INDUSTRIAL STANDARDIZATION: PROGRESSIVE'S LOST ISSUE

[ulTRAX]

I find it so bizarre that the benefits of modest industrial standardization have been lost on us... lost to the point it's an issue that's off the radar. Yet it's an issue that central to how much of an environmental impact we have for a given standard of living, how we compete with other nations, even if we can shorten the work week.

The Right wants us to believe that we're at the end of history... that there's something so intrinsically desirable about free market capitalism and globalization that the debate was over. I wholeheartedly disagree. While I believe capitalism can a driving force for progress, I also know that capitalism is a two edge sword and it can is terribly inefficient. That inefficiency is hidden because like externalities (social costs) it's not reflected in actual market transactions. These costs have to be estimated.

Here's a prime example of capitalistic madness... the VHS v BETA format war of the 1980s. VHS had longer run time, BETA had better picture quality. By definition both were inferior formats in that neither was as good as a format that had the best features of BOTH design teams.

How much did consumers ultimately spend investing in a dead-end format only to have to reinvest in the winning, but still inferior, format? How much data was lost when owners gave up on the format? What was the cost of producing pre-recorded movies for both formats?

Free marketers would hold VHS's eventual victory up as a triumph of the free market. I see it as just another example of capitalism's intrinsic waste and inability to produce that legendary best product at the best price. I can't imagine a more wasteful way to introduce a product. And who pays? We consumers do, of course.

The examples of such industrial waste are endless... PS2 vs XBox, DVD-R vs DVD+R vs DVD-RAM, Windows vs Apple, look at all the incompatible flash memory card formats, vacuum cleaner bags, mop heads, camera lens... then there's the matter of spare parts. You get the idea. There COULD be much more standardization but companies would rather gamble creating a proprietary monopoly than risk competing in the open market.

On the other hand we never think of the efficiencies of having a universal standards. Take the power grid. We didn't need Microsoft to invent plug & play. We have standards for piping fixtures, electrical wiring, batteries, fuels, . We have broadcast standards such as AM, FM and NTSC TV... now HDTV. These were developed BEFORE products were introduced so both broadcasters and consumers knew there would be instant compatibility. On the other hand when it came to developing AM Stereo radio, the Reagan admin took the dogmatic market approach. It fell apart because few broadcasters and consumers were willing to risk an investment in a dead end format.

Many of the above are government standards or codes. But private industry has been known to cooperate on occasion. The electronics industry cooperated in creating the DVD standard and a consumer digital video tape (DV) standard 10 years ago. Of course as soon as the latter was introduced Sony and Panasonic introduced incompatible professional variants. Sadly, DVD is now is in its own ridiculous format war and the incompatibilities are infuriating. It's capitalism at it's most pathological.

I believe that government SHOULD encourage and if necessary mandate industries cooperate. Too much of the creative energies of American industry are being pissed away on playing corporate games instead of innovation. When this waste is in the pharmaceutical sector, we're all at risk that a drug that might save our lives will be delayed because of the games corporations play.

[90-percent]

1. free market

the more I learn about the New Deal programs the less I think the "free market" as currently practiced is a good thing.

regulated industries are certainly good for the consumer and the regulated industries can still make a good buck. Everybody wins without obscene concentration of wealth.

"free market" is usually just a code word for corporate pillaging and enron management.

standardization rocks and cooperation rocks. W. Edwards Deming is the big guru on this and his "14 points" are really worthwhile. Gingrich is a Deming fan, btw.

look at batteries - A B C D, etc. then look at printer ink cartridges, hearing aid and camera batteries, oil filters air filters etc. no way is it impossible to make a standardized ink jet cartridge. would probably retail for $5 instead of $45 for 3 color!

-85%

[ulTRAX]

2. thanks for some other examples....

Ya... ink cartridges for printers are a prime example of the "razors and blades" thinking of corporations carried to extremes. They don't make money on the razors but on the blades. Last time I bought cartridges it cost me over $100 for 2 sets (Black & color...) and those were wholesale club prices.

The economics of the printer industry are so nutty that printers are being considered throw-away items. Surely standardized cartridges could easily have been made. Provisions could have been made for large/small capacity cartridges... different ink types etc.

It's not rocket science. But it's another example of how ingenuity is wasted not on innovation but on the dysfunctional rules of the market.

[sweetheart]

3. eminent domain

A progressive court court intervene in the sorts of areas you mention
and force the market to acknowledge the public interest. The problem
is that we don't have proactive regulators with teeth. Really its too
bad and it really is an incredible waste.

That said, innovation works that way. Any regulator must truly be a
public agent... something that has not been the case for over 100 years.
In the worst case, you wind up with something where the regulator is
just another corporate shill and we end up with 8 track tapes instead
of CD's or MP3's.

The internet itself is a poor communications system compared to
Bellcore's intelligent network (IN), and windows was rather poor quality
when IBM was pushing its bigger products.... i'm not so sure even i
agree with the level of market intervention you're on about... it is
easy to say with hindsight, but there is a great difficulty in
divining market technology consolidation as a public monopoly preemptively.

[ulTRAX]

5. I don't agree

sweetheat wrote: "there is a great difficulty in
divining market technology consolidation as a public monopoly preemptively"

I don't agree. I think the problems of the current model are self-evident even if it's not apparent to dogmatic free-market types. There is a legitimate role for civic intervention here.

I believe laws and market incentives can be designed to accelerate innovation as opposed to stifling it by encouraging industry cooperation early in the stages of new technology development. Let the best ideas be consolidated into one standard or product. The royalties would then be split between participants and the corporations could then compete on reducing the price.

This is the opposite of the model currently used in the drug industry. Rather than having basic research be centralized... then let the drug companies compete on LOWERING price..... most of big Pharma's energies go into reinventing each other's wheel... coming up with me-too drugs that are no better than existing drugs, pissing away research dollars trying to find some clinical justification to market these me-too drugs, then pissing away more marketing dollars to propagandize consumers and doctors.

[sweetheart]

7. You think its simple?

I merely said it was difficult. I agree with your idea that there should
be civil engineering in ALL markets. Just how do you force market
consolidation when things are so complex.

You picked a simple one. How about hard disk standards? How about
SQL standards and programming languages. What about linux and X windows.
You vastly simplify something that is extremely complex, and the reality
is not something that was evident at the time. In 1991, X-windows/Motif
was a superior UI system to windows.

Technical evolution is very collaborative, and the only way would be to
empower a proactive regulator to participate in the collaboration as a
public advisor... but then there'd be lobbying and lots of grease, that
your pure-hearted idea would become perhaps even MORE corrupt than the
"free" market of today.

[ulTRAX]

8. the goal can be accomplished by changing the rules

I'm well aware that technical innovation might be unpredictable. Yet the current model can't guarantee that the best ideas float to the top. We see an economy filled with corporations leveraging inferior products and brand name loyalty to maintain market share. See any rational discussion of just what NSAID is best for whom?

I think it's clear that while Microsoft was not capable of producing a decent product arguably until NT.. it was in a favorable market position ONLY because it's licensing agreement with IBM made an inferior product a de-facto standard and brought in the money.

How many of the industry's best ideas fell by the wayside because Bill Gates happened to be at the right place at the right time? So who's calculating the economic losses for this travesty of MS-DOS kludge becoming a standard?

Anyone?

We have successful models of government-mandated and voluntary industry cooperation. Do you deny this?

I think we can have the best of both worlds by encouraging cooperation at the early stages of technological development. How? One way is to beef up the royalty system to encourage all players to consult early... and to change tax laws as to what is deductible for research.

[sweetheart]

9. in all fairness, such a thing needs be global

The video standards you mention are not just US standards but global
ones. The same is true of other technology developments. Many of the
innovations come from other parts of the world. To simply develop
in the US and ship abroad is incredibly imperialist, and denies that
95% of the world's population has any rights to innovate.

So in that sense, what you're suggesting needs to be under the auspices
of a united nations, and a "global" patent authority. Given that it
takes big money to protect patents around the world, what happens is that
only large corporations are able to play in the game, and the very
innovation we want (which comes from individuals), is priced out of the
system.

My experience of this comes from www.fixprotocol.org. This is a
computational standard for data interchange in capital markets. The
standards body has a european, and american and an asian group, as the
subtleties of organizing a standard centrally are too complex, and as
well, many issues need to bubble up in their regional areas to make
it in to a global standard.

Much of the newer innovation in future will come in terms of highly
complex standards, which involve massive information sharing and
global cooperation. To achieve this without government intervention
is hard enough... FIX (the standard i just mentioned), is basically
funded by industry firms who want to participate, and these donate
labour resources... and the whole thing started with some maverick
programmers at salomon brothers and fidelity... but that era of
US centricity in computing is now over.

And i'm not so sure that the standard would have developed at all had
there been any regulator involved, as it was a voluntary sharing of
information that sponsored it, not imposed development of a system.

Myself i think computing is in early-days still, and that a global
guild of computational professionals should form, that, like in
telephony, standards and ideals create a healthy global profession,
that like civil engineers, we achieve the ability to build a bridge
anywhere in the world to recognized safety and quality standards.

I think your suggestion could best be achieved by empowering the
NIST with market-intervention and a massively larger budget that the
public gain from coordinating the development of such things.
http://www.nist.gov/

[ulTRAX]

10. global, yes... but the initiative has to start somewhere

The principle of increased efficiency and improved standards though cooperation is not limited to the US. In a globalized economy there has to be global standards. I believe the call for increased standardization has to begin somewhere. Just as industry has co-opted government to push for free trade agreements, Progressives here and abroad have to get this issue on the radar. We can't let the myths of unfettered competition go unchallenged.

You suggest that the project that you're working on might not have come about if any regulators were involved. I have not suggested the need for government regulators though having them for broadcast standards is self-evident. In the case of NTSC TV and HDTV the FCC organized industry researchers to devise the standard. I don't believe any government regulators were involved in developing the DV video tape format or DVD. Industry cooperated because they felt it was in their interest not to have a format war. There are already standards organizations that work on an international level. ISO comes to mind as does http://www.w3.org/

I believe direct regulation would be a last resort: when corporations DO find it in their interest to have such destructive economic wars. I believe the first step is for governments to change the incentives built into current laws in a way that encourages industries to channel their ideas though such international standards organizations.

So are we now in agreement?

[Redstone]

4. Well, the government of the Soviet Union "mandated that

industries cooperate," as you suggested.

Look at how well that worked out.

Redstone

[ulTRAX]

6. nonsense

I gave some examples of government mandated standards and voluntary industry standards.... BOTH helped accelerate the process of creating better products thus accelerating market acceptance.

Isn't the REAL question how much of the creative potential of the US economy is pissed away STIFLING innovation and finding ways to raise prices?

[ulTRAX]

11. smart laws can discourage industrial waste

The pharmaceutical sector is a prime example of rampant inefficiency that borders on the psychotic. But much of the problem is a result of the rules these corporations play by.

For example a drug company only needs to prove to the FDA that a new drug safe and is better than a placebo to be approved. It doesn't have to prove a new drug is better or safer than existing drugs. This creates a loophole so big that drug companies piss away precious research dollars with countless me-too drugs then more research dollars trying to find some unique clinical claim they can make.

A prime example is Prilosec and Nexium. Nexium was not definitively proven any better than Prilosec and when it was, it was because a larger dosage was used. Yet it's on this basis that a multi-hundred million dollar ad campaign was built.... all to get consumers to demand that new $5 pill.

A simple change in the FDA regulations could get the drug companies to focus on innovation rather than pissing away precious research dollars reinventing each other's wheel, devising questionable research studies, then propagandizing doctors and consumers. Is the myth of the infallibility of the free market more important than our health and that of the ones we love?