From: Billy Brown (bbrown@conemsco.com)
Date: Tue Feb 09 1999 - 05:51:42 MST
Eliezer S. Yudkowsky wrote:
> Amazon.com, Jerry Kaplan and Bill Gross - in that order - have just
> kicked the support struts out from under the entire U.S. economy..
<snip>
> So. It looks like I may have severely underestimated the transformation
> of the U.S. economy. Not only are most of the major middleman sectors
> going to be eliminated, but whatever's left will be given away for free..
> The question now is: Is this kind of economy stable? How can you sell
> ads when there's nothing left to buy? And how can you sell stock when
> all the companies are operating at a loss?
I think you overestimate what is happening here. Amazon.com has simply
pioneered a new form of borrowing - they are spending equity to build market
share now, but they will have to start making a profit within a few years.
Otherwise investors will decide they aren't such a hot buy after all,
causing both the stock price and the company to crash and burn. Other
companies may emulate them, but they will face the same limitation - stock
prices are ultimately based on expectations of future profitability, after
all.
Jerry Kaplan and Bill Gross seem to be pioneering a new economic niche -
companies that make a profit by rapidly building a high-value customer base,
then selling their information. This is really just a variation on what
newspapers, magazines and television have been doing for decades. First you
figure out a way to attract lots of eyeballs, then you charge advertisers
for the attention.
> I'm not entirely sure, but I think this is a bad thing, mostly because
> when CF and complex barter eliminate the ad market and the equity
> market, that's the whole economy down the toilet. Also, it seems very
> probable that the Free Economy will be unstable - it seems far more
> grounded in psychology (rather than a deep ontology) than our
> current market..
I can see how successful CF could make most advertising useless (although I
would expect press releases, paid product comparisons, and other modest
remnants to survive). However, I don't see how any sort of 'complex barter'
system could even be competitive with a modern financial system.
The problem here is the same as that of translating between a large number
of data formats. Barter is equivalent to directly translating between each
possible pair of formats, which is a O(N^2) problem. Using money is
equivalent to translating between each format and a universal meta-format,
which is only a O(N) problem. Using computers to facilitate more complex
transactions simply amplifies this difference by making N a larger number.
Besides, what possible advantage would there be?
> On the whole, the Free Economy may be more stable than the current one.
> High productivity does not destabilize the Free Economy. Whereas with
> this economy, once 10 million people can do the work of 100, the other
> 90 million starve; only productivity-reducing innovations such as
> lawyers, paperwork, the stock market, and Welfare have kept
> us afloat so far.
How does high productivity destabilize capitalism? Very rapid change can do
it, by requiring people to shift jobs faster than they can re-train
themselves. High productivity just encourages people to do something about
desires they never had time to bother with before. Maybe there would be a
problem if we were so rich that everyone could live like a rock star without
bothering to work, but that's still a good way down the road.
IMO, the real problem will come when automation becomes good enough, and
cheap and flexible enough, that it is easier to automate a new job than to
hire a human to do it. Then the connection between economic growth and
human employment will be severed, and the system is likely to start
producing unexpected results.
Billy Brown, MCSE+I
bbrown@conemsco.com
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