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Feb 12, 2013 
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If you want to build widgets, and each widget has a base-plate, a power supply, and a cover-plate, and you've got 10 base-plates, 10 power supplies, and 6 cover-plates, then you can just build 6 widgets. The cover-plates are the limiting factor.
If a new shipment comes in with 6 more power supplies and 10 cover-plates, now your inventory stands at 10, 16, and 16. The bottleneck has moved – the base-plates are the limiting factor.
Yes, your shop is now materially better off than it was before the shipment arrived, but you, as the conscientious small business owner, are not satisfied – you're paying attention to the limiting factory.
There is always a limiting factor.
Alvin Toffler famously noted that there have been three waves of massive change in human society.
Starting with the initial condition when we were hunter gatherers, operating much like the other primates on the savanna:
The first wave was the development of agriculture. People moved from the open range to the farm as we grew our food, which meant that we didn't have to continually move to new locations, which meant that we could accumulate physical goods, which meant that we could experiment with producing physical goods via new techniques, which meant that we could have specialization of labor, which meant that productivity went up, which meant that we could support dedicated government, priestly caste, and so on.
The second wave was the development of industry and mass production. People moved from the farm to the factory as specialization increased, food yields went up, universal factory style education was created, the corporation prospered, the extended family gave way to the nuclear family, universal literacy appeared, returns on education increased radically.
The third wave is the post-industrial society. People moved from the factory to the coffee-house, open source appeared, people began forming friendship groups that spanned continents instead of city blocks, one good algorithm could now reshape a massive industries, 20-something billionaires became – if not normal, at least not surprising. Pets began getting pedicures, celebrity chefs appeared on TV and organic food appeared in supermarkets.
In each of these four eras mankind has become materially better off than in the era before…and yet there is always one shortage.
In the initial state of hunter-gatherers, the shortage was food. The lack of food kept the population in check, and when times got really hard, only the physically strongest (and their allies) would eat. Utopian visions were those where there was lots of food.
In the first wave society, the shortage was irrigated land – anyone could raise enough food to live on if only he had enough land. The lack of land kept the serfs in check. Those with a monopoly on the land (the best armed thugs those favored by God and blessed with the divine right of kings) owned all the land and let the peasants work it in return for a share of their product. Utopian visions were those where there was lots of land.
In the second wave society, the shortage was capital – anyone could buy enough food to live on if only he had enough capital to start a small business. The lack of capital kept the proletariat in check. Those with a monopoly on capital let the proletariat work their machines in return for a share of their product. Utopian visions were those where there was there was enough machinery for everyone.
In the third wave society, the shortage is not good ideas – it's minds capable of executing good ideas. Your average silicon valley maniac has more ideas than he can shake a stick at (to use a first wave term). The problem is that bringing even one of his ideas to fruition takes years of effort. …and not just years of anyone's effort, but years of effort by one or more people with
- high intelligence
- high executive function
- strong self discipline
There is a shortage of such people (and, again, but "shortage", I mean not "people are dying in the streets because we don't have more", but "we are only rate limited by this").
Given that this is the only real shortage that the world faces, I find it darkly amusing to look at retrograde utopians of earlier eras, telling us that all of our problems will be solved if we just adopt their dated hundred- or thousand- year old solutions.
Those who still think that there's a first wave shortage of good land want us to adopt Georgism. "We'd all be better off if they didn't have a monopoly on the land!". Yeah, OK – if I just gave you a few acres, Google and Goldman Sachs would tremble before your might.
Those who still think that there's a second wave shortage of capital want us to adopt redistributive socialism. You know what happens if we take away Elon Musk's money and hand it out to every American? Ten years later Elon Musk is a billionaire (again) and you're carrying a balance on your credit card (again).
When the shortage is human minds, there's really only one solution ("solution"): enslave the high productivity brains (or perhaps just tax them at 90%) and make them labor for everyone else so that the livers can lean back and watch Jersey Shore reruns courtesy of Larry Page and Sergei Brin's paychecks.
While I'm not a fan of this on deontologic grounds (i.e. "we have no right"), it's at least an honest model of how the world works.
The mainstream political parties are blind to reality, and that's because of incentives – everyone involved is handsomely rewarded for being blind to reality. The Republicans fondly remember 1860, when the common man stood behind a plow, and the Democrats fondly remember 1960, when the common man stood behind a stamping machine.
The Republicans want to bring back small towns and white-painted churches, because when those things were ascendant all was right in the world.
The Democrats want to bring big cities and big industry, because when those things were ascendant all was right in the world.
And so the Republicans shovel money at farmers, endorse prayer in school, and tell us to worship our heroes fighting for manifest destiny, and the Democrats shovel money at unionized teachers, endorse government run mass transit, and tell us to worship dense urban living.
If a rawhide clad savage stood before a podium in Washington and told us that all of our problems could be solved if we, as a tribe, packed up and moved over that hill there, because there's a lot of rabbit, and maybe even some deer, we'd laugh at his naivety.
…and yet when representatives of the two major parties stand up in 300 year old clothes and tell us that the path to prosperity lies in moving over that hill there, because there's a lot of arable land and/or good paying factory jobs, we pretend we're hearing something other than rank idiocy.
Last 5 posts by Clark
- an interesting review of "The Three Languages Of Politics" By Arnold Kling over at The Wall Street Journal - May 25th, 2013
- Ideological Turing Test (mainstream liberal democrat edition) - May 23rd, 2013
- depression - May 9th, 2013
- Mayday, Mayday...we are under attack - May 4th, 2013
- too good to fact check - May 3rd, 2013
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