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The Myth of the Objective

opowell.com

51–60 of 65 posts

Re: The Myth of the Objective

#51
post #38

Earlier quoted context omitted.

> not to mention there's a finite supply of money, it's literally impossible for everyone to be a millionaire (well, you could inflate the currency to the point where a million dollars is nearly worthless, but that's just playing semantic games). Most people who are millionaires don't get there by holding a million dollars in currency, they get there by holding assets worth a million dollars. This is not zero sum - a…

It isn't a question of actual dollars in circulation, you can always print more after all, it's a question of total economic value. All goods in circulation in the U.S. have a finite value, and it definitely is a zero sum game. You can add more goods and therefore value, but that can only happen at a certain rate (this would be tied into population growth, employment rate, and profit margins among other things). Ther…

If economic value were zero sum, then economies would never grow.

>All goods in circulation in the U.S. have a finite value, and it definitely is a zero sum game.

Except I can create new goods, possibly for free (e.g. writing software, growing crops, mining materials) and directly increase the value of the economy. Contrary to zero sum.

>You can add more goods and therefore value, but that can only happen at a certain rate

Unless you want to try to argue that the rate is so low that the economy is *effectively zero sum in the short term, you've just contradicted yourself. If you can add value to the economy, it is fundamentally not zero sum.

You seem to be conflating the finiteness of wealth and value with the inability to create new wealth or value.

Now, that aside, one could argue that currency exchange itself is zero sum on short timeframes when new money is not printed, but market forces dynamically assign value to currency, such that the economy may still grow with a finite supply of money. Furthermore, I'd like to point out that generally when one purchases goods or services, even in the short term the transaction is unlikely to be zero sum, because goods and services can be used immediately to generate more wealth, and therefore are arguably worth more following the exchange.

Re: The Myth of the Objective

#52

Earlier quoted context omitted.

pg (and many, many other entrepreneurs and investors) disagree vehemently, positing that startups are about wealth _creation_. if wealth isn't created, how has humanity's global standard of living so radically improved?

Some startups will create extra wealth, some will destroy wealth some will redistribute it. Imagine I create a new shoe factory right next door to an existing shoe factory. After 10 years we find... 1) I failed, I lost all the investors money and had to close down. I destroyed the investors wealth. 2) I win, the next door factory has closed down and now I have all of their business. But I have exactly the same costs,…

In the scenario where a startup destroys wealth, what they're really doing is redistributing it. It's not like they take the investors money, cash the cheques, then burn the cash.

Isn't there also at least a fourth and firth scenario, one where the new shoe factory wins but has larger costs than the old one (better marketing but worse cost control), and another scenario where both shoe factories thrive? What about one where they merge, or a holding company buys both and operates them both to produce different lines.

Re: The Myth of the Objective

#53

Earlier quoted context omitted.

pg (and many, many other entrepreneurs and investors) disagree vehemently, positing that startups are about wealth _creation_. if wealth isn't created, how has humanity's global standard of living so radically improved?

Some startups will create extra wealth, some will destroy wealth some will redistribute it. Imagine I create a new shoe factory right next door to an existing shoe factory. After 10 years we find... 1) I failed, I lost all the investors money and had to close down. I destroyed the investors wealth. 2) I win, the next door factory has closed down and now I have all of their business. But I have exactly the same costs,…

4) You win, The neighboring shop is still there, you have specialized and they have specialized and the available breadth of product in your category (shoes) has created consumer choice to capture a larger share of wallet.

Re: The Myth of the Objective

#54

One of the father's of quality, W. Edwards Deming came out very strong against Management by Objective, even though he was very statistically inclined. In his 14 points [0] he mentions Eliminate numerical quotas for the workforce and numerical goals for management. . His idea is you should focus on the journey (always improve) rather than artificial endpoints. It's a profound idea, and one I've sometimes struggled to…

Profound indeed, and very similar in principle to the Toyota Production System / Lean Manufacturing.

It’s too bad these methodologies aren’t more prevalent in corporate culture. Imperative Command & Control methods always seems to dominate.

Re: The Myth of the Objective

#56
post #53

Earlier quoted context omitted.

Some startups will create extra wealth, some will destroy wealth some will redistribute it. Imagine I create a new shoe factory right next door to an existing shoe factory. After 10 years we find... 1) I failed, I lost all the investors money and had to close down. I destroyed the investors wealth. 2) I win, the next door factory has closed down and now I have all of their business. But I have exactly the same costs,…

4) You win, The neighboring shop is still there, you have specialized and they have specialized and the available breadth of product in your category (shoes) has created consumer choice to capture a larger share of wallet.

That also implies that demand for other products has fallen, so that's just wealth redistribution (because you're taking a larger share of their wallet).

Re: The Myth of the Objective

#57
post #51
post #38

Earlier quoted context omitted.

It isn't a question of actual dollars in circulation, you can always print more after all, it's a question of total economic value. All goods in circulation in the U.S. have a finite value, and it definitely is a zero sum game. You can add more goods and therefore value, but that can only happen at a certain rate (this would be tied into population growth, employment rate, and profit margins among other things). Ther…

If economic value were zero sum, then economies would never grow. >All goods in circulation in the U.S. have a finite value, and it definitely is a zero sum game. Except I can create new goods, possibly for free (e.g. writing software, growing crops, mining materials) and directly increase the value of the economy. Contrary to zero sum. >You can add more goods and therefore value, but that can only happen at a certai…

More or less your first point, the rate of growth is so low, that over short term it's effectively zero sum.

Something else to consider is that in your example of "for free" wealth creation you're not actually getting any of that for free, that's a form of wealth transformation or transfer. Let me elaborate on that point using each of your examples. I'll start with mining as that's the simplest, in that case you're taking a natural resource (which is finite) and extracting it and refining it. You're having to pay your workers (and/or buy and maintain machines) in order to do so, so in part your redistributing the companies wealth to the workers and service providers your company does business with. In exchange you receive raw and/or processed minerals/metals. That might seem like wealth creation but it's really transformation, you've reduced the value of the land you extracted the material from and converted it into a transportable form. The value of that material might seem to be more, but that's only because you've invested value in extracting it, in other words you're passing on your cost of doing business. You haven't added value, the value was already there, you've simply converted it and invested some of your companies value into it, so when you sell it you're simply converting one form of wealth into another, you're converting the wealth of that processed material into cash wealth.

The situation with growing crops is similar, although part of what is being invested there is time. You might think, "well, time is infinite, there's always more time", but each persons time is finite and it has value, even if only to that person (opportunity cost), so once again you're doing a wealth transformation, you're transforming those workers time into money, and ground, seed, fertilizer, water, and sun into crops. When you sell those crops you're once again recouping your cost of doing business. Wealth hasn't been created from nothing, it was transferred and concentrated from a variety of sources. You might think, "well, what about the workers time, that's new wealth", only it isn't, there was a cost involved in those workers upbringing and living, so that's once again just a form of wealth transfer and transformation. Truly the only free wealth in the entire thing is the sun, although even that isn't infinite, even if it is free from the perspective of anyone on Earth (it might be more accurate to say it's wasted/destroyed if you don't use it). Ultimately there is no free lunch, entropy always wins.

Software is the most complicated one, as there's zero unit costs associated with it, but substantial development costs. Once again though, you're looking at wealth transformation/transfer. In the case of software you're transferring/transforming the developers, QA, and other workers personal knowledge and time into software. Similar to the workers in the previous example they've invested time and money into improving their knowledge and living, so you're really paying them for them to recoup their losses (wealth transfer) and then when you sell the software you're simply passing those expenses on to your customers.

Ultimately it's all about wealth transformation and transfer. There is finite natural wealth, it existed before humanity, and if humans vanished tomorrow it would continue to exist. Economies are mostly about taking the existing wealth and distributing, concentrating, and transforming it into forms that are more convenient for people. When you get down to it, the unit cost of a good is really it's intrinsic value, it's a form of wealth transformation. Profit margins on the other hand, are wealth transfer, you're transferring wealth from the purchaser to yourself. No value is actually being created. New wealth only comes from discovering new resources. Want to create wealth now? Do like Elon Musk and others are doing and take a look at asteroid mining.

Re: The Myth of the Objective

#58

Earlier quoted context omitted.

Some startups will create extra wealth, some will destroy wealth some will redistribute it. Imagine I create a new shoe factory right next door to an existing shoe factory. After 10 years we find... 1) I failed, I lost all the investors money and had to close down. I destroyed the investors wealth. 2) I win, the next door factory has closed down and now I have all of their business. But I have exactly the same costs,…

In the scenario where a startup destroys wealth, what they're really doing is redistributing it. It's not like they take the investors money, cash the cheques, then burn the cash. Isn't there also at least a fourth and firth scenario, one where the new shoe factory wins but has larger costs than the old one (better marketing but worse cost control), and another scenario where both shoe factories thrive? What about on…

In some cases they actually do destroy wealth in the process of redistributing it.

For any startup that subsidizes its products below its costs it is possible for it to destroy value. If they produce something for $10 dollars then sell it for $8 to someone who derives $9 of value out of it, then they have transferred $1 of wealth to their customer and have destroyed $1 of wealth.

Re: The Myth of the Objective

#59
post #54

One of the father's of quality, W. Edwards Deming came out very strong against Management by Objective, even though he was very statistically inclined. In his 14 points [0] he mentions Eliminate numerical quotas for the workforce and numerical goals for management. . His idea is you should focus on the journey (always improve) rather than artificial endpoints. It's a profound idea, and one I've sometimes struggled to…

Profound indeed, and very similar in principle to the Toyota Production System / Lean Manufacturing. It’s too bad these methodologies aren’t more prevalent in corporate culture. Imperative Command & Control methods always seems to dominate.

Similar perhaps because he inspired them. :-)

Re: The Myth of the Objective

#60
post #48

Earlier quoted context omitted.

So how do you know whether you're always improving if you don't measure your performance at consistent points along the way? Just ask everyone if it felt like you improved, followed by a group hug and mutual back-patting?

I dont think he said to eliminate the measurements, he said to eliminate the quotas.

Exactly.

Going by his theory... If you say, "I am paying you to produce 1,000 cars per month" then that's what you'll get. If instead you rely on intrinsic motivation, and improve the system, you will get more than 1,000, and they'll be higher quality.

This doesn't work everywhere. (Certainly not with Sales commission!) But it is worth thinking through the logical implications of it.

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