Aaron Renn on Silicone Valley and the Logic of the Global economy.

Silicon Valley and the Logic of the Globalized Economy | Newgeography.com

This is an excellent look at how, and why modern US tech companies are so productive, profitable, and able to pay such high wages.

More after the break.

 It is clear that this model cannot be extended outwards to very many other industries. This model requires a very streamlined number of employees, with nearly direct access to markets, and customers. An industry like grocery, or retail is far more clogged with people, making it difficult, or perhaps, impossible to achieve the density of high quality, highly dedicated employees, or the high profits necessary to pay such people. 

This could change radically with the introduction of robots. 

This is also a uniquely American model, or perhaps more accurately, an Anglospheric model. This model relies primarily on traits like willingness to hard work, grit, dedication, and perseverance. It also requires that each employee be very close to autonomous, making independent decisions for the good of the company without direct input from superiors. 

This model is somewhat scalable to European countries, but not particularly scalable to Asian countries like China. The problem with the model in Europe is that Europeans do not want to work hard for high pay. This is primarily because they are taxed so much that they receive only a small additional benefit from the large amount of additional work. The reward system in Europe favors only working to a moderate level. In addition, there is a strong social culture demanding one month off during the summer, extensive vacation time during the rest of the year, myriad "national" holidays, and stiff limits on hours worked. There are also significant problems with delegating responsibility.

The European system retains strong vestiges of feudal aristocracy, and delegating responsibility sufficient to meet the Silicone Valley model is untenable. I remember seeing a graph recently which showed this nicely. Essentially it showed that the European earning at the 95% level only had the spendable cash of a worker earning at the 45% level in the US. With nicely showed that Europeans in the upper middle class live to US middle class standards, middle class to lower middle class, and lower middle class to near US poverty standards. Only the lowest 5% in Europe lived at or slightly above their US equivalent.

Asia has a problem with the idea of autonomy, and individual responsibility. Long working hours are not the problem. Workers in Asia more resemble worker bees, with decisions made only at the higher levels, and tasks executed only at the lower levels. The model used in Asia utilizes an employee dense model, and appears to be as much an employment scheme, as business/profit model. This looks more like our grocery/retail model, although less efficient. 

Renn notes the difficulty of workers maintaining this high level of performance. I agree with him, for most it is difficult, and perhaps impossible to continue at this level year after year. I do not think that lower IQ individuals cannot perform at sufficiently high levels, but I do not believe they can do so for long periods of time. The demands are simply too great. 

I am surprised that Renn did not integrate some analysis of the gig/sharing economy into his analysis. One thing which seems to be happening in the US is that this gig economy allows all individuals to participate in highly productive employment in an ad hoc manner. This allows the high achievers to perform for longer at higher pay, and the lower achievers, and those who do not wish to work for long at highly productive levels, to work in spurts with substantial breaks between work sessions. 

Such a model would be more scalable to Europe. This could be called the gig/sharing/collaborative work model. The problem again for Asia is the fact that responsibility must be delegated far down the employment chain, and these cultures are uncomfortable with this. I suspect the highly productive Asian countries will be able to work around this model and find something which works. In China, however, I cannot see how the culture could be stretched to make this work. The CCP will certainly not be friendly to such a model.

Anyway, this is an interesting article and it deserves your attention. 

Your thoughts and comments would be welcomed.