Monday, May 16, 2011


A quick thought, which I invite rebuke on: all investment risks are equal to the average investor.  The market has already surveyed all available information and calculated the value of that risk.  It might be a long-term risk, and priced accordingly, or a short-term risk, and priced accordingly, but the prices, and the risks, are fundamentally equal.

A key point on this is that the average investor is investor who would engage in the sum of the least and most skilled investments in the market - which means that the average investor assessed by investment is in fact an exceptionally -good- investor, as good investors make considerably more investments than poor ones (owing to that they don't lose all their investment on the first go).

If this idea holds true, investment is a bad idea for anybody who isn't exceptionally skilled at investing to begin with.


Capitalism rewards the most efficient competitor.  Efficiency can loosely be treated as having the highest return for the investment (where maintenance costs, salaries, capital goods, and anything else necessary to operations are part of investment).

Our culture has long since stopped respecting that efficiency; we find a company that takes in 100 million a year while spending 99 million a year more impressive than a company which takes in 10 million a year while spending 9 of it; one has a return on investment a magnitude greater than the other, and it isn't the one we tend to focus on.  Billionaires are frequently better off investing their money in smaller start-ups than in expanding existing franchises; franchises are great and have their place, but they are low risk and low return; a place for businessmen looking for businesses to administrate, but not the place for skilled investors.

Sometimes size can create economy of scale - and this is a good thing.  This is the second concept of efficiency; size can bring about certain advantages.  Size -also- comes with disadvantages, however.  The bureaucracy necessary to accommodate that size decreases efficiency.  Perhaps more importantly, a large organization is less flexible; other, more capable authors on the subject discuss concepts such as corporate culture in describing this flexibility, but the end result is that, from a strict economic perspective, size has little natural sum advantage beyond inertial moment; the biggest companies still eventually die.

The third concept relating to efficiency is that of law - and this is where small companies get crushed.  Wal-Mart has real economy of scale here; it has lawyers on payroll and retainer to stay abreast of legal matters, and modifying its entry to accommodate wheelchairs or whathaveyou is a small expense in comparison to its income.  The Mom and Pop hardware store with an annual revenue of 200,000 and an annual profit of 60,000 can't afford lawyers to make sure they're staying in compliance, and probably can't afford to renovate their entryways to come into compliance anyways.

Wow.  An English essay.  Three supporting paragraphs.  God I've spent too long being "educated."  And that third really was an extension of the second, a definite sign of "education."

My point here comes to this: Capitalism itself carries no particular penalty OR benefit for being a large corporation.  Large corporations are large, a la evolucion, by virtue of having survived the worst economies could throw at them, and still being capable of expansion; they are the best of the best at what they do.  Being large gives them reserves when times get tough, true - but they can still die the same death as any small company.

Media "Balance"

Following up on the first idea expressed in this post; the problematic implementation of media balance.

The not-so-pithy summary: The same phenomenon which results in feminists accusing the media of fostering a rape culture also results in a large part of the US right of believing that the media, and hence the Left, fosters Islamic terrorism.  It results in white people accusing the media of hiding black-on-white crimes.  It results in the people of both sides of the political schism of believing the media to be unfairly protecting the other side.

The modern media's idea of balance is, regardless of actual merit, to -present- some kind of merit to both sides. The Associated Press exemplify this concept most strongly, which is a large part of where their decline has come from; a news story about the US bombing its enemies for being bastards cannot be "balanced" without coverage of a stray bomb destroying the homes of civilians in the area.

Identifying something close to the truth is hard, so fairness is substituted in for good judgment; there have been too many stories about Muslim extremists doing bad things lately, we need to show how the Muslims really aren't bad people, so here's the head of an institute talking about how Muslims aren't that bad.  (Oh shit the dude beheaded his wife quick find somebody else).

The media -cannot handle- lopsided stories; its dependency on controversy, and its tendency to generate it, comes about not just for the ratings, but because controversy is necessary to balance a lopsided picture.  The modern media couldn't get away with just reporting black-on-white and white-on-black crime; the former is significantly more common, the story would be lopsided and unbalanced.

Reality is lopsided, however.  Muslims -do- engage in a lot more violence than their Christian counterparts; burn a Koran, people a thousand miles away die.  Burn a bible, or a cross, and people a thousand miles away never even know about it; it's beneath their notice or their care - well, unless you're Christian, then burning a cross suddenly -does- deserve media attention as a hate crime.

Reality is lopsided, and as a general rule of thumb, whoever is getting media sympathy is probably a member of a group least deserving of it, because otherwise there wouldn't be any controversy to fuel that sympathy's projection in the media.  Media' favorite villains are the people you'd most expect to be upstanding members of society, their favorite victims are those you'd most expect to be garroting people in the streets after dark.

I will be worried when libertarians start getting cast in a more sympathetic light in the media.

A Challenge to Anarchists

[This was originally an e-mail to Billy Beck, which I'm reproducing in a slightly modified version here.  I'll post replies only with permission.]

On the nature of government:

I assert first and foremost that government is not a collective, not a representation of society, not any of the things it is normally asserted as being - I assert instead that government is a tool without moral value of its own, no different from a gun, or a nuclear weapon.  (See this post for more on this)

Like a gun, government can be used either for good or for evil; for offensive purposes, or self defense purposes.  I assert that a government formed on the sole principle of self-defense is a moral government.  To argue this purpose immoral is to argue that self defense itself is evil, or that we have no right to band together for mutual self-interest.  Whether or not government is doomed to expand beyond its moral purposes by historical evidence is, to me, as silly an argument as whether or not anarchy is doomed to spontaneous organization into governmental structure; no government yet has been formed on a moral basis, just as no sustained anarchy has yet arisen.

More, I'm going to assert that specific forms of taxation do in fact have a moral basis as well as a moral purpose - property taxes.  Not the property taxes that exist today, which tax a person on their achievements with that property, but a property tax which serves solely to recognize and ameliorate that our right to property is derived from our conversion of it, and that consequently we have no right to the unconverted resources which we do not use, and which are always going to be a part of any property.  That is, property tax should be proportional to the base value of the land, absent any improvements - the unconverted value of the resources upon which it lays.

They are rent, of a sort, paid not because somebody else has claim to something, but paid because somebody else has -equal- claim to that thing as you.  They are paid as part of a broader - and yes, social (see note one, below) - agreement that expands our domain to go beyond our basic right not to have our property destroyed (by which we may rightfully claim the farm we have tilled and the house we have built) to further protect "property" which remains unconverted and thus for which we have no right whatsoever; it is an agreement that others will not mine beneath us, or build around us.

Wilderness we have staked claim to is not ours by any natural right; the planting of a flag does not invoke ownership.  Thus property taxes allow land to be put to uses without any value of conversion - but do so solely on the basis of one's capacity to conversion, and disproportionate productive capacity on other land.

The second step in this argument would be a discussion of what moral purposes such taxes can be put towards, but that requires resolution of whether or not such an agreement to be moral to begin with, so I'll leave off here without response.

Note 1: There is a somewhat more substantial argument possible here over whether "society" has any right to trade away the miner's right to convert the iron and coal beneath your farm, provided he can do so without harm to your converted property; this is indeed a moral issue.  While writing moral treatise is entertaining, the potential right to unconverted property is something I am already convinced of, and if my reader shares my convictions in the matter of whether one can meaningfully be said to own as-yet unconverted resources, the work involved would be meaningless.  I may write a follow-up post on the subject, however, at a later date.

Thursday, May 5, 2011

The High Costs of Small Fees

One of my clients does business in [I decided not to specify the state; it's a liberal state on the east coast, however]; they are hardly the only client to do so, but let's consider the lone case for illustrative purposes.

Their billing process for this state varies by ZIP code.  Depending on the ZIP code, they have to charge different local use fees to their clients.

They're spending about $200 of my time to handle this one case.  This isn't much for them, but I'm only one part of the process, and one of the cheaper parts; for every hour I spend handling this one case there are ten other people spending an hour or three or their time, some of whom provide me the information, some of whom check my work, some of whom run the QA process, some of whom's time is being wasted in meetings they aren't relevant in, some of whom are just overseeing the process.

My small part of this process costs them around $4,000.  And my part is cheap.  They, or their clients, are spending around $20,000 to handle this one case, one you figure in the additional costs of lawyers, business administrators who identify and build the logic to handle this, etc, etc, etc.  Each client ends up paying this money, some several times over because they have multiple internal systems.  (AT&T has literally -dozens- of distinct billing systems; they don't pay these particular fees, but I guarantee they're paying different ones.)

They have a few dozens clients.  This one state's idiosyncrasies cost several hundred thousand dollars in this company and its clients alone.  I've seen these fees, and I am willing to put money down that the total cost to businesses - before they even pay these fees to the local governments - exceed the actual revenues from those fees.

I see this situation over and over and over again in clients; from state, county and city fees for business transactions to different sales tax reporting guidelines across cities, counties, and states, to simpler regulatory rules (some states explicitly require my clients to use social security numbers to uniquely identify customers, others explicitly forbid them from using them), the sum costs just in compliance - never even minding what these companies pay in taxes and fees - is mind-boggling.

There are hundreds of companies in the industry that operate in this state; if each of them pays a mere $20,000 to comply with these fees (I guarantee half of them are paying substantially more), we're discussing millions of dollars a year (the work I'm doing has been done before - our client previously worked with another vendor, and there are system upgrades, and training costs, and the laws change more than once a decade on top of that) to achieve a few hundred thousand dollars a year in revenue for the government.

This isn't even the grossest case.  I've seen single companies pay millions of dollars to have vital systems completely reworked to produce a new kind of document because a state changed some compliance paperwork submission rules to save itself a few thousand dollars of processing a year.

Wednesday, May 4, 2011

Niche Markets

To The Left, capitalism works solely to the benefit of the biggest companies, who drive small companies out of existence.

Blockbuster put out hundreds of small video rental stores; this didn't stop Movie Gallery from doing the same to them.  Movie Gallery is defunct now, Blockbuster just shy of.  This without even getting into Blockbuster's predecessors.

The Blockbuster near me is closed.  The two locally owned video rental stores are still in business; I am an occasional patron of one, by virtue of that it's cheaper than Netflix.  (I very rarely watch movies, so a monthly plan is not to my benefit.)

Being big didn't save Blockbuster; indeed, to a significant extent it killed it.  The video store I am an infrequent patron of, I chose for its selection of cult movies which could not be found in the Blockbuster, such as Six String Samurai.

It succeeded because it catered to more eclectic tastes which were not sufficiently being serviced by the bigger companies, who focused on the common denominator - comments on "low culture" aside, as these are the domain of Left-leaning elitists, ignorant of the history of culture.  (Guess which characterization was used of Shakespeare among his contemporaries?  It wasn't "high culture.")

I am a niche market - and capitalism serves me well.  Communism, and collectivization more broadly, never has served niche markets, save by fiat and at the expense of the common market.  Capitalism can sustain both.  And as markets grow, ever-more niche markets will be viable.

You could say they're the bread and butter of small companies, but this would be patently false.  Most small companies serve the same common markets as the large companies (although in some sense they take advantage of niche markets anyways as a result of a popular move for local products and/or companies, I ignore this where they do not choose the market).

Niche markets aren't the bread and butter of small companies, but small companies -are- the bread and butter of niche markets; partly because if the market took off the companies would cease to be small, but perhaps more importantly because of the aforementioned flexibility, and the fact that niche markets also tend to be fad markets, prone to vanishing - small companies often don't get the opportunity to expand before their business dries up.

This is why large companies stay away from them, which leaves substantial room in the spaces of the economy for companies to grow, possibly prosper, possibly die, and rarely to explode in an unexpected way. The niche markets are perhaps the defining characteristic of capitalism.

Wal-Mart doesn't just fulfill the basic shopping needs of a populace - it fulfills a specific and limited set of those needs.  If you want to buy a top-20 book, it's just fine.  If you're looking for a book that's been out of print for 20 years, you'll need to look elsewhere; thus, it simultaneously puts small bookshops out of business, while creating a new and more specific market for them to exploit.  (We'll put aside the ways the internet has changed this, being irrelevant to what I'm getting at.)

The specificity is important, because it requires niche players to service a broader range of that niche than it otherwise would; a small bookstore might have stocked a few old books and a lot of new books before giants filled the "new books" space.  In the new market, it must cater to those the giants miss in order to survive - a significant percentage of which it ignored before.

Think of a sex toy shop, itself a niche market.  They have a broad range of toys - which is great if you're looking for what everybody else is looking for - but in truth, the selection is really rather scanty in regards to any particular thing.  They might have four or five different varieties of restraints, four or five vaguely S&M related things, three or four different kinds of strap ons, a rainbow of different vibrators/dildos (the largest market segment for them), a few hundred of the more popular (and less imaginative) porn titles, etc.  To the genuine S&M fan, completely useless, which is why these individuals have typically had to resort to mail-order (or homemade) goods in the past.

Imagine if Wal-Mart started selling "marital aids".  Sex shops would be forced to broaden their niche markets in order to survive, because that would become their selling points - things which Wal-Mart (or more ordinary stores more generally) wouldn't stock.

Wal-Mart has generally encouraged niche players, actually - it frequently owns the surrounding storefronts, and leases out to even companies which compete with some of its products, like GameStop - this is because GameStop, while it does compete to some extent with Wal-Mart's electronics department, caters to a different market that Wal-Mart is largely unable to capitalize on.  Same with some office supply stores, and pet supply stores, which also frequently appear in proximity.