Michael H. Goldhaber

I wrote this years ago, and just stumbled on it:

You can be a big star, or a successful achiever in any field, but still feel that no one really understands you, that no one pays attention to what you really are or what you really want to express, perhaps because you are afraid to express it. In that case you get very little attention, or so it must feel. Your life is meaningless, since no meaning is conferred on it by others — in ways that feel real to you.

Could this be Jackson’s pain?

I am not a big fan of the numerical sociologists of the Internet , Fang Wu and Bernardo A. Huberman., but I thought for a bit they had finally come up with something interesting with their paper “Persistence and Success in the Attention Economy”. Their data reveal a seeming paradox: the more videos a person uploads on YouTube, the less likely the video will be an attention success, that is will garner more than 1% of all downloads for videos uploaded in that week. They make it seem that persistence in continuing to upload new videos in that situation is foolish at best.

What they ignore is that seeking attention does not automatically mean seeking the widest possible audience. Given the popularity of Youtube overall, there are probably many specialized audiences, and it could well be that persistent up-loaders are seeking and even have found a substantial niche audience, even though it be less than 1% of the undifferentiated total. They also ignore that uploading a video takes very little effort, is free, and may be intended just for friends or relatives. What this study really demonstrates is only that individual motivation cannot be determined just by numerics. An actual look at the videos of the “persistent” up-loaders would probably offer more insight into the aims behind them.

There has been much discussion of leadership at Apple recently. Is Steve Jobs indispensable? Short answer: “yes” In fact: “absolutely.” Jobs is the star we pay attention to through all Apple outpourings. Even in the unlikely even that an Apple user or would-be user, or even hater, has not heard Jobs’s name, or seen him on video or in a photo, what that person would most likely align to as special behind Apple products is clearly Jobs’s sensibility, his outlook towards the world, his remarkable vision and foresightedness, his particular aesthetic, his contact with the zeitgeist and so on.

I wish Jobs the best of health and a long life, of course. He has done so much to affect  so many current experiences, even of those who have never once used and Apple product. Still, though Apple Computer, Inc. might persist and possibly even do well without Jobs at the helm, I suspect it is only likely to flourish under his continued leadership. Without him, even with some other visionary at the helm, the strong alignment we have with Jobs – for those of us who do — will dissipate over time. The urgency of buying or checking out the latest Apple products and services just will not be the same.

In an article in Sunday’s NY Times (1/18/09), Steve Lohr oddly quotes two different musicians, one of whom is now a corporate “innovation  consultant” to the effect that this is not so, that Jobs has solid people in place to continue the company without hIm.

“ ‘Nobody is indispensable indefinitely,’ said John Kao, a jazz musician and innovation consultant to corporations and governments. ‘The “great man” theory does hold water, but mainly at times of transition when a charismatic leader lends what psychologists would call an individual’s ego strengths to the organization or country as a whole, to allow it to regroup and move forward.’ ”

AND

“ ‘As special as Steve is, I think of Apple as like a great jazz orchestra,’ said Michael Hawley, a professional pianist and a computer scientist who once worked for Mr. Jobs. ‘Steve did a superb job of recruiting a broad and deep talent base. When a group gets to be that size, the conductor’s job is pretty nominal — mainly attracting new talent and helping maintain the tempo, adding bits of energy here and there.’”

Bull. I submit that these musicians don’t understand their own fields, much less the secret of contemporary management.  Quite the contrary of what they say, the larger a musical ensemble, the more crucial is the conductor. This is especially true of jazz orchestras, which is one reason the great ones of the past — such as  Duke Ellington’s or the two of the Dorsey brothers — are no more. When even a standard, classical symphony orchestra changes conductor, the whole sensibility and a good deal of the fan base changes, and these are orchestras who, to a large extent, keep playing music by the same few composers. The conductor doesn’t just choose the musicians and the pieces to be played, but approaches them with a style and sensibility and a personality that the musicians as well as the audience must respond to.

I have no doubt that Jobs is gifted at spotting and nurturing talent, but that is not his only role at Apple (nor was it at Pixar or NeXT). People in the company might come to him with many wonderful ideas, and it’s possible he initiates few innovations these days. But he very clearly exercises remarkable powers of selection in choosing what should go forward — and when — and what should not. (Sometimes he makes poor choices, and he probably ignores certain areas, but that’s inevitable.)

Looking at the way Apple spokespeople (who are sometimes managers of one area or another)  dress makes it clear they follow Jobs slavishly. I very much doubt that among the talents Jobs has nurtured or could nurture is another Steve J. Such a person would almost certainly be at sharp odds with Jobs and would have gone his or her own way. And of course that person would be very unlikely to share Jobs’s exact style or vision. By way of analogy, think of a great dramatist or novelist or painter (or a great conductor to stick to the musical metaphor). Such a person might mentor another but not in any way someone who would draw the same set of fans, or resonate with similar enthusiasm.

And Other Companies?

What has all this to do with corporations in general? Quite a lot, I think. Companies that lack strong vision and can thus draw and keep consumer attention are going to have an increasingly hard time staying afloat as they encounter others that compete in one area or another. Any area that begins to be lucrative under current conditions will quickly engender competition from others who will pour into the field. The only moderately long term success will be among those who develop the kind of fan base few besides Apple have now. When the original leader quits for whatever reason, any such company will face an increasingly perilous transition. A new charismatic leader will be needed for the long term if the company is to continue to prosper, not just for the supposed transition period. Generic executives such as John Sculley and Gil Amelio were no good at running Apple. They will be less good in general anywhere, I suspect. (Though Bill Gates is more of shrewd businessman than a Jobs-like visionary, he is enough of a visionary and inspirer that Steve Ballmer, his hand-picked successor,  has been unable to replace him at Microsoft.)

Of course, though I hope that like Elliott Carter, the composer, Steve Jobs stays healthy and at work past 100, that doesn’t mean that Apple or any other particular corporation is likely to survive that long. Even if he remains that vibrant, Jobs will at some point perhaps not be so good at responding to the zeitgeist. Keynes famously said that “in the long term we will all be dead,” and that’s true of companies too. In fact, their life expectancy is growing ever shorter, I think, even as that of humans increases.

Subtleties to Bear in Mind

However, 2 caveats: (1) Just as Elvis still has fans long after his death, fans of Jobs would certainly continue to have an interest in Apple products for a long time should Jobs leave the Co. for whatever reason. Still, in the fast-moving world of computers, etc., oldies but goodies are not of much value, so a Jobs-like vision would still have to be in effect.

(2) Still more germane, the visionary behind a line of products or services need not be the CEO. Consider Google in this regard, where Larry Page and Sergey Brin are sill very active despite not being the CEO.

(Disclaimer: I own some Apple stock.)

Having discussed the new strangeness of money as such, I will now turn the most money-dependent sector— finance. But before getting into details, let me make a point about banks and attention. Money flows in the same direction as attention does, and so, right now stars — that is, large scale attention getters — generally have high monetary incomes. But having money incomes doesn’t lower the net attention they have, because attention itself can be thought of as being “stored” in the memories of those who pay it. The more attention you pay someone the more you remember and the more likely you are to pay additional attention. And whenever you do pay attention you tend to have a certain urge to satisfy the attention-getter’s wants.

So despite their high money incomes, stars do not really require conventional banks, because their attention is stored in others’ minds, to be tapped more or less at will. The more attention you have gotten in the past, the easier it is to do this. At the same time, if you have never had attention, your money is not a very good guarantee that you will get attention when you need it. So, as attention transactions gain increasing prominence, the entire financial sector will have a less and less important real role to play. But instead of shrinking, this sector has burgeoned of late, which brings up a second mystery.

The Banking Mystery and the Suspects

In the next-to-last post, I discussed the rapid growth of productivity in typical industries that provide standardized goods and services. The financial sector, you would think, is among the most amenable to automation, since all that is involved is handling and recording the digits that represent money. And that has happened in practice:ATMs; automated credit card accounting; electronic stock exchanges and brokerage services; online banking: etc. In other words, most parts of normal financial transactions are exceedingly automated and require very little actual human attention.

However, the relative size, income, and employment of the financial sector — in this country and others — has grown and grown. Investment banks now spend an increasing portion of their efforts on trading for their own accounts. As with most hedge funds, this typically involve using sophisticated computer programs to find ways to cash in on slight fluctuations or small trends in the financial markets. Banks also package and trade in derivatives that are connected by complex algorithms to the underlying investments in such entities as standardized goods-producing companies, government bonds or real estate.

Derivatives are supposedly financial instruments intended to help minimize risk. If risk really were minimized, the possibility of gaining vast profits would presumably disappear, since profit is supposedly a reward for successful risk taking. To put it another way, if risk were so minimal, many would enter the market for the relatively small gains, which then become even smaller on average. But risk is of course not actually minimized. One reason is that the mathematics of risk minimization, like other mathematical economics, assumes that the basic conditions they describe or even just assume are somehow fixed and unchanging, or that everything had been taken into account in finite equations. Of course everything has never been taken into account; soothing generalities stop working; small risks can add up to huge ones; and risk takers, on average end up with what they came in with or less.

These risks can be taken only because the huge fund of worldwide savings that have no reasonable way of being invested in safe industrial growth  still search for growth somehow. The financial manipulations offer the appearance of such growth, even though it would certainly seem that unless they create money out of nothing, all they earn is merely taken in a game of poker in which someone else — someone with less good financial choices — actually loses.

I am agnostic about whether money is or is not in fact created, since central banks can increase the money supply through lending, and the financial houses who sometimes obtain amazing-appearing returns do so by being highly leveraged, hugely borrowing. Of course, if money can be created out of nothing, it can also disappear just as easily, and there is no reason to suspect that on net that does not happen, so as to balance everything out. (One way it disappears is when overall markets —whether of stocks or housing —  fall, certainly wiping out “paper gains.” A recent report I saw stated that two trillion dollars worth of “actual wealth” has been wiped out with declining real estate prices? Actual wealth? The houses of course are still there, for the most part, and standard economics teaches that the actual value of something is the current market value, so of course the wealth that disappeared was entirely notional, even though it was a notion central to many people’s financial planning. So much for finance, I guess.)

Of course, even if the money that is destroyed equals the money created, most players do not end up even. The banks, hedge funds, and brokerage houses probably have enriched their shareholders, and certainly their main partners and and a large subset of their employees, essentially by grabbing for themselves an ever-larger share of total incomes in each country. These unequal shares of income then head back into the global money fund, for they mostly are not used for buying things.

The Home-Run Kings

A considerable proportion of people employed as “quants,” analysts, traders, and brokers receive many times the monetary income of others with similar talents employed outside finance. They receive much of this in bonuses, supposedly connected with the profits of the firms or the departments of firms they work for. Yet, of the hundreds of billions of dollars made in the last few years by the major investment banks, even more has been lost this year alone. Nonetheless, far from being expected to pay back their past years’ oversize earnings, those still employed might even be paid similar bonuses this year. Some percentage of these bloated bonuses are however used for buying luxuries of all sorts, which does increase employment and to an extent greater than the mass-produced goods sector can do does spread wealth around a bit. (As I discussed last time, luxuries are highly attention-related.)

To some extent the financial stars seem to think of themselves in a manner analogous to sports superstars. The latter generally sign multiyear contracts with teams that offer high remuneration even if the player or team should experience a prolonged “slump.” Similarly, financial stars, good at playing a game of their own, think they deserve healthy bonuses even if they have lost fortunes instead of  gaining them.

Another way to look a the rococo rise of the financial sector and its complex and unstable “products” and its “masters of the universe” is in the same terms as that of the nobles in say the period of Louis XIV of France. He had inherited a country full of the heirs of actual fighting feudal nobles, but he confined them to Versailles and turned them into dandies who did his bidding as they vied with each other for the most luxurious and remarkable clothes and hairdos, the best coaches and castles, etc. The competition that had taken the form of fighting was now both exaggerated and highly artificial. As they strolled through Versailles and its environs , the nobles wore bejeweled and beauteous swords and daggers, and in some cases knew how to use them, but these swords were no match for the muskets, pistols, and cannons in use by that time by actual armies. We can think of the stars of the financial sector as for the most part playing comparably decorative roles, even though apparently involved in what is most central and important for the old economy, namely money.

“Safe as Houses”

I think the complicated play-acting of the financial sector was bound to lead to an eventual fiasco, many orders of magnitude larger than, say, the Long-Term Capital Management fall of 1998 or the Enron catastrophe of 2001. As the finance sector continued to grow in apparent wealth,  more and more people would have come to depend on its inherent fallacy, until some point was reached where it proved quite incapable of actual delivery. However, the fact that the actual fiasco involved ordinary people’s homes and their putative value only helped both prolong an untenable situation and led to the effects oft ultimate crash being far more far-reaching.

If someone were to tell you that some standardized kind of good — whether it be a car, a computer or a corkscrew — could never go down in price but will always grow in value, you would consider them insane. After all, ordinary industrially produced goods become ever easier to replace,  wear out, become obsolete, or just lose their panache. But for some reason when similar optimism was expressed about very nearly mass-produced homes, too many people were willing to take the pronouncement as quite sane. “Real property” requires land, and supposedly “they aren’t making land anymore.”  Unfortunately, that statement is nonsense in several ways.

In the first place — as anyone who has ever looked at open houses offered by realtors or developers should know — much more than with ordinary mass-produced goods, they aren’t selling material objects, they are selling dreams. These are dreams of refuge, privacy, independence, marital concord, healthy and happy children, visits by friends and family, comfort,  warmth, praise from one’s friends, attention from strangers, beauty, ease, neighborhood, community, good schools, convenience — along with other emotionally tinged and historically contingent prospects. Dreams are subject to change, and the reality that supposedly underlies them can easily change too. An easy commute can become congested and overlong; neighbors can turn out not be nearly as nice as the ones one left, community spirit may not exist or may not welcome one; or an area with enough water for nice lawns can be affected by permanent shortages, especially as climate changes. And the gadgets, appurtenances, style and substance of a house or condo can become obsolete, come to seem ugly, or just fall apart.

What about that idea that the amount of land is fixed and invariable, so that, with a growing world population it is in increasingly short supply, and therefore intrinsically worth more and more? It just doesn’t hold water. The value of land, quite obviously, depends on where it  is and how it is looked upon, and both those things are subject to change, down as well as up. Land that was once highly desirable can become noisome and polluted, or just out of fashion, as home designs or sub-divisions can.  And, in effect, new land can be created every time it seems desirable — say — to live closer in to other people — perhaps in high-rise buildings rather than in a suburban houses. (Some land actually is “reclaimed” — created— from bodies of water or marshland, and though ecologically that might be undesirable, it still happens.)

Clearly though, real estate and housing related securities have a certain aura of security among people who don’t stop to think “concretely” of how very abstract the notion of ever-rising home prices is and always has been. The twenty-somethings who serve as the basic laborers in the field of investment banking may have had no knowledge or experience of land bubbles, but more mature people in those businesses seem to have been equally willing to be fooled by what they should certainly have understood better.

What makes mortgages even less reliable investment was little examined: in a typical case of foreclosure,the costs and right offs apparently can amount to upwards of 30% of the face value of the mortgage. The sliced, diced packages of mortgages seemed to lower the chances of such danger, while in fact making any analysis of risks much harder. The invention of newer and newer mortgage “products” that allowed introductory teaser rates with later sharp rate increases simultaneously gave investors the feeling that they would get good returns while greatly enlarging the pool of new home buyers. This further inflated housing prices, making the investments seem even more reliable. The chances of catastrophic failure grew ever larger.

And of course, all this would not have happened had it not been that all this funny money were chasing good investment opportunities while actual industrial growth could not offer nearly enough of an outlet. At the same time, the mortgage mess, etc.,would have been much less problematic if incomes had been less unequal. In that case, there would have been less money chasing investments, but more chance for ordinary people to pay more ordinary mortgages. That, however, is just what things once were like, in the US anyway. Whether they can be like that again, I tend to to doubt.

In a subsequent post, I will add to the prognostications and solutions I offered earlier.

When I wrote about Palin shortly after McCain chose her, I said she did not have enough time to gain fan loyalty in order to have a significant positive effect on McCain’s votes. I think I was right on that, despite her obviously having gotten a big bump in popularity, simply by being a novel sort of candidate. I wouldn’t be surprised, after seeing her disastrous interview with Katie Couric on CBS news, if she in fact does what was bruited about during the Republican convention, namely resign from the candidacy. Maybe McCain could now pick Lieberman.

But McCain has said he is suspending campaigning, ostensibly because of the looming financial mess. He has not said that he will restart his campaign,and perhaps he won’t. This may turn out to become one of the oddest elections in US history, a candidate essentially giving up.

In the Couric interview, Plain did not come across as someone one can easily align one’s mind or emotions with, since she bordered on incoherence of a depth far beyond the worst George W. Bush ever offered, and she looked continually scared, while pretending to be confident, not a winning combination, nor one that it is easy to identify with. I think few people will be won over to her, rather than seeing her as more of an object than a person.

McCain cannot have failed to note that Palin is a disastrous candidate, how cannot keep his campaign afloat. (He would have not gotten much bounce in the polls at all, had he not chosen this unconventional candidate, so he was counting on her for a lot. Barring a disastrous mistake by Obama, McCain probably knows he now cannot win. His choice is get rid of Palin and take a gamble on Lieberman, or just forget the whole thing. I suspect he will find losing badly to be highly humiliating, so he might take the former course, though the precedent (McGovern’s dropping Eagleton in ‘72) is not hopeful for him.

If it does happen, you read it here first. And, by the way, McCain might do really badly in debate himself.

Hillary Rodham Clinton, speaking at the 2008 Democratic Convention, asked whether her supporters backed her just as a person or because of the issues she embraced, implying that of course they should answer: “the latter.” But we know that is not in truth the case. All candidates “flip-flop” to some degree on issues that might be important to their voters, and since no one can foresee exactly what will face successful candidates during the term of office in question, we have to embrace the person over the issues to a considerable extent. But what makes the embrace much stronger now is that the main candidates who received so much exposure and large audiences through the primaries and possibly before are all clearly stars. (The US is by no means the only country in which star power has become highly necessary for political success. The examples of Blair in England, Sarkozy in France, Berlusconi in Italy and Koizumi in Japan all used their ability to come across to large audiences as an essential part of their pull. And of course, actual celebrities like Schwarzenegger and Reagan have done well at times in the US. )

Stars, as I define them, are people who get much more attention than they give, and to whom, as a result, we offer up our loyalties in highly personal ways. Once someone is a star her or his fans feel a strong pull to that person, to refuse to substitute anyone else, and to identify with the vicissitudes of the star. People who are for Hillary may transfer their loyalites to Obama if she says so, because they want to please her, though this is not likely to be an easy or complete process. They are now loyal to him to a degree, but he still has to deepen that loyalty, by making it seem he notices and values them.

Meanwhile, of course, the Republicans decry Obama for being a celebrity, as if McCain were not, and then McCain chooses a vice-presidential candidate as much for personal traits as anything else. Now Sara Palin has appeared on the scene and received thundrous applause for her red-meat, rabid speech at the Republican Convention. Meanwhile people watching at home get more of a sense that she is worthy of attention because of the applause of that celebratory crowd in the hall.

So is Palin now a star who is likely to make much difference in the Presidential vote? I very much doubt it. One exposure in the political arena does not turn an unknown into a star for whom a great number of people are likely to work or to change their vote. In the condensed two months before the election, to make a real difference, Palin would have to open herself up to the public to a remarkable degree, and voters would have swoon over what they see. Furthermore, they would have to vote overwhelmingly with heart not head. I strongly suspect that Palin cannot make this work, because she really has little to offer that is positive, beyond a buoyant personality compared with her negative approach on most issues, and her too right-wing stance.

Does this mean Obama will win automatically? No. He has always had an uphill struggle. McCain has some crowd pleasing traits and his POW story. If Obama continues to seem high-minded and presidential, while at the same time emphasizing his own plans to turn the country around, and emphasizing that McCain is just copying his lines out of political expediency, he stands a good chance. The key point is that we have to believe in him, have to feel a deep tug based on his story, on his steadiness, his youth, and the rest.