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Delightful treatment of the idea that efficient markets produce products that work by Dan Luu.

The whole thing is worth reading, but the most interesting section to me was the one on trust in between firms and within firms.

Coming back to when it makes sense to bring something in-house, even in cases where it superficially sounds like it shouldn't, because the expertise is 99% idle or a single person would have to be able to build software that a single firm would pay millions of dollars a year for, much of this comes down to whether or not you're in a culture where you can trust another firm's promise. If you operate in a society where it's expected that other firms will push you to the letter of the law with respect to whatever contract you've negotiated, it's frequently not worth the effort to negotiate a contract that would give you service even one half as good as you'd get from someone in house. If you look at how these contracts end up being worded, companies often try to sneak in terms that make the contract meaningless, and even when you managed to stamp out all of that, legally enforcing the contract is expensive and, in the cases I know of where companies regularly violated their agreement for their support SLA (just for example), the resolution was to terminate the contract rather than pursue legal action because the cost of legal action wouldn't be worth anything that could be gained.

If you can't trust other firms, you frequently don't have a choice with respect to bringing things in house if you want them to work.

Although this is really a topic for another post, I'll note that lack of trust that exists across companies can also hamstring companies when it exists internally. As we discussed previously, a lot of larger scale brokenness also comes out of the cultural expectations within organizations. A specific example of this that leads to pervasive organizational problems is lack of trust within the organization. For example, a while back, I was griping to a director that a VP broke a promise and that we were losing a lot of people for similar reasons. The director's response was "there's no way the VP made a promise". When I asked for clarification, the clarification was "unless you get it in a contract, it wasn't a promise", i.e., the rate at which VPs at the company lie is high enough that a verbal commitment from a VP is worthless; only a legally binding commitment that allows you to take them to court has any meaning.

Of course, that's absurd, in that no one could operate at a BigCo while going around and asking for contracts for all their promises since they'd immediately be considered some kind of hyperbureaucratic weirdo. But, let's take the spirit of the comment seriously, that only trust people close to you. That's good advice in the company I worked for but, unfortunately for the company, the implications are similar to the inter-firm example, where we noted that a norm where you need to litigate the letter of the law is expensive enough that firms often bring expertise in house to avoid having to deal with the details. In the intra-firm case and you'll often see teams and orgs "empire build" because they know they, at least the management level, they can't trust anyone outside their fiefdom.

While this intra-firm lack of trust tends to be less costly than the inter-firm lack of trust since there are better levers to get action on an organization that's the cause of a major blocker, it's still fairly costly. Virtually all of the VPs and BigCo tech execs I've talked to are so steeped in the culture they're embedded in that they can't conceive of an alternative, but there isn't an inherent reason that organizations have to work like that. I've worked at two companies where people actually trust leadership and leadership does generally follow through on commitments even when you can't take them to court, including my current employer, Wave. But, at the other companies, the shared expectation that leadership cannot and should not be trusted "causes" the people who end up in leadership roles to be untrustworthy, which results in the inefficiencies we've just discussed.

People often think that having a high degree of internal distrust is inevitable as a company scales, but people I've talked to who were in upper management or fairly close to the top of Intel and Google said that the companies had an extended time period where leadership enforced trustworthiness and that stamping out dishonesty and "bad politics" was a major reason the company was so successful, under Andy Grove and Eric Schmidt, respectively. When the person at the top changed and a new person who didn't enforce honesty came in, the standard cultural norms that you see at the upper levels of most big companies seeped in, but that wasn't inevitable.

I’m not sure at the moment how much I agree with his approach to build vs. buy decisions but I know I agree with his assessment that the essential ingredient for productivity is trust.

Unlike the typical seaweed collector, Durant was not a British woman but an American man, an inventor and scientist. Born in 1805, he seemed to assume, like many educated men of his era, that no aspect of the mechanical, physical, or natural world was beyond his ken. His biography is a litany of claims-to-fame.16 With a hot-air balloon ascent from Battery Park, New York in 1830, he made his name as the first American aeronaut, staying aloft for two hours in a balloon he’d sewn himself. His second ascent, in 1833, was attended by President Andrew Jackson and thousands of others, during which Durant dropped leaflets featuring his own ecstatic poetry. These poems, about the virtues of ballooning, seem to have been the world’s first instance of aerial propaganda. He was the first US manufacturer of silkworm gut, a filament used for fishing line, and his raw silk and cocoons took high awards. He turned his attention then to Mesmerism, a faddish belief in clairvoyant hypnosis that was sweeping the nation. After infiltrating Mesmerist circles by pretending to find the practice credible, he wrote one of the first anti-Mesmerism screeds to be published in America, in which he debunked the supposed science with great relish.17 After that book, Durant became interested in hydraulics. He maintained a year of technical correspondence with Ellis S. Chesbrough, chief engineer of Boston’s waterworks, and soon-to-be engineer of Chicago’s sewage system. Their letters were published as Hydraulics: On the Physical Laws that Govern Running Water (1849).

Charles Durant went on to write the first American book on seaweed, and according to this article, at least, the best one. The whole article is worth reading, especially if like me, you’re interested in seaweed.

The geography of the industrial revolution in Britain was shaped in part by the corrupt, rentier economy of London in the eighteenth century. The various by-laws, regulations and tax regimes in and around London largely precluded the establishment of new industrial processes. This drove industrial investment to the midlands, and especially to the steep and narrow valleys of Yorkshire, Lancashire and South Wales, where there was abundant water-power to drive the new industrial machinery. The need to efficiently pump water provided the impetus for the development of steam, driving industry forward.

From Does Britain Exist by Tim Watkins. You often hear about regulations constricting growth and leading innovation to happen elsewhere, but I think this is the first time I can remember someone citing a specific example.

Thanks to the Browser for the recommendation

I love this post by Uri Bram on export subsidies and how they could be applied to personal skill development.

Here’s Uri on export subsidies:

South Korea is one of the greatest development stories rarely told. In just 60 years, they've taken 50 million people from largely rural poverty to a higher GDP per capita than Japan's - it's a bonkers achievement. How did they do it?

Through export subsidies. For the full story, read How Asia Works, but the short version is that Korea strategically brought its manufacturing sector up to scratch by subsidising firms conditional on them successfully exporting products; that is, on selling things abroad on the open market to people who had plenty of other options and no particular reason to buy Korean.

His really interesting idea is how you might apply this to skill development:

So paying your kid's costs while they do a writing degree is not an export subsidy, it's just a regular-subsidy. But promising to match any money they make from submitting freelance articles to magazines? This is what we'll call a Personal Export Subsidy. By supplementing the money they make from successfully placing freelance articles, you're letting an impartial external arbiter (the various magazines) decide whether your kid's work is actually worth something, while acknowledging that in the early days you'll need to increase that "something" for your kid to survive while climbing the ladder.

I’ll add to this that you think of things like the YouTube Shorts Fund as a sort of export subsidy for short form video creation. Another example of this is venture capital, particularly at early stages where funding is pretty directly tied to showing some form of commercial traction and the bar for company traction gets raised as the company matures.

Product management is a generalist’s field. You do a little bit of user research, a little bit of strategy, a little bit of design and a little bit of engineering. Everyone you work with is better at what they do than you are, yet you still have to find a way to help them.

Within a field of generalists, I am a generalist PM. I’ve worked across agriculture, ad tech, consumer social, and most recently fintech. This makes me doubly a generalist.

Perhaps because of this, I am especially appreciative of the art of being a useful generalist, which Ross Simoini captures so well in this article. Here’s an excerpt:

In this way, the generalist must have a high tolerance for complexity, confusion, and uncertainty. Generalism does not offer the clearly tiered progression offered to the specialist. Working across various fields means you will likely spend long periods being unskilled at them. The generalist can acquire new talents, but they are also a perpetual amateur in a cycle of discovery and failure. There are benefits to this process: slowness encourages a certain quality of attention; novelty encourages a sharp perspective; and an outsider’s position keeps you immune from the insider’s tunnel vision.

Specialism, on the other hand, offers an easily measured form of success. In fact, specialization usually defines a spectrum of success and failure.“Best” and “worst” can exist only when the boundaries of success have been narrowed to a single parameter: the best RBI hitter in baseball; the most dividends earned in a single day.

I left this article thinking there should be a Society for Generalists the way there is are professional groups for specialities. Worth reading the entire thing, especially if you’re a generalist.