Wednesday, July 21, 2021

Tony Soprano was a piker

 

“Once you know how it all ends, the only use of time is…how do I buy more bitcoin? But take all your money and buy bitcoin. Then take all your time, figure out how to borrow more money to buy more bitcoin. Then take all your time and figure out what you can sell to buy bitcoin. And if you absolutely love the thing, that you don’t want to sell it, go mortgage your house and buy bitcoin with it. And if you’ve got a business that you love because your family works for the business and it’s in your family for 37 years, and you can’t bear to sell it, mortgage it, finance it, and convert the proceeds into the hardest money on earth, which is bitcoin.” – Michael Saylor


As a companion piece to yesterday's post,  Doomberg peaks into the window of the asylum. 

Fast forward about 20 years to mid-2020. MicroStrategy is a no-growth (but free cash flow positive) software provider sitting on about $500 million in cash. Saylor, who owns 25% of MicroStrategy’s stock, makes a fateful decision. With a market cap of $1.2 billion, his ownership of MicroStrategy is worth approximately $300 million. As we’ll see, Saylor isn’t the settle-for-being-a-centi-millionaire type, so he decides to do something totally unique. He goes all in on bitcoin.

On August 11, 2020, Saylor and MicroStrategy shocked the investing world by revealing they had spent $250 million of shareholder money to purchase 21,454 bitcoins at an average price of $11,652 each. Recognizing the significant risk of a negative market reaction, Saylor hedged his bluff. MicroStrategy’s stock had closed at $123.62 the day prior. Concurrent with the bitcoin announcement, the company also revealed it was willing to repurchase up to $250 million of the company’s stock at up to $140 a share, a 13% premium to the prior close. Here’s the text from the 8K filed with the SEC:

“On August 11, 2020, the Company also issued a press release announcing that the Company has commenced a “modified Dutch Auction” tender offer to purchase up to $250.0 million in value of shares of its issued and outstanding class A common stock, or such lesser number of shares as are properly tendered and not properly withdrawn, at a price not greater than $140.00 nor less than $122.00 per share. A copy of this press release is attached as Exhibit 99.2 to this Current Report on Form 8-K.”

The bluff worked, and so did Saylor’s bet on bitcoin. MicroStrategy’s stock quickly rose to above the repurchase offer. Ultimately, the company only ended up spending $60.5 million on the modified Dutch auction and used the remaining money to, wait for it, buy more bitcoin!

...

Saylor also continued to put his shareholder’s money where his mouth was, regularly using the rest of the company’s cash (and any new cash flow generated by the underlying software business) to buy more bitcoin. When those funds ran dry, Saylor officially crossed the Rubicon. On December 7, 2020, with the stock trading at $330 a share and bitcoin trading at $19,000, MicroStrategy announced its intent to issue debt in the form of unsecured convertible bonds to buy more bitcoin. Naturally, the deal was oversubscribed and upsized to $650 million. Stonks and whatnot.

On February 9, 2021, with bitcoin over $47,000, MicroStrategy stock reached an intraday all-time high of $1,315 a share, a ten-fold increase since Saylor embarked on his bitcoin adventure. His stake in MicroStrategy soared to above $3 billion, on paper at least.

What is a responsible steward of shareholder value, err, degenerate gambler to do? This might come as a surprise to you, but Saylor isn’t the settle-for-being-a-low-single-digit-billionaire type either. A week after MicroStrategy’s stock topped, he went back to the debt market, this time raising $1.05 billion in a new unsecured convertible debt offering to buy yet more bitcoin. This time, however, he seems to have nearly top-ticked the bitcoin price. After reaching $57,000 in the aftermath of Saylor’s latest gambit, bitcoin treaded water for the next three months, before collapsing by ~50% in mid-May to the mid-$30,000s.

Just when I thought Saylor was out of Rubicons to cross, he found another. Having tapped out the unsecured debt market, Saylor literally mortgaged MicroStrategy’s software business to raise yet another $500 million of debt, but this time it was of the secured variety. That’s right, by issuing a straight bond with a 6.125% coupon, secured by the assets and future cash flows of the software business, Saylor simultaneously screwed over the previous buyers of the unsecured convertible debt (by cramming them down the cap table behind the new bondholders) and tripled down on his bitcoin parlay.

The latest development is MicroStrategy selling up to one billion new shares of equity, undoubtedly to buy more bitcoin. The closest analogy I can think of for all this is a mafia bust out but with the CEO doing it to his own company. 

But no one seems to care. Not the regulators, of course, because this is the 21st century. Not the stockholders who have given this bitcoin holding company a market cap of more than one and a half times the bitcoin it holds. More than twice if you figure in the massive debt the company has taken on. 

Here's the kicker. Even though the company is obviously obscenely overvalued, Doomberg DOES NOT recommend betting against it. "In today’s market, the more outrageous a CEO behaves, the higher their stock can go." It may have always been true that "the market can stay irrational longer than you can stay liquid," but it's never been this true.

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Tuesday, July 20, 2021

Hiltzik on Robinhood

One of the fundamental lies of early 21st century investing is that making it easier and cheaper to play the markets with tools including a full range of derivatives will democratize the system and finally let the little guy compete on an equal footing.

This isn't just wrong; it's dangerously wrong, but far too many journalists have been too timid to call this out. Fortunately, here is LA we have Michael Hiltzik. 

The cost of the settlement is $70 million, including $12.6 million in restitution to customers. The Financial Industry Regulatory Authority, or Finra, which imposed the settlement, calls the fine the largest in its history.

Robinhood settled the Finra case without admitting or denying the allegations, but “consented to the entry of FINRA’s findings,” the regulator said. Stripped of its jargon, that statement implies that you can interpret Finra’s allegations as true.

That’s not a good look for a company about to issue stock to the public for the first time, especially since Finra’s case is so comprehensive. Nor is it particularly consistent with Robinhood’s corporate boast that its mission is “democratizing finance for all.”

The company founders say in a letter to shareholders and customers attached to its SEC stock registration filing that “we believe that it’s important ... to be able to own stocks directly in the companies you love, without any middlemen.” (Of course, Robinhood itself is a middleman, but leave that aside.)

Indeed, Robinhood’s performance thus far raises the question of whether Wall Street will look askance at any alleged wrongdoing as long as there’s money to be made. The date for Robinhood’s public offering on Nasdaq hasn’t been set, but the whisper number on the street is that the firm could be worth $30 billion.

That’s possible because the details of Finra’s findings haven’t been as widely reported as the size of the settlement, which is broadly seen as Robinhood putting its problems behind it.

We’ll take a closer look. Finra accused Robinhood of plying millions of customers with “false or misleading information” about their account balances, of leaving millions of customers unable to trade because its IT systems broke down at crucial moments, and of approving thousands of customers for options trading even though it should have known they were unqualified to play the options market.

...

Its app was crafted to resemble a video game, with features that appear designed to get customers’ blood flowing, including a digital confetti shower to mark customers’ first trades and other milestones.

“Our app is simple, easy-to-use, bright — maybe even delightful,” its website says. But it scrapped the confetti thing after Massachusetts regulators filed a complaint that it was luring inexperienced customers into treating investing as a game.

...

The mystery of why Robinhood would be so cavalier about exposing its customers to options trading risk may have been solved by its stock registration filing. That document reveals that the firm made handsome revenues from options trading, through a process known as “payment for order flow.”

This is a controversial practice through which retail brokers such as Robinhood steer customer orders to big trading firms, which appreciate the volume, for a fee. (Robinhood’s alleged failure to fully disclose this practice to customers and how it might affect the prices at which they bought and sold securities is what brought the SEC down on its head in December.)


According to the filing, Robinhood collected about 0.2% of the value of its customers’ holdings of stocks as payment for order flow as of the end of the first quarter of this year — $133.3 million in “transaction-based revenues” on holdings of $65.1 billion. But it received 9.7% of its customers’ option holdings as payment — $198 million on holdings of only $2 billion. Obviously, the options market was a cash cow for Robinhood, compared with the stock market.

That brings us to one more aspect of Robinhood’s business that became known through its stock registration filing: It has become a big player in the cryptocurrency market, especially in Dogecoin.

Dogecoin, as it happens, is a cryptocurrency that was originally launched as a parody of Bitcoin. But since nothing in the crypto market makes any sense in terms of financial fundamentals, it has gained a foothold as a tradable instrument.

Among the “risk factors” Robinhood listed for would-be investors in its SEC filing is its immoderate dependence on revenues from Dogecoin trading. In the quarter that ended March 31, they amounted to about 6% of total revenue of $420.4 million, or about $25 million.


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Monday, July 19, 2021

Monday Tweets




One of the lessons of the education reform movement was that defunding an institution is generally the worst way to reform it. Politically speaking, the only thing worse would be to associate your party with defunding while the other party was actually doing it on the sly.



Back to the strap-on wings configuration

[The 1917 Curtiss Autoplane]



It is difficult to overstate Andrew Sullivan's impact on American jornalism, and I do not mean that in a good way.



Covid notes.















One for both the education and Tucker-Carlson-is-a-horrible-person threads.



The economic niche for dancing robots is smaller than you might think.



A good point about the hiacking metaphor.



The conclusion might be getting just a bit ahead of its skis, but still interesting



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Friday, July 16, 2021

Marshall (almost) goes there

Let's just get this out of the way at the top. 

There is no way to have a blanket objection to the filibuster in principle and not object to the actions of Democratic state legislators in Texas. If you use the framing of anti-majoritarian = bad then there is simply no way to support (or even defend) this tactic. Under these assumptions, placing constraints on the will of the majority is simply wrong. They also make the Bill of Rights more than a bit problematic (it's basically just a list of things even a democratically elected government isn't allowed to do), but that's a topic for another day.

Josh Marshall is a more nuanced thinker. 

We’re witnessing another of these state legislators abscond across state lines dramas in Texas. As I mentioned a few weeks ago, it hearkens back to a similar drama in 2003 which presaged much of our current politics. But I’d like to take this in a different direction. What we’re seeing right now with these efforts to short-circuit the legislative process is what the legislative filibuster in the Senate should be like.

Now, I’m not suggesting that we move to a system where Senators run off to Canada or I guess in some cases Russia. It gets a bit more complicated in jurisdictional terms. But Texas Democrats clearly believe these laws are of an extraordinary character. Texas legislative Democrats get outvoted all the time. But they view this law as different from other laws they oppose. And most critically their actions are public and self-limiting.

It’s very publicly clear what’s happening here. Democrats are making a huge spectacle. No one’s going to miss that. They also have to be very clear why they’re doing it. It’s because of an assault on voting rights in the state. They have to own that. And they’re taking this step because they’re clearly quite willing to own that.

Just as clear, this can only go on for so long. How do I know? Basically logic really but also history. We’ve seen this in Texas, Oregon, Wisconsin and various other places. Legislators are only willing to stay on the lam for so long. Over time there are various tools legislative majorities can use to get their way. (That’s not a bad thing. Majority rule is our fundamental system.) You also need a really good reason for doing it. Otherwise public opinion will rapidly turn against you.

The whole effort is best seen as an effort to stall, buy some time and they hope either slow the process down or shift public opinion in their favor. It’s not pretty but there’s some value in having that kind of escape valve in the legislative process. It’s public. It’s self-limiting. You have to own it and be politically accountable for your actions.

Reading between the lines a bit (because the post, while well reasoned, does not follow through with what seem like fairly obvious conclusions), Marshall apparently sees the filibuster as bad because it can be used by a minority without restraint, transparency or cost. Since the Texas action looks like a good filibuster, this implies good filibuster is possible.

It's also worth noting that, as far as I can tell, everything Marshall says about what a filibuster should be applies to the talking filibuster. He stops short of an endorsement but it's pretty much the inescapable next step.

I believe the underlying logic here (which I happen to agree with) is that while the support of 50.01% of the population should not give you unconstrained power and there are rare cases where a minority should be able to at least delay the majority's will, there must be constraints on those constraints. The process has got to be transparent, costly and difficult to sustain and it must come with real accountability. A talking filibuster meets these conditions; supermajority rules do not.

I realize abolishing any form of the filibuster has become a point of principle for many. I'm just not sure if those principles are well thought out, let alone a hill worth dying on.

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Thursday, July 15, 2021

One Twitter thread and one tweet. Presented without comment.












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Wednesday, July 14, 2021

"Musk is not in it for the money."

[For the source of the quote...]

From a product standpoint, SolarCity isn't a very interesting company. Tesla has made some impressive cars and the engineers at SpaceX have made real progress building on TRW's foundation. SC's best known product is, by comparison, roof tiles that didn't actually exist when Musk demonstrated (and still don't match the specs he claimed.

However, for those trying to make sense of Musk the businessman, keeping up with the SolarCity story. We've already recommended this excellent long-form expose by Bethany McLean (best known for her reporting on Enron, which should give you some idea where things are going). For a more up-to-date account, check out this from Dana Hull. 


[Emphasis added]

Tesla’s board initially balked at the proposal. So did Evercore Inc., one of the banks it brought in to evaluate the deal. (Not that they felt their guidance would be heeded: “It’s Elon’s world. We just live in it,” an Evercore banker joked in an email.) Even Tesla’s then-Chief Financial Officer Jason Wheeler raised concerns. “We have Model 3 happening. We have a lot of things going on. We ourselves have a large debt load,” Wheeler said in his June 2019 deposition. “Why do we need to do this now, Elon?” 
Then there were the jarring conflicts of interest. Besides his cousins Lyndon and Peter Rive running SolarCity, its board and Tesla’s had complicated overlaps. Six of Tesla’s seven directors were Musk associates (including his brother, Kimbal) with SolarCity ties. Antonio Gracias was on the board of both companies. What’s more, Musk had used his other entities to raise capital for SolarCity: SpaceX, for example, had purchased $255 million of SolarCity bonds. Musk bought $65 million worth. Tesla’s directors had to grapple with this apparent self-dealing as Musk pushed them to reconsider the acquisition in May 2016. Musk said he recused himself from these deliberations, but court filings indicate he remained actively involved, even advocating for the move directly with bankers and investors. 
To win over shareholders, Musk came up with the concept of a “Solar Roof” that resembled a traditional rooftop shingle but could capture power from the sun. At a joint Tesla-SolarCity event in Los Angeles in October 2016, Musk showed off the product to an impressed audience. The demos he unveiled weren’t functional, but the acquisition received approval a few weeks later.



Musk may still dodge this bullet but if he does, it probably says more about the legal system than it does about his case.
Perhaps the most telling testimony came from Kimbal Musk in an earlier hearing. The whole thread is highly recommended.
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Tuesday, July 13, 2021

I have to admit, that’s one future of work development we didn’t see coming

Remote work wasn't a very sexy topic back when we first started talking about it a few years ago. All of the cool kids were into urban density, yimby-er than thou. Everyone was focused on the rise of the creative class and the utopian urbanists had firm control over the narrative (and that was a group that really didn't like it when someone brought up telecommuting).

At the beginning of the pandemic, we wondered if the upheaval would finally nudge knowledge work into the 21st century. A couple of months later, we suggested that business travel would also be radically different on an age of virtual offices. 

This is a story we've followed closely and I would have thought we had heard all of the arguments on both sides, but this piece from Josh Marshall pointed out a disadvantage of remote work that we had never even thought of.

The Low Drama of Work From Home

Work from home has been a boon or a loss for people across the US. Now it’s deprived just-fired former Social Security Commissioner Andrew Saul of some what appears to be some much-desired drama. In their write-up of Saul’s firing, which didn’t note that TPM reported the news first but we totally don’t care about those things, the Post quotes Saul as saying he does not recognize the legality of his dismissal and plans to show up for work Monday morning like any other day.

That’s going to be pretty awkward when Saul shows up and presumably SSA personnel have to physically bar him from going to his office! And yet that’s not actually what’s going to happen. Saul plans to go to work Monday morning by logging in from his home in New York – Saul’s a big-time apparel industry executive and GOP donor.

Showing up for work after you've been fired makes a big, dramatic statement. Sitting in your living room petulantly staring at a locked computer screen simply doesn't have the same impact. 

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Monday, July 12, 2021

Perhaps "the most energy-efficient, environmentally clean, and cost-effective space conditioning systems available" is something we should be talking about

But of course we aren't. It's a mature, proven technology that could substantial decrease the energy we use on heating and cooling and it would also go a long way towards protecting the grid from seasonal overloads. What could be less sexy than that?

There are any number of boring, workable policies and technologies that couldn't get the attention of the press unless they showed up in a celebrity sex tape.  There are some exceptions in the media --  ProPublica is strong and public radio (particularly Marketplace) has its moments -- but on the whole, an interest in solutions guarantees you'll never be one of the cool kids (but if you're reading a blog originally called Observational Epidemiology, cool was never really on the table). 

From Wikipedia:

As of 2004, there are over a million units installed worldwide providing 12 GW of thermal capacity with a growth rate of 10% per year. Each year, about 80,000 units are installed in the US and 27,000 in Sweden. In Finland, a geothermal heat pump was the most common heating system choice for new detached houses between 2006 and 2011 with market share exceeding 40%.

...

The US Environmental Protection Agency (EPA) has called ground source heat pumps the most energy-efficient, environmentally clean, and cost-effective space conditioning systems available. Heat pumps offer significant emission reductions potential, particularly where they are used for both heating and cooling and where the electricity is produced from renewable resources.

GSHPs have unsurpassed thermal efficiencies and produce zero emissions locally, but their electricity supply includes components with high greenhouse gas emissions unless the owner has opted for a 100% renewable energy supply. Their environmental impact, therefore, depends on the characteristics of the electricity supply and the available alternatives.

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Friday, July 9, 2021

Friday Tweets





This is an extremely useful framing.



It also goes along with one of our long-running threads.
We’ve discussed this before, but the pandemic has given us a wealth of new examples.

What possible ideological basis is there for arguing for the relative contagiousness of one virus over another? Or of insisting on the efficacy of a particular drug? And yet, how one answers questions like these have become arguably the defining political positions of the day, particularly in conservative media and the far right.

I’m certain someone out there is working on a painfully epicyclic model to explain this (does R have a spirograph package?), but the picture becomes remarkably straightforward if you approach it in partisan terms.

From a conservative/Republican standpoint, when it comes to a potential collapse in support for President Trump, timing matters more than magnitude. A bad Q3 is worse for them than a terrible 2021 would be. Prematurely lifting lock downs is unlikely to buy them more than a dead cat bounce, but might be enough to avert a GOP bloodbath.

Add to that the constraint of not infuriating Trump. The base is (for the moment at least) personally loyal to him, not to the party, and temperamentally he is more than willing to bring the temple down with him.

Obviously, the memes and narratives of Fox et al. are often ideological and partisan, but when you look at the odd quadrants, you see lots of stories that advance a partisan aim with no significant ideological component, relatively few that go the other way.




Moviepass





"...longer than you can stay liquid."




The legacy of Silicon Valley




Beter red and dead




If they would have tried really hard, they could have worked in a vampire reference.




One for the secular evangelicalism thread.




For the life of me, I can't think of a JIT pun




And one for the OTA television thread.




Voter suppression file.






Vaccines and variants




Unlike Western megafires, the relationship between tropical cyclones and climate change is direct and undeniable.




Crypto




A tale of two cults and one very unlucky woman.




Follow Mayer.




Yep.




Epic nerd thread. 




The Wages of Strauss




As someone actually from the Ozarks, I can't believe anyone actually fell for this fake.




And in closing.


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Thursday, July 8, 2021

This is a trivial story. You may want to skip it.

But while the living arrangements of Elon Musk aren't worth the time it takes to read this, a discussion of the coverage might be. It started, as with so many things musk-related, with a tweet.
Not surprisingly, the humble billionaire bit was too good for a hack reporters to resist. Here's a representative sample from the NY Post. 
Elon Musk may be one of the world’s richest people, but he’s not living large.

After selling much of his real estate portfolio in the past year and listing his final property earlier this month to focus on his mission to Mars, the Tesla and SpaceX CEO is taking the phrase “Live below your means” to another level.

Musk, who turned 50 in June, revealed in a tweet that he is now living in a humble $50,000 home that he rents from SpaceX on its launch site in Boca Chica, Texas.
The idea that the world's second richest man cares not for material things didn't start here. It's been part of the Musk myth for years. No less a luminary than David Roberts assured us back in 2016 that "Musk is not in it for the money." (Which was pretty damned funny when you consider what was going on at the time.) Monastic living quarters fit in perfectly with the narrative.

Funny thing about that tiny house, though. Elon Musk does most of his traveling in his private jet, the flight plans of which are a matter of public record. Assuming these gives us a good indicator of Musk's location, he divides his time between LA, the Bay Area, Austin (where his girlfriend and infant son live) and Brownsville 300+ miles away.

Having a little cottage next to the office on a campus you visit regularly would strike most of us as a convenience, particularly if if usually only staying for two or three nights, but like most things about Musk, the significance has grown with the telling. 
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Wednesday, July 7, 2021

Picking up on the business travel thread from a year ago

Leisure travel is back to pre-pandemic levels. But business travel? Not even close.


Mitchell Hartman reporting for Marketplace.

Business travel is still down as much as 50% from pre-pandemic levels, and that matters to airlines and hotel chains.

“They make up 10 to 15% of travelers, but they can contribute up to 75% for a company’s revenues,” said Joanna Piacenza at Morning Consult.

They buy premium air tickets at the last minute, book hotel suites, dine out on expense accounts. Morning Consult finds three in 10 pre-pandemic business travelers aren’t planning a trip this year.  

Alan Lewis at consulting firm L.E.K. said some of that’s thanks to “lessons-learned” during the pandemic:

“Technology — Zoom and Teams — will replace some meetings that would have occurred live, going forward,” he said.

Lewis said other kinds of travel resistance come from management and employees.  

“CFOs have been able to reduce their travel budgets. Reopening those purse strings will take time. The productivity that people have discovered — they’ve found that they can be more productive by not investing time in travel,” he said.

WEDNESDAY, MAY 20, 2020

There’s about to be a huge business travel shaped hole in the economy and we need to start thinking about how we are going to fill it up.




For most sectors, the post pandemic economy will probably look a lot like the pre-pandemic economy. For certain industries, however, we are probably looking at a permanent market contraction. In these cases, the business models will have to fundamentally change and it is likely that many of the major players will not see the end of the decade . The one sector I’m most bearish on is business travel. Both because travel in general is going to suffer from heightened pandemic concerns and because it is an industry that is long overdue a major downsizing.

One of the widely known but little talked about truths of the white-collar world is that most of the trips we take are an enormous waste of time and money not to mention being horrible from an environmental standpoint.

Ironically, the modern age of business travel started in the postwar era about the same time that modern telecommunication was about to make it increasingly obsolete. Even before the pandemic, companies were starting to catch on to the absurdity of flying people across the country to sit at a conference room and wait for 20 minutes while someone locates missing cords and tries to get the PowerPoint projection in focus on a beige wall when you could simply have everyone sitting at their own desk watching the presentations on large high definition monitors.

The one real value of these meetings was social, allowing people who had interacted only over the phone and through emails actually hang out together eat lunch and perhaps have a couple of drinks, but all too often, the participants are flying in early in the morning and flying out on an afternoon flight so their time together is spent trying to read a blurry projection rather than bonding.

Of course, some business travel is legitimately necessary, and there will certainly be at least a few companies that are still reluctant to embrace 21st-century approaches. The industry is not going to disappear in 2021. It will, however, inevitably be smaller and require leaner business models probably less dependent on the principal agent problem.

This is going to leave a hole in the economy and it is not too early to start the discussion of how we are going to fill it up.
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Tuesday, July 6, 2021

The Toucan in the Coal Mine?

[Usual caveat for this thread. A lot of this is well past the boundary of my expertise so if any of my better informed readers would care to chime in, the input would be greatly appreciated.]

The Netflix story is definitely post-modern. The narrators are unreliable. The facts are incomplete. The versions participants and observers tell themselves can't be entirely right but may not be all that wrong. 

Part of the problem is that the company is very good at controlling the narrative (spending billions annually on marketing and PR doesn't hurt). Case in point, the production deal just signed with Spielberg's production company. The lede from this CNN article could have (and possibly did) come out of NF's PR department: "Steven Spielberg is partnering with Netflix. Getting Hollywood's premiere director represents a major coup for the streaming service." You have to read the whole thing to learn that "Spielberg added that he and Amblin ... will continue to work with longtime partners like Universal Pictures." and that "Netflix and Amblin did not say how long long the multi-year deal would be nor if Spielberg would direct any films that would land on Netflix."

In other words, we have no idea how big (or trivial) this is. NF has a history of picking projects passed over by other studios, always offering top dollar. This could be a major deal or it could be Amblin burning off some second rate properties.

By comparison, this potentially much more interesting development pass unnoticed by Netflix business watchers.

A bit of context.

NF started out buying no rights other than licensing to any of their originals (House of Cards, Orange is the New Black, etc.). Despite this, major (mainly East Coast) publications including the New York Times ran credulous borderline puff pieces about the massive content library the disruptor was building. This went on for years until people finally started catching on.   

Coincidentally or not, when reporters started picking up on the apparent contradiction between this approach and NF's stated goal of long term dominance, the company reversed its policy and made a great show of buying all rights. The explanation for the change didn't make a lot of sense but no one seemed to care. NF's commitment to acquiring IP instantly became part of the standard narrative.
There are important caveats here. Netflix’s content costs are high in part because it now buys out all the rights (e.g. home video, syndication, EST) for its Originals on a global basis, while traditional networks (e.g. FX or ABC) will typically buy only select content rights and on a single market basis. Furthermore, buying out all rights means that the talent involved in a hit series (e.g. cast, writers, producers) don’t have access to any of the economic upside from participating in a hit series. As such, Netflix must also pay extra (and upfront) to compensate the talent responsible for their Originals for this lost income opportunity (albeit on a risk-adjusted basis). As a result, Netflix’s costs for a given volume of original content is substantially higher than that of linear and/or domestic networks with the same output. That said, this same dynamic means that while most of its traditional networks hedge their content investments, Netflix quadruples down.

But it clearly wasn't entirely true. Lots of originals were based on IP owned by major studios and other corporations and we could be reasonably certain that NF wasn't getting clear title to She-Ra or the DC universe Lucifer. This suggested that some of the service's most popular shows are not part of its permanent content library. Netflix would continue having to pay large sums of money to its competitors if it wanted to keep airing them. (Compare this to Amazon actually buying Lord of the Rings.)

Still, that left a lot of shows not owned by Disney and the rest. Presumably NF did have clear title to those. That would still leave a decent library. But if this is the case, how did Tuca and Bertie land on WB's Adult Swim? This was an obscure web comic from a largely unknown cartoonist. There was no obvious reason to bend the rules for this but they appear to have done so. Is this the only case, or is NF passing up rights on other originals. If so, their library even thinner than we thought.

I don't want to put too much weight on this one data point. Netflix is a major company that may well justify its valuation one day, but journalists have gotten in the habit of letting these press releases set the narrative for them and ignoring contradictory details. That's not good for the profession.
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Monday, July 5, 2021

Seriously, do not listen to the Get Smart cover

This discussion of  a thinly researched New Yorker piece got me thinking about a corrective piece we did a few years on a review the magazine released with no apparent fact checking whatsoever (still uncorrected of this writing). To up the humiliation factor, the mistakes of misattribution and omission involved lots of famous names ranging from big in the industry (Hagen, Greenwood) to big period (Goldsmith, Bacharach). The uncredited author also missed a wonderful moment of pop culture convergence when he failed to notice that the cover of the Get Smart theme was from "Bob Crane, His Drums & Orchestra." Crane was the star of Hogan's Heroes which was, if you stretch the spyfi definition a bit, the second longest running show in the genre, losing to Mission Impossible by one season. (Crane was a gifted percussionist, but the cover is terrible.)

The lesson here is that even respectable publications often don't take fact-checking all that seriously, particularly when the subject is esoteric enough. Often this translates to trivial, as it does here -- absolutely nothing about The Last of the Secret Agents is of any importance -- but questions of science, technology, and yes, statistics can be esoteric without being trivial at all.


THURSDAY, JUNE 18, 2015


The New Yorker's culture desk could use a fact checker

I recently came across an uncredited piece that drove my inner film geek crazy. About halfway into the review of Ace Records’s new compilation, “Come Spy With Us: The Secret Agent Songbook,” I came across this.

[emphasis added]
The world of spy themes doesn’t stop at Bond (or at Bond offshoots or Bond antidotes), and neither does Ace’s set. Lalo Schifrin’s immortal “Mission: Impossible” theme is here, along with the Challengers’ version of Hugo Montenegro’s “Theme from the Man From U.N.C.L.E.” Both of those illustrate the relationship not only between spy music and surf music—similar in instrumentation, similar in insistence—but also between spy music and the music of spaghetti Westerns.

...

There are far too many good selections here to list them all: Billy Strange’s “Our Man Flint,” Nancy Sinatra’s “The Last of the Secret Agent” (Flint and Sinatra would collaborate on the theme song for the Bond film “You Only Live Twice,” which isn’t on the set) [That should be "Strange and Sinatra," Derek Flint being fictional and all. It should also be noted that the version of “You Only Live Twice” that most of us are familiar with is by Barry and Sinatra. Billy Strange had nothing to do with it -- MP], and Matt Monro’s “Wednesday’s Child.”   
Billy Strange was an arranger and session musician now best remembered as a member of the legendary Wrecking Crew. Hugo Montenegro was a minor film and TV composer (other than I Dream of Jeannie, I doubt any of his compositions would register if you heard them) who was best known for cheesy but popular cover arrangements.

[The original link for this blog is dead now so I made the obvious substitution.]




Both released albums of covers of soundtracks of popular movies and TV shows. As far as I can tell, neither had anything to do with the original scores. Those came from composers such as Ennio Morricone, John Barry and, in this case, the man who wrote the theme for the Man from UNCLE and composed most of the music for the show's first season and who scored both Flint films, Jerry Goldsmith.

For movie people, Goldsmith is kind of a big deal:

Jerry Goldsmith has often been considered one of film music history's most innovative and influential composers.[8] While presenting Goldsmith with a Career Achievement Award from the Society for the Preservation of Film Music in 1993, fellow composer Henry Mancini (Breakfast at Tiffany's, The Pink Panther) said of Goldsmith, "... he has instilled two things in his colleagues in this town. One thing he does, he keeps us honest. And the second one is he scares the hell out of us."[65]  ...  In a 2001 interview, film composer Marco Beltrami (3:10 to Yuma, The Hurt Locker) stated, "Without Jerry, film music would probably be in a different place than it is now. I think he, more than any other composer bridged the gap between the old Hollywood scoring style and the the [sic] modern film composer."[67]
For someone writing about film music, crediting Montenegro or Strange with a Goldsmith composition is the kind of mistake that makes you wonder how much of the writer's expertise came from the liner notes. Perhaps worse, it is such an easily avoidable error. Thanks to Wikipedia, it takes so little time to get the facts right.

In fairness to the author, some of the critical points are valid (such as the relationship between spy films and surf music. For example, check out the arrangement from this sequence from Our Man Flint,



But even good arguments are difficult to take seriously when they come with careless mistakes.

p.s. I didn't want to go full nerd in the middle of a post, but if you feel like releasing your inner spy geek, I recommend checking out these discussions of the various arrangements of Man from UNCLE themes (including the revelation that Goldsmith hated Lalo Schifrin's new arrangement).

p.p.s. I ran this past an actual authority, Brian Phillips. He pointed out another one I should have caught: "Though Bill Cosby starred in “I Spy” as early as 1965 (the brassy Roland Shaw theme is included)..."  The I Spy theme was, of course, by Earl Hagen who was, in Sixties television, also kind of a big deal [Andy Griffith Show, Dick Van Dyke Show, etc.].

Brian also questions whether the bassline to "Come Spy With Me"  is really James Jamerson.
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Friday, July 2, 2021

The Button-Down Mind of Bob Newhart was closer in time to Kitty Hawk than it is to us

In a sense, the satire of this classic bit is sharper now than it was when first released. The idea of private sector blue-sky research was still a thing in 1960. Scientists and engineers were far more likely to develop technology with no immediate plans for monetizing.

Merchandising the Wright Brothers










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Thursday, July 1, 2021

Similar to plans to empower investors include raising credit limits at casinos

We've talked about the various scams and bubbles that have come to dominate the markets and the role retail investors and their culture have played. Here's some more of the puzzle.



 
Jemima Kelly of FTalphaville. 

Baldwin makes the whole thing sound so simple, and so . . . free (emphasis ours):
You just log in, pick a stock, set an amount, and hit trade. And yeah, you gotta pay a commission, except . . . No you don’t! Cause they don’t take one. That’s right. You can invest in stocks with no commission Zero. Nada. Zilch.
So it was with interest that we perused the press release announcing eToro’s Q1 results that landed in our inbox on Tuesday, particularly the top line:
That’s right: eToro more than doubled the amount of commission it earned year-on-year in the first quarter, to $347m — about a quarter of a billion pounds. Not bad for a company that is so generous in its offering of commission-free products.

It’s almost like they’re selling investors one message and consumers another, isn’t it? 
...

So yes, as we have written about before, as soon as you use any leverage, or decide to trade crypto, or CfDs — which is what eToro is known for — it turns out that you are not paying zero, nada, zilch commission; you’re actually paying quite hefty fees. And as we have also pointed out in the past, moving from trading stocks into other commission-heavy products is a pretty seamless experience.
Quick aside from Investopia [emphasis added]
What Is a Contract for Differences (CFD)?
A contract for differences (CFD) is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled. There is no delivery of physical goods or securities with CFDs.

Contracts for differences is an advanced trading strategy that is used by experienced traders and is not allowed in the United States.
Back to Ms. Kelly:
But this isn’t about luring customers into fee-paying products, you understand; this is about empowerment. No, really. Like all good companies these days, eToro has a serious social mission, as chief executive Yoni Assia tells us:
eToro’s mission is to empower people to grow their knowledge and wealth and we see our platform as a bridge between the old world of investing and the new.

And one more thing.

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