If you imagine that a 25% cost advantage would let your firm quickly displace all rivals, think again. Yes more efficient firms and plants eventually displace less efficient ones, but it is easy to overestimate the strength and speed of this effect. For example, in a US manufacturing industry with five plants in use, the best plant will typically produce about
This is indeed what efficient capital markets accomplish. However, I suspect that production in factories suffers some of the same difficulty as the real estate market. No two houses are really the same, and the value of a particular house is not the same to any two people looking at it. Thus we don't find effective 'commodity' markets in real estate, their is all sorts of room for extremely local expertiese to produce profits for extremely local traders, and there is little substitute when shopping for a house to spending lots of time looking at lots of houses.
I wonder if it is somehow similar with factories, that the 'trade secrecy' of good and bad factories alike, plus the vagaries and variations of 100s of inputs to the factory across the land- and mind- scapes leave it an intrinsically inefficient market, a market where the information needed to make it more efficient is vast and expensive to acquire?
Why would I want to drive out my competitors? I could do what Toyota did for a long time -- slightly undercharge the competition, and take home the rest as profit.
Not sure, but I can say that I make a good living suing over trade secrets (engineered improvements to production, typically). Engineers combat commoditization, after all, and I work to be sure that their tiny improvements in productivity go to those who employ them.
How much would you value an institution which significantly accelerated selection (just using strong empirical evidence effectively, never mind doing much better)? How likely is such an institution to arise in the near future?
My current feeling is that such an institution would be very valuable and will plausibly exist in the relatively near term (probably in the form of some large financial institution). Current non-existence demonstrates some obstruction, but while a few decades isn't much time compared to human history, at the current rate it looks like it will represent a large fraction of historical innovation in finance.
This is indeed what efficient capital markets accomplish. However, I suspect that production in factories suffers some of the same difficulty as the real estate market. No two houses are really the same, and the value of a particular house is not the same to any two people looking at it. Thus we don't find effective 'commodity' markets in real estate, their is all sorts of room for extremely local expertiese to produce profits for extremely local traders, and there is little substitute when shopping for a house to spending lots of time looking at lots of houses.
I wonder if it is somehow similar with factories, that the 'trade secrecy' of good and bad factories alike, plus the vagaries and variations of 100s of inputs to the factory across the land- and mind- scapes leave it an intrinsically inefficient market, a market where the information needed to make it more efficient is vast and expensive to acquire?
Why would I want to drive out my competitors? I could do what Toyota did for a long time -- slightly undercharge the competition, and take home the rest as profit.
Err... the takeover market?
Faster selection would be of great social value.
Not sure, but I can say that I make a good living suing over trade secrets (engineered improvements to production, typically). Engineers combat commoditization, after all, and I work to be sure that their tiny improvements in productivity go to those who employ them.
How much would you value an institution which significantly accelerated selection (just using strong empirical evidence effectively, never mind doing much better)? How likely is such an institution to arise in the near future?
My current feeling is that such an institution would be very valuable and will plausibly exist in the relatively near term (probably in the form of some large financial institution). Current non-existence demonstrates some obstruction, but while a few decades isn't much time compared to human history, at the current rate it looks like it will represent a large fraction of historical innovation in finance.