Pirates mean serious business

Thursday, January 20th, 2011

Pirates mean serious business, Spencer Ackerman reports:

A maritime industry group crunches the numbers and finds that the measures companies and governments take to avoid and combat the piracy threat cost between $7 and $12 billion every year.

The One Earth Future Foundation’s Oceans Beyond Piracy project documents exploding costs in piracy-related actions (.pdf). Ransoms paid to Somali pirates totaled $238 million in 2010 — the worst year for piracy on record, according to the International Chamber of Commerce. The average payout from ransoming a hijacked ship was $5.4 million last year, up from just $150,000 in 2005. (Check out this analysis of the Somali pirate business model from WIRED.)

And ransoms aren’t even the lion’s share of piracy’s costs to global maritime commerce. Insuring ships passing near piracy-prone areas like the Gulf of Aden costs between $460 million and $3.2 billion. Naval forces’ presence to protect merchant presence costs another $2 billion. Regional economies lose up to $1.25 billion annually. Re-routing ships to less pirate-prone waters costs up to $3 billion. (Hat tip: GCaptain.)

When you consider that a .50-caliber machine gun only costs $14,000 or so, other ideas spring to mind…

Posted in Business, War | 6 Comments »

The Rise of the New Global Elite

Thursday, January 20th, 2011

Chrystia Freeland looks at the rise of the new global elite:

Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition — and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.

This stat illustrates the shift:

In 1916, the richest 1 percent of Americans received only one-fifth of their income from paid work; in 2004, that figure had risen threefold, to 60 percent.

Some examples:

Peter Peterson, for example, is the son of a Greek immigrant who arrived in America at age 17 and worked his way up to owning a diner in Nebraska; his Blackstone co-founder, Stephen Schwarzman, is the son of a Philadelphia retailer.

And they are hardly the exceptions. Of the top 10 figures on the 2010 Forbes list of the wealthiest Americans, four are self-made, two (Charles and David Koch) expanded a medium-size family oil business into a billion-dollar industrial conglomerate, and the remaining four are all heirs of the self-made billionaire Sam Walton. Similarly, of the top 10 foreign billionaires, six are self-made, and the remaining four are vigorously growing their patrimony, rather than merely living off it.

It’s true that few of today’s plutocrats were born into the sort of abject poverty that can close off opportunity altogether— a strong early education is pretty much a precondition — but the bulk of their wealth is generally the fruit of hustle and intelligence (with, presumably, some luck thrown in). They are not aristocrats, by and large, but rather economic meritocrats, preoccupied not merely with consuming wealth but with creating it.

Freeland insists on calling the rich plutocrats, which fits when describing the Wall Street elite but misses the point entirely when describing John Galt:

You might say that the American plutocracy is experiencing its John Galt moment. Libertarians (and run-of-the-mill high-school nerds) will recall that Galt is the plutocratic hero of Ayn Rand’s 1957 novel, Atlas Shrugged. Tired of being dragged down by the parasitic, envious, and less talented lower classes, Galt and his fellow capitalists revolted, retreating to “Galt’s Gulch,” a refuge in the Rocky Mountains. There, they passed their days in secluded natural splendor, while the rest of the world, bereft of their genius and hard work, collapsed.

Galt is not a plutocrat; he’s a technical genius, like today’s Silicon Valley engineer-entrepreneurs. His enemies are plutocrats who use political pull to drag down their more-productive competitors.

That’s the whole point of the book, really. Sigh.

Posted in Business, Economics, Media, Policy | 3 Comments »

Why Our Best Officers Are Leaving

Sunday, January 16th, 2011

Tom Kane explains why our best officers are leaving the military:

It’s convenient to believe that top officers simply have more-lucrative opportunities in the private sector, and that their departures are inevitable. But the reason overwhelmingly cited by veterans and active-duty officers alike is that the military personnel system — every aspect of it — is nearly blind to merit. Performance evaluations emphasize a zero-defect mentality, meaning that risk-avoidance trickles down the chain of command. Promotions can be anticipated almost to the day — regardless of an officer’s competence — so that there is essentially no difference in rank among officers the same age, even after 15 years of service. Job assignments are managed by a faceless, centralized bureaucracy that keeps everyone guessing where they might be shipped next.

The Pentagon’s response to such complaints has traditionally been to throw money at the problem, in the form of millions of dollars in talent-blind retention bonuses. More often than not, such bonuses go to any officer in the “critical” career fields of the moment, regardless of performance evaluations. This only ensures that the services retain the most risk-averse, and leads to long-term mediocrity.

When I asked veterans for the reasons they left the military, the top response was “frustration with military bureaucracy” — cited by 82 percent of respondents (with 50 percent agreeing strongly). In contrast, the conventional explanation for talent bleed—the high frequency of deployments — was cited by only 63 percent of respondents, and was the fifth-most-common reason. According to 9 out of 10 respondents, many of the best officers would stay if the military was more of a meritocracy.

The US military has a long history of innovative thinking — and a long history of punishing it:

General Mitchell was court-martialed for insubordination in 1925; and who can forget the hostile treatment afforded General Eric Shinseki in 2003 after he testified that “something on the order of several hundred thousand soldiers” would probably be required to stabilize post-invasion Iraq?

In a 2007 essay in the Armed Forces Journal, Lieutenant Colonel Paul Yingling offered a compelling explanation for this risk-averse tendency. A veteran of three tours in Iraq, Yingling articulated a common frustration among the troops: that a failure of generalship was losing the war. His critique focused not on failures of strategy but on the failures of the general-officer corps making the strategy, and of the anti-entrepreneurial career ladder that produced them: “It is unreasonable to expect that an officer who spends 25 years conforming to institutional expectations will emerge as an innovator in his late forties.”

Posted in Business, War | 3 Comments »

You don’t mess with Gaston Glock

Saturday, January 15th, 2011

When you hear that a trusted business associate tried to kill Gaston Glock a few years ago, you might expect to hear a story involving guns:

Lured into a dimly lit garage in Luxembourg by his colleague Charles Ewert, the Austrian Glock stopped to look at a sports car at Ewert’s suggestion. Suddenly, a massive masked man leaped from behind and smashed a rubber mallet into Glock’s skull. Ewert fled to the stairwell. “I am a coward,” he later told . With Glock off balance, the attacker landed another crushing blow. “I was fighting for my life,” recalls Glock, 73, during a rare interview with the press.

Springing up on legs toned by miles of daily swimming, Glock thrust his enormous fist into his assailant’s eye socket. As the would-be assassin staggered, Glock pounded again, knocking out a few of the man’s teeth. The bloodied attacker staggered, then collapsed on top of Glock “with his arms outstretched like Jesus,” according to John Paul Frising, Luxembourg’s deputy attorney general, who brought attempted murder charges against the attacker, the French-born Jacques (Spartacus) Pêcheur, 67. This was how the police found the two men at 9:30 a.m. on July 27, 1999.

Glock says he lost a liter of blood from cuts and abrasions and that he suffered seven head wounds. Yet as soon as he reached the hospital he summoned his personal bankers at UBS and Banque Ferrier Lullin. The banks held $70 million in cash, and Ewert had access to it all. By 12:30 p.m. Glock managed to move $40 million to a Swiss account. But by then Ewert had blocked the other $30 million with a court order. As he nursed his injuries, Glock wondered how he could have trusted the wrong man.

Gaston Glock’s gun business has come a long way in a short time:

The U.S. police business was once dominated by Smith & Wesson and Beretta. Then in 1985 along came Glock with a gun made from a nylon resin that was tough enough to be made into most parts of a pistol (except the carbon steel barrel). The Glock was also revolutionary for its simple design — 34 parts, compared with 60 or so for the Smith & Wesson .45 caliber semiautomatic — and its 24-ounce weight, to 25.4 ounces for the Smith & Wesson. A Glock shooter experiences a softer recoil because the gun’s polymer frame flexes slightly when it’s fired. Glock fans include the New York City police, U.S. Special Forces, the FBI and many international antiterrorist units.

These days Glock GmbH has an estimated $100 million in sales, two-thirds of it from the trigger-happy United States. A gun that retails for $500 can be manufactured for $75, and the company has a pretax margin nearing 60%, estimates John Farnam of Defense Training International, a LaPorte, Colorado, small arms instructor.

Posted in Business, Crime, Weapons | No Comments »

More TV viewers may be cutting the cord this year

Friday, January 14th, 2011

The Los Angeles Times reports the unsurprising news that more TV viewers may be cutting the cord this year, as a torrent — get it? — of television-ready gadgets hit store shelves this year:

For entertainment industry executives, Internet video’s migration from the PC to the TV presents opportunities as well as fresh headaches. It opens the market to a new crop of distributors willing to pay top dollar for licensing rights to TV shows and movies. But it also causes friction with cable, satellite and telecommunications carriers, which pay $30 billion annually to deliver video into the home.
[...]
Nonetheless, Internet TVs began gathering retail momentum this year, as 1 in 4 high-definition televisions sold in the U.S. provided Internet capability, according to researcher Parks Associates. Fewer than half of the consumers who purchased such high-end devices, or 40%, took advantage of this feature, Parks found.

A scant 5% of people whose televisions are connected to the Internet have used their TVs to access online video services such as Netflix, Amazon Video on Demand, Vudu or Hulu Plus. Although this is seemingly insignificant compared with the 60 million people who subscribe to pay TV, analysts say this nonetheless represents a meaningful shift away from these Internet-based on-demand services as computer-centric experiences.

This seems like a good moment to reiterate that you’re not currently paying for channels you never watch. Really.

Posted in Business, Economics, Media | No Comments »

A Theory of Growth

Thursday, January 13th, 2011

Eric Falkenstein reiterates his theory of growth, which does not focus on preventing recessions:

That decentralized, self-interested, people can collectively make such large errors seems irrational or corrupt to many, but they should remember that growing economies require people to be making things better, which means, new ways of doing things. New ideas are often wrong. Economics has gone onto intellectual cul-de-sacs many times (socialism, Keynesian macro models, input-output models, Hilbert spaces in finance, Arbitrage Pricing Theory, Kalman-filter macroeconomic models, etc.). Other scientific disciplines have their own mistakes, and political mistakes — stupid wars — are also common. These are rarely conspiracies, but rather, smart people making mistakes because the ideas that are true, important, and new, are really hard to discern, and tempting ones are alluring when lots of other seemingly successful people are doing them.

My Batesian Mimicry Theory posits that recessions happen because certain activities become full of mimics, entrepreneurs without any real alpha who got money from investors looking in their rear-view window of what worked and focusing on correlated but insufficient statistics. For example, people assumed a nationally diversified housing prices would not fall significantly in nominal terms, because they had not for generations; people assumed anything related to the internet would make them rich in the internet bubble, conglomerates would be robust to recession in 1970, that the ‘nifty fifty’ top US companies had Galbraithian power to withstand recessions in 1973, that cotton prices would not fall in 1837, etc.

As in ecological niches, there is no stable equilibrium when mimics arise to gain the advantages of those with a real, unique and costly, comparative advantage. Every so often there are too many mimic Viceroy butterflies, not enough real poisonous Monarch ones, and a massive cataclysm occurs as predators ignore the unpleasant after-effects and start chomping on all of them. The Viceroy population grows until this devastating event occurs, a species recession. Next time, it won’t happen in butterflies, but rather, among frogs or snakes. They key is, some ecological niche is always heading towards its own Mayan collapse (distinct from the 2012 Mayan apocolypse).

The key to wealth creation is doing more with less — destroying jobs at the micro level and creating jobs at the macro level by reallocating capital and labor to more valuable pursuits. The computer got rid of things from typesetters, secretaries, to engineers working with slide-rules, but these people didn’t stay unemployed, they did something else, making the economic pie bigger. This is antithetical to government and unions who think creating a permanent ‘job’ creates productivity — stability at the micro level and stagnation at the macro level. Wealth is created by having decentralized decision-makers focused on simple goal of making money, which means, they oversee transactions where revenues collected are greater than expenses paid. If externalities are properly priced (I know, most liberal think this never happens), this implies value is created. The continual improvements in method (ie, productivity, wealth creation) merely maintain profits in a competitive environment; to do nothing would see their profits eaten away by competitors would could easily copy what they did and just undercut their prices.

This passage reminds me of our recent discussion on authority and education:

The key to this is having managers who keep their workers focused. A good example is a story I heard second-hand about a football player for Minnesota Vikings in the 1970s. Coach Bud Grant called this marginal player into a meeting, and said, ‘Here’s what I need you to do…’. The player, an articulate fellow quite confident in himself, interrupted with an explanation of why he wasn’t doing better and suggestions about how to correct it, mainly focused what others were doing wrong. Grant cut him off: ‘You don’t understand. This isn’t a negotiation. Do what I’m telling you, and you have a role here. Otherwise, you don’t.’ Hierarchies only work well when people have clearly defined goals, and managers who manage their direct reports singlemindedly.

Private firms can do this much more quickly and often than government, and are rewarded with investment and retained earnings to the degree they do it well. When the government wants to do something, like build a light-rail system, it instead satisfies all its stakeholders who have no financial downside, only veto power, and so the cost/benefit calculus is almost irrelevant. The probability that benefits will outweigh costs when not prioritized is negligible, as highlighted by the fact that companies have to work very hard to make this positive when all those other considerations are ignored.

Posted in Business, Economics, Eric Falkenstein, Policy | No Comments »

Group IQ

Friday, January 7th, 2011

Group IQ, according to a study out of MIT’s Sloan school, has less to do with the group’s average IQ than you might expect:

In two studies, researchers divided 699 people into groups of two to five people. They measured each team member’s intelligence individually, but then gave the teams intelligence-testing tasks to solve — figuring out the next pattern in a sequence, brainstorming the different potential uses of a brick. Then, the group performed a more complex “criterion” task, such as playing checkers against a computer or completing a complicated architectural task with Legos, which was used to understand whether the collective intelligence researchers measured in the initial tasks correctly predicted the group’s abilities.

What the researchers found was that groups’ collective intelligence strongly predicted how well they did in the computer checkers game and on the Legos task — evidence that something called “collective intelligence” did in fact exist. What was more surprising, however, was that neither the average intelligence of the group members nor the person with the greatest intelligence strongly predicted how well the group did.

Other tenets of group success also seemed to fall by the wayside: A group’s motivation, satisfaction, and unity were unimportant. Instead, the researchers found that when a group had a high level of collective intelligence, the members tended to score well on a test that measured how good they were at reading other people’s emotions. They also found that groups with overbearing leaders who were reluctant to cede the floor and let the others talk did worse than those in which participation was better distributed and people took turns speaking. And they also found that the proportion of women in the group was a predictor of collective intelligence — a factor they believe was likely influenced by women’s generally superior social sensitivity.

Posted in Business, Science | 4 Comments »

Private Schools ‘Counsel Out’ the Unsuccessful

Thursday, January 6th, 2011

Apparently it’s news to New York Times readers that the city’s exclusive private schools ‘counsel out’ the unsuccessful — which has created a market for a very different kind of private school:

Filling a role that reform or military schools used to perform, alternative schools like Smith, which has about 35 students in grades 7 through 12, tend to take a more nurturing approach. Some of these schools provide an educational rehab of sorts: the Stephen Gaynor School on the Upper West Side and the Windward School in White Plains specialize in getting students back into mainstream schools after a few years — sometimes the same schools they left.

But with their high staff member-to-student ratios, they are not cheap: Windward’s annual tuition is $43,000, about $10,000 more than at most Manhattan private schools. Smith’s upper-school tuition is $29,000 to $41,500, depending on the grade and the extent of extra help.

Posted in Business, Education | No Comments »

Electric Delivery Fleets

Thursday, December 23rd, 2010

Electric vehicles may or may not make solid economic sense for many consumers, but they have their advantages in commercial delivery fleets:

Staples has ordered 41 trucks from Smith Electric Vehicles of Kansas City, Mo., and will start receiving them in January. There is “a real strong chance we’ll make a second order for 40,” Mr. Payette said.

The trucks, which have a top speed of about 50 mph and can carry 16,000 pounds, cost about $30,000 more than a diesel, but Staples expects to recover that expense in 3.3 years because of the savings inherent in the electric models, Mr. Payette said.

Staples said the annual maintenance cost of a diesel delivery truck is about $2,700 in most years, including oil, transmission fluid, filters and belts. For an electric truck — which has no transmission and needs no fluids, filters or belts — the cost is about $250.

And since it costs much more to maintain an internal-combustion delivery truck than a car, the cost savings for truck fleets is greater than for consumers buying an electric model.

One big savings comes in brakes. Because electric trucks use “regenerative” braking, which returns some of the force of stopping to the batteries in the form of electricity, the brakes don’t wear out as fast. That means the brakes last four or five years, not one or two, before they need a $1,100 repair.

Electric trucks also don’t need the urea exhaust-cleaning system of diesels, which costs about $700 a year to maintain. And electric motors are far less complex than diesel engines, last much longer and the training required to work on them is minimal, Mr. Payette said.

On top of this, Staples says it will save each year roughly $6,500 in fuel costs per electric vehicle over a diesel model.

Each of Staples’s electric delivery trucks will run a daily route of under 70 miles and then come back to be recharged at night. In addition, since its nonelectric trucks get about 10 miles per gallon, the savings in fuel costs with an electric is more dramatic that it is for consumers buying an electric car.

On the flip side, electric trucks cost substantially more. A Smith model with a 50-mile battery range and basic equipment would go for about $90,000, compared with about $60,000 for a diesel model, Smith Electric said. Mr. Payette declined to say what Staples is paying for models with a 100-mile range.

Add it all up and Staples expects to save nearly $60,000 over the 10-year life of an electric truck over a diesel model.

One impediment to wider adoption of electric trucks: few finance companies offer leases on them. That’s because finance companies are unsure about how to value the lease “residual,” a truck’s worth after a few years of use. Many large companies, including Staples, prefer to lease trucks to avoid the large capital requirements of an outright purchase, Mr. Payette said.

Still, some big truck customers are trying out electrics.

FedEx is using 19 all-electric vehicles in London, Paris and Los Angeles made by Modec of Great Britain and Navistar International Corp. FedEx Chief Executive Officer Fred Smith has been outspoken about his desire to see electric vehicles proliferate, in part to cut the U.S. dependence on imported oil.

Frito-Lay, meantime, has ordered 176 Smith electric delivery trucks. The snack foods maker intends to convert up to half of its 4,000 medium-duty trucks to battery-powered models.

“We are not making a trade-off and doing a good deed for the sake of a good deed. There is a great return on that investment,” said Mike O’Connell, director of fleet operations for Frito-Lay.

Mr. O’Connell estimates his company will reduce fuel consumption by 500,000 gallons a year with its first batch of electric trucks.

Posted in Business, Technology | No Comments »

The Practical Chinese

Thursday, December 23rd, 2010

Younghusband cites this amusing line about the practical Chinese, who are building a railroad in Saudi Arabia:

Some firms would have been put off by the fact that non-Muslims are barred from working in Mecca, so China simply converted hundreds of railway workers to Islam.

Posted in Business, Policy | No Comments »

Just Don’t Call It Moonshine

Wednesday, December 22nd, 2010

“From the farmer’s perspective,” Derek Grout explains, “the only way to increase the value of an apple is to make it into spirit and put that in oak.” But adding value has some legal hurdles:

After Prohibition, laws made production feasible for only a few huge distilleries. A craft distilling movement began on the West Coast about 20 years ago, but restrictive state regulations kept it from spreading. In the last few years, though, as states sought new forms of revenue, they cut astronomic licensing fees and gave incentives to producers who got the bulk of their raw materials in-state, as with New York State’s Farm Distillery Law in 2007.

Frank Coleman, senior vice president of the Distilled Spirits Council of the United States, a trade group, said the number of distilleries nationwide has grown to 220, from 24 in 2001, and is expanding.

I love the marketing spin passed off as reporting:

Like Mr. Grout, virtually all craft distillers use small pot stills rather than the huge column stills used by the industry giants. Though more labor-intensive, these more faithfully capture the essence of fruit and grain, and let a distiller precisely select what part of the distilling run to use to create the most nuanced styles and flavors.

Posted in Business, Policy, Technology | No Comments »

The Atlantic Turns a Profit

Wednesday, December 22nd, 2010

The Atlantic, which is 153 years old, gave voice to the abolitionist and transcendentalist movements of the 19th century. It first published the “Battle Hymn of the Republic”.

In the 20th century, Jeremy Peters says, it seemed more comfortable as an academic exercise than a business, but it has reinvented itself for the 21st century, and it is on track to turn a tidy profit of $1.8 million this year. For the first time in at least a decade, The Atlantic will make money:

“We imagined ourselves as a venture-capital-backed start-up in Silicon Valley whose mission was to attack and disrupt The Atlantic,” said Justin B. Smith, president of the Atlantic Media Company, who arrived at the magazine’s offices in the Watergate complex in 2007 with a mission to stanch the red ink. “In essence, we brainstormed the question, ‘What would we do if the goal was to aggressively cannibalize ourselves?’ ”

What that meant more than anything else was forcing one of the nation’s oldest magazines to stop thinking of itself as a printed product.

Separations between the digital and print staffs in both business and editorial operations came down. The Web site’s paywall was dismantled. A cadre of young writers began filling the newsroom’s cubicles. Advertising salespeople were told it did not matter what percentage of their sales were digital and what percentage print; they just needed to hit one sales target. A robust business around Atlantic-branded conferences took off.

The strategy is not a cure-all template for troubled media companies, of course. The Atlantic, a tiny enterprise compared with vast corporate magazine empires like Time Inc. and Condé Nast, has only about 100 business and editorial employees and a circulation of 470,000. A scale that small means that a few million dollars could push the company over the top — an amount that would barely register on the balance sheets of many other publishers.

Since 2005, revenue at The Atlantic has almost doubled, reaching $32.2 million this year, according to figures provided by the company. About half of that is advertising revenue. But digital advertising — projected to finish the year at $6.1 million — represents almost 40 percent of the company’s overall advertising take. In the magazine business, which has resisted betting its future on digital revenue, that is a rate virtually unheard of.

Posted in Business | No Comments »

Amazon Prime

Sunday, December 12th, 2010

Amazon Prime may be the most ingenious and effective customer loyalty program in all of e-commerce, Brad Stone says, if not retail in general:

Analysts describe Prime as one of the main factors driving Amazon’s stock price — up 296 percent in the last two years — and the main reason Amazon’s sales grew 30 percent during the recession while other retailers flailed. At the same time, Prime has proven exceedingly difficult for rivals to copy: It allows Amazon to exploit its wide selection, low prices, network of third-party merchants, and finely tuned distribution system, while also keying off that faintly irrational human need to maximize the benefits of a club you have already paid to join.
[...]
The company declines to disclose specifics about the program, though analysts estimate it has more than 4 million members in the U.S., a small slice of Amazon’s 121 million active buyers worldwide. Analysts say Prime members increase their purchases on the site by about 150 percent after they join and may be responsible for as much as 20 percent of Amazon’s overall sales in the U.S. The company’s executives acknowledge only that the program gets people to buy more — and more kinds of items — on the site. “In all my years here, I don’t remember anything that has been as successful at getting customers to shop in new product lines,” says Robbie Schwietzer, vice-president of Amazon Prime and an eight-year veteran of the company.

Posted in Business | No Comments »

Inside Kevin Smith’s Booming Podcasting Business

Sunday, December 5th, 2010

Kevin Smith, the fat director, has a booming podcasting business:

For Smith fans, the live-podcasting theater is the sanctum sanctorum where they get to see the king of the comic-book geeks in action, regally decked out in his signature PUCK U jersey amid a hockey-inspired decor featuring mountains of sticks and red-and-black carpeting for his beloved New Jersey Devils.

For a handful of Smith’s friends who podcast with him and share in the profits, SModcastle is the saving grace that has freed them from living with their parents. And for Smith himself, it’s the source of creative freedom and emotional solace he desperately needs. “All the fun that went away from the movies is here,” Smith says. The 40-year-old feels like he’s back in the Wild West of indie filmmaking, when he made Clerks for $28,000, before his movies became corporate Frankensteins. “No bosses saying, ‘You can’t do that,’” he says, “or, ‘This is going to cost too much money.’” Or having to deal with difficult stars like Bruce Willis, who starred in Cop Out. “That’ll kill your fucking soul,” he says.

The SModcastle has also become the hub for Smith’s expanding podcast business: “We don’t have the balls to say, ‘Pay what you will as you exit,’ like the Little Rascals did. We like to get the money up front.” That’s 50 seats at 10 or 25 bucks a head depending on the show, one or two performances a night, four nights a week, in a place that rents for $4,000 a month. “We haven’t advertised at all; we’re selling out shows simply because of Twitter,” he says, looking extremely pleased as he stands at the refrigerator of the bus he uses as his on-set trailer. Smith is holding a carton of low-fat chocolate milk, occasionally lifting it to his mouth, but he doesn’t take a swig because he’s talking too much. “It’s shocking how self-sufficient you can be.”

SModcast 3D commands roughly $2,000 for an advertising spot, with two spots running in a typical hour. “For as much as I thought, Wow, this is a brand-new world, it’s really the same old world,” Smith says. “Everyone tries to figure out how to keep it as similar to everything as possible, so this is like TV or radio ad buys.”

Posted in Business, Media | No Comments »

Tablets and Etherealization

Wednesday, December 1st, 2010

Paul Graham suspects that we’ll end up calling iPhones, iPads, and their Android equivalents tablets:

The only reason we even consider calling them “mobile devices” is that the iPhone preceded the iPad. If the iPad had come first, we wouldn’t think of the iPhone as a phone; we’d think of it as a tablet small enough to hold up to your ear.

The iPhone isn’t so much a phone as a replacement for a phone. That’s an important distinction, because it’s an early instance of what will become a common pattern. Many if not most of the special-purpose objects around us are going to be replaced by apps running on tablets.

This is already clear in cases like GPSes, music players, and cameras. But I think it will surprise people how many things are going to get replaced. We funded one startup that’s replacing keys. The fact that you can change font sizes easily means the iPad effectively replaces reading glasses. I wouldn’t be surprised if by playing some clever tricks with the accelerometer you could even replace the bathroom scale.

The advantages of doing things in software on a single device are so great that everything that can get turned into software will. So for the next couple years, a good recipe for startups will be to look around you for things that people haven’t realized yet can be made unnecessary by a tablet app.

In 1938 Buckminster Fuller coined the term etherealization to describe the increasing tendency of physical machinery to be replaced by what we would now call software. The reason tablets are going to take over the world is not (just) that Steve Jobs and Co are industrial design wizards, but because they have this force behind them. The iPhone and the iPad have effectively drilled a hole that will allow etherealization to flow into a lot of new areas. No one who has studied the history of technology would want to underestimate the power of that force.

Posted in Business, Paul Graham, Technology | No Comments »

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