Friday, October 7, 2011

Lingering effects of unemployment

This is a quite terrifying post by Megan McCardle at the Atlantic. She referred back to it today when discussing the Occupy Wall Street protests. Written in 2008, she talks about her experience of unemployment in the early 2000s:

For the next eighteen months, I struggled to find a job, in the teeth of a recession that kicked MBAs especially hard. It was awful in a way that is difficult to describe to anyone who hasn't been unemployed long term; the thing makes you question everything about your life. I remember going to see Avenue Q on a date, and writhing in humiliation, thinking that my date must be identifying me with the aimless failures on stage. I was 29 years old, and living at home. I had money--I always managed to work. But as far as I could tell, I had no future. ..

It took me a long, long time to crawl out of that hole. I'll never make what I expected to make as a consultant. I'll never have the job security that I had learned to expect in the pre-9/11 world. The universe will always seem a potentially malevolent place to me, ready to unleash some unknown disaster at any moment.

Things are very hard indeed for people in their 20s right now, weighed down with student debt and few assets. G and I discussed the Wall St protests last night. Are they just standard left-wing puppet theater? Or a sign that a generation is losing touch with the America dream, and it is a much deeper if vague and inchoate awakening?

Worst financial crisis ever

This is really not a good sign. Mervyn King, the Governor of the Bank of England, generally quite a dry academic type, says the outlook is not good (as the Bank launches another round of quantitative easing.)

this is the most serious financial crisis at least since the 1930s, if not ever.

A thousand little companies reduced to a few survivors

This fascinating archive piece turned up in an Atlantic tweet the other day, probably because they thought it was relevant to discussion of Steve Job's legacy. James Fallows writes in July 1982 about how he bought a computer to do word-processing, after spending near 24 hours straight retyping a 100,000 word draft to hit a deadline.

On one level it is just a colorful historical artifact, as he explains to his readers what a computer is and what word processing means.

When I sit down to write a letter or start the first draft of an article, I simply type on the keyboard and the words appear on the screen.

But what is also interesting is the astonishing machine he uses to write on, a Processor Technology Sol-20, with a hefty 48K of memory.

Never heard of it? Nor me. The company that made it apparently went bust about six months later.

And there were dozens of such companies. Says Fallows:

The microcomputer industry these days is like the auto business in 1910, with a thousand little hustlers trying to claim a piece of the action. The next time you feel depressed about the vigor of the American economy, pick up a copy of Byte—or Personal Computing, or Popular Computing, or Interface Age, or InfoWorld —and look at the columns upon columns of ads from small-time companies with new products to sell.

There is Tandy and North Star, both of whom make odd things called 'Disk Operating Systems' or DOS. There is IBM with its new PC. Radio Shack and DEC and Commodore and Osborne make computers.

Over the past few months, in the interests of thorough research, I have tried computers by Apple and Zenith, Victor and Vector, Digital and Wang, Superbrain and Radio Shack, Atari and North Star, to name just a few.

Towards the end he mentions a company called Apple, which he says is one of the best known- but he doesn't like the Apple II's keyboard.

He never mentions Microsoft.

It can be very hard indeed to tell which out of a cluster of small new companies is going to make it. I looked up "Processor Technologies" on Wikipedia.

Processor Technology Corporation was a microcomputer company founded by Bob Marsh and Gary Ingram in April 1975.

It could have been - on one morning in a garage in 1978 or 1980 - Bob Marsh and Gary Ingram who were destined to grow the largest company in the world and be lauded and remembered in every newspaper on the globe.

All new innovations tend to produce waves of dozens or hundreds of new companies like this, and then consolidate down to two or three survivors. The auto industry was the same in the 1910s and 1920s, as Fallows says. Search technology was the same in the late 1990s. Remember Excite, Nothern Light, and of course Altavista?

It is the evolutionary nature of capitalism that I discussed way back in July, here. It generates variation, and then the market selects the fittest.

It can be quite brutal. While we remember Steve Jobs, maybe we ought to remember all the thousands of other computer entrepreneurs in the 1970s who did not end up as billionaires.

The Stagnation of Innovation?

Another great column this morning by David Brooks who wonders whether innovation is stagnating. iPads and the internet are amazing, sure. But where are the flying cars and Martian colonies and cures for cancer (like the pancreatic cancer that killed Steve Jobs) that we were promised?

It's not just a matter of technology, he says, but evolution in the culture. Steve Jobs combined elements of 1960s hippiness, 1970s Silicon Valley nerdiness and corporate America.

The roots of great innovation are never just in the technology itself. They are always in the wider historical context. They require new ways of seeing. As Einstein put it, “The significant problems we face cannot be solved at the same level of thinking we were at when we created them.”

As Brooks says, this stagnation is becoming an increasingly common theme in discussion. Tyler Cowen writes about it in The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will(Eventually) Feel Better.

One additional point Brooks and others make is science fiction has become moribund. It has become about dystopias, not new gee-whiz visions.

Maybe fiction and imagination are very important to creating the cultural resources for progress, or at least as an index of the state of the culture at a point in time. Something like Margaret Atwood's Oryx and Crake doesn't inspire much hope.

Thursday, October 6, 2011

The future of the book

Meanwhile, everyone is not as happy with economic developments as Apple stockholders. Sam Harris discusses the future of the book in the Daily Beast. He admires an article Christopher Hitchens has just written in Vanity Fair:

Vanity Fair has a print circulation of around 1 million copies; the current issue has a fresh photo of Angelina Jolie on its cover; and Hitch is one of the best writers to ever draw breath. However, I’m reasonably sure that this blog post, or the next one, will reach more readers than his latest gem. For bloggers like Ferriss and Godin, the future arrived long ago: Publishing in Vanity Fair would be tantamount to burying their work. This is astounding.

A blog can get more hits than a major traditional magazine. The economics of short e-books make them difficult to sustain, but fewer people have the appetite for a full book.

Maybe this is also an example of the power-law winner-take all model which is growing in many industries - a few massive size concerns, and then a long long tail of smaller and smaller sites or blogs or organizations. A few category killers, and then an infinity of smaller niches, with open access and unpredictable success.

How people discover new things and direct their attention is at the core of the new economy.

Steve Job's View of Work

Steve Jobs died yesterday, and e whole country seems to feel the loss. From the Atlantic, how Steve Jobs thought about work. You should do what you love.

At the same time, Jobs the man embodied a new way to think about work, countercultured in the petri dish of the Bay Area in the 1970s. The point of work was not to create glory for the country. The point of work was not to advance slowly up the corporate ranks until you got a watch and a retirement party. No, the point of work was self-fulfillment. Your job should provide nothing less than the completion of yourself. You should do what you love, Jobs urged in his famous 2005 Stanford commencement speech. "Your time is limited, so don't waste it living someone else's life," he urged the students. And yet to produce Apple products requires that thousands of workers flawlessly execute Jobs' business plans, which is to say his life.

Of course, it was better to Be Steve than to work for Steve. Other people may have done whatever it took to please him, rather than what they loved. But few can doubt he changed the world in significant ways.

Wednesday, October 5, 2011

Gratuitous Extra Photo of Miami

Art Deco Architecture on Ocean Drive, South Beach. In the 1980s South Beach was a crime-ridden run-down area, with dilapidated and outmoded buildings.

Now the beautifully restored 1930s architecture gives a young city a sense of place and history and character. People want beauty and a sense of something unique. And if you do it right, you get huge wealth in real estate.

The Experience Economy

How are we supposed to make sense of changes in the economy? One of the best perspectives I've read recently is The Experience Economy: Work Is Theater & Every Business a Stage by B. Joesph Pine and James H. Gilmore , a business classic from 1999.

They begin with a vivid example. The cost of the coffee in your morning cup is about 1 or 2 cents a cup when it is bought as a commodity on a wholesale commodities exchange. When a manufacturer grinds and packages it and sends it to the grocery store - turning it into a good - the price of your cup is about 5 to 25 cents.

Buy it in an ordinary diner, a standard service offering, and it will cost you 50 cents to a dollar.

However, when you buy it in Starbucks with elaborate extra brewing and preparation and pleasant surroundings, it's $3. In a five star hotel after dinner, $5 or $6.

And if you order it at Cafe Florian in St Mark's Square, Venice, sitting in the crisp morning air immersed in the visual splendor and sounds of one of the most beautiful spots on earth, you willingly pay $15 for that same cup that is worth two cents as a commodity.

Experiences are vastly more valuable.

This progression of value is all the more important and urgent, because they argue most existing goods and services are getting commoditized. They are getting standardized and automated and turned into the equivalent of that 2 cent coffee.

Commodities are fungible "stuff" which can't be differentiated beyond basic grades - for example, one barrel of sweet crude oil is much like any other. The only way to escape this relentless downward pressure on prices and profits is to rise up the progression of economic value.

Civilization started off with commodities, like grain and olive oil and tin. They are fungible . The material itself is the offering.

Next came goods, invented and manufactured products, which are tangible. The product is the offering.

Then comes the service economy, where you add more value by performing an activity on behalf of someone. The value becomes intangible. The operation and procedures are the offering. Starbucks finds the best arabica beans, grinds, tamps and serves you your perfect Cafe Mocha with a caramel swirl. GE offers financing and maintenance contracts with their jet engines.

So far so normal, as these cover the major categories in national accounts and economic statistics, even if the service sector is much more sketchily covered by data. We largely live in a service economy.

The next level, and the book's distinct contribtution is where companies need to go next, - providing experiences. Experiences are memorable. The event is the offering. It is about engaging the customer.

The focus is on the experience customers have while using the good, not the features of the good itself (which sounds very like a key to Apple's success). It is about developing scripts for an encounter, and it borrows a lot from the theater. Experiences are staged. They can be entertainment. esthetic, educational or escapist, depending on the degree of immersion and active participation.

That leads off into a number of rather unpersuasive chapters about how companies can learn from the theater, which get quite tiresome.

They conclude by arguing there is one stage beyond experiences, which do in fact have some weaknesses. Companies like Rain Forest Cafe which stressed an immersive experience around the food found it hard to get repeat business. Once was enough for many people, who looked for the next novelty.

The next and final stage in the progress of economic value is transformations which are about changing individuals permanently.

When you customize an experience to make it just right for an individual- providing exactly what he or she needs right now - you cannot help changing that individual. (p165)

The individual him- or her-self is the offering, rather than a product or an event.

It is all about guidance, and crucially dependent on new aims and purposes and perseverance. This is where the highest economic value can be created. Even management consultancies realize it is no longer enough to sell a service, but they have to achieve a permanent transformation for their clients.

If services are about charging for activities you execute and experiences are about charging for the time customers spend with you, then transformations are about charging for demonstrated outcomes.

Nothing is more important, more abiding or more wealth-creating than the wisdom to transform customers. And nothing will command as high a price. (p190)

They quote Virginia Postrel:

We are , in fact, living more and more in an intangible economy, in which the greatest sources of wealth are not physical. We aren't yet used to an economy in which beauty, amusement attention, learning, pleasure, even spiritual fulfilment are as real and economically valuable as steel or semiconductors. (p187)

I find much of what they say illuminating and persuasive. G and I spent over $400 on dinner at Le Bernardin earlier this year - a hundred times what it would cost us to eat at home. And we felt we got good value because it was a very memorable experience. We will talk about and remember it for years to come. We weren't really thinking of the price, but the fact it was a peak experience.

But we wouldn't go to Le Bernardin every day. And it will be a long time before we go back, if ever - because there are so many other spellbinding dining experiences to try first, not to mention all the places we want to go and things we want to do. You can't run an economy and employ millions of people on the basis of running one of the ten best restaurants in the world, or similar extraordinary experiences.

What's more, many of the best experiences are free, or close to it. Natural beauty, friends, family, looking at art. The cost of entertainment and stimulation tends to get lower over time, even if total spending as a proportion of income on those categories rise.

The book argues that "The history of economic progress consists of charging a fee for what was once free." (p67). I just don't think this is true. Yes, people are more likely to hire a plumber now for specialist activity. But they are more likely to carry out many activities themselves - painting the wall, booking their flights to Miami on Expedia, or figuring out why the router won't work because it avoids hours on the phone to tech support.

The education process itself may get automated and commoditized with technology, at least for standard offerings. You may not be able to automate Harvard or Oxford. The business course at the local community college - maybe.

I completely agree with their "progression of economic value" model. The problem is that the higher levels aren't necessarily more expensive. You could argue theater itself, their paradigmatic experience. has become commoditized compared to a hundred years ago, when there are two hundred channels of drama on Time Warner Cable and several thousand movies on Netflix. People will pay a lot for peak experiences, like the Royal Shakespeare Company or seeing Les Mis on Broadway. But for ordinary experiences they'll just hit the remote control and see what ABC has on.

The highest stage, transformation, also sounds very much like the traditional role of education and the churches - which have not traditionally been associated with automatic wealth (although, granted, the selling of indulgences was a cunning move).

All that said, it is one of the most persuasive books I've read about where future sources of value lie as the economy evolves away from basic goods and services. But these new stages of economic value may not actually employ many people.

Change of Pace Photo

Ocean Drive, Miami, FL

Will Robots Steal Your Job?

"Software could kill lawyers." says Slate. "Why that's good for everyone else."

While legal automation will be a boon for those who can't afford representation, it's bad news for lawyers. The industry is already in a slump, and law school is no longer seen as a sure path to riches. Because software will allow fewer lawyers to do a lot more work, it's sure to drive down both price and demand.

This underlines the continuing theme that technology could remove a lot of routine white-collar jobs. And it could happen quite quickly, once the software reaches a threshold where it can perform well.

Jumping hoops to get into college

So we got home OK, if two hours late and past midnight.

Here is a scary story about the meritocracy going wild in university admissions in the NYT.

“It used to be that if you were editor of the paper or president of your class you could get in almost anywhere,” Mr. Singer says. “Now it’s ‘What did you do as president? How did you make the paper special?’ Kids file stories from Bosnia or El Salvador on their summer vacations.” Such students are known in college admissions circles as “pointy” — being well-rounded doesn’t cut it anymore. You need to have a spike in your achievement chart.

Kids learn to jump through hoops held out by others, to the exclusion of all else.

Monday, October 3, 2011

Blogged from Seat 12F

So we are sitting on a delayed flight home from Miami. Mechanical problems with the airplane.

We were watching the new fall tv show Pan Am last Sunday, which represents a very glamorous take on air travel in the 1960s.

Now, not so much. It's one part of modern life which has got much cheaper - but commodified, security-processed and made a little like livestock processing. ho hum If it wasn't cheap, we wouldn't go to Miami for the weekend.

We'll just be pleased to get home tonight at this rate.

The History of Leisure

We were out swimming in the ocean this morning again. There is something so pleasing about the surf and the waves and the light. Beaches have an almost hypnotic attraction for so many people.

I wonder when that started, though. I doubt it was any earlier than the late 19th century. Spas go back earlier, no doubt. I'm thinking of a book on my shelf, Witotld Rybzinski's Waiting for the Weekend, which will probably have the answer.

One thing we don't get enough of in New York is nature. There were pelicans and seagulls swooping and diving for little minnows in the shallows near us. And the magnificence of the ocean itself is stirring, even if the shoreline is built up with towers for fifty miles in either direction.

One Iconic moment

I had a wonderful time sitting on the balcony here in Miami Beach late last night. G was inside sleeping, I had a bottle of wine in an ice bucket, a glass, and the ipad. It was completely dark, just the sound of the waves crashing and a soft rain falling off in the darkness. I downloaded a kindle book with 72 classic works of philosophy and ended up reading bits of the Nichomachean Ethics of all things. The Golden Mean and a glass of wine and the ocean.

Sunday, October 2, 2011

What makes a place your own?

We are staying in a hotel room in Miami Beach. I'm thinking about why you would want to own a condo here full-time instead, especially if you could only use it a few weeks, or at most month, a year.

Let's discount the investment value, because, certainly in this area, there hasn't been much investment return recently. Quite the opposite.

An important part of what makes a place your own is you have your own possessions and things around you, your own books, music and other collections of things you amass over time.

We have a jam box in our room, and two ipads. That means we can play a large proportion of our entire music collection at will, in a completely different place. We have books on our kindles. We have full internet.

It blurs the boundaries of what is your own long-established space and what is borrowed space. You can take digital possessions anywhere.

Of course, if it was our own condo we would have art on the walls and plants and little sculptures, candles, cups, wine glasses.

We would have a fully equipped kitchen.

But having a large slice of our own books and music here makes any place seem more like home. We can rent beautiful surroundings - an ocean view, a balcony -- for a quick refresh. We don;t need it all the time.

We think more in terms of renting places for a week or a month in the future, through sites like, rather than buying a single vacation home. Any place can be ours for a few weeks.

Flew into Miami Beach

I'm sitting here writing this on a balcony in Miami Beach. Just saying that brings a smile to my face. It is not even just the fact we are here, but the fact we CAN be here. We can choose to spontaneously go somewhere and do something different from normal routine, watching the shorebirds skim along the breaking surf below.

G and I suddenly decided on Monday evening earlier this week that we needed a break We had to get up at 5am yesterday to make an 8am flight from Kennedy, but three hours sitting on a Delta jet and here we are.

Miami is so attractive at first glance. Forests of pastel-colored skyscrapers, art deco architecture, and neon highlights. It has the palm trees and the ocean. A degree of culture too, a feel that Miami is slowly developing into a major world city.

We were out in South Beach last night. There is no sign of anything like recession or slowdown here, at least judging from all the crowds milling around and the full restaurants on Ocean Drive.

G said the atmosphere is like St Tropez, which is exactly right. Very beautiful, relaxed, quite wealthy.

But South Beach is no longer just a haven of models and the beautiful people, either. The procession of people passing by our outside table seemed very middle America, and mostly a bit overweight.

There is also something a little too hedonistic and shallow about it, perhaps. Or maybe that is just me thinking about what the epitome of South Beach local life is - the beach, parties, being seen at the right clubs, soft drugs, a suggestion of something harder-edged lurking in the other districts outside Lotus land.

We had very good food sitting outside at a restaurant on Ocean Drive, watching people pass by. I had a paella which was as good as any I had in Spain. The quality of food has leapt up around the western world in the last ten years. Many of those small details of life, the quality of daily experiences, are improving steadily. I'm drinking coffee from a Starbucks 'Via" packet, which is ten times better than usual hotel coffee.

What we choose to do on vacation tells us a lot about what we really want. Usually G and I charge around a place seeing every cultural attraction or national park within a few hours driving distance. That's what we did last time we were in this area, eight years ago. We did Everglades National Park, the Overseas Highway and Key West, Key Biscayne, Coral Gables and Miami Beach - all in about four days.

Yesterday we actually sat on a lounger on the beach for an hour. Very unlike us.

So what do most people come to Miami Beach for? The climate, of course, especially in midwinter. The deep subliminal attraction of the ocean, the beach, the surf, the waves crashing onshore. The good food and bright lights and parties - although I wonder how different that really is to most cities around North America on a Friday or Saturday night. It might have something to do with a feeling of membership, of being the kind of person with the tastes and sophistication to want to go to an "in" place. People are very good at self-grouping and clustering into cliques.

And there must be an independent attraction to variety and novelty, a chance to see somewhere new and do things differently to normal routine. I think that explains much of the reasons people jump on a plane for holiday. Although we also chose to come and stay in the same hotel we stayed at eight years ago. For nostalgic reasons, I suppose.

I'm very interested in what makes a city attractive and livable, why people choose to live in one place rather than another. I am not sure I'd want to live here. I don't know what we'd really do with a condo here, for example, although clearly many people do. And we are very happy with where we live in New York already.

But right now, sitting with a coffee on a balcony overlooking the ocean is perfect.

The sun is just rising, streaming from behind a cloud.