Another reason for scale in business has been in order to convey information-transmission incentives between parties in the supply chain.


Suppose there is a clothing warehouse, and a retail store. If they are owned by the same company, and the people in the store refuse to tell the people at the warehouse which inventories are running thin, the guy at the warehouse can complain to their common boss, who then disciplines the people at the retail end.


Now suppose the clothing warehouse and the retail store are owned separately. There is some piece of information, regarding what is moving at retail, which it would be worth $10.00 for the warehouse to know about in advance. Maybe he needs to alert the factory.


If there were a pricing-and-payment mechanism, the warehouser would be willing to pay the retailer $9.99 for this information. But such a mechanism doesn't exist. So all the retailer sees is that giving up this information could cost him $1.00 - since the warehouser will now "take advantage" of his need - and the information won't get transmitted


In other words, suppose a transfer of a packet of information creates a positive sum between two parties. The warehouse guy gains $9.00 by knowing what to order from the factory. And he gains $1.00 by knowing he can charge the retailer full fare, because some item is hot. $1.00 of it is zero-sum, and suffered by the retailer.


Only if there is some payment flowing in the opposite direction - $1.01 from the warehouser to the retailer in this case - will the information transfer take place. The information payment synchronizes their interests, among independent entities, in the information being exchanged!


Notice that communism - or private information property, but belonging to both of them as a result of a common shareholder - isn't nearly as optimized. The warehouse people can request the retail people provide a list of every unsold item in the store, every five minutes. And the retail people might comply, just to keep the bossman out of their hair!


In other words, if the parties are inside the same business, the information is rationed by the articulated, intermittent, high-overhead decrees of the boss, not by a price system. And the incentives and needs have to be conveyed by periodic time-consuming presentations to the boss, rather than implied instantaneously in a dynamically-adjusted information price.


So, with private property in time-axis information, an automated exchange, and a pricing metric, businesses could be smaller and more efficient. As a result, they could evolve and adapt more interchangeably, and therefore more rapidly!


eLROY


P.S. On 1-to-1 redundancy - or linear redundancy - 1-to-1 redundancy is a much simpler, but equally-tragic problem compared to many-to-many, or even looped redundancy, in the supply chain. (The supply chain is just a house of mirrors that should reflect a single, complete image from one end of the universe to the other


Suppose Air Jordan sneakers are really hot at Foot Locker, and they start to run out. Seeing the impending shortage - and wanting to stock up for a rainy day - some customers might buy an extra pair. Then, when their first pair wears out, they'll effectively sell themselves a second pair, as a speculator, at a later date.


The factory can see the same impending sneaker shortage looming at a later date, and start to ramp up production capacity today - to come on line right about when the customer's first pair of sneakers is due to wear out. Since the customer bought two pairs the first time, this time the manufacturer will have two pairs ready for sale. And the customer will need zero.


There, in a nutshell, is the problem with price-implicit information transmission in the spot market. Multiple people, at opaque locations, can respond to the same single redundandlty - even if there is just one buyer and seller - so long as both can carry an inventory along the time axis! So, the most important type of information to sell explicitly is time-axis visibility.