Tag Archives: markets

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Young market problems: ebooks as clearing house for unpublishable content

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Part of me really wants to get a decent ereader and start plunging into the brave new market of electronic books; as a writer, reader, some-time publisher and general technoforesight wonk, I feel I should be down in the trenches if I want to see how the campaign is really going. The other half of me is the half that’s been burned by classic early-adopter screw-ups ever since I acquired that tendency from my father; I’m waiting for either a universally accepted open format, a decent open platform, or both. (I doubt I’ll have much longer to wait; I expect I’ll be nailing myself an affordable Android-based tablet in the post-Xmas sales next year.)

So, perforce, I have to get my news about the actual content sloshing around in the ebook marketplace from other people… and while I’m not taking it as broadly representative, this post from James “Big Dumb Object” Bloomer highlights the state of play wherein creators and new middle-men/aggregator outfits are testing the water to see what will actually float. Or, to put it more plainly: everyone’s throwing shit at the wall in order to see what sticks:

The other day I bought How To Write Science Fiction by Paul Di Filippo, tempted by the price (69p) and the prospect of another author’s view on writing SF.

It’s an interesting read, containing thoughts on what maximalist SF is, how to (attempt to) write it and an essay on the creation of Di Filippo’s novel Ciphers. There’s a few interesting nuggets there for me to think about (plus, now, a need to read some Pynchon). However it’s not very long, not really a book and not really about how to write Science Fiction. It’s the sort of text I’d expect to be posted to a blog. It’s the sort of text that in physical form would be thin and flimsy, and I probably wouldn’t ever buy.

It’s going to take a while for pricing to settle down in line with customer expectations, but the nature of the content being sold is a big part of that. Perhaps it’s the case that no one’s gonna pay for a lengthy blog essay when there are umpteen thousand of the things – some of exceptional quality, others not so much – floating around out here on the unwalled web, just waiting to be read. But then again, Nick Mamatas’ Starve Better – my dead-tree version of which I’ve been greatly enjoying over the last week or so, incidentally – is essentially a collection of essays and articles, many of which either were or started out as blog posts or fanzine pieces; it’s retailing at $3.99 for a selection of electronic formats, and – had I been in possession of a decent ereader – I’d have considered that a damned good price for the material it contains. I don’t know how long the di Filippo piece is, exactly, but perhaps the problem here is the attempt to price a single essay fairly; meanwhile, Starve Better is a curation product, an act of filtering Mamatas’ prodigious output down to the best material devoted to a specific topic.

So perhaps we could say that Apex, by doing the old-school publisher thing, have added value to the raw material and thus earned their middle-man cut, while 40k – who, I should note, I think are one of the more interesting ebook ventures I’m aware of at the moment, and not just because they’re publishing a lot of stuff from sf authors – are just rolling chunks of content out of the door with a snappy title and hoping for the best. Maybe the latter would work at a lower price… but until someone sorts out a decent and widely-adopted micropayments system, pricing at under a buck will remain the province of big clearing houses like Amazon who can afford to eat up the transaction charges on a lot of tiny purchases. Economies of scale haven’t gone away just yet, it seems.

More musings from James:

Will this mean that buyers will tread ever more safely when buying books? Perhaps now people will only trust books from the bestseller top ten or those recommended by a high profile book club? It feels to me right now that the lack of physical form may actually hinder more experimental buying once the blush of the new fangled eBooks dies to the norm, the marketing departments have tried to pull a few fast ones and readers have been bitten by buying some dreadful self-published novels?

I think these are very real issues, and not just for publishing; a flattened media landscape means curation and aggregation are becoming at least as important as the traditional editorial roles, and the marketing/PR channel needs to become more focussed on finding the right niche vertical to pitch to, as opposed to the old model of making generalised statements of awesomeness about a piece of work and hoping some hack will cut’n’paste it verbatim. Interesting times ahead.

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Emerging markets less risky than developed economies?

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Via Global Dashboard, speculation that a pretty fundamental shift in global economics may be under way*:

… could the emerging world now be a destination for those looking for security? That is what the credit markets say. Either they are wrong and emerging market credit is in an incipient bubble, or we need to turn received wisdom on its head.

[…]

What is fascinating is the market’s comparative judgment of the risk in emerging markets. Insuring against a default in China is exactly as expensive as in the UK – 0.6 per cent. The list of countries deemed safer than Italy (1.82 per cent) includes Mexico, Brazil and Chile, Russia, and even Indonesia (1.39 per cent).

This relative judgment on the emerging world has completely reversed in the two years since the aftermath of the Lehman Brothers bankruptcy seemed likely to tip over into an emerging market debt crisis. Then, insuring against an Indonesian default cost 12.47 per cent.

Back then, emerging markets were victims of a “risk off” trade. Investors got out as quickly as they could. This time, in spite of no shortage of true panic about sovereign debt in the eurozone, investors are not responding by selling emerging market debt.

The obvious explanation is “it’s a bubble!”, but the article goes on to suggest that it’s the very lack of financial sophistication in developing economies that may make them safer – a lower likelihood of speculative trader voodoo taking down entire countries, for example.

… this is not just about avoiding the west; emerging markets have advantages. They do not have expensive welfare states, so it is easier to keep their fiscal houses in order. They have less heavily developed financial sectors and banks that for the most part did not go overboard in the way that they did in western Europe and the US. Ireland’s banking sector grew far too big for its government to be able to rescue it without pain. If you want to avoid such risks, put your money in places such as Indonesia and Brazil.

I’m no economist, of course, so I’m not going to call it either way, but I think it’s interesting to consider the possibility that the “developed” economies are actually overdeveloped, a dead-end branch of excessive complexity on the tree of economic evolution.

[ * That link will probably smoosh you straight into the FT’s paywall, but if you Google one of the paragraphs above and click the correct link from the search results, you’ll be able to read the article in full. ]

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Whoa; capitalism is like The Matrix, dude

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The latest book in the wave of economics-for-the-layman texts, piggybacking on the global sense of “WTF just happened?” in the wake of the subprime collapse and its ripples, is 23 Things They Don’t Tell You About Capitalism from Cambridge economist Doctor Ha-Joon Chang, who apparently manages to play a currently popular theme (“free markets are bad”) with a less-popular counterpoint (“the welfare state should be expanded”) [via TheBigThink].

“It is like The Matrix. There is a reality where things could and should be better,” he said. “In order to wake people up to that alternative reality, you need to show them that it isn’t impossible. I’m not necessarily saying that I have a solution, but we have to recognise that some of the things we accept as inevitable aren’t.”

But while Dr Chang may not have the answer, he is sure of the problem – arguing that free-market capitalism has left the global economy more unstable, and people with less job security and greater feelings of insecurity, than ever before. His conviction that, post-recession, we should be rebuilding our country in a “moral” way – by acknowledging the social consequences of economic choices such as benefit cuts and job losses – will strike a chord with many.

“Another myth that needs to be busted is the idea that we can discuss economics without any moral implications,” he said. “What kind of economy we build changes us, so what we do in terms of monetary policy determines who we are.”

Kudos to any pundit honest enough to admit that they don’t have a silver bullet in the breech. I’m in close agreement with Chang’s thoughts about the morality of economic processes, though I take some issue with his rejection of free markets (which is, to be fair, hardly new to Chang). I’d agree that what are usually described as “free markets” are indeed broken (there’s too much evidence to ignore), but I remain to be convinced that those markets are truly “free” in any way that Adam Smith himself would have recognised. I’m no economics boffin, of course, and as such I’m not going to state with certainty that truly free markets would be the solution to all our economic woes… but I think it’s fair to say that regulation is never going to prevent disasters and abuses in a system wherein certain groups and individuals are given (or simply invent for themselves) ways of avoiding or circumventing such.

Like Chang, I don’t have a solution, but I suspect our best route forward is through the territory of transparency. Another thing that would help would be encouraging economic actors to be less trusting, but how that could be achieved is quite beyond me; the duplicitous and deceitful tactics of lending institutions prey on what appears to be a hardwired psychological blindspot whereby we privilege short-term advantage over long-term consequences. For example, would the global collapse still have happened if all the people who simply couldn’t afford the mortgages they were signed up to had looked rationally at their situation and never taken them on? Which is easier: to prevent institutions flogging dodgy deals, or to prevent people from signing a contract they don’t fully understand?

Easier said than done, of course: the rational actor is possibly the greatest myth of economic theory. But could the rational actor be nurtured? I think that perhaps you wouldn’t need to educate everyone in the intricacies of economic theory to achieve this; simply encouraging a pathological cynicism toward the deal that looks too good to be true might be enough (which recent events seem to have gone some small way toward accomplishing), and in a networked peer-to-peer society, more knowledgeable and trustworthy individuals would develop a reputation for reliable advice on complex financial issues. I’d certainly place more trust in a succession of recommendations and reviews from ordinary people more than in a diploma certificate and an expensive office…

… and it looks like my anarcho-utopianism is showing again*. I have no idea whether it would be possible to rationalise the economic thinking of everyday people (though I suspect that, if it were to occur, it would most likely occur as an emergent phenomenon in small local groups at first, possibly piggybacking on local currency movements and/or cooperative communities)… but I doubt it’s any more impossible than building a system of laws that’s big enough to encapsulate the world economy, yet devoid of the regulatory loopholes and protectionism that tend to push us into these periodic catastrophes.

Shorter version: the grass is so much greener on that side of the fence, but I have no idea how we should climb it.

[ * It’s awkward and frustrating, sometimes, being cynical enough to poke holes in one’s own underlying optimism about people. People call me a pessimist, but that’s not the case: if anything, I’m a pragmatic optimist. And so much for nomenclature. ]

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Attention economics, redux: why supermodels are like toxic assets

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Remember me linking to that article that compared the inflationary bubble in the cult of celebrity to the sub-prime mortgage crisis? Well, here’s a similar (and slightly more serious) piece that explains how supermodels are similar to toxic assets [via MetaFilter]:

Coco [Rocha] is what economists would call a winner in a “winner-take all market,” prevalent in culture industries like art and music, where a handful of people reap very lucrative and visible rewards while the bulk of contestants barely scrape by meager livings before they fade into more stable and far less glamorous careers. The presence of such spectacular winners like Coco Rocha raises a great sociological question: how, among the thousands of wannabe models worldwide, is any one 14 year-old able to rise from the pack? What makes Coco Rocha more valuable than the thousands of similar contestants? How, in other words, do winners happen?

The secrets to Coco’s success, and the dozens of girls that have come before and will surely come after her, have much less to do with Coco the person (or the body) than with the social context of an unstable market. There is very little intrinsic value in Coco’s physique that would set her apart from any number of other similarly-built teens—when dealing with symbolic goods like “beauty” and “fashionability,” we would be hard pressed to identify objective measures of worth inherent in the good itself. Rather, social processes are at work in the fashion modeling market to bequeath cultural value onto Coco. The social world of fashion markets reveals how market actors think collectively to make decisions in the face of uncertainty. And this social side of markets, it turns out, is key to understanding how investors could trade securities backed with “toxic” subprime mortgage assets leading us into the 2009 financial crisis.

Well worth a read; it’s interesting to see someone looking at a market in terms of its social construction rather than as a bunch of mathematical abstractions and assumptions. One of the things that has frustrated my research into economics is the way it always seems to be portrayed as a coldly rational science, without any attempt to understand or deconstruct the emergent social consensus that drives it. This is almost ertainly due to me looking in the wrong places, so if anyone has any suggestions for good sources of social and/or behavioural economic literature that won’t baffle an inquisitive layman, please pipe up in the comments.

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Fractal market movements predict deep economic depression just ahead

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It’s a great time to be a prophet of economic doom, because everyone’s still smarting badly enough from the last suckerpunch to take the threat of a groin-kick very seriously. And if you want a really bleak prediction, Robert Prechter’s ananlysis of fractal patterns in the market movements of the 1930s and 40s implies that the groin-kick will be delivered by an elephant wearing concrete boots [via TechnOccult]:

Originating in the writings of Ralph Nelson Elliott, an obscure accountant who found repetitive patterns, or “fractals,” in the stock market of the 1930s and ’40s, the theory suggests that an epic downswing is under way, Mr. Prechter said. But he argued that even skeptical investors should take his advice seriously.

“I’m saying: ‘Winter is coming. Buy a coat,’ ” he said. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”

[…]

For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”

The Dow, which now stands at 9,686.48, is likely to fall well below 1,000 over perhaps five or six years as a grand market cycle comes to an end, he said. That unraveling, combined with a depression and deflation, will make anyone holding cash “extremely grateful for their prudence.”

Prechter’s analysis isn’t very popular, naturally.

The “mathematics don’t work,” Mr. Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, “I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over.”

Still, on a “near-term” basis, he said, “We’re probably saying the same thing.”

There’s a deep emotional component to Acampora’s response, there – the same one that keeps most of us from considering the real worst case scenarios. Caesar hears only what is pleasing unto Caesar, perhaps… but note that Acampora has shifted his own personal holdings to cash in the short term, so grim times are likely to be on the cards one way or the other.

But Doug Rushkoff, typically enough, sees an opportunity to build a better system on the ruins of the old:

Yes, this is really it. The beginning of a true end-of-cycle economically.

If you own “stocks,” use these bounces to get out completely. If you have to park your money somewhere, consider yourself lucky you have money to park.

The object of the game for those who actually have capital is not how to grow it, but how to keep it. Capital has driven our economy since 1300, and the recent bull market was the end of a cycle that began in the mid-1700′s.

The fact that it is ending is not the end of the world at all. It just means that there’s a whole lot of money out there with no place to go. People can’t find a place to park their money because there’s more money looking for investment than there is stuff to invest in.

And that’s because we’re finally in a technological era where great innovations are more about reducing the need to spend time, resources, and energy than they are about increasing it. iPads aside, of course.

Given the choice, I’ll take Rushkoff’s vision of the future, please. Will we make that choice for ourselves, and carry it through? I guess that’s down to us.