Every time a reader reads to the end of a 3,000-page book, the author earns almost 14 dollars

Friday, January 17th, 2020

Self-published romance is no joke:

A genre that mostly features shiny, shirtless men on its covers and sells ebooks for 99 cents a pop might seem unserious. But at stake are revenues sometimes amounting to a million dollars a year, with some authors easily netting six figures a month. The top authors can drop $50,000 on a single ad campaign that will keep them in the charts — and see a worthwhile return on that investment.

This has led to some unscrupulous practices:

Book stuffing is a term that encompasses a wide range of methods for taking advantage of the Kindle Unlimited revenue structure. In Kindle Unlimited, readers pay $9.99 a month to read as many books as they want that are available through the KU program. This includes both popular mainstream titles like the Harry Potter series and self-published romances put out by authors like Crescent and Hopkins. Authors are paid according to pages read, creating incentives to produce massively inflated and strangely structured books. The more pages Amazon thinks have been read, the more money an author receives.

The per-page payment model was actually an attempt to crack down on a previous strategy of capitalizing on Kindle mechanics. When Kindle Unlimited was first introduced, authors were paid a flat fee per book that readers “borrowed” through the program. “Those of a kind of a black hat mindset saw the opportunity,” says David Gaughran, a blogger who has been following the phenomenon of book stuffing since 2016. “They started producing these eight-page books … very short, like recipe books, how to lose weight, no-carb diet, whatever.”

Readers, as it turned out, hated checking out books and later finding out that the books were really pamphlets. Shortly thereafter, Amazon rolled out the next iteration of Kindle Unlimited — authors would now be paid per page read.

Many self-publishers, says Gaughran, moved on to producing books that were thousands of pages long. Some of the books would include multiple translations into several languages — all run through Google Translate. Others would include junk HTML code. These methods — blatant violations of the terms of services — weren’t tolerated. Books were removed and authors were banned.

It’s not clear if these early book-stuffers moved onto the self-publishing romance scene, or if some of the self-publishing romance authors began to pick up on these tricks. Either way, book stuffing plagues the romance genre on Kindle Unlimited, with titles that come in at 2000 or even 3000 pages (the maximum page length for a Kindle Unlimited book). That’s approximately the length of Atlas Shrugged or War and Peace.

Book stuffing is particularly controversial because Amazon pays authors from a single communal pot. In other words, Kindle Unlimited is a zero-sum game. The more one author gets from Kindle Unlimited, the less the other authors get.

The romance authors Willink was discovering didn’t go in for clumsy stuffings of automatic translations or HTML cruft; rather, they stuffed their books with ghostwritten content or repackaged, previously published material. In the latter case, the author will bait readers with promises of fresh content, like a new novella, at the end of the book.

Every time a reader reads to the end of a 3,000-page book, the author earns almost 14 dollars. For titles that break into the top of the Kindle Unlimited charts, this trick can generate a fortune.

Of course, you might be wondering if any readers actually read through all 3000 pages. But authors deploy a host of tricks in service of gathering page reads — from big fonts and wide spacing to a “link back.” Some authors would place a link at the very front of the book, to sign up to a mailing list. The link would take them to the back of the book, thus counting all pages read. It’s not clear whether any of this actually works. A spokesperson for Amazon told The Verge that Amazon uses a standardized page count that won’t take big fonts or wide spacing into account. A June blog post by the Kindle Direct Publishing Team assured authors that the KENPC system (Kindle Edition Normalized Page Count) recorded pages read with “high precision” and that the company was constantly working to improve its “fidelity.”

Almost any change led to increased productivity

Friday, January 10th, 2020

The term Hawthorne effect was coined in 1958 by Henry A. Landsberger when he was analyzing earlier experiments from 1924–32 at the Hawthorne Works (a Western Electric factory outside Chicago) to describe the surprising finding of the numerous productivity studies:

The original purpose of the Hawthorne studies was to examine how different aspects of the work environment, such as lighting, the timing of breaks, and the length of the workday, had on worker productivity.

In the most famous of the experiments, the focus of the study was to determine if increasing or decreasing the amount of light that workers received would have an effect on how productive workers were during their shifts. Employee productivity seemed to increase due to the changes but then decreased once the experiment was over.

What the researchers in the original studies found was that almost any change to the experimental conditions led to increases in productivity. When illumination was decreased to the levels of candlelight, production increased. In other variations of the experiments, the production also improved when breaks were eliminated entirely and when the workday was lengthened.

The results were surprising and the researchers concluded at the time that workers were actually responding to the increased attention from their supervisors. Researchers suggested that productivity increased due to attention and not because of changes in the experimental variables. Landsberger defined the Hawthorne effect as a short-term improvement in performance caused by observing workers.

Sometimes it feels like Amazon is trying to make the publishers look ridiculous

Thursday, January 9th, 2020

The 2010s were supposed to bring the ebook revolution, but it never quite arrived:

Instead, at the other end of the decade, ebook sales seem to have stabilized at around 20 percent of total book sales, with print sales making up the remaining 80 percent. “Five or 10 years ago,” says Andrew Albanese, a senior writer at trade magazine Publishers Weekly and the author of The Battle of $9.99, “you would have thought those numbers would have been reversed.”

And in part, Albanese tells Vox in a phone interview, that’s because the digital natives of Gen Z and the millennial generation have very little interest in buying ebooks. “They’re glued to their phones, they love social media, but when it comes to reading a book, they want John Green in print,” he says. The people who are actually buying ebooks? Mostly boomers. “Older readers are glued to their e-readers,” says Albanese. “They don’t have to go to the bookstore. They can make the font bigger. It’s convenient.”

Ebooks aren’t only selling less than everyone predicted they would at the beginning of the decade. They also cost more than everyone predicted they would — and consistently, they cost more than their print equivalents.

[...]

Printing and binding and shipping — the costs that ebooks eliminated — accounted for only two dollars of the cost of a hardcover, publishers argued. So the ebook for a $20 hardcover book should cost no less than $18. And according to publishers, by setting the price of an ebook at $9.99, Amazon was training readers to undervalue books.

[...]

Print books are generally sold under a wholesale model, which works like this: First, the publisher will set a suggested list price for a book; say, $20. Then it will sell the book to resellers and distributors for a discount off that suggested list price. So if Simon & Schuster wants to sell a $20 book to Amazon, Amazon might negotiate a discount of 40 percent for itself and end up paying Simon & Schuster only $12 for that book.

But once Amazon owns the book, it has the right to set whatever price it would like for consumers. The $20 list price that Simon & Schuster set was just a suggestion. Under the wholesale model, Amazon is free to decide to sell the book to readers for as little as a single dollar if it chooses to.

Until 2010, ebooks were sold through the wholesale model too. So if Simon & Schuster was publishing a $20 hardcover, they could choose to set a suggested list price of $18 for the ebook — two dollars less than the hardcover — and then sell that ebook to Amazon at a 40 percent discount for $10.80. And Amazon could, in turn, feel free to sell that ebook for $9.99 and swallow a loss of 81 cents.

[...]

Apple was offering publishers an incentive to root for it over Amazon. With its App Store, Apple had established a resale model that worked differently from the wholesale model publishers were used to. It was called the agency model, and it worked like this: publishers would decide on what the list price for their book should be, and then put it up for sale at that price in the iBooks store. Apple would take a 30 percent commission on every sale.

Apple wasn’t willing to sell ebooks for $18, but it thought a cap of $14.99 was perfectly reasonable. And if publishers decided to go along with Apple’s plan, they could set a list price of $14.99 for an ebook and be sure that no one in the iBooks store would ever discount it without the publisher’s express permission. Apple, meanwhile, would pocket $4.50 from each sale.

But Apple couldn’t enter the ebook market while charging consumers five dollars more per unit than its biggest competitor was. It needed some assurance that no one would have a cheaper product than it had. So it made a deal with five of the Big Six publishers (Simon & Schuster, Penguin, HarperCollins, Hachette, and Macmillan; Random House, then the biggest trade publishing house, abstained): They could all sign on to Apple’s agency model, as long as they guaranteed that they’d also use that same agency model with every other retailer they worked with. That way, Amazon, too, would be forced to sell its ebooks for $14.99 — and if it refused, publishers could withhold their ebooks from Amazon and make them exclusive to Apple.

[...]

“Amazon can still discount whatever they like on the print side,” explains Jane Friedman, a publishing consultant and the author of The Business of Being a Writer. On the ebook side, however, Amazon now lists publisher-mandated prices, often with the petulant italic addition “Price set by seller.” “So the market is very weird, and often the ebook costs more than the print,” Friedman says. “Sometimes it feels like Amazon is trying to make the publishers look ridiculous.”

It all gets lost in the crowd

Monday, December 16th, 2019

I expected The Roman Guide to Slave Management to include more tips like this:

Gang labour makes slaves work faster, harder and better. You should form them into groups of about ten. This is a particularly easy number of men to keep watch over. Larger gangs can be difficult for an overseer to control on his own. So, on your estate, you should assign these groups to different sections of it, and the work should be distributed in such a way that the men will not be on their own or in pairs, since they cannot be supervised properly if they are scattered all over the place. The other problem with larger groups is that the individuals within the group will not feel that the work has anything to do with them personally. It all gets lost in the crowd.

The super-rich love South Dakota

Friday, December 6th, 2019

Money has poured out of traditional offshore jurisdictions, such as Switzerland and Jersey, and into a small number of American states, such as Delaware, Nevada, Wyoming, and, above all, South Dakota:

A South Dakotan trust changes all that: it protects assets from claims from ex-spouses, disgruntled business partners, creditors, litigious clients and pretty much anyone else. It won’t protect you from criminal prosecution, but it does prevent information on your assets from leaking out in a way that might spark interest from the police. And it shields your wealth from the government, since South Dakota has no income tax, no inheritance tax and no capital gains tax.

A decade ago, South Dakotan trust companies held $57.3bn in assets. By the end of 2020, that total will have risen to $355.2bn. Those hundreds of billions of dollars are being regulated by a state with a population smaller than Norfolk, a part-time legislature heavily lobbied by trust lawyers, and an administration committed to welcoming as much of the world’s money as it can.

[...]

At the heart of South Dakota’s business success is a crucial but overlooked fact: globalisation is incomplete. In our modern financial system, money travels where its owners like, but laws are still made at a local level. So money inevitably flows to the places where governments offer the lowest taxes and the highest security.

[...]

When Citibank based its credit card business in Sioux Falls, it could charge borrowers any interest rate it liked, and credit cards could become profitable. Thanks to Janklow, Citibank and other major companies came to South Dakota to dodge the restrictions imposed by the other 49 states. And so followed the explosion in consumer finance that has transformed the US and the world. Thanks to Janklow, South Dakota has a financial services industry, and the US has a trillion-dollar credit card debt.

Fresh from having freed wealthy corporations from onerous regulations, Janklow looked around for a way to free wealthy individuals too, and thus came to the decision that would eventually turn South Dakota into a Switzerland for the 21st century. He decided to deregulate trusts.

Trusts are ancient and complex financial instruments that are used to own assets, such as real estate or company stock. Unlike a person, a trust is immortal, which was an attractive prospect for English aristocrats of the Middle Ages who wished to make sure their property remained in their families for ever, and would be secure from any confiscation by the crown. This caused a problem, however. More and more property risked being locked up in trusts, subject to the wishes of long-dead people, which no one could alter. So, in the 17th century, judges fought back by creating the “rule against perpetuities”, which limited the duration of trusts to around a century, and prevented aristocratic families turning their local areas into mini-kingdoms.

[...]

Then Governor Janklow came along. In 1983, he abolished the rule against perpetuities and, from that moment on, property placed in trust in South Dakota would stay there for ever.

[...]

In most jurisdictions, trusts have to benefit someone other than the benefactor – your children, say, or your favourite charity – but in South Dakota, clients can create a trust for the benefit of themselves (indeed, Sun Hongbin is a beneficiary of his own trust). Once two years have passed, the trust is immune from any creditor claiming a share of the assets it contains, no matter the nature of their claim. A South Dakotan trust is secret, too. Court documents relating to it are kept private for ever, to prevent knowledge of its existence from leaking out. (It also has the useful side effect of making it all but impossible for journalists to find out who is using South Dakotan trusts, or what legal challenges to them have been filed.)

[...]

When a whistleblower exposed how his Swiss employer, the banking giant UBS, had hidden billions of dollars for its wealthy clients, the conclusion was explosive: banks were not just exploiting poor people, they were helping rich people dodge taxes, too.

Congress responded with the Financial Assets Tax Compliance Act (Fatca), forcing foreign financial institutions to tell the US government about any American-owned assets on their books. Department of Justice investigations were savage: UBS paid a $780m fine, and its rival Credit Suisse paid $2.6bn, while Wegelin, Switzerland’s oldest bank, collapsed altogether under the strain. The amount of US-owned money in the country plunged, with Credit Suisse losing 85% of its American customers.

The rest of the world, inspired by this example, created a global agreement called the Common Reporting Standard (CRS). Under CRS, countries agreed to exchange information on the assets of each other’s citizens kept in each other’s banks. The tax-evading appeal of places like Jersey, the Bahamas and Liechtenstein evaporated almost immediately, since you could no longer hide your wealth there.

[...]

But the US was not part of CRS, and its own system — Fatca — only gathers information from foreign countries; it does not send information back to them. This loophole was unintentional, but vast: keep your money in Switzerland, and the world knows about it; put it in the US and, if you were clever about it, no one need ever find out. The US was on its way to becoming a truly world-class tax haven.

The Tax Justice Network (TJN) still ranks Switzerland as the most pernicious tax haven in the world in its Financial Secrecy Index, but the US is now in second place and climbing fast, having overtaken the Cayman Islands, Hong Kong and Luxembourg since Fatca was introduced.

A concerned citizen is largely helpless

Saturday, November 30th, 2019

In Loserthink Scott Adams cites a celebrity’s global warming climate change tweet as an example of a bright person talking about something without training in economics or business:

Now let’s say you had experience in economics and business, as I do. In those domains, anyone telling you they can predict the future in ten years with their complicated multivariate models is automatically considered a fraud.

[...]

You might be debating me in your mind right now and thinking that, unlike the field of finance, the scientific process drives out bias over time. Studies are peer reviewed, and experiments that can’t be reproduced are discarded.

Is that what is happening?

Here I draw upon my sixteen years working in corporate America. If my job involved reviewing a complicated paper from a peer, how much checking of the data and the math would I do when I am already overworked? Would I travel to the original measuring instruments all over the world and check their calibrations? Would I compare the raw data to the “adjusted” data that is used in the paper? Would I do a deep dive on the math and reasoning, or would I skim it for obvious mistakes? Unless scientists are a different kind of human being than the rest of us, they would intelligently cut corners whenever they think they could get away with it, just like everyone else. Assuming scientists are human, you would expect lots of peer-reviewed studies to be flawed. And that turns out to be the situation. As the New York Times reported in 2018, the peer review process is defective to the point of being laughable.

[...]

My point is that a concerned citizen is largely helpless in trying to understand how settled the science of climate change really is. But that doesn’t stop us from having firm opinions on the topic.

[...]

Whenever you have a lot of money in play, combined with the ability to hide misbehavior behind complexity, you should expect widespread fraud to happen. Take, for example, the 2019 Duke University settlement in which the university agreed to pay $112.5 million for repeatedly submitting research grant requests with falsified data. Duke had a lot of grant money at stake, and lots of complexity in which to hide bad behavior. Fraud was nearly guaranteed.

If you have been on this planet for a long time, as I have, and you pay attention to science, you know that the consensus of scientists on the topic of nutrition was wrong for decades.

[...]

Over time, it became painfully obvious to me that nutrition science wasn’t science at all. It was some unholy marriage of industry influence, junk science, and government. Any one of those things is bad, but when you put those three forces together, people die. That isn’t hyperbole. Bad nutrition science has probably killed a lot of people in the past few decades.

It didn’t go through

Friday, November 22nd, 2019

I was not expecting Tesla’s new “cybertruck” to look like this:

“As processing power grows,” Paul Graham quipped, “future versions of the cybertruck will have more curved lines.”

It was something we could all talk about together

Wednesday, November 13th, 2019

Television defined the American median:

It was something we could all talk about together.

There was a comforting sense of homogeneity to the TV of this era. It didn’t ask too much of you, and it was always there when you needed it, a friendly and familiar presence. It wasn’t designed to be great; it was designed to be consistently fine.

The apotheosis of this style of television was the long-running, insanely popular 1990s sitcom Friends, a show that literalized the idea of what television was in its title. Friends was a show about a bunch of attractive and mildly glamorous but essentially ordinary white people hanging out and talking about their lives. It was a show you could watch and engage with but also one that you could just have on as background noise, with the characters’ idealized, fictional, not-too-difficult lives serving as the backdrop to your own. That was television’s reason for being: to keep ordinary people company in their own homes.

Unlike broadcast networks, Netflix knew exactly what subscribers were watching, and when, and how often:

The company had three major revelations.

The first was that television-style content, which on both cable and broadcast had always been delivered on a specific schedule, in a linear sequence over the space of weeks, could be divorced from time. Netflix not only allowed viewers to watch its shows whenever they wanted, it posted entire seasons online at once and then encouraged viewers to “binge-watch,” or consume the whole thing all in one go. Appointment TV, in which you regularly dated a show you liked, was no more; Netflix was TV as a series of intense one-night stands.

The second revelation was that TV could be portable. Netflix was an app, not a channel, which meant you could watch it on your computer, on your phone, in your car, and possibly even on your refrigerator. Netflix shows came to you, wherever you were. The service was platform agnostic.

Finally, Netflix realized that demand for new scripted content was practically infinite and began producing accordingly. In 2013, the year Netflix committed itself fully to originals, the total number of scripted series produced annually across all of Hollywood jumped by 17 percent.

In the 1980s and 1990s, fewer than 50 original scripted television series were produced each year. In 2008, there were more than 200. By 2018, the number was just shy of 500, and streaming networks were the biggest producers. Netflix, which will reportedly spend $15 billion on content this year, wasn’t competing with ABC and NBC and CBS. It wasn’t even really competing with HBO. It was competing with the entire rest of one’s life, with 24 hours of things to do that aren’t watching Netflix. CEO Reed Hastings said in 2017, “We actually compete with sleep.” Then he added, perhaps not entirely kidding, “And we’re winning!”

Mother of invention

Tuesday, November 5th, 2019

Apparently the Economist has an offshoot 1843 magazine, which profiled Elon Musk’s mother, naming her the mother of invention:

Musk, a striking woman with cropped white hair, glowing skin and brilliant blue eyes, does not mince her words. As a dietician she has no truck with fads. As a mother — of Elon, the world’s most famous inventor, Kimbal, a tech and food entrepreneur, and Tosca, a film director who recently started a streaming service to bring romance novels to television — she has a similarly robust attitude.

Unlike most women of her generation — she is 69 — maternity has not defined Maye. She has run her own nutrition business for 45 years and has been a model for 54 years. In an era in which parents and children are ever more closely intertwined as they navigate the hazards of competitive education, she has a refreshing enthusiasm for her and her children’s independence.

Thanks to business’s growing enthusiasm for older models, she seems to be getting more, not less, successful. She has been on a cereal box, featured in a Beyoncé video and starred in a campaign for Virgin America. Once you have seen her unusual face, you find yourself recognising it in adverts.

Maye Musk

Maye’s own childhood was not a standard one. Family holidays were often spent flying over the Kalahari desert in Namibia in her father’s single-engine plane — “mostly airsick” — looking for a legendary lost city. The plane was her father’s passion, not a rich man’s toy: her parents were not wealthy but she remembers a home with mulberry trees, peaches, plums, oranges and lemons. At schools she was a “science nerd”, and teachers would send her to demonstrate mathematics to classes of older children. Her brains made her a magnet for bullies — South Africa was a rough place — but her larger and more athletic twin, Kaye, fought them off.

Independence came early, thanks to her striking features. She was modelling at 15 but expected the work to dry up by 18, so she studied dietetics. By 21 she had her own practice.

A year later, in 1970, she married an engineer, Errol Musk. Elon arrived nine months later, Kimbal arrived about a year after that, and not long after came a daughter, Tosca.

Maye’s marriage lasted nine years. After the divorce, she took the children and started on her own as a single, working mother. Money was particularly tight. The family couldn’t afford many things, such as eating out and movies. Maye managed by juggling her private practice as a dietician, wellness talks and modelling.

[...]

Left to explore the world for themselves, each child spontaneously developed strong — and very different — interests. Elon was an obsessive reader and thinker from an early age, so absorbed in his own world that his parents thought he might have a hearing problem and took him to the doctor. Drawn to computers he sold his first computer program when was 12. He struggled to make friends at school and was badly bullied. But he developed strong, lifelong bonds with his brother and sister which, to this day, seem to serve as a stabilising influence in his life. After Thanksgiving, he posted a picture of himself and Kimbal in the Rockies, arms around each other with the message “love my bro”.

Tosca, too, had her enthusiasms lit at a young age. When she was four she watched the musical fantasy film “Xanadu”, which gave her a passion for movies. By the age of 18 she had landed a job in a studio and from there went on to become a film director. As for Kimbal, Maye recalls taking the children to a grocery store when the boys were in their early teens. “Elon would take a book and read. Tosca would hang around me, and Kimbal would be picking up the peppers and smelling them and saying ‘aaah’.”

[...]

Led by Elon, the brothers created home-made rockets and explosives. They raced their dirt bikes so hard that Kimbal fell into a barbed-wire fence. They walked door to door at night in a dangerous country selling Easter eggs at a scandalous mark-up: Kimbal told customers sceptical of the price, “you are doing this to support future capitalists.” They tried to start up a video arcade. Parental attention didn’t always point them in the right direction: their father took them to a casino (gambling was illegal).

It wasn’t a 100 percent honest honest mistake

Sunday, October 6th, 2019

Boeing’s MCAS (the Maneuvering Characteristics Augmentation System) was an honest mistake, but the secrecy shrouding the program’s very existence told you it wasn’t a 100 percent honest honest mistake:

According to Rick Ludtke, a former Boeing employee, Boeing agreed to rebate Southwest $1 million for every MAX it bought, if the FAA required level-D simulator training for the carrier’s pilots.

[...]

Simulator training for Southwest’s 9,000 pilots would have been a pain, but hardly ruinous; aviation industry analyst Kit Darby said it would cost about $2,000 a head. It was also unlikely: The FAA had three levels of “differences” training that wouldn’t have necessarily required simulators. But the No Sim Edict would haunt the program; it basically required any change significant enough for designers to worry about to be concealed, suppressed, or relegated to a footnote that would then be redacted from the final version of the MAX. And that was a predicament, because for every other airline buying the MAX, the selling point was a major difference from the last generation of 737: unprecedented fuel efficiency in line with the new Airbus A320neo.

The MAX and the Neo derived their fuel efficiency from the same source: massive “LEAP” engines manufactured by CFM, a 50-50 joint venture of GE and the French conglomerate Safran. The engines’ fans were 20 inches — or just over 40 percent larger in diameter than the original 737 Pratt & Whitneys, and the engines themselves weighed in at approximately 6,120 pounds, about twice the weight of the original engines. The planes were also considerably longer, heavier, and wider of wingspan. What they couldn’t be, without redesigning the landing gear and really jeopardizing the grandfathered FAA certification, was taller, and that was a problem. The engines were too big to tuck into their original spot underneath the wings, so engineers mounted them slightly forward, just in front of the wings.

This alteration created a shift in the plane’s center of gravity pronounced enough that it raised a red flag when the MAX was still just a model plane about the size of an eagle, running tests in a wind tunnel. The model kept botching certain extreme maneuvers, because the plane’s new aerodynamic profile was dragging its tail down and causing its nose to pitch up. So the engineers devised a software fix called MCAS, which pushed the nose down in response to an obscure set of circumstances in conjunction with the “speed trim system,” which Boeing had devised in the 1980s to smooth takeoffs. Once the 737 MAX materialized as a real-life plane about four years later, however, test pilots discovered new realms in which the plane was more stall-prone than its predecessors. So Boeing modified MCAS to turn down the nose of the plane whenever an angle-of-attack (AOA) sensor detected a stall, regardless of the speed. That involved giving the system more power and removing a safeguard, but not, in any formal or genuine way, running its modifications by the FAA, which might have had reservations with two critical traits of the revamped system: Firstly, that there are two AOA sensors on a 737, but only one, fatefully, was programmed to trigger MCAS. The former Boeing engineer Ludtke and an anonymous whistle-blower interviewed by 60 Minutes Australia both have a simple explanation for this: Any program coded to take data from both sensors would have had to account for the possibility the sensors might disagree with each other and devise a contingency for reconciling the mixed signals. Whatever that contingency, it would have involved some kind of cockpit alert, which would in turn have required additional training — probably not level-D training, but no one wanted to risk that. So the system was programmed to turn the nose down at the feedback of a single (and somewhat flimsy) sensor. And, for still unknown and truly mysterious reasons, it was programmed to nosedive again five seconds later, and again five seconds after that, over and over ad literal nauseam.

An unwritten but zealously enforced handshake agreement

Saturday, October 5th, 2019

I didn’t realize quite how cozy Southwest and Boeing had grown:

On something of a lark, Boeing had given Kelleher a sweet no-money-down deal on his first four 737s in 1971, and Kelleher repaid the favor by buying more than 1,000 737s over the next 50 years — and zero of any other plane. According to a recent lawsuit against Southwest and Boeing, the airline had rewarded this loyalty with an unwritten but zealously enforced “handshake” agreement, dating back to the 1990s, that Boeing would not sell any planes for less than Southwest was paying, or Boeing would send Southwest a rebate check. And in exchange for that guarantee, Southwest reliably swooped in with big orders and/or accelerated payments after accidents, stock price plunges, or both; the same lawsuit claims that, after September 11, the airline formed an off–balance-sheet slush fund to bail out Boeing during unanticipated shortfalls, and lent other airlines its own planes when Boeing production fell behind, all while it waited patiently for its order deliveries to be filled at a time when it was convenient for Boeing. As the carriers became more profitable in the twenty-first century, more of them followed Southwest’s lead and helped Boeing make its numbers, with United Airlines and Alaska Airlines pitching in during fourth-quarter 2015, alongside Southwest, to make payments not due until 2016. Those partnerships were but one numbers-smoothing mechanism in a diversified tool kit Boeing had assembled over the previous generation for making its complex and volatile business more palatable to Wall Street, and while not entirely kosher and not at all sustainable, they were by far the least destructive tool in the kit — until Southwest called in the favor on its orders for the MAX.

Equip the man, or man the equipment?

Monday, August 26th, 2019

What has Erik Prince been up to since he sold Blackwater?

I moved to the UAE because of piracy off the coast of Somalia. At the time there were 80 to 90 ships a year being hijacked and the UAE government wanted to do something about that, so I gave some ideas as to build a police unit, which effectively ended piracy and did it for a cost of less than the pirates were taking in ransom per year. It was kind of a passion project, and it showed how cheaply and effectively the private sector can do things if allowed to innovate. I compare that to the U.S. Navy, the EU navies that were dispersed all over the Indian Ocean — if you have a problem in your yard, the smart homeowner doesn’t chase bugs all around the yard with a spray can, rather they find the nest, and that’s what we did.

Since then, I started a private equity fund, I’ve invested in some mining and energy upstream geoscience activities, and I’ve been involved in some more aviation and transportation work in Africa and the Middle East. I’ve been very public about what the United States should do in Afghanistan and a few other of the nagging problems where people continue to suffer because no one can seem to put the fire out.

The U.S. military is designed to win a conventional war, but the problem is when you take a conventional unit and re-task it from a linear battlefield, re-tasking everything from your air defense guy, your chemical weapons specialist, to your artilleryman to now fight an insurgency where the enemy is all around you or nowhere, we have a real struggle dealing with that. I remember a former Special Operations commander describe it this way, ‘In [Special Forces (SF)] units, you equip the man — the guy is the weapon system. In a conventional unit, optimized for that linear battlespace, fighting a nation state — in that case, you man the equipment.’ What does the Army say? Artillery is the king of battle, so you man the artillery, the tanks, the rockets, because that’s what does the large-scale killing on the battlefield. All that firepower doesn’t really apply to fighting guys on motorbikes wearing flip-flops, and that’s where the United States has struggled this past 17 years. Right after 9/11, we had around 100 CIA and SF guys working in Afghanistan in an unconventional manner, and they smashed the hell out of the Taliban in a matter of weeks. Then, when the conventional army rolled in, we largely replicated the Soviet battle plan.

The way the U.S. and NATO deploy there is that they send a unit for seven or eight months. The guys spend a couple of months on the ground getting to know the area, and some of them have never been to Asia in their lives. They’re productive for a couple of months, spend the last month or so packing up and ready to go home, then they lift that unit out and send another one to start again to repeat the cycle.

We’ve done that more than 30 times now, where you completely rip away any continuity. The one part of the Afghan forces, which fights pretty well is the Afghan Commandos because they’re trained and mentored by their SOF counterparts who do a better job of focusing in small unit tactics, being flexible, and equipping the man, rather than manning the equipment.

What I’ve advocated for is replicating that model across the entire regular Afghan army using SF veterans. If I send those veterans back as contractors, they can stay for years at a time on a 90-day rotation, but they go back to the same unit, the same valley, and they get to know the terrain, the good mullah, the bad mullah, and the guys are incentivized to make sure their unit performs well. They’re dependent on the local population for intelligence, and they’re responsible to protect that population from the Tailban or ISIS, so it becomes this intertwined, interlocking dependency that stems from continuity and trust.

We also have to provide those guys in the field with the overwhelming advantage of airpower, so that they get lift and medevac and resupply and close air support in a very timely manner, which hasn’t always been the case, especially for the Afghan units. They’ve been lucky to get aircraft tasked inside of 10-12 hours, unless they happen to have an American JTAC with them. So you have Afghans who are dying in the field from what should be nonlife-threatening wounds; you have Afghan firebases routinely surrounded and annihilated where nobody comes after four, five, seven days.

Our model would be a very joint program where any of our contractor-provided leased aircraft would be crewed by one professional pilot and one Afghan crewmember. Any weapons release decision remains in the sole authority of the Afghan, so it’s not a contractor dropping a bomb or shooting a canon, only an Afghani citizen.

The third component is what I call government support. In this, we’re not trying to fix the government, just the key elements that the military needs to run on. Getting the men paid on time, fed on time, supplied and medevaced. There’s currently a huge amount of ‘ghost soldiers,’ a huge amount of corruption, which bleeds the supplies, and there’s corruption in the promotion process because guys are promoted by their ethnicity or religious affiliation, rather than merit, competency, or bravery.

I had hundreds of instructors attached to Afghan units for a long time — we built the entire Afghan border police. I had many reports of when we’d get a new crop of students that within two days you could tell if there was a bad egg. When the other Afghan students — who greatly appreciate the fact that they were in a properly run schoolhouse, where they’re getting fed, paid, and the light switches work, and there’s batteries for the radios and a comms plan — they took care of making sure that any bad eggs were removed and sent on their way. The way that mentoring is currently done by the U.S. Army is largely one of drive-by mentoring, where they’re not living on the same base, eating at the same chow hall, and embedded with their Afghan brothers.

It is not the seller and so can’t be responsible

Sunday, August 25th, 2019

Amazon has shifted from something like a big-box store to something much more like a flea market:

A Wall Street Journal investigation found 4,152 items for sale on Amazon.com Inc. ’s site that have been declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators — items that big-box retailers’ policies would bar from their shelves. Among those items, at least 2,000 listings for toys and medications lacked warnings about health risks to children.

The Journal identified at least 157 items for sale that Amazon had said it banned, including sleeping mats the Food and Drug Administration warns can suffocate infants. The Journal commissioned tests of 10 children’s products it bought on Amazon, many promoted as “Amazon’s Choice.” Four failed tests based on federal safety standards, according to the testing company, including one with lead levels that exceeded federal limits.

Of the 4,152 products the Journal identified, 46% were listed as shipping from Amazon warehouses.

[...]

Amazon’s common legal defense in safety disputes over third-party sales is that it is not the seller and so can’t be responsible under state statutes that let consumers sue retailers. Amazon also says that, as a provider of an online forum, it is protected by the law — Section 230 of the Communications Decency Act of 1996 — that shields internet platforms from liability for what others post there.

[...]

Third-party sellers are crucial to Amazon because their sales have exploded — to nearly 60% of physical merchandise sales in 2018 from 30% a decade ago, Amazon says. The site had 2.5 million merchants with items for sale at the end of 2018, estimates e-commerce-intelligence firm Marketplace Pulse.

Amazon doesn’t make it easy for customers to see that many products aren’t sold by the company. Many third-party items the Journal examined were listed as Amazon Prime eligible and sold through the Fulfillment by Amazon program, which generally ships items from Amazon warehouses in Amazon-branded boxes. The actual seller’s name appeared only in small print on the listing page.

[...]

In contrast, Walmart Inc. requires all products on store shelves be tested at approved labs, company documents show. Target says it requires suppliers of store-branded products to undergo additional inspections and testing beyond government standards.

Target and Walmart have created online marketplaces for third parties to sell directly to consumers. Target’s site, launched earlier this year with several sellers, is invitation-only. Walmart had around 22,000 sellers at the end of 2018, according to Marketplace Pulse. It requires an application that can take days for approval, and only a fraction of merchants applying make it through the vetting, says a person familiar with Walmart’s policy.

Netflix is spending hundreds of millions of dollars to produce big-budget films

Sunday, August 11th, 2019

Netflix is spending hundreds of millions of dollars to produce big-budget films:

Earlier this month, Netflix agreed to spend nearly $200 million to make the Dwayne Johnson action movie “Red Notice,” which will be filmed next year at exotic locations and also stars Ryan Reynolds and Gal Gadot, the people said. In addition, a person familiar with the matter said, Netflix plans to release later this year “6 Underground,” a Michael Bay-directed action film that is costing about $150 million, and Martin Scorsese’s “The Irishman.”

The latter film might be the company’s riskiest bet. “The Irishman,” a historical drama likely to appeal only to adults interested in serious subject matter, costs as much as some all-ages action-adventure movies because of cutting-edge visual effects that allow stars including Robert De Niro, Al Pacino and Joe Pesci to appear at different ages. People close to the picture said Netflix’s total commitment is at least $173 million, with some going above $200 million, making “The Irishman” the most expensive adult drama in recent history.

Netflix has previously said about one-third of its total viewing is movies, rather than television series.

[...]

Netflix has been picking up many film projects Hollywood studios didn’t see as commercially viable at the box office, at least at the same budgets. Recent examples include Sandra Bullock’s post-apocalyptic movie “Bird Box’” and the jungle-heist flick “Triple Frontier,” starring Ben Affleck. Neither was a standout with critics, but “Bird Box” drew 80 million viewers during its first month and “Triple Frontier” has been watched 63 million times since its March release, the company said, making them Netflix’s first and fifth most popular original films, respectively.

Netflix bought the rights to “The Irishman” after major studios passed because of concerns that it was too expensive for a drama, a genre that has struggled at the box office in recent years. The producers were in the midst of raising independent funds to make the film when Netflix entered. “Without Netflix, ‘Irishman’ would not have been made,” said one of the people close to the movie. “I just don’t see [other] studios wanting to dive into these projects any more. I think they are staying away from the riskier, more mature films, especially dramas.”

The dark side of Japan’s anime industry

Sunday, July 28th, 2019

According to this Vox piece on the dark side of Japan’s anime industry, animators there don’t make a living wage, despite being in great demand:

Shingo Adachi, an animator and character designer for Sword Art Online, a popular anime TV series, said the talent shortage is a serious ongoing problem — with nearly 200 animated TV series alone made in Japan each year, there aren’t enough skilled animators to go around. Instead, studios rely on a large pool of essentially unpaid freelancers who are passionate about anime.

At the entry level are “in-between animators,” who are usually freelancers. They’re the ones who make all the individual drawings after the top-level directors come up with the storyboards and the middle-tier “key animators” draw the important frames in each scene.

In-between animators earn around 200 yen per drawing — less than $2. That wouldn’t be so bad if each artist could crank out 200 drawings a day, but a single drawing can take more than an hour. That’s not to mention anime’s meticulous attention to details that are by and large ignored by animation in the West, like food, architecture, and landscape, which can take four or five times longer than average to draw.

[...]

According to the Japanese Animation Creators Association, an animator in Japan earns on average ¥1.1 million (~$10,000) per year in their 20s, ¥2.1 million (~$19,000) in their 30s, and a livable but still meager ¥3.5 million (~$31,000) in their 40s and 50s. The poverty line is Japan is ¥2.2 million.

[...]

Anime’s structural iniquities stem back to Osamu Tezuka, the creator of Astro Boy and the “god of manga.” Tezuka was responsible for an endless catalog of innovations and precedents in manga, Japanese comics, and anime, onscreen animation. In the early 1960s, with networks unwilling to take the risk on an animated series, Tezuka massively undersold his show to get it on air.

“Basically, Tezuka and his company were going to take a loss for the actual show,” said Michael Crandol, an assistant professor of Japanese studies at Leiden University. “They planned to make up for the loss with Astro Boy toys and figures and merchandise, branded candy. … But because that particular scenario worked for Tezuka and the broadcasters, it became the status quo.”

How much work can a young animator produce in one year for $10,000? I’m tempted to come up with a project.