By Martin Gurri, due out November 13. I am reading this splendid book for the first time. It basically explains why Brexit and Trump won, and what will happen next. Due to social media, we are disillusioned with our elites, and that will prove hard to reverse.
Consumer DNA testing — and the mountain of data it has generated — has become pervasive enough that it’s possible to identify about six of every 10 people in the U.S. who are of European descent, even if they’ve never given a sample.
We could call this strange geography created by technology “AirSpace.” It’s the realm of coffee shops, bars, startup offices, and co-live / work spaces that share the same hallmarks everywhere you go: a profusion of symbols of comfort and quality, at least to a certain connoisseurial mindset. Minimalist furniture. Craft beer and avocado toast. Reclaimed wood. Industrial lighting. Cortados. Fast internet. The homogeneity of these spaces means that traveling between them is frictionless, a value that Silicon Valley prizes and cultural influencers like Schwarzmann take advantage of. Changing places can be as painless as reloading a website. You might not even realize you’re not where you started…
The profusion of generic cafes and Eames chairs and reclaimed wood tables might be a superficial meme of millennial interior decorating that will fade with time. But the anesthetized aesthetic of International Airbnb Style is the symptom of a deeper condition, I think.
Why is AirSpace happening? One answer is that the internet and its progeny — Foursquare, Facebook, Instagram, Airbnb — is to us today what television was in the last century…
That is all from Kyle Chayka at The Verge. I found this article interesting, well-written, and making a valid point. Still, is it not mostly your fault if you are stuck in “Airspace,” as it is called? Northern Virginia has some of the wealthiest counties in the United States, yet most of the terrain still is not Airspace or anything close to it. Nor is most of San Francisco this way, or most of Manhattan, much less the other boroughs. (And might you not prefer Airspace for the NYC subway?) Seoul is a city which has its share of Airspace, but again is hardly dominated by it — the dense, low-slung neighborhoods of small restaurants are fascinating and mostly retro.
I think of Airspace as a 2-3% of our living space condition, yet a 2-3% that you can immerse yourself in if you are so inclined.
Which I am not.
Ben Thompson is an American business, technology, and media analyst, who is based in Taiwan. He is known principally for writing Stratechery, a subscription-based newsletter featuring in-depth commentary on tech and media news that has been called a “must-read in Silicon Valley circles”.
…led by Pat Bajari, Amazon has hired more than 150 Ph.D. economists in the past five years, making them the largest employer of tech economists. In fact, Amazon now has several times more full time economists than the largest academic economics department, and continues to grow at a rapid pace.
That is from the new Susan Athey and Michael Luca paper “Economists (and Economics) In Tech Companies.”
And here is commentary from Ben Thompson:
This is why the so-called “link tax” is doomed to failure — indeed, it has already failed every time it has been attempted. Google, which makes no direct revenue from Google News, will simply stop serving Google News to the EU, or dramatically curtail what it displays, and the only entities that will be harmed — other than EU consumers — are the publications that get traffic from Google News. Again, that is exactly what happened previously.
There is another way to understand the extent to which this proposal is a naked attempt to work against natural market forces: Google’s search engine respects a site’s robot.txt file, wherein a publisher can exclude their site from the company’s index. Were it truly the case that Google was profiting unfairly from the hard word of publishers, then publishers have a readily-accessible tool to make them stop. And yet they don’t, because the reality is that while publishers need Google (and Facebook), that need is not reciprocated. To that end, the only way to characterize money that might flow from Google and Facebook (or a €10-million-in-revenue-generating Stratechery) to publishers is as a redistribution tax, enforced by those that hold the guns.
Here is the full post, excellent as always.
Wow! It’s unbelievable how hard you are working to deny that monopsony and monopoly type market concentration is causing all all these issues. Do you think it’s easy to compete with Amazon? Think about all the industries amazon just thought about entering and what that did to the share price of incumbents. Do you think Amazon doesn’t use its market clout and brand name to pay people less? Don’t the use the same to extract incentives from politicians? Corporate profits are at record highs as a percent of the economy, how is that maintained? What is your motivation for closing your eyes and denying consolidation? It doesn’t seem that you are being logical.
First, monopsony and monopoly tend to have contrasting or opposite effects. To the extent Amazon is a monopsony, that leads to higher output and lower prices.
Second, if Amazon is knocking out incumbents that may very well be good for consumers. Consumers want to see companies that are hard for others to compete with. Otherwise, they are just getting more of the same.
Third, if you consider markets product line by product line, there are very few sectors where Amazon would appear to have much market power, or a very large share of the overall market for that good or service.
Fourth, Amazon is relatively strong in the book market. Yet if a book is $28 in a regular store, you probably can buy it for $17 on Amazon, or for cheaper yet used, through Amazon.
Fifth, Amazon takes market share from many incumbents (nationwide) but it does not in general “knock out” the labor market infrastructure in most regions. That means Amazon hire labor by paying it more or otherwise offering better working conditions, however much you might wish to complain about them.
Sixth, if you adjust for the nature of intangible capital, and the difference between economic and accounting profit, it is not clear corporate profits have been so remarkably high as of late.
Seventh, if Amazon “extracts” lower taxes and an improved Metro system from the DC area, in return for coming here, that is a net Pareto improvement or in any case at least not obviously objectionable.
Eighth, I did not see the word “ecosystem” in that comment, but Amazon has done a good deal to improve logistics and also cloud computing, to the benefit of many other producers and ultimately consumers. Book authors will just have to live with the new world Amazon has created for them.
And then there is Rana Foroohar:
“If Amazon can see your bank data and assets, [what is to stop them from] selling you a loan at the maximum price they know you are able to pay?” Professor Omarova asks.
How about the fact that you are able to borrow the money somewhere else?
Addendum: A more interesting criticism of Amazon, which you hardly ever hear, is the notion that they are sufficiently dominant in cloud computing that a collapse/sabotage of their presence in that market could be a national security issue. Still, it is not clear what other arrangement could be safer.
I am surprised issues of this kind have taken so long to surface:
Amazon is investigating claims that employees accepted bribes to disclose confidential data that would give sellers that use its marketplace a competitive advantage. The company confirmed the investigation following a report in the Wall Street Journal that Amazon employees, working through brokers, have sold internal sales data, the email addresses of product reviewers, and the ability to delete negative reviews and restore banned accounts. “We are conducting a thorough investigation of these claims,” an Amazon spokeswoman said.
These practices seem to be a particular problem in China, though not only. Here is more from Shannon Bond at the FT. Here is further coverage at Verge: “The WSJ also reports that it costs roughly $300 to take down a bad review, with brokers “[demanding] a five-review minimum” per transaction.”
…start-ups are likely to be hit hardest, whether their products are made in China or they import components and do the final assembly work in the US.
“Your resistor or diode is already costing you 10 times what you’d pay if you were Apple,” said Mr Kelly. Slapping a tariff on these higher prices will add to the pain, he said. Companies such as Brilliant face the extra challenge of trying to price their products in a way that will generate demand in new markets that have yet to establish themselves.
…breaking into the mass market usually involves cutting the price, something that is now much harder.
In the technology industry, hardware start-ups face some of the longest odds for success. Until they reach high enough volumes to strike better deals with suppliers and support the costs of brand marketing it is hard to make the economics work, and profit margins are notoriously low. “When you’re in hardware, a 25 per cent tariff can be a death knell to your business,” says Nate Kelly, a supply chain expert who now heads TrackR, a company that makes Bluetooth devices. The lack of a financial cushion or a diversified set of products means many companies will not be able to “ride this out for six months or a year”, he said.
And Mexico will gain, China will lose. That is from Richard Waters at the FT.
That is the topic of my latest Bloomberg column, here is one bit:
The world of the internet – fundamentally a world of information – is reporting on the failures of the elites 24/7. And while pretty much every opinion is available, some have more resonance than others. Is it not the case that, post-2008, most people really are skeptical of the ability of American elites to prevent the next financial crisis? Going even further back, I recall the optimism surrounding the Mideast peace talks of the 1970s or the Oslo accords of the 1990s. Hardly anyone honest has the same positive feelings about today’s efforts at peace talks.
Again, these impressions are based on actual information. An informed populace, however, can also be a cynical populace, and a cynical populace is willing to tolerate or maybe even support cynical leaders. The world might be better off with more of that naïve “moonshot” optimism of the 1960s.
…Instead of today’s swamp of negativism, do you not instead long for a few rousing hymns, a teary rom-com happy ending, a non-ironic exhibit of wonderful American landscape paintings? Yet all these cultural forms are largely on the wane. It’s no accident that the hugely successful romantic comedy “Crazy Rich Asians” is set in Singapore.
Homer > Socrates!
That is by Michael Bailey, Ruiqing Cao, Theresa Kuchler, and Johannes Stroebel¶, there is a demonstration effect in consumption, namely you are more likely to buy a house if your friends did well buying homes. Here is from the working paper version:
We show how data from online social networking services can help researchers better understand the effects of social interactions on economic decision making. We use anonymized data from Facebook, the world’s largest online social network, to first explore heterogeneity in the structure of individuals’ social networks. We then exploit the rich variation in the data to analyze the effects of social interactions on housing market investments. To do this, we combine the social network information with housing transaction data. Variation in the geographic dispersion of social networks, combined with time-varying regional house price changes, induces heterogeneity in the house price experiences of different individuals’ friends. We show that individuals whose geographically distant friends experienced larger recent house price increases are more likely to transition from renting to owning. They also buy larger houses and pay more for a given house. Similarly, when homeowners’ friends experience less positive house price changes, these homeowners are more likely to become renters, and more likely to sell their property at a lower price. We find that these relationships are driven by the effects of social interactions on individuals’ housing market expectations. Survey data show that individuals whose geographically distant friends experienced larger recent house price increases consider local property a more attractive investment, with bigger effects for individuals who regularly discuss such investments with their friends.
“I think Trump’s complaint undid a lot of good and sophisticated thought that was starting to work its way into public consciousness about these issues,” said Siva Vaidhyanathan, a professor of media studies at the University of Virginia who has studied Google and Facebook’s influence on society.
The idea that many of the extant media and academic criticisms of Google are not much better than Trump’s, or that Google might be wrecking us and making us stupid, but the president is the only one not allowed to criticize it…well…Or how about the notion that the public was becoming “good and sophisticated” on the issue, but somehow unable to resist the polemics of Trump?
We need a new word for these kinds of fallacies. Any nominations?
Here is the full Farhad Manjoo piece.
Here is the transcript and audio, definitely recommended. Here is part of the summary:
She and Tyler explore her ideas about the stifling effect of political correctness and more, including why its dominant form may come from the political right, how higher education got screwed up, strands of thought favored by the Internet and Youtube, overrated and underrated Australian cities, Aussie blokes, and more.
Here is an excerpt:
COWEN: When did political correctness become a major issue, or become a major issue again? And why do you think it happened exactly then?
LEHMANN: That’s a good question, and I don’t know if I have the answer. I know that there were lots of debates around political correctness in the early ’90s, for example.
COWEN: Yes, and it seems to fade away and then come back.
I’ve noticed in my own life that I started noticing political correctness around 2007. At the time, I thought it had something to do with the business model of Internet publishing.
That was when Gawker and the blog Jezebel was really popular. It was established in 2007, and then it got very popular over the next couple of years. I thought that there were a lot of clickbait kind of articles promoting these really simplistic black-and-white narratives of oppression.
Unless one had reasonable critical thinking skills, I could see how young people could be influenced by that kind of content coming out. I think there’s something to do with the Internet and the way the media has had to adapt to this new business model where you have to drive . . . You have to get lots of views, lots of hits, millions more than you would with the newspapers.
I think it’s something to do with that, but that’s probably just one variable in many other factors.
COWEN: What do you think of the hypothesis that political correctness is a kind of virus that’s hijacked the left? It’s figured out some kind of weak entry point, and it’s come in and taken over parts of it, and it will bring down many victims with it, but actually, it’s crippling the left.
LEHMANN: Yep, yeah.
COWEN: True or false?
LEHMANN: Probably true.
COWEN: If one objects to that argument, we should in a sense encourage more of it, at least if we’re being pure utilitarians, or not?
COWEN: Probably in the media? In general, intellectual life, but if you take, say, the United States as a whole, do you think it’s left-wing or right-wing political correctness that’s stronger and more destructive?
LEHMANN: Yeah, it’s probably right-wing political correctness.
A question from me:
COWEN: I’ve been speaking about the right in aggregate terms, but if you think of the effect of the Internet, which strands of the right do you think are favored, and which do you think are falling away because of Internet discourse? Because it shouldn’t favor it all equally, correct?
We also cover Australia vs. New Zealand, the masculine ethos of Australia and its origins, why PC is different in Australia, the movie Lantana (which we both strongly recommend), and yes Australian fashion.