by Tyler Cowen
on January 4, 2014 at 11:23 am
1. Management lessons at Netflix? And here is Felix Salmon’s great piece on the dumbing down of Netflix.
2. Andrew Flowers at the Atlanta Fed on whether productivity has declined (pdf).
3. Some new results on whether Medicaid benefits the health of recipients (pdf).
4. Fill out this form to start your very own Altcoin.
5. “No time travelers were discovered.”
6. The self-cleaning plate.
Interesting claim about Netflix not having any formal time off (or formal expense policies, reviews, etc.), because SarbOx compliance would make it annoying to grant formal time off but allow people to report informally. So instead everything is informal.
Obviously a policy that relies upon the employees having the right to exit to another job.
The second is a management incentive. Treat people poorly, give them work they don’t like or are not good at, or have a bad atmosphere or whatever, and they leave. Then the manager should as well.
A local businessman who is a client described his HR philosophy similarly. He depends on people showing up and being enthusiastic and positive. He recognizes that the work is hard and demanding. So if someone is having trouble, being late, whatever, they have a chat and he helps them find something else to do that would suit them better, including generous severance.
Handling people is challenging. I suspect that it is not only the promise of lower costs that has driven manufacturing offshore. It is the utter uselessness of HR management techniques that cause more problems that they solve. It is far easier to deal with hungry and poor people motivated by basic necessities than reform HR. The reaction to his ideas shows how entrenched bad practices are.
#5. Further confirmation of both 1) the Fermi Paradox and 2) the growing block universe hypothesis (the future DOES NOT exist): neither distant aliens nor our distant descendants presently exist, at least not in baryonic form.
Why is all talk of Netflix these days about its streaming service? If you care about good movies, get more DVDs per month and kill the streaming. If you prefer the streaming service, then you don’t care much about good movies. Maybe the streaming business model is more interesting to people who find business models interesting, but in that case why should the quality of the content be a concern to you?
Felix is also exaggerating the quality of Netflix’ old predictive algorithm by a long shot. It was never very good.
I am astounded by the number of people who praise Netflix, Amazon, etc. for their predictive recommendation algorithms. These have rarely, if ever, offered anything except for mainstream obvious examples or totally off the mark (and also mainstream) choices. Individuals like Tyler or Pitchfork’s writers or even “wisdom of crowds” sites like Rotten Tomatoes and Yelp greatly outperform Netfix and Amazon’s fancy algorithms for my money.
I wonder if the methodology behind the industrial production data is causing us to understate manufacturing growth.
The weights in the IP data are changed annually based on the value of nominal output.
For info tech prices are falling at double digit rates, so that even though output of info tech is the strongest growing segment of industrial production, it’s weight in the industrial production data falls every year. It is now only 2.5% compared to some 8% to 10% about a decade ago.
I know there are valid arguments for this methodology, but does it have the unintended consequences of causing Industrial production growth to be understated?
#4: That only allows cosmetic changes to the currency. You can swap out the crypto algorithms it uses, but you’re stuck with the tapering production rate, the decentralized proof of work system, and key numbers, which are really scale independent.
It wouldn’t allow anyone to do anything really different that pro-inflation/CB proponents would like to see:
– Give production control to a central bank
– Have constant inflation
It’s still an amazing step towards commoditization. Making a linearly increasing supply should be the next step that CoinGen allows.
Creating your own coin has a certain novelty value at this point, but success at that is like at anything other tech startup where first-mover advantage is important. While differentiation is table-stakes, you have to rise above the noise, catch a fast growth curve and change as you learn your customers. That last bit’s doubly hard. Changing means good developers, and learning your customers means you have to be good at business already.
A more interesting autogen would pump out variations that piggyback on the Bitcoin or Lightcoin protocols, adding niche services to disrupt the trust industry of one’s choice.
Sounds like a recipe from one of those airport management books.
There is little first mover advantage and not much use of good developers because the core program is open source (mySQL, yay!).
Also you suggested Litecoin could be used for innovations, but earlier you said it as a second mover should be disadvantaged vs. Bitcoin.
I don’t see that I said Litecoin was a second-mover.
Netflix officers and directors: http://ir.netflix.com/management.cfm
Sorry, but we’re not in a tech bubble. Bitcoin, real estate, & web 2.0 valuations will keep going up
Andreessen: Bubble Believers ‘Don’t Know What They’re Talking About’
Venture Capitalist Discusses the Current State of Tech Investing
After surging in 2013, stocks starting 2014 with a loss
I would be buying this dip
The perils of weak productivity growth
That management strategy really embodies Average is Over, doesn’t it? Hire only superstars, and give them carte blanche. Fire everyone else.
Yes, and it has trickled down into almost everything. A number of years ago a friend who had an automatic transmission repair shop, described how the 6 or 8 transmissions on the market with known and predictable failure modes changed into three different ones every model year with electronic over hydraulic, then digital over hydraulic to digital control. He would get vehicles out of warranty that the dealers had never been able to fix. There were no easy problems anymore, and the level of skill and competence required to do the work and get paid for it rose substantially. Many shops closed.
I’m seeing the same thing in what I do. You can’t afford to have anyone who isn’t there, and the customer can’t afford to pay for superstars. Netflix could.
I would suggest that it makes the economy and the well being of folks extremely fragile. When things are going really well everyone has money to buy new, to pay for the problems. But when there is a hiccup, it isn’t possible to keep things going with binder twine and a deft hand. I have wondered about all those homes built in the mid 00’s with all the fancy electronic locks and network and lighting systems, appliances. By now all this stuff would have quit, and only the most flush would have been able to keep the stuff going. Even if the market improves so that they aren’t underwater, they are now needing serious cash to get things to a sellable state. And who is around to fix or maintain this complicated stuff?
It sounds like a recipe for over-qualification and hiring people for strategic reasons (partially so you can deny their talents to other companies). There was a Quora entry a while back where someone asked what the worse thing was when they worked for Google, and the most common entry was that people would get stuck doing all kinds of tasks that were way below their talent and experience level. They would have been better off hiring a ton more people who might be less competent but still reliable and capable of doing those tasks, and focusing the super-stars on other stuff.
Isn’t that good for the low achieving losers like me? If the companies which are flush with cash gobble up all the high achievers then wages rise, and I still get the chance to make good money at a second rate company? Of course, that’s assuming a ceteris paribus lump of labor.
You’re making the mistake of assuming that “second-rate companies” will exist. Is there a second-rate Netflix?
Well, no, Blockbuster quite literally no longer exists.
Amazon Prime, Hulu, Vudu. If you expand beyond “subscription-based video streaming” to pay-per-view the list grows.
Read into whether they’re “second-rate Netflix” as you will.
Blockbuster no longer exists as a video rental store in the US, but it still exists as a redbox competitor and streaming video provider
“The best thing you can do for employees—a perk better than foosball or free sushi—is hire only “A” players to work alongside them. Excellent colleagues trump everything else.”
I always thought that was blatantly obvious. Apparently not to HR people.
I said as much when this story was covered on Slashdot. Was criticized for being an arrogant prick. C’est la vie.
It was Slashdot. Consider the audience.
Most companies can’t afford only excellent workers. Despite what you hear about unemployment and underemployment, excellent workers aren’t a dime a dozen and don’t walk through the door when you put up a help wanted ad. It is difficult to build a team and the best workers are in demand from your competitors who always seem to have more money than you do.
Netflix claims they’re underpriced by the market. That is to say, you get more productivity per worker by staffing with the expensive/excellent types. They could be wrong, of course, but that’s what they’re arguing at least. If true, then many companies can’t afford not to hire excellent/expensive folks.
Regarding Netflix’s HR “re-invention”:
It sounds like a sweatshop run by sociopaths. They’re essentially saying: work at 110% all the time, or you’re fired. This was tried before in the 1890’s, and it was a great management technique when you had an endless supply of dirty starving immigrant children, and you were producing shirts. Do they put locks on all the fire exits too?
Actually, in many ways it is how management consulting and investment banking has always worked. Last I checked management consulting recruiting was not limited by the number of willing applicants but more the share of qualified ones and IB had more applicants than positions… And a lot of the approach was pioneered in consulting industry. For example, with a few exceptions, most expense regulations I have are driven by tax authorities, not anyone at my firm (and expense accounts can be absolutely mind blowing in consulting).
Disclaimer: I am a management consultant myself.
I didn’t get that at all? In my experience most work gets done by the capable employees anyhow, and all the others seem as much of an impediment as anything. There’s truth imho to the assertion that the best employees are far more productive than adequate employees. I’d say it’s far more than 2X productivity based on what I’ve seen.
Much of the presentation and comments rang true to me – I kept nodding “that’s the company I used to work for” as I read. Like the part about deciding to fire somebody and then dragging that decision out over 3-6 months of performance improvement utilizing increasingly burdensome tasks designed to run employee off while documenting inability to complete tasks. Meanwhile we as co-workers knew it was over for said employee and and just wished it was over with.
Similarly – process heavy organizations will destroy innovation. (I think my organization would be classified as a unified monolith approach based on the descriptions in the presentation). In a process-heavy area, If you want to do anything differently it often requires moving mountains to get small changes done because of all the sign-offs required. So many projects needlessly turn into “gargantuan” tasks because half of the company is involved in what should probably be more localized decisions/actions. Process oriented efficiency/optimization vs. innovation and flexibility is an interesting take-away from this discussion.
“I’d say it’s far more than 2X productivity based on what I’ve seen.”
For some tasks yes. For other tasks no. More often than not, though, yes. That said, many companies don’t actually get 2x the productivity from top talent even when they manage to hire some. Typically expectations are set at a level that’s achievable by most team members. Say “1x”. So unless an employee is just driven, which is often the case, he may end up coasting. Maybe he manages to be 1.2x as productive while working 0.5x as hard, gets a pat on the back from his boss, then spends his days reading Marginal Revolution and managing his fantasy baseball team.
>Do they put locks on all the fire exits too?
Kinda hard/useless to walk out with digital data.
Or: do the firewalls keep them in? hahahahahahahahahhahahah, with apologies.
And your attitude is the reason why private sector unions are an endangered species. What, people who are working for a wage or salary, be expected to do what is required to generate income to pay the cost of them being around? What a shocking thought.
The unhappiest most miserable complaining and, unfortunately, unpleasant to be around folks have been those who work in jobs where there is no accountability, not sense of productivity, and where people are spending time doing things they are not good at or want to do.
It’s a recipe for burn-out, particularly if or when it trickles down to jobs where the pay isn’t so generous but they still expect you to be working long hours at 110%.
I do like the honesty, though. It’d be nice if employers just straight-up told you that there’s no real need for your skill-set anymore, and gave you a good severance package in parting.
Where is this “110%” coming from?
exactly. The point is that you’re not rewarded for working long hours, but for effectiveness on the job regardless of hours at the office.
People who are bad at math?
I think you’re reading “perform at a high level” and translating that into “work long hours”. The two aren’t necessarily the same. If Netflix is expecting its employees to kill themselves year in and year out, sacrificing “work/life balance” on the altar of “productivity”, then, yeah, that’s going to bite them in the ass eventually since it will narrow their hiring pool to “driven nutcases”. But I doubt that’s what it expects. Basically they’re saying is: “We only want to employee people who are ‘very good’ at what they do, and where we have a legitimate business need for whatever it is they’re ‘very good’ at.”
This. It’s a pain in the ass to have to closely monitor someone elses’ work and fix the mistakes. And the customer always wants the A team anyway. So you’re better off with less employees working longer hours for more money and turning some work away.
Agree completely, but only if you have “A” level work for everybody – otherwise somebody gets stuck doing the scut work (e.g., supplier management) and sees everybody else doing the cool stuff (e.g., inventing new algorithms, building new capabilities). Unless there’s a way to make the scut work interesting (e.g., fire the supplier and make it yourself), you need to find somebody who is good enough to do a good job, but not so good that they will get bored immediately. There are usually lots of these kind of jobs, as Google seems to have found out, and they have to be done well, but they don’t need top brainpower. It’s easy to hire geniuses for genius-level work, much harder to find the quality people to handle the nuts and bolts.
I’m going to suggest that maybe you’re misusing the term “A level” in applying it to individual jobs. There are just “jobs”. It is often advantageous (depending on cost) for an employer to see that each of them is done “very well”. An “A level” algorithm designer may have a different skill set and background than an “A level” manager of suppliers. You probably don’t want to hire a bunch of people who could do “A level” work in both roles then arbitrarily force one of them to do the “boring” (from the perspective of an algorithm designer) work of managing suppliers. Instead, hire someone with the ability to do “A level” work as a supplier manager but who has no aspiration (nor the skill set) to be an algorithm designer. You’ll have someone who does great work and isn’t constantly pissed that he’s not designing algorithms. Recognize his “A level” contributions by paying him more than he could expect to earn (as as supplier manager) elsewhere.
Fair enough, and not too different from what I said, but different enough to be enlightening.
So, I restate my thesis as follows: I have personally seen companies emphasize cognitive ability over everything else over the broad spectrum of technical jobs (aerospace, mechanical, electrical engineering in this case); from what I’ve read elsewhere about companies such as Google and in this article by the former Netflix manager, these high tech companies are also prioritizing cognitive ability over everything else. As Brett says above, this appears to lead to a large chunk of dissatisfied Google employees who feel very under-utilized; I doubt this is unique to Google (I have personally seen it elsewhere). My thesis is essentially that it’s a lot more work to do the fine-grained matching of people to jobs than companies often want to do, especially if they have this emphasis of only hiring the best and brightest; too often the definition of “best and brightest” is focused too narrowly on more-easily-measured cognitive abilities, and leads to too many people being asked to do what they consider the “scut work”. This to me is the supreme danger of the apparent Netflix and Google approach to hiring.
I’ll grant that in practice many tech companies unduly emphasize a particular type of cognitive ability in situations where they oughtn’t. That said, it’s more a failure to execute on (what I understand to be) the hiring philosophy laid out by Netflix in that set of slides. Their slides emphasize productivity rather than cognitive ability per se.
Every new hire and/or decision to keep someone is a ROI calculation. Does the person’s output merit the amount at which they’re being compensated. All else being equal, offering higher compensation will allow you to attract and keep more productive employees. All Netflix is saying is that the relationship isn’t linear and that an employer gets more “bang for his buck” by paying top dollar and only keeping folks who do great (as opposed to merely “adequate”) work. Maybe paying 1.5x of “average” gets you someone who is more than 1.5x as productive.
What they’re also saying is that limiting one’s self to folks who do great work has an additional halo effect of increasing morale.
“So, I restate my thesis as follows: I have personally seen companies emphasize cognitive ability over everything else over the broad spectrum of technical job ”
I’ve known plenty of very smart people who aren’t A level. You’ve got to have the desire to produce excellent work consistently, even if the work is boring. Plenty of smart people aren’t A level, but just smart B Level’s. They only perform at a high level while their interest remains high in a project, as soon as they start getting bored, the quality of their work drops to a much lower level.
I think you read a different article than the rest of us.
If the plates are superhydrophobic, wouldn’t it be superhard to wash off grease?
@Mark Thorson, stick to designing next-generation fusion. I think there should be no conflict between grease, which is hydrophobic anyway (note how the grease forms spheres and repels water, not to mention the specific density is less than water), and these plates.
Let’s say I had a plate made out of solidified grease. You think that would repel grease? I don’t.
Don’t look now, but there’s already a Krugmancoin. There is no great… oh, nevermind.
I think he’s preparing us for the Tylercoin. In 2014, every serious economist will have their own blog and cryptocurrency.
A squatter might make off with a little stack in the bidding war between Cowen and Tyler Howard Winklevoss.
See there, crypto-currencies are the new Internet, we already have squatters.
1. As Felix pointed out, Netflix is moving much more in the direction of Television. Television is great for streaming in the era of serialized television, much cheaper than movies both in production expenses and licensing rights, and customers are more tolerable of not having the freshest stuff right away (with some Game of Thrones sized exceptions). I got Netflix because it allowed me to binge-watch through “Futurama” and a couple of other series, and I’ll use it when I finally get around to watching “Breaking Bad” down the line.
If you just want to watch a movie, a lot of them are available to rent on Amazon Video or VUDU for a few bucks, especially if you don’t care about having HD graphics.
Felix is spot on. I am an old-fashioned DVD renter at Netflix. The streaming selections are awful. Much better to get the DVD of the titles you want, rip the video and load it on your laptop/phone/tablet and watch when you want. Easily done. Between that and video piracy, you’re all set (as a movie lover).
I’m a DVD renter also. But I don’t see a need to rip the DVD’s. If I want to watch something again, I can put it at the top of my queue and it will arrive in a couple of days.
Can’t the time travelers read the paper, note the methodology used, and evade detection accordingly?
Think any could be roaming around the Large Hadron Collider? Maybe they (solo agents? pairs?) consorted with Einstein in Bern moments ago and just zipped into Geneva, would be a quick transit. Could they manage to materialize on-camera, off-camera even?
No, they just bought a bunch of Bitcoins and left.
No they are all at the crucifixion…
I sent the item to a friend of mine, and he responded with this:
I suppose we collectively would feel foolish if it turned out there were time travellers underfoot everwhere, and no one had thought to bother taking the least bit of effort to look for them.
Unfortunately the “new results” on whether Medicaid benefits the health of recipients is only an abstract. Looks like a good model, but until I can see the actual paper I can’t say for sure.
Just for the record, the results as stated seem to indicate that Medicaid had a positive effect:
“The results show that mortality rates in higher- and lower-eligibility states were indistinguishable
prior to Medicaid, but immediately after states adopted Medicaid programs, the mortality rates of
nonwhite children fell by eight percent in high-eligibility states relative to low-eligibility states.
Same positive results for older Americans and, when no positive health benefits occurred, well being still improved due to not having to worry about excessive health care bills.
I’m not surprised no one wants to talk about these results. But if you think about it for a moment any other result would mean that health care does no one any good at all, except the medical industry. Maybe that’s the argument that Robin Hanson makes, but as far as I know he still keeps his health insurance program.
The productivity link is about the first moment. At AEA John Haltiwanger showed a chart of productivity DISPERSION for manufacturing firms. It has been climbing, and it climbs rather sharply starting in the mid-2000s. Given the secular decline in various measures of firm/establishment volatility, rising TFP dispersion is a bit of a puzzle. He also showed some simple regressions suggesting that the link between firm-level productivity and employment has weakened in recent decades.
Re “Time Travelers”, the real use of studies of the type done are efforts to identify insider trading.
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