Valjean (Hugh Jackman) serves nineteen years for stealing a loaf of bread: a punishment that he regards as unjust, though in fact it reflects well on the status of French baking. Had he taken a croissant, it would have meant the guillotine.
Anthony Lane on Les Misérables, Django Unchained, and Amour. You just knew Lane would have a fun go of it hate-reviewing Les Mis.
Robert Gordon wrote a much discussed article titled Is U.S. Economic Growth Over? (PDF) in which he concludes it is. One of the arguments he makes, which echoes some of what Tyler Cowen wrote about in The Great Stagnation, is that the economic impact of the 2nd Industrial Revolution (electricity, plumbing) will far outweigh those from the 3rd Industrial Revolution, the one we live in now, which has brought us computers and the internet.
As a thought exercise to support his claim, Gordon offers readers this choice:
With option A you are allowed to keep 2002 electronic technology, including your Windows 98 laptop accessing Amazon, and you can keep running water and indoor toilets; but you can’t use anything invented since 2002. Option B is that you get everything invented in the past decade right up to Facebook, Twitter, and the iPad, but you have to give up running water and indoor toilets. You have to haul the water into your dwelling and carry out the waste. Even at 3am on a rainy night, your only toilet option is a wet and perhaps muddy walk to the outhouse. Which option do you choose?
Gordon assumes Option A is the obvious and overwhelming choice. That makes Kevin Kelly's dissent all the more interesting.
Option A is not obvious at all.
The farmers in rural China have chosen cell phones and twitter over toilets and running water. To them, this is not a hypothetical choice at all, but a real one. and they have made their decision in massive numbers. Tens of millions, maybe hundreds of millions, if not billions of people in the rest of Asia, Africa and South America have chosen Option B. You can go to almost any African village to see this. And it is not because they are too poor to afford a toilet. As you can see from these farmers' homes in Yunnan, they definitely could have at least built an outhouse if they found it valuable. (I know they don't have a toilet because I've stayed in many of their homes.) But instead they found the intangible benefits of connection to be greater than the physical comforts of running water.
Most of the poor of the world don't have such access to resources as these Yunnan farmers, but even in their poorer environment they still choose to use their meager cash to purchase the benefits of the 3rd revolution over the benefits of the 2nd revolution. Connection before plumbing. It is an almost universal choice.
This choice may seem difficult for someone who has little experience in the developing world, but in the places were most of the world lives we can plainly see that the fruits of the 3rd generation of automation are at least as, and perhaps more, valuable than some fruits of the 2nd wave of industrialization.
The question is when we'll see the fruits of the 3rd Industrial Revolution. Kelly argues we haven't given it the same amount of time as we gave the first two Industrial Revolutions to bear fruit. More specifically, Kelly believes it's the networking of things that is the true 3rd Industrial Revolution, and it's just getting underway.
That's just one of his arguments in a long and excellent essay. I am personally excited for the benefits to mankind that will arise from computers coordinating with each other without human intervention. It will make life wonderful until the Skynet and the computers take over and enslave us all.
Tyler Cowen would make a great lunch companion, and he was one for this interview with the Financial Times. Interesting, as always. A few tidbits:
Nevertheless, he is worried about the number of people going into finance. “I think about this a lot: you’re young, you come from a smart, wealthy family, you’re somehow supposed to show that you’re successful quite quickly. Banking, law, consultancy allow you to do this; engineering, science and entrepreneurship less so. Your friends expect it, your parents, your potential mates do ... So we see so many talented people very quickly having to signal how smart they are but that may not be the longest-term social productivity.”
On politics:
“What I would like to vote for is a candidate that is socially liberal, a fiscal conservative, broadly libertarian with a small ‘l’ but sensible and pragmatic and with a chance of winning. That’s more or less the empty set.”
And, just because he always has to write something that surprises me:
“Sports is remarkably cognitive. I think it’s underrated just how smart it is. Actually, if I had more time, I would spend more time with sports. Watching it, reading about it, I think it’s oddly underrated.”
What company, according to Fortune, is the eighth largest employer in the world, with over 549,000 employees globally?
The answer shocked me: Volkswagen. That's just the tip of the iceberg in terms of fascinating tidbits from this mini profile.
Efficiency experts will tell you that on an employee-per-vehicle basis, Volkswagen looks hopelessly inefficient. Financial analysts will tell you that the company woefully trails its competitors on a revenue-per-employee basis. But VW will tell you that it makes more money than any other automaker – by far.
While VW's stated goal is to become the world's largest car company by 2018, it's already there if you measure it by revenue and profits. Its revenue of $200 billion is greater than every other OEM. Last year's operating profit of $14 billion is the kind of performance you expect from Big Oil companies, not automakers.
Last year's operating profit of $14 billion is the kind of performance you expect from Big Oil companies, not automakers.
How can this be possible? How can VW look so uncompetitive from a productivity standpoint, yet out-earn all of its competitors?
Ah, that's the magic of VW's corporate structure. While business schools teach future MBAs that centralized operations can cut cost by eliminating overlapping work and duplication, VW maintains strongly decentralized operations with lots of overlap. While business schools preach the benefits of outsourcing to cut cost, VW is very vertically integrated.
Anytime a car company buys a component from a supplier, that supplier has to charge a profit. If an automaker can make those components in-house, it gets to keep that profit. VW is building a lot of components in-house.
To dominate you need multiple brands, and VW has more than anyone else.
If an automaker truly wants to dominate the market, it has to accept a certain amount of overlap and duplication. It just goes with the territory. To dominate you need multiple brands, and VW has more than anyone else, which admittedly overlap at the edges. But to VW they are more than just brands.
All of VW's brands (VW, Audi, Seat, Skoda, Bentley, Lamborghini, Ducati, Porsche, Bugatti, MAN, Scania, and VW Commercial) are treated as stand-alone companies. They have their own boards of directors, their own profit & loss statements, and their own annual reports. They even have their own separate design, engineering and manufacturing facilities. Yes, they do share some platforms and powertrains and purchasing, but other than that they're on their own.
Anyone who works in technology will hear an echo in much of this strategy. Volkswagen's model of of running all its brands as independent companies is an example how the biggest tech companies try to push decision-making to the edges, to the teams running a variety of product lines, as a way of trying to remain entrepreneurial, innovative, and nimble.
The way Volkswagen has vertically integrated is reminiscent of the way Apple has, over time, taken over more and more of the computing value chain, down to opening their own retail stores. Given how Samsung is also vertically integrating and competing head on with Apple in the mobile computing market, it would be surprising if Apple didn't stop sourcing chips from Samsung and take their business elsewhere, to a partner less vertically integrated, like Taiwan Semiconductor.
Volkswagen, by dint of its vertical integration, can capture value wherever it occurs in the value chain, and as the sources of value shift as it often does over the life cycle of technology products, Volkswagen retains its cut. On a related note, look at the last chart on this post at Asymco. Stunningly, Samsung makes more operating income from Android than Google is! In this mobile computing war, Samsung is making money off of both Google and Apple. After Apple, it's difficult to name another company that has profited more from the mobile computing revolution.
Volkswagen is the answer to the subject of this post, but Samsung is nearly as shocking a dark horse of a corporate behemoth.
As many have pointed out, the reach of Instagram's TOS aren't significantly different than those of services like YouTube and Twitter. But users don't view all social services as equal (and yes, I treat YouTube as a nascent high potential social service, perhaps Google's best chance to build an elite social network). I don't think Twitter users ever worry about their tweets being turned into advertisements, the concept seems extremely unlikely. As for YouTube, from its earliest days the value of having a video hosting service that offers global distribution immediately, for free, seemed worth any amount of advertising.
More importantly, though, I hypothesize one reason the outcry over the modifications to Instagram's TOS have been so much louder is that the ratio of content creation to content consumption on Instagram is higher than for those other services, or for just about any other social network I use. Almost everyone I follow on Instagram seems to post photos from time to time, certainly more than write on Twitter or post videos to YouTube regularly. We need a name for this metric for content sharing social networks:
Number of users who create content / Number of active users on that content network
I'll just call it participation rate for now. My guess is the higher the participation rate on a content social network, the more the users feel like they're creating the bulk of the value on that network. I don't think that's fair to Instagram as they were nearly perfect in creating the purest of social networks, and they do host and distribute a gazillion photos a day. But no matter, that's how users feel, and how they feel determines how they react when the company imposes a value capture mechanism (or in this case, hints at how they'll do it).
What exacerbated the issue was that the new TOS had language that implied that Instagram was going to use your photos to earn money and not provide you with any financial compensation. The users already felt like they'd created a huge percentage of the value in the network, and now it sounded like they'd be exploited to make the company's owners, who had already earned enough money to live out the rest of their days like some of their more well-heeled users, even more money.
[Note that for professional photographers and celebrities on the service, this is actually a serious monetary issue. Naysayers kept mocking regular users for thinking their terrible food and sunset photos would be monetizable in any way, but I follow a bunch of professional photographers and celebrities who make a huge percentage of their living off of monetizing their photographs, and the idea that Instagram could just jump in and take that is absolutely a non-starter. I hope they don't all flee because where else am I going to get my regular fix of pics from the fairy tale life of baddiebey to leave in a constant state of capitalist envy?]
Without knowing what the participation rate is for the leading social networks, it's difficult to test this hypothesis, but one other way to test this would be to look at those who grumbled the most. I suspect they came largely from those who actively post photos instead of just consuming them.
If anyone has any data on this, I'd love to hear it. Namely, it would be fascinating to compare Instagram to two services which I'm guessing have much lower participation rates: Flickr and 500px. Both of those services embrace what I suspect is an audience composed more of a large population of viewers and only partially of contributors (those who upload lots of photos). Both have designed their service with that user distribution in mind, choosing to monetize by targeting only the power users, that sliver of their population that actually upload high-res photos in volume and who value things like higher upload capacity or limits.
It doesn't seem like a strategy Instagram can easily borrow given their viewer/contributor distribution. What fraction of their users could they tax, and for what features? If it's true they have a more evenly distributed base of contributors, i.e. a high participation rate, it may be easier for them to just show ads for all their viewers. That seems the most likely path.