One makes millions, millions make $1. CES 2012 and the decline of Journalism


Here at CES Las Vegas you can feel the energy of the thousands of bloggers, all of whom hope to spawn their own success stories.    I like bloggers and blogging a lot, but I think much of the early promise of blogger as citizen journalist is getting co-opted by commercialization – the need to eat creates a challenging relationship with sponsors and content.   Not a huge surprise, but I think the era of “citizen journalist” is probably going to be short lived as we transition to more of a combination of commercial and/or groupthink models of journalism.

Very few will be able to make it big online doing their own thing, or even make a living here. That’s OK – capitalism and journalism are a game of survival of the fittest, and most people aren’t fit to write quality stuff, even by sometimes  pathetic blogging standards.  Even those who ARE good writers are unlikely to make much money online, and then only when they work for large well capitalized sites.

Many silly articles  suggest otherwise:

guardiantech Guardian Tech …The writer who made millions by self-publishing online bit.ly/wdgj0J

A more relevant story would be how millions make very little rather than how one makes millions, but that story is not as interesting….which brings us to the challenge of journalism in general, especially commercial journalism.

Here at CES there are about 6000 “press”, many in young blogging teams writing for medium to large websites covering the show.     That’s great in one sense but in another it reminds me of pro sports, where millions with *some* talent are filtered to a few thousand who actually make it to the big time and a few hundred who actually make it big.    Again, that’s a virtuous cycle in one sense, though I will smack you if you suggest that the success comes from quality writing or true innovation.   There’s some of that online, but in terms of online journalism its mostly a race to the bottom where gimmicks and garbage will triumph.   Again, that’s OK and inevitable but its somewhat unfortunate that we’ll see seasoned good thinking journalist folks replaced by ditzy kook celebrity gossip.

… end rant …  Gotta go find Justin Beiber here at CES and get an invite to the SOUL Headphone party by Ludacris !

Got Optimal?


It seems to me that one of the most underrated notions in the world is that of the “optimal” arrangement.    You hear a lot of folks talking about things like  “exploitation”, “growth”, “fairness”, “maximizing profits”, etc, etc, but it seems to me we don’t talk nearly enough about how to structure the world in the way that best benefits the most people, ie to seek the optimal arrangement given the needs and contributions of all the players involved.

Nearsighted conservatives will sometimes mistake that kind of discussion as “socialist” because they see it as veering away from the competitive, individual forces that very effectively drive  highly productive economies, but they forget that in the game of economics we should generally be looking at metrics such production divided by number of people (GDP), and this number will be bigger if we optimize correctly.

The left in this sense is usually too “far sighted”, looking to distribute the wealth that may vanish if we eliminate those individual and corporate competitive structures that are the hallmark of industrialization and the spectacular rise in the average standard of living in the industrialized world over the past century.

So, how to optimize things?   Economist Vilfredo Pareto  (OMG he’s Italian?!  economic credibility challenge alert!) had some neat ideas with respect to optimizing systems where we’d examine them to find ways to increase the well being of some participants without decreasing that of others.    http://en.wikipedia.org/wiki/Pareto_efficiency

I think this simple basic idea should factor in a lot more, especially for those who fret a lot about the inequitable distribution of production towards the rich.    Those folks generally, and very wrongly, assume that redistribution won’t have negative effects on production.    It will, although that certainly does not mean we should not redistribute anything.   It just means we need to redistribute with *great caution* to avoid the catastrophic kinds of problems faced by basket case economies like North Korea.

I think the single greatest challenge of optimizing is the degree to which you factor in the needs of other nations.   Optimizing with the rural Pakistan peasantry in mind is different than if we draw our lines at the US border and say to heck with the needs of everybody else.   Although I believe we have a moral imperative to take the needs of the world into much better account than we do now, I also recognize that it’s not practical or even possible for those of us who enjoy the many benefits of industrialized capitalism to successfully integrate our economies with those of countries like North Korea or China or even very friendly “economic allies” like India.     Fortunately for those guys – and probably for us too – industrial globalization and the communications  and technology revolution are handling much of this task, often via the invisible hand of Adam Smith style free marketeering.

The future … is better optimized !

To Prosper or NOT to Prosper.com ?


Last year I began an experiment with PROSPER peer to peer lending.    The concept is great – cut out the banking middlemen and middlewomen, delivering higher returns to lenders and more borrowing power to investors.     Years ago PROSPER struggled with its initial implementation, running into SEC issues which, I think, related to them effectively overreporting the interest PROSPER lenders could reasonably expect to get.   Part of the trick here is that as far as I can tell their are a LOT of borrowers on Prosper who have no plans to ever repay the loans.   They are assuming, perhaps reasonably, that collections on these small, unsecured loans in this wild online environment will be inadequate and they’ll simply default on them without much consequence.
My strategy last year was to start by lending a total of $500 to the  “higher risk, higher return” types of loans.  After noting that the return appeared positive I added $2000 to this amount for a better test of the overall return.
I pretty much forgot about this experiment until last week when I logged in to see what was going on with my PROSPER investment.   Unfortunately  it’s very hard to tell if the return is even positive.  They provide me with several numbers but they are confusing. The 4% return they cite seems like the return I’m getting so far – clearly NOT good enough to hassle with this and take the risks,  even though it appears I also have an extra 2% from “bonuses” that are given for investing in certain loans at certain times.
All that said, it’s possible I’m going to start to make a much higher return now that the “bad loans” appear to have defaulted.   I intentionally picked risky loans that said they’d have a much higher net return  and I’m still not clear if Prosper reflects this in the current stats.     The average “expected” return on my loans per Prosper would have been well over 10%, so if I wind up with 4%  it would seem Prosper could be up to their old trick of under-reporting the risks and/or inflating the expected returns.
Note that with fairly small investments – like my $2,500 in this Prosper Experiment – your TIME starts to  matter more than extra money.    Making an extra 1% on 2500 is only $25 per year, so it’s worth an hour or two of hassle time but NOT WORTH many hours of hassling, extra tax issues, etc.
I’m skeptical that Prosper offers more than a few extra percent if even that much.  THUS thus it would only be worth hassling with if you were investing tens of thousands.   In THAT case there is some serious uninsured risk involved, so I’m leaning against Prosper until I see more results from others who, like me, have tested them out and hopefully, unlike me, can figure out the Prosper reporting.
Prosper loans are often paid early or defaulted, which complicates the earnings calculations a lot.    They also do NOT pay interest on the ‘float’, or time between funds going into your account and getting invested.   Thus you’ll always have some days – perhaps months – where you earn 0% interest.   Not a big deal in the current interest environment but even a few weeks at 0% will trim a total rate down quickly.   I think there are “auto invest” options to lower this float time and I don’t think it’s scandalous – but it’s not a good thing.
Also, the tax issues alone appear like they may be a major hassle with Prosper.  I think one may need to report the total interest and then deduct the “bad loans” as capital losses or gains to avoid overpaying on interest received.  This is NOT a simple deal since one generally funds dozens of notes per year.   I’m still confused by this part of the PROSPER adventure.
Of course if LENDING is a bad idea at Prosper, Borrowing may be a GOOD idea, though I’m wondering if those who simply default immediately are the big beneficiaries here.    The interest rates on borrowing seem incredibly high with Prosper – much higher than a home equity line or even many auto borrowing situations, so if you pay it all off you are going to be paying … a fairly high rate of interest on these small loans.
Overall I’m thinking this may be a “high risk” loan environment and therefore not all that Prosperous one for anybody.
I’ll have more in another post where I’ll show my statement to see if others can figure it out.

Eat those mofo CEOs! Or maybe not.


For me the  “Eat the Mofo CEOs!” argument, aka “CEO pay is an outrageous inequitable violation of human rights”, etc, etc.  isn’t necessarily wrong, it’s just very incomplete.

What we DO KNOW is that most folks are a lot better off here in USA than in most of the alternative economies.  This is particularly true for those of us making more than a modest amount per year, but I think it’s hard to make a case that even welfare folks here are not better off than in, say, any of the other top 10 populated countries with perhaps Japan as an exception.

What has generated that prosperity for so many?    Certainly “high CEO pay” is at best only a small factor in this, but I’m not clear how you can start modifying things like “maximum CEO benefits” without running into some complications with innovation and productivity.

One can reasonably note that there’s not a correlation between CEO pay and corporate productivity  (at least I think this is indicated by several studies).   However a better question is really “is there a correlation between the lack of intervention in economies and productivity?”.   This has been tested now for many centuries across many countries, and we generally find that lack of intervention seems to create more total wealth and massive intervention as in old school communist crazy stuff tends to bring a sh**storm of economic trouble.

However US style ALSO seems to push the distribution more to the rich.    Of course it would be better to have more equal distribution IF you could keep all that productivity, but how do you arrange that?

It’s the biggest question of our lives.  I don’t have the answer, but when I look around the USA (where distribution is NOT equitable even after heavily progressive taxing of the rich) I see a LOT better standard for pretty much everybody than when I look around places that don’t have vibrant capitalistic economies (or have only had them a short time).

One can offer up Scandinavia as the “alternative model” and I’d agree that if we could duplicate Scandanavian standards of living at US scale we should do so.    but I don’t think you could apply that model effectively to a country the size of the USA.   These countries  have some major advantages that have to do with oil wealth and demographics and history.  They are smaller than many US states and thus not really comparable if you are talking about global economic architecture, as you must do when trying to “fix” the many problems the world is facing after the boom and recent mini-bust of the post WWII era.

It seems to me that the *first* line of discussion with respect to any economy needs to be “how do we create wealth?” rather than “how do we distribute he wealth we have created?”

This point is completely obvious to pretty much anybody I talk to from the right or in business, and seems to be completely opaque to many on the left side of the political equation, especially the wall street occupation forces.   Many of those folks seem out of touch with basic business economics and hell bent on the destruction of capitalism – naively assuming that massive productivity will continue under all scenarios, so the only thing we should focus on is making sure the rich don’t get … richer, because then we’ll see all that prosperity flow more equitably to … usually… their causes or even to them.

But be careful what you wish for because when taking a global perspective on things redistribution will not necessarily flow in your direction!   Folks in China and India are living at much lower levels than almost anybody here in the states, so as we work for equitable distribution (as we should), we’ll need to work to get THEM more involved in the economy so they can raise their standards to a fraction of ours!   Globalization is taking care of this right now in the sloppy form capitalism usually takes, but it’s ironic to me that occupiers seem to think the wealth of the super rich should be heading back to mainstreet USA rather than to the truly needy.    Rich or poor, pretty much everybody seems to think they are the underpaid and overworked folks.    Take out a map folks and put your finger on your location.   If it’s in USA then equitable distribution is likely to flow AWAY from you.

I’m all for more equitable distribution IF you can do it without hurting productivity, though I also would like to see that prosperity flow to those who really need it rather than simply bloating the bureaucracy as we tend to do when taxes go up.

Ray Dalio of Bridgewater Capital – the world’s largest Hedge Fund – both makes a ton of money and pays a ton of taxes.    Like most of the rich he pays both a greater total amount and a greater percentage of his income to federal taxes.   His point on Charlie Rose the other night was direct and simple.   Like Gates, Buffett, and legions of other super-wealthy folks Dalio is going to be giving most of his billion dollar fortune away to the poor.   He’d be happy to give it to the government IF they’d spend it wisely, but he knows that they will NOT.

[updated] Cardilly is NOT a legitimate business. Security Certificate REVOKED. DO NOT buy from Cadilly!


Cardilly.com is either a scam or has a very unusual social media strategy going, since much of the buzz about Cardilly is very negative right now with many people insisting it’s a scam.   I think it’s probably NOT a scam   [update – I’m leaning to “scam” based on all the unaddressed negative feedback and undelivered cards], but surprised they are not addressing critics, and fast.   Is this all part of a strange  “negative news is still news” strategy?    If so, it’ll be interesting to watch the Cardilly saga play out.

After responding to an online advertisement  from what appeared to be a Google ad at a major site I wound up at the new website “Cardilly.com” that was offering $100.00  Wal Mart Gift Cards for … $50.00  .     Some would say that’s “too good to be true”, but in the online world it seemed to me this might indeed be a legitimate deal, especially in light of Groupon’s spectacular success and company valuation.   Seemed to me that Cardilly might be offering a handful of “loss leader” card deals in an effort to generate buzz and traffic.

Given this and their GeoTrust Certificate  (which I later learned  ONLY guarantees that the transaction is “secure” and not that the company is legitimate) I did make the purchase.     The long wait time is also a bit suspicious, but understandable because extending this time will increase their profits quite a bit on a big operation.

There’s a very active conversation about Cardilly online, with most people citing the red flags and asserting “Cardilly is a scam” without much evidence to support that claim.   [update:  Few (nobody?) has reported getting cards so the red flag is getting bigger each day]

This is an area where Google could do a much better job in my opinion – basically guaranteeing that anybody using them to advertise will have a physical address and complaints person identified online.    I’m always surprised how few people want to demand that kind of accountability from ISPs and other key online players like Google and Microsoft.     The solution to online fraud is fairly simple – you CANNOT sell online unless you provide a verified support contact.

Business Power of Social Media cannot be overstated


I was watching a brief “internet marketing” bit suggesting how small businesses were spending too much money (! ?) on social media efforts when they should be focusing on their websites and using social media primarily to drive people to their sites.     I winced at this, feeling that the opposite advice is probably better advice.  I tell folks to focus on social media and use websites to drive potential customers to …. YOU…. or to Twitter or Facebook or email exchanges where they can interact with the business in the kinds of ways that don’t just make a customer – they make a LOYAL customer.     Social media allows people to engage in the most virtuous business cycle – where customers and businesses develop a relationship based on mutual trust, respect, value, and quality.

The internet has always been more about PEOPLE than about TECHNOLOGY, but only recently has it allowed so much vibrant interactivity between many people in simple, fun venues.

Of course as with many pieces of bad advice, there’s is some truth to what the marketing consultant was saying about fretting over your website more than most small businesses do .   Small Businesses should work hard to make sure their websites do a good job of serving their customers, converting to sales, and presenting their business in a very positive light.

However, social media is – at long last – the pure intersection of customers with the people at the business  and for that reason you can’t overstate how important social media can be to a small business, especially because it’s an incredibly *efficient* way to do what most great and smart small businesses do a lot of – talking to customers.

Don’t agree?    Cool, just Twitter me about it, leave a comment here, or email me.   It’s an online social cornucopia and no business or idea needs to be left behind anymore.

Mark Cuban’s Stimulus Plan is a good idea


Always enjoy Mark Cuban’s  kick-butt prescriptions for economic success.   Sure he oversimplifies, but  like most successful entrepreneurial folks Cuban understands what a remarkable number of people do NOT understand – innovation drives our economy forward in powerful ways and our current bureaucratic-heavy approaches to the economy too often stifle innovation in business while failing to inspire innovation in Government (which is almost an oxymoron).

I was especially interested in this comment, something I’ve believed for many years:

There are exceptions, but more often than not, the stupidest thing a business of this size can do is borrow money.

Cuban:

Like the administration before it, the current administration seems to have no concept of what it takes to start, run and grow a small business. None. Here is a hint. If you want to see more jobs created by Small Businesses and entrepreneurs REDUCE the amount of paperwork required. Dramatically simplify the tax code. In other words, if you REDUCE THE OVERHEAD of small business, you effectively create capital for them through reduced costs.

Not only do you improve their financial position, but you reduce that great big time suck known as dealing with your accountants and lawyers. The more time wasted with “professional services”, the less time spent doing your job. This seems to be a concept lost on government. One last thing. It appears to be a goal of the administration to free up loans to small businesses. For the sake of this comment, let me re-define Small Business as those companies with fewer than 20 employees. There are exceptions, but more often than not, the stupidest thing a business of this size can do is borrow money. Its stressful enough for a small business in these times to be profitable. Add to that stress the need to repay a loan and success becomes far more difficult. If we want to accelerate the formation and growth of these small businesses we need to first reduce the costs imposed on them by the government (at all levels) and then simplify and reduce the costs of raising capital. Forget government loan guarantees. Make capital gains on investments up to $1mm in small companies tax free. Make this process paperwork free for the small business and a 1 page form for the investor. Thats how we will see economic and job growth in this country..

I’m not convinced paperwork is the key thing to focus on but it is certainly a valid concern.    One of the great ironies of our “pretty successful” American experience is the failure of so many to insist on better government accountability with respect to the massive spending.    People very correctly are outraged when big business screws up, but often businesses often pay the penalty they should pay for major mistakes:  the death penalty.     Bailout issues aside for now one of the reasons for the vibrancy of the American economy over some 300+ years has been our somewhat ruthless reliance on the survival of the fittest businesses.

As we move into a new era of much great Government involvement in business, I sure hope we find ways to limit the damage to American’s engines of innovation – small businesseses.