Tag: mancur olson

Scale, Countries and Organizations

Excerpt 1:

“The Rise and Decline of Nations” put forth Mancur Olson’s theory to explain macroeconomic growth. Why do some countries grow quickly and others slowly? Why do some countries grow quickly at some times and slow at others? Though he doesn’t claim that it is the only factor, he answers that a main reason for this effect is that over time, in stable countries with unchanged boundaries, distributional coalitions (interest groups, collusive organizations) start to form and grow. The longer the country is stable, the more distributional coalitions it will have. These groups influence politics to gain benefits for their group, thereby imposing economic inefficiencies on the country.

https://marieljohn.blogspot.com/2010/02/rise-and-decline-of-nations.html

Excerpt 2:

If you compare a Starbucks of ten years ago to a current one, they’re virtually the same. Compare this to the originals in Seattle, and the difference is startling.
The same goes for the design of a typical McDonald’s.
Apple launched the Mac with about a dozen full-time people working on its development. Today, they have more than a thousand times as many engineers and they haven’t launched a groundbreaking product in a while.
The same goes for Google. And Slack.
It’s not just famous big brands. Just about every organization hits a point where the pace of innovation slows as scale increases.

https://seths.blog/2022/06/scale-vs-speed-why-organizations-slow-down/

On the face of it, these might not seem very (or even at all) similar, but if you ask me, the underlying commonality is that both excerpts are talking about why and how continuing to grow at the same rate once you’re talking about a large organization (or a country) is very difficult.

Seth lists out a number of possible reasons for why firms innovate less over time:

  • Technical debt (shortcuts taken to make sure things work for now, future complications be damned)
  • Handshake overhead (the article I’ve linked to refers back to Seth’s post, but also has an interesting application of the idea)
  • Customer commitments (existing customers would prefer that you stick with the tried and tested, rather than try new things)
  • Partner preferences (same point as above, but with folks/organisations you work with, not customers)
  • Wall street’s fear (don’t rock the boat, go with what works)
  • Managerial anxiety (when leadership is replaced with bureaucracy that much rather do the bare minimum rather than experiment and try risky things)

Seth goes on in his post to talk about potential solutions to this problem. He mentions two things:

  • Boring as a strategy: iterative improvements on a regular drip schedule, and nothing out of the ordinary, ever.
  • Structural bankruptcy: by which he means one should ‘spin off the cash cow’ and go do something new with a brand new team.

Can these ideas be applied to nations? That is, can these solutions work to arrest the decline of nations? The decline of nations is a hard thing to define, let alone measure, but I think I am safe in assuming that we ‘kind of know it when we see it’. That won’t pass muster in a classroom discussion, let alone an academic paper, but you’ll allow me this laxity in a blog post, I hope. Here’s a thread that might help explain what I’m trying to get at.

I don’t know if these ideas can be applied to nations, but it is certainly true that (some, but not all) nations have a problem that needs addressing:

Andreessen’s essay ends with a call for mentorship, social pressure, and a realignment of priorities. “Every step of the way, to everyone around us, we should be asking the question, what are you building?” He writes. “What are you building directly, or helping other people to build, or teaching other people to build, or taking care of people who are building? If the work you’re doing isn’t either leading to something being built or taking care of people directly, we’ve failed you.”
I don’t think that’ll be enough. So let me end with my answer to Andreessen’s question: What should we build? We should build institutions biased toward action and ambition, rather than inaction and incrementalism.

https://www.vox.com/2020/4/22/21228469/marc-andreessen-build-government-coronavirus

But the problem lies in that fact that ‘spinning off the cash cow and doing something new with a brand new team’ might be possible in a firm, but is all but impossible in a country with a democratically elected government, and that is (almost certainly) a good thing:

But that means doing the difficult work of reforming existing institutions that aren’t going anywhere. You can’t sidestep the existence of the government, as too many in Silicon Valley want to do. You have to engage with it. You have to muster the political power to rebuild parts of it. And then you need to use the government to make markets competitive again.

https://www.vox.com/2020/4/22/21228469/marc-andreessen-build-government-coronavirus

It makes me tired just thinking about what that paragraph means in practice, let alone trying to figure out how to come up with a plan for it… and definitely let alone trying to implement a plan like that. But it is oh-so-necessary, and not just for the United States of America.

The Rise and Decline of Nations, by Mancur Olson is a great book to read (but take your time over it, please). Read it, and reflect on how to use the ideas in that book to either arrest or prevent a decline in your own nation.

But also reflect on how that book has the power to help you explain why the organization you are working for may be in decline, and that, for me, makes this book a truly great one:

The persuasiveness of a theory depends not only on how many facts are
explained, but also on how diverse are the kinds of facts explained. Darwin’s
theory offers insights into the origin and evolution of creatures as diverse as
whales and bacteria, and this makes it more convincing than if it could explain
only mosquitoes, however many millions of mosquitoes might be satisfactorily
explained. If a theory explains facts of quite diverse kinds it has what William
Whewell, a nineteenth-century writer on scientific method, called
“consilience.” Whewell argued that “no example can be pointed out, in the
whole history of science, so far as I am aware, in which this consilience…has
given testimony in favor of an hypothesis later discovered to be false.

Olson, M. (2008). The rise and decline of nations. In The Rise and Decline of Nations. Yale University Press.

Mancur Olson in Afghanistan (And Thakur in Sholay!)

Who is (was) Mancur Olson?

An American economist of some note, who is perhaps not as widely known as he should be. Let me be honest upfront and say that I have never read a single book of his cover to cover, in spite of repeated attempts – they are really hard going, at least for me. But even dipping into them every now and then, based on snippets I pick up here and there is by fun, and rewarding. (One such snippet was provided by The Economist recently, about which more in a second.)

Olson is perhaps most well known for his theory of the “roving” and “stationary” bandit. Here’s Wikipedia:

In his final book, Power and Prosperity (2000), Olson distinguished between the economic effects of different types of government, in particular, tyranny, anarchy, and democracy. Olson argued that under anarchy, a “roving bandit” only has the incentive to steal and destroy, whilst a “stationary bandit”—a tyrant—has an incentive to encourage some degree of economic success as he expects to remain in power long enough to benefit from that success. A stationary bandit thereby begins to take on the governmental function of protecting citizens and their property against roving bandits. In the move from roving to stationary bandits, Olson sees the seeds of civilization, paving the way, eventually for democracy, which by giving power to those who align with the wishes of the population, improves incentives for good government. Olson’s work on the roving vs. stationary bandits is influential in analysis of the political and economic order structured in warlord states and societies.

https://en.wikipedia.org/wiki/Mancur_Olson

And here’s the Economist, writing about the current state of Afghanistan:

At the edge of Kabul, the boss of a company which imports cooking gas says the security of his tankers has actually improved over the past year, because the Taliban control more roads. They charge 35,000 afghanis ($455) for every lorry travelling from Herat, on the Iranian border, to Kabul. “In the past there were no Taliban taxes,” he says. “But they used to shoot us with RPGs [rocket-propelled grenades]. So we are happy with the taxes.”

https://www.economist.com/asia/2020/11/18/as-america-pulls-out-of-afghanistan-the-taliban-fight-on

The trick (for the bandit) lies in getting the quantum of taxation just right, of course…

Links for 6th June, 2019

  1. “That night, after singing in the Rose Garden, Nelson went to sleep with his wife, Connie, in the Lincoln Bedroom. Then one of the president’s sons knocked on his door.“Chip Carter took me down into the bottom of the White House, where the bowling alley is,” Nelson says. Then they went up to the roof and smoked a joint. Nelson remembers Carter explaining the surrounding view — the Washington Monument, the string of lights on Pennsylvania Avenue. “It’s really pretty nice up there,” Nelson says.”
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    I found it hard to extract an excerpt from this article, because it is (all of it) entirely readable, multiple times. There’s information about music, weed, economics, sustainability, mortality, longevity and so much more!
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  2. “Graham Fagg, the British miner who punched through to the French side and became the face of continental connection, on Friday told French news agency AFP that he was now a Brexit supporter. “I worked on the Channel Tunnel and did the breakthrough, but I actually voted for Brexit,” the 70-year-old said. “I don’t see that as incompatible.”Fagg said he supported joining the European Economic Community — the forerunner to the EU — in a 1975 referendum, but did not realize it would become a political union.”We voted for a trade deal,” he explained. “I can’t remember anybody ever saying to me, ‘we’re going to turn it into a federal Europe. We’re going to set all the rules and you’ve got to obey them’.””
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    A short, but very readable article about the Chunnel – I didn’t know the history was as long as all that. I also found the Thomas The Train picture quite poignant.
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  3. “The consistent critic of anarchism must, however, attack with equal force all of those who suppose that large groups will whenever the need arises voluntarily organize a pressure group to deal with the state, or a labor union to deal with an employer. Bentley, Truman, Commons, Latham, and many of the pluralist and corporatist thinkers are fully as guilty of the “anarchistic fallacy” as the anarchists themselves. The anarchists supposed that the need or incentive for organized or coordinated cooperation after the state was overthrown would ensure that the necessary organization and group action would be forthcoming. Is the view that workers will voluntarily support a trade union, and that any large group will organize a pressure-group lobby to ensure that its interests are protected by the government, any more plausible?”
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    Aadisht Khanna reviews “A Theory of Collective Action”. This, I should confess, is a book I started but have (at least for now) given up on. It is not an easy read. But reading Aadisht’s review, this excerpt caught my eye – it is the strongest argument I have seen to make me want to vote.
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  4. “And so Thibaw wasted away in Ratnagiri, “a very unpleasant place to live in”, he wrote, full of “snakes and scorpions”. His expenses—much of it religious—led to endless debt, even as he petitioned the British for the return of valuables he had entrusted to them when surrendering his former capital (including a celebrated ruby, never seen since). His wife was initially resolute: She smelt conspiracy everywhere, Shah notes, and taught her daughters to cook, certain that they would be poisoned otherwise. But, by 1900, bogged down by their fall, she was in the grip of depression. Denied regular social contact, and policed and watched, their daughters too grew up lonely—the princess who in 1944 gave mangoes to her visitor began an affair with their Maharashtrian gatekeeper, her love child later marrying the family’s dog-walker. This granddaughter of the last king of Burma would one day transform herself from TuTu to Baisubai, selling paper decorations in the local market.”
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    Do you follow Manu Pillai on Twitter? Do you read his columns in Livemint? Have you read his books? Get started right away!
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  5. “The results of this survey have not been officially released. However, the leaked reports of an historically high unemployment rate and the subsequent resignation of two members of the National Statistical Commission (NSC), who were involved with the PLFS, created a furore and heightened the politicisation of unemployment. The Opposition used this as an opportunity to malign the government, while the government representatives at NITI Aayog resorted to the view that the survey results have not been reviewed by experts, and therefore the report was not deemed reliable enough to be released. The truth of the matter, however, is that there is neither credible evidence of a job crisis in India, nor credible evidence of the absence of it.”
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    There is a problem pertaining to data measurement in India, and it is a big one. This article doesn’t necessarily tell you how to solve that problem (no article can, in the length that articles usually comprise of), but it does help you be aware of what the problem is.