That was exactly what the little Zvi voice in the back of my head said. I’m not yet convinced. The “network effects → natural monopoly” argument is a strong one, but it still seems like coordination problems are the main economic bottleneck even when there isn’t value capture involved, especially in smaller-scale situations.
Some examples:
Academics who specialize in bridging between fields or sub-disciplines, e.g. biophysicists, mathematical chemists, synthetic biologists (usually from an engineering background), mathematicians who translate one sub-field’s jargon into another, etc.
Cross-department coordination within companies, e.g. car-ad spreadsheet example. People who work across specialized departments seem to have unusually high value relative to effort exerted.
There’s a book on tackling large coordination problems in government—they call them “wicked” problems. The opening chapter is the only interesting one. It’s written by Mike McConnell, the guy tasked with fixing up US intelligence after 9/11. Various agencies had all the pieces to stop the attacks, but multiple cross-agency coordination failures prevented them from acting in time.
McConnell also tells the story of the Goldwater-Nichols Act. After the invasion of Grenada, the complete coordination failure of the military was apparent. Each half of the island was controlled by a different branch, and in order to talk to each other, officers had to walk to the nearest payphone and get routed through one of the opposite branch offices on the US mainland, because their radios were incompatible. The Goldwater-Nichols Act reorganized things to fix this. It passed despite unanimous opposition by the service chiefs, it worked, and ten years later every single service chief testified before congress that it was the best thing to ever happen to the US military.
In all of these cases, there’s no clear natural monopoly and no obviously outsized value capture relative to value created. Rather, the “potential energy” is created by language barriers, intra-organization political coalitions, information silos, and communities with limited cross-talk.
That’s not to say value capture isn’t relevant to e.g. Google or Facebook. Obviously it is. But Google (and more debatably Facebook) still creates huge amounts of real value, regardless of how much it captures, and it does so with little “effort”—Google’s employee base is tiny relative to value created, and most of those employees don’t even work on search.
There is an argument to be made that I’m really talking about two qualitatively different cases here: coordination problems which involve breaking down cross-silo barriers, and coordination problems which involve building new markets. Maybe both of these are interesting on their own, but generalizing to all coordination problems goes too far? On the other hand, there are outside-view reasons to expect that coordination problems in general should get worse as the world modernizes—see From Personal to Prison Gangs.
That was exactly what the little Zvi voice in the back of my head said. I’m not yet convinced. The “network effects → natural monopoly” argument is a strong one, but it still seems like coordination problems are the main economic bottleneck even when there isn’t value capture involved, especially in smaller-scale situations.
Some examples:
Academics who specialize in bridging between fields or sub-disciplines, e.g. biophysicists, mathematical chemists, synthetic biologists (usually from an engineering background), mathematicians who translate one sub-field’s jargon into another, etc.
Cross-department coordination within companies, e.g. car-ad spreadsheet example. People who work across specialized departments seem to have unusually high value relative to effort exerted.
There’s a book on tackling large coordination problems in government—they call them “wicked” problems. The opening chapter is the only interesting one. It’s written by Mike McConnell, the guy tasked with fixing up US intelligence after 9/11. Various agencies had all the pieces to stop the attacks, but multiple cross-agency coordination failures prevented them from acting in time.
McConnell also tells the story of the Goldwater-Nichols Act. After the invasion of Grenada, the complete coordination failure of the military was apparent. Each half of the island was controlled by a different branch, and in order to talk to each other, officers had to walk to the nearest payphone and get routed through one of the opposite branch offices on the US mainland, because their radios were incompatible. The Goldwater-Nichols Act reorganized things to fix this. It passed despite unanimous opposition by the service chiefs, it worked, and ten years later every single service chief testified before congress that it was the best thing to ever happen to the US military.
In all of these cases, there’s no clear natural monopoly and no obviously outsized value capture relative to value created. Rather, the “potential energy” is created by language barriers, intra-organization political coalitions, information silos, and communities with limited cross-talk.
That’s not to say value capture isn’t relevant to e.g. Google or Facebook. Obviously it is. But Google (and more debatably Facebook) still creates huge amounts of real value, regardless of how much it captures, and it does so with little “effort”—Google’s employee base is tiny relative to value created, and most of those employees don’t even work on search.
There is an argument to be made that I’m really talking about two qualitatively different cases here: coordination problems which involve breaking down cross-silo barriers, and coordination problems which involve building new markets. Maybe both of these are interesting on their own, but generalizing to all coordination problems goes too far? On the other hand, there are outside-view reasons to expect that coordination problems in general should get worse as the world modernizes—see From Personal to Prison Gangs.