## Wednesday, July 16, 2008

### Optimal Markups

Optimal Markups
Andre Willers
15 July 2008

See
http://andreswhy.blogspot.com
“Infinite Probe.”

Start Quote :

“Non-Failure Ratio
A non-failure ratio of (1- 1/3) ~2/3 summated over infinity = (2/3) / (1-2/3) =2 .

This means that any system that can be described or broken up into smaller groups is strongly ordered . Successful subgroups survive by a factor of 2 . This is built into the mathematics of the Universe . Life is one such sub-group , so are particles ,etc . Negative entropy is the rule . Life is everywhere . Positive entropy only holds in the most primitive and earliest systems .

Beautiful!

Quantum and non-quantum systems are the same . “
End Quote .

This says it all , though it might not be so obvious at first sight .

To put it Brutally Simple:
Let all profits go into reserves . Then , at a minimum :
Profits must pay for future basic costs .(Ie costs without provision for reserves or profits)

Reserves * mu = 1 – Reserves ,
mu = 1/ Reserves – 1 ,

Where Reserves is a fraction of costs , and mu is the multiple of reserves to cover the non-reserve portion of costs .

Res = 0.27 , or 0.33 , or 0.37 (=1/(e+1) , avg , 1/e from previous discussion.)
Mu= 2.7 , or 2 , or 1.7

This means:
A trade Empire needs a smaller reserve , but a bigger markup (mu) . An empire needs a bigger reserve , but a smaller markup .

The average is a reserve of a third , and a markup of 2 (ie 200 percent of cost.)

This acts as a basin for an attractor around mu=2 , regardless how many dimensions (ie players) are involved .

See
http://andreswhy.blogspot.com
“Petroleum Price”

What does a markup mu=2 mean ?
Profit is a subset of reserves . so state it:
Profit + Res * mu = 1- (Profit + Res)
This gives
2*Profit = 1 –Res(1+mu)

Res = 0.27 , or 0.33 , or 0.37 (=1/(e+1) , avg , 1/e from previous discussion.)
Mu= 2.7 , or 2 , or 1.7
Profit = 0 , 0 , 0

Any Profit in the long term is always zero for static systems because 1- R(1+mu)=0.
This is also known as the Primary Conservation Principle , mainly of energy .

How on earth do we make a profit ?

How does our civilization exist ?

By Fluctuations .
Shifting between varying values of Reserves and Markups , positives get reinforced (eg DNA) , but negatives only get eliminated .
This is a variation of the Random Walk .

So , what is the maximum long-term sustainable growth using fluctuations ?
Contrast the max and min differences in Res and Mu .

From Profit = 0.5*(1 –Res(1+mu))
From the resulting grid , the positives are 6% , 10% ,14%
The negatives are truncated by evolutionary processes.

This grid is valid for any system that can be described and enumerated for any species over any time .

Profit
Res
Mu 0.27 0.33 0.37
2.7 0.0005 -0.1105 -0.1845
2 0.095 0.005 -0.055
1.7 0.1355 0.0545 0.0005

So what is the sustainable growth rate ? There is no single optimal growth rate .

They are clumped . due to feedback mechanisms .
6% , 10% ,14% are rates the systems will hunt towards . The whole system will be biased towards the lowest ,ie 6% . Remember , Mu and Res are clumped values , not smooth .

Capitalistic systems as practiced in the West tends to high Mu and low Res , ie low profitability . They survived only because of they plundered entire continents .

Even so , billions of people average a growth of 6-14 percent for decades .

Can you see why AI’s love diversity ? Remember , I define an AI as a human interacting with a large database , even if the interaction is via fingers and screens .
The infinite summations in the “Infinite Probe” should tell you immediately .

Any summation over a large domain must include outliers . The summation can only become more accurate or trigger a paradigm shift . There are an infinite (at least Aleph 0 ) paradigm shifts .

See
http://andreswhy.blogspot.com “Randomness”

Andre