Quotulatiousness

December 7, 2022

Facebook’s strategy for collapse

Filed under: Business, Media, Technology — Tags: , , , , — Nicholas @ 05:00

Ted Gioia clearly isn’t a Facebook fan — and I sympathize, having lost access to my Facebook account a few years ago — but it’s not just people like us that have contributed to Facebook’s epic decline:

Most companies fail because of competition. They simply aren’t fast enough or smart enough to keep up with the marketplace.

But the big web platforms aren’t like that.

In many instances, they are quasi-monopolies. They are so big and powerful that they hardly need to worry about competition.

After all, who can match Google for search? Who can beat Amazon for online shopping? Who does more to keep you connected with family and friends than Facebook? Who helps you clean out the junk in your garage better than eBay?

But even the most dominant players can falter. There was a point in living memory when Sears controlled 30% of all retail spending in the US. I’m not exaggerating: three out of every ten dollars were spent at Sears.

Sears once operated 3,500 stores. Today only 22 are left. Many of my readers have never seen the inside of a Sears store.

This happened because Sears was so big that it didn’t need to worry about competitors.

That sounds impossible. How can you fail by being too powerful? But this has happened in many instances, even on the web. There was a day when Yahoo was the leader in search. There was a day when MySpace was the dominant social network. There was a day when Tumblr was the place to share photos.

There was even a day when the two companies in total control of your access to the Internet were called Netscape and America Online.

Not anymore.

This has happened before and will happen again. The bigger they are, the harder they fall.

[…]

The situation at Facebook is now uglier than MC Hammer’s wardrobe closet. Meta is the worst performing stock in the S&P 500 this year. In other words, there were 499 other companies in the composite that did better — and this was a tough year all around in financial markets.

Mark Zuckerberg has personally lost more than $100 billion. In fact, he lost $11 billion in a single day. Has that ever happened before in human history? Almost exactly 12 months earlier, I’d written an article entitled “Meta Is for Losers” — but even I never envisioned losses on this scale,

Of course, there are many losers in this story — including the 11,000 workers who got fired a few days ago.

What’s going on?

You probably think that this is the result of Zuckerberg’s fool’s bet on the Metaverse. That’s what everybody is saying. But as we shall see, the Metaverse is just a symptom not a cause.

I can actually explain the problem in one sentence:

Instead of serving users, the dominant company decides it’s better to control them.

This would never occur to a small business. The owner of your neighborhood deli or gas station has no grand plans to control people — for the simple reason that this is an impossible dream.

That’s the reason why they say: “The customer is always right.” It’s not because the customer isn’t often wrong. Customers are frequently wrong — go listen to them sometimes and cringe at the stuff they demand. But if you’re in business, you must act as if they’re right even when they aren’t. And you do learn things by listening, even (or especially) when their demands are excessive.

By the way, you succeed by listening in every sphere of your life — starting at home.

There’s a good reason why students at hospitality school are told never to use the word never — or “no” or “can’t” or “impossible” — when talking to clientele. Instead of saying: “No way, dude, we’re not putting mayonnaise on your pizza, that’s disgusting”, you offer something positive:

I wish we could do that, dude, because it does sound super tasty — but I will put extra mozzarella on your slice, and our high temperature oven will give it a kind of mayo texture.

That’s how you roll in retail.

But at Facebook, the customer is always wrong.

November 26, 2022

Indigo vastly prefers selling pillows, candles, and tchotchkes of all kinds rather than – ugh! – books

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

In the latest SHuSH newsletter, Ken Whyte explains why it’s becoming harder and harder to find actual books in Canada’s biggest bookstore chain … because they no longer want to be a bookstore chain:

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

We need to talk about Indigo. As you know, it’s Canada’s biggest bookstore chain, with 88 superstores and 85 small-format stores. It sells well over half the books that are bought in stores in Canada, with Walmart, Costco, and independent bookstores accounting for most of the rest.

One problem with Indigo is that it’s failing. The other problem is that it’s abandoning bookselling. Yes, that sounds like a Woody Allen joke, but it’s not funny from a publishing perspective. We depend on Indigo.

The company’s finances have been ugly for some time. It 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 the first two quarters of 2023 are now in the books (it has a March 28 year end) and Indigo has already dropped $41.3 million.

[…]

Indigo hasn’t come right out and said we’re through with books. It can’t, given that Heather [Reisman] has spent the last twenty-five years building herself up as the queen of reading in Canada. Also, the Indigo brand is still associated with books in most people’s minds and that won’t change overnight no matter how many cheeseboards it stocks. So Heather talks about a gradual, natural transition: “We built a wonderful connection with our customers in the book business. Then, organically, certain products became less relevant and others were opportunities.”

To be clear, books are irrelevant; general merchandise is the opportunity. Heather recently appointed as CEO a guy named Peter Ruis who has no experience in books. He comes from fashion retail, most recently the Anthropologie chain, which sells clothing, shoes, accessories, home furnishings, furniture, and beauty products. Anthropologie was hot in 2008, and it seems to be where Indigo wants to go today.

Fair enough. You own a company, you can take it in any direction you want, so long as your shareholders will follow. I don’t blame Heather for having second thoughts about the book business. (I have them every week. It’s a tough business.) But where does that leave readers, writers, agents, publishers, and everyone else who remains committed to books?

You’ll recall that Indigo and Chapters, between them, decimated the independent bookselling sector in Canada in the nineties. They are the principal reason Canada has so few independent bookstores today. You could probably fit the combined stock of all our independents into a handful of Heather’s stores.

The federal government let Heather’s Indigo buy Larry Stevenson’s Chapters in 2001, which gave her a ridiculously large share of the market. That shouldn’t have happened.

At the same time, with the help of some lobbying by Heather, the federal government made it clear that the US chains, Borders and Barnes & Noble, weren’t welcome up here. The argument was that bookselling was a crucial part of our cultural sector and needed to be protected from foreign domination by the Canadian government.

In that spirit, Indigo also asked the federal government to prevent Amazon from opening warehouses in Canada. That request was denied in 2010, which is about when Indigo began its transition out of books.

One can see how Heather might feel betrayed by the federal government. Instead of protecting bookselling, it swung the door wide open for Amazon. You said I wouldn’t have to compete!

November 7, 2022

“We are the descendants of good team players”

Filed under: Americas, Books, History, Science — Tags: , , , , , , , — Nicholas @ 05:00

Rob Henderson considers the Male-Warrior hypothesis:

The male-warrior hypothesis has two components:

  • Within a same-sex human peer group, conflict between individuals is equally prevalent for both sexes, with overt physical conflict more common among males
  • Males are more likely to reduce conflict within their group if they find themselves competing against an outgroup

The idea is that, compared with all-female groups, all-male groups will (on average) display an equal or greater amount of aggression and hostility toward one another. But when they are up against another group in a competitive situation, cooperation increases within male groups and remains the same among female groups.

Rivalries with other human groups in the ancestral environment in competition for resources and reproductive partners shaped human psychology to make distinctions between us and them. Mathematical modeling of human evolution suggests that human cooperation is a consequence of competition.

Humans who did not make this distinction — those who were unwilling to support their group to prevail against other groups — did not survive. We are the descendants of good team players.

It used to be accepted as a given that males were more aggressive toward one another than females. This is because researchers often used measures of overt aggression. For instance, researchers would observe kids at a playground and record the number of physical altercations that occurred and compare how they differed by sex. Unsurprisingly, boys push each other around and get into fights more than girls.

But when researchers expanded their definition of aggression to include verbal aggression and indirect aggression (rumor spreading, gossiping, ostracism, and friendship termination) they found that girls score higher on indirect aggression and no sex differences in verbal aggression.

The most common reasons people give for their most recent act of aggression are threats to social status and reputational concerns.

Intergroup conflict has been a fixture throughout human history. Anthropological and archaeological accounts indicate conflict, competition, antagonism, and aggression both within and between groups. But violence is at its most intense between groups.

A cross-cultural study of 31 hunter-gatherer societies found that 64 percent engaged in warfare once every 2 years.

Men are the primary participants in such conflicts. Human males across societies are responsible for 90 percent of the murders and make up about 80 percent of the victims.

The evolution of coalitional aggression has produced different psychological mechanisms in men and women.

Just as with direct versus indirect aggression, though, homicide might be easier to observe and track with men. When a man beats another man to death, it is clear what has happened. Female murder might be less visible and less traceable.

Here’s an example.

There’s a superb book called Yanoama: The Story of Helena Valero. It’s a biography of a Spanish girl abducted by the Kohorochiwetari, an indigenous Amazonian tribe. She recounts the frequent conflicts between different communities in the Amazon. After decades of living in various indigenous Amazonian communities, Valero manages to leave and describes her experiences to an Italian biologist, who published the book in 1965.

In the book, Helena Valero describes arriving in a new tribe. Some other girls were suspicious of her. One girl gives Valero a folded packet of leaves containing a foul-smelling substance. She tells Valero that it’s a snack, but that if she doesn’t like it she can give it to someone else. Valero finds the smell repulsive and sets it aside. Later, a small child picks up the leaf packet, takes a bite, and falls deathly ill. The child tells everyone that he got the leaf packet from Valero. The entire community accuses Valero of trying to poison the child, and banishes her from the tribe, with some firing arrows at her as she runs deep into the forest.

The girl who gave Valero the poisonous leaf packet formed a win-win strategy in her quest to eliminate her rival:

  • Valero eats the leaf packet and dies
  • Or she gives it to someone else who dies and she is blamed for it, followed by being ostracized or killed by the community

This is some high-level indirect aggression. Few men would ever think that far ahead (supervillains in movies notwithstanding). For most men, upon seeing a newcomer they view as a potential rival, they would just physically challenge him. Or kill him in his sleep or something, and that would be that.

Point is, this girl would have been responsible for Valero’s demise had she died. But no one would have known. If a man in the tribe, enraged at the death of the small child, had killed Valero, then he would be recorded as her killer. Or if Valero had been mauled by a jaguar while fleeing, then her death wouldn’t have been considered a murder.

Interestingly, the book implies that Valero was viewed as relatively attractive by the men, which likely means the girl who attempted to poison her was also relatively attractive (because she viewed her as a rival). Studies demonstrate that among adolescent girls, greater attractiveness is associated with greater use of aggressive tactics (both direct and indirect) against their rivals.

October 16, 2022

QotD: State monopolies

Filed under: Bureaucracy, Economics, Government, Quotations — Tags: , , — Nicholas @ 01:00

Competition leaves people with choices. But under the New Socialism, people will really discover what it means to be unfree when they only have this choice: work for the state and spend your falling wages on government-supplied goods — or starve. And to whom does the unhappy citizen turn when there is only one healthcare provider, one landlord, and one education system? The state monopolies under socialism offer a kind of subjugation and submission far greater than that in competitive markets. The faceless corporate decision makers that trouble professor Robin are far less sinister than government bureaucrats who can block all exit options. Imagine how poorly the Post Office would function without competition from Federal Express and UPS.

Richard Epstein, “The Intellectual Poverty of the New Socialists” [PDF], 2018.

October 8, 2022

Faint glimmers of hope for Canadians’ “right to repair”?

Filed under: Business, Cancon, Law, Liberty, Technology — Tags: , , , , — Nicholas @ 03:00

Michael Geist on the state of play in modifying Canada’s digital lock rules to allow consumers a tiny bit more flexibility in how they can get their electronic devices repaired:

“The Self-Repair Manifesto from ifixit.com ‘If you can’t fix it, you don’t own it’. Hear, hear!” by dullhunk is licensed under CC BY 2.0 .

Canadian anti-circumvention laws (also known as digital lock rules) are among the strictest in the world, creating unnecessary barriers to innovation and consumer rights. The rules are required under the World Intellectual Property Organization’s Internet Treaties, but those treaties leave considerable flexibility in how they should be implemented. This is reflected in the countless examples around the world of countries adopting flexible anti-circumvention rules that seek to maintain the copyright balance. Canada was pressured into following the restrictive U.S. approach in 2012, establishing a framework is not only more restrictive than required under the WIPO treaties, but even more restrictive than the U.S. system.

One of the biggest differences between Canada and the U.S. is that the U.S. conducts a review every three years to determine whether new exceptions to a general prohibition on circumventing a digital locks are needed. This has led to the adoption of several exceptions to TPMs for innovative activities such as automotive security research, repairs and maintenance, archiving and preserving video games, and for remixing from DVDs and Blu-Ray sources. Canada has no such system as the government instead provided assurances that it could address new exceptions through a regulation-making power. In the decade since the law has been in effect, successive Canadian governments have never done so. This is particularly problematic where the rules restrict basic property rights by limiting the ability to repair products or ensure full interoperability between systems.

The best policy would be to clarify that the anti-circumvention rules do not apply to non-infringing uses. This would enable the anti-circumvention rules to work alongside the user rights in the Copyright Act (also known as limitations and exceptions) without restricting their lawful exercise. This approach was endorsed by the 2019 Canadian copyright review, which unanimously concluded:

    it agrees that the circumvention of TPMs should be allowed for non-infringing purposes, especially given the fact that the Nintendo case provided such a broad interpretation of TPMs. In other words, while anti-circumvention rules should support the use of TPMs to enable the remuneration of rights-holders and prevent copyright infringement, they should generally not prevent someone from committing an act otherwise authorized under the Act.

The government has not acted on this recommendation, but two private members bills are working their way through the House of Commons that provide some hope of change. First, Bill S-244 on the right of repair. Introduced by Liberal MP Wilson Miao in February, the bill this week passed second reading unanimously and has been referred to the Industry committee for further study. The lack of a right of repair exception in Canadian digital lock rules has hindered both consumers and Canadian innovation significantly, leaving consumers unable to repair their electronic devices and farmers often locked out of their farm equipment. After farmers protested against similar copyright restrictions, the U.S. established specific exceptions permitting digital locks to be circumvented to allow repair of software-enabled devices.

Given the impact on consumers, the agricultural sector, and the environment, a provision that explicitly permits circumvention for purposes of the right of repair in Canada is long overdue. Indeed, such an approach is consistent with the 2019 copyright review recommendation:

    Recommendation 19

    That the Government of Canada examine measures to modernize copyright policy with digital technologies affecting Canadians and Canadian institutions, including the relevance of technological protection measures within copyright law, notably to facilitate the maintenance, repair or adaptation of a lawfully-acquired device for non-infringing purposes.

July 19, 2022

Drawing the proper lessons from the massive Rogers outage earlier this month

Filed under: Business, Cancon, Government, Media, Technology — Tags: , , , , — Nicholas @ 05:00

In The Line, Matt Gurney explains the really important lesson that seems to have escaped a lot of the critics who covered the Rogers internet/cell/TV outage that took a third of the country offline for 24 hours or more:

Most of the conclusions reached after the Rogers telecommunication outage two weeks ago are wrong. Millions of people lost home internet, television and cellphone service for the better part of a day (some for much longer). For those who had all their services bundled with Rogers, this meant being entirely cut off, including from access to emergency services. It was a big deal, both in terms of lost economic productivity and for those Canadians who needed help and could not access it.

The problem isn’t with Rogers, though. The problem is with everyone else.

I don’t want to be misunderstood. Rogers is bad. It did have a big problem. I am not a fan. Their customer service is generally awful. Their reliability and performance is decidedly meh and the meh costs a fortune. So don’t take this column as some sort of apologia for Rogers. I am one of their customers, but I’m only one of their customers because none of the other options are much better.

But still. The lesson of two Fridays ago shouldn’t be that Rogers is bad. It also shouldn’t be that the CRTC is bad or that our politicians are spineless and that our regulators are thoroughly captured. All of those things are true, but they’re not the lesson. That wasn’t the failure of two Fridays ago. The failure of two Fridays ago was that when one of our telecom companies went down, a pretty horrifying cross-section of Canadian society had no back-up plan.

Let’s imagine an alternate universe where things in Canada simply functioned better. Close your eyes and just dream it up. You’re in a different Canada now. The CRTC is awesome. Our politicians are terrific. Rogers is an incredibly good company that is masterful at delivering services that are overwhelmingly reliable and affordably priced. Even in this increasingly far-fetched parallel timeline, no telecom company is going to bat a thousand. You will never have 100 per cent service reliability. This alternate Canada still has outages — maybe they’re rare and brief, but they’re not unheard of or impossible.

And that’s why we can’t look at what happened two weeks ago as a failure at Rogers. Obviously Rogers failed. But the real failure was a failure of imagination and planning on the behalf of millions of individuals, and a worryingly diverse set of institutions, that did not have a back-up plan.

July 11, 2022

Canadians deserve better than “core network maintenance problems” for critical cell phone and internet services

Filed under: Business, Cancon, Government, Technology — Tags: , , , , — Nicholas @ 05:00

Our internet service provider, Rogers, suffered a major network failure early on Friday morning, taking down not just wired internet services, but also cable TV, and cell phone services and causing knock-on issues that utterly disrupted many emergency 911 services, government websites, banks (including ATM and point-of-sale terminals) and many more. I subscribe to both Rogers internet and Rogers cell phone services, but fortunately my wife has a different wireless phone provider so we weren’t completely offline all of Friday and most of Saturday. Michael Geist and his family weren’t as lucky:

Like many Canadians, I spent most of the massive Rogers outage completely offline. With the benefit of hindsight, my family made a big mistake by relying on a single provider for everything: broadband, home phone, cable, and wireless services on a family plan. When everything went down, everything really went down. No dial tone, no channels, no connectivity. Work was challenging and contact with the kids shut off. It was disorienting and a reminder of our reliance on communications networks for virtually every aspect of our daily lives.

So what comes next? We cannot let this become nothing more than a “what did you do” memory alongside some nominal credit from Rogers for the inconvenience. Canada obviously has a competition problem when it comes to communications services resulting in some of the highest wireless and broadband pricing in the developed world. Purchasing more of those services as a backup – whether an extra broadband or cellphone connection – will be unaffordable to most and only exacerbate the problem. Even distributing the services among providers likely means that consumers take a financial hit as they walk away from the benefits from a market that has incentivized bundling discounts. Consumers always pay the price in these circumstances, but there are policy solutions that could reduce the risk of catastrophic outages and our reliance on a single provider for so many essential services.

First, there is a need to better understand what happened and why. Rogers CEO says the problem lies with maintenance to the core network, which caused some routers to malfunction. But that’s just tech talk. Canadians deserve answers that explain not only how this happened, but how we find ourselves in a position where malfunctioning routers at one company cause a nationwide payment system to go down, government services to be taken offline, and emergency services to be rendered inaccessible. It is one thing for my household to make a mistake, but another for Interac to do so. That means conducting an open CRTC process into this outage alongside a Parliamentary hearing on the broader issues since this is a matter that requires both regulatory and political response. There is no need to wait: these hearings must happen this month with the goal of identifying the scope and source of the problem along with potential policies that might mitigate future harms.

Neither the CRTC nor the current government has shown much inclination to challenge the big telcos. CRTC Chair Ian Scott has reversed years of a consumer-focused Commission into one more comfortable supporting the big providers, while the government has been far more interested in sabre rattling or shaking down Internet companies than taking on big telecom. Yet as we were reminded on Friday, the linkage to the availability of essential services – payments, health care, government services – runs through the telcos, not the Internet companies.

This is the second object lesson in concentrated power in a small number of government-approved hands this year. Our first wake-up call was when the government prompted chartered Canadian banks to cut off some of their customers from all financial services even though no crimes had been committed and no charges were laid. It’s not clear how many people were affected, but arbitrarily denying people access to their bank accounts and credit cards should have rung alarm bells for many people. Now, we’ve been shown how dangerous it can be to allow a very small number of companies to divide the mobile phone and internet service market between them and use the power of government to keep out potential competitors. Will enough Canadians notice?

May 29, 2022

Approaching the “Chekhov’s gun” denouement in the Random Penguin-Simon & Schuster play

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

In the latest SHuSH newsletter, Kenneth Whyte updates us on the state of play in the long-running drama in the publishing world:

SHuSH readers know that back in November 2020, the fattest of the world’s five big publishing companies, Penguin Random House, outbid the second fattest, Rupert Murdoch’s HarperCollins, to acquire a listless third member of that group, Simon & Schuster.

Regulators in the UK, Canada, and the USA immediately began studying the $2.1-billion cash deal to determine if it would result in too much concentration of ownership and not enough competitiveness in the big leagues of book publishing. Last November, the US department of justice decided it would and sued to block it. A trial is expected this summer. Penguin Random House has until November to close the deal or it expires (with PRH owing S&S a dead-deal fee of $200-million).

For those of you who think in literary terms, the deal is Chekhov’s gun, and we’re coming in hard on the third act. Either S&S gets shot (acquired) or the play ends in an anticlimax (although whoever has been stewarding the deal at PRH may get shot by its parent company, Bertelsmann.)

If the deal fails, we’re in for a sequel because the current owner of S&S, Paramount (formerly ViacomCBS) won’t want it back. It is a motion picture/television company in the process of selling everything it owns not directly related to screen entertainment. It hopes to cement its status as a fourth-rate streaming service. S&S no longer fits, if it ever did.

Our view of the PRH-S&S deal is that the department of justice suit will fail to block the merger and S&S will be swallowed whole. It will be difficult to present the merger as the end of competition in the book industry when there are still four large publishers operating in the US, and a shitload of mid-size and smaller publishers. Combined, PRH&S&S may amount to less than a third of the American trade book market, and as little as 20 per cent, depending on how you do the math. That’s a long way from monopoly.

The DOJ, moreover, has chosen to fight its battle on low ground. It’s saying that the deal is bad for competition in books generally, but it is particularly concerned that the merger will result in less competition for the services of writers of anticipated top-selling books, loosely defined as authors commanding huge advances. You read that right: the DOJ is seeking justice for the .001% of the literary world. We argued all this at length, and destroyed the government’s case back in SHuSH 123.

May 28, 2022

“… the only thing that is history are any immediate hopes for a more competitive communications marketplace in Canada”

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

Michael Geist pans the latest official misinformation from the federal government on telecommunications legislation:

Innovation, Science and Industry François-Philippe Champagne unveiled the government’s proposed new telecom policy directive yesterday, hailing it as a “historic step”. However, a closer look at the policy suggests that the only thing that is history are any immediate hopes for a more competitive communications marketplace in Canada. Once again, the government has shown itself unwilling to take a strong stand in favour of consumers and competition, instead releasing a directive that largely retains the status quo and sends the message to CRTC Chair Ian Scott to stay the course. Indeed, the primary purpose behind the announcement would appear to be an attempt to shield the government from criticism over its decision to leave the controversial CRTC decision on wholesale Internet access intact, thereby denying consumers the prospect of lower costs for Internet services.

While the new proposed policy directive features much needed details and helpfully replaces the 2006 and 2019 directives that often conflicted and enabled the CRTC to pay little more than lip service to the issue, it sends a strong signal that it is happy with the Commission’s current approach. For example, the directive’s summary on measures to address wholesale Internet access are all about the status quo: “requiring large companies to continue to give access to competitors” or “directing the CRTC not to phase out the existing model for wholesale access.” These are not instructions to change.

The same is true for mobile wireless competition. Rather that using the opportunity to accelerate competition through mobile virtual network operators, the CRTC is instead to directed to improve its hybrid MVNO model “as necessary”. A full MVNO model? The government says it is prepared to support it “if needed”. Based on the current market, it apparently believes it isn’t needed.

May 12, 2022

Too many cannabis retailers? “… a scrappy band of politicians is coming together to save main street from the excesses of the free market”

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

Steve Lafleur points out that the temporary surplus of cannabis stores will inevitably self-correct, as most retail situations tend to do on their own without needing the “helpful” hand of government to intervene:

Lately there has been a moral panic brewing in Toronto about the number of marijuana stores in Toronto. Take this New York Times article, for example, which captures the mood with the quotes from various Torontonians. Or this BlogTO piece. And here is a link to a story about two city councilors (including my own) pushing for a moratorium on new pot shops.

At least on its face, the panic hasn’t been about the availability of cannabis products or any kind of (unsupported) claims about pot shops attracting crime. Rather, the concern is that there is simply an unsustainable number of shops that may be cannibalizing other retail opportunities. So a scrappy band of politicians is coming together to save main street from the excesses of the free market.

What could possibly go wrong?

The boom in pot shops is real. Legal marijuana retailing is a new phenomenon, and there has been a gold rush in the sector. This was first evident in financial markets during the 2018-19 weed stock boom (which went bust) as investors sought to capitalize on the rollout of legal marijuana sales in Canada. There are now nearly 2,000 pot shops in Ontario, and it’s not hard to find two on the same block. People aren’t wrong to point out that there has been a rapid buildout of marijuana retailers. Hence the push by City Council and now the Ontario Liberal Party, to restrict clustering of pot shops.

To be sure, new trends can push out old trends. And this can be frustrating. For instance, one insidious trend recently replaced two of my two favourite hole-in-the-wall restaurants: poke bowls. The trendy Hawaiian rice bowls have taken cities by storm. Businesses, understandably, want to capitalize on the trend. If people want it, businesses will sell it.

Trends can create dislocations. No one knows in advance how many poke restaurants — or pot shops — the market will bear, where they should locate, or what their operating hours should be. But through a process of trial and error, retailers and consumers will figure this out. And if it is just a flash in the pan trend, many will fail.

But that’s okay. That’s just the creative destruction of the market at work. It’s not always pretty, but it’s how we get new products and services. It’s a process. Sometimes the market rewards annoying things. But trying any effort to plan these things in a way that avoids over-saturation of short-lived trendy businesses would be rife with unintended consequences.

April 30, 2022

“The NFL Draft is not socialism. It’s capitalism on steroids”

Filed under: Business, Football, History, Sports, USA — Tags: , , , , — Nicholas @ 03:00

Peter Jacobsen refutes the claim that the NFL Draft is like socialism:

Once we recognize that teams aren’t really business competitors, and insofar as there is athletic competition it’s tempered to maximize profit, the claim that the draft is socialism rings pretty hollow.

But, as if this weren’t enough, history also debunks the claim that the draft is a socialist institution.

In 1934, Minnesota Gophers’ senior running back, Stan Kostka, led his team to an undefeated season and made himself the top prospect for professional teams. As a result, teams engaged in a bidding war which ended in Stan going to the (no longer existing) Brooklyn Dodgers.

As a result of the bidding war, Kostka became the highest paid player in the NFL (with a $5,000 contract).

The owner of the Philadelphia Eagles was so mad about losing the bidding war that he proposed the idea of the draft to the NFL the following year.

So, in other words, the NFL draft started as a way for team owners to cooperate to keep player wages below where they would be if bidding wars were allowed.

To be fair, I haven’t read everything Marx wrote. But something tells me a system where capital owners cooperate to keep employer bidding wars from occurring isn’t praised in some obscure work he and Engels published. In fact, this is about as opposite to Marx as you can get.

In the modern day, players have formed unions to combat owner cooperation, but the point remains the same. The NFL is a highly sophisticated organizational structure that allows athletic competitors to cooperate in the goal of making money.

So, insofar as Americans enjoy the exciting games created by the draft system, they don’t have socialism to thank. Instead they should thank the cooperation facilitated by self-interest channeled through the free market.

The NFL Draft is not socialism. It’s capitalism on steroids.

April 27, 2022

QotD: Competition

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

In a normal industry (e.g., restaurant ownership) competition should drive profit margins close to zero. Want to open an Indian restaurant in Mountain View? There will be another on the same street, and two more just down the way. If you automate every process that can be automated, mercilessly pursue efficiency, and work yourself and your employees to the bone – then you can just barely compete on price. You can earn enough money to live, and to not immediately give up in disgust and go into another line of business (after all, if you didn’t earn that much, your competitors would already have given up in disgust and gone into another line of business, and your task would be easier). But the average Indian restaurant is in an economic state of nature, and its life will be nasty, brutish, and short.

This was the promise of the classical economists: capitalism will optimize for consumer convenience, while keeping businesses themselves lean and hungry. And it was Marx’s warning: businesses will compete so viciously that nobody will get any money, and eventually even the capitalists themselves will long for something better. Neither the promise nor the warning has been borne out: business owners are often comfortable and sometimes rich. Why? Thiel says it’s because they have escaped competition and become at least a little monopoly-like.

Thiel hates having to describe how businesses succeed, because he thinks it’s too anti-inductive to reduce to a formula:

    Tolstoy opens Anna Karenina by observing “All happy families are alike; each unhappy family is unhappy in its own way.” Business is the opposite. All happy companies are different: each one earns a monopoly by solving a unique problem. All failed companies are the same: they failed to escape competition.

Scott Alexander, “Book Review: Zero to One”, Slate Star Codex, 2019-01-31.

January 16, 2022

Library borrowing versus book store sales

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

I used to be a regular library user, but tapered off substantially after a few unhappy visits to the Toronto Reference Library on Yonge Street in the late ’80s (I’m now fully a believer in some of the wilder tales of disruptive and even criminal behaviour within libraries). I had my doubts about the direction most western library systems chose to concentrate on “popular” books and to get rid of “old” or infrequently borrowed books. It seemed to me that this was an attempt to set up libraries in direct competition with bookstores, and a deliberate act of neglect toward the function of libraries as repositories of valuable but less popular media. In the latest SHuSH newsletter, Kenneth Whyte details a fascinating natural experiment we’ve all be involved in over the last two years that seems to prove that library systems have been, in effect, taking money away from book sellers:

“Toronto Public Library” by Jim of JimOnLight is licensed under CC BY-NC-ND 2.0

Those of you who have been reading SHuSH for a while know that I suspect public libraries are doing harm to the publishing industry and author incomes.

Before the shooting starts, my standard qualifiers: I love libraries; they do a lot of fine work and are crucial civic institutions, running many outstanding programs and providing many necessary services, including the lending of books to children and people who genuinely can’t afford to buy them; I am always in libraries for research and to borrow and read hard-to-find books; I don’t want libraries to go away; I don’t want them harmed; I want their lending practices adjusted before they swallow what’s left of commercial publishing, book retailing, and, along with it, what’s left of author incomes.

By way of background, I’ve written at length in previous newsletters about how public libraries in the last decades of the last century abandoned their traditional role as gatekeepers of the culture, responsible for the moral, intellectual, and aesthetic growth of the public, choosing instead to pander to their patrons. They began pimping the likes of Mickey Spillane and Jacqueline Susann to goose the foot traffic and circulation stats they habitually use to demand of their political masters more funding and better buildings.

Over time, librarians have trained people who can afford to buy books for their own entertainment — the vast majority of library reading is for entertainment — to borrow them instead. Today, three out of four books read in the US and four out of five read in Canada are borrowed, not bought. That is bad for publishing, bookselling, and author incomes.

And then the Winged Hussars Wuhan Coronavirus arrived:

I believe it is self-evident that spending loads of taxpayer money to make the most popular books available at no charge at dozens of points around a city (as well as online) undermines retail sales of books, as it would if the same were done for coffee, running shoes, or Leafs’ tickets.

I have to admit, at the same time, that I’ve lacked hard evidence showing a portion of book borrowing represents lost sales. Nobody has thoroughly researched the question (it certainly isn’t in the interests of libraries to do so). The absence of a smoking gun has made it easy for library defenders to throw up their hands: maybe there’s a relationship, maybe not. People love free shit and will cheerfully strangle good faith to retain access to it.

I’ve tried to devise ways to prove conclusively that libraries are seriously undermining book sales. Maybe some huge experiment where we closed the public libraries in a large jurisdiction and studied what happened to retail book sales. But who was going to organize that? It seemed impossible until COVID-19 stepped up.

Libraries across North America and, indeed, around the world, have been closed, semi-closed, or otherwise limited in their borrowing activities throughout the two-year course of the pandemic. According to Library Journal, total circulation of library materials collapsed by 25.7% in 2020 (notwithstanding a huge spike in e-book borrowing). It looks like physical borrowing fell by roughly half. The 2021 numbers aren’t out yet but individual library reports suggest they will look a lot like 2020.

Meanwhile, over in publishing land, the champagne corks are flying. US book sales, which grew healthily in the first pandemic year 2020, grew again in 2021 and are now 19% ahead of the pre-pandemic year, 2019. All the major publishers have reported smashing sales (attributing the increase to their own genius). All categories are up, including adult fiction (31% over 2019) and adult non-fiction (10% over 2019).

Going by these numbers, it appears that a roughly 25% reduction in library borrowing leads over a two-year period to an increase of 19% in bookselling. I wouldn’t bank on those numbers, or even on the rough proportions, but I think the data demonstrates that when you make books more difficult to borrow for free, people turn more frequently to booksellers.

January 14, 2022

Industry with 1% profit margins accused of earning “record profits”

Filed under: Business, Economics, Media, Politics, USA — Tags: , , , — Nicholas @ 03:00

Joe Lancaster on Senator Elizabeth Warren’s renewed assault on the top-hatted, monocle-wearing robber barons of the grocery business:

“Piggly Wiggly” by afiler is licensed under CC BY-SA 2.0

… Warren could hardly have picked a worse industry to use as an example: Grocery stores consistently have among the lowest profit margins of any economic sector. According to data compiled this month by New York University finance professor Aswath Damodaran, the entire retail grocery industry currently averages barely more than 1 percent in net profit. In its most recent quarter, Kroger reported a profit margin of 0.75 percent, during a time in which Warren claims that the chain was “expanding profits” due to its “market dominance.”

In actuality, for much of the last year, grocery stores have seen enormous boosts in revenue, but not increased profitability, for the simple reason that everything has been costing more: not just products, but transportation, employee compensation, and all the extra logistical steps needed to adapt to shopping during a pandemic. Couple that with persistent inflation — which Warren also recently blamed on “price gouging” — and it is no wonder that things seem a bit out of balance.

Warren has had an itchy trigger finger for antitrust laws for some time. In 2019, as part of her presidential platform, she called for using the laws to forbid retailers from selling their own products. This would affect industry leaders like Amazon and Walmart, but ironically, it would have a devastating impact on grocery stores as well: Grocers increasingly rely on their own proprietary goods to stock cheaper alternatives alongside name brands. This provides not only less expensive options for consumers, but lower costs to the stores themselves. Store brands also help fill gaps created by external supply shortages.

December 22, 2021

QotD: Sibling rivalry

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

It’s only natural to feel competitive with your siblings. I recall all of those Christmas mornings, as my brother and sister and I compared gifts to figure out which one of us was the least beloved. This was important information because we adjusted our levels of misbehavior to match the rewards. There’s no point in being extra good if the presents are just okay.

Mealtime was competitive too. The winner was the one who moved the greatest percentage of my father’s income through his or her digestive system. I was in my thirties before someone told me that eating is not a speed sport.

Scott Adams, Dilbert Newsletter 61.0, 2005-10-25.

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