Media and the social layer

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The recent Spotify update added some sweet-looking social features. I say they look impressive because Spotify has yet to release its service in the U.S. With at least four major music labels to negotiate with to get a critical mass of tracks, the woods are thorny indeed, but if they manage to clear that significant hurdle and roll out the following feature set, I'd be ready, at long last, to switch to a subscription service over the model of buying and owning my own music:








Sasha Frere-Jones wrote about the shift of online music to the cloud in a recent issue of The New Yorker. He mentions the usual players (Pandora, MOG, Spotify) and concludes that the age of the computer DJ is upon us.



Similarly, the anonymous programmers who write the algorithms that control the series of songs in these streaming services may end up having a huge effect on the way that people think of musical narrative—what follows what, and who sounds best with whom. Sometimes we will be the d.j.s, and sometimes the machines will be, and we may be surprised by which we prefer.



I think he's partially right. DJ HAL is doing a good job (you can throw Apple's Genius in with those other services), but I still suspect that what Spotify and what I'm sure will be an iTunes cloud-based subscription service will facilitate is the sharing of playlists and discovery among humans. I enjoy MP3 blogs, but I'd much rather follow the lead of musical tastemakers more directly through the same applications I use to listen to music rather than having to read their blogs, go find the music they reference, and then spin those into playlists in iTunes to transfer to my iPod.


Current bandwidths for WiFi and 3G are sufficient to stream music to my iPhone. I'm ready for a cloud-based music subscription service that adds a follower-based social layer (where you can find good tastemakers and choose to follow them even if they don't care to follow you). Such a service is dynamic and ideally improves and changes every time you visit it.


I'm ready for this same revolution to occur in books, too, and with Amazon's latest Kindle app, we're just starting to see the first pebbles of the avalanche skipping by our ankles.


Recently I read David Lipsky's Although Of Course You End Up Becoming Yourself: A Road Trip with David Foster Wallace on my iPad through the Amazon Kindle app. As I was reading, I noticed some passages had been underlined already. When I clicked on the underlined passage, a box would pop up noting "57 other readers have highlighted this passage".


Ah.


What was frustrating about the battle between Amazon and publishers over digital book pricing was that no one was talking about how to enhance the value of the digital book by capitalizing on what a digital, internet-connected book delivery service could provide, and that is a social reading experience. Publishers were demanding that Amazon charge higher prices for Kindle editions of books, but not once did I read anyone saying how they might justify that price hike by creating something more valuable for the reader.


In college, I hated buying used copies of textbooks, despite the significant price savings, because a book that was marked up and highlighted violated some aesthetic sensibility, especially if the previous owner had highlighted passages I didn't consider important.


But with the Kindle, you can enable highlights and notes to be turned on selectively. To pivot off of David Foster Wallace for a moment, recently the University of Texas acquired the David Foster Wallace archive. DFW was a voracious reader, and besides drafts of his writing the archive contains actual books from his personal collection.




There are also some two hundred books from Wallace’s own library. “Virtually all of the books are annotated, many are heavily annotated,

Learnings from Dropbox

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I really enjoyed this presentation from Drew Houston, CEO of Dropbox, an online storage service I've been using for many months now. It covers what they learned on their rapid ascent to success. Among them is the fact that most of their customers have been acquired via referral. Example in point: my endorsement here.


I liked this quote:



SEM is a way to harvest demand, not create it.



That's something that may be evident to those who've purchased AdWords on Google before, but it may not be to the newcomer to SEM. If a user is doing a directed search on Google, it will take a hell of a lot more than a short headline and two line text ad to pry them away from their mission. If your result matches what they're searching for, great, but you can't generate much emotional appeal in two lines of text.


When Apple debuts it's iAd product on the next iPhone OS, you can be sure they'll have worked with some advertisers to debut some eye-popping, emotional, beautifully designed ads. A quick look back at Apple's ad campaigns, from 1984 to Think Different to "I'm a Mac" to its iPod silhouettes, is ample evidence that Apple knows emotional advertising. In their rivalry with Google, it makes sense that Apple would attack Google's core revenue product by differentiating its product on the dimension of design and emotion.


Can your product, in two lines of text in a Google ad, be exactly what a user is searching for? Or does it require sight, sound, and motion to explain what your product is and what it does? Or is your product good enough to mobilize an army of evangelists? It helps to answer that before you choose where and how to advertise.



The health-care divide

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I first wrote this two weeks ago, just after Obama's health-care summit. The passage of any HCR bill, at the time, seemed unlikely, but things have since turned more optimistic on that front. I give passage maybe a 55% chance now? Regardless, my thoughts on why I'd like to see the HCR bill pass still hold.


James Surowiecki isn't optimistic that yesterday's health-care summit will lead to any meaningful change. He traces this to an unbridgeable gap in philosophies.



...the lack of any real progress was the result of a simple fact: there’s an unbridgeable chasm between what Democrats and Republicans want health-insurance reform to do.


For Republicans, the current health-insurance system works reasonably well—in their minds, it’s a key part of what they kept referring to as “the best health-care system in the world

Could progressives have passed any stronger HCR bill?

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Nate Silver crunches the numbers and says it's unlikely. Using a negotiation model built by Bruce Bueno de Mesquita, an NYU political scientist, Silver models a complex negotiation with 12 parties, each with their own end goal, and even adjusting the variables in a variety of ways, the best he could come up with was a HCR bill with a weak public option.



Still, perhaps the most important finding of the model is that the outcome was relatively robust. Although there are a number of things that Democrats could have done a bit better, essentially all of the scenarios that I tested produced a score between a 50 -- a bill something like Senate Finance Committee's -- and a 60 -- a weak public option. It would probably not have been possible to get a strong public option (much less anything resembling single payer) even if a number of variables were changed within reasonable boundaries.


This squares, in any event, with my intuition. No matter how clever progressives and activist groups might have been, they were enmeshed in a complex negotiation that:


(i) necessarily required the approval of a certain number of Blue Dogs;


(ii) featured some parties -- Republicans and lobbyists -- who had limited but nonzero influence and who were actively trying to do undo any settlement;


(iii) was overseen by a series of party leaders (Pelosi, Reid, Obama) who have institutional incentives to broker a compromise, regardless of their (fairly liberal) personal preferences and,


(iv) was constrained by an ambivalent public.


The influence of any one group in what is essentially a 10- or 12-way negotiation is liable to be fairly limited, no matter how wisely they select their strategy -- and to suggest otherwise probably reflects a certain amount of self-importance.



The usual caveats apply -- this is just a model, it's not foolproof, Silver's assumptions might not be correct, and so on -- but the result squares with my intuition, also. Those who think progressives could have forced a stronger bill through by being tougher seem to be wishcasting.


And of course, no healthcare bill has passed yet, so even the predicted outcome might be optimistic.


The web version of Mesquita's model, if you want to predict the outcome of your next complex negotiation (will she make me see Bounty Hunter, or can I get her to see Hot Tub Time Machine with me instead?) is here.


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Tyler Cowen on Managed Care

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Tyler Cowen's article in this past Friday's NYTimes brings the "unacknowledged monster lurking in the room" to the center of the healthcare debate: managed care.



For all the complaints, managed care does not seem to hurt actual health care outcomes, whether pertaining to life expectancy or recovery from disease, according to a series of papers by David Cutler, an economics professor at Harvard, and co-authors.


It’s time to consider which forms of managed care — relabeled, if necessary — are likely to maintain the flow of innovation while keeping costs under control.


For all of managed care’s problems, national bankruptcy would be considerably worse, and that’s where we’re heading if we don’t rein in health costs.



In EconLog, Arnold Kling makes an interesting comment on Cowen's article.



I think that what is implicit in his view is that we would rather outsource our rationing decisions than make them as individuals or families. Suppose that it is your aging parent who is offered the high-cost, low-benefit procedure and cannot afford it. Do you want to be under pressure to put up the money, or do you want the social norm to be that this decision is up to the managed-care provider?



Some people may be ready to make those tough decisions themselves, but I suspect most people would rather blame an institution than admit to a loved one that they don't want to pay for the hail mary procedure themselves.


Cowen isn't certain we're ready to accept that we have to ration health care.



The real challenge is to change our fundamental attitude toward health care. We live in a world where we can spend virtually everything we have on more and better treatment. The question is not managed care versus the status quo, but which opportunities — and the restrictions that go with them — we are prepared to accept.


When will we acknowledge that our government — or, for that matter, our insurance companies — can’t pay every bill? We’re in denial, and the longer we wait, the more painful the solution will be.



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Precious samples or excess inventory?

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Gilt Group is on track for $500MM in revenue in 2010. What's interesting is that the CEO is positioning Gilt as a way for designers to try out risky designs and offload them if they don't sell, but I don't know if Gilt can avoid lowering the perceived value of the designer brands they're working with. But that's clearly an issue CEO Susan Lyne is cognizant of. She's positioning Gilt as a way for designers to earn new customers, not a way for existing customers to get the goods at a lower price.



The day a particular label is on Gilt, traffic to that brand's site increases, across the board. Anecdotally, so many people have told me, "Oh my god, my new favorite designer is ..." because they were able to try a new one at a price that felt comfortable. If I'm going to drop $3,000 on a jacket, I'm probably going to do it on one of my old favorites, a smaller universe of brands that I know and I'm comfortable with. Starting this year, we're going to be selling exclusive items and capsule collections from emerging labels such as Trovata and Yigal Azrouël.



This is always the challenge for luxury brands who work with discounters. If you see a Prada suit on discount for 50% of retail price over and over, will you ever pay full price for a Prada suit again, even if your move up the socioeconomic ladder? Perhaps, but it's always a risk. The one thing Gilt has going for it is that the supplies of their goods are so limited that their argument that they're offering limited opportunities to sample designers is more credible than sample sales and other luxury discount websites that seem like endless bounties of luxury goods that were duds at their original price (I went with my sister-in-law to the Barney's Warehouse Sale in NYC a few years back, and because there were no dressing rooms, I saw people stripping down in aisles in a sterile, fluorescent-lit basement to try on samples grabbed from numerous bins that contained designer clothing that had been hand tossed into a sort of fabric salad, hardly the most flattering light in which to present those luxury brands).


When will someone make a Gilt Group for typefaces? That's something I'd appreciate when wearing my individual and not corporate budget hat.


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What to learn from customers

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Is El Bulli closing permanently after 2011, or reopening after two years as an institute, or has Chef Ferran Adrià even planned that far in advance? Stories are all over the place, including speculation over how such a coveted reservation (estimates range from 300,000 to 2 million for how many people apply for one of the 8,000 annual seats) could lead to a restaurant losing half a million euros a year (a fact reported in a handful of articles).


In this synposis of an HBS case on El Bulli, Adrià offers a hint as to his restaurant's financial situation when he says, "I should charge 600 euros [for a meal at elBulli] but I do not cook for millionaires. I cook for sensitive people."


The article ends with HBS professor Michael Norton noting, "Adrià says he doesn't listen to customers, yet his customers are some of the most satisfied in the world. That's an interesting riddle to consider."


That's not actually puzzling. At Amazon.com, Jeff Bezos used to say that you can't build a product just by listening to customers. They're good at telling you what they don't like, but not so good at telling you what they want. As an entrepreneur you have to innovate on their behalf. We knew at Amazon that perhaps the most significant barrier to buying online was shipping charges. Customers would tell you again and again that they hated to pay shipping fees, even when they were offset by not having to pay sales tax. But they couldn't tell us what solution we could offer since shipping is not free.


That's where Amazon innovated on behalf of the consumer, first in the form of Super Saver Shipping, then in the form of Amazon Prime. We traded in some of the gross margin efficiencies of the business model to subsidize shipping and offset it with revenue volume from the increased orders that resulted from removing the massive psychological hurdle of shipping costs.


The case also highlights the distinction between understanding and listening to customers. "Adrià's idea is that if you listen to customers, what they tell you they want will be based on something they already know," Norton observes. "If I like a good steak, you can serve that to me, and I'll enjoy it. But it will never be a once-in-a-lifetime experience. To create those experiences, you almost can't listen to the customer."

A Hulu success story

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I'm fairly certain this is the most successfully named movie in Hulu's catalog. Not that you need to make a movie with "sex" in the title to hit it big, but given the powerful bloc of young males voting with their mouse clicks and search queries, it was a built-in advantage. You still need to make something people want to watch; attracting that first click doesn't get you the full check, but with each ad break you keep a viewer through earns you additional revenue.


Still, the naming shouldn't be discounted here. The filmmaker Stevie Long didn't know his movie would end up on Hulu so it may just be chance, but knowing your distribution medium and tailoring something to break through on that medium is something more independent artists looking to break through should consider. When Jeff Bezos founded Amazon, he specifically wanted a name for the company that began with the letter A because so many directories for the web were organized alphabetically back then. Being on page 1 was a big deal.


Strictly Sexual is also a testament to the power of free, or in this case, semi-free. There are many sites that will charge you $5 for an online rental of indie films, but if you're an independent filmmaker who thinks someone will drop $5 on a movie they've never heard of, you're likely overvaluing monetary payback and undervaluing exposure. But Long's example shows you don't always have to trade off between the two. Per CNN, he's reinvesting his profits into his next film, "Porn Star: The Ugly Life of a Beautiful Girl," which he'll release directly on the internet.


Why mess with the formula?


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Stereotypes of non-profits versus for-profits

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This may seem self-evident, but a research study reveals that consumers think of non-profits as "warm, generous and caring organizations, but lacking the competence to produce high-quality goods or services and run financially sound businesses" while stereotyping for-profit companies as "more competent from a balance sheet perspective, but are not necessarily socially aware."


This has significant implications for non-profits who are looking to increase donations. It's tough to expect people to open their pockets to you if you're seen as financially incompetent. It's the equivalent of the image problem homeless people must overcome when asking for change; some people think they'll spend the money frivolously, for example on alcohol.


How do non-profits and for-profits combat the problems with their respective stereotypes? More for-profit companies seem to have succeeded in this effort: companies that make green products or contribute revenue consistently to green causes are obvious examples.


One issue for non-profits may be that individuals who volunteer for non-profits often experience the chaotic processes that result when a group of people who've never worked before are thrown together to organize an impromptu charity event. My experience is that the successful operation of such events often depends on the leadership of one or two charismatic people rather than the process or institution itself, and others who feel the same will be biased to suspect that most events run by that charity are not as fortunate.


I suspect one reason DonorsChoose.org has been so successful is that it feels like your money is just being routed directly to the end recipient, with DonorsChoose being just a simple lightweight software marketplace in the middle. You don't imagine a somewhat chaotic and overwhelmed group of human volunteers sitting in the middle writing checks and licking stamps to mail your payments, so it feels efficient.


[The other advantage of DonorsChoose.org is the direct connection created between you and the recipient(s). I received a personal thank-you note from the last group I donated money to. This isn't a new idea for non-profits, but with the Internet it should be simpler and lower cost to facilitate. This is, unfortunately, an area that huge charities like The Red Cross of The American Cancer Society may continue to struggle with considering they don't always know where your money is going to go, towards what research, etc. But technology makes it possible to trace your donation if that's the goal they set for themselves. Knowing exactly where your money goes would be a huge upgrade of the donation experience.]


Another option, of course, is to not rely on donations for your funds but to instead launch an immensely successful company and make a fortune that way, then spend the rest of your life distributing that fortune to causes that move you. Not recommended for most.


A related point here is the value of brand. Because it's so hard to directly measure the value of brand, most companies discount it heavily. It's easy to focus on those parts of your brand that you have functional areas focused on anyhow, like the product, but when your brand may be impacted by external forces, or by something that isn't directly the result of one group or person's work inside the company, it's easy to let it slip by unaddressed.


I have every person on my team answer user e-mails because it's the one way I know of to ground them in real conversation with our end users who we're focused on serving. Brand exists somewhere in between our work and our users reception of that work. The tricky part is finding the right moments to shift between a creator's conviction and sympathy.


Taking the status quo for granted

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A short interview with Peter Thiel, who sounds like an interesting thinker just based on this read.



Thiel: People take it for granted that their retirement funds can earn 8.5 percent a year. That’s what their financial planners tell them. And sure, you look back over the past 100 years, the stock market has generally gone up 6 to 8 percent a year. But in a larger historical perspective, that kind of growth is exceptional. If you had done the equivalent of investing in the stock market from, say, 1000 to 1100 AD, you would not have made 8 percent a year. During the fall of the Roman Empire, you’d have been lucky to get zero. We’ve been living in a unique period of accelerating technological progress. We’ve gone from horses to cars to planes to rockets to computers to the Internet in a very short time. It’s not automatic that that continues.


Wired: What happens if we don’t get the growth everyone expects?


Thiel: If it doesn’t happen, people will go bankrupt in retirement. There are systemic consequences, too. If we don’t have enough growth, we will see a powerful shift away from capitalism. There are good things and bad things about capitalism, but inequality becomes completely intolerable to society when everything’s static.



As I get older, the thing I try to emphasize most in my thinking is to challenge all assumptions. We all tend to accept too many things as gospel because they've always been that way.


Education, for example, is important, but is our current global school system the best one for the job? Sir Ken Robinson's TED talk this year drilled in on that question. Here's an excerpt, with Robinson's full talk embedded below.



If you were to visit education as an alien and say what's it for, public education, I think you'd have to conclude, if you look at the output, who really succeeds by this, who does everything they should, who gets all the brownie points, who are the winners, I think you'd have to conclude the whole purpose of public education throughout the world is to produce university professors. Isn't it. They're the people who come out the top. And I used to be one, so there. And I like university professors, but you know, we shouldn't hold them up as the high-water mark of all human achievement. They're just a form of life, another form of life. but they're rather curious and I say this out of affection for them, there's something curious about them, not all of them but typically, they live in their heads, they live up there, and slightly to one side. They're disembodied. They look upon their bodies as a form of transport for their heads, don't they? It's a way of getting their head to meetings.


If you want real evidence of out-of-body experiences, by the way, get yourself along to a residential conference of senior academics, and pop into the discotheque on the final night, and there you will see it, grown men and women writhing uncontrollably, off the beat, waiting until it ends so they can go home and write a paper about it.


Now our education system is predicated on the idea of academic ability. And there's a reason. The whole system was invented round the world there were no public systems of education really before the 19th century. They all came into being to meet the needs of industrialism.


So the hierarchy is rooted on two ideas: Number one, that the most useful subjects for work are at the top. So you were probably steered benignly away from things at school when you were a kid, things you liked, on the grounds that you would never get a job doing that. Is that right? Don't do music, you're not going to be a musician; don't do art, you're not going to be an artist. Benign advice -- now, profoundly mistaken. The whole world is engulfed in a revolution.


And the second is, academic ability, which has really come to dominate our view of intelligence because the universities designed the system in their image. If you think of it, the whole system of public education around the world is a protracted process of university entrance. And the consequence is that many highly talented, brilliant, creative people think they're not, because the thing they were good at at school wasn't valued, or was actually stigmatized. And I think we can't afford to go on that way.











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Bundling

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James Surowiecki, as he usually does, provides a good overview of a topic that many people never think about, and that is bundling in cable pricing. He's right that most people prefer the convenience of bundling and that in an unbundled world, it's not certain that prices just wouldn't be reshuffled to maintain overall profits for cable companies, but in the current environment, where cable subscriptions are still increasing and profits still high, there is an opportunity at the margins for enterprising customers to try to mix and match their own entertainment lineup for cheaper.


As long as they remain a minority, companies won't bother trying to rejigger their prices and packages to catch them. It's not an endeavor for the lazy, though, as it can require buying special boxes, plugging computers into TV's, subscribing to multiple services, etc.


I'm glad that the convenience of bundling still works for most people, though. One of the simple benefits of Hulu is its aggregation model, which is just a form of bundling. It's one reason that even content providers who want to maintain their own online distribution presence should consider joining us, and one reason I think most online sellers with their own storefront would benefit from a simultaneous listing on Amazon.com.


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Why does the U.S. tax code encourage debt?

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I'd always taken the U.S. tax code for granted when it comes to tax shields for debt. Individuals can deduct mortgage interest, and companies can write off interest on debt. These nudge players towards debt, all things being equal. When I first joined Amazon.com, we were looking for more funds post-IPO to finance all the investments we wanted to make over the next several years, and we went with what was, at the time, the largest convertible debt offering ever. The internet market hadn't crashed then, and debt was the cheapest way to fill our war coffers.


But, as James Surowiecki notes, even without these tax shields, debt would be prevalent in the U.S. (after all, most people can't pay for an entire house with cash, and most companies love the leverage of debt). Even worse, these tax shield for debt have almost no social benefits while magnifying risk, as the recent financial crisis exposed all too well.


Surowiecki notes that while abolishing these tax breaks will be politically challenging, other countries have done it.



...there are precedents, on a smaller scale, for these kinds of changes. In the U.S., people used to be able to write off the interest they paid on credit cards. That tax break was abolished in 1986, and, the same year, the mortgage-interest deduction, which used to be unlimited, was capped. Great Britain, meanwhile, abolished its mortgage tax break in 2000. Similarly, there are a number of countries, including Brazil and Belgium, that don’t give corporate debt a tax advantage over equity, while, just last year, both Germany and Denmark cut back sharply on their business-interest tax breaks, limiting how much interest companies can write off. Given the weak state of the economy and of housing prices, a wholesale rewriting of the tax code may be a bridge too far right now, but there are plenty of reforms—capping deductions, phasing them out over time, restricting their use by heavily leveraged companies—that would move in the right direction.




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Fallout

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James Surowiecki noted in his New Yorker column this week, probably turned in sometime before this past weekend, that Tiger Woods' recent troubles directly undermined exactly the appeal that sponsors saw in him, and that is his amazing control and focus.



Scandals that aren’t out of tune with a celebrity’s image are often surprisingly easy to bounce back from: after images of Kate Moss snorting coke surfaced, her bookings fell, but, over time, they went up. Revelations that Michael Jordan had lost hundreds of thousands of dollars gambling barely dented his appeal, since the story reinforced the image of him as a fierce competitor. But scandals that conflict with a person’s public image can wreak havoc.



And then Woods was dropped by Accenture this weekend.



The interesting question is why all of these experts, whose careers depend on their supposed ability to analyze and understand the mood of the public (and of corporations), could have so completely misdiagnosed what was happening. Some of the reaction can be explained as simply assuming that Tiger was too big to be brought down by extramarital transgressions. And some of it probably derived from marketing consultants’ benighted faith that any problem can be solved if the marketing is good enough. But I also think there was a profound misunderstanding on the part of these experts of the nature of Tiger’s appeal, which from the start has been founded on an image of complete control and focus, an image that this scandal utterly wrecked. And the fact that most sports marketing professionals seem not to have understood just how this story would play out with the public and with sponsors, even though understanding these things is their core business, does make you question whether companies should be listening to marketing consultants at all.



I'd generalize to say that 9 times out of 10, if you're relying on consultants, you didn't hire the right person for the job in the first place. That 10th time is usually for some skill it isn't cost-effective to keep in-house full-time (for example, you may need to do some interior decorating in your office once in a while, but keeping an interior decorator on staff full-time is not cost-efficient).


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No white knights

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People with iPhones in the U.S. universally loathe AT&T for its terrible network capacity (count yours truly among them). IIf I could have my iPhone on the Verizon network, I'd switch in a heartbeat.


Or would I?


As this David Pogue column notes, Verizon has its despicable and shady practices for gouging customers also. They make it almost impossible to avoid incurring inadvertent $1.99 data download charges, and they charge exorbitant early termination fees for smartphones.


The net of it is that cell phone companies, like cable companies, are just universally despised by consumers, and for good reason. The brands stand for profit and unresponsive customer service, and changing that mentality through a massive company is so difficult once it has contaminated the company culture.


Indie downturn

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I had a wonderful time at the Toronto International Film Festival (TIFF) this year; more on my first visit there soon.


With the high cost of attending a film festival like Sundance or Toronto (once you factor in plane tickets, lodging, transportation, and the cost of a film ticket there, assuming you can even secure the tickets you want, the $20 you pay for a movie ticket, popcorn, and drink at your local indie cineplex seems like a bargain), it's worth considering whether such a trip is worth it.


One reason these treks are still worthwhile to me is the contraction of the independent film market. Anne Thompson sees the dearth of purchases at this year's TIFF as continuation of this trend. I still enjoy a lot of what people refer to as "independent films" but fewer and fewer of them cross that bridge over troubled water between film festival and theatrical release.


Yes, I can still wait and see the movies on DVD at some point, but call me old-fashioned, I still love the experience of watching a movie on a huge screen in a darkened theater in the company of others. Drifting into the theater with other moviegoers giving off that palpable sense of anticipation, watching the movie trailers and making snap judgments about what will succeed, nibbling on popcorn or some candy, standing outside the theater afterwards and discussing our reactions to the movie we just saw, I love it all. Some people complain about the price of a movie ticket, but for my money, $10 or $11 for a movie ticket is still the best value for 2 hours of entertainment on a night out.


Back to independent film, most wouldn't make enough on DVD sales alone to continue to subsidize their production. Financiers back these movies assuming some revenue from theatrical release.


So yes, for independent film lovers, there is still value in the film festival pilgrimage (it's also a great way to diet; rushing from one screening to another at TIFF, I learned to subsist on water, popcorn, and body fat).


As to the fate of the independent film market, I am not as gloomy as most, though there will be blood in the near term. It should come as no surprise given what I've spent so much of my career working on that the reason I'm still bullish is that little thing called the Internet.


What do independent films need? Publicity and distribution. The internet is very good at the former, and getting better at the latter. The stigma against the internet as a distribution channel is understandable given how conservative the entertainment industry has always been (just tonight, on the Emmys, Neil Patrick Harris played Dr. Horrible in a skit poking fun at internet distribution of television). And internet distribution is still handcuffed by certain factors, including the shoddy internet infrastructure in the U.S. and the somewhat shaky and long chain of software and hardware involved in watching video streamed live through said the Internet. The reliability and quality of streamed video can't match that of a DVD disc played through your DVD player. Yet.


But that won't last forever. Take out the costs of film prints and old methods of marketing an indie film, trying to open it big in NYC and LA, and suddenly the height of the cost hurdle drops in a massive way. Forego the traditional windowing system and release a movie through multiple channels simultaneously and take advantage of concentrating your marketing efforts on a narrower window. Many independent movies that play the festival circuit won't generate revenue across multiple windows the way a Harry Potter movie will anyway, so why diffuse the spend across multiple windows?


I mentioned above how much I love seeing movies in theaters, but I'd absolutely pay to watch some of these movies at home on my TV, through PPV or streamed or downloaded off of the internet for $10 a pop, if that meant these movies would continue to get made.


If anything good comes from this downturn in the independent film market, I hope it's that filmmakers of all sorts look past their prejudice against the internet as a means for sharing their work and apply the same creativity they use to make their movies to exploiting the internet.


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Confidence game

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So what did cause this whole financial meltdown? Malcolm Gladwell blames overconfidence.


Those who don't like the anecdotal style of Gladwell will probably dismiss the article. And it's true, Gladwell doesn't make much of a case in this relatively short article that overconfidence is definitely at the heart of the financial meltdown. It reads more like a Gladwell hunch, loosely connecting some stories about former Bear Stearns CEO Jimmy Cayne with a quick survey of psychological studies on human overconfidence.


But that doesn't mean he isn't a skilled storyteller. Profiling Cayne:



Jimmy Cayne grew up in Chicago, the son of a patent lawyer. He wanted to be a bookie, but he realized that it wasn’t quite respectable enough. He went to Purdue University to study mechanical engineering—and became hooked on bridge. His grades suffered, and he never graduated. He got married in 1956 and was divorced within four years. “At this time, he was one of the best bridge players in Chicago,

Africa

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Thomas Barnett urges the U.S. government to look beyond foreign aid and debt forgiveness when trying to spur improvements in Africa's standard of living.



Let me clue you in on something: When the average Western businessman goes to Africa, he sees bad environment, bad infrastructure, bad climate, and bad governance. And guess what? He's not particularly inclined to invest his money. But when the average Chinese or Indian businessman goes to Africa, he sees all the same things and thinks to himself, "Hmmm, not that different from home. I can make a lot of profit happen here!" Ditto for a lot of Arab money looking to reassert itself throughout Africa in the manner of centuries past (hint: Europeans weren't the only colonial masters).


My point is this: Africans aren't waiting for the West to finally decide to connect it up to the global economy. Asia has already beaten us to the punch, and for a lot of good reasons.


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A recent World Bank study made this point in spades. It detailed how foreign direct investments from China and India, while overwhelmingly concentrated in extractive industries (energy, minerals, agriculture), are both growing rapidly and diversifying to the point where African economies are being integrated into buyer-driven network chains (think Wal-Mart) and producer-driven network chains (think Toyota). The rise of such "network trade" (largely within multinational corporations) means that Asia is starting to do to Africa what America once did to Asia: pulling new sources of cheap labor into the lower ends of global production chains, all while moving itself up the ladder into higher-tech (and thus higher-paying) jobs.


Too exploitative for your tastes? Perhaps you'd prefer Africans still picking cotton decades from now and calling that "development." Africa is only 30 percent urbanized today, or roughly where China was when it began its great rise thanks to Deng Xiaoping. Africa is expected to be half urbanized within a generation's time, so tell me: What do you expect all those new urban laborers to do?



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Michael Lewis on AIG

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Michael Lewis further explores the financial meltdown at AIG in Vanity Fair. He brings to the fore a new potential leading villain in this saga, Joe Cassano. I thought I was done reading about this whole debacle, but I enjoy most Lewis articles, and this does indulge my weakness for white collar crime chronicles.


This is an article I would have expected to read in Conde Nast Portfolio, but that magazine went defunct after just a short run.


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