Economic paradigms are informal rules created in the marketplace
as a result of the transactions between buyers and sellers. Paradigms exist
because every transaction has implications for both buyer and seller. Implications
that may go beyond merely an exchange of goods, services, and money. Usually,
when making a transaction these rules are just assumed; that is why I call
them paradigms. Understand, every transaction has attached paradigms, and
paradigms change depending on the kind of transaction. Some transactions,
like selling a paper clip, have short term implications, and may have only
simple paradigms. Some transactions have long term implications for both
buyer and seller, like a life insurance policy, and long term implications
create a different set of paradigms. Some transactions require an enormous
technological infrastructure to even happen, like making a phone call.
The telephone paradigms are complex because the transaction requires a
string of technological preconditions to happen (first A, then B, then
C, and then hello). And, some transactions can only happen in within an
ecological system, like hiring a neighbor’s kid to sweep your driveway.
The kid requires oxygen to sweep, oxygen comes from rain forests, and no
one makes money from the manufacture and importation of the gas (but they
can make money from logging or tourism). This transaction requires a long
term commitment to a stable ecology. So, It’s the implications of the transactions
that create market paradigms; and the market exists because these paradigms
are accepted by all parties. The paradigms are the fundamental rules of
the markets, and can go beyond economics. Understand, there is no one homogenized
market, or one set of universal rules, because different kinds of transactions
have different implications. Instead, the market is divided into sectors
where different paradigms apply. Correction, the national economy is divided
into different sectors where different economic rules apply. So, whenever
anyone talks about an economic system, like capitalism or socialism, they
are really talking about simplified, condensed, homogenized sets of paradigms
(kind of like a Reader’s Digest condensed book). And, an economic system
can be relevant or irrelevant depending on circumstances. Capitalism is
very relevant if we are talking about Walmart. Socialism is very relevant
if we are discussing the public water supply. The problem with Social-ism
is that you cannot run an entire national economy as a public utility.
Nor can you run an entire national economy like a K-Mart. Finally, to understand
any business, you must figure out the paradigms behind that business. Paradigms
are fundamental to understanding the business.
There is a problem with economic paradigms, officially they don’t exist; at least in the United States. Why? Back during the Cold War, when most of us (Americans) were in grade school, our nation was engaged in a life and death struggle with communism. So, the world of our childhood was divided into two camps, the Free World and the Communist Block. The dividing line between the camps was largely based on economic dogma. So, when we went to school, we were not taught economics, instead we got this one size fits all doctrine of the economic everything based vaguely on capitalism. The reason was that the school system was trying to protect our little minds from the heresy of socialism. Then, when we went home, and watched the “twilight struggle” unfold on television. As we grew up, the memes (fundamental ideas) of the Cold War stayed in the background of our mental world. Now, no one (in the U.S.) ever bothered to give the economic everything a good name because capitalism was supposed to be the universal truth, so I decided to call it “holynomics.” The Russians were a little smarter (at least they had an official ideologist), so they found a good name for their version of the economic everything, “Scientific Socialism.” Understand, the problem with holynomics is that it is a universal from our collective childhoods. Back in elementary school, we all received it as truth. Because, as children we tend to internalize anything an adult authority says. And today, many people just assume that there can be only one universal economic rule for every business and market in the world. So, paradigms cannot exist.
The other problem is with the business schools. I don’t think anything serious about paradigms is taught in the business schools. It’s a cultural thing; the teachers and professors who run these institutions grew up during the cold war. And, most of them (to one degree or another) picked up the cold war economic memes, which they are now passing on to their students. For the students, this is terrible because years later as (grownup and graduated) managers they can make horrendous blunders simply because they do not understand the rules of market they are trying to do business in, because these rules cannot exist. According to holynomics there can be only one rule for the (one and only) mass market; so looking for paradigms in the dynamics of the market is “wrong” (childish sense), and the teacher will give you an “F” and make you wear a dunce cap for even thinking about hidden informal rules. Unfortunately, the dynamics of the markets are based on these nonexistent paradigms. So, corporate managers regularly make outrageous decisions simply because they don’t understand the ways of the market their doing business in. Now, with paradigm fundamentals behind us, on to the computer business.
On Computing Paradigms
There are two deeply conflicting economic paradigms at work in the
computer industry, the hardware paradigm and the software paradigm. Also,
there is a third paradigm, the communications paradigm that sometimes comes
in conflict with the first two (but I wont go into this here). The reason
is that a computer is a piece of electronic hardware that does nothing
in itself, until you add software. Also, a computer is (once you add the
right software) a universal communications tool. So, computers exist in
three very different economic environments, with fundamental conflicts.
Let me explain.
The software paradigm favors the infinitely flexible, because software can do anything and emulate everything. So, for maximum software profits; there should be an infinite variety of machines available to fit every possible need. That way the software companies can market an endless number of applications to fit every possible situation. But, software is immortal. Yes, the stuff written thirty years ago may still be useful to someone. So, to maximize profits, the software writers should try to get the manufacturers to go along with a regime of planed obsolescence; to force their customers into a continual round of useless upgrades and expensive migrations. But, there is an inherent conflict here. To make maximum profits on the software paradigm the manufacturers should insure that every machine they make is able to run every line of code ever written (through emulation software), because this makes their machines most useful to consumers. This does tend to put the hardware manufacturers at odds with the software companies. The hardware companies make money by keeping old software competitive; the software authors by enforcing planned obsolescence.
On the other hand, the hardware paradigm is extremely rigid, and favors the extremely standardized. The big company able to invest millions in research and development; and able to standardize manufacturing on a world wide basis. So, for maximum hardware profits, there should be only one standard PC, made by one BIG manufacturer, running one standard OS, with only a few standard applications (sold by the manufacturer). Ideally, the machine and it’s applications should change relatively slowly, and have lots of built in backwards compatibility, to protect the customers investment in the companies technology and insure their loyalty. But, for the software companies, things are different. To insure maximum profits, the old software should be abandoned whenever a new technology comes along (like when the Pentium replaced the 486, or when the Pentium 3 replaced the Pentium 2). Totally new software should be written for the new technology, and the manufacturers should insure that the old software in not compatible. But, planned software obsolescence is not in the best interests of the hardware companies. So, as you can see, the computing paradigms totally conflict. A company can either make money on software and lose money on hardware, or make money on hardware and lose money on software; but making money on both can be very difficult (unless you are very creative).
OS Concepts
An operating system is the bridge between hardware and software. It’s
the operating system that lets the computer run software and be useful.
Today, there are two operating system concepts in the computer world; general
OSs, and proprietary OSs. The general OSs (Windows or Unix) can run on
thousands of different computers from hundreds of different manufacturers,
and currently hold a large share of the market. The proprietary OSs (Mac
OS or Amiga) basically run on only one manufacturer’s machines, and, it
seems, can never have more than a small share of the market. I think the
problem with the proprietary OS is that it puts the manufacturer on the
unprofitable side of both paradigms. For example, Apple Computer cannot
effectively use planned software obsolescence because it would cut into
the sales of their machines. If users had to junk their applications to
upgrade to a new Mac, then Windows PCs might be more attractive. Also,
Apple cannot concentrate on just one kind of computer. They have to make
a variety of models to fit different needs, or lose market share. So, Apple
is caught having to make machines that have to work under both the hardware
and software paradigms. This is a big advantage for Macintosh users. Macs
are generally easier to set up, more reliable, easier to fix, are much
better on software compatibility, and more capable of emulating other computers.
Naturally, this makes a Mac a little more expensive. However, I think Apple
Computer has good future prospects, provided management realizes that unconventional
strategies are needed to deal with their inherent paradigm conflicts.
On the other hand, Microsoft makes operating systems for several thousand manufacturers, and can ignore hardware issues. The manufacturers, if they follow Microsoft’s specs, can ignore software issues. This specialization makes Windows machines cheaper, because both sides can ignore the other sides issues. But sometimes, this leaves the users caught having to deal with conflicts between hardware and software. So, Windows machines are known for stability problems, software compatibility problems, and hardware compatibility problems. Unfortunately, the monopoly has enabled Microsoft to ignore software issues also, so Windows glitch’s are getting more interesting. In the end, I think the paradigms will catch Microsoft (if the Federal government doesn’t get them first). There are several versions of Unix available that on the market from makers who do care about software issues. And, strangely enough, new versions of Windows may hurt Microsoft. If enough Windows users decide that their current machines are adequate, they may start putting off the purchase of the latest new technology (with the latest versions of Microsoft software). That way, they can avoid the OS upgrade hassles; like having to buy new versions of the same old applications, or special software to squelch upgrade bugs, or more memory. The management at Microsoft has to come to realize that the old rules of marketing apply; be honest, sell a good product, and take care of your customers. But, the software paradigm keeps pushing them into directions that can only alienate people.
Conclusion
Understanding economic paradigms is very important to understanding
the economy. Understanding paradigm conflicts is even more important because
they occur everywhere (the computer industry is a simple example). For
example, in the arguments about health care the main issues stem from conflicting
paradigms and the (childish) need to force fit the medical establishment
into the framework of holynomics. But, the paradigms are never recognized
for what they are (teacher say’s they don’t exist). So, the arguments flow
this way and that and policies change continually, but no one’s solutions
ever seem to work. The real issue is understanding and accepting the paradigms,
then working with them. This means putting aside dogma, and abandoning
any belief in political black magic. A Boeing 747 can fly because it was
designed to closely follows the laws of nature, because the designers accepted
the laws of nature. An economy works because the rules of the markets are
accepted and used to create policies, not because politicians can legislate
economics. Understand the paradigms and work with them.
I hope you enjoyed reading this.
If you want to know more about “Holynomics,” see An
Un-economic Interlude.
If you want to read about an example of paradigms in actions, see Cloning
at Apple Computer.
If you want to know more about microsoft, see Microsoft
Monopoly.
December 2, 1999 - July 10, 2000