Coase's Law: Cost of Collaboration

One of the interesting things i read in Wikinomics is Coase’s Law. I had never heard of it. Here’s the deal:

Ronald Coase was a badass and won the Nobel Prize in 1991
Ronald Coase was a badass and won the Nobel Prize in 1991

Many companies today are turning to collaborative b2B models where consumers, employees, partners, and even competitors co-create value for a company. This is all happening due to the declining cost of collaborating.

It began in 1937 when a English socialist, Ronald Coase, published a paper called “The Nature of the Firm.” Coase was both fascinated and bewildered by american industry. He toured Ford and General Motors and wondered aloud why economists could say that Stalin and communism was mistaken to try to run the Soviet Union like one gigantic company when Henry Ford adn Sloan ran their own gigantic companies (Ford & GM) in similar ways. After all, the marketplace is the best mechanism for matching supply and demand, establishing prices, and getting maximum utility from limited resources.

He studies more the cost of information. Producing things (bread, a car, a hospital ER) involves steps where close cooperation and common purpose is essential. You can only break down day-to-day tasks so much before incurring costs that outweigh the savings of doing in under the same roof. These are called transaction costs:

  1. search costs (finding different suppliers and determining if they are good)
  2. contracting costs (negotiating prices and contracts)
  3. coordination costs of meshing products and processes

Most businesses in 1937 determined it was best to do all of these in-house. All of this encompasses “Coase’s Law” which states: A firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction on the open market. Basically, as long as it’s cheaper to perform a transaction inside your firm, keep it there.

The internet makes a difference because basically now transaction costs as so low that it has become much more useful to read Coase’s Law backwards: You should shrink a company until it’s harder to do things externally than internally, then bring it in-house.

It’s interesting because Coase’s Law does both a great job of explaining why old-school corporations were so big and powerful and does an equally good job of explaining why traditional companies are on the way out and why new businesses are smaller and more nimble.

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Heavy Rotation

I got a new plugin that feeds me an RSS feed of my top plays of the past week into my RSS feeder.  It’s interesting to see what my top artists are each week.  This week i’ve got:

  1. Whitest Boy Alive
  2. Born Ruffians
  3. Guns N’ Roses

The Whitest Boy Alive and Born Ruffians are two of my favorite new artists. WBA are really chill and easy to listen to while Born Ruffians are a better version of Clap Your Hands Say Yeah.  I recommend you check both out.

Why I like to blog

While reading Fred Wilson’s blog today about Live Blogging, he ended his post with this comment:

Blogging has a reputation as an ego centric activity for people who want to be heard. And that is certainly true and a big motivation for many people who do it. But blogging can be valuable in many other ways.

I often get in conversations with people as to why i blog.  To many it’s viewed as pure a vanity project.  I’ve found that putting my ideas and thoughts down for others to read is a great way to stimulate conversation and “talk” with friends but to do so by;

  1. allowing them to jump in at their leisure.  After they see the movie or read the book that i’ve written about or if they finally get a moment when they’re bored at work.
  2. not requiring them to participate.  They can read and process but unlike email they don’t have to respond unless they want to.  I’ve noticed that many of my friends will read my blog, never comment but will bring it up with me weeks or months later.  I love this.  We’re talking but in a turn-based way.  I’m just always making the first move
  3. making the conversation to be public – anyone can join.

I love it for these reasons. I don’t really care how many people read it or if anyone at all reads.  Sometimes i like to just get my thoughts down on paper so they’re organized and stated and i can forget them.

Why do you blog?  What do you like about it?

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You know you're a Minnesotan if…

My sister sent me this and i found myself chuckling.  Instead of forwarding, i’m just putting it up…

You know you’re a Minnesotan if..

  • 75% of your graduating high school class went to the Univ. of Minnesota. (maybe another 10% to Madison)
  • You know more than 1 person who has hit a deer.
  • People from other states love to hear you say words with “o”s in them.
  • You know what and where “Dinkytown” is.
  • “Perkins” was a popular hangout option in high school.
  • You have no problem saying or spelling “Minneapolis.”
  • You get mad at people who think Fargo is in Minnesota
  • Your school classes have been canceled because of snow or cold.
  • You know what Mille Lacs is and how to spell it.
  • You assume when you say “The Cities” people know where you are referring to.
  • You know the 2 sports-related reasons why we hate Dallas.
  • Continue reading “You know you're a Minnesotan if…”

Blogging from iPhone

I just downloaded the WordPress iPhone application. I’m pretty excited because now I can do some blogging from the road. I’m not exactly how it’ll work. I’m thinking I’ll send the text up from the phone and then add photos once I get back to the computer

Actually I just took a photo for the post and it worked pretty easily. I think this could dramatically increase my blogging

photo

Batman Rocks

I went and saw Batman on Friday and loved it. First of all, let me just say that the option of choosing your seats at a movie when purchasing the tickets online is a GREAT thing. Nothing like going to a sold out show and knowing that you’re centered perfectly. Also, don’t read any more if you’re going to see the movie and don’t want a spoiler.

So, about Batman. I give it a 9 out of 10. It has some amazing parts and a few parts that could be just a little bit better. The action scenes are incredible. The Hong Kong kidnapping sequence was just a small piece of genius. The Bat Motocycle makes me want to immediately go out and ride

It’s been written everywhere that The Joker makes the movie and i completely agree. His first scene where he confronts the mob and does the magic trick or making a pencil disappear sets the tone for the entire movie. It says, “Hi i’m the joker. I’m funny, clever and i’m going to kick ass all over the place.” My man at WWTDD.com describes Heath Ledger’s performance best:

Everything Ledger did in this movie was fucking awesome. “And here we go” is not an amazing line. Picture that on the page. It’s just four little words. Ledger made it awesome. “Why so serious,” is an empty, ordinary line. Ledger made it great. This sucks. I can’t believe he’s dead. Most actors fucking suck. There’s only like 7 good ones. Now there are 6. Now pretty idiots like Channing Tatum will ruin more of my movies, reading lines like his script had the dialog written upside down and backwards. Channing, if you’re reading this, and later today you feel a pop inside your head, it’s because I just threw a rock at the back of your skull. Hey, look, over here, it’s me, Brendon, from that website. You Suck.

This movie is not as good as Batman Begins. Sequels never are. The first films build the characters and the backstory – they are more character driven. Second films usually have more villains, more blood and more action and this one is no exception, but compared to Hellboy 2, Spider-Man 2, X2, and other sequels i think it stands as the best of the bunch.

Some parts i didn’t like about the film:

  • When Harvey Dent goes to Two-Faced the CGI is too much. The entire movie has amazingly real ation sequences and a cartoonish face seems out of place
  • Batman’s voice is kind of lame. I know he has a voice changing device but still, it seemed corny
  • Harvey Dent’s rampage. I just didn’t believe it as much as The Joker’s cause. I can understand that he’s upset but pointing that anger towards Gordon or Batman seems ridiculous.
  • Maggie G. She just needed to be hotter. I mean, it’s a comic book – get some bombshell in there who can be both smart and hot. I mean they had a smokin’ hot australian computer hacker in Transformers. They can do better here.

That’s all i can think of now. What did you all like?

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What Makes Billy Joel Think

There was an interesting article in the NYTimes on Sunday about Billy Joel.  When asked which of his songs make him think, he immediately cites two: “Vienna” (1978), a celebration of a life’s worth at every age, and “Summer, Highland Falls” (1976), a meditation on emotional extremes.

It’s a good article of his life and how he’s come to terms with his success. He seems to be much more chill now. Although i wonder what his thoughts are about Christie Brinkley’s latest divorce debacle.

  • MP3 of Summer, Highland Falls is HERE
  • MP3 of Vienna is HERE

The Coach of Silicon Valley

On the plane this past weekend, i read a great article about a guy named Bill Campbell who is known in Silicon Valley as “coach.” He’s a former football coach at Columbia who is non-technical but has a knack for handling personalities and managing companies and employees. He’s on the board of Apple and Intuit, sits in on every Google board meeting, and can frequently be found around the valley drinking bud light and yelling at people (in a good way).

One interesting thing about the article is how he evaluates talent. He believes that startups often hire “early stage” people without thinking about whether they will succeed as the company grows. Instead, he believes they should hire major players who know how to scale up. Once hired, the review system should measure these 4 areas:

  1. On the job performance – the typical quantitative goals
  2. Peer group relationships
  3. Management / leadership and how well you develop the people around you
  4. Innovation and best practices

I thought these were interesting, especially having peer group relationships being part of a review. I think that’s smart as these interactions do impact your performance immensely. If you can’t get along with your co-workers, it’s hard to be productive, or manage or lead.

Bruno Movie – Cound be Better Than Borat

I thought Borat was genius but from what i’m hearing Bruno sounds incredible.  Check out this report in The Smoking Gun:

JULY 8–Lured by $1 beer and the prospect of “hot chicks” and “hardcore fights,” thousands of Arkansans were duped last month into appearing as extras in comedian Sacha Baron Cohen’s latest staged mayhem. Cohen and his confederates organized cage fighting programs on consecutive days in Texarkana and Fort Smith. Both cards ended with two male grapplers (one was identified as “Straight Dave” and wore camouflage) tearing each other’s clothes off and, while in underwear, kissing down their opponent’s chest. This man-on-man action triggered Fort Smith fans to throw chairs and beer at the ring, according to one cop present at the city’s Convention Center. Cohen is currently filming a follow-up, of sorts, to his smash 2006 film featuring Borat, his fictional Kazakh journalist. The new film stars another of Cohen’s creations, Bruno, a gay Austrian journalist who interviews subjects about fashion and entertainment. It is reportedly titled, “Brüno: Delicious Journeys Through America for the Purpose of Making Heterosexual Males Visibly Uncomfortable in the Presence of a Gay Foreigner in a Mesh T-Shirt.” The June 5 Texarkana promotion was adverstised as “Red, White, and Blood.” The June 6 matches in Fort Smith were dubbed “Blue Collar Brawlin'” as seen in the below poster. Ads on Craigslist–like this one–noted that attendees had to be over 21 and suggested that fans arrive early “for $1 BEERS!” Cohen & Co. underwrote the cost of beer, which usually sells for $4 at the Fort Smith facility. “Blue Collar Brawlin'” drew about 1500 fans, who were greeted by signs stating that the event was being filmed. Attendees were also not allowed in with cameras or cell phones and some were asked to sign releases. The “Blue Collar Brawlin'” web site (fortsmithfight.com) was registered two weeks before the event in the name of “Peto Philer” of Algeria. The site, which remains live but has been stripped of all content, appears to be currently hosted on servers in Los Angeles.

I’ve always thought that Bruno’s stuff was a little bit funnier than Borat’s.  If you’ve never seen any of his pranks, check this out:

[youtube=http://youtube.com/watch?v=ilyA3s4FsHo]

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