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.

March 9, 2024

Salt – mundane, boring … and utterly essential

Filed under: Books, Economics, Food, Health, History — Tags: , , , , , — Nicholas @ 05:00

In the latest Age of Invention newsletter, Anton Howes looks at the importance of salt in history:

There was a product in the seventeenth century that was universally considered a necessity as important as grain and fuel. Controlling the source of this product was one of the first priorities for many a military campaign, and sometimes even a motivation for starting a war. Improvements to the preparation and uses of this product would have increased population size and would have had a general and noticeable impact on people’s living standards. And this product underwent dramatic changes in the seventeenth and eighteenth centuries, becoming an obsession for many inventors and industrialists, while seemingly not featuring in many estimates of historical economic output or growth at all.

The product is salt.

Making salt does not seem, at first glance, all that interesting as an industry. Even ninety years ago, when salt was proportionately a much larger industry in terms of employment, consumption, and economic output, the author of a book on the history salt-making noted how a friend had advised keeping the word salt out of the title, “for people won’t believe it can ever have been important”.1 The bestselling Salt: A World History by Mark Kurlansky, published over twenty years ago, actively leaned into the idea that salt was boring, becoming so popular because it created such a surprisingly compelling narrative around an article that most people consider commonplace. (Kurlansky, it turns out, is behind essentially all of those one-word titles on the seemingly prosaic: cod, milk, paper, and even oysters).

But salt used to be important in a way that’s almost impossible to fully appreciate today.

Try to consider what life was like just a few hundred years ago, when food and drink alone accounted for 75-85% of the typical household’s spending — compared to just 10-15%, in much of the developed world today, and under 50% in all but a handful of even the very poorest countries. Anything that improved food and drink, even a little bit, was thus a very big deal. This might be said for all sorts of things — sugar, spices, herbs, new cooking methods — but salt was more like a general-purpose technology: something that enhances the natural flavours of all and any foods. Using salt, and using it well, is what makes all the difference to cooking, whether that’s judging the perfect amount for pasta water, or remembering to massage it into the turkey the night before Christmas. As chef Samin Nosrat puts it, “salt has a greater impact on flavour than any other ingredient. Learn to use it well, and food will taste good”. Or to quote the anonymous 1612 author of A Theological and Philosophical Treatise of the Nature and Goodness of Salt, salt is that which “gives all things their own true taste and perfect relish”. Salt is not just salty, like sugar is sweet or lemon is sour. Salt is the universal flavour enhancer, or as our 1612 author put it, “the seasoner of all things”.

Making food taste better was thus an especially big deal for people’s living standards, but I’ve never seen any attempt to chart salt’s historical effects on them. To put it in unsentimental economic terms, better access to salt effectively increased the productivity of agriculture — adding salt improved the eventual value of farmers’ and fishers’ produce — at a time when agriculture made up the vast majority of economic activity and employment. Before 1600, agriculture alone employed about two thirds of the English workforce, not to mention the millers, butchers, bakers, brewers and assorted others who transformed seeds into sustenance. Any improvements to the treatment or processing of food and drink would have been hugely significant — something difficult to fathom when agriculture accounts for barely 1% of economic activity in most developed economies today. (Where are all the innovative bakers in our history books?! They existed, but have been largely forgotten.)

And so far we’ve only mentioned salt’s direct effects on the tongue. It also increased the efficiency of agriculture by making food last longer. Properly salted flesh and fish could last for many months, sometimes even years. Salting reduced food waste — again consider just how much bigger a deal this used to be — and extended the range at which food could be transported, providing a whole host of other advantages. Salted provisions allowed sailors to cross oceans, cities to outlast sieges, and armies to go on longer campaigns. Salt’s preservative properties bordered on the necromantic: “it delivers dead bodies from corruption, and as a second soul enters into them and preserves them … from putrefaction, as the soul did when they were alive”.2

Because of salt’s preservative properties, many believed that salt had a crucial connection with life itself. The fluids associated with life — blood, sweat and tears — are all salty. And nowhere seemed to be more teeming with life as the open ocean. At a time when many believed in the spontaneous generation of many animals from inanimate matter, like mice from wheat or maggots from meat, this seemed a more convincing point. No house was said to generate as many rats as a ship passing over the salty sea, while no ship was said to have more rats than one whose cargo was salt.3 Salt seemed to have a kind of multiplying effect on life: something that could be applied not only to seasoning and preserving food, but to growing it.

Livestock, for example, were often fed salt: in Poland, thanks to the Wieliczka salt mines, great stones of salt lay all through the streets of Krakow and the surrounding villages so that “the cattle, passing to and fro, lick of those salt-stones”.4 Cheshire in north-west England, with salt springs at Nantwich, Middlewich and Northwich, has been known for at least half a millennium for its cheese: salt was an essential dietary supplement for the milch cows, also making it (less famously) one of the major production centres for England’s butter, too. In 1790s Bengal, where the East India Company monopolised salt and thereby suppressed its supply, one of the company’s own officials commented on the major effect this had on the region’s agricultural output: “I know nothing in which the rural economy of this country appears more defective than in the care and breed of cattle destined for tillage. Were the people able to give them a proper quantity of salt, they would … probably acquire greater strength and a larger size.”5 And to anyone keeping pigeons, great lumps of baked salt were placed in dovecotes to attract them and keep them coming back, while the dung of salt-eating pigeons, chickens, and other kept birds were considered excellent fertilisers.6


    1. Edward Hughes, Studies in Administration and Finance 1558 – 1825, with Special Reference to the History of Salt Taxation in England (Manchester University Press, 1934), p.2

    2. Anon., Theological and philosophical treatise of the nature and goodness of salt (1612), p.12

    3. Blaise de Vigenère (trans. Edward Stephens), A Discovrse of Fire and Salt, discovering many secret mysteries, as well philosophical, as theological (1649), p.161

    4. “A relation, concerning the Sal-Gemme-Mines in Poland”, Philosophical Transactions of the Royal Society of London 5, 61 (July 1670), p.2001

    5. Quoted in H. R. C. Wright, “Reforms in the Bengal Salt Monopoly, 1786-95”, Studies in Romanticism 1, no. 3 (1962), p.151

    6. Gervase Markam, Markhams farwell to husbandry or, The inriching of all sorts of barren and sterill grounds in our kingdome (1620), p.22

February 27, 2024

The Company that Broke Canada

BobbyBroccoli
Published Nov 4, 2023

For a brief moment, Nortel Networks was on top of the world. Let’s enjoy that moment while we can. Part 1 of 2.

00:00 This is John Roth
02:04 The Elephant and the Mouse
12:47 Pa without Ma
26:27 Made in Amerada
42:15 Right Turns are Hard
57:43 Silicon Valley North
1:07:37 The Toronto Stock Explosion
(more…)

February 8, 2024

North American newspaper economics

Tim Worstall discusses some of the issues ailing Canadian and American newspapers which are not easily solvable (government subsidies, as attempted in Canada, just turn the recipients into an underpaid PR branch of the governing party … not a good look in a democratic nation):

“Newseum newspaper headlines” by m01229 is licensed under CC BY 2.0 .

So, as a little corrective, a quick jaunt through what actually ails American journalism. The concentration is upon the big newspapers because that’s where the problem is worst. The conclusion is that it’s gonna get a lot, lot, lot, worse too. Because the industry is facing a base economic problem that it’s not willing to actually face up to. Or, at least, all the journalists writing about it aren’t — there’s the occasional sign that some of the business side of the equation grasp it.

[…]

Before Y2K American newspapers were segmented along geographic lines. The size of the country, the lack of a long distance passenger railroad network, meant that this was just so. If you’re printing a daily paper then you’ve got to deliver it daily. On the day it’s meant to refer to as well. If Chicago is 1,100 miles (no, I’ve not looked it up but that’s within an order of magnitude of being right, which is better than many newspapers manage with numbers) from New Orleans then the same newspaper is going to find it difficult to print and deliver to both markets. Add in the fact that trains take a week to traverse that distance, passenger trains – anyone who has ever travelled Amtrak will say it feels that long at least — included.

You could not and therefore did not have national newspaper (USA Today, with satellite printing plants, was an attempt to deal with this and slightly earlier than our cut off date but doesn’t change the basic story) distributions. What you had was a series of local and regional monopolies. Each one centred on a large population centre and serving the area around it that could be reasonably reached by truck overnight. Chicago and Cincinnati, not 1,100 miles away from each other, did have entirely different newspapers.

By contrast, and just as an example, the British newspaper market was national from pre-WWI. We simply did have overnight at worst passenger rail that covered the country. Partly it’s a much, much, smaller place, partly the passenger rail system was just different. So, printing overnight (and some maintained separate Scottish editions and plants) meant that those papers that came off the press in London at 8pm were on sale in Glasgow at 8 am, those that came off the press in London at 4 am were on sale in London at 8am. That’s not exact but it’s a good enough pencil sketch.

Cincinnati newspaper(s) served Cincinnati. Chicago, Chicago and New Orleans the area of New Orleans. There simply wasn’t a “national press” in the US in that British sense.

OK. But this also meant that American newspapers were much more like a monopoly in their local area than anything else. Network effects still exist even before computer networks after all. The most important of which was the classifieds.

As with Facebook, we’re all on Facebook because everyone else is on Facebook. So, if we’re to join a social network we’re going to be on Facebook where everyone else is — except those three hipsters who are where it isn’t cool yet. This applies to classifieds sections. Folk advertise in the one with the most readers, the widest market. Readers buy the one with the most ads in it, the widest market. You advertise the bronzed baby shoes, unused, where there are the most people looking for bronzed baby shoes, unused.

So, the dominant paper will suck up the classifieds in any particular market. Classifieds, fairly obviously back in the days of prams, cheap used cars, waiters’ jobs and so on being geographically based.

No, this is important. A useful pencil sketch of American newspaper revenues pre-Y2K was that subscriptions produced some one third of revenues. They also, around and about, covered print costs and distribution. They were, roughly you understand, about a face wash in fact.

Display ads produced another one third and classifieds the final one third. Classifieds were also wildly profitable — no expensive journalists to pay, no bureaux, just a few women waiting to get married on the end of the phone line.

January 20, 2024

The British Empire would have failed a proper cost-benefit analysis

Filed under: Africa, Asia, Britain, Economics, History, India — Tags: , , , , — Nicholas @ 05:00

At the Institute of Economic Affairs, Kristian Niemietz is working on a paper on the economics of empire that, as he shows in this article, indicates that the empire was never a winning economic proposition for Britain as a whole, no matter how well certain well-connected individuals and companies benefitted:

The British Empire in 1914 (via antiquaprintgallery.com)

But is it actually true that imperialism makes countries richer? Does imperialism make economic sense?

This question was already hotly debated at the heyday of imperialism. Adam Smith believed that the British Empire would not pass a cost-benefit test:

    The pretended purpose of it was to encourage the manufactures, and to increase the commerce of Great Britain. But its real effect has been to raise the rate of mercantile profit, and to enable our merchants to turn into a branch of trade, of which the returns are more slow and distant than those of the greater part of other trades, a greater proportion of their capital than they otherwise would have done […]

    Great Britain derives nothing but loss from the dominion which she assumes over her colonies.

He believed that Britain would be better off if it dissolved its Empire:

    Great Britain would not only be immediately freed from the whole annual expense of the peace establishment of the colonies, but might settle with them such a treaty of commerce as would effectually secure to her a free trade, more advantageous to the great body of the people, though less so to the merchants, than the monopoly which she at present enjoys.

The liberal free-trade campaigner Richard Cobden agreed:

    [O]ur naval force, on the West India station […], amounted to 29 vessels, carrying 474 guns, to protect a commerce just exceeding two millions per annum. This is not all. A considerable military force is kept up in those islands […]

    Add to which, our civil expenditure, and the charges at the Colonial Office […]; and we find […] that our whole expenditure, in governing and protecting the trade of those islands, exceeds, considerably, the total amount of their imports of our produce and manufactures.

If imperialism was a loss-making activity – why did Britain and other European colonial empires engage in it for so long?

Smith and Cobden explained it in terms of clientele politics (or Public Choice Economics, as we would say today). Somebody obviously benefited, even if the nation as a whole did not. And the beneficiaries were politically better organised than those who footed the bill.

This proto-Public Choice case against imperialism was not limited to political liberals. Otto von Bismarck, the Minister President of Prussia and future Chancellor of the German Empire, hated liberals in the Smith-Cobden tradition, but he rejected colonialism in terms that almost make him sound like one of them:

    The supposed benefits of colonies for the trade and industry of the mother country are, for the most part, illusory. The costs involved in founding, supporting and especially maintaining colonies […] very often exceed the benefits that the mother country derives from them, quite apart from the fact that it is difficult to justify imposing a considerable tax burden on the whole nation for the benefit of individual branches of trade and industry [translation mine].

In his writing about the economics of imperialism, even Michael Parenti, a Marxist-Leninist political scientist (who is, for obvious reasons, popular among Twitter hipsters), sounds almost like a Public Choice economist:

    [E]mpires are not losing propositions for everyone. […] [T]he people who reap the benefits are not the same ones who foot the bill. […]

    The transnationals monopolize the private returns of empire while carrying little, if any, of the public cost. The expenditures needed […] are paid […] by the taxpayers.

    So it was with the British empire in India, the costs of which […] far exceeded what came back into the British treasury. […]

    [T]here is nothing irrational about spending three dollars of public money to protect one dollar of private investment – at least not from the perspective of the investors.”

This leads us to a curious situation. Today’s woke progressives disagree with their comrade Parenti on the economics of empire, but they do agree with Britain’s old imperialists, who argued that the Empire was vital for Britain’s prosperity.

November 26, 2023

Ontario’s beer market may see radical changes soon

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

For beer drinkers outside Ontario, the province’s weird beer retailing rules may seem to be from a different time, but that’s only because they are. Until fairly recently, the only place to buy beer was from one of two quasi-monopoly entities: the provincially owned and operated LCBO or the foreign brewery owned Beer Store. LCBO outlets were limited to single containers and six-packs, while Beer Stores sold larger multipacks and also handled bottle deposits and returns. In the last few weeks, the Ontario government has indicated that long overdue changes are coming:

“The Beer Store” by Like_the_Grand_Canyon is licensed under CC BY-NC 2.0

The only thing we really know at this point (and it’s been reported by the Toronto Star and now CBC, and earlier by this website, all from sources) is the horribly unfair deal The Beer Store has had since 1927 in Ontario is about to come to an end. It’s expected that The Beer Store will be given notice by the end of December under the Master Framework Agreement (MFA) that the deal will be all but dead. They will have two years to wrap things up while a more modern system of booze retailing is fine-tuned and prepared for implementation. There’s a new era dawning in Ontario, one that would seemingly benefit grocery and convenience stores, local brewers, Ontario wineries, and obviously consumers who will get wider selection, more convenience and competitive pricing.

“The MFA has never been about choice, convenience or prices for customers, it has always been about serving the interests of the big brewing conglomerates, and that’s what needs to be addressed,” Michelle Wasylyshen, spokesperson for the Retail Council of Canada, whose board of directors includes members from Loblaw, Sobeys, Metro, Walmart, and Costco, told Mike Crawley of the CBC.

The end of The Beer Store MFA in whatever iteration it will look like will have a cascading impact on local VQA wine. Ontario wineries hope that it’s a positive impact and are cautiously optimistic that wide open beer and wine sales at grocery and convenience stores means more sales and less levies for their products.

As the CBC pointed out in its story, the looming reforms “pit a range of interests against each other, as big supermarket companies, convenience store chains, the giant beer and wine producers, craft brewers and small wineries all vie for the best deal possible when Ontario’s almost $10-billion-a-year retail landscape shifts. And — this is a biggie — the LCBO lobbying efforts to keep its antiquated system of monopoly retailing intact, which seems to be a big ask with what we now know from sources. Something must give.

Some key bullet points from the CBC report:

  • Will the government shrink the LCBO’s profit margins, including its take from products that other retailers sell?
  • Will retailers such as grocery and convenience stores be required to devote a certain amount of shelf space to Ontario-made beer and wine, or will they have total control over the inventory they stock?
  • Will small Ontario wineries get any help in competing against big Ontario wineries whose products can contain as much as 75% imported wine?

The government has been listening to all stakeholders in the booze industry in Ontario for over a year now. Three key associations — Ontario Craft Wineries, Tourism Partnership Niagara, and Wine Growers Ontario — joined together to commission a report titled Uncork Ontario. That report, which concludes that the Ontario wine sector is well positioned to drive sustainable economic growth for the region, the province, and the country and has the potential to drive at least $8 billion in additional real GDP over the next 25 years, launched a campaign to lobby the government for radical changes to reach those lofty goals, or at least put the wheels in motion.

One of the big issues for Ontario wineries is a punishing 6.1% “sin” tax charged on every wine made in Ontario but not foreign wines. It’s a tax that’s been hurting Ontario wineries for years even though a grant was issued to wineries to help pay that tax back. To this date, the tax has not been cancelled and wineries keep remitting the tax owed monthly and can only hope the grant keeps getting extended. Ontario wines are among the highest taxed in the world with up to 73% of every bottle sold going to taxes and severe levies at the LCBO.

August 23, 2023

QotD: “Megacorporations” of the Roman era

The definition of a megacorp differs a bit, work to work. They are, of course, megacorporations in the literal sense; massive, vertically integrated companies that often have monopolistic control over multiple markets. But more fundamental to the definition of the megacorp is that they typically employ their own armed forces and either enforce their own law or are at least able to ignore the law more generally. It is not enough for a company to be big, it has to generate the sort of wealth to which M. Licinius Crassus famously quipped “no one was truly rich who could not support an army at his own expense” (Plut. Cras. 2.7).

Which is to say that what really defines a megacorporation is that it trespasses into domains usually occupied by the state: military, police and judicial functions – the use of force. A megacorporation is, simply put, a corporation so large and powerful that it begins to act as a state, be that in the form of the private armies of Cyberpunk 2077, the privatized police force of the Robocop franchise, or the straight-up corporate governments of Stellaris (which in turn channel things like the Spacer’s Guild or the Ferengi Alliance) And that is core to the generally dystopian leaning of megacorporations – they are meant to reflect capitalism and corporate empire building taken to an extreme, to the point where it has swallowed the entire rest of the society.

Taking that definition to history, we can actually see a fair number of megacorporations; they are by no means common, but they do exist. Going very far back, the Roman societates (lit: “fellowships”, but “business association” or “company” is an accurate enough rendering) of the publicani (businessmen who filled public contracts) exercised close to this sort of power in some of Rome’s early provinces. During the Middle and Late Roman Republic, the job of extracting tax revenue from the provinces was too administratively complex for the limited machinery of the Republic, so instead the senate directed the censors to auction the right to collect taxes. Groups of Roman businessmen (and often silent patrician partners) would group resources together to bid for the right to collect taxes from a province – any taxes they took in excess of that figure would be their profit.

These companies could be very large indeed. For instance, parts of the lex portorii Asiae (the customs laws for the Roman province of Asia) survive and include regulations for the relevant company including a slew of customs houses and guard posts (the law is incomplete, but mentions more than 30 collection points – all major ports – to which would also need to be added posts along the land routes into the province). From other evidence we know that the staff at customs posts included armed guards along with the expected tax collectors and bookkeepers. And we know that publicani were sometimes delegated local or Roman forces to do their work (e.g. Cic. Ad Att. 114, using Shackleton Bailey’s numbering). They also maintained the closest thing the Roman Republic had to a postal service (Cic. Ad Att. 108). It’s not clear exactly how many employees one of the larger tax collection companies might have had (and those for the province of Asia – equivalent to the west coast of Anatolia – would have been some of the largest), but it was clearly considerable, as were the sums of money involved.

To the cities and towns of a province, such Roman companies must have seemed like megacorporations, especially if they were in with the governor (which they generally were) and thus could call down the forces of Rome on recalcitrant taxpayers. And we certainly know that these publicani often collected substantially far more than was due to them under the law (the reason why “tax collector” and “sinner” seem to be nearly synonymous in the New Testament, a fact that gave Ernst Badian’s study of them, Publicans and Sinners, its title). At the same time, we see the clear limitations too: such companies were clearly subservient to the governor and to the Roman state. Administrative changes beginning under Julius Caesar and brought to completion under Augustus did away with some of the largest tax contracts and the influence of the societates publicanorum with them.

Bret Devereaux, “Fireside Friday: January 1, 2021”, A Collection of Unmitigated Pedantry, 2021-01-01.

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 1, 2023

Britain’s first embassy to India

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

In The Critic, C.C. Corn reviews Courting India: England, Mughal India and the Origins of Empire by Nandini Das, a look at the first, halting steps of the East India Company at the court of the Mughal Emperor Jahangir early in the seventeenth century:

The late Sir Christopher Meyer, the closest thing modern British diplomacy has produced to a public figure, enjoyed comparing his trade to prostitution. Both are ancient trades, and neither enjoys a wholly favourable reputation. Any modern diplomat will discreetly confirm that the profession is far from the anodyne, flag-emoji civility and coyly embarrassed glamour they project on Twitter.

Whilst none of our modern representatives are working in quite the same conditions as their predecessor Sir Thomas Roe, they may well find uncanny parallels with his unfortunate mission.

The fledgling and precarious East India Company, founded in 1600, had sent representatives to the Mughal court before, but they were mere merchants and messengers. The stern rebuff they received called for a formal representative of the King.

After the company persuaded James I of the necessity, Thomas Roe (a well-connected MP, friend to John Donne and Ben Jonson, and already an experienced traveller after an attempt to reach the legendary El Dorado) was dispatched to the court of Mughal Emperor Jahangir in 1615. He remained there until 1619, in an embassy that the cultural historian, Nandini Das, describes in Courting India as “infuriatingly unproductive”.

The company kept rigorous records, and Roe meticulously kept a daily diary. Professor Das uses these and the reports of other English travellers to narrate Roe’s journey, as well as contemporary literature and, more importantly, their Indian equivalents. It is not so much the diplomatic success that fascinates Das about Roe’s embassy, but the mindset of the early modern encounter between England and India.

In a boom time for histories of British colonialism, this is an intelligent and gripping book with a thoughtful awareness of human relationships and frailties, and a model approach to early modern cross-cultural encounters.

The privations suffered by Roe’s embassy are striking. Only three in ten people had a chance of coming home alive from the voyage to India. Das’s recreation of the journey out is as intense and claustrophobic as Das Boot, with rotten medicine, cruel maritime punishments and untrained boys acting as surgeons. Dead bodies onboard would have their toes gnawed off by rats within hours.

In India, the English sailors excelled themselves as uncouth Brits abroad: drinking, fighting and baiting local customs, such as killing a calf. A chaplain was notorious for “drunkenly dodging brothel-keepers and engaging in half-naked brawls”. For most of his time, Roe — seeking to keep costs down — lived with merchants and factors already in India, in a cramped, filthy, dangerous house.

April 30, 2023

David Howarth’s history of the East India Company

Filed under: Books, Britain, Europe, History, India — Tags: , , , , , , — Nicholas @ 05:00

Robert Lyman reviews David Howarth’s recent work Adventurers: The Improbable Rise of the East India Company:

It is the human detail of the EIC and the ultimate triumph of its trading endeavours despite the best efforts of Portugal, the Dutch Republic and of the vicissitudes of Neptune that holds great fascination for me, and which is the triumph of Howarth’s intimate and intricate portrayal of the EIC in the first century of its existence. His great achievement is both to bring the dusty tomes of the Company back to life, not just to humanise one of the greatest trading ventures of all of human history, but to interpret the early years of the Company (his book spans 1600 to 1688, though most of the narrative is pre-1650) as a peculiarly human rather than an institutional endeavour. Is this important? Yes. Humans have agency; institutions consume or act upon the determining agency of human beings, not the other way around. Too much of modern (post 1880) history is based upon determining the perspective of organisations and movements (as interpreted by later historians, many with their own ideological baggage) rather than of actual, real live people making decisions for themselves in the peculiar and particular context of their lives and times.

The means through which Howarth paints his story is by the decisions, actions and activities of actual people, some influential decision-makers and many others who were not, all of which makes up a remarkably vivid tapestry of human intercourse. Each chapter, for instance, is constructed around a person or group of people. One powerfully tells the story of the men of the Peppercorn, an EIC East Indiaman, as it seeks out the riches of a world on the extreme periphery of the consciousness of most Europeans. The ultimate triumph of European expansion into Asia is not difficult to comprehend. Europe was pursuing an adventure, aggressively, relentlessly and determinedly, to bring the riches of the world back to its own shores. At no time did the Chinese, Japanese, Indians or inhabitants of the Spice Islands return the favour. The energetic persistence of Sir Thomas Roe, for instance, the Company’s ambassador to the Mughal court (1615-1619), is easily compared to the intellectual (and alcoholic) indolence of the Great Mughal with whom Roe was attempting to interact. Roe was there, in India: Europeans were interested in the “East” and with travelling to the other side of the world for purposes of human engagement, adventure, patriotism and, yes, greed and selfish self-interest. The Great Mughal, by contrast, was also driven by greed and self-interest, but he just wasn’t interested in exploring. He certainly wasn’t interested in Europe. He was already, in his view, at the top of the human tree and had no need for either the ideas or the money of the red-haired barbarians who came from across the sea, a sea that incidentally few Mughal emperors had (amazingly) ever even seen. Fascinatingly, the Mughal shared with King James I an abhorrence with “trade”, though James knew he needed grubby merchants like Sir John Lyman [the reviewer’s ancestor] as they gave him coin. It wasn’t just about the merchants: Kings and governments needed the money that the merchants delivered by the bucket load because they couldn’t create it themselves. Howarth astutely observes that the “EIC belonged to the globe of politics as much as it did to the sphere of commerce”. Indeed, something of a symbiosis between the two in Tudor and Stewart England created a sense of nationhood – in the face of the resistance of others, in Europe and further afield – for the first time. The Mughal Empire was ultimately swallowed up as a result of a dynamism by European politicians and merchants working in unison which it never bothered to replicate by undergoing the reverse journey.

And power? No. Howarth is remarkably clear that the primary task of the EIC was to make money, not to accrue territory, create power in foreign territories or aggrandise native populations. The role of the executive arm of the EIC (its ships, sailors and factors) was to make money for its investors, many of whom were the very merchant adventurers in the little ships travelling east over vast oceans. The great game of mercantile expansion took place because those who had most to lose were also sailing the ships, negotiating with foreign emissaries, fighting the Portuguese and the Dutch and placing their lives on the line. Amazingly, in 1570 England had only 58,000 tons of marine tonnage compared with Spain’s 300,000, and was very definitely the minnow in the rush to conquer the seas. The men who built and sailed its boats came from a long way behind, and yet in time were to build a seagoing commercial empire which more than rivalled all its competition. Its early growth was fuelled by the wealth provided by spice rather than slaves and, in contradistinction to what some modern historical moralists are keen to tell us, by a “reluctance to use violence and vigilance to avoid land commitments”. Indeed, unlike that of the Dutch, and despite what one might assume if we were to read the British national anthem back into history, “expansion in England happened with no appeal whatever to national glory”.

The amazing thing about the EIC was just how chaotic and disorganised it was. There was nothing inevitable about its rise as a monolithic mercantile overlord destined for instance, in the due course of time, to rule India. Second guessing history is only possible for historians able to look backwards and identify trends and features, convictions that didn’t exist for those when history was happening trying to make their way through the fog of an uncertain and troublesome future. The EIC proved simply to be better organised than the Portuguese, and not distracted as the Dutch were in their long war against Spain. Luck and serendipity played as much a role on the eventual survival of the EIC as did its ability to raise massive amounts of money from venturers in England (every raise or round of financing was heavily over-subscribed) for its adventures and to recruit adventurers to take its ships to sea. The EIC was phenomenally successful in raising voluntary capital to fund its ventures relative to other European states. By comparison, “although Iberian barns might have looked well built and better stocked, once they were given a good kick the rusted hinges flew off”.

February 9, 2023

“Prediction is very difficult, especially about the future” … but sometimes it’s almost prophetic

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

Once again, Ted Gioia’s Honest Broker Substack has something interesting I’d like to share with you (I wouldn’t blame you at all for cutting out the middleman and just subscribing for yourself):

Today I want to focus on a single paragraph published in 1960.

You’re asking yourself: How much can a single paragraph matter — especially if it was written 63 years ago? But read it first and judge for yourself.

It’s a chilling paragraph.

[…]

By any measure, [Paul Goodman] was one of the most eccentric thinkers of the era. Yet he anticipated our current situation with more insight than any of his peers.

Let’s look at this one paragraph from the Preface to Growing Up Absurd. It’s a long paragraph — it takes up most of two pages. So we will break it down into pieces.

Goodman begins with a puzzle he needs to solve — society is stagnating everywhere, and we all can see it. But there’s no action plan to fix it. There’s a lot of huffing and puffing and finger-pointing everywhere, but nobody has even started on developing a practical agenda.

According to Goodman, this is because people “have ceased to be able to imagine alternatives”. Everybody accepts that the current system “is the only possibility of society, for nothing else is thinkable”.

Now comes his analysis, and — to my surprise — Goodman begins by talking about music. This was the last thing I expected in a social critique, but for Goodman the manufacturing of hit songs is a metaphor for everything else that’s wrong in a stagnant society.

He writes:

    Let me give a couple of examples of how this [inability to imagine healthy alternatives] works. Suppose (as is the case) that a group of radio and TV broadcasters, competing in the Pickwickian fashion of semi-monopolies, control all the stations and channels in an area, amassing the capital and variously bribing Communications Commissioners in order to get them; and the broadcasters tailor their programs to meet the requirements of their advertisers of the censorship, of their own slick and clique tastes, and of a broad common denominator of the audience, none of whom may be offended: they will then claim not only that the public wants the drivel that they give them, but indeed that nothing else is being created. Of course it is not! Not for these media; why should a serious artist bother?

When I first read this, I was dumbstruck. Goodman wrote this during the winter of 1959 and 1960, when radio stations were independent and freewheeling. Back in my teen years, a single business was only allowed to control one AM station and one FM station. In 1985 this was increased to 12 stations on each band. And in 1994 this was raised again, this time to 20 AM stations and 20 FM stations.

But then all hell broke lose when the Telecommunications Act of 1996 passed in the Senate by a 91 to 5 margin and was signed into law. Now the sky was the limit — and all the airwaves it contained.

Soon Clear Channel Communications owned more than 1,200 radio stations in some 300 cities. The company began the process of standardizing and homogenizing our musical culture. We still suffer from that today.

Even after radio started losing influence in the Internet Age, huge streaming platforms (Spotify, Apple Music, etc.) ensured that access to the ears of America would be controlled by a tiny number of huge corporations. A musical culture that was once local, indie, and flexible has become centralized, corporatized, and stagnant.

How could Paul Goodman even dream of such a scenario back in 1960? That future was decades away at the time.

But we are only at the start of this visionary paragraph. Goodman now explains that the same thing will happen in universities.

Colleges and schools were small and non-bureaucratic back in 1960. Yet Goodman sees a crisis looming. On the next page Goodman warns against “the topsy-turvy situation that a teacher must devote himself to satisfying the administrator and financier rather than to doing his job, and a universally admired teacher is fired for disobeying an administrative order that would hinder teaching”.

Administration at US colleges has grown exponentially in the last two decades and has turned almost every academic institution into a plodding bureaucracy — but how in the world did Goodman anticipate this in 1960?

Now let’s return to our chilling paragraph. Immediately after discussing radio stations, Goodman adds a gargantuan sentence. It jumps all over the place but hits the target at every twist and turn:

    Or suppose again (as is not quite the case) that in a group of universities only faculties are chosen that are “safe” to the businessmen trustees or the politically appointed regents, and these faculties give out all the degrees and licenses and union cards to the new generation of students, and only such universities can get Foundation or government money for research, and research is incestuously staffed by the same sponsors and according to the same policy, and they allow no one but those they choose, to have access to either the classroom or expensive apparatus: it will then be claimed that there is no other learning or professional competence; that an inspired teacher is not “solid”; that the official projects are the direction of science; that progressive education is a failure; and finally, indeed — as in Dr. James Conant’s report on the high schools — that only 15 per cent of the youth are “academically talented” enough to be taught hard subjects.

Here in a nutshell is the credentialing crisis of our times. Learning is replaced by exclusionary certification programs that limit career opportunities — unless you take out loans and “purchase” the necessary credential from these academic gatekeepers.

This has become so destructive in our own time that many are crushed by student loans, and others seek ingenious ways of bypassing college entirely. There’s no way that Goodman could have grasped this in 1960 — when only 7.7 percent of Americans had college degrees.

Nor could he have known about the replicability crisis in science or the destructive games now played in awarding of scientific grants. Those are the problems of our times — not his.

But somehow Paul Goodman saw it coming.

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.

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.

May 16, 2022

The Hudson’s Bay Company in Canadian history

Filed under: Britain, Cancon, History — Tags: , , — Nicholas @ 03:00

As a kid growing up in the late 60s and early 70s, “The Bay” was just a department store. It wasn’t as upscale as Eaton’s, but had different stock than Eaton’s or Simpson’s so occasionally you’d find something there that wasn’t available in the other major central Canadian department stores. It took me an embarrassingly long time to make the connection between the big retail store in the mall and the company that owned vast swathes of what eventually became Canada in the seventeenth and eighteenth centuries. At Terra Nullius, Ned Donovan tries to put that massive geo-political organization into context:

At the turn of the 17th Century, felt hats were all the rage and felt hats are made of beaver skin. At the time, this relied on Russia’s long-established fur trade. But as demand grew, quality dropped significantly as the native European beaver population began to be hunted out of existence. Within decades, it was very difficult for merchants to find high quality felt from Russia, and customers in England were complaining that they were having to wear felt made from rabbit instead.

Approximate extent of Prince Rupert’s Land in the late 17th to early 18th century – note that this is the range of the company’s trappers and traders, not military or political control.
Image from Wikimedia Commons.

But around the same time, irregular and rare shipments began to arrive from the European colonies in North America where beaver – mostly trapped by French settlers and Indigenous Americans – was still plentiful and of very good quality. In 1669, the ship Nonsuch dropped anchor in the Thames with a large shipment of some of the highest quality furs London had ever seen, selling them immediately for £1,233 (equivalent to around £1 million in 2022). The Nonsuch had led an expedition invested in by some of London’s richest merchants and sponsored by Prince Rupert, a first cousin of King Charles II. It had done its trapping in Hudson’s Bay in the north of what is now Canada. The purpose of the expedition was to demonstrate that the issues with fur supply could be solved if its trapping in North America could be optimised, leaving behind the slow and traditional approach of the French and First Nation trappers.

This was not the first time Prince Rupert had seen to make money from exploiting colonised lands, having poured large amounts of his wealth into the slave trade from West Africa and sitting on the board of the Royal African Company. With this financial success made from trading in human lives, he turned his interest to North America and helped put together the syndicate that sent the Nonsuch to Hudson’s Bay. In 1670, his cousin King Charles II granted the syndicate a royal charter to form the Hudson’s Bay Company, giving the company a monopoly over “Prince Rupert’s Land” made up of the land drained by rivers and streams flowing into Hudson’s Bay – or 3,861,400 square kilometres.

In short order, the company had established trading posts throughout its monopoly, known as factories (as each was controlled by a company official known as a factor). The only thing that mattered to these factories and its parent company was beaver. Nothing could stand in the way of ensuring the safe passage of furs and pelts to Europe. By 1690, the demand in England for hats and caps was five million per year – or one per person. Hundreds of thousands more would be exported onwards from England to Europe such was the demand for the well-known quality of the Hudson Bay beaver. For example in 1756, Portuguese customers spent more than £20 million in today’s money on English beaver felt hats.

As Prince Rupert’s Land was largely still wilderness, besides company staff it was inhabited only by European and First Nations trappers and as a result there was only a barter economy, to both subjugate indigenous residents and prevent private wealth. There were standardised prices throughout Prince Rupert’s Land and instead of a normal currency, the company instead pegged everything against the unit of 1MB (1 Made Beaver). For three made beaver pelts, you could be given one clay pot in exchange at a company store, or for 10 you could get a gun. Private trading was outlawed and all beaver pelts that left Prince Rupert’s Land traveled through the warehouses and accounts of the Hudson’s Bay Company.

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.

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