A few weeks ago there was a New Yorker article that chronicled the eight days leading up to and after the collapse of Lehman Brothers (as usual they’ve decided to only offer the abstract to non-subscribers unfortunately). Since I mentioned my penchant for process stories, it should come as no surprise that I quite enjoyed this one. The highlight, though, might have been this quote from a treasury official that basically boils the whole thing down to just a few sentences:
The treasury official described the situation: “Lehman Brothers begat the Reserve collapse, which begat the money-market run, so the money-market funds wouldn’t buy commercial paper. The commercial-paper market was on the brink of destruction. At this point, the banking system stops functioning. You’re pulling four trilliout of of the private sector” — money-market funds — “and giving it to the government in the form of T-bills. That was commercial paper funding GE, Citigroup, FedEx, all the commercial-paper issuers. This was systemic risk. Suddenly, you have a global bank holiday.”
George Packer makes a very interesting point about Obama’s press strategy, which shies away from stories that explain the political process. Packer writes that people in the administration “say that the Obama hates ‘process’ stories because they end up focussing on trivial matters of personality. They also say that the White House wants to give the impression that everything flows from the top.”
To which Packer replies:
This last is the one that troubles me most. Even if such a thing were possible, it isn’t healthy. I’d even say it’s undemocratic. Something as vast and complex as the U.S. government cannot be presented to the public along the same lines as a Presidential campaign. In the end–I saw this happen to the Bush Administration in Iraq–the result is that the White House doesn’t seal information in, but, instead, it seals itself off from information. The levers of government eventually stop working because no one in the bureaucracy wants to explain what’s going on for fear of the White House press office, which means the ability to think clearly grows sclerotic.
Two things I find interesting about this: First, it’s a non-partisan criticism of the way the Obama administration does stuff. We don’t have enough of that in politics. Second, I am in complete agreement that there is really value in the process. Actually it reminds me of something Robin wrote over at Smarkmarket about what makes Packer’s New Yorker colleague, Atul Gawande, so good: “It’s a first person narrative — and not tentatively so. There are I’s everywhere in this piece, and it’s wonderful.” I think politicians (and the media, frankly) underestimate the value of this sort of narrative.
I was amazed by this during the financial crisis last year. As politicians were trying to figure out what to do with TARP there was an incredible lack of clarity about what was going on. I suspect this was because the politicians were being brought up to speed on how the financial system works and they didn’t want everyone to see, but I think it could have been a real calming influence to have someone sit down America and explain what the hell was going on. (For what it’s worth, Rick, COO of The Barbarian Group, wrote one of these for the company and I think it went a long way (I know it did for me).
Also, while I’m on the topic of writing, I’ve been thinking a lot lately about the difference between the way I was taught to write and the way I actually do. Like everyone else I was taught the basic essay structure: Tell them what you’re going to say, say what you’re going to say, tell them what you’ve said. However, the way I write here is far more off the cuff. I had no idea I was going to write about my writing style at the end of this post (in fact, this post started as a link to the Packer quote and eventually started to go a little long for the sidebar). I prefer to just flow through ideas, something that doesn’t feel quite right in other media (which probably explains why it’s seldom done by journalists), but works quite well for the relatively intimate setting of a blog. I guess it speaks to something I’ve mentioned before: Blogs are more like interpersonal communication than mass.
A few times over the last few months I have talked about overconfidence and wondered how so many people could think they’re above average. Well, it turns out (or at least some scientists are arguing) it’s a good evolutionary strategy:
In fact, if the potential reward is at least twice as great as the cost of competing, then overconfidence is the best strategy. In fact, overconfidence is actually advantageous on average, because it boosts ambition, resolve, morale, and persistence. In other words, overconfidence is the best way to maximize benefits over costs when risks are uncertain.
So by being overconfident you can sometimes beat the odds and actually achieve that which you otherwise probably shouldn’t (at least that’s how I understand it). Seems simple enough, I guess.
YouTube explains something I always suspected: The vast majority of videos that are rated are given five stars. (This is by no means a shocking piece of news, more that it proves out what we all suspected.)
Seems like when it comes to ratings it’s pretty much all or nothing. Great videos prompt action; anything less prompts indifference. Thus, the ratings system is primarily being used as a seal of approval, not as an editorial indicator of what the community thinks about a video. Rating a video joins favoriting and sharing as a way to tell the world that this is something you love.
This seems to have driven the current trend of “favroting” (or “liking” on Tumblr). Netflix, I suspect, is an exception to the rule, partly because they explain so clearly the benefit to yourself of rating movies (better recommendations) and partly because they’re one of the few sites that explain what stars mean (one star is hate, two stars is didn’t like, three stars is like, four is really liked, five is loved … or something like that). Also reminds me of the post I wrote about the personal rules people apply to rating systems.
Back in August, Adam Rasheed, a propulsion specialist from GE’s Global Research Center came down and spent a week with us. Anyway, he’s just posted some of his observations which I thought I’d share:
One thing is that a lot of the folks I met are involved in something based off the internet, and their medium is information. This is pretty fascinating environment. Because the “barrier to entry” is so low, it’s relatively easy to very quickly try many different things on the web – and just see which one sticks. And that appears to be one of the keys to coming up with ideas… many cheap and quick iterations to maximize your ability to learn. I am trying to figure out how to apply this to my world, where it simply isn’t practical to build 10 different designs for a jet engine (at billions of dollars and many years of development) – and then take the best one – we’d go out of business! But it is something we can do on a smaller scale in the lab.
It’s always interesting to hear how someone from a totally different headspace interprets and tries to adapt thinking from the world many of us live in. Frankly, it’s also interesting to see the things Adam chose to focus on (knowing that we talked about lots of stuff).
I often find myself arguing that for all the change we’re seeing in the world at the moment, most of it is really just incremental. Communication speed, for instance, has been increasing at a pretty rapid clip for awhile now and the rise of self-publishing of the last five years is an extension of the camcorder (YouTube is the internet’s America’s Funniest Home Videos).
Anyway, over at Overcoming Bias, economist Robin Hanson outlines three changes he finds significant enough to dub “unique”: “We are entering an era where most anyone can quickly talk to most anyone else who can talk” (he talks about not just the spread of English but also translation tools), we don’t have contact with “strange cultures” (“Our distant ancestors heard rumors from travelers about distant strange cultures.”) and how rich we are (“each thinking-talking person having a median income so far above his or her subsistence level”).
Whether or not you accept Hanson’s three examples or not, it’s an interesting thought exercise. What would you add?
All of this talk about us coming out of the recession is making me really uncomfortable. It’s not that I don’t want to see the country recover, however, I can’t help but feel as though the trope of the last 12 months, one centered around a “reset” in the world’s economy, has been forgotten (and maybe never was). I’ve felt this way for a few months now, though I must say it’s been inflated for me by the dealmaking in the tech world of the last few weeks.
It started a few months ago as I kept reading about executive after executive explaining to the world that business was fundamentally changing and then, in the next breath, explaining how their company would come out the other side unscathed. I kept thinking that it felt akin to the whole world believing they’re above average, ignoring that if that were really true, average would just go up and they’d all be back to square one.
Anyway, I was having a conversation about this at likemind this morning and felt like writing something about it and then I read this interview with Nassim Taleb and knew I had the quote I needed to anchor an argument:
The government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient’s symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment.
That’s exactly it. I am ultimately worried that we haven’t really fixed anything and instead have just postponed something, transferring the problem to another time (and maybe even generation) so we can go back to a world of building faux-value: A world where we start to believe our own hype, thinking that just because we’ve cooked the balance sheet to make things look better that we’ve really fixed the problem.
I don’t mean to be a “Debbie Downer” or anything, just really felt like I had to write all this stuff. I don’t know the answers or even think that I’m immune to the “good times” thinking.
That’s all, carry on with the happy thoughts.
Hey everyone, sorry for the interruption (and slow posting lately), just need a favor. I have to do a presentation next week about Brand Tags and I’m trying to find some interesting new data to pull and share. What sort of stuff would you want to see? How would you like to use the site? Also, any additional feature ideas are welcome. Thanks a bunch.
For a long time I’ve wondered whether Google would start an investment arm that looked for insights in their search queries for inspiration. While they haven’t done exactly that, they did release Google Domestric Trends which tracks related searches across a number of different categories and allows you compare them to market growth. The Google Finance Blog explains:
Google Domestic Trends tracks Google search traffic across specific sectors of the economy. The changes in the search volume of a given sector on google.com may provide useful economic insight. We have created 23 indexes that track the major economic sectors, such as retail, auto and unemployment. Each index value is baselined at 1.0 on January 1, 2004 and is calculated and displayed on the Google Finance charts as a 7-day moving average. You can easily compare actual stocks and market indexes to these Google Trends on the charts.
Hal Varian, chief economist for Google, has more to say on the subject, specifically his work looking at unemployment statistics (also check out the year-on-year change from unemployment searches). This is going to be fun to play with.
The idea of finance, as explained by this post from The Baseline Scenario (which I’m now subscribed to) is pretty simple:
The financial sector connects savers and borrowers – providing “intermediation services”. You want to save for retirement and would obviously like your savings to earn a respectable rate of return. I have a business idea but not enough money to make it happen by myself. So you put your money in the bank and the bank makes me a loan. Or I issue securities – stocks and bonds – which you or your pension fund can buy.
What happens when you put a lot of money in one place, however, is quite a bit more complex and that’s what the author tries to explain. The more I read this stuff, the more I think we’re bound to swing back to the simplicity of something like peer-to-peer lending.
Overcoming Bias makes an interesting point about societal contributions. In talking about how rich people often donate large sums of money to have their name put on stuff (hospital wings, academic institutions), the author, Robin Hanson, wonders whether that money couldn’t be better put to use funding innovation:
But when folks like Alex [Grass, founder or Rite Aid,] spend their later years trying to “do good” with the millions they were paid for actually doing good, they usually end up pissing it away. We already have too much medicine and academia, because such things are mainly wasteful signals. We didn’t need and shouldn’t be thankful for more hospital wings or lecture halls. Imagine how much more good could have been done instead via millions spent trying to make more innovative products or organizations.
Of course the latter strategy is far from guaranteed to succeed, leaving the rich person with a much-less well-rounded life story (theoretically), but it’s a good point.
Robin of Snarkmarket had an excellent idea for his book project: Use Google Adwords to test character names. Putting that aside for a second, though (you can read all about it if you’d like), I really like what Robin had to say about playing with new internet stuff: “But okay, I’ll be honest. This was mostly just an excuse to try a new tool. Any nerd will tell you that tools can provide their own intrinsic rewards. There’s an aspect of exploration to it, too: you’re pressing out into new tool-territory, learning about what you can and can’t do.”
I love that. I’ve tried to explain to lots of folks that aren’t so into the web that the easiest way to get a handle on things is just screw around (I’m sure I’ve written it here before as well). It’s hard to wrap your head around this stuff fully (Google search ads being a great example) until you’ve tried them yourself.
Consumer Reports did a taste test of 29 store-brand and name-brand foods and found 23 of the 29 store brands tasted as good or better. Now this is only moderately interesting in and of itself, but what got me was this explanation of why there was a price difference: “Price gaps have less to do with what goes into the package than with the research, development, and marketing costs that help build a household name.”
So basically the price difference is marketing and innovation. But if store brands continue to eat away at market share, what’s incentivizing name brands to keep pushing new ideas? It’s an interesting conundrum (and one that the pharma industry spends a lot of time thinking about). I’m not totally sure what the answer is, but I know as far as over-the-counter medication goes, there have been pushes in innovative package design (basically making the product look like it should cost more money). I guess the flip side is that the store-brands start to become more like name-brands and start spending the marketing/research money as well, thereby making everything meet in the middle … Anyway, just something I’ve been thinking about. (Oh, and as a side note, I always forget that Consumer Reports owns Consumerist, that’s pretty awesome.)
First off, it’s hard to remember what the internet was like before everyone was speculating on what newspapers should do with themselves.
Okay, now on to the actual point of this post, which is mostly an interesting quote from the economist. The post is a response to a response to a response to a New Yorker article by James Surowiecki where he argues that newspapers should have been more aggressive in recognizing what industry they’re really in and adjusting their business/product accordingly (Surowiecki is the only one of these I have actually read). In case I haven’t lost you yet, The Economist offers a different reading on alternate strategies for newspapers (and one I haven’t actually heard before!):
Often, when an industry faces decline, management and ownership will opt to take door number three; rather than reinvesting profits in new businesses or redistributing them to shareholders, they’ll direct them to legislators and lobbyists in an effort to buy themselves protection from competition. This has been the strategy used by agricultural and manufacturing interests, often, though not always, with success. I’m actually a little surprised that journalism has not been more aggressive or successful with appeals for government help.
While the author acknowledges it would be hard to squash the internet, it’s an intriguing point. When other industries get in real trouble there’s definitely a lot of going back to the government for help.
This paragraph from the FT’s Lex Column coverage of Vivendi caught my eye:
Say what you like about Vivendi, but the French media conglomerate has done an admirable job of recession-proofing its business model. A focus on subscriptions – whether for pay-TV, mobile phones, and the ability to hunt goblins and orcs in the online game World of Warcraft – has helped Vivendi weather the downturn better than rivals more dependent on advertising. A day after Germany’s Bertelsmann reported a €333m net loss, dragged down by a collapse in ad revenues at broadcaster RTL, Vivendi on Tuesday unveiled profits that beat most analysts’ estimates.
Subscriptions are such a simple mechanism and one of the things that are actually made easier with the web, where you can subscribe to things with both smaller amounts of money and more granularity. Ease is worth paying for. Over the last few months I’ve wondered, for instance, why I can’t get just the Lex Column delivered to my Kindle (Amazon’s fault I assume) and why I can’t subscribe to all my favorite label’s releases for the year. (For whatever that’s worth.)