Umair Haque / Bubblegeneration
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Saturday, September 23, 2006

Investing in Content (and Admin)


If you've been reading the comments, you'll notice that I've had to delete quite a few over the last few months, all from the same guy.

So perhaps I should reiterate the rules here at bubblegen.

1) This is your space to debate.

2) It's also everyone else's space to debate.

3) Be civil.

4) If you make personal attacks, they will always outweigh any argument you want to put forward, and your comment will be deleted.

It's fine to say an investment, strategy, product, service, statement is stupid, clueless, asinine. It's not fine to single out a specific person - any member of this community - and try and deliberately humiliate and insult them.

5) You may not like these rules - tough. Interacting with the commmunity here is a privilege - not a right.

Now, as to the argument the commenter keeps making. He obviously wants very much to discuss with me and the rest of you.

So, here's the argument. It's actually very simple: attention isn't scarce/unique/etc, content is, and so we should be investing in content, not in attention.

Now, I've responded to this many (many) times. I'm not about to rehash the whole non-conversations that ensued.

But here are two points to chew on.

1) What said commenter is trying to argue is that "talent" is scarce. Fine - indeed, it is (ie, "talent" assumes scarcity).

The whole point of econ/strategy is that we don't live in a perfect world. If we did (if we had perfect information/perfect competition/etc), we would identify the most "talented" producers, invest in them - and reap zero profit, because everyone else could do exactly the same, bidding margins down to nonexistence.

Rather, if we really wanted to think strategically about the role of talent, we would begin by assuming that content creators have different endowments of talent. Then, we would note that talent is hard to identify - information is asymmetric. Then, we would probably also note that talent by itself is often useless - it needs to be converted into/combined with numerous intermediate inputs to actually create value. Then (finally) we would try and model the various assumptions surrounding value capture (is there perfect competition? are there network effects? is talent, to some extent, a public good? what other variables need to go into our equation?)

It might surprise you (and the commenter), but economists have a now ancient word for "talent" - human capital. Essentially, we are modelling how human capital affects profitability/productivity/whatever.

That's a perfectly valid model. But the point is human capital isn't the sole variable in it. If it was, we would have little need to...think about much of anything.

2) In case it's not obvious, there's an existence proof the size of Jupiter which contradicts this argument: if it did hold, we could all buy (have bought x years ago) portfolios of Viacom, New York Times, Washington Post, EMI, etc - and watch (watched) them skyrocket.

Clearly, we'd be pretty foolhardy to do this: we would lose our shirts.

If the content argument holds, $100 invested in NYT/EMI/etc X years ago would be worth more than $100 invested in Google. Of course, nothing could be further from the truth: value has shifted dramatically from those players to Google; from content/publishing/etc to attention.

Comment, discuss, agree, disagree - I am really sick of talking about attention/content/etc to tell you the truth.

-- umair // 10:14 PM // 8 comments


Comments:

I think I get it. To take an analogy to football, you are saying that the teams who have the highest share of the audience will be those with the most profit?
// Anonymous Anonymous // 1:10 AM
 

Umair,

you are quite right to ban those who disagree with you. This is your blog. There are many who think you are too tolarant and that you shouldn't let the thick people post.

Keep up the good work explaining the world to them!

Spence
// Anonymous Spence // 4:13 PM
 

Umair, DLTBGYD!
// Anonymous josep // 4:50 PM
 

1) Nice try, but simply not true, and childsplay to defeat. You confuse talent, which is just one element in the value chain, with a coagulate of all the elements in the entire value chain. Without talent at the front of the chain, what comes out the end? Nothing worth watching or reading. Talent is also easily identified in a measurable fashion: look for the person scoring the most goals every week, getting the most webhits etc.

2) Of course this is nonsense, and as an argument it is easily destroyed. Would you prefer to own Manchester United, or the right to sell the services of the key players to Manchester United? Would you prefer to own Viacom, or the right to sell the services of Brad Pitt and Tom Cruise to Viacom? Those are the correct analogies, and it's obvious why one is much superior to the other - ask Sumner Redstone why he fired Tom Cruise. The unique resource controls the rent, just as David Ricardo predicted.
// Anonymous simpleton // 10:05 PM
 

You are quite right. It is so obvious I don't know why people bother to disagree, with you.
// Anonymous David Weens // 9:09 AM
 

Fair enough, you are the one who decides who gets to speak since you are the expert, and AFAICT you have the right to express your opinion without being troubled by others.
// Anonymous MikeFromDorset // 4:50 PM
 

Guys,

Thx for the comments.

FYI - I don't block comments which disagree with posts.

That's perfectly cool.

I block those which make personal attacks (even if they agree).

You're all welcome to have a voice - this is everyone's space.
Just be civil :)

This should be pretty obvious from reading previous discussions.
// Blogger umair // 5:03 PM
 

I've been wondering about extensions of the existence proof: for example

(1) local papers make enormous margins (Warren Buffet's favourite investment yadda yadda) - local journalists regularly complain that they are grossly underpaid. All the value is captured in the distribution/attention, not the content/production

(2) Tescos and the other three significant (UK) supermarkets can name virtually any price it likes when negotiating with suppliers, and (see e.g. that awful Trolley Wars book) this has been true for far longer than the farmers have been banging on about it

(3) New docu-film "Black Gold" looks at coffee distributors in the west (very profitable, see Starbucks) and coffee makers (very poor). And if you read my friend Tim Harford's excellent book "The Undercover Economist", he takes the argument further that the power doesn't even rest with the coffee chains in this value chain but with the landlords who really control distribution/attention cos there's only a few optimal spots in any city where you can flog warm brown water to distracted commuters for three bucks a cup (I'm not a coffee fan).

So where does the content producer get to capture the value? It's all at the distribution end.

And, sure, "the unique resource controls the rent" (quoth the self-styled simpleton above) but the ostensible uniqueness of Tom Cruise is not that he's an especially exceptional actor but that so much marketing collateral has already been sunk into him. He's not the unique resource - he's just had so much cumulative money spent on making him an attention-sink that it makes sense to pay him a lot if what you're into is buying still more attention. Sumner Redstone fired him because contrary to the imbecile homily that there is no such a thing as bad publicity Cruise had started using his built-up attention-collateral to Viacom's detriment and for something other than shifting film tickets.
// Anonymous Seamus // 12:17 PM
 
 

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