October 12, 2017

Britain’s Old Boy Network – from “the Establishment” to “the Embarrassment”

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

In the media rounds supporting his new book, The Square and the Tower: Networks, Hierarchies and the Struggle for Global Power, Niall Ferguson discusses the decline and fall of the oldest power network in Britain:

It used to be that the United Kingdom of Great Britain and Northern Ireland was the United Cronydom of Great Poshhouse and Northern Grousemoor. The only network that mattered was the Old Boy Network. The OBN was formed by men who were the old boys of a tiny elite of boarding schools known as “public schools” because they were closed to the public. Most boys at those schools were scions of the aristocracy or the landed gentry: future barons and baronets.

Even if thick to the point of educational sub-normality, these young gentlemen would attend either Oxford or Cambridge. They would then be given one of the following jobs:

1. Estate manager and courtier (eldest son).

2. Foreign Office or Treasury mandarin (brightest son).

3. Cabinet minister (most extrovert son).

4. Governor of [insert Caribbean island] (youngest son).

5. BBC director-general (Left-wing son).

This is of course a caricature. In reality, there were all kinds of sub-networks — clusters — within the elite network that ran Britain. Sometimes, a brilliant group of talented young men would come together to achieve great things. There was the “Kindergarten” formed by Alfred Milner, which tried (and failed) to transform South Africa into a second Canada or Australia. There were the Apostles — the Cambridge Conversazione, the most exclusive intellectual club of all time — to which the economist John Maynard Keynes belonged.

However, with increasing frequency after 1945, the OBN’s achievements were less than brilliant. Suez. Wilson. Heath. Double-digit inflation. The three-day week. From being the winners of glittering prizes, the OBN degenerated in the eyes of a previously deferential public into the upper-class twits of the year.

In the Sixties the journalists Henry Fairlie and Anthony Sampson popularised the disdainful name that the historian A.J.P. Taylor had given the British elite: “The Establishment”. By the Seventies the Establishment were more like The Embarrassment — objects of sitcom ridicule. By the Eighties they had been almost entirely driven from the corridors of power. Nothing better illustrated this than the Thatcher governments: not only was the prime minister a woman from provincial Lincolnshire (albeit one with an Oxford degree); there were enough ministers in her Cabinet with Jewish backgrounds to inspire off-colour jokes about “Old Estonians”.

October 6, 2017

Regulation and the unregulated sharing economy

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

This particular article talks about the situation in Australia, although it’s quite similar here in Canada:

Living in Australia sometimes feels like living in a bureaucrats’ version of a spaghetti western. The heroes are the brave and all-knowing public servants, while the villains are the naughty people who are too foolish to realise that government knows best.

Politicians and bureaucrats alike want to regulate first, ask questions later. It seems barely a week passes without someone trumpeting the expansion of the nanny state. And with each new crackdown, ban or tax, our freedom gets that little bit smaller.

Whereas once the government would at least go through the motions of citing things like market failure, all it takes now is for a politician to want to look tough or be seen ‘doing something’. So it is with the proposed regulation of short-term accommodation platforms like Airbnb and Stayz.

Sharing our home with someone is as old as time. Who has not stayed with a family member or friend, or the friend of a friend? The difference these days is that it is much easier. Technology allows us to stay in someone’s home nearly anywhere in the world.

The immense popularity of these platforms is simply staggering. Globally, Airbnb has just passed four million listings, more than the rooms of the top five hotel brands worldwide. Australia is particularly fertile ground for the company, with almost one in five adults having an account. The company claims Airbnb is the “most penetrated market in the world”.

For government, the platforms are confronting. With no red tape or government involvement, travellers are protected, bad apples ejected and quality maintained via hosts and guests providing reviews of each other using sophisticated technology and a trusted online marketplace. Airbnb says that, on average, a host could have a new reservation every day for over 27 years before experiencing a single bad incident. A track record like that would be the envy of any pub, hotel, motel or caravan park in the country.

The so-called sharing economy challenges the idea that people need red tape, regulations or government to keep them safe from harm. But that does not stop some from trying. Currently, the NSW Government is toying with a grab bag of Big Brother and nanny-state policies ranging from new taxes and caps, to licences, planning approval and complete bans.

No modern government has ever seen a healthy, flourishing market without feeling the need to insert itself into the process, usually justified by the need to “protect” consumers.

July 13, 2017

QotD: What are “network effects”?

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

Few buzzwords are hotter in tech circles than “network effects.” This was so 15 years ago, when I was an MBA candidate grinding through job interviews; it is so today. Probably, when the heat death of the universe is imminent, and our nine-tailed descendants are trying to figure out what to do, some bright Johnny will suggest we can keep things going if we can just add another 2 billion stars to our user base.

Don’t get me wrong: Network effects are important, and I frequently talk about them in relation to everything from media companies to neighborhoods to choices about motherhood. But when I hear the term, the hairs rise on the back of my neck, because it’s often used imprecisely. People say “network effects” when they are really talking about switching costs, or regulatory coordination, or spillover effects, or any number of other things that are at best tangentially related to what the network effect model was built to describe.

Worse, far too many people seem to use the term the way college sophomores deploy the names of philosophers they have just read, in the mistaken belief that a piece of jargon can magically banish disagreement. Your firm doesn’t seem to have a viable revenue model? You’re just saying that because you don’t understand network effects! Someone seems insufficiently worried about the market power of some technology behemoth? It must be because that benighted fool has never heard about network effects!

Network effects are a useful concept, but not when deployed in this slipshod way. Worse, such careless routine deployment actually threatens the concept’s usefulness in conversations where it does offer real insight.

So just what is a network effect? The term describes a product that gets more valuable as more people adopt it, a system that becomes stronger as more nodes are added to the network. The classic example of network effects is a fax machine. The first proud owner of a fax machine has a very expensive paperweight. The second owner can transmit documents to the guy with the pricey paperweight. The thousandth owner has a useful, but limited, piece of equipment. The millionth owner has a pretty handy little gadget.

Megan McArdle, “Facebook Is Big, But Big Networks Can Fall”, Bloomberg View, 2015-10-08.

July 12, 2017

The real newspaper problem is not Facebook and Google … it’s their monopolistic heritage

Filed under: Business, History, Law, Media, USA — Tags: , , , , — Nicholas @ 03:00

Tim Worstall argues against allowing US newspapers to have an anti-trust exemption to fight Facebook and Google:

The first thing to note is the influence of geography and transport. By definition a newspaper needs to arrive daily — in physical format least — meaning that there’s a useful radius around a printing plant which can be served. What then happened is exactly what is happening with Google and Facebook, network effects come into play. Each urban area effectively became the monopoly of just the one newspaper. Sure, there were more than that in New York City for example, SF supported two majors later than many other places. But even in such large and rich places we did really only ever end up with one “serious” newspaper.

The network effects stem from the revenue sources. Roughly speaking, you understand, one third came from subscription revenues, one third from display advertising and one third from classifieds. Classifieds are a classic case of said network effects. Everyone advertises where they know everyone reads. Everyone reads the ads where they know everyone advertises those used baby bassinets. Whoever can get ahead in the collection of either then almost always wins the race. Classifieds are also hugely, vastly, profitable.

The way that American newspapers are sold, on subscriptions with a local paper boy, also contains elements of such network effects.

The effect of this economic structure was that each major urban area really had the one monopolist newspaper. This is where that famed “objectivity” comes from too. If there’s going to be the one newspaper then it’s going to try to make sure there’s no room for another by steadily occupying the middle ground on anything and everything. This is just the Hotelling problem all over again. Swing too viciously left or right (on any issue, political, social, whatever) and there might be room for someone to sneak in from the borderlands. Thus the very milquetoast indeed political views at most of these newspapers.


And that, I insist, is what is really happening to US newspapers. Most certainly, their problems stem from the internet. for the internet broke that monopoly imposed by economic geography and all else stems from that. They got fat and happy within those monopolistic areas and their pain is coming from the adjustments necessary to deal with that. The likely outcome I would expect to be many fewer first line newspapers staffed by many fewer people in much the way that the UK market has worked for near a century now. I would also expect to see them using political stance as a differentiator just as in Britain.

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