Shamubeel Eaqub

Sped up change: Blackberry, Crackberry, gone?

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Blackberry, the phonemaker that popularized smartphones, may put itself up for sale. It has gone from a superstar to a has-been in less than a decade. Its share price has fallen from a peak of US$140 in 2008 to around $10 now. It was severely disrupted by Apple and other smartphone makers. I am one of those who migrated from obsessing over my Blackberry at the dinner table to obsessing over my iPhone at the dinner table – I don’t miss it one bit.

This had me wondering what it means to live in a fast changing world, where loyalties are fickle and preferences turn on a dime. I had a bit of time at the airport in Taranaki. This blog is asking those questions out loud and does not have fully formed answers. I want your views.

Blackberry share price (from Yahoo!Finance)

Blackberry’s fall from grace is Joseph Schumpeter’s “creative destruction” in action.

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Matt Nolan

Economic analogies explained

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Via a self-confessed “long time reader, first time contributor” came this excellent Onion article on job growth being akin to a slug.

And to clarify, sources emphasized that the current employment climate isn’t being described as sluggish because it looks like a slug. That reportedly wouldn’t make any sense. No, the slug term is being evoked due to the performance of the job market, which in spite of moderate gains in the manufacturing sector is currently, you know, slow.

Just like a slug, sources again confirmed.

Look, this reportedly still may not be totally clear. But how about this: If you think of job growth as an animal—and you don’t necessarily have to do that, but sources confirmed it can be a useful way of explaining things—it makes sense to choose an animal based on its speed, as that’s how the overall economy itself is usually assessed.

Aha, excellent.  There is no way economists abuse analogies  …

Sidenote:  For the social scientists is this (via Robert Went on Twitter).  If  this does not make you lol, you must be having an annoying day, and I’m sorry 🙂

Shamubeel Eaqub

First home buyer help – lets repeat others’ mistakes

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National has announced policy to support first home buyers to take on more debt. It will have an entirely predictable outcome: higher house prices and higher debt. This will drastically increase the cost of the homes, which are as of now being sold. I recently took the assistance of a company to sell my house fast Arizona and not only did the house get sold remarkably soon, but the money was transferred to my bank account without any delay. So this policy which has just got introduced could make things for potential home buyers a little difficult.

The only good thing about this policy is that it is relatively small: $64m over four years. That’s $16m per year and assuming 90% gearing, $160m of house sales. That’s just under 0.5% of $36b of housing turnover in the year to July 2013.

To National’s credit they couch it in terms of a short term response and in the backdrop of other work to look at housing and land supply. But it is still a bad policy that inflames demand for housing even further, before they have tangible impact on increasing supply.

First home ownership subsidy/support policies have been tried in USA, Australia and UK. This led to a high amount of borrowing by those who could not afford it. It was also at the heart of the sub-prime crisis in the USA and the subsequent GFC. Read more

jamesz

Side effects of 9/11

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Humans are boundedly rational and use heuristics to make decisions, rather than optimise at every turn. It doesn’t always serve us well:

In the months after the 2001 terror attacks, passenger miles on the main US airlines fell by between 12% and 20%, while road use jumped.
…
Professor Gerd Gigerenzer, a German academic specialising in risk, has estimated that an extra 1,595 Americans died in car accidents in the year after the attacks – indirect victims of the tragedy.
…
Gigerenzer ascribed the extra deaths to people’s poor understanding of danger. “People jump from the frying pan into the fire,” he said.

“We have an evolutionary tendency to fear situations in which many people die at one time. This is likely a hold-over from when we lived in small groups, where the death of a small part of the group could place the lives of everyone else in jeopardy.

“That’s no longer the case, but it is very difficult to elicit the same fear for the same number of deaths spaced over a year.”

Matt Nolan

Isn’t Economic History grand

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The discussion about Milton Friedman going on at the moment is great fun – with a bunch of people discussing whether Friedman was Keynesian and what this even means.

It all starts with Krugman attacking Friedman’s obsession with monetary aggregates.

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jamesz

Everybody lies

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Netflix makes a lot of money from understanding your viewing preferences and one thing they’ve learned is that ratings don’t matter, only viewing behaviour is predictive:

Why do I see so many three- or even two-star movies in my recommendations?

Gomez-Uribe: People rate movies like Schindler’s List high, as opposed to one of the silly comedies I watch, like Hot Tub Time Machine. If you give users recommendations that are all four- or five-star videos, that doesn’t mean they’ll actually want to watch that video on a Wednesday night after a long day at work. Viewing behavior is the most important data we have.

Amatriain: We know that many of the ratings are aspirational rather than reflecting your daily activity.

We can’t hide from you.

Gomez-Uribe: A lot of people tell us they often watch foreign movies or documentaries. But in practice, that doesn’t happen very much.

This is why economists focus on revealed preferences almost to the exclusion of stated preferences.