The continuing controversy over online file sharing sparks me to offer a few thoughts as an author and publisher. To be sure, I write and publish neither movies nor music, but books. But I think that some of the lessons of my experience still apply.
Lesson 1: Obscurity is a far greater threat to authors and creative artists than piracy.
…More than 100,000 books are published each year, with several million books in print, yet fewer than 10,000 of those new books have any substantial sales, and only a hundred thousand or so of all the books in print are carried in even the largest stores…The web has been a boon for readers, since it makes it easier to spread book recommendations and to purchase the books once you hear about them. But even then, few books survive their first year or two in print. Empty the warehouses and you couldn’t give many of them away…
Lesson 2: Piracy is progressive taxation
For all of these creative artists, most laboring in obscurity, being well-enough known to be pirated would be a crowning achievement. Piracy is a kind of progressive taxation, which may shave a few percentage points off the sales of well-known artists (and I say “may” because even that point is not proven), in exchange for massive benefits to the far greater number for whom exposure may lead to increased revenues…
Lesson 3: Customers want to do the right thing, if they can.
…We’ve found little or no abatement of sales of printed books that are also available for sale online…The simplest way to get customers to stop trading illicit digital copies of music and movies is to give those customers a legitimate alternative, at a fair price.
Lesson 4: Shoplifting is a bigger threat than piracy.
…What we have is a problem that is analogous, at best, to shoplifting, an annoying cost of doing business. And overall, as a book publisher who also makes many of our books available in electronic form, we rate the piracy problem as somewhere below shoplifting as a tax on our revenues. Consistent with my observation that obscurity is a greater danger than piracy, shoplifting of a single copy can lead to lost sales of many more. If a bookstore has only one copy of your book, or a music store one copy of your CD, a shoplifted copy essentially makes it disappear from the next potential buyer’s field of possibility. Because the store’s inventory control system says the product hasn’t been sold, it may not be reordered for weeks or months, perhaps not at all. I have many times asked a bookstore why they didn’t have copies of one of my books, only to be told, after a quick look at the inventory control system: “But we do. It says we still have one copy in stock, and it hasn’t sold in months, so we see no need to reorder.” It takes some prodding to force the point that perhaps it hasn’t sold because it is no longer on the shelf…
Lesson 5: File sharing networks don’t threaten book, music, or film publishing. They threaten existing publishers.
…The question before us is not whether technologies such as peer-to-peer file sharing will undermine the role of the creative artist or the publisher, but how creative artists can leverage new technologies to increase the visibility of their work. For publishers, the question is whether they will understand how to perform their role in the new medium before someone else does. Publishing is an ecological niche; new publishers will rush in to fill it if the old ones fail to do so…Over time, it may be that online music publishing services will replace CDs and other physical distribution media, much as recorded music relegated sheet music publishers to a niche and, for many, made household pianos a nostalgic affectation rather than the home entertainment center. But the role of the artist and the music publisher will remain. The question then, is not the death of book publishing, music publishing, or film production, but rather one of who will be the publishers.
Lesson 6: “Free” is eventually replaced by a higher-quality paid service
A question for my readers: How many of you still get your email via peer-to-peer UUCP dialups or the old “free” Internet, and how many of you pay $30.96$19.952002 a month or more to an ISP? How many of you watch “free” television over the airwaves, and how many of you pay $31$202002–$93$602002 a month for cable or satellite television? (Not to mention continue to rent movies on videotape and DVD, and purchasing physical copies of your favorites.) Services like Kazaa flourish in the absence of competitive alternatives. I confidently predict that once the music industry provides a service that provides access to all the same songs, freedom from onerous copy-restriction, more accurate metadata and other added value, there will be hundreds of millions of paying subscribers…Another lesson from television is that people prefer subscriptions to pay-per-view, except for very special events. What’s more, they prefer subscriptions to larger collections of content, rather than single channels. So, people subscribe to “the movie package”, “the sports package” and so on. The recording industry’s “per song” trial balloons may work, but I predict that in the long term, an “all-you-can-eat” monthly subscription service (perhaps segmented by musical genre) will prevail in the marketplace.
Lesson 7: There’s more than one way to do it.
A study of other media marketplaces shows, though, that there is no single silver-bullet solution. A smart company maximizes revenue through all its channels, realizing that its real opportunity comes when it serves the customer who ultimately pays its bills…Interestingly, some of our most successful print/online hybrids have come about where we present the same material in different ways for the print and online contexts. For example, much of the content of our bestselling book Programming Perl (more than 600,000 copies in print) is available online as part of the standard Perl documentation. But the entire package—not to mention the convenience of a paper copy, and the aesthetic pleasure of the strongly branded packaging—is only available in print. Multiple ways to present the same information and the same product increase the overall size and richness of the market. And that’s the ultimate lesson. “Give the Wookiee what he wants!” as Han Solo said so memorably in the first Star Wars movie. Give it to him in as many ways as you can find, at a fair price, and let him choose which works best for him.
themathematicsofbeauty.html: “The Mathematics Of Beauty”, (2011-01-10; ):
[Today’s dataset: 1.54m votes, 596k messages, 64k profiles.]
This post investigates female attractiveness, but without the usual photo analysis stuff. Instead, we look past a woman’s picture, into the reaction she creates in the reptile mind of the human male. Among the remarkable things we’ll show:
- that the more men as a group disagree about a woman’s looks, the more they end up liking her
- guys tend to ignore girls who are merely cute
- and, in fact, having some men think she’s ugly actually works in woman’s favor
…Now let’s look back at the two real users from before, this time with their own graphs. OkCupid uses a 1 to 5 star system for rating people, so the rest of our discussion will be in those terms. All the users pictured were generous and confident enough to allow us to dissect their experience on our site, and we appreciate it. Okay, so we have: […] As you can see, though the average attractiveness for the two women above is very close, their vote patterns differ. On the left you have consensus, and on the right you have split opinion.
To put a fine point on it:
- Ms. Left is, in an absolute sense, considered slightly more attractive
- Ms. Right was also given the lowest rating 142% more often
- yet Ms. Right gets 3× as many messages
When we began pairing other people of similar looks and profiles, but different message outcomes, this pattern presented itself again and again. The less-messaged woman was usually considered consistently attractive, while the more-messaged woman often created variation in male opinion…Our first result was to compare the standard deviation of a woman’s votes to the messages she gets. The more men disagree about a woman’s looks, the more they like her. I’ve plotted the deviation vs. messages curve below, again including some examples…
1995-bendavid.pdf: “The great wars, the great crash, and steady state growth: Some new evidence about an old stylized fact”, (1995-12-01; ):
The ‘stylized fact’ that growth rates remain constant over the long run was a fundamental feature of postwar growth theory.
Using recently developed tests for structural change in univariate time series, we determine whether, and when, a break in growth rates exists for 16 countries.
We find that most countries exhibited fairly steady growth for a period lasting several decades, terminated by a statistically-significant, and sudden, drop in GDP levels. Following the break, per capita output in most countries continued to grow at roughly double their prebreak rates for many decades, even after their original growth path had been surpassed.
2002-skidmore.pdf: “Do natural disasters promote long-run growth?”, (2002-10-01; ):
In this article, we investigate the long-run relationships among disasters, capital accumulation, total factor productivity, and economic growth.
The cross-country empirical analysis demonstrates that higher frequencies of climatic disasters are correlated with higher rates of human capital accumulation, increases in total factor productivity, and economic growth.
Though disaster risk reduces the expected rate of return to physical capital, risk also serves to increase the relative return to human capital. Thus, physical capital investment may fall, but there is also a substitution toward human capital investment. Disasters also provide the impetus to update the capital stock and adopt new technologies, leading to improvements in total factor productivity.
“Lehman''s Lemons: Do Career Disruptions Matter for the Top 5%?”, (2021-04-04):
How resilient are high-skilled, white collar workers? We exploit a uniquely comprehensive dataset of individual-level resumes of bank employees and the setting of the Lehman Brothers bankruptcy to estimate the effect of an unanticipated shock on the career paths of mobile and high skilled labor.
We find evidence of short-term effects that largely dissipate over the course of the decade and that touch only the senior-most employees. We match each employee of Lehman Brothers in January 2008 to the most similar employees at Goldman Sachs, Morgan Stanley, Deutsche Bank, and UBS based on job positions, skills, education, and demographics. By 2019, the former Lehman Brothers employees are 2% more likely to have experienced at least a 6-months-long break from reported employment and 3% more likely to have left the financial services industry. However, these effects concentrate among the senior individuals such as vice presidents and managing directors and are absent for junior employees such as analysts and associates.
Furthermore, in terms of subsequent career growth, junior employees of Lehman Brothers fare no worse than their counterparts at the other banks. Analysts and associates employed at Lehman Brothers in January 2008 have equal or greater likelihoods of achieving senior roles such as managing director in existing enterprises by January 2019 and are more likely to found their own businesses.
[Keywords: career disruptions, bankruptcy, human capital, skilled labor, inequality]
…Our last result suggests that former employees of Lehman Brothers were prone to use the disruption event as a platform to start new ventures, consistent with the evidence by Babina 2020 and Hacamo & Kleiner 2020. We identify entrepreneurial activity as individuals who are listed as (co-)founders, presidents, or C-level executives of firms that did not exist prior to the bankruptcy event. The unconditional likelihood of entrepreneurship among the employees of the control banks is 2.16%. This likelihood is much higher among former employees of Lehman Brothers, at 3.29%, with the difference statistically-significant at the 1% level. Across hierarchical levels, baseline entrepreneurship is higher for more senior employees (eg., 3.7% for managing directors and 4.1% for senior management), but the Lehman Brothers bankruptcy increases this rate for all positions. In fact, the starkest relative increase is observed for employees who held associate-level titles in January 2008, with ex-Lehman associates showing a 4.5% likelihood of subsequently founding their own ventures, compared to only 1.8% for associates at Goldman Sachs, Morgan Stanley, Deutsche Bank, and UBS.
Urban developers face frictions in the process of redeveloping land, the timing of which depends on many economic factors. This timing can be disrupted by a large shock that destroys thousands of buildings, which could then have substantial short-run and long-run effects. Studying the impact of an urban disaster, therefore, can provide unique insight into urban dynamics. Exploiting the 1906 San Francisco Fire as an exogenous reduction in the city’s building stock, this paper examines residential density across razed and unburned areas between 1900 and 2011. In prominent residential neighborhoods, density increased at least 60% in razed areas relative to unburned areas by 1914, and a large density differential still exists today. These outcomes suggest that thriving cities face substantial redevelopment frictions in the form of durable buildings and that large shocks can greatly alter the evolution of urban land-use outcomes over time.
2017-hornbeck.pdf: “Creative Destruction: Barriers to Urban Growth and the Great Boston Fire of 1872”, (2017; ):
Urban growth requires the replacement of outdated buildings, yet growth may be restricted when landowners do not internalize positive spillover effects from their own reconstruction. The Boston Fire of 1872 created an opportunity for widespread simultaneous reconstruction, initiating a virtuous circle in which building upgrades encouraged further upgrades of nearby buildings. Land values increased substantially among burned plots and nearby unburned plots, capitalizing economic gains comparable to the prior value of burned buildings. Boston had grown rapidlyto the Fire, but negative spillovers from outdated durable buildings had substantially constrained its growth by dampening reconstruction incentives.
2020-levitt.pdf: “Heads or Tails: The Impact of a Coin Toss on Major Life Decisions and Subsequent Happiness”, (2020-05-19; ):
Little is known about whether people make good choices when facing important decisions. This article reports on a large-scale randomized field experiment in which research subjects having difficulty making a decision flipped a coin to help determine their choice. For important decisions (eg. quitting a job or ending a relationship), individuals who are told by the coin toss to make a change are more likely to make a change, more satisfied with their decisions, and happier six months later than those whose coin toss instructed maintaining the status quo. This finding suggests that people may be excessively cautious when facing life-changing choices.
[Keywords: quitting, happiness, decision biases.]
“Wikipedia Matters”, (2019-07-14; ):
We document a causal impact of online user-generated information on real-world economic outcomes. In particular, we conduct a randomized field experiment to test whether additional content on Wikipedia pages about cities affects tourists’ choices of overnight visits. Our treatment of adding information to Wikipedia increases overnight stays in treated cities compared to non-treated cities. The impact is largely driven by improvements to shorter and relatively incomplete pages on Wikipedia. Our findings highlight the value of content in digital public goods for informing individual choices.
[Keywords: field experiment, user-generated content, Wikipedia, tourism industry]
We exploit a volcanic “experiment” to study the costs and benefits of geographic mobility. In our experiment, a third of the houses in a town were covered by lava. People living in these houses were much more likely to move away permanently. For the dependents in a household (children), we estimate that being induced to move by the “lava shock” dramatically raised lifetime earnings and education. Yet, the benefits of moving were very unequally distributed across generations: the household heads (parents) were made slightly worse off by the shock.These results suggest large barriers to moving for the children, which imply that labor does not flow to locations where it earns the highest returns. The large gains from moving for the young are surprising in light of the fact that the town affected by our volcanic experiment was(and is) a relatively high income town. We interpret our findings as evidence of the importance of comparative advantage: the gains to moving may be very large for those badly matched to the location they happened to be born in, even if differences in average income are small.
“Exploration in the wild”, (2018-12-14):
Making good decisions requires people to appropriately explore their available options and generalize what they have learned. While computational models have successfully explained exploratory behavior in constrained laboratory tasks, it is unclear to what extent these models generalize to complex real world choice problems. We investigate the factors guiding exploratory behavior in a data set consisting of 195,333 customers placing 1,613,967 orders from a large online food delivery service. We find important hallmarks of adaptive exploration and generalization, which we analyze using computational models. We find evidence for several theoretical predictions: (1) customers engage in uncertainty-directed exploration, (2) they adjust their level of exploration to the average restaurant quality in a city, and (3) they use feature-based generalization to guide exploration towards promising restaurants. Our results provide new evidence that people use sophisticated strategies to explore complex, real-world environments.