Felix Salmon

How technology redefines norms

Felix Salmon
May 18, 2013 21:01 UTC

Jeff Jarvis reprints the clip above, in an article dismissing the privacy concerns surrounding Google Glass. The Victorian attitudes of Newport’s cottagers, he clearly implies, were misguided and misplaced. “Rest assured,” he writes. “ I will ask you whether it’s OK to take a picture of you in private.”

The key words, here — words which weren’t even part of the cottagers’ vocabulary — are “in private”. We now live in a world where we have public lives and private lives — and for over a century now, since roughly the point at which the above article appeared, the portion of our lives considered “public” has been expanding, while the portion of our lives we can consider “private” has been contracting. What’s more, Jarvis himself is a prominent proponent of the idea that we should maximize the speed at which we move our lives into the public realm; he also equates a desire for privacy with being “scared of the public” .

Never before have we faced so many opportunities to turn the formerly-private into the newly-public. As those opportunities arise, many people adopt them, and turn “public” into the new norm for such activities. Eventually, the norms become societally entrenched, to the point at which it is now utterly unobjectionable for those who once would have been labeled “kodak fiends” to take photographs outside a Newport tennis tournament.

My point here is that technology has a tendency to create its own norms. The classic example is the automobile — a technology which kills more than 30,000 Americans every year. From the 1930s through the 1990s, societal norms about who roads belonged to, and what people should do on them, were turned on their head thanks to the new technology. The dangerous new activity allowed by the new technology became the privileged norm, to the point at which just about all other road-based activity — and roads have been around for thousands of years, remember, since long before the automobile — essentially ceased to exist. Eventually, we reached the point at which elected representatives were happy saying that if a bicyclist gets killed by a car, it’s the bicyclist’s fault for being on the road in the first place.

If Google Glass — and wearable computing more generally — takes off and fulfills its potential, it will change society’s norms about what is public and what is private. It is therefore entirely rational, whatever you think of the set of norms we have right now, to assume that they will end up moving towards something more well disposed towards the new technology.

Jeff Jarvis will welcome that move, and can come up with dozens of reasons why it would be a good thing rather than a bad thing. “There’s no need to panic,” he writes. “We’ll figure it out, just as we have with many technologies—from camera to cameraphone—that came before.” But let’s be clear here about how much weight is carried by that “we’ll figure it out”. Realistically, “figuring it out” means, in large part, changing norms: irrevocably moving the line between what is private and what is public. That might be a good thing, it might be a bad thing. But if you like the norms we have right now — or if you think they’ve already gone too far in terms of robbing individuals of their privacy — then you have every reason to worry about what the onset of wearable computing might portend.

Update: Noah Brier points me to a quote from Daniel Mendelsohn, who goes back further still than the Victorians:

I am amused by the fact our word idiot comes from the Greek word idiotes, which means a private person. It’s from the word idios, which means private as opposed to public. So the Athenians, or the Greeks in general who had such a highly developed sense of the radical distinction between what went on in public and what went on in private, thought that a person that brought his private life into public spaces, who confused public and private, was an idiote, was an idiot. Of course, now everybody does this. We are in a culture of idiots in the Greek sense.


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Apple’s new pitch to investors

Felix Salmon
Apr 23, 2013 22:19 UTC

Today’s earnings report marks the point at which Apple is officially no longer a high-growth tech stock, valued on its monster potential. Instead, it has become a cash cow, valued on its ability to pump hundreds of billions of dollars into its shareholders’ pockets.

That’s the main lesson from the big news of the day, which is that Apple is going to return $100 billion to its shareholders by the end of 2015. By comparison, Apple closed Tuesday with a market capitalization of $380 billion. And its $145 billion cash pile isn’t going to get any smaller: the newly-announced program merely brings its dividend and share-repurchase expenditures up to roughly the level of its current free cash flow. Apple will still have more than enough money to invest as much money as it likes in anything it likes, even its new headquarters.

Apple says that its new capital-return scheme “translates to an average rate of $30 billion per year from the time of the first dividend payment in August 2012 through December 2015″; it’s pretty hard to imagine that number falling thereafter. If you assume fungibility of dividends and share repurchases, then you can express that number as an effective dividend yield: a $30 billion dividend, divided by a $400 billion market cap, works out to a yield of a whopping 7.5%. No wonder the stock market is welcoming the news.

In order to be able to continue to return $30 billion per year to shareholders in perpetuity, Apple is going to have to become a more conservative and predictable organization than it has been until now. Which brings me to the chart that Jay Yarow published yesterday:


As Yarow says, this chart shows the effects of Apple’s stated intention to be more realistic about its earnings guidance. And today’s earnings continued the pattern: EPS beat guidance by 7%, while revenues beat by 4%. Those numbers are decidedly modest compared to the kind of beats we saw in 2010-11.

But at the same time, we’re also seeing the law of large numbers in this data. Let me present Yarow’s revenue data in a slightly different way, adding in today’s latest datapoint:


It’s pretty clear that the massive beats, here, took place at times of massive growth: all corporate numbers are hard to predict, even internally, when they’re growing at 73% a year, like Apple’s revenues did in 2011. This quarter’s revenues are still substantially higher than the same quarter’s last year: they’re up 11%. But earnings per share are actually down by 18% from the same quarter last year, and when you’re a manufacturer making $10 billion a quarter on revenues of more than $40 billion, and when you’re as ruthlessly efficient as Apple is, you’re not likely to have a lot of big surprises any more.

Apple is trading at an astonishingly low valuation, with a p/e ratio in single digits, because it has now become that animal investors like least: a slow-growing tech stock. Either one is fine on its own, and both slow-growing stocks and fast-growing tech stocks can support much higher multiples than Apple is seeing right now. But conservative investors, who like slow-growing stocks with high dividends, are constitutionally uncomfortable with the volatility inherent in the tech world. And technology investors, who are happy taking that kind of risk, want to see substantial growth. Apple, notwithstanding the fact that it’s one of the most valuable companies in the world, is falling through the capital-markets cracks.

All of which perhaps explains the other part of today’s announcement: that Apple is going to start leveraging itself, and taking on debt. Apple’s debt will provide a safe low-yielding investment for conservative investors; and while it will increase the earnings volatility seen by shareholders, the fact is that Apple clearly hasn’t seen any valuation benefit from seeing its earnings volatility come down, so it might as well artificially bring it back up again. If its current capital structure is attractive to no one, maybe its new capital structure will have something for everyone.


Two questions:

1) When Apple posts another few quarters with 50%+ growth in the next few years, what will happen to its share price?

2) What makes Apple’s dollar of revenue, with ~40% gross margin worth about as much as Amazon’s, with single digit margins (if that)?

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Kickstarter funders aren’t angel investors

Felix Salmon
Apr 18, 2013 18:04 UTC

A correspondent writes, via email:

Since much of the seed capital of Matter was Kickstarter funded, isn’t it worth asking why the backers aren’t coming along, so to speak?

I know the absolute answer, but the usual issues of founder sweat equity versus angel capital apply, it seems to me. It’s likely that the angel funding via Kickstarter is pretty substantial on a term sheet basis relative to other early stage investing. At the very least, it’s an interesting topic vis a vis what Kickstarter is and isn’t: the Verge just did a piece about how it’s not a store. Fine. But what exactly is it then? It would be one thing if it was used to put the screws to Sand Hill Road, but the people left holding the bag aren’t really Fred Wilson.

This is an easy one, but it’s also important. Kickstarter is not a store, but it’s definitely not a place to raise seed-round equity. The money that gets raised by a company on Kickstarter isn’t debt, and isn’t equity: it’s operating revenues. From a business-plan perspective, Kickstarter revenues are basically pre-orders.

Last September, NPR asked a simple question: “When A Kickstarter Campaign Fails, Does Anyone Get The Money Back?”. It’s a question with a simple answer: No. To take just one example, look at the Geode. It raised $350,000 a year ago, but most of its backers — who are complaining vociferously in the comments section — seem to have received nothing. And while the founder didn’t just abscond with the money (he was eventually tracked down by the Charleston Post and Courier), it’s pretty clear that the Geode is Exhibit A for people who think of Kickstarter as SkyMall for vaporware.

There is one small piece of good news from the Geode fiasco: while the manufacturer has disappeared, and Kickstarter certainly isn’t giving anybody their money back, some commenters have managed to get refunds from their credit-card companies. If you do back a Kickstarter where you’re expecting a reasonably valuable thing in return, then it makes sense to use a credit card, rather than say a debit card or PayPal, to make your payment. (Just as it makes sense, if you’re buying an airline ticket, to use a credit card just in case the airline goes bust before your flight.)

That said, NPR’s question does make it clear that there’s a pretty explicit contractual relationship between the company and the funder: cash goes one way, goods and/or services flow the other way, a few months later. The money counts as revenues, not as funding, and the liability for the company is not a cash liability but rather one of deliverables.

But if it’s wrong to think of Kickstarter funding as debt finance, it’s even more wrong to think of it as equity finance. Kickstarter money is pretty much the cheapest money that an entrepreneur can raise, and that’s great: anything which makes it easier to generate some cashflow for startups can generally be considered a good thing. And Kickstarter is very clear that it’s not going to jump onto the crowdfunding bandwagon that was included in the JOBS act. Other companies can try to provide platforms for small companies selling off micro-chunks of micro-equity: that’s not what Kickstarter is about.

Matter did give out some equity, carefully, to important partners like Clearleft, which is wonderfully recycling the proceeds from yesterday’s sale into a small incubator. Matter’s backers, however, would and should neither want nor expect to see their pledges converted into some kind of equity. Most of the backers — 1,775 of the 2,566 in total — gave $25 or less: it’s clearly impractical for any company to deal with that many shareholders owning such tiny stakes. And people who subscribed after Matter launched have in some cases given just as much money; it’s not clear why the people who prepaid should get some kind of equity stake, while all other customers don’t.

Clearly there’s a bit of an asymmetry here: whenever you back a Kickstarter project, you’re running the risk of unexpectedly losing everything, while there’s no countervailing upside risk of some windfall down the road. But that’s the genius of Kickstarter. It gives creative people and entrepreneurs a way of asking for money without seeming to be begging, and it gives funders a way to be able to support the people they like and admire within the familiar wrapper of a commercial transaction. It’s a fine line to walk, and Kickstarter has done a very good job of not turning it into a contractually-binding funding operation, be it debt or equity or something in between.

For people who are used to looking at the world in terms of capital structures and funding costs, this can be weird: at one event in Davos this year, I met a successful businessman who was genuinely offended at how cheap the effective funding cost was for startup companies using Kickstarter. But backers of Kickstarter projects don’t think that way, and it’s worth noting that Kickstarter caps the amount that any one person can give at $10,000.

On the internet, there are lots of people who are generous and enthusiastic. That’s a great resource to be able to tap into. Let’s not try to turn it into something which is all lawyered up and financial.


rapgenius.com is VC-funded to the tune of $15 million. That means there isn’t really any shortage of capital. Quite the opposite.

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What will Henry Blodget do with Jeff Bezos’s millions?

Felix Salmon
Apr 5, 2013 18:25 UTC

The news of the day in the media world is that Jeff Bezos has led a $5 million Series E funding round for Business Insider. Here’s the story, according to CEO Henry Blodget:

Jeff’s investment grew out of a dinner he and I had about a year ago. We talked about the business, and he was excited about it. (He sees some parallels with Amazon). A few months later, he expressed an interest in investing. My reaction was basically “Hell, yeah!”

Blodget has now articulated a simple public goal: “to become the best digital business publication on the planet”. It’s a conscious echo of Bloomberg’s stated aim to be “the world’s most influential news organization”. If he needs to invest millions of dollars of other people’s money to get there, that’s fine.

Blodget goes on to say that he’s obsessed with his customers — both readers and advertisers — and that his customer focus is the main thing he shares with Bezos. (Well, that and his famous Amazon call, of course.) He also says that Bezos’s money “will allow us to continue to invest in our editorial, technology, and client teams” — which almost certainly means that there’s no chance, now, of Business Insider being profitable in 2013. Six years after it was launched, the site is still in growth mode.

And frankly, there are quite a lot of things that Blodget could use the money for, if he is really focused on the reader experience — indeed, there are so many things that he could probably spend all that money quite a few times over, if he wanted. The site could use a redesign, for starters, to make stories pop more for readers and to provide more attractive opportunities for advertisers. On top of that, the architecture of the site should reflect the way that stories are covered. Here’s how BI’s editorial chiefs see the way that they work:

“We don’t really think of things we put up as ‘an article,’” said Carlson. “It’s a bit of information conveyed to people. One of my old colleagues used to say that the last sentence of your last post is the first sentence of your next post. Because by the time you reach the end you sort of come to a cliff, ‘Oh I have another thought on this and I’m just going to put it in the next post.’ In a way, it does sort of become a narrative. For sure, I think [that's] the attraction of reading something at Business Insider … It’s a live medium where the narrative is always coming out with the next thing.”

Weisenthal is often reminded how differently digital outlets such as BI work when it comes time to submit content for awards.

“They have the journalism competitions where they invite people to apply and they always say, ‘Submit your top three posts for consideration that you’re most proud of’ or something like that,” he said. “And I can never come up with the stuff. I don’t think I have a single great post last year that I’m really proud of. Everything I write is part of this bigger stream.”

He pointed to his real-time blanket coverage of the monthly U.S. jobs report as an example. “If you follow me on Jobs Day, within like 20 minutes of the report coming out, I have a summary posted,” he said. “Then I have another post singling out one detail I thought was interesting. I have another post saying what it might mean for interest rates and fed policy. I have another post talking about the political dimensions and so forth. I’m proud of the fact that it’s this whole suite of stories.”

I’m an admirer of this form of journalism, and I think that many media organizations, including Reuters, are going to move in this direction. But right now, if you go to one of Joe’s payrolls posts, it’s not easy to find all the other ones — to have them all in one place, together giving the bigger picture. In order to be able to allow that, Blodget will need to make some serious technology investments.

What’s more, a re-engineered website might well result in a website with significantly fewer pageviews. If you can see all of Joe’s payrolls posts on one page, then that means fewer pageviews for BI than if you call up all ten of them individually. For most of its existence, BI has been in an uncomfortable race, trying to increase the number of pageviews it serves up faster than its CPMs are falling. Investors are generally OK with losses, which reportedly reached $3 million last year, only so long as revenues are growing. And they are growing: Blodget tells me they were more than $10 million in 2012, up from about $7.5 million in 2011 and $4.7 million in 2010.

The problem is that in the chase for revenue growth, Blodget is sacrificing a pleasant user experience. He installs ugly automatic links under certain phrases, for instance, which when you mouse over them start playing video ads. Or he sells a lot of interstitial ads which force you to click another time before reaching the story you want to read. Quartz points out that there’s a good chance Business Insider is worth less than the much younger BuzzFeed, where CEO Jonah Peretti is adamant that he’ll never run a BI-style slideshow, or even “crappy display ads”, just because readers clearly prefer everything on one page and don’t get value from those ads.

The problem is that if Blodget decides to pare back on artificial revenue juicers which readers dislike, that hurts revenue growth as well as profits — even as BI is saying that it intends to accelerate revenues this year to something in the $15 million range. In order to keep revenues growing even as he re-engineers his site to make it sleeker and less optimized towards pageview maximization, Blodget would have to invest not only in technology, but also in sales — paying big money for expensive staffers to build relationships with brands. BI gets too much of its revenue from banner ads right now: it needs to diversify its ad revenue, and start finding more ways for brands to reach BI’s coveted readership. One of those new channels is conference sponsorship, and I expect that BI will use a bunch of its new money to invest aggressively in conferences. But one of the big hidden costs behind building a new kind of website is the fact that you need to build a new kind of sales team, too, selling the kind of products which are often referred to as “native”, whatever that’s supposed to mean.

Business Insider has always been run on something of a shoestring; it made the entirely understandable decision, for instance, to hold onto a large chunk of the capital it raised in the past, rather than blowing through it and then suddenly being forced to cut back for the sake of profitability. This new round allows BI to increase the amount it’s investing while still retaining a reassuring cushion. But $5 million is not remotely enough money to allow Blodget to pivot to a very different business model, even if he wanted to do so, which he probably doesn’t. For better or for worse, he’s stuck in a world of banner ads and CPMs, and although he’s done well in that world to date, the future of that world looks pretty bleak.

There are many sites, Gawker Media’s foremost among them, which have gone to great lengths to wean themselves off their addiction to banner ads. And in general it seems to me self-evident that “the best digital business publication on the planet” is not going to be one which aggressively chases pageviews and ad revenues at the expense of the user experience. By thinking of stories as streams, Joe Weisenthal found a great way of juicing pageviews, since every element of that stream, under the current architecture, is a new story and a new page. But he’s also stumbled upon a powerful and addictive new form of journalism, which is Blodget’s best hope for achieving his ambition. The question is: will Blodget be willing to give up his current business model, in order to let Weisenthal follow his editorial vision to its logical conclusion?


Henry Bodget was pumping stocks on CNBC, etc then emailing his important clients and telling them that these same stocks were garbage and to sell them when they rallied on his buy recomendation. He was, and still is hyping overpriced amazon as his wall street buddy is Jeff Bezos. Bezos has now rewarded Bloget with a 5 million dollar investment for hyping amazon stock.
Both Bezos and Blodget are wall street crooks who belong behind bars. Boycott amazon and send a message to Bezos that his paying off wall street to prop up his stock price is both illegal and immoral. Boycott amazon and send these two crooks into the gutter where they belong

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Why bitcoin’s rise is nothing to celebrate

Felix Salmon
Apr 3, 2013 13:50 UTC

I’ve posted a very long piece on bitcoin over at Medium. Obviously, I’d love for you to go over there and read the whole thing — or at least save it somehow for reading later. But here’s the heart of the article:

Volatility is a serious problem, if you’re trying to put together a currency, rather than a vehicle for financial speculation. If the currency of a country ever fluctuated as much as bitcoins did, it would never be taken seriously as a medium of exchange: how are you meant to do business in a place where an item costing one unit of currency is worth $10 one day and $20 the next? Currencies need a modicum of stability; indeed, one of the main selling points of bitcoin was that it couldn’t be destabilized by government institutions. But that comes as scant comfort to people watching the value of a bitcoin behave like some kind of demented internet stock during the dot-com bubble.

In reality, then, bitcoin doesn’t really behave like a currency at all. In terms of its market value, it looks much more like a highly-volatile commodity. That’s by design: bitcoins were created to be the most fungible commodity the world had ever seen – to the point at which they would effectively erase the distinction between a commodity and a currency.

But is that a good idea?

The answer, of course, is no. It’s a bad idea to turn a currency into a commodity, because if the price of the commodity goes up, then everybody using the currency suffers from enormous deflation. Imagine a sucker who took out a loan in bitcoins a few weeks ago — she’d never be able to pay it back today. That’s a pretty good sign that bitcoins don’t work as a currency.

More profoundly, it’s incredibly corrosive to try to build a currency on mistrust, as bitcoin has attempted.

It’s because we place so much trust in banks, after all, that they are forced to take on a great deal of responsibility. Banks and central banks are given an important job to do, are regulated and scrutinized, and can be held responsible for their actions. The population of the entire country, as represented by the government, stands behind bank deposits and promises to honor them even if the bank goes bust. Money, in other words, is a key ingredient in the glue which keeps the social compact together. (What we’re seeing in Cyprus is in large part a demonstration of what happens when that compact starts becoming unglued.)

Bitcoin, in that sense, is anti democratic. It’s based on mistrust rather than trust, it refuses to take any responsibility onto itself – indeed, it doesn’t even have a self to take responsibility onto. It’s nihilistic.

It’s fun to watch the bitcoin bubble, but it’s also important to understand that almost no one actually wants to live in the kind of world that bitcoin enthusiasts are looking forward to. Thankfully, the rising price of bitcoins is not some kind of market signal telling us that we’re closer to that world. But at the same time, it’s certainly not something to celebrate.


“Banks and central banks are given an important job to do, are regulated and scrutinized, and can be held responsible for their actions.”
Close, the only minor tweaks i would make are that a) they’re not regulated, b) they’re not scrutinized, c) they’re primarily responsible for running our economy into the ground, and d) stealing all of your money. The are not “given a job”, they actually are the driving force behind most policy, which you can hopefully see is quite SHIT nowadays.

Regarding bitcoin being “built on mistrust” you’ve got to be kidding me. You clearly have a lot to learn when it comes to bitcoin. There is a lot of fear in ignorance when it comes to technically challenged individuals. As the revolutionary tidal wave of next generation technology sweeps over the planet many panic and get swept out to sea rather than understand what the situation is and adapt.

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Must investors be on Twitter?

Felix Salmon
Mar 18, 2013 16:44 UTC

Izabella Kaminska and Joe Weisenthal have both, in their own ways, weighed in on the importance of Twitter to investors. Here’s Kaminska:

There are a lot of professional investment people out there who have no idea about the private market in information. They still digest all their news from official sources and consider things like Twitter noise or unsubstantiated rumourtrage that can’t be trusted without ever having tried it themselves.

They are at a huge disadvantage and have missed major trends as a result and don’t even realise it.

Meanwhile, watching the Cyprus drama unfold, Weisenthal says that “the Twittersphere has come to the rescue” of any investor starved for good sell-side research:

The value of Twitter (and Twitterers’ blogs) have been growing for some time.

But on a weekend, with a high degree of local knowledge and nuance required, the best information out there was all free.

All of this is true, and especially true with respect to Cyprus — a country which is far too small to have dedicated sell-side coverage. Precious few bank analysts will have good contacts within Cypriot policymaking circles, or even be able to name a single Cypriot policymaker. Which means that everybody’s pretty much starting from the same place, giving a big advantage to the iterative and conversational way in which knowledge builds on Twitter. My post over the weekend had 21 different external links, most of which came from Twitter in one way or another.

More generally, if you’re an investor who wants to avoid being blindsided by something huge you were utterly unaware of, Twitter is a great tool for minimizing that risk. That’s thanks in large part to its short attention span: by its nature it flits randomly from topic to topic, making it a fantastically good serendipity engine, better than any other source at showing you stuff you didn’t know you wanted to know.

Kaminska points out that journalists, rather than investors, are at the edge of the envelope here, and cites Weisenthal in particular as being the person who “sets the benchmark for what the human brain is capable of absorbing”.

Information is power. You can choose to ignore it and get behind, but this is a market like anything else. And you can’t stop or shut it down just because you can’t keep up. Only the strongest and best at absorbing and processing all this information will survive.

This is why bloggers and journalists like us (those using social media rather than those using old techniques) become so insightful. We do the reading so you don’t have to.

But guess what, the amount of material we consume on a daily basis relative to the investment community which still operates on 1990s information terms (a research note here, a pontification there, a look at the newspaper — yesterday’s news, tomorrow ) makes me realise the scale of the power chasm that is forming between the informed, those who know and do exploit the information available, and the uninformed, who don’t because it gets in the way of their quality of life.

Of course, there are some investors who are extremely adept at drinking from the fire hose.  And there are other investors who specialize in taking very, very deep dives into very narrow asset classes, often just a single stock, trying to monetize their information advantage that way. But most investors are much more broadly exposed than that, and need to stay on top of what is happening, globally, in a world which can change with dizzying speed. And as Kaminska says, there are a lot of “old school money managers” who simply don’t have the skill set to do that.

There’s still, however, the question of what people do with the information they get from the rapidly-proliferating set of sources which are freely available online. Weisenthal and Kaminska are both very smart, but that doesn’t mean I’d be likely to give them my money to invest on my behalf. A large part of investing is knowing when to wait, in a world which is always biased towards action. Another large part is being able to step back and see the big trends, without spending too much time being distracted by noise. And yes, for all that it’s incredibly valuable, Twitter is also incredibly noisy.

If Kaminska’s point is about the kind of money managers whose investment services are sold rather than bought — individual stockbrokers, fund-of-funds managers, that kind of thing — then it’s well taken.  And if you’re a sell side analyst, Twitter is great at helping to prepare you for just about any question which might get thrown at you. But if she’s talking about purer investors, like mutual-fund or hedge-fund managers, or family offices, or even just individual investors, then I think we’re still quite a way from the point at which being on Twitter is a necessity. Some people love it, and get value out of it, and become better investors through it: all power to those people. For others it’s a noisy distraction in a world where there’s never enough time to think deeply about complex issues.

The people I respect the most in the financial-services industry tend to be the ones with both breadth and depth. I don’t know whether David Rolley of Loomis Sayles has ever spent any time on Twitter, but I know that he has a protean yet focused intelligence which seems perfectly suited to his job. On the other hand, being on Twitter is hardly disqualifying: I would put Dan Davies and Mark Dow in the same category, and they’re both must-follows on Twitter, who surely receive as much from the service as they give to the rest of us.

There’s a reason why journalists flock to Twitter: they cover news, and Twitter is always new. They also, however, nearly always overestimate the importance of news to the markets. What’s happening in Cyprus might be very important when it comes to making investment decisions, but that doesn’t mean those decisions need to be made right now. Investing, along with providing valuable information to investors, which is what sell-side research desks do, involves much more than staying on top of current events: they also act as a screen, passing on only the stuff which is important, and identifying the securities which are most tied to the event in question. Twitter is very good for sentiment analysis, but it’s pretty horrible as a source of trading or hedging ideas.

All of which is to say that while I’m sure there are many investors out there who would be lost without Twitter, there are surely just as many for whom it would be little more than an unhelpful and noisy distraction. The great thing about Twitter is that the value and the conversation take place among people who want to be there. Telling people that they have to be there, or else they’re missing out, is actually not helpful. Because the one thing we can probably all agree on is that people who feel obliged to be on Twitter are very unlikely to either contribute or receive much of value at all.


“the investment community which still operates on 1990s information terms”

Tsssssssss. As if investors are from a different planet, or something. Wasn’t Rick Ashley still popular in the 90s? Get real…

I know a LOT of journalists who are not active on twitter and keep hanging on to their old routines. Probably just as many as investors. It is nonsense to make it look like the two groups differ all that much.

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Did Google just kill RSS?

Felix Salmon
Mar 14, 2013 21:01 UTC

On Tuesday, Google paid $7 million to settle charges with a coalition of 38 states in relation to its privacy breaches. The 14-page agreement is pretty detailed, and includes promises from Google to spend a substantial amount of effort educating the public about the importance of securing wifi networks. (Which gives me a sad: I love unsecured wifi networks, and have yet to find any empirical data supporting the thesis that they cause real damage.)

On Wednesday, Google announced that it was shutting down Google Reader.

I’m not saying that the second event was directly caused by the first, but the two are linked. As the NYT explains today, the settlement is no less than an attempt to change the very culture of Google, to make it less freewheelingly Silicon Valley and more of a mature and responsible corporate giant.

Google Reader was a part of that freewheeling culture, although just how freewheeling Google was is open to debate. Om Malik has a fantastic interview with Reader’s founder, Chris Wetherell, who hacked it together with a small team and who never really managed to get Google senior management interested in the product or its potential.

“There was so much data we had and so much information about the affinity readers had with certain content that we always felt there was monetization opportunity,” he said. Dick Costolo (currently CEO of Twitter), who worked for Google at the time (having sold Google his company, Feedburner), came up with many monetization ideas but they fell on deaf ears. Costolo, of course is working hard to mine those affinity-and-context connections for Twitter, and is succeeding. What Costolo understood, Google and its mandarins totally missed.

But whether or not Reader was ever going to be a good business for Google, it was from day one a fantastic public service for its users. Google started as a public service — a way to find what you were looking for on the internet — and didn’t stop there. Google would also do things like buy the entire Usenet archives, or scan millions of out-of-print books, or put thousands of people to work making maps, all in order to be able to get all sorts of information to anybody who wants it. All of that was good business, as Daniel Soar explained in 2011:

Google is learning. The more data it gathers, the more it knows, the better it gets at what it does. Of course, the better it gets at what it does the more money it makes, and the more money it makes the more data it gathers and the better it gets at what it does – an example of the kind of win-win feedback loop Google specialises in – but what’s surprising is that there is no obvious end to the process.

The end to the process, it turns out, is the government — the Germans, of course, but also US states and many other authorities around the world. Governments love gathering data themselves, but they’re less excited when a private, for-profit company does it — and often does it better than they themselves can do it. What’s more, while many of their citizens are still excited about Google and its range of offerings, a lot of them are worried, too, that they’re losing their privacy and that Google has a scary amount of information about them.

Meanwhile, Google was becoming too big to manage, with far too many bits and pieces which could in theory help the broader company but which in practice, like Reader, just sat there using up resources and contributing very little in return. So Larry Page decided that he would start killing them off, and making Google more focused; I’m sure that decision was made easier by the fact that if Google now needs to control the amount of information it collects about people, it can’t have engineers freewheelingly making unilateral decisions to start collecting exactly that kind of information. Dick Costolo’s ideas were probably great in 2005; in 2013, they would be politically suicidal.

The result is that Google is going to be less of a utility, less of a public service, and more of a company with a constrained set of products. The problem with the death of Reader is that it was the architecture underpinning lots of other services — the connective tissue of just about all RSS readers and services, from Summify to Reeder to Flipboard. You didn’t even need to use Google Reader; it was just the master central repository of your master OPML list, all the different feeds that you were subscribed to. Google spent real money to provide that public service, and it’s going to be sorely missed. As Marco Arment says, “every major iOS RSS client is still dependent on Google Reader for feed crawling and sync.”

Arment sees a silver lining in the cloud, saying that with Google gone, “we’re finally likely to see substantial innovation and competition in RSS desktop apps and sync platforms for the first time in almost a decade.” I’m less sanguine. Building an RSS sync platform is a hard and pretty thankless task, it costs real money, and it might not work at all — especially in a world where less and less content is actually available in RSS format. (You can subscribe to my Tumblr feed in RSS format, but there’s no such feed for my posts on Twitter or Facebook or Instagram or Path or even Google+.)

RSS has been dying for years — that’s why Google killed Reader. It was a lovely open format; it has sadly been replaced with proprietary feeds like the ones we get from Twitter and Facebook. That’s not an improvement, but it is reality. Google, with Reader, was really providing the life-support mechanism for RSS. Once Reader is gone, I fear that RSS won’t last much longer.


I hate this kind of thing.

In what damn universe is twitter a replacement for RSS? RSS is more than link sharing, for goodness sake, and all the false equivalence that it is is so grating.

Twitter doesn’t replace it. Facebook doesn’t replace it.

Why everyone seems to want one tool for all tasks is beyond me. RSS is for one thing, and it’s good at that thing. Shoehorning some similar task into FB is a loss for everyone.

And twitter, for god’s sake usually you can’t even read the damn URL since it’s shortened, much less the title of the article or the content. It’s like replacing a newspaper or magazine with a bunch of closed envelopes that contain one article a piece, with little or no context for each. Which is to say, manifestly worse.

Anyway, soapbox over for the moment. I’ll be taking my RSS feeds to The Old Reader (apparently appropriately as i seem to be some kind of curmudgeonly gray beard), and continuing to happily read what i want, rather than try to digest a random firehose of twitter links.

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When crowds disintermediate charities

Felix Salmon
Mar 12, 2013 03:55 UTC

Seth Stevenson has a problem with the fact that the Internet raised $703,168 for Karen Klein, the bullied bus monitor. That kind of money is “disproportionate”, he says, adding:

Charities have always used poignant, individual stories to play on people’s emotions and open up their wallets. But the idea was that you should donate to the charity, not to the individual sad sack with the most heart-wrenching video or the most prominent link on Reddit. Likewise, political and social causes have long used the specter of bad behavior to lobby for new laws and policies—but rarely to round up an angry mob that tracks down specific offenders. It seems we’ve decided it’s more fun (and much easier) to collaborate in making one person happy or unhappy than it is to work together to change the underlying context.

Well, yes! It is more fun, and much easier, to make one person happy than it is “to work together to change the underlying context”. And yes, that’s one of the reasons why we do such things. There’s nothing inherently bad about fun-and-easy, but Stevenson seems to think that there is. The hidden syllogism would seem to be that the $700,000 that went to Karen Klein is money that would otherwise have gone to change the underlying context, and that therefore there’s something corrosive about the donations to Klein, because the alternative, while not as fun and not as easy, was in some sense superior.

But this is silly. At the margin, the Karen Klein campaign, along with all the publicity surrounding it, surely helped, rather than hindered, those people working to change the underlying context. And once someone has given $20 to Karen Klein, they will be more rather than less receptive to people asking for help on broader campaigns.

The fact is that almost none of us have some kind of annual giving budget, from which we draw when we send money to someone like Karen Klein. Instead, we give as and when we’re moved to do so. Once you start giving money away, you’re more likely to give money away in the future; Stevenson’s implication, by contrast, is that giving money in one place makes you less likely to give money somewhere else. Which is completely wrong.

Still, phenomena like the Karen Klein campaign are interesting. As Stevenson says, the vast majority of the money was given after it became clear that campaign founder Max Sidorov’s stated aim — to send Klein on “the vacation of a lifetime” — had long been surpassed. Which means that the people giving to the campaign no longer, at that point, wanted to send Klein on a vacation. The whole point of the campaign, from the beginning, was to be excessive: to single out Klein and shower her with cash and goodwill, not because she was more deserving than anybody else on Indiegogo, but just because sometimes the internet does excellent things for people. As the campaign snowballed, the very gratuitousness of it became its point: thousands of people were giving money to someone who no longer needed it, just because they could.

Stevenson draws various lessons about “metaperceptual influence” online, along with “deindividuation through the enhanced opportunity for anonymity”, all in the service of a thesis that there’s “something inherently different about crowd behavior on the Internet”. But he misses the simple and obvious point: that the internet is so enormous that 32,000 is less of a crowd than it is a micro-subset of people who think it’s cool to do something randomly good in a vaguely coordinated and largely effortless manner. As Amanda Palmer puts it, on the internet, a relatively small number of self-selecting people can be more than enough: enough to fund an album tour, enough to send $700,000 to a bus monitor in upstate New York, enough to make thousands of Harlem Shake videos. There’s something random about these things: you could never predict in advance which ones will catch the wave and which ones won’t. That’s just the way the internet works: it’s a bed of a million oysters, and, randomly yet inevitably, some of them will grow pearls.

If you want to look at crowd behavior online, it seems to me that the place to look is not any of the million fads which flare up and die down in a matter of a week or two. More interesting, to me, are the political campaigns — Howard Dean ’04, Barack Obama ’08, Ron Paul ’12 — which manage to excite a wired and youthful base. Those campaigns really are rival goods: if you support Obama you’re opposing Hillary, if you support Ron Paul you’re opposing Newt Gingrich. And they also share with political campaigns more generally the fact that giving money is generally done more for the benefit of the giver than it is for the benefit of the recipient: the marginal benefit of a donated dollar in a presidential campaign is very close to zero, in these ad-saturated times.

And that’s surely the real reason why so much money flowed to Karen Klein: people who gave her money felt really good about doing so. They weren’t trying to change the world, they were just making themselves feel good, and helping out a victim of bullying at the same time. It’s the story of most successful Kickstarter campaigns, too: the feeling-good-about-giving part is much more important than the ostensible commercial transaction.

The internet is the greatest disintermediating force the world has ever known, and it’s going to have to change the way that charities campaign — at least with respect to the ones who like to use individual stories as a way of raising collective funds. That worked much better when you couldn’t help the individual directly. Nowadays, as a charity, you either need to give people the belief that they are helping the individual (as Kiva does, for example). Otherwise, you risk being disintermediated entirely by the likes of Max Sidorov.


Publius, it sounds to me like you’re describing intermediaries. The Red Cross collects blood from a bunch of people, in order to redistribute it to those in need. A disintermediated blood donation system would have individuals willing to donate blood giving that blood to specific people in need of blood.

United Way is DEFINITELY an intermediary. People give them money; they then give the money to organizations that they think are helping people, and those organizations, we hope, actually help people. The Klein story involved a bunch of people giving money directly to Klein, rather than to an intermediary they trusted to distribute it to a broad class of people in need of money.

“You keep using that word. I do not think it means what you think it means.”

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The problem with online freelance journalism

Felix Salmon
Mar 5, 2013 21:46 UTC

Nate Thayer caused quite a stir in the Twittersphere this morning when he published the email correspondence between himself and Olga Khazan, an editor at the Atlantic. Khazan had seen Thayer’s 4,300-word piece for North Korea News about “basketball diplomacy”*, and decided that it would be great to have a shorter version of the story at the Atlantic. After a bit of back-and-forth, she proposed this to Thayer:

Maybe by the end of the week? 1,200 words? We unfortunately can’t pay you for it, but we do reach 13 million readers a month. I understand if that’s not a workable arrangement for you, I just wanted to see if you were interested.

I spoke to Bob Cohn, the head of Atlantic Digital, today, and he said, echoing editor in chief James Bennet’s formal apology to Thayer, that this was a mistake. It would have been OK, probably, to ask Thayer if the Atlantic could cross-post, or syndicate, the original piece, with no more work involved on Thayer’s part. At that point, he could have said yes or he no (or, in this case, he could leave the decision to NK News, which owns the copyright on the piece) — but he wouldn’t have been asked to work for free.

The cross-posting model can be a very healthy one: once a piece has been written and published, it can reach a much wider audience if it appears on a few different sites. To take one high-profile recent example: “I am Adam Lanza’s Mother” did very well at its original location, getting 1,738 comments. But it did even better at HuffPo (15,220 comments, 1,269,516 Facebook Likes) and at Gawker (794,000 Likes, 3.8 million pageviews). That’s a special case, of course. But both professional and amateur writers tend to want their stuff to be read by as many people as possible, and (like me) normally say yes to people asking if they can cross-post.

I don’t think that Thayer would have been offended by a simple cross-posting request: that can be dealt with with an equally simple yes or no. Instead, however, he was asked by the Atlantic to cut 4,300 words down to 1,200 words — something which involves a substantial amount of work, and often a substantial amount of rewriting. For that, the Atlantic should have offered to pay him. Or, more realistically, they shouldn’t have asked him to do that in the first place: there is value to reprinting the original story, and there is value in quoting it and linking to it, but there’s not a huge amount of value in editing such a thing down — not when your medium has no space constraints.

Also, there’s something a little disingenuous about the “13 million readers” thing. I can say that Reuters has 40 million readers every month, but that tells you nothing about the number of people reading my blog. It’s OK to ask people to do things for free, but it’s not OK to oversell yourself in the process: when Khazan tells Thayer that “some journalists use our platform as a way to gain more exposure”, she should be honest about the number of readers that Thayer’s post is likely to get, rather than citing huge numbers with very little relevance to Thayer. What’s more, at the margin, a large readership should by rights increase a publication’s ability to pay freelance contributors, rather than merely increasing freelancers’ desire to appear in that publication.

The exchange has particular added poignancy because it’s not so many years since the Atlantic offered Thayer $125,000 to write six articles a year for the magazine. How can the Atlantic have fallen so far, so fast — to go from offering Thayer $21,000 per article a few years ago, to offering precisely zero now? The simple answer is just the size of the content hole: the Atlantic magazine only comes out ten times per year, which means it publishes roughly as many articles in one year as the Atlantic’s digital operations publish in a week. When the volume of pieces being published goes up by a factor of 50, the amount paid per piece is going to have to go down.

But there’s something bigger going on at the Atlantic, too. Cohn told me the Atlantic now employs some 50 journalists, just on the digital side of things: that’s more than the Atlantic magazine ever employed, and it’s emblematic of a deep difference between print journalism and digital journalism. In print magazines, the process of reporting and editing and drafting and rewriting and art directing and so on takes months: it’s a major operation. The journalist — the person doing most of the writing — often never even sees the magazine’s offices, where a large amount of work goes into putting the actual product together.

The job putting a website together, by contrast, is much faster and more integrated. Distinctions blur: if you work for theatlantic.com, you’re not going to find yourself in a narrow job like photo editor, or assignment editor, or stylist. Everybody does everything — including writing, and once you start working there, you realize pretty quickly that things go much more easily and much more quickly when pieces are entirely produced in-house than when you outsource the writing part to a freelancer. At a high-velocity shop like Atlantic Digital, freelancers just slow things down — as well as producing all manner of back-end headaches surrounding invoicing and the like.

The result is that Atlantic Digital’s freelancer budget is minuscule, and that any extra marginal money going into the editorial budget is overwhelmingly likely to be put into hiring new full-time staff, rather than beefing up the amount spent on freelancers. Cohn didn’t give me hard numbers, but some back-of-the-envelope math would indicate that more than 95% of his total editorial budget is spent on staffers, rather than freelancers.

Staffers come in, work hard at a multitude of jobs, and coordinate with each other surprisingly well; it also takes them very little time to understand how to create great web content quickly and internally, rather than relying on outsiders. Khazan had only just started her job when she tried to get Thayer to repurpose his article; my guess is that with a little bit more experience, she would have found it much easier to simply write a quick article of her own, linking to and blockquoting Thayer’s piece, driving traffic to him without having to negotiate with him at all. Look, for instance, at how David Trifunov of Global Post tackled the subject: he wrote a short but interesting post of his own, incorporating links to three outside stories, including Thayer’s, as well as another Global Post story. That’s the natural way of the web, and it doesn’t involve any freelancing.

The fact is that freelancing only really works in a medium where there’s a lot of clear distribution of labor: where writers write, and editors edit, and art directors art direct, and so on. Most websites don’t work like that, and are therefore difficult places to incorporate freelance content. The result is that it’s pretty much impossible to make a decent living on freelance digital-journalism income alone: I certainly don’t know of anybody who manages it. There’s still real money in magazine features, and there are a handful of websites which pay as much as $1,000 or $1,500 per article. But in general it’s much, much easier to get a job paying $60,000 a year working for a website than it is to cobble together $60,000 a year working freelance for a variety of different websites.

The lesson here, then, is not that digital journalism doesn’t pay. It does pay, and often it pays better than print journalism. Rather, the lesson is that if you want to earn money in digital journalism, you’re probably going to have to get a full-time job somewhere. Lots of people write content online; most of them aren’t even journalists, and as Arianna Huffington says, “self-expression is the new entertainment”. Digital journalism isn’t really about writing, any more — not in the manner that freelance print journalists understand it, anyway. Instead, it’s more about reading, and aggregating, and working in teams; doing all the work that used to happen in old print-magazine offices, but doing it on a vastly compressed timescale.

There are exceptions to this rule, of course — websites which still pay freelance writers decent sums. The New Republic, for one, seems to be carving out an impressive niche as a place to find carefully-edited, print-quality freelance content even when the piece in question doesn’t appear in the magazine. And when the web slows down, as it does at places like Matter, it’s quite easy to find in-depth journalism and reporting from well-paid freelancers. But in general, it’s fair to say that the web is not a freelancer-friendly place. Just be careful about extrapolating: there are lots of very good digital-journalism jobs out there, no matter how badly some freelancers get treated.

*Update: In another layer of irony, it turns out that Thayer’s piece itself was deeply indebted to — and yet didn’t cite or link to — Mark Zeigler’s 2006 story on the same subject. (Although it does at one point mention “documents obtained by the San Diego Union Tribune in 2006″.)


How many bottles of milk or pieces of bread did the 15,220 comments and 1,269,516 Facebook Likes from Huffington Post buy the writer of the article? It’s great to have your stuff read, but sometimes there is a difference between a “professional writer” and someone who just wants to have their voice heard. The former can be a proud thinker who has a point to spread but who needs to support themselves through their work; the latter can be a narcissist who just wants attention.

To quote a famous Motown song, Being “liked” gives me such a thrill, but a Facebook “Like” don’t pay my bills.

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