$100,000 on juice: Collective goods within firms

The rules and norms that allow markets to function effectively are public or collective goods. That’s something to which internet entrepreneurs turn their attention when setting up ‘two sided markets’ like Kaggle. At Kaggle we are always asking ‘what would make this an even better experience for the users (and the users are also the producers of the ultimate product – algorithms of use to those who host competitions).  In any event, one of my themes when introducing the economics of web 2.0 is mentioning the ways in which web 2.0 platforms conform to the technical definition of a public good which is to say that they’re non-rivalrous in consumption, and non-excludable.*

I also offer the further proposition which is that all productive economic structures are always and everywhere ecologies of public and private goods. As John Kay has observed, we do have live experiments of doing away with public goods – and they’re called failed states. You wouldn’t want to live there.

taxonomy of goods

In any event, the purpose of this post is not a lot more than a note to self on being reminded of how much new startups put into creating great collectively consumed goods for their workplaces. Virtually all the most successful internet startups are famous for their food and for the hospitality they lay on for their workforce. The article which provoked this post was this one in which Steve Jobs boasts that in 1985 The Mac team spent $100,000 annually on juice! Facebook took great pride in pinching Google’s cook for their own caf. Us humangoes are turned on by belonging to collectives with which we identify.

One downside I noticed on a visit to both Microsoft and the Googleplex in February is that though both have a ‘campus’ feel with oodles of adjacent buildings (Microsoft has a whole food hall – with all the charm and charisma that shopping malls and Microsoft are famous for) they also require ID to get into these social spaces, because otherwise they’d be subsidising outsiders (and perhaps picking up the local homeless population). Anyway, this highlights the fact that, in terms of the Ostrom’s quadrant on which public goods appear, these internal public goods could also be regarded as ‘club goods’ rather than pure public goods. They are nevertheless experienced as collectively produced and consumed goods.**

* To be precise, though the definition has typically been put in terms of the non-excludability of a good, that’s because economists have thought about public goods as a problem rather than as an opportunity. Google, Twitter, Facebook and Wikipedia could be closed to all those who wouldn’t pay a price to access them, but those who run them can meet their (private) objectives more fully by leaving them open. They thus become public goods.

** At least to the extent of the subsidy which in many cases is 100%.

This entry was posted in Economics and public policy. Bookmark the permalink.
Subscribe
Notify of
guest
15 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
conrad
conrad
10 years ago

It’s funny that their workplaces start getting called “campuses” and that they they offer all of these nice things to the employees. This must be a homonym of the word campus that is more commonly associated with universities, where many places don’t even have free coffee. It would be interesting to examine the effect this has on employees — I assume that they believe that giving their employees nice places to work rather than just more money generates more than it costs in increased productivity.

john walker
john walker
10 years ago

The funny thing about some ..many? attempts to encourage individual spontaneous initiative, is that are often put together by people that are anything but spontaneous.

Incurious and Unread (aka Dave)
Incurious and Unread (aka Dave)
10 years ago

Nicholas,

I think what Google etc are trying to encourage is informal, social interaction. It is that social, creative space that is the public good. The orange juice (which is clearly a private good) is just a means to establishing that good.

Judith Sloan
Judith Sloan
10 years ago

I hate to rain on your parade, Nicholas, but there is quite a negative interpretation that can be placed on food halls and ambient workspaces – the employer is attempting to merge the worlds of work and leisure so the employees hand around longer. Are these workplaces unionised? I don’t think so. And have you read any of the literature on the issue in the above terms.

And these sorts of arrangements do not stop at the hip, internet start-ups and Googles/Microsofts. All big law firms/accounting firms have extremely well-equipped kitchens, chefs, supply breakfasts, bring in top-quality dinners for staff working excess hours. Club good, I’m not so sure: just part of the sweetener to employees to induce them to work excessive and anti-social hours.

desipis
10 years ago

I think it depends a lot of what type of company it is. Internet start-ups or technology companies generally what to encourage dynamic and innovative work. So if the companies set up ‘public goods’ to deal with the auxiliary minutia of a workplace they free up the cognitive energy employees might spend on organising or planning their own solutions (the ‘relaxed environment’). This cognitive energy is then free to be used on something preferable for both the employee and employer. Contrast this to a company that uses its employees for repetitive monotonous work there won’t be such gains and in fact allowing more freedom and individuality for the auxiliary elements might provide a more balanced workplace. I’m thinking something along the lines of the paradox of choice here.

Incurious and Unread (aka Dave)
Incurious and Unread (aka Dave)
10 years ago

Judith,

AIUI, those well-equipped kitchens etc have more to do with FBT rules: dining clients on-site rather than at outside restaurants.

conrad
conrad
10 years ago

“but there is quite a negative interpretation that can be placed on food halls and ambient workspaces”

I imagine this is quite workplace specific — for example, where I work, I can buy exceptionally high quality food very cheaply within 3 minutes walk (indeed almost anything I can think of that isn’t European). But if I worked at Monash, La Trobe, or Macquarie (where I used to), I’d really appreciate having decent food and not the muck that universities inevitably serve up when they have these monopolies — especially because I’m often obliged to work late. I assume that the Microsoft and Google workplaces are so vast that they are in the Monash and La Trobe categories for getting food easily. I also think it depends on the type of employee you have. If I remember correctly, one of the reason Steve Jobs got Apple to do this was that he was sick of seeing IT workers looking like stereotypical IT workers (i.e., overweight etc.), and so they gave out free food, all of which had to be healthy.

Patrick
Patrick
10 years ago

All big law firms/accounting firms have extremely well-equipped kitchens, chefs, supply breakfasts, bring in top-quality dinners for staff working excess hours.

Mine is pretty damn big, and if we work late we have to go get dinner and claim the expense…now that I think of it, are you even based in Australia?

There is something peculiarly American about foodhalls, though.

As for Microsoft, etc, I think the following points are relevant:
1 Americans (not a majority at Redmond!) expect it;
2 There is not really anywhere else in Redmond;
3 Many of the staff (thousands, literally) are young people who have just moved out of home to come to Seattle and are probably pretty glad not to be cooking; and
4 Of course they aren’t unionised (but the food halls are!) and wtf kind of furphy is that anyway? Where in the world are highly paid professionals unionised besides China??

(real point 4: the reality is that for highly paid professionals in the contemporary world there is a merging of home and work. Why not make this easier rather than harder?)

On topic, I agree wholeheartedly with the ‘get the right people in and offer them guidance’ approach to management. Now if I could just work out the right people part…

Pedro
Pedro
10 years ago

Patrick, it used to be pretty easy to get the free dinner in a big law firm and then the rules started to tighten up when they realised that the grads and young solicitors would hang around chatting, or even postpone work till the evening, so they could get the free meal.

“the employer is attempting to merge the worlds of work and leisure so the employees hand around longer”

I don’t think it is a trick by management, just a recognition that people have to be fed and stuff if they are working late, which is a default assumption in many professional organisations. Also, smart employers realises that money is not the only reward people get from working. Lots of us like being in organisations and having colleagues and such. Smart organisations help us along the way.

desipis
10 years ago

…it used to be pretty easy to get the free dinner in a big law firm and then the rules started to tighten up when they realised that the grads and young solicitors would hang around chatting, or even postpone work till the evening, so they could get the free meal.

I have to wonder how much all the effort to minimise the costs of ‘bad’ employees is doing more to put off ‘good’ employees. I mean nothing says “We’re on the same team” like a system that says “I don’t trust you!”

john walker
john walker
10 years ago

Ever read Pierre Bourdieu on the economy of cultural capital- prestige -status?

Pedro
Pedro
10 years ago

Desipis, I think most people understood the need for it, but I recall a few grudging complaints.