Profit-maximizing organizational structures can hamstring technologies whose impact depends on them

Profit maximizing organizations obviously have incentives to try to capture as much of the value they create as possible. Of course, profit maximizing companies are not mindless greed-monsters. In many situations, giving up short term profit can actually lead to longer term revenue. Ideally, these organizations would be able to sit at some point on the tradeoff curve that maximized value by maximizing impact. Keep in mind that profit-maximizing organizational structures can also be the best way to support a technology! tensions.

However, there are four mechanisms that can lead to good-acting but for-profit companies hamstringing technological advancement.

Specialization.Generally, it’s a good idea for a for-profit business to start with a single product and a specific market or niche. This good business practice means that short of a large company with an R&D department, most of the development work should be focused on productizing a technology for a specific task. Startups who want to start by building a platform or doing all the things tend to go down in glory-seeking flames. Specializing technology for a specific task is not inherently a bad thing! It’s also possible to thread a path of increasing generality, starting from a small niche and jumping to bigger and bigger applications over time. Elon Musk is the master of this. However, it’s just as possible to get stuck in one of those niches, especially if it’s not profitable enough to support R&D on the more general technology. This situation happens all the time with university spin-off technology, where it really needs more general development to reach a certain performance threshold, but it gets stuck in a niche in order to build a company. <Need examples.>

Investor Pressures For-profit companies working on technology generally need investors because they won’t turn a profit for at least several years after getting started. These investors have their own incentives, and maximizing the impact of a technology generally is not the most important one. Investors can have specific timelines for an exit, incentives to show growth in order to raise a new round, or just opinions about where the technology should go that conflict with maximizing impact. (Of course, any source of money comes along with its own set of pressures!)

Capturing value For-profit companies need to capture some value that they create! tensions, but There is a significant class of innovations that would create drastically less value for the world if their value had been captured by their creators.

Speed An organization could realize all of the above traps and forgo trying to maximize profit, not take investment, and make most of its technology work public, pulling in revenue through non-exclusive license fees and consulting work. Unfortunately, this strategy can hamstring the technology you’re working on in a different way, slowing general-purpose development to the work that can be done when you have particularly lucrative contracts. Many aerospace technologies seem stuck in this particular mechanism.

It is rare that an organization can both forgo significant value by making key parts of a technology public and make money hand over fist at a rate that satisfies investors and can fund the development of general-purpose technologies.


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