Figures and Formulas

A long while back, I remember reading about Stallman proposing a change to copyright time. I thought that the setting of a particular figure, and then refining it was an absurd solution. In my opinion a much better solution is to set a formula by which the length of copyright is to be calculated, and a figure on how often that length should be recalculated.

Today, I finished reading My Life as a Quant. Somewhere in the middle of the book he talks about the drive to become a partner at Goldman (before it’s IPO). The firm had some specified number of partners, and a means by which to add to that group. I also assume that they had a beneficial profit sharing scheme. These partners would also form the committee that decides policy and in what direction to take the company.

The world seems to run more on figures than formulas. The US Constitution is anomalous in this regard, because of a formula for specifying how representation in Congress should be calculated. Interestingly Congress’s composition is determined by a formula based on state population while the Senate is fixed at 2 members per state. There have been many arguments (mostly a result of integer arithmetic) about this formula, beginning with the framing of the constitution itself.

I thought it would be interesting if a business’s direction were a summation of the votes of it’s employees. Of course we wouldn’t want to represent everyone equally, and so a weighting by salary would probably be good (even though managers get paid more, the workers probably get more in total). But it’s difficult to cast company-wide votes because of issues with wording and understanding of what’s at stake. As an example, suppose a trading company wanted to keep it’s risk in sync with those working at the company. During the hiring process, each new employee could take a risk-assessment test (so popular during the 80’s) that would chart their personal risk-profile. Then this graph could be added to the sum of everyone’s profile in the company (weighting by salary) to obtain the risk profile of the entire company. This graph could then be handed off to the market modeling groups and trading desks who would use it for portfolio calculations.

I also am really fond of the use of internal markets to make company decisions. Formulas and markets are simply more flexible and responsive to changing environmental conditions. Constructing a bureaucracy on formulas rather than figures would likely give you a very competitive edge, and it lets everyone feel a modicum better about their representation. I call this the Democratic Business Model.

Also of interest is a post on what Gen Y wants from work.