Comment by fpoling a day ago
I think a better solution is exponential tax on a company size. I.e. once a company starts to earn above, say, 1 billion, it will be taxed by income by ever increasing amount. Or put it another way, use taxes to break the power law and winner takes effect all into a Gaussian distribution of company sizes.
> And the second is that taxes create a perverse incentive for the government. You absolutely do not want the government to have even more of a financial incentive to sustain and create more of the companies of that size. What you want is to have fewer of them.
That's not really a convincing argument. The government is the body for setting up the economic rules, it is not bound by it. The government doesn't have revenue or profit. Money is created by the government, it doesn't have a value yet. The direct financing of actions through taxes is not done for the government, but a way for the government to project the costs of the governmental action into the economy. Sure, there are a lot of idiots now-a-days, that think a state should work like a business and make profits, but they are misled.
> The government is the body for setting up the economic rules, it is not bound by it.
When a new law is proposed, the Congressional Budget Office prepares a report on the impact it will have on the budget.
Now suppose a new law is proposed that will remove an existing unfair advantage of large companies over small ones, causing more small companies to form and take market share from incumbent larger ones. If large companies pay a 50% tax rate and small companies pay a 10% tax rate, the CBO analysis will show tax revenue going down. Then in order to make up the shortfall at a given level of deficit spending, the government would have to raise taxes or reduce spending, both of which are unpopular, so instead the bill gets tabled and the huge companies retain their unfair advantage. That's the perverse incentive we don't want to see.
> Money is created by the government, it doesn't have a value yet.
If the government can create an unlimited amount of money with no drawbacks, why don't they just send everyone a check for a trillion dollars? If they can't then whatever they want to spend in excess of what they can get away with printing or borrowing has to come from tax revenues, and then what happens when you set up an incentive structure where the government gets more money to spend the bigger they allow companies to get?
> anybody can sue them.
who bears the costs of this suit?
And who determines what makes for a good market share size to be the threshold?
And by having such a rule, an industry that would have higher efficiency to when consolidated would not be able to (but you wouldn't know). It's a bad set of policy imho.
A better way would be for gov't to increase competition by adding supply, or demand, whichever one is the bottleneck to competition. If a company, such as AWS, is getting a lot of marketshare, but their profit margins is still high, then the gov't should incentivize competition by funding or giving loans to businesses that want to compete with AWS.
However, if AWS's profit margins, even at high market share, remains very low (e.g., amazon's commerce side), then there's no need for the gov't to "step in" at all, as there would be no incentive for any competitor to try enter the market due to low margins.
> who bears the costs of this suit?
The goal is to not have it happen, because the company is going to see that they're only slightly below the threshold and voluntarily split themselves into smaller pieces and buy themselves a safety margin because if they don't everybody knows the lawsuits are going to vaporize them once they exceed the threshold.
> And who determines what makes for a good market share size to be the threshold?
Anything in the vicinity of 5%-15% would be fine.
> And by having such a rule, an industry that would have higher efficiency to when consolidated would not be able to (but you wouldn't know).
This is extremely rare and the circumstances where it happens aren't a mystery. It's when entering the market has extremely high fixed costs but then the unit cost of usage is negligible, e.g. it costs a huge amount of money to install water and sewer but then the incremental cost of someone washing their hands is insignificant.
For those things you either have the government do them, or if it's a private company then it's a regulated utility which is completely banned from anything that even vaguely resembles vertical integration as the price of being allowed to have more than the threshold amount of market share.
> A better way would be for gov't to increase competition by adding supply, or demand, whichever one is the bottleneck to competition.
The problem is generally caused by the incumbents capturing the government and then enacting rules that inhibit rather than increase competition. That's why you need anyone to be able to initiate the lawsuit, so they can't capture the government department which is supposed to be thwarting them because then it's the entire public.
> so they can't capture the government department
so why not solve this issue directly? Transparency, auditing and public awareness etc are needed to prevent regulatory capture. Public apathy are the reason why it is currently "easy" to do capture regulators.
The fact is even if a law suit is possible from anyone in the public, no one is going to pay to do a law suit (which has costs), when the result doesn't net them more profit. So unless the law suit enables the accuser to wholesale take a piece of that company as private property from the owners - which no law currently would allow nor have precedents for - why would anyone expend private money for a public good?
And in any case, i don't the apathy going away, even if the law suit was free. Because currently, the same apathy is allowing regulatory capture in the first place. So solving public apathy first, and foremost, is the solution.
> Transparency, auditing and public awareness etc are needed to prevent regulatory capture. Public apathy are the reason why it is currently "easy" to do capture regulators.
It's mostly easy because the people doing it are good at lying. When they create a rule it isn't called the "mandate this company's product rule" or the "increase fixed costs to lock out smaller competitors rule", it's sold as a safety measure or consumer protection or some other pretext, even though the effect is to raise costs to the benefit of the companies getting the money or exclude competitors to the benefit of the incumbents.
Or they simply don't prosecute antitrust violations, and then there is nothing to audit because there is nothing happening, meanwhile people are kept distracted with other things.
> The fact is even if a law suit is possible from anyone in the public, no one is going to pay to do a law suit (which has costs), when the result doesn't net them more profit.
It does net them more profit. The premise is that having more than the threshold amount of market share is a strict liability antitrust violation, which allows any customer or prospective customer (i.e. anyone) to sue them for it. The person who files the lawsuit would get the money, the same as someone who sues a company for pollution or fraud.
The point of letting people sue you for polluting or fraud or, in this case, market consolidation, isn't to make plaintiffs rich, it's to deter the thing you don't want companies to do. The goal isn't to have a lot of lawsuits, the goal is to have companies not want the market to consolidate and actively prevent it because if it happens they'll get sued.
> So solving public apathy first, and foremost, is the solution.
Apathy is cyclical. People don't care until the problem gets bad enough, then they care enough to demand change and make it go away for a while, then they stop caring until it gets bad enough again.
But you don't want people to have to die or get severely abused before the problem gets addressed. What you want is to change the structure of the system to prevent it from getting that bad to begin with, by making sure that the power to nip the problem in the bud (i.e. stop market consolidation at 5% or 15% instead of 50% or 90%) is held by someone who will actually exercise it, which can be accomplished by granting that power to everyone affected, which in this context is each and every member of the public.
This would permanently increase DRAM prices. Memory fabricators either earn billions of dollars in income each year or they can't keep going. There are no little Mom and Pop businesses that can do photolithography on leading process nodes.
Nonsense, it would force vertical de-integration.
Chip fabs used to be like book publishers; you don't have to own a printing press to be an author. Carver Mead even described his vision of the industry that way.
Nowadays you have to get your cell libraries and a large chunk of your toolchain from the fab. Of course it's laundered through cadence+synopsys, but it's still coming from the fab. You have to buy your masks from the fab (heck they aren't even allowed to leave the fab so do you really own them?). And on and on.
For the record I don't agree with the "exponential" part, but otherwise this is an underappreciated and powerful technique.
In another comment you proposed a sane version of the parent proposal. I wouldn't have commented if fpoling had originally floated that scheme. I was mainly objecting to drastically increasing taxes "once a company starts to earn above, say, 1 billion" without regard for the minimum viable scale of different businesses.
> Chip fabs used to be like book publishers;
I can still make a book like that in my basement. People do this as a hobby now. You can still build chips like that in your garage. People do this as a hobby now.
These things DO NOT SCALE... you cant have 10,000 people running printing presses in their basement to crank out the NYT every day. A modern chip fab has more in common with the printer for the NYT than it does with what you can crank out in your garage.
Let's look at TSMC's plant in AZ. They went and asked intel "hey where are you sourcing your sulfuric acid from. When they looked at the American vendors TSMC asked intel "how are you working with this". Intels response was that it was the best they could get.
It was not.
TSMC now imports sulfuric acid from Taiwan, because it needs to be outrageously pure. Intel is doing the same.
Every single part, component, step and setup in the chain is like that. There is so much arcane knowledge that loss of workers represents a serious set back. There are people in the production chain, with PHD's, who are literally training their successors because thats sort of the only option.
Do you know who has been trying the approach you are proposing? China. It has not worked.
https://www.youtube.com/asianometry probably the best rough and ready education you can get on the industry.
Complexity of the fab processes is isn't what the parent was talking about. They're talking about the major changes in the relationship between fabless semiconductor companies and commercial foundries.
The complexity of actual fabrication was always, and still is, entirely within the foundry. But in the early days of that model, designs could be more easily handed off at the logical level, leaving the physical design to back end companies, which makes designs much more portable between foundries. (The publisher analogy.) What's changed is that the complexity of physical design has exploded, and you can't make the handoff at nearly as high a level, and there is much more work that depends directly on the specific process you are targeting. Much more work at the physical level falls to the fabless semi companies. So it is much more work to retarget a design to a different foundry or process.
> Do you know who has been trying the approach you are proposing? China. It has not worked.
> https://www.youtube.com/asianometry probably the best rough and ready education you can get on the industry.
I would take anything from that channel regarding China with a pinch of salt.
> I can still make a book like that in my basement. People do this as a hobby now. You can still build chips like that in your garage. People do this as a hobby now.
You can absolutely manufacture a convincingly-professional, current-generation book in your basement with a practically-small capital investment.
You cannot manufacture a convincingly-professional chip (being generous: feature size and process technology from the last two decades) in your basement without a 6-7 figure capital expenditure, and even then - good luck.
Is that revenue, or profit? If revenue, it'll slam certain kinds of high-volume low-profit businesses, and if it's profit then the company will just arrange to have big compensation "expenses" for executives.
The latter would have to be backstopped by taxes on individual income.
The sane version of this proposal omits the "exponential" part, applies to profits (net income), and makes the tax rate industry-specific (just like Washington State's revenue tax).
Set limits so the top cant earn more than x times the lowest paid in the company then.
Ah yes, the same tax mentality that is working great for EU innovation.
> I think a better solution is exponential tax on a company size. I.e. once a company starts to earn above, say, 1 billion, it will be taxed by income by ever increasing amount.
This is in the right spirit but you want two things to be different about it.
The first is that the threshold for a given industry doesn't make sense as a dollar amount, it makes sense as a market share percentage. Having more than 15% market share should be a thing companies don't want, regardless of whether it's a $100 trillion industry or a $100 million one.
And the second is that taxes create a perverse incentive for the government. You absolutely do not want the government to have even more of a financial incentive to sustain and create more of the companies of that size. What you want is to have fewer of them.
So, what you want is a rule that if a company has more than 15% market share, the entire general public is allowed to sue them into bankruptcy for the offense of market consolidation. Which also removes the problem where they buy off the government prosecutors, because if they commit the offense then anybody can sue them.