The horizon is not so far as we can see, but as far as we can imagine

Tag: Oligopoly

What App Stores Have Cost All Of US

There’s a very old Canadian joke. A farmer is angry at the weather, so he raises his fist to the sky, and yells, “Goddamn you, CP Rail!”

Back in the age of rail if you were a farmer the only way to get your product to market unless you lived very close to a city, was by rail. There were few railroad companies, probably only one near you, and whatever they charged, you had to pay.

Rail company freight prices were based on maximizing profit for them, and that price drove a lot of farmers out of businesses, and left many others working for poverty wages.

App stores are, effectively, the only way many software developers can get their products to market. Most of them charge 30%.

A lot of consumers think this doesn’t matter, “who cares how they split the price?”

But that 30% is a cost, a high cost, for a service which costs companies like Apple and Steam almost nothing. (Apple also insists on a cut of all in-App purchases.)

Thirty percent is actually about a 42% price increase (30/70). It is HUGE. It is absolutely a cost; apps are not viable at all price points: you can’t just charge whatever, because most of them aren’t “must haves.” Running app stores costs almost nothing compared to the profits (not for the monopoly or near-monopoly providers, like Google, Apple and Steam).

Anyone who is the least familiar with business knows that increasing your production costs so much absolutely means that many products will never see the light of  day; they aren’t profitable. Entire companies will not come into existence because when the initial costing is done, the 30% makes their offerings unprofitable. Other companies will go out of business because their product(s) don’t make a profit or enough of a profit with that 30% in place, where they would at 15% or 10% or 5%.

Even businesses which do exist, and prosper, would prosper more if the charge was less, AND Apple and Steam and Google would all still be fine, and able to provide just as good services. (All these businesses are infamous for their profits, and their app stores are nearly pure profit.)

So what app stores at 30% has cost us is a lot of businesses: many which never existed and we can’t miss, others that went out of business. Thirty-percent app stores have also cost existing businesses a lot of profits they could have reinvested in new employees, or given to shareholders (or, admittedly, wasted on their executives.) They have also cost us a lot of apps, both from companies that never existed and from existing companies, because the 30% made them unprofitable right at conception.

App store fees are taxes; all major app stores that I can think of off-hand are near monopolies or part of oligopolies. We don’t know what Apple’s profits from the app store are, but one expert guessed around 80% (Apple said “no” but never gave the necessary data to refute.)

No one makes that sort of profit except in brief periods or when they have a huge, and unfair, market advantage. There is no way in any reasonable market theory to justify such profits over a period of more than a couple years. These are pure market position/monopoly/oligopoly profits.

So, yes, my friends, unless you are attached to the spigot (not necessarily the App spigot, but the general oligopoly spigot), the App store has cost you something: a world with a lot more jobs, companies and apps. You don’t even know what you lost, because what App store companies have done is mostly akin to strangling newborns: you never got to see what they killed, just by existing and taking extortionate profits.

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Facebook, Destroyer of Media

So, Facebook has been fined forty million dollars for inflating video statistics.

Sounds like a yawn, eh? Not a very big fine, for a not-very-big crime.

But it was a big crime. Newspapers, web sites, etc…pivoted to video. Facebook said that views were as much as 900 percent higher than they actually were (counting, among other things, three-second views as viewership.)

So companies hired video staff, got rid of writers and pivoted.

And revenues crashed, because there wasn’t actually viewership or a way to monetize that viewership.

Virtually the entire online humor industry, for example, went under.

Facebook and Google are parasites and predators. They don’t create sweet fuck all, but they take a huge share of the revenue that would go to actual content producers. They devastate entire industries. And in this case, Facebook did it by straight-up fraud. They made billions from their lies, and paid a tiny fine.

In other words, the fine is so small, that Facebook knows they should commit fraud again in the future.

This isn’t effective law, effective regulation, or anything approaching justice.

Facebook needs to be broken up into constituent parts, and they need to be regulated. As a place to connect to friends, with a chronological timeline, Facebook provides a genuine service. As surveillance capitalism and a gateway that skims actual producers’ profits, destroying producers wholesale, it’s a catastrophe.

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Oppressive Precedents Used Against Nazis Will Be Used Against the Left

All right, so the Daily Stormer got kicked off GoDaddy, went to a new hosting company, and then got kicked off that one. Victory? Even the guy who did it isn’t happy he did it.

I am reminded of when PayPal, Visa, and Mastercard all decided to stop accepting payments for Wikileaks, after they published Collateral Murder. (I know many on the left now hate Wikileaks, but at the time these leaks were considered beneficial to the left wing, since it hit a Republican war–Iraq.)

There’s no question that the Daily Stormer amounts to Nazis, I’m not even going to say “neo,” but if you think this won’t be used against the left, well…

NY Governor Cuomo isn’t a Nazi, but he is one the biggest assholes around, having conspired to make sure that Democrats didn’t take control of the NY State legislature, for example, among many other strategies.

Yeah. Look, historically, censorship laws and so on have always hit the left harder than the right. Any law which can be used against the left will be used against the left.

Protecting the rights of people you hate is the price of protecting your own rights. If you take rights from Nazis, you will be taking them from yourself. At the very least, be sure they are specifically targeted at Nazis, similar to Germany’s laws. If they aren’t, they will be used against you.

As for private power: Concentration of power into a few oligopolies has made private actors able to effectively censor with as much efficacy as government. When Google decided to hit “fake news” somehow that meant that the World Social Website got hit hard.

Concentrated private powers that censor are almost as bad as governments that censor. In some ways, it is worse, because we pretend that places like Facebook, Google, and Twitter are not commons, but private, and thus grant them immunity from things like the first amendment, even though they control most of what people see.

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The Only Person with Sense in the Trump Administration…

Steve Bannon

…is Steve Bannon. (Yes, he’s a nasty nativist as well.)

In the last few days, Bannon has suggested increasing the top marginal rate to 44 percent and regulating Google and Facebook.

Both of these are good ideas. I’m sure that Bannon’s regulations of Facebook and Google might not be what I’d want, but the bottom line is that these are now the primary media organizations of the world: What people read or see is mostly determined by Google or Facebook–their algorithms and employees.

For example, three months ago, Google put out a new algo to reduce fake news. Result?

In the three months since Google implemented the changes to its search engine, fewer people have accessed left-wing and anti-war news sites. Based on information available on Alexa analytics, other sites that have experienced sharp drops in ranking include WikiLeaks, Alternet, Counterpunch, Global Research, Consortium News and Truthout. Even prominent democratic rights groups such as the American Civil Liberties Union and Amnesty International appear to have been hit.

Hey! What a surprise. Major corporation does something which makes people who tend to think badly of major corporations read less!

The bottom line is simple: Two companies control most of what people read and that should be under democratic control. And that’s before we even get to how Google and Facebook have systematically taken control of advertising, diverting more and more of the profit to them and away from actual content creators.

This is similar to the problem of railroads before major highways and trucking: farmers could only get crops to market through railroads, so railroads took almost all the profits. We have forgotten, but farmers hated the railroads with a sickly passion, and for good reason.

Google and Facebook determine who gets read, the political and economic repercussions of which are massive. (And Facebook’s CEO quite clearly wants to be President.)

Bannon is right, whether you like his other politics or not.

As far as the Trump admin goes, Ivanka and Jared are the ones who try to mitigate the nasty social stuff (often failing) and Bannon is the only one who wants ordinary Americans to do well.

You can despise all three, with good reason, but understand the reality.

Oh, and “fake news”? It exists, but the hysteria around it is being ridden heavily by people you want nothing to do with. And no fake news so far has ever equaled the New York Times lies which helped sell the Iraq war.

Fake news hysteria among elites is really just them saying: “Our monopoly on lies is being taken away from us! Only approved lies should be allowed!”

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The Problem with Basic Income

Basic income—just giving everyone a certain amount of money, is an idea with a lot to recommend it.  In any society which isn’t willing to just let people suffer or die because they don’t have money, there is a “social welfare net” with a vast bureaucracy.  Why not just give everyone enough money to live on, and wipe out most of that bureaucracy?  If you’re going to give poor people money anyway, it’s more efficient, and vastly less humiliating.

There’s a great deal of controversy around the idea of technological unemployment (economists sneeringly dismiss the idea on aggregate as the “lump of labor” fallacy), but even if you don’t believe in it en-gross, changing technology does cause specific people, often large numbers of them, to lose their jobs, and many of them never work again, or if they do, work at terrible jobs.  A basic income deals with this issue, at least somewhat, and, again, far more efficiently than welfare and unemployment insurance and so on.  And if you believe that there will be widespread technological improvement as AI and robotics improve, this will mitigate against it.

In a demand based society; a consumer society, where the economy is based on large numbers of people buying things, a basic income makes sense.  People with no (or too little) money, don’t spend it (obviously) and that’s bad for the economy.  Every dollar you give a poor person gets spent; it immediately goes to someone else, and that means that even those who are well off have reason to be for a basic income: most of it is going to wind up in their hands, and if it doesn’t (because you have a basic income which goes to everyone, not just those below a certain income), well, they still get theirs.

One might point out that we’re moving away from a demand based society, however, at least in the West. More than all the productivity gains of the last business cycle in the US, for example, have gone to the top 10% (really the top 3%).  Consumer inflation is flat, and in many countries verging on deflation, while the goods that the rich buy (investment art, Manhattan and London real-estate) are booming.  Moving away from a broad-based demand society, such as we had in the post-war liberal era was mainly done because it benefited the rich, but it also solved another problem—increased demand fed into oil and other commodity prices, and as the 70s  and early 80s showed, that lead to huge inflation and economic dislocation.

So basic income, at any level that would be equivalent to a living wage (aka. letting people live a decent life, not just barely scrape by), can be expected to spike inflation in various commodities, including oil.  This is a problem, but it’s not a huge problem, because we finally have the technology which allows us to move off oil (not completely, but enough to mitigate the effect of demand increases), and because, hey, we’re flirting with deflation anyway.

The real problem with basic income has to do with who controls our economy—with the fact that we are sold what we need, by and large, by oligopolies.  A few large companies control most industries, and effectively price set.  (Broadband profits in the US are almost 100% a year.)

This is known as pricing power. When someone needs what you sell more than you need to sell it to them; when they have little choice but to pay what you ask, you can demand a premium.  If something is scarce, either naturally or artificially, those who control it get more of the share of national income than otherwise.  In a society whose economy is not controlled by oligopolies this is usually a good thing—prices go up, more people enter the industry, prices drop.  That’s the what the economics textbooks tell you happens.  But it doesn’t happen in an oligopolistic economy where the oligopolists control government and where barriers to entry are very high.

So those who are in an oligopolistic situation, whether telecom companies, health insurers, pharmaceutical companies or landlords, are generally able to set prices: you must have medicine, you must have shelter, and in a modern economy, try and get by without a phone and internet.

What this means is that increases in income, especially at the lower end, tend to be simply taken away by those who have what you must have.  Everyone will know what the basic income is, and they will know who is surviving on just that, or just that plus a low-wage job.  And they will raise prices so that money goes to them.

Basic income which does include either oligopoly busting or regulation (or having the government, oh, just provide broadband and/or housing itself) will help many people, to be sure.  But in a not very long time, most of the gains will be eaten by those who have pricing power.

This, by the way, is far from a “socialist” theory. This comes out of bog-standard neo-classical economics.  Non-competitive markets tend towards concentration of wealth, and those who have pricing power use it (they act in their own self-interest, precisely as economics says they will.)  Markets are wonderful things. They are extremely efficient at allocating money.  And they will do exactly what they are set up to do.  In an oligopoly situation, with capture of government, they will allocate that money very quickly to the oligopolists.

So if you want basic income to work, you must also make capitalism work. You must create actual competitive markets, you must-trust bust, you must regulate and you must move, as government, to ensure that the important things people will spend that basic income on are not scarce—either naturally or artificially.

This extends far beyond basic income.  A market economy; a capitalist economy, works to the benefit of the majority only when it is competitive and when scarcities are actively managed, ideally to remove them, and when they can’t be removed, to ensure that those who provide scare necessities, do not reap outsize profits which allow them to buy up the rest of the system, including government and civic society.

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