economics

The psychohistorian on the op-ed page

I cite Isaac Asimov’s influ­ence on Paul Krug­man a lot, but this is the most com­plete artic­u­la­tion of it I’ve yet seen—from the New Yorker pro­file:

Krug­man explained that he’d become an econ­o­mist because of sci­ence fic­tion. When he was a boy, he’d read Isaac Asimov’s “Foun­da­tion” tril­ogy and become obsessed with the cen­tral char­ac­ter, Hari Sel­don. Sel­don was a “psychohistorian”—a sci­en­tist with such a pre­cise under­stand­ing of the mechan­ics of soci­ety that he could pre­dict the course of events thou­sands of years into the future and save mankind from cen­turies of bar­barism. He couldn’t pre­dict indi­vid­ual behavior—that was too hard—but it didn’t mat­ter, because his­tory was deter­mined not by indi­vid­u­als but by laws and hid­den forces. “If you read other gen­res of fic­tion, you can learn about the way peo­ple are and the way soci­ety is,” Krug­man said to the audi­ence, “but you don’t get very much think­ing about why are things the way they are, or what might make them dif­fer­ent. What would hap­pen if?”

Yes!

 

Stock and flow

I was an eco­nom­ics major in col­lege, and I’ve been grate­ful ever since for the few key con­cepts it drilled into me: things like oppor­tu­nity cost, sunk cost (that’s a big one), and mar­ginal cost. I think about this stuff all the time. Some­times I con­sider the mar­ginal cost of, like, mak­ing myself another sandwich.

But one of the biggest take­aways was the con­cept of stock and flow.

Do you know about this? Couldn’t be sim­pler, and really, it’s not even that much of an a-ha. There are two kinds of quan­ti­ties in the world. Stock is a sta­tic value: money in the bank, or trees in the for­est. Flow is a rate of change: fif­teen dol­lars an hour, or three-thousand tooth­picks a day. Easy. Too easy.

But I actu­ally think stock and flow is the mas­ter metaphor for media today. Here’s what I mean:

  • Flow is the feed. It’s the posts and the tweets. It’s the stream of daily and sub-daily updates that remind peo­ple that you exist.
  • Stock is the durable stuff. It’s the con­tent you pro­duce that’s as inter­est­ing in two months (or two years) as it is today. It’s what peo­ple dis­cover via search. It’s what spreads slowly but surely, build­ing fans over time.

I feel like flow is ascen­dant these days, for obvi­ous reasons—but we neglect stock at our own peril. I mean that both in terms of the health of an audi­ence and, like, the health of a soul. Flow is a tread­mill, and you can’t spend all of your time run­ning on the tread­mill. Well, you can. But then one day you’ll get off and look around and go: Oh man. I’ve got noth­ing here.

But I’m not say­ing you should ignore flow! No: this is no time to hole up and work in iso­la­tion, emerg­ing after long months or years with your perfectly-polished opus. Every­body will go: huh? Who are you? And even if they don’t—even if your exquisitely-carved mar­ble statue of Boba Fett is the talk of the tum­blrs for two whole days—if you don’t have flow to plug your new fans into, you’re suf­fer­ing a huge (here it is!) oppor­tu­nity cost. You’ll have to find them all again next time you emerge from your cave.

Here’s a case study: my pal Alexis Madri­gal here in SF has got the stock/flow bal­ance down. On one end of the spec­trum, he’s a Twit­ter nat­ural and a Tum­blr adept. Madrigal’s got mad flow; you plug in, and you get a steady stream of inter­est­ing stuff every day. But on the other end of the spectrum—and man, this is just so important—he’s work­ing on a deep, nuanced his­tory of green tech in Amer­ica. He’s work­ing on a book intended to stand the test of time.

You can tell that I want you to stop and think about stock here. I feel like we all got really good at flow, really fast. But flow is ephemeral. Stock sticks around. Stock is cap­i­tal. Stock is protein.

And the real magic trick in 2010 is to put them both together. To keep the ball bounc­ing with your flow—to main­tain that open chan­nel of communication—while you work on some kick-ass stock in the back­ground. Sac­ri­fice nei­ther. It’s the hybrid strategy.

So, okay, I was think­ing about stock and flow while I was doing the dishes just a sec­ond ago, and won­dered: Wait. There are all these super-successful artists and media peo­ple today who don’t really think about flow. Like, Wes Ander­son? Come on. He’s all stock. And he seems to do okay.

But I think the secret is that some­body else does his flow for him. I mean, what are PR and adver­tis­ing? Flow, bought and paid for. Mes­sages metered out over time. Rewind his­tory and put Wes Ander­son on his own—alone in the world—and I don’t think you get the same result. His stock is strong stuff: hugely com­pelling, utterly unique. But how does he tell peo­ple about it?

So if you are in the posi­tion to have some­body else han­dle your flow while you tend to your stock: awe­some. But that’s true for almost no one, and will (I think?) be true for even fewer over time, so you need to have your own plan for this stuff.

Any­way: this is not a huge insight, I know. Mostly I just wanted to share the lingo, because it’s been echo­ing in my head since my first micro­eco­nom­ics course. Today I’m still always ask­ing myself: Is this stock? Is this flow? How’s my mix? Do I have enough of both?

 

The five texts

Eco­nom­ics has, dur­ing its entire his­tory, from the mid-18th cen­tury until today, been dom­i­nated by only five text­books. David Warsh lists them and explains:

[F]or the entire his­tory of mod­ern eco­nom­ics, all 250 years of it, from its begin­nings dur­ing the Enlight­en­ment of the eigh­teenth cen­tury to the present day, the dis­ci­pline has been dom­i­nated by five canon­i­cal text­books — and only five (though, of course, each had many imi­ta­tors). Those who found com­pelling the author­ity of these texts became econ­o­mists. Those who didn’t became some­thing else — soci­ol­o­gists, polit­i­cal the­o­rists, anthro­pol­o­gists, psy­chol­o­gists, his­to­ri­ans, lawyers, reform­ers, busi­ness­men, reli­gious leaders.

Isn’t that an inter­est­ing way of fram­ing it? “Those who found com­pelling the author­ity of these texts became econ­o­mists.” Won­der­ful phras­ing; neat idea, too. The five texts were writ­ten by Adam Smith, David Ricardo, John Stu­art Mill, Alfred Mar­shall… and Paul Samuel­son, who died recently, and who is the sub­ject of Warsh’s piece.

The piece also includes this fun anec­dote, new to me. Samuelson’s epochal text opens with an epi­gram from Willard Gibbs, a sci­en­tist and math­e­mati­cian: “Math­e­mat­ics is a lan­guage.” The story behind those words, from Muriel Rukeyser:

[Gibbs] would come to meet­ings — these fac­ulty gath­er­ings so full of cam­pus pol­i­tics, scarcely veiled maneu­vers, and aca­d­e­mic obsta­cle races — and leave with­out a word, stay­ing politely enough, but never speak­ing. Just this once he spoke. It was dur­ing a long and tir­ing debate on elec­tive courses, on whether there should be more or less Eng­lish, more or less clas­sics, more or less math­e­mat­ics. And sud­denly every­thing he had been doing stood up — and the past behind him, his [philol­o­gist] father’s life, and behind that, the long effort and voy­age that had been made in many life­times — and he stood up, look­ing down on the upturned faces, aston­ished to see the silent man talk at last, and he said, with empha­sis, once and for all: “Math­e­mat­ics is a language.”

“And sud­denly every­thing he had been doing stood up.” Jeez. More won­der­ful lan­guage. What an image. “Every­thing he had been doing stood up.”

 

Bangladesh Rural Advancement Committee

I sec­ond Nick Kristof’s rec­om­men­da­tion of BRAC—the Bangladesh Rural Advance­ment Committee—as an orga­ni­za­tion worth giv­ing to. With a name that unsexy, they’ve got to be good, right? In Bangladesh, BRAC is pretty much the gov­ern­ment; it pro­vides the sup­port and invest­ment that a good gov­ern­ment is sup­posed to pro­vide, while the “real” gov­ern­ment squab­bles with itself. Now BRAC is branch­ing out to other coun­tries as well. It’s an amaz­ing organization—and, for good or for ill, I think it’s a peek into the future.

 

Nine Chinas

This is ter­rific: a col­or­ful lit­tle map that breaks China down into nine dis­tinct regions. Prob­a­bly a bit too con­cise for real China experts, but I found the short­hand rev­e­la­tory and useful.

And here, the map’s cre­ator slots the regions one-by-one into a list of the world’s most pop­u­lous coun­tries. Man that is a lot of people.

Here’s the North Amer­i­can ana­logue for all of Snarkmarket’s Chi­nese read­ers! “Ecotopia”—talk about shorthand—but I love it.

 

Time, space, and warehouse robots

Alexis Madri­gal has a great piece about ware­house robots over at Wired Sci­ence. Here’s a nuance I would not have predicted:

The sys­tem adjusts to the nature of the prod­ucts and work­ers, too. In a typ­i­cal [robot ware­house], the humans are placed around the edges of the room. As the robots pick up loads of prod­ucts and put them back, they adjust the ware­house for greater effi­ciency. More pop­u­lar prod­ucts end up around the edges of the ware­house while more obscure prod­ucts, like those acid-washed bell bot­toms, end up buried deep in the stacks. The self-tuning nature of the sys­tem cre­ates big efficiencies.

How cool is that? The ware­house adapts. The phys­i­cal space becomes a map of the under­ly­ing cost of time—which isn’t just about raw dis­tance in this case, but about rep­e­ti­tion, too.

I real­ize this sort of map­ping exists else­where; I just can’t think of any­where else where it’s so flex­i­ble. For instance, I’m think­ing about this view of Lon­don that paints both hous­ing cost (in dol­lars) and travel cost (in min­utes) onto the map. Now if only bits of the city could scoot around on robot wheels and rearrange them­selves for max­i­mum efficiency…

See also: Matt Jones’ recent talk on time as a mate­r­ial that can be manip­u­lated and designed.

 

Pick your POV carefully

Paul Gra­ham, whose writ­ing I always enjoy, just posted a new piece about pub­lish­ing and, to a degree, the struc­ture of mar­kets for con­tent. I want to zoom in on one point:

What about iTunes? Doesn’t that show peo­ple will pay for con­tent? Well, not really. iTunes is more of a toll­booth than a store. Apple con­trols the default path onto the iPod. They offer a con­ve­nient list of songs, and when­ever you choose one they ding your credit card for a small amount, just below the thresh­old of atten­tion. Basi­cally, iTunes makes money by tax­ing peo­ple, not sell­ing them stuff. You can only do that if you own the chan­nel, and even then you don’t make much from it, because a toll has to be ignor­able to work. Once a toll becomes painful, peo­ple start to find ways around it, and that’s pretty easy with dig­i­tal content.

I think this is a cheat—aren’t all stores just toll­booths, then? You never buy goods at cost. There’s a markup, a tax, asso­ci­ated with the aggre­ga­tion, the cura­tion, the expe­ri­ence. This is as true for a gro­cery store as it is for iTunes and the App Store. And you can see Graham’s anti-iTunes argu­ment sort of fuzz out as the para­graph pro­ceeds: It starts very spe­cific, then breaks down into a restate­ment of that old information-wants-to-be-free dig­i­tal determinism.

But that’s not the point I want to make. Rather, it’s that almost all of this discussion—not just Graham’s, but the broader con­ver­sa­tion it’s part of—tends to oper­ate from one of two extreme points of view: either that of the con­sumer (who wants con­ve­nience and econ­omy) or that of the com­pany (which wants big prof­its, or at least a busi­ness model). I find myself wanting—sort of des­per­ately wanting—to hear from a dif­fer­ent group: the creators.

And, this is as much of a sur­prise to me as any­body else, but find­ing myself more and more in that position—the posi­tion of some­body who wants to make con­tent, and make money from that content—I see the Kin­dle Store and the App Store and I say: thank you.

Now lis­ten, I under­stand all of the prob­lems. I just got into another round of the iPhone: Is It Evil? con­ver­sa­tion last night. (Our con­clu­sion, same as always: yes, a lit­tle bit.) But if it’s not yet what we want it to be, at least it moves us in the right direc­tion. In iTunes and the App Store, an indi­vid­ual cre­ator can make some­thing and offer it to the world for a small sum, and peo­ple will actu­ally take her up on it. I wish that wasn’t so rev­o­lu­tion­ary… but it is!

Trust me, I get the argu­ment for free. I love Kevin Kelly’s strate­gies for sell­ing stuff in the age of command-D. Ran­som model, hello?

But at the same time, I don’t want to give up on sell­ing stuff quite yet. I don’t think the cen­tral les­son of the App Store is that peo­ple will suf­fer a tax if it’s small enough. Rather, I think it’s that peo­ple are happy to pay for things if it’s easy enough. And that’s espe­cially true when those things aren’t the prod­ucts of Super Amal­ga­mated Con­tent LLC, but rather of Indie Con­tent Haus, or bet­ter yet, of your friend Matt.

If that’s true, then Paul Graham’s argu­ment about iTunes leads us in the wrong direc­tion. Dig­i­tal deter­min­ism says it’s a tax, a toll booth, a tor­tured con­struct that denies the essen­tial nature of dig­i­tal con­tent. Prag­ma­tism says—without deny­ing that there’s room for improvement—that it’s a joy, a gift, an oppor­tu­nity engine.

Now, a ques­tion you could ask is this: Why isn’t iTunes proper—the music and video part—more like the App Store? The for­mer is open to indies, but still dom­i­nated by big cor­po­rate media. The lat­ter is open to big cor­po­ra­tions, but dom­i­nated (so far) by indies. What’s dif­fer­ent? How might you splice some of the App Store’s indie vigor into iTunes proper?

I think one strategy—which doesn’t really answer my ques­tion above—is to start think­ing hard about how to blur the lines between soft­ware and con­tent, and get some “con­tent expe­ri­ence apps” (I promise never to type that again) into the App Store. (Paul Gra­ham ends up say­ing some­thing sim­i­lar.) For what­ever rea­son, as a mar­ket, it’s work­ing for cre­ators. So maybe it’s sim­ply where creators—of many kinds—ought to go.