The issue in IT doesn't arise around the Coke formula on Dropbox, unless Coke could somehow sue Dropbox for damages. The issue arises around large quantities of sensitive information. What if those Red Box video rental machines could be stolen to get the credit card data inside (they can't, the data aren't in there).
The issue hits hard in medical record IT. Losing control of 500 or more folks' medical records gets your name in lights here, and you're required to try to notify everybody who might be affected.
http://www.hhs.gov/ocr/privacy/hipaa/administrative/breachno...
What kind of insurance could possibly cover a startup against the reputation cost of this? Not insurance that any startup could afford. Plus, the liabilities for misuse of the leaked data (identity theft, employment blacklisting of sick people, you name it) are unlimited.
So, a business that holds medical records for people is inherently a Ferrari car wash, unless the entrepreneurs can somehow persuade their hospital customers to bear the reputation risk. That's very hard.
Cool! The wall around another walled garden starts to crumble! How many years before the carriers themselves start using open source code in their infrastructure because it's more reliable and robust?
This particular garden has legal walls: 4G radio frequencies are licensed. Transmitting on them without a license can (depending on circumstances) result in jail time.
No, sir, it's not inappropriate. The cost of health care is a major cost to most businesses. Startups are lucky that the investors bear the cost; but it shows up as a major line item, second only to salaries, in the typical startup's pro forma expense budget. You could probably stretch your first round 15% further timewise if you could get employees without buying them health insurance.
Longevity in China is increasing rapidly and the one-child policy results in a grandchild potentially having four grandparents to look after. The “four grandparent policy” means the elderly cannot expect to be looked after in old age. Four grandparents, one grand-kid makes abandoning the old-folk looks easy and near certain.
Nor can the elderly rely on a welfare state to look after them. There is no welfare state.
So the Chinese save. Unless they save they will starve in old age. This has driven savings levels sometimes north of fifty percent of GDP. Asian savings rates have been high through all the key industrializations (Japan, Korea, Singapore etc). However Chinese savings rates are over double other Asian savings rates – this is the highest savings rate in history and the main cause is the one-child policy.
Under present regulations, if two people marry, who are both "only children", then they can have two children. So four grandparents means two grandkids.
The one-child policy is slowly changing into a two-child policy, via the slow rollout of many exemptions. I'm guessing the policy will morph into a complete two-child policy one day (though never completely disbanded because the National Family Control Administration workers will want keep their jobs).
If anything, that piece probably understates the problems mentioned. Though there has been recent moves to provide pension schemes for urban and rural workers, even if the programs are underfunded, it still covers a huge portion of the population, where before it was mostly urban and patch-work & underfunded at that.
You know, people really ought to listen to what the early capitalists and anti-capitalists said about overproduction more often. It's the never-solved problem of capitalism.
EDIT: Thanks downvoters. I hope you enjoy your ever-falling profitability, your unsold and unsaleable goods, your deflating currency, your rising indebtedness as the real value of nominally-denominated debts increases, your unemployment crises.... All of it. Keep downmodding; share and enjoy!
Your post would be slightly more illuminating if you made more specific reference to whom you're referring to specifically, and where they commented on overproduction. Perhaps also a bit of the substance of what was said.
Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products.
Sometime clarity of exposition beats stridency for illumination.
Until the industrial age was moderately advanced, overproduction wasn't particularly much a problem -- most societies alternated between sufficiency and (fairly often, if not more often) insufficiency, especially in food, but also other goods and products.
But we're not talking about the early industrial age. We're talking about today.
I thought the article was actually lacking in that it didn't mention overproduction. This is the classic bane of industrialized economies: unsold inventory, rising unemployment, falling or negative inflation, falling asset yields, etc. The article describes China gaining the symptoms of overproduction.
And, as many writers both pro- and anti-capitalist have noted, it tends to require a solution extrinsic to the market (think of Paul Krugman's "babysitting co-op parable"). To make things profitable again, someone or something has to purchase the excess inventory at some market-clearing price. Nominal private debts also need to be cleared from the market, allowing general price levels to adjust.
Now here's the tough bit: overproduction is not the same as recession. Recession comes from malinvestment, and once capital is reallocated to genuinely productive uses it goes away. Some stimulus, especially infrastructure investment, also helps, but recessions are a natural part of the business cycle that end more or less on their own. Society just has to withstand the economic "bad weather".
Overproduction crises, however, also known as depressions, don't go away on their own. Apparent malinvestment in an overproduction crisis is only a symptom, not a cause.
If I could put forth a hypothesis, the actual cause is that one of the two big pillars of production has gotten way out of price-balance with the other. Those are labor and capital. In a healthy economy, labor is costly and productive, encouraging capital investment to get the most out of limited human labor-power. Capital, in turn, is well-priced for wide distribution and developed, increasing general productivity.
Knock out either of these, and you've got problems. If labor is too cheap compared to capital (ie: right now and the Great Depression), then you'll get overproduction: aggregate demand from labor wages won't exist to purchase the products of capital, and they rot. You also get low productivity growth, because it's that much cheaper to just employ humans at menial tasks (see: the service industry) rather than to automate.
(As an aside, computing is currently one of the few healthy fields: labor is expensive and capital (ie: FLOPs as well as investment dollars) is cheap, encouraging massive capital investments and productivity growth.)
If you knock out capital by making it too expensive or unavailable when labor is strong, you get stagflation. The capital-owning class and the working class bounce between themselves the price shock in the cost of investment or technological capital. So unemployment gets high (because where's the capital to employ people?) while price levels rise in general (because labor and consumers refuse to "take one for the team").
So to get rid of an overproduction crisis, what we actually need to do is increase the cost of labor, which feeds into aggregate demand to purchase down inventory and increase the marginal profitability of capital investments. I'd say the best way to do this is usually by either direct strengthening of workers (ie: allow labor to organize, shorten the work-week, other stuff like that), or by infrastructure investment (which employs laborers as well as yielding positive capital externalities).
Wasn't familiar with Krugman's "babysitting co-op parable". Interesting.
I'm not convinced that depression is strictly an issue of overproduction -- it's more a vapor-lock in which the currency pump between production and consumption seizes up. The Friedman approach is to encourage production, the Keynesian approach is to stimulate demand. Calling insufficient demand the same thing as overproduction doesn't quite seem right to me.
I've got to reflect on your cheap vs. expensive labor comments as well. The immediate problem I see is that expensive labor, in a world in which either capital or labor is free to migrate, results in either in-migration of cheap labor, or capital flight to less expensive markets. Which suggests possibly putting some controls on both, or addressing the labor costs part.
I suspect we're agreeing in at least part on the idea that you've got to have currency flows on both sides of the production/consumption cycle.
I'd also argue that right now both capital (in the form of interest rates) and labor (in the form of wages) are relatively inexpensive in the US. The dual problems are of stimulating demand, and on generating a real return on investment (equity or debt).
Overproduction is an issue insofar as (mostly) consumer goods are how we manage to generate fiscal flows. People buy goods for money. However if they either don't buy goods, or prices are too low to generate sufficient flows, you end up in a cycle where you're cranking out crap goods which people don't particularly need to consume but are strongly encouraged (by advertising, moral suasion, societal pressure) to do so: the "consumer economy".
We worked our way out of this the last time (Great Depression) with WWII.
I suspect we're agreeing in at least part on the idea that you've got to have currency flows on both sides of the production/consumption cycle.
Definitely. I can say that at least right now, one of the major problems is that labor is "penned in" by national borders, but capital isn't. The labor side of things has gotten too weakened because capital can arbitrage itself to seek optimum pricing, and labor can't.
So yes, to a certain degree I'm in favor of capital and/or trade controls simply because I think a real one-world open-borders policy cannot possibly work right now, and free trade/capital flow without free movement of labor is just an arbitrage opportunity waiting for eager capitalists.
I'm not convinced that depression is strictly an issue of overproduction -- it's more a vapor-lock in which the currency pump between production and consumption seizes up.
True enough. A "real depression" also seems to have another major component: a weight of private debt that the nonfinancial economy cannot reasonably carry. This prevents price and currency adjustments from correcting the other imbalances naturally.
When I was a college student, I had my bikes stolen so often that I did two things: First, I started buying hot bikes cheap because, hey, legal bikes were expensive.
Second, I wrapped the frame of one bike in masking tape and smeared grease and paint on it. I kept that one for years; not even the local junkies wanted it. I guess they didn't notice my servicable Campy brakes and shifters, or didn't see the value in them.
I'm not sure the rational-actor theory applies to bike theft.
UNLESS it's the bike dealers behind the theft rings doing it to create demand, and they're just crushing the old stuff. Bwahahahahahaha. There's a batman movie in that villain theory.
Investors annoyed that Zuckerberg's management beat them at their own game! Film at 10!
Bankers didn't have to go out at $38. Investors didn't have to buy at $38. I should think the VCs who sold into the IPO would be happy they got such a premium. The ones who bought into the IPO are probably feeling burned. The insiders who had a lockup are probably feeling burned. That's the way it goes on 21st-century wall street.
Would this business of guessing whether a prospective customer will spend big money be more ethical if it were transparent -- that is, if these escores were visible to the persons being scored?
