, 279–81 economic freedom argument, 123–27 free speech and, 191–92 majority over individuality, 11, 44–45, 109–10, 121, 279, 292. see also collective decisionmaking notion of individual freedom, 116–17 pro-government presumption, xiii–xiv, 11–13, 44–50 rational basis test and, 125–27 rights as permissions, 95, 109, 116–17, 279, 282–83 socialist nature of, 46, 123–27 visionary zeal to do gooders, 13, 46 Prohibition, legacy of, 183–84 property corporate, 34 regulation as secondary to, 272–73 property redistribution government redistributive programs, 283 Progressivism and, 13 property rights, xvii, 24–25 of criminals, 259 givings theory and, 272–74 land-use regulation, 160. see also zoning laws, protectionism and Locke on, 273 ownership as separate from right to use, 257 partial property rights in other people, 290–91 Rehnquist and Roberts Courts, 277–78 right of use of property or land, 257, 271 see also regulatory takings Property Rights from Magna Carta to the Fourteenth Amendment (Bernard Siegan), 283 Prosser, William, 76 protection of the public. see public interest or public welfare protection of unenumerated rights, 93–94 372 protectionism, xvi, 141–44, 173–74 agricultural adjustment programs, 164–70, 174 barriers to entry, 141 contracts clause and, 154 dormant commerce clause and, 153–54 franchise acts and, 170–73, 174 as legitimate state interest, 289 licensing laws, 145–59, 174 necessity of new business and certificates of necessity, 143–44 public choice theory and, 289–90 tariffs, 141 taxi industry example, xi–xiii, xiv, xv, xvi, 143–44, 286 zoning laws, 159–63, 174 public choice theory, 289–90 public contracts, 69–73 public interest or public welfare contracts clause, 75–81 Liebmann and, 142–43 Munn and Nebbia and, 101, 125–27. see also rational basis test Powers and, 152–55, 159, 162, 289 seizure of property. see eminent domain doctrine; regulatory takings public nuisance, xvii Blackmun on, 240 common or public right definition, 241 reasonable and lawful conduct, 243–45 reasonableness and unreasonableness, 240–41, 242 regulatory takings and, 258 tort law abuse, 239–45 public policy, manipulation of contracts and, 214, 215, 220–24 public use, synonymous with public benefit, 255 Pumpelly v.


pages: 675 words: 141,667

Open Standards and the Digital Age: History, Ideology, and Networks (Cambridge Studies in the Emergence of Global Enterprise) by Andrew L. Russell

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barriers to entry, borderless world, Chelsea Manning, computer age, creative destruction, Donald Davies, Edward Snowden, Frederick Winslow Taylor, Hacker Ethic, Howard Rheingold, Hush-A-Phone, interchangeable parts, invisible hand, John Markoff, Joseph Schumpeter, Leonard Kleinrock, means of production, Menlo Park, Network effects, new economy, Norbert Wiener, open economy, packet switching, pre–internet, RAND corporation, RFC: Request For Comment, Richard Stallman, Ronald Coase, Ronald Reagan, Silicon Valley, Steve Crocker, Steven Levy, Stewart Brand, technoutopianism, Ted Nelson, The Nature of the Firm, Thomas L Friedman, Thorstein Veblen, transaction costs, web of trust

The ASA’s clever consensus-building process – a superior alternative to the courts and to commissions, in the eyes of its many advocates – created the basis of widely adopted rules for creating, maintaining, and disputing standards. In other words, the ASA established standards for setting standards.46 A standards process that calls itself open will usually adopt clear rules for consensus and due process, but in recent years standards committees have democratized participation in deliberations by lowering barriers to entry or eliminating membership fees or requirements altogether. The most prominent example of radical openness is the Internet Engineering Task Force, a group that conducts much of its work on public email lists that anyone can join. In practice, discussions tend to focus on specialized topics that require advanced knowledge of computer networking to understand, thus having the effect of excluding substantive contributions from a vast majority of the general public.

In practice, discussions tend to focus on specialized topics that require advanced knowledge of computer networking to understand, thus having the effect of excluding substantive contributions from a vast majority of the general public. In sum, it is possible to distill an ideology of open standards from the spectrum of open standards definitions that presently exist. First, open standards strive to honor the ideals of participatory democracy, including commitments to fairness, transparency, due process, and rights of appeal. Second, open standards embrace the ideal of a vibrant market economy that has negligible barriers to entry and liberal terms for using standardized technologies. Third, proponents of open standards share the implicit conviction – which, in some cases, manifests itself as a religious zeal – that their work is just and that the forces of technological and social progress are on their side.47 They share a common foe – namely, anyone who advocates closed or centralized control over the production and use of standards.

The emergence of the “voluntary consensus” model of committee standardization, significant as it was, begs a related question: How did monopoly firms develop standards, and how did their standardization efforts fit within the collaborative, consensus-based model developed in the late nineteenth and early twentieth centuries within trade associations and engineering societies? Conventional answers to these questions point to the power of the managerial hierarchies that exist within monopoly firms. In the conventional view, monopolies create standards through a hierarchical, closed, and proprietary process as part of a broader strategy to erect barriers to entry and maintain centralized control over a given market or markets. They capture the network effects that standardization generates. Monopolies, in this view, act in a monolithic and almost petulant manner: their goal is to reduce variety, stifle outside innovations, lock in users, and preserve their control.2 From the late nineteenth century to the present day, critics of the monopoly Bell Telephone System have found ample evidence to support this conventional view of monopoly standardization.


pages: 200 words: 54,897

Flash Boys: Not So Fast: An Insider's Perspective on High-Frequency Trading by Peter Kovac

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bank run, barriers to entry, bash_history, Bernie Madoff, computerized markets, computerized trading, Flash crash, housing crisis, index fund, locking in a profit, London Whale, market microstructure, merger arbitrage, prediction markets, price discovery process, Sergey Aleynikov, Spread Networks laid a new fibre optics cable between New York and Chicago, transaction costs, zero day

All you needed to trade electronically was a computer, a network connection, and lots of smarts. For a few brief years, the barriers to entry in the industry were quite low (well, except for the last requirement). At every other time in history, it has been extremely difficult to break into the stock market. Aside from incredibly high trading costs, oligopolistic systems of bequeathed trading privileges made it almost impossible for new participants. If you were one of the lucky few who owned a “seat” at the NYSE, you could trade directly; if not, you had to pay some broker who did own a seat to trade for you. The advent of electronic trading a decade ago eliminated these barriers to entry and created a huge democratization of trading that undermined much of Wall Street’s traditional hold on the markets.

Their transaction costs are down probably 80% in the last ten years.”[20] Chapter 3: Trying to Connect the Dots Co-location Ronan Ryan’s experience at Radianz rings true. As he was plugging in network connections for electronic trading firms, I’m not surprised that he saw gauze wrapped around a co-location cage, or someone leaving Toys “R” Us signs up. There are at least two reasons folks tried to conceal their computer hardware from prying eyes: first, as mentioned earlier, the barriers to entry for electronic trading are ridiculously low and any advantage is significant; second, as demonstrated, guys like Ronan Ryan love to yak about the strange things they’ve seen, so new innovations don’t stay under wraps for long. Incidentally, paranoia has always been the norm everywhere on Wall Street. Hedge funds are constantly fretting that somebody will hear about their great strategy and replicate it, because it’s not that hard to do so.


pages: 166 words: 49,639

Start It Up: Why Running Your Own Business Is Easier Than You Think by Luke Johnson

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Albert Einstein, barriers to entry, Bernie Madoff, collapse of Lehman Brothers, corporate governance, corporate social responsibility, creative destruction, credit crunch, Grace Hopper, happiness index / gross national happiness, high net worth, James Dyson, Jarndyce and Jarndyce, Jarndyce and Jarndyce, mass immigration, mittelstand, Network effects, North Sea oil, Northern Rock, patent troll, Plutocrats, plutocrats, Ponzi scheme, profit motive, Ralph Waldo Emerson, Silicon Valley, software patent, stealth mode startup, Steve Jobs, Steve Wozniak, The Wealth of Nations by Adam Smith, traveling salesman, tulip mania, Vilfredo Pareto, wealth creators

Ray Kroc sold equipment to the McDonald brothers in their single Californian hamburger restaurant. In the brothers’ fabulous formula, Kroc saw something that even the brothers themselves didn’t see, and he duly developed and franchised the concept elsewhere. A few years later he bought the brothers out for $2.7 million. Before long his purchase was worth billions – built on their brainchild and his execution. Often it is necessary to buy an operation to overcome regulatory barriers to entry: perhaps planning, licences or suchlike. To develop a mine or quarry you will probably have to agree to a lease and rights to extract minerals with a landowner. When I entered the dentistry field in 1996, we had to buy a dental body corporate, which at the time was the only legal way for a non-dentist to trade as a dental practice in the UK. Over the following years, these obscure vehicles multiplied in value tenfold as more entrants bid up their prices.

Both Peter Lynch and Warren Buffett – two of the legendary investors of our time – agree that longer-term investing in outstanding companies produces above-average returns. The effective private investor focuses on a few sound businesses, running winners and dropping losers. Have they found a solid niche? It’s unusual to find big new British companies growing rapidly. I am much more likely to identify opportunities with vast upside among small, specialist companies. Such businesses should possess decent barriers to entry, be it a brand, patent, contracts, franchise or other proprietary situation. Ideally the company should be unique, since it must compete against large competitors who will be better financed. In the real world such companies should have products or services that are evolutionary rather than revolutionary, since markets can take years to accept radical changes. Such drawn-out plays can produce low annualized returns that fail to match those produced by small companies delivering follow-on, adapted technology that is usually quicker to profit.

‘Even these hardships will be grand things to look back on’ Virgil X & Y in a downturn They say the X & Y generations are the most entrepreneurial in history. But none of them have been in business during a recession. This is the service economy era. Younger entrepreneurs I meet are running marketing agencies, web-design firms, recruitment companies, finance businesses, software houses, telecom firms. These operations required limited capital to get going and faced few barriers to entry, compared to periods when heavy industry ruled. The Internet has helped unleash ambition and enterprise in an unprecedented way. But I worry that a lot of these companies are fragile constructs, not built to weather severe conditions. For founders who have only ever known expansion, challenging times are a harsh wake-up call. They will suffer bad debts when customers go bust. They experience real cost inflation for the first time in decades – and desperately try to pass on price rises, just when customers are harder to come by.


pages: 398 words: 86,855

Bad Data Handbook by Q. Ethan McCallum

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Amazon Mechanical Turk, asset allocation, barriers to entry, Benoit Mandelbrot, business intelligence, cellular automata, chief data officer, Chuck Templeton: OpenTable, cloud computing, cognitive dissonance, combinatorial explosion, commoditize, conceptual framework, database schema, en.wikipedia.org, Firefox, Flash crash, Gini coefficient, illegal immigration, iterative process, labor-force participation, loose coupling, natural language processing, Netflix Prize, quantitative trading / quantitative finance, recommendation engine, selection bias, sentiment analysis, statistical model, supply-chain management, survivorship bias, text mining, too big to fail, web application

Consider the following: Files Are Simple! Simplicity and ubiquity are virtues that are very hard to find in technology products. There is simply less bureaucracy to deal with when you use files. Files Work with Everything Just about everything will (sort of) know how to process your data. Utilities will need coaching to understand how to extract structure from your files. This is generally not a significant barrier to entry, though. If you stick with a few conventions, such as using common and consistent delimiters, then you will be fine. Compare this to a traditional database system, for which you will often need a specific adapter, which may in turn have its own API. If you’re using an abstraction layer, such as an object-relational mapper (ORM), then you need to understand its unique syntax. Recent databases often provide an HTTP API, but this is still more of a burden than opening and reading a file.

Many such tools are heavily tested (having been run billions of times over the years), reliable, and are generally implemented in C for performance. grep is one of the fastest ways to hunt for things. Remote replication is only an rsync away. A word count for a file takes two characters: wc. A version control system such as Subversion or Git will help you maintain a history of your changes over time. There’s No Install Tax Working with files has a very low barrier to entry. You can eliminate a lot of friction by not needing to install client libraries, compile drivers, or worry about a schema. Files certainly aren’t ideal for every situation. They’re best suited for cases that are read-heavy, require few modifications, and incur minimal cost to translate the data into a typed representation. That means storing logs (such as webserver logs), recorded events, web crawlings, large binary data, and sensor readings, which are all suitable use cases.

The evolution of these two components is important. We, as end users, have been able to publicly broadcast our thoughts from an IP address for nearly 17 years now (since the broader network widely came online). It has been technically possible to set up an HTTP server, routable via public DNS, and publish content to it for public consumption for a long time. Over the years, that process has radically shifted, however, and barriers to entry have changed. 1995: Very hard and expensive. Purchase a server (several thousand dollars), an operating system (hundreds of dollars), and connect it to the network via a hosting provider (several thousands of dollars per month). Purchase an HTTP server (hundreds of dollars). Figure out how to write/publish HTML. Purchase a domain name and tie it to DNS (hundreds of dollars). Publicize your “site” (thousands of dollars in marketing campaigns). 2001: Still difficult, but more affordable.


pages: 534 words: 15,752

The Sushi Economy: Globalization and the Making of a Modern Delicacy by Sasha Issenberg

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air freight, Akira Okazaki, anti-communist, barriers to entry, Bretton Woods, call centre, creative destruction, Deng Xiaoping, global supply chain, haute cuisine, means of production, Nixon shock, Saturday Night Live, Silicon Valley, special economic zone, telemarketer, trade route, urban renewal

Auction licenses, like taxi medallions, seats on a stock exchange, and liquor licenses, are authorized in limited number. New ones are never produced, and so they are traded on a secondary market created only when a participant chooses to get out of the business and allow someone new to purchase the privilege of entry. The preponderance of family-owned firms like Matsui’s makes such a transfer rare, and presents a potential new tuna buyer with his greatest material barrier to entry. For someone like Matsui, it is the most significant asset his business owns, now worth in the range of $100,000. At the market’s Bubble peak, Tsukiji licenses appreciated as rapidly as Akasaka studio apartments and room-ser vice orange juice at the Hotel Okura. At one point, a license to buy tuna sold for nearly $2 million. Four tuna sat on wheelbarrows in the cluttered alley that ran behind his stall.

In a city on the frontier of the American economy, Mutual Trading’s upgrade of its equipment—adding largescale freezer and refrigeration facilities—would not have attracted much notice, but it presaged a generation of changing American tastes. The pioneers of the pickle trade had acknowledged that the future of Japanese food would not be found in cans and bottles. For sushi, American appetites posed high barriers to entry that nonthreatening ingredients and familiarly hued waitstaff alone could not surmount. While foreign flavors have long seeped into American foodways, sushi had unique challenges. Early Chinese restaurants were true to the motherland’s cuisine, both in terms of recipes and the style of dining. In 1865, newspaper editor Samuel Bowles dined at a San Francisco restaurant banquet that featured as many as three hundred items, including bird’s nest soup, reindeer sinews, fried fungus, and dried Chinese oysters.

It’s ready to go on my truck, and a guy yells out, ‘I’ll give you $24 a pound for that right now!’ I looked at the captain, dropped the fish right down and said, ‘Take your $24.’ The guy hadn’t even looked at the fish.” Rainbow had to break the strong ties dealers like Bob Kliss and Mark Godfried had built over the years with their fishermen. To the dozens of companies like Rainbow—as they would to anyone entering the market—those bonds stand as considerable barriers to entry. “In this business, you either get a shot or you don’t. If they don’t come by your company to give you a chance to bid on their fish, you’re not in the game,” explains Danny Bubb, a Long Islander who came to Gloucester in 1999 and immediately stood out among the city’s old tuna hands, thanks to his rich tan, shaved head, and the giant tuna tattooed on his bicep. The only way for a newcomer to get the opportunity to even see what boats are catching—which is to say, an effective license to compete in the marketplace— is to pay for the access, Bubb says.


pages: 444 words: 86,565

Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions by Joshua Rosenbaum, Joshua Pearl, Joseph R. Perella

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asset allocation, asset-backed security, bank run, barriers to entry, capital asset pricing model, collateralized debt obligation, corporate governance, credit crunch, discounted cash flows, diversification, fixed income, intangible asset, London Interbank Offered Rate, performance metric, shareholder value, sovereign wealth fund, technology bubble, time value of money, transaction costs, yield curve

Leading and Defensible Market Positions Leading and defensible market positions generally reflect entrenched customer relationships, brand name recognition, superior products and services, a favorable cost structure, and scale advantages, among other attributes. These qualities create barriers to entry and increase the stability and predictability of a company’s cash flow. Accordingly, the sponsor spends a great deal of time during due diligence seeking assurance that the target’s market positions are secure (and can potentially be expanded). Depending on the sponsor’s familiarity with the sector, consultants may be hired to perform independent studies analyzing market share and barriers to entry. Growth Opportunities Sponsors seek companies with growth potential, both organically and through potential future bolt-on acquisitions. Profitable top line growth at above-market rates helps drive outsized returns, generating greater cash available for debt repayment while also increasing EBITDA and enterprise value.

Strong Asset Base A strong asset base pledged as collateral against a loan benefits lenders by increasing the likelihood of principal recovery in the event of bankruptcy (and liquidation). This, in turn, increases their willingness to provide debt to the target. The target’s asset base is particularly important in the leveraged loan market, where the value of the assets helps dictate the amount of bank debt available (see “LBO Financing” sections for additional information). A strong asset base also tends to signify high barriers to entry because of the substantial capital investment required, which serves to deter new entrants in the target’s markets. At the same time, a company with little or no assets can still be an attractive LBO candidate provided it generates sufficient cash flow. Proven Management Team A proven management team serves to increase the attractiveness (and value) of an LBO candidate. Talented management is critical in an LBO scenario given the need to operate under a highly leveraged capital structure with ambitious performance targets.

See Form 10-K antitrust arranger asset base asset based lending (ABL) facility asset sale gains on limitations on losses on term loan prepayment transaction attorneys auction . See also broad auction and targeted auction B back-end short form merger balance sheet in LBO analysis bank book bank debt bank lenders bank meeting bankruptcy Barra barriers to entry Base Case Base Rate basic shares outstanding basket benchmarking analysis comparable companies analysis precedent transactions analysis benchmark rate. See LIBOR and Base Rate beta (β) relevering unlevering bidders. See prospective buyers bidding strategy Bloomberg board approval board of directors bond investors book value assets equity bookrunners borrower borrowing base breakage costs breakeven pre-tax synergies breakup fee bridge loans bring-down provision broad auction advantages and disadvantages business disruption business profile buy-side advisory C CA.


pages: 209 words: 89,619

The Precariat: The New Dangerous Class by Guy Standing

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8-hour work day, banking crisis, barriers to entry, basic income, Bertrand Russell: In Praise of Idleness, call centre, Cass Sunstein, centre right, collective bargaining, corporate governance, crony capitalism, deindustrialization, deskilling, fear of failure, full employment, hiring and firing, Honoré de Balzac, housing crisis, illegal immigration, immigration reform, income inequality, labour market flexibility, labour mobility, land reform, libertarian paternalism, low skilled workers, lump of labour, marginal employment, Mark Zuckerberg, mass immigration, means of production, mini-job, moral hazard, Naomi Klein, nudge unit, old age dependency ratio, pensions crisis, placebo effect, post-industrial society, precariat, presumed consent, quantitative easing, remote working, rent-seeking, Richard Thaler, rising living standards, Ronald Coase, Ronald Reagan, science of happiness, shareholder value, Silicon Valley, The Market for Lemons, The Nature of the Firm, The Spirit Level, Tobin tax, transaction costs, universal basic income, unpaid internship, winner-take-all economy, working poor, working-age population, young professional

The United States is only the harbinger. The attack on the public sector is part of the post-2008 adjustment across all industrialised countries. In Greece, under a centre-right government, 75,000 civil servants were added to the already huge public sector between 2004 and 2009. Once the crunch came in 2010, the public salariat was slashed, feeding the Greek precariat. The government also announced it would remove barriers to entry to some professions, lowering their wages to reduce public spending. In Italy, pressure on the civil service was also growing. In October 2009, 40,000 police officers marched through Rome to demand better pay and new police cars. Because of a freeze on hiring, the average age of Italian policemen had risen to 45. They were not alone; millions of civil servants were losing employment security.

The modern legal treatment stems from the response to the mass displacement before and during the Second World War, which led to the 1951 UN Convention Relating to the Status of Refugees. The problem was regarded as one of short-run adjustment as people were helped back to their countries or enabled to resettle elsewhere. Now, increasing numbers seeking to escape from degradation, oppression and conflict are running up against rising barriers to entry. Many fall into chronic social and economic insecurity. According to the UN refugee agency, in 2009 there were over 15 million refugees, a majority in Asia and Africa, with another million asylum seekers awaiting decision. And some 27 million people were displaced within their countries as a result of conflict (Internal Displacement Monitoring Centre, 2010). Globally, a tragedy has been unfolding.

The UK Labour government was also planning a points-based system for temporary migrants, restricting work permits for those from outside the European Union and taking some occupations off the list of those deemed to have shortages. In 2010, the new Coalition government tightened the process even further. In sum, because the old queuing system has dissolved, and because governments cannot or do not wish to reverse the labour market reforms they have instituted, they have increasingly sought to raise barriers to entry, make the denizen status of migrants more precarious and encourage or oblige them to leave when no longer needed. This opens up some ugly possibilities. Migrants as cheap labour in developing countries Your labour is glorious and deserves respect from all society. Wen Jiabao, Chinese Prime Minister, June 2010 To die is the only way to testify that we ever lived. Perhaps for the Foxconn employees and employees like us – we who are called nongmingong, rural migrant workers, in China – the use of death is simply to testify that we were ever alive at all, and that while we lived, we had only despair.


pages: 515 words: 126,820

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World by Don Tapscott, Alex Tapscott

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Airbnb, altcoin, asset-backed security, autonomous vehicles, barriers to entry, bitcoin, blockchain, Bretton Woods, business process, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, cloud computing, cognitive dissonance, commoditize, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, cryptocurrency, disintermediation, distributed ledger, Donald Trump, double entry bookkeeping, Edward Snowden, Elon Musk, Erik Brynjolfsson, ethereum blockchain, failed state, fiat currency, financial innovation, Firefox, first square of the chessboard, first square of the chessboard / second half of the chessboard, future of work, Galaxy Zoo, George Gilder, glass ceiling, Google bus, Hernando de Soto, income inequality, informal economy, information asymmetry, intangible asset, interest rate swap, Internet of things, Jeff Bezos, jimmy wales, Kickstarter, knowledge worker, Kodak vs Instagram, Lean Startup, litecoin, Lyft, M-Pesa, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, means of production, microcredit, mobile money, money market fund, Network effects, new economy, Oculus Rift, off grid, pattern recognition, peer-to-peer, peer-to-peer lending, peer-to-peer model, performance metric, Peter Thiel, planetary scale, Ponzi scheme, prediction markets, price mechanism, Productivity paradox, QR code, quantitative easing, ransomware, Ray Kurzweil, renewable energy credits, rent-seeking, ride hailing / ride sharing, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, seigniorage, self-driving car, sharing economy, Silicon Valley, Skype, smart contracts, smart grid, social graph, social software, Stephen Hawking, Steve Jobs, Steve Wozniak, Stewart Brand, supply-chain management, TaskRabbit, The Fortune at the Bottom of the Pyramid, The Nature of the Firm, The Wisdom of Crowds, transaction costs, Turing complete, Turing test, Uber and Lyft, unbanked and underbanked, underbanked, unorthodox policies, wealth creators, X Prize, Y2K, Zipcar

Summoned by an unknown person or persons with unclear motives, at an uncertain time in history, the genie is now at our service for another kick at the can—to transform the economic power grid and the old order of human affairs for the better. If we will it. Let us explain. The first four decades of the Internet brought us e-mail, the World Wide Web, dot-coms, social media, the mobile Web, big data, cloud computing, and the early days of the Internet of Things. It has been great for reducing the costs of searching, collaborating, and exchanging information. It has lowered the barriers to entry for new media and entertainment, new forms of retailing and organizing work, and unprecedented digital ventures. Through sensor technology, it has infused intelligence into our wallets, our clothing, our automobiles, our buildings, our cities, and even our biology. It is saturating our environment so completely that soon we will no longer “log on” but rather go about our business and our lives immersed in pervasive technology.

But as we have pointed out, a majority of the world’s population is still excluded—not just from access to technology but also from access to the financial system and economic opportunity. Moreover, the promise that this new communications medium would bring prosperity to all has rung hollow. Yes, it helped companies in the developed world provide jobs for millions in the emerging economies. It lowered the barriers to entry for entrepreneurs and gave the disadvantaged access to opportunities and basic information. That’s not enough. There are still two billion49 people without a bank account, and in the developed world, prosperity is actually declining as social inequality continues to grow. In developing economies, mobile is often the only affordable means of connecting. Most financial institutions have mobile payment apps that combine cameras and QR codes.

In his 1937 paper “The Nature of the Firm,” Coase identified three types of costs in the economy: the costs of search (finding all the right information, people, resources to create something); coordination (getting all these people to work together efficiently); and contracting (negotiating the costs for labor and materials for every activity in production, keeping trade secrets, and policing and enforcing these agreements). He posited that a firm would expand until the cost of performing a transaction inside the firm exceeded the cost of performing the transaction outside the firm.5 Don argued that the Internet would reduce a firm’s internal transaction costs somewhat; but we thought, because of its global accessibility, it would reduce costs in the overall economy even more, in turn lowering barriers to entry for more people. Yes, it did drop search costs, through browsers and the World Wide Web. It also dropped coordination costs through e-mail, data processing applications like ERP, social networks, and cloud computing. Many companies benefited from outsourcing such units as customer service and accounting. Marketers engaged customers directly, even turning consumers into producers (prosumers).

The Future of Technology by Tom Standage

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air freight, barriers to entry, business process, business process outsourcing, call centre, Clayton Christensen, computer vision, connected car, corporate governance, creative destruction, disintermediation, distributed generation, double helix, experimental economics, full employment, hydrogen economy, industrial robot, informal economy, information asymmetry, interchangeable parts, job satisfaction, labour market flexibility, Marc Andreessen, market design, Menlo Park, millennium bug, moral hazard, natural language processing, Network effects, new economy, Nicholas Carr, optical character recognition, railway mania, rent-seeking, RFID, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, smart grid, software as a service, spectrum auction, speech recognition, stem cell, Steve Ballmer, technology bubble, telemarketer, transcontinental railway, Y2K

Furthermore, a company could not just make handsets: to be taken seriously by the mobile-network operators, and ensure everything worked properly, it also had to manufacture the much larger and more complex base-stations that are used to provide mobile-phone coverage. All these requirements meant that the industry came to be dominated by large, vertically integrated firms such as Nokia, Motorola and Ericsson. “For many firms good at low-cost electronics, the barrier to entry was simply too high,” says Tony Milbourn of ttpCom, a British firm that designs and licenses hardware and software components for mobile phones. But the situation has changed. Radio chips can now be bought off the shelf, as can the software required to make a mobile phone work. Manufacturing can be outsourced to an “electronic-manufacturing services” (ems) firm. Some of these have started to design as well as build 155 THE FUTURE OF TECHNOLOGY handsets; these “original design manufacturers” (odms) sell their finished phones to other firms, which in turn sell them under their own brands.

Some of these have started to design as well as build 155 THE FUTURE OF TECHNOLOGY handsets; these “original design manufacturers” (odms) sell their finished phones to other firms, which in turn sell them under their own brands. Meanwhile, a flourishing ecosystem has sprung up of small firms specialising in areas such as handset design, chip design, testing and software. ttpCom, for example, provides the software that enables Sharp camera-phones and BlackBerry wireless e-mail devices to send and receive data over mobile-phone networks. In other words, the barriers to entry have fallen. Hardware and software have, to some extent, been commoditised, and there is far more scope for outsourcing of design and manufacturing than there used to be. This has allowed odms, consumer-electronics firms and even startups to enter the handset business. “Anybody with the right financial backing can break into the phone business now,” says Ben Wood, an analyst at Gartner, a consulting firm.

In addi10 tion to marketing clout, they own a large back catalogue of 0 Sony/ EMI Universal Warner Indemusic that can be repeatedly BMG pendents reissued. They are also bolSource: International Federation of the Phonographic Industry stered by music-publishing businesses, which collect royalties on already published songs used in recorded music, live performance, films and advertisements. Historically, the majors have controlled physical distribution of cds. Yet that barrier to entry will erode as more music is distributed on the internet and mobile phones. Artists can, in theory, use the internet to bypass record firms, though few have yet done this. The principal reason most have not is that they need marketing and promotion, which the majors also dominate, to reach a wide audience. The majors have a tight hold on radio, for example, by far the most effective medium for promoting new acts.


pages: 226 words: 71,540

Epic Win for Anonymous: How 4chan's Army Conquered the Web by Cole Stryker

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4chan, barriers to entry, Berlin Wall, Chelsea Manning, cognitive dissonance, Columbine, commoditize, creative destruction, crowdsourcing, Firefox, future of journalism, hive mind, informal economy, Internet Archive, Julian Assange, Mark Zuckerberg, Marshall McLuhan, Mason jar, pre–internet, Silicon Valley, slashdot, social web, Stephen Hawking, Steve Jobs, Stewart Brand, technoutopianism, wage slave, We are Anonymous. We are Legion, Whole Earth Catalog, WikiLeaks

An exploitable could be a man’s face with a blank thought bubble overhead; everyone can fill in the bubble with their own text. It’s kind of like the New Yorker caption contest. It becomes a game to creatively fill in the blanks. And it doesn’t stop at text. Photoshop wizards augment the imagery itself, for hilarious results. Exploitables allow anyone to engage in the communal meme pool that is 4chan, with a very low barrier to entry. All you need is some basic image-editing prowess and a sense of humor, and you too can achieve maximum lulz. Some of the comics that come out of these threads surpass anything I’ve seen in the Sunday funnies. A Meme Pool For Participatory Culture There are many words used to describe this kind of interactive entertainment. Some call it riffing; others call it remixing. Media scholar Henry Jenkins calls it participatory culture.

Many of the community’s first users were subscribers to Brand’s Whole Earth Catalog, a magazine devoted to topics like alternative shelter, nomadics, and telecommunications. These subscribers were already on the forefront of technology, and very smart. This early user base would come to have a tremendous influence on the quality of discourse. In 1995, a decade into the WELL’s history, Wired magazine called the WELL the world’s most influential online community. It was a hyperintellectual environment that bore significant structural barriers to entry. It was slow. It was complicated. And perhaps most importantly, it was expensive. Between the monthly fee ($8), the hourly fee ($2), and any additional fees exacted by telephone companies (to say nothing of the cost of a computer and modem in those days), it wasn’t uncommon for power users to burn through $300+ per month. The WELL provided free access to reporters, which not only rewarded the WELL with plenty of press, but also infused the community with a sense of journalistic integrity.

That masked man I saw on the train in Europe? He was part of Project Chanology. Of course, the broader going anti-Scientology movement goes all the way back to Usenet days. Before delving into the early anti-Scientology movement, it’s important to understand something about the ideals of hackers and even general Internet users from that era, all of whom today would be considered extremely tech-savvy given the structural barriers to entry that the Internet imposed. Tech heads were, and still are, drawn to the Internet in part because it promises a level playing field, where all-important information is out in the open. As the WELL’s Stewart Brand famously declared, “Information wants to be free.” Enthusiasts in those days saw the Internet as a utopian future, where one could be taken at his or her word. Usenet was home to a fervent discussion at alt.religion.scientology, started in 1991 by Scott Goehring, a regular guy who wished to expose the hypocrisies and deceptions of the Church of Scientology.


pages: 236 words: 77,098

I Live in the Future & Here's How It Works: Why Your World, Work, and Brain Are Being Creatively Disrupted by Nick Bilton

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3D printing, 4chan, Albert Einstein, augmented reality, barriers to entry, book scanning, Cass Sunstein, death of newspapers, en.wikipedia.org, Internet of things, John Gruber, John Markoff, Marshall McLuhan, Nicholas Carr, QR code, recommendation engine, RFID, Saturday Night Live, Steve Jobs, Steven Pinker, Stewart Brand

I’d return to New York with the secrets of the future of media like a time traveler carrying a winning lottery ticket. Despair It took only a few meetings before I realized that the lottery ticket didn’t exist—or at least that’s what I was told. Despite my excitement about discovering new ideas in the California porn industry, I heard mostly fear and desperation from directors and the people who run production houses. Prices were falling. The barriers to entry had disappeared. Some money was flowing in, but advertising and sales of traditional media were in decline and it wasn’t clear how long even the current business could sustain itself. The industry, I was told, was being attacked by parasitic piracy and file sharing. “It’s tough now,” said one porn purveyor. “We’re dealing with piracy, and we’re dealing with free content on the Internet, which is eroding the normal business models that have been around for many years, like DVDs, magazines.”

Step right up; he’ll be glad to provide whatever people are willing to pay for. These pornography sites charge any number of different prices for their content. But these companies realized that they have to make the content that consumers want, and they have to make it available anywhere, at reasonable prices, any time the consumer wants it. Most important, since production costs and distribution channels no longer create a barrier to entry, if these companies don’t do that, someone else can and will. To bring in revenue, the smaller sites have recognized that advertising can be enough to pay the bills and keep the lights on. But the ads must be relevant to their audience. So if viewers see an advertisement similar and relevant to a clip they are about to watch, there’s a good chance they’ll click through to the ad’s link. But if the consumer is watching porn and the advertisement is for a car, the ad probably won’t generate many clicks.

But these striking numbers underscore that it is less expensive to produce digital copies without the costs of printing, paper, and physical distribution. Of course, there are still costs—highly skilled editors, copy editors, author royalties, and so on—but distribution is drastically less expensive, and the public recognizes this. In the public mind, the product you hold in your hand should cost more than the one that was downloaded—especially if it was downloaded onto an expensive e-reader or another gadget. As technology has demolished barriers to entry, consumers have become much more aware of what it costs to produce new content. Now anyone sitting in her bedroom with a microphone and a laptop can become a music producer. You don’t even need a separate camera and a tripod to create a TV show. Using only the camera built into the computer, young producers have made videos that collectively have reached hundreds of millions of viewers on YouTube and other advertising-based online video outlets.


pages: 209 words: 13,138

Empirical Market Microstructure: The Institutions, Economics and Econometrics of Securities Trading by Joel Hasbrouck

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Alvin Roth, barriers to entry, conceptual framework, correlation coefficient, discrete time, disintermediation, distributed generation, experimental economics, financial intermediation, index arbitrage, information asymmetry, interest rate swap, inventory management, market clearing, market design, market friction, market microstructure, martingale, price discovery process, price discrimination, quantitative trading / quantitative finance, random walk, Richard Thaler, second-price auction, selection bias, short selling, statistical model, stochastic process, stochastic volatility, transaction costs, two-sided market, ultimatum game, zero-sum game

These processes are usually automatic and routine, and the traders seldom need to concern themselves with the details. It is important, though, that they require some sort of preexisting relationship, possibly one that is indirect and via intermediaries, between the parties. Establishing a brokerage account or clearing arrangement is neither costless nor instantaneous and may therefore create a short-run barrier to entry for a potential buyer or seller not previously known to the market. Trading often involves a broker. A broker may simply provide a conduit to the market but may also act as the customer’s agent. This is a more 9 10 EMPIRICAL MARKET MICROSTRUCTURE substantial role and may involve discretion about how to handle a customer’s trading needs: when to trade, where to trade, what sort of orders to use, and so on.

Finally, interdealer trade in the FX market is typically conducted via a limit order book (such as EBS or Reuters). From the diversity of these examples, it is clear that the interdealer market is defined by its participants, not by the mechanism. Analyses of interdealer markets include Reiss and Werner (1998) and Viswanathan and Wang (2004). 15 16 EMPIRICAL MARKET MICROSTRUCTURE Dealer markets are typically flexible. The fixed technology and infrastructure costs are low. The main barrier to entry is access to a set of customers. Dealing operations are easily scaled up or down. Certain terms of trade and security characteristics may be set to accommodate customer preferences. For example, the equity derivatives desk at a bank might sell a customer a call option for which the underlying strike price, maturity, and size differ from any other option the desk has ever bought or sold. 2.3.2 Dealers in Hybrid Markets Dealers can make markets work where they might otherwise fail.

In a discriminating book, therefore, a limit order is priced at the “tail expectation,” that is, the expected value of the security conditional on an incoming order of a size just sufficient to trigger execution or anything larger. 13.1.3 A Monopolistic Dealer Most security markets are well approximated by the competitive dealer or limit order paradigms just described. But in a market for a thinly traded security or one in which there are regulatory or institutional barriers to entry, a dealer may possess market power. In the third setting we consider a monopolistic dealer. One feature of this situation is the standard result. The monopolist enjoys rents, abnormal profits that are not competed away. A more surprising result is that a monopolistic market may benefit customers (relative to the competitive dealer market). In a competitive dealer market (or in the limit order market, for that matter) each point on the price schedule is a competitive equilibrium, in the sense that it is open to entry by new liquidity suppliers.


pages: 411 words: 80,925

What's Mine Is Yours: How Collaborative Consumption Is Changing the Way We Live by Rachel Botsman, Roo Rogers

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Airbnb, barriers to entry, Bernie Madoff, bike sharing scheme, Buckminster Fuller, carbon footprint, Cass Sunstein, collaborative consumption, collaborative economy, commoditize, Community Supported Agriculture, credit crunch, crowdsourcing, dematerialisation, disintermediation, en.wikipedia.org, experimental economics, George Akerlof, global village, Hugh Fearnley-Whittingstall, information retrieval, iterative process, Kevin Kelly, Kickstarter, late fees, Mark Zuckerberg, market design, Menlo Park, Network effects, new economy, new new economy, out of africa, Parkinson's law, peer-to-peer, peer-to-peer lending, peer-to-peer rental, Ponzi scheme, pre–internet, recommendation engine, RFID, Richard Stallman, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Simon Kuznets, Skype, slashdot, smart grid, South of Market, San Francisco, Stewart Brand, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thorstein Veblen, Torches of Freedom, transaction costs, traveling salesman, ultimatum game, Victor Gruen, web of trust, women in the workforce, Zipcar

For these services, the peer-to-peer rental companies charge about a 6 percent commission on every transaction. If you need to trim a hedge, do you buy a trimmer from Home Depot for about $140 or rent one for $8? More and more consumers are renting, and when they rent, they experience firsthand that they don’t need to buy and own to have what they want and get what they need. Access becomes the privilege and ownership the burden. Removing Barriers to Entry Another category of usage PSS removes a common barrier to entry, whether that obstacle is price, availability, or even social status. Take public libraries, one of the oldest forms of product service systems. Many of the town libraries of the early 1600s were not open to the general public but were accessible only to scholars, who often had to review books in situ. The Boston Public Library in Massachusetts, opened in 1854, was the first large free municipal library in the United States that allowed people to borrow books and take them home to read.

There are many scenarios where the market is ripe for this type of PSS, including when the product has “high idling capacity” (cars or household tools); when the product has a limited use because of fashion (handbags) or it fulfills a temporary need (baby equipment and maternity clothes); when the product diminishes in appeal and value after usage (a movie); and when high start-up or purchasing costs for products are the barrier to entry (solar panels). The second model is an “extended-life” PSS. Here an after-sales service such as maintenance, repair, or upgrading becomes an integral part of the product’s life cycle, thereby reducing the need for replacement or disposal.9 Products that are expensive or require a specialized knowledge to repair (electronic goods) or products that need to be updated or frequently maintained to preserve their appeal (furniture) are well suited to this type of product service system.


pages: 272 words: 64,626

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs by Andy Kessler

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23andMe, Andy Kessler, bank run, barriers to entry, Berlin Wall, Bob Noyce, British Empire, business process, California gold rush, carbon footprint, Cass Sunstein, cloud computing, collateralized debt obligation, collective bargaining, commoditize, computer age, creative destruction, disintermediation, Douglas Engelbart, Eugene Fama: efficient market hypothesis, fiat currency, Firefox, Fractional reserve banking, George Gilder, Gordon Gekko, greed is good, income inequality, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, libertarian paternalism, low skilled workers, Mark Zuckerberg, McMansion, Netflix Prize, packet switching, personalized medicine, pets.com, prediction markets, pre–internet, profit motive, race to the bottom, Richard Thaler, risk tolerance, risk-adjusted returns, Silicon Valley, six sigma, Skype, social graph, Steve Jobs, The Wealth of Nations by Adam Smith, transcontinental railway, transfer pricing, wealth creators, Yogi Berra

“Everything is eventually a commodity within its own market. That’s what markets do. The question is how you define the market. The goal of every business is to raise the volume and predictability of its output to the point that it becomes a commodity. This is achieved not by raising prices but by lowering prices and benefiting from the learning curve efficiencies that result from larger volumes. The largest profits and barriers to entry come when the learning curve is steeper than the curve of declining prices. The issue of intellectual property and its ownership is separate from the issue of commoditization. The most profitable companies launch a large number of learning curves and commodities.” Whoa. There’s a lot there to chew on. Profits are best when costs drop faster than prices, as long as prices are dropping. Okay, I get that.

Early TV was radio shows with cameras turned on, much as early movies were Broadway shows with film running. I still fall over laughing at the Marx Brothers’ The Cocoanuts and Animal Crackers, “Hooray for Captain Spaulding . . .”, which were made this way. It took a while, but eventually, production values increased to $2.6 million per TV episode for Friday Night Lights and $100 million-plus movie budgets. This became the barrier to entry. Viewers demanded better quality, better than the cheap stuff they were initially fed. Animal Crackers is a classic, but now quaint. The Web is still back in the pioneer days. Beyond the pirated stuff that leaks out of the moguls’ traditional media pipes, today’s Web content is mainly user-generated: MySpace pages, YouTube videos, podcasts, Facebook walls, all disgustingly cheap to produce (and armchair critics like me go sniff, sniff, and mutter “lame”).

I asked my friend Mark Cuban—who knows a thing or two about both Internet video and owning media franchises, let alone the NBA and Dancing with the Stars—about moguls and their loss of control. He told me to watch for the eventual economic model of this whole thing as production values inevitably go up: “Mashups, hyperlinks?” he said. “We’ve seen it all before in the music business. Anyone can produce and distribute any song they want. We have seen some artists and songs emerge, but very, very few. And that is in an environment where there truly are no digital barriers to entry. Yet the moguls are still the moguls. Not as strong, but still in control. I don’t see them going away. Why? Because in a Long Tail universe, the cost to crawl up the tail to the rat’s ass is more expensive than the production. Which means only the people with the money can make the investment, which brings you back to the moguls.” It’s the Yogi Berra problem—no one goes there anymore, it’s too crowded.


pages: 233 words: 66,446

Bitcoin: The Future of Money? by Dominic Frisby

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3D printing, altcoin, bank run, banking crisis, banks create money, barriers to entry, bitcoin, blockchain, capital controls, Chelsea Manning, cloud computing, computer age, cryptocurrency, disintermediation, ethereum blockchain, fiat currency, fixed income, friendly fire, game design, Isaac Newton, Julian Assange, land value tax, litecoin, M-Pesa, mobile money, money: store of value / unit of account / medium of exchange, Occupy movement, Peter Thiel, Ponzi scheme, prediction markets, price stability, QR code, quantitative easing, railway mania, Ronald Reagan, Satoshi Nakamoto, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, Stephen Hawking, Steve Jobs, Ted Nelson, too big to fail, transaction costs, Turing complete, War on Poverty, web application, WikiLeaks

Suddenly, along comes Bitcoin, an open-source currency with no central authority, offering an alternative that could undermine the existing monetary order. Nobody even knows who designed it. It’s by no means the first attempt at digital cash, but it’s the first that works this well. It’s actually more efficient than dollars or pounds. It’s immune to all the manipulation and abuses that go on, there are no barriers to entry, bar internet access, and it has captured a zeitgeist in a way that nobody could have foreseen. If Bitcoin changes the way we transact and the way we store wealth – and it has the potential to do this – the repercussions could be enormous. Think what email did to the postal service, or what the internet did to newspapers, publishing, music and television. With the huge costs involved in the printing and distribution of physical newspapers, news publishing was once the exclusive domain of a few large companies.

With barcodes you can open your wallet on your smartphone, photograph the barcode, hit send and the payment is made. The day is not far off when you will walk into a shop, select an item you wish to buy, photograph the code on the label, payment will be made automatically and off you go. Once you get the hang of it, it is as simple as using a credit card. And, as long as you have internet access, there are no barriers to entry. Cash in my wallet, money in the bank I bet you use different kinds of money all the time, sometimes without even realising it. In various online accounts, I currently have: some dollars, some pounds and some euros. I have some air miles from two different credit card companies. I have some supermarket rewards points from three different companies. In addition, I have some bitcoins in a wallet on my computer.

He used to buy distressed companies, but there are no distressed companies any more. Low interest rates have meant that what should have died lives on. If he wants to set up a fund, the regulation is so onerous that he would need to raise £100 million to make it viable. That’s impossible. Regulation has just re-enforced the monopolies of the banks. Big corporations like regulation because only they can afford it. It’s a great big barrier to entry. ‘But Bitcoin. There’s none of that in Bitcoin. It’s the future,’ he says. He’s been called over to start another auction. A canny East End Jewish lad in his mid-30s, Paul, seems to be running things. I want to talk to him. As the auction begins, Paul offers to buy 100 pounds’ worth of bitcoin at £500 a coin. Wanting an excuse to talk him, I accept. ‘One hundred pounds worth of bitcoin at 500.


pages: 202 words: 72,857

The Wealth Dragon Way: The Why, the When and the How to Become Infinitely Wealthy by John Lee

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8-hour work day, Albert Einstein, barriers to entry, Bernie Madoff, butterfly effect, buy low sell high, California gold rush, Donald Trump, financial independence, high net worth, intangible asset, Mark Zuckerberg, negative equity, passive income, payday loans, self-driving car, Snapchat, Stephen Hawking, Steve Jobs, Tony Hsieh, Y2K

Present yourself in the best possible light. Remember, you need to stand out! Never before has there been such a total meritocratic environment for entrepreneurs. Anyone can launch a website. It's relatively cheap. We can trade on a global scale thanks to credit cards and payment systems such as PayPal. We can market to anyone through the Internet. But a meritocracy is a double-edged sword: It removes barriers to entry whilst increasing competition. And that's why you need to do everything you can to stand out. These days it is not so much about who you know as who knows you! And before anyone knows you, you must know yourself and know what you are selling. Know exactly what skills you are selling, what your strengths and weaknesses are, how you come across in a business meeting, and what value your business adds to the lives of your clients and customers.

Imagine you have L plates on, like a learner driver. Don't worry, you'll get to take them off, but you must psychologically wear them to begin with, to remind yourself, as much as anyone else, that you are still in learning mode. Once you feel you've gained enough knowledge and experience, you can take the L plates off and learn will become earn! People perceive the property business as having very low barriers to entry, in that anyone can get into it. This is true, but it still doesn't mean it's easy or that you don't need to educate yourself first. Mistakes in property investment can be cripplingly costly! Vince: I remember a woman coming to me because she'd inherited £50,000. She wanted to start investing in property. She was interested in taking my course and learning about property investing. At the last minute she pulled out because she said she'd found a portfolio of properties that she could just invest her full £50,000 into through a lease-option deal.

It's win-win however you look at it. People before Property We've said it before and we'll say it again: The property business is a people business, so you need excellent people skills. Whether it's the sellers, the solicitors, or your investment partners, you are dealing with people at every step of the way. Knowing how to deal with people is therefore a key skill you must acquire and hone. Because of the low barriers to entry in property investing, almost everyone assumes they can throw some money down, buy a few houses and rent them out for a nice passive income. But it takes a lot more than that. Yes, it is a meritocracy (i.e., anyone can do it), but property investing comes with a huge amount of responsibility. People often come to us because they have made mistakes and lost money trying their hand at property investing without educating themselves first.


The Art of Scalability: Scalable Web Architecture, Processes, and Organizations for the Modern Enterprise by Martin L. Abbott, Michael T. Fisher

always be closing, anti-pattern, barriers to entry, Bernie Madoff, business climate, business continuity plan, business intelligence, business process, call centre, cloud computing, combinatorial explosion, commoditize, Computer Numeric Control, conceptual framework, database schema, discounted cash flows, en.wikipedia.org, fault tolerance, finite state, friendly fire, hiring and firing, Infrastructure as a Service, inventory management, new economy, packet switching, performance metric, platform as a service, Ponzi scheme, RFC: Request For Comment, risk tolerance, Rubik’s Cube, Search for Extraterrestrial Intelligence, SETI@home, shareholder value, Silicon Valley, six sigma, software as a service, the scientific method, transaction costs, Vilfredo Pareto, web application, Y2K

Because the janitors create a clean and safe workplace, fewer germs are transmitted between the engineers, accountants, marketing professionals, and so on. This comparatively germ-free environment results in more time spent at work and more things getting done. Moreover, the cleanliness is done at lower cost than having the other professionals worry about cleaning common areas, and so on. Finally, sensitive documents are shredded by the proprietary janitorial team and as a result fewer trade secrets are lost thereby increasing barriers to entry for competitors. The janitors now have purpose in life and they are significantly happier with their jobs. If we can develop a causal roadmap for janitors, it stands to reason that teams that are closer to the creation of value should be even easier. For instance, an engineer writes and designs the code that creates the product upon which your revenue is predicated. An engineer working within a classic back office IT group is responsible for writing code and developing systems that allow people to be more productive for each hour that they spend at work, thereby decreasing unit cost of work produced and either reducing the total cost structure of the organization or alternatively increasing the throughput at similar cost.

Just as the business executives have not spent as much time understanding how to run technical projects or how to “speak tech” as the technology leaders have spent learning to read financial statements, it is also likely that the technical executive has not spent a lot of time learning what truly drives your business. To be sure, he probably believes he knows. A good test is to have him define the technology metrics in terms of things that are important to your business: revenue, profit, time to market, barriers to entry, customer retention, and so on. It is critical for the technology executive to understand how the business makes money, the drivers of that revenue equation, the current financial reality within the business, and the current year’s financial goals for the business. In AllScale, as discussed in Chapter 2, Roles for the Scalable Technology Organization, the previous CTO was promoted based on his technical acumen.

Beta was arguably a better technology than VHS, yet it still lost. Apple’s Macintosh had a more intuitive interface than the PC, yet the PC won based on the ecosystem of providers and tools available for it. To be able to answer the second question, you really need to be able to explain how, by building the system in question, you are raising switching costs, lowering barriers to exit, increasing barriers to entry, and the like. How is it that you are making it harder for your competitors to compete against you? How does this help you to win new clients, keep existing clients, and operate more cost effectively than any of your competitors? What keeps them from copying what you are doing in very short order? “Not Built Here” Phenomenon If we seem a little negative in this chapter, it is because we are.


pages: 441 words: 136,954

That Used to Be Us by Thomas L. Friedman, Michael Mandelbaum

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3D printing, Affordable Care Act / Obamacare, Albert Einstein, Amazon Web Services, American Society of Civil Engineers: Report Card, Andy Kessler, Ayatollah Khomeini, bank run, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, business process, call centre, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, Climatic Research Unit, cloud computing, collective bargaining, corporate social responsibility, creative destruction, Credit Default Swap, crowdsourcing, delayed gratification, energy security, Fall of the Berlin Wall, fear of failure, full employment, Google Earth, illegal immigration, immigration reform, income inequality, Intergovernmental Panel on Climate Change (IPCC), job automation, Kenneth Rogoff, knowledge economy, Lean Startup, low skilled workers, Mark Zuckerberg, market design, mass immigration, more computing power than Apollo, Network effects, obamacare, oil shock, pension reform, Report Card for America’s Infrastructure, rising living standards, Ronald Reagan, Rosa Parks, Saturday Night Live, shareholder value, Silicon Valley, Silicon Valley startup, Skype, Steve Jobs, the scientific method, Thomas L Friedman, too big to fail, University of East Anglia, WikiLeaks

“We are in business to help other businesses,” explained Lesk, an expert in putting together real estate transactions involving tax credits to generate financing for community-oriented developments, such as low-income housing. “And what we are finding is that the core of American business is changing—the repeat deals, involving similar structures, are fewer and farther between. There is more competition, barriers to entry are lower, our clients are reaching out to us for new ideas now much more frequently.” His law firm therefore has to be more creative and nimble in every way. For instance, says Lesk, his firm was a pioneer in putting together low-income housing credits with solar-energy credits in order to finance affordable housing for low-income people that would also come with solar-powered energy. “A few experienced practitioners in the industry were looking at the base product that we had used for years—the Low-Income Housing Tax Credit—and at the same time we were learning about renewable-energy tax credits,” explained Lesk.

Lesk continued: “Necessity is the mother of invention and we are in the age of great necessity because little that was given in the past is given today—whether it is fees, types of projects, the structure of deals, or availability of financing. I have worked with tax credits and affordable housing for twenty-five years. It was a specialized field and for a long time it had a reasonably limited number of players. Today it changes frequently and the barriers to entry are so low that we have all kinds of new competitors, and not only law firms.” His firm’s new chief innovation officer will lead a program to recruit, coach, and inspire lawyers so that they will not only do today’s standard legal work but also invent tomorrow’s. Those qualifications are already being taken into consideration when the firm determines annual pay and bonuses for its lawyers.

The collective potential of a million garage tinkerers is about to be unleashed on the global markets, as ideas go straight into production, no financing or tooling required. “Three guys with laptops” used to describe a Web startup. Now it describes a hardware company, too. “Hardware is becoming much more like software,” as MIT professor Eric von Hippel puts it … We’ve seen this picture before: It’s what happens just before monolithic industries fragment in the face of countless small entrants, from the music industry to newspapers. Lower the barriers to entry and the crowd pours in. But some people are not risk takers—not resilient or entrepreneurial enough to start a new company from scratch. That’s okay. In that case, though, they need to re-create themselves within their existing company or line of work by taking a routine creator job or routine server job and turning it into something special for which people will want to pay extra. For some that will be providing something sophisticated that a creative creator would do—designing a building, writing an innovative legal brief, inventing a new business, composing an ad, redoing a kitchen, or writing an iPad application.


pages: 310 words: 34,482

Makers at Work: Folks Reinventing the World One Object or Idea at a Time by Steven Osborn

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3D printing, A Pattern Language, additive manufacturing, air freight, Airbnb, augmented reality, autonomous vehicles, barriers to entry, Baxter: Rethink Robotics, c2.com, Computer Numeric Control, computer vision, crowdsourcing, Douglas Engelbart, dumpster diving, en.wikipedia.org, Firefox, future of work, Google Chrome, Google Glasses, Google Hangouts, Hacker Ethic, Internet of things, Iridium satellite, Khan Academy, Kickstarter, Mason jar, means of production, Minecraft, minimum viable product, Network effects, Oculus Rift, patent troll, popular electronics, QR code, Rodney Brooks, Shenzhen was a fishing village, side project, Silicon Valley, Skype, slashdot, social software, software as a service, special economic zone, speech recognition, subscription business, telerobotics, urban planning, web application, Y Combinator

So I guess that third category is partly the new development tools, but the point is that there’s this movement happening that’s getting bigger and bigger, and is fundamentally about lowering the barriers to entry for people that want to build new things with hardware. I’m really excited about that because I think the kinds of devices that we’re going to see come out of this are going to be really different—it’s going to be like the personal computer era again, but a much more wildly varying set of systems and devices. I think that’s going to be exciting. Osborn: When you mention all the new development platforms. The key to me is not that there are so many more of them, but that it doesn’t cost $2000 anymore to go get a development kit to start. Your barrier to entry is as low as a $20 bill. You can get an Arduino-compatible board and start programming microcontrollers in a couple of hours.

I’ve been watching one called the Galago6 that’s particularly interesting to me because it has the same kind of microcontroller in it as the Sifteo Gen2 Base, but with the Galago, you fire up the development environment in a browser window on your computer. It talks to the hardware and lets you debug it the same way you’d expect to debug a software application. I think that’s pretty exciting. It’s basically reducing the barriers to entry for people that want to work with hardware. I think that is going to be just as empowering as what happened in software, especially as the Internet took off. We’re starting to see it now with the wave of hardware startup companies— like Sifteo, like Fitbit, MakerBot—that are popping up and growing big, and showing that there’s a world of startups that can actually make physical goods because the development of the Internet makes it possible to market them to the entire world and get it out there fast, in a way that you just couldn’t before.

It’s just being accelerated in the same way as what happened with desktop publishing, because the cost of these tools is so cheap and the Internet and computing are ubiquitous. As you’ve seen, you can buy a CNC laser for $2,300, and we’re selling a $900 3D printer and a $600 CNC mill. If you can afford an Xbox, you can afford a mill. Most people interested in these kinds of things already have a computer, so the barriers to entry are extremely low just to get started. There are free versions of all the software you need. It really comes down to, “Are you passionate? Are you interested? Do you have ideas of what you want to make?” Then, when you start seeing people going on Kickstarter and raising all this money, like $9 million for an open-source gaming console, you know, people start to take notice. Like Scott Wilson, whose office is a couple of blocks from ours, he did a Kickstarter.


pages: 351 words: 123,876

Beautiful Testing: Leading Professionals Reveal How They Improve Software (Theory in Practice) by Adam Goucher, Tim Riley

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Albert Einstein, barriers to entry, Black Swan, call centre, continuous integration, Debian, Donald Knuth, en.wikipedia.org, Firefox, Grace Hopper, index card, Isaac Newton, natural language processing, p-value, performance metric, revision control, six sigma, software as a service, software patent, the scientific method, Therac-25, Valgrind, web application

Patches can be as small as a one-line fix to documentation. As some people leave the project, others step in to take their places, and this continuous cycle of new developers and casual submitters is what keeps Python alive.* Thus the project’s very existence depends on keeping the barriers to entry low so that those who have a limited interest in contributing to Python aren’t scared away. Comprehensive tests not only protect Python against mistakes that could be made by new contributors who are unfamiliar with the code base, it also helps lower the barrier to entry for these new contributors. It is much more reassuring to make a change to a complex code base if you’re able to run tests against your change and satisfy yourself that your change did not break anything. When you make a change, you can just run the test suite, and if it passes, you can be reasonably sure that you didn’t break other parts of the system.

We eventually gave up on the idea of community-driven ad-hoc testing, and instead focused our efforts on writing better manual test cases. You Are Always Recruiting This is very self-explanatory. Everything you do on your project must be with an aim to build your volunteer base. This means not only being welcoming when you are in a public space, but it also means getting to know people personally. It means unceasingly hunting for ways to lower the barrier to entry on your project. So for every event we did, we always ensured that we gave people a simple, easy-to-understand way to contribute. We always gave plenty of detailed instructions. We always looked at how to make things easier and easier. Our home channel on IRC was more like a giant group of people sitting in a living room around a burning fire than a workplace. While we were all there for the work, it was very important to allow people to connect with each other, and these chats also gave us a chance to connect with them.

Windmill has made its bet on the JavaScript platform to continue running the Web, and the principals of open source to influence the direction of new features. The documentation has proven to be very comprehensive, and the community responsive. 292 CHAPTER TWENTY-ONE Comparison There are many solutions out there for testing web applications in the browser: Watir, Selenium, Twill, and WebDriver, to name a few. Although they all have strengths and weaknesses, Windmill clearly has some very useful features, and appears to have the least barriers to entry for new test writers, regardless of the platform or browser they need to test on. Windmill boasts a recorder, integrated Firebug Lite, integrated inspector, and support for crossdomain and SSL testing. However, unlike Watir, Windmill operates within the content security model, which means that it can’t access some parts of the browser, such as the confirmation dialog or file uploads. But Windmill has come up with a solution or workaround for many of these challenges.


pages: 382 words: 120,064

Bank 3.0: Why Banking Is No Longer Somewhere You Go but Something You Do by Brett King

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3D printing, additive manufacturing, Airbus A320, Albert Einstein, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, asset-backed security, augmented reality, barriers to entry, bitcoin, bounce rate, business intelligence, business process, business process outsourcing, call centre, capital controls, citizen journalism, Clayton Christensen, cloud computing, credit crunch, crowdsourcing, disintermediation, en.wikipedia.org, fixed income, George Gilder, Google Glasses, high net worth, I think there is a world market for maybe five computers, Infrastructure as a Service, invention of the printing press, Jeff Bezos, jimmy wales, London Interbank Offered Rate, M-Pesa, Mark Zuckerberg, mass affluent, Metcalfe’s law, microcredit, mobile money, more computing power than Apollo, Northern Rock, Occupy movement, optical character recognition, peer-to-peer, performance metric, Pingit, platform as a service, QR code, QWERTY keyboard, Ray Kurzweil, recommendation engine, RFID, risk tolerance, Robert Metcalfe, self-driving car, Skype, speech recognition, stem cell, telepresence, Tim Cook: Apple, transaction costs, underbanked, US Airways Flight 1549, web application

Table 1.1: Comparison of Product Application Approval Times Product 1980 2008 Credit Card 14 days Instant approval Personal Loan 7–14 days Pre-approved, or 24 hours Home Mortgage 30 days+ 24 hours41 These product application approval times are indicative of the pressure on financial service providers to adapt to the changing expectations of customers, and the need to stay competitive. Barriers to entry are lowering, and new innovations in business models are creating pseudo banking services streamed right to our desktop, supermarket or corner 7-Eleven store. Here’s how I articulated this disruption for bankers in my last book, Branch Today, Gone Tomorrow: “Everything about retail financial services that relies on outmoded physical artefacts, proprietary and outdated networks, and processes that are complex and unwieldy—all lend themselves to disruption.

Once a small retailer or local merchant is regularly using his phone to accept “swipe” payments (such as with Square), it’s then a very simple shift for the merchant to accept payments via a consumer tapping their phone (instead of a swipe). Technology such as PayPal and Pay with Square even allow payments just using our phone number or name—no physical interaction required. Once the merchant is accepting payments via a smartphone, there’s virtually no ongoing barrier to entry—i.e. the merchant doesn’t need to invest in a sophisticated POS terminal and such. PayPal has already deployed its supposed “Square competitor”—the triangle—and is aiming to compete in this phone-to-POS space in the near term. In Europe this has spawned iZettle—an EMV equivalent of the Square device in the United States. In October 2011, iZettle raised $11m in a Series A financing deal, supporting its growth plans.16 iZettle is based in Sweden.

The reason for this perspective, particularly in the US, is that right now US mobile carriers are attempting to restrict mobile wallet operations on their networks. Ultimately, these current attempts are likely to end in nought for any number of reasons, but mostly because the mobile payments market will continue to fragment. The number one reason, however, is that, unlike the credit and debit card industry, historically, the barriers to entry are extremely low. Let me explain. When MasterCard and Visa emerged in the 70s and 80s, they had a whole infrastructure to build. Merchants didn’t have point-of-sale capability to capture credit card payments. In those days there weren’t even networks to process those card payments. I’m sure many of us remember those so-called “flatbed manual imprinter” machines. These were known in the old days as “knucklebusters” by many merchants because of their design.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Albert Einstein, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

In a way, Nokia’s fortunes were squandered because it was remarkably good at what it was doing: it ran one of the most efficient production networks in the telecom sector. It was too profitable to abandon. There are companies that manage to combine global scale and specialization with the ethos of creative destruction, but most firms do not. For those that have successfully reached global scale there is usually a far more pressing preoccupation: ensuring that the barriers to entry are so high and thorny that new rivals will not bother to cross into their territory. Protecting markets can be difficult, and big companies can fail to do it even in markets where competition is concentrated among a few big players. Over the last decades, however, firms have become more skilled at market and incumbency protection (see Chapter 5) and they invariably use the same formula as Nokia: increasing production specialization and optimization.

The political opposition to Uber reveals a banal but rarely observed point about regulation: regulated markets do not sit comfortably with innovation and an ambition to contest them. And Uber’s story is a telling example of how regulation – intentionally or not – preserves a particular form of market behavior and puts up barriers to contestable innovation. That is all too often true even with the benign form of regulation. For example, regulation tends to increase the barrier to entry for the simple reason that the cost of regulation per employee or unit of sale is higher for a new small entrant than an incumbent firm. Both economic and social regulations have that effect. A survey by the OECD, for instance, estimated the annual regulatory administration cost per employee to be about nine times higher for a company with fewer than 20 staff than for a company with a workforce of 50–499.12 Less benign regulation preserves an existing market order by protecting investors and labor from competition, including competition from innovation.

And that fits the paradigm of the planning machine, especially its technological determinism and disregard for those factors that govern whether an invention can be turned into market-renewing innovation. In this view, regulators and politicians will embrace the new innovation, regardless of its impact on competition, and allow timely and undisrupted access to consumers. Markets will thus flourish naturally on the back of innovation – and the speed at which innovation can ripple through various markets will not get arrested by policy barriers to entry. Even if there may be some initial resistance, the paradigm of the planning machine holds that technology will inevitably trump politics. In the battle between innovation and existing policy or market hierarchies, innovation will always win. It is a romantic view of politics – and that bee has stung a good part of the tech commentariat. The notion that politics runs on the spirit of bettering the welfare of humankind is not without merit.


pages: 281 words: 95,852

The Googlization of Everything: by Siva Vaidhyanathan

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1960s counterculture, activist fund / activist shareholder / activist investor, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, creative destruction, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, moral panic, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application, zero-sum game

Back then I took seriously the notion that the world had stepped beyond the stalemate of the Cold War and had settled on a rough consensus on competitive open markets, basic human rights, and liberal democracy—even if the road to those goals was still long and rocky in much of the world.1 I assumed digitization would level the commercial playing field in wealthy economies and invite new competition into markets that had always had high barriers to entry. I imagined a rapid spread of education and critical thinking once we surmounted the millennium-old problems of information scarcity and maldistribution. But in the early part of this century, my mood soured and my enthusiasm waned. I saw my great hopes for an open and free Internet corrupted by the simultaneous pressures of inadequate security (in the form of fraud, spam, viruses, and malware) and the attempts at a corporate lockdown of culture and technology.2 I saw that the resistance to openness, transparency, accountability, and democracy was stronger than I had imagined and present in parts of the world—including my own— where I thought the forces of light had triumphed long ago.3 I worried that the environment generated by the global reach of the Internet was pulling us in opposite directions—toward both anarchy and oligarchy— and draining the institutions and environments that would foster more P RE FAC E xiii reasonable, republican virtues, such as measured deliberation, critical thought, and mutual respect.4 I noted the ways in which those who promoted the digitization and networking of all things reverted to simplistic and wrongheaded views of how technology works in society.5 I grew weary of others’ attempts to describe technology as an irresistible force that young people have mastered and old people must conform to or wither away trying to resist.6 And I had an intellectual allergic reaction to the growing notion that one company—Google—could or would solve some of the greatest and most complex human problems simply by applying the principles of engineering.7 So I sought a way to explore both my disenchantment with and my approval of changes in our global information ecosystem.

Many of Google’s positions correspond roughly with the public interest (such as giving empty support to a network neutrality policy and “safe-harbor” exemptions from copyright liability). Others, such as fighting against stronger privacy laws in the United States, do not.13 REN D E R UNTO CA ESA R 19 When confronted with questions about its dominance in certain markets, Google officials always protest that, on the Internet, barriers to entry are low, and thus any young firm with innovative services could displace Google the way Google displaced Yahoo and AltaVista in the early days of the twenty-first century. With Google unable or unwilling to leverage its advantages though some sort of lockdown, such as holding users’ content and data hostage with technology or exclusive contracts so that they must continue to use Google services, they point out that users could easily migrate to the next Google-like company.

Being able to use a search engine, click on a link, and even post to Facebook does not require much skill or investment, but producing video, running an influential blog, participating in the Wikipedia community, hosting a proxy server, and even navigating between links and information sources on the Internet demand much more money and knowledge than most people in the world have. To acquire such skills, people need at least minimal free time and significant means, and many with disabilities are excluded regardless of education or means. The barriers to entry for such productions are lower than ever in human history, but they are far from free, open, and universal.57 To consider the prospects for a cosmopolitan global civil society or its cousin, a global public sphere, and the role that Google might play in it, we should consider the role of powerful and flexible communicative technologies in places as dynamic and diverse as China, Russia, and India.


pages: 358 words: 106,729

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bernie Madoff, Bretton Woods, business climate, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, price stability, profit motive, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, school vouchers, short selling, sovereign wealth fund, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

Film makers such as Kodak, which did not anticipate the speed of this change, have had to struggle to remake themselves. With this kind of growth process in mind, what is loosely termed the institutional school of economists has argued that the role of the government in business is to create the institutional environment for competition and innovation—to establish secure property rights, strengthen patent laws, reduce barriers to entry, and reduce taxes—and then let the private sector take charge. There is a small problem with this view. No large country has ever grown rapidly from poverty to riches with this kind of strategy, in part because poor countries do not have the necessary private organizations to take advantage of such an environment, and the environment, in turn, is not conducive to creating the organizations quickly.

It then supported incumbents by supplying raw cotton to mills directly, advancing them working capital, and buying up the entire production of yarn. It followed a similar approach toward weavers. It also imposed tariffs on imported yarn and cloth and even banned imports when tariffs proved insufficient. As the textile industry boomed, the government encouraged firms to merge so that they could realize economies of scale. More generally, the tools used by governments have included erecting barriers to entry, offering tax breaks so that private firms can generate larger profits and use their retained earnings to fund investment, encouraging close ties between banks and favored firms so that the former lend abundantly (and cheaply) to the latter, providing raw materials at a subsidized price, and imposing tariffs so that foreign competition is not a threat. With subsidies and protection from the government, some favored champions have grown rapidly and profitably, acquiring technology, wealth, organizational capabilities, and stability.

Instead, they tried to remedy a fundamental deficiency: the weakness of existing organizations—even while tackling more traditional development problems like the lack of basic education and skills in the workforce and deficiencies in the health care system. The process of strengthening organizations, in their view, required massive but careful government intervention. Infant firms had to be nurtured. The very real danger, as evidenced in India’s stagnation during the 1960s and 1970s, was that the infant firms would demand permanent protection and then strangle growth. One option was to increase internal competition by reducing barriers to entry and eliminating various subsidies. But governments thought this would waste resources and be potentially harmful to the incumbents who had only recently become profitable. Moreover, the internal market was small, made even smaller by the repression of households in favor of producers. The solution instead was to use the disciplinary power, as well as the attractiveness, of the large global market.


pages: 261 words: 103,244

Economists and the Powerful by Norbert Haring, Norbert H. Ring, Niall Douglas

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accounting loophole / creative accounting, Affordable Care Act / Obamacare, Albert Einstein, asset allocation, bank run, barriers to entry, Basel III, Bernie Madoff, British Empire, central bank independence, collective bargaining, commodity trading advisor, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, diversified portfolio, financial deregulation, George Akerlof, illegal immigration, income inequality, inflation targeting, information asymmetry, Jean Tirole, job satisfaction, Joseph Schumpeter, Kenneth Arrow, knowledge worker, labour market flexibility, law of one price, light touch regulation, Long Term Capital Management, low skilled workers, mandatory minimum, market bubble, market clearing, market fundamentalism, means of production, minimum wage unemployment, moral hazard, new economy, obamacare, old-boy network, open economy, Pareto efficiency, Paul Samuelson, pension reform, Ponzi scheme, price stability, principal–agent problem, profit maximization, purchasing power parity, Renaissance Technologies, rolodex, Sergey Aleynikov, shareholder value, short selling, Steve Jobs, The Chicago School, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, ultimatum game, union organizing, Vilfredo Pareto, working-age population, World Values Survey

The fund was well known for pressing the banks it was working with for hints about market developments, such as big buy and sell orders (Sender 2009). 54 ECONOMISTS AND THE POWERFUL Trading on insider information diminishes the returns of all other investors. The damage to the individual investor from the individual insider deal is minor. However, as we will see, insider dealings and similar strategies are so pervasive in the financial industry that the cumulative damage to the individual investor can be sizable. Market power in finance Two important conditions for the exertion of economic power are the existence of barriers to entry and the power to determine prices. High profits of big investment banks, the constant increase in governmentsponsored financial institutions and many examples of extortion, which we will cover below, provide ample proof that competition does not work well to discipline participants in the financial sector. Market entry is not free. You need a license to found a bank and there is a significant regulatory burden.

Throwing out the neoclassical innovation to theory as faulty leaves classical economics and the notion that the negotiating power of the various social classes determines wages and profits. This is exactly what first year classes in practical business skills teach: an overview of the main points of Pierre Bourdieu’s economic sociology (e.g. The Social Structures of the Economy, 2005) and Porter’s five forces strategic analysis (barriers to entry, threat of substitutes, buyer power, seller power, competitive rivalry). Both are absolutely centered on how negotiating power between economic actors works in the real world. Conclusion Companies make profits beyond the assumed remuneration for taking risks and for the entrepreneur’s work. Mainstream economic theory has no theoretical basis on which to determine how these rents should be distributed among capital owners, management and workers.

G. D. 13 American Economic Association ix, 10, 17, 20, 26–7, 44 American Economic Review 8, 20, 26–7 American International Group (AIG) 70, 90–91 Anglo-Saxon economics ix Arrow, Kenneth 7, 23–4, 212; see also impossibility theorem (Arrow’s) asset bubble 104 asymmetric information: see information, asymmetric AT&T 147 authoritarianism 24, 210 average cost 148, 151 Bank of America 77, 86, 94 barriers to entry 54, 160 Basel III Accord 104–5 Bear Stearns 90, 96, 107, 111 Becker, Gary S. 186 Bemis, Edward 9–10 Bentham, Jeremy 11 Berlin, Isaiah 25 Bernays, Edward 15–17 Bill of Rights (US) 208 Bolsa Família program 41 Boskin Commission 36 Bourdieu, Pierre 25, 115, 160 Bridgestone (tire manufacturer) 163–4, 166–7 British Empire ix, 16, 100 Buchanan, James 23–4 Buffett, Warren 93, 107–9 Bullionists 2 Bureau of Labor Statistics 32–3, 35 capitalism vii–viii, ix, 2, 5–6, 10, 18–19, 21, 31, 46, 142, 153, 158, 165 central bank 43, 67, 79–88, 104–5 CEO: see chief executive officer (CEO) Chicago, University of 10, 17, 19, 26, 27, 44, 80, 84, 168, 186, 193 chief executive officer (CEO) xi, 16, 47, 61, 70, 93, 95–6, 103, 107–13, 115–27, 132, 138–9, 215, 217 Chrysler xi, 113 Citicorp (bank) 43 Citigroup (bank) xi, 61, 63, 96, 105, 112, 125 Clark, John Bates 6, 10–11, 155, 193 classical value theory 5 Cold War 2, 18, 21, 25–8, 46 collective bargaining 185 Commodity Futures Trading Commission (CTFC) 90, 92 Commons, John R. 8–10 communism xii, 2, 19, 21, 25, 139 comparative advantage 4 Condorcet, Marquis de 23 conflict 165 consumption viii, 11, 13, 32, 78, 158, 192, 203, 211 control fraud 94–5 convergence vii 242 ECONOMISTS AND THE POWERFUL cooperation 73–5, 165, 167, 170, 198 cooperative 102 Cornell University 10 corporate elite x, xii, 115, 117, 140 corporate governance 92, 119, 127, 135, 136 corporate government 135 corporate management 109 corporation tax 139 corruption 220 credit x, xi, 29, 48–50, 59–60, 62, 65, 71, 73, 75, 77–84, 90–91, 95–8, 100, 104, 110, 149, 183 credit default swap 91, 93 CTFC: see Commodity Futures Trading Commission (CTFC) Darwinism 167 Debreu, Gerard 7 demand curve 146 democracy 18, 207, 211–13, 220 depreciation 33, 147 derivatives 67, 90–93, 96–7 Deutsche Bank 105, 121 disability adjusted life expectancy vii discrimination 130, 186–7 earnings management 129–30 economic growth xi, 80 economic policy xi, 46, 66, 76, 152 economic utility 4–5, 13 economics, mainstream viii, x–xi, xiii, 1, 29, 47, 136, 145, 164, 170, 208, 211, 214 economics, neoclassical ix, xii, 6, 8, 10–11, 13, 21–2, 25, 30, 38, 42, 45, 141, 143–4, 153–5, 157–60, 163–4, 168, 170–71, 173, 180–82, 188, 191–2, 210, 213 economies of scale 3, 54, 152, 161 economies of scope 54 Edgeworth, Francis Y. 10 efficiency vii, x, xi, xii, 13, 19, 25, 39, 43, 48, 62, 73, 101, 108, 136–7, 143, 144, 146–7, 149, 156, 160, 170, 176, 179, 183, 190, 193, 197, 202–4, 216, 219 efficient markets x Ely, Richard T. 9–10 employment protection 188, 200–203, 205 Enron 52, 92, 98, 110, 128, 132, 217 entrenchment 126, 135 equality of opportunity vii–ix, xii, 37, 39–41, 45, 53, 114, 124, 172 equality of outcome vii equilibrium x, 6–7, 37, 47, 146, 159, 161, 181–2, 197, 208 euro ix, 67, 82, 102 European Central Bank 103, 189, 215 European Commission/Union 67, 152 executive compensation 120–21, 138 exploitation 6, 156, 209, 212 exports 2, 34, 180–81 fairness ix, 13, 37, 39–40, 160, 164–6, 169–70, 177, 220 Fannie Mae (US government subsidizer of mortgages) 217 fear, uncertainty, doubt (FUD) 145 Federal Reserve (US) 43–4, 69–70, 85, 87–92, 143, 215 feedback loop 40, 216, 220 fiat money 75, 81 filibuster (US antilegislative maneuver) 218 financial industry xi, 44, 46–8, 51, 54–6, 64, 70, 89, 91–2, 121, 129, 217 financial markets xi, 47, 92, 108, 110, 128 financial rating agencies: see rating agencies financial sector xi, 43–4, 47–8, 53–4, 60, 64, 69, 79, 81, 83, 88–9, 100–101, 103, 105 Financial Stability Board 103 First (Workingmen’s) International 5 first mover advantage 132 Fisher, Irving 10, 13, 60, 75, 81, 83–4, 214 Fitch (ratings agency) 97 fixed costs 143 INDEX Fortune (magazine) 128 Fortune 500 (index) 49, 139 forwards (financial instrument) 67 founding fathers (of the United States) 207, 218 Freddie Mac (US government subsidizer of mortgages) 217 free market 6–7, 24, 46, 84, 147, 188, 193, 209 free riding 24, 37, 164 free trade 3–4, 16, 46, 209 freedom viii, 10, 18, 21, 25, 80, 94, 188, 191, 218 Freud, Sigmund 15 Friedman, Milton 44, 57, 81 front running (trading strategy) 65–6 FUD: see fear, uncertainty, doubt (FUD) fund managers 56–8, 63–4, 68, 134 futures (financial instrument) 67 Galbraith, John Kenneth 11, 74 GDP: see gross domestic product (GDP) General Motors xi, 16, 184–5 global financial crisis ix, 90; see also Great Financial Crisis God 24 gold 2, 72–7, 79–80, 86–7, 89 golden parachutes 112 Goldman Sachs 47, 49, 54, 56, 63, 66, 69, 88, 93, 105, 121, 215 goodwill 131 Great Depression 11, 70, 80, 138–9, 181, 204 Great Financial Crisis 79, 100, 111, 136; see also global financial crisis gross domestic product (GDP) vii–ix, xi, 28–31, 143 growth 27–8, 31, 33, 35, 39, 71, 90, 102, 108, 128, 132, 135, 151, 195, 203–4 Hadley, Arthur 10 happiness 202 Harvard Business Review 17–18 Harvard University 17–18, 26, 109, 208 243 hedge fund 29, 43, 46, 53, 58, 64–8, 92, 96, 101, 107 hedonic method 33–6 Hicks, John 13–14, 21 Homo economicus 164–6, 173 hostile takeovers 126 human capital 128 imports 2, 12, 34, 35 impossibility theorem (Arrow’s) 23–4, 212–13 incentives 39–40, 42–5, 52, 91, 93, 109, 114–15, 129, 132, 140, 172–4, 177, 182, 214 income guarantee 41 incompleteness viii, 12, 49, 145, 169, 184 incumbency 121, 134, 149 index tracking fund 55, 58 indifference 141, 168 industrial goods 2–3, 142 industrial production 2, 179 Industrial Revolution 5, 143, 181 inequality vii, 40, 138, 140 inflation 32–3, 36, 50, 78, 81, 104, 109, 120 information advantage 48, 131 information, asymmetric x, 191 information costs 144 information goods 143 information, imperfect x, xii, 142, 145, 149, 220 information technology 34, 218 innovation 34, 43, 147, 150–52, 160, 208 insider information 53–4, 62–3, 131 insider knowledge 131 insider trading 63–4, 131 institutionalism 8, 21 insurance xi, 39, 69, 82, 89–91,152, 189, 198, 204, 210 interest rate, real 50, 159 International Monetary Fund 27, 31, 48, 69, 74 International Workingmen’s Association 5 244 ECONOMISTS AND THE POWERFUL investment 32–3, 37, 41, 51, 56–7, 68, 78, 96–100, 103–4, 128–30, 133, 135, 140, 157, 184, 217 advice 51, 54, 56, 129 banking 29, 43, 47, 51, 52, 54, 55, 60–62, 64, 70–71, 89–90, 93, 94, 96, 97, 101, 107, 111–12, 125, 132 personal viii irrationality vii, 1, 13, 16, 38, 40, 151, 205, 211–12 Ivy League 27 Jevons, William Stanley 5, 16 job security viii, 108, 199–200, 202–4 J.P.


pages: 227 words: 32,306

Using Open Source Platforms for Business Intelligence: Avoid Pitfalls and Maximize Roi by Lyndsay Wise

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barriers to entry, business intelligence, business process, call centre, cloud computing, commoditize, en.wikipedia.org, Just-in-time delivery, knowledge worker, Richard Stallman, software as a service, statistical model, supply-chain management, the market place

In some cases the availability of free source code may not be a benefit due to a lack of internal resources and/or skills to provide all of the development efforts required. Other organizations are using alternate versions of free software to further their business efforts and are open to the concept of expanding their use of OS. With many factors going into the changes surrounding OS adoption, the barriers to entry involving lack of knowledge or IT development infrastructure to deploy solutions are no longer restricting adoption. For companies without supporting BI infrastructures, commercial OS solutions exist that can help them get on track and take advantage of free solutions. The differences between community- and commercial-based OS will be discussed in the next chapter with an overview of the differences between vendor offerings and the various outlooks vendors have on their commercial products and services.

The figure below identifies the average cost of OSBI usage versus traditional BI offerings based on Madsen’s evaluation of the TCO of OSBI versus traditional offerings.4 The deployment size is based on looking at deployments of 25 users, 100 users, and 500 users, respectively. However, these numbers are based on large-scale traditional vendors. As we’ll see later on, newer offerings are minimizing these differences and potential barriers to entry, but OSBI still has the benefit of no-cost software. 4 Lowering the Cost of Business Intelligence With Open Source: A Comparison of Open Source and Traditional Vendor Costs Mark Madsen, Third Nature, Prepared for Pentaho, page 4. 122 CHAPTER 11 Evaluating ROI and TCO Average Cost per User $3,500 $3,000 $2,500 Cost $2,000 $2,500 $1,000 $500 $Small Medium Large Avg Cost Trad. $2,664 $3,103 $3,174 Avg Cost Open $1,200 $870 $174 FIGURE 11-1 Average Cost Per User, Comparing Traditional and Open Source Across Scenarios.

For instance, a number of best-of-breed solutions exist for companies evaluating adding dashboards to their internal reporting needs. Many organizations are moving away from one platform and a standardized approach and integrating diverse offerings to make sure they get the best of everything. This does not mean that one solution outperforms another, but that based on changing price structures and lowering barriers to entry, organizations can develop a piecemeal approach. Within the realm of OSBI, this may mean that OS only represents one portion of BI or that disparate offerings pull data from the same sources or may need to interact in specific ways. For instance, no matter what exists on the backend, business users need a seamless business experience. Once organizations define what they have in-house, they can identify which aspects require OSBI considerations and which don’t.


pages: 299 words: 91,839

What Would Google Do? by Jeff Jarvis

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23andMe, Amazon Mechanical Turk, Amazon Web Services, Anne Wojcicki, barriers to entry, Berlin Wall, business process, call centre, cashless society, citizen journalism, clean water, commoditize, connected car, credit crunch, crowdsourcing, death of newspapers, disintermediation, diversified portfolio, don't be evil, fear of failure, Firefox, future of journalism, Google Earth, Googley, Howard Rheingold, informal economy, inventory management, Jeff Bezos, jimmy wales, Kevin Kelly, Mark Zuckerberg, moral hazard, Network effects, new economy, Nicholas Carr, old-boy network, PageRank, peer-to-peer lending, post scarcity, prediction markets, pre–internet, Ronald Coase, search inside the book, Silicon Valley, Skype, social graph, social software, social web, spectrum auction, speech recognition, Steve Jobs, the medium is the message, The Nature of the Firm, the payments system, The Wisdom of Crowds, transaction costs, web of trust, Y Combinator, Zipcar

Cable and phone companies hope the internet is just their next pipe to own. They all want to control the internet because that is how they view their worlds. Listen to the rhetoric of corporate value: Companies own customers, control distribution, make exclusive deals, lock out competitors, keep trade secrets. The internet explodes all those points of control. It abhors centralization. It loves sea level and tears down barriers to entry. It despises secrecy and rewards openness. It favors collaboration over ownership. The once-powerful approach the internet with dread when they realize they cannot control it. The internet adds networks of links over society, connecting people with information, action, and each other. It is in those connections that value is created, efficiency is found, knowledge is grown, and relationships are formed.

In film and video, that delta is many times larger, which I believe will lead to even more investment in online shows, as the opportunities are even greater. Revision3 started on a shoestring but received a reported $9 million investment to create more shows, build a studio, and hire its CEO. It’s still run on a shoestring, CEO Jim Louderback told me. “The story of the internet,” he said, “is ruthlessly efficient business models and blowing away barriers to entry and access.” Revision3 saved money on equipment, which Louderback credited to Moore’s Law. Intel’s Gordon Moore decreed in 1965 that the number of transistors and thus the computing power on a chip would double every two years (this law enabled Google and the internet to exist and led to every law in this book). The cost of digital cameras has thus plummeted. Revision3 goes Cadillac with an $8,500 model but I’ve seen newspapers and even TV stations recording high-definition segments with $1,000 handhelds.

It’s also harder to find and evaluate new companies. I get a headache reading the popular blog TechCrunch, which covers new web 2.0 companies, because I can’t hope to keep track of them all: mobile companies, social companies, companies dedicated just to managing blog comments. The low cost of launching and running new enterprises means they can serve niche needs in a small-is-the-new-big age. But the barrier to entry to competitors is also about a millimeter off the ground. It’s harder than ever to figure out which of many competitors in a space will win. So investors need to use a wider network of trusted people to help find and then manage new companies. Taking investment capital from these trusted agents and giving them a share of the profits if their finds pay off could form a network of miniVCs backed by the bigger VC.


pages: 313 words: 84,312

We-Think: Mass Innovation, Not Mass Production by Charles Leadbeater

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1960s counterculture, Andrew Keen, barriers to entry, bioinformatics, c2.com, call centre, citizen journalism, clean water, cloud computing, complexity theory, congestion charging, death of newspapers, Debian, digital Maoism, double helix, Douglas Engelbart, Edward Lloyd's coffeehouse, frictionless, frictionless market, future of work, game design, Google Earth, Google X / Alphabet X, Hacker Ethic, Hernando de Soto, hive mind, Howard Rheingold, interchangeable parts, Isaac Newton, James Watt: steam engine, Jane Jacobs, Jaron Lanier, Jean Tirole, jimmy wales, John Markoff, John von Neumann, Kevin Kelly, knowledge economy, knowledge worker, lone genius, M-Pesa, Mark Shuttleworth, Mark Zuckerberg, Marshall McLuhan, Menlo Park, microcredit, new economy, Nicholas Carr, online collectivism, planetary scale, post scarcity, Richard Stallman, Shoshana Zuboff, Silicon Valley, slashdot, social web, software patent, Steven Levy, Stewart Brand, supply-chain management, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Whole Earth Catalog, Zipcar

Boulders and pebbles Imagine surveying the media, information and cultural industries in the mid 1980s, industries that provide most of our information and entertainment and so filter our access to the world around us and shape how we make sense of it. The scene would have resembled a large, sandy beach, with crowds organised around a few very large boulders. These boulders were the big media companies. The boulders came into being because media had high fixed costs – print plants for newspapers and studios for television. They were closely regulated and resources, like broadcast spectrum, were scarce. All that created high barriers to entry. Anyone trying to set up a significant new media business could be seen coming from a long way off. Rolling a new boulder onto the beach took lots of people, money and machinery. In the mid 1980s an entrepreneur called Eddie Shah tried to roll a boulder onto the British beach by setting up a national newspaper based in northern England. That provoked a protracted national strike. Rupert Murdoch caused controversy by moving his boulder – production of his News Corporation newspapers – from one part of London to another.

There are no zoning regulations, fences or white lines to tell you where to go (admittedly this is not true of some beaches in Spain, France and Italy). Order emerges as each family joins the throng. On popular beaches people spend all day in close proximity but generally remain civil and considerate. Precisely because there is no one in control – other than sometimes lifeguards looking after safety – people take it upon themselves to self-regulate. Beaches are generally egalitarian in spirit because barriers to entry are quite low. Normal rules do not apply because there is no private property. A public beach is a commons for pleasure. Many public events and spaces – festivals and carnivals, parks and libraries – thrive on this ethic of mass self-regulation. The web is bringing the spirit of the beach into the sharing of ideas and information. The beach also explains why the enclosure of the cultural commons of Web 2.0 would be such a bad idea.

The battle to bring democracy to repressive states will be fought online through thousands of struggles like those in Shanwei, by people who want simply to be able to think out loud, together. So on balance, will the open web be good for democracy? Yes, it will. Equality The Utopian hopes invested in the web’s democratic potential are matched by claims for its capacity to promote equality by breaking down concentrations of power based on information and knowledge, and lowering barriers to entry into the market-place for ideas. In a global economy that trades information and ideas as much as raw materials and physical goods, anyone with a computer and a modem can become a participant. At least that is the theory. There are serious doubts as to whether the web will do much to make the world less unequal and make any difference to the most pressing problems facing the poorest societies in the developing world.

The Future of Money by Bernard Lietaer

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agricultural Revolution, banks create money, barriers to entry, Bretton Woods, clean water, complexity theory, corporate raider, dematerialisation, discounted cash flows, diversification, fiat currency, financial deregulation, financial innovation, floating exchange rates, full employment, George Gilder, German hyperinflation, global reserve currency, Golden Gate Park, Howard Rheingold, informal economy, invention of the telephone, invention of writing, Lao Tzu, Mahatma Gandhi, means of production, microcredit, money: store of value / unit of account / medium of exchange, Norbert Wiener, North Sea oil, offshore financial centre, pattern recognition, post-industrial society, price stability, reserve currency, Ronald Reagan, seigniorage, Silicon Valley, South Sea Bubble, The Future of Employment, the market place, the payments system, trade route, transaction costs, trickle-down economics, working poor

This theory works from the assumption that all parties have all the information relevant to optimise a given purchase, that there are zero transaction costs and no barriers to entry for few suppliers. In 'real' world transactions, these conditions are rarely met. Interestingly, the cyber economy could become the first actual large-scale involves information, both of us have it. In buying this book, for instance, Government classifications, trade 'near-perfect market'. Information can definitely be more abundant and accessible to more people in cyberspace. The Net makes transaction costs lower than ever. And many of the usual barriers to entry, such as location, capital requirements, etc., are less applicable. Because comparison- shopping is so easy on the Net, it promises to be a fiercely price-sensitive market.

The most popular form of local currency mutual credit system in the world. Market: Physical or virtual space in which demand and offer of a given product or service interact to create a price. Market economies presuppose price variability, for instance prices dropping automatically to clear what is on offer. Theory shows that true market economies require large numbers of small suppliers and consumers, and low barriers to entry. These perfect conditions are rarely prevailing in today's economy. The opposite of a market price is a price fixed by some authority - individual, government or corporate. Micro-credit: Refers to loans in conventional national currency for small amounts to small-scale entrepreneurs. The Grameen Bank in Bangladesh has been a model of success in such activities. Monetarism: Economic theory which posits that only the quantity of money determines prices, and therefore that it is counterproductive to use monetary adjustment tools for purposes other than inflation control.


pages: 286 words: 82,065

Curation Nation by Rosenbaum, Steven

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Amazon Mechanical Turk, Andrew Keen, barriers to entry, citizen journalism, cognitive dissonance, commoditize, creative destruction, crowdsourcing, disintermediation, en.wikipedia.org, future of journalism, Jason Scott: textfiles.com, means of production, PageRank, pattern recognition, postindustrial economy, pre–internet, Sand Hill Road, Silicon Valley, Skype, social graph, social web, Steve Jobs, Tony Hsieh, Yogi Berra

Says Blau, “It used to be it was expensive to create and expensive to distribute—to amplify speech—was held in very few hands, held to high standards by people, by governments or by societies. That meant that very few people had that opportunity to amplify speech. Now that cluster, that nexus, has been irretrievably broken.” Today publishing tools have been set free, Blau says. Cost, ownership, and barriers to entry are all gone, almost overnight: “The ability to amplify one’s voice, to amplify that beyond the reach of what we have had, reflects a change of course in human history. A lot of the discomfort people have about the kind of current riot of voices is that it’s irresponsible, it’s dumbing us down. What happens when anyone can actually speak to a very large audience? Now the whole dynamic of how stuff gets made and moved and managed has been changed so fundamentally that the gatekeeping function that we’ve come to expect is gone.”

After all, the Web is disintermediating lots of businesses that used to have middlemen. But Jarvis goes on to connect all this to Madison Avenue, seeing a battle ensuing between old-media companies moving online and emerging complete new-media outlets. Says Jarvis, “What excites me most is that reduced cost of production. That’s really what drove Weblogs: history’s cheapest publishing tool reduced the barrier to entry-to-media and allowed anyone to produce and distribute text content. Now this will come to video … A half hour of how-to TV that now costs X hundreds of thousands of dollars to produce can be done quite respectably—and probably with more life and immediacy—for a few thousand dollars. New content producers will pop up all over, just as they did in blogs, and now they can distribute their content freely thanks to BitTorrent.

For Tim O’Reilly, the founder and CEO of O’Reilly Media and a coauthor of The Twitter Book, it’s all about emerging new forms of distribution. “What’s so interesting about Twitter,” O’Reilly says, “is that it reflects all the many, many use cases, including spreading misinformation as well as being the first alert of new information.” No longer is a source trusted because it has the power or money to access the publishing ecosystems of TV, radio, or print. Anyone can use Twitter—there’s no barrier to entry. “I know people like me who are using it as a way of sharing my thought processes—what I’m learning, what I’m reading, what I’m caring about. I’m using it as a publishing medium really,” O’Reilly says. “And I’ve described my own work with Twitter as being the most minimal newspaper. A publisher pays attention to a community, whether it’s a community of authors or a community of newsmakers.


pages: 354 words: 92,470

Grave New World: The End of Globalization, the Return of History by Stephen D. King

9 dash line, Admiral Zheng, air freight, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, Plutocrats, plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

It is not so surprising, then, that some of them may abandon ship in the event that a populist party or a charismatic politician comes along promising them something that the mainstream parties had simply not bothered with. No one likes to be ignored forever. Social media cuts both ways. It allows advertisers – and mainstream political parties – to target specific audiences to maximize their goals, whether they happen to be profit or power. Yet it also brings down ‘barriers to entry’, allowing challenger businesses, charismatic political personalities and newly formed political groupings to enter the fray. These new entrants necessarily threaten the existing order not just locally, but also globally. And their quest is likely to be aided by the impact of technology on global supply chains. DIGI-STASIS The more costly the information, the less likely trade will take place.

By reducing the cost of information – and by creating global online ‘hubs’ like Alibaba and Amazon, where buyers and sellers can ‘virtually’ meet one another – the global marketplace should expand, competition should intensify and pricing should become more transparent. All in all, the allocation of resources should improve, leaving output higher, prices lower and everyone – other than inefficient rent-seeking companies – happier. Yet this argument assumes that technology only works by reducing barriers to entry, limiting information asymmetries and encouraging price discovery. That’s much too narrow a view. Technology also fundamentally alters production techniques and hugely skews the distribution of income and wealth. In both cases, technology can be enormously damaging to globalization. The decision on where to locate production facilities ultimately depends on a trade-off between the forces of dispersion and agglomeration.

WHERE OUR OBLIGATIONS BEGIN AND END This ‘Disunited States’ parable reveals many of the fundamental weaknesses associated with blind faith in globalization. Too much economic analysis habitually assumes that whilst human beings may have differing tastes, they are nevertheless all ‘super-rational’ and at all times are trying to ‘maximize their utility’. Any basic microeconomics textbook will argue that utility maximization is most likely to be achieved in a world of perfect competition where there are no ‘barriers to entry’, including, most obviously, the borders that surround sovereign nation states. This is, of course, mostly nonsense. Human beings tend instead to use simple rules of thumb – or, to use the jargon, heuristics – to make decisions. Often, those rules of thumb are so deeply embedded in the subconscious that we are blissfully unaware of what is going on. Our brains may be the biological equivalent of supercomputers, but for much of the time we rely on what might best be described as ‘gut instinct’ or even ‘tribal loyalty’.


pages: 212 words: 49,544

WikiLeaks and the Age of Transparency by Micah L. Sifry

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1960s counterculture, Amazon Web Services, banking crisis, barriers to entry, Bernie Sanders, Buckminster Fuller, Chelsea Manning, citizen journalism, Climategate, crowdsourcing, Google Earth, Howard Rheingold, Internet Archive, Jacob Appelbaum, John Markoff, Julian Assange, Network effects, RAND corporation, school vouchers, Skype, social web, source of truth, Stewart Brand, web application, WikiLeaks

When I attended the first face-to-face meeting of the Kos community, at a convention center in Las Vegas in June 2006 where more than two thousand people attended, the main hall felt like a summer camp reunion of people who knew each other personally (either by name or user handle) but had never met before. This style of political organizing is not the monopoly of the left; the Internet itself is just a system that rewards open methods more than closed ones. The Tea Party movement in United States, at least in some of its iterations, is another good example of open source organizing. Instead of having one central address or leader, it has lots of small groups and no real barrier to entry. Thus no one can control it or stop it by delegitimizing a single leader.4 “If you have a machine, you know exactly how to attack it, exactly how to shut it down,” says Keli Carender, an early Tea Party activist from Seattle. “If you have three million machines coming at you, you don’t know where to turn.”5 As Jonathan Rauch wrote in a long article describing the movement’s methods: The tea party began as a network, not an organization, and that is what it mostly remains.

And last but not least, this approach will create a large union of shared interests in the defense of the rights to run an anonymous post-drop in the digital world.14 The battle over WikiLeaks has had another salutary effect: it has delivered a wake-up call to everyone who thought the free and open Internet was already a fact. Freedom of the press is no longer the exclusive province of those who own one, but while the Internet has drastically lowered the barriers to entry into the public sphere, it has not eliminated them. 175 WIKILEAKS AND THE AGE OF TRANSPARENCY Especially when that public sphere is built on privately owned infrastructure. Take Amazon’s hasty decision to kick WikiLeaks off its cloud servers after a mere phone call from a staffer for Senator Joe Lieberman. In its blog post explaining the decision, Amazon says the group was in violation of its terms of service: Our terms of service state that “you represent and warrant that you own or otherwise control all of the rights to the content . . . that use of the content you supply does not violate this policy and will not cause injury to any person or entity.”


pages: 179 words: 42,006

Startup Weekend: How to Take a Company From Concept to Creation in 54 Hours by Marc Nager, Clint Nelsen, Franck Nouyrigat

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

Amazon Web Services, barriers to entry, business climate, invention of the steam engine, James Watt: steam engine, Mark Zuckerberg, minimum viable product, pattern recognition, Silicon Valley, transaction costs, web application, Y Combinator

But there are plenty of entrepreneurs around the country and the world who need an effective way of connecting with cofounders and colleagues—people who share that startup spirit. The kind of work that goes on at Startup Weekend allows people to form strong bonds that eventually grow into a community. Typically, Startup Weekend organizers have a lot of contacts in their startup, business, and/or tech communities. So, even though the barrier to entry may seem low, the events often turn out to be composed of a very highly motivated and connected group of participants. And Startup Weekend's international outreach has meant that entrepreneurs looking to expand their horizons have a resource for finding like-minded people all over the globe. One Startup Weekend participant launched a company that provided beach lockers and electronic locker solutions in Portugal.

As much as we talk about ingenuity and innovation being part of the United States' DNA, there's still that funny look that some people get when you're introducing your husband or your wife around the circle—in which everybody else is an investment banker or in marketing—and you say something like, “Yeah, he's working on his own thing right now.” It's simply not part of the cultural norm. There are always psychological and social aspects of being an entrepreneur. If we could get a critical mass of people engaged in entrepreneurship, or at least know someone who is an entrepreneur, then the barrier to entry might seem a little lower. Your Next Iteration Startup Weekend serves different functions for different people. Startup Weekend is helping entrepreneurs reach the next step in their respective journeys, wherever they currently are on the startup ladder. For those who know what they're doing, the weekend offers a condensed chronological period in which to get things done. They know they can access people, focus solely on things related to their entrepreneurial vision over that weekend, and actually launch something.

The Orbital Perspective: Lessons in Seeing the Big Picture From a Journey of 71 Million Miles by Astronaut Ron Garan, Muhammad Yunus

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Airbnb, barriers to entry, book scanning, Buckminster Fuller, clean water, corporate social responsibility, crowdsourcing, global village, Google Earth, Indoor air pollution, jimmy wales, optical character recognition, ride hailing / ride sharing, shareholder value, Silicon Valley, Skype, smart transportation, Stephen Hawking, transaction costs, Turing test, Uber for X, web of trust

We need an international team of people and organizations to work collaboratively to build backbone platforms that unify efforts across sectors to address and respond to humanitarian needs, quickly and efficiently. Optimally, the structure of such a platform would be completely open, allowing anyone to participate while also enabling the formation of subgroups customized to tackle 92â•…   L O O K I N G EARTH WARD specific problems or parts of problems, as needed. A completely open structure lowers barriers to entry and offers the possibility of attracting the largest number of problem solvers and the widest solution sets. The system should bring users that are closest to the problem into the system and ensure that everyone has a voice in the discussion. Such a mechanism requires a collaborative community—╉ a community of trust working together with a shared purpose—╉and a philosophy of contribution in which people are focused not solely on doing their assigned job well but also on making a good contribution to further the shared overarching goal.

An effective collaborative mechanism would pair challenges with solutions and bring together an international team of people and organizations who will work collaboratively, unifying efforts across sectors to address and respond to humanitarian needs, achieving impact with efficiency and speed. Because there are many efforts to build universal open source platforms, it is critical to align efforts. We need to make sure there’s a path to bring users closest to the problem into the system, lowering barriers to entry to ensure that everyone has a voice in the discussion. This Unity Node would be a collaborative community, 162â•…    Co n c l u sio n a community of trust, working together with a shared purpose. As with a hackathon, there would be a philosophy of contribution in which people are focused not solely on doing their assigned job well but also on making a good contribution to furthering the shared, overarching goal.


pages: 196 words: 57,974

Company: A Short History of a Revolutionary Idea by John Micklethwait, Adrian Wooldridge

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

affirmative action, barriers to entry, Bonfire of the Vanities, borderless world, business process, Corn Laws, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, double entry bookkeeping, Etonian, hiring and firing, industrial cluster, invisible hand, James Watt: steam engine, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, knowledge worker, laissez-faire capitalism, manufacturing employment, market bubble, mittelstand, new economy, North Sea oil, race to the bottom, railway mania, Ronald Coase, Silicon Valley, six sigma, South Sea Bubble, Steve Jobs, Steve Wozniak, strikebreaker, The Nature of the Firm, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, tulip mania, wage slave, William Shockley: the traitorous eight

But the gains from reducing transaction costs that companies deliver have to be balanced against “hierarchy costs”—the costs of central managers ignoring dispersed information. In the nineteenth century, the gains to be had from integrating mass production with mass distribution were enormous—as Alfred Chandler, the doyen of business historians, puts it, the “visible hand of managerial direction” replaced “the invisible hand of market mechanisms.” In the twenty-first century, technology and globalization are helping to reduce barriers to entry—and thus helping to unbundle the corporate package. At the touch of a button, a mere journalist can get access to more information than a corporate giant could amass a decade ago. The fashion nowadays is for virtual companies—for airlines that do not own their own planes, for banks that do not have branches, for the invisible hand to claw back ground from the visible one. That should not imply that the company is beginning a slow, inevitable decline.

By July 1932, the Dow Index, which had stood at 386.10 on September 3, 1929, had fallen to 40.56. Industrial output fell by a third. In the Depression, consumers were only willing to part with their surplus cash for genuine novelties (or apparent ones: by the late 1930s, Procter alone was spending $15 million a year on advertising). Yet, throughout this turmoil, the big Sloanist firms held on to their positions. With the barriers to entry in most businesses still high, they were rarely threatened by young upstarts; the main danger was of a neighboring giant diversifying systematically into their territory. The only way a multidivisional firm could get beaten was by another multidivisional firm. THE MANAGERS Behind this success sat a new culture of management. In the late nineteenth century, business education consisted of little more than teaching bookkeeping and secretarial skills.


pages: 169 words: 56,250

Startup Communities: Building an Entrepreneurial Ecosystem in Your City by Brad Feld

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barriers to entry, cleantech, cloud computing, corporate social responsibility, Grace Hopper, job satisfaction, Kickstarter, labour mobility, Lean Startup, minimum viable product, Network effects, Peter Thiel, place-making, pre–internet, Richard Florida, Ruby on Rails, Silicon Valley, Silicon Valley startup, smart cities, software as a service, Steve Jobs, text mining, Y Combinator, zero-sum game, Zipcar

While Silicon Valley is the iconic example, we are seeing success and potential in other places as well, like Washington, D.C.; Chicago; Denver; Boston; Seattle; Portland; Austin; Raleigh; and Nashville. But the startup revolution isn’t limited to these cities—any locality in the United States can build a vibrant startup community if it strategically brings together the key partners who support growth. In fact, the barriers to entry have never been lower for many sectors across the economy. That’s why we launched the Startup America initiative, and that’s why this book is such an important contribution: Brad does a great job using the Boulder, Colorado, regional ecosystem as a blueprint for creating and developing a sustainable startup community in any city. If you want to know how to usher in a new wave of job creation, innovation, and growth in your city, I recommend reading this book.

; and (3) provide a pipeline to the community: The CU New Venture Challenge should be a point of entry for CU students and faculty to get meaningfully involved in the region’s startup scene. These three objectives drove the architecture of the CU New Venture Challenge. First, in order to collapse the campus, the CU New Venture Challenge starts each year with kick-off events that are energetic, informative, and involve few barriers to entry. The goal is to have attendees from all parts of campus to get them interested in entrepreneurship. For content, events included a leading area entrepreneur’s talk about how to pick a business idea worth pursuing, and a pitch night to facilitate team formation. To drive turnout, we assembled an executive committee of student ambassadors, with several students from each department on campus who served as evangelists to get the word out in classrooms and to relevant student groups.


pages: 179 words: 43,441

The Fourth Industrial Revolution by Klaus Schwab

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3D printing, additive manufacturing, Airbnb, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, barriers to entry, Baxter: Rethink Robotics, bitcoin, blockchain, Buckminster Fuller, call centre, clean water, collaborative consumption, commoditize, conceptual framework, continuous integration, crowdsourcing, disintermediation, distributed ledger, Edward Snowden, Elon Musk, epigenetics, Erik Brynjolfsson, future of work, global value chain, Google Glasses, income inequality, Internet Archive, Internet of things, invention of the steam engine, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, life extension, Lyft, mass immigration, megacity, meta analysis, meta-analysis, more computing power than Apollo, mutually assured destruction, Narrative Science, Network effects, Nicholas Carr, personalized medicine, precariat, precision agriculture, Productivity paradox, race to the bottom, randomized controlled trial, reshoring, RFID, rising living standards, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, smart cities, smart contracts, software as a service, Stephen Hawking, Steve Jobs, Steven Levy, Stuxnet, supercomputer in your pocket, The Future of Employment, The Spirit Level, total factor productivity, transaction costs, Uber and Lyft, Watson beat the top human players on Jeopardy!, WikiLeaks, winner-take-all economy, women in the workforce, working-age population, Y Combinator, Zipcar

The decision by Apple and Google to enter the automotive market shows that a tech company can now transform into a car company. In the future, as the value shifts towards the electronics, the technology and licensing software may prove more strategically beneficial than manufacturing the car per se. The finance industry is going through a similar period of disruptive change. P2P (peer-to-peer) platforms are now dismantling barriers to entry and lowering costs. In the investment business, new “robo-advisory” algorithms and their corresponding apps provide advisory services and portfolio tools at a fraction of the old transaction cost – 0.5% instead of the traditional 2%, thereby threatening a whole segment of the current financial industry. The industry is also aware that blockchain will soon revolutionize the way it operates because its possible applications in finance have the opportunity to reduce settlement and transaction costs by up to $20 billion and transform the way the industry works.

Figure V: Distribution of US Occupational Employment* over the Probability of Computerization * Distribution based on 2010 job mix. Source: Frey, C.B. and M.A. Osborne, “The Future of Employment: How Susceptible Are Jobs to Computerisation?”, 17 September 2013 Positive impacts – Cost reductions – Efficiency gains – Unlocking innovation, opportunities for small business, start-ups (smaller barriers to entry, “software as a service” for everything) Negative impacts – Job losses – Accountability and liability – Change to legal, financial disclosure, risk – Job automation (refer to the Oxford Martin study) The shift in action Advances in automation were reported on by FORTUNE: “IBM’s Watson, well known for its stellar performance in the TV game show Jeopardy!, has already demonstrated a far more accurate diagnosis rate for lung cancers than humans – 90% versus 50% in some tests.


pages: 243 words: 61,237

To Sell Is Human: The Surprising Truth About Moving Others by Daniel H. Pink

always be closing, Atul Gawande, barriers to entry, call centre, Cass Sunstein, Checklist Manifesto, choice architecture, complexity theory, Credit Default Swap, Daniel Kahneman / Amos Tversky, disintermediation, future of work, George Akerlof, information asymmetry, Jeff Bezos, Kickstarter, Marc Andreessen, Menlo Park, out of africa, Richard Thaler, rolodex, Ronald Reagan, Steve Jobs, The Market for Lemons, Upton Sinclair, Wall-E, zero-sum game

As you’ll see in the findings of a first-of-its-kind analysis of people’s activities at work, we’re devoting upward of 40 percent of our time on the job to moving others. And we consider it critical to our professional success. Chapter 2 explores how so many of us ended up in the moving business. The keys to understanding this workplace transformation: Entrepreneurship, Elasticity, and Ed-Med. First, Entrepreneurship. The very technologies that were supposed to obliterate salespeople have lowered the barriers to entry for small entrepreneurs and turned more of us into sellers. Second, Elasticity. Whether we work for ourselves or for a large organization, instead of doing only one thing, most of us are finding that our skills on the job must now stretch across boundaries. And as they stretch, they almost always encompass some traditional sales and a lot of non-sales selling. Finally, Ed-Med. The fastest-growing industries around the world are educational services and health care—a sector I call “Ed-Med.”

Consider Etsy, an online marketplace for small businesses and craftspeople. Begun with essentially no outside investment in 2005, Etsy now has more than 875,000 active online shops that together sell upward of $400 million of goods each year.7 Before Etsy came along, the ability of craft makers to reach craft buyers was rather limited. But the Web—the very technology that seemed poised to topple salespeople—knocked down barriers to entry for small entrepreneurs and enabled more of these craft makers to sell. Ditto for eBay. Some three-quarters of a million Americans now say that eBay serves as their primary or secondary source of income.8 Meanwhile, many entrepreneurs find fund-raising easier thanks to Kickstarter, which allows them to post the basics of their creative projects—films, music, visual art, fashion—and try to sell their ideas to funders.


pages: 50 words: 15,603

Orwell Versus the Terrorists: A Digital Short by Jamie Bartlett

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augmented reality, barriers to entry, bitcoin, blockchain, crowdsourcing, cryptocurrency, Edward Snowden, ethereum blockchain, Kuwabatake Sanjuro: assassination market, Satoshi Nakamoto, technoutopianism, Zimmermann PGP

It’s this type of attack that security services (in the UK and elsewhere) are extremely concerned by: low planning, low preparation, and difficult to prevent. I’m writing this the day after two Islamist radicals shot and murdered twelve people in the offices of the French satirical magazine Charlie Hebdo; as I write these words, another radical Islamist has taken a number of people hostage in a kosher supermarket in Paris (and murdered four people, I learn later). One of the reasons there has been an increase in lone wolves is because the barriers to entry have fallen. According to Jeffrey D. Simon, author of Lone Wolf Terrorism: Understanding the Growing Threat, the lone wolf is ‘the most innovative, most creative and most dangerous’ type of terrorist. Lone wolves aren’t restricted by ideology or hierarchy, and don’t need to worry about alienating their group or organisation. In Simon’s view, the wealth of easy-to-access information online facilitates the rise of lone wolves.


pages: 49 words: 12,968

Industrial Internet by Jon Bruner

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autonomous vehicles, barriers to entry, commoditize, computer vision, data acquisition, demand response, en.wikipedia.org, factory automation, Google X / Alphabet X, industrial robot, Internet of things, job automation, loose coupling, natural language processing, performance metric, Silicon Valley, slashdot, smart grid, smart meter, statistical model, web application

Internet Protocol-based architectures have found their way into industrial plants and have brought about modularity that makes these systems vastly more flexible and easier to update. Richard Ross, the head of IT at Atlas Air, was previously CIO at Hess Oil, where large networks of sensors were integrated with supply-chain systems and personnel databases to schedule preventative maintenance on oil platforms and refineries. “It used to be that the totality of the sensor network was proprietary to a given vendor. Now, with TCP/IP technology, the barriers to entry to put these things in are much lower, the costs to install and maintain them are much lower and there is much more vendor competition,” he says. In airplanes, too, says Ross, “You’re no longer making a commitment to a single vendor for the rest of the life of the plane.” Modularity means that “software can be treated like a part — just like you’d change out an engine part.” Another former oil company CIO says he worked hard to build interoperability between his systems.


pages: 687 words: 189,243

A Culture of Growth: The Origins of the Modern Economy by Joel Mokyr

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Andrei Shleifer, barriers to entry, Berlin Wall, clockwork universe, cognitive dissonance, Copley Medal, creative destruction, David Ricardo: comparative advantage, delayed gratification, deliberate practice, Deng Xiaoping, Edmond Halley, epigenetics, Fellow of the Royal Society, financial independence, framing effect, germ theory of disease, Haber-Bosch Process, hindsight bias, income inequality, invention of movable type, invention of the printing press, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, Jacques de Vaucanson, James Watt: steam engine, John Harrison: Longitude, Joseph Schumpeter, knowledge economy, labor-force participation, land tenure, law of one price, Menlo Park, moveable type in China, new economy, phenotype, price stability, principal–agent problem, rent-seeking, Republic of Letters, Ronald Reagan, South Sea Bubble, statistical model, survivorship bias, the market place, The Structural Transformation of the Public Sphere, The Wealth of Nations by Adam Smith, transaction costs, ultimatum game, World Values Survey, Wunderkammern

Chapter 11 Fragmentation, Competition, and Cultural Change As we have seen, one bias in cultural evolution is what I call coercion bias, the ability of those in power who have a strong stake in the cultural status quo—be it religious, artistic, or scientific—to suppress innovation and persecute heterodox cultural entrepreneurs who deviate from the received wisdom. Innovations can undermine an existing structure of beliefs and in the process “erode beliefs” that provide certain groups with rents and legitimization (Benabou, Ticchi, and Vindigni, 2014). Another way of looking at this bias is to note that incumbents erect high barriers to entry into the market for ideas to protect their monopoly. These barriers often rely on such terminology as “heresy,” “apostasy,” and “blasphemy” and depend on raw political power to prevent new ideas from competing. In other cases, the educational system may have built-in protection for the intellectual status quo, such as the Chinese civil-service examination system or Jewish religious education.

Barnett (2015) has pointed to the Swiss towns as a pivotal location in connecting the Italian Republic of Letters with its Northern counterparts, as well as their polyglot character, which produced a set of translators needed when more and more intellectuals began publishing in their vernacular. Political fragmentation was thus important for more than restrained taxes and effective governance; it was a major factor in the emergence of cultural pluralism. In the sixteenth century, heterodox cultural variants emerged in many fields, meaning that existing barriers to entry were being compromised and penetrated. New people challenged the conventional wisdom in every area of knowledge and thought. To be sure, a variety of conservative bodies made serious attempts to suppress innovators, and some of the most innovative cultural entrepreneurs paid with their lives.17 No European country was completely free of suppression. Protestant nations were at times more intolerant than Catholic ones.

European advances in science did filter into China through the activity of the Jesuits, but apart from recalibrating their calendars and predicting eclipses, their impact was highly selective and not dramatic.24 Had the Chinese authorities allowed other gates of entry for European knowledge besides the Jesuits, it is likely that the new science of Galileo and Newton might have made more of an inroad. In Ming and Qing China there was a market for ideas, but the barriers to entry were high, and the competition between intellectual incumbents and intellectual innovators was biased in favor of the former. This may sound odd in a land where there was no Holy Inquisition (though the Qing emperors at times persecuted intellectuals whom they suspected of subversion), no concepts of blasphemy or sacrilege in the European sense. But perhaps the sharp rise of these institutions in the early modern West was a sign that in Europe the intellectual incumbents felt (justly) that they were under threat.


pages: 69 words: 18,758

Turning Pro: Tap Your Inner Power and Create Your Life's Work by Steven Pressfield

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barriers to entry, delayed gratification, Donald Trump, fear of failure, Guggenheim Bilbao

I think you’ll be glad that the wait is over. You’ll notice, on the spine of this book (or in the title page of your eBook), that the company publishing Turning Pro is called Black Irish Books. It is my great pleasure to declare that Black Irish Books is just another name for two guys (Steve and I) who battle Resistance every single day…just as you do. It’s no secret that book publishing is in the midst of radical change. The barriers to entry have crumbled and, as a result, opportunities have grown exponentially. Steve and I joined forces as co-founders of Black Irish Books to get into the ring ourselves. We intend to publish steak-and-potato kind of books whose aim is to inspire, encourage, and fortify those artists, entrepreneurs, and athletes whose ambition is not to stand on the sidelines, waiting for permission from others, but to take their destiny in their own fists—to pursue their heart’s calling and make it work.


pages: 283 words: 73,093

Social Democratic America by Lane Kenworthy

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affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, Celtic Tiger, centre right, clean water, collective bargaining, corporate governance, David Brooks, desegregation, Edward Glaeser, endogenous growth, full employment, Gini coefficient, hiring and firing, Home mortgage interest deduction, illegal immigration, income inequality, invisible hand, Kenneth Arrow, labor-force participation, manufacturing employment, market bubble, minimum wage unemployment, new economy, postindustrial economy, purchasing power parity, race to the bottom, rent-seeking, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, school choice, shareholder value, sharing economy, Skype, Steve Jobs, too big to fail, Tyler Cowen: Great Stagnation, union organizing, universal basic income, War on Poverty, working poor, zero day

But competition can wreak havoc on the lives of particular individuals. Since the 1970s, competition has become a much more pervasive feature of America’s economy. Firms selling goods or services in international markets confront intense foreign rivals. Domestic industries, such as restaurants and hotels, face more competitors too, as technological advances, falling construction and transportation costs, and deregulation have reduced barriers to entry. In addition, shareholders now want rapid appreciation in stock values. Whereas a generation ago they were happy with a consistent dividend payment and some long-term increase in the stock price, they now demand buoyant quarterly profits and constant growth. Robert Reich has an apt label for this new economy: “supercapitalism.” American firms, he notes, “now have little choice but to relentlessly pursue profits.”2 This shift benefits investors, consumers, and some employees.

Yet in another respect, government will be smaller: there will be fewer regulations on firms and individuals. We’ll always need some restrictions to prevent financial excesses, protect worker and consumer safety, safeguard the environment, and more. But we will rely less on specifying what businesses can and can’t do and more on competition coupled with cushions. If we do better at enforcing antitrust rules and scrap or reduce regulations that create barriers to entry, competition will help to align business behavior with the preferences of consumers. Insurance—both compensatory and proactive, both cash payments and services—will cushion those who are victimized by market processes or the vagaries of life. Government also will be more efficient and effective in its administration. Those who favor expanding public insurance ought to be at the forefront of efforts to improve government’s performance.


pages: 209 words: 80,086

The Global Auction: The Broken Promises of Education, Jobs, and Incomes by Phillip Brown, Hugh Lauder, David Ashton

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

active measures, affirmative action, barriers to entry, Branko Milanovic, BRICs, business process, business process outsourcing, call centre, collective bargaining, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, deindustrialization, deskilling, Frederick Winslow Taylor, full employment, future of work, glass ceiling, global supply chain, immigration reform, income inequality, industrial cluster, industrial robot, intangible asset, job automation, Joseph Schumpeter, knowledge economy, knowledge worker, labour market flexibility, low skilled workers, manufacturing employment, market bubble, market design, neoliberal agenda, new economy, Paul Samuelson, pensions crisis, post-industrial society, profit maximization, purchasing power parity, QWERTY keyboard, race to the bottom, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, sovereign wealth fund, stem cell, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, transaction costs, trickle-down economics, winner-take-all economy, working poor, zero-sum game

If free enterprise was to be the motor of economic growth, everyone should be institutionally encouraged to pursue their self-interest by extending market competition, consumer choice, and shrinking the safety net provided by the welfare state. Getting the incentives right for business involved reducing all the impediments or rigidities to free market behavior. These included removing trade barriers and attacking the power of trade unions. In the global economy, barriers to entry were seen to protect inefficient businesses while trade unions kept wages artificially high. 24 The Global Auction At the same time, middle-class families were encouraged to believe that more consumer choice would give them greater control over their lives without government interference. Schools, hospitals, and pension plans were all now a matter of personal choice. In many cases, the promise of choice was and is illusory.

A major problem confronting many of these companies was that “there’s this massive population which we’ve got to get down to a manageable pool.” This HR director recognized that while there may be some good candidates in lower tier universities, the numbers are tiny, as those at elite universities have already gone through a rigorous selection process. “It’s a total numbers game; it’s very frustrating but it’s a total numbers game.” But by choosing to fish in such a small pool of college graduates, companies are strengthening the barriers to entry. It is as if they are putting a sign out: “Those who are not at top-notch universities need not apply.” What may be considered extraordinary about this strategy is that despite the demand for increased numbers of young managers who can work across the globe, they remain focused on recruiting from the elite universities in each country. The consequence is that many able 94 The Global Auction students will not have the opportunity to get their foot in the door to demonstrate their worth.


pages: 282 words: 80,907

Who Gets What — and Why: The New Economics of Matchmaking and Market Design by Alvin E. Roth

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Affordable Care Act / Obamacare, Airbnb, algorithmic trading, barriers to entry, Berlin Wall, bitcoin, Build a better mousetrap, centralized clearinghouse, Chuck Templeton: OpenTable, commoditize, computer age, computerized markets, crowdsourcing, deferred acceptance, desegregation, experimental economics, first-price auction, Flash crash, High speed trading, income inequality, Internet of things, invention of agriculture, invisible hand, Jean Tirole, law of one price, Lyft, market clearing, market design, medical residency, obamacare, proxy bid, road to serfdom, school choice, sealed-bid auction, second-price auction, second-price sealed-bid, Silicon Valley, spectrum auction, Spread Networks laid a new fibre optics cable between New York and Chicago, Steve Jobs, The Wealth of Nations by Adam Smith, two-sided market

See also labor markets for college admissions, 5–6, 169, 170–73 in law firm recruiting, 65–68 signaling in, 169–73 strategic decision making in, 10–11 apps, 21–22 Arunta people, 71–72 Ashlagi, Itai, 48, 149, 239, 243, 244 auctions, 121–22, 180–89 ascending bid, 182, 184, 188–89 eBay, 104–5 first-price, 184–85 package bidding in, 188–89, 225–26 price discovery in, 185–89 sealed bid, 182–84 second-price sealed, 182–84 simultaneous ascending, 187–89 for spectrum licenses, 185–89 for targeted ads, 189–92 automatic teller machines, 24 Avery, Chris, 91, 239 BandwidthX, 105 bankruptcy, 201 banks and banking, 178, 200–201 banner ads, 191–92 barriers to entry, 24 barter kidney donation as, 31–32 repugnant markets and, 202–5 Becker, Gary, 245 behavioral economics, 52 Beran, Bob, 146 Beth Israel Deaconess Medical Center (Boston), 42 Bitcoin, 24 BlackBerry, 22 black markets, 207 blocking pairs, 139–43 Bloomberg, Michael, 106, 107 Bolton, Gary, 118, 240 Boston Globe, 126 Boston Pool Plan, 138 Boston Public Schools, 11, 122–28, 162–65.

., 7, 149–50, 166–67 for coffee, 17–18 of college bowl games, 60–65 vs. control, 212–15 culture and, 78 expert guides in, 147–48 failures in, 52–53 failure to implement, 86, 88 for function, 12–13 gaining support for, 88–89 human behavior and, 52, 118 ongoing adjustments in, 52–53, 164–65, 222–23, 227–31 pervasiveness of, 15 reliable information in, 118 for restaurants, 217–20 solutions in, 133–34 trading cycles and, 32–41 markets and marketplaces barriers to entry in, 24 based on desires, 5 central planning vs., 7, 149–50 collective nature of, 229–31 commodity, 5 communication speed in, 99–106 congestion in, 9–10, 92–93, 99–112 connections among, 7, 22–24, 227 equilibrium in, 77 evolution of, 13–14 flexibility of, 149 free, 7, 12–13, 217, 226–28 as human artifacts, 212–15, 229–31 legal vs. illegal, 114–15 matching, 5–6 regulation of (See regulation) repugnant, 6, 11–12, 192, 195–215 safety of, 11, 113–30 simplicity of, 11, 26–27 thick, 8–9.


pages: 294 words: 80,084

Tomorrowland: Our Journey From Science Fiction to Science Fact by Steven Kotler

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Albert Einstein, Alexander Shulgin, autonomous vehicles, barriers to entry, Burning Man, carbon footprint, Colonization of Mars, crowdsourcing, Dean Kamen, epigenetics, gravity well, haute couture, interchangeable parts, Kevin Kelly, life extension, Louis Pasteur, North Sea oil, Oculus Rift, oil shale / tar sands, peak oil, personalized medicine, Peter H. Diamandis: Planetary Resources, RAND corporation, Ray Kurzweil, Richard Feynman, Richard Feynman, Ronald Reagan, self-driving car, stem cell, Stephen Hawking, Stewart Brand, theory of mind, Watson beat the top human players on Jeopardy!, Whole Earth Catalog, WikiLeaks

Bill Gates, in a recent interview, told reporters that if he were a kid today, forget about hacking computers, he’d be hacking biology. And, for those with neither the lab nor the learning, there are dozens of service providers willing to do all the serious science for a fee. Since the invention of genetic engineering in 1972, the high cost of equipment and the high cost of getting enough education to use that equipment effectively kept most with ill intentions away from these technologies. Those barriers to entry are now gone. “Unfortunately,” said former Secretary of State Hillary Clinton in a December 7, 2011, speech to the global review board for the Biological Weapons Convention, “the ability for terrorists or other nonstate actors to develop and use these weapons is growing. Therefore this must be a renewed focus of our efforts, because there are warning signs and they are too serious to ignore.” 5.

See MDMA Ehrlich, Paul, 204 Einstein, Albert, 109 Eisenhower, Dwight, 109 Eldredge, Niles, 54 Eleusinian Mysteries, 167 empathodelics, 160 end-of-life care, 157–67, 170–71, 174–76, 178–82 LSD in, 178–79, 181–82 MDMA in, 170–71, 174–76, 178–79, 180–82 psilocybin in, 160 research on, 161–62 endorphins, 42 Energy from Thorium Foundation, 120 Engerman, Stanley, 51–52 Enríquez, Juan, 58 epigenetics, 55 epilepsy, 43–44 ethics distributed justice in, 211 genetic engineering and, 232–33 of space exploration, 143–45 of sperm banking, 251 stem cells and, 206–18 Ethics and Religious Liberty Commission, 260 “The Ethics of Exploration” (Consolmagno), 144 eugenics, 58–59 Evans, Nick, 189–90 Everglades, 81–95 alligators in, 91–92 Army Corps of Engineers taming of, 85–86 cattails and blue-green algae in, 90–91 cost of restoring, 85 drought and, 83–84, 89–90 Floridan aquifer and, 88 Kissimmee River in, 85–87 lack of knowledge about, 87–90 Lake Okeechobee in, 88–90 loss of species in, 84, 87 pollution in, 84, 89 sugarcane farming in, 90–92 water impoundments in, 88–90 evolution acceleration of, 49–59 economic development and, 51–53 gene-culture dynamics and, 55–57 geological shifts and, 53–54 inefficiency of, 53–54 metabiological, 55 of mosquito drug resistance, 134 of mosquitos and malaria, 134–35 of new species, 59 punctuated equilibrium in, 49, 54, 56 techno-physio, 54–57 existential anxiety, 175 exoskeletons, bionic, 20 extinction, 83 extreme states, xiv–xv, 33–48 after-effects of, 42–43 biological basis of, 40–43, 45–48 brain changes after, 43–45 brain changes during, 45–48 concentration in, 46–47 euphoria in, 41–42 in fighter pilots, 40–42 near-death experiences, 37–45 psychedelic drugs and, 155–82 REM sleep and, 44–45 reproducibility of, 47–48 in skydiving, 35–36 transformative nature of, 42–48 triggered by drugs, 38–39 triggered by fear, 39 Facebook, 3 Fairfax Cryobank, 246–47 Faisal, Turki bin, 255 Farmer in the Sky (Heinlein), 87 fascinomas, 38 Federal Bureau of Investigation (FBI), 236–37, 244 Fermi, Enrico, 109 fertility clinics, 247–63 Catholic Church on, 259–60 economics of, 250–51 stem cells and, 208–10, 211 Feynman, Richard, 30 Fisher, Lucy, 213–14 Floridan aquifer, 88 Floud, Roderick, 54 Flow Genome Project, 145 flying cars, xii, 97–105 Fogel, Robert, 51–52, 54–59 Food and Drug Administration (FDA), 67 on psychedelic research, 174 on sperm banking, 251, 261–62 on steroids, 195 Foundation Fighting Blindness, 74 Foundation for Applied Molecular Evolution, 232 Fraser, Claire, 245 Frazer, James, 258 free radicals, 191 Freud, Sigmund, 175 Fuentes, Carlos, 23 Fukushima Daiichi Nuclear Power Plant, 122–23 Gates, Bill, 121 gene-culture dynamics, 55–57 GeneGenie, 27, 222 General Electric, 113, 221 genetic code, xv. See also sperm banks aging and, 191 in binary code, 226–27 evolution and, 55, 57, 58–59 Human Genome Project and, 57, 228 interaction of culture with, 56–57 largest collections of, 249 printing, 231 stem cells in repair of, 199 synthetic biology manipulation of, 230–32 genetic engineering, 226–30 barriers to entry in, 229–30 BioBricks in, 234–35 of bioweapons, 219–46 cost of, 228, 229, 243–45 crowdsourcing in, 221–23 dangers of, 227, 232–33 environmental dangers of, 133–34, 138–39 gene sequencers in, 228–29 genetic markers in, 136–37 improved technology for, 226–27, 228–29 jumping genes in, 136–37, 138–40 open-sourcing, 243–45 synthetic biology and, 230–32 viruses in, 221–23, 233 genetic markers, 136–37 Genetics and IVF Institute, 257 Genome Institute, 212 genomic sequencing, 57 G-LOC, 40–42 Goldman, Robert, 187 Goldstein, Larry, 210–11 Goodman, Marc, 219–46, 224 Google, 28 Gould, Stephen Jay, 49, 54 gradualism, 49 Graham, Bob, 237 Granger, Richard, 58 Grant, Cary, 169 Green, Robert, 245 Greyson, Bruce, 39 Greyson Scale, 39 Griffiths, Roland, 152 Grof, Stanislav, 172, 180 Guardian (newspaper), 236–37 “Gym and Tonic: A Profile of 100 Steroid Users” (Evans), 190 gyrocopters, 102 gyroplanes, 102, 104 Haldane, J.B.S., 87 Halothane, 39 Hansen, James, 119 Harman, Denham, 191 Harris, Bernard, 54 Hartrick, Michael, 8–9 Hatch, Orrin, 214 Hawking, Stephen, 135 Hayabusa (space probe), 146–47 Hayes, Ollie, 224 headaches, cluster, 162, 164 healing, spontaneous, 164–65 health body mass changes and, 55–56 longevity and evolution and, 52–56 mosquito-borne illnesses and, 131–40 sperm banks and, 252–57 health care anti-aging medicine, 183–200 genetically targeted, 224–25, 240–41 psychedelic drugs in, 155–82 rights of embryos/fetuses in, 208–10 stem cells in, 201–18 health care costs, 19–20 coal burning and, 112 for visual prosthesis, 70 hedonic principle, 33 Heinlein, Robert A., 87, 148 helium-3, 151 Hermes gene, 137, 138 Herr, Hugh, 7–10, 12–15, 16–20 Herwitt, Allison, 210 Hessel, Andrew, 57, 59, 219–246 Hinman, Frank, Jr., 249–50 hippocampus, artificial, 26 HIV, sperm donation and, 261 Hoffa, Jimmy, 248 Hofmann, Albert, 168 Hoglund, Tom, 74 Homo evolutus, 58–59 Homo sapiens, 49, 59 Hong, Sok Chul, 54 Hood, Leroy, 216 hormones.


pages: 252 words: 73,131

The Inner Lives of Markets: How People Shape Them—And They Shape Us by Tim Sullivan

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Airbnb, airport security, Al Roth, Alvin Roth, Andrei Shleifer, attribution theory, autonomous vehicles, barriers to entry, Brownian motion, centralized clearinghouse, Chuck Templeton: OpenTable, clean water, conceptual framework, constrained optimization, continuous double auction, creative destruction, deferred acceptance, Donald Trump, Edward Glaeser, experimental subject, first-price auction, framing effect, frictionless, fundamental attribution error, George Akerlof, Goldman Sachs: Vampire Squid, Gunnar Myrdal, helicopter parent, information asymmetry, Internet of things, invisible hand, Isaac Newton, iterative process, Jean Tirole, Jeff Bezos, Johann Wolfgang von Goethe, John Nash: game theory, John von Neumann, Joseph Schumpeter, Kenneth Arrow, late fees, linear programming, Lyft, market clearing, market design, market friction, medical residency, multi-sided market, mutually assured destruction, Nash equilibrium, Occupy movement, Pareto efficiency, Paul Samuelson, Peter Thiel, pets.com, pez dispenser, pre–internet, price mechanism, price stability, prisoner's dilemma, profit motive, proxy bid, RAND corporation, ride hailing / ride sharing, Robert Shiller, Robert Shiller, Ronald Coase, school choice, school vouchers, sealed-bid auction, second-price auction, second-price sealed-bid, sharing economy, Silicon Valley, spectrum auction, Steve Jobs, Tacoma Narrows Bridge, technoutopianism, telemarketer, The Market for Lemons, The Wisdom of Crowds, Thomas Malthus, Thorstein Veblen, trade route, transaction costs, two-sided market, uranium enrichment, Vickrey auction, Vilfredo Pareto, winner-take-all economy

Ted bursts the hitchhiker’s bubble by noting that he could easily be undercut by another would-be fitness mogul selling a “Six Minute Abs” video. To build a profitable business, you need to create something that people want and then make sure there aren’t any copycat competitors. The things that keep others out of Uber’s sandbox, so to speak, aren’t so different from the regulatory shenanigans that its predecessors resorted to. You try to erect what economists call barriers to entry, which are, almost by definition, market frictions. They’re the strategies Uber and every other business employs to try to keep customers from choosing freely among competing options in the marketplace, whether by driving competitors out of business or finding ways of keeping customers from shopping around. Sometimes, as we’ve learned from Uber in recent years, it can be a dirty business.

INDEX Abidjan, Ivory Coast, 167–168 Adfibs.com, 69 adverse selection, 48, 51–55, 57, 59 advertising, as money burning, 70–71 Super Bowl advertising, 70–71 AdWords, 14, 101 Airbnb, 3, 6, 50, 109, 125, 170–172 Akerlof, George, 43–51, 58–59, 64, 112 Alaskoil experiment, 55–57, 58–59 algebraic topology, 44–45 Amazon, 2, 3, 16, 50, 51, 52, 59, 74, 91, 95, 97, 108, 110, 119, 126, 128–129 American Express, 115–116 America’s Second Harvest, 154–160 Amoroso, Luigi, 21 Angie’s List, 120 “animal spirits,” 50 applied theory in economics, 45, 50, 75–76 Arnold, John, 156–158, 160 Arrow, Kenneth, 30–34, 36–37, 40, 76, 117, 180 ascending price English auctions, 83, 100 asymmetric information, 41, 44–55 attribution theory, 177–178 auctions AdWords, 14, 101 auction theory, 82–84 coat hooks, 151–152, 174 design, 14, 101–102 first-price sealed-bid, 86–87, 99–100 first-price (live), 84 internet, 94–97 types of, 81–82 wireless spectrum, 102–103 See also eBay; Vickrey auctions AuctionWeb, 40 Ausubel, Larry, 98 Azoulay, Pierre, 112 Bank of America, 113–115 barriers to entry, in marketplace, 173 baseball posting system, 79–81 Bazerman, Max, 55–57 Becker, Gary, 35, 161–162 Berman, Eli, 67 Berners-Lee, Tim, 41–42 Big Data, Age of, 15 Blu-ray-HD DVD format war, Sony, 125–126 Book Stacks Unlimited, 42–43 Boston public schools, 144–149 Boston University MBA students experiment (Bazerman and Samuelson), 55–57, 58–59 See also Alaskoil experiment bridge design, 141–142 Brown, William P., 83–84 Brownian motion, 28–29 cab drivers, Uber vs., 169–170, 172 Camp, Garrett, 170 candle auctions, 82 capitalism, free-market, 172–173 car service platform, 169–171 cash-back bonus, 116 cash-for-sludge transactions, 167–169 See also Summers, Larry centralized clearinghouses, 140–141 Champagne fairs, 105–106, 126–128 Changi POW camp, 175–177 Le Chatelier, Henry Louis, 29 Le Chatelier’s principle, 29 cheap talk, 62–66, 69 chess, difference between Cold War and, 26 See also poker, bluffing in child labor, 180 cigarettes, as currency in German POW camp, 8–9 Clarke, Edward, 93 Clavell, James, 175 clerkship offers, with federal judges, 140 coat hook, 151–152, 174 Codes of the Underworld (Gambetta), 68 Cold War, difference between chess and, 26 See also poker, bluffing in Collectible Supplies, 128–129 “College Admissions and the Stability of Marriage” (Gale and Shapley), 137 commitment, signs of, 62–63, 69–71, 72–75 community game, 178–179 competition models of, 35, 166, 172–173 platform, 124–126 unethical conduct with, 180–181 “Competition is for Losers” (Thiel), 173 competitive equilibrium, existence of, 29, 31–34, 36–37, 40, 45, 76 competitive markets, 35, 124–126, 172–174, 180–181 See also platforms competitive signaling, 70–71 congestion pricing model, 86, 94 constrained optimization, 85–86, 133 contractorsfromhell.com, 120 copycat competitors, 172–173 corporate philanthropy, 72–75 Cowles, Alfred, 25, 27 Cowles Commission for Research in Economics, 25, 27, 31, 134 “creative destruction,” 50 credit card platforms, 113–116, 123–124 criminal organizations, informational challenges of, 68 currency, at Stalag VII-A POW camp, 8–9 customer feedback, 52, 74–75 Davis, Harry, 154, 157 Debreu, Gérard, 20, 24, 25, 32–33, 36–37 decentralized match, 139–140 deferred acceptance algorithm, 137–141, 145–149 Delmonico, Frank, 164 descending price auctions, 81–82 design, auction, 14, 101–102 Digital Dealing (Hall), 94 Discover card, 115–116 distribution of income, 22 Domar, Evsey, 36–37 Dorosin, Neil, 142–144 Douglas Aircraft Company, 25 Dow, Bob, 1–2 Dow, Edna, 1–2 Drèze, Jacques, 85–86 dumping toxic waste, transactions for, 167–169 Dutch auctions, 81–82 dysfunction, market, 36, 75–77, 143 eBay adverse selection on, 51–55, 57 auction listings, 94–97 concerns on model for, 43, 46, 48 on seller motivation for giving to charities, 73–75 start of, 39–41 as two-sided market, 109, 119 e-commerce, 41–43, 52–55 “The Economic Organization of a P.O.W.


pages: 270 words: 79,992

The End of Big: How the Internet Makes David the New Goliath by Nicco Mele

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3D printing, 4chan, A Declaration of the Independence of Cyberspace, Airbnb, Amazon Web Services, Any sufficiently advanced technology is indistinguishable from magic, Apple's 1984 Super Bowl advert, barriers to entry, Berlin Wall, big-box store, bitcoin, business climate, call centre, Cass Sunstein, centralized clearinghouse, Chelsea Manning, citizen journalism, cloud computing, collaborative consumption, collaborative editing, commoditize, creative destruction, crony capitalism, cross-subsidies, crowdsourcing, David Brooks, death of newspapers, Donald Trump, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, Exxon Valdez, Fall of the Berlin Wall, Filter Bubble, Firefox, Galaxy Zoo, global supply chain, Google Chrome, Gordon Gekko, Hacker Ethic, Jaron Lanier, Jeff Bezos, jimmy wales, John Markoff, Julian Assange, Kevin Kelly, Khan Academy, Kickstarter, Lean Startup, Mark Zuckerberg, minimum viable product, Mohammed Bouazizi, Mother of all demos, Narrative Science, new economy, Occupy movement, old-boy network, peer-to-peer, period drama, Peter Thiel, pirate software, publication bias, Robert Metcalfe, Ronald Reagan, Ronald Reagan: Tear down this wall, sharing economy, Silicon Valley, Skype, social web, Steve Jobs, Steve Wozniak, Stewart Brand, Stuxnet, Ted Nelson, Telecommunications Act of 1996, telemarketer, The Wisdom of Crowds, transaction costs, uranium enrichment, Whole Earth Catalog, WikiLeaks, Zipcar

Granted, the administrator log-in in question doesn’t provide much access, but if it works as advertised, it could give anyone the ability to deface the Web site.21 It took me just thirty minutes to find and purchase the information—what could a motivated, better-informed troublemaker manage to do? Such accessibility of provocative information is unprecedented. As Singer writes: The barriers to entry for gaining the ultimate weapon in the Cold War, the nuclear bomb, were quite high. Only a few states could join the superpowers’ atomic club—and never in numbers that made these second-tier nuclear powers comparable to U.S. and Soviet forces. By comparison, the actors in cyberspace might range from thrill-seeking teenagers to criminal gangs to government-sponsored “patriotic hacker communities” to the more than 100 nation-states that have set up military and intelligence cyberwarfare units.22 In 2008, the National Security Agency discovered a piece of code—a computer virus, essentially—inside one of the U.S. government’s most secure, classified computer networks.

During the twentieth century, manufacturing required a lot of direct workers, all located here in the United States. Then manufacturing moved overseas and became increasingly automated. As it gets more automated, the costs of smaller manufacturing runs has dropped, to the point where we can now make one of something economically. Radical connectivity has played a key role in collapsing the advantages of scale, removing barriers to entry to the marketplace and—more importantly—allowing small companies to share resources that previously were only available to Big Companies. Inside the Cloud Cloud computing exemplifies such resource sharing. You hear people talking about the cloud all the time in the context of the Internet, but a lot of us still have a fairly cloudy notion of what exactly cloud computing means. From the perspective of companies, cloud computing makes it easier to share computing resources that otherwise would be too expensive.

Economic Gangsters: Corruption, Violence, and the Poverty of Nations by Raymond Fisman, Edward Miguel

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, barriers to entry, blood diamonds, clean water, colonial rule, congestion charging, crossover SUV, Donald Davies, European colonialism, failed state, feminist movement, George Akerlof, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Live Aid, mass immigration, megacity, oil rush, prediction markets, random walk, Scramble for Africa, selection bias, Silicon Valley, South China Sea, unemployed young men

Guidolin and La Ferrara argue that the mining companies took a beating from investors because the fortunes they’d made from Angola’s diamond mines relied on the treacherous conditions created by civil war. After Savimbi’s death, while mining companies with Angolan investments saw their stock prices plunge, those without Angolan exposure appreciated in value. In other words, an end to conflict hurt the dominant diamond companies by knocking down barriers to entry for competitors. Most people, including nearly all of Ray’s first-year MBA students, think that the key to business success is cheaply and efficiently producing something people want to buy. If 182 TH E RO A D BA CK F RO M WAR this were the case, then war’s end should have made Angolan miners and their shareholders much richer as production costs plummeted. But the effect of peace on diamond mining in Angola shows that more important than producing something well is doing it better than the competition—and the potential competition.

Not every CEO or shareholder is willing to set up a private army, or partner with a real-life Danny Archer, the mercenary played by Leonardo DiCaprio in the film Blood Diamond about Sierra Leone. But some know how to turn wartime adversity to their advantage. Firms like Mano River Resources, DiamondWorks, and Rex Diamond have operated mines in multiple African war zones over the years, despite the costs and hurdles that drive out everyone else. That is, war acted as a “barrier to entry” that kept other companies out and insiders’ profits high. After 2002, peace 183 CH A PTER SEVEN in Angola presented an opportunity for many new companies to bid for lucrative mining licenses. Guidolin and La Ferrara found that, in fact, most of the wartime-dominant companies kept their mining concessions, and some even expanded their Angolan operations at war’s end. However, the mere presence of potential competitors helped the government to renegotiate its contracts from a position of newfound strength.


pages: 394 words: 110,352

The Art of Community: Building the New Age of Participation by Jono Bacon

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barriers to entry, Benevolent Dictator For Life (BDFL), collaborative editing, crowdsourcing, Debian, en.wikipedia.org, Firefox, game design, Guido van Rossum, Johann Wolfgang von Goethe, Jono Bacon, Mark Shuttleworth, openstreetmap, Richard Stallman, Skype, social software, software as a service, telemarketer, web application

Licensing of work Every contribution to the Linux community is licensed in such a way that it benefits the entire community. The fair licensing of all contributions adds a strong sense of confidence to the security of the community. Open tools Anyone with an Internet connection and a computer can contribute. All of the development tools and documentation are entirely free and open to access. This provides a low barrier to entry, and lets new users play with the technology. Although these elements were essential at the birth of Linux, it is not open communication, licensing, and tools that generate opportunity. These elements merely made it possible to build a world-class Free Software operating system. Opportunity is born in a sense of belief. Belief is a critically important human function. Whether your belief is in an all-creating god, in a family member’s ability to achieve something for herself, in a better future in your neighborhood, or in the reliability of a restaurant guide, belief is what gives us hope for the world around us.

Many users have single-shot queries and questions, and the requirement to battle through the somewhat complex sign-up process and then receive all conversations can be off-putting. NOTE An important consideration to make when setting up a mailing list is whether the list is archived on the Internet. If you want the conversations to be private (such as if the mailing list is for a governance body), you should close off the archives. We discuss governance in detail in Chapter 8. Discussion forums Forums are a very popular, low-barrier-to-entry medium. They manifest in the form of websites that allow you to create an identity and have a discussion using that identity. Forums have exploded in popularity in recent years, and some huge forums have developed across the Internet. At the time of writing, the biggest in the world is an Anime role-playing community with over 15 million members and over a billion posts. Now that is a lot of tentacles and oversized eyes.

Target participants Who is the process designed for? Is it intended for a particular kind of contributor, such as a developer, documentation writer, translator, or advocate? 96 CHAPTER FOUR Download at Boykma.Com Requirements What tools, knowledge, and experience must the contributor have in order to follow through with the process? If she does not possess these requirements, how can she obtain them easily? Are these requirements a barrier to entry (such as costing money or limited availability)? Steps involved What are the chronological steps involved in achieving the goal? What could go wrong? Is it possible for people to accidentally ruin a step? How is feedback provided about each step? Who provides the feedback? Verification Who makes the decision about the successful completion of the process? Also, how is it communicated that the contributor has achieved the process?


pages: 503 words: 131,064

Liars and Outliers: How Security Holds Society Together by Bruce Schneier

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airport security, barriers to entry, Berlin Wall, Bernie Madoff, Bernie Sanders, Brian Krebs, Broken windows theory, carried interest, Cass Sunstein, Chelsea Manning, commoditize, corporate governance, crack epidemic, credit crunch, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Graeber, desegregation, don't be evil, Double Irish / Dutch Sandwich, Douglas Hofstadter, experimental economics, Fall of the Berlin Wall, financial deregulation, George Akerlof, hydraulic fracturing, impulse control, income inequality, invention of agriculture, invention of gunpowder, iterative process, Jean Tirole, John Nash: game theory, joint-stock company, Julian Assange, mass incarceration, meta analysis, meta-analysis, microcredit, moral hazard, mutually assured destruction, Nate Silver, Network effects, Nick Leeson, offshore financial centre, patent troll, phenotype, pre–internet, principal–agent problem, prisoner's dilemma, profit maximization, profit motive, race to the bottom, Ralph Waldo Emerson, RAND corporation, rent-seeking, RFID, Richard Thaler, risk tolerance, Ronald Coase, security theater, shareholder value, slashdot, statistical model, Steven Pinker, Stuxnet, technological singularity, The Market for Lemons, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, too big to fail, traffic fines, transaction costs, ultimatum game, UNCLOS, union organizing, Vernor Vinge, WikiLeaks, World Values Survey, Y2K, zero-sum game

This sort of thing is taken to the extreme by companies like Facebook, which don't even charge their users for their apps at all, and make all their money selling information about those users to third parties.18 It turns out that offering a product or service for free is very different than offering it cheaply, and that “free” perturbs markets in ways no one fully understands. The optimal way to do business in an open-air market—offer the best products at the lowest prices—fails when there are other revenue streams available. An additional complication arises with products and services that have high barriers to entry; it's hard for competitors to emerge. In an open-air market, if the sandwich vendors all sell their sandwiches at too-high prices, someone else can always come in and start selling cheaper sandwiches. This is much harder to do with cell phone networks, or computer operating systems, or airline tickets, because of the huge upfront costs. And industries can play the meta-game to prevent competition, as when the automobile industry bought and then dismantled cities' trolley networks, big agriculture lobbied government to impose draconian regulations on small farms, and so on.

Those companies are likely to have executives who have worked for all the other companies during their careers, and are personally friendly with all the other executives. They are also likely to have former regulators working for them, and former employees as regulators. At this point, there's enough trust amongst them for them to band together into a cartel. Another researcher wrote that the two features that are necessary for successful cartels are high seller market sales concentration and product homogeneity.High barriers to entry help ensure that a cartel is long-lived. (2) The only markets where we have routinely allowed for monopolies are utilities: power, gas, telephone, etc. The idea is that the cost of infrastructure is so high, and the potential for profit is so slim, that market economics will simply drive sellers out of business. Given that, society has given companies monopolies and then heavily regulated them.

questionable telecom credits Jonathan A. Knee (2006), The Accidental Investment Banker: Inside the Decade that Transformed Wall Street, Oxford University Press, xvii. described dot.coms In the matter of Merrill Lynch & Co. (2002), Decision and Order, Supreme Court of the State of New York. Chapter 13 band together into Tim Wu (2010), The Master Switch: The Rise and Fall of Information Empires, Alfred A. Knopf. High barriers to entry John M. Connor (2002), “The Food and Agricultural Global Cartels of the 1990s: Overview and Update,” Purdue University Department of Agricultural Economics, Staff Paper 02-4. There are exceptions Yvonne Chouinard (2005), Let My People Go Surfing: The Education of a Reluctant Businessman, Penguin Press. implant false memories Priyali Rajagopal and Nicole Votolato Montgomery (2011), “I Imagine, I Experience, I Like: The False Experience Effect,” The Journal of Consumer Research, 38:578–94.


pages: 418 words: 128,965

The Master Switch: The Rise and Fall of Information Empires by Tim Wu

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accounting loophole / creative accounting, Alfred Russel Wallace, Apple II, barriers to entry, British Empire, Burning Man, Cass Sunstein, Clayton Christensen, commoditize, corporate raider, creative destruction, don't be evil, Douglas Engelbart, Douglas Engelbart, Howard Rheingold, Hush-A-Phone, informal economy, intermodal, Internet Archive, invention of movable type, invention of the telephone, invisible hand, Jane Jacobs, John Markoff, Joseph Schumpeter, Menlo Park, open economy, packet switching, PageRank, profit motive, road to serfdom, Robert Bork, Robert Metcalfe, Ronald Coase, sexual politics, shareholder value, Silicon Valley, Skype, Steve Jobs, Steve Wozniak, Telecommunications Act of 1996, The Chicago School, The Death and Life of Great American Cities, the market place, The Wisdom of Crowds, too big to fail, Upton Sinclair, urban planning, zero-sum game

In De Forest’s words, radio “is the coming Science, is moving ahead faster, possibly, than any other.”15 He urged young men to “take up Radio work because it offers a means of entertainment second to no other; gives useful instruction that can be made to produce tangible results later on; keeps everyone interested; enables you to get the news of the world by wireless and provides a pastime and hobby that will get the busy man’s mind into other channels.” One must stress that it was not merely technological wizardry that set people dreaming: it was also the openness of the industry then rising up. The barriers to entry were low. Radio in the 1920s was a two-way medium accessible to most any hobbyist, and for a larger sum any club or other institution could launch a small broadcast station. Compare the present moment: radio is hardly our most vital medium, yet it is hard if not impossible to get a radio license, and to broadcast without one is a federal felony. In 1920, De Forest advised, “Obtaining the license is a very simple matter and costs nothing.”

Burch’s Mesa Telephone Company offered its customers daily broadcasts of weather, train wrecks, and murders, the interval of programming announced by ten short rings. As Kline writes, “Every evening at a designated time, usually seven p.m., an operator would call all farms on a line and give the time, weather and market reports, newspaper headlines and local news, ‘with a spicing of gossip.’ ” • • • In the theory of competition that applies to information industries, as to all others, we speak of barriers to entry: the obstacles that a newcomer must overcome to get into the game. But barriers in an information industry, trafficking as it does in expressive content, can represent more than a restraint on commercial aspirations; they can, depending on how crucially the information medium figures in a society’s communications, also restrain free speech. If we want to define how “open” any industry is, we should start with a number: the cost of entry.

Embracing the process of “competition” that was under way, the Bells prepared to make their comeback as a dominant player in a nominally open industry. It was a perfect wedding of a new government ideology and a new corporate calculus when the Bells, AT&T, and the rest of the industry signed on to the Telecommunications Act of 1996.9 The most sweeping legislative overhaul of the business since the Communications Act of 1934 was founded on the principle of “competition everywhere.” The idea was to remove barriers to entry in all segments of the industry, a goal that the Bell companies (Bell Atlantic, Bell South, Pacific Telesis, Verizon, and the rest), the long distance firms (AT&T as well as MCI), and the cable companies all pledged to uphold. The Act was designed to encourage cable companies to enter the phone business, phone companies to offer TV service, long distance firms to build local networks, and so on.


pages: 386 words: 122,595

Naked Economics: Undressing the Dismal Science (Fully Revised and Updated) by Charles Wheelan

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affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, capital controls, Cass Sunstein, central bank independence, clean water, collapse of Lehman Brothers, congestion charging, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, Daniel Kahneman / Amos Tversky, David Brooks, demographic transition, diversified portfolio, Doha Development Round, Exxon Valdez, financial innovation, fixed income, floating exchange rates, George Akerlof, Gini coefficient, Gordon Gekko, greed is good, happiness index / gross national happiness, Hernando de Soto, income inequality, index fund, interest rate swap, invisible hand, job automation, John Markoff, Joseph Schumpeter, Kenneth Rogoff, libertarian paternalism, low skilled workers, lump of labour, Malacca Straits, market bubble, microcredit, money market fund, money: store of value / unit of account / medium of exchange, Network effects, new economy, open economy, presumed consent, price discrimination, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, race to the bottom, RAND corporation, random walk, rent control, Richard Thaler, rising living standards, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, school vouchers, Silicon Valley, Silicon Valley startup, South China Sea, Steve Jobs, The Market for Lemons, the rule of 72, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, transaction costs, transcontinental railway, trickle-down economics, urban sprawl, Washington Consensus, Yogi Berra, young professional, zero-sum game

When LeBron James signed a three-year $60 million contract with the Cleveland Cavaliers, I thought to myself, “I need to play basketball for the Cleveland Cavaliers.” I would have gladly played for $58 million, or, if pressed, for $58,000. Several things precluded me from entering that market, however: (1) I’m five-ten; (2) I’m slow; and (3) when shooting under pressure, I have a tendency to miss the backboard. Why is LeBron James paid $20 million a year? Because nobody else can play like him. His unique talents create a barrier to entry for the rest of us. LeBron James is also the beneficiary of what University of Chicago labor economist Sherwin Rosen dubbed the “superstar” phenomenon. Small differences in talent tend to become magnified into huge differentials in pay as a market becomes very large, such as the audience for professional basketball. One need only be slightly better than the competition in order to gain a large (and profitable) share of that market.

Nobody tunes into their second-favorite radio station, so it’s winner-take-all when it comes to listeners and the advertisers willing to pay big bucks to reach them. Many markets have barriers that prevent new firms from entering, no matter how profitable making widgets may be. Sometimes there are physical or natural barriers. Truffles cost $500 a pound because they cannot be cultivated; they grow only in the wild and must be dug up by truffle-hunting pigs or dogs. Sometimes there are legal barriers to entry. Don’t try to sell sildenafil citrate on a street corner or you may end up in jail. This is not a drug that you snort or shoot up, nor is it illegal. It happens to be Viagra, and Pfizer holds the patent, which is a legal monopoly granted by the U.S. government. Economists may quibble over how long a patent should last or what kinds of innovations should be patentable, but most would agree that the entry barrier created by a patent is an important incentive for firms to make the kinds of investments that lead to new products.

The authors of the study recommend that states eliminate entry barriers that keep talented people from becoming public schoolteachers.4 Most states are doing the opposite. Mr. Stigler would have argued that all of this is easy to explain. Just think about how the process benefits teachers, not students. Making it harder to become a teacher reduces the supply of new entrants into the profession, which is a good thing for those who are already there. Any barrier to entry looks attractive from the inside. I have a personal interest in all kinds of occupational licensure (cases in which states require that individuals become licensed before practicing certain professions). My doctoral dissertation set out to explain a seemingly anomalous pattern in Illinois: The state requires barbers and manicurists to be licensed, but not electricians. A shoddy electrical job could burn down an entire neighborhood; a bad manicure or haircut seems relatively more benign.


pages: 494 words: 142,285

The Future of Ideas: The Fate of the Commons in a Connected World by Lawrence Lessig

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AltaVista, Andy Kessler, barriers to entry, business process, Cass Sunstein, commoditize, computer age, creative destruction, dark matter, disintermediation, Donald Davies, Erik Brynjolfsson, George Gilder, Hacker Ethic, Hedy Lamarr / George Antheil, Howard Rheingold, Hush-A-Phone, HyperCard, hypertext link, Innovator's Dilemma, invention of hypertext, inventory management, invisible hand, Jean Tirole, Jeff Bezos, Joseph Schumpeter, Kenneth Arrow, Larry Wall, Leonard Kleinrock, linked data, Marc Andreessen, Menlo Park, Network effects, new economy, packet switching, peer-to-peer, peer-to-peer model, price mechanism, profit maximization, RAND corporation, rent control, rent-seeking, RFC: Request For Comment, Richard Stallman, Richard Thaler, Robert Bork, Ronald Coase, Search for Extraterrestrial Intelligence, SETI@home, Silicon Valley, smart grid, software patent, spectrum auction, Steve Crocker, Steven Levy, Stewart Brand, Ted Nelson, Telecommunications Act of 1996, The Chicago School, transaction costs, zero-sum game

MY AIM in this chapter has been twofold. The first part has been to introduce the idea of open code and to demonstrate how it operates at the content layer to inspire a wide range of innovation. It does this both for the reasons that technologists give—it is fast, cheap, and powerful—and for reasons that are too often missed. By offering to the world a wide range of code and hence coding resources, open code lowers the barriers to entry for innovators.60 By building a neutral platform, open code invites a different kind of innovation. By protecting that neutral platform, both through licenses and through distributed source code, the system assures developers that the platform will remain neutral in the future. This feature of open code, however, is not limited to code. The lesson of open code extends to other content as well.

And just as the invention of a new machine can in turn reduce the cost of some production process, the ability to capture and use this new resource will reduce the costs of advertising dramatically. Rather than technologies that produce 0.5 percent return,23 these technologies will produce a much greater return at a lower cost.24 Thus the architecture of the Net enables a resource otherwise unavailable. And through this resource, a barrier to entry is reduced. For if one of the hardest parts of breaking into music is the cost of promotion, then as long as these data mines remain competitive, lowering the cost of promotion will make it easier to break into music. The same is true with books or any other content. By increasing the demand for a diverse selection of content, and by enabling the cheaper identification of that demand, the Net widens the range of potential contributors.

Noam likens that system to the subway's method of charging for ridership. The advantage of Noam's solution is that it keeps the cost of spectrum use down. As Noam writes, an auction is simply “a tax on the communications sector and its users.”39 Given the size of the bids currently being offered for this resource, it will tend, as Noam argues, to encourage oligopoly. “An auction payment that must be paid in advance is a barrier to entry, unless capital markets are perfect, which they are not.”40 We are far from the moment, however, when it would make sense to layer this market onto open spectrum. Just as the National Park Service began charging entrance fees late in its life, so too should we begin without entrance fees and layer them on, neutrally, as needed. This mode of regulating a large chunk of the resource of spectrum would inspire the widest range of spectrum use.

Stock Market Wizards: Interviews With America's Top Stock Traders by Jack D. Schwager

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Asian financial crisis, banking crisis, barriers to entry, beat the dealer, Black-Scholes formula, commodity trading advisor, computer vision, East Village, Edward Thorp, financial independence, fixed income, implied volatility, index fund, Jeff Bezos, John Meriwether, John von Neumann, locking in a profit, Long Term Capital Management, margin call, money market fund, Myron Scholes, paper trading, passive investing, pattern recognition, random walk, risk tolerance, risk-adjusted returns, short selling, Silicon Valley, statistical arbitrage, the scientific method, transaction costs, Y2K

Nevertheless, Watson demonstrates that if risk controls are in place to avoid the open-ended losses that can occur in a short position, shorting can reduce portfolio risk by including positions that are inversely correlated with the rest of the portfolio. On the short side, Watson seeks out high-priced companies that have a flawed business plan—often one-product companies that are vulnerable either because the performance of their single product falls far short of promotional claims or because there is no barrier to entry for competitors. Watson achieves risk control through a combination of diversification, selection, and loss limitation rules. He diversifies his portfolio sufficiently so that the largest long holdings account for a maximum of 2 to 3 percent of the portfolio. Short positions are capped at about 1.5 percent of the portfolio. The risk on long positions is limited by Watson's restricting the selection of companies from the universe of low-priced stocks.

What you are left with is a number of relatively small inefficiencies that are often fairly complex and which you're not likely to find by using a standard mathematical software package or the conventional analytical techniques you might learn in graduate school. Even if you were somehow able to find one of the remaining inefficiencies without going through an extremely expensive, long-term research effort of the sort we've conducted over the past eleven years, you'd probably find that one such inefficiency wouldn't be enough to cover your transaction costs. As a result, the current barriers to entry in this field are very high. A firm like ours that has identified a couple dozen market inefficiencies in a given set of financial instruments may be able to make money even in the presence of transaction costs. In contrast, a new DAVID SHAW entrant into the field who has identified only one or two market inefficiencies would typically have a much harder time doing so. What gives you that edge?

The stocks flagged must meet three additional conditions to qualify for an actual short sale: WIZARD LESSONS >• very high P/E ratio; > a catalyst that will make the stock vulnerable over the near term; > an uptrend that has stalled or reversed. Watson's ideal short-selling candidate is a high-priced, one product company. He looks for companies whose future sales will be vulnerable because their single or primary product does not live up to promotional claims or because there is no barrier to entry for competitors. 62. Use Options to Express Specific Price Expectations Prevailing option prices will reflect the assumption that price movements are random. If you have specific expectations about the relative probabilities of a stock's future price movements, then it will frequently be possible to define option trades that offer a higher profit potential (at an equivalent risk level) than buying the stock. 63.


pages: 472 words: 117,093

Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson

3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, book scanning, British Empire, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, Plutocrats, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, two-sided market, Uber and Lyft, Uber for X, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day

An unprecedented amount of computing power is now available to organizations and individuals. Applications, blank or preconfigured servers, and storage space can all be leased for a long time or rented for a few minutes over the Internet. This cloud computing infrastructure, largely less than a decade old, accelerates the robotic Cambrian Explosion in three ways. First, it greatly lowers barriers to entry, since the kinds of computing resources that were formerly found only in great research universities and multinationals’ R&D labs are now available to startups and lone inventors. Second, it allows robot and drone designers to explore the important trade-off of local versus central computation: which information-processing tasks should be done in each robot’s local brain, and which should be done by the great global brain in the cloud?

For this reason, most companies prefer to operate higher on the demand curve, where prices are greater, even if total demand will be lower. Two forces push prices downward. The first is consumers, who obviously want to pay as little as possible and thus side with platform builders that seek to rapidly grow their networks. The second is that in most markets, many suppliers compete for business, and many other potential suppliers are waiting in the wings. Platforms usually enhance this competition by reducing barriers to entry, and they often commoditize the suppliers, making them more interchangeable to the consumer. Competition and commoditization, of course, tend to drive down prices, and to deliver the business to the companies willing to supply products most cheaply (while maintaining acceptable quality). In short, platform builders and consumers both want low prices, and competition among suppliers tends to result in them.

., 166–67 Angry Birds, 159–61 anonymity, digital currency and, 279–80 Antikythera mechanism, 66 APIs (application programming interfaces), 79 apophenia, 44n apparel, 186–88 Apple; See also iPhone acquiring innovation by acquiring companies, 265 and industrywide smartphone profits, 204 leveraging of platforms by, 331 Postmates and, 173, 185 profitability (2015), 204 revenue from paid apps, 164 “Rip, Mix, Burn” slogan, 144n as stack, 295 application programming interfaces (APIs), 79 AppNexus, 139 apps; See also platforms for banking, 89–90 demand curve and, 157–61 iPhone, 151–53 App Store, 158 Apter, Zach, 183 Aral, Sinan, 33 Archilochus, 60–61 architecture, computer-designed, 118 Aristophanes, 200 Arnaout, Ramy, 253 Arthur, Brian, 47–48 artificial general intelligence (AGI), 71 artificial hands, 272–75 artificial intelligence; See also machine learning current state of, 74–76 defined, 67 early attempts, 67–74 implications for future, 329–30 rule-based, 69–72 statistical pattern recognition and, 72–74 Art of Thinking Clearly, The (Dobelli), 43 arts, digital creativity in, 117–18 Ashenfelter, Orley, 38–39 ASICs (application-specific integrated circuits), 287 assets and incentives, 316 leveraging with O2O platforms, 196–97 replacement by platforms, 6–10 asymmetries of information, 206–10 asymptoting, 96 Atkeson, Andrew, 21 ATMs, 89 AT&T, 96, 130 August (smart door lock), 163 Austin, Texas, 223 Australia, 100 Authorize.Net, 171 Autodesk, 114–16, 119, 120 automated investing, 266–70 automation, effect on employment/wages, 332–33 automobiles, See cars Autor, David, 72, 101 background checks, 208, 209 back-office work, 82–83 BackRub, 233 Baidu, 192 Bakos, Yannis, 147n Bakunin, Mikhail, 278 Ballmer, Steve, 151–52 bandwagon effect, 217 banking, virtualization and, 89–90, 92 Bank of England, 280n bank tellers, 92 Barksdale, Jim, 145–46 barriers to entry, 96, 220 Bass, Carl, 106–7, 119–20 B2B (business-to-business) services, 188–90 Beastmode 2.0 Royale Chukkah, 290 Behance, 261 behavioral economics, 35, 43 Bell, Kristen, 261, 262 Benioff, Mark, 84–85 Benjamin, Robert, 311 Benson, Buster, 43–44 Berlin, Isiah, 60n Berners-Lee, Tim, 33, 34n, 138, 233 Bernstein, Michael, 260 Bertsimas, Dimitris, 39 Bezos, Jeff, 132, 142 bias of Airbnb hosts, 209–10 in algorithmic systems, 51–53 digital design’s freedom from, 116 management’s need to acknowledge, 323–24 and second-machine-age companies, 325 big data and Cambrian Explosion of robotics, 95 and credit scores, 46 and machine learning, 75–76 biology, computational, 116–17 Bird, Andrew, 121 Bitcoin, 279–88 China’s dominance of mining, 306–7 failure mode of, 317 fluctuation of value, 288 ledger for, 280–87 as model for larger economy, 296–97 recent troubles with, 305–7 and solutionism, 297 “Bitcoin: A Peer-to-Peer Electronic Cash System” (Nakamoto), 279 BlaBlaCar, 190–91, 197, 208 BlackBerry, 168, 203 Blitstein, Ryan, 117 blockchain as challenge to stacks, 298 and contracts, 291–95 development and deployment, 283–87 failure of, 317 and solutionism, 297 value as ledger beyond Bitcoin, 288–91 Blockchain Revolution (Tapscott and Tapscott), 298 Bloomberg Markets, 267 BMO Capital Markets, 204n Bobadilla-Suarez, Sebastian, 58n–59n Bock, Laszlo, 56–58 bonds, 131, 134 bonuses, credit card, 216 Bordeaux wines, 38–39 Boudreau, Kevin, 252–54 Bowie, David, 131, 134, 148 Bowie bonds, 131, 134 brand building, 210–11 Brat, Ilan, 12 Bredeche, Jean, 267 Brin, Sergey, 233 Broward County, Florida, 40 Brown, Joshua, 81–82 Brusson, Nicolas, 190 Burr, Donald, 177 Bush, Vannevar, 33 business conference venues, 189 Business Insider, 179 business processes, robotics and, 88–89 business process reengineering, 32–35 business travelers, lodging needs of, 222–23 Busque, Leah, 265 Buterin, Vitalik, 304–5 Byrne, Patrick, 290 Cairncross, Francis, 137 California, 208; See also specific cities Calo, Ryan, 52 Cambrian Explosion, 94–98 Cameron, Oliver, 324 Camp, Garrett, 200 capacity, perishing inventory and, 181 Card, David, 40 Care.com, 261 cars automated race car design, 114–16 autonomous, 17, 81–82 decline in ownership of, 197 cash, Bitcoin as equivalent to, 279 Casio QV-10 digital camera, 131 Caves, Richard, 23 Caviar, 186 CDs (compact discs), 145 cell phones, 129–30, 134–35; See also iPhone; smartphones Census Bureau, US, 42 central bankers, 305 centrally planned economies, 235–37 Chabris, Chris, 3 Chambers, Ephraim, 246 Champy, James, 32, 34–35, 37, 59 Chandler, Alfred, 309n Chase, 162 Chase Paymentech, 171 check-deposit app, 162 children, language learning by, 67–69 China Alibaba in, 7–8 concentration of Bitcoin wealth in, 306–7 and failure mode of Bitcoin, 317 mobile O2O platforms, 191–92 online payment service problems, 172 robotics in restaurants, 93 Shanghai Tower design, 118 Xiaomi, 203 Chipotle, 185 Choudary, Sangeet, 148 Christensen, Clay, 22, 264 Churchill, Winston, 301 Civil Aeronautics Board, US, 181n Civis Analytics, 50–51 Clash of Clans, 218 classified advertising revenue, 130, 132, 139 ClassPass, 205, 210 and economics of perishing inventory, 180–81 future of, 319–20 and problems with Unlimited offerings, 178–80, 184 and revenue management, 181–84 user experience, 211 ClassPass Unlimited, 178–79 Clear Channel, 135 clinical prediction, 41 Clinton, Hillary, 51 clothing, 186–88 cloud computing AI research, 75 APIs and, 79 Cambrian Explosion of robotics, 96–97 platform business, 195–96 coaches, 122–23, 334 Coase, Ronald, 309–13 cognitive biases, 43–46; See also bias Cohen, Steven, 270 Coles, John, 273–74 Collison, John, 171 Collison, Patrick, 171–74 Colton, Simon, 117 Columbia Record Club, 131 commoditization, 220–21 common sense, 54–55, 71, 81 companies continued dominance of, 311–12 continued relevance of, 301–27 DAO as alternative to, 301–5 decreasing life spans of, 330 economics of, 309–12 future of, 319–26 leading past the standard partnership, 323–26 management’s importance in, 320–23 markets vs., 310–11 as response to inherent incompleteness of contracts, 314–17 solutionism’s alternatives to, 297–99 TCE and, 312–15 and technologies of disruption, 307–9 Compass Fund, 267 complements (complementary goods) defined, 156 effect on supply/demand curves, 157–60 free, perfect, instant, 160–63 as key to successful platforms, 169 and open platforms, 164 platforms and, 151–68 and revenue management, 183–84 Stripe and, 173 complexity theory, 237 Composite Fund (D.


pages: 410 words: 119,823

Radical Technologies: The Design of Everyday Life by Adam Greenfield

3D printing, Airbnb, augmented reality, autonomous vehicles, bank run, barriers to entry, basic income, bitcoin, blockchain, business intelligence, business process, call centre, cellular automata, centralized clearinghouse, centre right, Chuck Templeton: OpenTable, cloud computing, collective bargaining, combinatorial explosion, Computer Numeric Control, computer vision, Conway's Game of Life, cryptocurrency, David Graeber, dematerialisation, digital map, distributed ledger, drone strike, Elon Musk, ethereum blockchain, facts on the ground, fiat currency, global supply chain, global village, Google Glasses, IBM and the Holocaust, industrial robot, informal economy, information retrieval, Internet of things, James Watt: steam engine, Jane Jacobs, Jeff Bezos, job automation, John Conway, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, joint-stock company, Kevin Kelly, Kickstarter, late capitalism, license plate recognition, lifelogging, M-Pesa, Mark Zuckerberg, means of production, megacity, megastructure, minimum viable product, money: store of value / unit of account / medium of exchange, natural language processing, Network effects, New Urbanism, Occupy movement, Oculus Rift, Pareto efficiency, pattern recognition, Pearl River Delta, performance metric, Peter Eisenman, Peter Thiel, planetary scale, Ponzi scheme, post scarcity, RAND corporation, recommendation engine, RFID, rolodex, Satoshi Nakamoto, self-driving car, sentiment analysis, shareholder value, sharing economy, Silicon Valley, smart cities, smart contracts, sorting algorithm, special economic zone, speech recognition, stakhanovite, statistical model, stem cell, technoutopianism, Tesla Model S, the built environment, The Death and Life of Great American Cities, The Future of Employment, transaction costs, Uber for X, universal basic income, urban planning, urban sprawl, Whole Earth Review, WikiLeaks, women in the workforce

True to the von Neumannian model, “the number of them in existence and the wealth they produce can grow exponentially.” Bowyer’s vision of a self-replicating future implied not merely an enormous increase in planetary production capacity, but its radical democratization as well. In this conception of things, there may be fairly stark limitations on what can be produced—combine harvesters and pile drivers are out, similarly mobile phones or tablets—but the barriers to entry are lowered to the point that anyone with the requisite will can own the means of production. And because the RepRap’s specifications are open, users are free to tinker and improve upon Bowyer’s original design, free to contribute those improvements back to the informational commons so everyone can benefit from them. Bowyer hoped that the fabricator itself would become “subject to evolution by artificial selection,” as the fruits of constant, iterative enhancement were incorporated into each new generation.

But neither Buterin nor the team around him set out with the intention of designing a general organizational form suitable to the complexities of 21st-century culture. The question they proceeded from was specific, forthright and entirely explicit: “How can revenue be generated within a purely decentralized environment?”21 So let’s take them at their word, and start by considering how the DAO might work in its original intended role, as an investment vehicle. How would this work? While formally open to anyone, a DAO presents would-be investors with barriers to entry only a little less onerous than those of participation in the traditional equities market. One invests in a DAO by purchasing “vote tokens” denominated in whatever cryptocurrency the organization runs on, in most cases Ether, and this means going through all the steps of downloading and setting up a suitable wallet. Once purchased, tokens allow the investor to share in profits realized by the DAO, also denominated in cryptocurrency, and they carry voting rights to a degree proportional to the magnitude of the investment.

Even beyond the question of lock-in, the highly formal quality of the relations inscribed in a DAO makes it completely unsuitable for situations characterized by a shallow gradient of commitment, where participants might prefer to maintain some ambiguity about the nature and degree of their involvement. It turns out that one of the defining characteristics of a commons, in the contemporary political sense, is precisely its lack of a hard boundary, its disinclination to present the newcomer with barriers to entry. National Technical University of Athens professor Stavros Stavrides, author of a well-regarded book on the experience of spatial commoning, argues that it is the fundamental openness and porosity of any true common space—its invitational quality—that enables it to survive as such over time.28 To seal off opportunities for participation is to invite metabolic death. And yet sealing off such opportunities is what a DAO does in a dozen tiny ways, by requiring participants to invest Ether, insisting on interpreting all exchanges as formal contractual obligations, and in general failing to accommodate the suppleness and idiosyncrasy of the arrangements we make to support collective endeavors.


pages: 924 words: 241,081

The Art of Community by Jono Bacon

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barriers to entry, Benevolent Dictator For Life (BDFL), collaborative editing, crowdsourcing, Debian, DevOps, en.wikipedia.org, Firefox, game design, Guido van Rossum, Johann Wolfgang von Goethe, Jono Bacon, Kickstarter, Larry Wall, Mark Shuttleworth, Mark Zuckerberg, openstreetmap, Richard Stallman, side project, Silicon Valley, Skype, slashdot, social graph, software as a service, telemarketer, union organizing, VA Linux, web application

Licensing of work Every contribution to the Linux community is licensed in such a way that it benefits the entire community. The fair licensing of all contributions adds a strong sense of confidence to the security of the community. Open tools Anyone with an Internet connection and a computer can contribute. All of the development tools and documentation are entirely free and open to access. This provides a low barrier to entry, and lets new users play with the technology. Although these elements were essential at the birth of Linux, it is not open communication, licensing, and tools that generate opportunity. These elements merely made it possible to build a world-class Free Software operating system. Opportunity is born in a sense of belief. Belief is a critically important human function. Whether your belief is in an all-creating god, in a family member’s ability to achieve something for herself, in a better future in your neighborhood, or in the reliability of a restaurant guide, belief is what gives us hope for the world around us.

Many users have single-shot queries and questions, and the requirement to battle through the somewhat complex sign-up process and then receive all conversations can be off-putting. Note An important consideration to make when setting up a mailing list is whether the list is archived on the Internet. If you want the conversations to be private (such as if the mailing list is for a governance body), you should close off the archives. We discuss governance in detail in Chapter 10. Discussion forums Forums are a very popular, low-barrier-to-entry medium. They manifest in the form of websites that allow you to create an identity and have a discussion using that identity. Forums have exploded in popularity in recent years, and some huge forums have developed across the Internet. At the time of this writing, the biggest in the world is an anime role-playing community with over 15 million members and over 1 billion posts. Now that is a lot of tentacles and oversized eyes.

Target participants Who is the process designed for? Is it intended for a particular kind of contributor, such as a developer, documentation writer, translator, or advocate? Requirements What tools, knowledge, and experience must the contributor have in order to follow through with the process? If she does not possess these requirements, how can she obtain them easily? Are these requirements a barrier to entry (such as entry fees or limited availability)? Steps involved What are the chronological steps involved in achieving the goal? What could go wrong? Is it possible for people to accidentally fail to complete a step? How is feedback provided about each step? Who provides the feedback? Verification Who decides when a process has been completed successfully? Also, how is successful completion of the process communicated to the contributor?


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

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activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Plutocrats, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce, zero-sum game

The phone book would be full of underemployed Realtors, the ten-thousand-dollar subsidy just barely compensating for the fact that there aren’t enough customers to go around. So this would not be a package for which the rational Realtor would campaign very hard. Industries that are difficult for newcomers to break into—that have “high barriers to entry,” in the jargon of economics—are more likely to find it rational to campaign for subsidies. But even high barriers to entry are not in themselves enough, if the industry is booming. Suppose existing big-box retailers such as Wal-Mart successfully lobbied for a government subsidy. It would do them little good, because new rivals would be willing to climb the entry barriers, pick up the subsidy, and watch their investments pay off in a growing market. In contrast, it’s rational to campaign for subsidies if you’re in an industry that’s expensive to enter and has poor long-term prospects, such as the auto or steel industry.


pages: 336 words: 90,749

How to Fix Copyright by William Patry

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A Declaration of the Independence of Cyberspace, barriers to entry, big-box store, borderless world, business intelligence, citizen journalism, cloud computing, commoditize, creative destruction, crowdsourcing, death of newspapers, en.wikipedia.org, facts on the ground, Frederick Winslow Taylor, George Akerlof, Gordon Gekko, haute cuisine, informal economy, invisible hand, Joseph Schumpeter, Kickstarter, knowledge economy, lone genius, means of production, moral panic, new economy, road to serfdom, Ronald Coase, Ronald Reagan, semantic web, shareholder value, Silicon Valley, The Chicago School, The Wealth of Nations by Adam Smith, trade route, transaction costs, trickle-down economics, web application, winner-take-all economy, zero-sum game

Hence, the need for law to be consistent with prevailing markets and technologies. My conclusion is that market forces and technology have moved well beyond our current laws and are now in conflict with them. Copyright laws arose out of eighteenth-century markets and technologies, the most important characteristic of which was artificial scarcity. Artificial scarcity was created by a small number of gatekeepers, by relatively high barriers to entry, and by analog limitations on unauthorized copying. Artificial scarcity was important because it created monopoly value: not profits earned above costs of production, but rather profits disconnected to costs. Those profits were dependent on the creation and legal enforcement of artificial scarcity through copyright laws.This is the environment in which copyright, at least Anglo-American copyright, arose.

Buggy whip makers, however, could no more claim a right to a continued market after the Model T car eliminated the demand for horse-drawn carriages than musicians who accompanied silent movies had a right to be paid after the talkies made their performances unnecessary. No copyright law can preserve markets that have been passed by. The new markets created by the Internet and digital tools are the greatest ever: Barriers to entry are low, costs of production and distribution are low, the reach is global, and large sums of money may be made off of a multitude of small transactions. This contrasts dramatically with the world of analog artificial scarcity, which based sales on a small number of expensive transactions, a situation that favored gatekeepers over individuals. The democratization of creation has arrived thanks to digital abundance replacing analog artificial scarcity.


pages: 377 words: 97,144

Singularity Rising: Surviving and Thriving in a Smarter, Richer, and More Dangerous World by James D. Miller

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23andMe, affirmative action, Albert Einstein, artificial general intelligence, Asperger Syndrome, barriers to entry, brain emulation, cloud computing, cognitive bias, correlation does not imply causation, crowdsourcing, Daniel Kahneman / Amos Tversky, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, en.wikipedia.org, feminist movement, Flynn Effect, friendly AI, hive mind, impulse control, indoor plumbing, invention of agriculture, Isaac Newton, John von Neumann, knowledge worker, Long Term Capital Management, low skilled workers, Netflix Prize, neurotypical, pattern recognition, Peter Thiel, phenotype, placebo effect, prisoner's dilemma, profit maximization, Ray Kurzweil, recommendation engine, reversible computing, Richard Feynman, Richard Feynman, Rodney Brooks, Silicon Valley, Singularitarianism, Skype, statistical model, Stephen Hawking, Steve Jobs, supervolcano, technological singularity, The Coming Technological Singularity, the scientific method, Thomas Malthus, transaction costs, Turing test, Vernor Vinge, Von Neumann architecture

If you come across a website written by some guy who never even went to high school (like Eliezer) but claims that he’s leading a crusade to protect us from a pseudoscientific-sounding apocalypse, then it’s almost certainly not worth your time to read enough content on the website to see if it’s the ramblings of a lunatic or the teachings of a visionary. (Although Eliezer has little formal schooling, he did, at age eleven, earn a 1410 on the SATs, a score that could get a seventeen-year-old into Harvard.101) The seeming insanity of the very concept of an intelligence explosion is a barrier to entry into the Singularity movement, preventing intelligent people from taking the idea of a Singularity seriously enough to investigate whether it should be taken seriously. A careful reader of Harry Potter and the Methods of Rationality, an e-book designed very effectively to teach its audience what it means to be rational and how to become more rational, would, however, at the very least not dismiss its author as an irrational crank.

See Hanson, Robin robots, 17, 210 robot soldiers, 24, 53 Roman Empire, 24, 78 Roman Republic, 137–38 Rumsfeld, Donald (former US Secretary of Defense), xviii Russia, 187, 194, 206 S safety-enhancing products, 179 Salamon, Anna, 44 SAT tests, 66, 162–63 savers gamble on the future, 176 Savoca, Elizabeth, 171 Scientific American “Why Women Live Longer,” 179 Scottish Mental Survey (1932), 68 search engines, 167 Second Law of Thermodynamics, 27 seed AI computer program of roughly human-level intelligence capable of improving itself, 36 intelligence explosion, undergoing, 48 that undergoes an intelligence explosion, 36 Self-Aware Systems, 25 sequence F, U, 115 sexbots, 193–95 sex drives, 195 sex-selective abortions, 194 sexually transmitted diseases, 194 Shakespeare, 21 Shaw, George Bernard, 84 Shulman, Carl, 147, 202 Singularitarians, 215 Singularity AI as smart as humans and/or augmenting human intelligence, x AI-centered, 209 AI-induced, 21 bad, avoid making, 58–59 bad Singularity-like event, x being well-educated will not make you materially better off, 192 believers, 27, 208 beyond which human affairs can not continue, xv civilization, xviii disabled children and, 212 emulations, materialized through, 203 enabling of computers, 6 expectations and savings rates, 186–87 expectations raise people’s uncertainty about the quality of the future, 193 expectations should affect when you have children, 193 five undisputed facts about, x–xii by gradual improvement, 178 harm of an unfriendly, 44 hellish, destroys the value of money, 58 humanity will be richer from, 165 intelligence explosion, from an, 203 investments, destroys the value of all, 57 is near, 177, 185, 191, 201, 207 Kurzweil-type, 178 luxuries from, 167 money has no value, 192 money no longer has value, 56 operating-system, 41 pollution as a bad, 56–57 post-Singularity civilization, 199–200, 221 post-Singularity race throughout the galaxy, 199 pre-Singularity destructive technologies, 201–2 pre-Singularity property rights will be respected, 187 pre-Singularity property rights will have value of post-Singularity, 188–89 pre-Singularity value of money, 211 profit opportunities of, 178 property rights and savings, 187–88 rapid political change, would bring about, 187 rich, makes everyone extremely, 192 savings and future wealth, 189 savings and investment returns, 188–89 savings rate, plummeting of, 191–92 savings rates with different Singularity scenarios, 189–90 scarcity, might abolish, 187 signposts of the, 177–78 utopian, 56, 58 utopian, will probably be, 179 as utopian or dystopian, 56 value of money, destroys the, 181 watch list, 209 Singularity conference, 92 Singularity Institute for Artificial Intelligence to create a “seed AI” designed to undergo an intelligence explosion to become a friendly ultra-AI, 14 Michael Vassar as director and former president, 44 Peter Thiel financial backing of, viii Yudkowsky founded, 35–36 The Singularity Is Near (Kurzweil), 3, 207 Singularity materialized through emulations, 203 Singularity movement intelligence explosion is a barrier to entry into, 38 Singularity of a black hole, xviii Singularity University Larry Page founded, x slaveholder compensation, 187 slave labor, 137–38 sleep deprivation, 105, 109, 124, 155. See also amphetamines (“speed”) Smith, Adam, 135 Smith College Adderall, 102–7, 112, 163 amphetamines use, 102 Dean and Adderall-type drugs for performance-enhancement, 102 student illegal drug use, 101 “study buddy” drugs, 102 survey of illegal cognitive-enhancing drug use among undergraduates, 103–9 socialists, 41 Social Security taxes, 157 sociopath, 22, 93 sociopathic children, 84 Socrates, 91 Socratic questioning method, 215 soft toilet paper, 166 Soviet Union, xiii, 19, 49, 124, 127, 206 spacecraft, 199 species extinction, 29 Stalin, Joseph, 22, 220 standard of living, 76, 123 Stanovich, Keith, 65–66 StarCraft II (video game), 106 stars “turned of” to conserve energy, 199 Star Trek, 171 starvation pressures, 150 Stewart, Potter (US Supreme Court Justice), 38–39 stop signal reaction time, 105 Study of Mathematically Precocious Youth, 65 subjective judgment, 39 sub-Saharan Africa, 173 suicide, 92–93 super genius, 90–91, 95 superhuman intelligence, xiv superintelligence, 21 superintelligence, “alien-like,” 122 super-skyscraper, 181 superweapon, 204 surrogate woman, 194 “survival of the richest,” 81 surviving children, 82 Swift, Jonathan, 88 T Tallinn, Jaan, 35, 215 tampons, 166 Tao, Terence, 91–92 tax on emulations, 150 teleportation device, xi teleportation machine, 138–39 terminal disease, 219 thermonuclear war, 52–53.


pages: 346 words: 102,625

Early Retirement Extreme by Jacob Lund Fisker

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8-hour work day, active transport: walking or cycling, barriers to entry, clean water, Community Supported Agriculture, delayed gratification, discounted cash flows, diversification, don't be evil, dumpster diving, financial independence, game design, index fund, invention of the steam engine, inventory management, loose coupling, market bubble, McMansion, passive income, peak oil, place-making, Ponzi scheme, psychological pricing, the scientific method, time value of money, transaction costs, wage slave, working poor

For instance, many decide to become healthy after they, or someone close to them, experiences their first heart attack or something equally serious. Similar epiphanies occur after temporary job losses during an economic crisis. Barriers include not knowing about an activity or its benefits, the belief that the activity is difficult to engage in, social disapproval, or the belief that there are more benefits in continuing the present behavior. People will naturally choose activities that they believe to have high benefits and low barriers to entry--the quick and easy way to riches. Benefits and barriers vary significantly between people. To some, walking half a mile is fun, or at least as natural as putting on a pair of pants, whereas to others it represents a significant labor to be avoided. Some have the same aversion to merely getting up from the couch. Most importantly, the proposed behavior may compete with one or more other behaviors, where doing the proposed activity excludes another activity, or is simply believed to exclude another activity.

Some companies reduce this risk by having no long-term debt or by having special classes of shares. Others reduce it by having many customers or clients or easy access to labor, either by outsourcing, offering attractive benefits or simply due to an abundance of workers in a given field. However, as long as there is a drive for profit, there will be competition and innovation, and those risks are hard to eliminate without monopoly pricing power, political favors, and other barriers to entry. Since profit is the income of the businessman, and since the businessman needs income to buy stuff for himself, he too is at risk. Many businessmen and entrepreneurs take steps similar to employees and establish emergency funds (see The working man). However, those that desire to retire early either need to earn a lot of money fast or find an alternative solution. The Renaissance man A Renaissance man is a person who is competent in a wide range of fields, covering intellectual areas as well as the arts, physical fitness, and social accomplishments.


pages: 315 words: 93,522

How Music Got Free: The End of an Industry, the Turn of the Century, and the Patient Zero of Piracy by Stephen Witt

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4chan, barriers to entry, Berlin Wall, big-box store, cloud computing, collaborative economy, crowdsourcing, game design, Internet Archive, invention of movable type, inventory management, iterative process, Jason Scott: textfiles.com, job automation, late fees, mental accounting, moral panic, packet switching, pattern recognition, peer-to-peer, pirate software, Ronald Reagan, security theater, sharing economy, side project, Silicon Valley, software patent, Steve Jobs, zero day

Brandenburg’s American counterpart James Johnston had signed away his rights to AT&T when he’d gone to work for Bell Labs, meaning that, even as the mp3 succeeded beyond his most fervent imagining, he earned nothing. Around this time, Linde began to notice subtle changes come over Brandenburg. His wardrobe shifted from sweaters to sport jackets and ties. He began talking less about things like modified discrete cosine transforms, and more about things like marketplace position and long-term barriers to entry. He was starting to understand the power of open, competitive markets and, like all good capitalists, did his best to avoid participating in them. Linde noticed, too, that while Brandenburg might have been eccentric, it wasn’t as if he had a personality disorder. Indeed, he seemed in recent years to have developed an excellent understanding of people’s tendencies and motivations. He had proved to be a careful student of human nature, and his own personal awkwardness was almost like a disguise he wore.

In the evenings, he would sit the child on his lap and play with him amidst the whirring background of the burning bootlegged discs. As soon as he’d saved up enough cash, he moved with his girlfriend out of the trailer and into a modest apartment. The move marked the end of the dog-breeding experiment. This had not been a lucrative venture. Pit bull puppies were a pure commodity, a market with no barriers to entry, and the premium on pedigree litters had been competed away. This experience was a lesson for Glover, as he began to see that success in a capitalist economy required a durable competitive advantage. So he started to act as a middleman between the street and the Scene. But even so, he struggled, losing out to his primary competitor: Tony Dockery. Dockery had built a tower, too, and he sold to many of the same customers.


pages: 267 words: 79,905

Creating Unequal Futures?: Rethinking Poverty, Inequality and Disadvantage by Ruth Fincher, Peter Saunders

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barriers to entry, ending welfare as we know it, financial independence, full employment, Gini coefficient, income inequality, income per capita, labour market flexibility, labour mobility, low skilled workers, low-wage service sector, marginal employment, minimum wage unemployment, New Urbanism, open economy, pink-collar, positional goods, purchasing power parity, shareholder value, spread of share-ownership, The Bell Curve by Richard Herrnstein and Charles Murray, urban planning, urban renewal, very high income, women in the workforce, working poor, working-age population

The fourth significant player, Rural Press, owns the Canberra Times and over 150 regional and country newspapers. Adverse effects of concentration of ownership include insufficient channels for the expression of opinions, economic forces creating barriers to entry for new players, diminished localism in content and accountability, reduced opportunities for journalists, and conflicts of interest for owners who have non-media interests, as well as the general undesirability of such concentration of power in a democracy (Chadwick 1996). It is unlikely, given the barriers to entry, that the number of mainstream major newspapers in Australia will grow. In this arena the best prospects for improving coverage of poverty and welfare issues lie in appeals to journalistic professionalism, editorial independence, and in continuing support for and lobbying of editors and journalists who display a social conscience.


pages: 323 words: 90,868

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century by Ryan Avent

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3D printing, Airbnb, American energy revolution, assortative mating, autonomous vehicles, Bakken shale, barriers to entry, basic income, Bernie Sanders, BRICs, call centre, Capital in the Twenty-First Century by Thomas Piketty, Clayton Christensen, cloud computing, collective bargaining, computer age, creative destruction, dark matter, David Ricardo: comparative advantage, deindustrialization, dematerialisation, Deng Xiaoping, deskilling, Dissolution of the Soviet Union, Donald Trump, Downton Abbey, Edward Glaeser, Erik Brynjolfsson, eurozone crisis, everywhere but in the productivity statistics, falling living standards, first square of the chessboard, first square of the chessboard / second half of the chessboard, Ford paid five dollars a day, Francis Fukuyama: the end of history, future of work, gig economy, global supply chain, global value chain, hydraulic fracturing, income inequality, indoor plumbing, industrial robot, intangible asset, interchangeable parts, Internet of things, inventory management, invisible hand, Jacquard loom, James Watt: steam engine, Jeff Bezos, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph-Marie Jacquard, knowledge economy, low skilled workers, lump of labour, Lyft, manufacturing employment, Marc Andreessen, mass immigration, means of production, new economy, performance metric, pets.com, price mechanism, quantitative easing, Ray Kurzweil, rent-seeking, reshoring, rising living standards, Robert Gordon, Ronald Coase, savings glut, Second Machine Age, secular stagnation, self-driving car, sharing economy, Silicon Valley, single-payer health, software is eating the world, supply-chain management, supply-chain management software, TaskRabbit, The Future of Employment, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, transaction costs, Tyler Cowen: Great Stagnation, Uber and Lyft, Uber for X, very high income, working-age population

Workers also band together to enforce artificial scarcity by creating guilds, trade unions and professional associations. On the face of things, guild-like institutions look benign enough. They profess to serve as guarantors of professional standards. The American Medical Association, for example, works to make it difficult to become an accredited doctor, and thereby works to raise doctor pay. Yet the public tolerates this because, rightly or wrongly, it sees the barriers to entry erected by the AMA as a way to ensure that doctors are well qualified. Professional organizations can also serve a related function as educational institutions. The European guilds that emerged in the Middle Ages also often set out the professional path for members of a particular occupation, from apprenticeship to master status. Such organizations, in addition, are seen as important counterweights to owners of other productive factors – either land or capital – who, thanks to the relative scarcity of their contribution to production, enjoy significant bargaining power in negotiations with labour.

But trade-union political power is nothing like what it used to be, especially in Anglo-Saxon economies.13 A different sort of labour protection, which has multiplied across rich economies, has received comparatively little scrutiny: the occupational licence. Service professionals in an extraordinary range of occupations – including roles such as hairdressing and interior decorating – must obtain a licence to work legally in many states or countries. These licences act as a barrier to entry, helping to protect the scarcity of professionals in a given field, and keep pay higher than it might otherwise be. Licences are often wildly abusive, however. In 2012, a group of Louisiana monks found that they were not allowed to sell the handmade wooden caskets they had been building to earn a little extra money, because they were not a licensed funeral establishment (becoming one would have required them to obtain a casket showroom and embalming room, among other things).* Even if the cost in time and money to get the licence is relatively low, it may deter enough would-be workers (such as those who would normally choose to cut hair a few hours a week, but who can’t be bothered to do so when the work can’t be done legally without a licence) to prop up the pay of those with a licence.

The End of Accounting and the Path Forward for Investors and Managers (Wiley Finance) by Feng Gu

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active measures, Affordable Care Act / Obamacare, barriers to entry, business process, Claude Shannon: information theory, Clayton Christensen, commoditize, conceptual framework, corporate governance, creative destruction, Daniel Kahneman / Amos Tversky, discounted cash flows, diversified portfolio, double entry bookkeeping, Exxon Valdez, financial innovation, fixed income, hydraulic fracturing, index fund, information asymmetry, intangible asset, inventory management, Joseph Schumpeter, Kenneth Arrow, knowledge economy, moral hazard, new economy, obamacare, quantitative easing, quantitative trading / quantitative finance, QWERTY keyboard, race to the bottom, risk/return, Robert Shiller, Robert Shiller, shareholder value, Steve Jobs, The Great Moderation, value at risk

SECTOR SYNOPSIS Media and entertainment is a ubiquitous and fast-growing sector that includes many companies in various subsectors, such as cable and radio, telecommunication, movies and TV, Internet services providers, and, of course, print newspapers and magazines. The main characteristics of this sector are a high rate of innovation (wireless technology, social media), frequent technological disruptions (online information services rattling print media), low barriers to entry, and relatively easy penetration of foreign markets, all enhancing cut-throat competition within the subsectors. Customers are the most important strategic asset of media and entertainment companies, particularly because in most subsectors, the customers’ identity is known to the provider of services (Internet service providers; cable, satellite radio, and telecom companies; newspaper and magazine publishers; etc.), enabling active management of the customer franchise.

DISRUPTION THREAT Absent obvious considerable growth prospects, is Sirius’s dominant position assured? On the bright side, Sirius’s brand is well known; it’s practically the only game in town for satellite radio, it has a large and slowly growing subscriber base, and it features some big-name exclusive artists. It seems impregnable. And yet, as the Resource Preservation column of the Report suggests, in this industry with fast-changing technologies and low barriers to entry, competitive and disruption threats can never be dismissed. Indeed, the media carry occasional articles on threats to Sirius’s dominance,5 and many of analysts’ questions in Sirius’s conference calls revolved around potential competition. The main concerns focus on an Internet strategy as an alternative to satellite radio—wi-fi in the car—and the entry of “big players,” like Apple and Google into the car streaming market.

Industry 4.0: The Industrial Internet of Things by Alasdair Gilchrist

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3D printing, additive manufacturing, Amazon Web Services, augmented reality, autonomous vehicles, barriers to entry, business intelligence, business process, chief data officer, cloud computing, connected car, cyber-physical system, deindustrialization, fault tolerance, global value chain, Google Glasses, hiring and firing, industrial robot, inflight wifi, Infrastructure as a Service, Internet of things, inventory management, job automation, low skilled workers, millennium bug, pattern recognition, peer-to-peer, platform as a service, pre–internet, race to the bottom, RFID, Skype, smart cities, smart grid, smart meter, smart transportation, software as a service, stealth mode startup, supply-chain management, trade route, web application, WebRTC, WebSocket, Y2K

9 10 Chapter 1 | Introduction to the Industrial Internet Traditionally, manufacturers set about producing the best cost-effective products they could to sell on the open market. Of course, this took them into conflict with other producers, which required them to find ways to add value to their products. This value-add could be based on quality, price, quantity, or perceived value for the money. However, these strategies rarely worked for long, as the competitor having a low barrier to entry simply followed successful differentiation tactics. For example, competitors could match quantity and up their lot size to match or do better. Worse, if the price was the differentiator, the competitor could lower their prices, which results in what is termed a race to the bottom. Selling Light, Not Light Bulbs What the customer ultimately wants the goods for is to provide a service (provide air transportation in the previous example), but it could also be to produce light in the case of a light bulb.

Prior to wireless technologies becoming ubiquitous in the home, consumers had everything they required to build their own smart home; in fact, the technology has been around since the early 1980s. The problem was that there was no way to connect the sleek microprocessor controller to the sensors and actuators without running wires throughout the house. This of course would be very disruptive and potentially damaging, so was not worth the trouble. Wi-Fi, Bluetooth, and ZigBee have removed that large barrier to entry and now we can connect devices. However—and this is a recurring theme—there is not one wireless standard that fits all purposes. The array of wireless technologies has arisen because they serve different purposes. Some, such as Wi-Fi (802.11), are designed for high bandwidth and throughput for web browsing and downloading from the Internet. Bluetooth, on the other hand, was designed to provide a personal area network to connect wirelessly the devices that you wear or carry, such as a mobile phone or a watch to a headset, and it therefore requires short range and less power and throughput capability.


pages: 364 words: 99,897

The Industries of the Future by Alec Ross

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23andMe, 3D printing, Airbnb, algorithmic trading, AltaVista, Anne Wojcicki, autonomous vehicles, banking crisis, barriers to entry, Bernie Madoff, bioinformatics, bitcoin, blockchain, Brian Krebs, British Empire, business intelligence, call centre, carbon footprint, cloud computing, collaborative consumption, connected car, corporate governance, Credit Default Swap, cryptocurrency, David Brooks, disintermediation, Dissolution of the Soviet Union, distributed ledger, Edward Glaeser, Edward Snowden, en.wikipedia.org, Erik Brynjolfsson, fiat currency, future of work, global supply chain, Google X / Alphabet X, industrial robot, Internet of things, invention of the printing press, Jaron Lanier, Jeff Bezos, job automation, John Markoff, knowledge economy, knowledge worker, lifelogging, litecoin, M-Pesa, Marc Andreessen, Mark Zuckerberg, Mikhail Gorbachev, mobile money, money: store of value / unit of account / medium of exchange, new economy, offshore financial centre, open economy, Parag Khanna, peer-to-peer, peer-to-peer lending, personalized medicine, Peter Thiel, precision agriculture, pre–internet, RAND corporation, Ray Kurzweil, recommendation engine, ride hailing / ride sharing, Rubik’s Cube, Satoshi Nakamoto, selective serotonin reuptake inhibitor (SSRI), self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart cities, social graph, software as a service, special economic zone, supply-chain management, supply-chain management software, technoutopianism, The Future of Employment, underbanked, Vernor Vinge, Watson beat the top human players on Jeopardy!, women in the workforce, Y Combinator, young professional

The analogy that most foreign policy hands point to as a possible precedent for containing cyberweapons is nuclear nonproliferation: the creation of arms control agreements, treaties, United Nations resolutions, and international monitoring programs to govern the spread and use of nuclear weapons. Under this international framework, nuclear war is still a threat, but nuclear weapons are well understood and there are processes in place to manage them. In the 20th century, similar sets of procedures and rules were also developed for the weaponization of airplanes, space, and chemical and biological weapons. But the confounding factor when it comes to cyberwar is that the barriers to entry are so much lower in cyber than in any of these other domains. Any country, or even any rogue group or individual, that puts a little bit of time and effort into it can develop some nasty offensive cyber capabilities. It is, in fact, the near-opposite of the development of nuclear arms, which requires years of work, billions of dollars, and access to the scarcest of scarce scientific talent and transuranium elements.

There is an increasingly large audience, however, that holds a different view from Charlie Songhurst. They believe that big data, instead of absorbing and supplanting other industries, will serve as a broad tool that every existing industry can use to spur growth. The idea is that data will become widely usable and scalable enough that it won’t have domain expertise in the same way that other high-barrier-to-entry industries of the future like genomics or robotics do. This view was explained to me by Mark Gorenberg, a veteran of West Coast venture investing who saw the investment case for analytics early and built a venture capital firm around it, Zetta Venture Partners. Mark has been in venture capital for a quarter-century and splits most of his time among investing, work with MIT, and serving as an advisor to the president of the United States as a member of the President’s Council of Advisors on Science and Technology.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

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3D printing, activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

But the banking industry and its regulators sensed an upstart in the making and challenged the company’s legality. Only regulated savings institutions are entitled to make money on “the float,” as PayPal was doing. So PayPal changed its business model and began charging buyers and sellers directly for the service.25 Still, PayPal was the first of many companies to promote peer-to-peer transactions by lowering the barriers to entry into the existing money networks. A company called Square took this a step further, developing both the technology and the accounting infrastructure through which people could swipe credit cards and accept payments through their smartphones. Although many coffee shops and smaller retail stores now use Square and an iPad in place of more cumbersome and expensive credit-card systems, the people most dramatically empowered by the system were independent sellers and service people and those who want to pay them.

AngelList, a Web site originally dedicated to helping startups connect with angel investors, offers a feature called “syndicates” through which people can back portfolios managed by notable investors, such as author and advisor Tim Ferriss or Launch founder Jason Calacanis. Subscribers pledge to back each of the leader’s investments by a certain amount. If the investment works, they then pay between 5 and 20 percent of profits to the leader and 5 percent to AngelList.61 While SEC regulations are under revision to lower the barriers to entry, currently most of these platforms are limited to “qualified” investors—people who have at least a million dollars in savings. As of this writing, numerous platforms that give less wealthy people access to the startup investing market are under construction.62, 63 While these may be democratic developments, they’re also as sure a sign of a bubble as any we’ve seen. Opening the floodgates to more angel investment doesn’t mean there will be a greater number of successful startups; it simply means more money will come in at the very top of the funnel.


pages: 141 words: 9,896

Pragmatic Guide to JavaScript by Christophe Porteneuve

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barriers to entry, commoditize, domain-specific language, en.wikipedia.org, Firefox, web application, WebSocket

The jQuery project was formally founded in September 2009, and its version 1.4 was released in January 2010 amid a two-week online celebration and coding fest. (The current version at the time of this writing is 1.4.2.) Report erratum Download from Wow! eBook <www.wowebook.com>this copy is (P1.0 printing, November 2010) J Q UERY AND J Q UERY UI 119 jQuery’s focus is mostly on lowering the perceived barrier-to-entry for people wanting to spruce up their web pages with a bit of JavaScript without prior knowledge of the language (or sometimes of programming in general). Its API provides a lot of quick shortcuts targeted at the most common use cases, and a number of plug-ins (some of them grouped in the jQuery UI project) take care of the rest. Recently I’ve been hearing people describe jQuery as “a DSL for DOM manipulation” or state that “jQuery comes from selectors to code, allowing people who know CSS to use JavaScript.”


pages: 556 words: 46,885

The World's First Railway System: Enterprise, Competition, and Regulation on the Railway Network in Victorian Britain by Mark Casson

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banking crisis, barriers to entry, Beeching cuts, British Empire, combinatorial explosion, Corn Laws, corporate social responsibility, David Ricardo: comparative advantage, intermodal, iterative process, joint-stock company, joint-stock limited liability company, knowledge economy, linear programming, Network effects, New Urbanism, performance metric, railway mania, rent-seeking, strikebreaker, the market place, transaction costs

Even Wrst class passengers also have been often subjected to delay and inconvenience . . . (p. 3) The Railway Committee agreed with the Select Committee, though, that amalgamation could reinforce monopoly power. Established railway companies in a district could combine to erect a barrier to entry by pooling their resources to contest proposals to build additional lines. Experience suggested that rationalization following amalgamation could result in the closure of useful sections of line, as when York and North Midland Railway closed down a section of the Leeds and Selby Railway because it competed with its own (longer) line into Leeds. Erecting barriers to entry was seen to be a possible motive behind the proposed amalgamation of three railways serving Liverpool: the Grand Junction Railway (to Birmingham), the Liverpool and Manchester Railway, and the North Union Railway (to Wigan and Preston).

D I R E C T L I N E S A N D E XT EN D E D B R A N C H E S The builders of early trunk lines quickly realized that although they might claim a monopoly of a particular route, they were always vulnerable to competition from the subsequent construction of alternative routes. Parliament indicated at an Business Strategies and their EVects 293 early stage that companies might well be confronted by competition from new companies entering their region, and companies therefore sought to invest in ‘barriers to entry’ to deter these entrants. As noted earlier, an important strategy for deterring competition was to build the shortest and fastest route between the major towns at either end. There was a strong belief by railway promoters that if competition were to develop later then the company with the shortest and fastest route would capture most of the traYc. One reason was that if two rival companies matched each other’s fares then customers, being indiVerent to the fares, would opt for the fastest route.


pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

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asset-backed security, backtesting, banking crisis, barriers to entry, beat the dealer, Bernie Madoff, Black-Scholes formula, British Empire, Claude Shannon: information theory, cloud computing, collateralized debt obligation, commodity trading advisor, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, Edward Thorp, family office, financial independence, fixed income, Flash crash, hindsight bias, implied volatility, index fund, intangible asset, James Dyson, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, money market fund, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, quantitative easing, quantitative trading / quantitative finance, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Rubik’s Cube, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

I went to the store, bought a pack of Kool-Aid for a nickel, made six glasses out of it, and sold it to them for a penny apiece. A penny actually had considerable value in those days. In the winter, I shoveled snow. At first, I charged a nickel, but I found that there was so much demand that I raised the price to a dime, and then to 15 cents. The first year, when I was eight, I made several dollars, but the next year the other kids caught on, and the market changed. A classic example of no barriers to entry. Another thing happened that had a hint of the future. I had a cousin who was not a totally scrupulous guy and who discovered that you could jiggle the slot machines that were located in gas stations and make them pay out more than they should. This was a fairly astonishing fact that you could go around jiggling machines and get a lot of extra nickels out of them. I didn’t make a career out of it, but I just noted that there was a gambling situation where you could extract extra money.

They fail to appreciate that only 300 million people live in the U.S., and there are 6.7 billion people in the rest of the world. The market in which Apple has the highest approval rating is China, which is a market with 900 million mobile phone subscribers. And currently, how many iPhones have been sold in China? Three million. Their unique operating system and excellent hardware give Apple a barriers-to-entry advantage relative to their competitors. I believe over the next four years, Apple will inevitably repeat the success it has had in the U.S. on a global scale. We forecast the earnings of every company we follow for three or four years out. I like to invest in companies that are cheap relative to their sector, but where we are forecasting earnings above consensus for the next few years. The catalyst I monitor for a stock to realize value is earnings surprise.

In late 2006, I bought Horizon Lines, which was a Jones Act container shipping company operating vessels primarily between Hawaii, Alaska, Puerto Rico, and the U.S. mainland. Under the Jones Act, all vessels transporting cargo between covered U.S. ports must be built in the U.S., registered under the U.S. flag, manned by predominantly U.S. crews, and owned and operated by U.S.-organized companies that are controlled and 75 percent owned by U.S. citizens. As one can imagine, the Jones Act creates a significant barrier to entry in these shipping lanes, and as a result, Horizon Lines had a substantial share of the market. On the negative side, though, the company also had its share of debt and a number of older vessels that needed to be replaced. My thinking at the time was that I was investing in a company that had a significant moat around it and that it would generate a lot of free cash flow, enabling it to deleverage.

Debtor Nation: The History of America in Red Ink (Politics and Society in Modern America) by Louis Hyman

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asset-backed security, bank run, barriers to entry, Bretton Woods, card file, central bank independence, computer age, corporate governance, credit crunch, declining real wages, deindustrialization, diversified portfolio, financial independence, financial innovation, fixed income, Gini coefficient, Home mortgage interest deduction, housing crisis, income inequality, invisible hand, late fees, London Interbank Offered Rate, market fundamentalism, means of production, mortgage debt, mortgage tax deduction, p-value, pattern recognition, profit maximization, profit motive, risk/return, Ronald Reagan, Silicon Valley, statistical model, technology bubble, the built environment, transaction costs, union organizing, white flight, women in the workforce, working poor, zero-sum game

While credit card loans generally had higher operating costs than conventional business loans, with 8.2 times the revenue they more than made up the difference. Banks frantically sought new sources of capital, like the card bond market, because the profits of credit cards were so much higher than their other investments. Such profits, as always, lured in new competition, who could also rely on these new methods of securitization to fund their loans. As conduit for capital, rather than sources of capital, such lenders no longer faced the greatest barrier to entry in lending—money to lend. The Rise of Pure Play Credit Card Companies With the expanding market for securitization, credit card banks with no other business—so-called “pure play” or “monoline” issuers—found their business model worked and expanded rapidly. Securitization lowered, if not eliminated, the capital to lend barrier.159 Fast-growing issuers like First USA, Advanta, and Capital One, all used securitized receivables to 258 CHAPTER SEVEN fund their growth, rather than internal capital.

Citicorp alone had 18.3 percent in 1992.176 The exact same rate—19.8 percent—at seven of the largest ten banks, D’Amato asserted, was damning evidence of oligopolistic collusion, demanding, at the very least, an extensive investigation.177 Chuck Schumer (D-NY) pushed for an 18-month study period, which the banking industry opposed, since the uncertainty surrounding the outcome of the investigation would make securitizing debt, in the meantime, much more difficult. Nonetheless, the GAO launched an investigation whose results were published in April 1994.178 The credit card industry, it found, was competitive despite the stability of its interest rates.179 With six thousand issuers nationwide, it was hard to imagine coordination.180 The seemingly collusive interest rates belied a frenzy of competition. The low barriers to entry fostered by securitization allowed competition between issuers, despite the apparent staggering sums required to achieve economies of scale. To be profitable, the industry had to be concentrated, but a company could easily be dislodged by an upstart with easy access to capital and new ways of lending. The credit card industry in the early 1990s was competitive but concentrated. Though the largest lenders controlled the bulk of the industry, they could not easily dictate prices like an oligopoly.

The Smiley decision came just in time for the credit card industry. As the profitability of interest income fell through the mid-1990s, penalty fee income had risen, but was still subject to state laws. By the late 1990s, profits in the credit card industry, while still higher than commercial loans, continued to slide. By 1996, after-tax return on assets was at 1.2 percent, nearly half of what it was in 1993.252 The low barriers to entry and the frenzied competition had driven profits down. A senior analyst at Moody’s remarked that the “competition of the past five years has changed the nature of the industry.”253 What profits remained were sustained by the increased interest and fee income derived from subprime lending, lower charge-offs derived from home equity loans, and higher fee income from penalties and merchant fees.254 One-quarter of all customers paid their bills late and issuers happily charged them an industry-average $26 fee.255 As customers used their cards for more mundane spending, income from merchants rose, enabled by the Smiley decision.256 While many credit card analysts were ambivalent about the subprime expansion, credit card issuers had little choice if they were to grow.


Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo

Albert Einstein, Alfred Russel Wallace, algorithmic trading, Andrei Shleifer, Arthur Eddington, Asian financial crisis, asset allocation, asset-backed security, backtesting, bank run, barriers to entry, Berlin Wall, Bernie Madoff, bitcoin, Bonfire of the Vanities, bonus culture, break the buck, Brownian motion, business process, butterfly effect, capital asset pricing model, Captain Sullenberger Hudson, Carmen Reinhart, Chance favours the prepared mind, collapse of Lehman Brothers, collateralized debt obligation, commoditize, computerized trading, corporate governance, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, Daniel Kahneman / Amos Tversky, delayed gratification, Diane Coyle, diversification, diversified portfolio, double helix, easy for humans, difficult for computers, Ernest Rutherford, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, Fractional reserve banking, framing effect, Gordon Gekko, greed is good, Hans Rosling, Henri Poincaré, high net worth, housing crisis, incomplete markets, index fund, interest rate derivative, invention of the telegraph, Isaac Newton, James Watt: steam engine, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, margin call, Mark Zuckerberg, market fundamentalism, martingale, merger arbitrage, meta analysis, meta-analysis, Milgram experiment, money market fund, moral hazard, Myron Scholes, Nick Leeson, old-boy network, out of africa, p-value, paper trading, passive investing, Paul Lévy, Paul Samuelson, Ponzi scheme, predatory finance, prediction markets, price discovery process, profit maximization, profit motive, quantitative hedge fund, quantitative trading / quantitative finance, RAND corporation, random walk, randomized controlled trial, Renaissance Technologies, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance, Robert Shiller, Robert Shiller, short selling, sovereign wealth fund, statistical arbitrage, Steven Pinker, stochastic process, survivorship bias, The Great Moderation, the scientific method, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Triangle Shirtwaist Factory, ultimatum game, Upton Sinclair, US Airways Flight 1549, Walter Mischel, Watson beat the top human players on Jeopardy!, WikiLeaks, Yogi Berra, zero-sum game

Even after fees, the most successful of these funds still manage to generate returns far above those of the typical mutual fund. However, the industry also has a very high attrition rate: many hedge funds go out of business, and many new hedge funds are launched to take their place. These features allow the industry to adapt very quickly to changing market conditions. Even in the wake of the recent financial crisis, hedge funds are still very lightly regulated. This means they have relatively low barriers to entry—they can easily gain a toehold on the new volcanic rock of the marketplace. Hedge funds have very high compensation levels for their managers, so the evolutionary stakes are significant. As a result, talented portfolio managers are drawn to hedge funds from all quarters of the business world. There’s no shortage of new strategies and hungry entrepreneurs in the hedge fund industry which, in turn, means that competition is intense and adaptation to specific profit-making niches is fast and ruthless.

“As we continued to discover new anomalies,” said Shaw, “we also benefited from a sort of a second-order effect: if the profit that could be gained from a given single effect was exceeded by the transaction cost that would be incurred to exploit it, it would be a mistake for anybody to bet on that effect in isolation. Once we’d identified a number of small inefficiencies, though, the aggregate profit opportunity was often sufficient to break through the transaction cost threshold. This allowed us to extract profits from market inefficiencies that were too small for most traders to exploit, creating a barrier to entry for potential competitors.” Shaw had built an organizational machine to detect and exploit even the smallest market anomalies. Along the way, however, he noticed that market dynamics were not only changing over time, but changing in a way that required D. E. Shaw & Co. to work harder for its profits. “Effects tended to disappear over time,” Shaw recalled. “Anomalies that had previously generated significant profits stopped making money, and you had to discover other, more complex effects that people hadn’t found.

And even though Finance Behaving Badly • 363 natural selection still operates on each individual in the same way as before, the existence of certain environmental shocks, like life-threatening diseases that can be cured by those who know enough biology, creates these groups. As the old saying goes, “The enemy of my enemy is my friend.” So what’s the problem with elitism, especially if it’s based on special knowledge that’s useful? In fact, we rely on third-party expertise all the time when we hire a plumber, go to the dentist, or enroll in business school. But these groups don’t pose any systemic problems because the barriers to entry into these priesthoods are significant, but not impossible. With enough hard work and the right kind of training, you too can become one of us, so there aren’t impenetrable walls separating you and me. But in cases where it becomes impossible, and where the knowledge is essential for life itself, this is where problems arise. The priesthood can now use that knowledge to exert control over the uninitiated—I know how to cure diabetes, but I won’t share this great boon with you unless you do my bidding.


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The Future of the Internet: And How to Stop It by Jonathan Zittrain

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A Declaration of the Independence of Cyberspace, Amazon Mechanical Turk, Andy Kessler, barriers to entry, book scanning, Brewster Kahle, Burning Man, c2.com, call centre, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, commoditize, corporate governance, Daniel Kahneman / Amos Tversky, distributed generation, en.wikipedia.org, Firefox, game design, Hacker Ethic, Howard Rheingold, Hush-A-Phone, illegal immigration, index card, informal economy, Internet Archive, jimmy wales, John Markoff, license plate recognition, loose coupling, mail merge, national security letter, old-boy network, packet switching, peer-to-peer, Post-materialism, post-materialism, pre–internet, price discrimination, profit maximization, Ralph Nader, RFC: Request For Comment, RFID, Richard Stallman, Richard Thaler, risk tolerance, Robert Bork, Robert X Cringely, SETI@home, Silicon Valley, Skype, slashdot, software patent, Steve Ballmer, Steve Jobs, Ted Nelson, Telecommunications Act of 1996, The Nature of the Firm, The Wisdom of Crowds, web application, wikimedia commons, zero-sum game

This observation has led others to conclude that in order for large organizations to become more innovative, they must adopt a more “ambidextrous organizational form” to provide a buffer between exploitation and exploration.28 This advice might be reflected in choices made by companies like Google, whose engineers are encouraged to spend one day a week on a project of their own choosing—with Google able to exploit whatever they come up with.29 But large firms struggling to learn lessons from academics about becoming more creative need not be the only sources of innovation. In fact, the competitive market that appears to be the way to spur innovation—a market in which barriers to entry are low enough for smaller firms to innovate disruptively where larger firms are reluctant to tread—can be made much more competitive, since generative systems reduce barriers to entry and allow contributions from those who do not even intend to compete. THE GENERATIVE DIFFERENCE Generative systems allow users at large to try their hands at implementing and distributing new uses, and to fill a crucial gap that is created when innovation is undertaken only in a profit-making model, much less one in which large firms dominate.


pages: 462 words: 150,129

The Rational Optimist: How Prosperity Evolves by Matt Ridley

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23andMe, agricultural Revolution, air freight, back-to-the-land, banking crisis, barriers to entry, Bernie Madoff, British Empire, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, charter city, clean water, cloud computing, cognitive dissonance, collateralized debt obligation, colonial exploitation, colonial rule, Corn Laws, creative destruction, credit crunch, David Ricardo: comparative advantage, decarbonisation, dematerialisation, demographic dividend, demographic transition, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, everywhere but in the productivity statistics, falling living standards, feminist movement, financial innovation, Flynn Effect, food miles, Gordon Gekko, greed is good, Hans Rosling, happiness index / gross national happiness, haute cuisine, Hernando de Soto, income inequality, income per capita, Indoor air pollution, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, James Hargreaves, James Watt: steam engine, Jane Jacobs, John Nash: game theory, joint-stock limited liability company, Joseph Schumpeter, Kevin Kelly, knowledge worker, Kula ring, Mark Zuckerberg, meta analysis, meta-analysis, mutually assured destruction, Naomi Klein, Northern Rock, nuclear winter, oil shale / tar sands, out of africa, packet switching, patent troll, Pax Mongolica, Peter Thiel, phenotype, Plutocrats, plutocrats, Ponzi scheme, Productivity paradox, profit motive, purchasing power parity, race to the bottom, Ray Kurzweil, rent-seeking, rising living standards, Silicon Valley, spice trade, spinning jenny, stem cell, Steve Jobs, Steven Pinker, Stewart Brand, supervolcano, technological singularity, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, ultimatum game, upwardly mobile, urban sprawl, Vernor Vinge, Vilfredo Pareto, wage slave, working poor, working-age population, Y2K, Yogi Berra, zero-sum game

I hold no brief for large corporations, whose inefficiencies, complacencies and anti-competitive tendencies often drive me as crazy as the next man. Like Milton Friedman, I notice that ‘business corporations in general are not defenders of free enterprise. On the contrary, they are one of the chief sources of danger.’ They are addicted to corporate welfare, they love regulations that erect barriers to entry to their small competitors, they yearn for monopoly and they grow flabby and inefficient with age. But I detect that the criticism is increasingly out of date, and that large corporations are ever more vulnerable to their nimbler competitors in the modern world – or would be if they were not granted special privileges by the state. Most big firms are actually becoming frail, fragile and frightened – of the press, of pressure groups, of government, of their customers.

Thanks to the internet, each is giving according to his ability to each according to his needs, to a degree that never happened in Marxism. This catallaxy will not go smoothly, or without resistance. Natural and unnatural disasters will still happen. Governments will bail out big corporations and big bureaucracies, hand them special favours such as subsidies or carbon rations and regulate them in such a way as to create barriers to entry, slowing down creative destruction. Chiefs, priests, thieves, financiers, consultants and others will appear on all sides, feeding off the surplus generated by exchange and specialisation, diverting the life-blood of the catallaxy into their own reactionary lives. It happened in the past. Empires bought stability at the price of creating a parasitic court; monotheistic religions bought social cohesion at the price of a parasitic priestly class; nationalism bought power at the expense of a parasitic military; socialism bought equality at the price of a parasitic bureaucracy; capitalism bought efficiency at the price of parasitic financiers.


pages: 402 words: 110,972

Nerds on Wall Street: Math, Machines and Wired Markets by David J. Leinweber

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AI winter, algorithmic trading, asset allocation, banking crisis, barriers to entry, Big bang: deregulation of the City of London, butterfly effect, buttonwood tree, buy low sell high, capital asset pricing model, citizen journalism, collateralized debt obligation, corporate governance, Craig Reynolds: boids flock, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Danny Hillis, demand response, disintermediation, distributed generation, diversification, diversified portfolio, Emanuel Derman, en.wikipedia.org, experimental economics, financial innovation, fixed income, Gordon Gekko, implied volatility, index arbitrage, index fund, information retrieval, intangible asset, Internet Archive, John Nash: game theory, Kenneth Arrow, Khan Academy, load shedding, Long Term Capital Management, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, market fragmentation, market microstructure, Mars Rover, Metcalfe’s law, moral hazard, mutually assured destruction, Myron Scholes, natural language processing, negative equity, Network effects, optical character recognition, paper trading, passive investing, pez dispenser, phenotype, prediction markets, quantitative hedge fund, quantitative trading / quantitative finance, QWERTY keyboard, RAND corporation, random walk, Ray Kurzweil, Renaissance Technologies, Richard Stallman, risk tolerance, risk-adjusted returns, risk/return, Robert Metcalfe, Ronald Reagan, Rubik’s Cube, semantic web, Sharpe ratio, short selling, Silicon Valley, Small Order Execution System, smart grid, smart meter, social web, South Sea Bubble, statistical arbitrage, statistical model, Steve Jobs, Steven Levy, Tacoma Narrows Bridge, the scientific method, The Wisdom of Crowds, time value of money, too big to fail, transaction costs, Turing machine, Upton Sinclair, value at risk, Vernor Vinge, yield curve, Yogi Berra, your tax dollars at work

Others have much higher standards, closer to the highest-minded bastions of reputation-driven journalism, and may be spawned by those news organizations as they evolve. Others have an “all Britney, all the time, except for shark attacks” attitude, but keep people coming The Text Fr ontier 205 back by breaking an occasional legitimate true story overlooked by the mainstream media. 4. Social media. The barriers to entry at the low end of the “news” business on the Web are vanishingly small. Anyone can send spam, create a blog, or post on message boards for stocks or other topics. A great deal of this is genuinely useful—think of the product reviews on Amazon—and some is just noise. On stock message boards, there have been CEOs who reveal valuable information; but for the most part, the typical posting still reads like it came from some guy sitting around in his underwear in Albania at 3 a.m., on vodka number nine.

The levels of extreme overleverage used turned bad ideas into major catastrophes. No less a culprit than Lehman’s Dick Fuld spoke of the need for such a monitor in his testimony to Congress. Regrettably, this seems to be getting less attention than it deserves, but it is a second story on the foundation of trading, clearing, and settlement systems that can give early warning of larger problems. Electronic market technology lowers the barriers to entry for creating this new infrastructure, as seen in the fragmentation of the equity Shooting the Moon 287 markets described in Chapter 3 (“Algorithm Wars”). For stocks, futures, and options, this has let a thousand flowers (well, about 40) bloom, and there is a great race under way to create the systems needed for a broader class of securities. Many of the contestants appeared at a conference on global exchanges held in October 2008, organized by Rosenblatt Securities, a small firm with a large profile in electronic markets.


pages: 481 words: 120,693

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

So, unless you believe that the random order of participating in the competition is linked to talent, the more obvious conclusion is that the music world celebrity brought by winning the Queen Elisabeth Competition, independent of how good you are, has a powerful effect on your professional success as a musician. But what about the long tail? One of the promises of the Internet has been that it can weaken the Matthew effect: the Web has low barriers to entry, and we all start out equal online. Matthew Salganik and Duncan Watts tested that premise in 2005 on 12,207 Web-based participants. The research subjects were offered a menu of forty-eight songs. Some participants were shown the songs ranked by popularity in the research group and told how often each song had been downloaded. Others were shown the songs in random order. A separate group was shown the songs in a meek-shall-inherit-the-earth order—the least popular songs were presented as most popular and vice versa.

The Mac 400 is an example of the next stage—emerging market engineers, employed by a Western company, creating a product inspired by a Western prototype, and redesigned for emerging market consumers. The world’s smartest megacorporations—GE, Google, Goldman Sachs—are finding ways to profit from the great economic shift of our times. The biggest winners, though, are individuals, not institutions; globalization and technology have dramatically lowered barriers to entry, and the beneficiaries are the people smart enough and lucky enough to make it on their own. Chopra was aware of the perks of working for a highly respected global behemoth like GE—“If you are the CEO of GE, anyone anywhere in the world will take a meeting with you,” he said—but he couldn’t resist the lure of responding to revolution. Following the model of Nucor, which revolutionized the U.S. steel business by building mini-mills, Chopra is working to create an Indian power company based on small, twenty- to forty-megawatt plants using environmentally friendly sources of energy.


pages: 482 words: 117,962

Exceptional People: How Migration Shaped Our World and Will Define Our Future by Ian Goldin, Geoffrey Cameron, Meera Balarajan

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Admiral Zheng, agricultural Revolution, barriers to entry, Berlin Wall, Branko Milanovic, British Empire, conceptual framework, creative destruction, demographic transition, Deng Xiaoping, endogenous growth, failed state, Fall of the Berlin Wall, Gini coefficient, global supply chain, guest worker program, illegal immigration, income inequality, income per capita, Intergovernmental Panel on Climate Change (IPCC), job automation, Joseph Schumpeter, knowledge economy, labor-force participation, labour mobility, Lao Tzu, life extension, low skilled workers, low-wage service sector, Malacca Straits, mass immigration, microcredit, Network effects, new economy, New Urbanism, old age dependency ratio, open borders, out of africa, price mechanism, purchasing power parity, Richard Florida, selection bias, Silicon Valley, Silicon Valley startup, Skype, spice trade, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, women in the workforce, working-age population

As of 2004, 286,557 Brazilian nationals and 56,000 Peruvian nationals were resident in Japan.101 The economic crisis by 2008 had led the Japanese Government to not only end but also seek to reverse its policy, offering incentives for the Nikkeijin to return to Latin America. Most government policies tend to view the migration process as a static and one-time decision that influences an individual's decision to cross a border. They are directed toward either increasing or decreasing barriers to entry, with a view to managing the number of people entering the country. This short-term and narrow view of migration often leads migration policy to fail, however, in terms of the effects that it produces.102 Wayne Cornelius notes that “the gap between the goals of national immigration policy…and the actual results of the policies in this area (policy outcomes) is wide and growing wider in all major industrialized countries.”103 Because migration is a dynamic social process, often encompassing multiple moves, for many different reasons, due to a variety of factors, immigration policy cannot be viewed as a gate that opens and closes.

Russia's Ministry of the Interior estimated in 2003 that there were five million foreigners of unclear legal status present in the country.105 The total number of undocumented migrants in continental Europe is estimated to be between four and eight million.106 In 2005, about a third of foreign workers in Japan and two-thirds in South Korea were undocumented.107 In Singapore, despite heavy employer sanctions for hiring undocumented workers, a 1998 study found that more than 80 percent of the total foreign workforce did not have visas.108 Levels of undocumented migration are high even in the Gulf States, where it is usually necessary to fly across the border (a significant barrier to entry), temporary work visas are relatively easy to obtain, and harsh jail sentences are often meted out to overstayers.109 To address this problem, the United Arab Emirates initiated a set of amnesties within the Gulf States between 1996 and 1998, during which undocumented migrants would leave or acquire a visa without facing jail or fines.110 More than a million people participated in the amnesty process, most of whom were returned to their home countries.111 Immigration policies can also have unintended or unforeseen consequences.


pages: 484 words: 120,507

The Last Lingua Franca: English Until the Return of Babel by Nicholas Ostler

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barriers to entry, BRICs, British Empire, call centre, en.wikipedia.org, European colonialism, Internet Archive, invention of writing, Isaac Newton, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, mass immigration, open economy, Republic of Letters, Scramble for Africa, statistical model, trade route, upwardly mobile

No simple rule decrees the long-term triumph of those who First take up a technical option, or a dominant position in a new world order. Found er effects, also known as the force of tradition, are stronger where either there is little cost in sustaining the past pattern (contrast the continuing expense in time and eff ort to induct new generations in Latin, eff ec-tively an artificial language), or the tradition is not at variance with some other new pressure (as Latin was in effect a barrier to entry for less educated bourgeois people). Hence notoriously, wheel gauges have remained at four feet eight and a half inches, originating as the axle length of chariots and carts, from the Roman Empire and its road ruts right on through medieval carriage-work, and as the current U.S. standard railroad gauge. What motive was there to change as one style of wheeled transport succeeded another? One could also note that Renaissance typographers of the fifteenth and sixteenth centuries, choosing the character styles for printing fonts, simply took over the styles (Gothic, roman, and italic) that were then in vogue in manuscript hands.

They have been sustained ever since—though Gothic, the least readable, has lost much ground— since there is no more of the particular dynamic in manual pen movement that had previously driven the changes since the capitals of the Classical age. Even more notoriously, the perverse QWERTY pattern of the English keyboard, invented in 1872, has survived a century of mechanical typing and the First thirty years or so of digital text entry. It is likely to continue to survive unless and until it comes to represent a barrier to entry to some sector of the population of would-be typists and writers, which—hitherto disenfranchised, is yet rising in influence. This kind of situation is precisely what can be expected to provide at least opposition, and perhaps effective Relegation, to English as a global lingua-franca. What about the vast section of the world’s population for whom the need to learn English is still a burdensome chore that they would prefer to avoid?


pages: 470 words: 144,455

Secrets and Lies: Digital Security in a Networked World by Bruce Schneier

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Ayatollah Khomeini, barriers to entry, business process, butterfly effect, cashless society, Columbine, defense in depth, double entry bookkeeping, fault tolerance, game design, IFF: identification friend or foe, John von Neumann, knapsack problem, moral panic, mutually assured destruction, pez dispenser, pirate software, profit motive, Richard Feynman, Richard Feynman, risk tolerance, Silicon Valley, Simon Singh, slashdot, statistical model, Steve Ballmer, Steven Levy, the payments system, Y2K, Yogi Berra

That’s history now, and we’ll never get back to that point again. Brand Theft Virtual identity is vital to businesses as well as individuals. It takes time and money to develop a corporate identity. This identity is more than logos and slogans and catchy jingles. It’s product, bricks-and-mortar buildings, customer service representatives—things to touch, people to talk to. Brand equals reputation. On the Internet, the barrier to entry is minimal. Anyone can have a Web site, from Citibank to Fred’s Safe-Money Mattress. And everyone does. How do users know which sites are worth visiting, worth book- marking, worth establishing a relationship with? Thousands of companies sell PCs on the Web. Who is real, and who is fly-by-night? Branding is the only answer to this question. When the Web first entered the public eye, pundits claimed that it heralded the end of the big brand.

Dennis Nikrasch made a good living—about $16 million total— ripping off slot machines. He practiced on slot machines at home, and learned how to open a machine up on the casino floor—without setting off the alarms—and swap firmware chips. Blockers stood between him and the cameras. Then he would leave, and an accomplice would play the rigged machines for the jackpot.) The morals of this section are simple. One, tamper resistance is largely a myth, but it does provide a barrier to entry. Two, tamper resistance should be augmented by other countermeasures. And three, any system where the device and the secrets within the device are under the control of different people has a fundamental security flaw. It’s possible to design a secure system that includes this flaw, but it must be recognized as a flaw. SIDE-CHANNEL ATTACKS In the last few years, new kinds of cryptanalytic attacks have begun to appear in the literature: attacks that target specific implementation details.


pages: 497 words: 150,205

European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

Amazon: amazon.comamazon.co.ukamazon.deamazon.fr

3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

However, the services directive left governments too much discretion to decide what constitutes a barrier to establishment, or a barrier to the provision of services across borders. The reduction in barriers to entry has not been as expected. 350 European Commission, "The economic impact of the services directive: A first assessment following implementation", June 2012 351 John Springford, "How to build European services markets", Centre for European Reform, September 2012 http://www.cer.org.uk/sites/default/files/publications/attachments/pdf/2012/js_markets_sept12-6206.pdf 352 Sometimes the retail sector is competitive; often it is not. Belgium is particularly bad. Supermarkets are shoddy and overpriced. One big barrier to entry is the availability of land: an intensely local issue that prevents an outsider like Britain’s Tesco from injecting much-needed competition. 353 While the Commission has produced two Single Market Acts in recent years, these mostly collate existing, often minor initiatives.


pages: 496 words: 154,363

I'm Feeling Lucky: The Confessions of Google Employee Number 59 by Douglas Edwards

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Albert Einstein, AltaVista, Any sufficiently advanced technology is indistinguishable from magic, barriers to entry, book scanning, Build a better mousetrap, Burning Man, business intelligence, call centre, commoditize, crowdsourcing, don't be evil, Elon Musk, fault tolerance, Googley, gravity well, invisible hand, Jeff Bezos, job-hopping, John Markoff, Marc Andreessen, Menlo Park, microcredit, music of the spheres, Network effects, P = NP, PageRank, performance metric, pets.com, Ralph Nader, risk tolerance, second-price auction, side project, Silicon Valley, Silicon Valley startup, slashdot, stem cell, Superbowl ad, Y2K

I had found a couple of titles interesting, including Michael Porter's Competitive Strategy and David Aaker's books on branding. I began regurgitating everything I could remember onto the paper in front of me: the five P's (or was it six?), the four M's, barriers to entry, differentiation on quality or price. By the time Sergey came back, I had enough to talk for ten minutes and was confident I could fill any holes with the three B's (Buckets of Baffling Bullshit). I went to the whiteboard and furiously drew circles and squares and unleashed arrows like Legolas. I was nervous, but not very. Sergey bounced on a ball and asked questions that required me to make things up on the spot. "What's the most effective barrier to entry?" "What's more important: product differentiation or promotion?" "How does the strategy change if the price is zero?" He seemed to be paying attention, and I began enjoying myself.


pages: 607 words: 133,452

Against Intellectual Monopoly by Michele Boldrin, David K. Levine

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accounting loophole / creative accounting, agricultural Revolution, barriers to entry, cognitive bias, creative destruction, David Ricardo: comparative advantage, Dean Kamen, Donald Trump, double entry bookkeeping, en.wikipedia.org, endogenous growth, Ernest Rutherford, experimental economics, financial innovation, informal economy, interchangeable parts, invention of radio, invention of the printing press, invisible hand, James Watt: steam engine, Jean Tirole, John Harrison: Longitude, Joseph Schumpeter, Kenneth Arrow, linear programming, market bubble, market design, mutually assured destruction, Nash equilibrium, new economy, open economy, peer-to-peer, pirate software, placebo effect, price discrimination, profit maximization, rent-seeking, Richard Stallman, Silicon Valley, Skype, slashdot, software patent, the market place, total factor productivity, trade liberalization, transaction costs, Y2K

This situation forced them to innovate frequently and to develop production processes able to guarantee very high productivity. Such intense competition already gave them a competitive edge relative to the Anglo-Saxon companies living in a world of generalized patenting. To this initial advantage was added the opportunity to patent products in the United Kingdom and the United States, allowing the German chemical companies to erect insurmountable barriers to entry in the chemical market. Do not get us wrong here; we are not claiming that the German companies did not use patents in building up their worldwide dominance. They did, and there is no doubt whatsoever that the chemical industry worldwide was an assemblage of more or less loosely held together cartels until the late 1930s, cartels in which the big German chemical companies played a major leading and coordinating role.

These two factors have prevented monopolistic concentration in the industry; the combined worldwide market share of the top thirty pharmaceutical and biotechnology firms is just over 50 percent. The sales of the two largest ones covered about 15 percent of the global market for drugs in 2004. Relative size and market share are not the sources of monopoly power, if there is any, in this industry. Furthermore, although the wave of mergers may have erected substantial barriers for reaching the top, it would be a stretch to claim that there are substantial barriers to entry into the industry per se. In every country we have considered there are often hundreds of competing pharmaceutical firms, and new biomedical startups are appearing and being financed, especially in the United States, on a monthly basis.25 A few additional symptoms may help the reader get a better understanding of why, at the end, we reach the diagnosis we do. Sales are growing, fast; at about 12 percent a year for most of the 1990s, and still now at around 8 percent a year; R&D expenditures during the same period have been rising only 6 percent.


pages: 587 words: 117,894

Cybersecurity: What Everyone Needs to Know by P. W. Singer, Allan Friedman

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4chan, A Declaration of the Independence of Cyberspace, Apple's 1984 Super Bowl advert, barriers to entry, Berlin Wall, bitcoin, blood diamonds, borderless world, Brian Krebs, business continuity plan, Chelsea Manning, cloud computing, crowdsourcing, cuban missile crisis, data acquisition, drone strike, Edward Snowden, energy security, failed state, Fall of the Berlin Wall, fault tolerance, global supply chain, Google Earth, Internet of things, invention of the telegraph, John Markoff, Julian Assange, Khan Academy, M-Pesa, mutually assured destruction, Network effects, packet switching, Peace of Westphalia, pre–internet, profit motive, RAND corporation, ransomware, RFC: Request For Comment, risk tolerance, rolodex, Silicon Valley, Skype, smart grid, Steve Jobs, Stuxnet, uranium enrichment, We are Anonymous. We are Legion, web application, WikiLeaks, zero day, zero-sum game

This became clunky, and in 1972 Ray Tomlinson at the technical consulting firm BBN wrote a basic program to read, compose, and send messages. This was e-mail: the first Internet “killer app.” Within a year, a majority of traffic across the network originally created for research was e-mail. Now networked communication was about people. The last step in creating the modern Internet was eliminating barriers to entry. Early use was limited to those who had access to the networked computers at research and defense institutions. These organizations communicated via dedicated data lines. As the evident value of networked communication grew and the price of computers dropped, more organizations sought to join. Modems, which convert data to sound waves and back, allowed basic phone lines to serve as links to other computers.

Even more disturbing to the US soldiers was how the insurgents had pulled it off. It turned out they were using commercially available software originally designed by college kids to illegally download satellite-streamed movies. Skygrabber, as it was known, cost as little as $25.95 on a Russian website. Examples like this lead many to believe that cyberspace is one of those strange places where the weak have an advantage over the strong. On one hand, the barriers to entry to developing cyberattack capabilities are relatively low, especially compared to building up more traditional military capabilities. For instance, it cost the United States roughly $45 million for the unmanned plane system and several billion dollars for the space satellite network that its feed traveled over. The $25.95 spent on illegal software to undermine those systems was a pretty good bargain.

Falling Behind: Explaining the Development Gap Between Latin America and the United States by Francis Fukuyama

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Andrei Shleifer, Atahualpa, barriers to entry, Berlin Wall, British Empire, business climate, Cass Sunstein, central bank independence, collective bargaining, colonial rule, conceptual framework, creative destruction, crony capitalism, European colonialism, Fall of the Berlin Wall, first-past-the-post, Francis Fukuyama: the end of history, Francisco Pizarro, Hernando de Soto, income inequality, income per capita, labour market flexibility, land reform, land tenure, Monroe Doctrine, moral hazard, New Urbanism, oil shock, open economy, purchasing power parity, rent-seeking, Ronald Reagan, The Wealth of Nations by Adam Smith, total factor productivity, trade liberalization, transaction costs, upwardly mobile, Washington Consensus, zero-sum game

For one, in a Schumpeterian world of creative destruction, property would be secure only if it were defended by barriers to entry (see Daron Acemoglu, “The Form of Property Rights: Oligarchic vs. Democratic Societies,” Working Paper, Department of Economics [Cambridge: Massachusetts Institute of Technology, 2005]). Secondly, property can be made secure not by right but by might: in Latin America, land was often protected by private militias (see Fernando López-Alves, State Formation and Democracy in Latin America, 1810–1900 [Durham: Duke University Press, 2000]). Most importantly, however, property rights mean something different for those who possess it and for those who do not. In the presence of barriers to entry and credit constraints—both prevalent in Latin America—property rights are exclusionary. See Elisa Mariscal and Kenneth L.


pages: 518 words: 147,036

The Fissured Workplace by David Weil

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accounting loophole / creative accounting, affirmative action, Affordable Care Act / Obamacare, banking crisis, barriers to entry, business process, call centre, Carmen Reinhart, Cass Sunstein, Clayton Christensen, clean water, collective bargaining, commoditize, corporate governance, corporate raider, Corrections Corporation of America, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, declining real wages, employer provided health coverage, Frank Levy and Richard Murnane: The New Division of Labor, George Akerlof, global supply chain, global value chain, hiring and firing, income inequality, information asymmetry, intermodal, inventory management, Jane Jacobs, Kenneth Rogoff, law of one price, loss aversion, low skilled workers, minimum wage unemployment, moral hazard, Network effects, new economy, occupational segregation, Paul Samuelson, performance metric, pre–internet, price discrimination, principal–agent problem, Rana Plaza, Richard Florida, Richard Thaler, Ronald Coase, shareholder value, Silicon Valley, statistical model, Steve Jobs, supply-chain management, The Death and Life of Great American Cities, The Nature of the Firm, transaction costs, ultimatum game, union organizing, women in the workforce, Y2K, yield management

In general, as one goes to lower levels of apparel production (that is, from design and cutting by manufacturers or jobbers at the top of Figure 9.3, to sewing by contractors or subcontractors at the bottom), the level of competition intensifies and the profit margin per garment diminishes. Sewing contractors—often themselves former sewers/cutters and recent immigrants to the United States—compete in a market with large numbers of small companies (employing on average twenty-five to thirty-five workers each in the women’s industry), low barriers to entry, and limited opportunities for product differentiation. This creates conditions for intense price-based competition. Because labor costs represent the vast majority of total costs for a sewing contractor, there is great pressure to strike deals with jobbers and manufacturers that are not economically sustainable if the contractor actually complies with wage and hour laws.22 As a result, noncompliance is predominantly a problem among the large number of contractors and subcontractors that assemble apparel products.

Although there are different varieties (sizes, shapes) and quality levels, in the end, a cucumber is still a cucumber. That means farmers have little to compete on in terms of product characteristics, requiring them, in true Economics 101 fashion, to compete on price. Falling transportation costs and trade barriers, improved technologies for transit and preservatives, and a large number of nations anxious to sell in the U.S. market mean that the barriers to entry have fallen (as the geographic boundaries of the potential suppliers have expanded). Add these factors together and you have the basis for high levels of competition among cucumber growers. If you are furiously competing on the basis of price, how do you cut costs? In agriculture, the major input costs are seed, fertilizer, pesticides, water, capital costs associated with equipment, and labor.


pages: 868 words: 147,152

How Asia Works by Joe Studwell

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affirmative action, anti-communist, Asian financial crisis, bank run, banking crisis, barriers to entry, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collective bargaining, crony capitalism, cross-subsidies, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, failed state, financial deregulation, financial repression, Gini coefficient, glass ceiling, income inequality, income per capita, industrial robot, Joseph Schumpeter, Kenneth Arrow, land reform, land tenure, large denomination, liberal capitalism, market fragmentation, non-tariff barriers, offshore financial centre, oil shock, open economy, passive investing, purchasing power parity, rent control, rent-seeking, Right to Buy, Ronald Coase, South China Sea, The Wealth of Nations by Adam Smith, urban sprawl, Washington Consensus, working-age population

North-east Asian states gave themselves the best possible start in their economic development by the attention they paid to agriculture. However, the impetus to development was greater still because of the means by which maximisation of agricultural output was achieved. By giving rural families equal amounts of land to farm, governments created conditions of almost perfect, laboratory-like competition. This was the kind of competition involving large numbers, no barriers to entry and freely available information about which mathematical economists fantasise (and at which many other people scoff because it occurs so rarely). But in this case conditions akin to those assumed by textbook economics were indeed created. Every family had its bit of capital – its land – along with the ability to access technical support, credit and markets, and so competed on a remarkably equal basis with its neighbour.

China appears, in the aggregate, to be doing better with its state-owned enterprises. Out of the country’s history of socialist industrial planning, and Zhu Rongji’s 1990s rationalisation programme, there has developed a roster of substantial mid-stream businesses that are becoming increasingly globally competitive. These public firms are protected from undue market fragmentation by high capital barriers to entry, yet there are enough of them in each industrial segment to make for fierce competition.29 They indicate that export discipline, and domestic competition combined with the steady culling of losers, are more important than ownership in determining industrial development success. That said, sometimes the key operating units are state group subsidiaries in which managers and other private shareholders hold substantial equity positions.


pages: 424 words: 121,425

How the Other Half Banks: Exclusion, Exploitation, and the Threat to Democracy by Mehrsa Baradaran

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access to a mobile phone, affirmative action, asset-backed security, bank run, banking crisis, banks create money, barriers to entry, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, cashless society, credit crunch, David Graeber, disintermediation, diversification, failed state, fiat currency, financial innovation, financial intermediation, Goldman Sachs: Vampire Squid, housing crisis, income inequality, Internet Archive, invisible hand, Kickstarter, M-Pesa, McMansion, microcredit, mobile money, moral hazard, mortgage debt, new economy, Own Your Own Home, payday loans, peer-to-peer lending, price discrimination, profit maximization, profit motive, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, Ronald Reagan: Tear down this wall, savings glut, the built environment, the payments system, too big to fail, trade route, transaction costs, unbanked and underbanked, underbanked, union organizing, white flight, working poor

Twenty-three-year-old David Korzeniowski, blocked out of the banking system for seven years, acknowledged that “he made a mistake” but that “the fees he pays for cashing checks, paying bills and wiring money cannibalize the paycheck he gets from part-time construction work … ‘Everything is more expensive,’ he said.”32 Banks have no need for small accounts because they do not yield high profits. Therefore, they have employed a variety of tactics to slough off their low-yield customers. High fees and barriers to entry have accomplished their desired result: those with small savings have weighed the costs and have decided to leave the banking system entirely. BANKING MARKETS But we can’t necessarily blame the banks. Everything is more expensive for those outside the banking system, but the business of banking has also become more costly. If the effect of fees, account minimums, and account denials is to disenfranchise the poor, the cause of these fees is the changed atmosphere in which banks now operate.

Insofar as the state enables credit markets, all creditworthy Americans deserve equal access to credit, especially because reasonable and safe credit can provide a smoother path both through and out of poverty. If banks are not providing credit to the poor, the state should provide it directly. The existing post office framework represents the most promising path toward effectuating such a public option. American banks long ago deserted their most impoverished communities, but post offices, even two centuries later, have remained—still rooted in an egalitarian mission. There have never been barriers to entry at post offices, and their services have been available to all, regardless of income. And so, it is not unreasonable to suggest that as America’s oldest instrument of democracy in action, the post office can once again level the playing field, and in the process, save itself from imminent demise. In fact, the post office inspector general’s office, a small regulatory branch of the post office, issued a White Paper report in January 2014 proposing just such a move.


pages: 395 words: 116,675

The Evolution of Everything: How New Ideas Emerge by Matt Ridley

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affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Alfred Russel Wallace, altcoin, anthropic principle, anti-communist, bank run, banking crisis, barriers to entry, bitcoin, blockchain, British Empire, Broken windows theory, Columbian Exchange, computer age, Corn Laws, cosmological constant, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, cryptocurrency, David Ricardo: comparative advantage, demographic transition, Deng Xiaoping, discovery of DNA, Donald Davies, double helix, Downton Abbey, Edward Glaeser, Edward Lorenz: Chaos theory, Edward Snowden, endogenous growth, epigenetics, ethereum blockchain, facts on the ground, falling living standards, Ferguson, Missouri, financial deregulation, financial innovation, Frederick Winslow Taylor, Geoffrey West, Santa Fe Institute, George Gilder, George Santayana, Gunnar Myrdal, Henri Poincaré, hydraulic fracturing, imperial preference, income per capita, indoor plumbing, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, Jeff Bezos, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kevin Kelly, Khan Academy, knowledge economy, land reform, Lao Tzu, long peace, Lyft, M-Pesa, Mahatma Gandhi, Mark Zuckerberg, means of production, meta analysis, meta-analysis, mobile money, money: store of value / unit of account / medium of exchange, Mont Pelerin Society, moral hazard, Necker cube, obamacare, out of africa, packet switching, peer-to-peer, phenotype, Pierre-Simon Laplace, price mechanism, profit motive, RAND corporation, random walk, Ray Kurzweil, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, rising living standards, road to serfdom, Ronald Coase, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, sharing economy, smart contracts, South Sea Bubble, Steve Jobs, Steven Pinker, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, women in the workforce

The original idea of a patent, remember, was not to reward inventors with monopoly profits, but to encourage them to share their inventions. A certain amount of intellectual property law is plainly necessary to achieve this. But it has gone too far. Most patents are now as much about defending monopoly and deterring rivals as about sharing ideas. And that discourages innovation. Many firms use patents as barriers to entry, suing upstart innovators who trespass on their intellectual property even en route to some other goal. In the years before World War I, aircraft-makers tied each other up in patent lawsuits and slowed down innovation until the US government stepped in. Much the same has happened with smartphones and biotechnology today. New entrants have to fight their way through ‘patent thickets’ if they are to build on existing technologies to make new ones.

The internet turns everybody into a journalist and a politician; puts the customer in ultimate charge; and lowers the cost for ordinary people to do extraordinary things, whether in charity, business or politics. Big companies are tumbling before its creative-destructive onslaught; big state bureaucracies cannot long resist. As the maverick MP Douglas Carswell puts it, ‘Everything that the internet touches it transforms. The barriers to entry come crashing down. Established operators face competition from nimble upstarts. So, too, in politics.’ Carswell argues that i-democracy is rapidly and inexorably transforming the old ways of doing politics, replacing party-controlled, bureaucracy-enabled traditions with radical emergent possibilities, from open primaries to instant plebiscites, from participatory budgeting in local government to online recall.


pages: 436 words: 114,278

Crude Volatility: The History and the Future of Boom-Bust Oil Prices by Robert McNally

American energy revolution, Asian financial crisis, banking crisis, barriers to entry, Bretton Woods, collective bargaining, credit crunch, energy security, energy transition, housing crisis, hydraulic fracturing, index fund, Induced demand, interchangeable parts, invisible hand, joint-stock company, market clearing, market fundamentalism, moral hazard, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, price discrimination, price stability, sovereign wealth fund, transfer pricing

But there is one other necessary feature that enables cartels: A natural inclination (ideally by a relatively small number of producers) toward integration and collective action when oversupply develops. Cartels work best when there are a limited number of producers, barriers to entry are high, and patented or elaborate technology is required to produce. In the case of oil, conditions in the early Pennsylvania oil fields were decidedly not favorable to the formation or success of a producer cartel. New drillers were as numerous as they were independent, barriers to entry were low, and oil drilling was neither sophisticated nor subject to technology patents. Despite an unfavorable atmosphere, early oil drillers tried to form cartels out of desperation to escape price crashes.31 But their efforts did not last long and ultimately failed, mainly because members succumbed to the temptation to cheat as hordes of new drillers, eager to strike it rich, continued discovering new gushers.


pages: 215 words: 55,212

The Mesh: Why the Future of Business Is Sharing by Lisa Gansky

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Airbnb, Amazon Mechanical Turk, Amazon Web Services, banking crisis, barriers to entry, carbon footprint, Chuck Templeton: OpenTable, cloud computing, credit crunch, crowdsourcing, diversification, Firefox, fixed income, Google Earth, industrial cluster, Internet of things, Kickstarter, late fees, Network effects, new economy, peer-to-peer lending, recommendation engine, RFID, Richard Florida, Richard Thaler, ride hailing / ride sharing, sharing economy, Silicon Valley, smart grid, social web, software as a service, TaskRabbit, the built environment, walkable city, yield management, young professional, Zipcar

Urban areas with greater density are also fertile ground for clusters of related Mesh businesses to take root and grow. Michael Porter at Harvard studies industry clusters, such as shoes in Milan, publishing in New York, film in Mumbai, and technology in Silicon Valley. In the Harvard Business Review he writes, “Clusters are important, because they allow companies to be more productive and innovative than they could be in isolation. [Clusters] reduce the barriers to entry for new business creation relative to other locations.” The proximity of businesses in an urban cluster speeds up sharing of expertise and labor pools, makes opportunities easier to spot, and promotes cooperation around common market goals. The Mesh, which is built on sharing information, markets, and social networks, is particularly well poised to take advantage of these clusters. Even some suburbs are becoming more Mesh-friendly.

Presentation Zen Design: Simple Design Principles and Techniques to Enhance Your Presentations by Garr Reynolds

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Albert Einstein, barriers to entry, business intelligence, business process, cloud computing, Everything should be made as simple as possible, Hans Rosling, Richard Feynman, Richard Feynman, Silicon Valley, women in the workforce, Yogi Berra

Sequence The slide/topic sequence for a fundraising pitch is pretty straightforward, and should only be deviated from after careful consideration. It should look like this: Company Logo [during the opening] Business Overview [the context setter] Management Team Market/Pain Points Product [including photos or screen shots] Business Model Customers [current and projected] Strategic Relationships, If Any Competition Barriers to Entry Financial Overview Capital, Valuation, and Use of Proceeds Review (Logo/Image) Validators Throughout the presentation, subject material should be liberally surrounded by “validators” that lend outside credence to the claims the presenter is making. These can range from the rock solid (“IBM, a repeat customer, has already paid us $10 million for our widgets and says we’re the best they’ve ever seen”) to the usual (“Gartner projects a tenfold increase in the buggy whip market over the next five years”), to something as simple as laying out a competitive landscape that includes brand names the audience has heard of (“McDonald’s sells standardized hamburgers around the world; we sell custom burgers in Tokyo”).


pages: 210 words: 42,271

Programming HTML5 Applications by Zachary Kessin

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barriers to entry, continuous integration, fault tolerance, Firefox, Google Chrome, mandelbrot fractal, QWERTY keyboard, web application, WebSocket

It offered weak performance, was saddled with a quirky syntax that led to mysterious bugs, and suffered from its dependence on the DOM. Browsers kept it locked in a “sandbox,” easing users’ security concerns but making it very difficult for developers to provide features that seemed trivial in more traditional desktop application development. Scripting culture created its own problems. Although providing a very low barrier to entry is a good thing, it does come with costs. One of those costs is that such a language often allows inexperienced programmers to do some very ill-advised things. Beginning programmers could easily find JavaScript examples on the Web, cut and paste them, change a few things, and have something that mostly worked. Unfortunately, maintaining such code becomes more and more difficult over time. With the Ajax revival, developers took a new look at JavaScript.


pages: 186 words: 49,251

The Automatic Customer: Creating a Subscription Business in Any Industry by John Warrillow

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Airbnb, airport security, Amazon Web Services, asset allocation, barriers to entry, call centre, cloud computing, commoditize, David Heinemeier Hansson, discounted cash flows, high net worth, Jeff Bezos, Network effects, passive income, rolodex, sharing economy, side project, Silicon Valley, Silicon Valley startup, software as a service, statistical model, Steve Jobs, Stewart Brand, subscription business, telemarketer, time value of money, zero-sum game, Zipcar

Polish sells prospective members using reams of what he calls “social proof,” like interviews with happy and successful members describing what they get out of the network and pictures of Polish with entrepreneurs like Richard Branson and Bill Gates. Polish isn’t shy about his value proposition. “This is the group of people you would want access to in your ‘dream rolodex,’” he says. Polish is careful to cultivate an air of exclusivity around his subscription. That exclusivity is what makes this private club model so appealing. As he puts it, “When there is more demand than supply, everyone wants to buy.” Barriers to Entry One of the things that makes the private club model work is the privacy itself. For some achievement-oriented people, the higher you make the barrier to enter, the more they want to climb over it. Look at TIGER 21, which stands for The Investment Group for Enhanced Results in the 21st Century, the world’s most exclusive investment club. Members pay a $30,000-per-year subscription fee; globally, the group has approximately 200 members who collectively manage roughly $20 billion in assets.


pages: 207 words: 63,071

My Start-Up Life: What A by Ben Casnocha, Marc Benioff

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affirmative action, Albert Einstein, barriers to entry, Bonfire of the Vanities, business process, call centre, creative destruction, David Brooks, don't be evil, fear of failure, hiring and firing, index fund, informal economy, Jeff Bezos, Lao Tzu, Menlo Park, Paul Graham, place-making, Ralph Waldo Emerson, Sand Hill Road, side project, Silicon Valley, Steve Jobs, Steven Pinker, technology bubble, traffic fines

“Some day, every city in America will need to have a system like this to track their communications. Yellow pads can only last for so long,” I told Dave Richmond during the interview process in 2003. It was now 2005 and that day had not yet come. Most cities were still making do with poorer alternatives. For the cities who were purchasing software like ours, there was still enough employee skepticism to make implementations lengthy and costly. There were also few barriers to entry in the market, allowing several new boutique firms to nab clients that should have been Comcate’s. When the product is a nice-to-have, the sales don’t go fast enough. Period. We conducted a variety of “tests” to see if we could bust through these challenges and shorten the sales cycle: we hired a retired city councilperson in West Virginia to try to sell the product as a reseller, we formed partnerships with other e-government providers, 154 MY START-UP LIFE we attended different kinds of trade shows, and the like.


pages: 184 words: 53,625

Future Perfect: The Case for Progress in a Networked Age by Steven Johnson

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Airbus A320, airport security, algorithmic trading, banking crisis, barriers to entry, Bernie Sanders, call centre, Captain Sullenberger Hudson, Cass Sunstein, cognitive dissonance, credit crunch, crowdsourcing, dark matter, Dava Sobel, David Brooks, Donald Davies, future of journalism, hive mind, Howard Rheingold, HyperCard, Jane Jacobs, John Gruber, John Harrison: Longitude, Kevin Kelly, Kickstarter, lone genius, Mark Zuckerberg, mega-rich, meta analysis, meta-analysis, Naomi Klein, Nate Silver, Occupy movement, packet switching, peer-to-peer, Peter Thiel, planetary scale, pre–internet, RAND corporation, risk tolerance, shareholder value, Silicon Valley, Silicon Valley startup, social graph, Steve Jobs, Steven Pinker, Stewart Brand, The Death and Life of Great American Cities, Tim Cook: Apple, urban planning, US Airways Flight 1549, WikiLeaks, William Langewiesche, working poor, X Prize, your tax dollars at work

The Internet “wants” both the Wall Street tycoons and the popular insurrection at its feet. Can that strange, contradictory cocktail drive progress on its own? Perhaps—for the simple reason that it democratizes the control of information. When information is expensive and scarce, powerful or wealthy individuals or groups have a disproportionate impact on how that information circulates. But as it gets cheaper and more abundant, the barriers to entry are lowered. This is hardly a new observation, but everything that has happened over the last twenty years has confirmed the basic insight. That democratization has not always led to positive outcomes—think of those spam artists—but there is no contesting the tremendous, orders-of-magnitude increase in the number of people creating and sharing, thanks to the mass adoption of the Internet. The peer progressive’s faith in the positive effects of the Internet rests on this democratic principle: When you give people more control over the flow of information and decision making in their communities, their social health improves—incrementally, in fits and starts, but also inexorably.


pages: 209 words: 63,649

The Purpose Economy: How Your Desire for Impact, Personal Growth and Community Is Changing the World by Aaron Hurst

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3D printing, Airbnb, Atul Gawande, barriers to entry, big-box store, business process, call centre, carbon footprint, citizen journalism, commoditize, corporate social responsibility, crowdsourcing, disintermediation, Elon Musk, Firefox, glass ceiling, greed is good, housing crisis, informal economy, Jane Jacobs, jimmy wales, Khan Academy, Kickstarter, Lean Startup, means of production, new economy, pattern recognition, Peter Singer: altruism, Peter Thiel, QR code, Ray Oldenburg, remote working, Richard Feynman, Ronald Reagan, selection bias, sharing economy, Silicon Valley, Silicon Valley startup, Steve Jobs, TaskRabbit, Tony Hsieh, too big to fail, underbanked, women in the workforce, young professional, Zipcar

She longed to share her life with them but knew it was unlikely unless she created the opportunity for it to happen. Though she knew very little about farming or winemaking, Kristine decided to buy a vineyard. Unlike Warren Brown and his connection to the craft of baking, Kristine’s dream was not to make wine, but rather to create a business that would bring her family together and build a community. The wine business had a relatively low barrier to entry and strong community of mentorship in winemaking—you looked to your neighbors for help. Her hope was that it would be a way for to finally bring her family together in one place, all working on the vineyard. It could be a business that was focused on community and relationships. Remarkably, her field of dreams worked. Kristine built the vineyard around her family, creating a ranch that allowed her to work with her kids by her side.


pages: 218 words: 44,364

The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations by Ori Brafman, Rod A. Beckstrom

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Atahualpa, barriers to entry, Burning Man, creative destruction, disintermediation, experimental economics, Firefox, Francisco Pizarro, jimmy wales, Kibera, Lao Tzu, Network effects, peer-to-peer, pez dispenser, shareholder value, Silicon Valley, Skype, The Wisdom of Crowds, union organizing

They had to maintain all of the costly infrastructure associated with handling a call—everything from phone cables to operator facilities. Skype bore none of these costs. Skype capitalized on new technological advances to offer a previously monopolized privilege for free. This spells bad news for the traditional phone companies. It requires only a small amount of software to create a desktop system that works like Skype. The barrier to entry for becoming a long-distance provider, once huge and insurmountable, is quickly disappearing. Anyone with a few million dollars to invest can build a Skype-equivalent. Thus, although Skype may or may not thrive in the long run, it has opened a Pandora's box. How have the long-distance companies reacted? Taking a cue from the record labels, the big players began consolidating. Only a couple of months after we talked to David Dorman, SBC acquired AT&T.


pages: 172 words: 46,104

Television Is the New Television: The Unexpected Triumph of Old Media in the Digital Age by Michael Wolff

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activist fund / activist shareholder / activist investor, barriers to entry, commoditize, creative destruction, disintermediation, hiring and firing, Joseph Schumpeter, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Silicon Valley, Steve Jobs, telemarketer, the medium is the message, zero-sum game

Google offered the biggest such network (DoubleClick was arguably the first Web-wide ad server—and purchased by Google), but there were myriad others, specialized to greater or lesser degrees, each with “inventory” available through the almost unlimited number of Web sites looking to make additional or marginal income from advertising sales. It was a curious devil’s bargain. In the past, the barrier to entry in the media business was that you not only had to have an audience but you had to have the wherewithal (a sales force) and the credibility (a brand) to sell that audience. Now, you didn’t. Any network would take any amount of inventory you could give it—albeit for pennies on the traditional media dollar. Still, this revenue opportunity, as discounted as it might be, also fueled the ever-marching increase in inventory, further lowering prices.


pages: 170 words: 51,205

Information Doesn't Want to Be Free: Laws for the Internet Age by Cory Doctorow, Amanda Palmer, Neil Gaiman

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Airbnb, barriers to entry, Brewster Kahle, cloud computing, Dean Kamen, Edward Snowden, game design, Internet Archive, John von Neumann, Kickstarter, optical character recognition, Plutocrats, plutocrats, pre–internet, profit maximization, recommendation engine, rent-seeking, Saturday Night Live, Skype, Steve Jobs, Steve Wozniak, Stewart Brand, transfer pricing, Whole Earth Catalog, winner-take-all economy

It’s not always easy to keep physical stuff from being taken without payment—a cat burglar may be waiting to steal your painting out of your studio right now!—but it’s infinitely easier than keeping people from making digital copies and distributing them without your permission. You’re probably familiar with this business model. It’s an oldie, but a goodie. 2. YOU CAN SELL ADS Before the net, getting an advertiser was hard, but the high barrier to entry kept the prices charged to advertisers high. So a newspaper, if successful, could make a lot of money from the space it gave over to ads. Today, newspapers—and other traditional media—make a lot less that way. But that’s not because the process of finding advertisements to run against your content has gotten harder. The Internet has made it easier than ever to get money for displaying ads around your stuff.


pages: 226 words: 59,080