Creating a Nation of Readers

Wednesday, September 24th, 2014

Publishers gave away over 100 million books during World War IIgood books, in a disposable format:

Serious books were hard to find before the war. An industry study in 1931 highlighted the book trade’s limited audience. Nineteen out of every 20 books sold by the major publishing houses cost more than two dollars, a luxury even before the Depression. Those who could afford them often struggled to find them. Two out of three counties in America lacked any bookstore, or even so much as a department store, drugstore, or other retailer selling enough books to have an account with a publishing house. In rural areas, small towns, and even mid-sized cities, dedicated customers bought their books the way they bought other household goods, picking the titles out of mail-order catalogs. Most did not bother.

There was another, less-reputable class of books, though, that enjoyed broader distribution. Cheap mysteries, westerns, and comics could be snapped up at newsstands in paperbound editions that cost far less to produce than hardcover books. Throughout the 1920s and ’30s, publishers tried to take advantage of this format to publish a wider range of books. Most efforts failed. Then, in 1939, two new entrants changed the equation. Pocket Books and Penguin Books each offered a mix of new titles and reprints of hardcover books, including some of a literary bent. More importantly, they sold these paperback books on magazine racks.

Americans could put down a quarter and pick up a book all over town, from train stations and drugstores. Within a year, Americans bought 6 million paperback books. By 1943, Pocket Books alone printed 38 million copies. “It’s unbelievable,” said the head of Random House. “It’s frightening.”

Old-line publishers had good reason to be scared. They were in the business of selling a premium product to an affluent audience. The sudden flood of paperbacks threatened to swamp their refined trade and erode its prestige. The cheap, disposable format seemed best suited to works of little lasting value. That Penguin and Pocket Books included some distinguished titles on their lists threatened the stability of these categories, even as their sales still tilted heavily toward the lower end of the spectrum. Paperbacks were expanding the market for books, but that market remained divided.

Then, war intervened. The key actors in the book trade organized themselves into the Council on Books in Wartime, hoping to use books to advance the war effort. In February of 1943, they circulated an audacious proposal. They proposed to print and sell millions of books to the army, for just six cents a volume.

Hardcover books could not possibly be produced so cheaply. But magazines could. So the Council decided to use magazine presses, printing two copies on each page, and then slicing the book in half perpendicular to the binding. The result was a book wider than it was tall, featuring two columns of text for easier reading in low light. The real innovation, though, was less technological than ideological. The publishers proposed to take books available only in hardcover form, and produce them in this disposable format.

The plan, breathtaking in its ambition, was sure to engender skepticism among publishers asked to donate the rights to some of their most valuable property. So the chair of the committee, W.W. Norton, took care to appeal not just to the patriotism of his fellow publishers, but also to their pursuit of profits. “The net result to the industry and to the future of book reading can only be helpful,” he explained. “The very fact that millions of men will have the opportunity to learn what a book is and what it can mean is likely now and in postwar years to exert a tremendous influence on the postwar course of the industry.”

The program turned The Great Gatsby into a success. Apparently A Tree Grows in Brooklyn was hugely popular with the troops.

(Hat tip to Steve Sailer.)

Jack and Jack

Friday, September 19th, 2014

Being famous in the age of social media means you can have a giant tour bus with your face on it and a line of screaming teenage fans, even if no one else in the world cares:

Jack and Jack — as their Vine fans affectionately call them — represent your classic new millennial celebrities. [...] At the end of their junior year in high school, they started filming Vines together as a comedy duo, without bigger intentions of fame. But one breakout clip of theirs — “The Nerd Vandals” — went viral. That was all it took to get the celebrity train going.

[...]

After that clip, Johnson and Gilinsky’s fan base started growing of its own volition. They had 1,000 followers when Jack Johnson went away to summer camp, and when he returned they hit 25,000. Now, roughly a year later, they’re up to 4.4 million followers on Vine, half a million subscribers on YouTube, and more than a million followers apiece on Instagram.

[...]

At the time of publishing this story, their biggest hit, “Tides,” is currently number 7 on the iTunes charts, behind Taylor Swift’s “Shake It Off” and newcomer Meghan Trainor’s surprise summer hit “All About that Bass.” The only other artists in front of Johnson and Gilinsky are major names like Maroon 5 and Ariana Grande. In other words, the two teen boys are killing it.

[...]

“It’s so weird,” Johnson says. “We have this fan base of millions of teenage girls, but no one knows it. It stays between these teenage girls.”

The Tim Ferriss Show

Tuesday, September 16th, 2014

If you enjoyed Peter Thiel’s recent AMA, you might also enjoy his quasi-interview on The Tim Ferriss Show.

For that matter, you might also enjoy the previous episode, with the most interesting man in the world, Kevin Kelly.

Ask Peter Thiel Anything

Thursday, September 11th, 2014

Peter Thiel is doing a Reddit AMA. Some highlights:

  • Most people deal with aging by some strange combination of acceptance and denial. I think the psychological blocks to thinking about aging run very deep, and we need to think about it in order to really fight it.
  • The zero-sum world [The Social Network] portrayed has nothing in common with the Silicon Valley I know, but I suspect it’s a pretty accurate portrayal of the dysfunctional relationships that dominate Hollywood.
  • Start with focusing on a small market and dominate that market first.
  • What did you think when you first met Elon Musk? Very smart, very charismatic, and incredibly driven — a very rare combination, since most people who have one of these traits learn to coast on the other two.
    It was kind of scary to be competing against his startup in Palo Alto in Dec 1999-Mar 2000.
  • Is Palantir a front for the CIA? No, the CIA is a front for Palantir.
  • If technology involves doing more with less, than US health care (like US education) is the core of “anti-technology” in this country: For the last four decades, we have been spending more and more for the same (or even for less).
  • At 22, I didn’t think it was important to meet people.
  • In your view, has the Thiel Fellowship been a success? Yes, on both a micro and a macro scale.
    Micro: the 83 fellows have collectively raised $63 million, and a number of their companies are tracking towards solid Series B venture rounds. Almost all of them did and learned far more than they would have in college.
    Macro: we started an important debate about the education bubble. Student debt is over $1 trillion in this country, and much of that money has gone to pay for lies that people tell about how great the education they received was.
  • I like the genre of past books written about the future, e.g.: Francis Bacon, The New Atlantis; JJ Servan-Schreiber, The American Challenge; Norman Angell, The Great Illusion; Neal Stephenson, The Diamond Age.
  • In the Soviet Union, chess was considered a sport — and I think that’s the one thing the communists got right.
  • I don’t agree with the libertarian description of the NSA as “big brother.” I think Snowden revealed something that looks more like the Keystone Kops and very little like James Bond.
  • Most people believe that capitalism and competition are synonyms, and I think they are opposites. A capitalist accumulates capital, and in a world of perfect competition all the capital gets competed away: The restaurant industry in SF is very competitive and very non-capitalistic (e.g., very hard way to make money), whereas Google is very capitalistic and has had no serious competition since 2002.
  • PayPal built a payment system but failed in its goal in creating a “new world currency” (our slogan from back in 2000). Bitcoin seems to have created a new currency (at least on the level of speculation), but the payment system is badly lacking.
    I will become more bullish on Bitcoin when I see the payment volume of Bitcoin really increase.
  • What is your view on Neoreaction? Sounds like a self-contradiction — if you’re reactionary, why do you need the “neo?”
  • I think there’s been a Gresham’s Law in science funding in this country, as the political people who are nimble in the art of writing government grants have gradually displaced the eccentric and idiosyncratic people who typically make the best scientists. The eccentric university professor is a species that is going extinct fast.
  • If our great expectations about the future are not realized, then we need to save way more than we are doing today. China (with 40% savings) is perhaps more “rational” than the US (with about 0% savings), at least in a world of general stagnation.
  • Sociopathic investor behavior that worked shockingly well in the 1980s and 90s will work much less well in today’s more transparent and founder-centric world.
    As an investor, I think one must always maintain a certain amount of humility. There is only so much we can do to help the companies in which we invest. And because of this, the act of making the investment (rather than the ability to fix things later) remains by far the most important thing we do.
  • A sense of mission is critical, but I think the word “social” is problematically ambiguous: it can mean either (1) good for society, or (2) seen as good by society.
    In the second meaning, it leads to me-too copycat companies. I think the field of social entrepreneurship is replete with these, and that this is one of the reasons these businesses have not been that successful to date.
  • Biggest mistake ever was not to do the Series B round at Facebook.
    General lesson: Whenever a tech startup has a strong up round led by a top tier investor (Accel counts), it is generally still undervalued. The steeper the up round, the greater the undervaluation.
  • Yes, I think [Henry] George is a really interesting thinker. The idea that we should tax land heavily (and perhaps not tax anything else at all) is very interesting, since many of the bad monopolies in our society involve the unholy coalition of urban slumlords and pseudo-environmentalists.
  • I think Andreessen is half-right: Snowden is both a hero and a traitor.
    It is really unfortunate that there were no internal checks in our system, and so it took something like Snowden breaking all the rules for us to have a serious discussion about the NSA.
  • Even when one understands that exponential growth and exponential forces are incredibly important, it is still hard to internalize this. PayPal was growing at 7%/day at the time of the launch (Oct 99-Apr 2000, from 24 users to 1 million), and we did not fully fathom the rocket we were riding.
  • I do not find myself fully on the side of any of our political leaders — because none of them are fully on my side.

Minerva Project Business Plan

Tuesday, September 9th, 2014

The Minerva Project has an unusual business plan:

To seed this first class with talent, Minerva gave every admitted student a full-tuition scholarship of $10,000 a year for four years, plus free housing in San Francisco for the first year. Next year’s class is expected to have 200 to 300 students, and Minerva hopes future classes will double in size roughly every year for a few years after that.

Those future students will pay about $28,000 a year, including room and board, a $30,000 savings over the sticker price of many of the schools — the Ivies, plus other hyperselective colleges like Pomona and Williams — with which Minerva hopes to compete. (Most American students at these colleges do not pay full price, of course; Minerva will offer financial aid and target middle-class students whose bills at the other schools would still be tens of thousands of dollars more per year.) If Minerva grows to 2,500 students a class, that would mean an annual revenue of up to $280 million. A partnership with the Keck Graduate Institute in Claremont, California, allowed Minerva to fast-track its accreditation, and its advisory board has included Larry Summers, the former U.S. Treasury secretary and Harvard president, and Bob Kerrey, the former Democratic senator from Nebraska, who also served as the president of the New School, in New York City.

Nelson’s long-term goal for Minerva is to radically remake one of the most sclerotic sectors of the U.S. economy, one so shielded from the need for improvement that its biggest innovation in the past 30 years has been to double its costs and hire more administrators at higher salaries.

[...]

Minerva is built to make money, but Nelson insists that its motives will align with student interests. As evidence, Nelson points to the fact that the school will eschew all federal funding, to which he attributes much of the runaway cost of universities. The compliance cost of taking federal financial aid is about $1,000 per student—a tenth of Minerva’s tuition—and the aid wouldn’t be of any use to the majority of Minerva’s students, who will likely come from overseas.

Subsidies, Nelson says, encourage universities to enroll even students who aren’t likely to thrive, and to raise tuition, since federal money is pegged to costs. These effects pervade higher education, he says, but they have nothing to do with teaching students. He believes Minerva would end up hungering after federal money, too, if it ever allowed itself to be tempted. Instead, like Ulysses, it will tie itself to the mast and work with private-sector funding only. “If you put a drug”—federal funds—“into a system, the system changes itself to fit the drug. If [Minerva] took money from the government, in 20 years we’d be majority American, with substantially higher tuition. And as much as you try to create barriers, if you don’t structure it to be mission-oriented, that’s the way it will evolve.”

Peter Thiel’s Contrarian Strategy

Friday, September 5th, 2014

Roger Parloff of Fortune describes Peter Thiel:

A gifted rhetorician and provocateur with a bottomless pocketbook, Thiel has drawn upon his wide-ranging and idiosyncratic readings in philosophy, history, economics, anthropology, and culture to become perhaps America’s leading public intellectual today, assuming a mantle once held by the likes of Thorstein Veblen or Norman Mailer. The conspicuous difference is that Thiel—a libertarian, gay Christian—espouses views that are far harder to anticipate, and he has earned his pulpit largely through commercial rather than literary or scholarly masterworks.

Flatley’s Law

Friday, August 29th, 2014

Over the past 13 years, the cost of sequencing DNA has dropped from $100 million per human genome to only $1,000:

The only thing more extraordinary than the growth rate of the sequencing revolution is that the beneficiary is a single company, Illumina of San Diego, and most of the credit for the rate of change can be laid at the feet of one entrepreneur, Chief Executive Jay Flatley. Thanks largely to Flatley’s leadership, Illumina emerged as the dominant maker of DNA sequencers eight years ago and has maintained 80% market share despite an assault by several well-funded competitors.

Since 2008 Illumina’s sales and profit have both increased 147%, to $1.42 billion and $125 million, respectively, as the stock increased 617% and the company’s market capitalization reached $23 billion.

TwistRate

Tuesday, August 26th, 2014

Crowdfunding sites like Kickstarter have decided that they simply cannot allow firearm projects to sully their mission, so now TwistRate aims to fill the gap:

TwistRate is Americans coming together online to build the innovations, dreams and causes of America’s veterans, service members, law enforcement, outdoor enthusiasts, fishing and hunting communities. We bring your ideas to life, giving you the tools to take your great ideas to others in your community so they can benefit from your ingenuity. TwistRate brings communities together to fund their own, build their own and make their own – all on their own.

TwistRate and you make the American Dream a reality by connecting the dreamers with the dollars.

My first thought is, TwistRate? You couldn’t think of a better firearms metaphor for getting something going?

How Marvel Became the Envy (and Scourge) of Hollywood

Friday, August 15th, 2014

Marvel became the envy (and scourge) of Hollywood through its CEO, Isaac “Ike” Perlmutter:

Under his tightfisted management, Marvel has become one of the most admired, envied and, in some quarters, resented entertainment companies. The 300-employee outfit has thrived despite insistence on ever-stricter creative controls and a reputation for extreme cheapness that strikes many accustomed to old-school industry dealings as disrespectful.

[...]

Perlmutter is not featured on Disney’s website (conversely, the heads of its Pixar and Lucasfilm divisions are), but he has shown no sign of relaxing on fiscal control simply because Marvel has become part of a big conglomerate. When staff moved from Manhattan Beach to the Disney lot in Burbank, a source says Perlmutter declined to upgrade the company’s worn furniture because he did not want to change the culture. “Disney owns Marvel, but Ike gets to control every budget and everything spent on marketing, down to the penny,” says a studio insider.

Disney does not disclose Marvel’s contribution to its bottom line, but a non-Disney executive says Marvel hits are more profitable than tentpoles at other studios because of the company’s deals with talent. “Avengers was a $200 million movie, but they’re not giving away a lot of their back end,” he says.

The Israel-born Perlmutter, who lives in New York and Palm Beach, Fla., with wife Laura, does not give interviews, and photos are all but nonexistent (except for a 1985 portrait in which he appears dark, handsome and slightly fearful-looking). He and fellow Israeli army veteran Avi Arad got into the Marvel business via a toy company they owned during the early 1990s. On the Marvel board, Perlmutter helped steer the company through bankruptcy protection and survived a battle with investor Carl Icahn to become CEO in 2005 — after which Marvel’s plan to produce its own movies was hatched. Perlmutter is said to have attended the Iron Man premiere in disguise and has not been spotted at a Marvel event since. He relishes his reputation as secretive and frugal, according to a top executive who has dealt with him: “It’s things like, ‘Why do you need a new pencil? There’s 2 inches left on that one!’ ”

Some at Disney are so intimidated, says one source, that they believe “he has spies or is listening in on phone calls,” though this person allows that “it could be paranoia.” (Or not: A Marvel veteran says “the way to curry favor is to tell Ike that someone spent more than he should have.”) Perlmutter once complained that journalists at a junket were allowed two sodas each instead of one, and Disney ran out of food at an Avengers media event because of Perlmutter’s constraints, causing reporters to pilfer from Universal’s nearby suite for The Five-Year Engagement.

Perlmutter allows actors traveling on Marvel business only a single companion. A source with ties to the CEO says he makes no apologies. “He’ll pay for the A-list talent — they get to travel with their entourage,” says this person. Otherwise, he rejects Hollywood excess: “He’s seen companies go into bankruptcy, and he thinks shareholders look at this stuff — and he doesn’t believe in it.”

Perlmutter is one of the top individual holders of Disney stock — the company declines to say how much he owns — and is said to have pressed Iger to dismiss studio chief Rich Ross in 2012. (Pixar’s John Lasseter also is said to have lost patience with Ross.) Perlmutter also has been identified as a force behind the 2011 departure of Andy Mooney as head of Disney’s consumer products division. (Perlmutter is said to have felt Mooney was not sufficiently focused on Marvel products and wanted more aggressive deals with licensees. Mooney, now CEO of Quiksilver, declined comment.)

[...]

And according to the FT, when Marvel replaced Terrence Howard with Don Cheadle in Iron Man 2 to save money, Perlmutter was alleged to have told colleagues that no one would notice because both actors are black.

Propane-Powered Motor Scooter

Tuesday, August 5th, 2014

The ProGo 3000 is a (proposed) propane-powered motor scooter that runs on 16.4-ounce canisters:

Technical Specifications

Engine: 25cc 4-stroke
Fuel Type: Propane
Start up: Pull start engine
Acceleration: Thumb throttle
Brakes: Disk
Tire size: 8 inch
Speed: Up to 20 mph
Dry Weight 35 lb.
Frame: Steel
Max Weight: 250 lb.
Run Time: 2-3 hours / 30-40 miles

They plan on retailing them for $449.

ProGo 3000

How America Fell in Love with Vitamins

Tuesday, August 5th, 2014

Brian Alexander tells the story of how America fell in love with vitamins and fortified foods, how public universities were transformed into money-making patent mills serving corporations, and how a clever young man, an electrical engineer from Cincinnati born with an ample supply of ambition and drive, became an unlikely celebrity and was hailed as a genius — all because of vitamin D:

In the beginning, fame was the prize in vitamin research, not money. This is why most of the early research on vitamins took place in universities: Scientists were freed from the demands of commerce. Patenting a discovery was taboo. The ethos demanded science for the sake of science, and for the public good.

But business soon developed a simple formula: If a little bit of vitamin in food was good, more had to be better. The only way to get lots more in one gulp was with a pill, or by finding some way to add more of it to food. Vitamin D, the scourge of rickets, was an especially good candidate for commercialization because most food didn’t have it at all.

With the cultures of business and academia circling each other, it didn’t take long for someone to break the taboo. The big leap came in 1922 when Frederick Banting and Charles Best at the University of Toronto announced that they had treated diabetes with a purified cow pancreas extract called insulin. The two scientists quickly patented their process and gave the rights to the university — which then licensed Eli Lilly and Company to produce insulin for the U.S. and Latin American markets in return for a 5 percent royalty on net sales. Lilly would go on to dominate the insulin market for the next 50 years and grow into a pharmaceutical powerhouse, and the university reaped millions.

For American scientists, it was a eureka moment: Suddenly, universities — and select researchers — could get rich. George Sperti would eventually be one of those lucky researchers. But so would the man who ultimately outplayed him in the arena of science and commerce, relegating Sperti to a curious, if still famous, footnote.

Though he had a nice-guy reputation among his lab employees, Harry Steenbock zealously guarded his turf. You had to if you worked in the vitamin field. An agricultural biochemist at the University of Wisconsin, he had reason to envy the Toronto scientists. His first push to patent a vitamin discovery had been pooh-poohed by the university. He never forgot the slight.

In 1924 Steenbock published a paper in the Journal of Biological Chemistry detailing an experiment that involved exposing rat food to light from a quartz-mercury vapor lamp. Rats who ate the irradiated food did not get rickets; control rats did. Somehow, and he wasn’t sure exactly how, the light had activated anti-rachitic properties in the food. Recognizing the potential, Steenbock included an addendum to the paper: “To protect the interest of the public in the possible commercial use of these and other findings soon to be published, applications for Letters of Patent…have been filed with the United States Patent Office.”

It was a bold move, and in some corners of the medical-industrial complex, an outrage. Children were suffering and Steenbock was patenting a possible preventive? The British Drug Houses, a trade group, tried to shame him, declaring in a letter: “As you know, extremely important contributions to this discovery were made by workers in this country who refused to seek any patent protection for their work.”

Steenbock shrugged off the criticism. He foresaw big commercial possibilities for vitamin D. With the help of a tough-minded Chicago patent attorney and Wisconsin alum named George Haight, he set up an independent, private, nonprofit business group called the Wisconsin Alumni Research Foundation (WARF). Though not part of the university, its aim was to fund University of Wisconsin research by licensing intellectual property created by university scientists. For the time being, that meant Steenbock, who remained intimately involved in WARF’s vitamin D deals.

Quaker Oats was the first; WARF made a secret agreement with the company in 1926. Quaker could experiment with what was being branded as the “Steenbock Process” for small yearly royalties. If the company commercialized a product, it would pay WARF an annual fee of up to $60,000 (almost $800,000 in today’s dollars) once sales began.

Movie Film at Death’s Door

Friday, August 1st, 2014

Kodak’s motion-picture film sales have plummeted 96% since 2006, the Wall Street Journal reports — from 12.4 billion linear feet to an estimated 449 million this year:

With the exit of competitor Fujifilm Corp. last year, Kodak is the only major company left producing motion-picture film.

Why Comic Books Are Almost Dead

Friday, July 25th, 2014

Sean J. Jordan explains why comic books are almost dead:

Comics used to be produced in a model very similar to magazines; comics were sold on newsstands and via subscriptions, and the cost of each comic was low because the comic books were being mass-produced and carried advertisements. Part of the appeal of comic books was their relative inexpense, but there was also a huge incentive for readers to trade comics because there were simply too many available for most people (namely, kids) to keep up on.

That all changed in the late 1980s and early 1990s, when comics went from being newsstand items to collectibles, much like the baseball card market had already done. Comics had traditionally been published on low-quality newsprint with a 4-color process that didn’t allow for a lot of variety. (One of the reasons traditional superheroes are so brightly colored has to do with this lacking palette.)  In the 1990s, everyone suddenly began focusing on quality to enhance the value of comics as collectibles. The price of comics shot up, and suddenly, everyone was a speculator. This is often said to have culminated in the release of Todd McFarlane’s Spawn #1, a book that sold over a million copies due to speculation about its future value, but which is still worth about a penny an issue today. (It was a terrible comic, too, for what it’s worth.)

So, the price of comics went up, the value of comics went down, and the entire market for comics crashed. This resulted in many changes for the comic book industry, including the eventual consolidation of distribution under one company, Diamond Comic Distributors. Every comic book store in America was eventually forced to deal with Diamond or deal with no one. One of the reasons this was bad for comic book shops was because Diamond had a “non-returnable product” policy. Retailers had to order carefully, or be stuck with assets that they would have a hard time unloading.

By the time I got on the scene, comics were pretty much dead. Whereas it’d been normal for comics to circulate in the hundreds of thousands in previous decades, now a hit comic was any book that sold about 10,000 copies. Comic book stores were closing left and right, and those that hung on were adjusting their product mix to become focused on collectible toys, tabletop gaming, and Japanese comics and anime.

[...]

But even so, I often heard during my time in the comic book industry that the only thing keeping Marvel afloat was its licensing department. The comic books were not really a profitable enterprise; it was the licensing from the comics that kept the entire machine alive. Apparently, something very similar was going on over at rival DC (which was and still is owned by Time Warner). Comic books had become an anachronism, something that only a handful of enthusiasts wanted to keep up with. What’s more, the serial nature of the storytelling has made it difficult to keep up with comics since they tend to ebb and flow in quality and frequently ship late.

Another problem (and it’s a big one!) is the barrier that hardcore fans present. Oddly, fans are never really happy with Marvel and/or DC, and they are probably the hardest group of people to appease. Yes, they spend money, and yes, they are the ones who are keeping comics alive, but they are not a desirable market because they are not growing. Plus, when you factor in the reality that many fans want to be comics creators themselves, you tend to find a lot of fans who keep up with comics to be able to participate in the conversation, but who make demands on publishers for stories that few people really want to read.

Demands on publishers for stories that few people really want to read? I can’t imagine…

Smart Money Buys Brand X

Thursday, July 24th, 2014

National brands succeed because of consumer ignorance:

To test whether a lack of information is responsible for consumers’ choices, Bronnenberg and his co-authors compared a range of consumers who shop in the same markets and chain stores during the same time periods. They used both indirect and direct measures of how well-informed the shoppers were about headache remedies. The indirect measures included occupation and education. The direct measures came from shoppers’ responses to questions about the active ingredients in headache remedies. There was a close connection between the indirect and direct measures: The average person accurately answered the ingredient question 59 percent of the time, but that figure rose to 85 percent for registered nurses and to 89 percent for pharmacists.

Using purchase data on more than 77 million shopping trips from 2004 to 2011, the authors matched consumers’ actual choices to their knowledge and professions. Pharmacists bought national brands only 8.5 percent of the time, while the average consumer bought them 26 percent of the time. People lacking a college education were especially likely to buy national brands. On the other hand, health-care professionals — including nurses and doctors — were more likely to buy store brands than lawyers, who don’t have relevant expertise.

In the case of pantry staples (salt, sugar, baking soda and the like), national brands accounted for 40 percent of total sales volume. But among chefs, the share dropped to just 23 percent — the smallest for any other occupation.

It’s interesting that health-care professionals show no special interest in buying store-brand salts, sugars or baking sodas; for those products, their choices look a lot like most other consumers’. And while chefs do show a preference for store-brand headache remedies, it’s not nearly as great as that of health-care professionals. For the most part, people’s knowledge is domain-specific.

Bronnenberg and his co-authors tell the same basic tale for other health products, including cold remedies, bandages, vitamins and contact-lens solutions. Knowledgeable consumers tend to choose store brands. The effects are smallest for first-aid and eye-care products — which suggests that informed consumers might find genuine differences in their quality.

Young Money

Tuesday, June 10th, 2014

Ezra Klein talks to Kevin Roose about Young Money and how Wall Street recruits so many insecure Ivy League grads:

Ezra Klein: My big takeaway from your book was that Ivy League graduates aren’t going to Wall Street because they love risk and want to make a ton of money. They’re going because they hate risk and are terrified about what to do next and Wall Street has figured out a way to calm their anxieties.

Kevin Roose: Wall Street invented this new way of recruiting in the early 80s. Before that they hired like any other industry. If you wanted to be a banker you applied for a job at a bank and they hired you or they didn’t. But in the early 80s Goldman Sachs and others figured out they could broaden their net and get lots of really smart people if they made it a temporary position rather than a permanent one.

So they created the two-and-out program. The idea is you’re there for two years and then you move onto something else. That let them attract not just hardcore econ majors but people majoring in other subjects who had a passing interest in finance and didn’t know what else to do. People now think going to a bank for two years will help prepare them for the next thing and keep them from having to make these hard decisions about the rest of their life. It made it like an extension of college. And it was genius. It led to this huge explosion in recruitment and something like a third of Ivy League graduates going to Wall Street.

EK: This seems really at odd with finance’s vision of itself as a world of capitalist cowboys.

KR: We think of Wall Street as being full of these crazy risk takers. But in a lot of schools it’s these scared organization kids going to Wall Street. One thing Wall Street does that’s really smart is they actually tell you way earlier than other industries if you got a job. They’ll let you lock the job down in the fall of your senior year. So you can take that job on Wall Street or you can gamble on getting something after you graduate.

EK: One of the other programs that uses that model is Teach for America. And it’s amazing, anecdotally, how often you see college seniors deciding between making huge money on Wall Street or making almost nothing with Teach For America. It really suggests to me that this isn’t nearly as much about the money as people think.

KR: The lesson of that is you don’t have to pay people a ton of money to come to your program after college if what you’re giving them still offers prestige and structure and the sense that they’re not signing up for something forever. Teach for America has really approximated the banking model without the money. If what you’re seeking is short-term rewards there’s no way you’d choose teaching in the Mississippi Delta over working at Goldman Sachs but there’s something calling people to do work they find meaningful.