Felix Salmon

Is Google becoming a key arm of the law-enforcement complex? It certainly seems to be so with respect to art thefts. I first came across this idea back in November, when Bloomberg Markets profiled Jeff Gundlach, who was hit by art thieves in September:

The cerebral Gundlach also gave investigators a tip for solving the crime. He says that while he was at home in his family room, it dawned on him that thieves would do a Google search using his grandmother’s name to find out more about the paintings and how much they might be worth.

Gundlach told the authorities that they should check the Internet to see who might have googled the name Helen Fuchs. He says exactly two such searches were executed: one by him and one by the thieves.

Now, another man has been arrested for art theft, and was found in much the same way:

In their investigation into the art theft, [officials] found that Mr. Istavrioglou had searched the Internet for reports about the robbery after it took place but before the story became news.

Law enforcement officials, it seems, have pretty easy and routine access to Google’s search-history database, and this is surely only the beginning when it comes to sifting through huge amounts of data to find evidence of crimes. The SEC, for one, has had a large data-mining team in place for a good five years now, going through enormous quantities of data to look for signs of suspicious activity.

Even journalists are getting in on the act of using data to uncover criminal activity. The Sun Sentinel, in Florida, managed to obtain a year’s worth of SunPass toll records for cop cars. That meant that they had data on the amount of time it took cops to drive from one toll plaza to the next. All they needed to do then was measure those distances, divide the distances by the time taken to drive that length of road, and come up with an average speed, for cops who were often just commuting to or from their houses, out of their jurisdiction. The result? The Sun Sentinel found “almost 800 cops from a dozen agencies driving 90 to 130 mph on our highways” — in a state where speeding cops have caused at least 320 crashes and 19 deaths since 2004.

Part of the reason why it has taken so long to bring Libor prosecutions is that going through millions of email and IM records, looking for smoking guns, is still a laborious and time-consuming process. But as data mining techniques continue to evolve, and as databases become increasingly unified and tractable, and our lives are lived almost entirely online, it’s going to be harder and harder for criminals not to leave a discoverable data trail — especially opportunistic criminals, who break the law when they’re given a chance, as opposed to more considered criminals, who spend a lot of time plotting a crime before committing it.

It stands to reason, given advances in computer power and given the size of the networks that we all involve ourselves in every day, that the kind of data crunching that used to be solely the domain of places like the NSA and GCHQ is now going to be available to local police forces and even ordinary citizens, including journalists. The privacy implications are profound, of course: millions of innocent people are going to have their personal data combed on a real-time basis, every day. But that seems to be inevitable, insofar as it isn’t already a reality.

I wrote something stupid on Friday. I was putting together a follow-up post about Maria Popova and her blog, Brain Pickings, covering a bunch of points I’d failed to make in my original post on the subject. And it turns out that there were a lot of those points: the follow-up post ran to more than 2,400 words, on top of the 1,000-word original.

The second post was written disjointedly, on trains and on strange couches and while sitting in a lecture hall at Yale Law School, half-listening to panel discussions about impact investing in emerging markets. As such, it wasn’t one of those posts where you have something to say, and then you write it down, and then you press “publish”; instead, it was one of those posts where you write a bit, and then you do a podcast, which gives you another idea, which you squeeze in somewhere, and so on. The perfect blog post is exactly one idea long; in that respect, this post was far from perfect. I just didn’t want to spend all week writing about Maria Popova, so I tried to get everything covered in one fell swoop.

As a result, halfway through the post, I made an ill-advised detour into gender politics. (Not that I had any advisers telling me this was a good idea: it was entirely my own mistake.) Here’s what I wrote:

The consistently positive and upbeat tone to Popova’s blog might generate healthy Amazon income as a side-effect, but it’s also genuine: she’s one of those bloggers — Gina Trapani is another very successful example — who have no time for snark and who naturally look for things to celebrate rather than things to tear down. (Just listen to that O’Reilly talk: she dishes out huge amounts of praise to virtually everybody she cites.)

To a certain extent, this is a female thing: positive happy bloggers tend to be female, as do their readers. And when someone like Anne-Marie Slaughter supports Maria Popova to the tune of $300 per year, there’s definitely an element there of supporting the sisterhood. Which is a good thing!

But to many male observers, there’s something a bit off there.

This did not go down well, and I soon ran into a firestorm of criticism on Twitter, accusing me of saying that women are simple and happy. How could I be so sexist? How could I generalize about women, or about women bloggers, in that way?

My first reaction was indignation: I hadn’t generalized about women, or women bloggers. If I say that “brain surgeons tend to be men”, you really haven’t learned anything about men, or about male surgeons. Men don’t tend to be brain surgeons, and neither do male surgeons.

But on reflection, including that passage was pretty obviously stupid. For one thing, my language (“female thing”, “male observers”) naturally and unnecessarily raised a lot of hackles: there’s a line between being plainspoken and being needlessly provocative, and I crossed it. In doing so, I made it far too easy for my readers to miss the precise meaning of “most positive happy bloggers are female”, and to read it instead as “most female bloggers are positive and happy”, or even “most females are positive and happy”.

And then there’s the bigger question of why on earth I thought it was a good idea to bring sex into the blog post at all. It really wasn’t a particularly important part of what I was saying, but it created a situation akin to a long play with a nude scene in the middle: once it’s over, all that anybody remembers is the nude scene. By including this passage, I was effectively doing my best to ensure that people would completely ignore the other 2,300 words of the post.

Finally, and most importantly, I was wrong on the substance of what I said, as well. This one took me longer to work out; I’m indebted to Salon’s Irin Carmon, who spelled things out in an email to me, for explaining something which can’t really be encapsulated in 140 characters:

You seem completely ignorant to the fact that if many women behave in a “positive” fashion, it’s partially because the social costs of being anything else are much, much higher than they are for men. Women who are critical, opinionated etc are still “crazy” or “bitchy” or whatever. Meanwhile, women have socialized to not make too much noise, be nice, make other people feel better about themselves — to enormous professional cost, I would argue, even if they are inherent goods for society. The successful women you write about are clearly threading that needle, and it’s working for them — but the way you described them clearly implied that it made them unserious (“to many male observers”, etc).

In a similar vein, women are often disqualified from serious discourse for writing about things that are become serious when men do them. See: Andrew Sullivan writing about his personal life. Women who do it are navelgazers.

When I talked about “male observers”, I didn’t mean the word “male” as a compliment. Far from it. But Irin’s point is well taken: there’s a societal pressure on women to be pleasant, and the many wonderful snarky female bloggers out there generally face much nastier and much more personal pushback than do those of us who are men. So it’s fine to praise a male blogger for being positive and happy, just as it’s fine to praise a white man for being calm and slow to anger. But talking about positive and happy female bloggers is a bit like talking about calm and controlled black men — it’s something which is incredibly fraught, and which you certainly don’t want to do in passing.

Katha Pollitt, in 1991, coined what she called the “Smurfette Principle” of children’s books:

The message is clear. Boys are the norm, girls the variation; boys are central, girls peripheral; boys are individuals, girls types. Boys define the group, its story and its code of values. Girls exist only in relation to boys.

My “female thing” was a prime example of the Smurfette Principle in action. Snarky and political male bloggers are the norm; happy and positive female bloggers are the peripheral exception. That is pretty offensive, and also untrue. Blogging is a broad and vibrant church, and singling out some random subset of it as being particularly female is very unlikely to be helpful. So: apologies to everybody who was offended by this wholly unnecessary passage. There was no good reason for publishing it, and doing so was entirely my fault.

Azam Ahmed has a report from Kabul’s ‘Car Guantánamo’ today:

Behind these walls are thousands of cars, trucks, vans, motorcycles and even bicycles, lined up in vehicular purgatory after falling afoul of the Kabul traffic police. Things that have landed cars in the slammer: illegal left turns, parking violations, involvement in fender-benders and, perhaps most egregious, failure to pay a bribe.

“I’ve been waiting two months to get my van back,” said Sayed Wahid, whose quest to reclaim it, after it was impounded for an expired international permit, propelled him on an exhausting odyssey through no fewer than six different government agencies…

In November, Mr. Wahid had driven his van from Kunduz down to Kabul when he was pulled over at a checkpoint in the capital. His license and car tags were clean, but a permit to cross international borders, though not needed for that specific trip, had expired.

For a moment, he said, he considered bribing the officer. He has regretted every day for the past two months his decision not to.

Ahmed explains that when it comes to Kabul’s traffic police, “the rules are unevenly applied, punitive to those who can least afford it, and mostly irrelevant to those with money and power.”

The point here is that it’s the poor, like Sayed Wahid, who are hit hardest by Kabul’s endemic corruption. Either they do the sensible thing, and pay a bribe they can ill afford, or else they’re at real risk of losing their livelihood. Meanwhile, the rich and powerful aren’t even asked to pay bribes: the police know better than to try this stunt on someone who could easily get them fired. It’s safe to solicit a bribe from a guy from Kunduz in a van; you’d have to be much braver to try it with a man in a suit driving a Mercedes.

It’s not that the rich don’t pay bribes at all; of course they do. But in general when the rich pay bribes, they tend to get even richer. That’s the deal: that’s business. When the poor pay bribes, by contrast, it’s a deadweight loss: it’s just money disappearing into the pockets of a corrupt official, never to be seen again.

A new paper by Shahe Emran, Asadul Islam, and Forhad Shilpi is instructive and sobering in this respect. Entitled “Admission is Free Only If Your Dad is Rich! Distributional Effects of Corruption in Schools in Developing Countries”, it looks at the cost, in bribes, of sending your kid to “free” school in Bangladesh. Exactly the same pattern is seen there as the one that Ahmed found in Kabul:

The results reported above in Tables 3 and 4 show that the poor are more likely to pay bribes. The estimates of Table 3 imply that a one percent lower income leads to a 0.73 percent increase in the propensity to pay bribes. The negative effect of income of propensity to pay bribe points to important role of a household’s “bargaining strength”. The richer households – with better bargaining power – are less likely to pay bribes than the poorer households. This is a depressingly perverse outcome given that the goal of free public schooling is to help the poor households, not to provide free schooling for the children of rich and influential only!!

Overall, households which paid a bribe to educate their children earned Taka 1930 per month, on average, while households which didn’t pay a bribe earned an average of Taka 2560 per month. And the bribes were large, too.

Among the households who reported positive amount of bribe payment, on average a household paid about Taka 241 during the survey year. To get a better sense of the financial burden imposed on the poor, it is instructive to look at the average bribe paid as a proportion of the household savings. The average bribes paid in schools is 9 percent of average annual household savings, while for the first and second quintile it amounts to 61 percent and 27 percent of annual household savings respectively.

The most famous line in Withnail and I is the point at which Withnail procures the key to his rich uncle’s cottage, explaining: “Free to those that can afford it, very expensive to those that can’t.” That phenomenon is well known: the richer you are, the more likely you are to be invited out to lunch, or dinner, or the Hamptons. But as we can see in Afghanistan and Bangladesh, the phenomenon doesn’t just apply to desirable luxuries such as the swag bags given out to celebrities at the Oscars. In the developing world, it applies to much more basic things, too, like the right to drive your car around Kabul, or the right to send your kid to a free school. And it’s not at all clear what if anything can be done about it.

By a curious coincidence, Maria Popova was scheduled to give a speech about blog business models the day after Tom Bleymaier and I wrote about hers. I went along to hear what she had to say, and caught up with her afterwards.

Popova is making changes to her site. Without revealing how much money she makes from Amazon links, she is going to improve her disclosure: every page now has a footer talking about how “Brain Pickings participates in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising commissions by linking to Amazon.”

That’s Amazon’s language, as mandated in section 10 of the Associates Program Operating Agreement. (It’s easy to miss, and it’s kinda buried in the agreement, so I’m sure a lot of other Amazon affiliates are also technically in breach of that part of the contract.) Unfortunately for Popova, it uses the word “advertising” twice in one sentence. That’s a problem, for Brain Pickings, because Popova doesn’t consider her affiliate links to be advertising, and she still says on her tip jar and on her donations page that the site is ad-free. Here’s how Popova sees the difference:

I’d be writing about the books I read anyway, whether or not they “generate a sale,” and that’s not true of an ad, which simply wouldn’t exist then.

There is a certain logic to this. It’s even reasonable to say that she’d be linking to the Amazon page for each book anyway; I, for instance, link to Amazon most of the time that I write about a book, without any affiliate link. In that sense, even the link to Amazon is a natural part of what one expects from a blog, and is not intrusive advertising which is only there because it generates revenue for the advertiser.

On the other hand, the fundamental property of advertising is that it advertises, not that it’s intrusive or gratuitous. (In glossy luxury magazines, for instance, the advertising is a necessary and fundamental part of the editorial product, just as much as it is the main source of income for the publisher.) So it’s understandable that many people, including Amazon, consider affiliate links to be advertising (as opposed to, say, some kind of biz-dev relationship). What’s more, many such links — especially when they’re accompanied by photographs of the product in question, and live permanently in the right rail of a website — are unambiguously advertisements.

It’s easy to overstate the importance of this point. The question here is just whether Popova can or should continue to describe her site as “ad-free” if she uses Amazon affiliate links: it’s not some kind of existential threat to her dual-income model.

The way I see it, Popova has three reasons for including that language. The first, which I’ll get to in a minute, is to imply in some sense that if she’s not making money from ads, she has to make money some other way. The second is to remind readers that they’re having a more pleasant experience just because Brain Pickings is unsullied by banner ads. And the third is Popova’s more general distaste for the ad-supported model, which she sees as leading to sites which lose their integrity as they whore for pageviews. I don’t share that distaste, especially as we move into a world where publishers are increasingly looking for unique visitors and engagement rather than raw traffic. Ultimately, Popova’s incentives are not that different from those of today’s ad-supported online properties: in both cases, income rises with readership and engagement.

The presence of Amazon ads is not some kind of existential threat to Popova’s tip jar: there’s absolutely no reason why she can’t have income from both sources. Just look at public radio and television: individual shows, and individual stations, and national networks all ask for donations even as they also receive substantial income from advertising. (Which is presented as “sponsorship”, but it’s the same thing.)

The conflict, then, if there is one, isn’t between having ads and asking for donations. So where might it be? Daniel Davies says that book reviewers shouldn’t get commission sales, and that he’s been disappointed in the books he’s bought after seeing her recommend them; is that the conflict?

Popova’s reply to Davies is that she doesn’t review books: that she only writes about books she loves, and that if she doesn’t like books, she simply won’t write about them.

It’s surely true that Popova’s success is in large part a function of how well-read she is, and how positive she is about what she reads. At the same time, however, she has a clear financial interest, on a site suffused with Amazon affiliate links, to write about a lot of books (as opposed to, say, online writing); and to say such nice things about those books that her readers are going to go out and buy them as a result. If she didn’t have the affiliate links, there would be less of a question about her recommendations, and whether it’s really possible for that many books to be that good.

Affiliate links do produce a conflict, then: they give an incentive to write positively about books for sale which might not actually be particularly worth buying. But there are conflicts all over media, and as conflicts go, this one’s relatively minor — especially for someone with Popova’s readership. Because here’s the thing: Popova isn’t a journalist, and her loyalties are only to her readers, who genuinely don’t seem to care about things like this. The consistently positive and upbeat tone to Popova’s blog might generate healthy Amazon income as a side-effect, but it’s also genuine: she’s one of those bloggers — Gina Trapani is another very successful example — who have no time for snark and who naturally look for things to celebrate rather than things to tear down. (Just listen to that O’Reilly talk: she dishes out huge amounts of praise to virtually everybody she cites.)

To a certain extent, this is a female thing: positive happy bloggers tend to be female, as do their readers.* And when someone like Anne-Marie Slaughter supports Maria Popova to the tune of $300 per year, there’s definitely an element there of supporting the sisterhood. Which is a good thing!

But to many male observers, there’s something a bit off there. I was on the MediaTwits podcast with Andrew Sullivan today, for instance, and he went to some length to explain that his paywall is not a tip jar, like Popova has. The difference between a paywall and a tip jar, to Sullivan, is that tip jars have connotations of being an amateur, or a charity, while he is a professional looking to get paid for what he does. His paywall has already visibly reduced the number of people who read beyond the home page, but he’s sticking with it: he clearly wants his subscribers to be paying for something which they wouldn’t otherwise be able to receive.

To Joe Weisenthal, too, Popova’s tip jar has connotations of charity: he considers it the digital version of “panhandling”. Again, Popova doesn’t see it that way: I asked her if there was any level of Amazon affiliate income at which she would be making so much money that she would take the tip jar down, and she said that there wasn’t. To Popova, the tip jar is not about pleading poverty or neediness: it’s about giving readers the opportunity to support a site they find valuable.

The tip jar and the affiliate links are pretty similar, in Popova’s mind: they’re both ways that her readers can help support the site, either directly or indirectly. (A hint, for Popova’s supporters: if you’re buying something expensive on Amazon, follow a link from her blog first, and then add that expensive item to your cart. That way she’ll get about 7% of the proceeds.)

The affiliate links provide Popova with more than just money. There’s a whole extra layer of value there: Popova can see what books her readers are buying, and thereby see what her readers are interested in, or what she too should maybe be reading. In that sense, the Amazon data is bit like the emails that pour into the inboxes of high-profile bloggers like Andrew Sullivan and Tyler Cowen: a useful and efficient back-channel way of crowdsourcing material for the blog.

So the links are great for Popova. But, now that she’s disclosing their existence on every page, is that going to put a dent in her tip jar income? Will Popova’s readers still donate the same amount of money now that it is more obvious that Popova is running a “clearly commercial site”? Popova’s language — the way that she combines a request for donations with a statement that she doesn’t accept advertising — suggests that she fears they might not, as does the whole Björk episode.

But really, Björk failed in her fundraising not because she’s commercially successful but rather because she hasn’t built up a strong two-way relationship with her fans. The difference between Björk, on the one hand, and Amanda Palmer, on the other, who raised over $1 million on Kickstarter, is that Palmer has an astonishingly strong relationship with her fans — a relationship which feels personal. If I say “I like Björk”, what I mean is “I like Björk’s music”. If I say “I like Amanda Palmer”, on the other hand, I’m much more likely to mean “I like Amanda Palmer”.

The part of Popova’s response to me which has resonated most strongly is undoubtedly the bit where she says of her blog “it’s MY LIFE, Felix”. For Popova, there’s basically no distinction between her blog and her life — she is Brain Pickings. What’s more, her supporters understand that, and they’re wholly aware that when they support the blog, they’re supporting Popova, personally. If Brain Pickings were published by Time Inc, its tip jar wouldn’t fill up very quickly: that would be weird, a bit like Reddit running a pledge drive while being owned by Condé Nast. (That turned out quite well in the end, but it was still weird.)

Because there’s not much of a distinction between supporting Popova and supporting Brain Pickings, there is a sense in which it would be fine for donations to start falling if Popova was making enormous amounts of money from other sources. If Brain Pickings were written by Bill Gates, for instance, rather than Maria Popova, it’s hard to imagine that many people would place $10 per month in his tip jar. And that’s why it makes sense for Popova to be a little bit more forthcoming with regard to the amount of money she makes from Amazon.

At the margin, it probably doesn’t make a huge amount of difference: Popova’s donation base is pretty strong, and indeed is likely to continue to rise from its current level, as her readership and fan base expands. But if you look at Popova’s examples, in her speech, of all the various people who are making money online from sources other than advertising, a trend emerges. To the extent that donations are voluntary, they tend to be based on an interpersonal desire to help somebody out. Twitter is the new radio, in that sense: both mediums feel particularly intimate, and can be very powerful in creating an audience of people who feel that they really know and like the person they’re following or listening to. The more of a personal relationship that readers feel with authors, the more they’re willing to give. Where there’s less of a personal relationship, publishers have to create other kind of incentives: withholding content from people who won’t pay, giving goodies to those who do.

I suspect that’s why Andrew Sullivan plumped for a paywall rather than a tip jar: while he’s very open about his personal life and his finances, he also wants his commercial relationship with his readers to be a professional one, based on mutually-beneficial trade, rather than a personal one. While people supporting Amanda Palmer are clearly supporting Amanda Palmer, for instance, Sullivan prefers to see his supporters as people who are buying access to his pro-quality website. A professional like Sullivan feels more comfortable asking people to pay for his professional services than he does asking people to just support him voluntarily.

And this is where the tension underlying Popova’s business model reveals itself. Popova has made the decision that there are certain types of things she doesn’t want to write about:

Andrew and I have very different styles. He writes about his partner. I don’t. He writes about his health. I don’t. He writes about his financials and other meta-topics. I don’t. Please understand this is out of an impulse of being “opaque” about it – it simply isn’t the kind of writing I do.

That’s fair enough — but the internet, just like television, has a habit of rewarding those who overshare. And the less you talk about yourself, the more room you leave for people like Tom Bleymaier to try to reverse-engineer the stuff that isn’t public from the stuff that is. In a slightly different world, this wouldn’t be an issue at all: if Popova had set Brain Pickings up as a non-profit, for instance, then her income would be public on her form 990, while if she lived in Sweden, it would be public on her tax return. But Brain Pickings isn’t a non-profit, and isn’t Swedish, and is very successful — which is naturally going to result in a lot of people being interested in just how much money it makes, and whether it might make sense for them to follow a similar strategy.

In a world where all media business models are precarious, having two separate income streams is entirely sensible. And in general, the more money that bloggers can make, the better. Popova might not be making $400,000 a year yet, but I hope she does in future — and what’s more, I hope she does so while retaining a substantial tip-jar income stream. That would be a great sign of what’s possible in the ideas-blogging space. What’s more, as she moves in that direction, I hope she gets over her reticence and celebrates her good fortune with her readers and the public at large. It’s possible that she might lose a little bit of her tip-jar income. But it would be pretty easy to more than make up for those losses by monetizing the inspirational story of how an impoverished Bulgarian became an iconic role model for the new information economy.

*Update: This sentence has not gone down well in the Twittersphere. Just to make it clear, there’s a huge difference between “most A are B”, on the one hand, and “most B are A”, on the other. I believe that women, in general, make better bloggers than men, even if that means they are less likely to appear on op-ed pages. But, I might well be wrong about that!

Brazilian multi-billionaire Jorge Paulo Lemann’s cunning plan seems to have worked. In 2008, when his InBev announced that it was buying Anheuser-Busch, there was an immediate uproar: sites like Drink American and SaveAB immediately appeared to protest the deal. (“With your help we can fight the foreign invasion of A-B. We will fight to protect this American treasure. We will take to the Internet, to the streets, to the marble halls of our capitals, whatever it takes to stop the invasion.”)

This time around, Lemann has decided that he wants to be the American — and he’s done it by teaming up with an American icon even more beloved than Budweiser or Heinz ketchup: Warren Buffett. This is a takeover of Heinz by 3G, make no mistake: Lemann approached Buffett with the idea in December. But look at how this is playing on, say, the NYT homepage: the headlines are all about Buffett and Berkshire, not about Brazil.  This is a leveraged buy-out, just like most other private equity deals, but it’s getting none of the bad press that LBOs often receive, and no one’s talking about “corporate raiders”. (The headline isn’t even accurate: Buffett is paying only half of the $23 billion, with the other half coming from Lemann and his partners in 3G. And it’s unclear what mergers are included in this “revival”.)

It’s easy to see why both 3G and Buffett love this deal. $23 billion is a lot of money, quite possibly more than 3G could comfortably stretch to on its own. So having a partner is attractive to them — especially when the partner is Warren Buffett. On the other side, Buffett gets to buy in to a storied franchise — one, what’s more, which will now be run by the best operators in the world. The 3G folks know the fast-moving consumer goods industry intimately, and can run companies in that industry more effectively and efficiently than anybody else in the world. Pair them up with brands as strong as Heinz’s, and it’s reasonable to assume that Buffett is going to see some gratifying profits from this deal.

This, then, is not a Buffett deal: it’s a 3G deal, with Buffett being brought in as a kind of guest GP. Neither is it, as Peter Lattman says, an indication of “the rise of Brazil as an economic power”, or of the strength of the Brazilian economy. 3G’s principals might be Brazilian nationals, but really they’re part of the global plutocracy, and are as happy with a Belgian brewery as they are with a Brazilian bank.

In a world where private-equity shops are desperate to put their money to work, and where stock-market investors are more conservative than aggressive financiers, we’re going to continue to see more of these high-profile LBOs. Which in turn is going to make the stock market even less relevant than it is today.

Back in May, Kickstarter looked as though it was moving upmarket. Following Bob Lefsetz’s lead, I said that “while Kickstarter was originally embraced by the undiscovered and impecunious, its greatest potential, in the music industry, is actually with established acts who already have a large following”.

I said that in the first days of the now-famous Amanda Palmer Kickstarter campaign — something which not only massively exceeded its target, but which also got Palmer a key slot on the TED 2013 roster. But there have been few established music-industry acts following in Palmer’s footsteps. Indeed, when Björk recently tried something similar, she quickly discovered that she was never going to get anywhere near her £375,000 goal, and pulled the plug. There were various reasons why the Björk project failed, but one of them was undoubtedly the fact that Björk is a rich person and therefore doesn’t “need” £375,000.

It’s entirely natural to want to funnel money where the need is greatest. Andrew Sullivan’s readers are supporting him, for instance, because they know that the the only source of income keeping his blog going. And Maria Popova’s readers are also reportedly quite generous. Anne-Marie Slaughter, for instance, is on the record as giving $25 per month — that’s $300 per year — to Popova, saying that doing so is “a lot like giving to your public radio station”.

Popova doesn’t claim poverty. But she does have a tip jar, prompting her readers to give between $7 and $25 per month (that’s a lower bound of $84 per year, well above the cost of, say, the New Yorker). And she explains on every page that “Donating = Loving”, and that “bringing you (ad-free) Brain Pickings takes hundreds of hours each month”. The tip jar is more explicit, saying that “Brain Pickings remains ad-free and takes 450+ hours a month to curate and edit”, and Popova has said in the past (although not recently) that Brain Pickings is “not for profit”.

The messaging here is clear: I work hard, I put all my time into this, and I have no other source of income, so please give generously to support what I do. And Popova does work hard. But she also has another job, editing Explore, and it’s hard to see how she can spend 450 hours a month on any job and still have time left over for that. More importantly, while Brain Pickings might technically be ad-free, it also provides a substantial income to Popova before she gets any money at all from donations.

The secret is affiliate links: if you follow a link from Brain Pickings to Amazon.com, then a big chunk of any money you end up spending on Amazon that session is going to make its way back to Popova. Affiliate links can be very lucrative: the Wirecutter, for instance, makes $50,000 per month, with that number “doubling every quarter”, according to David Carr; it gets that money from a readership of less than 350,000 unique visitors per month.

Brain Pickings claims 1.2 million readers, and while they surely don’t buy as much stuff on Amazon as the Wirecutter’s readers do, even if they only spend one fifth as much, that would still work out to an income to Popova of more than $400,000 per year from Amazon alone. An anonymous blogger on Tumblr (update: he has now named himself as Tom Bleymaier) has done the math a couple of different ways: one comes out to $432,000 per year, and the other comes in at $240,000 per year. However you estimate it, Popova’s Amazon income would seem to be more than enough to keep her blogging even if all her tip-jar income dried up entirely.

The blogger, who will say only that his name is Tom and that he Bleymaier, who runs a startup in Palo Alto, is not offended by Popova’s income: rather, he’s offended by the way in which Popova is being deliberately opaque about what she’s doing. Affiliate links are a form of advertising, which does somewhat put the lie to Popova’s claims of being ad-free. And as Tom says, if you’re making hundreds of thousands of dollars a year from such things, that gives authors a pretty strong incentive to “to change their tone such that they convince the reader to go all the way through with the purchase” of the book (or whatever) that they’re writing about.

What’s more, the affiliate links don’t end at Popova’s website: she links to Fab sales from her Twitter feed as well (here, for instance), and gets a percentage of all those revenues too. With more than 300,000 followers on Twitter, a 0.1% conversion rate means 300 sales, and potentially thousands of dollars of income from just one tweet. On top of that, as recently as a couple of months ago, Popova was found to be behind skeevy SEO sites like curesleepapnea.com, gastricbypassrisk.com, and liposuctionrisksinfo.com.

All of which makes the tip jar on Brain Pickings seem less like an honest request for readers to help keep the site going, and much more a cynical attempt to maximize income from a business which is already extremely lucrative. Andrew Sullivan is being very open about how much money he’s making, and where it’s coming from; Popova, by contrast, is being very opaque.

That’s sad, because Popova provides a valuable service to the web, and she also seems to have worked out a highly-successful business model. We should be celebrating the kind of money that Popova is making — I certainly don’t begrudge it — rather than seeing her try very hard to make it seem that she’s less successful than she is. If Popova is up there with John Gruber as a one-person operation making half a million dollars a year from blogging, and if she’s managed to get to that position by the age of 28, that achievement is just as impressive as Brain Pickings itself. The problem, of course, is that if she’s outed as a member of the 1%, her donation income might dry up quite quickly, and she doesn’t want that. Does she ever wonder, though, whether her readers might need that tip-jar money more than she does?

Update: Popova, who says there are “lots of factual errors” in this piece, has responded at length, via email. Here’s the whole thing.

Hey Felix,

A few thoughts on the whole Amazon situation.

Tom Bleymeier emailed me about a year ago with some seemingly polite but decidedly passive-aggressive questions about the affiliate links. I wrote him back and answered as patiently, honestly, and completely as I could, over a series of several exchanges. (I’ll forward you those in a second if I can dig them out – there’s nothing to hide, but I was very miffed by his complete lack of basic journalistic hygiene in making out-of-context quotes from private emails, which are by default always off the record, public.)

At some point, however, I had to disengage – in part because it was becoming enormously time-consuming, but mostly because it became painfully clear that this was a person who had projected his villain image onto me and had absolutely no interest in understanding my motives, my reality, who I am, or why I get up in the morning.

Regarding his Tumblr article – first of all, those numbers are ludicrous! If Amazon gave me even a tenth of that a year after Uncle Sam takes his fair share, I’d be delighted. Delighted!

A biographical note for context – I’ve spent most of my life in what constitutes poverty by American standards. When I came to America for college, I worked up to four jobs at a time to pay my way through, and graduated with student debt. Not much changed until 2010. When I moved to New York late that year, the security deposit my landlord required (in a non-fancy part of Brooklyn) was more than all my scattered savings combined – $80 more, to be precise. So I went to an ATM across the street, took $80 out of my credit card, deposited it into my checking account, and handed the whole big check to the landlord. While I’ve come a long way since the end of 2010, and I’m proud and relieved to report that for the first time in my life I’m not perpetually broke, to peg me as a member of the 1% – “outed” as one – is not only absolutely ludicrous but also quite hurtful.

Semi-relatedly, on motives: Brain Pickings is a record of what I, the subjective person, care about, what excites and inspires and stimulates me. A lot of that happens to be books, because I spend the majority of my life reading books, but I would do that anyway, whether 5 or 500,000 people shared in it. And I would do it whether those people clicked the Amazon link or the public library link I provide for each book I write about. (A fact, oddly, never made mention of – I suppose that would discredit the depiction of me as some dollar-sign-eyed monster trying to mercilessly “sell” people books…) I don’t mean to be passive-aggressive myself, I’m just having a very hard time with such depictions that run so counter to who I know I am.

Regarding the incorporation – that happened last spring, after a few readers alerted me that a company in Israel had incorporated under the name Brainpickin’, by someone named Ariel something-or-other per WHOIS, and was even using my old logotype. My studiomate Tina, who runs the Swiss Miss blog and had dealt with such issues, advised me to incorporate immediately and put me in touch with her IP lawyer, Jerald Tennenbaum. He said an LLC would be best and fastest for trademark purposes, filed the paperwork, billed me, I got a couple of official-looking envelopes from the government, and that was the end of it. I hadn’t even thought of it since, until this week’s quasi-scandal. If you’d like to reach out to Jerald to confirm, I’m happy to connect you.

Regarding transparency and comparisons to Andrew: I love Andrew, read him daily, and supported his indie move the first day he announced it. But Andrew and I have very different styles. He writes about his partner. I don’t. He writes about his health. I don’t. He writes about his financials and other meta-topics. I don’t. Please understand this is out of an impulse of being “opaque” about it – it simply isn’t the kind of writing I do. I’ve been completely honest about the Amazon links with anyone who’s ever asked – and have many, many, many emails I’m happy to forward – and have brought it up myself multiple times in talks and on Twitter.

There are many things I don’t write about simply because I don’t think they’re relevant to readers, but gladly disclose them when asked. For example, I don’t tell people how much it costs to actually run the site – which, when you add up web hosting, email newsletter delivery, the money I spend on books, TypeKit, VaultPress, proofreader, developer, designer, and various data plans, adds up to about $3,600 a month. That doesn’t include my hours which, if paid at minimum working wage – so if I were cleaning toilets instead of, say, poring through Edison’s diaries – would bring the total up to about $7,000 a month.

I also don’t mention that I send a good chunk of the donations and such I receive to other things I want to support – sites like It’s Okay To Be Smart and Ed Yong’s science blog (until he discontinued the donations a few weeks ago), Radiolab, The New York Public Library, A Room of Her Own (a foundation supporting women writers), and various KickStarter projects in the science/history/storytelling space. I don’t write about this partly because it’s my own business and thus irrelevant to readers, and partly because it’s simply cheesy to brag about altruism.

Regarding hours, actually – to anyone who knows me, questioning how much time I put into what I do would be laughable. Brain Pickings is not how I make a living – it’s MY LIFE, Felix. Every waking moment goes into it one way or another – the enormous amount of time it takes to read books, to research, to meet with people, to interview, and even to do this right now, and of course to write 3 articles a day Monday through Friday, between 300 and 3000 words each. (Add to that the time of my proofreader and any intern at any given time, plus designer and developer when needed.) And here’s the thing – I do it not to “build an audience” or “generate revenue” or any of that, but because it gives me enormous joy and stimulation. It makes me excited to wake up and fulfilled to go to bed. And I guess what it boils down to is that the fraction of the world that’s ever come across Brain Pickings and cares will just have to take my word for it. Those who don’t are free to ask me questions, which I will always answer as honestly as I can and as completely as time permits, or they’re free to move on. But Brain Pickings is my home – and people interested in hostile takedowns, like Tom seems to be, rather than in understanding what moves me or having an intelligent conversation about things, are simply not welcome in it.

Thanks for reading. Sorry this is so long.

// maria

As befits a company backed by a Who’s Who of Wall Street names, Relationship Science has tapped Andrew Ross Sorkin as the vehicle of choice for its big public unveiling.

The idea behind RelSci is that if you’re one of the 2 million most important people in the business world, there’s a huge amount of public knowledge out there already regarding the people you know and are connected to. You don’t need to connect with them on Twitter or Facebook or LinkedIn; RelSci knows who you know anyway, just like IMDB knows who has appeared in a movie with Kevin Bacon.

What’s essentially happening here is that the network which connects us all — the true, real-world social network, which has existed as long as humanity — is now being mapped without our consent, and being sold back to masters of the universe for the low, low price of $3,000 a year. As Mark Zuckerberg will tell you, there’s enormous value in networks. And although RelSci can’t control the real world in the way that Zuckerberg controls Facebook, it has the advantage that it includes the most powerful and important people you could ever want to get in touch with, from Lloyd Blankfein to the president of the United States.

Of course, there are no guarantees here. I’m friends with Ezra Klein on Twitter (or whatever it’s called when two people follow each other) — I’m sure that’s in the RelSci database. And Ezra, as Julia Ioffe says today, talks to the president: that’s public too. So does that mean I’m just one degree of separation from the president? Not really. I’d never ask Ezra to tell the president anything on my behalf, and if I did ask, he’d say no.

But for some relationships, RelSci could be very effective. Once you get to friends of friends of friends — two degrees of separation or more — I think it’s pretty useless. But friends of colleagues? That can be very powerful. If I’m a relationship banker, say, and I want to sit down with a CEO, I need someone to effect an introduction, and it’s possible — probable, even — that I’m quite unaware how many of my friends are directly connected to that CEO. Alternatively, if I’m in the midst of fraught deal negotiations, and talks are breaking down, RelSci could be invaluable in finding someone who’s close to, and trusted by, the principals on both sides of the table.

RelSci is initially targeting its product at Wall Street and the nonprofit sector, which has long spent enormous amounts of time and effort putting together detailed dossiers on potential donors and the people who might be able to influence them. But I suspect that DC lobbyists are going to be lining up to subscribe, if only for the way that RelSci might be able to turbocharge their opposition research. “Privacy by obscurity” isn’t working for Julia Angwin any more on Facebook, and it’s not going to work for politicians and business leaders in real life much longer, either. It used to be that our web of personal connections was known only to ourselves; those days are over, whether we like it or not.

My guess is that RelSci won’t last as an independent company for long: it will probably be acquired, with Facebook, LinkedIn, and Bloomberg at the top of the list of possible buyers. My own employer, too, might be interested: we already have a product called Westlaw PeopleMap which is not dissimilar. If Google buys RelSci, it might even open up the entire database to the world for free. But even if it doesn’t, it’s clear that we’re still at the early days of drawing real-world connections between real-world people. Over time, the RelSci network, or the companies which try to copy it, will get bigger, and the price of accessing it is likely to fall to zero surprisingly quickly.

Which means that even if you unfriend everybody on Facebook, and you never join Twitter, and you don’t have a LinkedIn profile or an About.me page or much else in the way of online presence, you’re still going to end up being mapped and charted and slotted in to your rightful place in the global social network that is life. People are going to make money from your social connections whether you like it or not. Unfortunately, it seems that in the first instance, those people are going to have names like Henry Kravis, Ron Perelman, and Ken Langone.

Allan Sloan neatly divides the world of Apple obsessives into two types of people:

For most people, Apple mania means buying the company’s products and playing with them. But for us financial voyeur types, the fun comes from watching the lunatic lurching of Apple’s stock price.

Financial journalists love any stock doing the lunatic-lurching thing, because that creates an easy heroes-and-villains story. Were you bearish at the top? You’re a genius! Were you bullish throughout the fall? You’re a goat!

James Stewart has a classic example of the genre this weekend, putting on his straightest face and contriving to be shocked — shocked! — that Wall Street was bullish on Apple stock during its recent decline:

Fifty of 57 analysts rated it a buy or strong buy; only two rated it a sell. Apple shares continued their plunge, and this week were trading at just over $450, down 36 percent from their peak.

How could professional analysts have gotten it so wrong?

It wasn’t supposed to be this way.

This is very, very silly: the clear implication here is that the analysts following Apple should have seen the fall coming. But you can’t time an individual stock like that: no one can. Especially when there was nothing — no thing — which caused the stock to fall. Apple stock was going up, and then it was going down. That happens with stocks: they’re volatile things. But you can’t expect anybody, no matter what their job is, to be able to anticipate all those fluctuations.

Instead, analysts generally do something else. At heart, they’re fundamental analysts: they look at a company’s numbers, and decide how much they think the company should be worth, given its revenue and profitability and prospects. Even at its peak, Apple was trading at pretty low multiples — and on top of that, it had a lot of upwards momentum. So it makes perfect sense that most analysts had “buy” ratings on the stock, with price targets somewhere north of $700. And given that nothing fundamental changed in the past few months, it would be weird for one of those analysts to suddenly slap a “sell” rating on the stock just because the ratios are becoming even more attractive as the stock gets cheaper.

With any stock, there’s always a bear case, and Stewart lionizes the one bearish analyst he managed to find, Carlo Besenius of Creative Global Investments. But even with hindsight, Besenius’s bear case doesn’t seem particularly compelling, based as it was on squishy things like “concerns about product quality and innovation”. You can always have “concerns about product quality and innovation”, and you can always be uncomfortable with “Apple’s arrogance”. But those concerns would have left you out of one of the greatest bull runs that the stock market has ever seen, over the past decade or so.

Similarly, Bethany McLean’s case for Apple being a $200 stock doesn’t actually include any ratios, or any calculation which comes to that number. Instead, she simply asserts that “built into Wall Street’s stock price targets was the expectation that the iPhone would rule the world” — and that therefore any future world which isn’t dominated by the iPhone must have Apple trading at a much lower level than those price targets.

The problem with this argument, of course, is that it’s far from clear that the price targets did incorporate global domination. It’s entirely possible that she’s right, of course, along with other bears like Jeff Gundlach, whose big Apple short last spring looked horrible for a while but now looks much smarter. But at heart, the bear case on Apple is one based on gut feeling: that the company has had its day, that its greatest glories are behind it, and that Tim Cook is not going to be able to continue Steve Jobs’s string of astonishing successes. It’s a perfectly reasonable gut feeling to have. But it won’t tell you when Apple stock is going to drop, and it won’t give you a level at which to exit your position. (McLean’s arguments, for instance, could be used to justify a $100 target, or a $200 target, or a $400 target.)

Meanwhile, the highest-profile Apple bull right now, David Einhorn, is arguably even worse than the bears. He has loads of clever ideas in the realm of financial engineering, whereby the issuance of new classes of stock would efficiently funnel money to shareholders like himself and thereby make them happy. It’s the kind of Clever Idea that activist hedge-fund managers like Einhorn and Bill Ackman often have, but it’s fundamentally a distraction in terms of Apple’s core job, which is to make insanely great products. Basically, everybody knows nothing, when it comes to the famously-secretive Apple, and it would be crazy for someone like Tim Cook to pay much attention to such ignoramuses.

Apple did spectacularly well, for most of the past 10 years, ignoring shareholders completely; at one of its competitors, Michael Dell is so sick of them he wants to buy them out and make them go away entirely. If Einhorn got his way, there might be a short-term boost in the stock, Einhorn would take his profits, the people who invest in Einhorn’s funds would make money — and Apple would in no way be better positioned for the future than it is today.

The day that Apple starts embarking on elaborate financial engineering in order to placate hedge-fund investors is the day that it loses sight of its core mission and starts turning into a mess like Hewlett-Packard, constantly trying to “deliver shareholder value”, whatever that might mean. When Tim Cook became CEO, he was given a restricted stock grant of 1 million shares, which don’t fully vest until 2021. The point was to keep him focused on a time horizon much longer than anything David Einhorn might be thinking about, and the message was that he shouldn’t worry about the stock price fluctuating up one month and down the next: so long as he builds an excellent permanent franchise, he will end up hugely wealthy. Apple listened to shareholders before, when it fired Steve Jobs and brought in John Sculley. It won’t make that mistake again.

Therefore, to use Sloan’s distinction, Cook rightly belongs with those of us who are interested mostly in buying the company’s products and playing with them, rather than those of us glued to the gyrations in the corporate share price. Let Wall Street worry about the Apple share price: very little harm is done to the company if it’s low, and Apple is so incredibly profitable that it has zero need for Wall Street or any kind of outside investment.

Apple shares are an interesting speculative vehicle, in which a lot of money can be made and lost. But they don’t help shape the fortunes of Apple itself — not any more. A close reading of the stock price might tell you something about herd mentality among mutual-fund managers, and the problems of being so big that people feel forced to buy your stock. But the share price has never been particularly useful in terms of being able to predict what’s going to happen next to Apple the company. Let New Yorkers worry about the stock: in Cupertino, they have much more important things to do.

Japan’s economy has been far too stagnant for far too long: everybody can agree on that. The aging population, now used to deflation, prefers saving to spending — an entirely reasonable stance if prices will be lower tomorrow than they are today. So the government has long been facing a very tough task: to change the psychology of a nation, basically. You can’t do that — as Japan learned the hard way — with old-fashioned public-works spending. Instead, you have to target expectations.

The Bank of Japan started on this road last month, formally adopting a 2% inflation target. That was the BoJ’s way of saying “start spending now, because your yen won’t be worth as much tomorrow as they are today”. And now the finance minister is doing his part to get the party started as well, in a highly unorthodox manner. In a speech on Saturday, he said that he wants to see the Japanese stock market rise 17% to 13,000 by the end of March.

It was a national holiday in Japan today, so the stock market was closed, but we’ll see tomorrow what effect Amari-san’s words will have: my guess is that they’ll give the market a pretty impressive boost. That’s certainly the intention. The Japanese stock market has been on fire of late, rising more than 30% since mid-November. The clear risk is that the rally will lose steam, and that people will start taking profits; the finance minister, with his speech, is basically trying to extend the rally as much as possible.

There’s no particular reason why the Nikkei shouldn’t continue to rise through the end of March, even reaching 13,000. Momentum is a powerful force, in the stock market, which is why central banks know that FX intervention is much more likely to work if you’re acting broadly with the market rather than broadly against it. Amari’s announcement is a canny way of anchoring expectations: the Nikkei might reach 13,000, or it might not, but for the next few weeks at least the perennial stock-market question is going to be reframed. Rather than “how far are we from where we closed yesterday”, it’s going to be “how far are we from 13,000″. The idea is that with stocks, just like with cars, you generally drive in the direction you’re looking.

I like this move: it shows imagination, and the upside is much bigger than the downside. The worst that can happen is that it doesn’t work, and the stock market ends up doing what the stock market would have done anyway; the best that can happen is that it helps accelerate the broad recovery that everybody in Japan is hoping for this year.

What’s more, Amari is not the first policymaker to talk about targeting asset prices. Minneapolis Fed president Narayana Kocherlakota, for instance, said quite clearly in 2011 that stock prices “are really going to be a central ingredient in the recovery process”, adding:

In this kind of post financial crisis, post net worth driven recession, it makes sense to be thinking about asset value as a way to try to generate more stimulus than you do in a typical recession.

In other words, don’t look to government spending for stimulus: Japan, of course, has learned that lesson the hard way. Instead, simply goose the stock market instead.

There are risks to this approach: if it works too well, you create a bubble — and when a bubble bursts, that can hurt confidence much more than a rising stock market helped it. But for the time being, the Japanese stock market still looks cheap, both on an absolute basis and in terms of its p/e ratio. Now’s no time to worry about overheating. Instead, Japan’s fiscal and monetary policymakers are working together to try to make the country as bullish and successful as possible. I’d do the same thing, if I were them.

(h/t BI)

Andrew Leonard has a very odd column about Netflix and House of Cards, under the headline “How Netflix is turning viewers into puppets”. Netflix, you see, has lots of data, and it used that data in the commissioning process for the series:

Netflix’s data indicated that the same subscribers who loved the original BBC production also gobbled down movies starring Kevin Spacey or directed by David Fincher. Therefore, concluded Netflix executives, a remake of the BBC drama with Spacey and Fincher attached was a no-brainer, to the point that the company committed $100 million for two 13-episode seasons.

It should go without saying, of course, that dropping $100 million on a 26-episode remake of a great TV show is never a no-brainer. For one thing, for all that the original series is extremely good, it was also very timely, coming as it did at the end of Margaret Thatcher’s transformation of the Prime Minister’s office into something much more powerful and Presidential than the UK had ever seen. The BBC series tapped into Britain’s fear of the possible implications of that power, as well as the fact that Richard III and Macbeth are deeply rooted in the national psyche.

More generally, remakes are inherently dangerous things: what producers think of as a “proven formula” more often turns out to have been a unique and inimitable confluence of creative electricity. And it goes without saying that the better the original was, the less likely it is that the remake will surpass it.

But Leonard doesn’t see any of those risks, he just sees science, quoting a Netflix flack waxing implausibly about how the company is “able with a high degree of confidence to understand how big a likely audience is for a given show based on people’s viewing habits”. And then Leonard takes that PR fluff and turns it into a lesson about the fearsome implications of Big Data:

The companies that figure out how to generate intelligence from that data will know more about us than we know ourselves, and will be able to craft techniques that push us toward where they want us to go, rather than where we would go by ourselves if left to our own devices. I’m guessing this will be good for Netflix’s bottom line, but at what point do we go from being happy subscribers, to mindless puppets?

We’re never left to our own devices, of course: billions of dollars’ worth of marketing, programming, and other expenses are designed precisely to make us watch this rather than that. But at the same time, we humans somehow stubbornly refuse to become mindless puppets, and our tastes tend to evolve in wonderfully unpredictable ways.

One example of this is Netflix’s own first foray into production, Lilyhammer, which turned no one into puppets mainly because no one actually saw it. But the best example isn’t Netflix at all, but rather Relativity Media. If you think that Leonard is overly credulous about the power of Netflix’s Big Data, wait until you see Chris Jones, profiling Relativity’s Ryan Kavanaugh in 2009. He opens with Ron Howard cooling his heels in Kavanaugh’s waiting room, and then explains just what it is that gives Kavanaugh the power to keep the Hollywood A-list waiting like that:

Before Relativity commits to financing a particular movie — either through its slate deals with Sony and Universal or on its own — it’s fed into an elaborate Monte Carlo simulation, a risk-assessment algorithm normally used to evaluate financial instruments based on the past performance of similar products. Enough variables are included in the Monte Carlo for Wilson and his team to have reached the limits of their Excel’s sixty-five thousand rows of data: principal actor, director, genre, budget, release date, rating, and so on. After running the movie through ten thousand combinations of variables (in marathon overnight sessions), the computers will churn out a few hundred pages that culminate in two critical numbers: the percentage of time the movie will be profitable, and the average profit for each profitable run.

In fact, of course, what gave Kavanaugh all that power is exactly the same thing that gives any other Hollywood producer power: ready cash. In Kavanaugh’s case, the money came from Elliott Associates, the New York hedge fund. Which expected to get hedge-fund-like returns from its investment in Relativity, and instead lost money.

For some reason, there seems to be a huge amount of appetite for anybody saying that Netflix is being incredibly clever here. Rebecca Greenfield’s column desperately trying to work out how spending $100 million on this series could possibly make sense has now racked up more than 100,000 views. But the base case scenario for Netflix is exactly the same as the base case scenario for any other rich outsider walking into the shark tank that is Hollywood. Stars like Kevin Spacey and David Fincher will happily take Netflix’s money for however long Netflix is willing to spend it — as will the studios charging Netflix top dollar for the rights to stream their back catalogues. It’s a lovely new revenue stream for the industry, but it doesn’t mean that Netflix knows what it’s doing.

The truth of Hollywood is no mystery: as William Goldman famously said, nobody knows anything. Sometimes, people have hot streaks, and when that happens, David Carr will write a gushing column about what might be called the anti-Netflix approach: ignore the numbers and the heuristics, and just go out there and take creative risks. And in general, the biggest rewards always accrue to the properties which came from nowhere, doing something startling and new. Conversely, formulas only work until they don’t, and the problem with the Relativity approach is that it’s pretty much guaranteed to hit that inevitable failure, if it keeps on churning out formulaic movies.

With hindsight, the biggest risk that Netflix took with House of Cards was not getting Andrew Davies to write it. Stars and directors are all well and good, but if you’re aspiring to the highbrow, as Netflix is with this series, you need great writing first and foremost. The BBC series, written by Davies, was some of the best-written television ever, at the time; it was The Wire of its day. The remake, by contrast, has cringe-inducingly bad writing, from which the best acting and directing in the world could never recover. (Not that a great writer guarantees anything: even the incomparable William Goldman had more than his fair share of flops.)

In order to realize that a script isn’t up to snuff and needs to be comprehensively rewritten, you need a producer with more than just a Monte Carlo simulation: you need someone who can not only hire talent but can fire it as well. And in order to create the kind of television which will resonate and become a cultural touchstone, you need an impossible-to-formulate cocktail of creativity, inspiration, teamwork, and luck. The House of Cards remake is perfectly good, but it’s not that good. And, in turn, that’s why we, the viewing public, will never be puppets, dangling on the end of some TV quant’s strings. TV’s quants are clever, to be sure. But clever is easy to come by in Hollywood. And it’s never been remotely sufficient for success.

For me, the most interesting part of Liaquat Ahamed’s Tim Geithner exit interview is this bit:

LA: You spent thirty years working on economic statecraft both internationally and domestically. You’ve been involved in just about every major financial crisis of this era, starting with Japan, the Asian crisis, Mexico, 2008, now the euro crisis. Each one seems to be worse than the other. What lessons have you learned from dealing with all these crises? You alluded earlier to the idea of taking political costs upfront. Can you amplify on that?

TG: Well, they’re all different in their contours and causes. But they usually have this common feature, which is a huge increase in leverage in the financial system. When the shock hits or the tide turns, as people bring their borrowings down, it puts enormous pressure on the economy as a whole. These things tend to reinforce each other, amplify each other. The financial deleveraging feeds on the economic weakness, the economic weakness forces more financial deleveraging, and you have this vicious spiral.

And I think what we have all learned from history, mostly from mistakes that we and others have made is that confronted with that, you need to apply a lot of force, with a lot of speed across the full spectrum of the policy tools we have. Which means monetary policy has to be very aggressive. You need to make sure that fiscal policies are very supportive of growth so you’re compensating for the huge collapse in private sector demand. And you need to be incredibly aggressive in making sure that you recapitalize the financial system. If you do those things incrementally, where you do one but not all three, then you’ll be left with much more damage. You have to do all of them. None of them is effective individually.

That line about the “mistakes that we and others have made” is about as close to an apology as we’ve seen from Tim Geithner, for anything that he’s done. It doesn’t go nearly far enough, of course. As the president of the New York Fed from 2003 to 2009, he sat on the FOMC, happily signing off on Alan Greenspan’s bubble-inflating policies, and also ran the most important of the many institutions charged with regulating American banks and reining them in when they got too ebullient. Clearly he did badly in both respects.

But the most obvious case in which Geithner has done a complete U-turn from his former views is that of Indonesia. The great Australian financial journalist Peter Hartcher explained this very well back in 2009, when Geithner took over as Treasury secretary. He quoted former Australian president Paul Keating explaining in a nutshell exactly what Geithner did wrong: “Tim Geithner was the Treasury line officer who wrote the IMF program for Indonesia in 1997-98, which was to apply current account solutions to a capital account crisis.” With hindsight, Geithner did the exact opposite of what he is now prescribing in the event of a crisis:

Geithner fundamentally misdiagnosed the problem. And his misdiagnosis led to a dreadfully wrong prescription.

Geithner thought Asia’s problem was the same as the ones that had shattered Latin America in the 1980s and Mexico in 1994, a classic current account crisis. In this kind of crisis, the central cause is that the government has run impossibly big debts.

The solution? The IMF, the Washington-based emergency lender of last resort, will make loans to keep the country solvent, but on condition the government hacks back its spending. The cure addresses the ailment.

But the Asian crisis was completely different. The Asian governments that went to the IMF for emergency loans – Thailand, South Korea and Indonesia – all had sound public finances.

The problem was not government debt. It was great tsunamis of hot money in the private capital markets. When the wave rushed out, it left a credit drought behind.

But Geithner, through his influence on the IMF, imposed the same cure the IMF had imposed on Latin America and Mexico. It was the wrong cure. Indeed, it only aggravated the problem.

Keating continued: “Soeharto’s government delivered 21 years of 7 per cent compound growth. It takes a gigantic fool to mess that up. But the IMF messed it up. The end result was the biggest fall in GDP in the 20th century.”

Indonesia in 1998 had a problem not dissimilar to what we saw in the US 20 years later: a sudden credit crunch afflicting a country whose government finances were fundamentally sound. Geithner’s solution, now, is for the government to “be very aggressive” spending money, and for the central bank to provide its own monetary support, all in the service of “compensating for the huge collapse in private sector demand”. But that’s not what he thought in 1998, when he forced the Indonesian government to cut spending and raise interest rates — precipitating a recession much larger than anything the US saw during the financial crisis.

Now that Geithner is going to write a book, I very much hope he goes as far back as Indonesia, and covers his two-year tenure at the IMF as well, rather than glossing over those episodes on the way to the juicy stuff about the more recent crisis. For one thing, it will be fascinating to see when and how his mind changed on such issues. And for another thing, it’s conceivable that the book might shed light on the how this consummate career government technocrat thinks — and thereby shed light on much of the system of global governance.

For Geithner has always stood foursquare in the center of economic orthodoxy, wherever it might be at the time. He’s no bomb-thrower, and will never think of himself as someone who speaks truth to power, in the way that the likes of Sheila Bair and Neil Barofsky do. Rather, he epitomizes power: yesterday, for instance, he rejoined the Council on Foreign Relations, the American perma-Davos on Park Avenue, where the great and the good mingle self-importantly and (mostly) in smug and well-cushioned secrecy. There he will work closely with (and was probably recruited by) Bob Rubin, setting up Advisory Committees and Workshops and Independent Task Forces and Plenary Sessions and Invitation-Only Roundtables, all the while mingling with the bankers and policymakers and politicians who might delude themselves that they’re working for the greater good, but who are convinced that the rest of us just couldn’t handle being exposed to what goes on behind the CFR’s expensively-paneled doors.

Geithner’s book would never be so indiscreet as to reveal what happens at meetings of, say, the Group of 30, which he joined in 2006. But if I have any hope for it, it’s that we’ll somehow be able to read between the lines to understand just how the international technocratic consensus reshapes itself over time, even as its practitioners remain certain, at any given time, that they’re advocating the clear best course of action. Geithner — just like his mentors Rubin and Summers — is not a man given to much self-doubt, except perhaps when it comes to his political skills on Capitol Hill. He’s a thoughtful and intelligent man, but at the same time he seems never to worry very much about the unavoidable uncertainties inherent in all economic policymaking. Given how spectacularly wrong he was in Indonesia, I’ll hold out just one hope for Geithner’s book: that it might explain how his ilk exhibit the pre-eminent skill of global technocrats — the way that they can hold two diametrically opposed views at two different times, without ever even realizing that they’ve changed their mind.

The fight between the Post Office and Congress is a very peculiar one. Normally, when the government owns some incredibly profligate business, it’s Congress which tries to impose efficiency gains and fiscal discipline, while the business insists that all of its spending is absolutely necessary and that it has already cut to the bone. In this case, however, the roles are reversed: the Post Office wants to change, and it’s Congress which is stopping it from doing so.

The latest move from the Post Office is a bold one: to abolish Saturday delivery unilaterally, starting August 1. This is a bit like Citicorp announcing that it was merging with Travelers: it’s illegal, but that’s not going to stop them, and the clear expectation is that somehow Congress will make it legal, before or shortly after it happens in reality.

As Jesse Lichtenstein details in his amazing 10,000-word Esquire story about the Post Office, the organization does actually have a detailed plan for becoming fully self-reliant over the next few years. Abolishing Saturday delivery is just one small part of that plan; all of it, by law, requires Congressional buy-in. The plan may or may not be successful, but, as they say, plan beats no plan. The big problem is simple, but huge: Congress isn’t playing along, and instead is just making matters worse, unhelpfully micromanaging everything from postage rates to delivery schedules to health-care contributions.

That’s why I love the idea of the Post Office doing something that’s clearly illegal, putting the ball squarely in Congress’s court. The idea is both delicious and dangerous: go ahead an implement the plan whether Congress likes it or not. And then dare them to bring down the hammer, or simply capitulate to the inevitable. They might not like the latter option, but the former would surely be worse for all concerned.

Today’s announcement says to me that relations between the Post Office and Congress have deteriorated so much that the Post Office has given up on getting Congressional buy-in for its plans. At the same time, the plans are necessary (sufficient is a different question) if the Post Office is going to survive for decades to come. And so the Post Office is just going ahead with what needs to be done, and has decided to treat Congress as an adversary, rather than as a key partner in its evolution.

The risks of this move are obvious: Congress is the government, and has awesome powers, should it choose to use them. But there’s a very good chance, here, that Congress will blink first, and end up giving the Post Office at least some of what it wants. Including five-day delivery. Sometimes, you’ve got to get tough with those legislators.

Why are Michael Dell and Silver Lake taking Dell private at a valuation of $24.4 billion? Christopher Mims explained his theory a few weeks ago: it’s all about a company that Dell acquired last year for roughly $500 million. Wyse makes PCs-on-a-USB-stick: everything is in the cloud. According to Mims, if you combine Wyse’s technology with Dell’s ability to talk the kind of language that corporate IT buyers love, Dell is now well position to disrupt itself:

A privately held Dell, shielded from the pressure to post continual growth on a quarterly basis, could refocus itself on thin clients and cloud computing, which could set itself up for a breathtaking turnaround.

This raises an interesting question. Right now, Dell has about $9 billion of debt; that number is going to rise substantially post-buyout, with a $2 billion loan from Microsoft and a $15 billion financing package from Wall Street. The cost of servicing all that debt is going to weigh heavily on any company trying to grow fast in the highly competitive and extremely capital-intensive world of cloud computing. Wouldn’t it be easier to just stay public, announce a new cloud-based strategy, let the stock find its level, and then execute with an eye to the long term?

After all, private equity shops like Silver Lake have a clear time horizon and exit strategy: they want to come in, turn the company around, and then sell out at a substantial profit within 5-10 years. Public equity, by contrast, is permanent capital, and has an infinite time horizon — in theory, it should be better suited for people with a long-term vision.

But two things are going on here. Firstly, Dell is incredibly cheap. It has revenue of roughly $60 billion per year, gross profit of almost $14 billion, and net income of more than $2.5 billion. That means Silver Lake is paying less than 10 times earnings for the second-biggest PC manufacturer in the US, and the third-biggest in the world. And secondly, debt is incredibly cheap as well. Financing terms haven’t been disclosed, but I doubt Dell is paying more than 6% for its money. 6% of $15 billion is less than $1 billion a year, which still leaves a lot of money left over for investing in the cloud.

Winning a significant share of the cloud-computing pie is not going to be easy: both Google and Amazon are formidable competitors. But I can absolutely see what Silver Lake is thinking here. For many years, the big money in technology has been in fast-growing early-stage companies — but those companies are being increasingly boxed in by a few large firms who each hold key patents in just about every area. Dell has patents — it acquired more than 180 of them with the Wyse acquisition alone; it has the ability to invest and to reach enormous numbers of customers; and it also has a large number of boring-but-viable business units which can be sold off to generate even more capital if needed.

The valuation curve in the technology space has never been as steeply inverted as it is right now: while there are dozens of billion-dollar startups with negligible profits or revenues, the giants in the sector are trading at a significant discount to the stock market as a whole. For a company like Silver Lake, which is based in Silicon Valley and exists to turn around mature technology companies, this can be seen as a once-in-a-generation opportunity combining cheap debt with low valuations and enormous upside potential if they get it right. Frankly, if Silver Lake didn’t buy Dell at this point it should probably just pack up and liquidate.

This buyout might well fail — private equity is an inherently risky business. But it’s pretty obvious that Silver Lake has a much greater risk tolerance, right now, than the public equity markets have. If public shareholders don’t want to touch Dell, and Silver Lake sees an opportunity, then it makes perfect sense for Silver Lake to buy the company — especially since they get to keep Michael Dell himself as a key partner in the deal. If you’re a big company wanting to take big risks in technology, it seems, these days you have only three choices. You can be Amazon, you can be Google, or you can go private. Dell’s choice was clear.

Andrew Ross Sorkin and Peter Lattman have uncovered an interesting wrinkle in the SEC’s case against Mathew Martoma, the most promising part of its huge investigation into Stevie Cohen. The SEC made quite a big deal of the fact that Martoma didn’t just sell his position in two pharmaceutical companies ahead of a big negative announcement; he even kept on selling after that, building up a substantial short position.

But as Sorkin and Lattman have worked out, that’s not really the case: SAC was flat going into the announcement, rather than being short.

The NYT’s spin on this news is that it suggests “a possible line of defense for the portfolio manager”, but it’s not entirely obvious from the report what that possible line of defense is, so let me spell it out.

First, it’s worth stating quite clearly that profits are the same as avoided losses in the eyes of the law. The SEC says that Martoma made $75 million in profits and avoided $194 million in losses as a result of the trading, for a total of $269 million; in the light of the NYT’s new information, that should probably just be $269 million in avoided losses, and nothing in profits. The total amount of money is the same, so the severity of the charges is unchanged.

But here’s the thing: if your trading book is long ahead of a big announcement, you’re basically making a bet on that announcement. Similarly if you’re short. But if you’re flat, that’s the one way of not betting on the announcement. And it now seems that SAC was flat, rather than short.

Of course, if Martoma traded on inside information, then he’s guilty whatever the final position of SAC’s trading book was. But if that position was flat rather than short, it’s no longer circumstantial evidence that SAC thought the announcement was going to be negative.

And there’s another line of defense here, too. As the NYT says, “SAC is well known for its aggressive, rapid-fire trading style, and several former employees say that there is nothing unusual about the fund’s exiting a large position over just a few days.” And this is the defense that has now been opened up. SAC was sitting on substantial paper profits, on its position in Wyeth and Elan. It knew an announcement was coming, and it knew that announcement could move the stocks substantially. If it made the sensible determination that the downside was bigger than the upside, there was every reason for the fund to move to a flat position ahead of the announcement, whether it had any inside information or not.

If I were a defense lawyer here, I’d be coming up with hundreds of previous cases where SAC exited a large position in a short amount of time, ideally ahead of some big announcement. Some of those exits will have been smart, in hindsight, while others will have been silly: SAC would have been better off holding onto its position rather than going flat. But the decision to go flat and take profits (or cut losses) is a common one within SAC, and can happen at any time for any of a million reasons. And as a result, SAC’s trading activity is not in and of itself prima facie evidence of insider knowledge.

Frankly, this isn’t much of a defense. Trading activity is what the SEC uses to try to find possible abusers of inside information; it’s not what the SEC uses to try to prove such cases. In this case, the SEC is relying on the testimony of Sid Gilman, the doctor who leaked the trial results to Martoma before the official announcement.

But the news does help insulate Cohen, even if it doesn’t help Martoma very much. No one knows what Martoma told Cohen before Cohen made the decision to go flat, but SAC’s trading action is entirely consistent with a simple declaration that Martoma wasn’t comfortable being long any more. (The rest of SAC was already making a strong case against being long at this point.) If Cohen knew that an announcement was imminent, and that the one person who wanted to be long no longer wanted to be long, then it would have made sense for him to go flat ahead of the announcement, even if he had no inside information at all. And there’s no particular reason to believe that Martoma would have admitted to Cohen that he had illegal insider information.

As Sorkin and Lattman say, the statute of limitations on this trade is rapidly running out: if the SEC will have to either bring charges against Cohen soon, or not at all. And so long as Martoma is refusing to cooperate with the SEC, it increasingly seems as though the SEC’s best chance yet to nail Cohen is going to slip through its hands.

Jim Surowiecki’s column about sports betting has appeared at roughly the same time as two important news reports. Firstly there’s a big Lucy Kellaway piece about traders in the City of London who become addicted to sports betting, with disastrous consequences for their careers and marriages. And secondly there’s the results of a 19-month international investigation, uncovering match-fixing in a mind-boggling 680 high-level soccer matches, including World Cup and European Cup qualifiers as well as a Champions League match in the UK.

Surowiecki paints sports betting as being an issue of states’ rights: New Jersey voters have spoken, and there’s no good reason why they shouldn’t have the same rights as residents of Nevada, Delaware, Oregon, and Montana. In those states, sports betting is legal, having been grandfathered in under a 1992 federal law making it illegal in the rest of the country. Sports betting also thrives illegally, with varying degrees of local tolerance.

There’s no doubt that the current jurisprudence surrounding sports betting (or any kind of betting, for that matter) is messy. But even if the 1992 law was declared unconstitutional, that wouldn’t much clean it up. Surowiecki says that allowing sports betting in one state would have “no obvious negative effects on other states or on the national economy”, and that “gambling has typically been a state issue, not a federal one” — but I don’t think that’s true any more, and it almost certainly won’t be true in future.

While the New Jersey law only allows sports betting in Atlantic City casinos and the state’s four horse racing tracks, for instance, it also allows people to place their bets at those venues over the internet. If the law is ever declared constitutional, the chances have to be high that pretty soon everybody in the US will have access to web apps offering spread betting — the kind of highly-addictive product that got those UK traders into deep trouble, and which promised huge riches to the Asian crime syndicate in the soccer scandal. Good luck to anybody trying to keep all gambling to New Jersey residents once that happens.

I’m an occasional gambler myself, although not on sports, and I’d probably avail myself of the opportunity to indulge in some spread betting were it easily available online for things like election outcomes or Oscar winners or the chances of the eurozone breaking up. But I don’t kid myself that such activity, once legalized, can or should be confined to individual states or individual casinos within states.

All of which is to say that we should really start a grown-up discussion about gambling, whether it should be legal, and whether paternalism can or should override the freedom to indulge in such activity. We should be open about the fact that if we legalize gambling, then the incidence of harmful gambling addiction will rise, as will the incidence of people trying to game sporting matches. And we should also be open about the fact that gambling will still be a lot less societally harmful than, say, gun ownership, or cigarettes, or alcohol, and that there’s no particularly compelling reason to be so much more prohibitive on the gambling front than we are elsewhere.

But it seems to me silly, in the online era, to try to confine legal gambling to certain physical locations, be they states or casinos within states. And it also seems silly to try to confine betting to certain things (sports) and not others (like, say, the Academy awards). If you’re going to allow it, then allow it. Make sure everybody offering it is clearly regulated and taxed — at the federal level, to avoid a regulatory race to the bottom. And make a clear determination that if you’re mature enough to be allowed to buy a gun, then you should probably be allowed to be able to bet on the Super Bowl, too.