Liebowitz Unchained
Robert Vienneau
now."
-- Stan Liebowitz
Paul David's article, "Path dependence, its critics and the quest for
'historical economics'", is available somewhere on the Web - I think
at a Stanford site. I downloaded the 2000 version some time ago.
"'Earnings are a decision variable, not a requirement,' says Prof.
Arthur, the economist. 'If everyone thinks you're doing fine
without earnings, why have them?'"
-- Apparently the Wall Street Journal
"This is a truly amazing quote....Surely Professor Arthur has been
misquoted. Or then again, maybe not."
-- Stan Liebowitz
"It should be noted that a firm has no incentive to
treat 'investment' expenditures of the kind referred to above
as anything other than costs of current operations unless it
wants to adjust its earnings figures to show a better profit
position for the sake of attracting investors or enhancing its
general reputation. We have argued that firms prefer to retain as
much of their earnings as possible for reinvestment in the firm.
To treat certain types of reinvestment expenditures as costs may
permit a higher total retention of earnings (as is well known
for depreciation) both because it may reduce the pressure to
pay higher dividends and because it reduces taxable income of
of the firm where corporate income is taxed. So long as profit
figures are 'satisfactory' there is, on the contrary, an
incentive to increase expenditures which are in fact for the
purpose of increasing profits in the future and to call these
expenditures 'current costs'."
-- Edith Penrose (1959)
--
Try http://csf.colorado.edu/pkt/pktauthors/Vienneau.Robert/Bukharin.html
To solve Linear Programs: .../LPSolver.html
r c A game: .../Keynes.html
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau
David Friedman
Robert Vienneau <rv...@see.sig.com> wrote:
> "Paul David has been promising a rejoinder for about ten years
> now."
> -- Stan Liebowitz
>
> Paul David's article, "Path dependence, its critics and the quest for
> 'historical economics'", is available somewhere on the Web - I think
> at a Stanford site. I downloaded the 2000 version some time ago.
http://216.239.51.100/search?q=cache:xHWir05yspwC:www-econ.stanford.edu/f
aculty/workp/swp00011.pdf+%22Path+dependence,+its+critics+and+the+quest+f
or&hl=en&ie=UTF-8
It consists of a lengthy, jargon ridden argument about the underlying
theory of path dependency. But one thing notably absent is any rebuttal
to Liebowitz and Margolis on the historical facts--which according to
them Paul David got wildly wrong.
Paul David has been promising a rebuttal for a very long time. If this
is it, then he is conceding that he was wrong about the historical
facts. Alternatively, twelve years after Liebowitz and Margolis
published "The Fable of the Keys," Paul David still hasn't gotten around
to answering it.
Or, as a third alternative, the answer is in some other article. Anyone
have one to offer?
susupply
"David Friedman" <dd...@daviddfriedman.com> wrote in message
news:ddfr-45FE5C.1...@sea-read.news.verio.net...
> Paul David has been promising a rebuttal for a very long time. If this
> is it, then he is conceding that he was wrong about the historical
> facts. Alternatively, twelve years after Liebowitz and Margolis
> published "The Fable of the Keys," Paul David still hasn't gotten around
> to answering it.
>
> Or, as a third alternative, the answer is in some other article. Anyone
> have one to offer?
Oh, Robert knows painfully well there is none. He's been humiliated about
as often as Arthur and David over this.
In this particular version of, "L&M are being mean to me", David slyly
admits he was wrong with such as:
"Arthur's (1989) phrase `lock-in by small historical events' is evidently a
gloss that should not be read too literally....".
Too bad for all those dot com entrepreneurs who lost their investors' shirts
by taking the earlier Arthur and David "too literally". Carl Shapiro and
Hal Varian being among those who helped popularize the ideas about which
David now says he was just kidding.
susupply
"Robert Vienneau" <rv...@see.sig.com>
who may one day find himself the target of a Paul Krugman column,
wrote in message news:rvien-F5542E....@news.dreamscape.com...
> We have argued that firms prefer to retain as
> much of their earnings as possible for reinvestment in the firm.
> To treat certain types of reinvestment expenditures as costs may
> permit a higher total retention of earnings (as is well known
> for depreciation) both because it may reduce the pressure to
> pay higher dividends and because it reduces taxable income of
> of the firm where corporate income is taxed. So long as profit
> figures are 'satisfactory' there is, on the contrary, an
> incentive to increase expenditures which are in fact for the
> purpose of increasing profits in the future and to call these
> expenditures 'current costs'."
> -- Edith Penrose (1959)
Which is how Enron, Global Crossing and a few other disasters came to be.
In the WSJ article from which Arthur is quoted, the story is that the "new
economy" is fundamentally different. Arthur and his sidekick were
frequently the economists upon whom these gurus relied. And now, after the
disasters, we get:
Robert Vienneau
Friedman <dd...@daviddfriedman.com> wrote:
Liebowitz and Margolis have some points about historical facts, at least
when it comes to the Dvorak keyboard. However, they are unlikely to
use empiricalism to successfully address David's point if they do not
understand David's point. It would be a manifestation of
anti-intellectualism - an attitude unworthy of serious scholars - to
complain about "jargon" like "ergodicity" and "stochastic processes"
in this context. It is fairly clear that L and M do not understand the
theory of path dependence, given their highly debatable representation
of it. And so they are unable to fully address the theory with their
historical facts. At least, that's what I get out of David's article.
In other words, the article I pointed to does indeed refute L and M.
If you want empirical examples, try:
Douglas J. Puffert, "Path Dependence, Network Form, and
Technological Change", 2000,
also available on the Web.
By the way, David, we see ignorant smearing elsewhere on this
thread of some of your economist colleagues. Here's an opportunity
for you to discourage uncivilized conversation. Will you take
it?
susupply
"Robert Vienneau" <rv...@see.sig.com>
suddenly fastidious about respecting the same people he often claims are
socialized to be ignorant,
wrote in message news:rvien-7516F8....@news.dreamscape.com...
> By the way, David, we see ignorant smearing elsewhere on this
> thread of some of your economist colleagues. Here's an opportunity
> for you to discourage uncivilized conversation. Will you take
> it?
At least Robert is still consistently self-unaware. As the above was
preceded by his:
> It is fairly clear that L and M do not understand
the
> theory of path dependence, given their highly debatable representation
> of it. And so they are unable to fully address the theory with their
> historical facts. At least, that's what I get out of David's article.
Meaning Robert is demeaning two professional economists, without having read
their work, merely on the say so of a third economist who is clearly
double-talking his way around admitting he was wrong.
David Friedman is correct that the quote from Stan Liebowitz about the
...um...tardiness(?... is that civilized enough for you Robert) of Paul
David's reply, is about the typewriter keyboard story. That QWERTY thing
that David promised to address sometime or other, but hasn't yet.
So Robert is in error in his claim:
> In other words, the article I pointed to does indeed refute L and M.
And, actually it doesn't refute anything at all in Liebowitz and Margolis
anyway. It's just Paul David appealing to his own authority, and hoping
there are enough Vienneaus out there willing to fall for it.
> If you want empirical examples, try:
>
> Douglas J. Puffert, "Path Dependence, Network Form, and
> Technological Change", 2000,
That would be the same Doug Puffert who shortly afterward, in April of 2001,
had to concede:
<< My thanks to Patrick Sullivan for forcing me to read more carefully (see
posting reproduced below). I retract my misinterpretation of Liebowitz' and
Margolis' definition, and I will remove the analogous discussion in footnote
3 of my contribution to Paul David's Festschrift.
<< My apologies to Liebowitz and Margolis for thinking, and writing, that
they
could make such a blunder. Mea maxima culpa. >>
And who also couldn't summon up an answer to this blunt question in the same
forum from Peter Lewin:
<< BTW, while we are talking about the real world, I am curious to know, do
you
believe that QWERTY is a case of inefficient lock-in? What is your take on
LM's
historical evidence? Are they similarly confused on this? >>
But at least Doug was willing to debate us publicly. Something Peter and I
will never see from Paul David.
David Friedman
Robert Vienneau <rv...@see.sig.com> wrote:
> Liebowitz and Margolis have some points about historical facts, at least
> when it comes to the Dvorak keyboard. However, they are unlikely to
> use empiricalism to successfully address David's point if they do not
> understand David's point. It would be a manifestation of
> anti-intellectualism - an attitude unworthy of serious scholars - to
> complain about "jargon" like "ergodicity" and "stochastic processes"
> in this context. It is fairly clear that L and M do not understand the
> theory of path dependence, given their highly debatable representation
> of it. And so they are unable to fully address the theory with their
> historical facts. At least, that's what I get out of David's article.
> In other words, the article I pointed to does indeed refute L and M.
Paul David is an economic historian. If his historical claims are
false--claims he thought important when he was making them in the
context of making arguments for path dependence--he has an obligation to
say so. It would even be appropriate to thank Liebowitz and Margolis for
correcting his errors. So far as I can tell he hasn't. Instead he writes
condescending articles claiming that the people who pointed out his
facts were wrong don't really understand his arguments.
Liebowitz and Margolis have not, in any of their stuff I read, claimed
that path dependency was logically impossible. The two arguments they
made, at least in the pieces I read (aside from the Microsoft book I
haven't followed the recent stuff), were that the idea of network
externalities were less new than claimed, and that their real effects
did not seem to be very large. For the latter they offered empirical
evidence.
I should add that I didn't work through the Paul David article/speech we
are now discussing in detail--that would have taken a substantial effort
and I'm not sufficiently interested in the question. But I saw nothing
that rebutted the arguments L&M actually make.
> By the way, David, we see ignorant smearing elsewhere on this
> thread of some of your economist colleagues. Here's an opportunity
> for you to discourage uncivilized conversation. Will you take
> it?
I'm afraid I don't know what smearing you are talking about, perhaps
because I haven't read all of the thread. I'm friendly with all three of
the people in question--for a force of evil Paul David is a very nice
fellow. But I think he owes Liebowitz and Margolis a public concession
on the historical facts, and at least as far as I can tell he hasn't
offered it. Certainly he didn't when I discussed the question with him
some years back. He said he was going to publish a rebuttal to their
"Fable of the Keys"--and the article we have been discussing doesn't
qualify.
The argument somebody made, I think in this thread, that he was
responsible for .com firms thinking that they could make money by losing
money in the process of establishing standards, is an interesting one. I
have similarly argued that his ideas may have been behind the failed
attempt to establish the Clipper chip as an encryption standard. In
either case, I don't think a scholar is responsible for how other people
use his ideas, as long as he is honest in giving the arguments that he
thinks are correct. My complaint about Paul David isn't that he argues
for the existence and importance of network effects and path dependency
but that he apparently did some very sloppy historical scholarship and
has, so far as I know, never admitted his error.
Tim Lambert
> In article <rvien-F5542E....@news.dreamscape.com>,
> Robert Vienneau <rv...@see.sig.com> wrote:
>
> > "Paul David has been promising a rejoinder for about ten years
> > now."
> > -- Stan Liebowitz
> >
> > Paul David's article, "Path dependence, its critics and the quest for
> > 'historical economics'", is available somewhere on the Web - I think
> > at a Stanford site. I downloaded the 2000 version some time ago.
>
> http://216.239.51.100/search?q=cache:xHWir05yspwC:www-econ.stanford.edu/f
> aculty/workp/swp00011.pdf+%22Path+dependence,+its+critics+and+the+quest+f
> or&hl=en&ie=UTF-8
>
> It consists of a lengthy, jargon ridden argument about the underlying
> theory of path dependency. But one thing notably absent is any rebuttal
> to Liebowitz and Margolis on the historical facts--which according to
> them Paul David got wildly wrong.
I don't know about the historical facts, but Liebowitz and Margolis
most definitely got the facts about HCI research wrong. They wrote:
"that the mathematical simulations of typing, which show no advantage
for Dvorak".
In fact, Don Norman, who conducted the simulations they refer to,
states that he found that Dvorak was 10% faster. This is in "The
Design of Everyday Things", which is not an obscure book - it is the
most widely read book on HCI out there.
Tim
David Friedman
Tim Lambert <lam...@cse.unsw.EDU.AU> wrote:
> I don't know about the historical facts, but Liebowitz and Margolis
> most definitely got the facts about HCI research wrong. They wrote:
> "that the mathematical simulations of typing, which show no advantage
> for Dvorak".
>
> In fact, Don Norman, who conducted the simulations they refer to,
> states that he found that Dvorak was 10% faster. This is in "The
> Design of Everyday Things", which is not an obscure book - it is the
> most widely read book on HCI out there.
What are you quoting--their book, or "Fable of the Keys?"
Samuel Barber
> The argument somebody made, I think in this thread, that he was
> responsible for .com firms thinking that they could make money by losing
> money in the process of establishing standards, is an interesting one. I
> have similarly argued that his ideas may have been behind the failed
> attempt to establish the Clipper chip as an encryption standard.
It recently worked for PayPal. They deliberately lost a large amount
of money up front to build a user base, gradually increased prices,
and eventually turned the corner into profitability (shortly before
being acquired by Ebay, another successful network effects dotcom).
They were also a bit lucky in that they launched their service a
couple months before any competing service was available, allowing
them to get an early lead.
Unfortunately, I didn't profit from my insight into PayPal, since EBay
was able to acquire it for essentially no premium. The pre-IPO
investors did great, of course.
Sam
Robert Vienneau
Friedman <dd...@daviddfriedman.com> wrote:
> In article <rvien-7516F8....@news.dreamscape.com>,
> Robert Vienneau <rv...@see.sig.com> wrote:
> Liebowitz and Margolis have not, in any of their stuff I read, claimed
> that path dependency was logically impossible.
The problem is that when L and M define path dependence, they seem
to focus on aspects that don't seem to be part of what Arthur and
David consider essential. I think L and M strike many as presently
their "facts" in such a tendentious manner that many simply
disbelieve them.
<http://www.mwbrooks.com/dvorak/dissent.html>
> > By the way, David, we see ignorant smearing elsewhere on this
> > thread of some of your economist colleagues. Here's an opportunity
> > for you to discourage uncivilized conversation. Will you take
> > it?
> I'm afraid I don't know what smearing you are talking about, perhaps
> because I haven't read all of the thread. I'm friendly with all three of
> the people in question--for a force of evil Paul David is a very nice
> fellow.
I was not referring to Liebowitz, Margolis, Arthur, or David.
> The argument somebody made, I think in this thread, that he was
> responsible for .com firms thinking that they could make money by losing
> money in the process of establishing standards, is an interesting one.
There you go. Do you remember having the same sort of discussion
about James Donald with Dan Clore and David Graeber?
Anyway, David, you are here defending disreputatable nonsense, at
best:
Patrick Sullivan wrote:
----------------------------------------------------------------
> In this particular version of, "L&M are being mean to me", David slyly
> admits he was wrong with such as:
> "Arthur's (1989) phrase `lock-in by small historical events' is evidently
> a
> gloss that should not be read too literally....".
> Too bad for all those dot com entrepreneurs who lost their investors'
> shirts
> by taking the earlier Arthur and David "too literally". Carl Shapiro and
> Hal Varian being among those who helped popularize the ideas about which
> David now says he was just kidding.
-----------------------------------------------------------------
And here's the passage from Paul David's article, which has nothing
to do with the above comments:
"By contrast, as the term 'lock-in' has been used in my work and
that of Arthur (1989), it simply is a vivid way to describe the
entry of a system into a trapping region the basin of attraction
that surrounds a locally (or globally) stable equilibrium. When a
dynamic economic system enters such a region, it cannot escape
except through the intervention of some external force, or shock,
that alters its configuration or transforms the underlying
structural relationships among the agents. Path dependent systems -
which have a multiplicity of possible equilibria among which
event-contingent selections can occur - may thus become locked in
to attractors that are optimal, or that are just as good as any
others in the feasible set, or that take paths leading to places
everyone would wish to have been able to avoid, once they have
arrived there.
From this vantage point, ARTHUR'S (1989) PHRASE 'LOCK-IN BY SMALL
HISTORICAL EVENTS' IS EVIDENTLY A GLOSS THAT SHOULD NOT BE READ
TOO LITERALLY; it is a convenient contraction of the foregoing
reference to the way in which trapping regions may be entered -
although somewhat unfortunate, in allowing a hasty reader to
suppose that the antecedent events somehow have created the local
stability, or locked-in state. To be more precise, albeit more
cumbersome, one should say that such configurations are
self-sustaining (Nash) equilibria; that in the case of a path
dependent process some particular historical event caused that
is, initiated the sequence of transitions that effectively
selected, one rather than another among such configurations to
be realized as the systemıs emergent property.
In some circumstances, as in the case of pure coordination games
(where there are strategic complementarities in the dynamic
interactions among agents) there is no Pareto-ranking of a
multiplicity of available equilibria from amongst which a path
dependent, branching process can make a selection. Which
coordination point is reached is a matter of welfare indifference
to the parties involved. A coordination equilibrium, thus, provides
us with the paradigmatic situation in which individuals are content
to remain doing something, even though they would be happier doing
something else if everybody would also do that other thing too. The
reason they donıt change what they are doing is, generically, that
there are information imperfections that make it unlikely that a
decentralized process can get everyone coordinated to move elsewhere,
collectively. Now notice that while incomplete information may be
critical in blocking spontaneous escapes from dominated coordination
equilibria, it is not a necessary condition for decentralized market
processes to select such states. This is another reason why presenting
'lock-in' as a particular (pernicious, and supposedly uncommon) form
of 'path dependence' is an invitation to further analytical
confusions."
-- Paul David (emphasis added)
So, David, we see ignorant smearing on this thread of some of your
economist colleagues. Here's an opportunity for you to discourage
uncivilized conversation. Will you take it?
--
susupply
"Tim Lambert" <lam...@cse.unsw.EDU.AU> wrote in message
news:tnadked...@oolong.orchestra.cse.unsw.EDU.AU...
> I don't know about the historical facts, but Liebowitz and Margolis
> most definitely got the facts about HCI research wrong. They wrote:
> "that the mathematical simulations of typing, which show no advantage
> for Dvorak".
>
> In fact, Don Norman, who conducted the simulations they refer to,
> states that he found that Dvorak was 10% faster. This is in "The
> Design of Everyday Things", which is not an obscure book - it is the
> most widely read book on HCI out there.
You are correct, you do not know historical facts. BTW, David's famous
paper claimed between 20% and 40% faster, so even if this book you are
pushing is correct you are only half way to the lower figure.
Anyway, here are the "historical facts" as cited in the work of Liebowitz
and Margolis:
<< [Hisao] Yamada as much as admits that experimental findings reported by
Dvorak and his supporters cannot be assigned much credibility [snip]
<< He cites a 1973 study based on six typists at Western Electric where
after
104 hours of training on DSK, typists were 2.6 percent faster than they had
been on Qwerty.
<< Similarly Yamada reports that in a 1978 study at Oregon State University
after 100 hours of training typists were up to 97.6 percent of their old
Qwerty
speed. Both of these retraining times are similar to those reported by
Strong
and not to those in the Navy study.
[snip]
<< The most recent studies of the relative merits of keyboards are found in
the
ergonomics literature. These studies provide evidence that the advantages of
the Dvorak is either small or nonexistent. For example A. Miller and J. C.
Thomas conclude that "the fact remains however that no alternative has shown
a
realistically significant advantage over the Qwerty for general purpose
typing." In two studies based on analysis of hand-and-finger motions R. F.
Nickells Jr. finds that Dvorak is 6.2 percent faster than Qwerty, and R.
Kinkhead finds only a 2.3 percent advantage for Dvorak. ....
[my note, here is where your guy, Norman, enters Stan and Steve's paper]
< < Simulation studies by
Donald Norman and David Rumelhart find similar results:
" We studied expert typists by using our simulation model. Here, we
looked at the [QWERTY] and Dvorak layouts, as well as several alphabetically
arranged keyboards. The simulation showed that the alphabetically organized
keyboards were between 2% and 9% slower than the [QWERTY] keyboard, and the
Dvorak keyboard was only about 5% faster than the Sholes.
" These figures correspond well to other experimental studies that compared
the
Dvorak and Sholes keyboards and to the computations of Card, Moran, and
Newell
. . . for comparing these keyboards.... For the expert typist, the layout of
keys makes surprisingly little difference. There seems no reason to choose
Sholes, Dvorak. or alphabetically organized keyboards over one another on
the
basis of typing speed. "
[Back to Stan and Steve:]
<< The consistent finding in the ergonomic studies is that the results imply
no
clear advantage for Dvorak. ....At the very least, the studies indicate that
the speed
advantage of Dvorak is not anything like the 20-40 percent that is claimed
in
the Apple advertising copy that David cites. Moreover, the studies suggest
that
there may be no advantage with the Dvorak keyboard for ordinary typing by
skilled typists. It appears that the principles by which Dvorak
''rationalized"
the keyboard may not have fully captured the actions of experienced typists
largely because typing appears to be a fairly complex activity. >>
And then there is the report that Robert Vienneau referenced in
characteristic fashion in February of 2001:
<<...here's a paper, which I haven't
read, apparently providing empirical evidence of the superiority
of Dvorak over QWERTY:
<< http://www.santafe.edu/sfi/publications/Abstracts/98-05-041Eabs.html >>
Which paper claims that Dvorak is all of 4.0% faster.
Stubborn things, these facts.
susupply
"Robert Vienneau" <rv...@see.sig.com>
still licking his self-inflicted wounds,
wrote in message news:rvien-AA03A2....@news.dreamscape.com...
> The problem is that when L and M define path dependence, they seem
> to focus on aspects that don't seem to be part of what Arthur and
> David consider essential. I think L and M strike many as presently
> their "facts" in such a tendentious manner that many simply
> disbelieve them.
>
> <http://www.mwbrooks.com/dvorak/dissent.html>
And Robert isn't having anything to do with "tendentious" argument! What a
hoot the above cited article is:
<<--------------quote----------------------
You might hear comments from time to time about studies showing Dvorak is
"no better than QWERTY," or words to that effect. All such comments that
I've heard seem to echo an article, "The Fable of the Keys," by S. J.
Liebowitz and Stephen E. Margolis, published in the Journal of Law &
Economics, vol. XXXIII (April 1990).
.... I will address its implications as if they were clearly stated claims:
Claim: Dvorak Is a Fraud, Studies Prove It's No Better
Claim: Dr. Dvorak Was a Mercenary Huckster
Claim: Dvorak's Keyboard Failed, So It Must Be No Good
Claim: It Was Always Easy To Convert Typewriters
Claim: QWERTY Was Designed Ergonomically
Claim: The QWERTY Standard was Established by Competition
Claim: Market Economics Prove Dvorak Is Inferior
The "Fable" article spews forth a host of references to various studies. In
the article's view, studies that present Dvorak in a good light are
"suspicious," having been "influenced" by Dvorak and his supporters. Of
course, in the article's view, it is not possible that Dvorak and his
supporters were influenced by their studies!
[snip]
The "Fable" article belabors the point that the Navy cannot produce a copy
of its study, and that the article's authors had to obtain it from Dvorak
International. The authors clearly want us to think this is suspicious, but
keep in mind we are speaking of a Government agency in a chaotic time (World
War II). ....
The article also makes much of the fact that the Navy study and some others
used questionable practices that might favor Dvorak unfairly. But the
article cannot and does not say that these practices, such as averaging
certain test scores or throwing out "unfair" preliminary tests, did favor
Dvorak, only that they might favor Dvorak. In each case, it seems the
original investigators thought (rightly or not) that they were correcting a
statistical bias. In hindsight, the "Fable" article second-guesses the
investigators and assumes they were biased in favor of Dvorak.
But what about studies showing Dvorak is worse than QWERTY? There aren't
any! The "Fable" article's star performer is a 1956 GSA study conducted by
Dr. Earl Strong. (More than one aspersion against Dvorak springs from Dr.
Strong.) In short, Dr. Strong recommended against the Dvorak layout, but
why?
The "Fable" article uses a different slant, but here's what it tells us: The
GSA study put 10 QWERTY typists through a blistering 25-day regimen,
training four hours a day in Dvorak to reach their pre-conversion speed.
Four hours a day! A well-worn rule of thumb (Dvorak cites studies from the
1920's) is that it's a waste of effort to speed drill for more than two
hours daily. After this torture, Strong found that the overtrained Dvorak
typists didn't gain from additional training as fast as 10 fresh QWERTY
typists did.
[snip]
At best, Dr. Strong's study is ambiguous. More realistically, it is a gross
example of why you should not put blind faith in studies. In any skill,
there is usually a burst of progress when you start speed training after a
time of routine work. Clearly, the burned-out Dvorak group would have to be
exceptional to match (as they nearly did) the progress of the slack QWERTY
group. Studies are often ill-conceived, but how could Dr. Strong make such a
horrible error in his study's design?
[snip]
What's worse, Dvorak introduced his layout in the midst of the Great
Depression. This was followed closely by the pressures of Word War II, and
then the powerful opposition of Dr. Strong. Those are tough hurdles for any
technology to clear.
[snip]
Mind you, I don't really give a damn about QWERTY's relevance to free-market
theory. I'm not really in this to convert QWERTY typists, although I've
helped a lot and they've all thanked me for it. I'm really in this because
people are teaching their children to type on a keyboard that could very
well torture them for life. These people might have good reasons, given
circumstances, but the relative cost of retraining isn't one of them.
--------------------endquote--------------------->>
High quality Vieneauian scholarship, as usual.
susupply
"Samuel Barber" <ope...@yahoo.com> wrote in message
news:37991aef.02111...@posting.google.com...
> It recently worked for PayPal. They deliberately lost a large amount
> of money up front to build a user base, gradually increased prices,
> and eventually turned the corner into profitability
All start up businesses lose money up front.
susupply
"Robert Vienneau" <rv...@see.sig.com>
getting down to brass tacks,
wrote in message news:rvien-AA03A2....@news.dreamscape.com...
> And here's the passage from Paul David's article, which has nothing
> to do with the above comments:
>
> "By contrast, as the term 'lock-in' has been used in my work and
> that of Arthur (1989), it simply is a vivid way to describe the
> entry of a system into a trapping region the basin of attraction
> that surrounds a locally (or globally) stable equilibrium.
Which is typical Davidian weaseling. Here's what he actually wrote in his
now infamous paper:
<< The story of QWERTY is a rather intriguing one for economists.....
competition in the absence of perfect futures markets drove the industry
prematurely into standardization on the wrong system...where decentralized
decision making subsequently has sufficed to hold it.
Outcomes of this kind are not so exotic. For such things to happen seems
only
too possible in the presence of strong' technical interrelatedness, scale
economies, and irreversibilities due to learning and habituation. >>
and, in the original, "on the wrong system" is italicized for emphasis.
So, most of the rest of David's paper is just as David Friedman described
it.
Actually, Friedman was being polite. The entire paper is deliberately
written in turgid prose to disguise what Paul David is up to, slyly
conceding that L&M have destroyed his argument.
At least he dropped his most ridiculous explanation in his latest. We all
remember his 1998 try:
<< Getting attention was a first requirement, and so my talk would start out
with
references to Sex. Seizing the audience's attention was one thing, but how
to
keep it? One generally reliable tactic of reinforcement suggested itself:
the
application of a stimulating shock. What is the subject that jolts
economists
even more than mention of Sex? Inefficiency! So, I would have to produce a
story involving an economic process that could not shake loose from the
influence of past events, and one in which rational autonomous agents were
led
to a shared, collective outcome that would judged to be no better for some,
and
for others definitely worse than a feasible alternative. And if that didn't
suffice, more "shock" would have to be applied: show that although all the
players individually might wish to choose otherwise were they only able to
wipe
away the past and start again, it was more than likely that they would go on
living with their unsatisfactory (Pareto inferior) situation -- because of
the
difficulties or expense of coordinating the actions that would be needed for
them to collectively achieve an escape. I do freely admit to having seized
upon
the history of typewriter (and computer) keyboard layouts as providing me
with
just such a rhetorical device.
<< Whatever novelty may be associated with my paper 'Clio and the Economics
of
QWERTY' resides largely in the surprising audience response, rather than in
either the story's ingred ients or its challenging message....>>
Of course, in all this time Paul David and Brian Arthur have been unable to
come up with an example that does satisfy their original claims.
susupply
"Robert Vienneau" <rv...@see.sig.com>
civilized conversationalist par excellence, but not much good at semantics,
wrote in message news:rvien-AA03A2....@news.dreamscape.com...
> Patrick Sullivan wrote:
> ----------------------------------------------------------------
>
> > In this particular version of, "L&M are being mean to me", David slyly
> > admits he was wrong with such as:
>
> > "Arthur's (1989) phrase `lock-in by small historical events' is
evidently
> > a
> > gloss that should not be read too literally....".
>
> > Too bad for all those dot com entrepreneurs who lost their investors'
> > shirts
> > by taking the earlier Arthur and David "too literally". Carl Shapiro
and
> > Hal Varian being among those who helped popularize the ideas about which
> > David now says he was just kidding.
> -----------------------------------------------------------------
>
> And here's the passage from Paul David's article, which has nothing
> to do with the above comments:
[snip]
> ...ARTHUR'S (1989) PHRASE 'LOCK-IN BY SMALL
> HISTORICAL EVENTS' IS EVIDENTLY A GLOSS THAT SHOULD NOT BE READ
> TOO LITERALLY; it is a convenient contraction of the foregoing
> reference to the way in which trapping regions may be entered -
> although somewhat unfortunate, in allowing a hasty reader to
> suppose that the antecedent events somehow have created the local
> stability, or locked-in state.
Here's a more recent (1998) interview with Brian Arthur, in which we shall
see that Paul David (and by extension his worshiper, Robert) is full of it:
http://www.strategy-business.com/media/pdf/98209.pdf
<<----------quote------------
Every 50 or 100 years, the economy
goes through a shift like this, involving
deep structural changes. ....
As we're shifting more and more
into high technology....high-tech markets operate under increasing,
rather than diminishing, returns.
That's something I've been arguing
since the early 80's. At the time,
it was considered very odd and weird.
It's like saying that there could be reverse
gravity. ....
.... In these markets,
you don't hear that Bill Gates has just
bought a steel company and that company
is about to take over all of the
steel in the United States. You simply
don't hear that. Or that somebody's
started a small lumber company and
in five years there is an I.P.O. and that
person is now worth half a billion dollars.
This is not like Netscape.
In high tech, though, there are two
or three characteristics that overturn
diminishing returns and give you increasing
returns, meaning the more
you get ahead, the more advantage you
have toward getting further ahead.
-------------endquote------------>>
Everyone paying attention? Arthur, contrary to what his colleague is
claiming, believes he's really on to something radical; "reverse gravity",
and "the more you get ahead, the more advantage you have toward getting
further ahead".
Back to Brian Arthur in his own words:
<<-------------quote---------------
If two or more products or companies are competing,
if one gets sufficiently ahead, it
gets more and more advantage. Under
certain circumstances, that can often
be enough to sort of tilt the market and
lock it in. So it locks into whatever gets
ahead. ....
[my note: David claimed we shouldn't take Arthur's phrase too literally]
... What I am saying is that under increasing
returns, and under very specific
mathematical conditions, markets
become unstable. One product,
one company, can take a great deal of
the market, 70, 80, 90 percent. ....it doesn't
necessarily have to be in the computer industry.
You get these dominances. In
high tech, you see companies getting
very wealthy, cash rich, buying other
companies, merging, and so on. ....
...If you are in a technically
based industry, then it's not
sufficient to think in terms of lowering
your cost, improving your quality,
keeping products moving out the
door. That's the traditional challenge
for what I call the bulk manufacturing
economy. But in high tech, that's no
longer sufficient. If these markets are
unstable, they can lock in to something
and become dominated.
In that case, business strategy has
to go far beyond the usual adages
about costs down, quality up, core
competency. High tech adds a new layer
of complication. You have to allow
that you are playing games where the
winner can walk off with a great deal of
the market and the losers are left with
practically nothing, even if their products
are technically brilliant, and the
cost is right. So basically the strategies
are very much the strategies you
would apply in presidential primaries.
You want to build up market share, you
want to build up user base. If you do,
you can lock in that market.
[my note: there's that phrase we shouldn't be taking too literally again]
...this creates
an unstoppable bandwagon.
But if you go into the market and
think that you have a wonderful product
uct and it's sufficient just to make sure
it's technically brilliant and priced
right, you're going to get blindsided or
creamed by somebody else's bandwagon.
In high tech, you have to realize
that you must build up a user base
and go from there. ....
...we're moving more and
more into a technically based economy.
If we are looking at technology,
then we have to realize that increasing
returns are legion in these markets,
and not just an exception. That leads
to a very different way of thinking,
about instability, timing, bandwagons.
....
People innovate and innovate
and innovate in high tech. They are
readying these products, they're getting
them going, with the knowledge
that if they lock in the market, they're
going to get very rich and if they don't,
they're going to lose everything.
------------endquote---------------->>
This interview appeared in a publication titled "Strategy and Business", I
remind Robert.
David Friedman
Robert Vienneau <rv...@see.sig.com> wrote:
> So, David, we see ignorant smearing on this thread of some of your
> economist colleagues. Here's an opportunity for you to discourage
> uncivilized conversation. Will you take it?
If you are talking about Hal Varian and Carl Shapiro, I'm afraid I have
no idea what writings of theirs are being referenced.
susupply
> If you are talking about Hal Varian and Carl Shapiro, I'm afraid I have
> no idea what writings of theirs are being referenced.
Robert isn't referring to them, he's just pouting.
However, Stan Liebowitz referenced "Information Rules" in his latest book.
He criticized them for repeating the David version of the keyboard story,
especially they made a reference, in a footnote, to one of L&M's papers,
thus they should have known better.
He also points out that they were among many to fall for the "first mover
advantage" myth. Specifically, in their Lessons for entrepreneurs, in their
chapter 6.
Robert Vienneau
Friedman <dd...@daviddfriedman.com> wrote:
I was not referring to Liebowitz, Margolis, Arthur, or David as
doing the smearing.
Consider:
"By contrast, as the term 'lock-in' has been used in my work and
that of Arthur (1989), it simply is a vivid way to describe the
entry of a system into a trapping region the basin of attraction
that surrounds a locally (or globally) stable equilibrium. When a
dynamic economic system enters such a region, it cannot escape
except through the intervention of some external force, or shock,
that alters its configuration or transforms the underlying
structural relationships among the agents. Path dependent systems -
which have a multiplicity of possible equilibria among which
event-contingent selections can occur - may thus become locked in
to attractors that are optimal, or that are just as good as any
others in the feasible set, or that take paths leading to places
everyone would wish to have been able to avoid, once they have
arrived there.
From this vantage point, ARTHUR'S (1989) PHRASE 'LOCK-IN BY SMALL
HISTORICAL EVENTS' IS EVIDENTLY A GLOSS THAT SHOULD NOT BE READ
TOO LITERALLY; it is a convenient contraction of the foregoing
reference to the way in which trapping regions may be entered -
although somewhat unfortunate, in allowing a hasty reader to
suppose that the antecedent events somehow have created the local
stability, or locked-in state..."
-- Paul David (emphasis added)
Is Paul David "slyly admit[ing] he was wrong" here, especially
in the emphasized phrase? The adjective "slyly" suggests there is
something dishonest about what Paul David is saying here. Is this
suggestion justified by the text?
Has any evidence been presented that "all those dot com entrepreneurs
who lost their investors' shirts" took anything mistaken from "the
earlier Arthur and David"? Is there any evidence at all that "Carl
Shapiro and Hal Varian [were] among those who helped popularize the
ideas about which David now says he was just kidding"? In particular,
does Paul David now say in the above text that he was "just kidding"?
So, David, we see ignorant smearing ("slyly", "just kidding") on
this thread of some of your economist colleagues. Here's an
opportunity for you to discourage uncivilized conversation. Will
you take it?
--
Mark Patrick Witte
susupply <susu...@mindspring.com> wrote:
>
>"Robert Vienneau" <rv...@see.sig.com>
>
>still licking his self-inflicted wounds,
Like Triumph the Insult Comic Dog, I suspect Venal licks himself a
James A. Donald
David Friedman:
> > The argument somebody made, I think in this thread, that he
> > was responsible for .com firms thinking that they could
> > make money by losing money in the process of establishing
> > standards, is an interesting one. I have similarly argued
> > that his ideas may have been behind the failed attempt to
> > establish the Clipper chip as an encryption standard.
Samuel Barber
> It recently worked for PayPal. They deliberately lost a large
> amount of money up front to build a user base, gradually
> increased prices, and eventually turned the corner into
> profitability (shortly before being acquired by Ebay, another
> successful network effects dotcom). They were also a bit
> lucky in that they launched their service a couple months
> before any competing service was available, allowing them to
> get an early lead.
e-gold followed a policy of making money from the beginning.
They are, in consequence, much smaller than PayPal, but on the
other hand, they are growing fast, and have made a lot more
money than PayPal has (any positive number being larger than a
negative number.)
Thus while PayPal has certainly gained a commanding lead by
losing money, it is far from clear that network effects will
suffice to lock out competitors indefinitely and allow them to
attain significant monopoly profits.
When the dust finally settles, we will be able to set a dollar
value on how big network effects are for PayPal's business. The
dust has not settled yet. The theory is that network effects
will enable them to reap monopoly profits for a long time. We
have not yet seen those monopoly profits.
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
YKg6TrBL1LN923rIDvdnc/3VH1LTAx+y+wGw0QUW
4ylPCced4Hk/Jseq/i4khlm9SVTEPRN7TDbsBQJaq
Samuel Barber
Usually because of fixed costs, though, not because they give away the
product. PayPal lost more money the more people used it. That's
unusual.
Sam
Samuel Barber
> When the dust finally settles, we will be able to set a dollar
> value on how big network effects are for PayPal's business. The
> dust has not settled yet. The theory is that network effects
> will enable them to reap monopoly profits for a long time. We
> have not yet seen those monopoly profits.
All of PayPal's venture-funded direct competitors are out of business,
and it's not likely that any new ones will be funded. There is still
the possibility that the major banks could get together and create a
rival service. That would be a formidable competitor. One reason this
might not happen is that the new network would compete with existing
profitable banking networks, and companies are always relunctant to
cannabalize business. PayPal is not yet a threat to the banks (I think
it will be someday).
Sam
susupply
> All of PayPal's venture-funded direct competitors are out of business,
> and it's not likely that any new ones will be funded. There is still
> the possibility that the major banks could get together and create a
> rival service. That would be a formidable competitor. One reason this
> might not happen is that the new network would compete with existing
> profitable banking networks, and companies are always relunctant to
> cannabalize business. PayPal is not yet a threat to the banks (I think
> it will be someday).
I'm not familiar with what PayPal does, could you briefly explain their
business. And tell me what the network effects are in their case.
Tim Lambert
The quote is from Reason Online:
http://reason.com/9611/ltr.sl.shtml
Tim
Tim Lambert
> "Tim Lambert" <lam...@cse.unsw.EDU.AU> wrote in message
> news:tnadked...@oolong.orchestra.cse.unsw.EDU.AU...
>
> > I don't know about the historical facts, but Liebowitz and Margolis
> > most definitely got the facts about HCI research wrong. They wrote:
> > "that the mathematical simulations of typing, which show no advantage
> > for Dvorak".
> >
> > In fact, Don Norman, who conducted the simulations they refer to,
> > states that he found that Dvorak was 10% faster. This is in "The
> > Design of Everyday Things", which is not an obscure book - it is the
> > most widely read book on HCI out there.
>
> << The most recent studies of the relative merits of keyboards are found in
> the
> ergonomics literature.
> ... Dvorak is 6.2 percent faster than Qwerty,
> ... a 2.3 percent advantage for Dvorak. ....
> ... Dvorak keyboard was only about 5% faster than the Sholes.
> ... Dvorak is all of 4.0% faster.
Gee, even the studies you cited consistently show Dvorak to be better.
If you want to find out what HCI experts think about this matter, you
could consult Don Norman's book , or the "Handbook of Human-Computer
Interaction" (which also suggest that the difference is about 10%).
> Stubborn things, these facts.
Indeed. The facts show that there *is* an advantage to Dvorak,
despite what Liebowitz says. But I get the feeling that you would
prefer to believe Liebowitz, rather than the facts.
Tim
susupply
"Robert Vienneau" <rv...@see.sig.com>
again writing without first reading what he wants to discuss,
wrote in message news:rvien-EA1036....@news.dreamscape.com...
> Has any evidence been presented that "all those dot com entrepreneurs
> who lost their investors' shirts" took anything mistaken from "the
> earlier Arthur and David"?
As Keynes famously put it: "The ideas of economists and political
philosophers, both when they are right and when they are wrong, are more
powerful than is commonly understood. Indeed the world is ruled by little
else. Practical men, who believe themselves to be quite exempt from any
intellectual influence, are usually the slaves of some defunct economist."
quoted by Stan Liebowitz in "Re-Thinking the Network
Economy"
And shortly after quoting Keynes, Stan starts quoting assorted stock market
analysts and business journalists who got their ideas from somewhere. Such
as this from a column in "eCompany":
<< "We have the first-mover advantage," Women.com CEO Marleen McDaniel told
CNBC in June 1999. "They have the first-mover-advantage," a Zona Research
analyst told a reporter, explaining why eToy's stock was a steal. "Eve.com
is an outstanding e-commerce opportunity with a first-mover advantage,"
Idealab founder Bill Gross bragged in a press release. As Draper Fisher
Jurvetson partner Tim Draper told USA Today in October 1999, the first-mover
is "usual the (company) that's going to win it." >>
Stan dryly notes that each one of the above mentioned companies soon went
belly-up.
After quoting "eCompany" Stan moves on to "Information Rules", which he
admits is "one of the more reasonable books of advice for the information
economy":
<< First-mover advantages can be powerful and long-lasting in lock-in
markets, especially those in information industries where scale economies
are substantial. If you can establish an installed base before the
competition arrives on the scene, you may make it difficult for the later
entrants to achieve the scale economies necessary to compete. >>
He notes the academic caution in the above; "can be" and "may make it
difficult", but later in their book they're saying:
<< Be prepared to invest to build an installed base through promotions and
by offering up-front discounts. You can't succeed in competetive lock-in
markets without making those investments. >>
Note their, "can't succeed...without".
Then Stan quotes, "Professor Brian Arthur, the pied piper of lock-in",
saying in the Harvard Business Review:
<< Two maxims are widely accepted in knowledge-based markets: It pays to
hit the market first, and it pays to have superb technology. >>
But notes that in the same year he said the above, he discarded the
importance of "superb technology" (in the "Strategy and Business" interview
from which I have already quoted): "...the losers are left with practically
nothing, even if their products are technically brilliant...."
> Is there any evidence at all that "Carl
> Shapiro and Hal Varian [were] among those who helped popularize the
> ideas about which David now says he was just kidding"? In particular,
> does Paul David now say in the above text that he was "just kidding"?
"ARTHUR'S (1989) PHRASE 'LOCK-IN BY SMALL
HISTORICAL EVENTS' IS EVIDENTLY A GLOSS THAT SHOULD NOT BE READ
TOO LITERALLY"
The emphasis on David's line above having been supplied by Robert, since it
is not in the original. Thanks for it, Robert, as well as for the rope with
which I've hanged you.
susupply
"Tim Lambert" <lam...@cse.unsw.edu.au> wrote in message
news:m3ptt81...@cycloid.localdomain...
> David Friedman <dd...@daviddfriedman.com> writes:
> > What are you quoting--their book, or "Fable of the Keys?"
>
> The quote is from Reason Online:
>
> http://reason.com/9611/ltr.sl.shtml
You've managed to quote, not an L&M paper, but (only part of) a short reply
by them to a letter to the editor. A letter which is deeply ignorant:
<<Liebowitz and Margolis's article is as flawed as the QWERTY keyboard. I
would suggest that they get out from under their papers, books, and research
studies to try a Dvorak keyboard to get at the truth. In the studies they
cite, where two groups competed against each other on the two machines, they
failed to observe that the participants previously all had been QWERTY
typists. This leads to an obvious disadvantage for the Dvorak groups, who
had to overcome their QWERTY habits while attempting to adapt to the new
keyboard layout. The only acceptable study would be one in which all the
participants had never typed before. The result would be quite clear: The
Dvorak is far superior.
<< James Argiro
Deerfield Beach, FL >>
Their reply being:
<< To Mr. Argiro we would note that the mathematical simulations of typing,
which show no advantage for Dvorak, do not have the drawback that he cites.
>>
You forgot to include their: "do not have the drawback that he cites".
susupply
> "susupply" <susu...@mindspring.com> writes:
> > Stubborn things, these facts.
>
> Indeed. The facts show that there *is* an advantage to Dvorak,
> despite what Liebowitz says. But I get the feeling that you would
> prefer to believe Liebowitz, rather than the facts.
The facts are as L&M have presented them, not as Arthur and David and their
idolators would have them. You yourself just got through quoting only part
of one sentence of a letter they wrote in response to a SPECIFIC criticism.
You disingenuously left out the clause in which the context would have been
made clear.
Further, you have also done a very dishonest edit of my response to you,
conveniently leaving out what your own source has to say:
<< There seems no reason to choose Sholes, Dvorak, or alphabetically
susupply
add to the evidence pile:
http://www.opinionjournal.com/columnists/pnoonan/?id=95001773
<<----------------quote----------------------
Let me tell you what I saw when I was there. I saw cavernous rooms with big
monitors on the walls, and on desks too. The monitors and computers were
blinking out numbers. I remember the numbers and words on the screens as
bright green. Young future Masters of the Universe were standing with
phones, monitoring the numbers, saying things, buying and selling. I met
with a woman famous in the company for being in charge of putting big
natural gas pipelines into Central or South America and India. She seemed
intense and intelligent and, like the men, very Armani but kind of Texas
Armani--everyone well tailored but with more gold, more colors than Wall
Street people, who are sort of more gray-hued.
I thought Ken Lay intelligent, soft-spoken, somewhat opaque. At one point I
met Mr. Lay's wife. ....
And I thought, they spend a lot of money. That was one thing that hit me
hard in Houston: They were "hemorrhaging money!" as Tom Wolfe's Sherman
McCoy said. They were building this and tearing down that, they were, they
told me, talking to legislators in various state houses, lobbying to get
deregulation bills passed. All of it seemed expensive, labor-intensive,
time-intensive.
And it all seemed so tentative, so provisional. The Enron building was huge;
the Enron sign outside, the big tilted E, was huge; the gold earrings on the
women executives were huge; the watches on the men were huge; the paychecks
were huge; the company's ambitions were huge. But all of it seemed to depend
on things that were provisional. If they are able to build the big pipeline
in India, it will be great and profitable--provided it happens. If they are
able to get states to deregulate electricity, and Enron is able to provide
it, and it all goes well, it will be great and profitable--if it happens. If
the Central or South American pipeline goes through and works and runs a
profit it will be great--if it happens. An empire built on ifs. It all
seemed so provisional.
I went away for a few weeks and worked hard and tried to put together a
speech and make a contribution to the annual report, but none of it really
worked. Mr. Lay used at least part of the speech I worked on, about
deregulation and its challenges. Some of what I tried to write for the
annual report made it in. But mostly my contributions weren't helpful, and I
think for two reasons. One was that the guys at the top, and in the middle,
seemed unable to communicate to me exactly what it was the company was doing
to make money. So I didn't absorb the information and make it understandable
to others. The other was that I think I sensed a sort of corporate monomania
at the top--if you can't understand what we're doing then maybe you're not
too bright.
But the key part was that I couldn't help them explain their mission because
I didn't fully understand what their mission was. I understand what the
Kenneth Cole shoe company does. It makes shoes and sells them in stores.
Firestone makes tires. I couldn't figure out how Enron was making its money,
what exactly it was selling, and every time I asked I got a kind of
gobbledygook answer or a cryptic one, like "The future!"
We should all have a realistic sense of our limits, and I decided that one
of mine is that I don't have a mind that appears to be able to understand
the complexities of modern big business. But my dimness was in this case
helpful to me. It meant I would have not a long relationship with Enron but
a short one that lasted about a month. And it allowed me to make another
choice. A friend, on being told I'd been to Houston and was working on an
annual report, told me: "Get paid in stock, that company is golden."
-------------------endquote------------------>>
susupply
>... I don't think a scholar is responsible for how other people
> use his ideas, as long as he is honest in giving the arguments that he
> thinks are correct.
Which reminds me of a surprisingly not well-known, article by the late
George Stigler: A Sketch of the History of Truth in Teaching.
Not available online, unless you have a subscription:
http://ideas.repec.org/a/ucp/jpolec/v81y1973i2p491-95.html
But it is included in his: The Intellectual and the Marketplace, which is
where I'm getting the following:
<<----------------------quote------------------------
....Witness the arrow of consumerism.
It started simply enough: various people--and especially a young man named
Nader--found automobiles less safe than they wished....These zealous patrons
of the public furthermore insisted that defective products be corrected, and
that damage arising in spite of the most conscientious efforts of the
manufacturer should be his financial responsibility. Similar arrows were
soon launched at a score of nonvehicular industries.
This quiver of truth- and safety-minded arrows was thrown for a time at
perfectly appropriate targets--businessmen accustomed to public abuse, who
were naturally able to charge their customers for any amount of safety,
frequent and successful lawsuits, and obloquy. But the arrows of reform
pass through--if they hit at all-the targets at which they are aimed, and in
1973 they hit a professor. Evil day!
In that year a young man named Dascomb Henderson, a graduate of Harvard
Business School (1969) and recently discharged as assistant treasurer of a
respectable-sized corporation, sued his alma mater for imparting instruction
since demonstrated to be false. This instruction...concerned the proper
investment of working capital. One of Henderson's teachers at Harvard, a
Professor Plessek, had thoroughly sold his students on a sure-fire method of
predicting short-term interest rate movements, based upon a predictive
equation incorporating recent movements of the difference between high- and
low-quality bond prices, the stock of money (Plessek had a Chicago Ph.D.),
the number of "everything is under control" speeches given by governors of
the Federal Reserve Board in the previous quarter, and the full-employment
deficit.....Assistant treasurer Henderson...played the long-term bond market
with his corporation's cash, and in the process the cash lost its surplus
character. He was promptly discharged...and sued.
....Henderson's attorney deliberately pursued several lines of attack....
1 ....
2 Professor Plessek did not display proper scientific caution. Henderson's
class notes recorded the sentence: "I'll stake my reputation as an
econometrician that this model will not [engage in intercourse with] a
portfolio manager". This was corroborated, with a different verb, by a
classmate's notes.
3 ....
4. Harvard University was grossly negligent in retaining (and hence
certifying the professional competence of) an assistant professor whose work
had received humiliating professional criticism (Journal of Business, April
1972). Instead, he had been promoted to associate professor in 1972.
....
Harvard...asked for a dismissal...claiming that it was frivolous and
unfounded. Universities and teachers could not be held responsible for
honest errors, or all instruction would be brought to a stop. .... Judge
Howlson (Yale, LL.B. 1940) remanded the case for trial on the merits,
and...remarked: "It seems paradoxical beyond endurance to rule that a
manufacturer of shampoos may not endanger a student's scalp but that a
premier educational institition is free to stuff his skull with nonsense."
...Harvard and Professor Plessek won the case...but by a thin and foreboding
margin. Only the facts that (1) the Plessek equation, as of 1969, looked
about as good as most such equations, and, (2) the plaintiff could not
reasonably be expected to be informed of the failure of the equation as soon
as two years after it was discovered--the lag in publication alone is this
long--excused the errant professor. ....
The university world received the decision with what an elderly Englishman
would call concern and I would call pandemonium. ...Within a breathless
three weeks, a professor at Cornell's medical school had sent an explicit
retraction of his treatment of Parkinson's disease to the last decade's
graduates of the school. This proved to be only the first of a torrent of
such actions; but well before that torrent had climaxed at least ninety-five
suits against universities and teachers had been filed.
[much more snipped]
----------------------endquote--------------------->>
James A. Donald
"Samuel Barber"
> > All of PayPal's venture-funded direct competitors are out
> > of business, and it's not likely that any new ones will be
> > funded. There is still the possibility that the major banks
> > could get together and create a rival service. That would
> > be a formidable competitor. One reason this might not
> > happen is that the new network would compete with existing
> > profitable banking networks, and companies are always
> > relunctant to cannabalize business. PayPal is not yet a
> > threat to the banks (I think it will be someday).
susupply
> I'm not familiar with what PayPal does, could you briefly
> explain their business. And tell me what the network effects
> are in their case.
Paypal allows people to send money by email. So does e-gold,
backed by private investors, and e-dinar, backed by the
government of Dubai, and e-rand, backed by the smell of an oil
rag and someone's credit card.
Obviously it is convenient to use the same service that
everyone else uses, which is Paypal, which overwhelmingly
dominates the business, almost totally dominates the business,
thanks to their early willingness to suffer extraordinarily
large losses, stupendous losses, to build their business.
But despite this overwhelming and near total domination, and
despite the obvious strength of network effects working in
their favor, their competitors are not in fact going away,
rather seem to be growing.
Thus while network effects obviously matter, we cannot yet tell
if they matter enough to justify the "new economy" strategy of
disregarding losses, in order to set standards in one's own
favor, whether network effects truly "lock in", or merely tilt
the balance a little bit.
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
OCDmyJUtdvnUlbgp2KOsADs97l5SzujJe8nzRE5e
4k2cKsA6lHw1ydM1Ul8TgZcYybHulgENNpX4pWIZm
Samuel Barber
> I'm not familiar with what PayPal does, could you briefly explain their
> business. And tell me what the network effects are in their case.
It should be obvious what the network effects are.
Sam
susupply
This is exactly the point Stan Liebowitz is making in "Re-Thinking the
Network Economy", way too many people have thought it was obvious, when it
really wasn't. Hence the bloodbath.
I note with some amusement that when I clicked on your paypal url, I saw
four logos for companies that are in the business of transferring funds,
which should tell us something about how strong the network effects are for
this type of activity.
susupply
> Paypal allows people to send money by email. So does e-gold,
> backed by private investors, and e-dinar, backed by the
> government of Dubai, and e-rand, backed by the smell of an oil
> rag and someone's credit card.
>
> Obviously it is convenient to use the same service that
> everyone else uses, which is Paypal, which overwhelmingly
> dominates the business, almost totally dominates the business,
> thanks to their early willingness to suffer extraordinarily
> large losses, stupendous losses, to build their business.
I don't see why it is obvious why everyone should want to use the same
service. Network effects can be negative, for one thing.
> But despite this overwhelming and near total domination, and
> despite the obvious strength of network effects working in
> their favor, their competitors are not in fact going away,
> rather seem to be growing.
Which is a sentence contradicting itself.
>
> Thus while network effects obviously matter, we cannot yet tell
> if they matter enough to justify the "new economy" strategy of
> disregarding losses, in order to set standards in one's own
> favor, whether network effects truly "lock in", or merely tilt
> the balance a little bit.
The evidence is very strong that network effects are heavily oversold as
part of a business plan. From what you've just told me about the enormous
losses Paypal took, I'm betting it was a poor bet for them too.
David Friedman
"susupply" <susu...@mindspring.com> wrote:
>
> "David Friedman" <dd...@daviddfriedman.com> wrote in message
> news:ddfr-90A68B.1...@sea-read.news.verio.net...
>
> >... I don't think a scholar is responsible for how other people
> > use his ideas, as long as he is honest in giving the arguments that he
> > thinks are correct.
>
> Which reminds me of a surprisingly not well-known, article by the late
> George Stigler: A Sketch of the History of Truth in Teaching.
I used to assign that in class. The funny things was how many students
took it for granted that it was real, despite the dates.
David Friedman
Tim Lambert <lam...@cse.unsw.edu.au> wrote:
> Indeed. The facts show that there *is* an advantage to Dvorak,
> despite what Liebowitz says. But I get the feeling that you would
> prefer to believe Liebowitz, rather than the facts.
And you apparently prefer not to read Liebowitz's published work--the
"Fable of the Keys" article and the Microsoft book--in order to find out
what Liebowitz says. He doesn't claim that Dvorak has no advantage. He
claims that if it has an advantage it is not very large, and does not
justify the claims made by Paul David et. al.
James A. Donald
On Thu, 14 Nov 2002 09:53:47 -0800, James A. Donald
> Paypal allows people to send money by email. So does e-gold,
> backed by private investors, and e-dinar, backed by the
> government of Dubai, and e-rand, backed by the smell of an
> oil rag and someone's credit card.
I exaggerated: e-rand is very small and perhaps not doing so
well, but is still worth a few hundred thousand, which is more
than "the smell of an oil rag and somebody's credit card."
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
HIroBX5dqE1MEs6Giry0f2GPYZ76HXV5Jby3h8m
4B50SkNH+ivKPYJzsEjjNxDnN6XMKYej2v76rTGLB
Samuel Barber
> I don't see why it is obvious why everyone should want to use the same
> service. Network effects can be negative, for one thing.
Can you be more specific?
> The evidence is very strong that network effects are heavily oversold as
> part of a business plan. From what you've just told me about the enormous
> losses Paypal took, I'm betting it was a poor bet for them too.
I offered some facts that indicate it was a good bet. Do you have any
non-theoretical reason to think it wasn't?
As far as I know, nobody has argued that network effects, however
strong, provide an absolute immunity to competition. Rather, they are
a hill that a would-be competitor must climb, a barrier that doesn't
exist in markets that don't exhibit network effects.
I don't know how to quantify it, except in vague terms like "strong"
or "weak". Strong network effects exist in cases where the service
would be completely useless to you if you were the only customer, and
much more useful as the users increase.
Sam
Robert Vienneau
Friedman <dd...@daviddfriedman.com> wrote:
The admission that QWERTY is not as "efficient" as Dvorak seems to
me a retreat for defenders of Liebowitz and Margolis. But David
Friedman should have noted that Liebowitz and Margolis arguably do
not address Paul David's main claim, the existence of path dependence
and lock-in in typewriter keyboards.
Anyways, David Friedman might consider:
"By contrast, as the term 'lock-in' has been used in my work and
that of Arthur (1989), it simply is a vivid way to describe the
entry of a system into a trapping region the basin of attraction
that surrounds a locally (or globally) stable equilibrium. When a
dynamic economic system enters such a region, it cannot escape
except through the intervention of some external force, or shock,
that alters its configuration or transforms the underlying
structural relationships among the agents. Path dependent systems -
which have a multiplicity of possible equilibria among which
event-contingent selections can occur - may thus become locked in
to attractors that are optimal, or that are just as good as any
others in the feasible set, or that take paths leading to places
everyone would wish to have been able to avoid, once they have
arrived there.
From this vantage point, ARTHUR'S (1989) PHRASE 'LOCK-IN BY SMALL
HISTORICAL EVENTS' IS EVIDENTLY A GLOSS THAT SHOULD NOT BE READ
TOO LITERALLY; it is a convenient contraction of the foregoing
reference to the way in which trapping regions may be entered -
although somewhat unfortunate, in allowing a hasty reader to
suppose that the antecedent events somehow have created the local
stability, or locked-in state..."
-- Paul David (emphasis added)
Is Paul David "slyly admit[ing] he was wrong" here, especially
in the emphasized phrase? The adjective "slyly" suggests there is
something dishonest about what Paul David is saying here. Is this
suggestion justified by the text?
Has any evidence been presented that "all those dot com entrepreneurs
who lost their investors' shirts" took anything mistaken from "the
earlier Arthur and David"? Is there any evidence at all that "Carl
Shapiro and Hal Varian [were] among those who helped popularize the
ideas about which David now says he was just kidding"? In particular,
does Paul David now say in the above text that he was "just kidding"?
I assume you can tell that the following two passages, apparently
from the book, "Information Rules", are not contradictory:
"First-mover advantages can be powerful and long-lasting in
lock-in markets, especially those in information industries
where scale economies are substantial."
"Be prepared to invest to build an installed base through
promotions and by offering up-front discounts. You can't succeed
in competetive lock-in markets without making those investments."
And I assume you can tell that the following two passages, apparently
from Brian Arthur, are not contradictory:
"Two maxims are widely accepted in knowledge-based markets: It
pays to hit the market first, and it pays to have superb technology."
"...the losers are left with practically nothing, even if their
products are technically brilliant...."
--
susupply
news:<ar1cmi$5h7$1...@slb4.atl.mindspring.net>...
> > I don't see why it is obvious why everyone should want to use the same
> > service. Network effects can be negative, for one thing.
>
> Can you be more specific?
Congestion.
> > The evidence is very strong that network effects are heavily oversold as
> > part of a business plan. From what you've just told me about the
enormous
> > losses Paypal took, I'm betting it was a poor bet for them too.
>
> I offered some facts that indicate it was a good bet. Do you have any
> non-theoretical reason to think it wasn't?
The only "facts" I saw from you were to the effect that they had "turned the
corner into profitably", which I read as; they have not recovered their
losses. Which is a pretty good non-theoretical reason for the strategy
being a bad bet.
> As far as I know, nobody has argued that network effects, however
> strong, provide an absolute immunity to competition.
Paul David and Brian Arthur. But thanks to L&M they've been backpedaling
like crazy from that early claim. Then there are all the business gurus who
have picked up their argument, and popularized it. There are plenty of
examples in "Re-Thinking the Network Economy".
> Rather, they are
> a hill that a would-be competitor must climb, a barrier that doesn't
> exist in markets that don't exhibit network effects.
That's not true. Competing with any established business, in any industry,
is a hill to climb.
> I don't know how to quantify it, except in vague terms like "strong"
> or "weak". Strong network effects exist in cases where the service
> would be completely useless to you if you were the only customer, and
> much more useful as the users increase.
That's not a very good definition. Stan Liebowitz and Steve Margolis have a
considerably more rigorous one in the Palgrave, which is available online
at:
http://wwwpub.utdallas.edu/~liebowit/palgrave/network.html
susupply
"Robert Vienneau" <rv...@see.sig.com>
continuing to refine his tradition of commenting on work he has not read
(nor even has any plans to read, apparently)
wrote in message news:rvien-D82A6E....@news.dreamscape.com...
> The admission that QWERTY is not as "efficient" as Dvorak seems to
> me a retreat for defenders of Liebowitz and Margolis.
This is most decidedly NOT what L&M have said. How very Male Answer
Syndrome of you, Robert.
> But David
> Friedman should have noted that Liebowitz and Margolis arguably do
> not address Paul David's main claim, the existence of path dependence
> and lock-in in typewriter keyboards.
Oh really, then what has Paul David been whining about all these years?
From The Fable of the Keys:
<< In the economics literature on standards, the popular real-world example
of this market failure is the standard Qwerty typewriter keyboard and its
competition with the rival Dvorak keyboard. This example is noted frequently
in newspaper and magazine reports, seems to be generally accepted as true,
and was brought to economists' attention by the papers of Paul David. ....
<< This article examines the history, economics, and ergonomics of the
typewriter keyboard. We show that David's version of the history of the
market's rejection of Dvorak does not report the true history, and we
present evidence that the continued use of Qwerty is efficient given the
current understanding of keyboard design. >>
I hope Robert doesn't choke on that last sentence.
> Anyways, David Friedman might consider:
[snip the third iteration of the same passage from a Paul David article, and
I note that Robert has again been unable to respond to the mountain of
evidence I've provided refuting David's claim regarding Brian Arthur's
phrase not being taken "too literally".]
> I assume you can tell that the following two passages, apparently
> from the book, "Information Rules", are not contradictory:
>
> "First-mover advantages can be powerful and long-lasting in
> lock-in markets, especially those in information industries
> where scale economies are substantial."
>
> "Be prepared to invest to build an installed base through
> promotions and by offering up-front discounts. You can't succeed
> in competetive lock-in markets without making those investments."
Who said the two phrases were supposed to be contradictory?
They were both offered as the evidence you claimed to want to know about.
Remember, we're not supposed to take "too literally" the phrase "lock-in",
but here's Varian and Shapiro telling entrepreneurs they "can't succeed in
competitive *lock-in* markets", without first losing huge amounts of money.
A lot of investors who took this seriously LOST THEIR SHIRTS.
> And I assume you can tell that the following two passages, apparently
> from Brian Arthur, are not contradictory:
>
> "Two maxims are widely accepted in knowledge-based markets: It
> pays to hit the market first, and it pays to have superb technology."
>
> "...the losers are left with practically nothing, even if their
> products are technically brilliant...."
I see, "it pays", is not contradicted by: "the losers are left with
practically nothing". You have a very odd vocabulary, Robert.
Tim Lambert
> "Tim Lambert" <lam...@cse.unsw.edu.au> wrote in message
> news:m3ptt81...@cycloid.localdomain...
> > David Friedman <dd...@daviddfriedman.com> writes:
>
> > > What are you quoting--their book, or "Fable of the Keys?"
> >
> > The quote is from Reason Online:
> >
> > http://reason.com/9611/ltr.sl.shtml
>
> You've managed to quote, not an L&M paper, but (only part of) a short reply
> by them to a letter to the editor.
So, what's your point? You don't think that they have to be truthful
in their reply?
> A letter which is deeply ignorant:
>
> <<Liebowitz and Margolis's article is as flawed as the QWERTY keyboard. I
> would suggest that they get out from under their papers, books, and research
> studies to try a Dvorak keyboard to get at the truth. In the studies they
> cite, where two groups competed against each other on the two machines, they
> failed to observe that the participants previously all had been QWERTY
> typists. This leads to an obvious disadvantage for the Dvorak groups, who
> had to overcome their QWERTY habits while attempting to adapt to the new
> keyboard layout. The only acceptable study would be one in which all the
> participants had never typed before. The result would be quite clear: The
> Dvorak is far superior.
>
> << James Argiro
> Deerfield Beach, FL >>
>
> Their reply being:
>
> << To Mr. Argiro we would note that the mathematical simulations of typing,
> which show no advantage for Dvorak, do not have the drawback that he cites.
> >>
>
> You forgot to include their: "do not have the drawback that he cites".
because it's not relevant. The fact is that they claimed that the
mathematical simulations of typing show no advantage for Dvorak, which
is not true.
Here is what Norman says in the "Design of Everyday Things"
-----------------------
There is a better way -- the Dvorak keyboard -- painstakingly
developed by (and named after) one of the founders of industrial
engineering. It is easier to learn and allows for about 10 percent
faster typing, but that is simply not enough of an improvement to
merit a revolution in the keyboard. Millions of people would have to
learn a new style of typing. Millions of typewriters would have to be
changed. The severe constraints of existing practice prevent change,
even where the change would be an improvement.[7]
Endnote 7: Admirers of the Dvorak keyboard claim much more than a 10
percent improvement, as well as faster learning rates and less
fatigue. But I will stick by my studies and my statements. If you want
to read more, including a worthwhile treatment of the history of the
typewriter, see the book Cognitive aspects of skilled typewriting,
edited by Cooper (1983), which includes several chapters of research
from my laboratory.
--------------------------------------
Tim Lambert
> In article <m3lm3w1...@cycloid.localdomain>,
> Tim Lambert <lam...@cse.unsw.edu.au> wrote:
>
> > Indeed. The facts show that there *is* an advantage to Dvorak,
> > despite what Liebowitz says. But I get the feeling that you would
> > prefer to believe Liebowitz, rather than the facts.
>
> And you apparently prefer not to read Liebowitz's published work--the
> "Fable of the Keys" article and the Microsoft book--in order to find out
> what Liebowitz says.
Huh? Are you saying that the claim he made in "Reason" was a
misprint? Has he retracted it?
> He doesn't claim that Dvorak has no advantage. He
> claims that if it has an advantage it is not very large, and does not
> justify the claims made by Paul David et. al.
However, the HCI studies show that it does have an advantage of about
5-10%. This is not as much as David suggested, but it is large enough
to matter.
Page 1288 of Handbook of Human-Computer Interaction:
-------------------------------------------------
Noel and McDonald (1989) used an artificial intelligence search
procedure to discover the best possible key layout for the standard
keyboard configuration. Their algorithm used the typing model
developed by Norman and Fisher (1982) to direct the search. Their
program considered 50,000 keyboard layouts from the first to the
final iteration of the search. The results indicated that the DSK
was about 10% better than QWERTY, and that the best possible layout
was 1.2% better than DSK.
Conclusions
Most studies have confirmed that DSK is faster than QWERTY. However,
there is disagreement about the size of the difference between the
two keyboard layouts. Earlier accounts claimed that DSK was from 15%
to 50% faster than QWERTY (Yamada, 1980). More recent calculations
give much smaller numbers, ranging from 2.3% to 17% (Kinkead, 1975;
Norman and Fisher, 1982; Yamada, 1980). Because the best design
their search procedure could turn up was only 1.2% better than the
DSK, the results of Noel and McDonald (1989) suggest that it would
be fruitless to attempt to develop a layout in the standard keyboard
configuration significantly superior to the DSK.
Because there are so many unknowns (such as how long it will take a
particular typist to retrain), a switch to DSK would probably not
provide a practical improvement in productivity. With an estimated 5
to 10% increase in output over QWERTY (Noel and McDonald. 1989;
Norman and Fisher, 1982), the switch might be cost effective for
some typists, but essentially worthless for most. For example, a
typist with an average speed of 50 wpm would, after complete
retraining, produce 52.5 to 55 wpm. At roughly 800 words per
single-spaced page, this hypothetical retrained typist, typing
nonstop for eight hours per day, would increase production from
about 30 pages per day up to 31.5 to 33 pages per day. Also. a
typist trained on QWERTY can easily transfer his or her skill to any
other standard keyboard, but a typist trained on DSK could not.
-------------------------------------------------
Tim
Tim Lambert
> "Tim Lambert" <lam...@cse.unsw.edu.au> wrote in message
> news:m3lm3w1...@cycloid.localdomain...
> > "susupply" <susu...@mindspring.com> writes:
>
> > > Stubborn things, these facts.
> >
> > Indeed. The facts show that there *is* an advantage to Dvorak,
> > despite what Liebowitz says. But I get the feeling that you would
> > prefer to believe Liebowitz, rather than the facts.
>
> The facts are as L&M have presented them, not as Arthur and David and their
> idolators would have them. You yourself just got through quoting only part
> of one sentence of a letter they wrote in response to a SPECIFIC criticism.
In which they falsely claimed that Norman's work found no difference.
> You disingenuously left out the clause in which the context would have been
> made clear.
It is dishonest of you to claim that the context changed their meaning.
> Further, you have also done a very dishonest edit of my response to you,
> conveniently leaving out what your own source has to say:
>
> << There seems no reason to choose Sholes, Dvorak, or alphabetically
> organized keyboards over one another on the basis of typing speed. >>
Pardon? Here is what my source says on the matter:
There is a better way -- the Dvorak keyboard -- painstakingly
developed by (and named after) one of the founders of industrial
engineering. It is easier to learn and allows for about 10 percent
faster typing, but that is simply not enough of an improvement to
merit a revolution in the keyboard. Millions of people would have to
learn a new style of typing. Millions of typewriters would have to
be changed. The severe constraints of existing practice prevent
change, even where the change would be an improvement.7
7. Admirers of the Dvorak keyboard claim much more than a 10 percent
improvement, as well as faster learning rates and less fatigue. But
I will stick by my studies and my statements. If you want to read
more, including a worthwhile treatment of the history of the
typewriter, see the book Cognitive aspects of skilled typewriting,
edited by Cooper (1983), which includes several chapters of research
from my laboratory.
Don Norman "The Design of Everyday Things"
Grinch
wrote both....
>However, the HCI studies show that it does have an advantage of about
>5-10%. This is not as much as David suggested but it is large enough to matter.
and...
>Page 1288 of Handbook of Human-Computer Interaction:
>...
> Conclusions
>
> ... a switch to DSK would probably not
> provide a practical improvement in productivity. With an estimated 5
> to 10% increase in output over QWERTY (Noel and McDonald. 1989;
> Norman and Fisher, 1982), the switch might be cost effective for
> some typists, but essentially worthless for most....
> Also, a
> typist trained on QWERTY can easily transfer his or her skill to any
> other standard keyboard, but a typist trained on DSK could not.
>-----------------
>Tim
David Friedman
Tim Lambert <lam...@cse.unsw.edu.au> wrote:
> > And you apparently prefer not to read Liebowitz's published work--the
> > "Fable of the Keys" article and the Microsoft book--in order to find out
> > what Liebowitz says.
>
> Huh? Are you saying that the claim he made in "Reason" was a
> misprint? Has he retracted it?
The claim "made in Reason" was, I believe, in a brief rebuttal to a
letter to the editor. It was indeed misleading, but that's not
surprising in that casual a context.
Someone here, I think on this thread, already quoted what L&M say in
their scholarly article on the subject. Their claim is not zero
improvement but an improvement much smaller than Paul David et. al.
claim.
> > He doesn't claim that Dvorak has no advantage. He
> > claims that if it has an advantage it is not very large, and does not
> > justify the claims made by Paul David et. al.
>
> However, the HCI studies show that it does have an advantage of about
> 5-10%.
That sounds, from my vague memory, as though it is comparable to some of
the results that L&M cited. They referred to a number of different
studies. The general pattern was a small improvement.
David Friedman
Tim Lambert <lam...@cse.unsw.edu.au> wrote:
> > You've managed to quote, not an L&M paper, but (only part of) a short reply
> > by them to a letter to the editor.
>
> So, what's your point? You don't think that they have to be truthful
> in their reply?
Truthful, yes. Speak precisely, not necessarily. They should have
written "show no large advantage." And that is sufficient for the point
they are making, which is about a particular way of explaining away the
failure of Dvorak to test as much better than Qwerty.
David Friedman
Robert Vienneau <rv...@see.sig.com> wrote:
> > And you apparently prefer not to read Liebowitz's published work--the
> > "Fable of the Keys" article and the Microsoft book--in order to find out
> > what Liebowitz says. He doesn't claim that Dvorak has no advantage. He
> > claims that if it has an advantage it is not very large, and does not
> > justify the claims made by Paul David et. al.
>
> The admission that QWERTY is not as "efficient" as Dvorak seems to
> me a retreat for defenders of Liebowitz and Margolis.
A retreat from where? Have you actually read _Fable of the Keys?_
> But David
> Friedman should have noted that Liebowitz and Margolis arguably do
> not address Paul David's main claim, the existence of path dependence
> and lock-in in typewriter keyboards.
"Arguably?" Have you read the article? They discuss in some detail both
Paul David's historical claims, which turn out to be almost uniformly
false, and the underlying argument, which becomes much less convincing
if you think about it for more than five minutes.
David Friedman
ope...@yahoo.com (Samuel Barber) wrote:
> I don't know how to quantify it, except in vague terms like "strong"
> or "weak". Strong network effects exist in cases where the service
> would be completely useless to you if you were the only customer, and
> much more useful as the users increase.
Have you read the Liebowitz and Margolis Microsoft book? They provide
some evidence that, in software, the effects are weak, and they discuss
the various other historical incidents that get offered as examples of
strong network effects.
Robert Vienneau
<lam...@cse.unsw.edu.au> wrote:
> "susupply" <susu...@mindspring.com> writes:
> > You've managed to quote, not an L&M paper, but (only part of) a short
> > reply
> > by them to a letter to the editor.
> So, what's your point? You don't think that they have to be truthful
> in their reply?
Patrick Sullivan doesn't think.
Samuel Barber
> "Samuel Barber" <ope...@yahoo.com> wrote in message
> news:37991aef.02111...@posting.google.com...
> > "susupply" <susu...@mindspring.com> wrote in message
> news:<ar1cmi$5h7$1...@slb4.atl.mindspring.net>...
> > > I don't see why it is obvious why everyone should want to use the same
> > > service. Network effects can be negative, for one thing.
> >
> > Can you be more specific?
>
> Congestion.
Ah. But that's a very temporary problem, at least in the cases we're
discussing.
> > I offered some facts that indicate it was a good bet. Do you have any
> > non-theoretical reason to think it wasn't?
>
> The only "facts" I saw from you were to the effect that they had "turned the
> corner into profitably", which I read as; they have not recovered their
> losses. Which is a pretty good non-theoretical reason for the strategy
> being a bad bet.
So every time a company turns from losses to profits, that's a sure
sign of failure? Huh?
> > As far as I know, nobody has argued that network effects, however
> > strong, provide an absolute immunity to competition.
>
> Paul David and Brian Arthur. But thanks to L&M they've been backpedaling
> like crazy from that early claim. Then there are all the business gurus who
> have picked up their argument, and popularized it. There are plenty of
> examples in "Re-Thinking the Network Economy".
Well, I certainly don't want to associate myself with that view,
assuming you are representing it truthfully.
> > Rather, they are
> > a hill that a would-be competitor must climb, a barrier that doesn't
> > exist in markets that don't exhibit network effects.
>
> That's not true. Competing with any established business, in any industry,
> is a hill to climb.
Reading comprehension problems? I didn't say or imply that network
effects are the only hill to climb.
Sam
susupply
> The claim "made in Reason" was, I believe, in a brief rebuttal to a
> letter to the editor. It was indeed misleading, but that's not
> surprising in that casual a context.
It wasn't misleading at all, actually, as this:
<< To Mr. Argiro we would note that the mathematical simulations of typing,
which show no advantage for Dvorak, do not have the drawback that he cites.
>>
was a reference to this paragraph in the magazine article:
<< Ergonomic studies also confirm that the advantages of Dvorak are either
small or nonexistent. For example, A. Miller and J Thomas, two researchers
at the IBM Research Laboratory, writing in the International Journal of
Man-Machine Studies, conclude that "no alternative has shown a realistically
significant advantage over the QWERTY for general purpose typing." Other
studies based on analysis of hand-and-finger motions find differences of
only a few percentage points between Dvorak and QWERTY. The consistent
finding in ergonomic studies is that the results imply no clear advantage
for Dvorak, and certainly no advantage of the magnitude that is so often
claimed.>>
And, following the sentence from L&Ms response that is quoted above, is
this:
<< Also, Dvorak did claim that QWERTY typists would also benefit from his
technique. His own Navy study compared retrained QWERTY typists,
appropriately mimicking the decision that faced actual typists (who already
knew QWERTY). Nevertheless, we agree that it would be interesting to have a
controlled experiment starting with new typists. Unlike Mr. Argiro, however,
we cannot claim with certainty what the results will show, although we
believe that he will be proved wrong. >>
Mr. Lambert is guilty of quoting grossly out of context.
susupply
> "susupply" <susu...@mindspring.com> writes:
> > The facts are as L&M have presented them, not as Arthur and David and
their
> > idolators would have them. You yourself just got through quoting only
part
> > of one sentence of a letter they wrote in response to a SPECIFIC
criticism.
>
> In which they falsely claimed that Norman's work found no difference.
That is a lie. They did not mention Norman, either in their response to the
letter writer or in their article. But they do quote from his work in other
articles, of which you are clearly ignorant.
[snip]
> > Further, you have also done a very dishonest edit of my response to you,
> > conveniently leaving out what your own source has to say:
> >
> > << There seems no reason to choose Sholes, Dvorak, or alphabetically
> > organized keyboards over one another on the basis of typing speed. >>
>
> Pardon? Here is what my source says on the matter:
Your source:
Donald A Norman and David E. Rumelhart Studies of Typing from the LNR
Research Group. in Cognitive Aspects of Skilled typewriting 45, (William E.
Cooper ed. 1983).
said:
<< For the expert typist, the layout of keys makes surprisingly little
difference. There seems no reason to choose Sholes, Dvorak. or
alphabetically organized keyboards over one another on the basis of typing
speed. >>
Further, you seem to be relying not on actual typing, but to some sort of
design simulation in your cite:
<< Page 1288 of Handbook of Human-Computer Interaction:
-------------------------------------------------
Noel and McDonald (1989) used an artificial intelligence search
procedure to discover the best possible key layout for the standard
keyboard configuration. Their algorithm used the typing model
developed by Norman and Fisher (1982) to direct the search. Their
program considered 50,000 keyboard layouts from the first to the
final iteration of the search. The results indicated that the DSK
was about 10% better than QWERTY, and that the best possible layout
was 1.2% better than DSK.>>
And then in the conclusions you've provided for us we can read:
<< Because there are so many unknowns...a switch to DSK would probably not
provide a practical improvement in productivity. With an estimated 5
to 10% increase in output over QWERTY (Noel and McDonald. 1989;
Norman and Fisher, 1982), the switch might be cost effective for
some typists, but ***essentially worthless for most***. >>
My *** in the above.
susupply
"Robert Vienneau" <rv...@see.sig.com>
imitating a character from a Monty Python skit,
wrote in message news:rvien-9AE179....@news.dreamscape.com...
Robert Vienneau
Friedman <dd...@daviddfriedman.com> wrote:
> In article <rvien-D82A6E....@news.dreamscape.com>,
> Robert Vienneau <rv...@see.sig.com> wrote:
> > The admission that QWERTY is not as "efficient" as Dvorak seems to
> > me a retreat for defenders of Liebowitz and Margolis.
> A retreat from where? Have you actually read _Fable of the Keys?_
Yes.
> > But David
> > Friedman should have noted that Liebowitz and Margolis arguably do
> > not address Paul David's main claim, the existence of path dependence
> > and lock-in in typewriter keyboards.
> "Arguably?" Have you read the article? They discuss in some detail both
> Paul David's historical claims, which turn out to be almost uniformly
> false, and the underlying argument, which becomes much less convincing
> if you think about it for more than five minutes.
Any underlying argument "becomes much less convincing if you think about
it for more than five minutes" if you don't notice an
unconvincing strawperson has been presented in its place.
When I first read Paul David's article on QWERTY, it did not strike me
as surpising.
Robert Vienneau
"Be prepared to invest to build an installed base through
promotions and by offering up-front discounts. You can't succeed
in competetive lock-in markets without making those investments."
narrator)
The above says such investments are NECESSARY in such markets. It
does not say that such investments are SUFFICIENT in such markets.
So the above is not shown to be mistaken by a claim that "A lot
of investors who took this seriously lost their shirts."
Consider:
"By contrast, as the term 'lock-in' has been used in my work and
that of Arthur (1989), it simply is a vivid way to describe the
entry of a system into a trapping region the basin of attraction
that surrounds a locally (or globally) stable equilibrium. When a
dynamic economic system enters such a region, it cannot escape
except through the intervention of some external force, or shock,
that alters its configuration or transforms the underlying
structural relationships among the agents. Path dependent systems -
which have a multiplicity of possible equilibria among which
event-contingent selections can occur - may thus become locked in
to attractors that are optimal, or that are just as good as any
others in the feasible set, or that take paths leading to places
everyone would wish to have been able to avoid, once they have
arrived there.
From this vantage point, Arthur's (1989) phrase 'lock-in by small
historical events' is evidently a gloss that should not be read
too literally; it is a convenient contraction of the foregoing
reference to the way in which trapping regions may be entered -
although somewhat unfortunate, in allowing a hasty reader to
suppose that the antecedent events somehow have created the local
stability, or locked-in state..."
-- Paul David
It seems to me he Paul David is saying that the term 'lock-in'
is supposed to explicate certain mathematical models used in
economics. These models are used to describe, at least, certain
high tech markets. Paul David says that the phrase 'lock-in by
small historical events' should not be read too literally insofar
as the small historical events do not create the trapping
region in these models. It is not LOCK-IN that Paul David is
saying should not be read too literally; it is more "BY SMALL
HISTORICAL EVENTS" that should not be read too literally. But
keep in mind that LOCK-IN is supposed to be backed up by
mathematical models.
Somebody less mature than most two-year olds has documented that
Brian Arthur uses the phrase "lock-in" in the same way:
"If two or more products or companies are competing, if one
gets sufficiently ahead, it gets more and more advantage. Under
certain circumstances, that can often be enough to sort of tilt
the market and lock it in. So it locks into whatever gets
ahead. ....
... What I am saying is that under increasing returns, and under
very specific mathematical conditions, markets become unstable. One
product, one company, can take a great deal of the market, 70, 80,
90 percent. ....it doesn't necessarily have to be in the computer
industry."
-- Brian Arthur
Robert Vienneau
> "susupply" <susu...@mindspring.com> wrote in message
> news:<ar326l$pb1$1...@slb4.atl.mindspring.net>...
> > > As far as I know, nobody has argued that network effects, however
> > > strong, provide an absolute immunity to competition.
> > Paul David and Brian Arthur. But thanks to L&M they've been
> > backpedaling
> > like crazy from that early claim. Then there are all the business
> > gurus who
> > have picked up their argument, and popularized it. There are plenty of
> > examples in "Re-Thinking the Network Economy".
> Well, I certainly don't want to associate myself with that view,
> assuming you are representing it truthfully.
Of course the rude and ignorant little boy isn't.
"THEOREM. An adoption process converges with probability one to
the dominance of a single technology if and only if its adoption
function p possesses stable fixed points only where x is a unit
vector.
These theorems follow as simple corollaries of the basic theorem
above. Thus where two technologies compete, the adoption process
will be path-dependent (multiple fixed points must exist) as long
there exists at least one unstable 'watershed' point in adoption
shares, above which adoption of the technology with this share
becomes self-reinforcing in that it tends to increase its share,
below which it is self-negating in that it tends to lose
its share. It is therefore not sufficient that a technology gain
advantage with adoption; the advantage must (at some market share)
be self-reinforcing."
-- Brian Arthur, _Economic Journal_, 1989. (Available on
Arthur's home page at Santa Fe Institute)
Arthur is presenting an abstract model in which one can quantify,
in some sense, the advantages of network effects. Notice he says
it is "not sufficient" for path dependence to occur "that a technology
gain advantage with adoption". Even when path dependence does occur,
an adoption process apparently can converge to a state where more
than one technology is available.
susupply
"Robert Vienneau" <rv...@see.sig.com> wrote in message
news:rvien-3064C6....@news.dreamscape.com...
> When I first read Paul David's article on QWERTY, it did not strike me
> as surpising.
Then why did they claim that their theory was going to revolutionize
economics?
susupply
"Robert Vienneau" <rv...@see.sig.com>
apparently offering a sample of what real "thinking" looks like,
wrote in message news:rvien-EE2B79....@news.dreamscape.com...
> "Be prepared to invest to build an installed base through
> promotions and by offering up-front discounts. You can't succeed
> in competetive lock-in markets without making those investments."
> -- Varian and Shapiro (quoted thrid hand from an unreliable
> narrator)
>
> The above says such investments are NECESSARY in such markets. It
> does not say that such investments are SUFFICIENT in such markets.
> So the above is not shown to be mistaken by a claim that "A lot
> of investors who took this seriously lost their shirts."
No one claimed it was "SUFFICIENT". This is an astoundingly fallacious
piece of logic from someone who claims to be a mathematician. Your last
sentence is a blatant non-sequitur.
Consider the real world example of Enron Energy Services which (if we can
believe Paul Krugman's source; a big "if", I admit) paid up-front cash
discounts (or rebates) of millions of dollars TO ITS CUSTOMERS to get them
to sign contracts. Enron was doing this in the hope of building "an
installed base", from which it (I guess) hoped to recover those "discounts".
Does Robert dispute that in this case, "shirts" were lost? That they might
well not have been lost had Enron acted more like Peggy Noonan's shoe and
tire companies? (I.e., had they ignored Shapiro and Varian's crack-pot
advice.)
> Consider: [snip the fourth iteration]
Consider that Robert seems to have read only a few paragraphs of Paul
David's 2000 paper, since he keeps quoting the same passages from it, all
the while neglecting to comment on the mountain of evidence from the mouth
of Brian Arthur that directly contradicts the claim.
> It seems to me he Paul David is saying that the term 'lock-in'
> is supposed to explicate certain mathematical models used in
> economics.
Then why did he give us a specific example from the real world?
> These models are used to describe, at least, certain
> high tech markets.
Incorrectly, since he can't find even one example to support his model, and
Stan Liebowitz has just provided plenty that destroy it.
> Paul David says that the phrase 'lock-in by
> small historical events' should not be read too literally insofar
> as the small historical events do not create the trapping
> region in these models. It is not LOCK-IN that Paul David is
> saying should not be read too literally; it is more "BY SMALL
> HISTORICAL EVENTS" that should not be read too literally. But
> keep in mind that LOCK-IN is supposed to be backed up by
> mathematical models.
No one disputes that he and Arthur have come up with mathematical models.
The question is whether their models describe any real world phenomena. So
far, no one can find any.
And as for the "small historical events" weaseling, his example, QWERTY was
supposed to illustrate just that point. But, he's been shown to be wrong on
just about every particular of those "small historical events".
> Somebody less mature than most two-year olds has documented that
> Brian Arthur uses the phrase "lock-in" in the same way:
>
> "If two or more products or companies are competing, if one
> gets sufficiently ahead, it gets more and more advantage. Under
> certain circumstances, that can often be enough to sort of tilt
> the market and lock it in. So it locks into whatever gets
> ahead. ....
>
> ... What I am saying is that under increasing returns, and under
> very specific mathematical conditions, markets become unstable. One
> product, one company, can take a great deal of the market, 70, 80,
> 90 percent. ....it doesn't necessarily have to be in the computer
> industry."
> -- Brian Arthur
Great, Robert just quoted what I've already quoted from Brian Arthur. Now
how about Robert addressing some of the other claims from Arthur that I've
offered, such as:
<< It's like saying that there could be reverse gravity. >>
or:
<< you are playing games where the
winner can walk off with a great deal of
the market and the losers are left with
practically nothing, even if their products
are technically brilliant >>
or
<< But if you go into the market and
think that you have a wonderful product
uct and it's sufficient just to make sure
it's technically brilliant and priced
right, you're going to get blindsided or
creamed by somebody else's bandwagon.
<< In high tech, you have to realize
that you must build up a user base
and go from there. >>
or:
<< if they lock in the market, they're
going to get very rich and if they don't,
they're going to lose everything. >>
susupply
"Robert Vienneau" <rv...@see.sig.com>
he of the extremely poor memory,
wrote in message news:rvien-4D5D1F....@news.dreamscape.com...
> In article <37991aef.02111...@posting.google.com>,
> ope...@yahoo.com (Samuel Barber) wrote:
>
> > "susupply" <susu...@mindspring.com> wrote in message
> > news:<ar326l$pb1$1...@slb4.atl.mindspring.net>...
>
> > > > As far as I know, nobody has argued that network effects, however
> > > > strong, provide an absolute immunity to competition.
>
> > > Paul David and Brian Arthur. [snip]
> > Well, I certainly don't want to associate myself with that view,
> > assuming you are representing it truthfully.
>
> Of course the rude and ignorant little boy isn't.
Back in the spring of 1998, I pointed out to Robert what Brian Arthur told a
Federal Court (as he was quoted in Gary Reback's infamous "white paper"):
<< 'My greatest fear [of allowing the Intuit merger to occur] is that an
inferior
technology could be locked in and bring progress to a halt.'." >>
"Bring progress to a halt", being effectively synonomous with Samuel's:
"absolute immunity to competition".
[snip the tendentious Brian Arthur quote from 1989]
In the same sci.econ post in 1998, I also mentioned my prediction:
<< I thought... Brian Arthur... was
attempting to arbitrarily define the issue away. That is, as ever more
embarrassing criticisms are directed at the theory, and its shortcomings are
exposed, it becomes necessary to construct a more restricted version of what
the theory is, and what it predicts. >>
Which is exactly what Vienneau is trying to do with this comment:
> Arthur is presenting an abstract model in which one can quantify,
> in some sense, the advantages of network effects. Notice he says
> it is "not sufficient" for path dependence to occur "that a technology
> gain advantage with adoption". Even when path dependence does occur,
> an adoption process apparently can converge to a state where more
> than one technology is available.
since the above is not at all a revolutionary idea.
And it was a revolution that Brian Arthur was promising as he "sat alone on
his barstool".
susupply
"Samuel Barber" <ope...@yahoo.com> wrote in message
news:37991aef.02111...@posting.google.com...
> "susupply" <susu...@mindspring.com> wrote in message
> > > > I don't see why it is obvious why everyone should want to use the
same
> > > > service. Network effects can be negative, for one thing.
> > >
> > > Can you be more specific?
> >
> > Congestion.
>
> Ah. But that's a very temporary problem, at least in the cases we're
> discussing.
How do you know this to be so?
> > > I offered some facts that indicate it was a good bet. Do you have any
> > > non-theoretical reason to think it wasn't?
> >
> > The only "facts" I saw from you were to the effect that they had "turned
the
> > corner into profitably", which I read as; they have not recovered their
> > losses. Which is a pretty good non-theoretical reason for the strategy
> > being a bad bet.
>
> So every time a company turns from losses to profits, that's a sure
> sign of failure? Huh?
That is an attempt at evasion. If companies don't recover their losses, and
you seem to be conceding that Paypal has not, then they've made a bad bet.
[snip Samuel's rejection of the theory he's been embracing, or at least the
theory as it was understood by its originator Brian Arthur, since I've dealt
with it in another post]
> > > Rather, they are
> > > a hill that a would-be competitor must climb, a barrier that doesn't
> > > exist in markets that don't exhibit network effects.
> >
> > That's not true. Competing with any established business, in any
industry,
> > is a hill to climb.
>
> Reading comprehension problems? I didn't say or imply that network
> effects are the only hill to climb.
The miscomprehension is not one of reading, but of the idea of network
effects. And it is on your part. You're misusing the term to simply
encompass any headstart.
Samuel Barber
> "Samuel Barber" <ope...@yahoo.com> wrote in message
> news:37991aef.02111...@posting.google.com...
> > "susupply" <susu...@mindspring.com> wrote in message
> news:<ar326l$pb1$1...@slb4.atl.mindspring.net>...
>
> > > > > I don't see why it is obvious why everyone should want to use the
> same
> > > > > service. Network effects can be negative, for one thing.
> > > >
> > > > Can you be more specific?
> > >
> > > Congestion.
> >
> > Ah. But that's a very temporary problem, at least in the cases we're
> > discussing.
>
> How do you know this to be so?
Observation.
> > > > I offered some facts that indicate it was a good bet. Do you have any
> > > > non-theoretical reason to think it wasn't?
> > >
> > > The only "facts" I saw from you were to the effect that they had "turned
> the
> > > corner into profitably", which I read as; they have not recovered their
> > > losses. Which is a pretty good non-theoretical reason for the strategy
> > > being a bad bet.
> >
> > So every time a company turns from losses to profits, that's a sure
> > sign of failure? Huh?
>
> That is an attempt at evasion. If companies don't recover their losses, and
> you seem to be conceding that Paypal has not, then they've made a bad bet.
No, you're confusing "they haven't recovered their losses"
(unsurprising for a firm that has just begun to turn a profit) with
"they will never recover their losses".
What you are saying is either turning a profit is not a reason to
think that they will (might) recover their losses (nonsense), or that
turning a profit is a reason to think that they will not (might not)
recover their losses (double nonsense).
> > > > Rather, they are
> > > > a hill that a would-be competitor must climb, a barrier that doesn't
> > > > exist in markets that don't exhibit network effects.
> > >
> > > That's not true. Competing with any established business, in any
> industry,
> > > is a hill to climb.
> >
> > Reading comprehension problems? I didn't say or imply that network
> > effects are the only hill to climb.
>
> The miscomprehension is not one of reading, but of the idea of network
> effects. And it is on your part. You're misusing the term to simply
> encompass any headstart.
Maybe you think so, but I'm not.
Sam
Robert Vienneau
> on his barstool".
For those attempting to follow Patrick Sullivan's ravings, this is
a reference to, among other things, a Boston Globe article by
David Warsh:
"David in the mid-1970s had written a deeply-penetrating few
pages on the the manner in which the high mathematical forms of
technical economics excluded a role for history. Arthur, ...in
1979 had begun writing about how in economics chance occurrences
might determine the future. Soon both Arthur and David were
calling this approach 'path dependence.'"
<http://www.boston.com/globe/search/stories/sitting_alone.htm>
For some reason, one of Patrick Sullivan's equally childish
acquaintances likes to cite this as evidence that Paul David
always intended the point of path dependence to be the orthogonal
issue of economic efficiency, not a formalization of the notion
that "history matters".
To re-iterate, Brian Arthur's 1989 Economic Journal article
(available off his home page somewhere) seems to be a canonical
statement of his theory. In it, he writes:
"It is therefore not sufficient [for path dependence] that a
technology gain advantage with adoption; the advantage must (at
some market share) be self-reinforcing."
So as I understand it, Arthur's theory does NOT imply:
o Given technologies that, in some region, are such that the
benefits users get from a given technology are higher the
more other users have adopted it, the adoption process is
necessarily path dependent (non-ergodic).
In other words, Brian Arthur distinguishes between network
effects and path dependence.
Arthur also writes:
"THEOREM. An adoption process converges with probability one to
the dominance of a single technology if and only if its adoption
function p possesses stable fixed points only where x is a unit
vector."
So, as I understand it, Arthur's theory does NOT imply:
o A path-dependent adoption process necessarily converges to a
region in which only one technology is adopted.
Furthermore, Arthur writes:
"...I want to define carefully what I mean by 'chance' or
'historical events'. Were we to have infinitely detailed prior
knowledge of events and circumstances that might
affect technology choices--political interests, the prior
experience of developers, timing of contracts, decisions at key
meetings--the outcome or adoption market-share gained by each
technology would presumably be determinable in advance. We can
conclude that our limited discerning power, or more precisely
the limited discerning power of an implicit observer, may cause
indeterminacy of outcome. I therefore define 'historical small
events' to be those events or conditions that are outside the
ex-ante knowledge of the observer--beyond the resolving power
of his 'model' or abstraction of the situation."
Consider those specific mathematical circumstances in which one or
more of the attracting limit points of path dependent adoption
process are characterized by the adoption of only one technology.
Which limit point is the process directed towards? It depends
on "chance" or "historical small events". And these "historical
small events" include competition.
It seems to me that the process of convergence here is of more
interest than the end-points.
All of the above should lead one to doubt that this theory says
that network effects, however strong, generally provide an immunity
to competition.
susupply
> > > > Congestion.
> > >
> > > Ah. But that's a very temporary problem, at least in the cases we're
> > > discussing.
> >
> > How do you know this to be so?
>
> Observation.
I thought it would be something like that.
[snip]
> > If companies don't recover their losses, and
> > you seem to be conceding that Paypal has not, then they've made a bad
bet.
>
> No, you're confusing "they haven't recovered their losses"
> (unsurprising for a firm that has just begun to turn a profit) with
> "they will never recover their losses".
You and someone else have told me about "stupendous losses" having been
incurred, just when do you expect Paypal to recover them?
> What you are saying is either turning a profit is not a reason to
> think that they will (might) recover their losses (nonsense), or that
> turning a profit is a reason to think that they will not (might not)
> recover their losses (double nonsense).
Neither of those two statements have been made by me.
[snip]
> > > Reading comprehension problems? I didn't say or imply that network
> > > effects are the only hill to climb.
> >
> > The miscomprehension is not one of reading, but of the idea of network
> > effects. And it is on your part. You're misusing the term to simply
> > encompass any headstart.
>
> Maybe you think so, but I'm not.
Then why were you unable to define for me what the network effects were in
the Paypal case?
susupply
"Robert Vienneau" <rv...@see.sig.com>
who, I suspect, knows a thing or two about sitting alone on a barstool,
wrote in message news:rvien-925A21....@news.dreamscape.com...
> > And it was a revolution that Brian Arthur was promising as he "sat alone
> > on his barstool".
>
> For those attempting to follow Patrick Sullivan's ravings, this is
> a reference to, among other things, a Boston Globe article by
> David Warsh:
Gee whiz, really! Boy, I'll just bet hardly anyone would have recognized it
without your help.
But, did you notice that the very first sentence in that article reads:
<< We've been telling the story of a revolution of sorts among
economists....>>
And that later in the article there is:
<< three major figures remain to be introduced....Together they will turn
much of macroeconomics on its ear in the years ahead, slowly but surely.
<< The first of these three...is W. Brian Arthur.>>
However, Warsh also truthfully states:
<< In many quarters, he is viewed as a self-promoter who has greatly
overstated the significance of his work. >>
Meaning I'm hardly along in my assessment, Robert. You see that, right?
[snip]
> For some reason, one of Patrick Sullivan's equally childish
> acquaintances likes to cite this as evidence that Paul David
> always intended the point of path dependence to be the orthogonal
> issue of economic efficiency, not a formalization of the notion
> that "history matters".
The reason is because that is what Paul David himself said it was. And note
in the above article about Brian Arthur, just as I said (thanks for the
support, Robert), these two guys were telling everyone about their
*revolutionary* idea.
And, "history matter" is not a revolutionary idea. Everyone knows that the
automobile couldn't be invented before the wheel was invented.
> To re-iterate, Brian Arthur's 1989 Economic Journal article
> (available off his home page somewhere) seems to be a canonical
> statement of his theory. In it, he writes:
>
> "It is therefore not sufficient [for path dependence] that a
> technology gain advantage with adoption; the advantage must (at
> some market share) be self-reinforcing."
In other words, the quote you insisted on giving (three times, iirc) from
Paul David is blatantly disingenuous:
<< 'lock-in by small historical events' is evidently a gloss that should
not be read
too literally >>
Because, thanks to the quote from Arthur that Robert just supplied, we can
that that is not the theory. The theory is that "lock-in" occurs due to
network effects that give increasing returns. Not to historical events.
So, why would Paul David, in a paper revised (I believe) three times make
such a blatant misstatement? The answer, most obviously, is that he is
slyly conceding he was incorrect. Which I have told you several times
before.
And don't think I've missed that you have yourself slyly dropped your claims
about shirts not being lost in part because of this theory.
Hal Varian
>
>
>>If you are talking about Hal Varian and Carl Shapiro, I'm afraid I have
>>no idea what writings of theirs are being referenced.
>
>
> Robert isn't referring to them, he's just pouting.
>
> However, Stan Liebowitz referenced "Information Rules" in his latest book.
> He criticized them for repeating the David version of the keyboard story,
> especially they made a reference, in a footnote, to one of L&M's papers,
> thus they should have known better.
I think that we covered both sides of the story fairly, citing both Paul
David and Leibowitz and Margolis in the "Further Reading" section. (Not
in a footnote!) The exact statement is: "On QERTY, see David (1985,
1986) and for the contrarian view, Leibowitz and margolis (1990). Lucky
(1998) describes both sides of the debate."
In fact, our final sentence in the keyboard discussion says: "Thus, we
find the ongoing persistence of the QWERTY keyboard in today's computer
society at odds with the strongest claims of superiority of the Dvorak
layout."
BTW the treatment of QWERTY in Lucky's book (Silicon Dreams) is well
worth reading; it's much more balanced that the economics debate...
> He also points out that they were among many to fall for the "first mover
> advantage" myth. Specifically, in their Lessons for entrepreneurs, in their
> chapter 6.
Note that chapter 6 is about switching costs, not network effects---they
aren't
introduced until chapter 7. The lesson that Leibowitz didn't like was:
"Be prepared to invest to build an installed base through promotions and
by offering up front discounts. You can't succeed in a competitive
lock-in markets without making these investments."
In the context of the chapter, this is saying: "Sell ink jet printers
cheap to stimulate the demand for cartridges, give away cell phones for
a nominal price to get people to sign up for your service, or --- the
classic case --- give away the razor to sell the blades."
Note that we recommend these activities specifically in the context of a
*competitive* industry---not an industry that is subject to
winner-take-all effects and/or first-mover advantages.
If you look at the discussion of what we refer to first-mover advantage
in this chapter (p 168-169) you will see that it has nothing to do with
network effects. What we describe are various techniques for blocking
the subsequent entry of rivals.
--
Hal Varian, Dean voice: 510-642-9980
SIMS, 102 South Hall fax: 510-642-5814
University of California h...@sims.berkeley.edu
Berkeley, CA 94720-4600 http://www.sims.berkeley.edu/~hal
Tim Lambert
> "Tim Lambert" <lam...@cse.unsw.edu.au> wrote in message
> news:m31y5m6...@cycloid.localdomain...
> > "susupply" <susu...@mindspring.com> writes:
>
> > > The facts are as L&M have presented them, not as Arthur and David and
> their
> > > idolators would have them. You yourself just got through quoting only
> part
> > > of one sentence of a letter they wrote in response to a SPECIFIC
> criticism.
> >
> > In which they falsely claimed that Norman's work found no difference.
>
> That is a lie. They did not mention Norman, either in their response to the
> letter writer or in their article.
They wrote "the mathematical simulations of typing" which is a clear
reference to Norman's work.
> But they do quote from his work in other
> articles, of which you are clearly ignorant.
>
> [snip]
>
> > > Further, you have also done a very dishonest edit of my response to you,
> > > conveniently leaving out what your own source has to say:
> > >
> > > << There seems no reason to choose Sholes, Dvorak, or alphabetically
> > > organized keyboards over one another on the basis of typing speed. >>
> >
> > Pardon? Here is what my source says on the matter:
Why did you you snip out what my source said?
Here it is again:
There is a better way -- the Dvorak keyboard -- painstakingly
developed by (and named after) one of the founders of industrial
engineering. It is easier to learn and allows for about 10 percent
faster typing, but that is simply not enough of an improvement to
merit a revolution in the keyboard. Millions of people would have to
learn a new style of typing. Millions of typewriters would have to
be changed. The severe constraints of existing practice prevent
change, even where the change would be an improvement.7
7. Admirers of the Dvorak keyboard claim much more than a 10 percent
improvement, as well as faster learning rates and less fatigue. But
I will stick by my studies and my statements. If you want to read
more, including a worthwhile treatment of the history of the
typewriter, see the book Cognitive aspects of skilled typewriting,
edited by Cooper (1983), which includes several chapters of research
from my laboratory.
Don Norman "The Design of Everyday Things">
> Further, you seem to be relying not on actual typing, but to some sort of
> design simulation in your cite:
That's right. What do you think L&M were referring to when they wrote:
"the mathematical simulations of typing" ?
Tim
susupply
"Hal Varian" <h...@sims.berkeley.edu>
who much too infrequently contributes to our debates here,
wrote in message news:3DD8363...@sims.berkeley.edu...
> I think that we covered both sides of the story fairly, citing both Paul
> David and Leibowitz and Margolis in the "Further Reading" section. (Not
> in a footnote!) The exact statement is: "On QERTY, see David (1985,
> 1986) and for the contrarian view, Leibowitz and margolis (1990). Lucky
> (1998) describes both sides of the debate."
First, as I've stated in a prior post you may not have read, Stan refers to
"Information Rules" as "one of the more reasonable books of advice for the
information economy". He also refers to you and Prof. Shapiro as "proper
academics" who are "somewhat circumspect about overstating the advantages of
being first".
In a footnote in his book, he writes:
"After presenting Paul David's strong lock-in story as if it were true, they
mention in the last sentence or two that something appears wrong with the
story because computer keyboards are so easily reprogrammed that strong-form
lock-in would seem impossible. Yet on page 233 they are back to stating
that QWERTY is an inferior design. They do try to cover themselves by
citing in a footnote the Liebowitz and Margolis 1990 presentation of the
typewriter history, but it appears to be more an example of covering
themselves against claims that they missed a relevant article than
attempting to present full information for their readers."
[snip, and going to what I had written:]
> > He also points out that they were among many to fall for the "first
mover
> > advantage" myth. Specifically, in their Lessons for entrepreneurs, in
their
> > chapter 6.
[Hal Varian comments:]
> Note that chapter 6 is about switching costs, not network effects---they
> aren't
> introduced until chapter 7. The lesson that Leibowitz didn't like was:
> "Be prepared to invest to build an installed base through promotions and
> by offering up front discounts. You can't succeed in a competitive
> lock-in markets without making these investments."
>
> In the context of the chapter, this is saying: "Sell ink jet printers
> cheap to stimulate the demand for cartridges, give away cell phones for
> a nominal price to get people to sign up for your service, or --- the
> classic case --- give away the razor to sell the blades."
>
> Note that we recommend these activities specifically in the context of a
> *competitive* industry---not an industry that is subject to
> winner-take-all effects and/or first-mover advantages.
This strikes me as odd. You specifically stated, "in competitive lock-in
markets". Which markets would be those that exhibit (supposedly) network
effects. The chapter in "Re-Thinking the Network Economy" from which I'm
taking this, is titled "Racing to Be First", which implies "*competitive*
industry".
[back to Hal Varian:]
> If you look at the discussion of what we refer to first-mover advantage
> in this chapter (p 168-169) you will see that it has nothing to do with
> network effects. What we describe are various techniques for blocking
> the subsequent entry of rivals.
Again, your book states:
"First-mover advantages can be powerful and long-lasting in lock-in markets,
especially those in information industries where scale economies are
substantial. If you can establish an installed base before the competition
arrives on the scene, you may make it difficult for later entrants to
achieve the scale economies necessary to compete."
There's that, "lock-in markets", again. And, to repeat for the benefit of
someone else reading this, the David-Arthur theory says that lock-in happens
due to network effects (and their increasing returns).
Any rate I have forwarded this onto Stan Liebowitz, and will report any
comments he may have.
Patrick R. Sullivan
Samuel Barber
> > think that they will (might) recover their losses (nonsense), or that
> > turning a profit is a reason to think that they will not (might not)
> > recover their losses (double nonsense).
>
> Neither of those two statements have been made by me.
Not explicitly. But you seem unwilling to concede that turning from
losses to profits is evidence that the business plan is working.
Instead you emphasize that PayPal has not yet recovered its losses,
which I explained was not a very interesting fact.
Let me put some additional facts on the table. PayPal had a successful
IPO, with a market cap of about $1.5 billion. Then they were acquired,
as I mentioned before, by EBay. Obviously other people besides me (the
stock market, EBay management) believe that PayPal was doing something
right.
> > > The miscomprehension is not one of reading, but of the idea of network
> > > effects. And it is on your part. You're misusing the term to simply
> > > encompass any headstart.
> >
> > Maybe you think so, but I'm not.
>
> Then why were you unable to define for me what the network effects were in
> the Paypal case?
Not unable. I didn't anticipate that you would dispute that there were
network effects, so I simply pointed you to the web site and said "it
should be obvious".
It is obviously useful to be able to make payments to, and receive
payments from, as many people as possible. If PayPal hadn't offered
people inducements to sign up and use (free of charge) the service,
they would have had a hard time getting a useful (lots of people using
it) service started. Once a critical mass was achieved, they were able
to reduce the signup inducements and introduce substantial transaction
fees, while continuing to enjoy very rapid growth in both signups and
usage. This rapid growth was partly due to word getting out about the
service, but mainly it was because the service was becoming more
useful as more people used it.
Sam
Tim Lambert
It is a rather telling error. Their articles are written to give the
impression that Dvorak has no advantage over Qwerty, and this suggests
that is what they really believe. For example, they write, "the
consistent finding in ergonomic studies is that the results imply no
clear advantage for Dvorak", when, in fact, HCI texts give figures
like 10% advantage ("The Design of Everyday Things") or 5-10%
advantage ("Handbook of Human-Computer Interaction").
They seem to have a clear bias against Dvorak -- this is especially
noticeable when you compare their treatment of the various studies
with that in the "Handbook of Human-Computer Interaction".
As for the overall point, I don't see how Paul David's argument
depends on Dvorak being 20% better, when the evidence suggests that it
is only about 10% better.
Tim
Hal Varian
> "Hal Varian" <h...@sims.berkeley.edu>
> First, as I've stated in a prior post you may not have read, Stan refers to
> "Information Rules" as "one of the more reasonable books of advice for the
> information economy". He also refers to you and Prof. Shapiro as "proper
> academics" who are "somewhat circumspect about overstating the advantages of
> being first".
Yes, I have read Stan's book and your prior posts.
>
> In a footnote in his book, he writes:
>
> "After presenting Paul David's strong lock-in story as if it were true, they
> mention in the last sentence or two that something appears wrong with the
> story because computer keyboards are so easily reprogrammed that strong-form
> lock-in would seem impossible. Yet on page 233 they are back to stating
> that QWERTY is an inferior design. They do try to cover themselves by
> citing in a footnote the Liebowitz and Margolis 1990 presentation of the
> typewriter history, but it appears to be more an example of covering
> themselves against claims that they missed a relevant article than
> attempting to present full information for their readers."
Again, we did not cite the L&M piece in a footnote; it was in "further
reading", where we cited it in parallel with the David piece.
>>Note that chapter 6 is about switching costs, not network effects---they
>>aren't
>>introduced until chapter 7. The lesson that Leibowitz didn't like was:
>>"Be prepared to invest to build an installed base through promotions and
>>by offering up front discounts. You can't succeed in a competitive
>>lock-in markets without making these investments."
>>
>>In the context of the chapter, this is saying: "Sell ink jet printers
>>cheap to stimulate the demand for cartridges, give away cell phones for
>>a nominal price to get people to sign up for your service, or --- the
>>classic case --- give away the razor to sell the blades."
>>
>>Note that we recommend these activities specifically in the context of a
>>*competitive* industry---not an industry that is subject to
>>winner-take-all effects and/or first-mover advantages.
>
>
> This strikes me as odd. You specifically stated, "in competitive lock-in
> markets". Which markets would be those that exhibit (supposedly) network
> effects.
Maybe, but not necessarily. There are many markets with no network
effects that exhibit high switching costs, e.g., to switch cell-phone
carriers you have to sign a new contract, you may have to get a new
phone, etc.
> The chapter in "Re-Thinking the Network Economy" from which I'm
> taking this, is titled "Racing to Be First", which implies "*competitive*
> industry".
Racing to be first seems to imply winner-take-all; at least that's how I
read the Leibowitz title. That isn't what we were talking about in
chapter 6 of our book; chapter 6 was concerned with primarily with
switching costs.
>
> [back to Hal Varian:]
>
>
>>If you look at the discussion of what we refer to first-mover advantage
>>in this chapter (p 168-169) you will see that it has nothing to do with
>>network effects. What we describe are various techniques for blocking
>>the subsequent entry of rivals.
>
>
> Again, your book states:
>
> "First-mover advantages can be powerful and long-lasting in lock-in markets,
> especially those in information industries where scale economies are
> substantial. If you can establish an installed base before the competition
> arrives on the scene, you may make it difficult for later entrants to
> achieve the scale economies necessary to compete."
>
> There's that, "lock-in markets", again. And, to repeat for the benefit of
> someone else reading this, the David-Arthur theory says that lock-in happens
> due to network effects (and their increasing returns).
Once again: one source of lock-in is scale effects, but that's not the
only source. There can be switching costs due to contracts, retraining
costs, and a variety of other reasons. In other words, lock-in may be
caused by network effects, but that's not the only reason. Similarly,
there can be strong network effects, but lock-in can be low.
For example, the fax machine is a standard example of network effects,
but these effects occur at the level of the technology, not at the
product level. The result is that there are very low switching costs
from changing from one fax machine to another.
So there can be network effects with no switching costs. Conversely,
you can have high switching costs in an industry with low network effects.
At the end of our discussion of QWERTY we point out that since almost
all keyboards can be reprogrammed now, without requiring any collective
decisions, if Dvorak were dramatically more efficient than QWERTY, and
retrainnig costs were not prohibitive, we would expect to see it adopted
more widely.
>
> Any rate I have forwarded this onto Stan Liebowitz, and will report any
> comments he may have.
>
> Patrick R. Sullivan
>
>
--
David Friedman
Tim Lambert <lam...@cse.unsw.EDU.AU> wrote:
I can't speak to the _Reason Article_, since I don't think I read it.
But _Fable of the Keys_ cites a variety of estimates for Dvorak vs
QWERTY from differing sources. My memory is that 10% would be on the
high end of those results.
It matters because when going from a theoretical possibility to a
situation in the real world, it is important how large the effects are.
Nobody would deny that there are some advantages to using a standard
word processor, typing layout, or whatever. But Paul David et. al. argue
that those advantages are so large that even when an alternative is
clearly a lot better, people still don't switch. And their arguments
depended not merely on the claim "Dvorak was marginally better" but on
very strong assertions about how much better it was.
Have you read _Fable of the Keys_, which is included in their Microsoft
Book? The book also has some interesting data on software markets.
David Friedman
"susupply" <susu...@mindspring.com> wrote:
> Again, your book states:
>
> "First-mover advantages can be powerful and long-lasting in lock-in markets,
> especially those in information industries where scale economies are
> substantial. If you can establish an installed base before the competition
> arrives on the scene, you may make it difficult for later entrants to
> achieve the scale economies necessary to compete."
>
> There's that, "lock-in markets", again. And, to repeat for the benefit of
> someone else reading this, the David-Arthur theory says that lock-in happens
> due to network effects (and their increasing returns).
But Liebowitz and Margolis argue that the tendency of software markets
to be (sequential) monopolies is due to scale economies in production.
Grinch
wrote:
>"susupply" <susu...@mindspring.com> writes:
>
>> "Tim Lambert" <lam...@cse.unsw.edu.au> wrote in message
>> news:m31y5m6...@cycloid.localdomain...
>>
>> [snip]
>>
>> > > Further, you have also done a very dishonest edit of my response to you,
>> > > conveniently leaving out what your own source has to say:
>> > >
>> > > << There seems no reason to choose Sholes, Dvorak, or alphabetically
>> > > organized keyboards over one another on the basis of typing speed. >>
>> >
>> > Pardon? Here is what my source says on the matter:
>
>Why did you you snip out what my source said?
>
>Here it is again:
Here is what your source said, as posted by you:
>>>Page 1288 of Handbook of Human-Computer Interaction:
>>>...
>>> Conclusions
>
>>> ... a switch to DSK would probably not
>>> provide a practical improvement in productivity. With an estimated 5
>>> to 10% increase in output over QWERTY (Noel and McDonald. 1989;
>>> Norman and Fisher, 1982), the switch might be cost effective for
>>> some typists, but essentially worthless for most....
>>> Also, a
>>> typist trained on QWERTY can easily transfer his or her skill to any
>>> other standard keyboard, but a typist trained on DSK could not.
"...a switch to DSK would probably not provide a practical improvement
in productivity ... essentially worthless for most...."
Why do you keep ingoring the conclusion of your own source?
James A. Donald
On Mon, 18 Nov 2002 18:56:04 GMT, David Friedman
<dd...@daviddfriedman.com> wrote:
> _Fable of the Keys_ cites a variety of estimates for Dvorak
> vs
> QWERTY from differing sources. My memory is that 10% would be
> on the high end of those results.
>
> It matters because when going from a theoretical possibility
> to a situation in the real world, it is important how large
> the effects are. Nobody would deny that there are some
> advantages to using a standard word processor, typing layout,
> or whatever. But Paul David et. al. argue that those
> advantages are so large that even when an alternative is
> clearly a lot better, people still don't switch.
The dot com boom resulted from an assessment that network
effects were common and large, so large as to constitute "lock
in"
The dot com bust resulted from a reassessment that network
effects were infrequent and small.
--digsig
James A. Donald
6YeGpsZR+nOTh/cGwvITnSR3TdzclVpR0+pr3YYQdkG
1MByRtnQqgZwl28RcBQxSommmHtvuzC08jjnrZnz
4WHcJldK81qPJ3nRMp1hM9SsD47Bnp61FFm2zuyay
Grinch
wrote:
>David Friedman <dd...@daviddfriedman.com> writes:
>....
>As for the overall point, I don't see how Paul David's argument
>depends on Dvorak being 20% better, when the evidence suggests that it
>is only about 10% better.
Huh???
The claim in the orignal paper was that Dvorak produced up to a
*2,000%* return on investment in the era of big expensive typing
pools, yet "lock in" and "path dependence" somehow prevented firms
from pocketing these large savings by switching to Dvorak. *That* was
the claim.
But if Dvorak didn't produce benefits large enough to be economically
meaningful in the era of typing pools, then the whole claim amounts to
a big fat *nothing*.
Even *today*, in the era of computing, a switch to Dvorak "would
probably not provide a practical improvement in productivity" and be
"essentially worthless for most", says your own source as quoted by
you, The Handbook of Human-Computer Interaction, p. 1288.
And back in the days of typing pools, for which Arthur and David made
their claim -- and which is what counts -- there was plenty of
commercial interest in Dvorak too, and plenty of studies that tried to
document and replicate Lt Com. Dvorak's claims, all of which *failed*
and concluded it was *not worth the cost of switching*. To wit:
[] A 1953 Australian Post Office study failed to find the supposed
benefits of Dvorak.
[] A 1978 study at Oregon State University indicated that after 100
hours of training, Dvorak typists were up to only 97.6% of their old
QWERTY speed.
[] A 1973 study at Western Electric found that after 104 hours of
training on Dvorak, typists were all of 2.6% faster than they had been
on QWERTY. (Of course, after 100+ hours of training you'd expect
QWERTY typists to be a lot better at QWERTY.)
[] A. Miller and J. Thomas, of the IBM Research Laboratory (IBM had
some interest in the subject) writing in the International Journal of
Man-Machine Studies, concluded that "no alternative has shown a
realistically significant advantage over the QWERTY for general
purpose typing."
And that's the end of the "Dvorak was better than QWERTY but was
locked out of the market by path dependence" myth.
To read Fable of the Keys itself rather than a magazine digest, see
http://wwwpub.utdallas.edu/~liebowit/keys1.html
>
>Tim
Grinch
wrote:
>"susupply" <susu...@mindspring.com> writes:
>
>> "Tim Lambert" <lam...@cse.unsw.EDU.AU> wrote in message
>> news:tnadked...@oolong.orchestra.cse.unsw.EDU.AU...
>.........
>> The most recent studies of the relative merits of keyboards are found in
>> the ergonomics literature.
>> ... Dvorak is 6.2 percent faster than Qwerty,
>> ... a 2.3 percent advantage for Dvorak. ....
>> ... Dvorak keyboard was only about 5% faster than the Sholes.
>> ... Dvorak is all of 4.0% faster.
>
>Gee, even the studies you cited consistently show Dvorak to be better.
>
>If you want to find out what HCI experts think about this matter, you
>could consult Don Norman's book , or the "Handbook of Human-Computer
>Interaction" (which also suggest that the difference is about 10%).
Somebody was kind enough to post what the HCI experts think:
~~
Page 1288 of Handbook of Human-Computer Interaction:
..
Conclusions
... a switch to DSK would probably not
provide a practical improvement in productivity. With an estimated 5
to 10% increase in output over QWERTY (Noel and McDonald. 1989;
Norman and Fisher, 1982), the switch might be cost effective for
some typists, but essentially worthless for most....
Also, a typist trained on QWERTY can easily transfer his or her skill
to any other standard keyboard, but a typist trained on DSK could not.
~~
"would probably not provide a practical improvement in
productivity... essentially worthless for most.... "
Well, I guess that explains why the switch never happened.
Thanks, Mr. Somebody. ;-)
>> Stubborn things, these facts.
>
>Indeed.
Indeed.
Grinch
wrote:
>David Friedman <dd...@daviddfriedman.com> writes:
>
>> In article <tnadked...@oolong.orchestra.cse.unsw.EDU.AU>,
>> Tim Lambert <lam...@cse.unsw.EDU.AU> wrote:
>>
>> > I don't know about the historical facts, but Liebowitz and Margolis
>> > most definitely got the facts about HCI research wrong. They wrote:
>> > "that the mathematical simulations of typing, which show no advantage
>> > for Dvorak".
>> >
>> > In fact, Don Norman, who conducted the simulations they refer to,
>> > states that he found that Dvorak was 10% faster. This is in "The
>> > Design of Everyday Things", which is not an obscure book - it is the
>> > most widely read book on HCI out there.
>>
>> What are you quoting--their book, or "Fable of the Keys?"
>
>The quote is from Reason Online:
>
>http://reason.com/9611/ltr.sl.shtml
"Fable of the Keys" is at
http://wwwpub.utdallas.edu/~liebowit/keys1.html
And, of course, the relevant issue in not whether Dvorak is better
than QWERTY today in our world of computing -- the Handbook of
Human-Computer Interaction's conclusion that switching to Dvorak is
"essentially worthless" being true enough, but beside the point.
The real issue is the original Arthur/David claim that in the
pre-computing world of very expensive typing pools switching to Dvorak
from QWERTY would have produced a *big* return on investment that
profit-hungry businessess failed to take due to path dependence or
lock-in or some such thing.
This is the claim that L&M demolish in FotK.
>Tim
Robert Vienneau
"We've been telling the story of a revolution of sorts among
economists in the way that they understand the processes of
economic growth. This is not a world-turned-upside-down
revolution, like the quantum revolution in physics at the turn
of the century, but it is a pretty significant intellectual event
nevertheless, one in which deeply cherished mathematical
assumptions have been discarded, and the contribution of knowledge
to productivity has come to be seen as rivaling that of labor and
capital...
...David in the mid-1970s had written a deeply-penetrating few
pages on the the manner in which the high mathematical forms of
technical economics excluded a role for history. Arthur, ...in
1979 had begun writing about how in economics chance occurrences
might determine the future. Soon both Arthur and David were
calling this approach 'path dependence.'"
<http://www.boston.com/globe/search/stories/sitting_alone.htm>
> > For some reason, one of Patrick Sullivan's equally childish
> > acquaintances likes to cite this as evidence that Paul David
> > always intended the point of path dependence to be the orthogonal
> > issue of economic efficiency, not a formalization of the notion
> > that "history matters".
> The reason is because that is what Paul David himself said it was.
Right. An article that says the the point of Paul David's work was
a formalization of the idea that "history matters", and where the
issue of potential inefficiencies barely appears, is evidence for
the opposite.
> And, "history matter" is not a revolutionary idea.
I, of course, don't say that the point of path dependence is the
notion that "history matters".
> Everyone knows that the
> automobile couldn't be invented before the wheel was invented.
I agree that "history matters" is not a revolutionary idea. Why, long
ago, Thorstein Veblen asked "why is economics not an evolutionary
science?". And obviously Paul David should reference at least
one of Joan Robinson's articles about History versus Equilibrium.
Since he didn't in his latest round about path dependence, David
obviously must be a self-promoter who greatly overstates the
importance of his work.
Nobody has ever explained to me why the proof of the Arthur, Ermoliev
and Kaniovski theorem is miscredited to Arthur, Ermoliev and Kaniovski.
> > To re-iterate, Brian Arthur's 1989 Economic Journal article
> > (available off his home page somewhere) seems to be a canonical
> > statement of his theory. In it, he writes:
> > "It is therefore not sufficient [for path dependence] that a
> > technology gain advantage with adoption; the advantage must (at
> > some market share) be self-reinforcing."
> In other words, the quote you insisted on giving (three times, iirc) from
> Paul David is blatantly disingenuous:
"...Arthur's (1989) phrase 'lock-in by small historical events' is
evidently a gloss that should not be read too literally; it is a
convenient contraction of the foregoing reference to the way in
which trapping regions may be entered - although somewhat
unfortunate, in allowing a hasty reader to suppose that the
antecedent events somehow have created the local stability, or
locked-in state..."
> Because, thanks to the quote from Arthur that Robert just supplied, we
> can
> that that is not the theory. The theory is that "lock-in" occurs due to
> network effects that give increasing returns. Not to historical events.
Whatever. Paul David echoes Arthur's point that
o The lock-in regions exist in the formal model because of the
properties of the adoption process
o 'Historical small events' ("those events or conditions...outside
the ex-ante knowledge of the observer--beyond the resolving power
of his 'model' or abstraction of the situation") determine which
region is attained by an individual realization of the process.
So when Paul David repeats what Arthur said in his canonical statement
of the theory of path dependence, David is being blatantly
disingenuous. I see.
> So, why would Paul David, in a paper revised (I believe) three times make
> such a blatant misstatement? The answer, most obviously, is that he is
> slyly conceding he was incorrect. Which I have told you several times
> before.
I see. David repeats what Arthur says ("It is therefore not sufficient
[for path dependence] that a technology gain advantage with adoption;
the advantage must (at some market share) be self-reinforcing"). Arthur
is correctly describing his theory. Therefore David is engaged in a
blatant mistatement. Thus, he is slyly conceding he was incorrect. I
like Steely Dan, but I don't remember which songs are on their album
Pretzel Logic.
> And don't think I've missed that you have yourself slyly dropped your
> claims
> about shirts not being lost in part because of this theory.
I see. Deciding not to address one aspect of a complete idiot's stupidity
is conceding the idiot is correct. Not that Patrick Sullivan is not
making up my supposed claim.
Robert Vienneau
Donald <jam...@echeque.com> wrote:
> The dot com boom resulted from an assessment that network
> effects were common and large, so large as to constitute "lock
> in"
>
> The dot com bust resulted from a reassessment that network
> effects were infrequent and small.
"Michael Jensen and William Meckling...argued that there was no
perfect way to align the interests of the owners and the managers...
...corporations came to realize that leveraged buyouts weren't the
only way to align the interests of managers and shareholders. There
was a much simpler tool available, which didn't involve going to
all the trouble of a multibillion-dollar takeover: the executive
stock option. Once endowed with a generous grant of these magical
instruments, a senior executive would no longer think of himself
as a mere hired hand but as a proprietor who had the long-term
health of the firm at heart. That was the theory, anyway...
Yet the real benefit of granting stock options - or so economists
insisted - was that they solved the problem of providing incentives
to senior executives. Once again, Michael Jensen was an influential
figure...
...Even Michael Jensen, the great defender of big payouts for
C.E.O.s, now concedes that the design of enormous stock-options
packages had a disasterous effect on corporate ethics."
-- John Cassidy, New Yorker, Sept. 23, 2002.
Beth Clarkson
I tried learning the Dvorak keyboard. I was able to get proficient at
it fairly quickly (less than 2 weeks) but found it too much of a
strain to switch from QWERTY to Dvorak on a regular basis. Since my
job required me to use QWERTY keyboards, I didn't find it worthwhile
and am firmly wedded to QWERTY at this point. I still have to type at
various computer stations on a regular basis.
My husband on the other hand, absolutely loves the Dvorak keyboard.
While he can type slightly faster with it, he says the main benefit
comes from ease of use. It doesn't put near the stain on his finger
muscles and he can type for longer periods without requiring a break.
Since he's a professional writer, spending long sessions at his desk
and never typing at another keyboard (except mine occasionally),
Dvorak makes sense for him.
At any rate, with current software, it's easy to configure your
keyboard to either setup. In fact, he often switches mine to Dvorak on
those rare occasions when he's using it.
Beth Clarkson
susupply
"Hal Varian" <h...@sims.berkeley.edu> wrote in message
news:3DD909F2...@sims.berkeley.edu...
> Again, we did not cite the L&M piece in a footnote; it was in "further
> reading", where we cited it in parallel with the David piece.
I'm puzzled why you insist on this distinction. Especially given the
unusual format of your book. There are almost no formal footnotes at all,
and most of them (all on one page) are simply cites to works listed in the
bibliography. So, it seems that your "Further Reading" section at the end
of your book, functions very much like most footnotes sections. Thus, I
don't think Stan is even rising to the level of poetic license in describing
it as, "in a footnote".
The more important point is how you treated the QWERTY story, substantively.
Here Stan is correct, you twice refer to QWERTY as an inferior design, in
the body of the book. And only at the end in a section many people won't
even bother to read, do you make a reference to their side of the story.
And their side of the story is the one that is true (as in closer to the
facts that can be gleaned). David and Arthur have as much as admitted it,
albeit not by shouting their concessions from the rooftops. So, why did you
feature the almost certainly false QWERTY story, not the more accurate one
from L&H?
BTW, I've had a look at Robert Lucky's Silicon Dreams, and there is nothing
in it about QWERTY that can't be found is the scholarly papers of L&H. And
there is much missing in Lucky, that IS covered in L&H.
[snip a bunch of stuff to avoid unwieldiness]
> Racing to be first seems to imply winner-take-all; at least that's how I
> read the Leibowitz title. That isn't what we were talking about in
> chapter 6 of our book; chapter 6 was concerned with primarily with
> switching costs.
and in an earlier post you had said:
>>Note that we recommend these activities specifically in the context of a
>>*competitive* industry---not an industry that is subject to
>>winner-take-all effects and/or first-mover advantages.
I think you are overstating the delineations between your chapters 6 & 7
(which I take to be the meat of your argument). The chapter is titled
"Managing Lock-In", and on page 146 you do say: "In the network economy,
simply being first to market can generate both differentiation and cost
advantages. The key is to convert a timing advantage into a more lasting
edge by building an installed base of users. Like Amazon, you may have a
first-mover advantage...."
And, you even mention Microsoft (p. 148) and its "customers...already locked
in", which is supposedly the biggest recent case of lock-in due to network
effects.
Of course, it is a long chapter, and there are a lot of things in it, but I
agree with Stan that the average reader of this book is not likely to pick
up on all the nuances. And one thing that is continually used throughout
the book is the term "lock-in". I get the feeling he thinks you should have
used this term much more precisely than you did.
[snip some preliminaries]
> Once again: one source of lock-in is scale effects, but that's not the
> only source. There can be switching costs due to contracts, retraining
> costs, and a variety of other reasons. In other words, lock-in may be
> caused by network effects, but that's not the only reason. Similarly,
> there can be strong network effects, but lock-in can be low.
And again, I think Stan thinks this an unwise (perhaps even a promiscuous)
use of the term. He and Steve Margolis being famous for their "three
degrees of path dependence" definitions, I think he wants unlike things to
not be referred to as the same things.
> For example, the fax machine is a standard example of network effects,
> but these effects occur at the level of the technology, not at the
> product level. The result is that there are very low switching costs
> from changing from one fax machine to another.
>
> So there can be network effects with no switching costs. Conversely,
> you can have high switching costs in an industry with low network effects.
Not disputed by L&H, in fact they go to some trouble to differentiate these
things. I saw a lot of "on the other hands" just now in skimming through
"Information Rules" , but I'm suspicious about how many of them register
with a business audience.
susupply
> I can't speak to the _Reason Article_, since I don't think I read it.
> But _Fable of the Keys_ cites a variety of estimates for Dvorak vs
> QWERTY from differing sources. My memory is that 10% would be on the
> high end of those results.
The articles they cite show between -3% and +6%, and most are around +2%.
There is not any credible evidence for the 10%, the guy he's citing first
said he found it to be 5%. Now he's apparently bumped that up to from
5-10%.
Further, some studies found that giving the same amount of training on
QWERTY actually increased tested speed by more than what Dvorak training
showed. And I stress, *tested speed*.
susupply
> > There's that, "lock-in markets", again. And, to repeat for the benefit
of
> > someone else reading this, the David-Arthur theory says that lock-in
happens
> > due to network effects (and their increasing returns).
>
> But Liebowitz and Margolis argue that the tendency of software markets
> to be (sequential) monopolies is due to scale economies in production.
I'm not sure what point you're making, but scale economies in production
don't produce "lock-in" that protects inferior products from superior
products. Which was the whole point of David's paper.
susupply
"Robert Vienneau" <rv...@see.sig.com>
needing yet another lesson in reading comprehension,
wrote in message news:rvien-48F375....@news.dreamscape.com...
> >> a Boston Globe article by David Warsh:
>
> "We've been telling the story of a revolution [snip]
> > > For some reason, one of Patrick Sullivan's equally childish
> > > acquaintances likes to cite this as evidence that Paul David
> > > always intended the point of path dependence to be the orthogonal
> > > issue of economic efficiency, not a formalization of the notion
> > > that "history matters".
>
> > The reason is because that is what Paul David himself said it was.
>
> Right. An article that says the the point...
The article was not written by Paul David, but by David Warsh. I'm using
primary source documents, you're using secondhand stuff.
[snip]
> > And, "history matter" is not a revolutionary idea.
>
> I, of course, don't say that the point of path dependence is the
> notion that "history matters".
Sure you do:
<<--------------------quote------------------------
From: Robert Vienneau (rv...@see.sig.com)
Subject: Re: Path dependence and costs of changing paths.
Newsgroups: sci.econ
Date: 1998/12/11
[snip]
What is the point? Traditional neoclassical models show an equilibrium
as an end point, unaffected endogeneously by the process by which it
is approached. These models have been criticized as teleological and
acausal. History doesn't matter to them, except through exogeneous
parameter changes. Apparently Arthur has developed formal models in
which "history matters," where this property is defined in a specific
technical sense.
---------------------------endquote-------------------->>
In the last sentence, clear as can be.
> > Everyone knows that the
> > automobile couldn't be invented before the wheel was invented.
>
> I agree that "history matters" is not a revolutionary idea.
Great, the journey of a thousand miles....!
[snip]
> > In other words, the quote you insisted on giving (three times, iirc)
from
> > Paul David is blatantly disingenuous:
>
> "...Arthur's (1989) phrase 'lock-in by small historical events' is
> evidently a gloss that should not be read too literally [snip]
> > Because, thanks to the quote from Arthur that Robert just supplied, we
> > can
> > that that is not the theory. The theory is that "lock-in" occurs due to
> > network effects that give increasing returns. Not to historical events.
>
> Whatever.
"Whatever", being Robert's entire argument going down in flames.
> Paul David echoes Arthur's point that
> o The lock-in regions exist...
The regions, not the "lock-in"
> ... in the formal model because of the
> properties of the adoption process
>
> o 'Historical small events' ("those events or conditions...outside
> the ex-ante knowledge of the observer--beyond the resolving power
> of his 'model' or abstraction of the situation") determine which
> region
Again, the "region", not the "lock-in"
> ... is attained by an individual realization of the process.
>
> So when Paul David repeats what Arthur said in his canonical statement
> of the theory of path dependence, David is being blatantly
> disingenuous. I see.
Pretty obviously you don't. The historical events select the path
(according to them), the lock-in arises because of the increasing returns
due to network effects.
David's changing the story to: lock-in by small historical events.
> > So, why would Paul David, in a paper revised (I believe) three times
make
> > such a blatant misstatement? The answer, most obviously, is that he is
> > slyly conceding he was incorrect. Which I have told you several times
> > before.
>
> I see. David repeats what Arthur says ("It is therefore not sufficient
> [for path dependence] that a technology gain advantage with adoption;
> the advantage must (at some market share) be self-reinforcing").
Read the above carefully, Robert. And ask yourself what "self-reinforcing"
means, and how it could come about. (Hint: it's not historical events)
> Arthur
> is correctly describing his theory. Therefore David is engaged in a
> blatant mistatement. Thus, he is slyly conceding he was incorrect. I
> like Steely Dan, but I don't remember which songs are on their album
> Pretzel Logic.
You must like to eat them.
> > And don't think I've missed that you have yourself slyly dropped your
> > claims
> > about shirts not being lost in part because of this theory.
>
> I see. Deciding not to address one aspect of a complete idiot's stupidity
> is conceding the idiot is correct. Not that Patrick Sullivan is not
> making up my supposed claim.
Deciding to completely (and silently) drop your argument:
> The above says such investments are NECESSARY in such markets. It
> does not say that such investments are SUFFICIENT in such markets.
> So the above is not shown to be mistaken by a claim that "A lot
> of investors who took this seriously lost their shirts."
When it has been hammered into a pulp:
<<------------quote------------
No one claimed it was "SUFFICIENT". This is an astoundingly fallacious
piece of logic from someone who claims to be a mathematician. Your last
sentence is a blatant non-sequitur.
Consider the real world example of Enron Energy Services which (if we can
believe Paul Krugman's source; a big "if", I admit) paid up-front cash
discounts (or rebates) of millions of dollars TO ITS CUSTOMERS to get them
to sign contracts. Enron was doing this in the hope of building "an
installed base", from which it (I guess) hoped to recover those "discounts".
Does Robert dispute that in this case, "shirts" were lost? That they might
well not have been lost had Enron acted more like Peggy Noonan's shoe and
tire companies? (I.e., had they ignored Shapiro and Varian's crack-pot
advice.)
----------------endquote--------------->>
Would be conceding your error, yes.
Hal Varian
> "Hal Varian" <h...@sims.berkeley.edu> wrote in message
> news:3DD909F2...@sims.berkeley.edu...
>
>
>>Again, we did not cite the L&M piece in a footnote; it was in "further
>>reading", where we cited it in parallel with the David piece.
>
>
> I'm puzzled why you insist on this distinction. Especially given the
> unusual format of your book. There are almost no formal footnotes at all,
> and most of them (all on one page) are simply cites to works listed in the
> bibliography.
Exactly. We refer to both David and L&M in the "Further Reading"
section of the book, not in a footnote. Both papers were cited equally
prominently, it wasn't as if we cited one in the text and the other in
footnotes.
> BTW, I've had a look at Robert Lucky's Silicon Dreams, and there is nothing
> in it about QWERTY that can't be found is the scholarly papers of L&H. And
> there is much missing in Lucky, that IS covered in L&H.
But note that Lucky's book was published in 1989, while L&H was
published in a journal in 1990. The point is that the story of QWERTY
was well known outside of the economics literature prior to Arthur,
David, and L&H. (BTW, I agree with the criticism that Arthur and David
should have reported the other side of the story, as Lucky did.)
>
> I think you are overstating the delineations between your chapters 6 & 7
> (which I take to be the meat of your argument). The chapter is titled
> "Managing Lock-In", and on page 146 you do say: "In the network economy,
> simply being first to market can generate both differentiation and cost
> advantages. The key is to convert a timing advantage into a more lasting
> edge by building an installed base of users. Like Amazon, you may have a
> first-mover advantage...."
I certainly think that there can be a first-mover advantage, for lots of
reasons: switching costs, entry blockade, and demand-side and supply
side economies of scale, just to mention a few....so I don't view it as
a myth. On the other hand, I agree that lots of first movers blow it
(CP/M, Wordstar, Lotus, etc.) In the book we offer some advice about
how to avoid some of the common mistakes....
> Of course, it is a long chapter, and there are a lot of things in it, but I
> agree with Stan that the average reader of this book is not likely to pick
> up on all the nuances. And one thing that is continually used throughout
> the book is the term "lock-in". I get the feeling he thinks you should have
> used this term much more precisely than you did.
There seem to be two strands in this literature; the Klemperer strand,
which emphasizes individual switching costs and the Arthur-David strand
which emphasizes "collective" switching costs, or coordination costs. I
think that it is pretty clear that Chapter 6 is mostly about the former.
Take a look at chapter 5, where we list sources of switching costs:
contracts, durables, brand-specific training, information conversion,
specialized supplies, search costs and loyalty programs --- note that we
say nothing (at this point) about network effects (that comes later).
>>Once again: one source of lock-in is scale effects, but that's not the
>>only source. There can be switching costs due to contracts, retraining
>>costs, and a variety of other reasons. In other words, lock-in may be
>>caused by network effects, but that's not the only reason. Similarly,
>>there can be strong network effects, but lock-in can be low.
>
>
> And again, I think Stan thinks this an unwise (perhaps even a promiscuous)
> use of the term. He and Steve Margolis being famous for their "three
> degrees of path dependence" definitions, I think he wants unlike things to
> not be referred to as the same things.
Switching costs---the cost to a consumer of switching technologies or
brands---is a pretty standard concept that's been around for a long
time. See Klemperer's 1987 article, among others. That was what we
talked about in Chapter 6. I think that it's pretty clear that we
weren't talking about "path dependence" in that chapter. We did discuss
something like this in subsequent chapters, but I don't think that we
used that particular phrase since it is a bit vague and overly technical
for the lay audience for whom the book was intended.
>>For example, the fax machine is a standard example of network effects,
>>but these effects occur at the level of the technology, not at the
>>product level. The result is that there are very low switching costs
>>from changing from one fax machine to another.
>>
>>So there can be network effects with no switching costs. Conversely,
>>you can have high switching costs in an industry with low network effects.
>
>
> Not disputed by L&H, in fact they go to some trouble to differentiate these
> things. I saw a lot of "on the other hands" just now in skimming through
> "Information Rules" , but I'm suspicious about how many of them register
> with a business audience.
I agree that this is a problem. I thought we went out of our way to
qualify various points, including devoting several sections warning
people that only some industries have positive feedback, that switching
costs can be overestimated, and the like.
The trouble is that you can explain network effects to a CEO in 5
minutes and he can talk about it for 6 months...and get the idea wrong
to boot. This is depressing, but it's a fact of life. I think my
textbooks are clear too, but after I read the midterm exams I begin to
wonder...
Well, maybe I shouldn't expect more of the CEOs than the sophomores...
susupply
> susupply wrote:
> > I'm puzzled why you insist on this distinction. Especially given the
> > unusual format of your book. There are almost no formal footnotes at
all,
> > and most of them (all on one page) are simply cites to works listed in
the
> > bibliography.
>
> Exactly. We refer to both David and L&M in the "Further Reading"
> section of the book, not in a footnote. Both papers were cited equally
> prominently, it wasn't as if we cited one in the text and the other in
> footnotes.
I'm still puzzled. You seem to be conflating two separate points I made. I
see no meaningful distinction between, "in a footnote" and "in the Further
Reading section", given the unusual way you formatted them.
A very different point is; you far more prominently feature the David-Arthur
version of the QWERTY tale (whether you credit them or not). Twice in the
body of your book it is presented as if it were true, but it is not. In
Stan Liebowitz's words, it is flat wrong.
In fact, the first time I picked up your book I put it aside after finding
these fallacious presentations, thinking it would be a waste of my time to
read such a book. Now I see that I was wrong, there are many good things in
"Information Rules", in spite of the erroneous QWERTY story.
> > BTW, I've had a look at Robert Lucky's Silicon Dreams, and there is
nothing
> > in it about QWERTY that can't be found is the scholarly papers of L&H.
And
> > there is much missing in Lucky, that IS covered in L&H.
>
> But note that Lucky's book was published in 1989, while L&H was
> published in a journal in 1990. The point is that the story of QWERTY
> was well known outside of the economics literature prior to Arthur,
> David, and L&H. (BTW, I agree with the criticism that Arthur and David
> should have reported the other side of the story, as Lucky did.)
First, I don't know why I typed "L&H" when I should have written "L&M", but
you seem to know to whom I was referring.
More importantly, what was "well known" was a false story about the
keyboard. A story Paul David fell for, without checking it out. It was
only (to my knowledge) when L&M investigated, that the true story came out.
I.e., David and Arthur did not know "the other side of the story" (aka, the
truth).
But now that they do, they should be more straightforward in admitting it.
Because a lot of economists still don't seem to know (or accept) the true
story, in my experience.
[snip]
> I certainly think that there can be a first-mover advantage, for lots of
> reasons: switching costs, entry blockade, and demand-side and supply
> side economies of scale, just to mention a few....so I don't view it as
> a myth. On the other hand, I agree that lots of first movers blow it
> (CP/M, Wordstar, Lotus, etc.) In the book we offer some advice about
> how to avoid some of the common mistakes....
I wouldn't call first-mover advantage a myth, but I think it is badly
oversold.
[snip]
> There seem to be two strands in this literature; the Klemperer strand,
> which emphasizes individual switching costs...
I'm not familiar with Klemperer, but switching costs are not anything new,
and I think it a mistake to use the term "lock-in" regarding them. We
entrepreneurs deal with switching costs all the time, there's nothing new
economy (how quaint that now sounds) about switching costs.
> ... and the Arthur-David strand
> which emphasizes "collective" switching costs, or coordination costs. I
> think that it is pretty clear that Chapter 6 is mostly about the former.
> Take a look at chapter 5, where we list sources of switching costs:
> contracts, durables, brand-specific training, information conversion,
> specialized supplies, search costs and loyalty programs --- note that we
> say nothing (at this point) about network effects (that comes later).
As I said earlier, I don't think you've actually accomplished this neat
division, though I believe you when you say you meant to. Your book is
subtitled "A Strategic Guide to the Network Economy", there are blurbs on
the jacket about: "the age of the Internet", "the first book to explain
network economics, the new economics of our lives", "Forget Econ 101. Get a
glimpse of Econ 2001", and so forth.
Even in Chapter 1, with your first mention of "lock-in", you begin with the
example of 33 rpm LPs to demonstrate switching costs, but that's also a
demonstration of network effects (which Brian Arthur should have thought
about when giving his, also false, story about Beta v. VHS).
[snip]
> > I saw a lot of "on the other hands" just now in skimming
through
> > "Information Rules" , but I'm suspicious about how many of them register
> > with a business audience.
>
> I agree that this is a problem. I thought we went out of our way to
> qualify various points, including devoting several sections warning
> people that only some industries have positive feedback, that switching
> costs can be overestimated, and the like.
>
> The trouble is that you can explain network effects to a CEO in 5
> minutes and he can talk about it for 6 months...and get the idea wrong
> to boot. This is depressing, but it's a fact of life. I think my
> textbooks are clear too, but after I read the midterm exams I begin to
> wonder...
I'll repeat that I think the problem is using the same phrase ("lock-in") to
refer to things that are actually different. In fact, I'd suggest retiring
that phrase altogether. Unless it's about political decisions....but don't
get me started.
BTW, I apologize to you and Prof. Shapiro for this I wrote in response to
another poster:
<< Does Robert dispute that in this case, "shirts" were lost? That they
might
well not have been lost had Enron acted more like Peggy Noonan's shoe and
tire companies? (I.e., had they ignored Shapiro and Varian's crack-pot
advice.) >>
since, while I was addressing a crack-pot, I shouldn't have associated you
with that level of analysis.
Patrick R. Sullivan
susupply
> "susupply" <susu...@mindspring.com> writes:
> > > In which they falsely claimed that Norman's work found no difference.
> >
> > That is a lie. They did not mention Norman, either in their response to
the
> > letter writer or in their article.
>
> They wrote "the mathematical simulations of typing" which is a clear
> reference to Norman's work.
Did you even bother to read my earlier response to this? In "Typing
Errors", they said:
<< Ergonomic studies also confirm that the advantages of Dvorak are either
small or nonexistent. For example, A. Miller and J Thomas, two researchers
at the IBM Research Laboratory, writing in the International Journal of
Man-Machine Studies, conclude that "no alternative has shown a realistically
significant advantage over the QWERTY for general purpose typing." Other
studies based on analysis of hand-and-finger motions find differences of
only a few percentage points between Dvorak and QWERTY. The consistent
finding in ergonomic studies is that the results imply no clear advantage
for Dvorak, and certainly no advantage of the magnitude that is so often
claimed.>>
[snip]
> Why did you you snip out what my source said?
If Chris Auld is reading this, you're going to be awarded a Pot, Kettle,
Black Award.
But, I repeat again what both Grinch and I have been pointing out, YOUR
source says switching is WORTHLESS for most people.
[snip]
> > Further, you seem to be relying not on actual typing, but to some sort
of
> > design simulation in your cite:
>
> That's right. What do you think L&M were referring to when they wrote:
> "the mathematical simulations of typing" ?
L&M offer a broad range of evidence. Simulations are not actual, real
world, behavior. When AT&T heard about these simulations (and other claims)
they got very excited about possible gains in productivity for their
teletype operators, back in the early 1970s (this I got first hand from a
senior executive of AT&T). But when they tested the Dvorak keyboards at
Western Electric in 1973, they were severely disappointed in the results.
They concluded they would never regain the re-training costs.
susupply
> > > What you are saying is either turning a profit is not a reason to
> > > think that they will (might) recover their losses (nonsense), or that
> > > turning a profit is a reason to think that they will not (might not)
> > > recover their losses (double nonsense).
> >
> > Neither of those two statements have been made by me.
>
> Not explicitly. But you seem unwilling to concede that turning from
> losses to profits is evidence that the business plan is working.
> Instead you emphasize that PayPal has not yet recovered its losses,
> which I explained was not a very interesting fact.
Because it is NOT such evidence, and it is interesting to people who have
money invested whether or not the losses will be recovered. Thanks to the
appearance here of Dean Hal Varian of UC Berkeley, I have at my fingertips
his explanation of what we're talking about:
(p. 144 of Information Rules) "The financial analysis of lock-in centers
depends on present discounted value calculations, not this quarter' income
statement."
> Let me put some additional facts on the table. PayPal had a successful
> IPO, with a market cap of about $1.5 billion. Then they were acquired,
> as I mentioned before, by EBay. Obviously other people besides me (the
> stock market, EBay management) believe that PayPal was doing something
> right.
There were all kinds of such successful IPOs that are now, literally, a dime
a dozen. Lots of people thought someone "was doing something right", but
they found out it wasn't so, billions of dollars later to their regret. At
one time people thought Enron, Global Crossing, HomeGrocer, were doing
something right.
[snip]
> It is obviously useful to be able to make payments to, and receive
> payments from, as many people as possible. If PayPal hadn't offered
> people inducements to sign up and use (free of charge) the service,
> they would have had a hard time getting a useful (lots of people using
> it) service started. Once a critical mass was achieved, they were able
> to reduce the signup inducements and introduce substantial transaction
> fees, while continuing to enjoy very rapid growth in both signups and
> usage. This rapid growth was partly due to word getting out about the
> service, but mainly it was because the service was becoming more
> useful as more people used it.
And, as I pointed out, this same basic service is offered by Visa, MC, Amex,
Diner's Club, Discover.... So, I wouldn't bet that PayPal is going to be
insulated from competition.
Hal Varian
> "Hal Varian" <h...@sims.berkeley.edu> wrote in message
> news:3DD9D427...@sims.berkeley.edu...
>
>>susupply wrote:
>
>
>>>I'm puzzled why you insist on this distinction. Especially given the
>>>unusual format of your book. There are almost no formal footnotes at
>>
> all,
>
>>>and most of them (all on one page) are simply cites to works listed in
>>
> the
>
>>>bibliography.
>>
>>Exactly. We refer to both David and L&M in the "Further Reading"
>>section of the book, not in a footnote. Both papers were cited equally
>>prominently, it wasn't as if we cited one in the text and the other in
>>footnotes.
>
>
> I'm still puzzled. You seem to be conflating two separate points I made. I
> see no meaningful distinction between, "in a footnote" and "in the Further
> Reading section", given the unusual way you formatted them.
Because we cite both authors, within an inch or so of each other, since
we wanted readers to be aware of both sides of the story.
>
> A very different point is; you far more prominently feature the David-Arthur
> version of the QWERTY tale (whether you credit them or not). Twice in the
> body of your book it is presented as if it were true, but it is not. In
> Stan Liebowitz's words, it is flat wrong.
We don't talk about "lock-in by small historical events" or anything
like that. In fact, the end of this section says: "...we find the
ongoing persistence of the QWERTY keyboard in today's computer society
at odds with the strongest claims of superiority of the Dvorak layout."
So we go out of our way to say that QWERTY can't be all that bad since
the collective switching costs are no longer operative (due to the
re-programmability of of keyboards.)
> I wouldn't call first-mover advantage a myth, but I think it is badly
> oversold.
But you did call it a myth in an earlier post:
susupply wrote:
> He also points out that they were among many to fall for the "first
> mover advantage" myth. Specifically, in their Lessons for
> entrepreneurs, in their
> chapter 6.
or perhaps you were just quoting Leibowicz? As I have explained the
lesson in chapter 6 is about entry prevention, not network effects.
These aren't introduced until chapter 7. The title of the section we
are discussing is "Collective switching costs", which is an introduction
of a new topic (different from the individual switching costs described
in chapte 6).
> I'm not familiar with Klemperer, but switching costs are not anything new,
> and I think it a mistake to use the term "lock-in" regarding them. We
> entrepreneurs deal with switching costs all the time, there's nothing new
> economy (how quaint that now sounds) about switching costs.
Well, I agree that there is nothing particularly new about them.
Klempeer's work dates from 1987.
> As I said earlier, I don't think you've actually accomplished this neat
> division, though I believe you when you say you meant to. Your book is
> subtitled "A Strategic Guide to the Network Economy", there are blurbs on
> the jacket about: "the age of the Internet", "the first book to explain
> network economics, the new economics of our lives", "Forget Econ 101. Get a
> glimpse of Econ 2001", and so forth.
Indeed, we do give significant weight to network effects (starting in
chapter 7). But that wasn't what the quote in chapter 6 referred to.
>
> Even in Chapter 1, with your first mention of "lock-in", you begin with the
> example of 33 rpm LPs to demonstrate switching costs, but that's also a
> demonstration of network effects (which Brian Arthur should have thought
> about when giving his, also false, story about Beta v. VHS).
True, chapter 1 is an overview of the rest of the book. Nevertheless,
the quote in chapter 6 was not about network effects, but rather entry
blockade and the like. Reader chapter 6 if you don't believe me.
> I'll repeat that I think the problem is using the same phrase ("lock-in") to
> refer to things that are actually different. In fact, I'd suggest retiring
> that phrase altogether. Unless it's about political decisions....but don't
> get me started.
I think that we use the term in a reasonably consistent way
1) start with switching costs, which, as you say, are nothing new;
2) when switching costs are "substantial" users face lock-in (p 104)
3) switching costs can be individual (p 117)
4) or collective (p 184)
The point raised on page 186 is pretty much independent of the
L&M-Arthur-David debate. The argument there is whatever the keyboard
layout, if it is costly to switch layouts--due to retraining--we will
end up with only one popular layout, since people will (rationally)
invest in learning whatever is the most popular/marketable layout.
What I take away from the L&M article is that the Dvorak keyboard is, if
anything, only slightly more efficient than the QWERTY keyboard. In
this case, we haven't been "locked-in" to a dramatically inefficient
standard, a point which we explicitly recognize.
Samuel Barber
> "Samuel Barber" <ope...@yahoo.com> wrote in message
> news:37991aef.02111...@posting.google.com...
>
> > > > What you are saying is either turning a profit is not a reason to
> > > > think that they will (might) recover their losses (nonsense), or that
> > > > turning a profit is a reason to think that they will not (might not)
> > > > recover their losses (double nonsense).
> > >
> > > Neither of those two statements have been made by me.
> >
> > Not explicitly. But you seem unwilling to concede that turning from
> > losses to profits is evidence that the business plan is working.
> > Instead you emphasize that PayPal has not yet recovered its losses,
> > which I explained was not a very interesting fact.
>
> Because it is NOT such evidence, and it is interesting to people who have
> money invested whether or not the losses will be recovered.
You are back to agreeing with statement #1, which you earlier
indignently denied.
And you're again having problems with reading comprehension. "It is
not a very interesting fact that company X has not yet recovered its
losses" does not mean "investors don't care whether they will recover
their losses".
> > Let me put some additional facts on the table. PayPal had a successful
> > IPO, with a market cap of about $1.5 billion. Then they were acquired,
> > as I mentioned before, by EBay. Obviously other people besides me (the
> > stock market, EBay management) believe that PayPal was doing something
> > right.
>
> There were all kinds of such successful IPOs that are now, literally, a dime
> a dozen. Lots of people thought someone "was doing something right", but
> they found out it wasn't so, billions of dollars later to their regret. At
> one time people thought Enron, Global Crossing, HomeGrocer, were doing
> something right.
You aren't saying anything interesting. Everyone knows that the future
is uncertain. The pattern is that I present facts to support my
contentions, you present no contrary facts, but are confident that
you're right.
Sam
Robert Vienneau
wrote:
> I think that we use the term in a reasonably consistent way
> 1) start with switching costs, which, as you say, are nothing new;
> 2) when switching costs are "substantial" users face lock-in (p 104)
> 3) switching costs can be individual (p 117)
> 4) or collective (p 184)
>
> The point raised on page 186 is pretty much independent of the
> L&M-Arthur-David debate. The argument there is whatever the keyboard
> layout, if it is costly to switch layouts--due to retraining--we will
> end up with only one popular layout, since people will (rationally)
> invest in learning whatever is the most popular/marketable layout.
>
> What I take away from the L&M article is that the Dvorak keyboard is, if
> anything, only slightly more efficient than the QWERTY keyboard. In
> this case, we haven't been "locked-in" to a dramatically inefficient
> standard, a point which we explicitly recognize.
"There are several versions of the claim that a switch to Dvorak
would not be worthwhile. The strongest, which we do not make, is that
Qwerty is proven to be the best imaginable keyboard. Neither can we
claim that Dvorak is proven to be inferior to Qwerty. Our claim is
that there is no scientifically acceptable evidence that Dvorak
offers any read advantage over Qwerty. Because of this claim, our
assessment of a market failure in this case is rather simple. It
might have been more complicated. For example, if Dvorak were found
to be superior, it might still be the case that the total social
benefits are less than the cost of switching. In that case, we could
look for market failure only in the process that started us on the
Qwerty keyboard (if the alternative were available at the beginning).
Or we might have concluded that Dvorak is better and that all parties
could be made better off if we could costlessly command both a switch
and any necessary redistribution. Such a finding would constitute a
market failure in the sense of mainstream welfare economics. Of
course, this circumstance still might not constitute a market in the
sense of Demsetz, which requires consideration of the costs of
feasible institutions that could effect the change."
-- Liebowitz and Margolis, "Fable of the Keys"
susupply
> susupply wrote:
> > A very different point is; you far more prominently feature the
David-Arthur
> > version of the QWERTY tale (whether you credit them or not). Twice in
the
> > body of your book it is presented as if it were true, but it is not. In
> > Stan Liebowitz's words, it is flat wrong.
>
> We don't talk about "lock-in by small historical events" or anything
> like that. In fact, the end of this section says: "...we find the
> ongoing persistence of the QWERTY keyboard in today's computer society
> at odds with the strongest claims of superiority of the Dvorak layout."
> So we go out of our way to say that QWERTY can't be all that bad since
> the collective switching costs are no longer operative (due to the
> re-programmability of of keyboards.)
And, at the end of your post you return to this with:
> The point raised on page 186 is pretty much independent of the
> L&M-Arthur-David debate. The argument there is whatever the keyboard
> layout, if it is costly to switch layouts--due to retraining--we will
> end up with only one popular layout, since people will (rationally)
> invest in learning whatever is the most popular/marketable layout.
>
> What I take away from the L&M article is that the Dvorak keyboard is, if
> anything, only slightly more efficient than the QWERTY keyboard. In
> this case, we haven't been "locked-in" to a dramatically inefficient
> standard, a point which we explicitly recognize.
Okay, while I think our dispute about distinctiveness between chapters 6 & 7
is merely a difference of opinion about which reasonable people can
disagree, here we have a factual dispute. And I think Stan Liebowitz is
clearly correct (as I quoted him in an earlier post) in his description of
your presentation.
First, I don't see how you can say that the presentation on page 186 is
"pretty much independent of the L&M-Arthur-David debate", since this is in
chapter seven, and it is in the "Further Reading" for chapter seven that you
cite their papers.
Also, on page 181 you do make reference to something like, "small historical
events": "success and failure are driven...by...luck....A nudge in the
right direction, at the right time, can make all the difference." That's
just four pages before you begin your presentation of the QWERTY story.
Then, in chapter 8 (p. 233) you flatly state: "the standard...may just turn
out to be an inferior standard, like QWERTY.". (With no reference to that
in the "Further Reading" section for chapter 8.) Which seems to come down
pretty clearly on the side of a false story (the Arthur-David version).
Your claim: "we go out of our way to say that QWERTY can't be all that
bad", thus doesn't seem accurate to me.
What I take from the articles (I stress the plural) of L&M is that there is
no evidence of an advantage for Dvorak. Given that the most common result
of the various tests is about +2%, and that just isn't big enough to rule
out some kind of testing effect (a 60 wpm typist would improve to all of 61
wpm). Nor that even that isn't just a transient advantage. After all,
some have found a bigger effect with retraining on QWERTY.
[I'd written:]
> > I wouldn't call first-mover advantage a myth, but I think it is badly
> > oversold.
>
> But you did call it a myth in an earlier post:
>
> susupply wrote:
>
> > He also points out that they were among many to fall for the "first
> > mover advantage" myth. Specifically, in their Lessons for
> > entrepreneurs, in their
> > chapter 6.
>
> or perhaps you were just quoting Leibowicz?
No, I was being somewhat sloppy. Probably because I didn't expect you to
enter the debate. You're correct I should have been more careful with my
language, as well as being truer to what Stan Liebowitz actually wrote.
Something like, using Stan's word, you were too "exuberant" in saying that
"first-mover advantages can be powerful and long lasting....".
> As I have explained the
> lesson in chapter 6 is about entry prevention, not network effects.
> These aren't introduced until chapter 7.
As I said, chapter 6 is a long chapter with several lessons. Near the end
you have the section: "Exploiting First-Mover Advantage" (in bold type). In
this section you use Ticketmaster as an example and say: "Entry is made
more difficult by the need to have a network of outlets...." (p. 168).
> The title of the section we
> are discussing is "Collective switching costs", which is an introduction
> of a new topic (different from the individual switching costs described
> in chapte 6).
Right, and, as an aside, I think Stan does a nice job in Re-Thinking the
Network Economy, in distinguishing between being compatible with oneself and
compatible with others.
However, your chapter 7 begins on page 173, where we can read: "the new
information economy is driven by the economics of networks". I think it a
bit too much to expect readers to see a hard and fast distinction between
that and what came only 5 pages earlier (albeit in a differently numbered
chapter).
I'm not disputing how you organized your book. I'm seeing chapter 7 as
standing atop the building block of chapter 6. Or perhaps as a snowball
accumulating more snow as it rolls downhill.
BTW, Northwestern's Mark Patrick Witte, via e-mail, has just written to me:
<< Shapiro and Varian's whole book is about how there is nothing "new
economy" about anything, that it's all to be understood with old micro
tools. >>
About which he is correct, and on the inside jacket is:
<< Not so fast, say authors...Shapiro and...Varian. In "Information Rules"
they warn managers, 'Ignore basic economic principles at your own risk.
Technology changes. Economic laws do not'." >>
But still, someone didn't get that message, as those back jacket blurbs
indicate:
"...the new economics of our lives", "Forget Econ 101. Get a
Hal Varian
> Also, on page 181 you do make reference to something like, "small historical
> events": "success and failure are driven...by...luck....A nudge in the
> right direction, at the right time, can make all the difference." That's
> just four pages before you begin your presentation of the QWERTY story.
Fair enough. I think that's true---I don't think that there is any
inevitability towards a particular outcome when the possibilities aren't
all that different. Some countries drive on the left, some on the
right. Which side was chosen is, to some extent, arbitrary.
But once a side has been chose, there are strong collective switching
costs in changing.
>
> Then, in chapter 8 (p. 233) you flatly state: "the standard...may just turn
> out to be an inferior standard, like QWERTY.". (With no reference to that
> in the "Further Reading" section for chapter 8.) Which seems to come down
> pretty clearly on the side of a false story (the Arthur-David version).
> Your claim: "we go out of our way to say that QWERTY can't be all that
> bad", thus doesn't seem accurate to me.
On page 186 we say "Thus, we find the ongoing persistence of the QWERTY
keyboard in today's computer society at odds with the strongest claims
of superiority of teh Dvorak layout." What could be clearer?
> No, I was being somewhat sloppy. Probably because I didn't expect you to
> enter the debate. You're correct I should have been more careful with my
> language, as well as being truer to what Stan Liebowitz actually wrote.
> Something like, using Stan's word, you were too "exuberant" in saying that
> "first-mover advantages can be powerful and long lasting....".
I don't see this on page 28 of Stan Liebowtiz's book, but perhaps I'm
looking in the wrong place.
>> As I have explained the
>>lesson in chapter 6 is about entry prevention, not network effects.
>>These aren't introduced until chapter 7.
>
>
> As I said, chapter 6 is a long chapter with several lessons. Near the end
> you have the section: "Exploiting First-Mover Advantage" (in bold type). In
> this section you use Ticketmaster as an example and say: "Entry is made
> more difficult by the need to have a network of outlets...." (p. 168).
This is a great example since the "network of outlets" on page 168 has
nothing to do with "network effects". The value of any one outlet is
not increased by the presence of others--if anything it is decreased.
We could have said "numerous outlets" and made the same point.
> << Not so fast, say authors...Shapiro and...Varian. In "Information Rules"
> they warn managers, 'Ignore basic economic principles at your own risk.
> Technology changes. Economic laws do not'." >>
>
> But still, someone didn't get that message, as those back jacket blurbs
> indicate:
>
> "...the new economics of our lives", "Forget Econ 101. Get a
>
>>>glimpse of Econ 2001", and so forth.
Well, one of the points we made was that the ideas that are "old" (or at
least well-known) to economists may be novel to practitioners. This
was, after all, our motivation for writing the book.
Robert Vienneau
wrote:
> >> As I have explained the
> >>lesson in chapter 6 is about entry prevention, not network effects.
> >>These aren't introduced until chapter 7.
> > As I said, chapter 6 is a long chapter with several lessons. Near the
> > end
> > you have the section: "Exploiting First-Mover Advantage" (in bold
> > type). In
> > this section you use Ticketmaster as an example and say: "Entry is
> > made
> > more difficult by the need to have a network of outlets...." (p. 168).
> This is a great example since the "network of outlets" on page 168 has
> nothing to do with "network effects". The value of any one outlet is
> not increased by the presence of others--if anything it is decreased.
> We could have said "numerous outlets" and made the same point.
I guess that's to the point how you can explain network effects, and
some will still not get it.
Does Varian and Shapiro acknowledge that Liebowitz and Margolis
misrepresent Arthur and David's theories of path dependence?
"Path dependence is an idea that spilled over to economics from
intellectual movements that arose elsewhere. In physics and
mathematics the related ideas come from chaos theory. One
potential of the non-linear models of chaos theory is
sensitive dependence on initial conditions: Determination,
and perhaps lock-in, by small, insignificant events...
In chaos theory, small events or perturbations tend to cause
a system to evolve in very different ways but the system never
settles down in any repeatable path or fixed equilibrium. The
essence of 'chaos theory' is that this seemingly endless
pattern, which never finds an equilibrium, is not random but
rather has a determinate structure. Path dependence in
economics has imported the view that minor initial
perturbations are important, but has grafted this on to a
theory where there are a finite number of perfectly stable
alternative states, one of which will arise based on the
particular initial conditions. The never ending 'disequilibrium'
that seems the essence of chaos theory is thus missing from the
economic analysis of path dependence.
In mathematics, path independence is a condition for the
existence of exact solutions for differential equations. In
probability theory, a stochastic process is path dependent if
the probability distribution for period t+1 is conditioned on
more than the value of the system in period t."
-- Liebowitz and Margolis, New Palgrave
The Lorenz system has one stable attractive set with a fractal
structure; it is not path dependent, as I understand it. Yet it
does exhibit sensitive dependence on initial conditions. Newton's
method, applied in the complex plane to low order polynomials, is
a dynamical system that approaches one of a finite number of perfectly
stable alternative states. Since the basis of attraction of
these equilibria are fractals, it can exhibit sensitive dependence
on initial conditions. Deterministic dynamical systems have exact
solutions, even if they cannot be written in closed-form.
Path dependence, as presented in Arthur's Economic Journal article, is
a property of stochastic processes. Even though they have stable limit
points, there can be always some random variation occuring in the
ratio of adopted technologies, even once a process has entered the
basin of attraction of a fixed point of the relevant map. Markov
processes can be path dependent (non-ergodic).
susupply
> > Because it is NOT such evidence, and it is interesting to people who
have
> > money invested whether or not the losses will be recovered.
>
> You are back to agreeing with statement #1, which you earlier
> indignently denied.
Excuse me, you have been making claims that you have been labeling as
"evidence", such as this one:
> > I offered some facts that indicate it [Paypal's business plan] was a
good bet.
To which, I responded:
> The only "facts" I saw from you were to the effect that they had "turned
the
> corner into profitably", which I read as; they have not recovered their
> losses. Which is a pretty good non-theoretical reason for the strategy
> being a bad bet.
Rather than offer more evidence, such as some financial analysis that might
suggest the persistence of these profits at a level that would guarantee (or
show a strong indication of) recovery of the "stupendous losses", you resort
to nonsense:
<< So every time a company turns from losses to profits, that's a sure
sign of failure? Huh? >>
That's the context of my later stating: "Because it is NOT such evidence".
> And you're again having problems with reading comprehension. "It is
> not a very interesting fact that company X has not yet recovered its
> losses" does not mean "investors don't care whether they will recover
> their losses".
In the absence of something other than a quarter's (or a few quarters')
operating profit, it is "interesting" that you can't come up with any
evidence that the losses (as I put it) "will be recovered".
[snip]
> > There were all kinds of such successful IPOs that are now, literally, a
dime
> > a dozen. Lots of people thought someone "was doing something right",
but
> > they found out it wasn't so, billions of dollars later to their regret.
At
> > one time people thought Enron, Global Crossing, HomeGrocer, were doing
> > something right.
>
> You aren't saying anything interesting.
It is as interesting as your claim that :
> > > ...other people besides me (the
> > > stock market, EBay management) believe that PayPal was doing something
> > > right.
> Everyone knows that the future
> is uncertain. The pattern is that I present facts to support my
> contentions, you present no contrary facts, but are confident that
> you're right.
It is you who told me about Paypal's huge losses. All the "facts" you can
muster are only about short term profit, which doesn't bear on when (if
ever) those losses will be recovered. Hence, your claim about their
business plan being a "good bet" isn't supported.
susupply
> susupply wrote:
> > You're correct I should have been more careful with my
> > language, as well as being truer to what Stan Liebowitz actually wrote.
> > Something like, using Stan's word, you were too "exuberant" in saying
that
> > "first-mover advantages can be powerful and long lasting....".
>
> I don't see this on page 28 of Stan Liebowtiz's book, but perhaps I'm
> looking in the wrong place.
On p. 28, in the paragraph immediately following his treatment of
Information Rules, Stan writes:
"More exuberant still is Kevin Kelley in his new book...."
[snip]
> > As I said, chapter 6 is a long chapter with several lessons. Near the
end
> > you have the section: "Exploiting First-Mover Advantage" (in bold type).
In
> > this section you use Ticketmaster as an example and say: "Entry is made
> > more difficult by the need to have a network of outlets...." (p. 168).
>
> This is a great example since the "network of outlets" on page 168 has
> nothing to do with "network effects". The value of any one outlet is
> not increased by the presence of others--if anything it is decreased.
> We could have said "numerous outlets" and made the same point.
I don't think this is right. Though, never having used Ticketmaster myself,
maybe I'm positing advantages to using them that don't exist. I thought
that people actually paid extra (over and above the ticket price) to use
Ticketmaster. If so, there must be some value to simply going to
Ticketmaster rather than to the box offices for the events themselves.
Thus, there would be increasing value the more events allowed their tickets
to be sold, as well as to the concert promoters, ball games, economics
lectures, etc, the more people bought indirectly from Ticketmaster.
Further, I thought that tickets could be exchanged through Ticketmaster.
I'm almost certain that a brouhaha developed in Seattle last summer about
private sales of Mariner baseball tickets (Safeco Field is almost always
sold out) through Ticketmaster. Those sales were allowed, while the police
were enforcing anti-scalping laws elsewhere.
It seems we may have beaten this horse to near death, but I did receive an
e-mail this morning from Stan Liebowitz indicating he would be sending me
some comments he wished to make about our discussion. Though from past
experience, I know Stan to be usually pressed for time, and there is often a
substantial lag before such comments actually arrive. But I will post them
when I get them.
Samuel Barber
> "Samuel Barber" <ope...@yahoo.com> wrote in message
> news:37991aef.02111...@posting.google.com...
> > "susupply" <susu...@mindspring.com> wrote in message news:<are3l6
>
> > > Because it is NOT such evidence, and it is interesting to people who
> have
> > > money invested whether or not the losses will be recovered.
> >
> > You are back to agreeing with statement #1, which you earlier
> > indignently denied.
>
> Excuse me, you have been making claims that you have been labeling as
> "evidence", such as this one:
>
> > > I offered some facts that indicate it [Paypal's business plan] was a
> good bet.
>
> To which, I responded:
>
> > The only "facts" I saw from you were to the effect that they had "turned
> the
> > corner into profitably", which I read as; they have not recovered their
> > losses. Which is a pretty good non-theoretical reason for the strategy
> > being a bad bet.
>
> Rather than offer more evidence, such as some financial analysis that might
> suggest the persistence of these profits at a level that would guarantee (or
> show a strong indication of) recovery of the "stupendous losses", you resort
> to nonsense:
But as you rightly pointed out, such an analysis might be mistaken, as
in the case of Enron. So obviously you would not be convinced. And I'm
not trying to convince you that success is certain, since I don't
believe that myself. What I said, and what I backed sufficiently with
facts, is that the business plan appears to be rational and (so far)
successful. (Incidentally, I never used the phrase "stupendous losses"
- that was James Donald's wording).
> > And you're again having problems with reading comprehension. "It is
> > not a very interesting fact that company X has not yet recovered its
> > losses" does not mean "investors don't care whether they will recover
> > their losses".
>
> In the absence of something other than a quarter's (or a few quarters')
> operating profit, it is "interesting" that you can't come up with any
> evidence that the losses (as I put it) "will be recovered".
Turning a profit is hard evidence that the business plan is working.
It's a benchmark event. That's why I mentioned it first, and only
later mentioned that Wall Street (and seperately, the management of
another firm) agrees. So far you have not offered even a hint of a
contrary argument, and are now lapsing into lazy skepticism.
> > > There were all kinds of such successful IPOs that are now, literally, a
> dime
> > > a dozen. Lots of people thought someone "was doing something right",
> but
> > > they found out it wasn't so, billions of dollars later to their regret.
> At
> > > one time people thought Enron, Global Crossing, HomeGrocer, were doing
> > > something right.
> >
> > You aren't saying anything interesting.
>
> It is as interesting as your claim that :
>
> > > > ...other people besides me (the
> > > > stock market, EBay management) believe that PayPal was doing something
> > > > right.
No. My statement is highly relevent information. Your reply, "but the
market isn't always right!" doesn't say anything we don't all already
know.
Sam
Tim Lambert
You left out the preceeding sentence from "Handbook of Human-Computer
Interaction" which pointed out the retraining costs involved in
switching. You did leave in the following sentence (about
transferring skills) which refers to network effects.
So the explanation seems to be some combination of switching costs and
network effects, with a 5-10% improvement being insufficient to
overcome these costs.
Tim