Capital and Problem and Solution

Weekly I/O#65

Capital is not a solution to problems. Capital is a means of scaling solutions.

Book: The New Industrial State

In the book by John Kenneth Galbraith, he argues that modern corporation is a complex system that is not amenable to simple solutions. Money alone cannot solve the corporation's problems, but it can be used to scale solutions already found. A company can use capital to expand the scale of operations, acquire new technology, and hire more people. However, capital cannot solve problems that are inherent in the structure.

Same for all the societal problems with complex incentive mechanisms involved. As noted in #59, attempting to solve these problems solely by pouring money into them can lead to unexpected consequences arising from Principal-Agent problem, Moral Hazard, or Adverse Selection. Capital cannot solve problems but scale solutions.

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