Reading to some purpose…

birds

“In an influential 1937 essay called “The Nature of the Firm,” the economist Ronald Coase argued that a firm would grow as long as its internal transaction costs were less than the external costs it would otherwise incur. But in the Bay Area today, Ravikant suggested, the external transaction costs for many things have got so low that there are fewer such economies.

 “For example, in the old days, we’d get breakfast and lunch brought in every day so that the engineers can work and be productive,” he said. “I might have had my office manager do that—essentially, I’ve hired someone who’s spending time doing it. Now we have a zillion different little services who bring that in-house.” The more assured Ravikant got, the faster he spoke; he started rattling off the options available. On the transportation front, “we have our Lyft and our Sidecar and our UberX and our InstantCab and our Flywheel. Two years ago, I couldn’t find a cab in this city to save my life. Now I’ve sold most of my cars and I have five different car services at my beck and call.”

The same systems that make outsourcing of small tasks more efficient have driven down the cost of launching a company. Once, an entrepreneur would go to a venture capitalist for an initial five-million-dollar funding round—money that was necessary for hardware costs, software costs, marketing, distribution, customer service, sales, and so on. Now there are online alternatives. “In 2005, the whole thing exploded,” Ravikant told me. “Hardware? No, now you just put it on Amazon or Rackspace. Software? It’s all open-source. Distribution? It’s the App Store, it’s Facebook. Customer service? It’s Twitter—just respond to your best customers on Twitter and Get Satisfaction. Sales and marketing? It’s Google AdWords, AdSense. So the cost to build and launch a product went from five million”—his marker skidded across the whiteboard—“to one million”—more arrows—“to five hundred thousand”—he made a circle—“and it’s now to fifty thousand.” As a result, the number of companies skyrocketed, and so did the number of angels: suddenly, you didn’t need to be a venture-capital firm to afford early equity.”


The youth, the upward dreams, the emphasis on life style over other status markers, the disdain for industrial hierarchy, the social benefits of good deeds and warm thoughts—only proper nouns distinguish this description from a portrait of the startup culture in the Bay Area today. It is startling to realize that urban tech life is the closest heir to the spirit of the sixties, and its creative efflorescence, that the country has so far produced.

..
Public-minded kids in San Francisco seem to have that expectation, which is partly why the startup market has had such growth, and why smart people from around the country keep flying in to try their hands at the game. The result is a rising metropolitan generation that is creative, thoughtful, culturally charismatic, swollen with youthful generosity and dreams—and fundamentally invested in the sovereignty of private enterprise.

  • Re-read Keynes’ old quote and was reminded about the power of ideas: “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist”

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