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June 25, 2005

The Parable of the Long Tail

No one, certainly no one here in Dymaxia, can argue that in some important ways, the range of content available to consumers today, is broader than at any time in history thanks mainly to what's come to be called the long tail of the Internet. Even within the limited scope of our BlogDrome  section, we are able to consistently reblog meaningful, thoughtful, sometimes jarring, sometimes amusing work being freely circulated by dedicated bloggers on the isthmus of media, technology, economy and politics.

Grassroots or Citizen Journalism, as it has come to be called, is a powerful means for getting information amplified and out into the public forum. The advent of powerful and diligent search engines that constantly troll the Internet for updated content and RSS feeds that notify consumers when their favorite sites have new content to offer, have made a major contribution to the speed and depth of the stream. Diligent consumers can also use their browsers to access content provided world wide by media organizations once found only in the largest of libraries, days old. Large organizations like the NY Times, the BBC and others make available video and audio feeds, podcasters offer a wide range of talk out of the control of the near monopoly radio broadcast networks.

Yet, against this backdrop of expansive long-tail content availability, it's not hard to argue that the big picture is darker, and far from a golden age. Take the dominant force in content production, the US entertainment/media complex. "The business", appears to be suffering a crisis of its own making. For years, it has increasingly tweaked its products in its successful attempt at ever wider audiences and near-complete hegemony. Time-Warner, the largest of these conglomerates, Disney, Viacom, Fox and the media wing of GE carefully manicure the distribution and cross-marketing of their products.

And just as the US has achieved sole superpower status by outspending the rest of the world, developing the most technically sophisticated military ever fielded --able, at least on paper, to take on foes anywhere in the world and near space with Rambo-like impunity-- Hollywood has built a bulllet-proof product line that is designed to span a wide range of markets with a common denominator for nearly every taste. The ideal product, in this formula, is a movie that has enough testosterone and estrogen stimulation for the teenagers who flock the live screens, a simple enough plot line and character pool familiar enough to be recognizable from Auckland to St. Petersburg and a secret blend of contemporary camp sauce to pique the appetites of the ever growing stay at home DVD aftermarket.

In so doing, Hollywood has succeeded --some would say, perhaps too well for their own good (especially, since most recently year over year box-office numbers are down for the last 20 weeks running)-- in chasing out the competition. Only India has been able to sustain a thriving domestic film industry. Countries, that played major creative roles in early film history, like Italy, France, Germany, Britain, Japan, Sweden, Russia, etc. have, for all practical purposes, gone out of business. Only tiny Denmark seems to have managed to avoid annihilation.

Italy, for just one example, turned out more movies annually in the early 60's than Hollywood now produces in a decade. It is impossible to imagine our cinemateque minus the likes of Eisenstein, Tarkovsky, Bunuel, Lang, Dreyer, Fellini, Rossolini, Bergman, Visconti, Vigo, Resnais, Godard, Losey, Wenders, Fassbinder, Misoguchi, Kurosawa, etc., not to mention the many great American directors who first learned their trade abroad, people like Wilder, Hitchcock and Von Stroheim.

On the broad information front, the situation is equally bleak: the network nightly news has become such a tepid shadow of itself that its sometimes impossible to distinguish it from shows like Entertainment Tonight. Does anyone still tune into 60 Minutes expecting to see them to break a story on the level of the Enron or MCI ponzi schemes? In today's atmosphere, can we really expect to see the Washington Post able to take the heat of pursuing a story of the scope of Watergate? Can we be sure that the NY Times would have the guts to release the equivalent of the Pentagon Papers this time around? In the past they had to resist the accusation of being anti-American, pro-communist; today they will surely be accused of being anti-Christian.

In the lead up to the ongoing war, all of the leading news-breaking media organizations --the number of these is unfortunately quite limited-- have acknowledged burying critical stories that questioned assumptions that were the main rationale for the invasion. Would anyone seriously argue today that minus the threat of WMD and a terrorism link with OBL and the promise of a cakewalk, a majority of Americans would have gone along with the invasion plans? Noticably, although Americans and Iraqis die every day from bloody attacks, there appears to be some sort of ban on photo coverage of these gory events. We do know that the Pentagon has made it impossible to cover through images the stream of coffins returning to the country.

But how seriously has this same MSM taken the revelations coming out of the Air Force Academy. In the wake of stories about fundamentalist Christian control of the Academy's leadership, and even manifested bizarrely by its football team, the Academy's Lutheran chaplain resigned this week and took the charge onto Nightline that it's common practice in the Institution to deny the existence of a Constitutional separation of church and state. When the training ground for the elite officer corps of the US Air Force, the guys that command the flight of the fighters and bombers and the missile launchers, is challenged on Constitutional grounds by its own Christian chaplain, this has got to be worthy of in-depth reporting! Hopefully, MSM editors will prove us wrong and have already assigned top journalists to a story that the Pentagon felt needed a press conference during the week.

With major newspaper readership in a downward spiral, many Americans get their news in short bursts from the radio and television or by taking quick glances at their local dailies. The all news channels tend to parade their rosters of talking heads who generally spout talking points listing canned party line positions, which, of course is really most useful for people trying to read the tea leaves of inside-the-beltway Washington.

The format on NPR's Morning Edition, All Things Considered and talk venues like the Diane Reim Show, Talk of the Nation, Science Friday etc. provide opportunities for a wide variety of beyond-the-sound-byte discussion. On television, PBS's News Hour with Jim Lehrer has little competition in the time it takes to treat four or five major daily stories. Another program that can often be counted on for in-depth reporting and some guts in taking on tough issues has been ABC's Nightline, which unfortunately appears to be in its death throes.

Given the preponderance of public broadcasting programs on our short list, it should come as no surprise that the entire public broadcasting system is under attack by the Administration and the conservative right. The campaign against public broadcasting has been multi-pronged this time around, which makes it a much more deadly strike than in the past when Congressional funding, alone, was put under attack. Deservedly, public broadcasting has a large and vocal audience that has been successful in pushing back the funding attack. This time around the Administration has appointed an ally, Kenneth Tomlinson, to head the Corporation for Public Broadcasting, the parent organization for PBS and NPR. Behind the scenes, Tomlinson has fought what conservatives call bias on NPR and PBS, managing first to get Bill Moyers removed from his program Now. Moyers, an experienced and passionate journalist and one of the founding fathers of public broadcasting, was punished, it seems, for offering, among other things, the kind of pro-immigrant and labor stories that have disappeared from media coverage but would hardly have raised an eyebrow 40 years ago, when PBS was founded. For "balance", PBS was convinced to run a Tucker Carlson show and one featuring the Wall Street Journal Editorial Board, a group that consistently takes conservative positions in contrast even to stories published by WSJ's own journalists. This week, in typical fashion, it distinguished itself with a long piece denying once again the validity of the role atmospheric carbon dioxide plays in global warming
 

Thursday, Tomlinson managed to get Patricia S. Harrison, the assistant secretary of state for educational and cultural affairs, selected as the new President of CPB, after three days of closed meetings by the corporationís board of directors. She was co-chair of the Republican National Committee from 1997 to 2001.


The attempted funding cuts for public broadcasting were meant to go very deep. They were aimed across the board at stations but also at particular programs. One irony, from this "conservative" Congressional attack is their focused aim at PBS's children's programming. In the cultural wars that have pitted the Bible Belt against Hollywood, it might have been assumed that PBS, the home of Sesame Street, et al. would be supported by parents offended by the Saturday morning fare coming from an industry they oppose.

But in a longstanding inside the Beltway tradition most recently exemplified by uber-lobbyists Jack Abramoff and Mike Scanlon, official Washington particularly relishes an opportunity to please their big contributors while hiding behind their culture war cloak. In the case of Abramoff and Scanlon, it was Christians and Indian tribes being played against an exceedingly profitable middle, while in the case of weakening PBS, that same vilified entertainment industry, itself a major contributor, could hope to eliminate competition via the lobbying capital of conservative groups. The coincidence that NPR's Morning Edition, the most listened to early morning radio program in the country, and that competitor in every market, Clear Channel  -- a major contributor to conservative causes-- is nothing to snicker at. Neither, does it go unnoticed in a very competitive TV advertising climate, that PBS has the ability to consistently attract a prime-time TV audience of affluent trendsetters away from the major networks.

America's economic problems flowing out of the massive trade deficit (see, China's unsolicited bid to buy Unocal  this week, as just the latest wrinkle), the out-of-control housing market, the accelerating exportation of manufacturing and service jobs, the growing budget deficit, looming problems in the health system, etc. not to mention a way out of the Iraq quagmire, are going to boil out of the mud at some point. After years of happy talk, Americans are going to have to face very likely a combination of grave issues with very complex solutions at some point soon. They are going to need well sourced information that may not please anyone. Only a very tiny portion of that will come from citizen journalists.

When it comes to overemphasizing the power of the long tail, we might be reminded of the ancient Chinese parable  of the blind men and the elephant. In the tale, the blind man who hangs onto the tail, declares with great assurance that the beast is like a rope.
 

Posted by dymaxion at 02:50 PM


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June 11, 2005

Double Bubble, Toil and Trouble

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Here at Dymaxion Web HQ we recently had to take time out to handle a problem with the floor in one of the bathrooms in our more than century old townhouse. We could have waited, even as floor tiles began to pop loose revealing a water damaged sub-floor layer. Happily, we could determine there was not yet apparent serious damage to the structural joists. In other words, nothing was about to fall in. Still, we decided it was past high-time to go after the problem despite the inconvenience.

We don't pass this bit of domestic trivia along for local color but rather, to make a point: It takes a long time to rip down a structure that has been constructed on solid building principles. We say this, because it came to mind as we  listened to the Mago, Allan Greenspan, as he led Congress to the well of wishful thinking. "Frothy" was the word he used to describe the housing market, evoking images of a soothing summer milkshake at the local Dairy Queen.

Since the 1980's, when supply side policy first got traction, real wages for the bottom half of society have remained level while those in the uppermost cohorts have increased to plateaus last seen in the days of Louis the XVI. To compensate for this gap in buying power, earners below the pinnacle, with Greenspan's guiding hand, have greatly increased the amount of debt they've taken on. We have, it seems, progressed from a supply side economy theoretically based on increased production to a debt-side economy based on greater borrowing.

Contrary to the original theory, private investors who received the greatest subsidies through a series of personal and corporate tax breaks and government, treasury and fed policy have not reinvested in more production capacity, certainly not in the US. Since 2001, when the present debt bubble began to form, the US has lost 16% more of its manufacturing jobs. Investors during this period have looked increasingly for profits in financial markets and the ever growing pool of hedge funds.

On the make side of the equation, General Motors, once our leading employer, has not turned a profit in its core business of manufacturing automobiles for the past few years while its mortgage lending arm has prospered. In concert, in a few short years, US big-three's market share has fallen, probably irrecoverably, from 43% to 35%.

Every bubble, and economic history has plenty of them, like every good scam, is based on some plausible argument: In the 90's we were experiencing a shift away from the military spending that had drained the Treasury during the Cold War while entering into a new age of worldwide communication and globalization , which would, as its proponents argued, radically change the economic equation. No doubt, the Internet has caused a great deal of change but in hindsight, we can also see that of all the thousands of companies with millions of employees that were once valued in the trillions of dollars by naive investors looking at a market with no upper limits, one can count on one's fingers the number prospering less than ten years after. Over $5 trillion dollars in assets went up in smoke when the stock bubble finally collapsed in 2001.

All that remains of those trillions, are great piles of tee-shirts yellowing in many a dot-comer's closet. Pawing through them, it's impossible to make out what these companies offered as their "value proposition" other than the magic ".com". The only thing we remember is that they did IPO's and within a number of days their stock sold for over a hundred dollars a share. Here, for instance, in our drawer, is a white blue and yellow one that says: "add content and shake".

With all eyes on Silicon Valley, the real story during those years and after was the dramatic changes going on in Southeast Asia, particularly China and India. Communication and computing power was being turned into jobs and capacity not in the US but in Southeast Asia. But American attention had turned elsewhere. First there was the predictable near total collapse of the market, then the attack on the World Trade Towers, then the ill-fated invasion.

Even without counting the costs of the Wars in Iraq and Afghanistan --kept "off the books"-- the government, to stimulate activity and reward wealthy backers, went into debt mode borrowing heavily from countries only too eager to take great chunks of US consumer market share in return.

With the government spending well beyond the amounts it collects in taxes and fees another method had to be found to cover the gap between spending and revenues. Enter countries like China, Japan, South Korea and Saudi Arabia that are happy to run hundreds of billion dollar trade surpluses with the US. China, alone, this year is expected to rack up a two hundred billion dollar trade surplus. In figures out today, China's month over month surplus widened a further 14% in April alone. Overall for April, the US bought $57 billion more than it sold to foreigners, or about $2 billion dollars a day that has to be borrowed from those same foreigners. Foreign debt has reached unprecedented heights. The trade deficit this year will represent over 6% of GDP.

The result of all this official and consumer borrowing is a situation contorted enough to inspire a carny side show operator. This dollar recycling has resulted in keeping long-term interest rates at historically low rates even as the Fed now raises short-term rates. At some point, if this continues, we may see a day when short term rates actually exceed long term rates. That has happened before and, BTW, has always preceded a recession.

But low long term rates and an excess of capital, has set off another bubble in the US, this time in housing. The concurrence of historically low interest rates with the migration overseas of industrial production and better paying manufacturing and service jobs, investors and the financial services providers have turned their attention to the housing market. With all stops removed --check out no money down, interest only loans-- the housing bubble has probably now reached the same point as the NASDAQ when it peaked in early 2001. Like any Ponzi Scheme, the last guys in get left holding the bag. The rates are variable and also timed to increase at a certain point, which means that when long term rates finally start to move up with all the bottled up inflationary forces pushing up consumer prices, many home buyers will be left stranded with houses that they can't sell at the price they paid and much higher monthly requirements than they can meet.

Curiously, the Bush Administration is pushing hard for a revaluation of the Chinese Yuan --China has up to now kept its currency pegged to the dollar and thus has ridden down with the dollar. Since the US is entirely reliant on the good will of the Chinese to continue financing US deficits, the Administration lacks any great levers but if it succeeds it may not like what happens. A higher priced Yuan will mean higher prices in Wal-marts and Target and that will fuel inflation in this country. This jump of prices across the board on consumer goods may just be the trigger that kicks long term rates up thereby pricking the housing bubble while causing a further erosion in US jobs --home building, being one of the few bright spots.

The Chinese have said they are quite happy with the Yuan as it is but in the background, again according to the WSJ, they have begun moves to create the mechanisms that would allow controlled trading in their currency. It's expected by many that some time this year they will begin experimenting with the currency market. If the US economy continues its pattern of hobbling along without picking up steam --and with an ever decreasing manufacturing base, it's hard to imagine otherwise-- then the Yuan move just might be the straw that bust the housing bubble.

This is a great time for American consumers, who have dropped their savings rate to less than 1% of income while at the same time increasing plastic and mortgage debt to unprecedented heights. Every once in a while, all you have to do is go back to the well and borrow even more from willing lenders offering ever more creative financing tools. After all, we're a rich country with a massive economic base, why would it collapse now?

Posted by dymaxion at 12:51 PM


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