A World of Connections - Economist Survey

A Special Report on Social Networking

30 January 2010

Global Swap Shops - Why Social networks have grown so fast--and how Facebook has become so dominant

• Network Effect - Value of a communications network to its users rises exponentially with the number of people connected to it
• Takes a while for social networks to reach its first million; once that happens, the numbers rise exponentially, as well.
• Multi-Feed (Facebook) searches databases almost instantly for relevant friend news.
• My Space's decline - faced with demanding revenue targets from News Corps, it neglected its technology and added new features like job listings that ignored its core users' interest--it got too cluttered for most people; its social network market fell from67% to 30% in September 2008

Towards a socialized state--The joy of unlimited communication

• The next big thing will be geo-networking apps, which use virtual data to broker real-world encounters.
• Foursquare, Gowalla, and Twitter are building businesses around this idea--asking people to add their whereabouts to their tweets will allow advertisers to direct services to people as they move from place to place.
• Sir Tim Benners-Lee - Weaving the Web

Internet was meant to be more of a social tool than a technical one.
Ultimate goal was to come up with something that made it easier for people to collaborate with one another.

Food Fighter - New Yorker

Does Whole Foods' CEO know what's best for you?

Nick Paumgarten

04 January 2010

Then

• A grocer typically wants to hide what goes on in back and disguise the hard work and artifice behind the scenes.
• Grocers have kept their customers ignorant of the slaughterhouses, onion fields, and artificial ingredients in soda.
• Our interface with the food chain ended with the stock boy and his sticker gun in Aisle 6

Now

• Whole Foods began to sell information and narrative along with the food.
• The Supermarket Pastoral as described in Michael Pollan's "The Omnivore's Dilemma"
• It showed pictures of the fisherman that actually caught the fish

Obama's Lost Year - New Yorker

The President's Failure to Connect with Ordinary Americans

George Packer

15 March 2010

Recovery Act signed on February 17, 2009 for 787 billion.

• In order to avoid a filibuster, Obama agreed to tax cuts that had little to do with economic recovery, and kept the stimulus package at the low end of what most economists thought was required.
• Spending was spread out over two years.
• Instead of giving money to local governments to hire workers, the administration thought regulations would drag out public hiring and has always felt that sustainable job creation is best done by the private sector.

Impact of the Recovery Act was nearly invisible

• No refund check for everyone like the Bush years, but instead refunds show up in the slightly larger paychecks over two years which can be missed, but more likely to be spent.
• Large numbers of jobs can be credited to the stimulus allowing states to keep public employees.
• Money was invested in long term infrastructure projects like high speed rails, etc and which was invisible.

The Key to Obama's first year is the Recovery Act

• Intelligent, but cautious policy making
• legislative compromises that watered down the bill's impact
• Immediate opposition campaign to declare it a failure.
• Gradual public disillusionment.

Shortly after the Inauguration, Republican party leaders announced to Obama that Republicans would vote against it as a block, even before negotiations had begun

Republicans thought there was greater political advantage to standing in opposition so democrats would take sole authorship of recovery efforts, rather than to help with the problems.

Windfall Tax

• The House voted to levy a 90% tax on AIG bonus and any other bonuses from firms that received public money.
• White House killed the bill because it was unconstitutional and felt that Wall Street was needed to restore long term solvency to the banks.
• Its difficult to tell people who are losing their homes that the situation is complicated.

Obama ties together the whole of his domestic agenda as a difficult, but necessary postponement of instant gratification in order to create a durable and widely shared prosperity. In a pattern that the White House has followed all year, the President just made a speech and moved on.

Similarities to Reagan

• In 1982, Reagan had 10.8% unemployment with a swelling deficit.
• Reagan continued a rhetorical offensive always drawing a distinction between his views and the Democrats.
• "Our current problems are not the product of the recovery program that is now just under way, as some would have you believe, Reagan said in his first State of the Union, they are the inheritance of decades of tax and tax and spend and spend.
• Obama's characterization that the economic crisis is a storm brought on by irresponsibility from both sides wasn't as dramatic a distinction as Reagan's words.

Obama's aversion to partisan small-mindedness and ideological oversimplification prevented him from making his case for his political agenda.

• Obama isn't rendering the country's story in a way that is memorable and convincing and as Begala puts it, "He doesn't situate it in a philosophy"
• Axelrod will tell you that they won because of character, not issues
• Barney Frank thinks that Obama could have done better if he were more adversarial to insurance companies and pharmaceutical firms and banks---suggesting that he was trying to be liked by too many people.

No Credit-New Yorker

Timothy Geithner's financial plan is working--and making him very unpopular.

John Cassidy

15 March 2010

During the past 10 months, US banks have raised more than 140 billion from investors and increased their reserves to cover unforeseen losses.

• Virtually all of the big banks (Bank of America, Wells Fargo, Goldman) have paid back the money borrowed from taxpayers.
• Treasury Department estimates the ultimate cost of the financial bailout to be 117 billion and much of it related to propping up GM and Chrysler, which is less than it cost taxpayers during the Savings and Loan implosion from the early 90s.
• When Obama came to office, Bush administration had already committed 230 billion dollars of taxpayer moneys to big banks, which Giethner as head of the NY Federal Reserve bank helped to enact.

American Recovery and Reinvestment Act of 2009 - 787 billion stimulus program

• Tax Cuts.
• New Spending Projects.
• Financial aid to states and individuals affected by the recession

Fed would purchase one trillion dollars worth of Treasury Bonds and mortgage securities--a move designed to bring down long-term interest rates, particularly for mortgages

Financial Stability Plan

• Public / Private investors would buy toxic assets and troubled loans from the banks.
• If the new funds did well, the private investors would share equally, if it went bad, the government would assume most of the losses.
• In the end banks were reluctant to sell their assets because they would have to admit a loss

Bank Stress Test - Government performed scenarios to see if banks could withstand severe recession.

• Undercapitalized banks would have to issue more stocks to investors or accept more government funding and more government control.
• The point was to bolster a bank's finances rather than nationalize them.

Richard Bove (Analyst at Rochdale Security)

• Calculated that US banks now have more capital as a percentage of assets in any year since 1935

Signs of Recovery

• Between March 9th and May 7th, when the results of the stress test were announced, the Dow rose by almost 2000 points
• Decline of house prices slowed.
• Fed began buying mortgage bonds.
• Congress started to disburse stimulus funds.

Larry Summers

Today with all of the major financial institutions having a market cap of more than 100 billion dollars and the economy growing again, the judgement not to nationalize, but to put an enormous emphasis on raising private capital looks to have been effective.

The Bonus and The Windfall Tax

• Last December, Geithner refused to follow the British government in advocating a windfall tax on bank bonuses because the Treasury Department advised him that the AIG bonuses couldn't be abrogated without breaking the law.
• An alternative bank tax was proposed in which big banks that expanded their balance sheet would pay more--this ended up raising more money than the windfall tax.

Financial crises have a way of revealing aspects of our economic system that otherwise would remain obscured, such as the symbiotic relationship between Wall Street and Washington, the hidden subsidies that financial firms receive from the Fed, and the fact that vast profits from JPMorgan and Goldman depend in part on an implicit guarantee from the tax payer.

Why do policy makers screw up financial crises?

They screw up because the politics is horrible and that deters action. They are slow and late and tentative and weak because they are scared to death of the politics.

Top of the Pops-New Yorker

Did Andy Warhol change everything?

Louis Menand

11 January 2010

The essence of Warhol was to eliminate the one aspect of a thing without which that thing would cease to be itself.

• Art that did not look like art--he sent impersonators out on lecture tours because it didn't make any difference.
• The Brillo boxes were received as art; the 8 hour movie showing the Empire State Building was received as a movie.
• Warhol wasn't hiding anything and he wasn't out to trick anyone--people just kept playing the game

The culture around Warhol was a culture of high artifice---its icon was the drag queen--and the gossip, the posing, and the pretense were all part of it.

• We ask if he loved or hated Campbell's soup because we want to know if there is significance to the iconography
• Is his work a commentary on the shallowness and repetitiveness of consumer culture or is it a celebration--a romp through the vulgar---a commentary on the art of highbrow Puritanism of the fine-art tradition
• When Monet was painting haystacks, he was doing something painterly with them, but Warhol's point was not to do anything to them--Popism

Arthur Danto

• Warhol's art is a celebration of the art that every American knows
• Danto's first epiphany--Art needs to be seen in an historical context--history of painting as a series of manipulations of the representation between art and history
• Danto's second epiphany--With the Brillo box, art history had come to an end because all styles were readily available now; art had realized its possibilities; there was nothing new technically to achieve--art had now become philosophy.

Clement Greenberg

• Avant garde artists were compelled to make non-represantational paintings because of the mass production of commercially manufactured culture.--kitsch; Hollywood films and popular fiction's subject was the satisfaction of middle class life; avant garde artists responded by making their subject art itself.

• Marcel Duchamp said the soup cans freed art from the tyranny of the retinal image; you don't have to stare at the art to get it, because the concept provides content
• Fine art is also a commodity and it can be mass produced.

Warhol's art was made possible by dadaism and the Bauhaus movement

• Moholy Nagy (Bauhaus) wrote "Art and Technology--A New Unity" (1937) and it questioned whether hand made art was better than mechanical and mass produced art.
• Walter Benhamin's 1936 essay "The Work of Art in the Age of Mechanical Reproduction"

Warhol was important because his work challenged impurist traditions.

• Warhol thought Rauschenberg, Jasper Johns, etc were still doing high brow stuff with low brow techniques--none of them could have made the Marilyns without doing things with it to get rid of sentimentality
• Warhol made the Marilyn pieces just after she died, the Jackie pieces from images from the funeral---and they spoke to concepts of beauty and mortality
• Rauschenberg silk screened bits and pieces from magazines, while Warhol just silk screened money.