Sadankata

Once upon a time, in a world long gone, it used to be that there was a clear distinction between an amateur [insert an occupation] and a professional. I'm using “occupation” here literally, as in something that occupies someone. Examples are banker, hair stylist, back scratcher and shoe shiner.

The difference was almost always clear. An amateur shoe shiner is one who is smitten by shining shoes, and is continuously refining their buffing technique and trying different buff clothes and doing other things that matter in shoe shining to become better at it. They are good enough that it’s clear they’re not your average Paul shining their work shoes, and may even get requests from family and friends specifically for these services. They don’t mind, really, because they enjoy shining shoes and each new shoe they shine is an opportunity for them to become better at it. The difference between them and a professional shoe shiner is that for the professional, this is their main gig. They live off of the shoes they shine. They may love shining shoes, but it’s not required that they do. They just need to do it well enough that their customers pay them. In fact, they could have started out loving it but have become jaded by unreasonable customer requests over the years and how much (or little) they make and do it now only because they have no other skill. In essence, in these before times, this was the difference. An amateur did something because they loved doing it, or because they love who they’re doing it for and have other things that they do for money. An amateur is someone for whom the occupation is a hobby, and is good at said hobby. A professional does this for one main purpose – to make a living, and the love is a nice add-on.

Even in these before times, amateurs sometimes got material benefits from their activities. A boxer who represents their country in the Olympics and wins a medal may get national awards, gifts from well wishers and patrons that they would not have gotten had they not partaken in that activity. This didn’t take them out of the amateur class; they did it for the love of the sport and went back to their life afterwards. The gifts and awards were great to have, but they would do it again even without them.

In today’s times, the lines have blurred very much, and it is harder to tell if someone is an amateur or not. What does it matter anyway? Some competitions do not allow professionals, an example is boxing at the Olympics, for different reasons. Regardless of the reasons, it’s harder to make the distinction. You must not have done this professionally to qualify What does this even mean? What if I’m a boxing influencer with a large social media following that I’ve parlayed into brand deals with makers of boxing gear? And this has given me the resources to hire professional trainers and spar with pros? Can I still qualify as an amateur? What if I participated in an unofficial match with UFC fighter for my social media channel? Am I still an amateur? This hasn’t happened yet, but it will happen and I’ll love to follow it when it does.

One thing about Amerika (not a typo) is that they are always on the edge of what is possible. If there’s a “what if”, there’s an American somewhere trying it out to see if it works. This amateur/professional debate has come to a head there in college sports. There has been a lot written about it – here is one summary – and in essence it says colleges are allowed to pay their student athletes unlimited amounts of money. The specific amount depends on the negotiating position between both parties; how much the school wants the player, how good the player is, how much the coach believes they fit into her system and so on. It was a landmark deal, and much was said about it.

In the before times I talked about earlier, college sports was clearly amateur, and professional sports had actual league: NBA, NFL and so on. College athletes were students who happened to be good at a sport, and so they represented their schools. Along the way, they hopefully learn some transferable skills: hard work, perseverance, mental strength to recover from defeat that they can apply to their careers after school. As time went on, it became more important for colleges to win so they gave students offers: We see you’re a great badminton player. How about you come to our college and play for us. We’ll like to be badminton champions in our state and turn our noses at our neighboring college who have trounced us for four decades now. We’ll make it worth your while. We’ll waive tuition for you, and we’ll add room and board. You won’t need those pesky campus jobs that students get to make ends meet. You’ll get to play badminton, which you love doing, and you’ll get a free degree while at it.

This was a good deal for a long time. Until some sports (mainly football and basketball) started making the schools a lot of money. It turns out that students loved it when their schools won games, and would show up to matches to cheer them on. They paid for tickets, which paid for all the Gatorade and equipment the teams needed. And as those students graduated and went on to make money, they didn’t lose their love for their schools. They followed the schools’ performances, and were willing to pay to watch them. A Duke University alum who now works in San Francisco can maybe travel back to North Carolina once a year to catch a game. But they would happily pay a fraction of the travel costs to watch the game on TV. This is the main source of the broadcast TV money that poured into popular collegiate sports. There are other reasons of course – the “amateur” image it had, where these were just kids putting in work for the love of the game and their school, without the money drama that abound in the pro leagues.

This money, that grew into billions of dollars a year by the 2020s is why the lawsuit that led to the settlement happened. Athletes argued (rightfully) they were doing physical work – training, playing, getting injured while the money went to the coaches and school administrators. It must feel bad to create value and get back only a fraction of what you create; awfully close to indenture.

Now that the amateur/professional separation has been fully erased in American college (male) football and basketball, why do we have the college league anyway? In a simple way, we have multiple professional leagues now: the NCAA, the NBA and NFL and the difference seems to be that the NCAA requires that an athlete be a “student” at a college while the NBA/NFL do not. But let’s be real, if a star student isn’t attending classes and doesn’t show up for an exam, will they get cut from the team? If the ECON 203 finals clashes with a game against their chief rivals, will the school ask the student to not attend the game? If their GPA goes so low as to warrant being asked to leave an academic program, will they really get kicked out? I feel like if I’m being paid $3 million a year to play football for a college, that is no longer a hobby. It’s not my main gig. I’m now a football player who happens to have a student ID.

What does this portend? I don’t know. The most fun version of the future for me is that college football and basketball keeps growing until they are hampered by the “athlete must be a student” rule, and the schools all band together to eliminate it and just go full pro. Then the teams are subsidiaries of the colleges and the league fully rivals the NFL and NBA, and eventually they merge. Then the schools realize that they need activities to teach their young students character, and someone says “you know, sports will be a good idea”. Then the schools restart the sports at the amateur starting line.

What’s life if not full circle? I really hope this future comes to pass so I can brag about how I foresaw it. Otherwise, it may still make for a good book/movie story. You heard it here first.

I suppose there are two ways to think about marijuana in the wake of legalization. One was to think about it is that it’s just like cigarettes; addictive but not a social crutch. Smoking is not allowed in practically all indoor spaces, but anyone can pop a cig in public. Drivers opening their windows a smidgen to get the smoke out is a common winter sight. There’s warnings everywhere about the dangers of smoking, but it you’re seen smoking outside no big deal – life goes on.

The other way to think about it is like alcohol. People drink, some people have religious opposition to drinking. It’s socially acceptable to not be a drinker. We have licensed liquor stores, and even accept some alcohol at work functions, but everyone agrees that (i) it can be intoxicating when one consumes beyond a particular quantity, and (ii) certain things are not to be done in conjunction with drinking. This set of activities includes driving, operating heavy machinery, and any serious work. In most jurisdictions, drinking in public is illegal and where it’s not, it’s frowned upon. Generally, if you found someone walking down the street at 1000 sipping from an open bottle of gin, you would give them a wide berth.

(Smoking) marijuana doesn’t fall neatly into those buckets. We generally agree it’s intoxicating (so not like a cigarette), but it’s also socially acceptable in large urban cities to smoke on the street. What then?

A common phrase heard from startup founders and small business entrepreneurs is “wearing many hats”. One person does the accounting, all the sales, the marketing and the procurement. All of those functions are important, but in a small business there’s not enough in each function to justify a full-time employee, let alone a team.

As companies grow, they get more customers. Now they need salespeople to go sell even more, marketing folks to get their message out effectively, and accountants to record all this revenue properly. They have to buy large quantities of raw materials and talk to suppliers so they need procurement people.

Of course now they have so many salespeople and marketing people and procurement folks that the CEO can’t oversee them effectively, so she appoints executives. These function as her deputies and oversee people on her behalf. Those executives delegate downwards until we get to the people doing the actual work. These CEO-delegates, from executives down to front line managers create a whole cadre of workers whose job is not to do the actual job function. Rather they are described as doing things like coordinating, leading, overseeing, supporting, aligning, prioritizing etc.

This subdivision creates a few peculiar problems. If a person in the products division is planning to launch a new product and wants to market it properly, they need to market it on billboards, facebook, instagram, TikTok, Google search, the web and on Snapchat. All of that is handled by different people. Now they need to align with all these folks on timing and direction. This happens for all products and marketing channels. This problem then extends into Legal, who have to sign off on marketing to prevent being sued over an ad, and procurement to actually buy the ads, and finance to approve the ads. Now even the individual contributor, the product manager who just wanted to launch a new product has to spend more time aligning and coordinating with people rather than actually building. This coordination overhead, or coordination cost is higher when they have to spend time even figuring out who they need to talk to before beginning the alignment.

As companies grow and have different people do what one person used to do, they have to spend resources to ensure everyone talks to everyone and is on the same page. This coordination cost grows in a nonlinear fashion. My elementary math says that for a network (company) with n nodes (people), the number of connections required to connect 1-to-1 is 0.5 x n x (n-1). A company with 100 people will need 4,950 relationships for everyone to know everyone, while growing to 1,000 people takes that count to 499,500; almost 100x.

There are many opinions about what the right company size is such that the additional output of an additional employee exceeds the added coordination cost that the company incurs. A better question to ask though is how can a company leader make coordination cost tend towards zero? What types of people need to be employed? What types of tools need to be used? How can ICs spend more time building?

In the days of yore, there was a platform known as twitter. On a particular day, a tweet made the rounds, and I don’t remember its exact words. I remember its gist though, and it was “Every country in the world has debt. If all countries owe money, who do they owe?”

In a folksy, relatable way, that was a galaxy-brained question. If Ian borrows money from Jenna, Ian is in the negative and Jenna is in the positive. There are at least two parties to any debt – debtors and creditors.

One simple way of explaining this is simply that the nations don’t owe each other money. Nations are entities, much as people and companies and states and cities, and they can all owe each other money. So, one may say that nations as a class of debtors owe other creditor classes (companies, people etc.)

I’ve come to start thinking about debt differently, as a consensus about the future. When a debtor borrows money from a lender, what is really happening is that the debtor believes they will have money in the future, and want to spend some of it now. The lender agrees with them, giving them today’s money with a promise to get it back in the future. The degree of agreement between lender and borrower shows up in the terms of the loan. The less the lender agrees with the borrower about the future, the more onerous the loan terms (collateral, interest rates etc.), and at the extreme end of the disagreement spectrum, the (prospective) borrower doesn’t get any money.

When one starts to think about debt in this way, as a consensus about what the future holds for the debtor, it starts to show up everywhere. It is what makes France pay much lower interest costs when compared to Nigeria despite having similar debt to revenue numbers.

Now you know what will happen when the consensus about France’s future shifts.

There are many ways to think about labor relations and organized labor and in my head, there are two extremes. There’s a labor-maximalist view, where worker rights are paramount, workers are always right and need every protection available from big business. The other extreme is the antitrust view of labor – if companies are not allowed to be monopolies, why should workers be?

Like all extremes, both those views are in some way rational but also in some way so wrong as to be impracticable. But I’ve recently started to think differently about labor. Started, not finished.

I started with a thought experiment. A world similar to most countries today with no slavery or serfdom or any other form of indenture. The only difference is the absence of corporations. Individuals grow all the food they eat, and make almost all the goods they use. What they don’t make, they buy. What they make excess of, they sell.

In this world, a hypothetical Jack is married to Sally, and they have three children. They live in Idaho on a 20-acre parcel. Jack built his farmhouse by his own hands, with wood from trees he felled on his tract. He farms about 1-2 acres of that, growing potatoes and wheat as staples, alongside vegetables over the summer. He has livestock too; a few head of cattle, some pigs, goats and chickens.

He and his family live a good life. He makes most of what he consumes – he grows all the food he eats, built his own house, and even makes some of his clothes with wool from his livestock. He has some skill in woodwork, and made the two tables and five chairs in his house. The things he can’t make, like good cotton clothes, and boots, and pots and pans, he buys from his neighbors. They’re infrequent purchases anyway, he buys a new pot once every five years and James’s cotton undershirts can last three years. He finances this with the proceeds of woodwork he does for his neighbors.

An important artifact about Jack’s labor is that he does what needs to be done, without fail, else he doesn’t eat. If the potatoes aren’t planted in the spring, or harvested in the summer/fall, his family doesn’t eat. If the cows aren’t milked every morning, there goes his family’s calcium and phosphorus intake for the day. If he takes his family on a month-long vacation in spring or fall, he might as well not return because there won’t be food when he gets back.

This is one of the wonders of the modern economy. We can craft a system such that one person’s absence from work does not impact their livelihood. We have such wonderful things as PTO, and have made vacations outside of town accessible to the people. The most important development that made this possible is agglomeration of labor in corporations. Before corporations, entrepreneurship and labor were joined at the hip. In our thought experiment, if Jack wanted to try out a new irrigation system for his potato farm, he would have had to do it himself.

Without corporations, every individual would have needed to be an entrepreneur. The corporation made it possible to exchange only labor and/or time without being fully exposed to the success of the actions.

An incredible invention. Almost like magic.