Not only have many copyright holders failed to keep their older works in print, but there are now many books whose copyright holders can't be identified at all. In many cases, the original copyright holder is dead and records about who now holds the copyright aren't available. These "orphan works" have become a serious problem for projects such as Google Books, which aims to digitize books and make them available to the public. Google can't obtain the rights to reproduce these books at any price because it can't figure out who it needs to negotiate with. The older a work is, the more likely it is to be orphaned, so copyright extensions have made the problem much worse.At some point the interests of the creator of the work are more likely served by allowing their creation to be published and enjoyed rather than left to wither on the vine. If nobody can even figure out who owns these rights then precisely who is being protected?
Thursday, October 31, 2013
An under-appreciated consequence of extremely long copyrights
This is one of the unforeseen consequences of extremely long copyright terms:
Wednesday, October 30, 2013
Martians and metadata
Just in case you don't know the story:
[Written primarily by Howard Koch who went on to do some other interesting work, but nobody talks about the writer.* ]
But most of the people who were listening when the show ended hadn't heard the beginning of the show. They had been listening to one of the highest rated acts on radio, a ventriloquist named Edgar Bergen (you might want to take a minute to reflect on the concept of a radio ventriloquist before continuing). About fifteen minutes into the hour, the show cut to a musical interlude and people started channel surfing.
Though we don't normally think of it in those terms, the title of a program is data, as is the author. We feed it into the algorithm we use to interpret what we see, or in this case, hear. People who didn't hear the words "The War of the Worlds by H. G. Wells" tried to impute the genre based on the information they heard when they first tuned in to what seemed to be a reporter covering a disaster.
Check out the first few minutes and think about what you'd conclude.
PBS has a special commemorating the anniversary, but I'm staying loyal to the original medium and recommending this radio documentary produced for KPCC.
* Welles' relationship with Koch in some ways foreshadowed the controversy over Citizen Kane. Here's Pauline Kael's summary.
The War of the Worlds is an episode of the American radio drama anthology series The Mercury Theatre on the Air. It was performed as a Halloween episode of the series on October 30, 1938, and aired over the Columbia Broadcasting System radio network. Directed and narrated by actor and future filmmaker Orson Welles, the episode was an adaptation of H. G. Wells's novel The War of the Worlds (1898).
[Written primarily by Howard Koch who went on to do some other interesting work, but nobody talks about the writer.* ]
Of course, no one who heard the whole broadcast panicked. The first line listeners heard clearly spelled out what was about to come: "The Columbia Broadcasting System and its affiliated stations present Orson Welles and the Mercury Theatre on the Air in The War of the Worlds by H. G. Wells."
The first two thirds of the 60-minute broadcast were presented as a series of simulated news bulletins, which suggested to many listeners that an actual alien invasion by Martians was currently in progress. Compounding the issue was the fact that the Mercury Theatre on the Air was a sustaining show (it ran without commercial breaks), adding to the program's realism. Although there were sensationalist accounts in the press about a supposed panic in response to the broadcast, the precise extent of listener response has been debated.
In the days following the adaptation, however, there was widespread outrage and panic by certain listeners, who had believed the events described in the program were real. The program's news-bulletin format was described as cruelly deceptive by some newspapers and public figures, leading to an outcry against the perpetrators of the broadcast. Despite these complaints--or perhaps in part because of them--the episode secured Welles' fame as a dramatist.
But most of the people who were listening when the show ended hadn't heard the beginning of the show. They had been listening to one of the highest rated acts on radio, a ventriloquist named Edgar Bergen (you might want to take a minute to reflect on the concept of a radio ventriloquist before continuing). About fifteen minutes into the hour, the show cut to a musical interlude and people started channel surfing.
Though we don't normally think of it in those terms, the title of a program is data, as is the author. We feed it into the algorithm we use to interpret what we see, or in this case, hear. People who didn't hear the words "The War of the Worlds by H. G. Wells" tried to impute the genre based on the information they heard when they first tuned in to what seemed to be a reporter covering a disaster.
Check out the first few minutes and think about what you'd conclude.
PBS has a special commemorating the anniversary, but I'm staying loyal to the original medium and recommending this radio documentary produced for KPCC.
* Welles' relationship with Koch in some ways foreshadowed the controversy over Citizen Kane. Here's Pauline Kael's summary.
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.)
Tuesday, October 29, 2013
Intellectual Property
We have not talked about copyright for a while, but this is an evergreen point:
I don't know where the right balance is. Matt proposes something vaguely sensible above, although one may be tempted to quibble with what is the correct period of protection. But infinite copyright isn't going to really serve the original public policy goals of intellectual property protection, and should definitely be rethought.
More recent characters never enter the public domain because a handful of 1930s-vintage characters—Mickey Mouse, Batman—are owned by corporations that are still powerful today and have successfully lobbied congress to retroactively extend copyright terms. What we ought to do is go back to a sensible regime of finite copyright—perhaps the lifespan of the author or 50 years, whichever is longer—so that creators can still benefit from their works but that new generations of characters will enter the mythic realm of the public domain.I think the piece here that is underappreciated is the retroactive nature of the copyright extension. There is no way that extending copyright on Batman (today) will provide incentives to people in the 1930's to create more comic book characters.
I don't know where the right balance is. Matt proposes something vaguely sensible above, although one may be tempted to quibble with what is the correct period of protection. But infinite copyright isn't going to really serve the original public policy goals of intellectual property protection, and should definitely be rethought.
Monday, October 28, 2013
Rocco Pendola confirms some suspicions I've had about HBO and Netflix
Why should you care about Netflix?
It depends.
If we're talking about Netflix the company, I can't think of a strong reason that you should. The company does provide some competition to an industry badly in need of it but not enough to make a big difference and certainly far less than we get from something like OTA television (click here and here to get started on that thread). The demise of Netflix would be a bad thing but it wouldn't exactly be traumatic. If, however, we're talking about a Netflix as an example of the dangers of naive and simplistic narrative journalism, the topic becomes considerably more important.
Just to be clear, I'm not blasting the genre as a whole. Narratives can do a wonderful job of bringing relationships into focus and pointing out the significance of facts we might otherwise overlook. From Wolfe's The Kandy-Kolored Tangerine-Flake Streamline Baby and Kael's Kane Mutiny to the latest from Michael Lewis, some of my favorite journalists and critics have used non-fiction narratives to express their ideas.
Of course, all of those narratives were complex, well-thought-out and written from unique points of view. When you take away the complexity, the thoughtfulness and the originality, you leave the form vulnerable to the greatest weakness of narrative thinking: selection bias. In an extreme cases, like the Netflix/Reed Hastings saga, not only are pertinent facts ignored but unsupported claims that fit the narrative are elevated to the level of fact.
If you take the standard account mindlessly regurgitated by writers like David Carr,* Here's a sample:
As for the actual production and the post-run relationship with the programs, Rocco Pendola recently explained how sharp the contrast was.
What's significant here is that the standard narrative is not something that appears to have emerged organically from the facts; instead, it seems to have been an excuse to trot out the familiar and appealing _____-is-the-new-_____ template. Furthermore, once that template became accepted, the implications of the narrative were not only treated as facts; they were actually given more weight. Consider this previously mentioned quote from Forbes:
I'm not saying that these are necessarily bad decisions on the part of Reed Hastings and Ted Sarandos. I'll admit that I don't have a lot of faith in either (Sarandos, in particular, makes me nervous), but I can imagine scenarios where these decisions turn out to be pretty smart. I think they're a bit improbable but no one died and made me Nostradamus. What I am saying is that these decisions are not part of the standard narrative.
If you missed on the rest of this thread, here are some previous posts (if you're a real glutton for punishment, just search "Netflix"):
Edging away from the genius hypothesis
Netflix can never be the next HBO
Curiously, agressively anti-social
Two quotes about Netflix, presented (almost) without comment
Netflix, the Emmys and the power of a happy narrative
Also check out Pendola's summary The Netflix Story in Three Tweets.
Rich Greenfield also has some sharp observations on the subject, some of which tie into a post I mean to write on the proper and improper use of business metrics.
* Carr's a bit of a creep too, but that's a topic for another day.
It depends.
If we're talking about Netflix the company, I can't think of a strong reason that you should. The company does provide some competition to an industry badly in need of it but not enough to make a big difference and certainly far less than we get from something like OTA television (click here and here to get started on that thread). The demise of Netflix would be a bad thing but it wouldn't exactly be traumatic. If, however, we're talking about a Netflix as an example of the dangers of naive and simplistic narrative journalism, the topic becomes considerably more important.
Just to be clear, I'm not blasting the genre as a whole. Narratives can do a wonderful job of bringing relationships into focus and pointing out the significance of facts we might otherwise overlook. From Wolfe's The Kandy-Kolored Tangerine-Flake Streamline Baby and Kael's Kane Mutiny to the latest from Michael Lewis, some of my favorite journalists and critics have used non-fiction narratives to express their ideas.
Of course, all of those narratives were complex, well-thought-out and written from unique points of view. When you take away the complexity, the thoughtfulness and the originality, you leave the form vulnerable to the greatest weakness of narrative thinking: selection bias. In an extreme cases, like the Netflix/Reed Hastings saga, not only are pertinent facts ignored but unsupported claims that fit the narrative are elevated to the level of fact.
If you take the standard account mindlessly regurgitated by writers like David Carr,* Here's a sample:
Original content is hard. As silly as the network process is — let’s finance 20 pilots, pick three and cancel two of them after three weeks — no one had come up with anything better until HBO came along. Its model of finding good people, paying them for full seasons and running their work until it builds an audience — or not — has been emulated to very good effect by Showtime, AMC, FX and now Netflix.The Netflix = HBO2.0 is one of the central recurring themes here, particularly regarding original content, but how similar are the approaches and models of the two companies? Despite Carr's implication, HBO does commission pilots, Its definition of 'good people' (especially behind the camera) is generally 'promising but relatively obscure' which is roughly the opposite of that of Netflix, where the approach has been to offer big checks for recognizable names. Furthermore, there's evidence that, even though the company pays top dollar, producers still treat the company as a place to pitch ideas after they've been turned down by HBO, Showtime, AMC, FX, etc.
As for the actual production and the post-run relationship with the programs, Rocco Pendola recently explained how sharp the contrast was.
First, Netflix guarantees 13 episodes right off the bat. Sometimes it will even give you a two-season commitment before the first season even airs. And, in terms of rights, it doesn't demand exclusivity. Outside of the first-run window, you are free to place your show anywhere you wish and, unless it cuts another deal with you, Netflix doesn't receive a cut of this action. Plus, there's very little, if any, creative development from Netflix.None of this means that Netflix will fail if it holds with its current strategy or that HBO can do no wrong (HBO worship is a standard narrative that should be addressed in another post). I'm not all that optimistic about NFLX, but it's a viable business in a volatile industry. With a few lucky breaks it could have a very good run.
In other words, the folks who output the content -- in this case, Sony -- are simply robbing Netflix blind. It's the type of deal that's too good to pass up.
Put another way, Sony doesn't care how many subscribers watch these shows on Netflix. They're more than happy to collect a fat (likely way too big) check, which subsidizes their risk, as they retain rights to sell the programming in markets where Netflix doesn't operate and in all other markets -- geographic and delivery -- after whatever the relatively short first-run window happens to be.
That's not how HBO, for example, plays the game. Never has been. And HBO sees no reason to start, given the franchise it has built and the enormous success it continues to have.
HBO doesn't give the world to studios and creators because it's not so desperate that it has to. It maintains exclusive rights to the programming it licenses. Unlike Netflix, it routinely produces programming in-house. And it almost always involves itself in the creative process. From what I understand, producers and directors actually appreciate this input, as HBO has a track record of making stars and producing huge hits.
Netflix is taking a massive risk writing big checks and doing whatever needs to be done to secure programming that might wind up elsewhere if "elsewhere" was as desperate as Netflix appears to be. Creators and studios go with Netflix because they can't turn down the easy money or their first choice turns down their programming. It's common to pitch HBO first, get a no and head over to Netflix. ...
What's significant here is that the standard narrative is not something that appears to have emerged organically from the facts; instead, it seems to have been an excuse to trot out the familiar and appealing _____-is-the-new-_____ template. Furthermore, once that template became accepted, the implications of the narrative were not only treated as facts; they were actually given more weight. Consider this previously mentioned quote from Forbes:
Of course, the end game may well lie in pivoting away from subscriptions and distribution altogether and moving into the world of content licensing. This would fundamentally change the company’s equation. Whether a move to content licensing is the key to Netflix’s future growth is yet to be seen, but it certainly sets up fascinating new dynamics—and ironies—for the broader industry.This fits perfectly with the HBO2.0 narrative (look at the post-run revenue stream of Sex in the City for an example of how big something like this can be) and so the idea that Netflix may be planning to become a major player in licensing makes it into one of our best and most respected financial publications. The fact that Netflix, despite the aforementioned huge checks that it's been writing, failed to acquire the rights to House of Cards and company. Unless something's buried in the fine print, they have no content to license and have shown no interest in acquiring any.
I'm not saying that these are necessarily bad decisions on the part of Reed Hastings and Ted Sarandos. I'll admit that I don't have a lot of faith in either (Sarandos, in particular, makes me nervous), but I can imagine scenarios where these decisions turn out to be pretty smart. I think they're a bit improbable but no one died and made me Nostradamus. What I am saying is that these decisions are not part of the standard narrative.
If you missed on the rest of this thread, here are some previous posts (if you're a real glutton for punishment, just search "Netflix"):
Edging away from the genius hypothesis
Netflix can never be the next HBO
Curiously, agressively anti-social
Two quotes about Netflix, presented (almost) without comment
Netflix, the Emmys and the power of a happy narrative
Also check out Pendola's summary The Netflix Story in Three Tweets.
Rich Greenfield also has some sharp observations on the subject, some of which tie into a post I mean to write on the proper and improper use of business metrics.
* Carr's a bit of a creep too, but that's a topic for another day.
Sunday, October 27, 2013
Negotiating costs
A correspondent to Talking Points Memo makes a point that matches my experience:
I don't want to say that it has never worked for anybody (the US is large), but most of the time you are happy to find a provider at all.
I've spent years making medical decisions based on the out-of-pocket cost. I've passed on doctor-advised MRIs because they would cost me $1,000 (and don't even get me started on the myth of how patients can negotiate with providers--a notion propagated largely by people who've never had to try it), and just this week I had to decide whether to have a follow-up visit with a neurologist for vertigo or see a podiatrist about an ongoing running injury.If there was a robustly competitive market then maybe it would be different. But most people have insurance and there isn't really a whole lot of ability to bargain down prices. I found it to be surprisingly challenging to be allowed in to see a medical doctor, paying the full (very high) sticker price.
I don't want to say that it has never worked for anybody (the US is large), but most of the time you are happy to find a provider at all.
Saturday, October 26, 2013
Friday, October 25, 2013
Directionality
There was a lot of concern that the Affordable Care Act would lead to fewer full time jobs. The most immediate effect was the opposite: more full time and fewer part time jobs.
Now this doesn't mean you can't find individuals or sectors who are affected. But it does cast some doubt on the potential strength of these effects. It is like lowering or raising taxes. In the ranges that the United States has tried in the last 30 years we had high taxes with high growth (Clinton) and low taxes with low growth (Bush). Now the underlying relation might hold, but over this range you begin to suspect that it cannot be a dominant effect.
In the same sense, the ACA might eventually lead to more part time jobs than the counter-factual. But the initial look suggests that we should update our priors as to the plausible effect size if it can be so easily swamped by natural market shifts.
Now this doesn't mean you can't find individuals or sectors who are affected. But it does cast some doubt on the potential strength of these effects. It is like lowering or raising taxes. In the ranges that the United States has tried in the last 30 years we had high taxes with high growth (Clinton) and low taxes with low growth (Bush). Now the underlying relation might hold, but over this range you begin to suspect that it cannot be a dominant effect.
In the same sense, the ACA might eventually lead to more part time jobs than the counter-factual. But the initial look suggests that we should update our priors as to the plausible effect size if it can be so easily swamped by natural market shifts.
A Motley Fool uupdate -- the Avengers probably can beat up the Agents of SHIELD
Just to recap: about a month ago Motley Fool ran a post with the provocative suggestion that the television program Agents of SHIELD could be bigger than the movie from which it was spun off, The Avengers.
This was an extraordinarily ambitious target. The Avengers was one of the very few movies in film history to break $1 billion at the box office and it made God knows how much more than that when you take into account marketing, rental and streaming, and the tentpole effect on other films in the franchise such as the upcoming Thor and Capt. America movies.
Even when you take into account the fact that a strong show can indirectly generate additional revenue through its effect on the rest of the lineup, the idea that this program would be bigger than the movie that spawned it would require Agents of SHIELD to be a huge perhaps even unprecedented television hit.
To support the claim that this was a relatively likely outcome, the Motley Fool writer offered very little in the way of argument other than his assurance that these things were going to be big.
How have these assurances panned out so far?
You'll notice the focus on the 18-49 audience. This is area of some controversy in marketing circles and I've heard a lot of smart people in the field suggest that, while a thirty-year-old set of eyeballs might be somewhat more valuable to an advertiser than a sixty-year-old set, the difference isn't big enough to justify dropping a huge segment of the population from your metrics.
Without getting too far into the debate, I will say that it's a good idea to look at both numbers. In this case, pay particular attention to CBS. NCIS remains a powerhouse across all demographics. I'm not a fan of the franchise but Bellisario has been at this for a long time and he has perfected a tremendously successful formula of action, military culture, quirk-heavy characters and at least one scenery-chewing veteran thespian per show. SHIELD is heavily targeted at 18-49 and it's not even winning there.
To be clear, we can't say definitively that the Motley Fool writer was wrong. After all, he only said this was possible, but it is important to remember a few things:
His suggestion was not just wrong, it was directionally wrong. He suggested that the series might wildly outperform expectations. Instead, it has at least mildly underperformed them;
His arguments for the suggestion were called out as being weak at the time;
Organizations like Motley Fool, CNBC, and other providers of stock tips are encouraging individuals to engage in an activity that is very risky. Almost no one who is getting their information from a post they see on Yahoo should be engaged in the business of stock picking.
This was an extraordinarily ambitious target. The Avengers was one of the very few movies in film history to break $1 billion at the box office and it made God knows how much more than that when you take into account marketing, rental and streaming, and the tentpole effect on other films in the franchise such as the upcoming Thor and Capt. America movies.
Even when you take into account the fact that a strong show can indirectly generate additional revenue through its effect on the rest of the lineup, the idea that this program would be bigger than the movie that spawned it would require Agents of SHIELD to be a huge perhaps even unprecedented television hit.
To support the claim that this was a relatively likely outcome, the Motley Fool writer offered very little in the way of argument other than his assurance that these things were going to be big.
How have these assurances panned out so far?
On Tuesday night, S.H.I.E.L.D. had 7.1 million viewers and a 2.6 rating among adults 18-49 at 8 p.m. This is still a good rating in this slot, especially when ABC has also recently launched freshman dramas that are much weaker, like Lucky 7, Betrayal and Once Upon a Time in Wonderland. Yet here’s how the Marvel series has tracked so far in the adult demo: A 4.7 rating for the show’s premiere, then 3.3, 2.9, 2.8 and now a 2.6.[A quick side note: Steranko (who arguably deserves co-creator credit for the original S.H.I.E.L.D along with Kirby and Lee) has a weekly gig at the Hollywood Reporter reviewing the show and his take is a bit more negative than the "found its groove" line suggests.]
It’s common for even successful and long-running new shows to drop the first two weeks after their launch, or even for three weeks. But now we’re on Week 5. We’re seeing some new shows stabilize or even improve in the ratings — last night, under-achievers like Fox’s Brooklyn Nine-Nine and ABC’s The Goldbergs finally crept up a bit. On Monday night, CBS’ Mom went up for the first time and Hostages held steady. Yet S.H.I.E.L.D is still trending down. Can Melinda May pull the S.H.I.E.L.D. jet out of its dive? Comic veteran Jim Steranko says the show has found its groove creatively. So why are fans still ditching? ABC has ordered a full season of S.H.I.E.L.D., so it’s not going anywhere anytime soon. But those numbers must stop dropping at some point, hopefully sooner rather than later.
You'll notice the focus on the 18-49 audience. This is area of some controversy in marketing circles and I've heard a lot of smart people in the field suggest that, while a thirty-year-old set of eyeballs might be somewhat more valuable to an advertiser than a sixty-year-old set, the difference isn't big enough to justify dropping a huge segment of the population from your metrics.
Without getting too far into the debate, I will say that it's a good idea to look at both numbers. In this case, pay particular attention to CBS. NCIS remains a powerhouse across all demographics. I'm not a fan of the franchise but Bellisario has been at this for a long time and he has perfected a tremendously successful formula of action, military culture, quirk-heavy characters and at least one scenery-chewing veteran thespian per show. SHIELD is heavily targeted at 18-49 and it's not even winning there.
| NET/TIME/SHOW | 18-49 RATING | TOTAL VIEWERS | |||
| FOX | 8:00P | DADS- | 1.4 | 3,608 | |
| 8:30P | BRKLYN 9-9- | 1.6 | 3,777 | ||
| 9:00P | NEW GIRL- | 1.8 | 3,759 | ||
| 9:30P | MINDY PRJCT- | 1.4 | 2,858 | ||
| ABC | 8-9P | MARVL-SHIELD- | 2.6 | 7,126 | |
| 9:00P | GOLDBERGS- | 1.7 | 5,264 | ||
| 9:30P | TROPHY WIFE- | 1.2 | 4,030 | ||
| 10-11P | SHARK TNK | RS | 1.1 | 3,450 | |
| CBS | 8-9P | NCIS- | 3.0 | 18,580 | |
| 9-10P | NCIS:LA- | 2.6 | 14,870 | ||
| 10-11P | PERSON-INT- | 2.2 | 12,937 | ||
| NBC | 8-9P | BIGST LR15- | 2.0 | 6,636 | |
| 9-10P | VOICE– | 4.0 | 12,847 | ||
| 10-11P | CHICAGO FIRE- | 2.1 | 7,586 | ||
| CW | 8-9P | ORIGINALS- | 0.9 | 2,152 | |
| 9-10P | SUPRNATURAL- | 1.0 | 2,298 | ||
To be clear, we can't say definitively that the Motley Fool writer was wrong. After all, he only said this was possible, but it is important to remember a few things:
His suggestion was not just wrong, it was directionally wrong. He suggested that the series might wildly outperform expectations. Instead, it has at least mildly underperformed them;
His arguments for the suggestion were called out as being weak at the time;
Organizations like Motley Fool, CNBC, and other providers of stock tips are encouraging individuals to engage in an activity that is very risky. Almost no one who is getting their information from a post they see on Yahoo should be engaged in the business of stock picking.
Thursday, October 24, 2013
Alternative thoughts
I read this passage:
On the other hand, maybe we should just stop having the federal government subsidize state programs and simply run them directly. Because these games waste a ton of resources without actually making the system work any better. A beggar thy neighbor strategy, in the long run, leads to everyone being poor.
For some people, disability insurance has become a way of exiting the labor force. It's hard for me to get into high dudgeon over these people, because I suspect that many of them have at least mild disabilities and also lousy job prospects, especially the last few years. But the hard fact is that the disability insurance program has limited funds, and is headed for bankruptcy. If it pays those funds to a substantial number people who are only marginally disabled, and could be working, it cannot pay higher benefits to the more severely disabled.in the context of this passage
There are private-sector consulting companies who are hired by states and paid several thousand dollars for every person who they manage to shift from a cash welfare program, which is partly funded by the state, over to disability insurance, which is funded by the federal government.And my reaction is very different than the original authors. On one hand, I think that the possibility that disability funds might dry up is a call to raising revenue. Helping the disabled (even the partially disabled) out is one of the characteristics of basic human decency.
On the other hand, maybe we should just stop having the federal government subsidize state programs and simply run them directly. Because these games waste a ton of resources without actually making the system work any better. A beggar thy neighbor strategy, in the long run, leads to everyone being poor.
Journalistic decline and GOP dysfunction
Picking up from Tactics, Schmactics...
When we talk about the mainstream media and the right-wing media and all the other little sliver media out there, there are all sorts of standards with which we can make our distinctions. The one I prefer, at least for this discussion, is axiom-based.
In the New York times, or Time Magazine, or slate, or in any section of the Wall Street Journal except the editorial pages, most of the writers start from the same basic set of assumptions. To a slightly lesser extent, you can say the same thing about the right-wing media: Fox news; Rush Limbaugh; red state. We could argue about the validity of each of those sets of assumptions, but the important part for the moment is the difference between the two sets.
Though there had always been right wing papers and left wing papers, it has only been in the past few decades that it is possible to completely immerse yourself in one set of assumptions while your neighbor is completely immersed in another.
That's part one of the story. Parts two and three are what happened to the two halves of the journalistic universe since then and how those changes have affected the breakdown of the Republican party.
On the mainstream side, simplistic narrative journalism, dogmatic centrism, and a increasing disregard for accuracy and for holding subjects to a high standard of honesty all acted together to weaken the press's traditional role in checking party extremes. Since these practices had long been coupled with a sense that the Republicans were the dominant power and a fear of conservative pushback, this primarily worked on the right, allowing unpopular and extreme Republican policies to gain traction. This was particularly true in the area of governance. Unprecedented use of filibusters and other obstructionist techniques were practiced up until recently with relative impunity due to the "both sides do it" mentality of many journalists.
On the right wing media side, journalists traded off their normal role as providers of feedback in order to be more effective motivators. This is perhaps most obvious with Ailes and Fox News where the goal (after turning a profit) was clearly to shape (and in some cases, falsify) the facts in such a way as to keep the base loyal and energized. In the short term, the strategy worked well but it always had inherent risks, risks that have finally started doing serious damage.
You can read this partly as a cautionary tale of Straussianism gone awry. The first, the most fundamental assumption of any society based on the noble lie is that you have a hierarchy with well-defined classes of the liars and the lied-to and that all major decisions are made by people in the first class.
Here's an analogy: officers have been known to paint overly rosy pictures for soldiers ("Things are going great on the Western front." "The enemy's factories are in ruins." "Victory is near."). We can argue over the ethics of this kind of lying, but it's easy to see why some officers might do it.
Now imagine that through a combination of field promotions, broken lines of communication and general confusion, strategic and tactical decisions start being made by people who actually believe all of the misinformation that was fed to the ranks. I'm no military historian but I'm fairly sure this would probably end badly.
We had a pretty clear example of this kind of a breakdown in the Romney team's analysis of poll data in the last days of the election. There was clear value for Romney in having his supporters believe that he was ahead but that value was more than negated by having his advisers believe the same misinformation. You can see similar dysfunction in the recent shutdown where many congressmen made what now appear to be disastrous decisions based apparently sincere belief in such Fox News talking point as "people won't get that upset about a shutdown."
Put more broadly, the processes that allow the right version of the truth to get to the right people – something that has been an integral part of the Republican strategy – has seemingly broken down entirely.
In addition to the largely random flow of misinformation, conservative media created an unforeseen problem in the rank and file with narrative momentum. When most members of a group get much of their information from outside, there's a natural friction on in-group narratives when members realize that their version is not shared by the general public. Conservative media is immersive to an unprecedented degree. Narratives like "the only time Republicans lose is when they become too moderate" are allowed to build unchecked.
On a related note, the immersive quality also greatly facilitates social norming. This greatly encourages extreme positions and widens the gap when members of the group try to communicate with outsiders.
More on this soon.
When we talk about the mainstream media and the right-wing media and all the other little sliver media out there, there are all sorts of standards with which we can make our distinctions. The one I prefer, at least for this discussion, is axiom-based.
In the New York times, or Time Magazine, or slate, or in any section of the Wall Street Journal except the editorial pages, most of the writers start from the same basic set of assumptions. To a slightly lesser extent, you can say the same thing about the right-wing media: Fox news; Rush Limbaugh; red state. We could argue about the validity of each of those sets of assumptions, but the important part for the moment is the difference between the two sets.
Though there had always been right wing papers and left wing papers, it has only been in the past few decades that it is possible to completely immerse yourself in one set of assumptions while your neighbor is completely immersed in another.
That's part one of the story. Parts two and three are what happened to the two halves of the journalistic universe since then and how those changes have affected the breakdown of the Republican party.
On the mainstream side, simplistic narrative journalism, dogmatic centrism, and a increasing disregard for accuracy and for holding subjects to a high standard of honesty all acted together to weaken the press's traditional role in checking party extremes. Since these practices had long been coupled with a sense that the Republicans were the dominant power and a fear of conservative pushback, this primarily worked on the right, allowing unpopular and extreme Republican policies to gain traction. This was particularly true in the area of governance. Unprecedented use of filibusters and other obstructionist techniques were practiced up until recently with relative impunity due to the "both sides do it" mentality of many journalists.
On the right wing media side, journalists traded off their normal role as providers of feedback in order to be more effective motivators. This is perhaps most obvious with Ailes and Fox News where the goal (after turning a profit) was clearly to shape (and in some cases, falsify) the facts in such a way as to keep the base loyal and energized. In the short term, the strategy worked well but it always had inherent risks, risks that have finally started doing serious damage.
You can read this partly as a cautionary tale of Straussianism gone awry. The first, the most fundamental assumption of any society based on the noble lie is that you have a hierarchy with well-defined classes of the liars and the lied-to and that all major decisions are made by people in the first class.
Here's an analogy: officers have been known to paint overly rosy pictures for soldiers ("Things are going great on the Western front." "The enemy's factories are in ruins." "Victory is near."). We can argue over the ethics of this kind of lying, but it's easy to see why some officers might do it.
Now imagine that through a combination of field promotions, broken lines of communication and general confusion, strategic and tactical decisions start being made by people who actually believe all of the misinformation that was fed to the ranks. I'm no military historian but I'm fairly sure this would probably end badly.
We had a pretty clear example of this kind of a breakdown in the Romney team's analysis of poll data in the last days of the election. There was clear value for Romney in having his supporters believe that he was ahead but that value was more than negated by having his advisers believe the same misinformation. You can see similar dysfunction in the recent shutdown where many congressmen made what now appear to be disastrous decisions based apparently sincere belief in such Fox News talking point as "people won't get that upset about a shutdown."
Put more broadly, the processes that allow the right version of the truth to get to the right people – something that has been an integral part of the Republican strategy – has seemingly broken down entirely.
In addition to the largely random flow of misinformation, conservative media created an unforeseen problem in the rank and file with narrative momentum. When most members of a group get much of their information from outside, there's a natural friction on in-group narratives when members realize that their version is not shared by the general public. Conservative media is immersive to an unprecedented degree. Narratives like "the only time Republicans lose is when they become too moderate" are allowed to build unchecked.
On a related note, the immersive quality also greatly facilitates social norming. This greatly encourages extreme positions and widens the gap when members of the group try to communicate with outsiders.
Wednesday, October 23, 2013
Efficient wage markets?
One grows increasingly skeptical of the claims that wages are a perfect reflection of market values:
1) CEO wages were terribly depressed in the early post-war era
2) Markets have changed to allow CEO's to add more value than before
The first seems questionable: we do not think of 1945 to 1978 as a era of desperate stagnation and sub-optimal economic performance. If it was hurting the United States, it was fairly subtle and swamped by other effects.
The second is only more plausible in that modern electronics and communications have made it easier for a CEO to influence policy. But, interestingly, insofar as firms are themselves command economies, this actually suggests that the return to assets on command economies has improved. I won't speculate further except to say that this is an interesting argument for the average free marketer to make.
I suspect the real story is that barriers to entry (i.e. patents, ability to buy out competitors with market capital) are allowing senior people to reward themselves more without hurting the firms ability to compete. Now that is not all bad -- extra resources have done a lot of things throughout history to improve matters, even when inequality is involved. But it does make a mockery of the idea that the market can find the right price or wage in all circumstances.
The gap between skyrocketing CEO pay and relatively stagnant compensation for everyone else has been widening for decades. While annual CEO compensation increased by 726.7% between 1978 and 2011, average worker compensation only went up 5.7% during the same time, according to a 2012 study by the Economic Policy Institute.To make the argument that this is efficient you need to really think one of the following:
1) CEO wages were terribly depressed in the early post-war era
2) Markets have changed to allow CEO's to add more value than before
The first seems questionable: we do not think of 1945 to 1978 as a era of desperate stagnation and sub-optimal economic performance. If it was hurting the United States, it was fairly subtle and swamped by other effects.
The second is only more plausible in that modern electronics and communications have made it easier for a CEO to influence policy. But, interestingly, insofar as firms are themselves command economies, this actually suggests that the return to assets on command economies has improved. I won't speculate further except to say that this is an interesting argument for the average free marketer to make.
I suspect the real story is that barriers to entry (i.e. patents, ability to buy out competitors with market capital) are allowing senior people to reward themselves more without hurting the firms ability to compete. Now that is not all bad -- extra resources have done a lot of things throughout history to improve matters, even when inequality is involved. But it does make a mockery of the idea that the market can find the right price or wage in all circumstances.
Tuesday, October 22, 2013
Tactics, Schmactics -- why I don't buy the latest trope on the government shut down
[I haven't seen anyone frame the discussion in the following way, but a lot of the points I want to make in this thread have been made recently by Josh Marshall and Jonathan Chait. Both are on my fairly short list of daily reads and both have a rare gift for, to paraphrase Orwell, seeing what's in front of their noses.]
You've been hearing it everywhere from Paul Krugman to the National Review: the growing rift in the Republican Party is strictly over tactics -- everyone on the right agrees on what they want; they're just fighting over how to get there -- but having looked carefully at this (and I've stared into this abyss longer than I should have), I'm convinced that it's not just wrong but wrong on multiple levels. I don't think it fits the facts but, more importantly, I don't even think it answers a meaningful question.
Here's a rough analogy. Let's say you're standing in a subway station and a man next to you has a seizure, falls to ground and rolls off of the platform. In that situation, "Why would he want to do that?" is not a meaningful question. The idea of explaining actions through desires only make sense if we make certain assumptions about rationality, vantage and control.
When we're talking about groups, particularly groups large enough not to be able to form fully connected graphs, checking similar assumptions becomes even more important. We have a tendency to anthropomorphize institutions. "The business community wants this." "The Tea Party is trying to do that." Of course, we know this isn't true. The most you can say is that there's a strong consensus or that the group is following the lead of an individual. This doesn't mean that it can't be useful to analyze groups as if they were individual actors; it can often be the best approach, but only if certain conditions are met. The first of these is that the groups have to be, for lack of a better word, functional.
To be functional, the group has to have certain mechanisms in place and working reasonably well:
Mechanisms to bring information into the system, analyze it and make appropriate decisions based on it;
Mechanisms to disseminate instructions for implementing these decisions, and gathering feedback from members to allow adjustments in strategy;
Mechanisms to check those personal agendas when they threaten the overall goals of the group.
My take is that for quite a while now, the Republican party and the conservative movement have not been functional by these standards. I'm not saying that conservatives are stupid or unbalanced or are acting in an irrational or erratic manner. I am saying that the mechanisms needed for functional operation have broken down and, furthermore, they have broken down in entirely predictable ways, as long as you apply the right principles (game theory, social and individual psychology, voting "paradoxes," collective action and principal agent problem, organizational theory, etc.).
For example, the Romney campaign's inability to process poll information clearly indicates a breakdown in the way that information is suppose to flow through a system. More recently, many of the statements being made by prominent conservatives are clearly cathartic; They can only be seen as the actions of people seeking emotional release without regard to the larger strategic goals of the group.
I've got some suggestions as to why this is happening that I will try to flesh out more later (with the caveat that I have no special expertise in any of these areas and I will invariably get in over my head). I've got first drafts of the next couple of posts, but just to restate the underlying thesis, when it comes to recent developments in the GOP, I think that we are less likely to find useful analogies in the Art of War and more likely to find them in When Prophecy Fails.
You've been hearing it everywhere from Paul Krugman to the National Review: the growing rift in the Republican Party is strictly over tactics -- everyone on the right agrees on what they want; they're just fighting over how to get there -- but having looked carefully at this (and I've stared into this abyss longer than I should have), I'm convinced that it's not just wrong but wrong on multiple levels. I don't think it fits the facts but, more importantly, I don't even think it answers a meaningful question.
Here's a rough analogy. Let's say you're standing in a subway station and a man next to you has a seizure, falls to ground and rolls off of the platform. In that situation, "Why would he want to do that?" is not a meaningful question. The idea of explaining actions through desires only make sense if we make certain assumptions about rationality, vantage and control.
When we're talking about groups, particularly groups large enough not to be able to form fully connected graphs, checking similar assumptions becomes even more important. We have a tendency to anthropomorphize institutions. "The business community wants this." "The Tea Party is trying to do that." Of course, we know this isn't true. The most you can say is that there's a strong consensus or that the group is following the lead of an individual. This doesn't mean that it can't be useful to analyze groups as if they were individual actors; it can often be the best approach, but only if certain conditions are met. The first of these is that the groups have to be, for lack of a better word, functional.
To be functional, the group has to have certain mechanisms in place and working reasonably well:
Mechanisms to bring information into the system, analyze it and make appropriate decisions based on it;
Mechanisms to disseminate instructions for implementing these decisions, and gathering feedback from members to allow adjustments in strategy;
Mechanisms to check those personal agendas when they threaten the overall goals of the group.
My take is that for quite a while now, the Republican party and the conservative movement have not been functional by these standards. I'm not saying that conservatives are stupid or unbalanced or are acting in an irrational or erratic manner. I am saying that the mechanisms needed for functional operation have broken down and, furthermore, they have broken down in entirely predictable ways, as long as you apply the right principles (game theory, social and individual psychology, voting "paradoxes," collective action and principal agent problem, organizational theory, etc.).
For example, the Romney campaign's inability to process poll information clearly indicates a breakdown in the way that information is suppose to flow through a system. More recently, many of the statements being made by prominent conservatives are clearly cathartic; They can only be seen as the actions of people seeking emotional release without regard to the larger strategic goals of the group.
I've got some suggestions as to why this is happening that I will try to flesh out more later (with the caveat that I have no special expertise in any of these areas and I will invariably get in over my head). I've got first drafts of the next couple of posts, but just to restate the underlying thesis, when it comes to recent developments in the GOP, I think that we are less likely to find useful analogies in the Art of War and more likely to find them in When Prophecy Fails.
Monday, October 21, 2013
An army of sock puppets
I'm working on a thread on the role of information and misinformation in GOP dysfunction. In the course of that thread, I'll probably be linking to this passage from NPR reporter David Folkenflick's "Murdoch's World":
This "courtesy" is self-serving because:
Murdoch and Ailes like to hit back hard and dirty;
Many friends and former co-workers of mainstream journalists now work for Fox and honest descriptions would make for some very uncomfortable socializing;
The day may come when these journalists find themselves in the Howard Kurtz role, disgraced and largely unemployable anywhere but Fox.
On the blogs, the fight was particularly fierce. Fox PR staffers were expected to counter not just negative and even neutral blog postings but the anti-Fox comments beneath them. One former staffer recalled using twenty different aliases to post pro-Fox rants. Another had one hundred. Several employees had to acquire a cell phone thumb drive to provide a wireless broadband connection that could not be traced back to a Fox News or News Corp account. Another used an AOL dial-up connection, even in the age of widespread broadband access, on the rationale it would be harder to pinpoint its origins. Old laptops were distributed for these cyber operations. Even blogs with minor followings were reviewed to ensure no claim went unchecked.One of the many problematic aspects of the increasingly self-serving ethics code of the mainstream press (yes, I'm back on that again) is the "professional courtesy" extended to organizations like News Corp. It's OK to be patronizing (at the NYT, it seems to be a job requirement), but you must always stop short of the five-letter-word for spade.
This "courtesy" is self-serving because:
Murdoch and Ailes like to hit back hard and dirty;
Many friends and former co-workers of mainstream journalists now work for Fox and honest descriptions would make for some very uncomfortable socializing;
The day may come when these journalists find themselves in the Howard Kurtz role, disgraced and largely unemployable anywhere but Fox.
Saturday, October 19, 2013
Weekend blogging: spies and fugatives
Joseph and I are long time fans of the show Burn Notice and both of us were very pleased with the series finale. If you have watched the show, even intermittently, you should definitely check it out. It offered a genuine resolution to the story with considerable resonance. Matt Nix, series creator and one of the best of a truly exceptional generation of show runners, wrote and directed the episode and delivered on all fronts. On top of all that, he provided one of my favorite series-ending lines.
Of course, given my diagnosed pop-culture affliction, all this talk of finales immediately got me thinking about Roy Huggins and the Fugitive.
Often working under the pen name John Thomas James, Huggins created one of the most memorable bodies of work in television. His specialty was casting some of the most charismatically masculine actors working in film and television -- in shows like Maverick, the Fugitive, Run for Your Life, and the Rockford Files -- then carefully deconstructing the standard definition of a masculine hero. Heroes were supposed to be brave and invulnerable (the second somewhat undercutting the first) and to always fight fair,* none of which you could count on in a Huggins production.
James Garner was arguably the definitive Huggins hero, but it was David Janssen's Richard Kimble who veered the farthest from the macho standard. Janssen spent the run of the show being as forgettable and nonconfrontational as possible and running away at any sign of trouble. It was an extraordinary performance, balanced by nuanced and occasionally (and improbably) sympathetic work by Barry Morse as Lt. Gerard. Morse and show runner Alan Armer somehow managed to make Gerard obsessed with duty without having him lose his objectivity. Other than one obvious blind spot he kept a clear and realistic view of the man he pursued. In the end, he even... but I'm getting ahead of myself.
In addition to an innovative and much imitated structure, Huggins had another groundbreaking idea. The Fugitive was always meant to be a story with an ending. After four seasons (hit shows had much shorter runs inn the Sixties), a two-part episode wrapped up all of the loose ends in a way that guaranteed that TV executives would take notice.
Part two of the finale was the most-watched television series episode at that time. It was viewed by 25.70 million households (45.9 percent of American households with a television set and a 72 percent share), meaning that more than 78 million people tuned in.For those far too interested in television, here's Huggins' account of the unlikely origin of the show:
* as always, I reserve the right to unapologetically split my infinitives.
Friday, October 18, 2013
NYT correction watch: Did Dickens meet Dostoevsky? -- Opinions still differ
About six months ago, University of California Berkeley Prof. Eric Naiman revealed that much of the literary world, including the New York Times, had been taken in by massive hoax.(you can read my take here but you should read Naiman's piece first. It's exceptionally good). When scholars first started raising questions about the hoaxster's claim, which appeared in the NYT, that Dickens met Dostoevsky, the paper published a weaselly update:
Correction: October 29, 2011The "some scholars" line badly understated the case but it was at least technically accurate at the time. Now, though, we know that all of the primary sources for this anecdote came from a serial fantasist writing under a string of assumed identities and we've known this since last April (the story even made Slate). That would seem to be plenty of time for the NYT to update their correction so I googled "Dickens Dostoevsky" and Michiko Kakutani (the writer in question). Here's what I saw:
The Books of The Times review on Tuesday, about “Becoming Dickens: The Invention of a Novelist” by Robert Douglas-Fairhurst, and “Charles Dickens” by Claire Tomalin, recounted an anecdote in Ms. Tomalin’s book in which Dostoyevsky told of meeting Dickens. While others have also written of such a meeting and of a letter in which Dostoyevsky was said to have described it, some scholars have questioned the authenticity of the letter and whether the meeting ever occurred.
Correction: October 29, 2011
The Books of The Times review on Tuesday, about “Becoming Dickens: The Invention of a Novelist” by Robert Douglas-Fairhurst, and “Charles Dickens” by Claire Tomalin, recounted an anecdote in Ms. Tomalin’s book in which Dostoyevsky told of meeting Dickens. While others have also written of such a meeting and of a letter in which Dostoyevsky was said to have described it, some scholars have questioned the authenticity of the letter and whether the meeting ever occurred.
Maybe they'll get around to fixing it next year.
Medical Innovation is expensive
Megan McArdle has some strong opinions on how high drug prices have managed to help drive medical innovation:
and
So this would be expensive. But I am unclear as to whether it would be more expensive than the current model of drug development. And these subsidies could go to many of the same companies that develop drugs now. I think that this conversation would be much better informed with some actual calculations as to cost/benefit. This is a bit outside of my expertise, but I see it as a key step to really advancing the conversation.
Drug development is essentially a giant international collective-action problem. The U.S. has kept it from being a total disaster because we don’t have good centralized control of our insurance market, and our political system is pretty disorganized and easy to lobby. If that changes -- and maybe we just changed it! -- we’ll knock down the prices of drugs to near the marginal cost using government fiat, and I expect that innovation in this sector will grind to a halt. Stuff will still be coming out of academic labs, but no one is going to take those promising targets and turn them into actual drugs.
and
There are some promising alternatives. The main two that have been suggested are prizes and having the U.S. government get into the business of developing actual drugs, rather than just funding basic research. I’m in favor of trying both of these approaches. But so far, prizes have not proved themselves as ways to fund what is essentially commercial product development -- at least, not at the same level that patents do. Nor has the government. As we’ve just seen from the government’s attempt to develop a Travelocity-like site for health insurance, there are reasons to think that government might not be very good at that sort of thing. I don’t mean to slur the government -- governments absolutely have developed drugs in the past. But these are not the majority, and government processes often make it hard to do things that companies do easily.Now I don't want to knock pharmaceutical companies. A lot of good work is done by these companies. On the other hand, medical costs in the United States are really, really high. And the National Institutes of Health has proven itself as a really effective model of targeted and efficient medical research. Now it is true that the cost of doing this would not be trivial. Randomized controlled trials are extremely expensive and crucial to ensuring that only safe medications reach the open market.
So this would be expensive. But I am unclear as to whether it would be more expensive than the current model of drug development. And these subsidies could go to many of the same companies that develop drugs now. I think that this conversation would be much better informed with some actual calculations as to cost/benefit. This is a bit outside of my expertise, but I see it as a key step to really advancing the conversation.
Thursday, October 17, 2013
Did Andrew Gelman catch me doing something I've complained about other people doing?
Maybe. In reply to this post where I suggested that Motley Fool's Netflix Emmy coverage was an example of the following:
I generally get annoyed with people who read hidden meaning into a story element when there's an obvious narrative or commercial reason for including that element. My go-to example is critics who read puritanical agendas into teen-slasher films, ignoring the facts that:
Exploitation film-makers are constantly looking for a way to incorporate sex and nudity or "the suggestion thereof" into scripts;
They are also looking for ways to scare the audience and for directors of limited talent, one of the easiest methods for making an audience jump is to spring the monster out when the victims have been lulled into a false sense of security;
In order to stretch this kind of story out to feature length, it helps if you can find an excuse to have one or two character at a time slip away from the group.
Under these constraints (and generally assuming none-too-gifted screenwriters composing as fast as they can type), it would be surprising not to see the sex-then-death plot device showing up in cheap horror films.
So am I guilty of the same kind of over-reading with Motley Fool and Netflix? Maybe a little but there are a couple of caveats that need to be thrown in.
First of all, a good sales pitch is generally a good story but it has to be a special kind of story, one that ends with the customer in just the right frame of mind. Unless I'm missing a revenue stream here, these MF posts exist solely to drive people, directly or indirectly, to purchasing an MF publication. They have to be entertaining enough to hold the readers' interest but, unlike a movie or a TV show or a magazine article, they have to do more than just entertain; they have to sell. Given that constraint, you can't analyze the story without analyzing the pitch.
Second, are stories of glamorous successes a good way of giving investment advice? I recall Peter Lynch saying that he preferred unglamorous companies that other investors were likely to overlook (if memory serves, he specifically said that the corniness of the name "Moe" in the Pep Boys logo made him much more eager to buy the stock). Given that the vast majority of us have no business picking stocks, is it responsible to sell the amateur investor on buying the superstars corporations that everybody's talking about?
One of Motley Fool's favorite strategies is to pick a hot company like Netflix or Disney and relentlessly talk it up. Unlike the traditional pump-and-dump, the goal isn't to drive up that individual stock (it's hard to move a Disney); instead what's being pumped is the idea that you're losing money by not being in. This frame of mind makes readers receptive to buying MF's investment books and $199 newsletters even though, based on their columns, they have little to offer other than conventional wisdom and questionable analysis.Gelman offered an alternate suggestion:
But I wonder if there’s something else going on. I don’t read The Motley Fool—actually, I’ve never looked at it before, but I did click on it just now when preparing this post—but I do subscribe to the New York Times. The Motley Fool’s motto is “to educate, amuse & enrich.” The Times is not enriching me, but I do read it to be educated and amused. I wonder whether the Fool’s pushing of Netflix is part of the educate-and-amuse bit. Okay, the story is not very amusing and apparently not educational at all—but, from the reader’s perspective, what the Fool is providing with the Netflix story is an ongoing saga, a mini-soap-opera.
The best analogy might be the newspaper coverage of a sports team. Yeah, the Tigers are gonna go all the way this year, check out their new pitching staff, etc. These kinds of stories have their own internal logic and they can be pegged to local news. Thus, the Emmys can be spun as evidence for a pre-existing story where Netflix is a hero, just as the local newspaper can spin a hot streak by the third baseman as good news for the home team.
I generally get annoyed with people who read hidden meaning into a story element when there's an obvious narrative or commercial reason for including that element. My go-to example is critics who read puritanical agendas into teen-slasher films, ignoring the facts that:
Exploitation film-makers are constantly looking for a way to incorporate sex and nudity or "the suggestion thereof" into scripts;
They are also looking for ways to scare the audience and for directors of limited talent, one of the easiest methods for making an audience jump is to spring the monster out when the victims have been lulled into a false sense of security;
In order to stretch this kind of story out to feature length, it helps if you can find an excuse to have one or two character at a time slip away from the group.
Under these constraints (and generally assuming none-too-gifted screenwriters composing as fast as they can type), it would be surprising not to see the sex-then-death plot device showing up in cheap horror films.
So am I guilty of the same kind of over-reading with Motley Fool and Netflix? Maybe a little but there are a couple of caveats that need to be thrown in.
First of all, a good sales pitch is generally a good story but it has to be a special kind of story, one that ends with the customer in just the right frame of mind. Unless I'm missing a revenue stream here, these MF posts exist solely to drive people, directly or indirectly, to purchasing an MF publication. They have to be entertaining enough to hold the readers' interest but, unlike a movie or a TV show or a magazine article, they have to do more than just entertain; they have to sell. Given that constraint, you can't analyze the story without analyzing the pitch.
Second, are stories of glamorous successes a good way of giving investment advice? I recall Peter Lynch saying that he preferred unglamorous companies that other investors were likely to overlook (if memory serves, he specifically said that the corniness of the name "Moe" in the Pep Boys logo made him much more eager to buy the stock). Given that the vast majority of us have no business picking stocks, is it responsible to sell the amateur investor on buying the superstars corporations that everybody's talking about?
Wednesday, October 16, 2013
The importance of measurement
Exactly how you measure a parameter is both important and difficult:
This is definitely a different perspective than I have had on this issue before. In a way I have been trapped in the paradigm of public versus private provision (and so a small public sector seems to suggest a low tax country to me). But a basket of goods and services can be difficult to break into such pieces.
An excellent example of this problem is the extraordinary costs of health care in the United States. Finding ways to properly tackle the problem of medical expenses is difficult, frustrating, and has some really nasty trade-offs. Trying to solve it is important.
But in the meantime, pushing economic growth for the lower and middle classes is a good second best way to proceed forward while we seek solutions to these fundamental issues.
Well, one of the reasons some Americans feel they’re being taxed to death is that if you add up our taxes, which are low compared to other modern countries, and then you add in private expenditures for things the tax system pays for in other countries — a lot of our health care costs, higher education costs, admissions and fees and tickets and licenses for a lot of things — lo and behold, we end up being a relatively high-tax country. But it depends on how you analyze the data.
And let me give you one killer figure: We spend so much money on our health care in this country — or as I prefer to think of it, sick care in this country — that for every dollar that the other 33 modern economies spend for universal coverage, we spend $2.64. And this is done using something called “purchasing parity dollars,” so they’re truly comparable. So we spend $2.64 per person and still have almost 50 million people with no coverage and 30 million with limited coverage, and these other countries spend far less with universal coverage.
This is definitely a different perspective than I have had on this issue before. In a way I have been trapped in the paradigm of public versus private provision (and so a small public sector seems to suggest a low tax country to me). But a basket of goods and services can be difficult to break into such pieces.
An excellent example of this problem is the extraordinary costs of health care in the United States. Finding ways to properly tackle the problem of medical expenses is difficult, frustrating, and has some really nasty trade-offs. Trying to solve it is important.
But in the meantime, pushing economic growth for the lower and middle classes is a good second best way to proceed forward while we seek solutions to these fundamental issues.
Tuesday, October 15, 2013
Deficits and Climate Change
Larry Summers makes the link and it is not the one you might expect; instead he is looking at the innate uncertainty in policy projections:
Much of this uncertainty is on the growth side of the equation, which may actually be the easiest policy lever to move in the short term. It seems to me, as a student of history, that it is rarely the case that a country has been ruined by a burst of prosperity, growth, and development of human capital.
But the second part of Dr. Summers' argument is really the best -- Climate change is at least as likely as an increase in the debt to GDP ratio in the next 75 years. I think the balance is much higher and the possible side effects of climate change are pretty dire for some really key places in America (think Miami). Yet it is not the flashpoint for this discussion and that, I believe, is what gives the game away.
Whatever people are fighting about, it is not the long term state of the debt. Sure, it would be nice to reduce it but obvious tactics (raising taxes) are completely off of the table and there is a constant return to trying to cut specific government programs. This has all of the hallmarks of a policy duel and not a real worry about the long term future.
But one way or the other, the discussion has been way too focused on the point estimates of the statistical models and not the confidence intervals. Epidemiologists have already learned, to their regret, how dangerous that can be.
P.S. And no, I am not suggesting a p-value based approach either, but rather measures of certainty that are explainable in ordinary language and make clear that these are projections, so that the level of sacrifice to improve the point estimate can be properly evaluated.
These figures lie well within any reasonable confidence interval for deficit forecasts. The most recent comprehensive CBO evaluation found that, leaving aside any errors due to policy changes, the expected error in projections out only five years is 3.5 per cent of GDP. Put another way, given the magnitude of forecast uncertainties there is a chance of close to 40 per cent that with no new policy actions the ratio of debt-to-GDP will decline over 25 or 75 years.
Of course, debt problems could also be much worse than is now forecast.
But in most areas policy makers avoid taking strong actions unless there is statistically compelling evidence to support them. Few would favor action to curb greenhouse gas emissions without evidence establishing that substantial climate change is overwhelmingly likely. Yet it is conventional wisdom that urgent action must be taken to cut the deficit, even as prevailing short-run deficit forecasts suggest no problems and long-run forecasts are within margins of error.When the variance in the projection models are explicitly discussed, it makes the whole matter seem more prosaic. After all, if we were frequentists we would reject the hypothesis of an increase in debt to GDP deficit at 10 years as not statistically significant (versus the null hypothesis that this change = 0).
Much of this uncertainty is on the growth side of the equation, which may actually be the easiest policy lever to move in the short term. It seems to me, as a student of history, that it is rarely the case that a country has been ruined by a burst of prosperity, growth, and development of human capital.
But the second part of Dr. Summers' argument is really the best -- Climate change is at least as likely as an increase in the debt to GDP ratio in the next 75 years. I think the balance is much higher and the possible side effects of climate change are pretty dire for some really key places in America (think Miami). Yet it is not the flashpoint for this discussion and that, I believe, is what gives the game away.
Whatever people are fighting about, it is not the long term state of the debt. Sure, it would be nice to reduce it but obvious tactics (raising taxes) are completely off of the table and there is a constant return to trying to cut specific government programs. This has all of the hallmarks of a policy duel and not a real worry about the long term future.
But one way or the other, the discussion has been way too focused on the point estimates of the statistical models and not the confidence intervals. Epidemiologists have already learned, to their regret, how dangerous that can be.
P.S. And no, I am not suggesting a p-value based approach either, but rather measures of certainty that are explainable in ordinary language and make clear that these are projections, so that the level of sacrifice to improve the point estimate can be properly evaluated.
Monday, October 14, 2013
A mean looking kid walking by a row of glass houses with a big ol' bag of rocks
TPM has a short but fascinating revelation
As regulars have probably guessed, I see this as another result of an increasingly dysfunctional culture of journalism, specifically the way that journalists react to having someone on the inside who ignores the implicit code of conduct.
This is not a left/right matter -- it cuts across pretty much all of the media establishment -- but conservatives have tended to make better tactical use of the rules we're talking about, for instance, using pox-on-both-their-houses conventions to provide cover for unpopular positions. As a result, there are more obvious targets on the right but that's a fairly trivial factor.
Silver and Krugman prompted such a strong reaction not because they were too liberal (despite seeing the world through an overwhelmingly upper class perspective, the NYT cannot be considered a right-wing paper); but because they were insiders who refused to follow the rules of the culture, and who therefore threatened that culture.
Over the past two decades, journalists have fashioned a remarkably self-serving code of conduct: de- emphasizing factual accuracy; embracing a lazy herd mentality with talk of narratives and memes; avoiding tough confrontations through false equivalencies; and passing the buck on keeping their audience informed.
When Nate Silver pointed out both that the data didn't support many of the popular narratives and that the journalists pushing those narratives were contributing nothing, he threatened reputations, business models and the underlying culture of the institutions. The fact that he was right was beside the point; he was ignoring the conventions of the journalistic establishment and there is no greater bastion of that establishment than the New York Times. By the same token, when Krugman points out that "centrist" pundits have a huge personal and professional interest in pushing the "Paul Ryan, serious policy guy" narrative, he was expressing a fact that was widely known but which was not supposed to be said aloud.
The paper has never been exactly friendly to blunt, independent writers with satirical tendencies as Molly Ivins discovered way back in the Seventies, but things have only gotten worse since then. Almost everybody lives in glass houses now and Paul Krugman does not look like someone you'd trust with a rock in that situation.
MSNBC host Joe Scarborough said Thursday that a public editor at the New York Times considers liberal columnist Paul Krugman's work to be an ongoing "nightmare."Assuming that Scarborough is on the level (and putting aside Ferguson's self-awareness issues), this would seem to echo the New York Times' reaction to Nate Silver. In both cases, the supposedly liberal staff seemed to take an instant dislike to highly respected liberal writer/researchers who appear to have brought in a large number of traditional and digital subscribers. What's going on?
During a segment on "Morning Joe," conservative historian Niall Ferguson joined Scarborough to pile on Krugman. Ferguson said that Krugman lacks "humility, honesty and civility."
"And there's no accountability," Ferguson said. "No one seems to edit that blog at the New York Times. And it's time that somebody called him out. People are afraid of him. I'm not."
Scarborough then recalled a conversation he had with a Times editor following his televised debate with Krugman earlier this year.
"I actually won't tell you which public editor it was but one of the public editors of the New York Times told me off the record after my debate that their biggest nightmare was his column every week," Scarborough said.
As regulars have probably guessed, I see this as another result of an increasingly dysfunctional culture of journalism, specifically the way that journalists react to having someone on the inside who ignores the implicit code of conduct.
This is not a left/right matter -- it cuts across pretty much all of the media establishment -- but conservatives have tended to make better tactical use of the rules we're talking about, for instance, using pox-on-both-their-houses conventions to provide cover for unpopular positions. As a result, there are more obvious targets on the right but that's a fairly trivial factor.
Silver and Krugman prompted such a strong reaction not because they were too liberal (despite seeing the world through an overwhelmingly upper class perspective, the NYT cannot be considered a right-wing paper); but because they were insiders who refused to follow the rules of the culture, and who therefore threatened that culture.
Over the past two decades, journalists have fashioned a remarkably self-serving code of conduct: de- emphasizing factual accuracy; embracing a lazy herd mentality with talk of narratives and memes; avoiding tough confrontations through false equivalencies; and passing the buck on keeping their audience informed.
When Nate Silver pointed out both that the data didn't support many of the popular narratives and that the journalists pushing those narratives were contributing nothing, he threatened reputations, business models and the underlying culture of the institutions. The fact that he was right was beside the point; he was ignoring the conventions of the journalistic establishment and there is no greater bastion of that establishment than the New York Times. By the same token, when Krugman points out that "centrist" pundits have a huge personal and professional interest in pushing the "Paul Ryan, serious policy guy" narrative, he was expressing a fact that was widely known but which was not supposed to be said aloud.
The paper has never been exactly friendly to blunt, independent writers with satirical tendencies as Molly Ivins discovered way back in the Seventies, but things have only gotten worse since then. Almost everybody lives in glass houses now and Paul Krugman does not look like someone you'd trust with a rock in that situation.
Sunday, October 13, 2013
Weekend blogging -- "nudity or the suggestion thereof"
Eventually this is going to tie back in with a recent Andrew Gelman post at the Monkey Cage and possibly with a post I need to write one of these days on the business lessons of Roger Corman, legendary maker of exploitation pictures (often but incorrectly identified as 'B-movies'*). In the meantime, I think this anecdote can probably stand on its own.
When Martin Scorsese first met Corman, he expected to meet the maniacal, seat-of-the-pants yahoo type that the stories might suggest. "Instead," Scorsese recalls, "I found him a very courteous and gentlemanly guy, but a very stern and tough customer who was quite polite as he explained these outrageous tactics of exploitation in cold, calm terms. . . . 'Martin, (Corman told him,) it's important that every fifteen pages there should be a touch of nudity or the suggestion thereof. Like a shoulder or leg exposed. It keeps the interest.' "* B's are films made to fill out the second half of a double feature and, as Corman himself likes to point out, that format had fallen out of favor well before he started making films.
Friday, October 11, 2013
Ecomonies and Pharmacoepidemiology: today's link.
Beat the Press points out just how much health care costs are driving the United States fiscal situation:
It is very much like pharmacoepidemiology. Our focus on the adverse effects of medication use can often blind us to the real benefits of appropriately prescribed and used medications. But balancing the two pieces is not at all trivial, so it can be too easy to just weigh one side of the equation.
But suppose we humor our friends at the Post. If our per person costs were the same as Canada's, or 53.1 percent of U.S. costs ($4,521.6/$8507.6) , then we would be looking at primary budget surpluses of more 2.0 percent of GDP over the next decade. These rise to more 3 percent of GDP in the 2040s and would eventually exceed 4 percent of GDP ($640 billion a year in today's economy).
If our per person health care costs were the same as in the U.K. then we would be spending just 40.0 percent as much on health care ($3,405.5/$8507.6). In this case our primary budget surplus would be over 3 percent of GDP for the next 15 years, rising to over 4 percent of GDP in the 2040s and eventually exceeding 6 percent of GDP by the end of the forecast period ($960 billion in today's economy).I think that this rather dramatically illustrates that there are a lot of ways to meet the challenges of the long term budget deficit. It's not that we can become Canada or the UK tomorrow, but that this difference in costs (with the attendant lack of access) is not ideal. If we do decide that it is worth it to put this focus on medical costs then it makes sense to realize that taxes are needed. In isolation, most taxes hurt somebody. In isolation, most government programs benefit somebody. The trick is to find a way to balance these two elements.
It is very much like pharmacoepidemiology. Our focus on the adverse effects of medication use can often blind us to the real benefits of appropriately prescribed and used medications. But balancing the two pieces is not at all trivial, so it can be too easy to just weigh one side of the equation.
Thursday, October 10, 2013
What does a position entail?
I am big fan of thinking through an argument from start to finish as well as assessing the implications of the argument. Matt Yglesias did a good job with this approach with this post:
After all, the assumption that economic growth will continue undergirds conventional wisdom about economic policy in a really profound way—namely it's the key reason to limit political interest in redistribution of economic resources. There are a lot of metaphors about rising tides lifting all boats and baking a bigger pie instead of arguing about how to divide up a small one, and they're all pointing to the same issue—distributional issues matter, but in the long-term, economic growth matters much much more. Average living standards in the West are much higher in 2013 than they were in 1863 not because we abandoned capitalism and workers seized control of the factories, but because society as a whole is much more prosperous than it was 150 years ago.It is an absolutely correct argument -- if there is no longer any potential for growth than pro-growth wealth distributions are kind of pointless and it becomes cruel to allow for high concentrations of wealth. Now it is a different argument to claim that wealth concentration is required to encourage growth, but then the absence of growth should be a huge problem for low-tax/high-growth crowd. Appeals to the long run get less compelling when the long run never actually arrives . . .
Tuesday, October 8, 2013
An interesting point on redistribution
Chris Dillow:
In practice going back to first principles on these types of rights can be very difficult and is likely to be somewhat misleading. However, it is always worth noting that the outcomes that we currently have are because of system of values interested to maximize aggregate welfare and not some sort of natural entitlement.
Now, libertarians might object that such redistributions are the effect of meddlesome government. In their ideal polity, we'd simply have secure property rights and no redistribution. I'm not sure. In a minimal state, we'd still have technical change. And this itself creates de facto rights. For example, in the 19th century mid-west, the invention of barbed wire (pdf) allowed land-owners to enclose large areas, thus strengthening their property rights. In the 21st century, file-sharing gives young people the idea that they have a right to free music. Faced with such technical change, even a libertarian state would have to choose how to allocate new rights - for example, the right to shared files versus the right to protect one's intellectual property. However it chooses, there's redistribution.
I say this to endorse Frances' claim; governments don't "defend" property rights but create them.I think that there is a real sense that this point is very useful -- property is entirely a social construct. There is no sense, in the state of nature, where a given piece of land is owned by a specific individual. A system of property rights has many great features but the choice of what can be owned is, itself, rather important as are the socially acceptable steps that can be taken to defend these rights.
In practice going back to first principles on these types of rights can be very difficult and is likely to be somewhat misleading. However, it is always worth noting that the outcomes that we currently have are because of system of values interested to maximize aggregate welfare and not some sort of natural entitlement.
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