Monday assorted links

1. “Why don’t they come?”  It’s not what they like, I would say, plus they are worse at planning and time management, and they enjoy TV more.  “Why should they go?” is maybe a better question than “Why don’t they come?”

2. How much does the Apple Watch cost to make?

3. Restaurant traffic meters.

4. Do agricultural conditions matter for institutions?

5. “In our sample, attraction seems to be more important than trust…

6. Croatia arrests the president of Liberland.

Comments

Re: (1)

"Ironically, the for-profit commercial TV industry is far more effective than our subsidized nonprofit arts organizations at engaging economically vulnerable members of our society."

Yeah, what irony. It's like rain on your wedding day. Still, later in the piece:

"We would urge would-be social engineers to tread carefully when it comes to deciding for poor people what their consumption preferences should be."

Baby steps. Baby steps.

Ironically should probably read "inevitably." To me the most interesting point in the piece was: " Sevilla et al. find that in contrast to previously mentioned increases in the quantity of leisure time, the quality of leisure time has declined across the board for people at all income levels, with an especially steep decline in leisure quality for low-SES individuals....increased TV watching as a prime culprit behind this decrease in leisure time quality, as watching TV is a passive, one-way communication medium that doesn’t require the presence of others."
I also like that the author of that piece is holding his own in the comments.

Why exactly is it surprising that the poor and working class don't particularly like "high culture"?

Having grown up in a (white) lower-SES neighborhood many moons ago, I would say there are at least two reasons they don't go: passivity and a lack of imagination. My parents were, thankfully, exceptions.

He's not only looking at high culture. Unless you count football games as high culture.

Turns out the poor and working class don't particularly like what was designed to make them feel inferior to the "elite".

Yep. Or I would put it in a less dark way: there is no advantage to these things outside of a certain social circle.

The chief reason I would go to an art gallery is to go along with friends, or for a date. Somehow the desire to go to these places and the ability to talk sensibly about what you see it a sign of being 3l33t.

1. If only we could make the American favelas attractive .... 'We also would build some makeshift structures there, similar to the better dwellings you might find in a Rio de Janeiro Favela. The quality of the water and electrical infrastructure might be low by American standards, though we could supplement the neighborhood with free municipal wireless. Hulu and other web-based TV services would replace more expensive cable connections for those residents. Then we would allow people to move there if they desired. In essence, we would be recreating a Mexico-like or Brazil-like environment in part of the United States, although with some technological add-ons and most likely greater safety.' Apparently, a passage from a book called Average Is Over.

Though one also has to point out that the same author also wrote a book explaining how capitalist culture creation was better than any previous model - and just coincidentally, there is a link to Amazon at this affiliate site to 'In Praise of Commercial Culture.' Which, one can safely assume, includes TV shows for the masses.

Marx probably would have something pithy to say, assuming he had ever met McLuhan.

(1.) I thought maybe Prof. Cowen linked to this because it is unintentionally hilarious, like an Onion parody of social science research.

But OK, seriously: High art culture requires significant investment before one can "consume it". People who have high discount rates (i.e. impatient) are less likely to do so. Also, consuming high art culture is probably more about signalling than consumption. It's like a tax on belonging to higher social classes. Lower SED have no reason to signal, since they don't meet the other requirements to belong in the high SED class.

I'm now curious about high-art tattoo parlors. Kind of hits that signaling point, doesn't it?

(I've seen tattoos in the design of Wassily Kandinsky. I'm positive it exists.)

I'm glad the article provided you with some good laughs. I'd be more confident in my comedic skills, however, if I could be sure that you actually read it. For example, the very first sentence states, "People with lower incomes and less education (low-SES) participate at lower rates in a huge range of activities, including not just classical music concerts and plays, but also less “elitist” forms of engagement like going to the movies, dancing socially, and even attending sporting events." The article is as much about Katy Perry concerts and dance parties as "high culture," whatever that means.

So the article reduces to "people with less money do fewer non-free things"? In that case, it's still laughable.

Again, read the article. Even when things ARE free, most people with less money do fewer of them.

Point taken, but c'mon: Katy Perry concerts are expensive. Movies with the required 3D cost $15 in the evening, and most sports tickets are very expensive too.

What I'm saying is: you are not communicating your point well. The burden is always on the writer, not the reader.

Free cultural events tend to cluster in areas with high costs of living. Primarily because it requires a wealthy local populace to subsidize the events either through donations or taxes. For example many museums have free admissions at least once a week, but they still tend to be located in rich neighborhoods. There's a hell of a lot more and higher quality free events going on in Manhattan or Santa Barbara than the Bronx or Eastern Kentucky.

Ever been poor? I can remember my parents deciding not to do things because of the lack of gas money. Very few things that are free are truly free from the perspective of a poor person. This is something that many well meaning people did not understand when they tried to help us out.

I haven't had a chance to read it yet, but have they included opportunity costs? I see one point that one of the studies they based their work on had looked at parents of small children, but that was too small of a population to make up for the difference alone.

They also assert that low socioeconomic status people have more leisure time. Haven't gotten to the point where they explain that.

So, TANSTAAFL, have opportunity costs been taken account of when looking at events with a nominal price of $0?

1. Classical music and high art didn't appeal to many people when they were new. And as Jack said, many of the high-SES are attending events for reasons other than enjoyment.

Attending NASCAR events can require a lot of resources. Why aren't more high-status people doing this as a form of conspicuous consumption?

The ultra-rich should start owning NASCAR teams instead of racehorses.

They do; of course, they might not be Brooklyn high-status but definitely Charlotte high-status.
http://www.brentsherman.com/PDFS/NASCAR.pdf (demographics of NASCAR fans)

Lots of rich people do, mostly through the proxy of corporate marketing departments. It isn't the rank and file's decision to put patches on racer's jackets and the sponsorships come with box seats.

NASCAR is pretty cheap as a form of all-day (or all-weekend) entertainment. There are lots of cheap seats, and you can bring in your own beer and food.

1. Burried lede. The counterintuitive part is: education is a much better predictor than income of who sees sporting events.

My guess is that geography explains it. The less education, higher income football fans, for instance, are more likely to live in the exurbs, far from the football stadium.

re: #1
A. I grew up in a middle SES household, have actual formal training in music, am now clearly upper SES, and would rather watch paint dry than sit through classical music. A point missed is that while basically 0 low SES folks attend such events, a rather small percentage of HIGH SES folks do. The fact that 90% of your attendees are high SES does NOT mean that 90% of high SES folks put up with your stuff. It's not about money, it's not even about time, it's about "who cares?"

B. There are lots of people with high SES around any real form of motorsports, but you rarely see them in the normal spectator seats. Every major series, and most certainly F1 and NASCAR, have "delux" arrangements for the movers and shakers. By the way, there certainly are ultra-rich sorts in motorsports, but as much or more F1, sportscars, etc. as NASCAR.

I'd be curious to know the mean income of the average pro rodeo fan. The National Finals Rodeo in Las Vegas in December is one of the most lucrative annual events for businesses in that city.

I have a pretty similar background to Bryan, and I still like to play guitar on occasion, but aside from some outdoor classical concerts (that are nice mainly because of the weather) and Christmas/holiday concerts that are a multigenerational family traditional, live classical performances are not something I seek out. Prefer Broadway to opera. Love museums but tend only to visit when there is a major exhibit in town. Philistine that I am, I would rank "Breaking Bad" ahead of Shakespeare's major tragedies.

I tend to think most patronage of classical music is signaling and as the value of the signal drops, patronage is dropping.

Lastly, I tend to think that it's not that low SES people are bad at time management/planning so much as being low SES makes it harder to plan/manage time.

1. The difference is in political-economy ideology.

Video and audio is increasingly serving the individualist conservative. The individual chooses without having some central planning elite dictate what you must sit through.

Going to events like concerts, ball games, art galleries, free concerts in the park are socialist-communist. They are group events with the program dictated by either central planner elites or by the group you are with picking the program and everyone contributes to the best of their ability and if you try, you get what you need.

You should try out this line on church-going fundamentalists. I'd love to see their reaction to going to church being called "socialist-communist."

Actually, one of the important hidden biases in the study is that it seems to be inquiring only about secular events and not events in the context of church attendance. Lots of music, performance and art is carried on in church contexts and the proportion is probably greater with lower SES. Someone who sees a passion skit or hears a Bach solo at a local church during a church service probably doesn't call that a theater or music performance.

I wonder about this as well. The only place I heard music live growing up was in a church settings. And not in churches that we actually attended on a regular basis either.

I was raised by middle-class immigrant parents from Europe who dragged me to violin lessons, orchestra practices, and concerts by professional classical musicians for most of my childhood. I then proceeded to attend two highly-ranked private universities, one of them in the Ivy League. Like Bryan above, I would now rather watch paint dry than consume classical music or any other kind of high-art. I do enjoy paintings that are humorous or very dark, but I see that as the exception that proves the rule - I like these things because they're NOT the typical portrait of some wealthy donor or some flowers. Still, most of my free time is spent consuming professional and collegiate sports, or posting on the internet.

I would bet a lot of money that most "high status" individuals who claim to like fine art are in fact signaling or engaging in conspicuous consumption.

I do wonder what the typical psychical/affective state is of someone attending an Opera or a modern art museum.

When I was in Berlin for a year, I went to the opera a lot. It was fun and cheaper than going to the movies.

Now that I am a 5%, I can afford to go see Ed Sheeran in concert.

The opera's quite entertaining and accessible (as long as you can see the translations), and the time passes much quicker than you'd think. I'd say even more so than typical Broadway musicals. Can't say the same for contemporary art exhibits (get dragged along frequently, because my wife's field of study is art history), they're pretty much only enjoyable if you go to make fun of the art. That being said a lot of contemporary art is basically philosophy with conversation pieces. A lot of people who do enjoy consuming it, like it not so much for the quality of art itself, but because the pieces are a jumping off point for interesting and deep discussions.

In Los Angeles, the Pacific Opera Project puts on immensely entertaining minor league opera productions for not too much more than the cost of a 3-d movie ticket. And you can eat and drink while watching. They're doing Richard Strauss's "Ariadne auf Naxos" the next two weekends.

http://www.pacificoperaproject.com/

General admission is $20, a table for two with a bottle of wine and a platter of cheese and fruit is $65 ($32.50 each). POP generally punches up the libretto's English language supertitles with at least 100 brand new jokes per opera, which get funnier the closer you get to the bottom of the wine bottle.

The price has gone up considerably over the two years we've been attending, but it remains a remarkable deal.

Thanks for the recommendation! Looks like a good time. Definitely on my short-list next time I'm in LA.

in other words you lack the imagination or ability to enjoy complex works of art.

Eh, Hadur has a point.

After all, too much navel-gazing and signaling leads you to Damien Hirst. Give me Banksy any day over that.

Re: #1: I've heard that Empire is actually pretty good. What is the consensus here, is it worth my time to invest in a new series?

Terrific acting, great potential but ultimately opted for soap opera over something meatier. It's fun and worth watching but I had hoped for more. (I wrote fairly early on: http://www.bloombergview.com/articles/2015-02-24/will-empire-match-its-ratings-)

#2 - Is there even a market for Apple Watches? Seriously.

(Disclosure: I'm the author of the Apple Watch post.) It's great to read your comment. From my perspective, there does appear to be a market for the Apple Watch. Consider that in 2014, >3M smartwatches were sold (1). None of them with the design and capability of the Apple Watch, and none of them backed by the valuable consumer installed base of Apple. Industry analysts estimate that Apple has sold >1.7M Apple Watches to-date (2). The figure for 2015 may be ~15M, if not more (3). Finally, note that, back in 2001, one could easily have asked "Is there a market for the Apple iPod?" Many thought not. I've purchased one, and am using it. In a phrase: "Capability is addictive." It's so convenient to glance at your wrist and know the weather, your next calendar appointment, or where you are with regard to your physical activity. Would everyone value this? Decidedly not. This smartwatch -- any smartwatch -- is not for everyone. But is there a market? -- I believe "decidedly yes". Just how large it grows to be, we shall see.

1. http://www.smartwatchgroup.com/top-10-smartwatch-companies-sales-2014/. I reduced the figure by one-half, just to be ultra-conservative. Some of the items aren't true watches, and some of the figures might not be as reliable as others.
2. http://www.theverge.com/2015/4/16/8398579/apple-watch-sales-estimates and http://www.zdnet.com/article/new-estimate-from-slice-pegs-apple-watch-orders-at-1-7-million/
3. http://blogs.barrons.com/techtraderdaily/2015/05/05/apple-watch-still-waiting-for-the-ah-ha-moment-says-rosenblatt/

Yes, but, several issues here:

1) Market size is the deal breaker for any Apple product. Is the market big enough to recoup the investment fast enough, and make a profit on it?

2) Unlike previous Apple "breakthroughs", Apple isn't the first-mover in this market. It's following products that already exist, which are, to most people, virtually indistinguishable from the Apple iWatch. Apple hasn't done this before.

3) Sales numbers of units don't mean much. 1.5 million or 15 million or whatever. What we need to know is how many they need to sell to recover the investment in this, and what margins Apple is getting. If indeed your estimates are that the watch actually costs twice as much as other analysts are claiming...than this is really bad news for Apple. Not enough margins on each watch sold.

Consider that smartphones sales reached...1 BILLION...last year, and then you see why such multi-million sales are actually insignificant. The margins on an iPhone are much larger for apple than those of an iWatch. Hence, as a revenue stream for Apple, they will (probably) remain a small part for quite a while. Which is not good news for Apple...as its smartphone and tablet business are already turning into commoditized businesses (where Apple cannot compete).

4) Personally, the idea sounds very stupid to me, and pretty redundant. Essentially wearing the functionality provided already by almost all smartphones, which are already in everyone's hands all the time...on your wrist. A less comfortable and convenient means of displaying the information. But, what do I know. I just think the whole idea is dumb.

Overall, long-term prospects for Apple, given such a dismally stupid product (in my opinion)...compared to their previous 3 breakthroughs...is not good.

First, let me say: As a long-time reader, I'm thrilled to be part of MR in any way. I realize full well that this article will probably be my first and only one that's interesting enough have a link in MR. So I'm grinning ear to ear.

AIG, I crafted a lengthy and -- believe me -- quite powerful :-)) response. (I jest.) But who wants boring words from gadget-head (me). That would be the epitome of "Why don't they come" (i.e., people *not* reading my words). So below is the short version. AIG, we might not agree 100%, but I am sincerely glad you commented, and I respect your view.
----
1. You might be right. The market might not be as big as Apple hopes. Should be big enough, though, for Apple to break-even in 2015. Here's a shoddy model to illustrate. http://mobileforward.net/very-rough-apple-watch-model/. Anyone with the link can see it, but it's not visible to site visitors.

2. Apple usually *follows* (e.g., PowerBook, iPod, iPhone, iPad came *years* after others developed the category). It usually *falters* when it leads (Newton, Apple TV (did you know it launched in 2007?).)

Indistinguishability? Probably not a factor: a) Apple Watch buyers have to own an iPhone, to use it. b) They can't use Android smartwatches with iPhone. So, c) the thought of "Can I distinguish between Samsung Gear and Apple Watch?" won't even cross their mind.

3. Apple will break-even in 2015. (I'm referring to the model I mentioned in #1.) Even with my estimates (in the article), gross profits are healthy. And that's just for the lowest-gross-profit units. Higher priced models make higher margins.

Of 1B smartphones sold, the vast majority earned little (or negative) operating profit. Most tablets earn little operating profit. Apple is the poster child for non-commoditization: it has pricing power. As a result, it earns 60%-70% of smartphone operating profits, and probably 80% of tablet operating profits. With the exception of Samsung, the rest of the field barely breaks even, or loses money.

4. Yours is a reasonable point of view. Many will share it. It's been okay for me. Haven't really had to form any new habits, and it's nice to see weather, answer the phone, or ask Siri a question without having to take out my phone. When judging the market, beyond our own preferences, it's useful to consider the following: This is the worst smartwatch Apple will ever make. They're only going to get better. Cheers.

Ok, fair enough. But...

1) 1 year + to "break even" on a 500 million dollar investment is...bad. Really bad actually.

2) It's even worst when considering that investors are waiting and hoping for the "next big thing" from Apple. And instead what they get is...a watch?

3) They're waiting for the next big thing from Apple because this game has plaid out before...3 times. The market becomes commoditized and competes on price: apple looses. Apple's only strategy (which it has successfully pulled off 3 times now), is to go create a new market somewhere else and start the game all over. The market was waiting for the 4th time. And it got...the iWatch?

4) Apple doesn't play the same strategy as other smartphone makers. They compete on price, Apple competes of differentiation. Problem is, if Samsung controls 50%+ of the market, and makes back its investment in a new phone in a matter of...weeks, probably...while Apple needs years to make up its investment, what will happen over time? Well, what has been happening over time: other smartphone features become just as good as Apple's, and prices plummet. That's why market share is the Achilles heel of Apple: at some level it needs enough "hispters" to pay $800 for a phone that does the same thing as a $100 phone.

5) Ok, Apple may not have been the very very first to introduce those new products, but it got in the game really early, and in a market which few recognized as meaningful. The iWatch just doesn't seem that way to me: this is an accessory to a phone.

6) The key determinant of Apple's success in the iPod or iPhone or iPad business wasn't...simply...the gadget. Apple and everyone else knows a cool gadget isn't going to cut it. Its the ecosystem created around the gadget which makes the difference. And Apple did it in both the iPod and iPhone markets: i.e. others may have been there first, or had better products, but lacked the ecosystem which Apple created.

In the case of the iWatch...this is just another gadget to take advantage of an already existing, and saturated, ecosystem. It's just another "phone accessory".

7) And here lies the problem: it may be a cool gadget (I don't think it is, but who cares what I think), it may be profitable (at some point, but still nothing to write home about)...but this isn't what investors were waiting for.

Investors are waiting for the...next big thing...the next market that Apple will create, like it did with the iPod and iPhone.

Short of that, long term, Apple will be squeezed out just like it was in the PC business. Apple can't compete on price. Apple can't compete even if it's product is the best in the world.

Other companies have much much shorter development cycles and ROI cycles. By the time it takes Apple to recover the investment on a new phone or OS, Samsung can get 6 out. So over time, everyone knows what will happen.

So the question is...is the iWatch what Apple really thinks will "save" it? And by "save" it, I mean create the next 20% a year growth rate that investors expect? Not even close. This is a drop in the bucket, even if it is hugely successful.

PS: When you compare Apple with other companies, keep in mind that Apple isn't competing only with the likes of Samsung. It's competing with the likes of Google too. It's competing with the likes of Amazon. And all the 3 dozen other companies throughout a vertical supply chain. So while you may be right that other companies may not make as high margins on their phones...but that's ok. When you have 6 times the market share...and your costs are only those of the phone but not the OS or many of the other supporting systems...tiny margins can be a lot more profitable.

What's Google's margins on Android?

I.e...Apple makes the phones and the OS, and other stuff too. OTOH, Google focuses on OS, Samsung on phones etc. I.e., Apple's R&D has to be split 6 ways. Other companies can specialize.

Where this game ends, everyone knows. Which is why I think with the iWatch, Apple is just telling the market "we're out of ideas".

PPS: In fact, it doesn't matter what Google's margins on Android are (or Android related profits). Margins matter for Apple. Volume matters for Google. And when the features become (or are) mostly indistinguishable...the question will again be (or already is), how long till the margins are squeezed.

(This comment comes after AIG's comment below, with timestamp: May 12, 2015 at 4:22 am)

MRMRMRMRMRMRMRMRMRMRMRMR
(added this line to catch attention, since this comment may appear out of chronological order)

Dear AIG: I'll let you have the last word, sir. Let's look at this again in a year. Who knows, I might have one more interesting piece by then. Or not. I suppose, on an (even more) neutral topic than Apple Watch, I would say - and hopefully many agree: R&D is the way forward for many companies, and for many countries. I hope the US (I'm partial) keeps moving forward.

Dear AIG - if you are not a "sir", my apologies. It should have occurred to me that I don't actually know. (Ah, words that would be fitting in so many other circumstances.) Since I didn't know, I should not have used that address. Cheers.

I wasn't very clear earlier: that financial model that I linked to -- that was an exaggerated, ultra, ultra-low probability worst case prepared for the purpose of showing how, even in such a scenario, Apple Watch breaks even quickly. My (personal) expectations of Apple Watch financial performance are much, much higher.

1. Arts consumption is mostly about identity.

+1

And Signaling.

You believe the same thing about attending a baseball game? Nobody seems interested in the interesting part of the paper.

The SES correlation is not the interesting part.

I know a working class guy who was just given free tickets to a Yankee game down in NY city. He really wants to take his son but is not sure his car will make it (he live in rural upstate New York) and he is not sure about other associated costs.

Tell him to take the train in from Poughkipsie....or Wassaic.
Although if he is far upstate, and the issue with going to a baseball game is that it is more than 200 miles away, that's not so much an issue with the game, but the fact that he lives in the sticks. It is the tyranny of distance, not an issue with the current state of baseball.

Sure, but the interesting finding is that if you hold income constant, the person with more education is more likely to attend a game.

Good point, but does that mean identity is the wrong way to look at it, or does it point to something interesting about how identity markers are themselves changing?

A lot of attendance at live entertainment threatens feelings of social comfort and dominance. Much of high culture emerged as a way to tame Conan the Barbarian-style aristocrats into gentlemen by bribing them to have higher status through patronage of civilized arts that require concentration and long tutelage.

Thus a lot of people aren't comfortable at the symphony because of embarrassing uncertainties like: Do you clap after the first movement? They'd prefer to go some place where they'd feel socially dominant, or at least comfortable, or stay home.

Even Pacific Opera Project insists upon using the original language titles for its delirious productions. "Ariadne auf Naxos” scares away a lot of people worried about how to pronounce it, although that tends to make the joke better for the people who do show up to enjoy the wackiness.

You have a theory on why, holding income constant, the person with more education is more likely to attend a ballgame?

That article did a disservice to studies on this subject. I was reading up on this a couple months ago and the fascinating finding is that education is much more highly correlated with event attendance - even at ball games & nightclubs - than income. The use of SES in this piece dillutes the findings.

Maybe you are measuring costs all wrong? The event may be free but I might not have a car? Or I'm going to be working that second job coz I am falling back on my mortgage?

(1) I believe Adam Carolla nailed this explanation years ago. It is pretty simple: most low SES people are severely depressed, and the causation runs from depression to low SES, not vice versa.

How does "low-SES" equal "people with lower incomes and less education"

Look interesting. "How To Use Economics & Not Be Used by Economists" https://www.youtube.com/watch?v=wFO2bU1du1M

Labor costs to make an apple watch: Wage per hour in China = $1.00; hours to make an apple watch = .25. Labor cost of an apple watch = $.25

Comments for this post are closed