Re: Too big to fail?
- From: Islander <nospam@xxxxxxxxxxx>
- Date: Wed, 18 Mar 2009 18:14:33 -0700
Jerry Okamura wrote:
"Evelyn" <evelyn.ruut@xxxxxxxxx> wrote in message news:gpr3na$qa2$1@xxxxxxxxxxxxxxxxxxxxxx"Islander" <nospam@xxxxxxxxxxx> wrote in message news:l4CdnX8D5clI8V3UnZ2dnUVZ_q7inZ2d@xxxxxxxxxxxxxxxxxLet me suggest your lower telephone bill had more to do with productivity improvements in the business then anything else. Think about it this way. There used to be a whole lot of people manning telephone exchanges, today all of that has been automated. In days past, when you called information you got to talk to a real person. Today, you get some automated response first, which if you get what you want from that exchange, you never have to talk to a real person.This is an expression that has come to be used pretty loosely. Most people really mean "Too big to *let* fail."
"Too big to fail" is an expression often used in the financial community that was intended to give investors confidence in these companies. Sure, your money is safe! These companies are too big to fail!
Of course, we know now that this is not true. They can, indeed fail.
"Too big to *let* fail" is an expression that is used to strike fear in anyone who might question the need to bail out these companies. This is an acknowledgment that we have allowed these companies to become too large and too intricately tied to the health of the overall economy. This is socialism by corporation. There is no difference between this kind of corporate central management and governmental ownership and central planning of an industry. Well, there is a difference - the pay scale for top level management!
I am now hearing more people argue that we shouldn't allow companies to get this large. But, what did several of these companies do with the initial TARP money dispensed by Paulson under the Bush administration? They bought up other companies, thereby becoming larger and, unfortunately, even more "too big to let fail." Somehow, the Bush administration even thought that this was a good idea and facilitated it.
It is time to break them up, cut loose the healthy parts and see if there are any high rollers who want to speculate on what is left. Want to bet that if anyone did buy the financial services division of AIG that they wouldn't fire all the top level management?
Breaking up a massively huge company worked out quite well for the telephone business. My phone bills are a lot cheaper nowadays for it, but it was a long time coming for the effects to fully kick in.
Not to diminish the contribution to lower costs due to automation, there was a second major change at work. I was at DARPA when Vint Cerf headed the Internet project in '81-'82. He not only advocated the TCP/IP standard, but also a new approach to billing. Instead of charging for every email (then proposed by the communications industry) but charging by the amount of bandwidth a customer subscribed to. This was a major point of disagreement that is still playing out in the voice market. The telephone companies were still accustomed to a world where a physical connection had to be made between parties and they charged for the length of time that that connection had to exist. Packet switching, at the heart of the Internet Protocol eliminated the need for that point-to-point connection. Any message, be it email, video, or voice was transmitted in fixed size digital packets across whatever paths were available and brought both reliability and efficiency to the networks. Vint argued that the customer should only be charged for the bandwidth that he had signed up for.
The companies understood this, but wanted to continue to bill customers for every increment of use. It was basic ideology. They felt strongly that this was the only way that they could bill people for what they actually used and prevent a few people from using more than they were paying for. Can you imagine an Internet today where you would receive a bill every month detailing every email that you sent, every access to USENET, every page that you downloaded from the web? That was what the companies wanted to do.
Fortunately for everyone, Vint persevered and not only was TCP/IP adopted as the standard communication protocol for everyone, but he also got the approach to billing that he wanted.
Today, you see the remnants of that struggle as companies compete for who can provide "free" telephone service to the most places. There are a few companies who are attempting to continue billing for every call, but they are being severely pressed by companies that charge one flat rate and you can make as many phone calls as you want.
Eliminating the overhead of detailed billing is what makes it possible. Some here might argue that only they can determine if every call was worth it to them. They claim that the "responsible" customer is the only protection against cost inflation. Well, this is one example where they have been proved wrong.
The health care industry might take a lesson from this!
.
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- Too big to fail?
- From: Islander
- Re: Too big to fail?
- From: Evelyn
- Re: Too big to fail?
- From: Jerry Okamura
- Too big to fail?
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