Protecting heterogeneous activity

Freedom is the ability to allocate your resources differently.  The majority allocates their resources in one direction...and you can choose to allocate your resources in a different direction. 

The perfect example is the story of Noah's ark.  Does it bother you that the story is fictitious?  It really shouldn't.  As the story goes...God informs Noah that he's going to destroy the world with a flood.  This information provides Noah with the incentive to use his resources to build a giant boat.  Even though he shares his partial knowledge with others...he's the only one who acts on it.  Everybody else laughs at him because they really doubt the business model.  The majority believes one thing and an extremely small minority believes another thing.  Both groups can't be right.  And in this case, neither can both groups be wrong.  Either the world will be destroyed by a flood...or it won't be.  Despite the fact that each group is certain that the other is wrong...there's no attempt to restrict each other's freedom.  Each group can allocate their resources differently.  The majority takes one path...and the minority takes another path.  It's a good thing that Noah's freedom was not restricted because it turns out that he chose the right path. 

The moral of the story is that heterogeneous activity is essential.  Because the future is uncertain...we should hedge our bets by protecting individual freedom.  Doing so maximizes the variety of economic activity which maximizes discovery which maximizes progress.
 

More here, interesting throughout. Isn't this a great description of Silicon Valley? Worth remembering the next time someone is ready to publish another piece of outrage when some wacky startup like Yo raises a million dollars in financing or someone raises over $50,000 on Kickstarter to make potato salad (the latter is hilarious to me and not reason for mass outrage; consider it either as a mass Duchampian art installation or as an economic transfer from the gullible to the clever).

Cohen wants you to believe that your immediate intuition, sharing is caring, is the correct one.  But in reality, the correct intuition is that recognizing and respecting ownership results in far greater abundance of the things that we value enough to sacrifice for.  Protecting ownership incentivizes people to choose the paths that others have positively valuated or might positively valuate.  If we, as consumers, want a greater abundance of apples...then we have to reward the producers who've chosen to grow apples.  This ties into the idea of value signals...

Here's a summary...

  1. Sylvia discovers a bunch of apples (risk)
  2. Others are willing to pay for her apples (valuation)
  3. If the value signal is bright enough, others will start supplying apples (incentive)
  4. The result is the optimum supply of apples (abundance)
     

It's a long post that delves into many other topics including a discussion of war and its impact on government spending and whether that's an optimal outcome. But what struck a chord with me was the importance of a lack of centralized funding allocation structure in Silicon Valley, and why that's important to protecting heterogeneous activity within the technology sector. It's one of the secrets to the generative nature of this sector.

Pragmatarianism is one of the blogs I recently discovered that made it into my browser toolbar. I'll point you to one last passage from this same post.

Michael Michaud is the author of Contact with Alien Civilizations.  He's under the impression that chances are pretty good that alien visitors wouldn't have discovered that progress depends on freedom.  It shouldn't be a surprise though given that he himself hasn't made this discovery. 

As I've argued in a few blog entries...

...contrary to Michaud, I believe that it's highly unlikely that extraterrestrial visitors wouldn't have figured out that progress depends on discovery...and discovery depends on doing things differently.  You're really not going to get different results by doing the exact same thing over and over.  Thinking otherwise is, according to Einstein, insane. 

Regarding Michaud's specific example...as history clearly proves...a certain amount of progress can be made without understanding that progress depends on freedom.  This is because it's extremely difficult to completely eradicate freedom.  But if Hitler had successfully managed to conquer the world...would the rate of progress have increased or decreased?  The rate of progress would have plummeted because far fewer people would have been free to allocate their resources differently. 
 

Could it be that the premise of almost every movie about our first encounter with extraterrestrial intelligence is flawed? Could the difficulty of traveling through space be an effective filter on war-mongering alien races, and should we instead presume that any civilization enlightened enough to travel light years across space to reach us would understand more than anyone the value of leaving us humans our freedom?

I'd love to see more utopic science fiction movies that use technology as a source of improvements in life. Not all roads have to lead to Skynet, and most probably don't.

Thou shalt have no other gods before me

It feels ridiculous to post a link found from Kottke (especially one that came via Alexis Madrigal) since I assume everyone has already seen it, but this article on analyzing cities like one would the molecular structure of materials intrigued me. Will this modeling actually yield value? I'm skeptical of any algorithm that puts Los Angeles and Seattle in the same bucket.

The premise is intriguing, but the question of the value of metaphor is even more important.

Are materials and metropolises really comparable? And if so, is the comparison useful as more than a metaphor? The urban planning community, which has its roots in the design world, has historically been wary of science’s attempts to capture the incredible complexity of the urban environment. (In her classic 1961 book “The Death and Life of American Cities,” Jane Jacobs lambasted modern urban planning itself as a “pseudoscience,” in which “years of learning and a plethora of subtle and complicated dogma have arisen on a foundation of nonsense.”)

But it is warming to these efforts. Today scientists are some of the leading investigators of urban design issues. “There have been ideas about cities since Aristotle and Plato,” said Luis Bettencourt, professor of complex systems at the Santa Fe Institute. “But the ways we can measure cities, test ideas, and compare cities across time and place and size has become so much more possible, that we can now test those ideas.” Bettencourt, who was trained as a theoretical physicist, published a paper in Science last summer proposing a new quantitative framework for understanding cities: They are a unique complex system, he argues, with predictable social, spatial, and infrastructure properties.
 

It's a worthwhile question to ask because I've long thought Silicon Valley and the technology world to be dangerously addicted to metaphor. If you look hard enough, almost anything can be found to resemble something else, but that does not mean outcomes in one system can be used to predict outcomes in another.

But pattern recognition is a reflexive habit for venture capitalists and technology prognosticators. When the future is unknown, we look to history as a guide because hindsight is rich in specific outcomes. This can be a dangerous trap when the similarity in patterns occur at the surface but result from differing underlying dynamics.

Modeling is one form of metaphor, and it can also be dangerous (recall the first chapter of Kieslowski's masterpiece The Decalogue, based on the first of the Ten Commandments: "I am the Lord thy God; thou shalt have no other gods before me."). However, the increased digitization and measurement of the world has made it possible to model many more natural phenomenon.

Look at the recent success of people with finance backgrounds moving over into the sports franchise ownership and management. Jonah Keri examined one such successful crossover in The Extra 2%: How Wall Street Strategies Took a Major League Baseball Team from Worst to First, but most teams not run entirely by finance alumni still employ quantitative analysts to pore over data and model out player and franchise performance, not to mention attendance and revenue. With advanced camera systems and statistical tracking come more data with which to build models of individual and team performance at greater resolution. Sports previously thought to be too complex to model (mostly team sports like basketball, football, soccer, and hockey, which lack the volume of discrete individual confrontations that baseball offers) are being understood at a deeper level using technology like the SportVU camera systems, and even baseball is being understood at a finer level by its own implementation of 3D camera tracking and systems like PitchFX.

When is there enough data to use a model for prediction? I thought of this when reading about the analysis of cities as molecular structures, and it recalled the legendary city of Magnasanti, the so-called perfect city.

If you haven't heard of Magnasanti, it's likely because it's not a real world city but a virtual city built in the game SimCity a few years ago by a young architecture student named Vincent Ocasla.

This video provides an overview of Magnasanti, as does this interview with Ocasla.

Godfrey Reggio’s Koyaanisqatsi seems to have been a big inspiration.
It very much was--I first watched it in 2006. The film presented the world in a way I never really looked at before and that captivated me. Moments like these compel me to physically express progressions in my thought, I have just happened to do that through the form of creating these cities in SimCity 3000. I could probably have done something similar--depicting the awesome regimentation and brutality of our society--with a series of paintings on a canvas, or through hideous architectural models. But it wouldn’t be the same as doing it in the game, because I wanted to magnify the unbelievably sick ambitions of egotistical political dictators, ruling elites and downright insane architects, urban planners, and social engineers.

I’ve a quote from one of your Facebook status updates here: “The economic slave never realizes he is kept in a cage going round and round basically nowhere with millions of others.” Do you feel that sums up the lives of the citizens of Magnasanti? (And you might want to set your Facebook to private by the way.)
Precisely that. Technically, no one is leaving or coming into the city. Population growth is stagnant. Sims don’t need to travel long distances, because their workplace is just within walking distance. In fact they do not even need to leave their own block. Wherever they go it’s like going to the same place.

Heavy.
There are a lot of other problems in the city hidden under the illusion of order and greatness--suffocating air pollution, high unemployment, no fire stations, schools, or hospitals, a regimented lifestyle--this is the price that these sims pay for living in the city with the highest population. It’s a sick and twisted goal to strive towards. The ironic thing about it is the sims in Magnasanti tolerate it. They don’t rebel, or cause revolutions and social chaos. No one considers challenging the system by physical means since a hyper-efficient police state keeps them in line. They have all been successfully dumbed down, sickened with poor health, enslaved and mind-controlled just enough to keep this system going for thousands of years. 50,000 years to be exact. They are all imprisoned in space and time.
 

If you look at how Ocasla achieved the perfect city in SimCity (I have not played the game in years but “perfect” in this case is measured by in-game metrics such as citizen happiness, crime rates, the number of abandoned buildings, etc), Ocasla came up with a symmetrical layout based on the Buddhist Wheel of Life and Death. The symmetry means everyone has the same amenities within a short distance of their residence, so there's no need to travel a lot for those because everyone has their version nearby. There are no roads, only subways, and there are lots of police stations, one of the things that gives Magnasanti its totalitarian feel.

If this is the ideal city in SimCity I have severe doubts as to the sophistication of the game's simulation. It looks one roadless suburb with the same strip mall in the center of each, all with the same exact stores: Chipotle, Starbucks, a Best Buy, maybe a Home Depot. The same suburbs that are seeing ghettoization and an outflow of residents into urban centers. Where is the art museum, the local sports stadium? How do you replicate restaurants from star chefs?

Despite all that, I could see China trying to build a Magnasanti prototype in their countryside.

Stories as religion

In almost all fictional worlds, God exists, whether the stories are written by people of a religious, atheist or indeterminate beliefs.

It’s not that a deity appears directly in tales. It is that the fundamental basis of stories appears to be the link between the moral decisions made by the protagonists and the same characters’ ultimate destiny. The payback is always appropriate to the choices made. An unnamed, unidentified mechanism ensures that this is so, and is a fundamental element of stories—perhaps the fundamental element of narratives.

In children’s stories, this can be very simple: the good guys win, the bad guys lose. In narratives for older readers, the ending is more complex, with some lose ends left dangling, and others ambiguous. Yet the ultimate appropriateness of the ending is rarely in doubt. If a tale ended with Harry Potter being tortured to death and the Dursley family dancing on his grave, the audience would be horrified, of course, but also puzzled: that’s not what happens in stories. Similarly, in a tragedy, we would be surprised if King Lear’s cruelty to Cordelia did not lead to his demise.

Indeed, it appears that stories exist to establish that there exists a mechanism or a person—cosmic destiny, karma, God, fate, Mother Nature—to make sure the right thing happens to the right person. Without this overarching moral mechanism, narratives become records of unrelated arbitrary events, and lose much of their entertainment value. In contrast, the stories which become universally popular appear to be carefully composed records of cosmic justice at work.
 

Robin Hanson on stories as religion. He mentions Syd Field's famous book on screenwriting Screenplay as one of the influences that codified this predominant form of Hollywood storytelling.

This notion of justice in movies is indeed the dominant model in Western filmmaking, to the point where movies sacrifice the unexpected in the name of conformity to norms of morality.

However, in some cultures, movies don't reflect such optimism about the world. When I was a child my dad would rent many Chinese movies from local video stores, and I was struck by the dearth of happy endings. Families lost children to tragic accidents, wives suffered in marriages to abusive husbands, citizens suffered again and again at the hands of heartless government bureaucrats, institutions, and policies.

Having grown up mostly on a diet of Hollywood films up until that point, it was a shock to the system. Where in the world would people make movies with such a grim worldview? Perhaps this is one reason Hollywood movies make for such good exports.

Now that I have several thousand movies under my belt, I'm more easily bored by movies that adhere to the "good guys win out" archetype. Genre movies still intrigue me, but predominantly when directors play off the form. Film festivals are a draw for their wealth of movies that work outside storytelling conventions. I'm curious to watch Boyhood not just because of the way it was filmed (over 12 years, using the same actors) but because Richard Linklater has always been a bit of a sui generis in Hollywood.

With the internet, cord-cutting, and the slowdown of growth in per capita attendance of the movies, perhaps we've also reached the peak of demand for the 90 to 120 minute filmed drama. Art forms have always come and gone, and the movie drama has had a good run. It's not likely to just disappear, but its cultural and economic pull may never be as great again.

Perhaps I'm extrapolating too much from San Francisco given that I last lived in Los Angeles with a ton of movie-loving film school classmates, but fewer and fewer people, especially those in Generation's Y and Z, seem to love the movies. Isn't this how you suddenly graduate to being old? One day you just look at the younger generation and wonder why they're on YouTube and Snapchat and Tumblr instead of appreciating movies the way you do. It just sneaks up on you, and then you're gaping across the chasm.

In another fascinating post on the same subject, Hanson writes:

Thus in equilibrium, people are encouraged to consume stories, and to deludedly believe in a more just world, in order to be liked more by others. This is similar to how people have long been encouraged to be religious, so that they could similarly be liked more by others.

A few days ago I asked why not become religious, if it will give you a better life, even if the evidence for religious beliefs is weak? Commenters eagerly declared their love of truth. Today I’ll ask: if you give up the benefits of religion, because you love far truth, why not also give up stories, to gain even more far truth? Alas, I expect that few who claim to give up religion because they love truth will also give up stories for the same reason. Why?

One obvious explanation: many of you live in subcultures where being religious is low status, but loving stories is high status. Maybe you care a lot less about far truth than you do about status.

The economics of South Korean TV

Fascinating article on the unabashed leveraging of product placement to finance the ever popular South Korean TV dramas.

While details of product placement deals are not disclosed, industry sources say exposure on popular shows costs at least 100 million won ($96,000) and much more for a hit drama featuring A-list stars with a regional following.

The biggest spender of all is Samsung — the world’s largest technology firm by revenue — which sponsors around two thirds of all domestically-produced soap operas, according to Kim Si-hyun, head of 153 Production, a major PPL agency in Seoul.

“It’s a full package, meaning all visible consumer electronics like smartphones, computers, cameras, air conditioners, TVs and refrigerators are Samsung products, from beginning to end,” Kim said.

Commodification of the dramas begins at the earliest stage of production, once a script writer has produced a basic story line listing characters and their professions.

The workplaces that will feature in the show are offered for sale to real companies looking for exposure.

According to Kim from 153 Production, the workplace of a lead character can go for between 500 million and 1 billion won.

That was how the female lead in “The Heirs” — a teenage romance that was a huge hit in Asia last year — ended up working for Mango Six.
 

More of note within, including just how effective such placement can be.

The South Korean TV industry is a machine. In the time a US studio takes to make one 24 episode season of television, South Korea will have produced two or more 30 to 50 hour K-dramas. Some of that relies on some brutal filming schedules as I've heard from some of my film school classmates that have worked in Korea, but it also comes from a heavy reliance on story archetypes, simplified lighting setups, and a stable of goto actors that cut down casting lead times. It's a formula, but thus far it hasn't exhausted its millions of devoted viewers throughout Asia.

Anomaly

Great piece by Rany Jazayerli on the mysterious formula of success of MLB pitcher Mark Buehrle.

In his 1984 Baseball Abstract, Bill James described “The Tommy John family of pitchers” as having “5 things in common.” James wrote:

1. They are all left-handed.
2. They are control-type pitchers.
3. They cut off the running game very well.
4. They receive excellent double-play support.
5. They allow moderate to low totals of home runs, lower-than-normal totals for a control pitcher.

This combination of abilities or tendencies enables this family of pitchers to be effective and to win at unusually high levels of hits per game, which then is another defining characteristic of the group.

Points four and five are essentially the same thing. James didn’t have access to ground ball/fly ball data 30 years ago, but he’s basically saying that Tommy John–style pitchers are extreme ground ball pitchers; ground balls lead to double plays and don’t lead to home runs. John himself allowed more than a hit per inning in his career, but many of those runners were wiped out on 6-4-3s.3

Buehrle would fit into the Tommy John family of pitchers perfectly, except for one small detail: He isn’t a ground ball pitcher. His career ground ball rate of 45 percent is just barely higher than league average, and thanks to spending most of his career at U.S. Cellular Field, he has surrendered 333 home runs in 3,009 career innings, a rate of exactly 1.00 per nine innings; John allowed 302 home runs in a career that spanned 4,710 innings. Thanks to all of those home runs in addition to hits surrendered on balls in play, Buehrle has allowed a higher batting average (.272) than John did (.265), even with a higher strikeout rate.
 

It's worth reading the piece to find out which two factors isolates as being enough to tip Buehrle over from failure to success, and just how fine that line is (as measured in outs and runs).

How we read online

Certainly, as we turn to online reading, the physiology of the reading process itself shifts; we don’t read the same way online as we do on paper. Anne Mangen, a professor at the National Centre for Reading Education and Research at the University of Stavanger, in Norway, points out that reading is always an interaction between a person and a technology, be it a computer or an e-reader or even a bound book. Reading “involves factors not usually acknowledged,” she told me. “The ergonomics, the haptics of the device itself. The tangibility of paper versus the intangibility of something digital.” The contrast of pixels, the layout of the words, the concept of scrolling versus turning a page, the physicality of a book versus the ephemerality of a screen, the ability to hyperlink and move from source to source within seconds online—all these variables translate into a different reading experience.

The screen, for one, seems to encourage more skimming behavior: when we scroll, we tend to read more quickly (and less deeply) than when we move sequentially from page to page. Online, the tendency is compounded as a way of coping with an overload of information. There are so many possible sources, so many pages, so many alternatives to any article or book or document that we read more quickly to compensate. When Ziming Liu, a professor at San Jose State University whose research centers on digital reading and the use of e-books, conducted a review of studies that compared print and digital reading experiences, supplementing their conclusions with his own research, he found that several things had changed. On screen, people tended to browse and scan, to look for keywords, and to read in a less linear, more selective fashion. On the page, they tended to concentrate more on following the text. Skimming, Liu concluded, had become the new reading: the more we read online, the more likely we were to move quickly, without stopping to ponder any one thought.
 

Maria Konnikova in The New Yorker on the ways we read differently online than we do words on a physical page. Interesting throughout.

This piece echoes concerns raised in the results of a study published earlier this year that those taking notes on a computer remembered far less than those taking notes with pen and paper.

The common thread seems to be one of mental focus. If you're reading online but distracted constantly by all the other sites you could be visiting, the ads all along the margin, the multitude of hyperlinks, your email, the whole Pandora's Box of digital age distractions, your mind isn't going to process as much. Similarly, if you're taking notes on a laptop and not mentally trying to comprehend what you're jotting down but instead just mindlessly transcribing in a half zoned out state, your mind may not absorb much of the material.

I'm as guilty of falling victim to mental distraction in this age as anyone (I'm embarrassed to share how many browser windows and tabs I have open on my computer right now), and I think with nostalgia back to my childhood, pre-Internet, when my favorite pastime was finding some nook to deep dive into a novel for hours on end.

Bill Viola

From a review of one of Bill Viola's latest video art installations Martyrs:

Viola was one of video art’s earliest exponents, and is now one of its most popular and critically divisive. He was the first video artist to have a retrospective to himself, at the Whitney in 1998. When Ada Louise Huxtable saw a work called The Crossing there—which, with effects very similar to some of those used in Martyrs, shows a walking man being consumed by falling water and by flames—she wrote in The New York Review that it was “an unforgettable image” that “can be taken as a morality play or a stunning piece of visual theatre.” It’s a combination of mystical ideas and aesthetic drama that perhaps explains why crowds flock to his shows. The New Yorker‘s art critic Peter Schjeldahl, though, is one of a chorus of dismissive voices: “unremittingly, emptily pretentious” and “a master of special effects passed off as spiritual epiphanies.” One of the most perceptive remarks has come from Roberta Smith. When she reviewed his Whitney exhibit for The New York Times she wrote that “it may be that Mr. Viola is better in small doses, in situations where you can contemplate his work without having to walk into another Viola.”

The reason for that is a mixture of portentousness and pace. Viola makes most of his work in slow motion, and a whole exhibition is agonizingly languorous. Most of his videos are very long, and the climaxes, when they come, are often vacant and predictable. Going Forth by Day (the title is drawn from the Egyptian Book of the Dead) is a huge five-video installation. One part shows a team from the emergency services packing up their kit after a flood in the desert, while a woman, wrapped in a blanket, waits by the water. Nothing much happens and eventually they all go to sleep. Then a man rises out of the water and up into the sky. It begins to rain, then the sun comes out and the people wake up. The piece lasts more than half an hour.
 

I enjoyed the first Viola exhibit I ever saw when living in New York City, slow motion high definition video has a hypnotic fetishization of thin slices of time that is like a more luxurious version of an animated GIF, but I empathize with Viola's critics in the semantic emptiness of his images.

With a proliferation of high resolution displays in the world, perhaps an artist will come along who makes this type of slow video art that can be enjoyed as background to your life rather than as a cultural luxury you have to take in at a museum in one focused visit. Something like a revival of the screensaver. Ambient art.

I wish I could buy a copy of Christian Marclay's The Clock and have it playing on a display in my apartment 24/7. It features so many images of clocks and watches that it really is a clock as art in the purest sense of the expression.

Cities are superlinear, companies are not

But unlike animals, cities do not slow down as they get bigger. They speed up with size! The bigger the city, the faster people walk and the faster they innovate. All the productivity-related numbers increase with size---wages, patents, colleges, crimes, AIDS cases---and their ratio is superlinear. It's 1.15/1. With each increase in size, cities get a value-added of 15 percent. Agglomerating people, evidently, increases their efficiency and productivity.

Does that go on forever? Cities create problems as they grow, but they create solutions to those problems even faster, so their growth and potential lifespan is in theory unbounded.

...

Are corporations more like animals or more like cities? They want to be like cities, with ever increasing productivity as they grow and potentially unbounded lifespans. Unfortunately, West et al.'s research on 22,000 companies shows that as they increase in size from 100 to 1,000,000 employees, their net income and assets (and 23 other metrics) per person increase only at a 4/5 ratio. Like animals and cities they do grow more efficient with size, but unlike cities, their innovation cannot keep pace as their systems gradually decay, requiring ever more costly repair until a fluctuation sinks them. Like animals, companies are sublinear and doomed to die.
 

From a Stewart Brand summary of research by Geoffrey West.

From a long conversation with West at Edge:

Let me tell you the interpretation. Again, this is still speculative.

The great thing about cities, the thing that is amazing about cities is that as they grow, so to speak, their dimensionality increases. That is, the space of opportunity, the space of functions, the space of jobs just continually increases. And the data shows that. If you look at job categories, it continually increases. I'll use the word "dimensionality."  It opens up. And in fact, one of the great things about cities is that it supports crazy people. You walk down Fifth Avenue, you see crazy people, and there are always crazy people. Well, that's good. It is tolerant of extraordinary diversity.

This is in complete contrast to companies, with the exception of companies maybe at the beginning (think of the image of the Google boys in the back garage, with ideas of the search engine no doubt promoting all kinds of crazy ideas and having maybe even crazy people around them).

Well, Google is a bit of an exception because it still tolerates some of that. But most companies start out probably with some of that buzz. But the data indicates that at about 50 employees to a hundred, that buzz starts to stop. And a company that was more multi dimensional, more evolved becomes one-dimensional. It closes down.

Indeed, if you go to General Motors or you go to American Airlines or you go to Goldman Sachs, you don't see crazy people. Crazy people are fired. Well, to speak of crazy people is taking the extreme. But maverick people are often fired.

It's not surprising to learn that when manufacturing companies are on a down turn, they decrease research and development, and in fact in some cases, do actually get rid of it, thinking "oh, we can get that back, in two years we'll be back on track."

Well, this kind of thinking kills them. This is part of the killing, and this is part of the change from super linear to sublinear, namely companies allow themselves to be dominated by bureaucracy and administration over creativity and innovation, and unfortunately, it's necessary. You cannot run a company without administrative. Someone has got to take care of the taxes and the bills and the cleaning the floors and the maintenance of the building and all the rest of that stuff. You need it. And the question is, “can you do it without it dominating the company?” The data suggests that you can't.
 

Lastly, from an article about West and his research in the NYTimes.

The mathematical equations that West and his colleagues devised were inspired by the earlier findings of Max Kleiber. In the early 1930s, when Kleiber was a biologist working in the animal-husbandry department at the University of California, Davis, he noticed that the sprawlingly diverse animal kingdom could be characterized by a simple mathematical relationship, in which the metabolic rate of a creature is equal to its mass taken to the three-fourths power. This ubiquitous principle had some significant implications, because it showed that larger species need less energy per pound of flesh than smaller ones. For instance, while an elephant is 10,000 times the size of a guinea pig, it needs only 1,000 times as much energy. Other scientists soon found more than 70 such related laws, defined by what are known as “sublinear” equations. It doesn’t matter what the animal looks like or where it lives or how it evolved — the math almost always works.

West’s insight was that these strange patterns are caused by our internal infrastructure — the plumbing that makes life possible. By translating these biological designs into mathematics, West and his co-authors were able to explain the existence of Kleiber’s scaling laws. “I can’t tell you how satisfying this was,” West says. “Sometimes, I look out at nature and I think, Everything here is obeying my conjecture. It’s a wonderfully narcissistic feeling.”
 

The pace of technology has already shifted some of the old company scaling constraints in the past two decades. When I first joined Amazon, one of the first analyses I performed was a study of the fastest growing companies in history. Perhaps it was Jeff, perhaps it was Joy (our brilliant CFO at the time), but someone had in their mind that we could be the fastest growing company in history as measured by revenue. Back in 1997, no search engine gave good results for the question "what is the fastest growing company in history."

Some clear candidates emerged, like Wal-Mart and Sam's Club or Costco. I looked at technology giants like IBM and Microsoft. Two things were clear: most every company had some low revenue childhood years when they were finding their footing before they achieved the exponential growth they became famous for. Second, and this was most interesting to us, many companies seemed to suffer some distress right around $1B in revenue.

This was very curious, and a deeper examination revealed that many companies went through some growing pains right around that milestone because smaller company processes, systems, and personnel that worked fine until that point broke down at that volume of business. This was a classic scaling problem, and around $1B or just before it, many companies hit that wall, like the fabled 20 mile wall in a marathon.

Being as competitive as we were, we quickly turned our gaze inward to see which of our own systems and processes might break down as we approached our first billion in revenue (by early 1998 it was already clear to us that we were going to hit that in 1999).

Among other things, it led us to the year of GOHIO. Reminiscent of how, in David Foster Wallace's Infinite Jest, each year in the future had a corporate sponsor, each year at Amazon we had a theme that tied our key company goals into a memorable saying or rubric. One year it was Get Big Fast Baby because we were trying to achieve scale ahead of our competitors. GOHIO stood for Getting Our House In Order.

In finance, we made projections for all aspects of our business at $1B+ in revenue: orders, customer service contacts, shipments out of our distribution centers, website traffic, everything. In the year of GOHIO, the job of each division was to examine their processes, systems, and people and ensure they could support those volumes. If they couldn't, they had to get them ready to do so within that year.

Just a decade later, the $1B scaling wall seems like a distant memory. Coincidentally, Amazon has helped to tear down that barrier with Amazon Web Services (AWS) which makes it much easier for technology companies to scale their costs and infrastructure linearly with customer and revenue growth. GroupOn came along and vaulted to $1B in revenue faster than any company in history.

[Yes, I realize Groupon revenue is built off of what consumers pay for a deal and that Groupon only keeps a portion of that, but no company takes home 100% of its revenue. I also realize Groupon has since run into issues, but those are not ones of scaling as much as inherent business model problems.]

Companies like Instagram and WhatsApp now routinely can scale to hundreds of millions of users with hardly a hiccup and with many fewer employees than companies in the past. Unlike biological constraints like the circulation of blood, oxygen, or nutrients, technology has pushed some of the business scaling constraints out.

Now we look to companies like Google, Amazon, and Facebook, companies that seem to want to compete in a multitude of businesses, to study what the new scaling constraints might be. Technology has not removed all of them: government regulation, bureaucracy or other forms of coordination costs, and employee churn or hiring problems remain some of the common scaling constraints that put the brakes on growth.