Betting they wish they would have taken the check from Facebook

This piece on the fall of Snap Inc. by the indispensable Michael Hiltzik plays like a greatest hits of badly run tech businesses, but as much as I'd like to go over every juicy embarrassment, like an ownership structure that theoretically allows the none-too-competent founders to control the company from beyond the grave (assuming it outlives them), I can't reprint Hiltzik's whole article, so I'm going to have to narrow my focus to our ongoing thread about the Ponzi threshold and the way that hype and next-big-thingism distorts markets and drives bad decision-making.

Just to review, he basic idea [of a Ponzi threshold] is that sometimes overhyped companies that start out with viable business plans see their valuation become so inflated that, in order to meet and sustain investor expectations, they have to come up with new and increasingly fantastic longshot schemes, anything that sounds like it might possibly pay off with lottery ticket odds.

With Snap, we have a slightly different version. Instead of focusing on the fantastic longshots, the company is damaging its growth potential and alienating their users in order to get a quick boost in revenue, but the underlying dynamic is the same. You start out with a good product that could be the basis of a profitable medium-sized business, but the sky-high valuation creates equally inflated expectations. In order to justify the price tag, good business plans are pushed aside for bad ones.


Snap Inc. again shows why it should not have become a public company

To recap, Snap fell short of virtually every expectation Wall Street had set for the first-quarter report. The Venice-based app developer reported revenue of $231 million, below consensus expectations of $244.5 million. Its daily active users — the essential metric for online services — came in at 191 million, short of expectations of 194 million. The company lost nearly $386 million in the quarter.

...

Pressed by the analysts to explain how he plans to reverse Snap's dismal results, Spiegel kept referring to the company's "mission" — seven times in the half-hour call, by my count. Sounding like a bargain-basement knock-off of Mark Zuckerberg, he described that mission as helping to "empower people to express themselves, live in the moment, learn about the world and have fun together." This is a high-faluting way of saying that Snap distributes a smartphone app, Snapchat, aimed at young users who use it to communicate with friends via messaging and short videos of themselves, and sells advertisers space on the screen.

...

Spiegel, 27, and his co-founder Bobby Murphy, 29, traded that in for a big payday at the IPO, which ludicrously valued the company at $33 billion and raised nearly $2.5 billion, making them each multimillionaires and, on paper, billionaires.

...
This would be marginally acceptable if it were indisputable that Spiegel and Murphy know what they're doing. On this, the jury is still out, but the evidence isn't encouraging. Early this year, the company rolled out a redesigned app that has met with near universal condemnation by users, scads of whom have taken to YouTube and other venues to vent their displeasure, often with verbiage not acceptable on this website.

Simply put, the app originally displayed a user's chat messages with friends with one swipe of the screen. An opposite swipe brought up video "stories" from friends and others, interspersed with paid advertising that was relatively unobtrusive and easy to ignore.

In the redesign, the chat and "stories" are displayed together, and advertising and paid messages get their own space. Users complain that this is confusing, makes it difficult to find their friends' most recent messages and most relevant stories, and gives advertisers too much unavoidable presence. "A lot of people are going to flee the platform, much like myself," a video performance artists named Davison posted on YouTube. "Now it's this bloated, complicated mess." Anecdotally, it seems that many Snapchat users are heading to Facebook's Instagram app.

When he introduced the Snapchat redesign late last year, Spiegel told users the goal was to make it "more personal" for its users, including by providing advertising "personalized just for you." But what really drove the redesign, plainly, was giving advertisers more access. "We listened to our advertisers very closely," Khan told the investment analysts.

It's been a long week. Let's just kick back and relax.

Aaron Copland - Corral Nocturne





Claude Debussy ‒ Images




Saint-Saëns - The Carnival of the Animals - VII. Aquarium




And since I was chastised for overlooking them earlier...

Here are Carol and Marilyn

These two tweets by Robin Hanson prompted a bit of a flashback recalling a thread from the early days of the blog.

The first was a reaction to this recent Slate piece ("George Mason University's Robin Hanson might be America’s creepiest economist.").

Done right, economics SHOULD be at least a bit creepy. We should explore concepts, & consider policies, that violate common norms separating official & personal worlds. These violations, + our quirks, make us into ambiguous threats = "creepy".  https://t.co/hm0Nx84E9c

— Robin Hanson (@robinhanson) May 2, 2018

You'll notice that Hanson's take on the problem here in no way lies with him but rather with the overly emotional non-economists in the audience who let their biases prevent them from thinking logically and clearly.

He later followed with this.

Two claims, in tension: 1) It is crazy to compare sex to income inequality, as sex is vastly less important. 2) One should know to step extra careful when talking sex, as it is our most sensitive subject, far more so than income. But why is it so sensitive if its so unimportant?

— Robin Hanson (@robinhanson) May 3, 2018

Putting aside the misrepresentation of the criticism (and that's a pretty big concession), these ideas aren't really in tension. It's entirely possible for one topic to be more important and another more sensitive, or for one topic being more sensitive under certain circumstances or (and this is the major one) for an issue to have more than one component. In this case, the sexual aspect is clearly secondary to the question of consent and self-determination (meaning that Hanson is abandoning his own libertarian principles in order to argue these points).




All of which got me to thinking about this.

Freakonomics: disagreeing about why we disagree

On today's Marketplace, Steve Levitt explains why he thinks many people see the world differently than he does:

One of the easiest ways to differentiate an economist from almost anyone else in society is to test them with repugnant ideas. Because economists, either by birth or by training, have their mind open, or skewed in just such a way that instead of thinking about whether something is right or wrong, they think about it in terms of whether it's efficient, whether it makes sense. And many of the things that are most repugnant are the things which are indeed quite efficient, but for other reasons -- subtle reasons, sometimes, reasons that are hard for people to understand -- are completely and utterly unacceptable.

There are few thoughts more comforting than the idea that the people who disagree with you are overly emotional and are not thinking things through. We've all told ourselves something along these lines from time to time.

But can economists really make special claim to "whether [ideas] makes sense"? Particularly a Chicago School economist who has shown a strong inclination toward the kind of idealized models that have great aesthetic appeal but mixed track records? (This is the same intellectual movement that gave us rational addiction.)

When I disagree with Dr. Levitt, it's for one of the following reasons:

I question his analyses;

I question his assumptions;

I question the validity of his models.

Steve Levitt is a smart guy who has interesting ideas, but a number of intelligent, clear-headed individuals often disagree with him. Some of them are even economists.

THE EFFECT OF INVENTIONS ON THE PEOPLE'S LIFE. (as viewed from 1896)

If you want to get a sense of how people in the late 19th century, the peak (or at least the beginning of the plateau) of arguably the most dramatic run of technological progress before or sense, thought about the state of that technology, I'd recommend take a look at the 50th anniversary issue of Scientific American. In particular, this essay is essential.

The material world has advanced so rapidly during the last half century, and with a pace so accelerated, that mankind has almost lost one of its most important faculties, and one essential to happiness-that of surprise. The nil admirari faculty is attaining a wide spread. The most marvelous developments are taken as a matter of course-the condition of things fifty years ago is seldom pictured to the mind-and all the material blessings which we now enjoy are used as conveniences of daily life, and no more. Formerly there was an idea prevalent that surprise and astonishment were emotions of the ignorant. To-day they are rather emotions of the scientist. The educated engineer cannot without such emotions contemplate the insignificant feed wire of a trolley road carrying silently hundreds of horse power to points all along the line-he cannot without these feelings contemplate the electric motors, drawing power in proportion to the work they have to do, all regulated by the automatic government of counter-electromotive force-he cannot see the unstable though gigantic ocean liner filled with every refinement of electrical and mechanical art, all working perfectly on their never quiet, never level platforms-he cannot follow the construction of a cantilever bridge with the ensuing changes from compressive to tensile stress and the reverse, as the span is completed-these things all excite in him such emotions that he cannot observe them and know them without a feeling of true astonishment at the achievements of mankind.

Full text below.

Salmon on Amazon: apparently "demonstrably false" is not a fatal flaw in a popular narrative

Very sharp piece by Felix Salmon (one that's also extremely relevant to our technology and hype megathread) on how the Amazon narrative drives the stock price and vice versa. Among other things, Salmon effectively proves that the Amazon-as-disruptor effect -- where business journalists invariably attribute every development to Amazon -- is almost always bullshit.

The sad part is (and I in no way mean this as a knock against Salmon) there's no reporting here. Felix is simply pointing out facts that are and have been widely known for a long time. The reporters who have kept this narrative going knew (or should have known) that the numbers completely undercut it but they chose the good story over good journalism.

Amazon is a perfect case in point. For one thing, its market capitalization of $814 billion compares to net income, over the past 12 months, of $3.9 billion. That means it’s trading at a price-earnings ratio somewhere north of 200. Compare that to a ratio of about 24 for the stock market as a whole. If Amazon traded on the same multiple of earnings as everybody else, its stock would fall by roughly 90 percent.

The stock is supporting a narrative, which in turn is supporting the stock. And the narrative is, frankly, looking a bit shaky these days.

...


Amazon similarly never fails to appear in just about any story about the so-called retail apocalypse—a phenomenon that is much, much bigger and more complicated than “people used to shop at stores, but now they just order from Amazon.” After all, Amazon still accounts for only 4 percent of American retail sales. Indeed, with its Whole Foods acquisition, Amazon clearly considers in-person shopping to be entirely aligned with its mission of customer service and convenience. The retail apocalypse is, at heart, a real estate story (too many malls built in areas where no one wants to shop), much more than it is an Amazon story.

Here’s a game you can play along at home: Pick a story, more or less at random, about any company that sells consumer goods and that is doing badly or worse than expected. Then count the paragraphs before the word Amazon appears. Take this story about Procter & Gamble, Unilever, and Nestlé, for instance; the fourth paragraph has the requisite clause about “Amazon.com Inc.’s rising prowess in selling more household staples.” But there are no numbers attached to that claim, maybe because Amazon, even if it’s growing, still has less than 1 percent of household-staples sales.

And while Amazon’s entry into the fashion business is certainly noteworthy, that doesn’t automatically mean it’s “disrupting fashion retail,” as the Financial Times would have you believe. That would be hard, with just $25 billion or so in revenues—just 2.5 percent of a $1 trillion market.

Michael Hiltzik also has some worthwhile thoughts on the subject, and he even works in a Dr. No reference.

In any other period, "one of the greatest inventions ever made" wouldn't seem like such hyperbole

One of the concepts that features heavily in the upcoming technology book is the idea of ubiquitous explosive change. When people wonder at the pace of progress today, they normally point out some aspects of lives that have radically changed, but in the late 19th/early 20th centuries (and to a lesser extent, during the postwar era) the challenge was finding an aspect that did not.
We can quibble about start dates and stop dates, but certainly during the period between, say, 1880 and 1905, inventions and advancements

Inventions and advances were so big and coming so fast that innovations which would have been at or near the top of the list for the decade are often neglected and sometimes even forgotten. New line
For example, in any other era, making the biggest improvement in decade to what was, at the time, the world's only mass medium would have been a pretty big deal.


From Wikipedia:

The machine revolutionized typesetting and with it especially newspaper publishing, making it possible for a relatively small number of operators to set type for many pages on a daily basis. Before Ottmar Mergenthaler's invention of the linotype in 1884, daily newspapers were limited to eight pages.

Scientific- American 1903/11/14

..."and we'll visit the Man in the Moon"

When you see one of those pretty, quaint yet ingenious and functional turn-of-the-century aircraft, chances are it came from this guy.

Alberto Santos-Dumont; 20 July 1873 – 23 July 1932, usually referred to as simply Santos-Dumont) was a Brazilian inventor and aviation pioneer, one of the very few people to have contributed significantly to the development of both lighter-than-air and heavier-than-air aircraft.

...

In 1904, after Santos-Dumont complained to his friend Louis Cartier about the difficulty of checking his pocket watch during flight, Cartier created his first men's wristwatch, thus allowing Santos-Dumont to check his flight performance while keeping both hands on the controls. Cartier still markets a line of Santos-Dumont watches and sunglasses.

From scientific American, 1905/10/14

And from Wikipedia (circa 1900)

When I started on this post, I immediately thought of a song a friend of mine named Jerron had introduced me to, so I did a quick Google search for the title and guess what popped up...

The headline actually was "This chart shows every major technological innovation in the last 150 years"

Sometimes, when you've been working on a theory for a long time, you come across an example so apt, so overly on-the-nose, that it makes you doubt yourself.

Case in point, one of the theses  of the upcoming technology book is that we have collectively bought into the idea of constantly accelerating progress to such an extent that people are (consciously or unconsciously) starting to distort the historical record in order to keep that record consistent with the myth.

Among the problems you run into trying to fit a nice exponential curve to technological progress over the past 200 or so years are the substantial spikes in innovation around the late 19th/early 20th centuries and the Cold War era. The causes for these surges are complex but the short and very incomplete version is internal combustion/electricity/lucky breaks in the first case and Cold War cash/deferred demand/lucky breaks in the second.

The only way to make the data fit the curve is to drop lots of important accomplishments from the surge periods and/or greatly lower your standards for more modern accomplishments.

As I near the end of the project, I came across this:

In its recent Equity Gilt Study, which is a massive annual report by Barclays chronicling the bank's thoughts on important topics in finance and economics, the bank focused heavily on new technologies and particularly on cryptocurrencies and artificial intelligence.

I read over this list a number of times, trying to find something I had missed. I couldn't believe that neither the airplane nor the telephone would make the list but both Bitcoin and the Bitcoin ATM did, that the creation of recorded media is ignored -- neither photography, phonographs nor motion pictures make the list -- but they find room for three companies (Netflix, Apple iTunes, YouTube) that distribute that media. Telstar didn't make the cut either.
I'm tempted to say something snide about people who rely on Barclays or Business Insider for investing insights, but the inability to have an intelligent, historically literate discussion about technology is not limited to one institution or publication.

Apologies, but I'm going to be a bit coy with the title. -- UPDATED

I'd like you to think about the following scenario:

7:30 – – wake up.

7:40 – – have a cup of coffee and some breakfast.

8:00 – – shower.

8:20 – – have another cup of coffee, catch up on paperwork, send out some emails.

And then...

"Or help you at the automat"

The fascination with automation was a big part of the late 19th/early 20th century popular imagination.

And they ued to call all vending machines "slot machines."

There, you've learned two things today.

The part about Disney's frozen head, however, is completely accurate

There's a lot of interesting and important stuff to discuss in this article by Derek Thompson, both in terms of the implications of Disney's starting a streaming service and in the ways that Thompson's reporting is shaped and often distorted by the need to adhere to a standard narrative. Unfortunately, I really don't have time to delve into the first at all (maybe later) and, for the moment, I'm just going to look at one particularly egregious paragraph to illustrate the second.

No company has been more responsible for shaping the modern entertainment landscape than Walt Disney. In 1937, with Snow White and the Seven Dwarfs, its first feature film, Disney invented the family blockbuster. In 1954, with Disneyland, an anthology series hosted by Walt Disney himself, it became the first movie studio to strike out for the wild west of television. Since then, Disney’s dominance has only grown. Of the dozen films with the largest worldwide box-office take since 2010, Disney released eight.

While the dates and numbers are correct, pretty much everything else in this paragraph excluding the final sentence is wrong. It is very much the standard narrative and, not coincidentally, one which Disney would very much like you to believe, but it's not the way it happened.

With all due respect to the success and influence of snow white, saying that all Disney invented the family blockbuster is simply silly. Loads of counterexamples here, including the films of arguably the biggest star of the time, Shirley Temple.

 The claim that Disney was the first studio to make a major play for television is even worse. RKO set up a television division in 1944 when the industry consisted of a handful of stations, a full decade before Disney got into the business.  Through its stake in the Dumont network, Paramount had been there since 1946. Warner Bros. had been flirting with the business for years and would finally hit on a tremendously successful slate of TV Westerns shortly after the debut of Disney.

None of this is meant to take away from Disney's remarkable accomplishments in the medium, particularly the unprecedented impact of the Davy Crockett shows, but the version told here is simply bullshit. You can make the case for Walt Disney being the first major film producer in the field (assuming you're fairly specific about “major”) and certainly for the man being a television pioneer, but the standard narrative of innovation, disruption, dominance, simply doesn't fit the facts.

More Retro-future (R.I.P. Chuck McCann)

This sketch from the largely forgotten HBO show Likely Stories (h/t Mark Evanier) hasn't agedd that well -- these things seldom do -- but it has some fun moments and it fits nicely with some of our ongoing threads.


A TRIP TO TOMORROW

Likely Stories: "A TRIP TO TOMORROW" from Imagination Productions on Vimeo.

Electro-culture

We previously discussed Turn of the Century scientists announcing major discoveries only to have the effect sizes later turn out to vanish entirely. This is probably a better example.

Remember, billboards are the billboards of the 21st Century

We've been over this before (repeatedly). Virtually every story you read or hear about Netflix -- whether it's a review of a new show, an interview with a star, or a report on an award -- is largely the product of a massive PR campaign. One of the key components of that campaign is the relentless carpet-bombing of LA with billboards and bus signs.

Admittedly, everyone plays this game, but not to the same degree. Among the major networks, spending seems inversely related to success. Little for CBS, more for NBC, but none of them spend that much. Certain cable networks (AMC, FX, TNT) maintain a big presence as do the pay channels (HBO et al.). The biggest players per show and perhaps overall are the streaming services with Netflix leading the pack. 

I knew  a huge amount of money was being spent on this, but I didn't realize it was this huge. [emphasis added]

Netflix is offering $300 million to acquire Regency Outdoor Advertising, a company that owns the familiar billboards along Sunset Strip, at Los Angeles International Airport and near the UCLA campus, Reuters reports.

The streaming TV giant plans to increase spending on marketing its original shows and movies to $2 billion this year, amid growing competition from technology companies such as Amazon.com, Facebook and Hulu, as well as from traditional media companies like Disney that are investing in their own streaming services.

Billboards are clearly part of Netflix’s promotional arsenal, with Sunset Boulevard adorned with images touting Stranger Things and The Crown.  Should the transaction be completed, HBO and Showtime would seemingly need to look for other locations to promote its shows.

A reply to Kevin Drum

This is Joseph.

Kevin Drum asks:

So why do we expect reading scores to be skyrocketing in the first place? Why do we almost universally refuse to acknowledge that scores are up at all, let alone up a fair amount? Why are we so determined to believe that kids in the past were better educated than kids today, even though the evidence says nothing of the sort? It is a mystery.

My opinion: because there is a lot of money in  education and it won't be possible to "disrupt" education and redirect this money if the current system is doing well.  Notice how there is always a lot of money in being a disruptive company, at least for the top management (see Uber -- it is clear that it pays better to run Uber than it does to run a traditional Taxi service). 

It also moves the goalposts.  If everything is falling apart then it isn't such a crisis if the disrupted industry has teething issues once they strip cash out of it to pay for the heroes who are reinventing the system. 

But if current educational systems are doing well, and slowly improving through incremental change, then it is a lot harder to argue that there is a crisis in education, isn't it?