Brad DeLong

Agglomeration Economies and Industrial Policies

Paul Krugman:

Motor City Stories: Brian Palmer has a nice summary of the reasons behind the concentration of car companies in Michigan… historical accident perpetuated by agglomeration economies. What he doesn’t say is that there is a close relationship between such stories and the case for the auto bailout. Agglomeration economies exist because… the network of suppliers, the skills, the interchange of knowledge supported by a geographical industry concentration in turn gives firms in that industry concentration an advantage…. Now, the existence of important agglomeration economies immediately implies that there are social consequences to the success or failure of an individual firm that aren’t captured by the profit and loss statement of that firm alone. Let General Motors fail, and the resulting collapse of its suppliers will hurt other firms too, possibly driving them out of business too. You don’t want to overuse this sort of argument…. But it was surely a major consideration for the auto bailout — and a reason why hard-line opposition to any such action was bad economics.

Tobias Buckell: B&N teams up with MSFT

Tobias Buckell

B&N teams up with MSFT: If you’d told me that B&N and MSFT had teamed up back in 2002 I would have thought ‘how Orwellian,’ and yet in this picture, they’re both the underdogs. But this will give Microsoft things to offer as it tries to come out with a tablet soon. And while I’m not the world’s biggest Microsoft fan, I do love competition…

Academics to the Barricades!: Long Past Time to Stop Publishing in High-Cost Journals...

Henry Farrell writes:

Harvard Library pushes open access: This looks like a bombshell announcement to me (I’m not aware of the internal politics behind the announcement, but I’m presuming that Robert Darnton’s fingerprints are all over it). Discuss.

We write to communicate an untenable situation facing the Harvard Library.… [M]ajor periodical subscriptions, especially to electronic journals published by historically key providers, cannot be sustained.… It is untenable for contracts with at least two major providers to continue on the basis identical with past agreements. Costs are now prohibitive…. [P]lease consider the following options open to faculty and students (F) and the Library (L), state other options you think viable, and communicate your views: Make sure that all of your own papers are accessible by submitting them to DASH in accordance with the faculty-initiated open-access policies (F). Consider submitting articles to open-access journals, or to ones that have reasonable, sustainable subscription costs; move prestige to open access (F). If on the editorial board of a journal involved, determine if it can be published as open access material, or independently from publishers that practice pricing described above. If not, consider resigning (F).

Some of this may be hardball bargaining, with the two unnamed providers (one of which, I presume, has a name starting with E[lsevier-North Holland]). But not very much – to state the problem so bluntly, and to encourage faculty to stop publishing in, and resign from the boards of non-open access journals sounds more like pushing for system-change than for a better deal within the current system. This may be the beginning of the end.

It ought to be not just the beginning of the end, but the end itself.

Gary Reback (2002): Patently Absurd http://www.forbes.com/asap/2002/0624/044.html Courtesy of Tim Berners Lee

eBooks and Amazon: Charlie Stross Fears Doom at the Hands of Cold-Blooded Slow-Thinking Publishers

Charlie's Diary:

What Amazon's ebook strategy means: By Charlie Stross It seems to me that a lot of folks in the previous discussion don't really understand quite what makes Amazon so interesting—and threatening, for that matter—to the publishing industry. So I'm going to take a stab at explaining…. I'd like to introduce three keywords that need defining before you can understand Amazon:

Disintermediation…. Monopoly…. Monopsony.

Agglomeration Economies and Industrial Policies

Paul Krugman:

Motor City Stories: Brian Palmer has a nice summary of the reasons behind the concentration of car companies in Michigan… historical accident perpetuated by agglomeration economies. What he doesn’t say is that there is a close relationship between such stories and the case for the auto bailout. Agglomeration economies exist because… the network of suppliers, the skills, the interchange of knowledge supported by a geographical industry concentration in turn gives firms in that industry concentration an advantage…. Now, the existence of important agglomeration economies immediately implies that there are social consequences to the success or failure of an individual firm that aren’t captured by the profit and loss statement of that firm alone. Let General Motors fail, and the resulting collapse of its suppliers will hurt other firms too, possibly driving them out of business too. You don’t want to overuse this sort of argument…. But it was surely a major consideration for the auto bailout — and a reason why hard-line opposition to any such action was bad economics.

Brian Palmer:

Why are all the big American car companies based in Michigan?: Detroit and its environs had a lot to offer the nascent auto industry around the turn of the 20th century. Iron ore… timber… [r]ail and water routes…. And Detroit already hosted heavy industry like machine shops and stove works…. Detroit’s eventual dominance probably had more to do with a couple of historical accidents than any geographic advantage. First, innovators like Henry Ford and Ransom Olds happened to live in Michigan. Second, automotive executives in early-20th-century Detroit behaved a lot like Silicon Valley executives today: They regularly switched companies and launched spinoffs and startups. This culture of cross-pollination spread innovative manufacturing and design ideas among the Detroit manufacturers. Distant competitors couldn’t keep up with Motown’s research and development….

[N]one of the 69 companies that entered the auto industry (PDF) between 1895 and 1900 was located in Detroit. Olds Motor Works became the city’s first major carmaker when it relocated from Lansing in 1900. Ransom Olds then made a decision that would shape the course of the industry—rather than creating hundreds of small components in-house for his Curved Dash Runabout, he subcontracted much of the work…. The people who built the car’s parts eventually learned so much about automotive manufacturing that they went on to launch their own brands….

The number of U.S. carmakers peaked at 272 in 1909, including major manufacturers in New England and Ohio. During the 1910s, however, the Detroit brands pulled away. In 1915, 13 out of the country’s 15 most popular car brands were in Detroit. Motor City executives, particularly Ford, invested heavily in research and development, distancing their products from the out-of-towners…

Marginal Products and Earnings in Historical Perspective...

In 1183 A.D., Reynaud de Chatillon--Prince of Antioch, Castellan of Kerak in Moab, Lord of Oultrejourdain, one of the leading nobles of the Latin Kingdom of Jerusalem, tall, strong, handsome, wielding his two-handed sword In Nomine Domine, and suffering from severe impulse-control problems--had much, much higher earnings than I would have had had I been back in the Latin Kingdom of Jerusalem in 1183.

Today, by contrast, I sit here outdoors in the warm Berkeley winter sun with a Treasury-Department Family Economic Income concept eight times the U.S. median, and were Reynaud de Chatillon to be here now he would be working the loading dock at Target at near-minimum wage and on Thorazine, for the skills that were his comparative advantage are to typically highly rewarded today--if he were not in Folsom Prison.

And perhaps in future centuries the wheel will turn again:

Ryan Avent:

Technology: Cognitive inequality: LAST week, I participated in a panel discussion on open questions in economics with professor and economics blogger extraordinaire Karl Smith. We got to talking about inequality, and I ran through a few of the bog standard interpretations of rising income gaps: mismatches between the supply of and demand for skills, superstar effects at the very top, and improved rent-seeking in the financial sector. Mr Smith offered something dramatically different, some of which he gets at in this post:

I want to make the point that this consistent with my long thesis that we are returning to an environment where productivity gains do not accrue to unskilled labor because they are imbedded in the brains of the innovators. A factory is really big and hard to keep secret. Computer code less so. When you simply write down the process you want or draw the object you want and the computer translates it for you the seep down [keeping the relative income distribution from blowing apart] will grind to [a] complete halt….

I want to stop there and use this thought to begin to tie a few threads together. Politicians, and many economists, are increasingly focused on the importance of global supply chains…. [W]hat most people seem to gloss over is the fact that the most important parts of modern supply chains are embedded in the heads of innovators and… in the space… in which discussions about innovation take place…. [T]he most important parts of the Apple supply chain are Steve Jobs' brain and the community of engineers tasked with turning Jobs' musings into actual, revolutionary products.

This has significant implications…. Someone with an outstanding analytical framework and a talent for manipulating information has probably (or at least potentially) enjoyed huge productivity and consumption gains from the internet and related technologies. Others have gotten some benefits from the internet, but it's far from clear that those benefits are outweighed by, say, the impact of increased outsourcing on the wage they can command….

[I]s this an iron rule of innovation in information technology—that the cheaper information becomes and the easier it becomes to manipulate it the greater will be the gap, productive and otherwise, between the informationally capable and the rest?

That's certainly possible….

I'm not sure we should be confident that continued innovation won't ultimately augment cognition generally, and perhaps in relatively surprising ways. Maybe as the internal aspect of cognition shrinks relative to the external, technological aspect, the differences in internal characteristics across the population will cease to matter very much. The more I rely on the same cloud brain that's available to anyone else, the less the strengths or weaknesses of my meat brain may matter…

But it probably will not turn again back in the direction of Raynaud de Chatillon.

Robert Allen: The British Industrial Revolution in Global Perspective

Everytime I reread http://www.ehs.org.uk/ehs/conference2007/Assets/AllenIIA.pdf, I think: Robert Allen is a fracking genius!:

The Industrial Revolution is one of the most celebrated watersheds in human history. It is no longer regarded as the abrupt discontinuity that its name suggests, for it was the result of an economic expansion that started in the sixteenth century. Nevertheless, the eighteenth century does represent a decisive break in the history of technology and the economy. The famous inventions–the spinning jenny, the steam engine, coke smelting, and so forth–deserve their renown1, for they mark the start of a process that has carried the West, at least, to the mass prosperity of the twenty-first century. The purpose of this essay is to explain why they occurred in the eighteenth century, in Britain, and how the process of their invention has transformed the world... […]

The industrial revolution was fundamentally a technological revolution, and progress in understanding it can be made by focussing on the sources of invention.... [T]he reason the industrial revolution happened in Britain, in the eighteenth and nineteenth centuries, was not because of luck (Crafts 1977) or British genius or culture or the rise of science. Rather it was Britain’s success in the international economy that set in train economic developments that presented Britain’s inventors with unique and highly remunerative possibilities. The industrial revolution was a response to the opportunity… […]

What commercial success did for Britain was to create a structure of wages and prices that differentiated Britain from the continent and, indeed, Asia: In Britain, wages were remarkably high and energy cheap. This wage and price history was a fundamental reason for the technological breakthroughs of the eighteenth century whose object was to substitute capital and energy for labour. Scientific discoveries and scientific culture do not explain why Britain differed from the rest of Europe. They may have been necessary conditions for the industrial revolution, but they were not sufficient: Without Britain’s distinctive wage and price environment, Newton would have produced as little economic progress in England as Galileo produced in Italy... [...]

The working assumption of this paper is that technology was invented by people in order to make money.... [L]abour was particularly expensive and energy particularly cheap in Britain, so inventors in Britain were led to invent machines that substituted energy and capital for labour.... The scale of the mining industry in eighteenth century Britain was much greater than anywhere else, so the return to inventing improved drainage machinery (a.k.a. the steam engine) was greater in Britain than in France or China. Third, patents that allow the inventor to capture all of the gains created by his invention raise the rate of return and encourage invention... [...]

Britain was a high wage economy in four senses:1. At the exchange rate, British wages were higher than those of its competitors. 2. High silver wages translated into higher living standards than elsewhere. 3. British wages were high relative to capital prices. 4. Wages in northern and western Britain were exceptionally high relative to energy prices...

The different trajectories of the wage-rental ratio created different incentives to mechanize production in the two parts of Europe. In England, the continuous rise in the cost of labour relative to capital led to an increasingly greater incentive to invent ways of substituting capital for labour in production. On the continent, the reverse was true…. It was not Newtonian science that inclined British inventors and entrepreneurs to seek machines that raised labour productivity but the rising cost of labour... [...]

Britain’s unusual wages and prices were due to two factors. The first was Britain’s success in the global economy, which was in part the result of state policy. The second was geographical–Britain had vast and readily worked coal deposits…. The superior real wage performance of northwestern Europe was due to a boom in international trade…. In a mercantilist age, imperialism was necessary to expand trade, and greater trade led to urbanization.... Coal deposits were a second factor contributing to England’s unusual wage and price structure…. First, inexpensive coal raised the ratio of the price of labour to the price of energy (Figure 4), and, thereby, contributed to the demand for energy-using technology. In addition, energy was an important input in the production of metals and bricks, which dominated the index of the price of capital services.... [C]oal is a ‘natural’ resource, but the coal industry was not a natural phenomenon.... It was the growth of London in the late sixteenth century, however, that caused the coal industry to take off. The Dutch cities provide a contrast that reinforces the point (Pounds and Parker 1957, de Vries and van der Woude 1997, Unger 1984). The coal deposits that stretched from northeastern France across Belgium and into Germany were as useful and accessible as Britain’s.... The pivotal question is why city growth in the Netherlands did not precipitate the exploitation of Ruhr coal in a process parallel to the exploitation of Northern English coal. Urbanization in the Low Countries also led to a rise in the demand for fuel. In the first instance, however, it was met by exploiting Dutch peat. This checked the rise in fuel prices, so that there was no economic return to improving transport on the Ruhr or resolving the political-taxation issues related to shipping coal down the Rhine. Once the Newcastle industry was established, coal could be delivered as cheaply to the Low Countries as it could be to London, and that trade put a ceiling on the price of energy in the Dutch Republic that forestalled the development of German coal. This was portentous: Had German coal been developed in the sixteenth century rather than the nineteenth, the industrial revolution might have been a Dutch-German breakthrough rather than a British achievement... [...]

The following generalizations apply to many inventions including the most famous: 1. The British inventions were biased. They were labour saving and energy and capital using.... 2. As a result of 1, cost reductions were greatest at British factor prices, so the new technologies were adopted in Britain and not on the continent.... [C]oke smelting was not profitable in France or Germany before the mid-nineteenth century (Fremdling 2000). Continuing with charcoal was rational behaviour in view of continental factor prices. This result looks general; in which case, adoption lags mean that British technology was not cost-effective at continental input prices. 3. The famous inventions of the industrial revolution were made in Britain rather than elsewhere in the world because the necessary R&D was profitable in Britain (under British conditions) but unprofitable elsewhere.... 4. Once British technology was put into use, engineers continued to improved it, often by economizing on the inputs that were cheap in Britain. This made British technology cost-effective in more places and led to its spread across the continent later in the nineteenth century.... The theory advanced here explains the technological breakthroughs of the industrial revolution in terms of the economic base of society–natural resources, international trade, profit opportunities. Through their impact on wages and prices, these prime movers affected both the demand for technology and its supply... [...]

Why did the French ignore the new spinning machines? Cost calculations for France are not robust, but the available figures indicate that jennies achieved consistent savings only at high count work, which was not the typical application (Ballot 1923, pp. 48-9). In France, a 60 spindle jenny cost 280 livre tournois in 1790 (Chassagne 1991, p. 191), while a labourer in the provinces earned about three quarters of a livre tournois per day, so the jenny cost 373 days labour. In England, a jenny cost 140 shillings and a labourer earned about one shilling per day, so the jenny was worth 140 days labour (Chapman and Butt 1988, p. 107). In France, the value of the labour saved with the jenny was not worth the extra capital cost, while in England it was. French cost comparisons show that Arkwright’s water frame, a much more capital intensive technique, was no more economical than the jenny. The reverse was true in England where water frames were rapidly overtaking jennies. The French lag in mechanization was the result of the low French wage… […]

Why did the industrial revolution lead to modern economic growth? I have argued that the famous inventions of the British industrial revolution were responses to Britain’s unique economic environment and would not have been developed anywhere else. This is one reason that the Industrial Revolution was British. But why did those inventions matter? The French were certainly active inventors, and the scientific revolution was a pan-European phenomenon. Wouldn’t the French, or the Germans, or the Italians, have produced an industrial revolution by another route? Weren’t there alternative paths to the twentieth century? These questions are closely related to another important question asked by Mokyr: Why didn’t the industrial revolution peter out after 1815? He is right that there were previous occasions when important inventions were made. The result, however, was a one-shot rise in productivity that did not translate into sustained economic growth. The nineteenth century was different–the First Industrial Revolution turned into Modern Economic Growth. Why? Mokyr’s answer is that scientific knowledge increased enough to allow continuous invention. Technological improvement was certainly at the heart of the matter, but it was not due to discoveries in science–at least not before 1900. The reason that incomes continued to grow in the hundred years after Waterloo was because Britain’s pre-1815 inventions were particularly transformative, much more so than continental inventions. That is a second reason that the Industrial Revolution was British and also the reason that growth continued throughout the nineteenth century.... The nineteenth century engineering industry was a spin-off of the coal industry. All three of the developments that raised productivity in the nineteenth century depended on two things–the steam engine and cheap iron. Both of these, as we have seen, were closely related to coal. The steam engine was invented to drain coal mines, and it burnt coal. Cheap iron required the substitution of coke for charcoal and was prompted by cheap coal. (A further tie- in with coal was geological–Britain’s iron deposits were often found in proximity to coal deposits.) There were more connections: The railroad, in particular, was a spin-off of the coal industry. Railways were invented in the seventeenth century to haul coal in mines and from mines to canals or rivers. Once established, railways invited continuous experimentation to improve road beds and rails. Iron rails were developed in the eighteenth century as a result, and alternative dimensions and profiles were explored. Furthermore, the need for traction provided the first market for locomotives. There was no market for steam-powered land vehicles because roads were unpaved and too uneven to support a steam vehicle (as Cugnot and Trevithick discovered). Railways, however, provided a controlled surface on which steam vehicles could function, and colliery railways were the first purchasers of steam locomotives. When George Stephenson developed the Rocket for the Rainhill trials, he tested his design ideas by incorporating them in locomotives he was building for coal railways. In this way, the commercial operation of primitive versions of technology promoted further development as R&D expenses were absorbed as normal business costs.... The reason that the British inventions of the eighteenth century–cheap iron and the steam engine, in particular–were so transformative was because of the possibilities they created for the further development of technology. Technologies invented in France–in paper production, glass, knitting–did not lead to general mechanization or globalization. One of the social benefits of an invention is the door it opens to further improvements. British technology in the eighteenth century had much greater possibilities in this regard than French inventions. The British were not more rational or prescient than the French in developing coal-based technologies: The British were simply luckier in their geology. The knock-on effect was large, however: There is no reason to believe that French technology would have led to the engineering industry, the general mechanization of industrial processes, the railway, the steam ship, or the global economy. In other words, there was only one route to the twentieth century–and it went through northern Britain...

Daring Fireball: Google Makes the Old 1990s Mistake

John Gruber:

Daring Fireball: MG Siegler on Google’s promotion of Google Plus pages in web search results:

I’m going to go ahead and make a prediction: this does not end well for Google. I’m not saying Google falls as a result of this mistake — that would be foolish, they’re too big to fail anytime soon — but I do think that over an extended period of time, whether users consciously realize it or not, they’ll start looking elsewhere for their information needs because Google has strayed from their foundation.

It’s a philosophical line they never should’ve crossed. What made Google Google is that their web search results were better than anyone else’s, and were ordered simply by their best guess as to relevancy. Even when they introduced ads, they did it in a way that was true to the same spirit: the ads most relevant to the search terms. They profit handsomely and deservedly from this.

I think their decision to artificially promote Google plus pages above more relevant pages on competing social networks is the modern-day equivalent of the ’90s era search engines turning their homepages into “portals”. A search engine should be designed to send users quickly and accurately away to whatever sites on the Internet they’re looking for. The ’90s-era search engine portals blew this, because the whole portal idea was to keep users on their sites rather than send them away. This Google Plus integration is the same thing — an attempt to keep users on Google.com for another page view or two.

Kieran Healy: What Is the Best Virtual Reality Tool Ever?

The book, he says--or, rather, the column of print.

Kieran Healy:

Apple for the Teacher: Instapaper and the Persistence of the Textbook: In his presentation, Apple’s Phil Schiller heavily criticized the static, text-heavy format of the traditional texbook. Far better to present information dynamically with graphics, supporting illustrations, movies, interactive components and all the rest of it.

Sure, why not? But—-consider how many of the most sophisticated computer users consume "content" online, perhaps especially the ones who use iPads. Do they seek out material that looks like this? Do they want multi-modal, multimedia formats? Do they love jazzy Infographics? No. They use Instapaper or some equivalent tool to create reading lists for themselves, and to read those articles in a format that deliberately strips out a lot of the original presentation and replaces it with simple, clean, easy-to-read, blocks of text that look a lot like a well-designed piece of outmoded 1950s technology.

Why do people like Instapaper so much? It’s because they’ve chosen to read what they save, and the app lets them keep it and read it in a straightforward, uncluttered way. Finding the good stuff is the hard part, along with the ability, motivation, and opportunity to read things: once you’re there, you don’t need the dynamic illustrations or zooming or supporting illustrations. You’ll read it because you’re already interested in it, and you’ll even seek out and pay for a way to make the reading and learning experience static and simple, because you don’t want to be distracted.

A similar point applies in education. Technology by itself—-let alone Keynote transitions, animations, or what have you—-will not by themselves engage students. The promise of "technology in the classroom" has always been that it will magically "engage" students in what they have to learn. But it never does: you still need a good teacher, the opportunity to learn, and some motivation of your own. More dynamic textbooks aren’t the solution to the problem of education—-they’re not even the solution to the problem of textbooks.

It’s strange to see Apple going down this well-worn road. When the iPad was launched, a stock criticism of it was that it was a device made for consuming rather than making or doing things. Very quickly, people found ways to use it that showed it was capable of a lot more than that. Apps like GarageBand or Star Walk or Leafsnap—-there are loads more—-take advantage of the iPad’s computing power and portability in ways that put it in a different class of activity from reading textbooks or sitting working at a computer. It’s these sort of use-cases where a device like the iPad really shines. So it’s a pity that Apple has chosen to re-enter the education market with a pitch about Reinventing the Textbook that, frankly, sounds pretty old hat. The reason, I suppose, is that there’s potentially a lot of money to be made selling the things to schools as replacements for the books.

Where Kieran may be wrong--not is wrong, but may be wrong--is that he may miss the fact that humanity is divided into two groups: we for whom the column of print is the best virtual reality tool ever, and the rest of the human race for whom it is not.

We need Instapaper, a quiet room, and the Lynx browser. The rest of the human race may need the productions of iBooks Author.

Decreasing Economic Upward Mobility Blogging: John Brown's Body Lies A-Mouldering in Its Grave Department

Barack Obama in Ossawatomie, Kansas:

A few years after World War II, a child who was born into poverty had a slightly better than 50-50 chance of becoming middle class as an adult. By 1980, that chance fell to around 40%. And if the trend of rising inequality over the last few decades continues, it’s estimated that a child born today will only have a 1 in 3 chance of making it to the middle class.

It’s heartbreaking enough that there are millions of working families in this country who are now forced to take their children to food banks for a decent meal. But the idea that those children might not have a chance to climb out of that situation and back into the middle class, no matter how hard they work? That’s inexcusable. It’s wrong. It flies in the face of everything we stand for…

---

Theodore Roosevelt's New Nationalism (1910): http://t.co/o4WkyosG

Robert S. La Forte

ON AUGUST 31, 1910, Theodore Roosevelt delivered what was perhaps the most important speech ever given in Kansas. Surrounded by 30,000 enthusiastic listeners at Osawatomie, he developed a political creed which became a milestone along the road to the modern all-powerful state. This speech, later called the "New Nationalism Address," evoked a wide variety of responses. It was labeled "Communistic," "Socialistic," and "Anarchistic" in various quarters; while others hailed it "the greatest oration ever given on American soil." What then were the circumstances surrounding the address? What was the Kansas role in the drama at Osawatomie? Why was that town chosen for such an auspicious moment in history? And why did an ex-President devise a comprehensive political program such as the "New Nationalism?"

The ostensible occasion for the speech was the two-day dedicatory ceremonies at the John Brown Memorial Park. The park, located at the southwestern edge of Osawatomie in the vicinity of a well-remembered skirmish between Proslavery forces and the men led by Brown during the "Battle of Osawatomie," was a gift to the state from the G.A.R.'s feminine auxiliary, the Women's Relief Corps. It was the brain child of Anna Heacock, Cora Deputy, and the property's former owner, Maj. John B. Remington. Remington, allegedly John Brown's nephew by marriage, had induced Deputy and Heacock to buy the land for their organization and then donate the 22-1/2 acres to the state for the memorial...

The Ease of Forgery in the Age of Nonrepresentational Art

Felix Salmon sends us to: http://www.diariohorizonte.com/impresa/fraudelongisland.pdf

Tim Harford: The Present of the Music Industry

Tim Harford:

There seems no objective justification for the idea that good music has simply dried up since file-sharing took off. “A digital vampire” – not the title of this season’s bestselling young adult novel, but an ageing rock star’s description of Apple’s online store, iTunes. In his recent John Peel lecture, the guitarist for The Who, Pete Townshend, railed against “the Aluminums” (Apple, I gather) and suggested changes to their business model that would be more supportive of musicians. He also wondered whether the modern, digitally distributed music industry could support the kind of careful listening and risk taking that the late DJ John Peel exemplified.

A reasonable response to Mr Townshend is that he could have picked more obvious targets – notably file-sharing sites and software, which facilitate outright piracy. (He did offer one sharp observation on the subject: “The word ‘sharing’ surely means giving away something you have earned, or made, or paid for?”) It is beyond doubt that the traditional music industry is dying: high street record shops are closing their doors or stocking alternative products, and music sales have fallen by about 40 per cent during the past decade. Digital music sales through retailers such as iTunes are manifestly failing to plug the gap from sales of physical CDs, but that is not the fault of the Aluminums.

Yet a more interesting question is how much this matters. According to Joel Waldfogel of the University of Minnesota, three-quarters of pirated music would never have been purchased anyway. In such cases the consumer gains but the producer does not lose. Alas, for the major record labels – and, perhaps, for the artists too – the one-in-four acts of piracy that do reduce sales seem to be quite enough to corrode the industry’s business model….

Waldfogel manfully attempts to estimate the continued flow of high-quality new music…. Waldfogel… produces some intuitively sensible results: the late 1960s were the pinnacle of the past 50 years, while the 1980s were dark days indeed…. Certainly there seems no objective justification for the idea that good music has simply dried up since file-sharing took off.

Quite why this should be is a puzzle, but Waldfogel suspects it has something to do with the ease with which any band can produce and distribute music – a fact reflected in the growth of independent record labels. The money may be drying up, but the beat goes on.

Charlie Stross on the Stupidity of the Publishing Companies

Charlie's Diary:

Cutting their own throats: Traditional publishing is dominated by the Big Six publishing groups…. The corporate drive for DRM is motivated by the fear of ebook piracy. But aside from piracy, the biggest ebook-related threat to the Big Six is called Amazon.com. Until 2008, ebooks were a tiny market segment, under 1% and easily overlooked; but in 2009 ebook sales began to rise exponentially, and ebooks now account for over 20% of all fiction sales…. And Amazon have got 80% of the ebook retail market….

Amazon has ruthlessly used its near monopoly of online sales to exert monopsony buying pressure against suppliers, forcing the likes of Holtzbrinck or Penguin or Hachette to give them a deep discount on ebooks…. [T]he Big Six's pig-headed insistence on DRM on ebooks is handing Amazon a stick with which to beat them harder. DRM on ebooks gives Amazon a great tool for locking ebook customers into the Kindle platform. If you buy a book that you can only read on the Kindle, you're naturally going to be reluctant to move to other ebook platforms… and even more reluctant to buy ebooks from rival stores that use incompatible DRM….

As ebook sales mushroom, the Big Six's insistence on DRM has proven to be a hideous mistake. Rather than reducing piracy, it has locked customers in Amazon's walled garden, which in turn increases Amazon's leverage over publishers….

If the big six began selling ebooks without DRM, readers would at least be able to buy from other retailers and read their ebooks on whatever platform they wanted, thus eroding Amazon's monopoly position. But it's not clear that the folks in the boardrooms are agile enough to recognize the tar pit they've fallen into...

Todd Wasserman: "Netflix Takes Up 32.7% of Internet Bandwidth [STUDY]"

Why Oh Why Can't We Have a Better Press Corps? Yes, It Is Yet Another Washington Post Edition

UPDATE: And Brad Plumer has added a credit to Mark Thomas...

---

This morning, November 3, Brad Plumer of the *Washington Post" has a nice story “How my taxes are raised matters” citing Richard Green and Susan Mettler.

I liked this story.

I liked it two days ago, when Mark Thoma wrote it:

Mark Thoma (November 1, 2011): "How My Taxes are Raised Matters"

As I said earlier today--watching the Los Angeles Times, Larry McShane of the New York Daily News, and Sean Michaels of the Guardian do this to Spencer Ackerman of Wired--this seems to me to go beyond sloppiness into approaching some kind of mental disorder.

And in my email inbox right now is a note about Politico, comparing Jake Sherman:

http://www.politico.com/news/stories/1111/67538.html: Grover Norquist, influential? To House Speaker John Boehner, he’s just another “random” guy. At least that’s what the Ohio congressman told reporters Thursday, declining to weigh in on whether the anti-tax crusader was a positive - or negative - force within the House Republican Conference.

to David Weigel:

http://www.slate.com/blogs/weigel/2011/11/03/boehner_on_norquist_the_random_person_.htmlThere was unexpected levity in Speaker of the House John Boehner's weekly presser, after NBC's Luke Russert mentioned that Grover Norquist, the paterfamilias of the GOP anti-tax pledges, was making rounds on the Hill. Did the Speaker think that Norquist was a positive influence on Republicans? Boehner twisted his mouth, wrestling with the premise of the question.

For Jake Sherman and Politico, it is pretty clear that not acknowledging Luke Russert is in their minds a feature and not a bug: they don't want to bring alternative news channels to the front of their readers' minds.

It is much less clear what the Los Angeles Times and Sean Michaels of the Guardian and Larry McShane of the New York Daily News by not acknowledging the existence of Wired--which is not a competitor of theirs--and thus pissing Wired off.

It makes least sense of all in the case of the Washington Post, which ought to regard Mark Thoma as an analyst-source to be cosseted rather than a competitor to be sent down the memory hole...

I Must Say I'm Very Tempted by This Conference…

Michael Froomkin writes:

University of Miami | School of Law: The University of Miami School of Law seeks submissions for "We Robot" – an inaugural conference on legal and policy issues relating to robotics to be held in Coral Gables, Florida on April 21 & 22, 2012. We invite contributions by academics, practitioners, and industry in the form of scholarly papers or presentations of relevant projects.

We seek reports from the front lines of robot design and development, and invite contributions for works-in-progress sessions. In so doing, we hope to encourage conversations between the people designing, building, and deploying robots, and the people who design or influence the legal and social structures in which robots will operate.

Robotics seems increasingly likely to become a transformative technology. This conference will build on existing scholarship exploring the role of robotics to examine how the increasing sophistication of robots and their widespread deployment everywhere from the home, to hospitals, to public spaces, and even to the battlefield disrupts existing legal regimes or requires rethinking of various policy issues.

Scholarly Papers:

Topics of interest for the scholarly paper portion of the conference include but are not limited to:

• Effect of robotics on the workplace, e.g. small businesses, hospitals, and other contexts where robots and humans work side-by-side.
• Regulatory and licensing issues raised by robots in the home, the office, in public spaces (e.g. roads), and in specialized environments such as hospitals.
• Design of legal rules that will strike the right balance between encouraging innovation and safety, particularly in the context of autonomous robots.
• Issues of legal or moral responsibility, e.g. relating to autonomous robots or robots capable of exhibiting emergent behavior.
• Issues relating to robotic prosthetics (e.g. access equity issues, liability for actions activated by conscious or unconscious mental commands).
• Relevant differences between virtual and physical robots.
• Relevant differences between nanobots and larger robots.
• Usage of robots in public safety and military contexts.
• Privacy issues relating to data collection by robots, either built for that purpose or incidental to other tasks.
• Intellectual property challenges relating to robotics as a nascent industry, to works or inventions created by robots, or otherwise peculiar to robotics.
• Issues arising from legal automation such as unauthorized practice of law or medicine.

These are only examples. We are very interested in papers on other topics as the purpose of this conference is to help set a research agenda relating to the deployment of robots in society…

Outside of the Bowl of San Francisco Bay...

... The AT&T iPhone is truly a marvelous device.

That is all.

Toward the Patronage Intellectual Society?

Sam Harris:

The Blog : The Future of the Book : Sam Harris: Writers, artists, and public intellectuals are nearing some sort of precipice: Their audiences increasingly expect digital content to be free. Jaron Lanier has written and spoken about this issue with great sagacity. You can purchase his book here, which most of you will not do, or you can watch him discuss these matters for free. The problem is thus revealed even in the act of stating it.  How can a person like Lanier get paid for being brilliant? This has become an increasingly difficult question to answer.

Where publishing is concerned, the Internet is both midwife and executioner. It has never been easier to reach large numbers of readers, but these readers have never felt more entitled to be informed and entertained for free…. One fact now seems undeniable: The future of the written word is (mostly or entirely) digital.

Journalism was the first casualty of this transformation. How can newspapers and magazines continue to make a profit? Online ads don’t generate enough revenue and paywalls are intolerable; thus, the business of journalism is in shambles. Even though I sympathize with the plight of publishers—and share it by association as a writer—as a reader, I am without pity. If your content is behind a paywall, I will get my news elsewhere. I subscribe to the print edition of The New Yorker, but when I want to read one of its articles online, I find it galling to have to login and wrestle with its proprietary e-reader. The result is that I read and reference New Yorker articles far less frequently than I otherwise would. I’ve been a subscriber for 25 years, but The New Yorker is about to lose me. What can they do? I don’t know. The truth is, I now expect their content to be free….

Not just free: easy to access: the New Yorker's proprietary reader is a monstrous offense to usability.

Harris goes on:


My friend Christopher Hitchens is a writer of truly incandescent prose whose career has been forged almost entirely in the context of print journalism. Among his many outlets, the most prominent has probably been Vanity Fair…. I visited the site a moment ago and read Hitch’s latest: a very tender essay of praise for the work of Joan Didion…. Hitch did his job and got paid. Didion will soon publish her book in hardcover and has already benefited from his review. All appears to be well in the Kingdom of Print.

However, with the gimlet eyes of a new blogger, I detect ominous portents of change. First, I see that Hitch’s article has been featured on the Vanity Fair website for the better part of a week and has garnered only 813 Facebook likes and 75 Tweets. Many of my blog articles receive more engagement than this, some by nearly a factor of 10. No doubt this has something to do with the ratio of signal to noise: When readers come to a personal blog, they are more or less guaranteed to read what the author has written. How many people will find Hitch’s article on the Vanity Fair website?… A glance at the online page rank of the magazine raises even greater concerns. I know bloggers—Tim Ferriss and Seth Godin, for instance—whose personal blogs get more traffic than the entire Vanity Fair website….

[I]t doesn’t seem entirely crazy to wonder whether a significant percentage of the people who have read Hitch’s essay in the last week read it in the last hour because I broadcast it on social media. I used to view this as a wonderful synergy—digital enables print; print points back to digital; and both thrive. I now consider it the death knell for traditional publishing….

Where is all this heading?  I can count on one finger the number of places where it is still obviously better for me to publish than on my own blog—the opinion page of The New York Times. But it’s not so much better that I’ve been tempted to send them an article in the last few months. Is this just the hubris of the blogosphere? Maybe—but not for everyone and not for long.

Related difficulties are now looming for books…. Publishers can’t charge enough money for 60-page books to survive; thus, writers can’t make a living by writing them. But readers are beginning to feel that this shouldn’t be their problem. Worse, many readers believe that they can just jump on YouTube and watch the author speak at a conference, or skim his blog, and they will have absorbed most of what he has to say on a given subject. In some cases this is true and suggests an enduring problem for the business of publishing. In other cases it clearly isn’t true and suggests an enduring problem for our intellectual life….

One thing is certain: writers and public intellectuals must find a way to get paid for what they do—and the opportunities to do this are changing quickly. My current solution is to write longer books for a traditional press and publish short ebooks myself on Amazon. If anyone has any better ideas, please publish them somewhere—perhaps on a blog—and then send me a link. And I hope you get paid.

Welcome to Siri!

Quote of the Day: October 13, 2011: Steve Job on Heathkits

"Heathkits were really great. Heathkits were these products that you would buy in kit form. You actually paid more money for them than if you just went and bought the finished product if it was available. These Heathkits would come with these detailed manuals about how to put this thing together and all the parts would be laid out in a certain way and color coded. You'd actually build this thing yourself.

"I would say that this gave one several things. It gave one a understanding of what was inside a finished product and how it worked because it would include a theory of operation but maybe even more importantly it gave one the sense that one could build the things that one saw around oneself in the universe. These things were not mysteries anymore. I mean you looked at a television set you would think that: 'I haven't built one of those but I could. There's one of those in the Heathkit catalog and I've built two other Heathkits so I could build that.'

"Things became much more clear that they were the results of human creation not these magical things that just appeared in one's environment that one had no knowledge of their interiors. It gave a tremendous level of self-confidence, that through exploration and learning one could understand seemingly very complex things in one's environment. My childhood was very fortunate in that way."

--Steve Jobs in 1995

Brynjolfsson, Gans, Greenstein: Digitopoly--Competition in the Digital Age

http://www.digitopoly.org

One "n", one "f", two "s"es, one "n". One "n", one "f", two "s"es, one "n". One "n", one "f", two "s"es, one "n". One "n", one "f", two "s"es, one "n"…

The Drag on Economic Growth from Nathan Myhrvold, Patent Troll

Needless to say, the patent system really, really needs to be fixed: this is really, really damaging to us.

Alex Blumberg and Laura Sydell:

Intellectual Ventures And The War Over Software Patents : Planet Money : NPR: Myhrvold has more than 100 patents to his name, and he's cast himself as a man determined to give his fellow inventors their due. In 2000, he founded a company called Intellectual Ventures, which he calls "a company that invests in invention." But Myhrvold's company has a different image among many Silicon Valley insiders. The influential blog Techdirt regularly refers to Intellectual Ventures as a patent troll. IPWatchdog, an intellectual property site, called IV "patent troll public enemy #1." These blogs write about how Intellectual Ventures has amassed one of the largest patent portfolios in existence and is going around to technology companies demanding money to license these patents….

[P]eople at companies that have been approached by Intellectual Ventures don't want to talk publicly. "There is a lot of fear about Intellectual Ventures," says Chris Sacca, a venture capitalist who was an early investor in Twitter, among other companies. "You don't want to make yourself a target." Sacca wouldn't say if Intellectual Ventures had been in contact with any of the companies he's invested in. "I tried to put you in touch with other people in this community to talk to you about this and they almost uniformly said they couldn't talk to you," Sacca told us. "They were afraid to." IV has the power to "literally obliterate startups," Sacca says….

IV says it has invented a nuclear technology that's safer and greener than existing technologies. A cooler that can keep vaccines cold for months without electricity. And the world's most high-tech mosquito zapper.

But the lab is a tiny fraction of what IV does. The company has received about 1,000 patents on stuff it's come up with at the lab; it's purchased roughly 30,000 patents from other people. In fact, nothing that's come out of this lab — not the mosquito zapper, not the nuclear technology — has made it into commercial use…. Imagine an inventor out there — someone with a brilliant idea, a breakthrough. This inventor has a patent, but companies are stealing his idea. And this inventor doesn't have the money or legal savvy to stop them. That's where IV comes in. It buys this inventor's patent, and it makes sure that companies who are using the idea pay for it. When we asked for an example of an inventor in this situation, someone with a breakthrough, who wasn't getting paid for it, two separate people at IV pointed us to a guy named Chris Crawford…. So we went to talk to Chris Crawford. But that turned out to be harder than we thought — and it led us on a five month journey, where things did not quite fit the story Intellectual Ventures was telling.

When we followed up with IV to get Chris Crawford's contact info, the company told us it no longer owned Chris Crawford's patent. And Crawford probably wouldn't want to talk right now anyway, the company said, because he was in the middle of litigation. We started digging around and found Chris Crawford in Clearwater, Florida. As predicted, he never responded to our many emails and phone calls. You'll never hear from him in this story. But we were able to locate Chris's patent — number 5771354. He got it in 1998. And the way IV explained the patent to us, Chris Crawford invented something that we do all the time now: He figured out a way to upgrade the software on your home computer over the Internet. In other words, when you turn on your computer and a little box pops up and says, "Click here to upgrade to the newest version of iTunes," that was Chris Crawford's idea.

But when we looked at the patent, it seemed to claim a lot more than that. The name of the actual invention is "an online back-up system." The patent says this invention makes it possible to connect to an online service provider to do a bunch of stuff — software purchases, online rentals, data back ups, information storage. The patent makes it seem like Chris Crawford invented a lot of the most common things we do on the Internet. We weren't sure what to make of all this, so we went to see David Martin, who runs a company called M-Cam. It's hired by governments, banks and business to assess patent quality, which the company does with a fancy piece of software. We asked Martin to assess Chris Crawford's patent. At the same time Crawford's patent was being prosecuted, more than 5,000 other patents were issued for "the same thing," Martin says. Crawford's patent was for "an online backup system." Another patent from the same time was for "efficiently backing up files using multiple computer systems." Yet another was for "mirroring data in a remote data storage system." And then there were three different patents with three different patent numbers but that all had the same title: "System and method for backing up computer files over a wide area computer network."

Martin says about 30 percent of U.S. patents are essentially on things that have already been invented. In 2000, for example, the patent office granted a patent on making toast — patent number 6080436, "Bread Refreshing Method." We also asked Rick McLeod, a patent lawyer and former software engineer, to evaluate Chris Crawford's patent. "None of this was actually new," he told us….

This brings us back to Chris Crawford's patent, the patent Intellectual Ventures cited as an example of how they encourage innovation by ensuring that inventors get paid. As we've said, this patent also seems to cover a big chunk of what happens on the Internet: upgrading software, buying stuff online, and what's called cloud storage. If you have a patent on all that, you could sue a lot of people. And, in fact, that's what's happening with Chris Crawford's patent. Intellectual Venures sold it to a company called Oasis research in June of 2010. Less than a month later, Oasis Research used the patent to sue over a dozen different tech companies, including Rackspace, GoDaddy, and AT&T. We called Oasis several times, but no one ever answered the phone. For a while, the company's voice mail message directed all questions to John Desmarais , a lawyer in New York. He didn't return our phone calls, but we did track him down at an intellectual property conference in San Francisco. He cited attorney-client privilege, and wouldn't tell us anything — not even who owns Oasis Research. (He did say he's a big fan of NPR.)…

The office was in a corridor where all the other doors looked exactly the same —locked, nameplates over the door, no light coming out. It was a corridor of silent, empty offices with names like "Software Rights Archive," and "Bulletproof Technology of Texas." It turns out a lot of those companies in that corridor, maybe every single one of them, is doing exactly what Oasis Research is doing. They appear to have no employees. They are not coming up with new inventions. The companies are in Marshall, Texas because they are filing lawsuits for patent infringement. Patent lawsuits are big business in Marshall, which is part of the eastern district of Texas…. We did find one key detail about Oasis Research. It was in a legal document called a Certification of Interested Parties, which lists all the entities with a financial interest in Oasis. Tom Ewing, an intellectual property lawyer who makes a business of tracking IV, brought it to our attention. The Oasis document lists the usual parties — the plaintiff, the defendants, the attorneys involved. But it also includes one other name: Intellectual Ventures. Peter Detkin, an attorney who co-founded Intellectual Ventures with Nathan Myhrvold, told us that IV likely has a "back-end arrangement" with Oasis…. Intellectual Ventures is taking a cut of whatever money Oasis gets from its lawsuits. Oasis is a company with no operations, no products, and, as far as we can tell, no employees, that is using a very broad patent from 1998 to sue over a dozen companies.

As it happens, Detkin is the man who coined the term "patent troll." He came up with it back in in 1999, when he was working for Intel.

We asked him how it feels to make money from an entity that's behaving much like the patent trolls he once condemned. He said:

These are patents we used to hold, we no longer hold. And we ensure that we have no control over the actions of these third parties. They are independent actors. They are not Intellectual Ventures. They may be monetizing in ways we disagree with, but it's not our call….

We asked if he could point us to a patent that was languishing, but then got licensed and built. "There were two deals that were done," he said. "One was with a toy company. The other was... I can't remember the technology, it was out there last Christmas, but I don't know how it's done."…

For this story, we called people who had licensing arrangements with IV, we called people who were defendants in lawsuits involving IV patents, we called every single company being sued by Oasis Research. No one would talk to us. Part of this is probably fear. Part of it is the fact that agreements with Intellectual Ventures include a non-disclosure agreement that's rumored to be the strictest in Silicon Valley...

Toward a Non-Insane Intellectual Property System

Cory Doctorow:

University of Michigan to stop worrying about lawsuits, start releasing orphan works: Bobbyg sez, "The University of Michigan Library will be sharing digital copies of their orphan works, that is, copyrighted works which have no identifiable owner, with the University community. Paul Courant, the University Librarian, says that the project is integral to the mission of the library, and that the sharing of the orphan works is a 'fair use' of the material, stating that 'sharing these orphan works does no economic harm to any person or organization, while not doing so harms scholarship and learning...'"

The Orphan Works Project is being led by the Copyright Office of the University of Michigan Library to identify orphan works. Orphan works are books that are subject to copyright but whose copyright holders cannot be identified or contacted. Our immediate focus is on digital books held by HathiTrust, a partnership of major research institutions and libraries working to ensure that the cultural record is preserved and accessible long into the future.

This effort is funded by the HathiTrust and is part of U-M Library's ongoing efforts to understand the true copyright status of works in its collection. As part of this effort, the Library will develop policies, processes, and procedures that can be used by other HathiTrust partners to replicate a task that will ultimately require the hand-checking of millions of volumes.

Bravo/a. I have no idea what will come of this, but pulling the default position of libraries, archives, and other institutions from one of debilitating fear or lawsuits to one of bravely sharing is something long past needed.

On Wikipedia

Jame Fallows sends us to Mark Bernstein:

Something Entertaining, If You're Feeling Smart: Students of Web phenomenon are naturally tempted to regard the Web as part of Nature, that it unfolds as it always has and, more or less, as it ought or must. But the Web is still new, and quite recently it was entirely possible to envision that the World Wide Web would be quite different from the Web we know. As late as 1993, for example, expert consensus held that the cost of persuading a core of writers and publishers to contribute a small library's worth of information to a public docuverse might be a mere trillion dollars; not only was the estimate quantitatively off target, but the sign was wrong...

Why Have I Never Read This?

Hannah Arendt, Men in Dark Times.

And why have neither Harcourt nor Lotte Kohler put it up on the web yet?

I Think the Answer Is "Yes" (Broken Intellectual Property System and Bad Actors Department)

Will Shipley:

(1) Twitter / Home: Nathan Myhrvold: Egotistical patent troll, or the lowest form of life on Earth?

Josh Rosenthall:

Is Nathan Myhrovld’s Intellectual Ventures behind the iOS in-app purchase patent troll job?: It’s been confirmed today that a company called Lodsys recently sent out a number of letters to independent iOS developers, including James Thompson - the developer of PCalc - and Dave Castelnuovo, creator of Pocket God , informing them that their use of in-app purchases in iOS infringes upon on this particular patent. Of course, Lodsys is going after small developers who lack the resources of larger development companies to fight back, presumably to frighten them into striking a licensing deal as soon as possible.

So who exactly is behind this unabashed case of patent trolling?

Well, we did a little leg work and though we can’t say with 100% certainty who is pulling the strings, it’s looking a lot like Intellectual Ventures is behind this disgraceful lawsuit. Intellectual Ventures was founded in part by former Microsoft CTO Nathan Myhrvold. The company’s business model is simple - it purchases and applies for a ton of patents. It then licenses out those patents to others under the threat of litigation coupled with a promise not to sue if a deal is struck.

Business Class Journalism?

Oliver Reichenstein:

Information Architects – Business Class: Freemium for News?: I had a perspective changing talk on the subject of pay walls with the chief executive of a big publishing company (no, I can’t tell you who). He asked me what I think about pay walls. I told him what I always say: The main currency of news sites is attention and not dollars and that I believe that it is his job, as a publisher, to turn that attention into money to keep the attention machine running. He nodded and made the following, astonishing statement:

I can’t see pay walls working out either. But we need to do something before we lose all of our current subscribers. Sure. It’s a tough business environment, but… But the flight industry is a tough environment too, and they found ways. So tell me: Why do people fly Business Class? In the end, an airplane brings me to the same place regardless of whether I fly Economy or Business Class and the massive price-increase I pay doesn’t compare the difference in value.

He asked whether I knew of a way to apply this logic to online news. What would a Business Class news site look like? People pay for Business Class because they don’t want to be tortured in Economy. They get faster lanes at the terror check. They get an extra glass of champagne. The stewards are more attentive. They get off the plane more quickly. They get the feeling of a higher social status. And he added that he wished that there was a way to lead each reader through the business class to Economy again and again to show him what he misses....

Pay walls weaken the main attractor (content) of your site and complicates the user experience (login on different platforms). Some leave social media back doors for pro users, but that’s not a good long term strategy either.... The idea of creating a business around the terrible online news experience is not that extravagant: Instapaper, Readability, FlipBoard & Co. are already profiting from the terrible reading experience of current news sites....

How would a business class version of a news site look in detail? We are currently working on a behind the scenes consulting project dealing with that problem.... No, you don’t need to make the free one ugly on purpose (apparently, they purposely torture us in Economy class). The traditional CPV/ad model design requirements will do the job for you.... Business Class idea would only work for titles like The New Yorker, Die Zeit, Il Sole 24 Ore, Le Monde.... So here is our question for you: as a regular reader of Le Monde, NYT, or Die Zeit, how much would you be ready to pay for a Business Class version of your news site?

The Great Ephemeralization

Tim Berners-Lee T.B. Lee:

Daring Fireball: The Great Ephemeralization: For example, a couple of years ago, Google waved a magic wand that transformed millions of Android phones into sophisticated navigation devices with turn-by-turn directions. This was functionality that people had previously paid hundreds of dollars for in stand-alone devices. Now it’s just another feature that comes with every Android phone, and the cost of Android phones hasn’t gone up. I haven’t checked, but I bet that this wealth creation was not reflected in GDP statistics. And it’s actually worse than that: as people stop buying stand-alone GPS devices, Google’s innovation will actually show up in the statistics as a reduction in GDP. […]

But the real lesson here may not be that the American economy is stagnating, but rather that the government is bad at measuring improvements in our standard of living that come from the software industry.

Sufficient Cause for Breaking Cambridge University Press's Copyright

I think it's time for somebody to scan and upload Keynes's Collected Writings...

Zunguzungu: Why Arianna Huffington is Bill Keller’s Somali Pirate

Patrick Nielsen Hayden sends us to Zunguzungu:

Why Arianna Huffington is Bill Keller’s Somali Pirate :

“In Somalia this would be called piracy.” -Bill Keller

“Africa, as an idea, a concept, has historically served, and continues to serve, as a polemical argument for the West’s desperate desire to assert its difference from the rest of the world.” -Achille Mbembe

Jay Rosen and Jeff Jarvis and Felix Salmon (and Felix Salmon) and all sorts of people have been following and commenting on the New York Times’ rhetorical war against Arianna Huffington and the Huffington Post.... To understand Bill Keller’s first op-ed, for example, a piece of screed called “All the Aggregation That’s Fit to Aggregate”... we need to look past the surface level confrontation.... [W]hile Huffington’s response to Keller got at some of what is most silly and self-serving about his silly and self-serving little diatribe (“patting himself on the back so hard I’d be surprised if he didn’t crack a rib,” as she puts it, is certainly apt).... [T]his particular argument... hinges on the “theft” of words and the “convergence” between new and old media.... [T]his isn’t an argument about anything. What they are most concretely at odds about in that exchange — the little piece of intellectual property which Keller claims Huffington stole from him, and which she then claims he stole from her — is a painfully banal cliché, the notion that old media and new media are “converging.” I don’t care who said it first, and neither should you, because at this point, this is not an idea that can be stolen, any more than one could steal the idea that politicians are corrupt, the American people are getting a raw deal, farmers are suffering, and we need to get back to basics if America is going to be great again. You cannot patent a cliché. Which is why that non-argument demonstrates what’s most interesting — and illustrative — about this exchange: since they are saying the same thing, what they are fighting about is who is going to be privileged with the right to say it.

To put this another way, what is interesting here is that both Keller and Huffington want to say the same thing: they agree on the fact that Real Journalists can and should do Real Journalism, and so they try to portray the other as a mere thief of words, an unimportant parasite.... Aggregators are pirates, while Real Journalists do Real Journalism. And what are Real Journalists? People who aren’t pirate aggregators.

The real problem, however, is that journalists are, by their nature, thieves of words. You can call it what you like; you can say “Possibly I am old-fashioned,” and talk about how “actual journalists are laboring at actual history, covering the fever of democracy in Arab capitals and the fever of austerity in American capitals” (Keller) or you can brag about the “148 full-time editors, writers, and reporters engaged in the serious, old-fashioned work of traditional journalism” (Huffington), but all this “old fashioned” stuff is just a way of covering over something really basic about what “actual” journalists “traditionally” do, all the time: write down what other people say.

They can exercise editorial discretion in how they integrate and harmonize the various quotes they‘ve aggregated. They can confirm, they can contextualize, and they can (very rarely) manage to witness something with their own two eyes. They can produce collages out of stolen scraps. And they should do these things. But at the core of the journalistic process is the act, inescapably, of taking other people’s texts, weaving them together, and then placing them under your byline (with appropriate citation) and profiting from the activity.

The more you talk about piracy, it seems to me, the more you bump into the uncomfortable fact that journalism is only distinguishable from word-piracy because, and to the extent that, we arbitrarily decide that it is.... [W]hile those conventions are under particular stress right now (file this under “the internet”) they were also never quite as stable as we might have liked to think they were.... That line of thinking, however, would take the conversation in a different direction than either Keller or Huffington want it to go. This is because they are not, a such, interested in the social function of “the press”... but rather, in the business of profiting from their activities.... “Real Journalism” talk... is just market fetishizing, a way of mystifying the work of social production that makes “news” possible, so that it can appear to be the original creation of whoever is selling it to you. Never mind all the different people whose unpaid contributions made the production of the story possible (the original tipoff, unquoted sources, quoted subjects, the reference works consulted, etc); they will not be paid or credited for intellectual labor, because of the magic thing that happens when the story has been published: having become news, it will subsequently be considered the sole production of the New York Times or whoever. And if Arianna Huffington steals it, now, she becomes indistinguishable from a Somali pirate....

Exactly so: when posturing in front of the FCC (or in front of customers), journalists will need to make Real Journalism seem as clear and unambiguous as possible, so that they can lay secure claim to being it. Since everyone has agreed to agree that Real Journalism is important to democracy, the people who try to sell their Real Journalism will receive the social sanction for doing so only to the extent that they can clarify and lay claim to their status as such.... Which is where the Somali pirates enter the picture: since journalistic products do not have value without their claim to a stable originality that will never really obtain in practice, people like Keller and Huffington will find it necessary to lay claim to being Real Journalists by conjuring up the figure of the Not Real Journalist.... [W]hat more perfectly illegitimate aggregator of other people’s hard earned capital than the metaphor made real in Somalia?

Julian Sanchez: Things That Are Irrelevant to Copyright Policy

Julian Sanchez:

Things That Are Irrelevant to Copyright Policy: Sometimes individual creators decide it’s in their best interests to transfer rights to their works—a song, a movie, a story, a character—to big, faceless, generally unsympathetic corporations. This should have exactly no impact on anyone’s view about the proper scope of the underlying right. Yes, sometimes people are hoodwinked into making unwise deals, and that’s bad and unfair—but it’s a kind of generic sad fact about life and contracts and whatnot, with no special significance in the realm of copyright. Often, the value of a right derives primarily from the ability to transfer it, and doing so will genuinely be in the best interest of the creator. So if you think that underling right is properly defined and deserving of respect when held by the creator, it is exactly equally deserving of respect when voluntarily sold to an entity you might not particularly like.

Sometimes, on the other hand, rights are retained by independent and sympathetic creators, who unsurprisingly want those rights to be as expansive as possible, and object to either general narrowing of those rights or the recognition of any number of “fair use” exceptions. These will often be wonderful, likeable, creative people, and the correct policy response to these objections as such is: Cry me a fucking river; now piss off.

Wise assessment of copyright policy should have nothing to do with how you feel about the person or entity who holds the right at any particular time, because copyright policy is not about identifying wonderful and meritorious people and ensuring—certainly not as an end in itself, anyway—that their income is proportioned to their intrinsic moral desert—or lack thereof. We are all the massive beneficiaries of millennia of accumulated human scientific knowledge and cultural output, and not one of us did anything do deserve a jot of it. We’re all just extremely lucky not to have been born cavemen. The greatest creative genius alive would be hard pressed to create a smiley faced smeared in dung on a tree trunk without that huge and completely undeserved inheritance.

So banish the word “deserve” from your mind when you think about copyright. Nobody “deserves” a goddamn thing. (I say this, for what it’s worth, as someone who makes his living entirely through the production of “intellectual property.”) The only—the only—relevant question is whether a marginal restriction on the general ability to use information incentivizes enough additional information production over the long run to justify denying that marginal use to every other human being on the planet, whether for simple consumption or further creation. That’s an empirical question, and while I strongly suspect the answer will generally be “not by a longshot” beyond a whole lot more limited level of protection than we currently provide, I’m happy to be persuaded otherwise along any particular dimension. But if you want to make an argument that turns in any significant respect on how unlikeable big corporations are or how marvelous creative people are… well, spare me. And the rest of us. Because in both cases it’s probably true, but as a policy matter, nobody should really give a damn.

Facebook as Leading Sector...

Karl Smith:

The Great Stagnation and the Socialvore: For me, and I know I am an in infovore subset, there has been massive deflation. However, the internet as the exclusive playground for infovores may be coming to an end. Social interactions may be the textiles of this new revolution. A product that almost every wants, that is suddenly becoming cheaper....

Suppose I have a hotel which blocks Facebook and is out of range of 3G. How much does this knock off the daily rate versus other hotels with no 3G but do have Facebook access. Even at $5 per night you you would be talking about $5*365*300M = $547B in annual GDP, priced out a zero dollars. That’s roughly 3% of national income, attributed to Facebook alone. Not advertising on Facebook mind you, but the economic value produced for users.

Is it that high? It could be lower but I could imagine it being higher possibly even $10 a night.... And of course, this is in theory just the beginning.

Internet Regulation

Michael Froomkin writes:

Free Drinks! (Repost) | Discourse.net: All you have to do is listen to a lecture first, starting at 5:30 on Monday, April 4, at the Lowe Art Museum. RSVP by March 30th — that’s tomorrow — to events@law.miami.edu:

Rationalizing Intellectual Property

Julian Sanchez:

Orphan Works: The ruling rejecting the Google Books settlement suggests, plausibly enough, that any general solution to the problem of orphan works is more properly the task of Congress than any kind of private agreement. I’ll admit to being a bit puzzled about why this hasn’t already happened. I take it for granted that our current lunatic copyright policy can be adequately explained by the fact that concentrated incumbent entities—RIAA and MPAA—are in a better position than dispersed consumers and amateur creators to lobby for legislation reflecting their (perceived) interests. But it seems like everyone ought to have an interest in resolving the orphan works problem. Content owned by incumbent content firms—and especially content currently generating revenue—is by definition not “orphan works.” Producers affiliated with those firms would also benefit from the presumption that they may make use of works whose owners cannot be found. And in the cases where there actually is a current living rights holder, they may well become aware of a highly successful adaptation of their work (and thus enjoy the benefit of royalties) that would simply not exist under the status quo because good-faith efforts to locate them failed. Who’s the rational veto player here?

What Is Jennifer Anniston Having for Breakfast?

From the Economist

Hal Varian Interview - Innovation with Google Economist Hal Varian | The Ideas Economy:

Economist: What fascinates you most about the rate of productivity today?

Hal Varian: There's a recent study out of the University of Michigan, where they had a team of students find answers to a set of questions using materials in the campus library. Then another team had to answer the same set of questions using Google. It took them 7 minutes to answer the questions on Google and 22 minutes to answer them in the library. Think about all the time saved! Thirty years ago, getting answers was really expensive, so we asked very few questions. Now getting answers is cheap, so we ask billions of questions a day, like “what is Jennifer Aniston having for breakfast?” We would have never asked that 30 years ago.

Khan Academy

Khan Academy

A "Great Stagnation"?--NOT!!

I think Hal Varian is right:

Hal Varian: I RECEIVED an email from The Economist's editor in London referring to Tyler Cowen's book yesterday afternoon. I went to Amazon, downloaded the book to my iPad, and read it...all in the space of an hour and a half. I then composed this note and sent it to London—19 hours after receiving the first email. I have every reason to believe that this note will appear on economist.com a few hours after it is received. None of this would have been possible 30 years ago. It is therefore particularly ironic that a major theme of the book is about how technological progress has stalled in the last 30 years.

To be fair, Mr Cowen singles out the internet as “one sector where we've had more innovation than anyone had expected”. The problem with the internet, according to Mr Cowen, is that it doesn't contribute much to jobs or revenue. But these facts just show that the internet is hugely efficient in producing consumer surplus: a relatively small amount of labour (plus a substantial dose of capital and know how) produces a huge amount of benefits.... osts of communication and computation have tumbled.  William Nordhaus at Yale University claims that computing performance has increased by a factor of 1 to 5 trillion since 1900, which represents a compound growth rate of 30-35% for a century. Since 1940, the growth rate has accelerated to 50% a year.

It's not that the growth in benefits from technology has stagnated. Quite the contrary, it's the growth in costs that have stagnated. And that's a good thing!

I think Annie Lowrey is wrong (and Tyler Cowen is wrong):

Annie Lowrey: Has the Internet, the most revolutionary communications technology advance since Gutenberg rolled out the printing press, done nothing for GDP growth? The answer, economists broadly agree, is: Sorry, but no—at least, not nearly as much as you would expect.... [A] theory... espoused by Cowen himself... [is that] the Internet is just not as revolutionary as we think it is. Sure, people might derive endless pleasure from it—its tendency to improve people's quality of life is undeniable. And sure, it might have revolutionized how we find, buy, and sell goods and services. But that still does not necessarily mean it is as transformative of an economy as, say, railroads were.

That is in part because the Internet and computers tend to push costs toward zero, and have the capacity to reduce the need for labor. You are, of course, currently reading this article for free on a Web site supported not by subscriptions, but by advertising....

That the Internet has not produced an economic boom might be hard to believe, Cowen admits. "We have a collective historical memory that technological progress brings a big and predictable stream of revenue growth across most of the economy," he writes. "When it comes to the web, those assumptions are turning out to be wrong or misleading. The revenue-intensive sectors of our economy have been slowing down and the big technological gains are coming in revenue-deficient sectors."... [I]f our most radical and life-altering technologies are not improving incomes or productivity or growth, then we still have problems. Quality-of-life improvements do not put dinner on the table or pay for Social Security benefits...

But the typical middle-class North Atlantic family already put dinner on the table perfectly well.

We--especially me--really do not need more calories, thank you.

What we need is the ability to quickly search and decide exactly what kind of dinner we want brought to us if we are lazy.

What we need is the ability to figure out quickly what the tastiest and most nutritional recipe we can make with what is in the fridge if we are feeling industrious.

Those are the things that the internet is best at.

That the internet is not "producing revenue" is completely beside the point. What the internet is doing is, as Paul Seabright has already written, saving attention--and that is much more valuable.

Given a choice between doubling the amount of calories consumed by the typical middle-class American family--or doubling the amount of furniture purchased, or doubling the amount of automobiles owned, or doubling the number of clothes in our closets--and halving the time we must spend searching for what we want to buy, to read, to watch, to listen to, can anyone think that this is a difficult choice?

And to the extent that our price indexes do not take into account the improvements in quality of life from the internet, we don't have to spend as much on Social Security benefits as the CPI suggests in order to provide our seniors with a generous standard of living.

Not One But Many Kinds of "Social Media"

Tom Slee on "Social Media":

Blogs and Bullets: Breaking Down Social Media - Whimsley: Once we give up on the "tendency" and "on average" arguments around digital technologies, the Internet takes its place as one part of the real world, not a separate entity.... In the early 1990's there was much talk of a "new economics" of the Internet, but in the end it turned out that - with a sharpened focus on increasing returns - traditional economics did explain much of the industrial organization of the digital realm. At the same time there was much talk of how the Internet would break down legal barriers, but such barriers have proven surprisingly resilient.... What smaller-scale structures would we talk about, if we give up the grand themes of "social media"? Here is a rough sketch of one division.

Internet-based social network platforms: Centralized, commercial, privately-owned and advertising-driven, the YouTwitFace world is obviously one of the big stories of the moment. The cost structure of such businesses make them natural, if maybe short-lived, monopolies. To be repetitious, the story is not just one about "networks"; it's also about the terms of service, privacy policies, and advertising policies of the major platform owners. A focus on the Internet has given a tendency to discuss Facebook (the platform)'s role in the current ferment independent of Facebook (the company), but that's unsupportable (much more here). What accommodations have the owners made with the countries in which they operate?

Mobile Devices: Messaging on a phone in the street is different from looking at a browser while sitting inside, especially in times of political turmoil. It is quite possible that the phone could supplement political activity while the desktop browser could displace it. Mobility makes a difference, and lumping SMS messaging together with blogs just confuses things. On the other hand, the proprietary nature of the phone network means that device manufacturers and network operators can be leaned on to comply with state-driven security demands (ask RIM).

Blogs: Despite Turkey blocking all of blogspot.com, blogging (and especially independent blogging) is architecturally different from social networking platforms. The network of sites is looser, the content more dispersed, the ownership more individual. Blogging plays a different role in political debate and activity to Facebook and other forms of expression.

Multi-channel outlets: Al Jazeera, The Guardian, The New York Times: major media operations that have adapted to the web now operate as multi-channel outlets. Does it make sense to situate The Guardian as traditional media and put the Huffington Post in the new media category? I don't see why, but these outlets that can operate in multiple media surely demand different treatment.

Displaced forms of media: The winner-take-all structure of digital markets means that in any one niche there are relatively few players compared to the number in the diminishing-returns-based physical world. There's no need for separate special-topic reference publications when Wikipedia can be expanded indefinitely, and there are fewer bookshops online than there are offline. The major cultural outlets for many countries are increasingly based on the west coast of the USA as Hollywood is joined by Apple, Amazon, and Netflix. We are losing a diversity of institutions in the move to a digital terrain, and it is worth investigating what impact that loss has.

Circumvention tools: Tools used specifically by activists while carrying out illegal or politically sensitive acts fall into a separate category. Do tools like Tor and the failed Haystack tell us much about social networking and Facebook? I don't think so.

Obviously there are many other divisions possible. My main point is: if there is one shift that forswearing "social media" would produce, it would be to talk less about networks and self-organization and to talk more about institutions (commercial, state, and global), and this seems to me a realistic shift given how the digital world has changed over the last few years.

The Hollowing Out of the U.S. Income Distribution Under the Pressure of Technology

What are we all going to do in the future as machines replace more and more of our jobs?

This has worried economists ever since the eighteenth-century French physiocrats tried to figure out how an economy could avoid mass unemployment if the agricultural share of the labor force ever fell below two-thirds. What would all those extra people do? Everybody knew that non-agricultural workers were not creators of net wealth but simply ways of transforming wealth--food and raw materials go into a non-agricultural sector and useful stuff comes out but, the physiocrats said, the non-agricultural workers transform value, they don't create value. Only the agriculturalists create value. And should the agricultural share of the labor force drop below fifty percent, there won't be enough useful ways to transform the agriculture-created value to employ everybody.

The physiocrats were, of course, wrong. We found lots of useful things that people could do not just to transform but to create value as the agricultural share of the labor force headed down to its current 2% or so share. But what happens next as hardware robots take over manufacturing, mining, and transportation and as software 'bots take over the routine paper shuffling?

Paul Krugman:

Autor! Autor!: A further note on brains and jobs: the story I told in my whimsical magazine piece bears a clear family resemblance to the influential analysis of Autor, Levy, and Murnane a few years later, which argued that the crucial difference in terms of possible replacement of humans by machines was one of routine versus non-routine, rather than white-collar versus blue-collar, and that computerization was if anything likely to increase demand for some “low-skill” occupations and reduce demand for some traditionally well-paying white-collar jobs. I’d note, by the way, that it increasingly looks as if “medical diagnosis” should be moved from the right column to the left.

And you can actually see this happening in the data.... In the 80s, the higher the skill required for an occupation, the bigger the employment gains. In the 90s, there was “hollowing out”, with the middle-skill occupations losing relative to both ends. And most recently, the hollowing seems to have spread further up the scale.

This is real, and it calls some of our favorite platitudes into question.

I don't see a problem with the number of jobs: I don't see any reason that technological unemployment should be any more in our future than it has been in our past.

What is of interest is the effect of all of this on the wage distribution. Here, however, I think the key thing to look at is not demand but supply: the supply of workers. White collar, blue collar, skilled, unskilled, whatever--the high salary occupations in the future will be those that manage to construct and maintain barriers to entry to entrench incumbents. For much of the past generation the principle barrier to entry has been the educational system: a combination of high cost, risk aversion on the part of the young, lack of knowledge on the part of the young, restricted numbers of places, and licensing requirements have meant that the supply of educated young workers has failed to keep up with the demand--and an extraordinarily booming college wage premium has been the result. But there have been other, secondary barriers to entry as well: there is only one Oprah Winfrey, and she is just the tip of the spear of the winner-take-all sector in which social network barriers to entry appear to loom large that now consumes such a large share of total income in our society.

Bruce Bigelow: Xconomy

San Diego-Area Business, Life Sciences, and Technology News | Xconomy

Matthew Yglesias: People Still Listen to Music

MY:

The Death of The Recordings-Sale Industry: People still listen to music. People still play music. People who play music even still earn money. But the business of selling recordings of music is shrinking. Which, of course, is exactly what ought to be happening to it. Distributing a digital copy of an album to a person’s computer is much cheaper than manufacturing and distributing a physical CD to a retail store. In a competitive market, the price of a widget ought to approximate the marginal cost of producing an additional widget. That’s one reason why this blog is free to read. Thanks to copyright, a recordings-seller does have some level of market power to allow him to seek monopoly rents. But there’s a pretty high degree of substitutability between different songs, so the competition is still pretty intense and the prices are low.

This is one reason why I would discourage bands from trying to underprice tickets at their own shows as a reward to fans. Since digital copies of recordings are non-rival and basically free to make, any non-zero sale price entails some deadweight loss. And since concert tickets are necessarily scarce, any sub-market price entails some deadweight loss. The optimal strategy for a popular band that wants to do something nice is market pricing for concert tickets, plus free recordings. Or even better, you could release your records into the public domain.

The Decline Of The Music Industry

Jay Yarrow:

CHART OF THE DAY: The Death Of The Music Industry: Here is a stunning visualization of the collapse of the music industry from Bain. As you can see, the growth of digital sales is not doing enough to offset the death of the CD. (Chart via Peter Kafka, who spotted it on Flickr.)

The Tech Bubble Was a Good Thing

I agree with Tim Duy here. We got a lot of business-model development, a lot of fiber installed, and a huge amount of social surplus created by the tech bubble--the only thing missing were the returns to investors.

Tim Duy:

Economist's View: "The Upside of the Tech Bubble": I think [Felix] Salmon goes a bit far when describing the tech stock bubble of the 1990s:

The NYSE is place for algorithms and speculators to make bets on financial assets. It last funneled real amounts of money into the broader economy during the dot-com boom, leaving behind a lot of Aeron chairs and little else.

I have gone back and forth on this topic.... But when you scrape away the detritus, you find the building blocks of all the technology that is increasingly integrated in our everyday life. The bubble-driven intensity of activity in information technology almost certainly accelerated its development and adaptation. Many news ideas were explored; some failed, some succeeded. The successes, however, outweighed the failures, leaving productivity much higher as a result (that this productivity has not translated into higher real wages, however, remains a disappointment).... [T]he tech bubble was a wild ride, but I am wary about declaring it an absolute failure of the capital allocation process.

Adrian Hon: Disruptive Change in the Book Industry

AH:

More on the Death of Publishers: If book publishers want to see the next decade in any reasonable health, then it’s absolutely imperative that they rethink their pricing strategies and business models right now. Hopefully this example will illustrate why:

I’m a big fan of Iain Banks’ novels.... His latest novel, Surface Detail... 627 pages.... I lugged the thing home and began reading it this morning.... I found it difficult to pull myself away from it.... I didn’t have any space left in my bag, so I did the unthinkable – I googled "surface detail ePub" so I could download and read it on my iPad.... I try doing this every six months or so, and I usually end up mired in a swamp of fake torrent links and horrible PDF versions; for what it’s worth, this was mostly out of curiosity, since six months ago I didn’t own an iPad. This time, it took me 60 seconds to download a pristine ePub file, and another five minutes to move it to my iPad and iPhone. While this was going on, I took the opportunity to poke around the torrent sites and forums that my search had yielded, and discovered a wonderful selection of books.... “Oh, but we’ve still got the backlist!” I hear some publisher cry. No such luck... some helpful pirate... ePub, mobi, PDF and every other popular format (the non-fiction and literary selection is much worse though, which probably reflects the tastes of the people uploading the torrents – that’ll change soon enough).

I am not a torrent-finding genius – I just know how to add ‘ePub’ to the name of a book or author. I don’t need a fast internet connection, because most books are below 1MB in size, even in a bundle of multiple formats. I don’t need to learn how to use Bittorrent, because I already use that for TV shows. And Apple has made it very easy for me to add ePub files to my iPad and iPhone. So really, there is nothing stopping me from downloading several hundred books other than the fact that I already have too much to read and I think authors should be paid.

But why would the average person not pirate eBooks? Like Cory Doctorow says, it’s not going to become any harder to type in ‘Toy Story 3 bittorrent’ in the future – and ‘Twilight ePub’ is even easier to type, and much faster to download to boot....

But of course I’m exaggerating. Most publishers won’t go bust. eBook prices will be forced down, margins will be cut, consolidation will occur. New publishers will spring up, with lower overheads and offering authors a bigger cut. A few publishers will thrive; most publishers will suffer. Some new entrants will make a ton of cash; maybe there’ll be a Spotify or Netflix for books. Life will go on. Authors will continue writing – it’s not as if they ever did it for the money – and books will continue being published.

Three years ago, I wrote a blog post called The Death of Publishers.... Here’s an excerpt:

Book publishers have had a longer grace period than the other entertainment industries.... This has led many publishers to complacency, thinking there’s something special about books that will spare them.... They’re wrong. eBook readers are about to get very good, very quickly. A full colour wireless eBook reader with a battery life of over a week, a storage capacity of a thousand books, and a flexible display will be yours for $150 in ten years time....

How wrong I was! It’s only taken us three years to get the Kindle 3 at a mere $189, with a battery life of a month and a storage capacity of 3500 books.... But I was right about the complacency of publishers. They’ve spent three years bickering about eBook prices and Amazon and Apple and Andrew Wylie, and they’ve ignored that massive growling wolf at the door, the wolf that has transformed the music and TV so much that they’re forced to give their content away for practically nothing.

Time’s up. The wolf is here.

How Is Microsoft Doing This?

Compound -$2.5 billion at 7%/year and you get -$35 billion...

Jay Yarow and Kamelia Angelova:

CHART OF THE DAY: Microsoft Incinerates ANOTHER $543 Million Online: Every quarter Microsoft reports earnings, and every quarter it reports a massive loss in its online operations. Today it reported a $543 million loss for its December quarter. This gives Microsoft a trailing-four-quarter loss of $2.5 billion. That's simply astounding. We've asked it before, and we'll ask it again: Has any company lost as much money online as Microsoft?

Photons and Electrons

James Condliffe:

One Per Cent: Kindle is mightier than the book, for Amazon at least: Forget the dog-eared holiday paperback: you'll be reading an ebook on the beach this summer, if Amazon's latest sales figures are anything to go by. For the first time, Amazon's Kindle book sales have overtaken those of their paperbacks, making ebooks the company's most popular format in the US. In a statement published on their website, Amazon announced:

Amazon.com is now selling more Kindle books than paperback books. Since the beginning of the year, for every 100 paperback books Amazon has sold, the Company has sold 115 Kindle books. Additionally, during this same time period the company has sold three times as many Kindle books as hardcover books.

Kindle sales first overtook hardbacks back in July of 2010. But this latest announcement marks a much more significant step forward. The company's aggressive marketing of digital books seems to have helped it achieve its first ever $10 billion quarter at the end of last year, and ebook sales look set to keep breaking records. Last December, the Kindle device replaced J.K. Rowling's "Harry Potter and the Deathly Hallows" as Amazon's biggest-selling single product ever, and the Kindle store itself now boasts over 810,000 titles.

Amazon has very cleverly separated hardback and paperback sales in these newly-released figures - and remained tight-lipped about the raw sales numbers for the time period they quote in their release. The Guardian points out that this differentiation actually "suggests that the online retailer still sells 120 print books for every 100 ebooks sold". So in absolute terms, the hard-copy book still outsells its digital counterpart.

Nevertheless, the news suggests that the Kindle's success is sealed as the champion of e-readers - and maybe even reading, full stop.

Patent Trolls

Matthew Yglesias:

Yglesias » And You Will Know Us By The Trail of Patent Trolls: One line from last night’s speech that really left me cold was this: “No country has more successful companies, or grants more patents to inventors and entrepreneurs.”... [T]he quantity of patents the government hands out to inventors and entrepreneurs is measuring two different things simultaneously. One is how many new ideas do inventors and entrepreneurs send in patent applications for. The other is how loosey goosey does the patent office get about what it deems patentable.... [By] 21st century standards Isaac Newton should have patented calculus (“A Method For Using Fluxions To Determine Instantaneous Rate of Change”) and then waited patiently until Leibniz published his superior method and then sued the pants off anyone who tried to take a derivative without coughing up a hefty license fee. But would that world have been a better place? The issue isn’t really so much the rents that Newton would have thereby extracted (I’m not going to begrudge one of human history’s greatest geniuses a fortune) but the barriers to entry that would have been created as a secondary consequence. A world in which smart people have access to the stock of existing human knowledge and are free to apply it in new ways is a world of competition and innovation. A world where you need to consult with an army of lawyers first isn’t. If you ask the people who care most about promoting entrepreneurship in America about this they kind of shrug, concede that the patent system is hopelessly broken, and then confess to despair that it can or will be fixed...

What Future Does Facebook Have?

The key question that everybody has when they go to the world wide web is a simple one: "What do I need to know?" Different web companies give different answers to that question:

• Wikipedia: You need a summary overview sketch of a particular person, place, thing, or event that you already have in mind--and we will provide you with such a sketch, written by a tag time of altruistic left- and right-libertarians and by some people who care too much about the topic.

• Google: You need to know what pages on the internet have been most linked to by others and that contain keywords that you already have in mind.

• Facebook: You need to know what your friends and your friends of friends already know that you do not.

Facebook thus has a different answer--and it may well be a better answer.

David Gelles:

Facebook’s grand plan for the future: After the public presentation I join Zuckerberg... for 40 minutes he talks animatedly.... “If you look five years out, every industry is going to be rethought in a social way,” he says. “You can remake whole industries. That’s the big thing.” His ambition, it turns out, is not simply to make Facebook an influential technology company, but the most important company in the world. “You can integrate a person’s friends into almost anything and make [it] instantly more engaging and viral,” he told me. “You care so much more about your friends. It’s not an intellectual thing. It’s hard-wired into humans that you need to focus on what the people around you are doing. It’s this very visceral, deep thing. That, I think, is the structural thing that is going to make it so that all these industries change.”

Zuckerberg uses the word “social” a lot, and it’s not always obvious what he means.... To Zuckerberg, a more social world is one where nearly everything – from the web to the TV to the restaurants you choose to eat at – is informed by your stated preferences and your friends’ preferences, and equipped with technology that lets you communicate and share content with people you know....

Zuckerberg seems at ease. “The fear is behind him,” said a friend of Zuckerberg’s. “Until a year ago, he thought this might be the next Google, but he wasn’t sure. Now he’s sure. The fear is gone.” Facebook’s soaring user base and booming revenues are, strangely, not really what is behind this shift in disposition.... Facebook is no longer merely a social network, where users check out updates from friends, glance at photos and play some games. Rather, it is making moves to be an essential part of the entire online experience. The company is becoming people’s homepage, e-mail system and more....

“They made this very ballsy decision to transform themselves from a place where everyone came to – a destination – into a service that lets me take my information everywhere,” says Sam Altman, chief executive of Loopt, a location services company that works with Facebook. Facebook colours this as a win-win for the sites with which it works. By giving sites such as The Times of India and TVGuide.com access to Facebook’s graph of friends, it allows them to draw in new traffic and easily acquire new users. When movie review site Rotten Tomatoes integrated with Facebook, the number of reviews on the site doubled. Facebook, of course, benefits too. By implanting its links and cornflower blue “f” logo on millions of pages, the company is enmeshing itself deeper into the fabric of the web, one site at a time....

If Zuckerberg is to be believed, we are rapidly moving from a world where the web doesn’t know who you are, to a world where the web knows exactly who you are. “What we’re imagining is very different,” says Chris Cox, who dropped out of Stanford to join the company in 2005 and is now one of Zuckerberg’s closest lieutenants. “If you imagine a television designed around social, you turn it on and it says, ‘Thirteen of your friends like Entourage. Press play. Your dad recorded 60 Minutes. Press play.’” In other words, the world will be experienced through the filter of one’s Facebook friends.

Zuckerberg points to companies such as Zynga (built on Facebook’s Platform) and Quora (a question and answer service founded by former Facebook employees, which relies almost exclusively on Facebook for users) as examples of companies building around social “from the ground up”. “The real disruption is going to come from people who are rethinking these spaces,” he said.... But seeing as Facebook alone is the keeper of the most comprehensive social graph on earth, what they really mean is building new companies and services around Facebook. And while this may sound hubristic, it reflects Zuckerberg’s belief that Facebook’s map of human relationships is among the most important developments in business history. “That, I think, is the strongest product element we have,” he said. “And [most] likely one of the strongest product elements that ever has existed.”...

Industry veterans stress that Facebook may not be the only identity one has on the web. “I think there will be a couple of different identities on the web,” said John Donahoe, chief executive of Ebay. (Ebay, which owns PayPal, works closely with Facebook.) “Facebook will be one of the identities you carry with you. The identity we’re focused on with PayPal is your monetary identity. It’s not one where you want to share all your information.” And while Facebook has the early lead, the changing nature of social structures makes this an inherently dynamic industry. “The fluidity of social networks is one of the reasons it’s not entirely clear that Facebook will be the be-all and end-all,” says one prominent social media executive. So far, however, no credible alternative has caught on...

This Means War!!

McGraw-Hill and Google Books just charged my $14 for what seemed to be an electronic copy of Hyman Minsky's Stabilizing an Unstable Economy but was actually only the first chapter of the book.

I don't like being charged $14 for introductory book chapters. I don't like bait-and-switch.

I think Google Books has some considerable amount of explaining to do...

UPDATE: Google appeases:

Hello Mr. Delong,

I recently read your blog and saw that you were unsatisfied with your recent purchase of “Stabilizing an Unstable Economy.” Upon closer examination my team and I found that the issue that you are experiencing is specific to “Stabilizing an Unstable Economy.” The flowing text version of “Stabilizing an Unstable Economy” is currently affected by errors in the ePub of the ebook. We have pulled this ebook from sale and are working to resolve the issue as soon as possible. While I cannot offer you a time line for when this issue will be resolved, I can offer you the following resolutions:

1) The ‘scanned pages’ version of “Stabilizing an Unstable Economy” is fully viewable, so you may read your ebook in this format should you prefer to do so. You can switch to ‘scanned pages’ by visiting your settings (Aa) from within your ebook and scrolling down to click on ‘scanned pages’ format.

2)If you prefer not to do this, you may request a refund at the following link: http://goo.gl/Zx5jT or email me back to verify that you would like a refund.

We apologize for any inconvenience that this may have caused, and Thank you for your feedback.

Sincerely,

Tina, The Google Books Team