Longreads + Open Thread

Longreads

• Rohit at Strange Loop Canon asks why there isn't a philosophy of business. Economics and finance come close, since they both help answer the question of why businesses exist and what they're worth what they're worth. There's a sense in which George Soros followed a standard academic path, where he was a philosophy generalist as an undergrad and then spent the remainder of his career studying narrower topics within the same domain. So maybe the real question is: why isn't Philosophy of Business called Philosophy of Business? And the answer is that nobody wants to pay a philosopher that much, so they have to disguise what they're doing by giving it a different job title.

• Christopher Helman at Forbes on a knotty compensation dispute over $200 million in bonuses paid by a privately-held oil company that later regretted them. A common intuition when there's a big windfall at a company is that there will be plenty of money to go around, and everyone will be able to walk away richer than they expected and happy with the outcome. But big one-time gains also turn the iterated game of compensation into a one-shot game; if the money available from taking reputational risk exceeds the likely rewards to having a sterling reputation, misbehavior is inevitable.

• C Trombley One asks what is the point of studying economics? Like a lot of fields, you can go very far in the applied version ("these simple models don't work perfectly, but with a few dozen caveats you can get some solid results") or the more theoretical one ("these models don't work perfectly. But if they did..."). Knowing the boundaries of theory and practice is valuable even if the theory isn't entirely correct.

• R y x, r has a great piece on why A/B testing isn't a panacea. The key point is that if every feature a product adds is A/B tested, then what each test is really doing is testing a combination of features. Users get mad when a feature they're used to goes away1, so A/B tests accumulate noise. Backwards-looking data-driven product changes are a good way to approach a local maximum, but they're not a way to actually get there and certainly not a way to reach the absolute maximum. This piece also makes the great point that "just look at the data" doesn't mean being agnostic about underlying theories; it actually implicitly means that the theory is that whatever is being measured—immediate usage, immediate revenue, etc.—is the highest priority.

• Kevin Xu at Interconnected has a translation of a speech by ByteDance founder Zhang Yiming, delivered in 2021. It includes an amusing aside about his occasional problems staying up too late watching addictive videos on his company's apps. More importantly, it concludes with a meditation on sustainable growth, and whether or not it's essential that the company keep doubling in size every year.

Books

• The Economics of World War II: Six Great Powers in International Comparison: hopefully I read this out of idle academic interest. This book is a look at the macroeconomic data of the UK, US, Germany, Italy, Japan, and USSR during the war. It's an impressive aggregation of data that's full of surprises. The US, for example, remains the best place to be if there's a global conflict: unlike everywhere else, US calorie and protein consumption per capita actually increased during the war, even though 22 million people, or about a third of the US workforce, were either in the military or employed in war-related manufacturing. Other countries had surprises, too: Germany was so aggressive about apprenticeship programs that they had a shortage of unskilled labor during the war, while the USSR had better accounting than most places (including measuring the economic cost of NKVD prison labor and charging its users accordingly).
  
  It's probable that the Second World War represents the peak proportion of economic activity that will ever be used specifically to fight a war: the participants were rich enough that they could have war industries without starving (or, as in the cases of Russia, Germany, and Japan, the state had high tolerance for letting people go hungry), and a big share of the economy was manufacturing that could be repurposed to the military. A modern war between great powers would use more resources in the aggregate, but wouldn't be able to shift as much around, because the services sector can't be as easily repurposed and because army size doesn't scale as much.
• Oil Leaders: Saudi Arabia is 12% of global oil production right now, since the 1960s they've been responsible for 15% of the world’s year-to-year variance in oil production. Since Saudi Arabia's economy is so reliant on oil, and the oil-consuming world is so reliant on them in turn, the country is in a unique position to affect oil's long-term adoption by changing production to affect the price. This book was written by Ibrahim AlMuhanna, who spent four decades working in the Saudi energy bureaucracy. It covers how Saudi Arabia made oil production decisions, and what politics look like for a one-product economy big enough to influence the global supply/demand balance for that product.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• What's the next shoe to drop for crypto? More defaults? Regulations? Everything to zero?

Reader Feedback

Calvin McCarter has a good comment on the unintended consequences of internal training programs:

Although the founders weren't laid off, they founded Health-Ade Kombucha in 2012 while at GSK when it was going through a series of lay-offs. Daina Trout and Vanessa Dew were both in sales at GSK, and in the early 2010s it was struggling to adjust to competition from generics. GSK notoriously mismanaged the process in 2010 by laying off sales reps just days after promising no layoffs at their sales convention: https://www.cbsnews.com/news/glaxosmithkline-layoffs-follow-promise-of-no-cuts-at-national-sales-meeting/

To improve morale and innovation, GSK started a rotational innovation / leadership program that Daina went through. However, after having this inspirational confidence-building experience, she was sent back to her old job in sales. The rotational program and repeated layoffs were both bad for employee morale by bringing "false dawns" followed by disappointment. Having said that, you might say that GSK's choices did in fact build confidence and innovation, but only in ways that didn't benefit GSK itself.

Daine Trout's interview on the How I Built It podcast is great btw: https://www.npr.org/2020/09/25/916944612/health-ade-kombucha-daina-trout

Big companies will sometimes try to create some kind of structure to provide upward mobility to their most promising new recruits. But that either requires the company to be growing enough that there are new responsibilities for rising stars, or to have high turnover in middle management so there's room to promote new people to replace the ones who leave. Neither of those is easy, and companies that aren't growing much but are constantly ranking and yanking can be stressful places to work.

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