Quotulatiousness

March 11, 2024

Google’s “wild success and monopolistic position has made it grow fat, lazy, and worst of all, stupid”

Google has long been the 500lb gorilla in the room as far as search engine dominance is concerned, despite a significant and steady drop in the quality of the search results it returns. Niccolo Soldo suggests that Google has gotten fat and lazy in the interval since the release of its last huge success — Gmail — and the utter catastrophe of Gemini:

It’s become passé to complain about Google’s search engine these days, because it’s been horrible for years. We all recall its early era when its minimalist presentation effectively destroyed its competition overnight. Only us olds remember AltaVista‘s search engine, for example. So ubiquitous is its core function that the word “google” entered our lexicon.

Roughly 85-90% of the readers who have subscribed to this Substack have used a gmail address to do so. It’s a great product, although it could be better. Like many of you, I have several gmail addresses, and use email services from other providers like Protonmail. Gmail is incredibly easy to use, and works very well on all the devices that we operate on a daily basis.

Google is a tech behemoth, and is in a monopolistic position when it comes to both of these services. It has used this position to hoover up an insane amount of cash, taking a battering ram to many other businesses in the process, especially news media outlets that rely on advertising revenue. Yet it has not scored any big victories since its rollout of gmail all those years ago. Pirate Wires says that it hasn’t had to for some time … until now. The explosion of AI tech means that its core business is now at threat of extinction unless it can win the AI arms race. Its first foray into this war via its rollout of Gemini has been an absolute disaster. Mike Solana chalks it up to many factors, primarily the “culture of fear” that seems to permeate the tech giant.

The summary:

    Last week, following Google’s Gemini disaster, it quickly became clear the $1.7 trillion-dollar giant had bigger problems than its hotly anticipated generative AI tool erasing white people from human history. Separate from the mortifying clownishness of this specific and egregious breach of public trust, Gemini was obviously — at its absolute best — still grossly inferior to its largest competitors. This failure signaled, for the first time in Google’s life, real vulnerability to its core business, and terrified investors fled, shaving over $70 billion off the kraken’s market cap. Now, the industry is left with a startling question: how is it even possible for an initiative so important, at a company so dominant, to fail so completely?

The product rollout was so incredibly botched that mainstream media outlets friendly to Google (and its cash) are doing damage control on its behalf.

Gemini’s ultra-woke responses to requests quickly became a staple of social media postings.

Multiple issues:

    This is Google, an invincible search monopoly printing $80 billion a year in net income, sitting on something like $120 billion in cash, employing over 150,000 people, with close to 30,000 engineers. Could the story really be so simple as out-of-control DEI-brained management? To a certain extent, and on a few teams far more than most, this does appear to be true. But on closer examination it seems woke lunacy is only a symptom of the company’s far greater problems. First, Google is now facing the classic Innovator’s Dilemma, in which the development of a new and important technology well within its capability undermines its present business model. Second, and probably more importantly, nobody’s in charge.

It’s human nature to want to boil issues down to one single cause of factor, when it’s usually several all at once. We humans also have a strong tendency to zoom in on one factor when presented with many, mainly because the one that we focus on is something that we know and/or are passionate about.

Of course, Google’s engineers didn’t do this accidentally. They’ve been very intently observed by the most woke of all, the HR department:

As we all know, HR Departments are the Political Commissars of the Corporate West.

Stupid stuff:

    Before the pernicious or the insidious, we of course begin with the deeply, hilariously stupid: from screenshots I’ve obtained, an insistence engineers no longer use phrases like “build ninja” (cultural appropriation), “nuke the old cache” (military metaphor), “sanity check” (disparages mental illness), or “dummy variable” (disparages disabilities). One engineer was “strongly encouraged” to use one of 15 different crazed pronoun combinations on his corporate bio (including “zie/hir”, “ey/em”, “xe/xem”, and “ve/vir”), which he did against his wishes for fear of retribution. Per a January 9 email, the Greyglers, an affinity group for people over 40, is changing its name because not all people over 40 have gray hair, thus constituting lack of “inclusivity” (Google has hired an external consultant to rename the group). There’s no shortage of DEI groups, of course, or affinity groups, including any number of working groups populated by radical political zealots with whom product managers are meant to consult on new tools and products.

February 4, 2024

QotD: American railroads and the Interstate Commerce Commission

Filed under: Business, Government, History, Quotations, Railways, USA — Tags: , , — Nicholas @ 01:00

The railroads [in the decades immediately following the U.S. civil war] saw advantages to regulation. Unstable prices, disliked by rail customers, could also be detrimental to the railroads. A recession in 1884 led to the failure of a number of railroads, and the railroads wanted to undertake pooling arrangements for their mutual profitability. Thus, the railroad industry, which was very competitive, wanted the ICC [Interstate Commerce Commission] to stabilize rates, regulate routes, and protect their profitability. Essentially, the ICC cartelized the industry, allowing it to be more profitable than it could have been in a more competitive unregulated environment.

Randy Holcombe, Liberty in Peril: Democracy and Power in American History, (2019).

December 17, 2023

Justapedia, the latest “new Wikipedia

Filed under: Media, Technology — Tags: , , , — Nicholas @ 03:00

At Quillette, Shuichi Tezuka introduces the latest challenger to the ever-more-biased free online encyclopedia Wikipedia:

In the aftermath of Elon Musk’s purchase of Twitter late last year, the journalist Jon Levine asked him: “I wonder how much Wikipedia would cost?” Musk had recently complained that Wikipedia has a “non-trivial left-wing bias”, and a few months earlier, had commented that “Wikipedia is losing its objectivity.” But regardless of whether Musk would have liked to purchase the site, there never was any real possibility of that happening, as stated by Wikipedia’s symbolic leader Jimmy Wales: “Wikipedia is not for sale”.

Following this exchange, there were several discussions on Twitter (as it was called at the time) about whether Musk might create his own alternative to Wikipedia. In the end Musk did not make such an attempt, but approximately eight months later, someone else did.

This new online encyclopedia, known as Justapedia, is the latest in a long series of attempts by various individuals to create a competitor to Wikipedia. So far all previous attempts have either been unsuccessful, or morphed into something so unlike Wikipedia that they could no longer be considered a competitor. However, one thing working in Justapedia’s favor is that the need for such a competitor is stronger now than it has been in past years, due to several recent controversies revolving around the manipulation and/or politicization of Wikipedia, along with a widespread perception that Wikipedia has not done enough to prevent this type of problem.

Justapedia was recently publicized by Larry Sanger, who co-founded Wikipedia alongside Wales, during an interview with Russell Brand and in a subsequent blog post. This article will present a more detailed examination of Justapedia’s background, including some of the recent controversies that demonstrate why it is needed, as well as the poor record of success other Wikipedia alternatives have had up to this point. Will Justapedia succeed where most other Wikipedia competitors have failed?

September 24, 2023

A sliver of hope for Indigo?

Filed under: Books, Business, Cancon — Tags: , , , — Nicholas @ 03:00

In the latest SHuSH newsletter, Ken Whyte relays some new-ish rumours in the book business that may provide a bit of help for the struggling Indigo chain:

“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0

So what do we make of Heather Reisman’s return as CEO of the Indigo bookselling chain after her unceremonious removal from that role just two months ago?

The short answer is I have no idea, but SHuSH has never shied away from delivering irresponsible speculation on happenings at Indigo. I heard this week from a reasonably reliable source that Indigo is in discussions with Elliott Management Corp., owners of Barnes & Noble and the world’s only buyer of distressed bookselling chains.

This conflicts with some chatter I reported last spring suggesting that Elliott Management was uninterested in Indigo. If what I’m now hearing is true, it’s great news.

I have to emphasize, I have no idea. But if a deal were imminent, it would make sense to bring Heather back to see it through. Indigo wouldn’t want the bother of recruiting a new leader simply to effect the handover, and who would want the job on those terms?

And another thing …

In last week’s piece about Indigo, I noted that the company’s staff, “with exceptions, were young, inexpert, and disinterested”. Amal, clearly one of the exceptions, left an interesting comment:

    No. We became disinterested simply because a) we were all book lovers and had zero interest in selling crap and b) just like the author of this piece, head office and management were beyond dismissive of our knowledge, our book expertise, our genuine love of the written word. I worked at Chapters/Indigo starting in 2006 all the way until 2019, a couple of days a week, simply for my love of books. I am incredibly proud of my time there — especially when I was able to introduce new authors or genres to readers. My staff picks would sell out because I would hand sell them to people with my joy. It certainly wasn’t for the stellar pay or the people who treat retail employees like we are “inexpert”. Fun fact: you were asked in the job interview what your favourite books/genres were.

September 17, 2023

Why Indigo’s struggles are far from over

Filed under: Books, Business, Cancon — Tags: , , , , — Nicholas @ 03:00

Following up from last week, in this week’s SHuSH newsletter Ken Whyte explains why Indigo went in the direction it chose and why it seemed like the thing to do at that time:

“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0

Bookselling is a difficult business and it’s been especially difficult over the last twenty years. The Internet captured a lot of the used book business and shifted it online. Amazon captured a lot of the new book business and shifted it online (and bought Abebooks.com, one of the largest used book sites).

Former Indigo CEO Heather Reisman tried and failed to convince the federal government to keep Amazon south of the border back around 2002. She went so far as to sue the feds on the grounds that Amazon, as a cultural entity, was not majority-owned by Canadians and therefore operating in contravention of the Investment Canada Act. The suit went nowhere because Amazon then had no physical presence in Canada; it operated primarily through Canada Post. By the time Amazon did announce its intention to build a warehouse north of the border, early in 2010, the government had given up enforcing the Investment Canada Act. It was happy to have Amazon create new jobs.

It was when Amazon opened its Canadian warehouse that Heather began backing Indigo out of the book business. She cursed Amazon for its anticompetitive practices, not least its habit of selling books below cost to destroy competitors, and adopted the term “cultural department store” as a pivot from bookstores.

I’ve made it clear in newsletter after newsletter that I don’t like the direction Heather took Indigo but it’s only fair to look back at prevailing circumstances in 2010 and wonder if she really had a choice.

I’m sure she had stacks of research and hordes of people telling her that abandoning books was the only move. Attempting to compete with Amazon’s enormous scale and superior logistics would have struck many as a fool’s errand. Amazon would always have the largest selection, the best price, and the fastest delivery.

There was also a widespread belief that print was dead. E-books, e-readers, and tablets were the future, along with the “one very, very, very large single text“. Global e-reader sales were growing like this:

They were expected to keep growing. So were sales of e-books. In 2012, the Financial Post quoted data from Indigo predicting that e-books would capture 50 percent of the market in five years.

So, having played the Canadian Nationalist card and discovering that the government was willing to bluster but not to meaningfully act, Heather Reisman took the advice of her consultants and diversified away from books and into all the utter crap that currently befoul at least half of the retail space in every Indigo store. After all, the big box bookstores in the United States were clearly failing in the face of Amazon, with Borders filing for bankruptcy and Barnes & Noble staggering in the same direction. From 1999 to 2019, fully half of all the bookstores in the country disappeared.

The story isn’t as bleak as it looked in 2019, as Barnes & Noble is staging quite a comeback by concentrating on the book business. It’s a radical move, but Indigo could do far worse than cooking up a maple-flavoured version of the Barnes & Noble strategy. It might fail, but they’ll definitely fail if they keep on pretending to be a department gift store that also has a few books.

August 13, 2023

“It makes [Canada] look like some cheap, politically petty little kleptocracy run by a collection of self-serving narcissists”

Filed under: Bureaucracy, Cancon, Government, Media — Tags: , , , , — Nicholas @ 03:00

Canada became a parody of itself so slowly that the legacy media barely even noticed:

There was a time when politicians steered very carefully around saying anything that could be construed as an attempt to influence a decision by one of Canada’s independent agencies.

Honest, there was.

There was also a time when, should a politician so much as nod or wink publicly to indicate a preferred outcome by, say, the office of the Commissioner for Competition, the nation’s leading media organizations would see this as a big story. Sixteen dollar orange juice big. Heads would roll.

Seriously, there was.

The reasons people like Francois-Phillipe Champagne, Minister of Innovation, Science and Economic Development are supposed to keep their yaps shut are pretty straightforward. Businesses, citizens, consumers, and investors need to know the processes at law enforcement agencies and regulators — such as the Competition Bureau and the CRTC respectively — are independent of the sordid manipulations of partisanship. They need to be able to trust that the rules are clear, their application is consistent and that they can have faith that the institution involved views matters before it in an objective fashion.

It’s Rule of Law 101 stuff and messing with it makes Canada look like something less than a first world country. It makes us look like some cheap, politically petty little kleptocracy run by a collection of self-serving narcissists.

Shortly after the CBC, the Canadian Association of Broadcasters and News Media Canada filed a complaint with the Competition Bureau over Meta’s decision to no longer carry news in Canada, Champagne seized the opportunity to show Big Tech who their daddy is.

“I am determined to use every tool at our disposal to ensure that Canadians can have access to reliable news — across all platforms,” Champagne posted on X (the platform formerly known as Twitter). “I fully support the complaint made to the Competition Bureau by Cnd media groups against Meta in their effort to promote a free & independent press.”

I don’t expect that many readers have hung around with cabinet appointees. But I have, and I’ve been one. And I can tell you that most of them — particularly the ones whose conditions of appointment mean they serve “at pleasure” as Competition Commissioner Matthew Boswell does — pay attention when the minister through whom their agency reports to Parliament, says anything, let alone things like that.

June 12, 2023

“The more recent four or five years at Indigo have been a disastrophe”

Filed under: Books, Business, Cancon — Tags: , , , , — Nicholas @ 03:00

In the latest SHuSH newsletter, Ken Whyte outlines the rise and fall of Canada’s biggest bookstore chain that stopped trying to be a bookstore chain and now appears to be looking for a new identity to assume in the wake of several board resignations and the announced resignation of Heather Reisman, the founder and public face of the chain:

“Indigo Books and Music” by Open Grid Scheduler / Grid Engine is licensed under CC0 1.0

Indigo opened its first bookstore in Burlington in 1997 and quickly expanded across the country in competition with the Chapters chain, which it bought in 2001. Heather’s husband, Gerry Schwartz, provided much of the financing in these years. Gerry is the controlling shareholder of Onex, a private equity firm that now has about $50 billion in assets under management.

Influential in Ottawa, the Schwartz-Reismans managed to convince the federal government to approve Indigo’s purchase of Chapters and also keep the US book chain Borders from moving north into Canada — a double play that cleared the field of meaningful competition and wouldn’t have happened in a country with serious antitrust enforcement.

Heather, as Indigo CEO, cast herself as the queen of Canadian literature, making personal selections of books to her customers, hosting book launches, interviewing celebrity authors, etc.

From a financial perspective, Indigo took about five years to get rolling after the Chapters acquisition. It looked steady through the late aughts and into the teens when Amazon showed up in force. Indigo’s share price caved. Unable to convince Ottawa to push Amazon back across the border, Heather adopted a new strategy, backing out of books and recasting Indigo as a general merchandiser selling cheeseboards, candles, blankets, and a lot of other crap to thirtyish women. “We built a wonderful connection with our customers in the book business,” she famously said. “Then, organically, certain products became less relevant and others were opportunities.” This charmed investors, if not the book community, and Indigo’s share price hit a high of $20 a share in 2018. By then, books, as a share of revenue, had fallen from 80 percent of revenue to below 60 percent (they are now 46 percent).

The more recent four or five years at Indigo have been a disastrophe. With its eighty-eight superstores and eighty-five small-format stores, the company lost $37 million in 2019, $185 million in 2020, and $57 million in 2021. Things looked somewhat better in 2022 with a $3 million profit, but its first three quarters of 2023 (Indigo has a March 28 year-end) resulted in an $8 million loss and its fourth quarter featured one of the most spectacular cyberhacks in Canadian commercial history. The company’s website was breached and its employment records held for ransom, resulting in a ten-day blackout for all of the company’s payment systems and a month-long outage in online sales. The share price is now $2.00 or one tenth the 2018 high.

ANALYSIS AND IRRESPONSIBLE SPECULATION

Given everything Indigo has been through over the last several years, and especially the last several months, it’s not surprising that Heather wants to pack it in. She’s seventy-four and super wealthy. There’s nothing but a desperately hard slog ahead for her money-losing company. Why stay?

Still, this has the feel of something that blew up at a board meeting, or in advance of a board meeting. It’s highly irregular for a company to lose almost half its directors in a single day. If these changes had been approached in conventional fashion, there would have been more in the way of messaging and positioning, especially regarding Heather. For all intents and purposes, she is Indigo. It wouldn’t exist without her. They ought to be throwing her a retirement parade and presenting her with a golden cheeseboard. Instead, all she’s getting, for now, are a few cliches in a terse press release.

It’s also weird that this all happened days before we get the company’s year-end results (they were out by this time last year). My guess is that the board got a preview, that the picture is ugly, that there are big changes afoot, and that the directors were nudged out as the start of a major retrenchment or given the option of sticking around for a bloodbath and chose instead to exit.

May 27, 2023

The true purpose of the Great Exhibition of 1851

Filed under: Britain, History, Technology — Tags: , , , , — Nicholas @ 05:00

In the latest Age of Invention newsletter, Anton Howes considers the “why” of the 1851 Great Exhibition:

The Crystal Palace from the northeast during the Great Exhibition of 1851, image from the 1852 book Dickinsons’ comprehensive pictures of the Great Exhibition of 1851
Wikimedia Commons.

Ever since researching my book on the history of the Royal Society of Arts, I’ve been fascinated by the Great Exhibition of 1851, which they initiated. Like most people, I had once assumed that the exhibition was just a big celebration of Victorian technological superiority — a brash excuse to rub the British Industrial Revolution in the rest of the world’s faces. But my research into the origins of the event revealed that it was almost the opposite. Far from being a jingoistic expression of superiority, it was actually motivated by a worry that Britain was rapidly losing its place. It was an attempt to prevent decline by learning from other countries. It was largely about not falling behind.

Industrial exhibitions already had a long history in 1851, as a crucial weapon in other countries’ innovation policy arsenals. They were used by countries like France in particular — which held an exhibition every few years from 1798 — as a means of catching up with Britain’s technology. This sounds strange nowadays, when the closest apparent parallels are vanity projects like the Millennium Experience, the recent controversial “Festival of Brexit” that ended up just being a bunch of temporary visitor attractions all over the country, and glitzy mega-events like the World’s Fairs. But the World’s Fairs, albeit notional successors to the Great Exhibition, have strayed very far from the original vision and purpose. They’re now more about celebration, infotainment and national branding, whereas the original industrial exhibitions had concrete economic aims.

Industrial exhibitions were originally much more akin to specialist industry fairs, with producers showing off their latest products, sort of combined with academic conferences, with scientists demonstrating their latest advances. Unlike modern industry fairs and conferences, however, which tend to be highly specialised, appealing to just a few people with niche interests, industrial exhibitions showed everything, altogether, all at once. They achieved a more widespread appeal to the public by being a gigantic event that was so much more than the sum of its parts — often helped along by the impressive edifices that housed them. The closest parallel is perhaps the Consumer Electronics Show, held since 1967 in the United States. But even this only focuses on particular categories of industry, and is largely catered towards attendees already interested in “tech”. Industrial exhibitions were like the CES, but for everything.

The point of all this, rather than just being an event for its own sake, was to actually improve the things on display. This happened in a number of ways, each of them complementing the other.

Concentration generated serendipity. By having such a vast variety of industries and discoveries presented at the same event, exhibitions greatly raised the chances of serendipitous discovery. A manufacturer exhibiting textiles might come across a new material from an unfamiliar region, prompting them to import it for the first time. An inventor working on a niche problem might see the scientific demonstration of a concept that had not occurred to them, providing a solution.

Comparison bred emulation. Producers, by seeing their competitors’ products physically alongside their own, would see how things could be done better. They could learn from their competitors, with the laggards being embarrassed into improving their products for next time. And this could take place at a much broader, country-wide level, revealing the places that were outperforming others and giving would-be reformers the evidence they needed to discover and adopt policies from elsewhere.

Exposure shattered complacency. The visiting public, as users and buyers of the things on display, would be exposed to superior products. This was especially effective for international exhibitions of industry, of which the Great Exhibition was the first, and simulated an effect that had only ever really been achieved through expensive foreign travel — by being exposed to things they hadn’t realised could already be so much better than what they were accustomed to, consumers raised their standards. They forced the usual suppliers of their products to either raise their game or lose out to foreign ones.

May 6, 2023

History Summarized: Chicago’s Tribune Tower

Overly Sarcastic Productions
Published 20 Jan 2023

It’s not a Dome, but it’s still pretty darn good.
(more…)

March 4, 2023

QotD: Profit margins in the restaurant trade

Filed under: Business, Economics, Food, Quotations — Tags: , , — Nicholas @ 01:00

This is an old rule of thumb, no more, from an experienced waitron unit.

The table that orders a starter, main and a bottle of wine – that just about breaks even for the restaurant. You can mix and match this a bit. Dessert instead of the starter, that sorta thing. But the costs of the building, the staff, the electricity, the stock that goes off, the cost of capital itself, all those things, mean that the basic restaurant experience just about covers its costs.

It’s the having the one thing extra that makes the money, the profit. A drink before the meal, having both a starter and a dessert to add to the main. The second bottle of wine, or the digestif with the coffee. This is why the waiter is so eager for you to have any one or more of these “extras”. The margin over food costs – food costs usually being around 30% of menu price – on those additions is exactly what provides a profit to the business that is the restaurant.

As to why, well, it’s the same reason that the menu prices of some well known item are going to be roughly the same across restaurants. Competition is fierce in the business. That means headline prices are pushed down to where they only just, if even that, cover costs. On exactly the same basis as Ryanair charging you spit for the seat and then a fortune for the air you breathe onboard. You get the punter in with the £20 for two steak dinners then hope like Hell they order the vanilla soup and also the vegetable ice cream in order to make your nut.

Tim Worstall, “Bar Owner Complains Of People Drinking Tap Water – Oi! Where’s My Profits?”, Continental Telegraph, 2019-05-27.

February 6, 2023

QotD: US railroad land grants

Filed under: Business, Economics, Government, History, Quotations, Railways, USA — Tags: , , , — Nicholas @ 01:00

In 1871, Kentucky Congressman J. Proctor Knott gave a humorous speech on the floor of the House of Representatives ridiculing the idea of giving land grants to western railroads. He focused on Duluth, which at the time had about 3,000 residents, and his basic argument was that U.S. taxpayers in general should not be required to subsidize projects that benefitted only a few.

The speech was widely reprinted by those skeptical of government pork barrel (a term that first became popular about the time Knott gave his speech). Sixteen years later, Northern Pacific, which received what was probably the largest land grant to a private company in American history, reprinted the speech in this brochure.

This might seem strange except that NP annotated the speech with recent facts in bright red letters, such as that Duluth had grown to house 26,000 people by 1886, that more wheat was delivered to Duluth each year than to any other American city, and that it also saw deliveries of millions of board feet of lumber and hundreds of thousands of tons of iron ore each year.

NP didn’t say so in so many words, but its point was clearly that the land grants, contrary to Knott’s predictions, were a good thing for most if not all Americans. However, the brochure also didn’t mention that James J. Hill was proving that a railroad that didn’t receive any land grants or subsidies could provide just as many benefits without going bankrupt, which would leave both investors and taxpayers in the lurch. (The St. Paul & Pacific did receive a small land grant, but Hill paid fair market value for that railroad and land after it went bankrupt, thus Hill didn’t particularly benefit from the subsidy.)

Train Lover (Randal O’Toole), “Debate Over Railroad Land Grants”, Streamliner Memories, 2022-11-01.

February 4, 2023

A lobster tale (that does not involve Jordan Peterson)

In the latest Age of Invention newsletter, Anton Howes relates some of his recent research on the Parliament of 1621 (promising much more in future newsletters) and highlights one of the Royal monopolies that came under challenge in the life of that Parliament:

European lobster (Hommarus gammarus)
Photo by Bart Braun via Wikimedia Commons.

One of the great things about the 1621 Parliament, as a historian of invention, is that MPs summoned dozens of patentees before them, to examine whether their patents were “grievances” — illegal and oppressive monopolies that ought to be declared void. Because of these proceedings, along with the back-and-forth of debate between patentees and their enemies, we can learn some fascinating details about particular industries.

Like how 1610s London had a supply of fresh lobsters. The patent in question was acquired in 1616 by one Paul Bassano, who had learned of a Dutch method of keeping lobsters fresh — essentially, to use a custom-made broad-bottomed ship containing a well of seawater, in which the lobsters could be kept alive. Bassano, in his petitions to the House of Commons, made it very clear that he was not the original inventor and had imported the technique. This was exactly the sort of thing that early monopoly patents were supposed to encourage: technological transfer, and not just original invention.

The problem was that the patent didn’t just cover the use of the new technique. It gave Bassano and his partners a monopoly over all imported lobsters too. This was grounded in a kind of industrial policy, whereby blocking the Dutch-caught lobsters would allow Bassano to compete. He noted that Dutch sailors were much hardier and needed fewer provisions than the English, and that capital was available there at interest rates of just 4-5%, so that a return on sales of just 10% allowed for a healthy profit. In England, by comparison, interest rates of about 10% meant that he needed a return on sales of at least 15%, especially given the occasional loss of ships and goods to the capriciousness of the sea — he noted that he had already lost two ships to the rocks.

At the same time, patent monopolies were designed to nurture expertise. Bassano noted that he still needed to rely on the Dutch, who were forced to sell to the English market either through him or by working on his ships. But he had been paying his English sailors higher wages, so that over time the trade would come to be dominated by the English. (This training element was a key reason that most patents tended to be given for 14 or 21 years — the duration of two or three apprenticeships — though Bassano’s was somewhat unusual in that it was to last for a whopping 31.)

But the blocking of competing imports — especially foodstuffs, which were necessaries of life — could be very controversial, especially when done by patent rather than parliamentary statute. Monopolies could lawfully only be given for entirely new industries, as they otherwise infringed on people’s pre-existing practices and trades. Bassano had worked out a way to avoid complaints, however, which was essentially to make a deal with the fishmongers who had previously imported lobsters, taking them into his partnership. He offered them a win-win, which they readily accepted. In fact, the 1616 patent came with the explicit support of the Fishmongers’ Company.

It sounds like it became a large enterprise, and I suspect that it probably did lower the price of lobsters in London, bringing them in regularly and fresh. With a fleet of twenty ships, and otherwise supplementing their catch with those caught by the Dutch, Bassano boasted of how he was able to send a fully laden ship to the city every day (wind-permitting). This stood in stark contrast to the state of things before, when a Dutch ship might have arrived with a fresh catch only every few weeks or months, and when they felt that scarcity would have driven the prices high.

January 14, 2023

More on the Barnes & Noble turnaround

Filed under: Books, Business, USA — Tags: , , , — Nicholas @ 05:00

In the latest SHuSH newsletter, Ken Whyte looks at the Barnes & Noble recovery story (discussed a couple of weeks back):

“Barnes & Noble Book Store” by JeepersMedia is licensed under CC BY 2.0 .

Back in 2018, the bookselling chain was losing $18 million a year. It had just fired 1,800 full-time employees. About 150 stores had been closed, leaving the company with 600. It had lost its fourth CEO in five years, this one to a sexual-harassment charge. The firm’s big digital initiative, the Nook e-reader, was a flop. The share price was down 80 percent.

Not only was the business failing: it was demoralized. As the writer Ted Gioia noted in a recent newsletter, B&N had lost faith in the public’s willingness to buy books from anyone but Amazon. Its leadership “shifted a huge portion of its floorspace to peddling toys, greeting cards, calendars, and various tchotchkes”. It doubled down on in-store cafes and even tried launching freestanding Barnes & Noble restaurants.

Just when it seemed B&N was certain to follow the path of its former competitor, the Borders chain, which closed in 2011, it was purchased for $638 million (US) by Elliott Advisors, a hedge fund.

SHuSH has been skeptical about the record of hedge funds in the cultural space. We are also skeptical of hedge funds in the retail space where they have a well-established record of buying chains, slashing costs, and driving them into the ground: Sears, Toys R Us, Payless Shoes, Radio Shack, Aeropostale, Sports Authority, etc.

Elliott Advisors is an exception.

The UK based-firm has a demonstrated commitment to bookselling (at least in the medium term — more on this later). It bought the Waterstones chain in 2018. Waterstones and its 283 stores had been rescued from near-bankruptcy in 2011 by lifelong bookseller James Daunt and a Russian backer. Elliott kept Daunt at the helm and a year later bought Barnes & Noble and added this second chain to his responsibilities.

Daunt acknowledged that Barnes & Noble was in rough shape when acquired by Elliott. Its stores were “crucifyingly boring”. But he was confident the chain could be turned around. There was no template or magic ingredient, he said. It was a simple matter of “running really nice bookshops”. To that end, he gives his stores unusual autonomy to develop their own personalities and tailor their stock to the interests of their communities.

Barnes & Noble stores have since dropped most of their crap: they no longer look like big-box flea markets. They’ve quit accepting payments from the major publishers to put their books on display, a practice that brought B&N revenue but left publishers in charge of what customers saw when they walked into stores. Local managers now decide how their books are presented based on what they think will appeal to their customers.

The company used the COVID lockdown to freshen up its dowdy stores. Managers were instructed to take every single book off the shelves and “weed out the rubbish”. Walls were painted, aged carpet replaced, furnishings upgraded. The result is a much improved browsing experience. Readers like to browse.

There were hard decisions, too. Daunt cut the B&N head office staff in half and shed about 5,000 of 30,000 employees.

All in all, it worked. Last spring, The New York Times reported that sales were up and costs were down at Barnes & Noble and that “the same people who for decades saw the superchain as a supervillain are celebrating its success. In the past, the book-selling empire, with 600 outposts across all 50 states, was seen by many readers, writers and book lovers as strong-arming publishers and gobbling up independent stores in its quest for market share … Today, virtually the entire publishing industry is rooting for Barnes & Noble — including most independent booksellers. Its unique role in the book ecosystem, where it helps readers discover new titles and publishers stay invested in physical stores, makes it an essential anchor in a world upended by online sales and a much larger player: Amazon.”

There are not a lot of reliable financial numbers available on Barnes & Noble because it is no longer a public company, but it reports that its 2021 sales in were up 3 percent over pre-pandemic times. Most importantly, sales of books were up 14 percent.

December 30, 2022

Barnes & Noble used to be like an even more boring Indigo … but they’ve been turned around

Filed under: Books, Business, USA — Tags: , , , , — Nicholas @ 05:00

Back when my job required more travel, one of the things I used to look forward to was visiting US bookstores, as they always had a wider and more interesting stock than our staid Canadian equivalents. Over time, the interesting local bookstores got harder and harder to find as the big box stores like Borders and Barnes & Noble took over much of their customer base. Of the two, I much preferred going into a Borders store, as they had better stock than B&N and the staff seemed friendlier and (generally) more helpful to clueless foreigners like me. Borders went under around the same time my business travels to the US tapered off and it looked like it was only a matter of time for B&N to follow it into bankruptcy. Even if it struggled on, surely the pandemic killed off what Amazon left behind? Ted Gioia says not so fast:

“Barnes & Noble Book Store” by JeepersMedia is licensed under CC BY 2.0 .

But Barnes & Noble is flourishing. After a long decline, the company is profitable and growing again — and last week announced plans to open 30 new stores. In some instances, they are taking over locations where Amazon tried (and failed) to operate bookstores.

Amazon seems invincible. So the idea that Barnes & Noble can succeed where its much larger competitor failed is hard to believe. But the turnaround at B&N is real. In many instances they have already re-opened in locations where they previously shut down.

Barnes & Noble tried exactly the same sort of “re-imagining” of their stores that Canada’s Indigo chain is currently floundering with: cutting back on the floorspace devoted to books in favour of throw cushions, candles, decorations, bath salts, scarfs and towels. It worked just as badly for B&N as it is working for Indigo: it chases out the primary customer base (book-buyers) in favour of bored people looking to waste away an hour or two just browsing tchotchkes. (And if you can find an Indigo staff member to ask about a particular book, they almost always assure you that you can find it on their website, which I’m sure helps bring more people into the store …) In desperation, B&N looked to expand into a very different market:

… in a bizarre strategic move, the company decided to launch freestanding restaurants under the name Barnes & Noble Kitchen — no books, just meals. But this was another disaster.

The company chairman Leonard Riggio eventually admitted, in September 2018, that running a restaurant is “a lot harder than you think it is … The bottom line is awful.”

Given the incredibly short and profitless life of most start-up restaurants, that really does qualify as a “No shit, Sherlock” moment. So how did Barnes & Noble turn things around?

It’s amazing how much difference a new boss can make.

I’ve seen that firsthand so many times. I now have a rule of thumb: “There is no substitute for good decisions at the top — and no remedy for stupid ones.”

It’s really that simple. When the CEO makes foolish blunders, all the wisdom and hard work of everyone else in the company is insufficient to compensate. You only fix these problems by starting at the top.

In the case of Barnes & Noble, the new boss was named James Daunt. And he had already turned around Waterstones, a struggling book retailing chain in Britain.

Bringing in fresh blood can be a life-saver for a business, but we also have that expression about deck chairs on the Titanic in common business parlance, so just being “new” isn’t enough … new leaders must also bring new approaches and fresh ideas:

But the most amazing thing Daunt did at Waterstones was this: He refused to take any promotional money from publishers.

This seemed stark raving mad. But Daunt had a reason. Publishers give you promotional money in exchange for purchase commitments and prominent placement — but once you take the cash, you’ve made your deal with the devil. You now must put stacks of the promoted books in the most visible parts of the store, and sell them like they’re the holy script of some new cure-all creed.

Those promoted books are the first things you see when you walk by the window. They welcome you when you step inside the front door. They wink at you again next to the checkout counter.

Leaked emails show ridiculous deals. Publishers give discounts and thousands of dollars in marketing support, but the store must buy a boatload of copies — even if the book sucks and demand is weak — and push them as aggressively as possible.

Publishers do this in order to force-feed a book on to the bestseller list, using the brute force of marketing money to drive sales. If you flog that bad boy ruthlessly enough, it might compensate for the inferiority of the book itself. Booksellers, for their part, sweep up the promo cash, and maybe even get a discount that allows them to under-price Amazon.

Everybody wins. Except maybe the reader.

Daunt refused to play this game. He wanted to put the best books in the window. He wanted to display the most exciting books by the front door. Even more amazing, he let the people working in the stores make these decisions.

This is James Daunt’s super power: He loves books.

“Staff are now in control of their own shops”, he explained. “Hopefully they’re enjoying their work more. They’re creating something very different in each store.”

This crazy strategy proved so successful at Waterstones, that returns fell almost to zero — 97% of the books placed on the shelves were purchased by customers. That’s an amazing figure in the book business.

On the basis of this success, Daunt was put in charge of Barnes & Noble in August 2019. But could he really bring that dinosaur, on the brink of extinction, back to life?

December 23, 2022

Remember when ending “Net Neutrality” was going to be the death of the internet?

Filed under: Government, Liberty, Media, Technology, USA — Tags: , , , , — Nicholas @ 03:00

Peter Jacobsen answers a reader question about the now almost forgotten doomsday scenario for the internet that was the ending of “Net Neutrality” in 2017:

To answer this question, we have to wind back the clock to 2017. Then-chair of the Federal Communications Commission (FCC) Ajit Pai successfully led an effort to repeal a set of 2015 regulations on Internet Service Provider (ISP) companies originally put into place by the Obama Administration.

The simplest summary of net neutrality regulations is that they required ISPs to enable access to content on the internet at equal speeds and for equal costs. For example, your ISP charging you to get faster speeds on YouTube or blocking High Definition access on Netflix would be examples of violations of net neutrality.

The idea of paying your ISP extra to have access to certain websites is a scary one, but it appears the worst fears associated with the end of net neutrality were overstated. To some extent proponents of net neutrality are the victim of their own apocalyptic marketing.

The Rumors of the Internet’s Death Were Greatly Exaggerated

If you spent any time on the internet during the death of net neutrality, it was hard to miss it. On July 12, 2017 websites across the internet coordinated their messages for the “battle for the net.”

Websites including Amazon, Netflix, YouTube, and Reddit called their users to fight for “a free and open internet”.

On Twitter, #SaveTheInternet thrived, seemingly implying the internet itself was facing an existential threat.

    The repeal of #NetNeutrality officially goes into effect today, but the fight is far from over.

    The people saying we can’t pass the resolution to #SaveTheInternet in the House are the same people who were saying we couldn’t do it in the Senate.

    Ignore them. Just keep fighting.

    — Ed Markey (@SenMarkey) June 11, 2018

After the decision by the FCC, CNN briefly declared it was “the end of the internet as we know it”.

Unfortunately for all kinds of doomsday prophets, extreme rhetoric always looks silly in hindsight when it fails to pan out.

Obviously we aren’t seeing ISPs charge users different amounts to use different websites in any systematic way. There’s no “pay your ISP to access Hulu” package yet. So already it’s clear some of the doom and gloom was over-hyped.

Fears of ISPs offering “fast lanes” to make users pay more for better service don’t seem to have materialized either. The only example of this sort of thing I could find was a Cox Communications trial of an “Elite Gamer” service. But this service was unlike the “fast lanes” hyped up by net neutrality proponents in that it never offered a less throttled experience and would have been permissible under the old net neutrality rules.

One of the biggest concerns about the repeal of these regulations was that it would lead ISPs to favor their own services. For example, AT&T owns Time Warner and HBO Max. In theory, AT&T could silently throttle speed to competing streaming platforms like YouTube and Netflix, thereby destroying competition.

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