February 7, 2011

Blogs are Here To Stay—Are Bloggers an Aberration?

It’s hard to say when the “blogger” phenomenon peaked. In the runup to the 2004 election, the media meta-narrative centered around “the blogger”—a possibly psuedonymous individual whose commentary was upending the traditional news cycle.

In the next few years, something strange happened: blogs became ubiquitous. But “the blogger” lost influence; the personalities that originally defined blogging never became as influential as most people expected.

I suspect that three forces sapped the blogging trend of most of its strength:

•Social media sites replaced low-traffic blogs.

•The right economic unit for high-traffic blogs is the blog network or the content farm, not the blogger.

•The only use for a blog qua blog is as an extended résumé or biz-dev pitch. Read the rest of this entry »

November 10, 2010

Will Disaggregation and Outsourcing Destroy the “Apprenticeship” Model?

Lawyers, consultants, and investment bankers follow a fairly similar career path: excessive hours and tedious work at the start of their careers, followed by vastly better compensation and marginally better hours later on.

This makes a certain amount of sense: the fastest way to get a decade of experience is do work double-time for five years.

The system works for people who are already in the industry: they get their grunt-work done. It works for people who are joining the industry: they learn everything they need to know, and the difficulty of the work allows the industry to keep an “up or out” structure along with a steady path for advancement.
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November 9, 2010

The Illusion of Social Progress

In the last 20 years, smoking has been transformed from something that seemed totally normal into a rather seedy habit: from something movie stars did in publicity shots to something small huddles of addicts do outside the doors of office buildings. A lot of the change was due to legislation, of course, but the legislation couldn’t have happened if customs hadn’t already changed.

—Paul Graham, The Acceleration of Addiction

“Whig History” is history rewritten to support a narrative of constant progress. The single best example I’ve found comes from David Brin’s essay on Lord of the Rings: JRR Tolkein — Enemy of Progress:

It’s only been 200 years or so — an eye blink — that “scientific enlightenment” began waging its rebellion against the nearly universal pattern called feudalism, a hierarchic system that ruled our ancestors in every culture that developed both metallurgy and agriculture. Wherever human beings acquired both plows and swords, gangs of large men picked up the latter and took other men’s women and wheat. (Sexist language is meaningfully accurate here; those cultures had no word for “sexism,” it was simply assumed.)

They then proceeded to announce rules and “traditions” ensuring that their sons would inherit everything.

Putting aside cultural superficialities, on every continent society quickly shaped itself into a pyramid with a few well-armed bullies at the top — accompanied by some fast-talking guys with painted faces or spangled cloaks, who curried favor by weaving stories to explain why the bullies should remain on top.

Only something exceptional started happening…

Read the rest of this entry »

November 8, 2010

The Iron Law of Online Marketing: Why Your Ads (Almost Always) Can’t Be Your Competitive Advantage

There is only one interesting way to make money, in any field: develop and exploit a durable competitive advantage.1 Berkshire Hathaway wins because they are the buyer of first resort for good businesses that want to sell, and they can get cheap capital through superior underwriting; Facebook wins because to achieve parity with them, you have to recreate a 500 million-node social graph; the corner bodega turns a profit because that particular corner has a bodega and a half’s worth of foot traffic. In every one of these cases, it’s theoretically possible to compete with the incumbent, but there’s a better ROI in just letting them dominate the industry.

One thing these companies have in common is that their competitive advantage applies to the product or the process—either they can make the same thing for less money, or they can make something nobody else can make. What they don’t rely on is superior advertising. With good reason:

In the long term, the best advertising—the best creative, the best placement—will be sold to the high bidder. And the high bidder is whoever’s competitive advantage lets them earn more from a given customer. Read the rest of this entry »

September 7, 2010

A Challenge for Net Neutrality Supporters

The great thing about most critiques of Laissez-Faire economics is that they make great business plans. If “the market” can’t provide something, but that something is in demand, it’s a great opportunity!

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August 12, 2010

Demand Media’s IPO: Everything You Need to Know

Demand Media is the biggest pure-play SEO company in existence. And SEO is one of the fastest-growing marketing channels. So if you want to know what the marketing industry as a whole will look like, the best way to do it would be to take a look at Demand Media’s financial data. That information was available to investors and executives at the firm, but not to everyone else—until now.

Read the rest of this entry »

August 2, 2010

Higher Education: The Next Big, Bad Bubble

“Good afternoon, sir. I’m a broker with Churnham & Burnham, and I’d like a few moments of your time to discuss an extraordinary investment opportunity. It’s an asset that everyone is buying—your friends, your neighbors, teachers, firemen, doctors, lawyers, and even your humble broker.

“Not only that, but it’s an exceptionally long-lived asset. Once you own it, you’ll be getting dividends for your entire working life.

“While it’s not as cheap as it used to be—in fact, it’s going up in price at about twice the rate of inflation—it’s never been easier to get government-subsidized loans to purchase it. In fact, third parties may pay for some or all of it for you!

“The asset is, of course, a college education. Now, wouldn’t you like to review the prospectus?”

Read the rest of this entry »

May 1, 2010

Good Bubble, Bad Bubble

In the future, historians will stop using the word “bubble,” because it refers to two opposite phenomena:

• In an equity bubble, investors have limitless optimism about the future. They expect many of the companies they invest in to fail, but believe that the 95th- or 99th-percentile performers will more than make up for this.

• In a credit bubble, investors have limitless faith in the status quo. They expect volatility to decrease, and they believe they can estimate returns with increasing accuracy. If they want higher returns, they know they can use leverage—but for the most part, investors celebrate the middle of the bell curve, and expect the tails to cancel each other out.
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April 5, 2010

The Economics of Advertising: Why Advertising Agencies Used to Be the Best Business in the World (And Why They Never Will Be Again)

There’s only one notably successful business personality who made his money in the ad agency business. He’s an accountant, and that should tell you something. The ad business is simply not a great place for making money.

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April 4, 2010

Beliefs, Not Companies, are “Too Big to Fail”

What makes a company “too big to fail”? The traditional answer is “size”: if a company as big as Bear Stearns or AIG suddenly needs to liquidate, the market will miss their unique role in clearing transactions or making a market. Then, as they dump their extra-special assets, it will cause widespread panic and needless disruption.

I believe that this is entirely wrong. A company becomes too big to fail when it’s a leveraged bet on a universally agreed-upon belief that happens to be false. Read the rest of this entry »