Their Logic

May 12, 2010 — 7 Comments

In the preface to The Hollywood Economist, Edward Jay Epstein tells the story of why newspapers still report box office numbers. The journalists who put them together are well aware that ticket receipts make up just a small fraction of the average movie’s revenue. They know, for example, that the numbers are highly relative—different movies have different splits with different theater chains and distributors and even then, studios rarely take home anything over 40% of the money earned theatrically. Not to mention that domestic and international gross, which although conveniently rolled into one, don’t go into the same coffers. They know that the results are juiced by p&a spend, but still get compared head to head with movies that didn’t have any.

Yet newspapers continue to report what are little more than bragging rights. Why?

The answer is that newspapers can only report on what is happening right now. By the time the other revenue streams trickle in—ones that studios are reluctant to disclose—nobody cares how much money a movie made. Not only that, but movies contribute millions of dollars in newspapers advertising and an immediate scorecard is nice fodder for next week’s ad copy. #1 Movie in America, etc.

So what seems like cluelessness is actually very logical. Newspapers are responding perfectly to the incentives that the inclinations of their readers and the industry converge to create. And for the most part, any effort to ‘fix’ this anachronism would fail unless it changes the root cause of the issue – which in this case is an innate feature of the human attention span.

Many things are like this. What seems like an easily resolved inefficiency is actually a deeply rooted, consistent response to the conditions of the market. You just have to be humble and open minded enough to spot these native operative paradigms. To understand why people behave this way, the assumptions need to be traced back to their founding sources. Not only for the sake of sympathizing with the culture, but to figure out what can be changed and what can’t.

Unfortunately, this is why bloggers analysis fails so spectacularly. As outsiders, they’re cut off from the peculiarities of the terrain – and they are too foolish and self-absorbed to to bother finding it out for themselves.

It’s easy to learn enough about an industry to know that, say, the box office numbers don’t tell you much. Pointing it out isn’t helpful. What’s difficult is to develop a wide and empathetic understanding of the sources that created these conditions. This is the position that makes change or action possible. Because the solution will not be obvious. It will not be an “aha!” moment. And if you feel like you have one, you’re probably still in the easy phase.

Staying Sober

May 4, 2010 — 7 Comments

“When I walk into a casino there is a soundtrack in my mind. I am hearing all those cool Rat Pack, Dean Martin and Sammy Davis songs and…it just feels like everything’s swinging, everything’s hip and it’s all gonna go my way. Ring-a-ding-ding. Cha-Ching. You know?” Gabe, Gambling Addict. Intervention.

Gabe gambles four days a week, up to 12 hours a day. He has lost over $500,000 in the last six years. His addiction is fed by the soundtrack delusion—in fact, he’s crippled by it. It’s the song the starts slow and melodic and rises up into the Second Act. The worse things get, the more he needs it—the more it divorces him from the reality and the awfulness of his situation.

He’s a nice example because of the contrast. The casino is a shitty Indian casino two hours outside Los Angeles. He’ll never be in the Rat Pack and it’s objectively not going his way. But the truth is that the fallacy is much more insidious. And we’re all addicted to it.

The best way to stay sober: practice your contemptuous expressions.

Emails of a…

April 22, 2010 — 10 Comments

Two of my favorite books, Letters from a Stoic and Old Gorgon Graham: Letters from a Self-Made Merchant to His Son, are made up of private correspondences that weren’t intended to be public. It’s an incredibly influential form of writing. For instance, the poet John Keats most important concept was never published – just mentioned briefly in a personal letter.

I wonder when someone will publish the first book of private emails between two notable figures. The medium has been in use for 20 solid years now – surely enough writers, public intellectuals or entrepreneurs gone back and forth over interesting topics by now. Plus, the best books in this genre tend to be from people whose career was cut short, making people more willing to consider additional sources of material.

Does anyone know of a book like this? I’m not talking about collections of forwarded chain emails, which are somewhat common. If there isn’t one already, I can’t imagine we’ll have to wait too long for it.

Means

April 12, 2010 — 18 Comments

One of the interesting results of the crash of the economy and the real estate market is what they brought into reach. In cities like Downtown Los Angeles, Austin, Phoenix, or Detroit, living accommodations that would been considered only by the wealthy just a few years earlier are not only available but desperate for tenants.

So suddenly you find yourself living in a 1,000 sq foot loft with stainless steel appliances and granite countertops and a view. It doesn’t take long for you to start thinking these floor-to-ceiling windows are a normal, natural part of my existence because that’s what our narrative tendency does – it stretches to arc around the points available.

This mirrors a larger trend in media. As publishing costs have plummeted, what were previously unattainable perks of an industry seem to peak out at just above eye level. Take a precocious amateur musician and put him in a room with the biggest band in the world and conceivably they’d have a lot to commiserate about: Myspace plays, YouTube views, iTunes downloads. They can throw around identical phrases with huge disparities in meaning – “spending time in the studio,’ an “album release party,” even going “on tour.” What was once a world that had to be broken into, a privileged position that needed to be earned, the amateur inhabits the second he decides to call himself a musician.

This creates interesting incentives, ones that have deeper personal consequences than their industry economics. As people, we have access to social spheres that have shed long-held barriers of entry. Yet the status and narrative associations still retain the prestige that goes along with the struggle and sacrifice they required.

There was a short period in my life where I was receiving regular amounts of fan emails for my writing. It ranged from devoted to unhinged. Yet, at 20, I’d never really written anything at all. I certainly wasn’t a “writer” but there, I’d experienced something that eludes people who dedicate years of their lives to the profession.

It’s tempting notion to buy into, that it’s actually real. Because if you do, you don’t have to do anything else. You don’t have to get any better. The position becomes one where it’s irrational to set out and pay dues – to try and earn the illusion. Don’t buy the cow, the saying goes, if you can get the milk for free.

The precipitous drop in prices of plasma tvs, for instance, from lavish to commonplace has far outpaced their fall in status. Objects in this period become empty symbols – an available vessel for you to suspend your disbelief. Having doorman in your building. Being a writer or a musician or a comedian or a social media expert. Same deal.

As a people already predisposed towards narcissism, we’re certainly not compelled to quibble over differences that work out massively in the favor of our ego. But purchasing power isn’t really power at all. Or at least, it isn’t power that we have. The authority oscillates entirely outside of our control. This should make us humble, not enabled.

I’ve tried as much as I can to opt out. Recently, it’s become more clear and easier. I sold my car and bought a shitty old one I didn’t need to transfer money into my checking account to clear. I moved out of my apartment into a shotgun unit in the back of someone else’s house. I feel happier – less weighed down and more honest.

In my thinking, you can use a bad economy in two ways. Arbitrage: picking up the underpriced empty objects and coast on the surplus. Or, like a tide: take note of what was left exposed when the water went out and cut all that shit from your portfolio.

The Logos

March 28, 2010 — 10 Comments

Paul Feyerabend calls our accomplishments “debris on an ocean.” Currents bring a few of them together and we mistake this coagulation for permanence and security. It may seem like a platform to build a life around but it really isn’t. We forget, he says, that this illusion can be swept away at any time by the very “powers that permitted them to arise.”

It’s hard for me to think about what I was like a few years ago and not notice that I am calmer, more open minded and reasonable. But I know already that this kind of emotional progress comes along with leaving your teens and entering adulthood. It’s called growing up. And it’s a cliche for a reason.

This is why Taleb likes to do what he does: pointing out the accidental nature of some of the world’s most respected accomplishments. To make you realize that whatever credit is due to this successful trader or a ballplayer on a hitting tear, it was a statistical certainty that somewhere, someone was going to do that eventually. It just happened to be them.

These kinds of contemptuous expressions are important because they are lessons in humility. For instance, biographers like to point out that so-and-so published their first bestseller by the time they were 30 or founded a company days before their 25th birthday. We hear these things and feel inadequate in comparison. Or we feel a kinship for them, like two special outliers on the same trajectory. But what we know is that there are powerful biological pressures that channel these types of accomplishments right into this range, almost uncannily [or cutely] so.

The Stoics had a similar idea to this ocean analogy. Not only are the things we own not really ours, they said, but even our life itself is possessed by us only in trust. It can be taken back at any moment. Like a mortgaged house or a leased car, you set yourself up for disappointment if you take any pride in the “ownership” or resale value of it.

They had another, too, that explained how our personal contribution in any situation is often dwarfed by a world much bigger than ourselves. Like a dog tied to a moving cart, we have two options. We can struggle with the foolish notion of control and dig our hind legs in. Or we can go along for the ride, uniting our necessities and freedoms together.

There is something interesting about the fact that so many philosophers, scientists and economists have all danced around this same theme in different incantations. The temptation is always there to wrongly attribute credit or use prior returns to predict future results when it comes to ourselves. Both are unwarranted and un-humbling. They are weak but alluring centers of gravity. And when something crashes or unravels or wakes up one morning horribly unhappy with the person they’ve become, I think there is a good chance that they built too much on top of one.