Starving the Monkeys: Fight Back Smarter

by Tom Baugh

  Most importantly for cementing power for the collective, the existing farmers benefit as the regulations create a barrier to entry. But now that they have surmounted this barrier, the existing farmers find themselves in a semi-monopolistic position. Even though these are precisely the people who would have complained the loudest about the regulations if they had been enacted at either the lower or the higher equilibrium.

  Importantly, the additional cost of compliance removes resources from the population, even though some benefit through the creation of meaningless jobs. The enactment of regulations during plenty consumes resources which are better used elsewhere. Yet, this pointless consumption is just as wasteful during plenty as it would be at either equilibrium point. A similar argument could be made about charity, which is donated by individuals in plenty rather than the culture as a whole. But those same resources are just as wasted, and even counterproductive, as they are removed from the hands of those who would have made more efficient use of them via free trade.

  To illustrate these points, consider the figure below, which plots supply and demand, on a per-capita basis, for a particular resource influenced by an innovation:

  This simplified drawing illustrates the lag between the innovation, at point A, and the new demand equilibrium established at point D. Between these times, perhaps as babies are being manufactured, supply will rise unchallenged, other than the normal forces of price regulation. Either increase nonetheless chases suppliers out of the industry. As the innovation is adopted, supply begins rising quickly at first, and then slows down, and stabilizes at point C.

  Demand for this newly abundant resource also takes a while to respond. Babies, for example, take a while to come on line and start consuming. But, eventually, at point C, whether through new little toothies, or through the government beginning to store the excess production in strategic reserves, demand also takes a while to start picking up. At first demand increases slowly, and then faster, finally tapering off at point D.

  In the period between these two curves, excess capacity lulls the collective into believing that the good times will not end, at least from the point of view of that particular resource. It is during this period that the collective finds it easy to add regulatory pressure in order to achieve the noble purpose of creating what are actually pointless jobs.

  Regulating harness widths is an absurd proposition, but many regulations in our modern world are hardly less absurd. Texas, for example, gets offended if you measure liquids without a license. No, not alcohol. I mean water in a graduated cylinder, like in a chemistry lab.

  Let's consider a more familiar example now from our modern experience. Prior to the invention of programmable computing, many businesses managed their accounts by hand. Some used punch-card technology, which was itself a relatively new innovation at the time. If you ran a store, you may have wanted to maintain credits for your customers, allowing them to buy now and pay later. To implement this, you might keep punch-cards or other paper tablets for their accounts which told you who owed you how much, and what transactions they had made recently. As well as help you calculate how many credits to charge them each month for maintaining their accounts.

  The establishment of store credit had an immediate benefit for the consumers in that they could buy without having to round up the right amount of cash to make a purchase. The benefits were even greater for large purchases, which might make the cash-holder susceptible to robbery, or even the store itself more susceptible to robbery at the end of a busy shopping day. Rob a store which maintains store credit, however, and all you get is a bunch of useless paper cards. Later, when the detailed bill arrived, the customer, via the medium of a check, simply instructed their bank to transfer money to the store's account, again, more or less secure from theft.

  So, the store credit added quality of life for the customer in the form of reduced need for cash. In turn, the customer added quality of life to the owner of the store in the form of a small monthly account maintenance charge, interest on aged amounts, and reduced risk of theft. Everyone wins. This model works great at any scale. Small general stores might maintain accounts for a few key approved customers in a hand-written ledger locked in a safe, while larger urban stores with many branches might use the punch-card method. While there is an economy of scale involved for the larger store, this scale difference isn't so large as to make a big difference. Mom and Pop Feed and Biscuit, who did this for themselves, wasn't at any significant risk from Super Big Co, who had specialized employees tucked away in a back room somewhere. Each business filled their own niche nicely.

  Enter the innovation of the computer. This machine started as just a big ticket item suitable for government work or large government contractors only. But it moved out into the corporate time share arena in the early 1960s, thanks to Ross Perot. Now, the work of tabulation comes easy to Medium Size Co., who can afford to buy computer time, while Mom and Pop still have to do this work by hand. After a slow startup time, Medium Size Co. can add incremental amounts of this innovation as it deemed profitable. So now the growing chain can creep farther into the hinterland, adding its value as it opens new stores, and in many cases displaces hand-run stores it encounters.

  As so often happens with free trade, new businesses spring up to meet new opportunities. Although Mom and Pop still can't afford computer time, a generic credit company can. Enter the credit card, which now allows Mom and Pop, and others like them large and small, to enjoy the benefits of a store card without needing the size of a store card store. Or to deal with any of the requisite bookkeeping. All in exchange for some relatively low fees. Again, everyone wins, including some operators who had never bothered to extend credit in the first place.

  Over time, then, the data processing ability quickly proliferated, got cheaper, and launched entirely new professions. These included designing, manufacturing, selling and servicing computers, as well as writing the software, and allocating and selling time to run it. Computers became cheaper and smaller, technology started improving their capabilities, and they became available to smaller and smaller operations, who hired more and more people to operate them. All the while the consumer continued to benefit as these systems enabled more efficient designs, stocking of inventory, fast and accurate checkouts through barcode scans, and on and on.

  This revolution has yet to burn out, with most people on the planet benefitting in at least some small way. The beneficiaries include remote tribes who wouldn't know a computer from a rock. But even these manage to get a package of aid thanks to computers running the engine control systems in the truck which dropped the bag in their village.

  Thank Ross sometime if you get a chance, even though the collective on the right called him a crackpot when he was in a position to unscrew things by getting elected President.

  Interestingly, just as the computer was launching the revolution in account management, the complexity of the tax code really began to take off. If you can imagine a world without computers, try to imagine that same world with today's tax code. Or workplace regulations, including payroll taxes, insurance, worker's compensation, sales taxes and unemployment taxes. No one in their right mind would even consider forcing a small business of the 1960s into complying with today's tax regulations without the aid of a computer. The calculations are just too mind-numbing to even consider.

  But, as the computer was making accounting easier, the collective moved to fill that void itself first. Almost as if by deliberate action, as computational power moved down into a segment of industry, that segment became subject to additional complex regulation and taxation. Even the credit card industry became heavily regulated as they were expanding to provide a valuable service. It is as if the collective came to view the excess resource as its own to be consumed as it saw fit.

  And during this time, regulators, tax accountants, consultants, risk mitigation specialists, and, yes, even computer programmers specialized for writing tax and employment-related software, became fully em
ployed. And not one of these specialists produced a single iota of original value beyond mitigating the risk of lack of compliance.

  And the Mom and Pop? Well, they were unable to amortize the cost of compliance, and so they faded away. The rural countryside of America is dotted with rotting hulks of little stores which all vanished about twenty to thirty years ago. Their departure cemented the hold on the marketplace of the larger stores as Medium Size Co. became Super Big Co.

  These larger companies, without pressure to excel in customer service from those who might rise from below to challenge them, turned to clever ploys. Including cheaply outsourced work to supply their networks of stores which grew more consolidated by the year, and stocked with cheap crap that you have to buy again, and again, and again.

  When idea workers work on ideas, what kind of ideas are they? Well, that depends on whether the thinker is a man or a monkey. Yes, sadly, even monkeys think. But when a monkey thinks, the monkey imagines ways to extract value which they haven't earned through the power of the collective. The low-rung monkeys think in simple ways, such as in wailing about their needs. This wailing from them grates on the ears of men, but is the sweet nectar of power for uber-monkeys. These latter include the shaman or the regulator or the commercial collectivist. Each of these provide for their flocks by using their combined electoral power to implement further barriers for the productive.

  These barriers in turn act like winepresses, extracting the most value from the productive to feed the collective. I shall return to the thoughts of monkeys, both great and small, as idea workers, in a while. For now, though, let's primarily consider the thoughts of men.

  When men think, what thoughts do they have? In general, those thoughts tend toward increasing the amount of automation. Or, equivalently, reducing the amount of push or energy or time required to create or transform a given quantity of stuff.

  Automation doesn't have to imply what first comes to our modern minds, that of whirring machinery or bleeping computers. All that is necessary is that some act of a person, man or monkey, becomes performed for them. Usually automation requires three costs. First, an up-front design cost (normally called non-recurring engineering, or NRE). Next, a perinstallation setup cost. And finally, an ongoing utility cost, usually in the form of energy or service fees. Here are some examples.

  The plow animal innovation amplified the control of plowing, rather than plowing consuming the work energy of the operator. The design cost of this innovation included all the stampedes and tramplings and plows attached to animal heads or legs. Or failed attempts to get a walrus to use a shovel before the traditional yoke-and-plow method emerged.

  The plow animal per-installation cost involves the breeding, raising and training of a particular animal, as well as making or purchasing the yoke, harnesses and plow. The utility cost includes all of those costs associated with the ongoing use of the animal, including feed, water, grooming and veterinary care. Add to these the costs for ongoing use of the equipment, such as oiling the harnesses and sharpening the plow. And, of course, the cost for the time required for the operator to guide the animal during the actual work.

  Bunny hutches automated the trapping of prey animals, allowing much more meat to be available with far less immediate effort or risk. A little bit of ongoing work, most of which could be expected to succeed, replaced pulses of trapping effort, not all of which would be successful. The design cost in this case was relatively small. This cost consisted mostly of figuring out what kinds of cages worked best, as well as what to feed the animals to prevent them from starving, dehydrating, or otherwise falling into ill health.

  The per-installation cost of bunny hutches requires the proprietor to build or procure a hutch for each bunny, as well as spare bunnies from the table for breeding so that the little bunnies themselves can be obtained. The ongoing cost for this innovation includes upkeep to the hutches, the feeding and watering of the bunnies, grooming to remove parasites and veterinary care. And ultimately, the slaughtering and preparation of the bunny for the pot.

  This last example introduced a new category of cost, which is the cost of an installed plant. In this case an individual bunny hutch, which is used over time to generate finished bunny units, is considered an installed plant. The cost of the hutch, including all the lifetime maintenance, is amortized over the number of bunny units that plant produces during its useful life.

  So in this case, compared to the animal plow, the hutches and the breeders are included in installation costs. But the hutch maintenance should be amortized over the product units. For an animal plow, then, the product units are plowed rows, and thus the ongoing costs are amortized over a certain number of plowed rows. You could even imagine a measure of the number of plowed rows to be expected from the use of a particular amount of hay and water. Or, the number of meat units to be expected from the use of a particular hutch plant.

  In either example, the maintenance costs, as provided by a licensed vendor of these services, might deviate from a desired norm. Or, the productivity might be too high or too low from a statistical point of view. In either case, in our modern regulatory environment, it would be time for the operator to justify these variations. Based on their answers, the operator might be rewarded with tax credits for production being too low. Or, he might suffer additional tax, such as those which might be demanded on profits for such a windfall. Or fined or even imprisoned if the operator simply failed to keep the required records, even if the operation itself was perfectly legitimate.

  These details, by the way, seem absurdly superfluous, except that is the way that the collective has decided one must think lest one incur the wrath of the taxman. Imagine trying to force a tribal bunny hutcher or farmer to keep track of all of their separate costs in such a fashion. Fertilizer time. Yet, because we have computers, we accept this kind of nonsense each day of our lives, and the additional drain it imposes on our productive potential.

  Selling of unused computer bandwidth at night in the middle of the twentieth century automated the work of rooms of clerks sifting through receipts and running punch-card machines by hand, or filling out ledgers by hand. This one gets a little more complicated, so hang on. The design cost seems cheap. After all, some salesman working for IBM just had an idea. How much does an idea cost to just think of it? But there was more to it than that, much more.

  I will summarize what happened in a moment, but to fully understand the framework in which modern innovation takes place, you should really read the following book:

  Reading Assignment

  The Innovator's Dilemma by Clayton M. Christensen That book doesn't specifically address the example presented here. But, it does provide some interesting insight into how the collective discounts innovation when it first appears. And then how the collective later jumps in to seize the fruits of that innovation once it has proved successful.

  So back to Ross Perot, our idea guy I mentioned above (I hear he went to a good school). Perot, whose day job was selling big computers for IBM, realized that a lot of these big computers he had been selling had a lot of extra bandwidth which wasn't being used. His employer, whose only interest was selling big computers, enjoyed a semi-monopolistic position in the market due to government contracts and the economies of scale the collective had legislated for those who hire more of the collective. Accordingly, his employer would rather see these smaller firms simply cough up the cash for a big computer of their own.

  After a while Perot left to start his own company, and he knew where all the big computers were. He also knew, from unsuccessful sales calls to sell them big computers, where all the mid-sized companies were which could benefit from his idea. OK, so there are some design costs right there, the jumping from the big company salary and commissions into the entrepreneurial fire, and the absorption of all the attendant risk.

  Next, this salesman, who was successful at selling the big computers, called on several dozen potential customers and made his pitch, all of whom turned h
im down. Now keep in mind that in that day a sales call wasn't an email or a phone call. No, a sales call meant scheduling time in front of a decision-maker and personally making a pitch face-to-face.

  Depending on what source you choose, Perot succeeded on his 77th or 78th try. Each of the previous unsuccessful pitches, including all the travel and lodging, were design costs, too. Each invariably led the salesman to refine his technique, just as the plow innovator and the hutch maker refined their techniques after either animal bolted.

  After this first sale, Ross the salesman then had to deliver. He hired some programming experts, which were desperately few and far between in that time, and also very highly skilled. These he set to the task of writing software which would run at night on an unused computer somewhere. By the way, he also had to convince each machine's owner to let him do this, and at a price which would be reasonable. More sales calls for that, too.

  That entrepreneur had to bear the cost of the programming. He also decided how the data would be loaded and then retrieved each night, as well as how payments for the time would be made to the machines' owners. He had to handle thousands of process design details to do something which had never been done before in history, but which we now take for granted as absolutely primitive stuff. All of which he had to handle before he was able to charge the first cent.

  Once the design was completed, he had to then pay for his installation costs. These included managing the account of a willing machine owner, who was, in effect, renting him the bunny hutch which he would raise his data bunnies in. He also needed meat robots to move the data back and forth. Many times this work was done physically in the form of boxes of cards and receipts. He also needed someone to punch all that stuff in, and collect the data. And at night, the only time the computers were idle.

  Plus, he had to hire and train these people, as well as selling individual customers on his service. And he needed software written peculiar to each customer's needs. All of this had to be done, once again, before he could charge a single penny for his service.