Friday, March 16, 2018

The Pragmatarian Model For The Seattle Times

Any excuse to pitch pragmatarianism...


Marginal Revolution is an economics blog that I read.  One of their entries included a snippet of your article...

I wanted to read the entire article but, when I clicked on the link, I was notified by your website that I'd either have to turn off my ad-blocker or subscribe to your paper.  The reason that I have the ad-blocker turned on is because I hate ads.  It turns out that my hate for ads is greater than my interest in reading the article.

I can't remember the last time that Marginal Revolution, or any other economics blog that I read, has linked to your paper.  Since most of your content doesn't match my preferences, I'm not interested in subscribing to your paper. 

However, I would be very interested in subscribing to your paper... if you gave subscribers the opportunity to "earmark" their subscription dollars to the most useful articles.  To be clear, I'm not suggesting the iTunes model for newspapers.  Individual articles would not be behind a paywall.  Instead, each month each subscriber would have the opportunity to divide their subscription dollars among all the articles. 

Right now the Seattle Times is in a market (I'm free to decide whether I spend my money on it)... but it is not a market... (if I subscribed I wouldn't be free to decide whether to spend my subscription dollars on economics articles).  So what, exactly, are markets are good for?  What's the point of revealing the demand for the Seattle Times?  Demand is the most effective way to measure usefulness.  The more useful the Seattle Times is... the more resources it should be able to compete away from other organizations.

The top story currently on your homepage is an article about the Seahawks.  Sports aren't at all useful to me.  Right now you know how popular sports articles are... but you don't actually know how truly useful they are to your subscribers.  This virtually guarantees that there's a disparity between supply and demand.  Nobody truly benefits when you supply more, or less, sports articles than your subscribers truly need.  Nobody truly benefits when your organization is far less useful than it could, and should, be. 

As you can tell, economics matches my preferences... and so does evolution.  These are useful topics that I'd be willing to allocate my subscription dollars to.  How many other subscribers would be in the same boat?  Right now you don't know, but if you did know, then your organization would win.  Your organization would quickly become far more useful than its competition. 

It's a pretty basic fact that two heads are better than one.  Your subscribers, as a group, have far more heads than your organization does.  If your subscribers were given the freedom to earmark their subscription dollars, they really wouldn't do so randomly.  Their allocation decisions would be based on all their information.  Collectively speaking, it's a lot of information.  Putting all this information to good use would guarantee that you'd beat all your competitors.  At least until they figured out the "secret" of your success.  Your website has zero results for "Joseph Henrich". 

If your organization became a market then the most useful information would be put on a pedestal... and all your subscribers would become better informed.  It would be a virtuous cycle. 

Right now your organization largely caters to popularity.  As a result, you end up putting the news equivalent of cat videos on a pedestal.  It's a vicious cycle.  You can be the very first newspaper to break this vicious cycle.

Please let me know if you have any questions. 

Thursday, March 15, 2018

The Invisible Hand

Comment on Why New Economics Needs a New Invisible Hand by David Sloan Wilson


It's true that Adam Smith only used the term "invisible hand" three times, but he often discussed the concept without using the term...

It is thus that the private interests and passions of individuals naturally dispose them to turn their stocks towards the employments which in ordinary cases are most advantageous to the society. But if from this natural preference they should turn too much of it towards those employments, the fall of profit in them and the rise of it in all others immediately dispose them to alter this faulty distribution. Without any intervention of law, therefore, the private interests and passions of men naturally lead them to divide and distribute the stock of every society among all the different employments carried on in it as nearly as possible in the proportion which is most agreeable to the interest of the whole society. — Adam Smith, Wealth of Nations

Samantha the bee discovers a huge patch of blooming Aloes. After collecting as much pollen/nectar as she can carry, she quickly flies back to the hive to report her discovery. The way that she transfers her information to the other bees is by dancing. She dances long and hard to express her estimate of the patch's high quality. This is not a cheap signal... it's a costly signal. It costs her many of her precious calories. Because she's willing to make such a big sacrifice, many of the onlooking bees decide that it's worth it to inspect the Aloe patch for themselves. When they return to the hive they confirm, via sacrifice, that the patch is very useful. But if too many bees end up visiting the patch, then it will be harder to find nectar/pollen, and when they return to the hive they will report a lower valuation of the patch. The is how and why the Invisible Hand works.

Evonomics supplies lots of articles... but they really aren't equally useful. Most of the articles about the Invisible Hand are pretty useless. This really shouldn't be a surprise... given that the supply of articles isn't regulated by the Invisible Hand.

The solution is really simple. When people make a donation to Evonomics... just give them the opportunity to "earmark" their money to the most useful articles. Create a page on the website where the articles are sorted by usefulness. People will logically read the most useful articles and it will be a virtuous cycle.

So no, the Invisible Hand isn't primarily about selfishness. It's primarily about communication. All else being equal, whichever group is better at communicating will win.

Tuesday, March 13, 2018

The Economics of Netflix

My comment on The Economics of Netflix’s Bright, a Netflix Original Movie Starring Will Smith (available on Netflix dot com) by spivonomist


Netflix doesn't know the demand for its content.  Netflix knows exactly how many subscribers watched Bright.  Netflix knows exactly how many times each subscriber watched Bright.  Netflix knows exactly how many subscribers gave Bright a thumbs up/down.  But Netflix does not know the demand for Bright. 

Netflix could easily reveal the demand for Bright simply by giving subscribers the freedom to "earmark" their subscription dollars to their favorite content.  To be clear, this isn't the iTunes model.  Bright would not be behind a paywall.  Netflix subscribers would not have to pay to watch Bright.  Instead, each month subscribers would have the opportunity to allocate as many of their $10 subscription dollars as they wanted to Bright.  The total amount of subscription dollars allocated to Bright would be the demand for it. 

I'm guessing that each month you would allocate $0 subscription dollars to Bright.  Netflix has 100 million subscribers though.  They don't equally hate/love Bright.  Out of 100 million subscribers, one subscriber loves this movie the most.  How many subscription dollars would this subscriber be willing to allocate to Bright in one month... in one year... in one decade? 

Which movie/show on Netflix do you love the most?  How many subscription dollars would you be willing to allocate to it in one decade?  Personally, I love The Man From Earth.  In a decade perhaps I'd be willing to allocate $840 subscription dollars to it, assuming that Netflix didn't supply a movie that I loved even more.  Is this a reasonable assumption? 

Consider these three things...

A. Criticizing the worst content
B. Giving a thumbs up to the best content
C. Allocating many subscription dollars to the best content

Which one would most improve Netflix's supply of content? 

The biggest problem in the world is that most people don't understand the benefit of knowing the demand for things.