Weekly Musings 14 (hyperinflation, sprouts & more)
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This week's topics:
New Media journalism and your role in shaping its future
Hyperinflation
Can the Herd Be Right?
Sprouts
New Media journalism and your role in shaping its future
This week, a subscriber who confessed to having subscribed inadvertently (he wanted to contribute $5, not $5/month) asked that his subscription be cancelled. He added that the Musings were not worth $5 a month to him.
The Musings, of course, aren't claiming to be "worth" $5 a month; they are a token of appreciatioon for those who have already chosen to contribute a substantial sum to oftwominds.com.
What exactly is "worth" a subscription or payment for "premium content"? As my friend and colleague Richard Metzger (www.dangerousminds.net) observed years ago, this is the fundamental question facing all New Media and all creators of content in any media: how can we be compensated in a world where everything is free?
There are two established sectors with long-established models of "unique value" that is "worth" cash: pornography and financial advice. Paid Pornography is apparently under assault by freely offered amateur porn (yes, you can still get 'famous" for taking your clothes off, though the value is depreciating rapidly duw to oversupply of other amateur "stars") while 20-year studies of financial advisors have found that the number of analysts/managers who beat the S&P 500 index is essentially zero (statistical noise).
The New York Times recently set up a pay wall, a model that has long been profitable for the Wall Street Journal, perhaps because its online subscribers (including yours truly) can write it off as a business expense. The general view is that the NYT cannot replace its print-version subscribers with online subscribers.
So where does that leave the media? Increasingly, it leaves all media, including CD and concert sales, with an older demographic. A recent piece in The Economist noted that spending has plummeted in the under-34 bracket and risen in the 75-and-up group. The average age of those watching TV is about 50, a trend that's paralleled in radio and CD sales: it's the aging baby Boomers who are buying CDs, listening to the radio and attending pricey dinosaur-rock concerts.
I am constantly amazed by the adverts for rock concerts here in the S.F. Bay Area: the list might as well be from 1981: Sade, Santana, Robert Plant, Earth Wind & Fire, Elvis Costello, Buffalo Springfield--a group that was already ancient history in 1981, 30 years ago. Clearly, the only demographic willing and able to pop $100 a ticket is the Boomers who like revisiting 1981 via a concert.
As for New Media, The New Republic recently published an insightful critique of the "Huffington Post" model of journalism: SEO search-engine optimized, aggregated content created by others, catchy headlines and a vast restless army of bloggers willing to work for free to build their "brand." And what exactly is the value of a blogging "brand" in a world where commentary and analysis are free?
The New Republic suggested that one way to address the incentives to aggregate free content to capture the advert revenues would be for
Google to stress the search value of original content, not just headlines and me-too aggregators. As a creator of content, I agree: modifying the Google search algorithms to favor the original source would make a monumental difference in New Media because traffic would flow to us originators and away from the pirates-aggregators.
All of us below Page Rank 7 on Google's basic algo (oftwominds fluctuates between 5 and 6 PR depending on what Google does in its overhauls) play this same game of "brand building": we give aggregators permission to reprint our content in order to "get out there." The advert revenues, of course, flow to the aggregators such as Financial Sense, Seeking Alpha, Business Insider, et al.
Back when there were only 3 TV networks and a relative handful of newspapers and radio stations, the advert revenues flowed into a small number of corporate hands. These media businesses were thus highly profitable; the "barriers to entry" were very high, as were the maintenance costs (newsrooms, etc.)
In the New Media world of blogs and social media, there are tens of millions of "channels" and voices. The advert pie is thus divided up amongst millions of channels, most of whom collect a tiny sliver of advert revenues--the so-called "long tail" of New Media.
In between the paid-premium model and the advert model lies oftwominds.com. Since it isn't limited to finance, it foregoes the "unique financial value" paid model, and its broad spectrum of topics and avoidance of SEO-aggregator tactics limits its potential audience and thus its advert revenues. All of which returns us to the basic question facing New Media: what is "valuable" or "worthwhile" enough to trigger a cash payment?
Given the eclectic nature of oftwominds' content, I cannot claim to offer "uniquely valuable" financial advice, nor am qualified to do so even if I wanted to. Is it "uniqueness" that creates value? Many things are unique but not deemed valuable. Indeed, every blog is as unique as its owner.
What makes a consumer of media decide to give hard-earned cash for something--written content, music, video, etc.--that is available for free on the Web? I suspect it is a sense of responsibility akin to empathy and the traits we associate with adulthood: if we do not act, then something available to all will be lost.
It may also be an expression of solidarity and community: we want to support platforms and groups which provide something we find valuable, be it a forum, a place for shared confirmation or a group that lobbies for things we believe are important.
I have no idea why hundreds of people support oftwominds.com with cash contributions and subscriptions. There are probably as many answers as there are contributors. When I ask the most generous readers (those contributing hundreds of dollars a year) what I can do as a token of appreciation, they usually say something like, "just keep doing what you're doing," i.e. write the blog.
If I had to make a guess, I would reckon that you want to support independent thinking wherever you find it. But that's just a guess.
The whole chaotic organism we call New Media is rapidly evolving, and it seems to be aggregating along the same lines as any other new industry: the thousands of independents get swallowed or go under until a handful of "brands" dominate the revenue streams.
The process of creating content and maintaining the blog is draining and amusing by turns. Recently I received an email from a thoughtful reader chiding me for not maintaining a "comments" thread. He warned me that I was losing audience due to my irrational recalcitrance and also noted that he found the adverts irritating.
I had to laugh because the sense of entitlement was so evident: oftwominds.com, it seems (and by extension every other blog), exists to serve his desires for no adverts and plenty of server space to display his thoughts, and I am supposed to work for free to maintain this forum for his opinions.
This is perhaps a natural result of every media story, every blog and every New Media site having a place for everyone to leave their comments, all based on the idea that lack of engagement dooms a site to "not valuable." Meanwhile, in the real world, who has time to read threads? How big is the payoff for this investment of precious time?
I do not maintain "comments" because I think it implies that I will be reading and engaging those who choose to leave comments. Since I only have enough time to create the content, then this would be a false promise.
So where does this ecology leave individual, independent creators? On tiny islands rapidly melting into the sea, it seems, if we are obliged to create original content and provide forums for everyone at no cost and for no compensation.
Some bloggers/content creators try to address this fundamental problem of funding/getting paid for creating content with "fund drives." Some are quite successful, others less so. I personally have decided to place my faith in the everyday readership and avoid the begging-bowl ritual so brazenly exploited by PBS.
As it stands, there is no mechanism to support creators of original content except donations/contributions, and this is why we all try to do our part, paying for shareware/freeware, and donating to blogs, print journals and New Media we don't want to disappear.
There are a few places where small individual payments still make a critical difference, and the New Media is certainly one. Every dollar each of us contributes is like a vote in favor of that voice continuing amidst a corporate crowding of SEO-aggregation, or falling silent.
Can the Herd be Right?
Right now, those who see rising inflation as "the trend of the decade" are pushing 97%, if measures of "dollar Bears" are to be believed. Those who are bearish on the US dollar are in effect bullish on inflation and all the assets which are perceived as retaining value in inflationary eras: gold, silver, commodities, oil, and land. There certainly is a large body of evidence to support this view, but the contrarian in me is forced to ask: can the herd be right?
there is no intrinsic reason why it cannot be correct, but at least in markets, the herd is rarely right for long.
Hyperinflation
I correspond with a number of other bloggers I respect and admire such as Jesse of Jesse's Cafe Americain. Recently, Rick Ackerman of Rick's Picks asked for permission to refer to a hyperinflation-related entry I'd written. In our exchange, I summarized my basic analytic perspective as political rather than financial, as I consider hyperinflation/loss of faith in a currency to be a political process:
"I certainly wouldn’t want to debate anyone because my arguments are those of a trader, basically, not an economist. Maybe we will get hyperinflation, I don’t claim to know. What bothers me is the widespread conviction that hyperinflation is “guaranteed.” This smells like a one-sided trade to me, even if it more of a meme than a trade.
As we’ve both said, the other issue is, how do the Elites benefit from hyperinflation? The only answer I’ve ever received is “they’ve already bought gold.” Yeah, right. As I noted, there’s $7T in gold, total, half of which is owned by central banks, and there’s $160T in financial wealth to protect in the world. Even if gold went to $10K/oz there would be no more than $35 T in gold in private hands, and by that time, the gold in Ft Knox (or in the PBoChina vaults, etc.) would be enough to establish a gold-backed currency. Meanwhile, the Financial Elites would have lost all their financial wealth. Have they really transferred all their wealth out of all financial instruments and totally into gold and land? If so, then owns the $160T in financial wealth?
This explanation—that the wealthy have already transferred their financial assets into gold and land and thus they don’t care if all money, bonds, mortgages, derivatives, insurance policies, etc. all go to zero and is wiped off the books as an asset—makes no sense because it doesn’t explain who is the bagholder to all this “fiat-based” wealth. If the wealthy don’t own all these financial assets, who does? Who did they sell it all to? Yet we know that the Financial Elites own all this financial wealth and thus it will not be in their self-interest to see it wiped out. Only debtors, i.e. Central States, want to see hyperinflation to wipe out their debt. But who considers all that sovereign debt an INTEREST-PAYING ASSET? the Financial Elites, that’s who, along with politically powerful union pension funds, banks, etc.
Everyone seems to forget that debt is an asset to the guy on the other side of the trade. The debtor would love hyperinflation but the owner of the debt will resist hyperinflation with every fiber of his being—and that includes the Financial Elite who owns the debt.
This is basically a “politics of experience” analysis, and very few are equipped to understand such an analysis, as it’s outside their econometric comfort zone. They prefer a deterministic financial analysis that there are “laws” of economics which lead to hyperinflation, etc. Meanwhile for me, there are only political choices, a narrow band of which lead to hyperinflation and a bunch of others which do not. This kind of analysis doesn’t lend itself to refutation or confirmation by financial models of the sort being bandied about—it’s a behavioral analysis and a political one.
I have yet to see how banks and the Financial Elites would benefit from hyperinflation. Without getting too fancy, it’s obvious that holders of debt, those collecting interest on debt assets, would be wiped out by hyperinflation. Thus as a simple matter of self-interest, we can deduce they will not favor policies that lead to hyperinflation. If the owners of debt (Treasuries, mortgages, corporate debt, commercial paper, etc.) were politically powerless, then we could expect them to be steamrolled by those who would benefit from hyperinflation. But they are not politically powerless—it’s the debtors who are powerless, except for the Central State, and it’s beholden to the Financial Elites who have captured the political and regulatory classes that govern the State.
Maybe we will experience hyperinflation after all. I am a skeptic, not a true believer, but I am certainly open to it as a possibility. I think all the financial arguments are somewhat akin to biblical debates about how many angels can dance on the head of a pin. They are fundamentally deterministic and apolitical, while the actual process of setting policies that lead to hyperinflation is entirely political.
I have no econometric arguments against hyperinflation, I only have political ones. But since politics sets policy, then hyperinflation is necessarily a political choice. So a political analysis will trump an econometric one in my view."
I get nervous whenever anything becomes "guaranteed," and we seem to be at such a point: the percentage of stock market Bulls is back to levels not seen since 2007, and the percentage of Bears is scraping bottom. Meanwhile, volume and participation are falling, strong evidence that buying is declining. That sets up a very dangerous vulnerability to even a small wave of selling turning into a self-reinforcing cascade, otherwise known as a crash.
Anyone can grow sprouts
Longtime correspondent and entrepreneur Jim S. sent in an interesting link to a longtime purveyor of sprout seeds:
Jim also recommended a new documentary by the filmaker who made "Supersize Me". The new film is titled "
What Would Jesus Buy?" and it traces the growth of a consumerist mindset and economy to Christmas.
I found "Supersize me" to be very effective theater on a critically important issue, and I look forward to watching his new work.
From Left Field
Thanks for reading--
Charles
