September 29, 2009

Why aren't guys shunned for ordering fruity caffeine drinks?

In any bar, if a guy strutted up to the counter and ordered a strawberry daiquiri, the girls would point and laugh from a safe distance while the other guys would surround him and duly begin chanting, "You! Are! Gay! -- You! Are! Gay!" If anything, guys steer toward drinks that are bitter, not sweet, in order to look tough.

If that's true for alcoholic drinks, why doesn't this happen at all when they order caffeinated drinks? Sit down in any Starbucks when it's busy, and it won't even take you half an hour to see the disgusting pattern emerge -- so-called men requesting a caramel macchiato, frappuiccino, passion tea lemonade, or -- worst of all -- a pumpkin spice latte. Like all other forms of pollution, the sound of a man ordering a drink with such a revoltingly cutesy name should be taxed by the government -- preferably by cutting off one of his balls, although on second thought that may not provide a very strong incentive in his case.

Those drinks are incredibly saccharine, and the guys have no excuse since they could just have easily ordered an espresso or black coffee. (And this is just as true for other coffee sellers, not only Starbucks. Look at all of those Dairy Queen blizzard wannabes that Dunkin Donuts peddles.) So, what's the key difference between caffeinated vs. alcoholic drinks, or perhaps between going to a coffee house vs. going to a bar?

We can rule out a lack of time for behaviors to settle in -- maybe at first a guy could've ordered a frappuccino and no one would have known how sugary it was, but "specialty" coffee has been entirely mainstream for 15 years. By now, people know roughly which drinks are sweet and which are bitter.

I also don't buy a costly signaling argument. It's true that the fruity coffee drinks are more expensive than the brewed coffee or espresso, while the fruity alcoholic drinks tend to be cheaper than the stronger ones. So maybe guys are just ordering whatever the most expensive stuff is in order to show off their wealth to female onlookers. But get real -- we're not talking an Aston Martin vs. a Honda Civic. If a guy wanted to look like a big spender in Starbucks, he'd conspicuously ask the barista about their espresso machines for sale, as though he were in the market for a several-hundred-dollar gadget. Or perhaps he'd order $100 worth of their ground coffee.

The other costly signaling argument is that guys are ordering fruity drinks to show how little-in-doubt their manliness is -- "Because I'm so macho, I can broadcast my fondness for 10 year-old girl drinks and no one will question my masculinity." Again, get real. These guys always look like hell, both physically and emotionally. It wouldn't work even if they weren't -- just imagine if James Bond's catch-phrase were altered to "Omigosh... I guess I'll just have an appletini."

And it's not as though the point of going to buy coffee is necessarily to load up on sugar. At Dairy Queen, we excuse guys for ordering sugar-bombs because that's all they sell. Because that's the whole point of going to Dairy Queen, we expect them to order such things. But they sell bitter drinks in coffee houses, and indeed that's probably what our mental prototype of "coffee" is -- not something with java chips, caramel syrup, and whipped cream.

I also don't believe it's due mostly to the lack of comfort that the onlookers would feel in pillorying him in a coffee house during the daytime, whereas they'd feel fine doing so in a loud and rowdy bar at night. Even if they wanted to, would guys try on pink running shoes at Foot Locker, or reach for a case of wine coolers at the supermarket -- let alone buy them?

And if you thought that guys aren't trying to look tough or impress anyone at Starbucks, saving that preening instead for the bar that night, guess again. You can't get them to shut up about the deal they're supposedly closing, the gig that their loser band has, bla bla bla. They also try to look at least somewhat successful (unless they're in IT), or at least show up in athletic gear to signal their fitness. And they often shamelessly flirt with the cute baristas. So clearly the coffee house isn't a world apart from the bar regarding macho posturing.

The only half-baked guess I have is linguistic -- there aren't any coffee names that sound badass. "Scotch," "gin and tonic," "whiskey" -- those all have a hard sound to them. But the only coffee drinks without sucrose are espresso and cappuccino -- and let's be honest, those names do sound just as la-la as macchiato and latte. Back when you could place your order for a "black coffee," that might have worked because black is inherently tough. "House blend" or "Pike Place Roast" just doesn't have the same no-frills ring of "black." Would a "Scotch, neat" have the same appeal if it were called a "Blissionata, pure"?

To test this idea, you'd look across languages and see whether men order the more bitter types of coffee where people have a more manly sounding name for them. For example, even if you don't speak Spanish, you can tell that a "cortado" sounds more macho than a "cappuccino." (And the connotation is tougher too -- it refers to espresso that's "cut" with a little milk.)

Perhaps coffee houses should invent mixed bitter tasting drinks and brand them with harder sounding names. It's good that they already call them "shots" of espresso, but that won't do for larger serving sizes. (Ordering 10 shots would make people think you were crazy, not strong.) I was going to suggest something subtle like "Thor's Hammer," but I see that's already been claimed by the alcoholics. However, this problem would work itself out during the competition between coffee houses: those who couldn't think of an appealing name would find their sales undercut by those who could. The winning names would have proven themselves.

Girls compete in such funny ways

We laugh when we see two meatheads flexing not so subtly in front of each other, the one observing the other to size him up. "Who would win in a fight?" they're thinking, but it all looks rather gay to us.

I saw something similar today, only between two girls. It wasn't brute strength they were competing over -- I wasn't on the DC metro's green line -- but instead how cute and seductive they could make their voices. One of the girls who works at Starbucks always uses an over-the-top raspy-girly voice, hoping to fool the guys into thinking that, like, dude, she totally digs them. She's not dumb: most surely are suckered.

Well, today some teenager came in and ordered her drink in an even cuter voice. Not to be outdone, the barista asked her some unnecessary question about whether she wanted this or that as well -- just to signal that, when it came to the imaginary hunk they were fighting over, her voice would hook his attention better. And just like those two bespandexed guidos pacing around each other in the gym, they went back and forth a couple times before deciding that they'd gathered enough vocal information. It was a pretty close fight, but I'd give the win to the teenager. (The barista is cute too, and only 21, but she met her match today, at least voice-wise.)

I've seen girls get nastily competitive face-to-face before -- seeing who can flip their hair the hardest, or who can give the most pitying look at what the other is wearing. And I've seen girls both ratchet up their cuteness when they're actively flirting with the same guy, or sense that they're being watched by a large audience. But this time the guy wasn't even there, just as the girl who the gym rats are trying to impress isn't there judging their performance. It was the first time I'd seen a purely hypothetical cuteness contest -- just to see who would win.

It's no wonder that when they've grown up, women are such emotional trainwrecks: in almost every competition they've ever fought in, they couldn't simply tear the other bitch apart (verbally or physically), but had to smile and out-cute their opponent -- and to do so effortlessly, lest her strained smile or barely concealed sarcasm reveal her anger and thereby undo her feminine facade.

September 25, 2009

A little self-restraint goes a long way

At '80s night I saw some girl going up to several guys, working her ass around in their lap for maybe 10 to 15 seconds, and then moving on to dance with her girl friend for awhile (often using the same moves in order to attract attention -- girl on girl). She was obviously ovulating and shopping around. The guys there are either high school seniors or college students, and a handful of 20-somethings, so her earlier targets must have given off the stink of desperation once she'd gotten close.

"DUDE, a hot chick's actually letting me touch her!"

Really, what does she have that you haven't seen?

A little after "Girls Just Wanna Have Fun" started, this girl climbed up on the smallish stage where I was hanging back and just bouncing my leg to the beat. She started right off by wiggling her tight little butt around, bending over and bouncing her knees, etc. There were no other guys on that stage. Rather than inflate her ego even more by piling on her right away, I stood back for a good 20 to 30 seconds with a knowing smirk on my face. But you can only hold back for so long, and I walked up and grabbed her by the hips from behind.

The club is 18+, but she looked like she could have been 15 or 16 with a fake ID. One of those five-foot energy factories (I'd guess she was / is a cheerleader or pom in high school). It's hard for me to recall a girl exploding that hard on the dance floor, but it was all because I didn't move in right away and let the urge swell up inside of her. She kept dropping it like it's hot, and girls are content for you to just stand there and take it. But they get even more fired up if you can hang with them that way, so we went along together like two dragonflies mating in flight.

Take-home lesson: if you react too soon, she'll think you're desperate, and she'll feel gipped because you didn't let her libido balloon first before going in to pop it.

(By the way, I love how the new shoe fashion among teenagers is to wear low-top canvas sneakers with no socks like Kelly Kapowski circa 1989. Takes me back to the first celebrity I really lusted over in elementary school.)

All they need is a sock puppet mascot

I recognize that I'm probably the 4,295,965th person to make that connection, but still.

"So, what does your website do?"

"We empower loud, middle-aged dopes to bore the world with updates about what they're doing."

"Goddamn -- give that man 100 million dollars!"

Worth $1 billion -- lmfao.

September 24, 2009

Why are girls usually embarrassed by PDA, and when is it tolerated?

First, let me be clear that I'm not talking about a guy putting his hand on his girlfriend's ass to signal possession. I'm talking about the more "I wuv you" types of PDA, along with things like bringing her roses at work (a disgusting site I witnessed the other day in Starbucks). Obviously not all girls look down on this servile behavior, but for those who do -- the majority -- what are they anxious about?

A female's health and age can be easily seen by just looking at her from afar. But other qualities, such as the many personality traits, are more difficult to figure out that way. Even after interacting face-to-face for awhile, you only get a crude estimate of how worthy she is on these other traits. But one much more honest signal of her hidden qualities is who she associates with -- in general, birds of a feather flock together. The literature documenting assortative mating is pretty large by now; for example, people tend to pair up with partners of similar intelligence, height, age, and so on.

As in many human relationships, there is a conflict of interest between the boyfriend and girlfriend. If the boyfriend is the type to lavish PDA on her, he is most likely a loser (relative to other local males). He is desperate to announce that he managed to punch just a bit above his weight. Why? For one thing, others will elevate their estimate of his quality if they see him getting away with PDA with a girl who they wouldn't expect him to get. It may also allow him to punch above his weight several more times, as female onlookers who are about as good-looking as his girlfriend will pause and think, "Hmmm, he doesn't seem so great, but if she is with him, he must have something I can't see." This is why men always resort to PDA, boxes of chocolate, roses, etc., when they are most desperate -- this is when they are most clearly reminded of how far out of their league their girlfriend is. And of course there is the hope that pleading will work.

The girl for her part wants the exact opposite. Clearly the partners will not be exactly equal -- one will be a little above the other, since the cost of searching and landing a partner of exactly equal value would not be worth the benefit, compared to finding someone who's close enough. Still, if she's the one who's above him, he may want to gloat about it to the whole world, but she will want to keep it a closely guarded secret. If her friends and acquaintances found out that she was "dating down," they might lower their esteem of her, and she would suffer the resulting social consequences. This is even more true if there is no enforced monogamy -- then, she may also be concerned that potential future mates will see her with a desperate man and think, "Meh, she looks OK, but if she's with that clown, she's not worth investing in as a wife."

The end result is what looks like a lonely father trying to smother his baby girl with hugs, while she violently pushes him back and orders him to stop embarrassing meeeee.

So are there pockets where PDA abounds? Clearly if the girl is deeply in love, that's as good as enforced monogamy, as the potential future mates are completely out of sight, out of mind. But these are rare, since usually a girl will not fall madly in love with someone far beneath her. If there is greater social enforcement of monogamy -- say in more religiously conservative areas -- then guys will be able to get away more with PDA. And in places with greater civic engagement and altruism, there is less ruthless calculation among one's friends and acquaintances -- they aren't going to jot down every little signal of your hidden qualities, because they're more trusting. So girls would be more accepting of PDA in a small Minnesota town than in Manhattan.

Which of these two forces -- enforced monogamy vs. peer esteem -- is stronger? All we need is a case where they run against each other. In middle and high school -- and even somewhat in college -- girls are subjected to heartless scrutiny of their inner qualities by all of their peers, not just their friends. For them, gossip and drama are constant background noise. On the other side, monogamy is strictly enforced -- not just by her friends, who would cast her out as a slut if she dated around, but also by herself, as girls are much more susceptible to falling hopelessly in love at that age.

Being under her peers' social microscope predicts that she'd want to shove her overly affectionate boyfriend away without even thinking about it, while the power of monogamy to cloud out her thoughts about potential mates predicts that she wouldn't care. For anyone who's been to the park or the mall in their lives, the answer is pretty clear -- monogamy is stronger than peer scrutiny. There's no mystery why a girl would allow PDA from a handsome quarterback, but a lot of the guys who these adolescent girls are with are pretty awkward and goofy. The fact that they accept PDA from them is pretty startling, so it must be that their more monogamous behavior, compared to 20-something women, outweighs their anxiety about what their peers will think when they see some doofus wrapping his arms around her.

It may be hard to remember, but monogamous behavior at that age is not driven only by social or institutional pressures and falling in love more easily. There is also the mindset that all reckless young people have -- it's going to last forever. I don't think you appreciate how strong that delusion is -- for every year since they started middle school, teenagers have seen their friends come and go as though it were a game of musical chairs, and yet they still use the term BFFs to describe people who they'll drift apart from the very next year, or at the latest by their sophomore year of college.

Natural selection must have designed the human mind this way to make sure that in the period leading up to starting a family, the partners -- who have potentially very different interests -- would trust each other a bit more. Few would stick it out through the first years of raising a family if one of them thought the other would quickly defect due to peer pressure. So a monogamous impulse had to evolve to be even stronger. Starting around her mid-20s, a female no longer has the same force of social scrutiny weighing down on her (people become more independent then), and she's more OK with dating around or practicing serial monogamy since she'd be past the typical age at first birth (the early 20s). It's only then that they start to really resist PDA across the board.

(Much later on, when monogamy is de facto because no one else would want her, and as she becomes even more socially independent, then PDA is allowable again -- surely you've seen those revolting scenes among middle-aged married people at the table next to yours in the restaurant.)

I don't like PDA because, again, it reeks of desperation. I don't mind picking girls up and spinning them around -- that's like showing her that you can open a jar that she can't, or drive better and faster than she can. However, if you're the gushy type, we can tell where you'd find more accepting girlfriends: find a young girl in a religiously conservative area where people are more trusting than calculating.

September 21, 2009

What's new at the data blog

Detailed info on my for-purchase data blog / e-book in progress is on the right sidebar, along with a full table of contents to see what you're getting. Purchases can be made with the PayPal button at the top. ($10 for 20 longer articles, with lots of shorter ones thrown in free.) Here's what's come out since the last update:

10. What predicts income dissatisfaction? I use GSS data to test the idea that the higher your status, the more dissatisfied you'll be with your income. For example, it could be that people's expectations of their livelihood rise faster than their income. I show how income dissatisfaction changes according to income, class identification, job prestige, intelligence, education, age, race, and sex. Surprisingly, the sex difference is the largest of all.

11. How are religiosity and teen pregnancy related? States with higher religiosity scores also have higher teen pregnancy rates, but does this pattern reflect individual-level patterns or not? I use the GSS to see whether age at first birth predicts greater religiosity -- that is, if the state-level pattern is just an individual-level pattern writ large -- or if teen mothers are less religious, so that their state's greater religiosity is just a response to their reckless behavior. Using three measures of religious beliefs and three measures of religious practice, I find evidence of both forces at work.

September 20, 2009

Government stimulus for moral preening rather than water and energy conservation

If you believe people are using too much of a scarce resource, the solution is remarkably simple -- raise the price. That will convey that this stuff is a lot scarcer than people had thought. They would prefer not to pay such high prices, so they'll automatically scale back their consumption of it. It's only when the stuff is so cheap that people take it for granted and don't give the slightest thought to conserving it -- as with the air we breathe, for instance.

But with resources whose markets are regulated by the government -- either from being public utilities or regulated private companies -- the simple and effective solution is much tougher to achieve. Government regulators are not in the business of getting prices right -- remember the oil crisis of the '70s? They are more or less a bunch of losers who couldn't do anything productive with their lives, and who salvage their self-esteem by imagining themselves as saviors of the people. "Somebody's gotta make sure that water stays affordable for all Americans -- I guess it might as well be me." As a result, they tend to keep prices artificially low for things like water and electricity.

And yet, that doesn't make the problem of over-consumption go away -- indeed, that is the very cause. Before environmentalism became sexy, regulators could simply have disregarded over-consumption and remained content with their champion of the little guy image. But that's no longer possible -- green, eco-friendly sustainability now commands just as much attention as saving souls once used to among the priestly caste.

So how do they strike a balance between causing over-consumption by forcing prices to be artificially low and assuring their Sierra Club donors that they're doing everything they can to tackle over-consumption? Simple: brow-beat people into using less, or adopting more efficient technologies. Here are two recent examples of local and national regulators pursuing these hopeless policies -- for energy and for water.

Notice that the regulators never defend their decision not to allow prices to move freely, so that they could go high enough to curb consumption. And the reporters, even for the Wall Street Journal, never question them on this. That is how incurably clouded the elite mind has become on these issues ever since environmentalism became fashionable. No one gives a shit anymore about conserving scarce resources -- instead, it's all about how to signal your moral superiority. Take the WaterSense initiative, which will reward you with an eco bumper sticker for your house if it consumes less water than average.

"Oh, well sure, some people may be content to just waste water on their tacky lawns all day, but I guess some of us are just more concerned about not raping Mother Earth. But once they see the cool WaterSense sticker on my window, they'll get jealous enough to want one too. So I mean, I'm just doing my part to make sure everyone else behaves as responsibly as I do."

If such a person's neighbors have any concern over the state of civilization, they will use that sticker for the only thing it's good for -- as a bullseye for a 500-gallon water balloon.

The continued legislative efforts to force consumer electronics companies to make more energy-efficient products is no less stupid. Again, it's all about being able to display your MacBook's Energy Star logo for all your crunchy confreres at the Whole Foods cafe to behold.

Rather than push policies that only provide incentives for jackass environmentalists to toot their own horn even more loudly, we need to simply let the prices of water and energy move freely. If people really are over-consuming, then getting a water bill that's 20 times greater than last month's will be a fairly clear wake-up call. Without resorting to moral strutting at all, they will slash their water usage in order to tame their now unwieldy water bill. If no products exist that are very efficient, existing companies will go broke as entrepreneurs who introduce new efficient products capture all of the now budget-conscious shoppers' money. Ditto for electricity. More, this would spur them to adopt more efficient appliances or less water-guzzling plant species for their yards, and they would also spontaneously reduce the percent of their land area devoted to grass -- again without even thinking about abstract sustainability, but just about the hole burning in their own pocket.

And of course, the handful of people who are obsessed with having their appliances being on all the time, or with watering their lawns all day, could still do so, but they'd have to pay through the nose for using up so much of a scarce resource.

But as long as these industries remain in the hands of regulators, don't expect the right thing to happen -- plan on further efforts to stimulate moral preening among consumers and make the regulators feel like their lives had a purpose.

September 18, 2009

The next stupid management fad -- tapping online social networks

If you've stepped into a Barnes & Noble within the past six months or so, you've no doubt seen these books. Written by modern medicine men, they offer our dopey managerial class the secrets on how to profit from dumping a bunch of money into the sinkhole of online social networks. And they all have the same overblown titles:

The Facebook Era: Tapping Online Social Networks to Build Better Products, Reach New Audiences, and Sell More Stuff

Smart Start-Ups: How Entrepreneurs and Corporations Can Profit by Starting Online Communities


Twitter Power: How to Hemorrhage Your Capital One Tweet at a Time

Facebook has been popular forever in internet years and surpassed MySpace quite awhile ago. Twitter has also been around long enough that its alleged ability to hike or hinder sales should now be evident. It won't come as any surprise to those who remember how retarded the dot-com incarnation of this nonsense was, but here's a clear hint that its mostly fluff: how video game players get information about what to buy (from NPD):

41 percent of all gamers report that they rely on word of mouth to obtain information on video games.

While this varies from one platform to another, all current generation platforms, including portables, rely on word of mouth above all other information sources, followed by hands-on play at friends' and/or relatives' homes at 31 percent. Magazine and online ads, as well as incentives/coupons and social networking sites are the least influential to gamers, with as little as five percent of all gamers using the latter for information.

So, here is a dream opportunity for businesses hoping to profit from social network sites -- a huge and pretty mature industry, consumers rely heavily on word-of-mouth that spreads throughout social networks, the users of both video games and online social network sites are likely similar in how savvy and enthusiastic they are about new technologies, and they're in pretty much the same demographic groups. If anywhere, the effect of using online social networks should show up here.

And yet -- nada. The reason is simple: the people who you would spread word-of-mouth about a video game to within your online social network are the exact same people who you will already be spreading it to in real life, only more vividly. Facebook just pools a bunch of functions into one place -- email, texting, and photo-sharing.

Before, you might have used a landline or cell phone, email client, etc., to send and receive this information with your social circle. Now, you do it all in one place, but that doesn't mean you're connected to more people than before, nor that the weights of the connections that already existed are going to ramp up or dip down. (If anything, it's the latter, since speech and face-to-face encounters are more bond-forming than sentence fragments left on your Wall.)

And Twitter is basically Facebook if it only had status updates with comments. The main difference is Twitter's target audience -- the middle-aged with even shorter attention spans than teenagers.

Because there is no qualitative difference between online and offline social networks, we might instead look at the quantitative differences. Surely you can send and receive information much more quickly online. Spreading information this way could speed up the process that would have occurred anyway without the internet -- say, if movies soon have a shelf-life in theaters of 3 weeks instead of 4.

Of course, qualitative changes can result given a large enough quantitative change. If we think of fads as social epidemics, the infection rate is higher with the internet, which would appear to make an epidemic more likely than if it were too slow to gain traction. However, the recovery rate -- the rate that you get bored of the fad and are no longer infected by it, indeed are immune to re-infection -- is also sped up with the internet. Just look at any indie rock blog: they all complain about how they've been listening to the same mp3s for the entire past 18 hours, and they desperately need something new to get them fired up again.

If people ditch the fad once it becomes "too popular," then the more quickly you can get information about how popular something is, the more quickly you’ll go through the cycle and be, like, so totally over it. And of course, the more quickly people recover from an infection, the less likely an epidemic is to occur. (It'll infect some people but will die off early instead of spiking up and then dropping off).

Thus, even if the internet has a big effect on two key parameters in the social spread of information, it may not affect their ratio very much, leaving the real world possibilities largely unchanged. Same overall pattern as before, just some pieces going a little faster. Because this is all that the internet changes -- the speed of information transfer -- we shouldn't expect it to radically alter our social world, whether that's interactions between friends, between politicians and citizens, or between buyers and sellers. That was a painful lesson of the dot-com crash, but as with many diseases, over time we may lose our immunity and become infected once again.

September 16, 2009

Is Redbox the next parasitic technology?

Stan Liebowitz has written an insightful and brief article about parasitic technologies, which provide consumers with content created by some other company, but in a way that chokes off the creator company's revenue stream. File-sharing is a clear example: such software provides listeners of music with permanent copies of songs they like, even though those songs were brought into being by the music industry (artists, sound engineers, marketers, etc.). The original revenue came from listeners buying CDs or tapes or albums at music stores, which those stores had to pay the music industry for.

In the extreme, the industry doesn't bring in enough money to cover the minimum costs, thus no more music is made, and so consumers will have nothing new to listen to. Note that this extreme is not even the world where 100% of songs are illegally downloaded -- the extent of file-sharing only has to be great enough for the music industry to cease being a profitable industry long-term. Things probably won't get that bad, but we shouldn't want to go even one step in that direction -- with less revenue, record labels will have to cut costs like crazy to try to stay profitable.

The overpaid studio executives can only have their pay cut so much -- after that it will be the quality of the sound engineering, the number of artists they support, the promotion budgets for the artists, and especially the amount of risk they'd be willing to take on new artists. When you're trying to stay afloat, you can't take huge risks on new artists; rather, you have to appeal to the lowest common denominator. So you can forget about hearing anything remotely novel. Notice how pop music goes to shit during recessions, and only picks up again in quality when we're back into a euphoric spending boom. The simple reason for that is the heightened risk aversion of music companies when consumers' income is pinched.

While the case of file-sharing is completely clear, other technologies are worth at least keeping our eye on. Liebowitz mentions digital radio, which pays little to nothing for the music it provides, thus depriving the music industry of potential revenue. I think it's worth adding Redbox to the list -- those DVD rental kiosks that charge $1 per night and offer movies right when they come out on DVD. (They've been in the news a lot lately as Hollywood tries to keep them from draining their revenue; just search the NYT, WSJ, or Lexis-Nexis for "Redbox".)

Redbox drives down prices for consumers, which is usually good, but it does this not by making better movies or by making movies of typical quality but just more efficiently, and then passing some of the resulting profits on to consumers. After all, they don't create any of the content that they provide. So, it's not similar to a case where Disney produces such great movies and is run so efficiently that they can pass on the savings to consumers by striking deals with retailers for $1 DVD rentals, whereas their competitors in the movie-making industry produce worse quality movies or movies of the same quality but in a more inefficient way.

But Blockbuster and other rental stores don't produce content either -- so why haven't they killed off Hollywood? For one thing, they charge $5 per rental, not $1. And for another, the movie studios get a cut of Blockbuster's revenues, somewhat like the studios getting a cut of the box office revenues from the theaters that show their movies. Aside from a recent deal with Paramount, Redbox in general does not send a portion of their revenue back to the movie studios. Thus, by both draining the market for new DVD copies and yet not funneling funds back to the content creators (as other rental stores do), Redbox poses a new, non-trivial threat to Hollywood's revenues. (Their revenues from the box office are already low and declining further.)

Where else is revenue going to come from to make up for this drain? You can see it now -- five-minute ads interrupting the movie every 10 minutes.

As with music studios, so with the movies: they'd have to start slashing costs to keep their heads above water. Again, overpaid studio heads can only lose so much in salaries -- after that, it's the number and quality of actors they can put in the movie, the editing quality, the sound, cinematography, special effects, screenplay, etc. They could not make a low-budget art film, which could work under such constraints, since the audience for those films is minuscule and could never repay the movie's costs. Even more so than now, studios would pander to the lowest common denominator. And with so little revenue coming in, they'd make far fewer movies.

Redbox would die off soon after, with practically no new movies to rent out, but not after having made a fortune. The fattened executives would fold up Redbox and move on to founding some other parasitic technology, while Hollywood and movie-watchers would be left with nothing.

Make no mistake -- entertainment providers need gigantic revenues in order to make good stuff, and to make it widely available. Most songs and movies are garbage or mediocre at best, so that finding the great ones requires making a huge number in all. If you think it's easy to make only two movies and have them both be superstars, go ahead and try for yourself. Before a movie is made, no one knows how it will turn out, so each one is basically a crap shoot. And to get a single win -- let alone several of them -- you need to throw the dice many, many times.

This is true of most intellectual property, by the way. Look at how many trailblazing inventions came out of Bell Labs and the DoD when both had stratospheric budgets. Many of their ideas went nowhere, but unless you pump out a bunch of inventions, you'll never find the rare gems like transistors, the internet, lasers, cell phones, and so on. Now there are so few ivory towers -- none, really -- which explains why essentially no more cool stuff has been invented for the past quarter of a century.

So how do we keep from heading toward that dystopia? The best solution is to allow movie studios to vertically integrate with distributors and rental / purchase stores, along with movie theaters. Then all of the revenue from DVD rentals / purchases at such stores would go back to the studios and allow them to put out more movies and of greater quality. They could still sell their studio's DVDs to another studio's store, or to other retailers like Wal-Mart, but they would have the option to not pursue that and to only rent out or sell their DVDs in their own kiosks or stores.

This could not allow monopolistic behavior because if you thought Fox's DVD store was restricting output to raise prices, you could always go to Universal's store instead. It would be no different than McDonalds making its own food and selling it in its own stores, and ditto for Burger King and Wendy's. You may have a slight preference for one of their hamburgers, just as you might want to see one of Fox's new movies more than one of Universal's, but if McDonalds or Fox tried to jack up prices, you'd happily defect to Burger King or Universal. In reality, movie studios bitterly compete against each other over scarce dollars that consumers spend on movies. With this added source of revenue, lack of parasitism from Redbox (or whoever), and less wasteful antagonism between studios and stores / kiosks (resulting from common ownership), studios would be more profitable and could put out greater products, more of them, and more efficiently -- and pass along some of the savings to consumers.

Of course, this would all probably be illegal, given that the studios have not been allowed to even own theaters after the completely bogus antitrust case brought against them in the 1950s. But that just means we need to work on voiding the antitrust decision. (See the relevant chapter in Arthur De Vany's Hollywood Economics, featured in the Amazon box above.)

In the meantime, any deals with Redbox should be like those with movie theaters -- the studios should get a certain percentage of Redbox's revenues from a given movie title, in return for discounted DVDs. If Redbox doesn't agree, the studios would simply cut off their supply for the first month after a DVD's release -- Redbox can always get DVDs from commercial outlets like everyone else. (And they have at times.) This would make Redbox much less profitable, hopefully enough so that they'd decide they had bigger fish to fry.

Consumers should obviously patronize places that are sending part of their revenue back to the studios, such as movie theaters or Blockbuster, but they have little incentive to do so when Redbox rents movies for just $1. They might agree with the logic of substantially lower revenues to Hollywood = far fewer movies / lower-quality movies in the future, but the temptation of cheap stuff is pretty strong.

Propaganda notwithstanding, the only group that stands to gain from the way things currently are headed is Redbox executives. Hollywood studios will have to start slashing costs -- and remember, if you can't make 100 movies, don't expect to find a one-in-a-hundred type of a movie. These increasingly mediocre movies will of course draw even fewer dollars from increasingly dissatisfied consumers (at the box office or wherever else), which will only force the studios to cut costs even more, and so on.

That is the heaven that the technological parasites wish to lead us toward -- one with few new things, and they all suck. More, those consumers who loudly insist on cheapness, even when they've had the consequences explained, will get what they deserve -- having only Police Academy 6 to rent every weekend for the rest of their lives.

September 13, 2009

Urban iPhone users protest that network prices aren't high enough

Just kidding -- that's what would happen if AT&T didn't have to deal with clueless brats for customers. (But even without this problem, they'd still be crippled by the threat of antitrust lawsuits -- more about that below.)

The background: users in San Francisco and Manhattan are so concentrated and use up so much of the network's capacity in these cities that running their sexy iPhone apps plods along more slowly than installing a 10-diskette computer game circa 1989. (Here is a follow-up by the author stressing that it's just in high-concentration areas that service is abysmal.)

So, the problem is that there is a shortage -- too much usage of the network, and not nearly enough to supply it. In other words, network capacity is a scarce resource. Therefore, AT&T needs to jack up its prices so that the market clears -- higher prices will cause users to demand less network usage, so AT&T should hike its prices until the total usage can be met by the available supply and in a way that the quality level of the service is great rather than garbage.

Of course, over the longer-term, AT&T should improve its service by building new towers, designing new software that will allow greater network capacity, and so on, so that network capacity won't be such a scarce resource as it is right now. And it is committing $18 billion this year to doing just that, not to mention introducing new technology that will allow faster speeds. However, the new technology will not immediately cover New York and San Francisco -- presumably because AT&T knows that simply allowing greater usage will not solve the scarcity problem, as iPhone users will merely re-calibrate what they perceive as normal and continue to hog and clog the network.

And at any rate, it will take awhile for all of these improvements to ameliorate the scarcity problem.

Right here and now, the real problem is that users don't understand that network capacity is scarce, or perhaps they do but have little incentive to curb their personal usage -- after all, how much difference would one person's restraint make? Prices are what convey the facts of scarcity to consumers, so if iPhone users currently spend all day following some retarded indie rock band on Twitter -- and howl when they are unable to do so because the network is so clogged -- clearly they are not getting the picture. Just shoot prices through the roof, and they'll get it.

Spending all their free time on Facebook, YouTube, and the NYT's website has made these losers accustomed to abundance, so admittedly AT&T will have a tough time explaining to them what happens when a resource is incredibly scarce and the amount of it demanded so high. "But I should be entitled to unlimited use of that scarce resource!" -- yeah, you and every other iPhone user in Manhattan. So either write a letter to Santa Claus or get a clue.

By the way, notice that none of the three technology articles / blog posts in The Newspaper of Record even noticed that this was a shortage problem, and thus whose solution is to raise prices high enough to clear the market. I have accepted that journalists will never understand numbers or math, but the problems and their solutions here are so simple that just words will do. Instead, the writers imply that it's a failure of AT&T to meet demand. Granted, AT&T didn't forecast demand well enough, and it should introduce new technology that over the next few years will boost capacity of the networks.

However, in the here and now, that isn't the problem at all -- it's their failure to raise prices and thereby convey how scarce the network capacity is, so that users will curb their usage. And in fairness, other telecom companies wouldn't have forecast demand any better, and probably wouldn't be able to sidestep regulations for building new towers, etc., any better. They were simply caught off-guard by how much data the iPhone customers felt comfortable using up, which is understandable given how strange and new the situation is compared to earlier periods of cell phone usage.

Still, you can understand AT&T's reluctance to raise prices -- not just because of having to deal with consumer psychology that will take offense at higher prices, even when you spell out the logic of doing so to solve the shortage. No, the greater fear they have is of antitrust lawsuits -- recall that the antitrust division of the DoJ recently said it wanted to kill its useless time by putting telecoms under a microscope because of increasing prices related to cell phone usage. At least for iPhone users in high-concentration areas -- and perhaps for other areas too, if others adopt the iPhone or similar "data guzzler" faster than network improvements can be made -- network prices are not high enough. As usual, behind this shortage there lies an attempt by the government to keep prices artificially low.

September 10, 2009

Desperate people don't gamble -- they save

One stereotype I've internalized is that the person who gambles is the schlub who's down on his luck or just going nowhere. What does he have to lose? -- he might as well risk it. I recall two episodes (at least) from one TV show alone featuring this narrative: The Simpsons had Homer betting on a dog race to pull in some Christmas present money during a bad year, and Krusty the Clown bet his last couple of bucks on a horse after a long financial slide.

Therefore, when more and more people feel that they're desperate, unlucky, or going nowhere, they should start gambling more. Conversely, when things look up, they should feel little need to gamble.

I don't know where this story came from -- probably from before the Industrious Revolution (when Europeans started to exhibit more middle-class traits like thriftiness and low time preferences). It's probably like the tales about upper-class murderers -- these plots used to be realistic in the 14th century, but now TV shows like Law & Order are just keeping alive a fairy tale. This also reflects the genetic and cultural change of the Industrious and Industrial Revolutions -- those violent upper classes killed each other off, and they were replaced by the more peaceable nation of shopkeepers.

At any rate, we now know that this gambling story isn't true. During the recent orgy of boominess, people were gambling, speculating, and leveraging like crazy. There was even a hit TV show set in Las Vegas, an epicenter of the housing bubble, about celebrities playing Texas Hold 'Em! And as it turns out, casinos and lotteries are getting hammered as consumers are saving more to pay off their debt after a long leveraging binge that began in the early 1980s. (Everyone who wants to sound cool slams the '80s as a decade of excess, but that continued unabated right up until the current economic meltdown.)

Some narratives make intuitive sense, and may even have been true at some point. But given how radically the world has changed in the past several hundred years, it's worth not taking those stories for granted. We need to update our picture of the world by checking the facts.

AIDS activists to life-savers: Drop dead

However expensive or not the anti-AIDS drugs are, they're at least something. None of the big pharma companies had great reason to develop them since, after all, AIDS is only a 1 in 300 disease. There are bigger fish to fry. Remember, these are for-profit companies, not charities. Maybe federal funding can be diverted to university or non-profit groups to cure less menacing or prevalent diseases, but not in big pharma.

Still, thanks to R&D, those with AIDS now live about 20 years longer. And what's the response of the leading AIDS activist group? To hand out embarrassing letter grades to the companies:

"There's no sugarcoating," [a group board member] said. "The membership feels that the pharmaceutical industry can be doing a much better job, whether it's innovation or pricing."

Let me not sugarcoat things either. Here's a rather simple way to cut down on the prevalence of this ravaging disease -- stop fucking each other in the butt.

September 4, 2009

The "market for lemons" among song and video game compilations

People who criticize the idea of selling entire albums as bundles, rather than allowing you to buy each song individually, complain that the record company is forcing you to buy all those other bad songs when all you want are the good songs. But this is wrong, and the reason is simple: before they release the album to the public, the record company has zero clue which songs are good and which are bad, according to the consumers' tastes.

If we measure song quality by how many downloads it sells on iTunes, we will probably see a distribution of songs that has a sharp peak near 0 where the innumerable also-ran songs are, and a long, fat tail where the superstars are. I'm assuming that songs are enough like movies, and Arthur De Vany showed in Hollywood Economics (featured in the Amazon box above) that if we look at a superstar movie, the expected revenues given a current level of revenues is even greater -- that is, we expect it to keep going and going (although we know it eventually must end). So, movie studios may have a guess about how well a movie will do (that is, what the average is), but the variance is infinite, which makes the guess worthless.

The same must go for songs. (Hopefully some economist has already looked into this.) The record studios may have a guess about how many downloads a song will get (i.e., what its quality level is), but that guess has an infinitely large error bar around it, so their guess is as good as anyone else's -- namely, not very good at all. Therefore, they don't know beforehand which songs on the album are good and bad, and so the charge about them ripping us off by bundling good and bad songs is wrong.

The record studios only find out which songs are good and bad once they've been out in the market long enough for consumers to vote with their dollars. Of course, the studios can't travel back in time to use this information before the album is released, but they can use it when they put together compilation albums. They have two options: bundle a few good with a majority bad songs, as the complainers fear, or put only good songs on (again, good as judged by sales -- there may be one or two that you don't like, but that everyone else does, and most of them everyone would agree are good).

It's striking how many greatest hits albums there are, and how few garbage compilations there are. Here, the studios actually do have the ability to bundle a few good ones with a bunch of crap -- anyone who has lost or sold their original albums, or who never heard the originals in the first place, would be forced to buy bad songs in order to get the good ones. And yet that rarely happens. My guess is that most of the target customers are savvy about the quality of the artist's various songs and would instantly spot a "bad bundle" compilation, get offended, and not buy it out of spite. Studios recognize that the target audience is this savvy and potentially spiteful, so they don't bother trying to pull a fast one on them. Instead, they're forced to use up all or most of the artist's good songs on a single greatest hits album, rather than boost profits even more by spreading them out across several bad bundles.

However, there are a few exceptions, and they stem from the target audience being fairly ignorant of song quality, while again the studio already knows which are good and bad by this time. We have a problem of asymmetric information, and as with the hypothetical example of the market for lemons, we get something close to a market failure. It isn't that bad, but it's close. Consider all of those compilations based on a decade, period, or really any concept that would pool together songs from a wide variety of artists (as opposed to hits from a single artist). There are tons of these, and if a savvy person thumbs through them, they'll notice that they're all bad bundles (lemon bundles?). In all my searching, I've never come across the equivalent of a greatest hits album. I've only bothered buying one, a new wave compilation with four or so good songs and a bunch of shit.

I believe most people buying such compilations weren't die-hard fans of the music when it was popular, just as I was only a toddler when new wave was big. It's also harder to know everything about an entire period that includes many artists, as opposed to knowing everything about a particular artist, even if you were alive during the period and vaguely recall some of the good songs. Most customers will therefore be pretty ignorant of song quality, while the studios will know a lot.

They can therefore sell bad bundles, and the target consumer won't be able to tell until it's too late. If a studio wanted to release a true "greatest hits of the '80s" album, it wouldn't sell too well because customers will have become jaded by all the other bad bundles flooding the market. So the studio has little incentive to put out a good period compilation. Why doesn't the market collapse? Because the jaded customers are replaced each year with a new round of ignorant customers, as the population ages or as new parts of the population become aware of the period and become curious about it. The bad compilations never gain much traction over time within a given group, but there are new naive buyers who enter the market each year, ensuring that the market doesn't totally collapse.

You see the same thing with video game compilations. If the bundle is based on a single franchise -- say, those featuring Nintendo's Mario -- then it's like the greatest hits album of a single artist. If you're part of the target audience for that compilation, you're pretty savvy about which games are good and which are bad. No one in the target market would buy a compilation that had the arcade Mario Bros. game, Super Mario Land, and Dr. Mario, but didn't come with Mario 3, Super Mario World, Mario Kart 64, and so on. So, just as with music, these compilations abound and are great (e.g., those for Mario, Mega Man, Sonic the Hedgehog, etc.).

However, there are counterparts to the decade or period compilations too -- namely, arcade game compilations. These bundle together anywhere from 4 to 20 or more arcade games. As with music, a few people who lived their lives in arcades may know enough about the games' quality levels just by looking at the list, but most people will not. I spent plenty of time in arcades and yet only recognize a handful of the titles. Customers may know which Mortal Kombat games are better than which others, but they will be pretty ignorant about the entire bundle. The video game companies have a decent idea of how well each game did in the arcade way back when, so they have much clearer information about each one's quality.

As a result, they bundle together a few gotta-have arcade games with a bunch of throw-aways. The customers won't find out they've over-paid until it's too late. They'll become jaded, although they'll be replaced with new naive customers each year, so that the market doesn't entirely collapse. And as before, a video game company has little incentive to offer a true greatest hits of arcade games. Most people would respond, "Yeah right, just like all those other alleged greatest hits compilations -- not falling for that again." So most of the arcade game compilations are "lemons." Just like music, I've got one or two of those too, but only because I'm one of the few who will bite the bullet and pay for the good ones rather than turn the whole thing down out of spite.

By the way, these bad bundles are also the bulk of lot sales on Ebay or some other second-hand market. Wow, 20 Sega Genesis games for one price -- too bad 18 of them are retarded sports games.

These facts are pretty interesting, given that finding real-world examples of a "market for lemons" wasn't as easy as some had thought. (See Market Failure or Success, also featured in the Amazon box above.) It looks like a market for lemons, or something close enough, is more likely to occur when the information required covers too broad of an area for the typical buyer to be savvy. If it's narrow enough, then those in the target market can just tell whether the product is good or bad. There's also a neat twist, in that the tiny handful of models I've seen don't look at the replenishment of suckers over time, whether due to one age group maturing to the point where they are now in the market for the product, or because some part of the population that used to not care about the product now finds itself in the market for it. This keeps the market from collapsing, although it probably does remain at a very low level of activity.

September 3, 2009

Food stuff

* At long last, the American Heart Association is telling people to cut out the sugar from their diet. There are pro and anti-fat camps, pro and anti-endurance exercise camps, and so on, but there is no pro-sugar camp in nutrition. Yet how often do they actually speak up about how necessary it is to minimize sugar intake if you want your body to look and work as it should? They're recommending no more than 6 teaspoons a day for women and 8 for men. When your blood sugar is normal, you have 1 teaspoon in your body -- but I guess telling people it's OK to consume triple the level sugar found in your blood twice a day is better than letting them drink a 12-oz soda that has 8 teaspoons.

I have between 2.5 and 3 teaspoons throughout the whole day (about 7 to 9 g from raspberries and another 5 g from a tomato), and I get by just fine. Some clueless nutritionist wrote into the WSJ saying how unrealistic the guidelines were -- it wouldn't even allow you to have a slice of cake at a party. Well, you aren't going to attend those every day, are you? In real life, you're eating one -- or five -- slices of cake while watching TV, not as part of a special celebration. As foreign as it may seem to nutritionists, you will have to tell your customers not to stuff cake in their face every day, let alone down it with a grande caramel java chip Frappuccino.

* Speaking of cutting out the sugar, what can you expect from hospital food these days? How about:

Jell-O molds and soggy sandwiches are out; crusted trout and fresh-baked scones are in. Hospitals are installing pizza ovens, sushi stations and salad bars featuring organic produce.

Fresh-baked scones are sugar bombs, and all that dough from the pizza will turn into sugar after it goes through your stomach. But I'm sure someone who's too sick to leave the hospital will appreciate all the inflammation and hunger that sugars bring. The queers who they have in charge of hospital food need to provide patients with lots of vitamins A and D, to boost their immune system and maintain the function of their epithelial cells, like those lining the respiratory and digestive tracts, as well as the skin. Obviously this means focusing mostly on animal products, as no plants contain either vitamin. (Sick people could always chew through 100 pounds of spinach, and might convert enough of the beta carotene into vitamin A -- but they'd probably rather take it easy than pretend they're a damned cow.)

These image-conscious chefs wouldn't even have to compromise their treasured coolness -- just serve the patients pate or liverwurst, hard-boiled eggs, full-fat cheese (since vitamins A and D are fat-soluble), and some strawberries. Civilized and healthy. It'll cost a little more, but whatever, just have the doctors cancel a round or two of golf each day, and you're all set.

By the way, in the hospital chef competition, they had strict limits placed on the calories, fat, and sodium of their meals -- but not on sugar. So, 600 calories worth of low-fat cookies would've been acceptable fare for people confined to hospital beds.

* Speaking of liver, you often here people nowadays describe organ meats as something that only the most destitute would eat. (I guess that's why they can only get rid of foie gras at soup kitchens.) For a reminder of reality, here's what starving peasants really eat: "cereal, rice, canned tomatoes and other basics."

* Last, Americans are going to get fatter and more irritable in the coming years as snacking becomes even more prevalent, especially in the morning. "Snacking" of course doesn't refer to having a small serving of ham, cheese, olives, and almonds, with a glass of water. This would fill you up for several hours and leave you feeling nice in the meantime. "Snacking" really means a bagel with jelly, a glass of fruit juice or soda, a cereal bar, and something else with jelly on it.

This will spike your blood sugar, send it crashing soon after, and leave you eaten inside by hunger for the rest of the day. You'd better not go out in public too much during this time, since your on-edge, overly irritable behavior is likely to get you punched in the face. Remember that people with very low cholesterol -- and you know who those people are -- not only have higher depression and thus suicide rates, but higher homicide victimization rates too. If you're constantly in a snappy mood, it's only a matter of time before you step on the wrong man's dick, and then you're dead meat.

Since going on a low-carb diet, I've never felt the need to snack -- just the opposite. I do just fine on two meals a day -- granted, they are very rich, filling meals -- and perhaps a mini-meal in the evening. Even if someone offers me a sweet, I feel no temptation, unless it's a really good chocolate. Salty snacks are even less appealing -- if I want salt and fat, I'll get it the chewy tasty way by eating cured meat.