rent

content/blog/rent.md

@@ -0,0 +1,85 @@
+Title: Economic Rent
+Date: 2024-01-23
+
+(Sorry, this isn't well-written! ~~Perfect~~ Good is the enemy of the mediocre.)
+
+Bryne Hobart asks ["How many trillion-dollar companies should there be?"](https://www.thediff.co/archive/how-many-trillion-dollar-companies-should-there-be/#how-many-trillion-dollar-companies-should-there-be)
+Market cap is functionally humanity's best guess at expected total dividends returned to
+shareholders. A company's profits come from its revenue, and its revenue comes
+from how much entities (probably mostly consumers) pay for its services. A trillion
+dollar company is one that pays out at least a trillion dollars to its shareholders,
+so its revenues must be over a trillion dollars, so it must be providing more than
+a trillion dollars of value to consumers.
+
+There are 6 trillion dollar companies today: Apple, Microsoft, Saudi Aramco, Alphabet, Amazon,
+and Nvidia. Microsoft currently pays out $0.75 per share per quarter. It has 7.5
+billion outstanding shares, so that's about $20B in dividends per year. It's
+worth $3T so humanity expects 150 years of current earnings to persist.
+
+Value provided to consumers isn't all that matters though! The light bulb and
+electricity provided much more value than Microsoft did, but its inventors didn't
+become quadrillionaires. *Capturing* some portion of that value is critical!
+
+Bryne says you need some sort of runaway network effect. He summarizes it as:
+when the thing you figured out first eventually becomes obvious to everyone else,
+have you set up a system that ensures that you're still accumulating new and
+valuable secrets faster than anyone else?
+
+- Facebook and Apple leverage the in-network effect (if your friends are on it,
+  you won't try anything else).
+- Tiktok also does this but it's less social. They use user data to make the app
+  much better for the user and marginally better for everyone else. Making it
+  better for everyone else means you don't try other apps
+- Amazon does this with improving its deliverability speed to crazy levels with
+  insights on user location
+- I don't think AWS and Azure have unstoppable network effects? They just have economies
+  of scale.
+- Microsoft Office (Microsoft's biggest revenue stream) just uses proprietary
+  software network effects. I don't think this has unstoppable network effects?
+- Saudi Arabia doesn't have network effects. They just lucked into one of the
+  largest crude oil reserves happening to exist under their ancestral lands, so they win.
+
+This is a form of *economic rent*. These firms have found a "natural resource"
+(some tool that's amenable to unstoppable network effects) and charge as much as
+they can for it. Their profits can't be competed away, so they get to capture lots
+of the value they create. It's a rent in the [Georgian sense](https://en.wikipedia.org/wiki/Georgism):
+owners extracting more value out of a scarce resource than they "deserve" based on
+the resources expended in creating/improving it.
+(Thanks to [Lars Doucet and Scott Alexander for making the connection to
+Georgism](https://www.astralcodexten.com/p/highlights-from-the-comments-on-billionaire).)
+
+So I wonder: is this worth thinking about before eg starting a company? Is being
+satisfied with producing lots of value for society foolish because you're missing
+opportunities to charge rent?
+
+One approach is to *embrace* the inevitability of your profits being competed
+away. Suppose you think ultrasound neuromodulation devices should be much better
+than they currently are. You can go build the first really good product, charge
+a lot for it until competitors crop up to eat away at your margins, and then
+leave satisfied. You wanted, after all, better devices and now there's a healthy
+competition pushing the state-of-the-art!
+
+Well, but you are still leaving money on the table by not finding a way to
+monopolize your advantage. Suppose there's an innovation in neuromodulation
+that costs $100B to realize. If your profits are eaten up before you can invest
+$100B, this innovation will never be realized! The system is
+broken and doesn't regulate rents, so it feels irrational to just ignore that
+inefficiency...
+
+[Vamshi](https://www.linkedin.com/in/vamshibalanaga/) pointed out that the greatest
+inventions don't seem to come about from immense investment by a few firms; they're
+usually the result of some genius working for very little because he can't help
+himself. [Matt Clancy points out](https://mattsclancy.substack.com/p/how-common-is-independent-discovery)
+that rediscovery is probably pretty common if the idea seems important looking
+forward; it's cause areas and ideas that are only important in retrospect that
+aren't likely to be independenly rediscovered. That's good news since even the
+most ambitious companies probably can't justify entirely pie-in-the-sky research.
+
+Also, *is* the economy that competitive? We only have ten billion people who can
+compete, and probably less than half of them have direct access to the global
+economy. There are all sorts of inefficiencies that wouldn't exist in a world with
+100 trillion people.
+
+Thanks [Anthony Russo](https://www.linkedin.com/in/aarussoexe/) and
+[Vamshi Balanaga](https://www.linkedin.com/in/vamshibalanaga/) for conversations
+on this.

pelicanconf.py

@@ -15,6 +15,7 @@
         "markdown.extensions.codehilite",  # Syntax highlighting
         "markdown.extensions.extra",
         "markdown.extensions.meta",
+        "pymdownx.tilde",
         MathJaxExtension(),
         PriceContextExtension(),
     ],

requirements.in

@@ -3,3 +3,4 @@ invoke
 livereload
 markdown
 pelican[markdown] == 4.*
+pymdown-extensions

requirements.txt

@@ -18,10 +18,11 @@ jinja2==3.1.2
     # via pelican
 livereload==2.6.3
     # via -r requirements.in
-markdown==3.4.3
+markdown==3.5.2
     # via
     #   -r requirements.in
     #   pelican
+    #   pymdown-extensions
 markdown-it-py==3.0.0
     # via rich
 markupsafe==2.1.3
@@ -34,12 +35,16 @@ pygments==2.15.1
     # via
     #   pelican
     #   rich
+pymdown-extensions==10.7
+    # via -r requirements.in
 python-dateutil==2.8.2
     # via pelican
 pytz==2023.3
     # via
     #   feedgenerator
     #   pelican
+pyyaml==6.0.1
+    # via pymdown-extensions
 rich==13.4.2
     # via pelican
 six==1.16.0