Longreads + Open Thread

Longreads

• Patrick McKenzie of Bits About Money: The optimal amount of fraud is non-zero. The best part of this is the ongoing thread of considering the tradeoff between fraud risk and lost sales. You can always prevent fraud by not having a business, or, barring that, by never generating revenue. Usually it's not the best call. But within revenue-generating businesses, there's a wide range of payoffs. One interesting lemma from this: since high-margin businesses have high tolerance for fraud, and since they sometimes control parts of the customer experience for lower-margin businesses, there's a temporary conflict of interest. (In the long run, it goes away, because the companies that ignore their customers' fraud risk lose those customers, either to competitors or because the customers go out of business.)
• Katie Notopoulos in Buzzfeed with the wonderful story of musicians who, deliberately or accidentally, rake in royalties from children yelling "poop" at Alexa. It's a good small-scale illustration of how media change when distribution changes.
• Samir Unni in New Science has a great history of the Rockefeller Foundation's Natural Sciences Division, which had an impressive track record in funding important research: "In the dozen years after the discovery of DNA’s structure, in 1953, all but one of the 18 scientists who received a Nobel Prize for genetic molecular biology research had been supported by Weaver’s team at the Rockefeller Foundation." This was partly a function of the level on which they operated: they selected promising fields first, and within those chose good teams over good projects—a decent way to outsource the exact projects to experts while still constraining the search process.
• Ash Milton in Palladium argues that the French Revolution created the modern state, telling this through the story of priest-turned-revolutionary Henri Gregoire. It's partly a story of new institutions, partly a story of standardizing language and norms to make the country governable. Language in particular is a big deal; multilingual empires run into all sorts of problems; consistent communications set higher limits to scaling.
• Luke Burgis in Wired writes about Athens, Jerusalem, and Silicon Valley, or the general question of how we struggle to integrate different values systems when they each make important claims but have fundamental incompatibilities. A very good meditation.

Books

• The Fall of the Celtic Tiger: Ireland and the Euro Debt Crisis: I've written a few times before about the Asian financial crisis of 1997-98, and Ireland's economy through 2008 was an even more extreme version of the same story. Initially, Ireland grew through value-added exports (in part by having an English-speaking population and low corporate taxes, and in part by catching up after decades of poverty). Starting around 2000, the model flipped to being more dependent on property development, which started to price out more productive sectors. This ended very badly. It's a fundamentally hard problem to run a small, open economy without going through periodic speculative bubbles.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• Modern states tend to impose some linguistic uniformity; it's hard to manage with dozens of mutually-unintelligible languages, and whatever language becomes the default for the biggest decisions tends to be the one everyone learns. What are some interesting examples of companies that use specialized internal vocabulary to make things more manageable?

Reader Feedback

Max Conradt has thoughts on how talent has become a more tradable resource, and what this means in the long term about how companies will determine their location footprint:

I imagine the optimal solution is something like having a company’s top 2-3 layers of management in the same headquarters and individual contributors in an area within 2 hours of certain clusters. For example, some of the most talented software engineers in the world live in Western European countries and would never move to San Francisco, so if you need to hire from the top 1% or in a specialized area like database engineering, you need to employ people in the Paris/Amsterdam/Berlin time zone, and they would rarely have synchronous interactions with your people in the Bay Area.

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