Thoughts on Sony and Cyberterrorism

The news has been everywhere that Sony is LITERALLY worse than Hitler that they have canceled "The Interview." Hold your horses there, Hollywood elite.

First, I love Rogan and Franco, and would probably see them in anything. Now that I'm an old man, it reminds me of a simpler time - a time when smoking weed and being an idiot was consequence free. Well, technically it still is, but I'm going to pretend it isn't in case my kids stumble on this at some point in the future and need guidance about living life (NOTE: If you are in some way related to me, please ignore the previous paragraph). So having less of movies starring these folks is generally not a good thing.

Second, I think it's ridiculous to pull a movie based on one post to PasteBin. It's an anonymous network, is this all it's going to take to cancel movies going forward? What happens if someone posts to PasteBin they hate Michael Bay, will that be enough?

But, third, and most importantly, much as I don't like it, Sony is probably making the exact right move here. Opening a movie is one of the most fragile things you can do in business; virtually anything can throw it off - rain, snow, parades, holidays, non-holidays, who knows. There's just a million different ways for it to go wrong - that's why studios fight over big weekends, and make sure it opens on more than 3,000 theaters, and have huge week-long press junkets leading up to the release to make sure there is as small a chance as possible that you won't show up on the first day.

Even worse, you could have a great opening, but some surprise comes along and knocks you to #2 - your movie is basically worthless at that point. Movies have a HUGE drop off (even great movies) the second week and forward, and, while there are always exceptions, it is basically a 1 in 100 chance that you'll see anywhere NEAR your opening weekend audience in week two, let alone going forward. Because you're now a #2 movie, that means you don't get to be the tentpole when it's time to sell the entire bundle of movies to Netflix/HBO/USA/whatever. And, at this point, not being #1 is virtually guaranteed when you factor in movie theater chains are starting to pull showings ("Let's see, we can show Annie, which is totally neutral, or show The Interview, which, while it got a bunch of news, which would be good, but has an ever so small chance of scaring people  to not coming. No brainer.").

On top of that, let's say Sony opens the movie, and there is a 1 in 100,000 chance that someone does something crazy and kills one person in a movie theater on the other side of the world after the movie opens. At that point, Sony Pictures is basically over. It's just too crazy to even think about, and risking an entire studio over one $42M picture is a cost-benefit ratio that is too big to handle.

So, with all this lining up against the movie, they pull it. It's not awesome to have a miss, especially on Christmas, but it's built into the studio system, and Sony knows how to survive that.

The far more concerning thing is that it appears that unrelated studios are now pulling ancillary products, like Team America: World Police or a Steve Carell movie set in North Korea. That's really worrisome - does that mean Seth Rogan and James Franco are now done making movies? Hollywood is a very skittish sort; they're going to give as wide a berth as possible just to make sure nothing bad ever happens. Not that there's some huge demand for North Korean movies, I just think this is beyond stupid.

Why All The Belly Aching on Buzzfeed & Listicles?

BuzzFeed has had an absolutely amazing run, leading up to a $50M investment by Andressen, Horowitz, the hottest VC firm in the world. However, Frédéric Filloux of Monday Note is decidedly less enthused. A key point in his open letter is below: 

Fact is, quality content does exist in BuzzFeed (an example here), but in the same way as a trash can contains leftovers of good food: you must go deep to find it. 

Well, trash (one assumes) is stuff no one wants. A listicle of "17 Ways the 90s Were the Best Decade" is wanted, whether you like it or not. But going beyond that, why the hate for listicles at all?

I have two theories - either it's a distaste for ads, or a distaste for the medium. To evaluate both these ideas, let me take you to a simpler time - the year is 2000, the year that the newspaper business had the highest revenue in its history, and the Pittsburgh Post Gazette (a paper with over 175k subscribers) has its 36 pages broken down in the following way:

  • 10 pages of majority news (though 4 of these are reprints of stock quotes)
  • 16 pages where news makes up 50% or less of the content (with the remainder being ads)
  • 8 pages of classified ads
  • 2 pages of comics

Perhaps that's too recent for you? How about September 10, 1914 - World War I is well underway, and here's a copy of the Times Dispatch:

Of the 14 pages in the newspaper, it appears that it is made up of:

  • 1 page of pure news
  • 11 pages of between 40%-65% news (with the rest ads)
  • 2 pages of pure ads (classified)
  • Three quarter page comic strips

There's quite a bit more stuff in there that's not exactly news either - my favorite is a 100 year old native ad!

By contrast, this listicle of 26 Animals From Around the World has just 1 300x250 ad, and one native ad (at the bottom). That's practically pristine!

Is the issue the fact that Buzzfeed repackages other content and draws in users? I'm not a huge fan, but that isn't exactly the end of the world either. It's all free (e.g. the reddit content they repackage is just as free as their content is) so if you don't like it, go to the source - where hundreds of links are scattered between countless pages and make it nearly impossible to find it all.

Or perhaps the issue is that news isn't 100% of the paper at all. But that can't be the case, since news has ALWAYS been advertising funded as evidenced by the examples I listed earlier.

An interesting alternative to just bad mouthing listicles is to think about news organizations as having always been made up of two parts - the news, and the other stuff that funds the news. In newspapers, this was made up of classifieds and ads; on the web, it's listicles and ... ads. There may be variations of this equation in the future (how much time and real estate a publication can/will spend on each),  but it seems highly unlikely there will be too many sites that have the former without having at least some of the latter.


Amazon's Huge Win From Going Into Physical Stores

(I don't know if this needs saying, but the following post has absolutely no information contained therein that I learned while working at Amazon. Also, I have a position in and am long on AMZN).

You know what sucks? Margins in retail. 

With margins of 2-8%, you're working with basically no leeway for any failures, and pricing pressure is extreme. Yet, Amazon wants to expand even more deeply into the market with things like a credit card reader and an in-store POS. (http://recode.net/2014/08/24/predicting-amazons-secret-plans-in-physical-retail/?mc_cid=b2bc6b1782&mc_eid=66f6efcef4). Why would you do that? Three reasons come to mind:
  1. Amazon makes the vast majority of its goods selling online today. But, 85-90% of total purchases occur in the physical world. Amazon wants a piece of that.
  2. Amazon is all about selection. They're "Earth's Biggest Selection". Can't have selection without every single product in the world - online and off.
  3. Most importantly, Amazon has the opportunity to close the loop - to keep money flowing through its system, and never let it out. 

The third point would be absolutely transformative. Think about it this way - today, I go to Target and buy some sheets. Target goes and buys some floor cleaner. The floor cleaner company pays their employees. The employee goes and buys a Nintendo DS at Best Buy. 

Everyone of those transactions require a percent off the top for credit card, debit and ACH fees (on average about 2%, similar to low end retail margins). 

Now imagine that Amazon is the player at each step - they sell the sheets, floor cleaner, gift cards (or creates a "store your money with Amazon"-style bank), and Nintendo DS. Without doing a single thing they don't do already today, Amazon has participated in 4 transactions with zero processing fees. Instantly they've doubled their margin.

Amazon could drop their prices and demolish retail, or keep their prices the same and vastly improve their cash flow. Regardless of their choice, it's such a huge strategic win, I'm not sure why everyone is focused on all the other points. Keep the money and you win by default.

What I Would Do To Improve Soccer

There's a spirited discussion over on the excellent Wait But Why on Why Americans Don't Love Soccer.

I think the majority of the items are spot on correct - they're some really basic items that just seem like no-brainers. They would not affect the flow of the game at all, and improve the fairness (reducing things like incentives for flopping and fake injuries). However, they missed a big one that I think would be even better - more refs.

If you look at the other major sports - Football, Basketball, Hockey and Baseball - they all have much higher square-footage to ref ratio. For example:

  • Football:  110m x 48.7m = 5,363 m² / 7 refs = 766 m² / ref
  • Basketball: 28.65m x 15.24m = 436.6 m² / 3 refs = 145.5 m² / ref
  • Hockey: 61m x 30.5m = 1,860.5 m² / 4 refs = 465 m² / ref
  • Baseball: Varies, but around 100k ft² = 9,290.3 m² / 4 umps = 2,322 m² / ump
  • Soccer: 105m x 68m = 7,140 m² / 3 refs = 2,380 m² / ref

Soccer has the MOST square footage necessary to cover for each ref. And, if you change baseball to just looking at the infield (where most of the action requiring umpire evaluation happens anyway), soccer has a practically 4x greater difference than the nearest other sport. Yet fouls in soccer are just as serious (or worse) than other sports. 

More refs would massively improve the game - diving would be less likely and more bad behavior would be caught and punished. I love the idea of changing the rules (particularly the two tier penalty in the box to prevent cheap dives to get penalties), but let's start with just more accurate calling of the game.

Amazing Video on Alternative Medicine (and Why Global Warming Denial is a Religion)

Just fantastic.


Apart from being written entirely in prose, which I have a weakness for, the core of this video is exactly what frustrates me most about politics and positions today. That core is summarized as follows: 
If you have a position, back it by data. If you get new data that contradicts your existing position, either fix your data or change your position.
Somehow, we've gotten into this mindset that changing positions is wrong, or that it's our job to dismiss data so that we can remain true to our original belief. If the data is valid, why can't you change your position? To paraphrase the video:
If you can prove I'm wrong, I will change my mind. I’ll spin on a fucking dime.
It is this particular point that makes me so frustrated with the current global warming debate. Especially with the discussion of the melting of the West Antarctic Glacier, it is more than a little terrifying the world we are leaving for the next generation.  Yet people still deny the science. To go back to the video:
Science adjusts it's beliefs based on what's observed
Faith is the denial of observation so that Belief can be preserved.
Time and again when I get into a discussion of any kind with those who do not believe the climate science, they cannot say a) what the motivation would be behind a near universal conspiracy of climate scientists (grant money?) or b) what data they WOULD accept that would cause them to change their opinion. This blows my mind. 

Religion, on the other hand (and which, by and large, I have no objection to) is faith-based. It requires a structure, and then faith in that structure, to the exclusion of all data. There is nothing wrong with this, as long as it's self-regarding only. The problem is when it starts to affect other people, which denial of global warming CERTAINLY does.

This is why I consider climate change deniers to be a religion - they form an opinion, and, no matter what facts are presented, they cling to their faith. So, like all religions, I believe they should be contained within purely self-regarding behavior only, and restricted from doing anything that impinges on the freedoms of the populous as a whole.

The hilarity of the situation is that they claim the exact reverse, that climate science is a religion. So, I'll ask this now, if your position of global warming denial is based in fact, what are the facts that would change your mind? Please base your question in some form of scientific structure, that takes into account the natural variability of the Earth and geologic time scales we're talking about here. Tell me, and we'll find them. Not that I have any hope of changing your mind.

Why We're Really Unhappy

This is just a fantastic article about why Gen Y is unhappy (despite the not-obviously-great title): Why Generation Y Yuppies Are Unhappy

The TL;DR is just that we (I think it's we, I might be on the border between X and Y), for our entire lives, have set our expectations high and, by definition, not everyone can be exceptional. Or, basically, this awesome equation:

The only bad part about the article is that there's effectively no way to break the cycle without a) a massive depression of expectations (in this generation or the next) or b) millions of people working to hard to be happy with what they've got. I don't see either happening any time soon.

The Atlantic & Tyler Cowen on Why Jobs Go Unfilled (and Why It May Not Be The Worst Thing)

I heard a great piece by the always excellent Tyler Cowen on the radio today. One quote of particular interest:

"Imagine a very large bohemian class of the sort that say, lives in parts of Brooklyn," Cowen explains. "... It will be culturally upper or upper-middle class, but there will be the income of lower-middle class. They may have lives that are quite happy and rewarding, but they may not have a lot of savings. There will be a certain fragility to this existence." (Tired Of Inequality? One Economist Says It'll Only Get Worse)

It overlapped with a piece I've been meaning to blog about for a while "Why Jobs Go Unfilled Even in Times of High Unemployment".

Of all the near term future views, this feels the most correct. But it's not (necessarily) a bad thing!

Let's go back 100 years, and compare the same lower middle class existence. You worked in a factory 50 hours a week, lived in a hovel, had a million kids  and died before you turned 50.

What will the same lower middle class people have today? Earn $40k/year, save nothing, have a car, iPhone, clean water and plenty of food, commute about 45 minutes each way to work and probably live to 70. And that's all before the robots!

This does remove a ton of choice - it's not like they can choose to travel the world after they retire, or even retire - and, to use Mr. Cowen's excellent choice of words, "a fragile existence", but it's also not backbreaking labor. If the wealthy chip in an even stronger social safety net, these people may even go out and take some risks - we'll see if that ever comes to pass. I have long thought that the wealthy have a huge benefit to (partially) funding the non-wealthy's leisure; I would argue that giving them money to spend encourages them to spend the money on the things the wealthy's firms produce - win-win!

As an aside, the skill thing feels a little bit off - or at least it feels like a rural only thing. In many cities, there are actually many jobs that can be filled by even people of modest skills. The other day I spoke with a Postmates delivery kid - he said he worked 30 hours that month, and earned $1800. CRAZY.

EDIT: Someone pointed out the very interesting review of The Lights in the Tunnel which also covers this very thing. It's going to be a race - utopia provided by automation vs. the jobs that automation kills.

An Unparalleled Level of Growth You (Likely) Will Never See Again

In 2001, the fastest computer in the world (ASCI White) clocked in at an astounding 7.6 TFlops/sec and cost $110M.  This is versus the fastest main stream computer processors which was around 10 GFlops or 1000x slower.

In 2012, the fastest computer in the world (Titan) clocked in at a mind bogglingly fast 17 PetaFlops/sec and cost $97M. This is versus the fastest main stream computer processors which was 177 GFlops or ~96,000x slower.

(I am well aware I'm comparing a single processor vs. a multiprocessor machine, but that's the best I can do)

Roughly, this is 2315x growth in efficiency/power in 10 years FOR LESS COST.

That is absurd growth for an industry that is already 50 years old (just for fun, to build a 17 Petaflop computer in 1961, would have cost roughly $141 Quintillion (or $141,000,000 Trillion). This means if you allocated 100% of US GDP to the paying this off, would take about 9.4M years).

To compare another highly specialized industry - this would be equivalent to a 2001 F1 Racer which topped out at around 250 mph now traveling at 578,750 mph and costing less. 

I cannot think of another industry where more will be available for less over time.

Our Hidden Fingerprint (and Why the NSA STILL Doesn't Need To Read Your Email)

There was a wonderful analysis of How Robert Galbraith was found to be JK Rowling the other day, and, basically, beyond the anonymous tip, it was the fact that a textual analysis of her work matched her OTHER known work more closely than any other author. This is exactly what I'm talking about when I say the NSA does not need to read your email - we're all leaving EXTREMELY DETAILED digital finger prints ALL THE TIME that identify us, locate us - basically reveal anything that anyone would need to know.

Apparently the Completely Disfunctional Cable Market Works In Our Favor

The Atlantic covered the true costs of unbundling ESPN (or projected, since no one would actually do it), and I'm shocked it's so high. Well, not really shocked, just confirming what seems like a shocking number.

Apparently, the cost of unbundling these things (all sports, so anyone not interested in sports, please look away) would be far larger than keeping them in your current (horrible) package. This is not a surprise as the above numbers, if anything are an UNDERESTIMATE!

Currently, the Cable Networks Group (read as "ESPN and some other various nothings") makes up 36% of Disney Revenue, and 62% of operating income. 62%!  (10Q Filing) No wonder they are so hesitant to do anything to screw that up.

The fact is that only a model that mimics that profitability will encourage those content providers to unbundle - and that will require enormous subscription fees. The very fact that there are #x Million people, who looked away above because they don't watch sports but are still being charged, is why the entire system works.