The whole system where all of these projects generally go towards some form of advertising where we convince people to buy things they don't really need is a far worse form of heat loss than this. Buying the latest shiny smartphone every year isn't just the heat loss of thousands of engineers making it slightly thinner, it's the actual loss of all the resources that went into last year's batch of smartphones that end up in a landfill somewhere.
And yet, none of this is really a loss as people need something that feels important to do with their time, and building that new smartphone that is the world's thinnest definitely feels like you're making accomplishments. And people are pretty happy when they open the box and see their new smartphone.
Moving corporate resources around is just one more step in a world we don't truly need, but which we create for ourselves anyway. In this case, it's part of the game of proving that our company has the biggest numbers so that our share holders get a smile on their faces when they open their retirement portfolios.
Getting a new smartphone is what people want. They wouldn't have an exciting thing to gift or to receive on Christmas. They would get tired of the way it looks all the time. They wouldn't be able to show it off to their friends. They wouldn't be delighted with the new UI. Life would be a bit more boring in one more way.
Why would you say no to them?
Not the most important thing in the world? Sure. Something that millions of people want and are willing to spend 1% of their annual pay check? Yes.
Saying that it makes no sense constitutes a very destructive thinking. When you start thinking of what "makes" or "not makes" sense, you stop being empathetic. There's always a better, "more right", more proper thing to do and millions of people are just wasting their time on something they don't need. But aren't they human beings? Isn't having irrational wants rooted in the humanity itself?
Planned economy was dealing in the same maxims. "People need food". "People need shelter". Also tools and military equipment. Fashion clothes? Nah, screw that, useless. Beauty items? Shenanigans of capitalists. Some variety of food? We don't have resources for that.
We use money and investment as a distributed resource allocation system.
It's kind of worked so far, but it is fundamentally flawed and on a catastrophic trajectory.
We've created a self-amplifying dissipative system without any kind of braking system, and we're already wasting the earth away faster than it regenerates.
The growth religion must be dispelled. I hope we can find a system that captures the positive aspects of capitalism while stopping the current destruction/consumption wave.
Isn't it funny, the amount of things like this that go on in the system we've created. Like how weird is it that "competition" - two companies both working on the same things against each other, without sharing what they know - can be better for the consumer than if both companies worked together. None of this is really going to change unless we can somehow make a world where making the world a truly better place can be a more powerful driver than money.
It isn't so weird when you remember that is how evolution works with biological creatures as well. If we all got together and tried to agree on the next singular mutation to our DNA, the whole thing just wouldn't work.
It seems to me like competing companies actually are incentivised to share information with each other. That would allow them both to cut costs. Does anyone know why they don't do this? Or know of examples where they do do this?
Of course competition would force them both to lower prices after they cut costs, but this will lead to increased demand so both companies should be making more profit. Also if they have a third competitior then they will both be gaining customers from them.
EDIT: Actually this happens all the time, just mediated by money. My economist brain switched off for a second. I was imagining a situation like "You tell us that trade secret in exchange for this one". But this situtation would require a "coincidence of wants". Money alleviates that problem. So this does happen all the time, it just looks more like "Even though you're our competitors we'll give you secret X in exchange for $n".
> Does anyone know why they don't do this? Or know of examples where they do do this?
Just about any capital-intensive industry cooperates. Your computer is made by any one of a few dozen companies; open it up and you'll see a bunch of parts made by suppliers. Open up a computer made by a competitor and you will see that most of the parts come from the very same suppliers.
The auto industry is both the same and different. I worked for an automotive electronics company in college. We'd get a binder full of specification in Japanese or German or French, translate it to English, and run the validation on the same part that went into a Ford or GM car, but with a few changes to the firmware to satisfy the differences in specifications. Most of the time, these things went out the door with no labels so the companies could put on their own.
Then there is collaboration between the automakers themselves. The new 10-speed transmission in Ford and GM trucks is a joint venture between the two. For decades, all automatic transmissions in BMWs came directly from GM. The new Mercedes Benz pickup truck is based on a Nissan. The upcoming Toyota Supra was joint developed with BMW. The new Diesel engines in Fords are co-developed with PSA. It goes on and on...
But what are people meant to do? The information isn't there.
Should I chuck away my diesel car and buy a Tesla? I'd certainly have a psychological reward for that, but what about the huge amount of energy/resources already invested in the diesel car? "But your old car will be used by someone else" people will say, and then it all starts to get complicated.
Depends how much you use it. The heuristic I use it that eventually they money I spend goes to a consumable, so if I spend as little as possible by focusing only on what actually makes me happy then I’m also being as environmentally friendly as possible. I’m basically retired already. That’s as much due to inheritance as frugality, but even without inheritance I think I would’ve managed to retire by 48 at this rate.
If the government implemented Pigovian taxes on pollution and carbon emissions then you wouldn't have to worry about this. The decision about whether it was environmentally sound would be baked into your decision about which option had better value for money.
I found this insightful, but disagree with two points.
First is that people think working on adtech is important. It may be fun or offer a good lifestyle, but they seem to know it's not the most meaningful, important work to do.
Second, that retirement portfolios are a major beneficiary of all this heat loss. Most of the value is captured lower on the food chain by employees, execs, and money managers.
Your statement about new shiny smartphone being a heat loss implies that there's some objective measure of what's worthy of resources and what's not. I don't think so.
Life has no meaning, and there's no inherent value in anything. How people decide to spend resources that they have is their responsibility. Thankfully, money, together with open markets is an extremely effective mechanism of conciliating millions of such decisions. So, if millions of people decide that they would rather buy a new phone than, I don't know, help starving children in Africa – it's their responsibility. Blaming it on advertisement is a view that presents these millions of people as helpless children, who are so easy to manipulate that they can't even be responsible for their own decisions – which is very far from the truth.
I'm not sure it is, it's hardly as if adverts are just lists of facts about the product you are buying. All that changed with Edwards Bernays. When I see an advert on television that is telling me I need to buy a specific model of car to be a good father then I know I'm seeing propaganda.
Your comment is true but it doesn't contradict my point in any way. Of course it's propaganda. But you're still an adult who is fully responsible for your actions.
Also, people are much more rational than economists give them credit for. You don't need a new car for transportation. But you may need a psychological boost of self-respect. You may need to feel like those people from the commercial. You may need social status, validation, a lot of other tangible things that economists and software engineers are so quick to label as "stupid"; and buying the car for those reasons is often a very rational and wise thing to do, even if you don't admit the real reasons to yourself.
Yes, of course I can be manipulated. By the way, "manipulation" is a very loosely defined term: you're trying to change my mind right now, which is also a form of manipulation. It doesn't contradict the fact that my decisions are still my responsibility.
Most of our decisions are not the result of conscious, deliberate thoughts. Our deliberate selves can be manipulated, but that's our instinct that's the most prone to manipulation.
Advertising is designed to make us act for the benefit of corporations, not necessarily our own benefit. It is nowadays built on the science that I've linked to, and they pour billions of dollars into it because it's so damn effective.
Speaking of phones, status symbols may have been important for survival 10,000 years ago, but they aren't anymore (or much less), and yet we still seek them, and corporations take advantage of that instinct to milk us by selling more and more useless, shiny junk. The ego boost is short-lived though because the next best thing is always around the corner, keeping us on the chronic dissatisfaction treadmill.
> advertising where we convince people to buy things they don't really need is a far worse form of heat loss.
The core business of advertising is making people chronically dissatisfied with their life. Not only does it cause economic waste, but it brings people down. Ad blocking (online and IRL) is not only a matter of privacy, it is a matter of sanity.
On your original point, please sing along gaily...
Grow theee...
Grow theee...
Grow the economy
Exponentially
we rise and we rise
and we tear up the skies
we...
Grow theee...
Grow theee...
Grow the economy
Like a kick-ass cancer
Hyperinvasive
And when everything's ruined
What will we do?
What will we do?
Cancer thank you!
Grow theee...
Grow theee...
Grow the economy
Just like rabbits in Australia
Grow the economy
Wildfires in California
Grow the economy
Nagasaki, Hiroshima
Grow the economy
The earth is like an apple pie...
Let's eat it and let's die!
Do you want some more? It's delicious :-)
This happens at the company I recently retired from. At intervals of between five and ten years someone decides that R&D should either be centralised or that the development engineers should be closer to the factories. The people are the same people, the work they do is the same, but the location is different. The justification for centralisation is usually that there will be better communication between the development engineers and the justification for putting them in the factories is that they will be able to communicate better with the management and workers of the factories. The reorganization is always intended to have a valuable side effect. I could never understand why they don't go directly for the side effect.
I work in a corporate environment in business intelligence and this rings true. This year we are tasked with retiring an arbitrary number of reports (mostly old Crystal reports) since they take too much of our time to maintain them. This will mean telling business partners that we are shutting down their reports, which in turn will cause them to create more Excel spreadsheets and Access databases. And in the process there will be the "heat loss" described in the article.
Isn't this the perfect example of lack of markets inside companies? i mean the consumers of your reports are either perfectly prepared to pay your department enough to keep the reports coming, or they don't want them that much. but without a free floating price the larger company will never know.
How can you have a market inside a company? Markets depend on having multiple suppliers and multiple customers. Nokia tried having internal competition and it didn't go well.
Something like it can work though. Many years ago I worked for Philip Semiconductor at the Mullard factory in Southampton in a department that designed and built production and test equipment. We had a formal project process where if the customer department wanted something they had to ask us first and allow us to perform a feasibility study or produce a prototype while spending up to ten percent of the rough estimate of the project cost. At the end of that we would present a detailed plan and cost. The customer department could then decide whether to offer the job to us or ask an external player such as British Aerospace to do it.
Its not a market so much as an economy. Instead of necessarily saying "you must do things this way" its "you must meet these requirements and these SLAs/goals/dates, and you have this many Magic Corporate Resource Bucks to spend". Those Magic Corporate Resource Bucks aren't real dollars necessarily, but they are representative of the costs of things that other divisions of the company may provide.
You can swap your MCRBs for real dollars and go out and purchase your own hardware, for example, or do your own service monitoring, or you can "pay" the team that manages hardware to maintain it for you. And the service monitoring team can integrate your project into the company-wide monitoring system. If you do the first option, it might be cheaper, but when things inevitably break, you're the one who takes the blame and has to fix it, instead of having in house experts who fix it.
There's central planning, so you don't have monopoly issues. The hardware provisioning team can't just jack up the price to infinity, because the company can see what the actual cost is and force the team to provide the stuff at cost.
Then you do a little magic like loosely tying bonuses to the amount of MCRBs you receive if your team is an infrastructural one, and perhaps allow management to redeem MCRBs for things like additional capacity to hire employees, and potentially even use MCRB allocation by end users as a way of figuring out what pieces of infrastructure are the highest impact/most in need of additional staffing/etc.
You end up with a system where infra teams have decent incentives to offer good tooling and to fix bugs/implement features (because there's always the looming threat of a client team leaving you and developing their own solution). User facing teams have an incentive to use existing tools and rely on the infrastructure that exists, unless there are compelling reasons not to, but when there are such reasons, they have some level of autonomy to develop unique solutions to fit their needs, and you have indirect, but still useful, signals of where upper management needs to invest additional resources, because something is being used a lot.
> How can you have a market inside a company? Markets depend on having multiple suppliers and multiple customers.
This is basically what Amazon did with AWS, to phenomenal success. You can create a single-supplier market within the company for any product as long as you sell to the wider public too, and if the wider public buys from your single-supplier then you know your internal customer is getting a good product.
> We had a formal project process...
Been there at companies with similar models, done that, the entire model is fundamentally broken. You may pay the lowest amount of cash on paper but the process takes so long that the additional amount of money you spend on management and architects over the project planning process usually outweighs any supposed competitive savings. You also pay in agility / opportunity costs.
The reference to Coase was too obscure - I am implying that the size of this firm is too large to internally find an efficient use of resources - in other words the firm should be split up into smaller firms that can for example compete to be Report Making departments
There is a fair amount of shaking out to do but look at saas companies - to a large extent they are just being the HR department or whatever for their clients. Fake internal markets have generally failed utterly.
I think we are going to see much smaller much more productive individual companies.
Not markets.. just billing should work. A department bills another department for work done. If the other department doesn't want to pay, they can internalise the work to their pleasure (and organisational policy requirements), find another provider internal or external, or simply stop needing whatever they needed before.
I work in a company where this is how it's done. It's awful in every way.
There's no competition, so there's no valuations, no local control (I have no company bucks I can use as an employee to, for example, get security to create a service account), just incompetent people using exorbitant pricing to provide utterly shoddy service that I can't go to any competitors over.
Want a group mailbox in Outlook? $450 dollars each.
Plenty of companies have some scheme where you have to "pay" for some internal service from your team/organization budget. If teams are paying for something it's easy to justify keeping it.
I completely agree with this. Something I would add here is the great danger of wanting to recreate products from scratch. You have the "heat loss" effect as stated here but you also have a massive amount of expectation from the users of the existing product. It can quickly become "the product which will fix all our issues" over time and the goalposts are being moved so much that the release day is just pushed forward forever.
This is a lovely account and, though it may not seem when you first read it -- in my experience, it is somewhat optimistic. For instance:
> The process of changing the system to have a new balancing point took work. It involved investments of engineer time, design work, tech writers and documentation changes, and all kinds of other "meta" stuff.
In most places I've worked, this involves investments of two interns' time and a few design meetings which result in a design document, half of which will never make it into the actual implementation. If it's a customer-facing thing, it will result in documentation changes -- otherwise, it won't. There will be no time to adjust the documentation and internal knowledge about how we do it now is going to float around as oral wisdom. Why we do it like that is going to be folklore two years down the road.
I think many businesses are implementing productivity improvement work which consists of a) an investment in engineering time and b) moving things around. I think to most people moving things around is the only really visible part. I think this leads to others simply copying the 'moving around' part in order to attempt to gain productivity improvements. The most common example of this nowadays is people moving their infrastructure into a cloud provider. If this is not done right and the investment made in the engineering time to deliver a more productive result, it's going to be worse than not moving around.
Another analogy that comes to mind would be 'going to gym'. Short-term, working out is exactly a heat loss (doing hard work with no useful results). But long-term, it makes you healthier and able to do more things.
Back to corporate IT, it's not that hard to stabilize a decent big ol' legacy revenue generating system, while avoiding making changes. But if the company has to compete against smaller and leaner startups, avoiding changes might become a major risk, as the cost of all changes tends to go up.
So, it would be reasonable to keep the system is a constant state of flux, so that it has no choice but to become fitter and learn to change quickly without breaking: stuff like reproducible builds, reproducible deployment, CI/CD don't matter a lot for monthly stable releases, but one would have a hard time doing nightly stable releases without them.
> But, it kept them busy, and let them show off, and they can take that all the way to the bank by way of a performance review system that optimizes for Shiny New Things.
Yup. At least some of the generated heat can be captured in the form of bullet points on resumes, which can be used as leverage for promotions or new jobs.
Perhaps from a whole-system or whole-company perspective the result may be a net loss, but the endeavour may be quite postive for many of the people involved who are making or executing the decisions.
The author assumes that a change in a process never amortize. However, some changes cost time and money yes, but they amortize after a few months ans are worth it.
Yes, some changes might lead to worse processes than others, but most changes aren't.
It all comes down to a good CEO, if you make too many changes that make it worse, the business becomes bankrupt after a few years. If your changes amortize, even only slightly, your business stays afloat or improves.
In my current project we get moved around teams on a monthly (!) basis. The heat loss generated is so enormous you start to feel like you are in a powerplant.
Well, I think it is difficult to draw a line or we wouldn't be having this conversation, and everyone's line is going to be in a different place (and move around a bit as they change their own opinions as well). A large part of philosophy is built on trying to decide what is meaningful to do.
I can't give you an answer because I'm not sure what the best answer is myself.
There might also be a net loss to society for any number of reasons, Bastiat's That Which is Seen, and That Which is Not Seen is of special interest here.
Has anyone blogged about a software refactoring project being "heat loss"?
Same thing really -- it comes out better, the same or worse but the underlying principles are identical. You could avoid the "heat loss" by just hacking on the old crufty code or redesign it into a fancy-smancy state of the art system.
I would also bring up The Economic Calculation Problem and how it applies to large monolithic corporations equally as well but that's a discussion for another day.
And yet, none of this is really a loss as people need something that feels important to do with their time, and building that new smartphone that is the world's thinnest definitely feels like you're making accomplishments. And people are pretty happy when they open the box and see their new smartphone.
Moving corporate resources around is just one more step in a world we don't truly need, but which we create for ourselves anyway. In this case, it's part of the game of proving that our company has the biggest numbers so that our share holders get a smile on their faces when they open their retirement portfolios.