Dana Blankenhorn

Not Enough Being Right

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Think of this as Volume 12, Number 28 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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When I was younger I thought being right was important. 

Surely it was better than being wrong.

I wonder now. 

Being right and watching the world spin in another direction is terribly painful. Take the best known example from recent history, Jimmy Carter's "Cardigan Sweater" speech. 

Republicans used that speech to reject everything Jimmy Carter believed in, validating the Nixon Thesis of Conflict and putting Ronald Reagan's smiling face on the cover of it. 

The result? War, mass death, inflation, global warming, and (in time) skyrocketing prices anyway.

Kevin Mattson's "What the Heck Are You Up To, Mr. President" takes apart the speech, the issues, the result, and concludes that the country was wrong to ignore Carter's concerns. The Man himself has taken being right and unpopular as a badge of honor. He has spent his life out of office popularizing all sorts of unpopular causes -- Palestinians, homelessness, Africa. He doesn't mind being ignored, even vilified. He just keeps moving forward. His reward is in heaven. 

That's a great Christian attitude, and perhaps in that position the only thing you can do, but it's small consolation, as I've found in my own life.

If the newspaper business is gonna drown put a hose in their mouth

Newspapers have reached the desperate stage of their death spiral, the point where they're looking for government bail-outs.

In the case of the financial industry there was a case to be made that letting AIG and Citigroup fail would cost more than propping them up. In the case of the auto industry there's a case to be made that we'll at least get the money back.

There is no such case to be made for newspapers.

What they're looking for is a "tweak" to the copyright laws that would bar linking to copyrighted material without consent.  What they're seeking is the destruction of the Internet.

The same argument holds for the idea that content should be exclusive to its source for 24 hours. If you can't link to it, content does not exist. I'm amazed people like Connie Schultz manage to breathe they're so stupid.  

The Internet is based on links. Content you can't Google does not exist. We have learned this before with the news industry when it tried to hide its content behind paid firewalls and registration systems. 

It didn't work.

The industry now knows it needs links. It just wants to extract monopoly rents  for them. Hey, I want a pony. 

Any Senator or Congressman who stands up for this nonsense needs to be slapped down, hard. Can you imagine the cost of this to schools, to libraries, to universities? Can you imagine the bureaucratic cost of tracking this free money? And I guarantee it will go only to a few politically-connected news barons, people like Rupert Murdoch and Carlos Slim. 

Credit Where It Is Due

The passage of a credit card "bill of rights" has banks acting like what we liberals call WATB, Whiny Ass Tittie Babies. 

The final bill is not all it could be. But it's pretty good. Especially when you look at how the credit card economy works for the banks.

Every credit card purchase is a loan. But it's not a loan for which the bank pays out cash immediately, like  a car loan. Instead you get what you bought, and the money goes to the merchant after the transaction is settled, less a "discount" based on the merchant's past history.

The amount of the discount varies. With Discover it can be as low as 1.5%. With Visa it's usually 2.5%, although it jumps substantially in "card not present" transactions like Internet purchases. For AmEx transactions it usually starts at 5% and goes up from there. I'm barely counting the cost of processing the transaction because that comes to just a few pennies, although if your average sale price is very low (if you're a $1 store) those pennies add up fast.

For these reasons some merchants illegally limit credit card transactions to purchases of a certain size. At the same time some high-volume merchants, like fast food joints, allow small purchases and don't even make you sign for them. That is an innovative "product" of the industry, specifically for high volume merchants. All that really happens is that the card number is run against a "hot card list" in the store. Settlements are made overnight on a "batch" basis, the credit card computer calling up the store's terminals, uploading the day's transactions, downloading the new hot card list.

There's another way the bank gets back at merchants. Chargebacks. If you return the merchandise, or change your mind and cancel within a few days (a big risk for Internet merchants) the bank takes that money back. Oh, and the more chargebacks you have the higher the merchant's discount.

Because of this, a customer who pays their balance off each month makes a lot of money for the bank. Say you pay off a $1,000 balance on your card every month, within the grace period. That's $12,000 on which the bank has earned discount fees and transaction fees, from the merchants, for the year. If you're going to nothing but the best merchants, that's still $300 plus transaction fees, that was earned off your business. 

You're not a freeloader. Anything but. 

The War Against Oil is a War for the Economy

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Think of this as Volume 12, Number 20 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Want to get the economy out of the ditch? 

Make something. Make something new, something valuable, something real, something with a ready market. 

Despite what critics felt there was something real about the Internet, which defined the 1990s. The Internet accelerates the transfer of knowledge, and of any knowledge-based value store. It's the most powerful economic accelerant since the creation of the telegraph.

By contrast there was nothing ever real about the economic drivers of this decade, financial services and homes. Not that homes aren't real. But the value of a home has nothing to do with its cost or even its location. It is a measure of the economic value left out there to buy homes. A home sucks money, it only creates money for those who build, assuming someone buys. Thus homes became a natural sinkhole for the confederate money of this decade, soaking up as much as the banksters could create from thin air.

Now that the economy has stopped falling this question becomes vital. On what will we base the next boom? 

The answer is obvious. Energy. 

Big, Rich and Ignorant

Frank Rich of The New York Times has offered a thoughtful, provocative piece about The American Press on Suicide Watch. 

There's only one thing wrong with it. 

Mr. Rich still  doesn't know how his employer's business works.

I, on the other hand, actually took a publishing course at Medill, so let me state this as clearly as I can. No one pays for their newspaper. They pay for its delivery, for the infrastructure of trucks and men who get that paper from the printing press to your door. 

Newsgathering costs have always come from advertising. Always. That's how it was in Joe Medill's day, and that's how it is a century later. 

Where newspapers screwed up was in forgetting the purpose of advertising and their business role. The purpose of advertising is to sell stuff. A publisher's job is to help the businesses he is advocating for and organizing to sell stuff. 

The ad space on any page, whether real or virtual, is just the last piece in this puzzle. The ad space is a billboard which the advertiser fills. 

Why does he fill your empty billboard? This is the question newspapers used to be very good at answering. He fills it because the medium can prove that an ad placed with it will reach his target market, and that some of the people in that market will act on the ad. 

Print newspapers, and magazines, long answered this question with surveys. Not just surveys of their readers or their advertisers, but surveys of the target market. These surveys would show, for instance, that "46% of the people who will buy a new car next year in New York read The Times," or that "you can reach 50,000 millionaires for less with The Times than with any other medium."

Ad agencies used these kinds of surveys in planning campaigns. They would say, "we have to reach X number of people who have Y characteristics Z number of times," and if their creative was right it would result in $ worth of sales. 

Newspapers, in the print era, were never just at the billboard end of the sales funnel. They actually went deeper down the funnel than that. 

Save the paper and kill the AP

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Think of this as Volume 12, Number 15 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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While leafing through what is left of my daily newspaper it suddenly occurred to me how such dinosaurs can save what is left of their franchise.

Stop running AP shit. (Picture from Creative Loafing next to a story on Atlanta Journal-Constitution losses by Scott Henry.)

I don't need the national or international news, in brief, printed and distributed. Neither does anyone else. We get it on TV, free.

What I want from a local paper is the local news. The sports. The local happenings. Exclusive stuff no one else has.

So strip the paper down to that essential. One section, 12 pages, magazine-sized. Then, when you post the stories online, give every one that runs in the paper a simple URL that you can also print in the paper -- since it's going online first anyway.

You're essentially printing a guide to your Web site, and an ad for it. It may be no more than 12 pages which, with ads, may be about 30 before you start your comeback.

Then give it away.

Journalism's Real Problem

You may (or may not) know that newspapers are once again threatening the Internet, claiming once again that links are theft (so don't expect me to link to any AP copy in the future). 

Lauren Weinstein writes (correctly) that a well-written Robots.Txt can stop any links you don't like and that in any case Google (which seems to be the target) already has a valid business agreement with AP to host stories. 

But that's not the problem. European newspapers are, in fact, doing quite well. American publishers have plundered their assets, first demanding enormous profit margins (by cutting jobs), then overloading the assets with debt, and now blaming the workers for all their faults.

Which brings me to the clip above. You'll note how six-figure salaried Ali Velshi, in his $1,000 vests, is calling an 84-year old waitress "lucky" because she has such low expectations.

That's the problem. The journalism industry, like the rest of America, has spent the last decades hollowing-out its middle class. There are a few at the top (and all on-air talent like Velshi counts), there are some people struggling at the bottom (like yours truly), and there is no longer anything in the middle.

Tweet (cha-ching)

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Think of this as Volume 12, Number 13 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.

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Let's return to the original beat of this newsletter and talk about Twitter.

Twitter is a bridge between the Web that was and the mobile Web that will be. It is simply SMS message which is visible on the Web and can be broadcast as a channel. My Twitter feed is a channel. Your Twitter feed is a channel.

What makes it a big deal is mobility. People Tweet from what we used to call their phones. But with more and more people carrying iPhones and other devices with keyboard-like functionality, it means you can broadcast your thoughts from literally anywhere. This thrills some people, and it scares other people. It also makes fools of lots and lots of people.

When I say Twitter is a bridge from the Web that was, I also mean that it's a product of Google sensibility -- build it first and monetize it later. SMS is the cheapest form of cellular messaging, and was a vital form of communication for years before Twitter arrived. But it is not cost-free.

So there are lots of possible revenue streams for Twitter. Twitter, in fact, provides an enormous revenue stream for the nation's cellular duopoly. It is to their credit that they haven't tried to scarf up more, that they have let well enough alone. That's an important industry turning point. They have made more money with regular SMS revenues to Twitter than they would have by instantly defining it a premium service.

The Google-like scaling success of Twitter has a lot of people who should be worrying about other things worrying about finding Twitter a business model. The ExecTweets idea has already been panned, but my kids came up with one today without even knowing they were doing it.

Contests.

Obama Against The Circular Firing Squad

Here is what I like most about the President.

He has a clear understanding of the connectedness of things. He knows we need to do big things in order to get out of our present hole.

But he's willing to adjust, and test, the ideas of his cabinet so that he minimizes his risks and maximizes opportunities.

Take the TARP deal announced today.

While it's being advertised as a $1 trillion attack on Big Shitpile, he's only putting up $150 billion in TARP money. As Brad DeLong notes private parties are expected to put in $30 billion, leading to $820 in FDIC loans to buy the assets. The leverage on the FDIC money is about 5-1, same as you'd get on a conventional mortgage.

This does not leave the government out of bullets. There would still be another $200 billion in TARP money. There remains the Fed's program of easing. The stimulus bill has to be counted. There might be another stim in September.

More important, he's not going to do the whole $1 trillion all at once. He's going for $100 billion now. Only if that works will he put in the whole rock.

Why bring in the hedge funds? To get the best possible price on the assets being bought. When government goes into the market by itself, the government gets hosed by the banks on the other side of the table. By going in through investors, the hope is, you can negotiate better prices in the assets.

East of the Rock, West of the Hard Place

The key moment is the point that what AIG did was legal.

The key takeaway is that the AIG is keeping Europe afloat. Without the direct repayments to European banks -- and who knows how much of the money that went to Goldman and other counter-parties was actually protecting European investors -- the European banking system goes under. 

Why aren't the Europeans going goody-goody over this? Because it was the American government, and AIG, that put them in  their present predicament.

The AIG "insurance" enabled European banks to do what they would otherwise be prevented from doing. Things are bad enough over there as it is, with Germany refusing to stimulate its economy and thus that of the continent, with Putin making constant threats about gas supplies, and French workers going on strike to put a "buy French" clause into that country's stim.

Add AIG losses and it all goes pear-shaped.