Quotulatiousness

June 3, 2013

CRTC rule changes may finally signal the end of the three-year phone contract

Filed under: Business, Cancon, Technology — Tags: , , — Nicholas @ 10:54

In Maclean’s, Steve Rennie outlines the new cell phone rules to come into effect later this year:

Wireless customers will be able to cancel their cellphone contracts after two years without any penalties — even if they’ve signed up for longer terms — under a new set of rules unveiled Monday by the federal telecom regulator.

However, the Canadian Radio-television and Telecommunications Commission didn’t go as far as an outright ban on the three-year contracts that Canadians vented so much about earlier this year as the national code for wireless services was being drafted.

“We didn’t focus on the length of the contract, we focused on the economic relation,” CRTC chairman Jean-Pierre Blais said in an interview.

“So, in effect, it’s equivalent to those asking for a ban of three-year contract without us actually banning three-year contracts, because what we’re saying is the contract’s amortization period can only be for a maximum period of 24 months.”

There’s also good news for those who travel with their cell phones (that’d be pretty much every Canadian traveller these days):

The CRTC is also capping extra data charges at $50 per month and international data roaming charges at $100 per month to avoid huge, surprise bills.

The regulator will require providers to allow customers to unlock their devices after 90 days, or immediately if they pay the full amount of the device.

May 29, 2013

Lessons learned in the post-Napster era

Filed under: Business, Law, Media — Tags: , , , — Nicholas @ 16:25

At TechDirt, Mike Masnick discusses the things we learned from Napster:

Last fall, law professor Michael Carrier came out with a really wonderful paper, called Copyright and Innovation: The Untold Story. He interviewed dozens of people involved in the internet world and the music world, to look at what the impact was of the legal case against Napster, leading to the shutdown of the original service (the name and a few related assets were later sold off to another company). The stories (again, coming from a variety of different perspectives) helps fill in a key part of the story that many of us have heard, but which has never really been written about: what an astounding chill that episode cast over the innovation space when it came to music. Entrepreneurs and investors realized that they, too, were likely to get sued, and focused their efforts elsewhere. The record labels, on the other hand, got the wrong idea, and became totally convinced that a legal strategy was the way to stem the tide of innovation.

The Wisconsin Law Review, which published Carrier’s paper, asked a few people to write responses to Carrier’s paper, and they recently published the different responses, including one from a lawyer at the RIAA, one from another law professor… and one from me. This post will be about my paper — and I’ll talk about the other papers in a later post. My piece is entitled When You Let Incumbents Veto Innovation, You Get Less Innovation. It builds on Carrier’s piece, to note that the stories he heard fit quite well with a number of other stories that we’ve seen over the past fifteen years, and the way in which the industry has repeatedly fought innovation via lawsuits.

You can read the whole paper at the link above (or, if you prefer there’s a pdf version). I talk about the nature of innovation — and how it involves an awful lot of trial and error to get it right. The more trials, the faster what works becomes clear, and the faster improvement you get. But the industry’s early success against Napster made that nearly impossible, and massively slowed down innovation in the sector. Yes, a few players kept trying, but it developed much more slowly than other internet-related industries. And you can see why directly in the Carrier paper, where entrepreneurs point out that it’s just not worth doing something in the music space, because if you want to actually do what the technology enables, the kinds of things that are cool and useful and which consumers would really like… you’ll get sued.

May 25, 2013

Ireland’s corporate tax rate

Filed under: Business, Economics, Europe — Tags: , , — Nicholas @ 08:01

At the Adam Smith Institute, Tim Worstall explains why Ireland has — and should continue to have — a low rate of corporate tax:

Companies don’t pay corporation tax: it’s some combination of the shareholders and the workers who do. This is not a point in argument: the only argument is about what the portions are, not the fact that the burden falls upon these two groups. We also know what it is that influences which group: it’s how large the economy is in relation to the world economy and how open it is to capital movement. The smaller and more mobile, the more the workers get it in the neck.

The mechanism is simple enough. It’s pretty much straight from Adam Smith in fact. There’s an average rate of return to capital: a jurisdiction that taxes that return to capital will have a return lower than that global average. So, some domestic capital will flow out seeking the higher foreign returns, some foreign capital will not flow in for the lower domestic ones. There’s thus less capital employed in the economy. Adding capital to labour is what drives up the productivity of labour: the average wages in a country are determined by the average productivity in that economy. So, tax companies, get less capital employed, wages are lower than they otherwise would be. The workers are bearing part of the burden.

As I say, the smaller the economy and the more open it is then the more of that burden is upon the workers. And in a wonderful result back in 1980 Joe Stiglitz showed that the burden upon the workers can actually be more than 100%. That is, the workers lose more in wages than the government gets in tax.

Ireland’s a small economy, 3.5 million people or so and as it’s in the EU has about as close to perfect capital mobility as it is possible to get. Thus it ought to have a lower corporation tax rate than larger economies. And it does, so that’s just fine then. Attempts to push it up (as various EU types are currently muttering) would simply lower wages in that country.

May 24, 2013

UBC’s latest big idea

Filed under: Business, Cancon — Tags: , , — Nicholas @ 08:45

Alex Usher calls it the best idea he’s seen all year:

If you’re a UBC student, staff, or faculty member, and want to start a business, you’re eligible for up to $5000 worth of business services (though, in practice, most use far less). And unlike virtually every other entrepreneurship system in Canadian PSE, there are no requirements whatsoever with respect to using UBC technology, nor is there any stipulation that the business be some kind of technology enterprise. Want to open a flower shop? This fund’s for you.

There’s no catch. UBC certainly isn’t interested in equity, for instance. All they want is recognition. All companies that move through the program must display a logo declaring themselves as “UBC-affiliated companies” for a period of five years.

How brilliant is that?

First, it creates a great, dense network between an institution and small businesses in its community (which will no doubt pay off philanthropically, down the road). Second of all, it allows the institution to get a much better handle on the post-graduation activities of its entrepreneurs, and hence allows UBC to highlight its larger role in job creation and innovation in British Columbia. Frankly, UBC could pay for this out of the Government Relations budget, and it would make complete sense — how great will it be to be able to walk into an MLA’s office and rattle off the names of all the new, “UBC-affiliated” businesses that have started-up in his/her riding?

It’ll be interesting to see how this works out in the long run, as $5,000 isn’t enough to establish a business but it can be a helpful amount of money to an otherwise undercapitalized business.

May 22, 2013

Fan fiction goes mainstream with Amazon’s Kindle Worlds

Filed under: Books, Business, Media — Tags: , , — Nicholas @ 12:54

People tend to have strong opinions on fan fiction (well, people who know it exists, anyway). This development will polarize fan ficcers very quickly:

The Twitters are abuzz today about Amazon’s new “Kindle Worlds” program, in which people are allowed to write and then sell through Amazon their fan fiction for certain properties owned by Alloy Entertainment, including Vampire Diaries and Pretty Little Liars, with more licenses expected soon. I’ve had a quick look at the program on Amazon’s site, and I have a couple of immediate thoughts on it. Be aware that these thoughts are very preliminary, i.e., I reserve the right to have possibly contradictory thoughts about the program later, when I think (and read) about it more. Also note that these are my personal thoughts and do not reflect the positions or policies of SFWA, of which I am (still but not for much longer) president.

1. The main knock on fan fiction from the rights-holders point of view — i.e., people are using their characters and situations in ways that probably violate copyright — is apparently not at all a problem here, since Alloy Entertainment is on board for allowing people to write what they want (within specific guidelines — more on that in a bit). Since that’s the case, there’s probably a technical argument here about whether this is precisely “fan fiction” or if it’s actually media tie-in writing done with intentionally low bars to participation (the true answer, I suspect, is that it’s both). Either way, if Alloy Entertainment’s on board, everything’s on the level, so why not.

2. So, on one hand it offers people who write fan fiction a chance to get paid for their writing in a way that doesn’t make the rightsholders angry, which is nice for the fan ficcers. On the other hand, as a writer, there are a number of things about the deal Amazon/Alloy are offering that raise red flags for me.

[. . .]

4. This won’t spell the end of unauthorized fan fic, and I’m very sure of that. For one thing, the Kindle Worlds program says it won’t accept “pornography” which means all that slash out there will still be on the outside of the program; likewise crossover fan fic, so those “Vampire Diaries meet Dr Who” stories will be left out in the cold. And besides that, there will be people who a) have no interest in making money and/or b) don’t write well enough to be accepted into the Kindle Worlds program (there does seem that there will be some attempt at quality control, or at least, someone has to go through the stuff to make sure there’s nothing that’s contractually forbidden). So if this was an attempt to squash fan fic through other means, it’s doomed to failure. But I don’t suspect that’s the point.

Update:

May 21, 2013

Apple and the question of profit shifting

Filed under: Business, Government, USA — Tags: , , , — Nicholas @ 09:23

Tim Worstall explains why both Apple and the Senate Permanent Subcommittee on Investigations can both be correct on the question of profit shifting — because the term’s meaning isn’t consistent:

Apple divides itself, roughly speaking, into two segments. The Americas and everywhere else (not that unusual for a US company, actually). Apple’s point is that it makes profits in the US selling things to people in the US. All profits from doing this pay the full US corporate income tax minus the usual deductions and allowances that every company can take advantage of.

Apple also points out that it makes the majority of its profits selling things outside the US to people who are not Americans. The iPhones are made in China and sold in Europe, just as one example. These profits are made outside the US: and Apple does not bring them into the US. Thus such profits are not liable to US corporate taxation (it is more complex than this but that’s the gist of it).

However, the Senate doesn’t use that commonsense definition of the phrase:

The Subcommittee is agreeing that these are profits made in foreign countries. Profits made by buying something in China and selling it outside the US. These profits are then not repatriated to the US. This is then deemed to be profit shifting.

It’s worth noting what everyone does agree upon.

Apple makes large profits in the US. These pay full US corporate income tax.

Apple makes large profits outside the US. These are kept outside the US and do not pay US corporate income tax.

And so the question becomes, what is the definition of profit shifting? If we take Apple’s definition, that they do not move profits out of the US, then they’re not profit shifting. If we take the Subcommittee meaning then they are. For without the corporate structures that Apple has put in place then those foreign profits would be subject to the US corporate income tax (minus, of course, the foreign taxes already paid).

Update:

Update, the second: The Register‘s report on the Irish side of the “profit shifting” story:

Irish deputy PM: You want more tax from Apple? Your problem, not ours
Póg mo thóin, you crazy Yanks

May 20, 2013

Yahoo’s Tumblr purchase

Filed under: Business, Media — Tags: , , , — Nicholas @ 09:15

Yahoo is spending $1.1 billion to acquire Tumblr:

Despite the breadth and diversity of life online, there are relatively few opportunities to make the kind of acquisitions that make the industry stop and take stock. Yahoo’s $1.1bn deal to buy Tumblr is one of those moments: a bold acquisition that says chief executive Marissa Meyer means business.

Comparisons to Yahoo’s 1999 $3.6bn acquisition of Geocities are too simplistic. In internet years, 1999 is more like two centuries ago and Yahoo is in a completely different place, led by a woman with all the zeal of a convert. Repeatedly passed over for promotion during her previous (another internet lifetime) 13 years at Google, she has an opportunity to do something impressive with Yahoo, which seemed in terminal decline. One venture capital executive told me that during the tenure of Carol Bartz, Mayer’s predecessor once removed, the investors were expecting Yahoo to ditch all but essential staff, focus on core revenue-building products and then rinse the company hard for maximum profit until it ran into the ground.

[. . .]

Yahoo was easy to write off in the tech community because it lacks the cool factor and developer kudos of Facebook and Google. But Yahoo’s power has always been in its more mainstream (though ageing) user base and its powerful display advertising business. Herein lies the key to its Tumblr acquisition. Though the fit with this hipster lite-blogging, photo-heavy platform could seem a little awkward, it makes sense in the context of Yahoo’s ad strategy.

Tumblr founder David Karp has always said its advertising model is based on Twitter’s “the tweet is the ad” principle. That is, that being embedded in a customised, personal flow of information, being relevant to an influential and proactive community is the most valuable and meaningful way of presenting display advertising right now. That makes Tumblr, integrated with Yahoo’s enormous expertise in display advertising, a diverse and demographically important platform for Yahoo that is mobile-heavy and social-focused.

May 19, 2013

Top Three Common Myths of Capitalism

Filed under: Business, Economics, Liberty, USA — Tags: , , , , — Nicholas @ 09:09

Is being pro-business and pro-capitalism the same? Does capitalism generate an unfair distribution of income? Was capitalism responsible for the most recent financial crisis? Dr. Jeffrey Miron at Harvard answers these questions by exposing three common myths of capitalism.

May 18, 2013

The booming market in pre-owned high fashion clothing

Filed under: Business, Economics — Tags: , , — Nicholas @ 08:14

A market I have to admit I was almost completely ignorant about, but it’s poised to become a very busy, competitive market if it can overcome a few hurdles:

There’s been a digital explosion in the market for pre-owned fashion. In the past year, we’ve seen a veritable land grab in the online consignment and resale space with the number of “re-commerce” sites now exceeding 50 — and many more, no doubt, incubating in Silicon Valley, New York, London and beyond. Several market levels are being addressed: mall/high street (Threadflip, Tradesy), thrift (LikeTwice, NiftyThrifty), upmarket (TheRealReal), haute vintage (Byronesque) and boutique (ReFashioner, my own company).

It may seem like these sites are dealing in a mere by-product of the fashion industry. But no, this is the product. Everything that’s bought becomes pre-owned. A tidal wave is building and it has the power to undermine or even destroy. Indeed, the stockpile of merchandise is overwhelmingly vast. I did the math in 2009 for ReFashioner’s beta, a luxury fashion swap site: $880 billion trapped in closets. And that’s just high-end womenswear in the US.

[. . .]

As with flash sales, this inventory is delimited by the retail market. And it’s wayward. The ROI sucks when every SKU is singular and inventory is locked up — literally — in houses. And there’s something of a standoff between buyer and seller: the non-professional seller, accustomed to seeing 100 percent mark-ups in the real world, wants top dollar for her career basics and contemporary designer wear, while the buyer wants Zappos-like service, Etsy pricing and Net-a-Porter merchandising. There are other issues too: resistance to higher ticket items without fittings, sketchy return policies, knock-off trading.

But there’s more. This merchandise is personal. It’s not just a numbers game, it’s about everything fashion means to us. It’s about honouring the past of the clothes and their place in our lives. If this is going to work, we need to add content and context. Idealistic, maybe. But idealism is how things get changed and idealism can work to the advantage of this category.

H/T to Virginia Postrel for the link.

May 16, 2013

The bitter truth is that hops might be ruining craft beer

Filed under: Business, USA — Tags: , — Nicholas @ 15:47

I link to this article with a heavy heart, because I’m a hop-aholic in my beer preferences:

If one of my favorite session beers was too hoppy and bitter for an avid beer drinker — for a homebrewer who is currently brewing beer to serve at his own wedding — what would he think of the famed Pacific Northwest IPAs? Do friends let friends drink only pilsners?

That’s when I realized that I had a problem. In fact, everyone I know in the craft beer industry has a problem: We’re so addicted to hops that we don’t even notice them anymore.

Hops are the flowers of the climbing plant Humulus lupulus, a member of the family Cannabaceae (which also includes, yes, cannabis), and they’re a critical ingredient in beer. Beer is made by steeping grain in hot water to turn its starches into sugar (which is later converted to alcohol by yeast). While the resulting liquid, called wort, is boiling, brewers add hops to tone down the mixture’s sweetness — without hops, beer would taste like Coke.* Recipes usually call for only a few grams of hops per gallon of beer produced, but those little flowers pack a big punch. In addition to their bittering properties, hops impart strong piney, spicy, or fruity flavors and aromas. They also contain antimicrobial agents that act as natural preservatives.

[. . .]

There are a few obvious reasons for hops’ status as the darling of craft brewers. Hops’ strong flavors present a stark contrast to watered-down horse piss, which is how I believe one refers to Bud Light in the common parlance. Maximizing hops is a good way for craft brewers to distinguish their creations from mass-market brands.

So, given all the flavourful goodness of hops, what’s the issue?

… unfortunately hops are a quick way for beginning brewers to disguise flaws in their beer, by using the hops’ strong flavor to overcome any possible off tastes. Do you regret throwing those juniper twigs in the boil? Did you forget to sterilize a piece of equipment and are now fretting about bacteria? Quick! Hops to the rescue!

From a consumer’s standpoint, though, beers overloaded with hops are a pointless gimmick. That’s because we can’t even taste hops’ nuances above a certain point. Hoppiness is measured in IBUs (International Bitterness Units), which indicate the concentration of isomerized alpha acid — the compound that makes hops taste bitter. Most beer judges agree that even with an experienced palate, most human beings can’t detect any differences above 60 IBUs. Sierra Nevada Pale Ale, one of the hoppiest beers of its time, clocks in at 37 IBUs. Some of today’s India pale ales, like Lagunitas’ Hop Stoopid, measure around 100 IBUs. Russian River’s Pliny the Younger, one of the most sought-after beers in the world, has three times as many hops as the brewery’s standard IPA; the hops are added on eight separate occasions during the brewing process.

The causes of the “Great Recession” by Tyler Cowen

Filed under: Business, Economics, Government, USA — Tags: , , — Nicholas @ 09:11

According to Professor Tyler Cowen, the Great Recession was caused by a number of different factors. Cowen outlines 4 distinct and complicated problems which led to the downturn:

• A drop in the aggregate demand (http://en.wikipedia.org/wiki/Aggregat…)
• A “horribly” performing banking sector
• Problems with monetary policy
• An increase in the “risk premium” (http://en.wikipedia.org/wiki/Risk_pre…)

Prof. Cowen explains why one economic model isn’t sufficient to explain the economic downturn. He shows how several different economic models can be used to explain both the cause and the effects of the recession.

Tim Harford on the patent system’s failings

Filed under: Business, Law, Technology — Tags: , , , , — Nicholas @ 08:15

The question seems to be is it totally broken or only partially broken?

According to one well-publicised estimate, there are 250,000 patents relevant to a modern smartphone. Even if the number is one-tenth of that, it suggests an impossible thicket of intellectual property through which a company must hack to bring a cool new product to market.

A key issue is something called the hold-up problem. If a $1bn product depends on 1,000 patents, it is clearly impossible to pay the typical patent holder more than $1m. But any patent-holder could try to extort many times that amount by threatening to block the whole project.

Large firms have responded to this problem by buying or developing large collections of patents. This gives them the ability to launch countersuits, and that threat should make rivals reasonable. But although defensive patenting looks like a pragmatic solution, it has costs and limits. The wave of defensive applications swamps patent offices, which means more poor-quality patents and longer delays.

“Patent trolls” — a derisive name for companies that make money purely from their patents — have less to lose in a patent war but although some are legitimate, others are extortionists. And while established players may reach cosy understandings, a young company with a new idea may find it impossible to break into a market that is thick with defensive patents. If only the big boys can play the patent game, innovation will suffer.

May 15, 2013

Google UK marks the 150th birthday of Frank Hornby

Filed under: Britain, Business, History, Railways — Tags: , , , , — Nicholas @ 08:09

If you go to https://www.google.co.uk/ today, you’ll see the Google doodle has a distinct toy train motif:

Google UK doodle for Frank Hornby

At The Independent, Matilda Battersby tells the story:

The search engine Google is celebrating the 150th birthday of visionary toy maker Frank Hornby, whose model railways, Meccano sets and Dinky toys are still being played with by children today.

Born in Liverpool on 15 May 1863, Hornby was behind three of the most popular toy lines of the 20th century despite having no formal engineering training.

[. . .]

Meccano’s turnover for the 1910 financial year was £12,000. His son Roland joined the business, and when the operation began exporting to Europe, he opened Meccano France Ltd in Paris. Two offices in Germany soon followed.

Having dabbled in politics in later life, Hornby died of a heart condition and diabetes in Maghull, near Liverpool, on 21 September 1936. Two years previously he had set up Dinky Toys to manufacture miniature model cars and trucks.

In 1938 his son Roland launched the Hornby Dublo model railway system — a posthumous honour to his father.

Enthusiasts around the world still collect Hornby train sets, Dinky Toys and Meccano models. The modern business also make Scalextric cars and Airfix kits.

H/T to Roger Henry for the link.

May 14, 2013

Is this week’s Scandalpalooza actually a “big bath” move?

Filed under: Business, Government, Media, USA — Tags: , , — Nicholas @ 13:22

Megan McArdle explains what a “big bath” is and how the current rash of scandals might be a political version of this financial accounting trick:

I confess, when I woke up this morning, I half expected to find that Obama had confessed to being one of our lizard overlords, or made an offhand mention of the time he’d had the CIA price out a drone attack on Mitt Romney’s headquarters. Between Benghazi, the discovery that Kathleen Sebelius has been leaning on insurers to finance their Obamacare PR, uncovery of a freelance political inquisition by the IRS, and last night’s revelation that the Department of Justice had been trolling through the phone records of AP reporters, this has been the most scandalicious week in living memory. I mean, sure, none of it rises to the level of Watergate. But while the gravity may pale in comparison, the volume is breathtaking. So breathtaking that it’s tempting to think that the administration is doing this deliberately.

In finance, there’s an art known as “Big Bath Accounting” which is used to manage earnings expectations. Here’s how it works: if you know you’re going to have a bad quarter, you look around for anything else that might go wrong in the future, and you decide to “recognize” that bad news now. Inventory looking a little stale? Write it down, man! Customers getting a little slow to pay? Now would be a good time to write off their accounts as bad debt. Is there some uncertainty in the projections about depletable assets like oil stores? For heaven’s sake, why not use the low end of the projections rather than the medium or high end? And we should really book some sort of charge to account for the risk that the Yellowstone supervolcano will explode, killing hundreds of thousands and covering the entire western half of the United States in volcanic ash, and in the process severely dampening demand for our premium line of Wyoming-themed memorabilia.

Corporations call this “cleaning up the balance sheet”. Accounting professors call it things I can’t print because this is a family blog.

Time to free the CBC

Filed under: Business, Cancon, Media — Tags: , , , , , , — Nicholas @ 11:04

In Maclean’s, James Cowan makes the case for liberating the CBC from the shackles of government subsidy, as it’s now out-competing private business in several fields:

The online success of the CBC should be laudable. Its website received an average of 6.2-million unique visitors last year, making it the most popular Canadian website. Around 4.3-million people visit the CBC News site each month, besting both The Globe and Mail and Huffington Post. Adding to this success is an ambitious five-year plan that will open digital-only news operations in cities like Hamilton and Kamloops and allocate 5 per cent of the overall programming budget to digital content. Once upon a time, it was only private TV and radio broadcasters who had reason to grumble about competing with the Crown corporation; in building its online empire, the CBC is taking on everyone from newspapers to Netflix.

In doing so, the CBC has strayed a long way from its original purpose: to sustain Canadian culture when and where the market cannot. The problem is, the CBC’s traditional funding model now allows it to build its digital empire unfettered by economic reality. In its last quarter, 60 per cent of the company’s expenses were paid by government subsidies while just 21 per cent of its revenue comes from advertising. All media companies are struggling to adapt to shifting consumer and advertising patterns brought about by the digital age; only the CBC had $1.2 billion in government cash to fund its experiments and ease the transition.

Broadcasters would argue the CBC has always operated from an unfair advantage. But the current scenario is different in several respects. For one, the Corp.’s legislated mandate to be “predominantly and distinctly Canadian” arguably placed it at a commercial disadvantage. Further, capital and regulatory requirements made it implausible for commercial broadcasters to serve many areas of the country. But nobody needs to ask the CRTC’s permission to create a website, and the startup costs for a digital service are far less than those of a television or radio station. If small cities like Kamloops need a local digital news service, that’s a need that could be plausibly served by entrepreneurs. The CBC is increasingly no longer complementing the market, but instead meddling within it.

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