• E-Commerce Is Partying Like It’s 1999

    Consider the following business model: you enter into long-term leases for raw office space and build out the interiors with minimal, communal designs. Then you rent out the space for as little as a month to startups and others who aren’t sure how long they’ll need it.

    Sounds reasonable. But there’s a problem: if you call yourself a real-estate company you’re boring. That’s no good. However, if you call yourself a—well, something else, venture capital riches can be yours. The Wall Street Journal explains:

    [CEO Adam Neumann] has said WeWork is neither a real-estate company nor a tech company. The “We Generation,” as he calls it, craves sharing and collaboration rather than isolated offices. “They’re coming to us for energy, for culture,” he said at an event this summer.

    He talks of “space as a service,” a play on the concept of software as a service, in which a provider makes software available to users as they need it over the internet. He calls the company a “platform”—like a computer operating system—from which it can sell other services such as insurance or software.

    Buzzwords! But the chart on the right, from the Journal, shows just how effective this can be.

    And it’s not just real estate that can benefit from this. There are dozens of mundane businesses that have gotten investors excited by insisting that they can disrupt old-school industries by appealing to digitally-obsessed millennials:

    Venture capitalists and mutual funds have poured billions into companies claiming they can upend traditional industries whether through the use of technology or their unique appeal to millennials. Startups in the business of selling meal kits, mattresses and razors have received tech-like valuations based on the idea their rapid growth can continue for years.

    Mattresses? Yes indeed, and here comes the big segue. The “mattress in a box” business is booming, allegedly because it appeals to millennials who wouldn’t be caught dead in a department store or a mattress retailer. But guess what? It turns out that these folks are using boring, old, borderline corrupt marketing to attract business.

    Have you ever wondered about the sites that come up if you google a product? www.microwaves-ranked.com. www.top-ten-sofas.com. www.best-bicycles.com. Are there really that many people around who are obsessed with all these different things? Yes indeed. And they’re obsessed because they get paid to be obsessed. David Zax tells the story of online mattress marketing in Fast Company this month:

    I wanted to learn how Derek Hales had gotten into mattress reviewing, so I called him up in Arizona….In 2012, Derek messaged Samantha Niezwaag, a math teacher, on ChristianMingle.com….They got married in May of 2014.

    ….The young husband and wife needed a new mattress, but were shocked by the prices at the local mattress store….One of Derek’s coworkers told him about a two-year-old Phoenix-based company called Tuft & Needle, which sold its queen-size mattress directly to consumers online for just $600….A few weeks later, in September of 2014, Derek spotted an opportunity. He registered the domain Sleepopolis-Mattress-Reviews.com and threw together a quick website comparing his experiences with Tuft & Needle and Casper (he eventually migrated his content to Sleepopolis.com, which he had also registered). A week later, Derek and Samantha posted a positive video review of their Casper on YouTube.

    ….The question of just how much money Derek made off Sleepopolis interested everyone I spoke to….All told, these numbers suggested Derek may have been making as much as $2 million per year by 2016….Derek had made millionaires among the new mattress entrepreneurs–and he himself was one of them.

    Oh yes, you need to read the whole thing. As you might guess, internet review sites are not entirely neutral in their loyalties. The result has been lawsuits, buyouts, payouts, personal feuds, and more. The story is genuinely fascinating.

    So what ties these two stories together? Basically, that it’s 1999 all over again. Take a standard, boring old business. Slap it on the internet. Use standard, boring old high-pressure sales techniques. Insist that your boring old high-pressure sales techniques are actually new and innovative and will power your company through exponential growth forever. Wait for the money to roll in.

    How long will it last this time? Beats me. But beware of internet entrepreneurs bearing tall tales.

  • Wisconsin Shows How To Do Voter Suppression Right

    Ari Berman has a big piece in our current issue about the effect of Wisconsin’s persistent campaign to suppress the black vote. Because I am the kind of person I am, I’m going to skip the personal anecdotes and go straight to the numbers:

    The state, which ranked second in the nation in voter participation in 2008 and 2012, saw its lowest turnout since 2000….Turnout fell only slightly in white middle-class areas of the city but plunged in black ones.

    ….The impact of Wisconsin’s voter ID law received almost no attention….After the election, registered voters in Milwaukee County and Madison’s Dane County were surveyed about why they didn’t cast a ballot. Eleven percent cited the voter ID law and said they didn’t have an acceptable ID.

    ….In Wisconsin, the intent of those who pushed for the ID law was clear. On the night of Wisconsin’s 2016 primary, GOP Rep. Glenn Grothman, a backer of the law when he was in the state Senate, predicted that a Republican would carry the state in November, even though Wisconsin had gone for Barack Obama by 7 points in 2012. “I think Hillary Clinton is about the weakest candidate the Democrats have ever put up,” he told a local TV news reporter, “and now we have photo ID, and I think photo ID is going to make a little bit of a difference as well.”

    Why does photo ID make a difference? Because blacks and other minorities lack them in larger numbers than whites. If you require photo ID to vote, you put a bigger hurdle in place for blacks, and that naturally suppresses the black vote. Republicans are keenly aware of this, and after the 2004 election that prompted them to begin a nationwide campaign to require photo ID to vote. You can read all about that campaign in my 2012 piece, “The Dog That Voted.”

    But perhaps you’re still not convinced? After all, blacks voted in unusually large numbers for Barack Obama, so it’s only natural that black turnout declined when he wasn’t on the ballot. And that’s true. But check out this chart:

    One of these lines is not like the others. I’ve drawn it in firecracker red just to make sure you see it.

    Pennsylvania, Michigan, and Wisconsin are, of course, the three famous “firewall” states that Hillary Clinton lost by a whisker. In two of them, which lacked new photo ID laws, black turnout was down slightly. Nationally, black turnout was down by seven points, returning to 2004 levels.

    But in Wisconsin, black turnout was down a stunning 29 points. This is not only because Wisconsin passed a very strict photo ID law, but because it made sure to go above and beyond in enforcing it illegally. Molly McGrath, the head of voter outreach for the Wisconsin ACLU, saw this firsthand:

    She had secretly recorded the DMV employees to show that the state was not complying with a court order to distribute voter IDs within a week to people…who did not have access to their birth certificates or other required documents.

    A few weeks earlier, US District Judge James Peterson, who oversaw the implementation of the voter ID law, had found that Wisconsin’s process for issuing IDs was a “wretched failure” that “has disenfranchised a number of citizens who are unquestionably qualified to vote.” Eighty-five percent of those denied IDs by the DMV were black or Latino, he noted in his ruling.

    ….Wisconsin assured the court that such a safety net was in place….The month prior, the Wisconsin Elections Commission had issued a similar release titled “Free Photo ID for Voting Now Available With One Trip to DMV.”

    But McGrath was skeptical. She enlisted her parents, who visited 11 DMVs across the state over the next two weeks to test what would happen to voters like Moore who did not have a birth certificate and wanted to get an ID. In recordings of those encounters, DMV workers said it would “take quite a while” to get the credentials needed to vote, and that it was “hard to predict” when that would be. Only 3 of the 11 DMVs confirmed they would issue a voter ID in a week or less, as the court had ordered.

    The lesson of Wisconsin is pretty simple: Voter suppression can work if (a) an election is close and (b) you’re really dedicated to making it work. Both of these things happened in Wisconsin in 2016, and Hillary Clinton lost the state.

  • Lunchtime Photo

    Along one stretch of Regent’s Canal, there’s a strip of pavement that parallels the towpath opposite the boats. Apparently, the folks who have mooring rights are also allowed to set up little sitting areas on the patch across from their houseboat. These setups revealed a lot of character about their owners, and I’m sorry I didn’t take more pictures of them.

    But I took a few, and this is one of them. It’s one of the simplest and most austere, but on a sunny day it offers a nice respite from the boat itself.

  • Artificial Intelligence Continues to Barrel Ahead

    Lee Jae-Won/AFLO via ZUMA

    I have a long piece in the current issue of the magazine about the way long-term trends in artificial intelligence are likely to cause mass unemployment in the future. Because of this focus, I included only a few brief examples of the current state of AI research along with details about how it works.

    And it’s a good thing, since that stuff is obsolete already. For example, I wrote a sentence or two about Google’s DeepMind computer and how it was able to become the best Go player in the world years before anyone thought it could. But now it’s even better, and this has some lessons for us. Here is Christina Bonnington in Slate:

    On Monday, researchers announced that Google’s project AutoML had successfully taught itself to program machine learning software on its own….On Wednesday, in a paper published in the journal Nature, DeepMind researchers revealed another remarkable achievement. The newest version of its Go-playing algorithm, dubbed AlphaGo Zero, was not only better than the original AlphaGo, which defeated the world’s best human player in May. This version had taught itself how to play the game. All on its own, given only the basic rules of the game. (The original, by comparison, learned from a database of 100,000 Go games.) According to Google’s researchers, AlphaGo Zero has achieved superhuman-level performance: It won 100–0 against its champion predecessor, AlphaGo.

    ….Early AlphaGo versions operated on 48 Google-built TPUs. AlphaGo Zero works on only four. It’s far more efficient and practical than its predecessors. Paired with AutoML’s ability to develop its own machine learning algorithms, this could seriously speed up the pace of DeepMind’s AI-related discoveries.

    This highlights some the things I briefly mention in my article. We have a tendency to think of AI primarily in terms of raw hardware power, and there’s no question that this is important. Full AI will simply never be possible until we have cheap, energy-efficient computing platforms with roughly the computing power of the human brain.

    But “computing power” is a combination of hardware and software. And hardware is a combination of CPU speed, custom chip design, and massive parallellism. In this case, the new AlphaGo machine has become a dozen times more efficient not because Intel has come out with a faster CPU, but via the use of better software, which is executed on Google’s custom Tensor Processing Unit chips.

    This is why I’m so confident that computing power will continue to double every couple of years, just as it has for the past half century. Standard CPUs aren’t likely to keep doubling in raw speed, but they’ll get smaller, cheaper, and more energy efficient. Combine this with better algorithms, better use of parallellism, and custom AI processing chips (which are in their infancy right now), and effective computing power is likely to continue to grow exponentially.

    We’re also in the infancy of making use of AI to help build better AI. Right now this is extremely limited, but that’s the way everything starts. In another decade, AI-assisted AI development is likely to be yet another factor keeping development on an exponential curve. It won’t be long before AI starts to get good at tasks that we currently pay human beings to do.

    This is going to put a lot of people out of work starting in about a decade or so, and this won’t be a rerun of the Industrial Revolution. Millions of people will be out of work for good, since by definition, any new jobs created by the transition to AI can also be done by AI. This is something we should be thinking hard about. But as I was researching my article, I was disappointed that even now, when the future of AI seems to be barreling toward us in a way that’s hardly deniable anymore, very little thought is going into this.

    So what can we do? I have a few ideas, but mostly I’m hoping that my piece sparks some more serious discussion. You can join in when it appears online.

  • Happy Birthday To Me!

    Happy Birthday to me! I’m 59 today.

    A reminder: I’m meeting up for drinks with a reader who was also born on the 19th, and everyone is invited. If you’re in London and want to get together, we’ll be at the Coal Hole at about 5 pm. The Coal Hole is at 91-92 The Strand, a few hundred yards east of Trafalgar Square. I’ll be wearing a bright red shirt. Feel free to drop by whenever you can. We’ll probably be there for a couple of hours or so.

  • Donald Trump Is Such a Pig

    Somehow Donald Trump can always surprise us. No matter how much of a pig we think he is, he turns out to be even worse. What kind of horrible excuse for a human being does something like this?

    Not that we should be surprised. It’s not as if this is the first time he’s done this.

  • Lunchtime Photo

    This is the dome of St. Paul’s Cathedral, shot from the south side of the river near the Tate Modern. The @#$*! scaffolding has been cleverly photoshopped out.

  • 50 (Un)popular Opinions

    For some reason, there exists a Twitter meme called “1 Like = 1 Unpopular Opinion.” I don’t really understand what this means, but the result is obvious enough: a long list of tweets spelling out your unpopular opinions.

    I don’t feel like using Twitter for this, and I don’t claim that all of these opinions are unpopular. That said, here are some pearls of wisdom presented old-school listicle style.

    NOTE: I have no intention of explaning any of these no matter how much you ask. Take ’em for what they’re worth.

    1. Execution is more important than strategy.
    2. Return of the Jedi is the best Star Wars movie. Just tune out the Ewoks.
    3. Good parenting is worth the trouble, but not because it produces great kids.
    4. The internet makes dumb people dumber.
    5. Southern California is the best place in the US to live.
    6. Preventing mistakes is a more important part of management than most people think.
    7. Path dependence explains a helluva lot.
    8. “Correlation is not causation” is a lazy shibboleth too often used by people trying to sound smart.
    9. Everyone should give up on hamburger arguments. Most fast-food burgers are basically the same. Except for McDonald’s which is bad.
    10. The trampoline picture used to illustrate gravity in General Relativity is a terrible metaphor and should be banned.
    11. Spam is kinda tasty.
    12. Jimmy Carter is both overrated and underrated.
    13. There’s no real reason that evolution needs to be taught in high school.
    14. “Veep” is an aggressively unfunny show.
    15. Hillary Clinton’s biggest problem is that she’s compulsively honest but sounds compulsively devious.
    16. Obama was absolutely right to do nothing in Syria.
    17. Del Taco makes great fries.
    18. Airline seats have gotten smaller because 90% of their customers aren’t very big and don’t care.
    19. Kids should probably be restricted in their social media use.
    20. Central banks cannot effectively raise inflation rates.
    21. Go ahead and salt your food. It’s not that big a deal for most of us.
    22. Artificial intelligence is going to start causing mass unemployment in a decade or two.
    23. Woke culture is doing a lot of damage to the ability of progressives to talk about race.
    24. Donald Trump is largely right about NATO.
    25. We should ban semi-automatic weapons.
    26. Movies are better than live theater in almost every respect.
    27. IQ is real and it matters.
    28. Saturated fat isn’t really that bad for you.
    29. Most magazine articles over 3,000 words are overwritten.
    30. Acting is almost all about voice control: pitch, timbre, rhythm, speed, resonance, etc.
    31. The Krell were not a very advanced race.
    32. We are too obsessed with Shakespeare at the expense of other classical playwrights.
    33. It’s OK for the y-axis not to start at zero. What matters is displaying the data honestly and clearly.
    34. We should ditch the trust funds and pay for Social Security and Medicare out of the general fund.
    35. Sleeping pills are a terrific way of overcoming jet lag.
    36. African-Americans are not underrepresented in the Oscar acting categories.
    37. White-collar hiring managers should worry less about finding someone with specific previous job experience.
    38. The permanent income hypothesis is absurd.
    39. Carpeting is better than hardwood.
    40. Wearing socks to bed is a good idea.
    41. Windows is a pretty good operating system.
    42. C.P. Snow was right.
    43. Managers should worry less about making workers happy and worry more about giving them the tools they need to succeed.
    44. Tom Cruise is a good actor.
    45. If something is important enough to be worth arguing about, it’s nearly always complicated enough that both liberals and conservatives have good points to make.
    46. Full-on driverless cars will be in widespread use by 2025.
    47. Lists are often a very good way to structure a story.
    48. Dostoevsky is better than Tolstoy.
    49. We don’t need either a wall or stepped up ICE raids against Mexican immigrants, but borders do matter and we should take reasonable steps to secure ours.
    50. Quantum mechanics: WTF?
  • Who Needs Corporate Taxes, Anyway?

    Kevin Hassett, currently CEA chair in the Trump administration, claims that a corporate tax cut would raise wages by $4,000. Laura Tyson, CEA chair during the Clinton administration and economic advisor to the Obama administration, says that Hassett’s claim is “disturbing” and “dishonest.” If you look at all the evidence, not just a few cherry-picked outliers, the most likely effect on wages is…zero.

    This should surprise no one. Hassett’s claim is ridiculous on its face. Nevertheless, Tyson supports the idea of cutting corporate taxes:

    My general view is a corporate rate tax cut with move to territoriality would increase investment in the United States. A lot of economists believe that….The original proposal from several years ago was for a revenue-neutral corporate tax cut. So a tax cut for corporations paid for by going after all the special deductions and special credits to broaden the base enough to generate revenue. The general view of that was that would eliminate distortions in the corporate tax code. There are wild differences in tax rates for retail, energy companies, etc.

    Roger that. A lot of people support tax reform like this—at least in theory. It’s getting them to support it in practice that’s hard.

    Here, however, I’m going to reveal my vast ignorance about corporate taxation. I basically think of taxes as just another input, like the cost of steel or transportation. What happens when those costs fall? In a normal market, competition forces companies to lower the prices of their goods until they are once again operating at the same level of profit as before. Lower prices produce higher sales, which in turn requires more workers.

    So yes: lower corporate taxes should have a modestly beneficial effect on employment. In a tight labor market, this will even lead to temporarily higher wages until a recession comes along to loosen up the labor market.

    But why should lower corporate taxes benefit capital? If, say, the widget industry operates on an expected return to capital of 10 percent, competition will keep it there even if taxes or other costs go down—but only as long as they go down for everybody. Thus, corporations should be eager for tax loopholes that benefit them exclusively, since that really does produce extra profits that can be put in the hands of shareholders and executives, but they shouldn’t care very much about overall tax rates that affect their entire industry equally.

    In other words, overall tax rates don’t matter much. It’s the loopholes and special subsidies that produce unjustified rents based on disparate tax levels. And sure enough, that’s what corporate lobbyists spend most of their time on. Getting rid of all this crap in the tax code is therefore a great idea, but the problem is that it will all just accrete again even if we manage to do it. The only way to get rid of it permanently is to eliminate the corporate income tax altogether.

    The overall effect of eliminating corporate taxes should thus be (a) higher employment and (b) fewer opportunities for non-market profits that benefit the rich. What’s not to like?

    Is this correct? If not, what’s wrong with it? Am I assuming that competition is too perfect? Or what?

    In any case, if this is close to right, it’s why I’ve long thought I’d support doing away with the corporate income tax entirely and swapping it for a carbon tax. We’d stop taxing stuff we like (corporate output) and instead start taxing stuff we don’t (carbon output). In the jargon of business, it’s a win-win.

  • Trump: ISIS “Gave Up” Because He’s President

    When I wrote yesterday about Donald Trump planning to take all the credit for the defeat of ISIS, I didn’t realize that he had been on the Chris Plante show a few hours earlier and had already done so:

    President Donald Trump took credit for the fact that ISIS is in retreat during an interview Tuesday, claiming that ISIS wasn’t on the run before because “you didn’t have Trump as your president.”

    ….”ISIS is now giving up, they are giving up, there are raising their hands, they are walking off. Nobody has ever seen that before.”

    When Plante asked why that hadn’t happened before, Trump took the bait. “Because you didn’t have Trump as your president,” he said. “It was a big difference, there was a big, big difference if you look at the military now.”

    Trump did nothing. The plan to take both Mosul and Raqqa was initiated under Obama, and Trump famously refused to approve a new plan for months because the military kept telling him that Obama’s approach was working. So he put them off and put them off until he finally approved a plan in August that was mostly the same as the plan we already had. And now he’s claiming that this new plan turned things around in eight weeks.

    I know we don’t expect anything else from Trump. But he can always be even worse than you think, can’t he? Hell, he didn’t even give the military any credit, let alone Obama. What a jackass.