Border Security Type I and Type II Errors

One way of looking at the a policy of increased ICE enforcement of US border security is as a debate over decision error costs. The expressed goal is to remove the worst of the worst criminals. Few would disagree with this goal. However, in this dragnet, immigrants without criminal backgrounds have also been detained. The administration may see this as representing a small cost to pay, while the protesters see this as an unacceptable consequence.

The graphic below from the Financial Times indicates how many more criminal and non-criminal detainees the policy change has resulted in. Your position in this debate likely comes down to whether you think the benefit of detaining ~6,000 more criminals outweighs the cost of detaining ~25,000 more with no criminal background. Reasonable people can disagree over what would be acceptable, but few have stated what value they consider to be acceptable.

(I understand there is also debate over what are acceptable detention tactics.)

What caused the jump in US residential energy prices?

The opportunity cost of US natural gas rose.    

Andy Masley Substack:

...Russia invaded Ukraine, Europe stopped buying Russian gas, America was suddenly competing with European countries more for natural gas from other places, and natural gas prices spiked for a bit. Here’s a graph of natural gas prices:

A functional organization helps Apple innovate

 HBR: 

SUMMARY:

• THE CHALLENGE: Major companies competing in many industries struggle to stay abreast of rapidly changing technologies.  
• ONE MAJOR CAUSE: They are typically organized into business units, each with its own set of functions.  Thus the key decision makers—the unit leaders—lack a deep understanding of all  the domains that answer to them.
• THE APPLE MODEL: The company is organized around functions, and expertise aligns with decision rights. Leaders are cross-functionally collaborative and deeply knowledgeable about details.

As companies grow, they often switch from a functional organization to a divisional one:

Business history and organizational theory make the case that as entrepreneurial firms grow large and complex, they must shift from a functional to a multidivisional structure to align accountability and control and prevent the congestion that occurs when countless decisions flow up the org chart to the very top.

But, you end up with general managers who lack technical expertise making decisions.  Instead:

...Apple relies on a structure that centers on functional expertise. Its fundamental belief is that those with the most expertise and experience in a domain should have decision rights for that domain. This is based on two views: First, Apple competes in markets where the rates of technological change and disruption are high, so it must rely on the judgment and intuition of people with deep knowledge of the technologies responsible for disruption. Long before it can get market feedback and solid market forecasts, the company must make bets about which technologies and designs are likely to succeed in smartphones, computers, and so on. Relying on technical experts rather than general managers increases the odds that those bets will pay off. 

Example:  Apple puts cameras in iPhones, computers, laptops, and iPads.  

...Apple’s more than 600 experts on camera hardware technology work in a group led by Graham Townsend, a camera expert. Because iPhones, iPads, laptops, and desktop computers all include cameras, these experts would be scattered across product lines if Apple were organized in business units. That would dilute their collective expertise, reducing their power to solve problems and generate and refine innovations.

What happens when functional areas disagree?

The answer is collaborative debate. Because no function is responsible for a product or a service on its own, cross-functional collaboration is crucial. When debates reach an impasse, as some inevitably do, higher-level managers weigh in as tiebreakers, including at times the CEO and the senior VPs. To do this at speed with sufficient attention to detail is challenging for even the best of leaders, making it all the more important that the company fill many senior positions from within the ranks of its VPs, who have experience in Apple’s way of operating. 

BOTTOM LINE:

APPLE’S FUNCTIONAL ORGANIZATION is rare, if not unique, among very large companies. It flies in the face of prevailing management theory that companies should be reorganized into divisions and business units as they become large. But something vital gets lost in a shift to business units: the alignment of decision rights with expertise. 

Why do companies so often cling to having general managers in charge of business units? One reason, we believe, is that making the change is difficult. It entails overcoming inertia, reallocating power among managers, changing an individual-oriented incentive system, and learning new ways of collaborating. That is daunting when a company already faces huge external challenges. An intermediate step may be to cultivate the experts-leading-experts model even within a business unit structure. For example, when filling the next senior management role, pick someone with deep expertise in that area as opposed to someone who might make the best general manager. But a full-fledged transformation requires that leaders also transition to a functional organization. Apple’s track record proves that the rewards may justify the risks. Its approach can produce extraordinary results.  

Supply and Demand for Data Centers

A recent Visual Capitalist Info-graphic displays a fair amount of agglomeration of data centers. Not only does Virginia (!) lead, but many other states (IL, OH, TX, OR) have more data centers than their population or level of economic activity would suggest. The general pattern aligns with Fan and Greenstein's analysis that proximity to customers is important, even if it raises costs due to higher land prices in urban areas. Additionally, data centers' demand for electricity will tend to lead them to states with lower energy prices. The ability to achieve economies of scale also appear to be important, which also would be more expensive in urban areas. Different suppliers locating near to each other suggests that the advantages scale fall on the industry, not just the larger firm. This could be due to a more robust labor market for data center talent.

VPPs Change the Scale of Energy Production

 

Advances in Virtual Power Plants (VPPs) illustrate how changes in Minimum Efficient Scale (MES) can reshape industry structure. Traditionally, electricity generation exhibited a high MES: firms needed large, capital-intensive plants to achieve low average costs, reinforcing concentration. VPPs lower MES by allowing thousands of small, distributed assets, such as rooftop solar, batteries, smart appliances, and EVs, to be aggregated through software and operated as a single, dispatchable resource. Because efficiency now comes from coordination and data rather than plant size, firms can enter electricity markets without owning large-scale generation assets. When MES falls relative to market demand, entry becomes easier and market structure shifts toward greater competition and fragmentation.

Not only are VPPs an example of how lower MES in physical assets reduces market power, they also relocate it. While generation-scale economies decline, new scale economies emerge in aggregation, customer acquisition, data analytics, and platform integration. As a result, competition increasingly resembles a platform market, where firms that control large networks of enrolled devices or superior optimization software can achieve cost and reliability advantages even without owning physical capacity. Declining MES at the asset level intensifies entry and rivalry, while increasing MES at the coordination layer may create strategic bottlenecks that generate a potential winner-take-most outcome.

Why is the Venezuelan stock market up over 100% following US hostilities?

Students for Liberty:

Under Maduro's "socialism of the 21st century," ... Venezuelans resorted to eating dogs and scavenging trash to survive.

  Marginal Revolution:  In expected value terms, the people of Venezuela are now much better off.