Felix Salmon

Bordeaux datapoints of the day

Felix Salmon
May 25, 2011 13:36 UTC

I’m a little late to this, but Shanken News has the latest Bordeaux export league tables, and they’re quite astonishing. The US is now only Bordeaux’s sixth-largest export market, in both price and volume. Meanwhile, the top spot on the dollar league table — held since time immemorial by the UK — has now moved to Hong Kong.

The numbers: in 2008, the US imported 1.75 million cases of Bordeaux, at €141 per case. By 2010, imports were down to just 1.36 million cases, and the average price per case was a mere €72. That’s wholesale, to be sure, but even at wholesale it’s hard to find decent Bordeaux at €6 per bottle.

China’s just a little bit cheaper. It imported 771,000 cases of cheap Bordeaux at €69 per case in 2008; by 2010 its 2.5 million cases were averaging €65 apiece.

And Hong Kong is a whole different world. In 2008 it imported 381,000 cases, which were worth €197 each on average. By 2010, imports had risen to 791,000 cases — still a fraction of the other countries on the league table. But the average price per case was a whopping €371. That’s well over four times what American importers are paying.

At the very top end of the market, the same thing is happening. “Last year, Hong Kong became the worldwide center of wine auctions,” Shanken News reports: total auction sales there outgrossed London and New York combined. To a first approximation, of course, wine auctions are Bordeaux auctions, especially in Hong Kong.

My feeling is that this is a positive development for the wine world more generally. Bordeaux is no longer the benchmark of quality that it once was: it can’t be, if an entire generation of non-Chinese wine drinkers is growing up never drinking the stuff. Instead, the world of wine is becoming more heterogeneous, and wine lovers are exploring many different regions, from California to Italy to Australia to Spain, as well as the Rhône and other bits of France far from the Garonne River. Such areas won’t attain cult status in Hong Kong for a while, if ever. But they’re just as easy to fall in love with as Bordeaux, and variety is always a good thing, with wine.

(Via Veseth)


What would be truly intriguing to see is how much of that wine is for the Hong Kong market? How much of the wine purchased in London is being exported to Hong Kong and then re-exported to China? I would venture to say that at least 20% of the HK purchases or more are re-exported to China both legally and illegally. Wouldn’t that be very interesting to know just how much to get a more accurate picture of what HK is drinking/buying and what is ultimately be drunk/purchased in China?

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The pinot heat debate

Felix Salmon
May 15, 2011 06:54 UTC

Mike Steinberger has delivered it. First, he explains the problem, as he sees it:

Critics of higher-alcohol wines tend to frame the issue as a question of balance, the implication being that wines above a certain threshold are inherently out of whack. But balance is a wholly subjective—one might even say amorphous—concept; alcohol is merely one component that contributes to a sense of harmony or lack thereof; and some wines can deceive you. Setting arbitrary cut-off points, as some sommeliers and at least one retailer have done, strikes me as an especially bad idea.

Check out Steinberger’s modifiers here: cut-off points are “arbitrary”, and the very idea of them is “especially bad”. But all cut-off points are arbitrary; that doesn’t make them all bad. Does Steinberger think that speed limits should be abolished just because they’re arbitrary and some people can drive safely at faster speeds?

Beyond being arbitrary, it’s not at all clear why Steinberger hates cut-off points so much. Any wine store or restaurant, no matter how big its list, is going to offer only a tiny fraction of the great wines out there. And so it makes sense, in some circumstances, to specialize. In my neighborhood, I have one store which sells only Spanish wines; another which specializes in Italy. Would Steinberger shun those, too? California has no shortage of restaurants and wine stores selling big, fruity, high-alcohol wine. What harm is done by one or two which shun it?

Besides, there’s a lot more to criticism of high-alcohol wine than simply moaning about “balance”. Alcohol is a way of hiding sins, of turning unpleasant juice into something big and sweet enough to enjoy. (I dislike grapefruit juice, for example, but I’m happy to drink a Greyhound.) There’s a certain purity to lower-alcohol wines: they’re better at expressing terroir, and they better at revealing subtlety and beauty than their high-alcohol cousins, in the way that you can appreciate the complex structure of a string quartet more easily than you can a loud rock group. And, they don’t give you nearly as bad a hangover.

In any case, Steinberger has proof of his thesis!

This last point was convincingly demonstrated at an event in March called the World of Pinot Noir. The weekend-long gathering included a panel discussion on the subject of alcohol and balance. Participants included winemaker Adam Lee of Siduri Wines, which produces pinots in California and Oregon, and Rajat Parr, a San Francisco sommelier who has a policy of not serving pinots that are above 14 percent alcohol at one of his restaurants. Unbeknownst to the other panelists, Lee had switched the labels on the two wines that he served. One had 13.6 percent alcohol, the other 15.2 percent. You probably know where this is going: Parr, a formidable taster, liked one of the wines so much he asked Lee to buy some, and it turned out the wine he liked was the 15.2 percent. Parr was gracious about the ruse, and I think Lee’s stunt underscored the perils of litmus tests when it comes to the alcohol issue.

That Steinberger considers this stunt to be a convincing demonstration of anything at all says much more about Steinberger than it does about high-alcohol pinot. This wasn’t a blind tasting, with all of the problems associated with those things — it was worse. Parr knew exactly what he was tasting, but he was deceived by Lee. If you’re told that the wine you’re drinking is 13.6%, and it says that on the label, why would you ever think that the wine was 15.2%?

Lee is perfectly happy with high-alcohol wines, to the point at which he serves them at his restaurants — including at the Mina steakhouses for which he wanted to buy that wine. Steak is one of the few foods which goes well with high-alcohol reds, including high-alcohol pinots. And if you can get some of that power in a wine with 13.6% alcohol, so much the better.

There’s no “peril” here. It’s worth going back to how Parr described his policy at RN74 when it was his turn to speak on the panel:

It’s the old name of the road through Burgundy, and it’s my dream restaurant. I was going to leave Michael Mina to start it, but Michael asked me to do it within the fold. I decided that since the restaurant was going to be an homage to Burgundy, I decided I would only list wines that were made in a style of Burgundy. For me that means balance. I picked Pinot Noir or Chardonnay only 14% or below. The reason I picked that was, if you don’t know, that Burgundy actually has a maximum alcohol that is legislated at no more than 14.5%. So I did that and there was a lot of criticism, mostly from producers. I was surprised. We’re this is one little restaurant, it’s not going to change the world. The rest of our restaurants don’t have this rule.

RN74 has many wines over 14.5%, just not pinot, since pinot over that level isn’t Burgundian, and the restaurant is an homage to Burgundy. Yet somehow Steinberger takes this fetching idea and turns it into a “litmus test” of quality — something it isn’t, and was never intended to be.

Steinberger’s on a roll now:

There’s another thing to consider: A lot of people enjoy buxom wines, a fact that has largely been ignored in all the frothing over alcohol levels. One of the gripes about full-throttle wines is that they can be difficult to pair with food, which is true: The flip side of all that alcohol is that the wines are low in palate-cleansing acidity. But for many wine enthusiasts, this apparently isn’t a problem: A recent survey found that most of the wine consumed in the United States is not drunk with meals.

Well, the survey actually found that just 25% of wine was drunk without food; 56% was drunk either at dinner or while preparing it. At weekends, when most wine is drunk, 89% of wine was drunk before, during, or after a meal.

None of this means that there aren’t people who enjoy hot wines, or that winemakers shouldn’t make them if they’re so inclined. But the fact is that no one’s making that case: Steinberger is tilting at straw men here. Those of us who like lower alcohol and more acidity aren’t trying to deny the fact that if you drink those wines without food, or in a blind tasting, they’re likely to taste less good than their fuller-bodied counterparts. You want to drink a glass full of overripe drunken blackberries? Go right ahead, be my guest. But it would be great if I had the choice of a few more lighter options.

Which brings us to Steinberger’s grand finale:

What kind of pinot drinker are you? Here’s one way to find out. Go to your local wine store and buy two pinots with significantly different alcohol levels—say, 13 percent and 14.5 percent. Next, find someone who can open and pour the wines and serve them to you blind. Taste the two wines, pick a favorite and then ask your designated pourer to reveal which was which. Although I’m a paid-up member of the anti-flavor wine elite, I recently put my palate to the test with two California pinots. One was from the aforementioned Adam Lee; I tried his 2009 Siduri Santa Lucia Highlands Pinot Noir ($26), which clocked in at 14.5 percent exactly. The other was the 2008 Au Bon Climat Santa Barbara County Pinot Noir ($21), which was 13.5 percent.

This is astoundingly silly. For one thing, the difference between 13.5% and 14.5% is not all that great: it’s within the margin of error for reporting the alcohol content in the first place. Try comparing a 12.5% wine with a 15.5% wine instead.

Secondly, if you’re tasting these wines blind, without food, you’ll probably prefer the heavier, sweeter one. That proves nothing. There’s really no reason to believe that the kind of wines which you like in artificial, food-free blind tastings are the kind of wines you’re likely to prefer when sitting down to a nice meal with friends and family.

Steinberger’s a wine writer who is fully invested in the idea that if you simply taste a wine, raw, in the glass, and then spit it out into a bucket, that’s all you need to know in order to make a concrete determination as to its quality. He’s wrong about that. Wine is a living, organic thing, and it’s highly context-specific. It flowers best with great company and great food, in a setting where no one is trying to trick anybody else or think too hard about which of two wines they might prefer.

So here’s my test: live your life. Go to restaurants. Cook dinner. Have meals with friends. Enjoy yourself. And at some point in the evening, glance at the alcohol level of the wine you’re drinking. When you find a wine which really makes the whole experience sing — which enriches the evening in ways subtle and profound — my guess is it’s going to be lower in alcohol. And when you find a wine which bullies its way onto your palette, by contrast, and shouts rather than sings, it’s going to be higher in alcohol. But don’t take my word for it, work it out for yourself. And then start buying more of the wine that you love, for the contexts that you love it in.

My method isn’t as simple as Steinberger’s, and it’s a lot more time-consuming. But it’s less artificial, and much more reliable. Just remember: it’s only the high-alcohol partisans who retreat to the world of blind tastings to make their point. And no one, in the real world, tastes wine blind for pleasure.


Felix, please do not quit your day job. We do not need any more not-ready-for-prime-time wine writer wannabes, and sadly, you decided to take potshots at someone who has forgotten more about wine that you appear to know. And he is a better writer in the bargain. Slow day on the financial desk at Reuters?

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Beer-drinking charts of the day

Felix Salmon
Apr 20, 2011 13:34 UTC

How do we know that the world is getting happier? It’s drinking more beer! Here’s the chart, from a new paper by Liesbeth Colen and Johan Swinnen:


What we’re seeing here is largely the China effect — and, more generally, a world where poor people, once they reach a certain minimum income, start hitting the hops.


By all indications, we’re still in the early days of this trend, whereby countries slowly converge in terms of per-capita beer consumption. For while China and Russia are soaring, the main beer-drinking nations of the world are all in decline:

In middle and low income countries which experience growth, such as China, Russia, Poland and India, beer consumption grows. In rich countries, however, further growth has led to a reduction in beer consumption per capita.

This is an economics paper, so of course there has to be some kind of regression analysis — in this case OLS, or ordinary least squares:

Our first important result is that we do indeed find an inverted-U shaped relation between income and per capita beer consumption in all pooled OLS and fixed effects specifications. From the pooled OLS regressions (Table 3), we find that countries with higher levels of income initially consume more beer. Yet, the second order coefficient on income is negative, indicating that from a certain income level onwards, higher incomes lead to lower per capita beer consumption. The first and second order effects for income are strongly significant and the coefficients are quite robust across the different specifications.

The fixed effects regression results confirm this (Table 4), so the non-linear relationship for income holds not only between countries, but also within individual countries over time. As a country becomes richer, beer consumption rises, but when incomes continue to grow, beer consumption starts to decline at some income level. We calculated the turning point, i.e. the point where beer consumption starts declining with growing incomes, to be approximately 22,000 U.S. dollars per capita.

I would imagine that this relationship could also be found within the U.S. — that states increase their beer consumption as they grow to an income of about $22,000 per capita, and thereafter see their beer consumption drop as their wine consumption increases.

I can also imagine that we’re going to see a China-driven surge in global wine consumption when the middle class population there starts earning that kind of money. In the first instance, most Chinese wine consumption will probably be domestic, but over the long term it’s surely inevitable that wine imports into China will stop being concentrated at the high end of the market and will start lubricating China’s middle classes on an everyday basis. But that’s probably not going to happen for a decade or two yet.

(Via Florida)


Get over yourself @BBERDUDE; firstly I am not a vegetarian (although I admit to eating very little to be more ethically responsible, save money and keep weight off) and had just read the information relayed to you as it was in the headlines. Sadly I could not find the same headlines but managed to get some data for you.

meat and food consumption
http://tywkiwdbi.blogspot.com/2011/03/am erican-meat-consumption.html


http://www.guardian.co.uk/environment/20 11/mar/10/world-food-prices-climbing

The more wealthy a nation becomes, the more meat consumption
http://nextbigfuture.com/2011/01/mckinse y-has-six-predictions-for-china.html

It takes up to 16 pounds of grain to produce just 1 pound of edible animal meat. According to the USDA and the United Nations, using an acre of land to raise cattle for slaughter yields 20 pounds of usable protein. That same acre would yield 356 pounds of protein if soybeans were grown instead.

http://www.berkeleycollege.edu/GreenPath  /Newsletter/July_09_2.htm

Food consumption charts
http://www.fao.org/DOCREP/005/AC911E/ac9 11e05.htm

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Adventures with wine lists, Apiary edition

Felix Salmon
Apr 16, 2011 20:31 UTC

I had dinner at Apiary last night, and I can recommend it: the food is spectacularly good. But, go on a Monday — free corkage night — and bring your own wine. Because the wine list — which the restaurant describes as “well-rounded and approachable” — is anything but.

Apiary is a small restaurant in the East Village; it offers a $35 prix-fixe three-course meal four days a week, and its regular a la carte menu is reasonably priced: appetizers range from $8 to $15, and mains from $22 to $29.

The wine list, by contrast, is an exercise in nosebleed pricing. It has two pages of whites and seven of reds; we fancied red wine last night, so you might think there’s a lot to choose from. But unless you’re happy spending triple-digit sums on your wine, there isn’t.

Of the 165 red wines on the list, just 49 are less than $100 per bottle, while 116 are in triple digits. At the top end, there are 24 different wines which cost more than $300 a bottle. Of the 49 wines under $100, there are exactly 7 under $50, where you’d expect to find wines to pair with a $25 entree. And don’t expect all those seven wines to be available, either. We finished off the Mas Roig, at $53; one recent reviewer at OpenTable said it took three attempts just to find a wine the restaurant hadn’t run out of.

If this is approachable, I fear to think what intimidating might be.

You’re certainly not going to find any bargains here. Take the Argentina/Chile section: there’s a 2009 Huarpe Malbec for $44 which would cost maybe $8 or $9 at retail. Then there’s a 2005 Neyen Carmenere/Cabernet for $111: it would cost you $40-$50 at retail. And finally there’s the 2006 Catena Zapata, which retails for $50-$60. It’s $176 here.

Admittedly, these wines aren’t always easy to find. But the 2007 Etude Pinot Noir can be picked up for $19.99 at Buy-Rite in Jersey City; it’s $84 at Apiary. And even something as exotic as the 1958 Borgogno ($423 at Apiary) is listed at Zachys for $200 a bottle.

In principle, I think it’s wonderful when restaurants have wine lists with a good selection of older vintages and a smattering of real rarities. There’s nothing wrong with a wine list which holds lots of appeal for wine geeks. But that’s no reason to treat the rest of us with haughty indifference.

The message this list sends is that the world of good wine is inaccessible and eye-wateringly expensive, and that anybody spending less than $50 on a bottle of wine is going to find slim pickings indeed. This is exactly the kind of wine list which puts people off wine entirely: the rational thing to do, on looking at it, is to simply order a beer for $8. In no sensible world does a glass of that Huarpe Malbec cost less than a bottle of Chimay Blue — but that’s exactly what you find at Apiary.

No good wine list incentivizes people to avoid wine entirely — which is why it’s fair to say that Apiary does not have a good wine list. It’s certainly “notable”, as various listings sites put it. But not in a particularly good way.


Biggest markup is on carbonated beverages. Costs are under a dime. Prices, well, I’m sure you know.


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The gastronomics of bad service

Felix Salmon
Mar 16, 2011 15:20 UTC

My first monthly Gastronomics column is up at NYMag, on the subject of the economics of bad service. Why are restaurants which do the best job of maximizing discomfort, inconvenience, and noise also the ones which are the most popular? My theory is that it’s all about signaling: that if restaurants succeed at manufacturing crowds and long waits, people reckon that the place must be good, otherwise everybody else would never put up with such things. And so they become self-fulfilling.

There’s a lot more other stuff to cover in this space, so do let me know if you’re in the restaurant/bar business and are happy talking about matters financial and economic. Or if you have any questions which have been niggling at you about the way that these places make money.

Update: Via Eater, Steve Plotnicki explains the downside of foisting bad service on your customers.


Throw “bad food” into the mix of “maximizing discomfort, inconvenience, and noise” and I suspect it won’t remain popular for long–even with the ‘in-crowd.’

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Austerity’s inauspicious historical precedents

Felix Salmon
Feb 23, 2011 14:48 UTC

One of the best aspects of being a journalist is that you get to talk at length to the most knowledgeable and interesting experts on just about any subject you can think of. For me, yesterday was a prime case in point: a long and fascinating lunch with James Macdonald, the author of my favorite book on the history of sovereign debt. Turns out he also has a microscopic vineyard in Tuscany, so the conversation ebbed wonderfully from economics to wine and back.

Macdonald has an economic historian’s view of the current austerity debate, and he was very clear: if you look at the history of countries trying to cut and deflate their way to prosperity while keeping their currencies pegged, it’s pretty grim — all the way back to Napoleonic times. Sometimes, the peg is gold. For a good example of the destructive abilities of that particular peg, look at the UK in the 1920s, which Macdonald says was arguably worse than the US in the 1930s: shallower, to be sure, but substantially longer. The devaluation of the pound, when it finally came, was very long overdue.

At other times, the peg is simply political: Macdonald gives the example of southern Italy being locked into what was essentially the Piedmontese monetary system at the time of the Risorgimento. That might have been well over a century ago, but there’s a case to be made that it has hobbled just about everywhere south of Rome to this day — and that’s in a country with about as much internal labor mobility as between EU countries.

So from a historical perspective, the prospects for countries like Portugal, Ireland and Greece are pretty grim. They can cut their budgets drastically and stay pegged to the euro, but most of them would be better off in the position of Iceland, which can and did devalue in a crisis (and allowed its banks to default, too). So far, the Baltic states have stuck to their deflationary guns with the most determination and discipline, but such things work until they don’t: at some point it’s entirely possible that Latvia or Estonia could pull an Argentina and kickstart growth by devaluing.

All of this is relevant for the US states, of course, which are also locked into a currency union and facing very tough fiscal cuts, as Steven Pearlstein says today:

Will the pain come in the form of prolonged high unemployment? Or wage and salary cuts? Or reduction in the value of homes and financial assets? Or loss of ownership of American companies? Or price inflation? Or higher taxes? Or reductions in government services and benefits?

The right answer, of course, is “all of the above.”

Meanwhile, David Leonhardt takes an important look at Germany, which you might think was benefiting, in some kind of zero-sum mathematics, from the pain of the European periphery. It isn’t: German GDP is still significantly lower than it was in the first quarter of 2008, while US GDP is now back above its pre-crisis levels. (Britain is doing significantly worse than either.)

“The historical lesson of postcrisis austerity movements,” writes Leonhardt, “is a rich one,” and also clear: they don’t work, even if they’re “morally satisfying.”

The answer, it seems, would be for crisis-hit countries to do the equivalent of what Macdonald and I did at lunch yesterday. I was coming off a slightly feverish and bed-ridden Monday, but we still went ahead and ordered the macvin, a spectacular fortified late-harvest white (yellow, really) pinot noir from the Jura. It goes very well indeed with mangalitsa ham. And I feel much better today, thanks.


It would be interesting to learn if the fiscal state of the government prior to the crises matters (ours, and those of the several EU economies, were pretty poor to begin with). Is it the initial state that causes post-crisis issues with austerity?

The same might apply to US states. Places like CA, IL, and NY were in pretty bad shape to begin with, and seem to be getting worse. Others, not so bad.

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The deal, and the catch

Felix Salmon
Feb 6, 2011 19:00 UTC

Ron Lieber’s column on Prosper and Lending Club misses both the upside and the downside of these peer-to-peer lending platforms, I think. Lieber calls these platforms a “gamble”, in his headline, and lists a number of issues with them. For instance, here’s Lieber on Lending Club:

From April through the end of November 2010, the company verified income or employment data on about 60 percent of borrower applications. For the period ending in September, just 65 percent of the borrowers from those files provided it with satisfactory responses. The others ignored the inquiries, withdrew their applications or sent along data that didn’t match the original posting. In the end, fully one-third of the applications didn’t pass muster.

Frightening, right? Mr. Laplanche noted that Lending Club flagged those loans for specific reasons, which would suggest that there were probably fewer errors or lies in the 40 percent of his overall portfolio that he did not double-check. Still, it doesn’t smell quite right. And if you can’t necessarily trust some portion of the borrowers, and the still-young companies don’t have much data on completed three-year loans, which are the most popular ones, this sure seems less a bond purchase than a new type of casino game in Las Vegas.

I’m much less frightened by these numbers than Lieber is. What’s happening here is, simply put, underwriting. Lending Club has an expensive and sophisticated automated underwriting system, on which its entire business model is based. If it works — and there’s every indication, according to performance numbers, that it has worked so far — then borrowers get an attractive interest rate on their loans, and lenders get an attractive interest rate on their investment.

Any underwriting system will have ways of checking whether people are telling the truth on their loan applications, and ways of raising flags if they might be lying. It seems that Lending Club’s system raises some kind of flag about 60% of the time — that’s a high number, not a low one. And in about a third of those cases, the loans are, properly, rejected.

Lieber’s worry here is that there are liars in the 40% of loan applications where the system doesn’t seek extra information on income or employment. It’s a reasonable question, but I’m willing to give Lending Club the benefit of the doubt, since Lending Club itself has every incentive to minimize defaults and delinquencies. So here’s a question for Lending Club: from Lieber’s numbers, it seems that roughly half of your loans are based on verified income or employment data, and in the other half you didn’t ask for such verification. Can you publish separate performance data on those two sets? That should help settle Lieber’s worry, I think.

The fact is that the percentage of borrowers that “you can’t necessarily trust” is 100%, it’s not just the ones who haven’t verified their income or employment data. Lending Club is not based on trust, it’s based on underwriting, and on the law of large numbers. If the underwriting system works, then Lending Club is a good investment. If it doesn’t, then it isn’t. (The reason that Prosper failed, initially, was precisely because of weaknesses in its underwriting.)

Lieber might not fully trust Lending Club’s underwriting system, but that doesn’t make Lending Club “a new type of casino game in Las Vegas” (where the punters are statistically certain to lose). It just means that Lieber wants to wait until the first tranche of loans has started maturing before he trusts in Lending Club’s system. That’s entirely reasonable, but it doesn’t mean that people investing in Lending Club today are gamblers.

I do agree with Lieber, however, that the only people who should invest in Lending Club are people with safer investments elsewhere. And in fact even Lending Club agrees with that. Check out its criteria for being able to invest:

Investors who are residents of states other than California or Kentucky must have (a) an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (b) have a net worth of at least $250,000 (determined with the same exclusions).

The restrictions on investors from California and Kentucky, meanwhile, are even tighter. Lending Club is explicitly an investment for the rich, not for the masses: I doubt that 10% of Americans would be eligible to invest under these criteria.

There’s a very good reason why these investments should be only for the rich, and it has nothing to do with them being a high-risk gamble. Instead, it’s all about liquidity. If you lend someone money for three years, your money is essentially out of reach for three years. If you reinvest your interest payments, as Lending Club assumes you do in its return calculations, then your money is out of reach indefinitely.

Lending Club does have a secondary market, but it runs into market-for-lemons problems which Lending Club hasn’t really managed to address. This isn’t a CD, where you can take your money out just by foregoing interest payments: it’s a highly illiquid investment which you should assume essentially zero resale value and will only pay off in cash terms three (or more) years after you decide to stop reinvesting your money. That’s fine, if you know that you’re not going to need that money for the next three years. But only rich people can say that with certainty.

Meanwhile, I’ve been taking a look at another area where online deals look significantly better than anything you’re likely to find in the bricks-and-mortar world: wine. Sites like Wines Til Sold Out or Lot 18 have sprung up of late offering wines at very substantial discounts for a very limited amount of time. This is clearly a great deal if you’re familiar with the exact wine and vintage being sold — but you need to be a serious wine wonk for that, given how obscure most of the wines being sold are. These sites are aimed at a much broader population than that, and so most of us, if we buy wine from them, will be buying a wine we’ve never drunk before.

That’s fine — a very large proportion of the wine I buy at retail or in restaurants falls into the same category. But in those cases, if I like the wine, I know how to get it again. With the new discount wine sites, once you’ve bought the wine you’ll either like it or you won’t. If you don’t like it, you’ll be sad because you wasted your money on subpar juice. And if you do like it, you’ll be sad because you won’t be able to buy any more of it — certainly not at the price you just paid.

More generally, it seems to me, deals on the internet often come with a kind of catch that most people aren’t really familiar with. Lieber, looking at Lending Club and Prosper, was on the lookout for risk factors surrounding total return — but the biggest risk actually surrounds the liquidity of the investment. And wine buyers who love bargains similarly forget the importance of being able to repeat the transaction if it turns out well.

So while the internet does throw up intriguing new deals and business models on a regular basis, it also throws up unexpected catches, in areas where people often aren’t looking.

Update: It was a bit rude of me to link to Lot 18 and send y’all into an opaque registration wall. But that’s fixed now! Go here, and you’ll not only get registered immediately, they’ll even throw in a $10 coupon.

Update 2: Lending Club has provided me with the numbers I asked for.


The secondary market on Lending Club is not a market-for-lemons problem at all. The sellers in the secondary market see the same performance data as you and are no “closer” to the borrower than a prospective buyer. You don’t have a market-for-lemons without information asymmetry.

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Wine list of the day, Davos edition

Felix Salmon
Jan 28, 2011 11:04 UTC

The prize for most obnoxious party at Davos was won on the first night, with the Davos Tasting put on by the Wine Forum.

Wine tasting was historically one of the more interesting and enjoyable events that was put on at Davos, but it got nixed in 2009 when conspicuous consumption of first-growth clarets was considered inappropriate in the face of the global financial crisis. The consequence was much the same as attempts to cap CEO salaries: just as the executives end up making much more money through stock options, the wine tasters, freed from whatever decorum was imposed upon them by the official constraints of the World Economic Forum, showed just how out-of-control wine events can really be.

The plutocrats at Davos, of course, both western and eastern, are exactly the kind of people who spend thousands of dollars a bottle on fine wines. But they’re also driven and single-minded executives who naturally gravitate to the obvious and middlebrow in other areas: if they’re buying art, they’ll plump for something shiny by Damien Murakoons (both Hirst and Koons are in Davos this week), while the big-name creative types here are the likes of Jose Carreras, Peter Gabriel, and Paulo Coelho.

Wine here, then, is judged with executives’ eyes rather than their noses. They look at the label first and then at two crucial numbers: the number of points it gets from Robert Parker or Wine Spectator and the cost in dollars. Take that to its logical conclusion and you wind up with exactly what we saw on Wednesday night:

This evening’s wine selection consists of wines that have achieved 100 points or equivalent from one of three well known raters.

The raters, of course, are Robert Parker, Jancis Robinson and the Wine Spectator — the consensus arbiters of mainstream wine taste.

You want the list? OK:

1969 Vega Sicilia, 1980 Vega Sicilia, 1982 Krug, 1982 Pichon Lalande Comptesse du Lalande, 1990 Gaja Barbaresco Sorì Tildìn, 1994 Harlan Estate, 1994 Quinta do Noval Port, 1998 Le Pin, 2000 Bruno Giacosa Barolo Le Rocche del Falletto, 2000 Léoville Las Cases, 2000 Cheval Blanc, 2000 Pavie, 2001 Domaine de la Mordoree Chateauneuf du Pape Cuvee de la Reine des Bois, 2002 Greenock Creek Shiraz Roennfeldt Road, 2004 Le Macchiole Toscana Messorio, 2005 L’Eglise Clinet, 2005 Pavie, 2006 Colgin, 2007 Dana Estate, 2009 Léoville Poyferré.

And that’s not including a few more Champagnes, a 1995 Figeac or the Louis XIII cognac.

The event was held at the semi-legendary Piano Bar of the Hotel Europe, which was fully booked out by the Wine Forum for two and a half extremely expensive hours. The Piano Bar is the late-night haunt of Davos Man and it comes with the permanent tang of stale cigarette smoke and a general culture of heavy drinking.

The result was basically a drunken mess. Revelers would cluster around stations loaded up with fine wine, getting large pours of increasingly-indistinguishable heavy cabernets, competing to find the Cheval Blanc and Le Pin (which were naturally considered the most desirable wines, just because they were the most expensive), all the while fighting off jetlag and concentrating mainly on greeting their old Davos buddies and catching up on gossip. (Update: I forgot to mention that all the wine was served “pop-and-pour” style, where a wine would run out, a waiter would run to get another bottle, would open it, and then immediately start pouring it into various partiers’ glasses. No decanting, no time to breathe, nothing. Maybe the reason I liked the Barolo so much was that it had been sitting open for a while by the time I got to it.)

Most of the wine, including the Cheval Blanc, was far too young to drink — but of course it’s hard to find such names in quantity if you want them older. My favorite, by far, was the Barolo (about $550 a bottle if you want to buy it in Hong Kong), but the event really wasn’t remotely conducive to tasting and appreciating the wines, so much as it was a way of celebrating and appreciating Anthony Scaramucci and Skybridge Capital, who underwrote the event. Scaramucci, a member of the Wine Forum, is the first to admit that he’s not much of a wine connoisseur, but he knew what he wanted: he told me that the bill for the event just kept on rising from its initial stratospheric level, as he insisted that if he was going to throw a party, the wine must never run out and must be available in quantity.

I’m glad that I got the opportunity to taste a bunch of these wines, even though I didn’t really appreciate most of them. Maybe to do that you need to have much more respect for point ratings or dollar prices than I do, or at least believe on a very deep level that they have a strong correlation with quality. I’m pretty certain, at this point, that my taste in wine isn’t Robert Parker’s taste, at least as it is revealed in his ratings. But ultimately events like this aren’t much about taste at all: they’re about putting down markers of various kinds and confirming in the plutocrats’ minds just how exclusive they, and Davos, really are.

Update: Scaramucci calls to say that I’m a “dork” for writing this, says that I’m an embarrassment to my profession, and argues that it was malicious and unfair of me to accept an invitation to his party, only to turn around in public and call it (and, by implication, him) obnoxious. He’s upset, which is understandable, and I very much doubt I’ll be invited to any more of his events. I’ll say here what I told him on the phone, which is that this post was not written maliciously, and that I bear no animus to him personally — I didn’t talk to him for long at the event, but he was very cordial to me and I liked him. I felt his party was so emblematic of Davos in so many ways that I had to blog it. But I’m sorry that he ended up being singled out; my point was very much about the culture of Davos more generally.

Update 2: I watched Wall Street 2 on the flight back to New York (don’t bother, really), and noted a huge Skybridge logo in a charity-ball scene. Oliver Stone has said that the product placement helped him enormously in financing the movie.


Wait until these attendees find out that there is gambling in the back room of Rick’s Cafe Americain — the rush will be on to see and be seen — Nothing new for Davos Man (or Roman Man). Perhaps not so much a “yawn” as an affirmation.

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Desnobbing wine

Felix Salmon
Jan 20, 2011 20:37 UTC

David Kesmodel reports that US consumers finally seem to be waking up to the fact that there’s no correlation between price and quality when it comes to wine:

The economic downturn was toughest for the U.S. wineries that sell wines for $20 a bottle and up. After switching to less-expensive wines in the downturn, many consumers are staying at those lower prices because they liked what they found, industry executives and analysts say.

Actually, there are two parallel things going on here. The first is that wine in the $9 to $12 range tastes just as good as wine in the $20 to $30 range. The second is that US wine over $20 is massively overpriced.

Kesmodel’s article quotes three individual winemakers. Two are in Napa; the first sells wine at $100 a bottle, while the second sells wine between $28 and $55. The third is in Washington, and sells wine at about $50 a pop.

At these levels, wine is not an everyday pleasure — not unless you’re solidly in the ranks of the rich. Instead it’s a tool for snobbery and one-upmanship, and a way of selling wine to people who choose wine based on exactly two numbers: its rating out of 100, and its price in dollars. In both cases, it is understood, higher means better.

It’s not hard to shatter these illusions, though. Once people move from $50 US wines to $11 French wines and actually prefer the latter to the former, then it’s all over for the Americans.

Much of the California wine business is based on the idea that California wines compete only with each other; in the upside-down world of Veblen goods, they often compete on price not by being cheaper than their competitors but rather by being more expensive.

It’s also true, however, that people who downgrade from luxury goods to better-but-cheaper mass-market alternatives very rarely trade back up again. Once you trade in your Vertu for an iPhone, you’re unlikely switch back.

And that seems to be what has happened in the wine world. If American wine drinkers are losing their snobbery, that’s great news for anybody who wants to see a vibrant culture of wine drinking in the US. But it’s very bad news for high-end wineries selling their juice at upwards of $50 a bottle.


I like the idea of allowing phone app users to add info about great tasting low cost wine. The iNapa iPhone app has just been updated and it is a great tool to explore California Wine Country. It locates the 10 closest to current location or select an area on a northern California map to display wineries at that location or browse by name. A fun way to find your favorite wine and discover new wineries. No network required & no typing necessary. http://itunes.apple.com/us/app/inapa/id3 59715668?mt=8

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