Longreads
Kim Masters at Hollywood Reporter on the personality clashes behind Netflix's recent stumbles. Some of what went wrong for Netflix is common to the rest of the pandemic winners: overestimating the permanence of behavioral shifts. But some of the company's issues come from combining a data-driven tech company with the hard-to-model, personality-driven creative side. Since entertainment is so hits-driven, it will always be possible to draw a trendline that either shows that a particular studio has finally gotten it all figured out or has completely lost its way, but that shouldn't detract from the fact that their baseline ability to create popular TV and films is not static.
William Buckner in Words in Progress on why we duel. Dueling is a fun topic, because it can be generalized so well: it's an agreement to avoid a long and costly conflict by instead picking a single contest that will settle things once and for all. Modern humans aren't all that different from our generally much more violent ancestors, and when we don't spend much time killing each other it's partly because we've found good proxies for that same instinct.
Nick Schmitz, Brian Chingono, and Dan Rasmussen at Verdad have a good piece on whether value investing works as a way to choose which country to invest in, rather than which stocks within a country. Many investment signals get examined within the context of a specific country, because it's a good way to control for idiosyncratic risks. But this misses the fact that countries, just like industries and companies, can go in and out of fashion. Right now, this approach basically means holding lots of Japanese stocks (like a number of long-suffering investors, I have a collection of screamingly cheap Japanese microcap stocks, which, of course, have not done anything exciting lately). But this approach also would have kept an investor out of Japan during the period when that country's market had a long, painful decline.
Mark Dittli interviews Joerg Wuttke, President of the EU Chamber of Commerce in China, for TheMarket.CH. It's a good look at the internal debate around Covid Zero, and some of the constraints China faces in switching policies. Specifically: "Until the 20th Party Congress, which will take place later this year, they will stick to the Zero Covid policy. President Xi wants to be confirmed for a third term, so he cannot change his narrative this close to the finish line. The president has maneuvered himself into two dead ends at once: He can’t change his Covid policy, and he can’t change anything about his friendship with Vladimir Putin." It's important to remember that even in authoritarian one-party states, politics is inescapable.
Joseph Kopecky and Alan M. Taylor have a paper on the problems arising from high savings and an aging population. Worth reading and thinking about: we'll be living with the consequences of this for the next few decades. In particular, the paper looks at the puzzle of a secular decline in bond returns without a decline in the equity risk premium. There are limits to what policy and preparation can do about this: altering demographics through (aggressive) pro-natalist policies will help, as will encouraging automation (a smaller working-age population and a large number of dependents means we'll need it). But this is another way of saying that for the world not to have a lower standard of living driven by aging-related problems in the future, we need a lower standard of living driven by mitigating those problems in the present.
Books
The Reckoning: Like watching a side-by-side pair of training montages, one from someone who really intends to win, and one from someone who will inevitably lose. This book traces, in parallel, the decline of the US auto industry and the rise of the Japanese one. There are some fun parallels—in both countries, companies came to an accommodation with labor because they were worried about communism, but in Japan's case it was a less generous one. This book is a great warning to anyone in an industry where times are getting easier, pay is going up monotonically, and competition seems distant. That can be true for a while, but not forever. (This one’s a reader recommendation, too.)
Mondo Agnelli: A history of Fiat and its founding family, this book veers back and forth between business history and celebrity gossip. Multigenerational wealth produces plenty of the latter even though it needs the former. The later chapters of the book are especially good, on how Fiat eventually adjusted to fundamental changes in the auto industry and got itself back on track.
Open Thread
Drop in any links or comments that may be of interest to Diff readers.
What are the best policy approaches to aging? Many of these will be zero-sum—for example, US demographics look better than other rich countries' because of high immigration, but when that immigration comes from such countries it makes their problems worse. Japan's export sector seems like it can withstand a drop in the working-age population, but there are only so many globally competitive product categories out there.
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The NYT pieces on Tucker Carlson are interesting, but this tidbit on media economics was maybe especially revealing:
> What it did not do was endear Mr. Carlson to advertisers. As blue-chip sponsors fled, Fox filled the space with in-house promos — using Mr. Carlson’s popularity to push other Fox shows — and direct-to-consumer brands like MyPillow, whose chief executive is a major promoter of Mr. Trump’s stolen-election lie.
> Last May, after promoting the white supremacist “replacement” theory, Mr. Carlson had half as many advertisers as in December 2018. But he brought in almost twice as much money.
People have this sense that you never want to piss off the big brand advertisers, and that’s true if you have a large younger audience that is attractive to them.
On the other hand, let’s say you have an older audience that is susceptible to misinformation. Scams and and junk are extremely high margin and direct response ads that peddle that stuff will work fine as well. I think newspapers and radio stations were making money off of fake patent medicines 100 years ago for the same reason.
Technologies that decrease the number of jobs that require young people that can handle physical labor and increase the jobs that can be done by older people? Automation, as you say, but maybe there are some outside the box ideas? Double the size of Congress? More Berkshires? 30-person Boards?
Building more senior friendly living spaces is another one. Older people can't drive (or shouldn't drive) and don't handle stairs that well. We have a lot of rules and incentives that make it hard to move and hard to build accessible neighborhoods and buildings relative to what you see in Japan (eg we require giant elevators in new buildings and make it hard to demolish stair-only older buildings, we require lots of free parking and build wide roads).
Immigration, as you mention, seems to be the big one. Improving the dependency ratio does wonders.