Ddulite Alert I (II to follow shortly)

NPR's Steve Henn  has an excellent story here about Facebook and Yahoo. Lots of good points but a couple struck me as particularly relevant to the ongoing ddulite thread.

Today, Facebook CEO Mark Zuckerberg turns 28 and gets the ultimate birthday gift: His popular social networking site is expected to go public later this week. The IPO could be valued at nearly $100 billion. Meanwhile, Yahoo, another company that also once had a bright future, continues to undergo upheaval as it struggles to define its mission.

Facebook is expected to start selling stock to the public and begin trading on the Nasdaq Stock Market on Friday. One of the things that are remarkable is how quickly Facebook became so valuable. Can a company started less than a decade ago in a college dorm really be worth that much?

To put this in perspective, when Facebook goes public it will probably be valued at more than Boeing and Ford combined. But Facebook's profits are relatively minuscule.

So to justify its sky-high stock price, Facebook will need to grow like a weed for the next few years. The amount of money it brings in will have to double and then double again for this deal to make sense for long-term investors.

Right now, more than 80 percent of the money Facebook makes comes from advertising. So that piece of its business needs to expand really quickly. But Facebook doesn't want to clutter up its site with too many ads and annoy its users.

Late last week Facebook gave us one hint about where it might be headed. The company has huge amounts of data about each of its users. It knows your likes, your friends — and where you went to school. Right now it uses those data to sell ads aimed at you, but those ads only appear on its own website.

Friday Facebook tweaked its privacy policy, allowing it to use that information to place ads aimed at its users anywhere on the Web.

...

So Facebook has to walk this line, while at the same time adding members, selling ads and figuring out how to collect even more information about us.

If Facebook doesn't figure all of this out, it will be very bad news for investors.

Investors who buy Facebook this week and plan to own this stock for the long haul are betting on a kind of crazy, almost unprecedented growth. Because without that, Facebook begins to look a lot like another Silicon Valley company — Yahoo.

Right now, Yahoo and Facebook sell just about the same number of ads. They both have audience measure in the hundreds of millions. But Yahoo stock is worth one-fifth of Facebook's projected value.

...

So this week as Facebook goes public, it's worth remembering that Yahoo was once valued by Wall Street at more than $100 billion too.

First a fairly technical point about marketing. Let's say you're on Facebook and you're in the market for a car and, as luck would have, I own an area dealership that sells the make of car you prefer. Though it doesn't entirely replace the need for untargeted marketing for things like brand building, being able to get my ad to you is quite valuable, but that value drops quite a bit if I find out that some other local dealership hit you with a similar ad when you went to another site. The value probably doesn't drop by half (you're still a good prospect even if I have some competition), but the expected return on the ad has dropped.

Assuming rational players and reasonable efficiency, doubling the number of ads per user should increase Facebook's revenue, but by a factor of less than two.

This brings us to some more basic points. Facebook is a well established company with respectable revenue and a huge user base. If you were worried about Facebook going under, these would be wonderful attributes. If you're worried about Facebook not justifying its stock price, these are causes for concern.

In order for it to be a good deal, Facebook has to grow at a fantastic rate over the next few years. Unfortunately there is a limited pool of potential users and each of those users has a finite amount of disposable income. Of course, those are both very big numbers, but not so big that Facebook wouldn't have to command a significant share of both. That's not impossible but as a general rule, the closer those upper bounds get, the more difficult growth becomes.

And that's assuming almost complete market dominance. Facebook does have substantial first mover advantages but we're talking about a volatile segment of the economy that could be turned on its head by a major technological innovation. There's also the possibility of some other deep pocketed companies making a play for FB's marketshare (already happening with Google), or of small niche competitors getting a foothold or even a major open source alternative. Then, there are the potential regulatory issues Henn mentioned in one of the sections I didn't quote.

None of these things threaten the existence of Facebook but any one or two of them could prevent the company from justifying its price.

The comparison to Yahoo is especially interesting.Yahoo has recently become a bit of a whipping boy for the financial press, despite the fact that it's a company with some pretty good fundamentals (hundreds of millions of visitors and billions in revenue according to Wikipedia), more threatened by management hysteria than by any flaw in its business plan.

There are differences between the two companies and good reasons to value Facebook higher than Yahoo, but to get the gap we see here you have to start considering bad reasons as well, and ddulite investors are high on that list. At the height of the tech bubble a dozen years ago, Yahoo had the aura of being the next big thing in technology and its stock broke $118. Now the aura's faded, it's trading for more than a hundred dollars less and it can't get any respect.

Today that aura surrounds Facebook and people are once again failing to price in potential problems and limitations. Perhaps things will work out better this time (but I don't think that's how the smart money will bet).

A good point on J.P. Morgan

(If you're still getting caught up on the JP Morgan story, you should probably go by Marketplace and check out Heidi Moore's explanation of the fiasco.)

I don't have a direct source for this other than that I heard it on either Marketplace or All Things Considered, but a financial reporter made an observation I've been waiting to hear put concisely since this story broke.

The reporter explained that the group that had the huge recent loss had been given a dual mandate: hedge against losses and make lots of money. The reporter then wondered if assigning those two mandates to the same team was a good idea.

I wonder if this is an example of something I've seen before or at least if something I've seen before might have contributed to it. One of the recurring themes in these bad-finance stories is the arrogant dismissal of seemingly obvious points, things like "it's hard for a hedge to provide protection against big, risky bets going bad when it's also a big, risky bet." Part of this arrogance may come from people's mistaken belief in their own sophistication.

There's a common fallacy often encountered by people who build models and handle data. It's the belief that complication implies sophistication. The truth is largely the opposite: complication amplifies naivety. When people use complicated, impressive-sounding systems they tend to be less concerned with common sense questions like, "is my sample representative?" or "Are the relationships we're assuming stable? Are they likely to break down under extreme conditions?"

In the period leading up to the crash, we heard a great deal about how sophisticated Wall street and the financial sector had become, particularly with respect to risk. I wonder if we, in fact, saw just the opposite. Did the rise of the quants and the reliance on elaborate models simply enable naivety and wishful thinking?

I'm not claiming that this was the (or even a) primary cause of the crisis. I would put before it, in no particular order, greed, misaligned incentives, deregulation, the growth fetish and possibly a few other candidates. Still, I think it's fair to say that things were made worse by the belief that having complicated formulas to deal with risk somehow meant you were safe from it.

Update -- I took advantage of the ten minute blogging rule (you have ten minutes after posting to change things) and added the third paragraph.

For the weekend -- five words with something in common

Project
Record
Produce
Conduct
Progress

UPDATE: I noticed no one had a guess yet so I'll put some clues in the comment section.

"Ar go"

Unlike NPR's Planet Money, which started out with one of the best debuts in in recent journalism then faded rapidly, American Public Media's Marketplace has managed to maintain its exceptional quality for better than two decades.

Here are a couple of examples from today's show (I'll blog about them later if I get a chance):

A beautifully done story on a program to help teen mothers in Cincinnati (*and the source of the title of this post). **

And a good account of the pros and the cons of the coupon business.

This show is definitely worth setting aside a half hour of you afternoon.


** While listening to Rayana and Liyah's story, keep this in mind:

Hart and Risley also found that, in the first four years after birth, the average child from a professional family receives 560,000 more instances of encouraging feedback than discouraging feedback; a  working- class child receives merely 100,000 more encouragements than discouragements; a welfare child receives 125,000 more discouragementsthan encouragements.

A response to a response -- honest libertarians

Following up on Joseph's follow up to this post, there's an important distinction I'd like to make with regard to this argument from the Cato Institute (as reported to Business Week):.

Some believe the Census Bureau does too much already. “They waste a share of their budget on studies that no one actually uses,” says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. “A lot of that could be done by the private sector.”

As I pointed out before, Edwards is basically saying (in reverse order) that:

1. the private sector could perform major functions of the Census (which is demonstrably wrong since, as I pointed out before, the private sector has tried to do this repeatedly without ever coming close to matching the quality of government data) ;

2. no one uses reliable data about American agriculture (which is too laughable to waste any time addressing).

What's interesting and depressing here is not just the bad arguments that Edwards made but the valid ones that he didn't (or at least that he didn't make forcefully enough to be quoted). To understand these other arguments, it's useful to think of a simple value function for evaluating government projects

V = Returns - Traditional Costs - Libertarian Costs

Traditional costs are what you normally think of for a project, direct expense, opportunity costs, negative impact on other economic activities. Libertarian costs are the losses of liberty that go with any action where the majority forces the rest of society to take collective action.

Most of us don't give a lot of thought to LC but it's not zero and libertarians are performing a valuable service when they bring it up. In this case Edwards could have made the following valid arguments:

We're financing the census by taxing people who in some cases object to it.

The census is an invasion of privacy by the government.

A relatively small group gets a disproportionate share of the benefits.

I don't happen to agree with those arguments but they are valid and it's worth noting that Edwards chose to use invalid ones instead. We've seen this sort of thing before -- libertarian groups like Cato pushing flawed reasoning rather than make the honest but difficult-to-argue libertarian case. It's a practice that undermines their credibility.

Or it would if anyone cared about credibility anymore.

A quick response to Mark

I am travelling again with limited email access but I wanted to comment on this point by Mark:

Proprietary data that could be used without the privacy restrictions the government imposes would be worth an incredible amount of money. Despite all that trying, though, no private data source comes close. I realize that the Cato Institute might not like to hear this, but this is one of those cases where the private sector tried to do something the government does and couldn't do it as well.

I am increasingly annoyed at either pro-government extremists (Marxists) and anti-government extremists (Randians).  It is quite clear to me that, as a society, neither approach will work and that a pure version of either vision is difficult to find (we can argue about edge cases like "failed states" but I am not sure that really addresses the major point).

Now it will always be the case that some groups in society will do better with more or less government.  For example, the extremely wealthy are not impressed by the benefits of social security given how unlikely they ar to need this money.  On the other hand, infrastructure developers are probably not delighted by all of the ways that we put in veto points for development projects to weaken the power of government.

But it would be very helpful for the debate if we just admitted that some tasks were better done by some approaches?  Governments have a very hard time with the art of shopkeeping and keeping prices in line without free market price discovery.  Private individuals will have a tough time fielding a modern army.

Why not try to limit the argument to the middle where there is a lot of room to disagree?

Half the ranting I'd do if I were feeling better

Menzie Chinn points out a great Business Week article on the nickel-and-diming of the Census Bureau. It's an incredibly short-sighted place to save what is basically a rounding error.

In 2003 the bureau requested more funding to survey financial, real estate, and other companies on a quarterly basis, rather than wait to take their pulse with its Economic Census, which gathers data on business every five years. Census data are funneled to the Bureau of Economic Analysis, which shares its conclusions with the president’s Council of Economic Advisers, the Federal Reserve Board, and Congress. Every year, Census asked for the extra funds; every year, Congress denied them the money, leaving the Census Bureau largely blind to the health of a sector that made up more than half the total economy.

Finally, in early 2009, after the real estate-fueled financial crisis, Congress gave Census what it had been asking for—an extra $8.1 million. In the view of many, it was too late. “That’s a grand example of how nickel-and-diming statistics agencies can screw up the economy,” says Andrew Reamer, a research professor at the George Washington University Institute of Public Policy and a member of the BEA’s advisory committee. “The government saved $8 million, but how many trillions were lost as a result of not being able to see the crisis coming?”

That extra data, says Reamer, would’ve revealed just how quickly certain parts of the economy were slowing down. For example, in April 2008 the BEA, with no quarterly data to work with, estimated that finance and insurance sector activity fell 0.3 percent in 2007. In July 2011, the BEA recrunched those numbers using quarterly data and showed declines of 2.2 percent, 5.3 percent, and 9.9 percent for those sectors in the last three quarters of 2007.

Most U.S. economic data come from three federal agencies: the Census Bureau, the BEA, and the Bureau of Labor Statistics. They have a combined budget of $1.6 billion, less than 0.05 percent of President Barack Obama’s $3.7 trillion proposed budget. These agencies have always had to fight for more funding. Now they may have to fight just to keep their budgets intact. As part of $19 billion in nondefense discretionary cuts in Paul Ryan’s (R-Wis.) budget—recently passed by the House of Representatives—the agencies are likely to get less funding.

The Senate is unlikely to embrace the Ryan budget in its entirety. Yet specific proposals show what the House has in mind. The House Committee on Appropriations recently proposed cutting the Census budget to $878 million, $10 million below its current budget and $91 million less than the bureau’s request for the next fiscal year. Included in the committee number is a $20 million cut in funding for this year’s Economic Census, considered the foundation of U.S. economic statistics.

 Of course, the census is also an invaluable source of data for businesses, which explains this

One of the most vocal critics of the proposed cuts is the U.S. Chamber of Commerce, a deficit hawk. “The chamber is in favor of getting the deficit under control, but you’re not going to get there by gutting the statistics agencies,” says the chamber’s chief economist, Martin Regalia, who last July signed a letter in favor of fully funding the BEA. “The total amount of money saved is relatively small compared to the massive loss of information it would lead to. It’s like trying to balance your checkbook by buying cheaper checks.”

 I'm tempted to go on a rant here about the importance and economic value of research and data collection, but it's late, I'm fighting a cold and pretty much anyone who reads a blog called Observational Epidemiology is already in the pro-research camp. I do, however, want to say something about this part of the article.

Some believe the Census Bureau does too much already. “They waste a share of their budget on studies that no one actually uses,” says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. “A lot of that could be done by the private sector.”

Edwards packs a lot of wrong in here. Working backwards, the private sector has been spending a tremendous amount of money and effort gathering data similar to that gathered by the census. Proprietary data that could be used without the privacy restrictions the government imposes would be worth an incredible amount of money. Despite all that trying, though, no private data source comes close. I realize that the Cato Institute might not like to hear this, but this is one of those cases where the private sector tried to do something the government does and couldn't do it as well.

Then there's the stunning cluelessness of Edwards' example. Can he actually believe that no one uses data on pork production, one of America's largest agricultural industries (with stocks of 62 million, making us the world's second largest producer) and a major source of protein around the world. Or perhaps he's just so cynical that he assumes the journalists covering the story will be too ignorant of agriculture to spot the absurdity.

Either way, it's a disappointing performance from a spokesman for what is (or, at least, used to be) one of the country's most respected think tanks.

"How venture capital is broken"

Felix Salmon has a long but very pithy post on a new report from the Kauffman Foundation on the state of venture capital. It's a fascinating story with some significant connections to two long-standing areas of concern here at OE (ddulites and growth fetishists). You should definitely take a look.

The whole thing is quotable, but I'll limit myself to what Salmon identifies as the most astonishing part.

What you’re looking at here is the self-reported returns from all 100 of the Kauffman foundation’s funds, plotted on a time zero axis. In theory, if you believe the VC industry’s hype, the returns should look a bit like the green line: negative in early years, as you make investments which won’t pay off for a long time, and then positive by year 10.
In reality, reported returns peak very early on, in month 16 — which just happens to coincide with the point at which the GPs tend to start going out on sales calls, trying to raise their next fund. (The blue line shows total fund returns, while the red line shows returns net of fees — the money which actually goes to LPs.) Of course, at month 16, none of the returns are realized: they’re driven instead by increases in portfolio-company valuations, and those valuations are set by the GPs themselves.
If GPs were incentivized mainly by their 20% performance fee, then you’d expect something like the green line, or at the very least you’d expect the performance to rise over time, as the fund’s illiquidity premium manifested itself. If GPs were incentivized mainly by their 2% management fee, however, then you’d expect something much more like the real-world red and blue lines, where performance figures are used more to raise new funds than to make money.

Amazing.  

This is the second Justin Fox post I've looked at in the past few days

and the second I've felt the need to pass on. There may be a pattern forming (via Krugman).

Don't Like the Message? Maybe It's the Messenger

Back on the subject of agricultural research

I'll be coming back to this.

From the Financial Times

[Cary] Fowler reminds me that losing varieties of crops means losing genes that may one day come into their own. He recounts the story of Jack Harlan, who in 1948 was collecting plants in Turkey. Harlan came across a wheat variety that looked scarcely worth picking up. "It was the most miserable-looking wheat. It had a poor yield, it was susceptible to lots of diseases, it fell over with rot... before it could be harvested." Some years later, wheat in the north-west of the US was attacked by stripe rust, and researchers scoured seed collections to find a way to help. The "miserable-looking" wheat turned out to be resistant. New varieties were bred to incorporate this quality. Fowler estimates that feeble-seeming wheat has been worth more than $100m a year to the US agrarian economy.

DVR Alert

Sherlock returns this Sunday.

More on mergers and the growth fetish

As a follow-up to this post (which was part of a larger thread), this NBER paper (courtesy, I believe, of Felix Salmon or Brad DeLong) suggests that the business case for many if not most mergers is decidedly weak.

The study by professors at the University of California, Berkeley, concludes that acquisitions, while nearly always initially cheered by investors, end up hurting a company, and in particular its share price, in the end. Winning by Losing, which was released this week by the National Bureau of Economic Research, found that following an acquisition the stock of that company tends to underperform shares of similar companies by 50% for the next three years. Another finding of the study: Deals done in cash, which is often considered a more conservative way to pay for acquisitions, tend to do worse than deals done for stock. If an acquiring company doesn't want its new owners' shares, you shouldn't either.

Of course, just because the market overvalues acquisitions doesn't mean that it overvalues growth in general, but this is another piece of evidence for the pile.

The issue with targeted metrics

Felix Salmon talks about the Employment Participation Rate:

The number the politicians look at, however, is the unemployment rate, which ticked down to 8.1%. That’s still high, but it’s not a statistic to beat Obama round the head with.

and

For demographic reasons — the retirement of the baby boomers — the labor force participation rate is naturally going to fall over the next decade. But go back just one year, to March 2011, and look at the official CBO projection of the labor force participation rate. The CBO saw a rate of 64.6% in 2012 — a full percentage point higher than we’re at right now. The participation rate wasn’t expected to fall to today’s level of 63.6% until 2017.

What is interesting is that people focus on the Unemployment Rate.  WHich actually makes it a less useful indicator of anything -- as there are incentives to try and frame the number in a way that looks better than it really is.  Dropping people who would like a job but are no longer looking from the sample is a clever way to make the number look better. 

I suspect that the same issue will happen with any high-stakes metric. 

"Because he could do all these things, he imagined that he did do them."

Now that I think about it, I'm surprised that Pauline Kael's "Raising Kane" hasn't come up before while we were discussing taking credit for other people's work.

The Mercury group wasn’t surprised at Welles’s taking a script credit; they’d had experience with this foible of his. Very early in his life as a prodigy, Welles seems to have fallen into the trap that has caught so many lesser men—believing his own publicity, believing that he really was the whole creative works, producer-director-writer-actor. Because he could do all these things, he imagined that he did do them. (A Profile of him that appeared in The New Yorker two years before Citizen Kane was made said that “outside the theatre … Welles is exactly twenty-three years old.”) In the days before the Mercury Theatre’s weekly radio shows got a sponsor, it was considered a good publicity technique to build up public identification with Welles’s name, so he was credited with just about everything, and was named on the air as the writer of the Mercury shows. Probably no one but Welles believed it. He had written some of the shows when the program first started, and had also worked on some with Houseman, but soon he had become much too busy even to collaborate; for a while Houseman wrote them, and then they were farmed out. By the time of the War of the Worlds broadcast, on Halloween, 1938, Welles wasn’t doing any of the writing. He was so busy with his various other activities that he didn’t always direct the rehearsals himself, either—William Alland or Richard Wilson or one of the other Mercury assistants did it. Welles might not come in until the last day, but somehow, all agree, he would pull the show together “with a magic touch.” Yet when the Martian broadcast became accidentally famous, Welles seemed to forget that Howard Koch had written it. (In all the furor over the broadcast, with front-page stories everywhere, the name of the author of the radio play wasn’t mentioned.) Koch had been writing the shows for some time. He lasted for six months, writing about twenty-five shows altogether—working six and a half days a week, and frantically, on each one, he says, with no more than half a day off to see his family. The weekly broadcasts were a “studio presentation” until after the War of the Worlds (Campbell’s Soup picked them up then), and Koch, a young writer, who was to make his name with the film The Letter in 1940 and win an Academy Award for his share in the script of the 1942 Casablanca, was writing them for $75 apiece. Koch’s understanding of the agreement was that Welles would get the writing credit on the air for publicity purposes but that Koch would have any later benefit, and the copyright was in Koch’s name. (He says that it was, however, Welles’s idea that he do the Martian show in the form of radio bulletins.) Some years later, when C.B.S. did a program about the broadcast and the panic it had caused, the network re-created parts of the original broadcast and paid Koch $300 for the use of his material. Welles sued C.B.S. for $375,000, claiming that he was the author and that the material had been used without his permission. He lost, of course, but he may still think he wrote it. (He frequently indicates as much in interviews and on television.)

“Foible” is the word that Welles’s former associates tend to apply to his assertions of authorship. Welles could do so many different things in those days that it must have seemed almost accidental when he didn’t do things he claimed to. Directors, in the theatre and in movies, are by function (and often by character, or, at least, disposition) cavalier toward other people’s work, and Welles was so much more talented and magnetic than most directors—and so much younger, too—that people he robbed of credit went on working with him for years, as Koch went on writing more of the radio programs after Welles failed to mention him during the national publicity about the panic. Welles was dedicated to the company, and he was exciting to work with, so the company stuck together, working for love, and even a little bit more money (Koch was raised to $125 a show) when they got a sponsor and, also as a result of the War of the Worlds broadcast, the movie contract that took them to Hollywood.

A truly remarkable piece of misreading

To some degree we've all been guilty of hearing what we expected to hear rather than what was said. At the risk of belaboring the obvious, this has always been a part of human nature and it's probably grown more common with the advent of the internet. Even with that in mind, though, this is a truly remarkable example.

Here's the context. A few days ago, Jonathan Chait wrote a long and unflinching take-down of Paul Ryan. He razed the man, left no stone on stone, salted the ground so... well, you get the point. What's more, Chait was just as direct and damning in his handling of the journalists who had given Ryan so many free passes, even going so far as to confront James Stewart on his Ryan pieces.

Here's a representative passage:

Ryan’s mastery of these details does not signify openness to evidence or a willingness to shape his views to real-world evidence. It actually signifies the opposite. And yet Ryan has grasped that the aura of specificity he has cultivated paradoxically renders the specifics themselves irrelevant.
For a virtuoso display of this principle in action, return to another vintage Ryan moment: his Dave profile from last year, where he awed a swooning reporter by opening up the budget to a random page and fingered a boondoggle. The item Ryan pointed to was the Obama administration’s reform of the student-loan industry. “Direct loans—this is perfect,” Ryan said. “So direct loans, that’s new spending on autopilot, that had no congressional oversight, and it gave the illusion that they were cutting spending.”
The exchange is so perversely revealing that it rewards explanation. For decades, the government helped make college more affordable through “guaranteed loans”—it encouraged banks to lend money to students by promising to repay the banks if the students defaulted. Banks were making billions of dollars in profits at virtually no risk. The General Accounting Office, a kind of in-house fiscal watchdog for the federal government, issued sixteen reports over the years noting how the government could save money simply by issuing the loans itself and cutting out the middleman.
It was the simplest, no-brainer pot of savings you could find—ending pure corporate welfare, just like in the movie Dave. The cause attracted support from think tanks, as well as the moderate Wisconsin Republican Tom Petri, an eclectic reformer who is sort of the real-life version of the Paul Ryan character who appears on television. Two National Revieweditors endorsed eliminating guaranteed loans in an article advocating a new reform conservatism.
The banks lobbied fiercely to protect their gravy train. Among the staunchest advocates of those government-subsidized banks was … Paul Ryan, who fought to protect bank subsidies that many of his fellow Republicans deemed too outrageous to defend. In 2009, Obama finally eliminated the guaranteed-lending racket. It could save the government an estimated $62 billion, according to the CBO.
Not everything in Ryan’s career, and possibly nothing at all, is quite so undeniably venal. You could pluck any other single example out of Ryan’s long history of strident conservatism and he would be able to defend it, at the very least, on ideological grounds. A tax cut for the rich, a hike in military spending—all those could be explained as a blow for the cause of Reaganism. This was an almost astonishingly unlucky break, an instance where he lacked even ideological cover—standing up for higher spending at the behest of a powerful lobby lacking any plausible rationale for its subsidy.
At the moment the page opened to that unfortunate item, Ryan’s heart must have stopped. Here was a reporter trying to cast him as a movie-hero outsider, and he was performing on cue. Yet the book opened to a page that, cruelly, just happened to expose the gap between Ryan’s image and the reality more clearly than anything else possibly could have.
Ryan probably knew, even in that split second, that he stood little chance of exposure. (The overlap between television news reporters and people with a detailed understanding of the federal budget is quite small.) Yet a lesser politician might have panicked, or hesitated, or possibly tried to flip to a different page. In that moment, Ryan revealed the qualities that have propelled him to his current position. As cool as can be, and as winsome as ever, he said, “This is perfect.”

Chait later said he was prepared for a wide range of responses but he had to admit that this post from the left wing site Crooks and Liars caught him off guard:

Praise Jesus and pass the awesome sauce. Paul Ryan's going to be the next Republican Saint, wrapped in a flag and waving down at all of us who are too stupid to understand the complex thinking and amazing nuance of St Paul's brain.Thank you, Jonathan Chait, for this awesome NYMag article telling us how to count the ways Paul Ryan is the Great American Hero. What would I have ever done without being enlightened in such an obsequious way, beginning with the title: The Legendary Paul Ryan?

It is, as Chait says, a fascinating read despite going on for over eighteen hundred words counting two updates (neither of which improves on the original). Part of the fascination comes seeing a writer with such exceptionally poor reading comprehension. She follows every quote from Chait with a reply that seems oddly inappropriate, as if she were listening to him in a noisy room and didn't really hear what he said.

And then there's the self-effacing "I'm not ambitious at all, no sir!" claim that Chait reinforces:

One trope that has marked Ryan’s media coverage from the outset is that he is consistently described as lacking ambition. It’s a sharp contrast with fellow Republican Eric Cantor, to whom the adjective “ambitious” is affixed like a tattoo. Ryan says, and many political reporters believe, that he is immune to the political concerns that distract his colleagues. He “has a level of disdain for the sort of rank political calculations required of people who want to climb the electoral ladder,” explains the Washington Post. Here is a telling description from Politico: “Of the partisan political game, Ryan confessed, ‘It’s not my natural tendency. I’m a policy guy.’ ” The operative word here is “confessed.”

Because wonks lack ambition? This would be why Ryan has abandoned St. Ayn Rand in recent days, eschewing her "I've got mine, screw the rest of you" philosophy for a kinder, gentler piety that "disagrees" with Catholic bishops and pretends to be a bipartisan kind of guy who gets along with everyone! Of course he's not ambitious. Jon Chait has told you so.

Of course, the operative word here is "operative." Chait specifically emphasizes that Ryan is telling us that Ryan's not ambitious. (The word "trope" is also telling.) It's a difficult point to miss, particularly given that a few lines later Chait points out that Ryan "had to elbow more experienced Republicans out of the way to grab his nomination, and then leapfrog other more experienced Republicans to claim the party’s leadership of the House Budget Committee in 2007."

Still, if this were just a badly reasoned post, I wouldn't be recommending you all read it. Seeking out something just because it's bad is mean-spirited and I try to avoid the habit (though the internet does encourage backsliding in that area). What makes the Crooks and Liars piece so fascinating is the way it shows how an interpretation can get embedded so deeply that everything we see confirms that view. As mentioned before, we've all had these moments but most of the time either we catch ourselves or someone shakes us out of it.

It's instructive to see what happens when you just keep going.