Growthology

The Mark Thoma / Kauffman Blogger Forum Interview

 

Mark Thoma, Professor, University of Oregon and author of the blog Economist's View

The Information Economy, Huh?

Automation at factories means that there are simply fewer and fewer manufacturing jobs. And this is a good thing. Machinery does most of the work growing the food we eat, and producing the goods we use (durable and nondurable). What's left is information, hence the moniker "The Information Age."

But if this is the great era of data, then what's with the demise of so many information companies? Newspapers, Record Labels, Encyclopedias, all heading south.

The now-familiar struggles of the newspaper industry is in the news again with the brinksmanship in labor negotiations at the Boston Globe, as well-told by David Warsh in this week's economicprincipals.com essay. David is more optimistic than I about the business of newspapering, but I'd like to think I'm more optimistic about the future of journalism. He concludes,

Never mind Warren Buffett’s admonition over the weekend that there is no price at which he would consider a newspaper an attractive investment (he still has positions in two, the Buffalo News and the Washington Post). Repair work has never been his passion. With a little luck, the best regional papers – The Boston Globe, the Chicago Tribune, the Baltimore Sun, the Los Angeles Times – will wind up back in the hands of people who know how to run them.  If so, the newspaper industry will return to a scaled-down semblance of its former self – a profitable and stable group of companies in the first-draft-of-history business. But then, I am a congenital optimist. I have sometimes been wrong.

Yet I find the story of Encarta even more interesting.  Encarta, as you may recall, was the revolutionary Microsoft product that put an encyclopedia on a CD-ROM in 1993 which was the creatively destructive force that assaulted Encyclopedia Brittanica, first published around 1768. Now it is Encarta that will be shuttering -- this year, even refunding existing users rather than continue into 2010 -- signaling the acceleration of technology cycles in the new century. In this NYT piece, Randall Stross describes how the destroyer became the destroyee:

It’s hard to look at the end of the Encarta experiment without the free and much larger Wikipedia springing immediately to mind. But Encarta arguably would have failed even without that competition. The Google-indexed Web forms a virtual encyclopedia that Encarta never had a chance of competing against.

Encarta was conceived pre-Web and had a long gestation. In 1985, Bill Gates envisioned a CD-ROM encyclopedia as a “high-price, high-demand” product with the potential of becoming as profitable to Microsoft as Word or Excel.

Tyler Cowen's 8 Minutes

As Tyler mentioned first on his blog, our video team assembled this 8-minute video of highlights from his interview at the Economics Bloggers Forum.  It's tremendous (kudos to Matt Pozel and Matt Long) and we sure appreciate Tyler taking time to sit down with us. 

The Mark Twain of our time, Part XXVI

Joel Achenbach writes my favorite sentence of the month so far (bolding added),

Blogworld is overrun with people who have never learned the beauty of the unpublished thought. I get tired of the gut reactions, the knee-jerk responses, the instantaneous neurological twitches, and what I believe are technically known among scientists as the mind-farts.

And of course, this would on the day that I finally sign up for Twitter, being the anti-Luddite-but-very-late-adopter (who still has no Mac by the way).  Honestly, I'm not sure how I can let other people sign up for my Tweets, but you are welcome to listen in before all of my insto-brilliance burns out (I've already tweeted twice, and can feel the energy fading).

Seriously, I signed up like 60 minutes ago. Curse you, Achenbach. Stop stalking me!

He's at it Again

Have you ever wondered what Deliverance, the Ivy League, debt financing, and DNA have in common? Well, you're in luck: Harold Bradley has the answer.

Is Journalism Dead?

That was the question heading one of our Kauffman Econ Blogger Forum discussions.  The panel spent most of the time discussing whether newspapers are dead (Scott Jagow's summary is here), which to me seems probable, if not obvious. That they are dying, no one can deny. Is it sad? Yes. Is the end of seeking truth in current events? Hardly.

What is likely to happen is that newspapers will evolve, perhaps so swiftly and completely that it will be hard to believe that the future species is related to the gray-paper-o-saurus. But will journalism die? That was a trick question. The answer in my mind is that bloggers are the new journalists. Or at least, some are. (Is Rushbo a journo?). In fact, it seems more accurate to critique the growing bias in newspapers than decry the savages in pajamas.

Insofar as we agree that journalism is the reporting of news in pursuit of objective truth, my belief is that this is a fundamental human motivation, the same spirit driving scientific curiosity. The day journalism dies is the day humanity is extinguished, and I'm still on the optimistic side of projecting neither of those events will occur, present recessions notwithstanding. That schools of journalism have downplayed objective truth exists, and some newspapers have abandoned ancient principles of objectivity, they have hastened the downfall of the daily printed word. But those are quibbles, really.

What's ultimately driving the evolution of journalism is the business model. A grimy gray broadsheet has some tactile appeal, about the same way that riding a horse has its appeal. But compared to the alternatives of jet planes and automobiles, the appeal is nostalgic. But the economics of newspapers (and maybe local news television) is eroding. The recession will accelerate the erosion, perhaps completely. The alternative is what exactly? Free content on YouTube and RealClear? Maybe. Or maybe the spectrum of news is much broader than what you imagine.

Maybe we should think about an infinitely long tail where people will pay, handsomely, for news about interests they deeply care about. The President will probably pay dearly for news about Iranian nukes, and the health of dear leaders in North Korea, Cuba, and Venezuela. My friend Luis will subscribe to feeds about Star Wars action figures no doubt (and who wouldn't?).

This is all to say, Luis wonders if the business model for journalism won't look a lot like iTunes.

The Wisdom of Economics Bloggers

The Wisdom of Economics Bloggers

Economic growth is a process of innovation and technological change. In the wake of the Internet revolution of the 1990s, blogging emerged as a booming phenomenon that is manifestly creative and destructive. Blogging is entrepreneurial, to be sure, driven by individuals with either expertise or strong opinions, sometimes both. Once castigated as people in pajamas, the broad wave of bloggers has disrupted print media and even—perhaps ironically—the art and science of economics itself.

In the span of a few years, a rich and incredibly timely discussion, debate, even tutorial about the economy has emerged through blogging techniques that were unknown a decade ago and probably unimaginable by almost everyone two decades ago. Opinions and advice are available from the brightest minds—available to schoolchildren of today in ways that would have been the envy of Presidents and Kings of generations past.

The Kauffman Foundation is dedicated to the idea that entrepreneurship and innovation drive economic growth. Naturally, this new technology is a fascinating one, both for its effect on the economic research frontier, but also as an innovation in its own right.

On February 27, 2009, the Kauffman Foundation hosted the first ever physical conference for economics bloggers at the Foundation headquarters in Kansas City, Missouri. Participants included famous independent bloggers such as Matthew Yglesias, Tyler Cowen, Mike “Mish” Shedlock, Robert X. Cringely, and Mark Thoma as well as distinguished economics journalists such as Amity Shlaes, Steve Malanga, Michael Mandel, Brian Carney, and keynote speaker David Warsh.

A forum of so many high-profile participants offers a unique opportunity for discussion, but time constrains the number of ideas communicated. As a partial remedy, we asked each participant to write brief statements on a few of the topics in question. A collection of the written responses from participants at the 2009 Kauffman Economics Bloggers Forum is collected here, titled "The Wisdom of Economics Bloggers." Thanks to Lacey Graverson and Melody Dellinger who helped with layout, editing and design. And also to Barbara Pruitt for getting the word out!

Over the next few weeks, our video production team will also be releasing a series of web videos of interviews with all the respondents. Matt Pozel will be the invisible guy on the opposite end of those discussions, and he truly is a master.

The event would not have been possible without the support of my co-blogger Bob Litan, as well as Carl Schramm, who also opened the forum with a welcome address reminding us all about who Mr. Kauffman was and why the way out this recession will be led by job creating entrepreneurs like him. But the biggest support was behind the scenes by our superstar Glory Olson, who was in essence the composer and conductor -- overseeing planes, trains, automobiles, nametages, agendas, room layouts, distances between tall chairs, and even barbecue sauce. Glory is awesome! She was ably assisted by Dave Kaiser, Leslie Kenagy, Norma Getz, and many others. Thanks to everyone, but especially the partipants listed below

Alison Schrager http://www.economist.com/blogs/freeexchange/  
Amity Shlaes http://www.amityshlaes.com/  
Bob Cringely http://www.cringely.com/  
Brian Carney http://www.Opinionjournal.com  
David Warsh http://www.economicprincipals.com/  
Gregg Gordon http://www.smirkingchimp.com/author/gregg_gordon  
Mark Thoma http://economistsview.typepad.com/  
Mark Perry http://mjperry.blogspot.com/  
Matt Schreiber OM III Capital Management
Scott Jagow http://www.publicradio.org/columns/marketplace/scratchpad/  
Seth Ditchik http://press.princeton.edu/  
Sramana Mitra http://www.sramanamitra.com/  
Steve Malanga http://www.realclearmarkets.com   
Tim Kane http://www.growthology.org  
Tyler Cowen http://www.marginalrevolution.com/  
Bob Litan http://www.growthology.org  
Arnold Kling http://econlog.econlib.org/  
Ben Wildavsky http://www.kauffman.org  
Carl Schramm http://www.kauffman.org  
Charles Johnson http://www.growthology.org  
Chris Lester http://www.kansascity.com/  
Dane Stangler http://www.growthology.org  
Don Boudreaux http://www.cafehayek.com/   
EJ Reedy http://www.kauffman.org  
Jeff Cornwall http://www.drjeffcornwall.com/  
John McIntyre www.realclearpolitics.com  
Lynne Kiesling http://knowledgeproblem.com/  
Matt Rees http://www.whwg.com/thefirm/staff.php/46/Matthew__Rees
Matthew Yglesias http://yglesias.thinkprogress.org/  
Michael Anton http://www.kauffman.org  
Michael Mandel http://www.businessweek.com/the_thread/economicsunbound/  
Mike Shedlock http://globaleconomicanalysis.blogspot.com/  
Paul Kedrosky http://paul.kedrosky.com/ 
Virginia Postrel http://www.dynamist.com/weblog/index.html
Wendy Guillies http://www.kauffman.org
Yves Smith http://www.nakedcapitalism.com/

Finally, here is a partial list of posts Barbara found mid-day on Friday:

http://mjperry.blogspot.com/2009/02/goin-to-kansas-city-economics-blogger.html

 

http://www.cafehayek.com/hayek/2009/02/bloggers-forum.html

 

http://economistsview.typepad.com/economistsview/2009/02/kansas-city-blogging-and-barbecue.html

 

http://business.nashvillepost.com/2009/02/27/a-bunch-of-economists-walk-into-a-blogging-convention/

 

http://economywatchblog.dallasnews.com/archives/2009/02/economy-bloggers-unite-in-pers.html

 

http://www.publicradio.org/columns/marketplace/scratchpad/2009/02/is_journalism_dead.html

 

http://www.bloggingteam.com/2009/02/27/kauffman-foundation-holds-first-ever-economics-bloggers-forum-market-wire-press-release/

 

Blogger Forum kickoff

Well, tonight our Kauffman Economics Bloggers Forum started with a huge barbecue dinner, and now three of us are sitting around talking about what an amazing group of people have gathered.  Tomorrow is the full day event, and we will be releasing a 40-page collection of partipants thoughts on kauffman.org.  I might actually be too busy with the day to blog much, but look out for the other 25 bloggers' blogs for news & updates!

By the way, I think it is fair to say that hosting an event in Kansas City in late February is NOT a boondoggle.  It's like the opposite end of the doggle spectrum. The Undoggle.  Bloggers are coming here, I'd like to believe, for the quality of the conversation.  And maybe the barbecue.

Question for the day: what's the best e-lance development site these days?  I used guru.com heavily a couple years, and will go back to it unless I see something better.  Bo Fishback recommended something yesterday that is twice is good, but I forgot to write it down (and he's driving to Nebraska right now, so out of reach).  Thanks in advance.

That Other Kauffman Blogger, Again

In which Harold Bradley, using only a chart, terrifies us all.

That Other Kauffman Blogger

From the inimitable Harold Bradley, a discourse on boxing, Wall Street executive compensation, the ancien regime, and corporate governance.

Fast Company

Fast Company invited me to do some blogging for them, which I just started today. I'm not very creative, so I just called it Growthology Max.

The bulk of my blogging will still be here, and I'll make sure to repost relevant material here as well.  But I did want to share the link with you to my initial post, which carries over the "Growth Deconstructed" line. Unfortunately, their blog editor chewed up the image, so I'm going to go ahead and repost the gif file here.  For analysis, I'll have to honor my agreement and direct you to the original content at the Fast Company site here.

Sayonara

Well, my time at Growthology is at an end. I'd like to thank Tim and Bob for this enjoyable experience. If, perchance, readers liked what they read, you can find me (and others) at www.boxscoreblog.com. And, of course, Tim and Bob may permit me to contribute again in the future.

Growing Ideas

Growthology.org was launched on May 12, just 10 weeks ago. To date, the site has received 20,000 pageviews and almost 1000 RSS subscribers. Maybe it's time to tell everyone why.

One question you get all the time in professional situations is, "What do you do (for your employer)?" And working for a philanthropy makes that a difficult question to answer. Entrepreneurs call it the elevator pitch, but I always need a longer elevator ride as an economist/writer/entrepreneur working at place with no customers.

The job compares in some ways to my experience at a DC think tank. The difference is that think tanks have to make money, whereas the challenge for a philanthropy is to give money away. Tough work, huh? There is a danger that a philanthropy can easily drift away from the founder's vision over time, whereas a think tank has its feet kept to the fire by donors with an ideological passion.

Ewing Kauffman realized the danger, and thankfully left us more detailed documentation of his vision than any other major U.S. philanthropist before or since. This is about capitalism -- growing prosperity with free markets, but in ways that empower individuals through entrepreneurship and education. The operational vision & mission statements are documented here in roughly 200 words.

For growth economists, the emerging consensus in the last 10 years is that the key factors that power national productivity are technological innovation and human capital development. It is no small feat that Mr. Kauffman saw these things, and acted on them, decades before the Ivory Tower did. And it is no exaggeration to say that the opportunity for the Foundation to execute on Mr. K's vision in alignment with scholars and policymakers is right here, right now.

Our President, Carl Schramm, never met Ewing Kauffman, but he honors his memory by making sure the Kauffman Foundation goes one step further and practices what it preaches. Associates here are encouraged to be entrepreneurial and innovative. Crazy stuff, I know. So there are no strict job titles or definitions or timetables. Instead, we have short contracts, high expectations, and unbelievable freedom. To be honest, I was shocked when my idea of blogging was not blocked or delayed by bureaucratic hurdles and office politics, but instead given a quick green light, an eager co-author in Bob Litan, and full support from Wendy Guillies and the marketing/IT team.

So there you have it. That's why growthology.org exists. As for what I do for a living ... tune in next month and maybe we'll have invented it!

Death of Newspapers, Part X

Becker and Posner have a masterful pair of essays asking "Are Newspapers Doomed?" to which both answer "Yes."

Posner takes on all the usual arguments one-by-one, all excellent, but I decided to share with you the one surprising (to me) nugget:

Nevertheless newspapers tend to be quite profitable (as recently as 2006, the average ratio of profit to revenue was 17 percent, which is high relative to industry as a whole), because competition is limited. ... High profits may seem inconsistent with declining revenues, but are not if the firm, seeing no future for itself, ceases investing in the its future and instead cuts costs to the bone (thus treating the firm's product or service as a "cash cow"). Many newspapers are doing that.

Becker is skeptical profitable dinosaurs, and he points to GM as a comparison, but he neglects Posner's key observation about the natural monopoly of most newspapers. And yet he is even more decisive in his anticipation of an end to the newspaper business at the hands of the Internet. Like Posner, he notes the demographic trends:

It is now rare to see anyone under age 30 reading the New York Times, Chicago Tribune, or any other major newspaper. A teacher used to be bothered when bored students starting reading newspapers in class. That is no longer a problem since they now turn to their computers and play video games or email friends.

For the record, I was about to cancel our WaPo subscription last year. The ONLY reason I didn't? Our then 12-year old started reading the Sports page religiously. Maybe there is hope after all. And maybe if I leave Shakespeare's collected works on the breakfast table, he'll start reading Hamlet ... it could happen!

Where is Cringely Now?

One of my fondest memories from the first start-up I co-founded is coding in our “office” (Jim Coyer’s studio apartment in San Diego) all day and night. One day in mid-summer 1996, Jim showed Ken and I a video tape of a PBS documentary called “Triumph of the Nerds” which was and remains hilarious.

Cringely used the same material for his excellent book, Accidental Empires: How the Boys of Silicon Valley Make Their Millions, Battle Foreign Competition, and Still Can't Get a Date, which was a national best-seller. The interviews with Steve Jobs, Bill Gates, and dozens of other interesting tech folks are priceless. Can’t you still hear Ballmer bellowing “K-locks!” and “Ride the Bear!” Jim?

When Occidental College asked me to design and teach a class on entrepreneurial economics, I couldn’t find a good textbook, and decided to use Accidental Empires instead. I would do it again, especially as a supplementary text. But I wonder: what’s a good entrep text nowadays? Hopefully the pickings have improved.

But I also wonder whatever happened to Cringely? I hold him in high esteem as a smart and funny tech journalist. Not quite the Mark Twain of our time (that nod goes to WaPo’s Joel Achenbach), but close. What is he up to now?

He’s blogging, of course. Even nerds can be hip.

Best Newspaper Story Yet (99% excellent)

The best story on the newspaper saga so far is Mark Bowden's article in the Atlantic. This qualifies as literature, and I'm not being ironic:

He may be awful, but he is rich and awful, smart and awful, powerful and awful, and while he may well be crazy to still believe in the future of print, he is determined and crazy. Murdoch might be the last person The Journal would have chosen as its savior, but newspapers may well be down to last hopes.

My only objection is this next paragraph, the apparently obligatory hand-wringing about the the demise of objectivity as if it were a 20th century dinosaur struck low by asteroid Murdoch. Sigh.

Instead, the Web gives voice to opinionated, unedited millions. In the digital world, ignorance and crudity share the platform with rigor and taste; the independent journalist shares the platform with spinmeisters and con artists. Cable television and satellite radio have taken broadcast journalism in the same direction, crowding out the once-dominant networks, which strove for the ideal of objectivity, with new channels that all but advertise their politics. When all news is spun, we live in a world of propaganda.

This (the weakest) section suggests that consumers cannot distinguish signal from noise, that they have no taste. A short introduction to the choices in the neighborhood grocery aisle might be in order, or any of these by Virginia Postrel.

But the larger issue that Bowden hints at is this: reputation matters, now more than ever. Does this carry over to the net? Consider Rapleaf. Or check this story in WIRED. Will bloggers neglect to seek the objective truth?  Ask Dan Rather. Finally, has this guy not heard of the Discovery channel, C-Span, or Animal Planet? All spin, Mark?

Now back to Bowden's 99% excellent essay:

It would be hard to imagine Murdoch coloring TheJournal’s crisply intelligent editorial pages any more conservative than they already are. But he can expand the number of pages devoted to opinion, as he has already done, and he can build TheJournal into a more general newspaper, broadening its coverage into the arts, religion, education, sports, and politics—areas where TheTimes is the dominant tastemaker and trendsetter. Murdoch sees TheTimes not just as a paper with primarily liberal politics but as a bastion of cultural elitism that wields a disproportionate influence over all aspects of American life. He wants his Journal to reflect another point of view, and to give people another choice.

Crichton's Mediasaurus

In 1993, author Micahel Crichton predicted the demise of the "Mediasaurus" within ten years.  Slate's Jack Shafer noted the failed prediction in 2002, but is graciously eating some humble pie here:

As we pass his prediction's 15-year anniversary, I've got to declare advantage Crichton. Rot afflicts the newspaper industry, which is shedding staff, circulation, and revenues. It's gotten so bad in newspaperville that some people want Google to buy the Times and run it as a charity! Evening news viewership continues to evaporate, and while the mass media aren't going extinct tomorrow, Crichton's original observations about the media future now ring more true than false. Ask any journalist.

Longtime growthology readers know I have been covering this story here and here. I don't pretend to know what happens to the print media in ten years, only why it happens. Consumer choice is being expressed through new disaggregating technologies and new delivery technologies and new matching technologies (algorithms that identify things for individuals that they were not aware they wanted). But does the old medium go exctinct? 

In 1993, Crichton predicted that future consumers would crave high-quality information instead of the junk they were being fed and that they'd be willing to pay for it. He's perplexed about that part of his prediction not panning out ...

What keeps the mediasaurus alive? There are at least five reasons I have on my mind:

1. Junk food tastes great. We are imagining a technology that WE want, and imposing that desire on the mass market. Most people probably don't want the super-informative information Crichton wants, and are happy consuming brain candy.

2. Bounded rationality.  The opposite side of the long tail is the short mass: one NBA champ, one Olympics, one President. In fact, mass media is under assault not just by disaggregating forces, but by aggregating forces as well. In a digital age, does the local station really need a D.C. correspondent? 

3. Cultural canon. I believe people enjoy have common cultural reference points (related to the items above), even trivial things like knowing who won Idol last night. Maybe this is sociobiological?

4.  Geography. The weather tomorrow doesn't need very much disaggregating (especially in February or August here in D.C. -- Ugh). Other local interests are also common.

5. What else are you going to read on the train?  (Kindle).  When the power goes out?

Also, there's a downside to Crichton's vision. Cost. I simply do not believe people will pay for information in the new economy. I believe in free pricing with a revenue model based on monetizing readers through personalized marketing.  In ten years.

Farewell, Peter Carlson

After 12 years, Peter Carlson is leaving his job as a journalist covering magazine culture, and taking the buyout offer from the Washington Post.  This is my update on the print media's metamorphosis.  Peter's farewell article, with some self-referential irony, describes creative destruction in the industry:

In the magazine business, as in nature, life is a Darwinian struggle that is frequently nasty, brutish and short. Every year, more than 500 magazines are born and nearly as many die. During the past 12 years, Life died. So did Civilization, My Generation, Spy, George, Talk, Brill's Content, Punk Planet, Doubletake and Mademoiselle, plus Lingua Franca, a smart, funny magazine about academia, Gadfly, a lively pop culture magazine and recently, the music magazines Harp and No Depression.

Replacing the dead on newsstands was a crop of newborns -- Maxim, Portfolio, Real Simple, the Week, Blender, the American Conservative, Hallmark, Found, Mental Floss and a fine literary mag called the Believer. Meanwhile, the Oxford American, a magazine of Southern culture, died and was reborn. And Radar, a snarky pop culture mag, died, was reborn, died again and was reborn yet again.

Joel Achenbach's blog covers the story, and tipped me off to Howard Kurz solid article covering the early-retirement plan's impact: 100 journalists out the door.  Still, I dislike the snarky "we get the media we deserve" whine that "the next generation blew us off in favor of Xbox and Wii and full-length movies on their iPods."  It's anecdotal.  Sure, you can point to some youngster who watches YouTube and scoffs at newspapers, but that person is an idiot.  What about the other million youngsters who are compulsively RSSing the news, and are deep into the long tail on foreign affairs, climatology, or gee, the U.S. presidential election? Kurz precedes his anecdote with this:

In one sense, the Web is a blessing. Daily circulation for the newsprint Post, now 673,000, may be down from 813,000 in 2000, but we are drawing an eye-opening 9.4 million unique visitors online each month, 85 percent of them from outside the D.C. circulation area.

My guess is that the online readers simply ain't linking to the Health or Business or Style sections. The Post is a powerhouse in political (Capitol Hill) and military (Pentagon) coverage, and that is probably where the paper will have to focus its reporting.  Bigger question (and keep in mind that I am ignorant of the WaPo's particulars, so this comment is general in nature, not aimed at the Post):

Is a company downsizing via early-retirement the best way to handle financial distress?  Would you rather lose your least productive 100 employees or your 100 employees who have the best outside options?  Yes, RIFs are better for morale than layoffs.  Or are they?  When the Air Force had a RIF, my morale was hurt by the departure of the top mentors and role models. I submit that it hurts any organization deeply when it reduces staff by effectively carroting out its most entrepreneurial people.  Maybe Jack Welch should become an editor?

The silver lining, perhaps, is that lost entrepreneurs may be lost to the organization, but not to society!  The fact that they leave and start new businesses is a net plus, right?  Indeed, Kurz points to Politico.com, founded by ex-WaPo staffers.