Monday, November 22, 2010

Blessings and Privileges

The first principle of civilization ought to have been, and ought still to be, that the condition of a person born into the world, after a state of civilization commences, ought not to be worse than if he had been born before that period.

-- Thomas Paine, Agrarian Justice (1796)

In this week's Sift:

  • Scrooge in November. Thanksgiving was supposed to be farmers celebrating a bountiful harvest. But more and more it feels like pirates celebrating the distribution of booty.
  • My Reservations About the Market Economy. Open Table: A simple example illustrating how wealth flows to gatekeepers, not producers.
  • Short Notes. Thirty real-life Nights at the Museum. Celebrity infidelity. DIY federal budget-balancing. Cyberwar is happening. But-heads. And more.

Scrooge in November

I don't know what the Thanksgiving equivalent of Scrooge is, but I find myself sliding in that direction. I've got nothing against gratitude, or a holiday in which an agrarian culture gives thanks for a bountiful harvest. But more and more of the standard Thanksgiving sentiments are leaving me with that bah-humbug feeling.

Thanksgiving is the holiday when we are supposed to count our blessings and be grateful for what we have. There are lots of ways to do that, and lots of excellent examples of people giving thanks in both religious and secular literature. But the Bible also contains an excellent example of how not to be thankful. In Luke 18, Jesus describes this character:

The Pharisee with head unbowed prayed in this fashion: "I give thanks, O God, that I am not like the rest of men -- grasping, crooked, adulterous. … I fast twice a week. I pay tithes on all I possess."

In other words: "What a great God you are, for making a great guy like me. Thanks for creating a world where I get to better than everybody else."

Bertrand Russell satirized another kind of self-centered thankfulness in An Outline of Intellectual Rubbish:

Sometimes, if pious men are to be believed, God's mercies are curiously selective. Toplady, the author of "Rock of Ages," moved from one vicarage to another; a week after the move, the vicarage he had formerly occupied burnt down, with great loss to the new vicar. Thereupon Toplady thanked God; but what the new vicar did is not known.

If you listen closely, a lot of Thanksgiving prayers -- particularly the patriotic ones -- sound like these bad examples.

Thanks, God, for putting me in a country where I get to use up all the world's oil. Thanks for making us so powerful that ordinary rules don't apply to us: We can attack other countries with impunity, assassinate people we don't like, and kidnap and torture anybody we think might pose a threat.

Thanks for a global economic system based on dollars -- which we create at will, so our country can consume more than it produces year after year. Thanks for undocumented immigrants who will do our dirty jobs for less than minimum wage. Thanks for letting us ship so much of our dangerous or poisonous production to the other side of the world.

We're grateful to You, O God, for creating a world in which it's so great to be us.

I'm becoming suspicious of the whole count-your-blessings framing of the holiday. Because most of what we count are not "blessings" exactly. They're privileges. They arrive on our doorstep not because we are God's special loved ones, but because we are the beneficiaries of an unjust global system.

Suppose, for example, that you had been born in Guatemala. Your land has been blessed with a climate and soil perfect for growing bananas. But your portion of this blessing is that you get to compete with your fellow peasants for the opportunity to make subsistence wages working on plantations owned by foreign corporations. Somewhere back in the mists of history those corporations may have bought that land from your ancestors (or not), but whatever benefit they received was long gone by the time your life started. Your grandfather may have participated in a political movement to take some of those lands back, but that movement was put down by military force organized by the CIA. So your lands' blessings belong largely to Americans now.

Or suppose you were born in Bolivia, a land blessed with rainfall that (depending on where you are) varies from adequate to abundant. But (until a near-revolution in 2002) none of it belonged you. All the water in Bolivia, even rain that fell decades ago and was sitting in underground aquifers, belonged to an international consortium led by Bechtel. Somewhere between God and you, the blessing of rainfall got intercepted and reassigned.

So yes, we Americans enjoy a large share of the world's blessings. But it's not at all clear that God intended us to have them. We took them. And I suppose we could thank God for making us strong enough to take what we want. But that's a blessing on a different level than turkeys and pumpkin pies.

I know, most of us never consciously applied to be beneficiaries of an unjust system, or intentionally conspired to keep the booty coming. If we're forced to think about it, we may not even approve. So how should we handle Thanksgiving?

I don't have a complete answer, but I will make a few suggestions. First, after-the-fact guilt helps no one. The turkey's in the oven, and you might as well enjoy it. If you don't, nobody else will.

If you do remember the Bolivians, Guatemalans, and other dispossessed peoples in your Thanksgiving prayers, don't think of them as "unfortunate". That leads you back towards imagining yourself as "fortunate"-- as God's special friend. But God didn't distribute the world's wealth. People did -- through force and guile and manipulation, often in perfectly legal and transparent ways. Many of these transactions have resembled another Bible story: Esau selling his birthright to Jacob for a meal. Some temporary need coupled with one generation's lack of foresight -- and ownership of the land and the forests and the rivers shifts forever.

Charity is fine, but that's not the answer either. The world's poor do need the jug of water you could buy them, but what they really need is access to the river. As far back as John Locke, the defenders of "liberty" have told just-so stories about the "state of Nature" that existed prior to government. But there's one aspect of the state of Nature they always leave out: The state of Nature offered full employment. The means of production were the lakes and plains and jungles where anyone could go hunt and gather. But a system in which even the groundwater is private property, whose owners have the "liberty" to do what they want with it -- not only free from government interference, but with government controlling anybody else who tries to interfere -- that's not a state of Nature. That's a very unnatural state indeed.

So here's what I recommend for Thanksgiving: Sure, count your blessings, but also count your privileges -- and don't confuse the two. And sure, resolve to give more to charity, but resolve even harder to use your privileges and powers and out-sized access to work for changing the system.

PeaceBang declares a pre-Thanksgiving Moment of Whining.

Vi Ransel writes: "You can't ignore the class war (by claiming you're not into politics)."

My Reservations About the Market Economy

How restaurants take reservations may not seem like typical topic for the Sift, but bear with me on this. A recent article about this particular niche of the economy says something interesting about how the economy as a whole works. is a service that allows you to make restaurant reservations online. It claims to handle 15,000 restaurants, and though it seems concentrated on upscale restaurants in the major cities, its reach extends all the way up here to Nashua, NH. It provides reservation-tracking software to restaurants. Its web site lets prospective diners check which of their favorite restaurants have tables open, and helps travelers find restaurants in unfamiliar neighborhoods.

Diners pay nothing, and in fact get loyalty points (exchangeable for free meals) for booking with Open Table. They also get to rate restaurants and see the ratings and comments of other diners. Restaurants pay installation costs, monthly membership fees, and a fee for each reservation. The business model seems to work. Open Table went public in 2009 and (at Friday's closing price of $67.83) has a market capitalization of $1.6 billion. (That's a little over $100,000 per restaurant. Hmmm.)

Services like this benefit from what is called a "network effect". In other words, each user makes it more valuable for all the other users. (The standard example of a network effect is a phone system. If you're the only person on a phone network, there's nobody you can call. You want to be on the network that everybody else is on.) A small table-reservation service is quirky and has patchy coverage. But a big one has lots of restaurants, lots of ratings, lots of comments, and the resources to put all the latest bells and whistles on its web site. The more you use it, the better it gets at recommending restaurants you'll like and tailoring promotions to your tastes.

Left to their own devices, markets with a strong network effect tend toward monopoly -- one network to rule them all. As this happens, the power relationship changes: Rather than simply connecting diners to restaurants, Open Table is becoming a gatekeeper. It controls the relationship with the customer. It decides which restaurants succeed or fail.

Restauranteurs are starting to see the writing on the wall. In a post that gives a fascinating glimpse into the restaurants' side of this relationship, San Francisco restauranteur Mark Pastore asks:

Have the ascent of OpenTable and its astronomical market value resulted from delivering $1.5 [now $1.6] billion in value to its paying clients, or by cunningly diverting that value from them? What does the hegemony of OpenTable mean both for restaurants and for the dining public in the long run?

He asked a dozen of his fellow restauranteurs in SF and New York about Open Table, and found only one who was happy. The others report feeling "trapped" and one says that his payments to Open Table amount to more than he makes from his 80 hours a week spent running the restaurant.

You see, once a service approaches monopoly, the dark side of the network effect appears: When only a few restaurants had Open Table, they might imagine that it was delivering new customers to them. But if all the restaurants have it, it's just shuffling customers around. Checking Open Table might cause you to book with Amelio's rather than Antonio's, but you were going out to eat somewhere anyway, and you probably would have spent just as much money. At that point, Open Table's fees are just siphoned out of the restaurant system without providing any systemic value.

Pastore concludes:

by permitting a third party to own and control access to the customer database, restaurants have unwittingly paid while giving away one of the crown jewels of their business, their customers.

And customers, by taking advantage of the short-term freebies Open Table provides, may ultimately wind up with fewer choices: If restaurants are less profitable, more will close. It's already a tough business, and anything that makes it tougher is bound to push marginally profitable restaurants over the edge.

So I'm finally able to explain why this is a Sift topic: When people defend our skewed distribution of wealth or argue that the rich should pay lower taxes, their rhetoric usually implies that the free market rewards the "productive" members of society. But when you look into markets more deeply, that's obviously false.

Think about the best restaurant meal you've ever eaten. Who should you thank for producing that experience? The master chef who perfected the recipe, the production chef who prepared your meal, the waiter/waitress who took care of you, the farmers who raised the ingredients, and even (though you probably never think about this) the cleaning staff. You might also thank the owner, who in a small restaurant was probably one or more of the people I've already listed.

But none of those people -- probably not even the owner, the "small businessman" that conservative rhetoric idolizes -- is making much money. None of them approach the wealth of Open Table's founders, or even of the investment banker who managed Open Table's IPO, or the speculators who have run up its stock price.

You see, our market economy doesn't reward producers, it rewards gatekeepers. You don't make money by building roads. You make money by finding (or creating) bottlenecks and setting up toll booths.

This weekend I happened to talk to someone with second-hand knowledge of a small publisher's attempt to get into e-books. The number of hurdles to jump is enormous -- unless they go through Amazon, which siphons off at least 30% of the list price -- practically the entire profit margin. The producers -- the authors, editors, and even publishers -- won't make nearly so much money on the books as Amazon will.

Short Notes

You didn't hear about this contest in time either, did you? Kate McGroarty won a chance to live at Chicago's Museum of Science and Industry for a month.

Salon's Mary Elizabeth Williams' reaction to celebrity infidelity is like mine: I have long understood that famous people shouldn't be our moral role models, but do they have to be so stupid about it?

This is how voter suppression works. The non-existent voter fraud problem gets all the media attention, but in every election real people get intimidated out of voting, or just run through enough hassles that they give up.

The NYT has an online gadget that helps you build your own balance-the-budget plan. It's not perfect, but it forces people to get real. Want to eliminate earmarks? Cut foreign aid in half? Reform malpractice suits? Good for you: You're 3% of the way there.

Matt Yglesias brings some uncommon sense to the deficit discussion.

the key thing for any fiscal adjustment plan to say on the cut side isn’t really how much money you’re cutting, it’s what things do you want the government to stop doing. Once you name the things, you can total up the savings. Then you can either say you’ve cut enough, or else you can go back and name more things.

Hence his reaction to the idea that the Smithsonian should charge admission: It costs a lot to assemble and maintain the Smithsonian collection, but almost nothing to let one more person see it.

presumably “people might visit the museum” is high on the list of possible benefits of having a National Gallery of Art. What you would ideally do with these kind of public services—be it a museum or a subway or whatever—is take a good hard look at whether or not you really believe in providing the service. And if you do, you provide it for free so that as many people as possible can benefit. If you develop a problem of overcrowding, then you start charging admission to ration capacity.

Instead of this kind of thinking, we talk about budget caps, hiring freezes, across-the-board cuts and everything but asking questions like: "Do we want to keep fighting in Afghanistan?"

You don't have to deny global warming to become a Republican Congressman. But you do need to deny global warming to stay a Republican Congressman.

Cyberwar isn't just science fiction any more. It looks like the Israelis unleashed a viral worm that was supposed to find its way into Iranian centrifuge controllers and wreck the equipment. No sign that it worked, but it's hard to be sure.

I'm not going to criticize the Israelis for this, because there's already some kind of proxy war going on between them and the Iranians, via Hezbollah. But I hope the US is careful about dabbling in cyber attacks. We have a way of kidding ourselves, imagining that we can do some whiz-bang thing and no one could possibly retaliate. Then when someone does find a way to retaliate, we imagine that they're madmen who hate us for no reason.

The Obama administration may have moved on, but the rest of the world still thinks we have a treaty obligation to investigate torture during the Bush years. The UN's Juan Ernesto Mendez, himself a victim of torture in Argentina in the 1970s, says: "There has to be a more serious inquiry into what happened and by whose orders... .It doesn't need to be seen to be partisan or vindictive, just an obligation to follow where the evidence leads."

Excerpts of Sarah Palin's new book are bouncing around. I particularly like this one:

The second reason the charge of racism is leveled at patriotic Americans so often is that the people making the charge actually believe it. They think America -- at least America as it currently exists -- is a fundamentally unjust and unequal country. Barack Obama seems to believe this too.

Because, unlike any other place where 1% of the people suck up 24% of the income and 1 out of 9 black men between ages 20 and 34 is in jail, America is a just and equal country. It's weird that Obama wouldn't know such an obvious thing about the nation he's president of.

The previous note is an example of my new resolution: I will stop using the word earn when talking about people with very high incomes. Seven hedge fund managers received $1 billion in 2009. I don't think anyone earned $1 billion in 2009.

I'm not sure how they could. Suppose you work 100 hours a week 50 weeks a year. Even with that kind of work ethic, a billion dollars is $200,000 an hour. Seriously, don't you think somebody somewhere would be willing to do your job for $100,000 an hour?

A stunningly perfect bit of terminology: Those inauthentic "I don't want to say X, but … " intros are called but-heads.

Even if the jobs come back the wage cuts are permanent.

47 years ago today: JFK is killed. I think my first "public" memory is watching Jack Ruby shoot Lee Harvey Oswald on live TV two days later.

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Kenneth said...

I don't hold a brief for Amazon or anything, but considering the fact that your local brick-and-mortar, mom-and-pop bookstore would expect 40% puts the 30% slice that Amazon takes of ebooks in a bit of perspective. Publishers do not sell at list price; they sell to a bookseller or distributor at a discount (which may vary by volume). No book publisher's margin should exist within that 40% (or, in today's distributor market, within 50%).

Geordie said...

As a publisher I choose to use Amazon and Apple's iBookstore because of the huge markets that they make available to me, but there are plenty of ecommerce solutions that allow the publisher to distribute the ebooks theselves. If nothing else there is the free option of somebody places an order and you email them an ebook.

Nick Aster said...

Great thoughts on Open Table. Not saying I agree or disagree, but some interesting stuff there. My reaction - is make a new open source "open table". Compete with them by building a platform that is the Linux version of the system, restaurants could play ball as easily as building a simple website - they only need a one time fee to pay some kid (probably a waiter that knows code) to slap it together and they're in the system. You can't gate-keep email. Still some expense in maintenance, but no real gatekeeper. No one becomes a millionaire, but lots of people make a little.... if open table is really strong-arming, surely some coders that appreciate a free meal now and then could build an open system in a few weeks!

Anonymous said...

It seems that restaurants have become Sneetches, and Open Table is happily in the role of Sylvester McMonkey McBean.