Closer To The Ideal

A very clever post by Arc90:

America has in fact transformed journalism from what it once was, the periodical expression of the thought of the time, the opportune record of the questions and answers of contemporary life, into an agency for collecting, condensing and assimilating the trivialities of the entire human existence, [...] the frantic haste with which we bolt everything we take, seconded by the eager wish of the journalist not to be a day behind his competitor, abolishes deliberation from judgment and sound digestion from our mental constitutions. We have no time to go below surfaces, and as a general thing no disposition.

The punch line is that this W. J. Stillman, writing in 1891, complaining of the effect of the telegraph on journalism.

A lament about the decline of the Wall Street Journal:

The politicalization of the WSJ has moved to a new and more risky phase. The paper is now in danger of being a money loser — not for its investors (tho that has already happened), but for those traders who read its content.

It used to be that articles on the Market or specific companies or various finance stories were objective and reliable and free from bias. Sure, you could always count on money losing, bat-shit crazy nonsense in the editorial pages, but that was a special area of sequestered partisans, who due to their insanity cared not a whit about how much capital their lunatic ravings lost their readers. (The list is long and varied, but the Boskin “Obama Crash” on March 6th is a good place to start; then read anything Don Luskin writes — he is a reliable contrary indicator).

I assumed the drunks on the OpEd page did not care about what they did to your portfolio if you drank their Kool-Aid. But they were easy to avoid –you simply avoided that page, or read it and laughed. Smart investors could easily say “Go sell crazy somewhere else –we ain’t buying.” That was possible because you knew that the business pages were sacrosanct, always run with a steel-eyed objectivity that professionals could rely upon.

That is no longer the case. The lunatics now run the asylum, and henceforth, I am moving the WSJ into the column of “Stuff to read, but not take very seriously.”

It is puzzling that there are so few good outlets for financial news. You would think that with so much money at stake, a lot of media outlets would cater to the demand, but the opposite seems to happen: with so much money at stake, the investing industry (mutual funds, day traders, the stock-issuing companies themselves) can not allow the truth to go un-managed. So most media outlets focused on investing get co-opted by the investing industry. The Wall Street Journal stood apart for a long while, notable for its objectivity. Now it is sunk, though for an unusual reason – its become co-opted by the most radical elements of the Conservative movement. Very sad to see.

Every time a society is doing economically well, someone emerges to suggest that that success is based on innate differences that go back thousand of years. Meanwhile, when a society is doing poorly, someone argues that it is being dragged down by forces that have been pending since the beginning of time. The most notorious example was the preening that the West engaged in during the 1800s – Asians and blacks were naturally lazy, whereas white people were biologically superior. The grotesque reality is that such attitudes were used to justify genocide.

Anyway, now China is doing well and America is doing poorly, so David Brooks starts writing a eulogy for the US:

David Brooks: Asians place emphasis on context while Westerners place more emphasis on individuals. This seems like a gross generalization but it is robustly supported by hundreds and hundreds of studies. Richard Nisbett’s book, “The Geography of Thought” summarizes some of the evidence.

If you show Americans a fish tank, they’ll talk about the biggest fish in the tank. If you show Asians a tank they will make, on average, 60 percent more references to the context and the features of the scene. Western parents tend to emphasize nouns and categories when teaching their kids, Korean parents tend to emphasize verbs and relationships. If you show Americans a picture of a chicken, a cow and grass, they will lump the chicken and the cow, because they are both animals. Asians are more likely to lump the cow and the grass because cows eat grass. They have a relationship.

The mode of thought more common in Asia is better suited to the complex networks that make up the modern world. The contextual, associational style is simply more valid. The linear style we’ve inherited from the Greeks is less adaptive toward the modern age. I think the West may be doomed.

For my part, I think the hype about China is over done. The problems in the US economy were created by forces internal to the US, and they can be fixed by internal forces as well.

Daniel Lyons possibly the first article ever published in Newsweek that is both about the Internet and also true:

The past decade is the era in which the Internet ruined everything. Just look at the industries that have been damaged by the rise of the Web: Newspapers. Magazines. Books. TV. Movies. Music. Retailers of almost any kind, from cars to real estate. Telecommunications. Airlines and hotels. Wherever companies relied on advertising to make money, wherever companies were profiting by a lack of transparency or a lack of competition, wherever friction could be polished out of the system, those industries suffered.

Remember all that crazy talk in the early days about how the Internet was going to change everything and usher us into a brave new techno-utopia? Well, to get to that promised land, we first have to endure a period of what economist Joseph Schumpeter called “creative destruction,” as the Internet crashes like a tsunami across entire industries, sweeping away the old and infirm and those who are unwilling or unable to change. That’s where we’ve been these past 10 years, and it’s been ugly.

Let’s start with newspapers. You wouldn’t think that in an information age the biggest victim would be purveyors of information. But there you go. Newspapers are getting wiped out in part because they didn’t realize they were in the information business—they thought their business was about putting ink onto paper and then physically distributing those stacks of paper with fleets of trucks and delivery people. Papers were slow to move to the Web. For a while they just sort of shuffled around, hoping it would go away. Even when they did launch Web sites, many did so reluctantly, almost grudgingly. It’s hard to believe that news companies could miss this shift. These companies are in the business of spotting what’s new, right? Yet they were blind to the biggest change (and the biggest opportunity) to ever hit their own business. Watching newspapers go out of business because of the Internet is like watching dairies going out of business because customers started wanting their milk in paper cartons instead of glass bottles.

Dan Bezdek posted on LinkedIn, suggesting that it was impossible to launch an online business nowadays due to the hyper-competition on the web. He wrote:

I still think there is a huge difference between an online business and a traditional business. We have this grocery store in the neighborhood which is right next to Safeway. Now, you’d imagine there is no hope for this store; however, not only it is surviving, but in fact has so many customers.

He also wrote:

The main problem is that the culture of internet is free service, and this problem will remain with Internet forever. You might spend a couple of years in development, and provide a great service; but you can’t charge users even a $1 except in very few niche sections.

I wrote a response, but LinkedIn limited me to 4,000 characters, so I was not able to post my whole response. I post it here, instead.

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Dan Bezdek, I’m afraid I’m unable to understand your reasoning. I’m going to try to paraphrase what I think you are saying.

You write “It is so easy for anyone in the world to compete with you even in places that $100 is a week pay.”

I think you are trying to say that because computer programmers can be hired cheaply, it is more difficult for you to build a business? But the opposite is true: cheap computer programmers make it easier to launch a new business. I can not think of a single case in economic history where the falling price of a supply factor made it more difficult to launch a new business. A few examples:

1.) During the late 1600s, in Europe, the dramatic fall in the price of paper allowed for the creation of the first modern newspapers. The Spectator launched on March 4, 1712.

2.) During the mid 1700s, in Europe, the dramatic fall in the price of coffee beans allowed for the first coffee houses to open. Paris had hundreds of small coffee stands at the outbreak of the Revolution.

3.) During the late the 1800s, in America, the dramatic fall in the price of communications (the telegraph and the telephone) allowed for the organization of businesses over a distance, and at a scale, never before seen.

4.) During the late 1900s, all over the world, the dramatic fall in the price of computing power brought several new technologies into the mass market, including cell phones, personal computers, and personal (non-business) software.

As a general rule, the cheaper supplies get, the easier it is to start a business.

You also wrote this:

“In any case, the point of all this is to say that developing even a barely successful online business is probably 10 times more difficult than setting up a grocery shop.”

You didn’t mention which country you are in. If you are in the United States, then your statement is incorrect. The retail sector in the US is overbuilt and is expected to consolidate over the next 10 years. Many grocery chains are expected to go bankrupt. Meanwhile, the Commerce Department projects that the software industry will continue to grow, and much of that growth will be happening on the web.

If you do not live in the US, then I’d have to know what country you are in, to know if there is any truth to what you are saying. Some countries, such as France and Italy, offer strong legal protections to small firms. In those countries, small groceries have some hope of surviving, but that is because of government protection, not economic fundamentals.

I think the concept that you are trying to get at is what economists would call “barriers to entry”. That is, what barriers keep competitors from entering your market and competing with you? And I think what you are thinking is that a local grocery store, because it is grounded in a specific geographical space, has some immunity from competition, whereas a web site has to compete with every other web site on the web.

Again, if you are speaking about the US, you are plainly wrong. The history of post-war economic development in the US is the history of retail consolidation. Mom-n-Pop stores have been relentlessly replaced by big chains such as Wal-Mart. Massive numbers of bankruptcies have happened in every state. The small-scale grocery was once common, and now is nearly extinct. They’ve been hunted to extinction through the relentless competitive pressures of market consolidation.

Consider the graph that the US government has posted here:

In the late 1990s, a number of leading grocery retailers went on a buying spree. Between 1997 and 2000, more than 4,100 stores were acquired, amounting to almost a fifth of all U.S. supermarkets. Mergers and acquisitions by large grocery retailers, including Kroger, Albertson’s, Ahold USA, and Safeway, produced a significant increase in the share of grocery store sales by the largest firms. By 2005, the 20 largest retailers accounted for 61.6 percent of total U.S. grocery store sales, up from 40.6 percent in 1995.

If you look at the facts, you’ll admit that small-scale groceries have mostly been wiped out. And this happened during some of the same decades that saw the explosive growth of the US software market.

Clearly, it is possible to make a lot of money on the web. 37 Signals makes millions of dollars in sales, and Amazon makes billions of dollars in sales. AOL is making a shockingly large gamble on weblogs.

You include this surprising comparison:

Now, compare this store to many 2-3 men operations online trying to make it online offerring some service; there are thousands of such operations which wish they were making as much as that grocery store.

I assume you meant “people” where you wrote “men”. A 3 person web start-up will cost less than running a grocery store. Even a small grocery store is going to have more than $50,000 worth of inventory in it, then it will have labor costs, rent or real estate taxes plus land cost, licenses for health, fire, safety, etc. If you are going to compare businesses that have different capital requirements, then you might as well write “I tried to run a lemonade stand, but it never made as much money as Toyota.” The comparison is absurd.

Of course, as segments of the web mature, the capital requirements for starting a web site go up for that particular segment. Once upon a time, a long time ago, you could start a successful weblog for free. Nowadays, if you are starting a weblog which you hope will develop a mass audience, then you should probably have $100,000 for marketing and writers. Likewise, if for some crazy reason you decide to launch a competitor to YouTube, you should start with $100 million in the bank. In the future, you may need millions of dollars to get into any established segment. But some segments will remain open to the sudden hit that comes form nowhere. Weblogs, for instance, began to consolidate some time ago, yet new weblogs still occasionally burst forth and become large-scale hits. And one of the great things about the web (so far) has been the speed with which new segments emerge.

I’ve already written extensively about the costs of building a web site. And I’ve helped launched a number of successful sites that cost less than $100,000 to get going. And I continue to work with start-ups that have budgets under $100,000, and I’ve great faith that a number of these will become successful.

If you are thinking of starting a new business, you’d be wise to start it online.

Jory Des Jardins writes with nostalgia about what print media used to be like:

I’m sure if I had stuck it out a bit more and not taken a new media job five years in I might have made more of a go of it. But things discouraged me about traditional media. It had an established power structure that made it nearly impossible to get noticed. I wrote things I was proud of on the side, while editing more established writers in the waking hours and writing uninspired copy as a freelancer. But I hadn’t really established a voice that was worthy of cashing in favors from editor friends of mine.

…I’d only hoped I would be able to pursue this growing interest in a model counter intuitive to the people I used to work for. A model that democratized media, to a large extent, and made possible a notion terrifying to most people like me who hinged their self-worth on “making it” in traditional media: that there’s a whole helluva lot of talent out there and it ain’t all on the Hearst, Conde Nast, or Time Warner payrolls. Traditional media just took in whom they could fit, who matched the pedigree, or who had an uncle who could introduce you to the editor, or who had this random bit of luck and was seen for what she could produce, and sometimes bonafide talent. But so may others could not even make it to the filter, let alone make a living at it.

Back in my print days, there was something so alluring about being one of a few selected, whose name would be committed to print. And there’s a whole community of folks, I’m sure, who still hold print sacred. I’m one of them, even as someone whose name has only made it via her work in new media. I fretted so long about being a part of it that even while it’s suffering I promise to someday return — if it will have me. Many bloggers who are doing just fine building platforms online still look at the book deal as the summit of success. I’ll know I’m fully evolved when I couldn’t care less about hardcover, softcover, or any cover.

Traditional media was hierarchical and often unfair. One’s actual talent was often overlooked due to the personal politics inside each organization. It is hard for me to feel nostalgia for the old model, though possibly I feel a slight nostalgia for the great era of photojournalism, when people like Henri Cartier-Bresson were at work, an era which was funded by the mass circulation magazines.

But all business models die, eventually. In the modern era, we’ve achieved the freedom to constantly re-invent ourselves. While this is occasionally stressful, it is a freedom that people have spent centuries fighting to establish. And this freedom is one of the most exciting aspects of being alive during this era. Karl Marx has a reputation for being critical of market based economies, but few people described our era as perfectly as he did:

Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty and agitation distinguish the bourgeois epoch from all earlier ones. All fixed, fast frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new-formed ones become antiquated before they can ossify. All that is solid melts into the air, all that is holy is profaned, and man is at last compelled to face with sober senses his real condition of life and his relations with his kind.

Penelope Trunk offers another reason why old media is doomed:

So we don’t need stupid rules about conflict of interest for people who are putting themselves on the line. That rule is for old media, where writers were putting only the brand of the newspaper on the line. In old media most journalists were no-names, writing under big (newspaper) names. So if they wrote something moronic, so that they could increase the value of a stock they held, or, maybe, get more oral sex, they would put only the newspaper brand at risk. Not their own.

Which means that the arcane conflict of interest rules are to protect the newspaper, not the readers. And this, by the way, is why newspapers are going down: because they are more about themselves, and their hierarchies, and rules and structures, than they are about what their readers want. Readers should not care about the business dealings of the writers or their publishers. Readers just want good content.

Penelope Trunk says you won’t make money from blogging. I assume she’s talking about personal blogging, otherwise her advice amounts to “You can’t make money with an online magazine” and clearly that is not true, since there are lots of profitable online magazines (like TechCrunch, Salon, etc).

Apparently, in the world of personal blogging mommy-blogging is a profitable exception:

Welcome to the world of mommy blogging, where women juggle the demands of childcare with building audiences online. It’s also, increasingly, a place where top brands battle for their attention, hoping for reviews from “real moms” and access to the valuable power of word of mouth. Being a player in the mommy blogger world can mean access to free products, getting big media buys and even trips to the red carpet in Hollywood and Caribbean cruises.

Does local news have a future in the era of the web? Sarah Lacy has a regular column with BusinessWeek and TechCrunch. On her personal blog, her best friend Olivia sometimes puts together these informal, amusing videos.

This video is only 6 minutes long, and, if you have the slightest interest in the issue of the future of media, then it is very much worth watching. Jacek Utko relates his own experience using design to rescue newspapers in Eastern Europe. I think this idea can be boiled down to: “Newspapers need to become more like magazines.” That is a solid idea. After all, before the financial crisis, magazines were doing well, and they will probably do well again as soon as the recession ends.

One of the strongest arguments for protecting today’s newspaper’s is that they are vital sources of objective information. However, in practice, they are less altruistic than they are supposed to be. Some of the less pleasant realities of journalistic practice undermine their claim that society will suffer harm if daily newspapers disappear.

Matt Yglesias comments:

[P]art of the peculiar set of institutions that constitutes “journalistic ethics” is the idea of a “beat-sweetener.” This means that when a new set of powerful people is put into place, and most of all when a new presidential administration comes to DC, you see a flurry of journalists penning lavishly flattering profiles of different key players. The idea is that the key player in question and his staff will then become a useful source of future information. I don’t think anyone ever quite admits that a piece they’ve handed in is a beat-sweetener, but people in the game generally know one when they see one and it’s frequently joked about and so forth.

Duncan Black points out how much this underines the idea that society can not survive without these media institutions:

I think the main issue with beat sweeteners is that they’re part of a whole host of journalistic practices which aren’t especially pretty… and more than that, they’re practices that the public is largely ignorant of. There’s a lack of transparency in journalism which is often at odds with the great degree of self-righteousness regularly exhibited by some in the profession. You can’t simultaenously be a superhuman devotee to truth telling and someone who writes stories deliberately to curry favor with sources. Such practices might at times be, on balance, good for the overall goal of providing information for readers (though frequently they’re probably just good for the overall goal of personal career elevation), but they’re also a reminder that journalism as practiced is not the pristine objective truth machine that some suggest when writing columns about how bloggers suck.

Sarah Lacy used LinkedIn to try to help a friends of her get a job. It occurs to her that the depression will be very good for LinkedIn:

In terms of ego and validation, I got the pride of knowing my network could help someone I care about. And not just help someone with something minor– help someone potentially find a new job. In this case she wasn’t laid off but, in an economy like this where hundreds of thousands are, survivor’s guilt runs high. Especially if you’ve been laid off before and viscerally remember that feeling. You want to be able to do something when you hear that kind of news, and LinkedIn offers that, whether it’s an introduction or just writing a recommendation for a laid-off friend. It was one of the first times an interaction with LinkedIn gave me that social media endorphin rush that I more commonly get with Twitter, blogging, Flickr or Facebook.

Paul Mulshine says no one can replace the work of professional journalists.

After I got out of Rutgers, I began as a reporter at a newspaper in Ocean County, N.J. If the Toms River Regional Board of Education had not offered free coffee, I fear that I might have been found the next day curled up on the floor in the back of the room like Rip Van Winkle. As it was, I only made it through the endless stream of resolutions and speeches by employing trance-inducing techniques learned in my youth during religion class at St. Joseph’s school up the street.

The common thread here, whether the subject is foreign, national or local, is that the writer in question is performing a valuable task for the reader — one that no sane man would perform for free. He is assembling what in the business world is termed the “executive summary.” Anyone can duplicate a long and tedious report. And anyone can highlight one passage from that report and either praise or denounce it. But it takes both talent and willpower to analyze the report in its entirety and put it in a context comprehensible to the casual reader.

Damn, I am getting bored of this debate.

If people aren’t willing pay for Paul’s summary of the Toms River Regional Board of Education then, by definition, that information is not valuable. So why should anyone do it?

Journalism starts with The Spectator. Yet Joseph Addison and Richard Steele wouldn’t recognize what Paul Mulshine does for a living. And there are aspects to the writing of The Spectator (in particular, the prevalence of opinion) that have more in common with blogs than with what Mulshine does.

Modern journalism begins to take shape during the 1890s and reaches its full form by the 1920s. Then it has a good 40 year run, and then it goes into decline. When I was young, in the 1980s, I heard story after story about how newspapers were in decline, because Americans don’t read any more.

When I was in middle school, and then high school, our teachers used to plead with us to read the newspapers. We were often given newspaper reading assignments – once a week we had to find a story we liked and bring it to class. Even though my folks were fanatic readers of the New York Times, and even though I read it often myself, I usually could not bring myself to engage in the stupid, artificial assignments.

I hated the histrionics – I recall a history teacher in the 9th grade who told us that without newspapers, there would be no more democracy. My feeling, then and now, was that if democracy was that weak then it deserved to die.

The death of the newspapers was a big subject all through the 80s, even after I got out of high school. In college I recall a professor asking the class how many of the students read the paper everyday. Maybe a quarter of the class raised their hands. The professor shooks his head sadly and said that the nation was doomed.

So much melodrama! So much dismay and nostalgia! So much sadness and disappointment for the older generation!

Can I contribute to this outpouring of emotion? I’d like to offer my own melodrama:

I want the newspapers to die! I’m tired of them always being on their deathbed! This industry has been dying for my whole life! How long can this story possibly continue? When I am 90, will the newspapers still be dying? Whatever Paul Mulshine is trying to defend is too old and too decrepit to be of any use to anyone, ever again. Drown it with acid, set it aflame or blow it to bits, whatever is necessary to make sure it is dead.

What I am eager to see is what comes next. I’m more interested in the new next thing then I am interested in yesterday’s news.

Sam Zell made a terrible mistake when he bought the Tribune Company:

When the Tribune Company announced that it was filing for bankruptcy, last Monday, Sam Zell, the man who bought the company a year ago, for $8.2 billion, said that its problems were the result of a “perfect storm.” You take readers and advertisers who were already migrating away from print, and add a steep recession, and you’ve got serious trouble. What Zell failed to mention was that his acquisition of the company had buried it beneath such a heavy pile of debt that any storm at all would likely have sunk it. But although Zell was making excuses for his own mismanagement, the perfect storm is real enough, and it is threatening to destroy newspapers as we know them. Layoffs and buyouts have become routine. The Miami Herald and the San Diego Union-Tribune are reportedly on the selling block, while lawmakers in Connecticut are trying to keep two newspapers there afloat. Even the New York Times Company has slashed its dividend and announced that it would borrow against its headquarters to avoid cash-flow problems.There’s no mystery as to the source of all the trouble: advertising revenue has dried up. In the third quarter alone, it dropped eighteen per cent, or almost two billion dollars, from last year.

Newspapers are simply a method of delivering ads:

It turns out that subscribers are more expensive, not less expensive, than online readers. Yes, they pay more — but they’re not paying for intensive reporting, experienced editors, and the like. They’re paying for printing presses, mobbed-up newspaper delivery operations, and the whole enormous physical infrastructure involved in getting thousands of tonnes of newsprint delivered to millions of front doors every morning. It’s a hugely expensive operation, and its costs are nowhere near covered by subscription revenues.

There’s an old saying that you’ll never understand newspaper economics until you understand why newspaper vending machines are designed so that you can take as many papers as you like for your quarter. Newspapers are, first and last, devices for delivering ads to readers. It’s the ads which account for all the profits, not the cash coming from subscribers or people who buy their paper at the newsstand. Yes, news itself is free, nowadays. But it always has been. What we’ve been paying for all these years was never news, it was papers.

Lately there have been a lot of articles about the newspaper industry. We are told that this recession is killing off newspapers, everything is moving to the web. There is some mourning, people wonder how journalism will survive once the newspapers are gone. But consider the other side – where will the ad dollars go? When the next boom hits, America will have a lot less newspapers than it has had in the past. And much more of the public will think it natural to get their news online. Doesn’t it seem that at some point quite a bit of ad revenue must become available to online ventures?