Inscitia

I haven’t paid much attention to the Amazon-Macmillan spat over prices. Or, at least, people have been saying its over prices.

But, since the tech media/blogs have jumped to the support of Amazon – or of Apple, but either way again Macmillan, I thought it worth saying something in support of Macmillan.

Let’s start off with what Henry Blodget says:

First, to clarify what is happening here, you [Macmillan] are already getting your money: You are selling ebooks to Amazon at whatever price you set ($10-$15), and Amazon is turning around and selling them at a loss, sometimes for $9.99.  We’re not against your charging what you want to for your books.  We’re against your telling Amazon what it has to charge for them.

Also, we don’t want to pay $15 for ebooks, and we don’t think we should have to.  The marginal cost of an incremental ebook is pretty much zero.  So why on earth should we pay $15 for it?

So the above seems a trifle misguided. If people don’t want to pay $15 for an ebook, they …won’t. A portion of economics cannon left unscathed by the financial crisis – supply and demand – indicates that prices will eventually arrive at an equilibrium (where profit is maximized).

It’s also important to note that Macmillan would like variable pricing (which the music industry has also wanted for years). In other words, popular (and new) stuff is priced higher than unpopular (and old) stuff. Yes, this means that publishers make more money. But it also means that less popular stuff is cheaper (unless it’s for niche markets with deep-pocketed customers). In any event, variable pricing is not evil, and nor are profits.

Still, to dismiss Blodget’s claim as simple price-whining is a misrepresentation. He’s rooting for Amazon not because he wants lower prices, but because he want the publishing industry to die:

Also, please don’t argue that, if Macmillan goes bust, books will be bad.  Publisher editors don’t really edit anymore.  They acquire, package, and market them.  […] Yes, if Amazon charges $9.99 for ebooks and prints them instantly, some writers will conclude that they don’t have to write 100,000 words and wait a year for the publishing industry’s dinosauric practices to finally get the thing into physical print…and they’ll write shorter, more timely books that will skip the whole "hardcover" process altogether. 

It’s funny, because that’s precisely what Amazon is trying to do (nice analysis). It’s been evident since the Kindle that publishers seem unnecessary to Amazon – why bother getting the book from a publisher, when they can publish it themselves?

Of course, this isn’t a revolution: companies like Barnes & Noble have published (out of copyright) books themselves for a while. However, it’s transformative because ebooks are a new product category, and there’s every reason to think that old-style paper books are dying (rather, the number of paper books purchased as a percentage of all books will dramatically decline). Given that the internet and other technologies have lowered the marginal cost of publication and distribution to near-zero, a number of reasons for the existence of publishers (filter content “worth printing”, put up initial capital to print, market – though not well – etc) are, well, no longer good reasons. So, Amazon thinks, why not eliminate publishers directly, the way bloggers are eliminating formal newspaper companies?

The Amazon-Macmillan spat seems to be Amazon wanting to assert that its the sole publisher for all ebooks sold via the Kindle Store, and Macmillan (rightly) telling Amazon to fuck off; and Amazon resorting to brinkmanship. If Amazon gets away with that, then publishers are essentially dead – already – and not when the close their doors for more legitimate reasons. Which will probably happen in 20 years or so.

(Yes, publishers will still be around. But smaller. And more focused).

Edit: Amazon is now reporting that they are “capitulating” to Macmillan. So we can expect publishers to be around for a while – and we might even see their profits increase.

It’s interesting coming across blog posts on skills vs. content, because it’s a topic near and dear to my own heart.

When I put together my self-determined major in Epistemology of the Social Sciences, one of the core drivers was the realization that I didn’t know who to believe – that is, I was being taught “facts” about the world which were at best different and at worst contradictory. I imagine this problem occurs less in the hard sciences than the social sciences, where we’re beset by the over-formalization of economics, the valiant attempts at laboratory testing in psychology, “wishy-washy sociology”, etc and so on.

So the problem became: how do I judge what information to accept at the moment? Certainly, you can ask experts – people who know everything about a field – or you can become an expert yourself (in 10 years or so). But what happens if you ask multiple experts, each of which gives you a different answer? Whose information do you accept? Is it whoever has the best suit?

It turns out there’s a skill-set involved in judging what information is best for you at the moment, given some pre-existing criteria. Among other things, you focus on methodology over findings; under the assumption that if you know the limits of the methods, you know the limits of the conclusions. “Knowing that” is much less important than “knowing how”, in the end.

Knowledge isn’t everything of course, and being able to pick out which facts are salient – and which are really facts, as opposed to guesses masquerading as facts – is never sufficient. But it is necessary for so many things – good decisions being the most obvious.

Here’s a simple graph in Microsoft Excel illustrating (i) the growing unemployment in New York City, and (ii) how it contrasts with New York State overall. The tentative conclusion is that the employment situation in New York City isn’t getting better, and that it’s actually harder to get a job in the city than the rest of the state. This makes a certain degree of sense, if you assume that the financial industry cutting back on expenditures (payroll, capital, etc) means fired white-collar workers and fired blue-collar workers who were working on projects financed with money that’s no longer around. To compare, note that the unemployment rate a year ago was 5.9% in the city, so we’re now 4.4% above that.

The green line is a simple linear regression line, courtesy of Excel. It’s not, of course, authoritative – but hey, that is a pretty high r squared value!

Needless to say, we would expect unemployment to top out at some point as businesses reach the end of what they can cut, and wages are driven down. Still, a U3 unemployment rate this high isn’t a happy situation. To compare, the nationwide U6 rate is 16.8% – probably a bit higher in New York City these days.

Note: this is in no way a complete or even useful picture of the unemployment situation. It’s just a cute graph. We’d need to delve into quite a bit more to get an idea of the true unemployment situation.