I find this plausible, but I have a few reservations. I note the NYT is a private sector institution. If the brain-drain hypothesis is true, how do we explain the decay of private sector institutions that is also happening? Consider the case of General Electric, or the decay of other industrial giants like General Motors, or IBM, or AT&T, or American Steel. They were all well within the time period set for the trend; the damage mostly happened 60s-80s for the older examples, but General Electric is in its death throes now.
We see the average age of private sector institutions shrinking, as measured by the average age of companies on the S&P500; the last projection I read said it would shrink to 12 years by 2027.
Why do the younger stable private sector institutions all come from computing, like Apple and Microsoft? Why doesn’t the brain drain seem to be benefiting the other sectors as much?
I can imagine an answer that extends the brain-drain argument to different industries in the private sector, where computing and finance pulled the same maneuver on manufacturing that the private sector as a whole was pulling on the government sector. Then some other sub-sectors were able to hold their own, like oil and gas or agriculture. The trouble I have with this is I can’t see why this would be; how do whole chunks of the private sector seem to get hit with the same mechanism, when the institutions in question had already been in the habit of paying top dollar for smart people?
Consider this analogy: Professional basketball teams are much better than hobby league teams because they have a much stronger talent pool and incentive feedback loop. Yet individual teams rise and fall within their league, because it’s a competitive ecosystem. Business is currently the pro league for brainpower, but individual companies still rise and fall within that league.
Business is also a faster-changing game than basketball because consumer preferences, supplier offerings and technological progress are all moving targets. So a company full of really smart people will still often find itself much less competitive than it used to be.
Companies like Yahoo that fall too far stop being able to generate large profits and attract top talent, and eventually go extinct. The analogy with sports teams breaks here because many sports leagues give their worst teams some advantages to rebuild themselves, while failing companies just go out of business.
GM, IBM and AT&T are teams who have fallen in the league rankings, but if they’re still operating in the market then they’re still effectively competing for talent and their higher-paid positions still probably have correspondingly higher average IQ.
The NYT is a case where the competitive ecosystem shifted drastically, and the business successfully continued optimizing for profit within the new ecosystem. Before the internet, when information was a scarce resource, the NYT’s value prop was information creation and distribution, with a broad audience, and paid for by broad-targeted ads. Now their value prop is more focused on advocacy of the viewpoints of its narrower subscriber base, paid for by that subscriber base. The governing board of the NYT may care about neutral news reporting, but they also care a lot about profit, so they consider the NYT’s changes to be good tradeoffs.
If you think of the NYT like a public service providing neutral reporting, then yes that service has been crumbling, and no company will replace it doing that same service (the way IBM’s services are getting replaced by superior alternatives) because it wasn’t designed with the right incentive feedback loops for providing neutral reporting, it was designed as a profit-maximizing company, and profit only temporarily coincided with providing neutral reporting.
I find this plausible, but I have a few reservations. I note the NYT is a private sector institution. If the brain-drain hypothesis is true, how do we explain the decay of private sector institutions that is also happening? Consider the case of General Electric, or the decay of other industrial giants like General Motors, or IBM, or AT&T, or American Steel. They were all well within the time period set for the trend; the damage mostly happened 60s-80s for the older examples, but General Electric is in its death throes now.
We see the average age of private sector institutions shrinking, as measured by the average age of companies on the S&P500; the last projection I read said it would shrink to 12 years by 2027.
Why do the younger stable private sector institutions all come from computing, like Apple and Microsoft? Why doesn’t the brain drain seem to be benefiting the other sectors as much?
I can imagine an answer that extends the brain-drain argument to different industries in the private sector, where computing and finance pulled the same maneuver on manufacturing that the private sector as a whole was pulling on the government sector. Then some other sub-sectors were able to hold their own, like oil and gas or agriculture. The trouble I have with this is I can’t see why this would be; how do whole chunks of the private sector seem to get hit with the same mechanism, when the institutions in question had already been in the habit of paying top dollar for smart people?
Consider this analogy: Professional basketball teams are much better than hobby league teams because they have a much stronger talent pool and incentive feedback loop. Yet individual teams rise and fall within their league, because it’s a competitive ecosystem. Business is currently the pro league for brainpower, but individual companies still rise and fall within that league.
Business is also a faster-changing game than basketball because consumer preferences, supplier offerings and technological progress are all moving targets. So a company full of really smart people will still often find itself much less competitive than it used to be.
Companies like Yahoo that fall too far stop being able to generate large profits and attract top talent, and eventually go extinct. The analogy with sports teams breaks here because many sports leagues give their worst teams some advantages to rebuild themselves, while failing companies just go out of business.
GM, IBM and AT&T are teams who have fallen in the league rankings, but if they’re still operating in the market then they’re still effectively competing for talent and their higher-paid positions still probably have correspondingly higher average IQ.
The NYT is a case where the competitive ecosystem shifted drastically, and the business successfully continued optimizing for profit within the new ecosystem. Before the internet, when information was a scarce resource, the NYT’s value prop was information creation and distribution, with a broad audience, and paid for by broad-targeted ads. Now their value prop is more focused on advocacy of the viewpoints of its narrower subscriber base, paid for by that subscriber base. The governing board of the NYT may care about neutral news reporting, but they also care a lot about profit, so they consider the NYT’s changes to be good tradeoffs.
If you think of the NYT like a public service providing neutral reporting, then yes that service has been crumbling, and no company will replace it doing that same service (the way IBM’s services are getting replaced by superior alternatives) because it wasn’t designed with the right incentive feedback loops for providing neutral reporting, it was designed as a profit-maximizing company, and profit only temporarily coincided with providing neutral reporting.