They also can appear at the top of search results

Tuesday, February 12th, 2019

To build a big line of exclusive products, Amazon is having other brands do most of the work:

The online retail giant is asking consumer-goods companies to create brands exclusively for Amazon after finding that developing them on its own is too costly and time-consuming, according to people familiar with the strategy.

Equal sweeteners and nutrition brand GNC are among the first to launch products through an accelerator program Amazon launched last year to outsource the work. Mattress maker Tuft & Needle also recently created a new brand called Nod exclusively for Amazon.

[...]

In exchange, brands get help launching their products on Amazon.com, faster customer feedback when testing new products, marketing support and revenue from the sales. They also can appear at the top of search results — a big draw, given Amazon’s platform lists an estimated 550 million items.

[...]

Amazon, on its own, also has been quietly growing the number of its in-house brands in recent years. Analysts estimate they now have more than 100. Those include the more obvious AmazonBasics brand, which makes everything from suitcases to batteries; the Happy Belly brand of foods; and the Mama Bear baby products brand. Amazon sometimes promotes its own brands higher in search results, like “Amazon’s Choice” and sponsored items, or default results in voice searches using Amazon’s Alexa virtual assistant.

[...]

Amazon is increasingly important for consumer product manufacturers. It now accounts for roughly half of all sales online, according to eMarketer.

It’s not a passive income; it’s a ton of work

Friday, January 11th, 2019

Apparently the secret to getting rich on Amazon is still safe:

In late 2016, McDowell and Bjork stumbled across a podcast hosted by Behdjou and Gazzola, normal guys who claimed they were making thousands of dollars working less than two hours a day on Amazon. The pair promised that anyone could do the same — all they needed to do was pay $3,999 for three months of coaching that would teach them everything they needed to know about the business. They’d learn how to source and ship a product from China, how to list it for an attractive markup on Amazon’s third-party marketplace, how to advertise it to consumers, and how to get them to leave good reviews. Amazon would take care of the logistics of storing and shipping, for a fee, through its Fulfillment by Amazon program. Behdjou and Gazzola even provided class participants with a manufacturing contact in China, and organized paid tours of Chinese merchandise markets.

At the time, the couple was living in a tiny New York apartment, struggling to make rent. McDowell was working a job she hated. Behdjou and Gazzola were offering a way out, and they seemed credible. They even posted screenshots showing the money they had made from selling supplements on Amazon. Bjork emailed a few people who had taken the class, all of whom said they were happy with their experience.

So the couple put the class fee on their credit card, started attending Monday night webinars, and picked their first two products: a glass wine decanter and plastic wine aerator, both sourced from China. Following Behdjou and Gazzola’s advice to purchase the minimum mass order possible, they ordered 3,000 decanters and 1,500 aerators and had them shipped directly to Amazon warehouses across the country, from which the company would send them directly to consumers.

Six months later, they had sold only about 100 decanters and a few hundred aerators. Customs taxes and shipping costs were starting to add up. The aerators kept breaking, and so Bjork and McDowell had to pay for returns. Amazon charged a seller fee of $39.99 a month, a per-piece fulfillment cost of a few dollars a unit, and a storage fee of 70 cents per cubic foot that increased during the holiday season. Then there was the cost of advertising, which they needed to actually get their product noticed amid the thicket of other people also selling wine accessories, also bought cheap from China, also on Amazon.

Maybe worst of all, the couple told me they were left alone to deal with all these headaches: Though their payment guaranteed them three months of coaching, they couldn’t reach Behdjou after the first few days, they say. (Behdjou disputes that he and Gazzola disappeared, writing in an email that all students get a response within 24 hours Monday through Friday.)

Within six months, McDowell and Bjork had spent nearly $40,000, with almost nothing to show for it. So they auctioned off what inventory they could, paid Amazon to destroy the rest, and got out of the business. “It’s not a passive income; [it’s] a ton of work,” McDowell told me. “We lost all our savings — everything we had.”

45.3 million of Netflix’s 137 million accounts watched Bird Box

Thursday, January 10th, 2019

Netflix rarely releases data on viewership of its content:

But in the case of “Bird Box,” a tale about a resourceful mother protecting her children from a homicidal force, the company said a record-setting 45.3 million of its 137 million accounts watched at least 70% of the movie in the first week of its release.

[...]

The movie’s budget is modest by Hollywood’s standards: about $30 million, according to a person familiar with the matter. Controlling costs while delivering content that lures in subscribers could become more important for Netflix. Its content spending has ballooned rapidly and reached an estimated $12 billion last year, according to industry analysts. Netflix hasn’t disclosed its 2019 programming budget yet.

Fake it until you make it

Saturday, December 29th, 2018

So many people want to be social media “influencers” that they’re now faking brand deals to look sponsored and thus successful:

A decade ago, shilling products to your fans may have been seen as selling out. Now it’s a sign of success. “People know how much influencers charge now, and that payday is nothing to shake a stick at,” said Alyssa Vingan Klein, the editor in chief of Fashionista, a fashion-news website. “If someone who is 20 years old watching YouTube or Instagram sees these people traveling with brands, promoting brands, I don’t see why they wouldn’t do everything they could to get in on that.”

But transitioning from an average Instagram or YouTube user to a professional “influencer” — that is, someone who leverages a social-media following to influence others and make money — is not easy. After archiving old photos, redefining your aesthetic, and growing your follower base to at least the quadruple digits, you’ll want to approach brands. But the hardest deal to land is your first, several influencers say; companies want to see your promotional abilities and past campaign work. So many have adopted a new strategy: Fake it until you make it.

Sydney Pugh, a lifestyle influencer in Los Angeles, recently staged a fake ad for a local cafe, purchasing her own mug of coffee, photographing it, and adding a promotional caption carefully written in that particular style of ad speak anyone who spends a lot of time on Instagram will recognize. “Instead of [captioning] ‘I need coffee to get through the day,’ mine will say ‘I love Alfred’s coffee because of A, B, C,’” Pugh told me. “You see the same things over and over on actual sponsored posts, so it becomes really easy to emulate, even if you’re not getting paid.”

Can’t realize a profit

Thursday, December 20th, 2018

Amazon is starting to realize that it sells a lot of CRaP — merchandise where it can’t realize a profit:

One example: bottled water from Coca-Cola Co. Amazon used to have a $6.99 six-pack of Smartwater as the default order on some of its Dash buttons, a small device that allows for automatic reordering with a single press. But in August, after working with Coca-Cola to change how it ships and sells the water, Amazon notified Dash customers it was changing that default item to a 24-pack for $37.20.

That raised the price per bottle to $1.55 from $1.17. And Coca-Cola will start shipping those orders directly to consumers, sparing Amazon the expense of shipping from its warehouses. Manufacturers shipping from their warehouses is something Amazon has asked more brands to do to cut its own costs.

Amazon told Coca-Cola that it was losing money on the smaller, cheaper shipments, according to people familiar with the matter.

I got them at Palessi

Sunday, December 2nd, 2018

Shoppers at the Palessi luxury shoe store found out that the chic boutique was not quite what they expected:

If you serve fast food on white tablecloths in a tony-looking restaurant, people sometimes think it’s haute cuisine. (At the very least, it tastes a lot different than it does when you’re scarfing it down from a drive-through bag).

It turns out you can do the same for bargain kicks by showcasing the footwear against the kind of chic backdrop usually reserved for luxury labels like Jimmy Choo and getting people to pay outrageous markups.

That’s what Payless did recently in Santa Monica, taking over a former Armani store and stocking it with $19.99 pumps and $39.99 boots. The chain, via agency DCX Growth Accelerator, invited groups of influencers to the grand opening of “Palessi” and asked their opinions on the “designer” wares.

Party goers, having no idea they were looking at discount staples from the mall scene, said they’d pay hundreds of dollars for the stylish shoes, praising the look, materials and workmanship. Top offer: $640, which translates to an 1,800 percent markup, and Palessi sold about $3,000 worth of product in the first few hours of the stunt.

Payless, or “Palessi,” did ring up those purchases but didn’t keep the money. Influencers got their cash back, along with free shoes. Their reactions caught in the short- and longer-form ads — those shocked “gotcha” moments — are fairly priceless.

New York Times picks up signal in a world full of noise

Monday, November 26th, 2018

I don’t follow Shane Parrish’s Farnam Street closely, but I’m familiar enough to be pleasantly surprised that it got coverage in the New York Times:

Shane Parrish was a cybersecurity expert at Canada’s top intelligence agency and an occasional blogger when he noticed something curious about his modest readership six years ago: 80 percent of his followers worked on Wall Street.

The blog was meant to be a method of self-improvement, helping Mr. Parrish deal with a job whose pressures had increased with the growing threat of global hacking. But his lonely riffs — on how learning deeply, thinking widely and reading books strategically could improve decision-making skills — had found an eager audience among hedge fund titans and mutual fund executives, many of whom were still licking their wounds after the financial crisis.

“People just found us,” Mr. Parrish said. “We became a thing on Wall Street.”

His website, Farnam Street, urges visitors to “Upgrade Yourself.” In saying as much, Mr. Parrish is promoting strategies of rigorous self-betterment as opposed to classic self-help fare — which appeals to his overachieving audience in elite finance, Silicon Valley and professional sports. His many maxims cite Ralph Waldo Emerson, Bertrand Russell and even Frank Zappa. (“A mind is like a parachute. It doesn’t work if it is not open.”)

[...]

Mr. Parrish’s site has drawn the attention of some of the biggest names in finance. Dan Loeb, one of the more prominent hedge fund executives on Wall Street, is a big fan. And Ray Dalio of Bridgewater, the world’s largest hedge fund, recently did a podcast with him.

[...]

Mr. Parrish joined the Communications Security Establishment, a division of Canada’s Defence Department, straight out of college. His first day was Aug. 28, 2001, and he was soon promoted in the tumult that followed the Sept. 11 attacks. Suddenly, he was managing a large staff at the age of 24.

Wanting to improve his decision-making skills, Mr. Parrish found inspiration in Charlie Munger — Warren Buffett’s longtime investment partner. Mr. Parrish quickly became an acolyte, drawn to Mr. Munger’s thoughts on multidisciplinary thinking and mental models.

He pored over Berkshire Hathaway annual reports and became a regular attendee of Mr. Buffett’s yearly meetings in Omaha. The name of his site is another tribute to the billionaire investor: Berkshire Hathaway’s address in Omaha is 3555 Farnam Street.

Last year, Mr. Parrish left intelligence work to tend to the site full time. He wouldn’t disclose how much his various projects were making.

The fall of Big Data and the rise of the Blockchain economy

Tuesday, October 30th, 2018

George Gilder’s Life After Google predicts the fall of Big Data and the rise of the Blockchain economy:

Famously, Google gives most of its content away for free, or (in comments Gilder credits to Tim Cook) if it’s free, you’re not the customer; you’re the product. That’s the least of it. Spanish has two words for “free”–gratis and libre. In our context it means gratis.

Let’s count the ways gratis benefits Google:

  • They are completely immune from any antitrust prosecution and most other regulatory oversight.
  • They can roll out buggy, beta software to consumers and improve it over time.
  • They don’t have to take responsibility for security. Unlike a bank, Google is at no risk if somehow your data gets corrupted or stolen.
  • They provide no customer support.
  • Your data doesn’t belong to you. Instead it belongs to Google, which can monetize it with the help of AI.
  • You get locked into a Google world, where everything you own is now at their mercy. (I’m in that situation.) Your data is precisely not libre.

Note that Google didn’t even bother to show up at the recent Congressional hearings about “fake news.” They consider themselves above the law (or, perhaps more accurately, below the law). They can get away with this because it’s free.

There are some disadvantages.

  • It’s not really free, but instead of paying with money you pay with time. Attention is the basic currency of Google-world.
  • People hate ads. “[O]nly 0.06 percent of smartphone ads were clicked through. Since more than 50 percent of the clicks were by mistake, according to surveys, the intentional response rate was 0.03 percent.” This works only for spammers. Ad-blockers are becoming universal.
  • Google thinks it can circumvent that by using AI to generate ads that will interest the user. No matter–people still hate them.The result is the value of advertising is declining. Gilder does not believe that AI will ever solve this problem. (I agree with him.)
  • Most important–Google loses any information about how valuable its products are. Airlines, for example, respond sensitively to price signals when determining which routes to fly, what equipment to use, what service levels to provide, etc. Price is the best communication mechanism known for conveying economic information. You immediately know what is valuable to consumers, and what isn’t.Google loses all that information by going gratis.Is Gmail more valuable than Waze? Google has no idea. As a result it has no way of knowing where to invest its money and resources. It’s just blindly throwing money at a dartboard.

Where did ranch dressing come from?

Friday, September 21st, 2018

Where did ranch dressing come from?

Steve Henson, a plumber from the tiny village of Thayer, Neb., came up with the dressing mix around 1950, during a stint in Anchorage as a construction worker, where he also served as an occasional cook for the crew. In that part of the world, perishable ingredients like fresh herbs, garlic and onions, and dairy products were not easy to come by.

By 1954, he and his wife, Gayle, had moved to California and bought a ramshackle property called Sweetwater Ranch, in the San Marcos Pass above Santa Barbara, Calif. They renamed it Hidden Valley, and opened it as a guest ranch. But according to their son, Nolan Henson, the place became even more popular as a steakhouse, with Steve’s dressing a favorite souvenir.

“It was all dry ingredients the way my dad made it,” said Nolan Henson, now 74, who grew up on the ranch. (Gayle died in 1993, Steve in 2007.)

“People carried it home in mayonnaise jars,” Mr. Henson said. “Seemed like we were always mixing it, and we put it on everything: steaks, vegetables, potatoes.”

Overwhelmed by demand, in the late 1950s the Hensons began packaging the dry ingredients in an envelope that could be presented or mailed to customers, who would add their own buttermilk and mayonnaise at home — much like a boxed cake mix, which was introduced to the mass market by Pillsbury in 1948.

The product was a runaway success. “The dressing pretty much took over the ranch,” said Mr. Henson, who spent hours as a child filling seasoning packets.

With that, ranch began to take over the nation, moving from the West to the Midwest and occupying salad bars through the 1970s; a shelf-stable version arrived on supermarket shelves in 1983. But according to Abby Reisner, the author of the new cookbook “Ranch” (Dovetail Press), ranch madness didn’t go national until 1986, with the introduction of Cool Ranch Doritos, tortilla chips that were infused with a distinctly creamy, oniony bite. Ranch was already popular on its own, but the combination of cream and crunch in one bite — a fusion of dip and chip — turned out to be a masterstroke.

Cool Ranch Doritos opened the door to ranch as a seasoning beyond salad. It began to show up frequently as a dip for French fries (replacing ketchup), for chips (instead of salsa) and for Buffalo chicken wings (pushing aside blue cheese dressing).

[...]

Ranch may be a modern phenomenon, but its flavor profile isn’t new at all. Many classic condiments also combine cream (or creaminess) with alliums (the family that includes garlic, onion, leeks and chives). Middle Eastern toum, Mediterranean aioli, Caesar dressing, French onion dip and the pasta sauce “Alfredo” served at places like Olive Garden all have the same profile: a mild, cooling base set against the heat of strong, pungent alliums.

That coolness is what makes ranch an appealing partner for food that is spicy or charred or deep-fried, and many of America’s favorite foods have those flavors front and center. (In case you don’t believe that ranch flavor represents the pinnacle of American culinary achievement, consider that ranch dressing is already called “American dressing” in many European supermarkets, and that the Doritos flavor we know as “Cool Ranch” goes by “Cool American.”)

Google’s leadership was quite dismayed by Trump’s election

Wednesday, September 12th, 2018

Breitbart just shared a video recorded by Google shortly after the 2016 presidential election, where the leadership is obviously dismayed:

  • (00:00:00 – 00:01:12) Google co-founder Sergey Brin states that the weekly meeting is “probably not the most joyous we’ve had” and that “most people here are pretty upset and pretty sad.”
  • (00:00:24) Brin contrasts the disappointment of Trump’s election with his excitement at the legalization of cannabis in California, triggering laughs and applause from the audience of Google employees.
  • (00:01:12) Returning to seriousness, Brin says he is “deeply offen[ded]” by the election of Trump, and that the election “conflicts with many of [Google’s] values.”
  • (00:09:10) Trying to explain the motivations of Trump supporters, Senior VP for Global Affairs, Kent Walker concludes: “fear, not just in the United States, but around the world is fueling concerns, xenophobia, hatred, and a desire for answers that may or may not be there.”
  • (00:09:35) Walker goes on to describe the Trump phenomenon as a sign of “tribalism that’s self-destructive [in] the long-term.”
  • (00:09:55) Striking an optimistic tone, Walker assures Google employees that despite the election, “history is on our side” and that the “moral arc of history bends towards progress.”
  • (00:10:45) Walker approvingly quotes former Italian Prime Minister Matteo Renzi’s comparison between “the world of the wall” with its “isolation and defensiveness” and the “world of the square, the piazza, the marketplace, where people come together into a community and enrich each other’s lives.”
  • (00:13:10) CFO Ruth Porat appears to break down in tears when discussing the election result.
  • (00:15:20) Porat promises that Google will “use the great strength and resources and reach we have to continue to advance really important values.”
  • (00:16:50) Stating “we all need a hug,” she then instructs the audience of Google employees to hug the person closest to them.
  • (00:20:24) Eileen Noughton, VP of People Operations, promises that Google’s policy team in DC is “all over” the immigration issue and that the company will “keep a close watch on it.”
  • (00:21:26) Noughton jokes about Google employees asking, ‘Can I move to Canada?’ after the election. She goes on to seriously discuss the options available to Google employees who wish to leave the country.
  • (00:23:12) Noughton does acknowledge “diversity of opinion and political persuasion” and notes that she has heard from conservative Google employees who say they “haven’t felt entirely comfortable revealing who [they] are.” and urged “tolerance.” (Several months later, the company would fire James Damore allegedly for disagreeing with progressive narratives.)
  • (00:27:00) Responding to a question about “filter bubbles,” Sundar Pichai promises to work towards “correcting” Google’s role in them
  • (00:27:30) Sergey Brin praises an audience member’s suggestion of increasing matched Google employee donations to progressive groups.
  • (00:34:40) Brin compares Trump voters to “extremists,” arguing for a correlation between the economic background of Trump supporters and the kinds of voters who back extremist movements. Brin says that “voting is not a rational act” and that not all of Trump’s support can be attributed to “income disparity.” He suggests that Trump voters might have been motivated by boredom rather than legitimate concerns.
  • (00:49:10) An employee asks if Google is willing to “invest in grassroots, hyper-local efforts to bring tools and services and understanding of Google products and knowledge” so that people can “make informed decisions that are best for themselves.” Pichai’s response: Google will ensure its “educational products” reach “segments of the population [they] are not [currently] fully reaching.”
  • (00:54:33) An employee asks what Google is going to do about “misinformation” and “fake news” shared by “low-information voters.” Pichai responds by stating that “investments in machine learning and AI” are a “big opportunity” to fix the problem.
  • (00:56:12) Responding to an audience member, Walker says Google must ensure the rise of populism doesn’t turn into “a world war or something catastrophic … and instead is a blip, a hiccup.”
  • (00:58:22) Brin compares Trump voters to supporters of fascism and communism, linking the former movement to “boredom,” which Brin previously linked to Trump voters. “It sort of sneaks up sometimes, really bad things” says Brin.
  • (01:01:15) A Google employee states: “speaking to white men, there’s an opportunity for you right now to understand your privilege” and urges employees to “go through the bias-busting training, read about privilege, read about the real history of oppression in our country.” He urges employees to “discuss the issues you are passionate about during Thanksgiving dinner and don’t back down and laugh it off when you hear the voice of oppression speak through metaphors.” Every executive on stage – the CEO, CFO, two VPs and the two Co-founders – applaud the employee.
  • (01:01:57) An audience member asks if the executives see “anything positive from this election result.” The audience of Google employees, and the executives on stage, burst into laughter. “Boy, that’s a really tough one right now” says Brin.

The ability to choose something simpler and more likely to endure

Tuesday, September 11th, 2018

Megan McArdle writes to a refrigerator dying young:

It turns out that refrigerators like the My First Fridge — the kind that quietly chug along decade after decade while needing only minor repairs — really are a thing of the past. According to the National Association of Home Builders, the average life span of a refrigerator is now just 13 years. And the German environmental agency found that between 2004 and 2013, the proportion of major appliances that had to be replaced in less than five years due to a defect rose from 3.5 percent to 8.3 percent. These days, we do not so much own our appliances as rent them from fate.

How did we become renters in our own homes? Peruse the Web, and you’ll discover a variety of explanations: outsourcing to suppliers who opt for cheapness rather than longevity; fancy computer-controlled features that add fancy problems; faster innovation cycles that leave inadequate time for testing; and government-imposed energy-efficiency standards that require a lot of fiddly engineering to comply with. But essentially, all of them boil down to one word: complexity. The more complicated something is, the more ways it can break.

When you are standing over the corpse of an appliance that died too young, it’s tempting to long for simpler days. But then, simpler isn’t the same as better. Replacement cycles may have shortened, but we can afford to replace our appliances sooner, because prices have fallen so dramatically. In 1979, a basic 17-cubic-foot Kenmore refrigerator cost $469 — or in today’s dollars, $1,735, which would have taken an average worker about 76 hours of labor to earn. It came with an ice maker, automatic defrost and some shelves. The nearest equivalent today has an extra cubic foot of storage, offers humidity-controlled crisper drawers and costs about a third as much to run. At $529, it represents under 20 hours of work at the average wage.

[...]

That’s the irony of modern life in so many ways, multiplying all our choices while taking away the most fundamental one: the ability to choose something simpler and more likely to endure.

eSports update

Saturday, September 8th, 2018

Tyler Cowen shares an eSports update:

Tournament prize pools now rival those for some of the biggest events in traditional sports, and global audiences for some big gaming events have surpassed 100 million viewers, driven largely by esports’ exploding popularity in Asia.

The lion’s share of esports revenue comes from corporate sponsorships, according to industry analysis firm Newzoo, with ticket sales, merchandising and broadcasting rights bringing in additional revenue. Newzoo estimates that esports will generate $345 million in revenue in North America this year, in addition to more than half a billion dollars in revenue overseas.

Commenter Stuart “worked in an earlier era of this business (2008)” and notes that “it is a weird world”:

A key challenge I perceived then as now is the opaque visible display of athleticism. The gap between a great tennis player and myself is quite easy to see. I can pick up a racket, but I can’t do much more. In contrast, I can play the same games as these pros and feel accomplished by virtue of a sliding scale of difficulty which games have relied on for decades. Certainly a youth league for Tennis offers a similar analogy to this, but games are designed to be winnable, creating some ambiguity about the difference between the average joe and the pros. The more one plays, the clearer the contrast becomes, but the level of understanding on the part of the general public to the nuance of this struck me then as the reason why it would not gain mass appeal.

What has happened in the intervening decade seems to be a continued disregard for any ‘mainstream’ audience but the continued development of a formerly niche viewership which can appreciate the nuance, strategy and skill on display.

Like other ‘nerdy’ pursuits, eSports still seem to wrestle with a hunger for mainstream acceptance (e.g. lobbying for inclusion in the Olympics), but are clearly at their best when speaking to their core, which is growing by the year.

As another commenter noted, the incentives are unusual in eSports, where a developer owns the game. “Imagine what the NFL would do differently if they were trying to maximize the number of people playing football instead of the number of people watching football.”

Collaborate on complex problems, but only intermittently

Tuesday, August 28th, 2018

A new study suggests that teams should collaborate on complex problems, but only intermittently:

Bernstein, Assistant Professor Jesse Shore of the Questrom School of Business at Boston University, and Professor David Lazer of Northeastern University put together and studied a number of three-person groups performing a complex problem-solving task. The members of one set of groups never interacted with each other, solving the problem in complete isolation; members of another set constantly interacted, as we do when equipped with always-on technologies; and members of the third set of groups interacted only intermittently.

From prior research, the researchers anticipated that the groups whose members never interacted would be the most creative, coming up with the largest number of unique solutions — including some of the best and some of the worst — and a high level of variation that sprang from their working alone. In short, they expected the isolated individuals to produce a few fantastic solutions but, as a group, a low average quality of solution due to the variation. That proved to be the case.

The researchers also anticipated that the groups whose members constantly interacted would produce a higher average quality of solution, but fail to find the very best solutions as often. In other words, they expected the constantly interacting groups’ solutions to be less variable but at the cost of being more mediocre. That proved to be the case as well.

But here’s where the researchers found something completely new: Groups whose members interacted only intermittently preserved the best of both worlds, rather than succumbing to the worst. These groups had an average quality of solution that was nearly identical to those groups that interacted constantly, yet they preserved enough variation to find some of the best solutions, too.

Perhaps the most interesting result was that when their interactions were intermittent, the higher performers were able to get even better by learning from the low performers. When high and low performers interacted constantly, the low performers tended to simply copy high performers’ solutions and were in turn generally ignored by the high performers. But when their interactions were intermittent, the low performers’ ideas helped the high performers achieve even better solutions.

Bernstein and his co-authors see a number of workplace implications for these findings, including the advantages of alternating independent efforts with group work over a period of time. In some ways, that’s how work traditionally has been done in organizations — with individuals working alone, then coming together in a meeting, then returning to work alone. But advancing technology has changed those cycles.

Extraordinarily pessimistic, and yet still extraordinarily motivational

Saturday, August 11th, 2018

Peter Thiel speaks to Die Weltwoche, in English — after beginning the conversation in German with an American accent:

At the moment, Silicon Valley still looks all-powerful.

The big question is: Will the future of the computer age be decentralized or centralized? Back in the 60s, you had this Star Trek idea of an IBM computer running a planet for thousands of years, where people were happy but unfree. Today, again we are thinking that it is going to be centralized: Big companies, big governments, surveillance states like China. When we started Paypal in 1999, it was exactly the opposite: This vision of a libertarian, anarchistic internet. History tells me that the pendulum has swung back and forth. So, today I would bet on decentralization and on more privacy. I don’t think we are at the end of history and it’s just going to end in the world surveillance state.

What has become the problem with Silicon Valley?

One of the paradoxes of Silicon Valley is that this internet technology revolution is supposed to get rid of the tyranny of place and geography. And yet, it was all happening in one place. There is, however, always a tipping point with network effects. At the beginning, they are very positive, but at some point they can become negative. In economic terms, they become negative when the costs get too high. If you have to pay 2000 dollars a month for a one-bedroom apartment in San Francisco, maybe that is a sign of the boom. But when it is 4000 dollars a month – with a city government where the police don’t work, the roads don’t work, the schools don’t work – 4000 dollars is just a very high tax, in effect. There is also a cultural component: At one point, the wisdom of crowds tips into the madness of crowds – and you end up with a sort of conformity, lemming-like behavior. It actually becomes a somewhat less creative place.

You label yourself a “contrarian”. How did you become one? How does one become a contrarian?

It is a label that has been given to me, not one that I give normally to myself. I don’t think a contrarian per se is the right thing to be. A pure contrarian just attaches a minus sign to whatever the crowd thinks. I don’t think it should be as simple as that. What I think is important for people is to try to think very hard for oneself. But yes, I do deeply mistrust all these kinds of almost hypnotic mass and crowd phenomena and I think they happen to a disturbing degree.

Why do they happen in a supposedly enlightened society?

The advanced technological civilization of the early 21st century is a complicated world where it is not possible for anybody to think through everything for themselves. You cannot be a polymath in quite the way people were in the 18th century enlightenments. You cannot be like Goethe. So there is some need to listen to experts, to defer to other people. And then, there is always the danger of that going too far and people not thinking critically. This happens in spades in Silicon Valley. There is certainly something about it that made it very prone to the dotcom bubble in the nineties or to the cleantech bubble in the last decade.

Tell us about how your support for Donald Trump for president of the United States was received in the Silicon Valley.

That was quite striking. My support for Donald Trump was, on some level, the least contrarian thing I have ever done. If it is half the country, it cannot be that contrarian. And yet, in the Silicon Valley context it has felt extraordinarily contrarian. It is not that politics is the most important thing. I think there are many things that are much more important than politics: Science is more important, technology is more important, philosophy, religion… We normally think that political correctness is literally about politics. But politics is sort of a natural place to start. If you cannot even have differences of opinion in politics, that’s a sign that things are very unhealthy.

What was unique about the Trump campaign?

Republican candidates have always been way too glibly optimistic about everything. I’ve thought for many years that it was critical for the Republicans to somehow run a more pessimistic candidate just because that was a more honest description of what was going on. It is very hard to know how to do that because if you are too pessimistic, you demotivate people: If everything is just going down the drain, no point even voting for me. Somehow, the genius of Trump was that it was extraordinarily pessimistic, and yet still extraordinarily motivational. The slogan “Make America Great Again”, the most pessimistic slogan of any presidential candidate in a hundred years: The country used to be great, it is no longer great. That is a shocking, shocking statement!

Another issue that is debated very controversially is Trump’s trade policy. People are shocked by his imposition of tariffs.

At the center of this is the question with China. The US exports something like 100 bn a year to China, we import 475 bn. What’s extraordinary, is that if we had a globalizing world, we would actually expect the reverse to hold: you would expect the US to have trade surpluses with China and current account surpluses because we would expect that there is a higher return in China because it is a faster growing country than the US. This is what it looked, let’s say, in 1900, when Great Britain had a trade surplus of 2 percent and a current account surplus of 4 percent of GDP. And the extra capital was invested in Argentinean railroads or Russian bonds.

The fact that the US does not have a surplus, that actually it has a massive deficit, tells you that something is completely wrong with the standard globalization picture that we have. It is sort of like: Chinese peasants are saving money and it is flowing uphill into low-return investments in the US and bonds in Europe with negative interest rates. There is something completely crazy about that dynamic.

What’s your view on Switzerland?

Switzerland is an extraordinarily well functioning country. I don’t like the neighborhood it is in, but it is really remarkable. If you compare Switzerland with Austria or Scandinavia, human capital is equally good but the per capita income in Switzerland is 50 to 100 percent higher. It does tell you that there is something that people are doing that is dramatically better. The question is whether its cities are big enough. If you are a talented young person: Do you move to Geneva or do you move to London? It was good if Switzerland had a somewhat better answer to that sort of question. But as I stated at the beginning, I think the technology will be more decentralized and so I think what has been a limitation for Switzerland will be much less going forward.

Are you jealous that you didn’t invent Bitcoin?

It is hard to be jealous of something that you weren’t remotely capable of doing. I have to acknowledge I would never come up with anything like that. So I can’t even be jealous. I was very interested in all these virtual currencies in the late 90s. We started Paypal thinking about that, but at the end it was a payment system for existing fiat money. Somehow, that experience weirdly primed me to underestimate Bitcoin early on. It was on the radar in 2011 and there were people telling me I should buy it, and we didn’t really get involved until 2014. When you have experiences and you learn things, it is often very dangerous and my experience in the late 90s was that cryptocurrencies didn’t work. And it was largely correct, but you always have to be open to think about it.

(Those are just some of the questions and answers.)

Why does tech have so many political problems?

Monday, August 6th, 2018

Why does tech have so many political problems? Tyler Cowen suggests some reasons:

  • Most tech leaders aren’t especially personable. Instead, they’re quirky introverts. Or worse.
  • Most tech leaders don’t care much about the usual policy issues. They care about AI, self-driving cars, and space travel, none of which translate into positive political influence.
  • Tech leaders are idealistic and don’t intuitively understand the grubby workings of WDC.
  • People who could be “managers” in tech policy areas (for instance, they understand tech, are good at coalition building, etc.) will probably be pulled into a more lucrative area of tech. Therefore there is an acute talent shortage in tech policy areas.
  • The Robespierrean social justice terror blowing through Silicon Valley occupies most of tech leaders’ “political” mental energy. It is hard to find time to focus on more concrete policy issues.
  • By nature, tech leaders are disagreeable iconoclasts (with individualistic and believe it or not sometimes megalomaniacal tendencies). That makes them bad at uniting as a coalition.
  • The industry is so successful that it’s not very popular among the rest of U.S. companies and it lacks allies. (90%+ of S&P 500 market cap appreciation this year has been driven by tech.) Many other parts of corporate America see tech as a major threat.