The Wall Street Journal has a front page article on transplant matching mechanisms along with this cool diagram. It also covers the debate between economists over whether markets or trading cycles are the most efficient and morally palatable method to get the right kidneys to the right people.

Via MR

Categories: Behavioral Economics, Business and Economics, Distribution, Incentive Centered Design, Matching Mechanisms
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In an interview, Tim O’Reilly points out the big deal of Web 2.0 – it’s about the information:

That goes back to a major theme of web 2.0 that people haven’t yet tweaked to. It’s really about data and who owns and controls, or gives the best access to, a class of data. Amazon is now the definitive source for data about whole sets of products — fungible consumer products. EBay is the authoritative source for the secondary market of those products. Google is the authority for information about facts, but they’re relatively undifferentiated.

Information is the oil/gold/guns of the twentieth century.

Categories: Business and Economics, Distribution, Information Economics, Information Markets, Social Software, Technology
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From the dumbest column I’ve ever read in Slate (which I normally read before anything else):

Suppose the national defense of the United States were relegated to the private sector. Instead of the publicly funded Army, Navy, Air Force, and Marines, the country would be defended by private militias funded mainly by insurance companies. In the event of foreign attack on U.S. soil, the militias would defend those citizens in the affected areas who’d paid defense insurance premiums through their places of work (or, if self-employed, as individuals).

The best-armed troops would defend the wealthiest and most hawkish segments of the population, who would have paid the highest premiums.

The premise of the article is that we should nationalize health care because it’s like the military, and look how good a nationalized military is. Wow, lets go through all the ways this is flawed.

1. National Defense is a public good, health care is not. You may think that health care is a right, or something everyone is entitled to, and those are philosophical positions, but health care doesn’t fit the definition of a public good in the economic sense. First of all, it isn’t non-rival, which means that if I consume some health care, you can’t consume that same amount. If I take a pill, or use a X-Ray machine, you can’t take that same pill or use the machine at the same time. In contrast, an army that protects the United States offers the same amount of protection, whether or not you add more people to it. Second, health care is excludable. I can stop you from taking a pill or getting that X-Ray if you don’t pay for it. But with national defense, if you don’t pay your taxes, the army still protects you. There are fundamental characteristics between them that make them different.
2. In general, everyone in the country shares the same risk if the country is attacked. Granted, people in high-risk areas may suffer a greater risk due to terrorism, and that is actually reflected most of the time in higher local tax rates to support police counter-terrorism, or insurance premiums for potential targets. In general, though, if there is a large scale attack against the United States or its allies, the risk to all of us is the same. When it comes to health care, we all have different amounts of risk, and only minimal information about that risk. Well planned insurance lets us pool this risk to reduce the cost to individuals and overcome some of this information problem. Nationalized health care has nothing to do with risk pooling, and it effectively involves the health and low-risk subsidizing the unhealthy and high-risk.
3. National defense is a pretty bad example. There’s definitely consensus on the left, and I think among some people on the right that we spend way too much on national defense. It costs the Defense Department orders of magnitude more to procure technology that is available cheaply in the private sector. Defense technology research involves massive outlays relative to the returns. The military is a sprawling and inefficient bureaucracy with a sprawling and inefficient supplier network supporting it. Do we really want to take our relatively dynamic biomedical research sector and make it part of a government supplier complex? Is this really a way to reduce costs?

I later found that Arnold Kling took a briefer, though probably more economically informed shot at the column as well.

Categories: America, Business and Economics, Distribution, Governance, Incentive Centered Design, Information Economics, Politics
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The spermatophore is a package of male sperm that is deposited on the female. The researchers were able to monitor the sizes of the spermatophores and found that its diameter per copulation decreased in males that mated with many partners. The scientists wrongly hypothesized that this decrease in average diameter might result from the males rationing their sperm; it turned out, however, that they were running out of resources to distribute. As a result, the females sought more mates to accumulate enough sperm to fertilize all their eggs.

Scientists have discovered that with fewer males, females get more frisky.  And get your mind out of the gutter, they’re talking about butterflies.

Categories: Dating, Distribution, Funny, Matching Mechanisms, Science
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Chris Anderson’s Long Tail Blog takes a look at how Anheuser-Busch is expanding into niche brands:

Earlier this month I got in touch with Anheuser-Busch to hear from the Clydesdale’s mouth why the shift from hits to niches was coming to suds, too. I mean, I get how the Internet lowers the costs of distribution in many markets to allow for more choice (the “infinite shelf space” effect), but how does that apply to real bottles on real shelves?

Categories: Business and Economics, Distribution, Information Economics, Marketing, Strategy
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I picked up a Wired magazine for the plane and it was one of their best issues in months.  A few of the Must Read pieces, in order:

• What We Don’t Know: Want to know all the cool things that scientists are still trying to figure out?  Wired collected dozens of questions, along with descriptions, that show where science is looking but not finding the answers they want.  Alongside are John Hodgmans hysterical expert opinions.  If you think learning stuff about the universe is cool, start reading this article now.
• How Yahoo Blew It: Yahoo had all the advantages when Google started to emerge: a full product suite, enormous user base, and existing relationships with advertisers.  So how did they screw it up?  This article points the finger indirectly at CEO Terry Semel, who came in to make it a content creator when it needed to serve ads better.  As an aside, I’ve noticed lately that a lot of the Yahoo! products that I left for Google are now better than their rivals.  I also owe Yahoo for helping me find my Wii.
• The Invisible Enemy: Soldiers from Iraq started getting sick with drug-resistant bacteria that started to spread through the evacuation chain.  Was it coming from desert soil? Unsanitary field hospitals? Coating the IEDs?  This article explores the making of an epidemic in the hospital system, and how the military is starting to combat it.

Two other articles, on MTV creating virtual worlds and the growing acceptance of manufactured diamonds, deserve nods, but not the lengthy descriptions.  I normally don’t highlight a whole magazine, but Wired this month deserves a trip to the newsstand.

Categories: Distribution, Science, Social Software
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Chris Anderson’s Long Tail Blog asks do artists who give their music away for free want to make money?

Many do, but they’re just smarter than most music industry execs. They understand the difference between abundance and scarcity economics. Music as a digital product enjoys near-zero costs of production and distribution–classic abundance economics. When costs are near zero, you might as well make the price zero, too, something thousands of bands have figured out.

Meanwhile, the one thing that you can’t digitize and distribute with full fidelity is a live show. That’s scarcity economics. No wonder the average price for a ticket was $61 last year, up 8%–in an era when digital products are commodities, there’s a premium on experience. No surprise that bands are increasingly giving away their recorded music as marketing for their concerts, which offer something no MP3 can match.

Categories: Business and Economics, Distribution, Entertainment Media, Incentive Centered Design, Information Economics, Marketing, Strategy
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In BusinessWeek:

Acer also hopes to improve its position in the U.S., where it has just 1.8% of the market. The company sells lots of notebooks to small businesses, but among large corporate customers, “they don’t have the credibility” needed, says Elsa Opitz, research manager at IDC in London. Acer has raised its profile with U.S. consumers over the past two years through deals to sell its wares at Wal-Mart (WMT), CompUSA, and Circuit City (CC)—which could ultimately pay off with big companies, says U.S. sales chief Mark Hill. “More of a presence in U.S. retail,” he says, “will inevitably lead to better name recognition.”

The problem may also be that I’ve never seen an Acer that didn’t have huge quality problems – usually major hardware problems – and their customer service is usually horrible about trying to fix them. Corporate customers would be foolish to invest heavily in such unreliable machines that will save them on capital outlays but cost them orders of magnitude more on reurring service problems.

I think Acer is also overestimating the importance of the retail sector in attracting corporate customers.  Dell and pre-Lenovo IBM have/had no retail business and dominate the corporate market.  HP slowed down on retails sales when it started picking up corporate accounts.  Most importantly, though, Acer has no offerings to speak of in the server market, the real gem of the corporate accounts.

Categories: Business and Economics, Distribution, Information Asymmetries, Technology
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From BusinessWeek:

Now that the merger with BellSouth merger is complete, the new AT&T may be trying to change the basis of rivalry in telecom. Providers have long competed on which can offer the biggest bundle of services such as wireless, landline, and TV. Now the competition may shift to who can offer free access to the largest community of users. “Before, it was about, ‘My bundle of services is bigger than yours,’ ” says Winther. “Now, they will say, ‘My community is bigger than yours.’ “

To move beyond bundling their low marginal cost services together, AT&T is trying to attract users by increasing the network effects of AT&T service.  It’s like an Information Rules case example.  Info-Econ students pay attention.

Categories: Business and Economics, Distribution, Information Economics, Marketing, Strategy, Technology
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The reason I get so annoyed when people misread The Long Tail to think that I’m arguing that hits are dead is that the canonical powerlaw that defines the Long Tail requires hits. That curve is the shape of radical inequality, where a few things sell a lot and a lot of things sell a little. The right side of the curve–the long tail–can’t exist without the left side of the curve–the short head–which is made up of hits.

Chris Anderson talking about the difference between hits and blockbusters.  He’s right – most people do interpret The Long Tail, which I can imagine must be extremely frustrating.

Categories: Business and Economics, Distribution, Entertainment Media, Information Economics, Technology
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The Washington Post notes that the Fairfax libraries are purging their collections to save on space:

So librarians are making hard decisions and struggling with a new issue: whether the data-driven library of the future should cater to popular tastes or set a cultural standard, even as the demand for the classics wanes.

Library officials say they will always stock Shakespeare’s plays, “The Great Gatsby” and other venerable titles. And many of the books pulled from one Fairfax library can be found at another branch and delivered to a patron within a week.

But in the effort to stay relevant in an age in which reference materials and novels can be found on the Internet and Oprah’s Book Club helps set standards of popularity, libraries are not the cultural repositories they once were.

Later in the article,

To do more with less, Fairfax library officials have started running like businesses. Clay bought state-of-the art software that spits out data on each of the 3.1 million books in the county system — including age, number of times checked out and when. There are also statistics on the percentages of shelf space taken up by mysteries, biographies and kids’ books.

A few observations of my own:

1. It’s about time libraries started running themselves like a business. In many ways, they’re actually (sadly) one of the first government agencies to do so. Libraries face direct competition on a number of fronts, from coffee houses, book stores, the internet, and other cultural institutions. They need to adapt to stay relevant, and in doing so, they need to adopt the management practices that have made their competitors so effective. On the flipside, libraries also need to get over themselves and realize that, with all this competition, they can’t continue to see themselves the same way they did fifteen or twenty years ago.
2. The computer system only uses circulation data, but the best use I get out of a library is when I go there for breadth, rather than depth, and don’t check books out. Instead, I’ll pull a number of relevant books off the shelf and read a chapter or so of each, often because it’s all I need or all that’s relevant. I use the library as a reference service, not a lending service (in part because I’m not capable of returning anything on time). A more accurate measure of reference use would be how often a book is reshelved, and even that metric is flawed – was the book reshelved because people found it useful but didn’t need to check it out, or because they took it off the shelf and then weren’t interested? Gathering the metric with the computer system wouldn’t be difficult – add a reshelf table to the database, and before books are reshelved, scan the whole cart. I also imagine this would work better for non-fiction than fiction.
3. As the article points out, libraries aren’t nearly as much about books anymore. Fiction is exceptionally cheap relative to incomes, to the point where owning books is much easier and much more common. Books also take a long time to bring to market, so for many subjects, they can’t stay timely and accurate very long. I remember going to the library when I was little and finding two decade old current events books, or books about computers from the 60’s. At some point, these just take up space. Most of my friends who consistently use the library see it as a cheaper form of Blockbuster (but with harsher late fees). Others use it as a meeting place. The only people I know who depend on it for books are my grandparents, and even they’re starting to buy more.

Categories: Books, Business and Economics, Community, Distribution, Governance, Information Economics, Libraries, Metrics, Strategy
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I don’t want to be so strident. At first, I thought that content holders weren’t taking the tectonic potential of these services seriously. I now believe it’s just the opposite. Looking at their model, it’s almost engineered to make digital delivery the least appealing option.

That’s Tycho at PennyArcade railing against the high price of digital delivery. The more I read up on the economics here, the more I realize that it isn’t so much that the media companies don’t get it; they do. The problem is that right now, so much of their revenues come from DVDs, and DVDs are sold at Wal-Mart and other brick and mortar retailers (but especially Wal-Mart), who see direct-to-the-home as a competitor. The reason studios and networks can’t deliver reasonably priced downloads to the home isn’t because they don’t want to, it’s because their “distribution partners,” who make a fortune off of DVDs, won’t let them.

Categories: Distribution, Entertainment Media, Information Economics
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