Category Archives: economics

The Structural Origins of Gamergate

“The AAAs *are* supporting Gamergate, at least tacitly. They don’t want the journos to gain any more influence (or to stop losing influence), and they loathe this pseudo-academic “critique” stuff just as much as your average gamer. The thought of having to kiss the ass of some PhD in order to gain an Indie or Social Justice imprimatur is insulting to them. They’ve got money to make. So by remaining silent on Gamergate and having IGN do the pageantry of adopting an ethics policy (no skin off their nose), the AAAs signaled that they were not in alignment with the journos. And they aren’t. They are happy to see Gamergate take these people on–and that enrages the journos all the more. This wasn’t a planned strategy on behalf of the AAAs, but it was an easy call to make once Gamergate was in play.”
David Auerbach, Sour Gripes: E3, the AAAs, and the Journos

Last year the most inexplicable event in the history of American publishing happened. Multiple game-enthusiast publications, in a coordinated campaign, published nearly identical editorials, with headlines like “Gamers are dead,” “Gamers don’t have to be your audience,” “Gamers are over, etc.”

gamasutra_gamers_are_over

Replace gamers with “golf-enthusiasts,” or “yacht owners,” or “biblical archaeology nuts,” or “railroad modelers,” or any other hobby you can think of. Never before, in American publication history, had publications that catered to hobbyists condemned their own hobby.

This was the origin of gamergate. There were events before (a sex-for-publicity microscandal in the hobby before hand, some tweets by actor Adam Baldwin afterwards), but those fit neatly into the daily churn of pop culture.

Hobbyist publications condemning their own hobby doesn’t “just happpen.” Something like gamergate requires professional media manipulators, and a failed revolt within a sector of the industry.

This is how it happened:

The games industry historically has five fundamental groups operating with in

  • Multimedia creators, such as AAA development studios (Electronic Arts ,etc) and indie studios of one or a few employees
  • Text and graphics creators, such as AAA magazines and indie hobbyist publications
  • Media consumers, who are gamers and game enthusiasts
  • Outrage entrepreneurs, attempting to extort various members of the three above groups for their own purposes
  • Gamers, who are customers that buy games

In the 1990s the barriers to capital for the multimedia and graphics creators were relatively high. It was (and is) expensive to run a AAA games studio. Running a magazine involved highering a lot of people, negotiating wiht book stores for shelf placement, and a large budget for printing and postage. Development tools were relatively unfriendly, and it was difficult to collaborate with others who were not in your same town. “Indie” games largely consistent of wargames, RPGs, and direct translations of these genres.

The only outrage entrepreneurs at this time were cultural conservatives such as Jack Thompson. They were alienated from all aspects of the industry, and so had to attack it (unsuccessfully) from the outside.

Gaming Industry Then and Now Slide1

Then, the internet happened.

The internet had a lot of consequences, all relating to lowering capital requirements as a barrier to entry:

  • News become “free” leading to the closure or consolidation of the old-line AAA publishers
  • Cheap “indie” or “clickbait” publications arose with no physical presense
  • Platforms with consumer-side economics of scale (like Twitch and Youtube) arose that lets gamers and game-enthusiasts self-publish to a broad audience, with no staff

But publishing a AAA game didn’t become cheaper. Instead (as gaming became increasingly hit driven, and the internet allowed the creation of marketing echo chambers) it became more expensive. Instead of both AAA game publishers and AAA news publishers both having ‘monopolies’ and some degree of equivalence, the remaining news publishers had a stark choice to make:

1. the transition to a “USA Today” of soft news managed by AAA game studios (the model adopted by the most popular online publisher, IGN, and the sole survivor of the print era, PC Gamer)
2. reducing expenses and dependency on AAA publishers for access by allowing writers more freedom; non-financial contributions in allowing writers to use their positions to push pet political interests, as long as the headlines geneated clicks (the model adopted by Gawker, Vox, and other “indie” or “clickbait” sites)

A second-order effect of the ultra-low cost model adopted by Gawker and Vox is that it enabled outrage entrepreneurs for the first time to target writers within the industry. In short order a new generation of such entrepreneurs. Its perhaps not a coincidence that the most successful such entrepreneur is rightist-become–leftist Jonathan McIntosh: as the audience for gaming outrage changed, so the political stances of the entrepreneurs changed.

Yet these “indie” or “clickbait” outlets faced the even lower-fost competition of self-publishing gamers on Youtube and Twitch. And there was a real culture clash. The sort of person who happily plays videogames and talks about videogames in a second or third tier city in England or Wisconsin is not the sort of person who moves to Brookyln or San Francisco to work for Vox and Gawker. Their sense of mission is different (evangelize how fun games are, v. share social commentary learned in university), their sense of persecution is different (memories of being bullied or mocked for a hobby, v. academic concerns learned in university), their sense of villains are diffrent (those who would prevent them from enjoying their hobby, v. rich businesses and capitalists).

This was gamergate: a “goat rodeo” built on an ill-defined culture clash but containing many petty grievances and placing indie developers at the center, with their presses and audiences eager to hear them praise or condemn any given side. The chaos of the situation lead to the bitterness, a civil war within the community.

Gaming Industry Then and Now Slide2

In internet debates, the larger community centered around AAA publishers is sometimes called “gamers,” and the rival community of outrage entrepreneurs and clickbait journalists “SJWs” or “Social Justice Warriors,” but these are ideological terms that hide the materialist structure of the unfolding drama. AAA publishers like money, and so have friendly relationships with light media which celebrates their industry; with self-publishers who act as category captains for their products, and of course with their final customers, gamers. Outside, and looking in, are the outrage entrepreurs, now joined by clickbait journalists who due to economic reasons have become their audience and mouthpiece.

Indie Authors, Gamers, and Monopoly Censorship

Book publishing and game news journalism are both being disrupted by “user generated” platforms that have consumer-side economies of scale.

For book publishing, two of these platforms are Kobo and Amazon Kindle. The users/producers of these services are called “indie authors.”

For game news publishing, two of these platforms are Twitter and Reddit. The users/producers of these services are called “gamers.”

While these services are united in their hostility to other types of publishing, each still faces competition from other “user generated” platforms with consumer-side economies of scale.

For instance, in book publishig, Kobo’s President Michael Tamblyn is warning “indie authors” that Amazon Kindle’s interest is not theirs, and Amazon Kindle could use market power to take away their profits and silence them.

Meanwhile, in game news publishing, this form of censorship has been observed. Early on in the #gamergate scandal, reddit began censoring discussion of collusion between Vox Media, Gawker Media, and game developers. This lead to the discussion to shift to twitter, a rival platform.

The power that monopolies have to extract all profits and control the agenda is called wholesale transfer pricing power.

If Amazon achieves a monopoly in “indie author” book publishing, they would have wholesale transfer pricing power, be able to strip all economic profits from indie authors, and censor indie authors at will.

If Reddit would achieve a monopoly in “gamer” news publishing, they would have wholesale transfer pricing power, be able to strip all economic profits from indie authors, and censor gamers will.

The only difference is that this shift from command-and-control to user-generated publishing is more advanced in game news than it is in books.

The today of gamers is the tomorrow of indie authors.

That’s why the gamergate scandal is the biggest news in publishing.

Some Notes on Class in America

One can classify Americans as belonging to one of several economic classes, including the

  • Grand Bourgeoisie, who are able to live off their investments
  • The Petite Bourgeoisie, who have invested wealth but must work to maintain their life style
  • The Proletariat, who have no invested wealth, and must work to live
  • The Lumpenproletariat, criminals and rascals who are of no economic value.

Competition exists both between and within these classes.

Between-class and within-class competition exists to establish the terms of trade of these classes within society.

While everyday politics can do little to change the terms of trade between classes, it can greatly effect the terms-of-trade within classes.

For instance, the Petite Bourgeoisie in the United States is heavily white, but south asians and east asians are disproportionately represented within it. Nonetheless, all asians combined are still a small minority of the Petite, so the Petite Bourgeoisie  spends most of its efforts on economically pointless cultural conflict (gar marriage, and so on).

The Proletariat, is much more diverse. Both blacks and hispanics are disproportionately represented in the proletariat. Further, unlike the petite bourgeoisie (where whites are a long-running and stable majority), immigration patterns created by the federal government (“the executive committee of the bourgeoisie” have lead to blacks being displaced as the largest minority in general, and even the largest non-white constituent group of the proletariat, by hispanics.

Whites in America really have no idea how hard life can be for blacks. Whites, whose leadership springs firmly from the petite bourgeoisie, are basically secure in their positions. In order to understand the plight of their fellow citizens, it is perhaps wise to imagine a United States in which Asians were already the dominant ethnic group.

The art of deciding who gets what is called politics. While political cartels can form among nearly all players in well established political communities, the immense tide of hispanic immigration in recent years means that it is impossible for factions within the proletariat to form a cartel without hispanic hegemony within that class. In the absence of a well established political community, the tools that will be used are democracy and organized violence. Democracy is a useful tool of the popular and numerous. Organized violence is the useful tool of the weak and small.

The lynching of George Zimmerman — the hispanic involved in a fatal confrontation with Treyvon Martin — only makes sense in the context of intraclass struggle. Organized violence — such as the eldery man beaten by 6 youths, the police car attacked, the death threats against the Zimmerman household etc — are clearly part of a LIHOP run by Al Sharpton on others to use the only means left at their disposal to save what remains of their hegemony within the proletariat.

People are murdered every day in the United States. Nothing’s special about that. No one cares.

What is unusual is for anyone to care.

And people do care in the case of Mr. Zimmerman.

Because lynching a hispanic is way cheaper for the petite bourgeoisie than facing a campaign of organized violence.

White petite bourgeoisie were getting hurt. Lynch a hispanic proletarian, and it all goes away.

A good deal, no?

The Life Cycle of a Monopoly Enterprise

Every monopoly is born, lives, and dies.

First, a monopoly enterprise is born thru:

  • organic growth of one competitor
  • a trust between several competitors
  • an outside firm using cash to buy a monopoly position
    government fiat
  • a privatization of a governmental function

Standard Oil was created as a trust. China Mobile had originally been a branch of the government in China.

Second the monopoly enterprise acts like a monopoly by:

  • Enjoying economies of scale
  • Extracts economic profit
  • Experiences regulation by the political economic system, which itself requires the monopoly to:
    • flatter existing power-holdings
    • Assist other stakeholders in achieving their objectives
    • Avoid enraging any stakeholder that can kill the monopoly

I’ve previously discussed dangers that monopolies face.

Third, the monopoly enterprise loses monopoly status and capitulates. This can be because of:

  • Not understanding the market
  • Not being empathetic to other stakeholders

The unpopularity of the term “monopoly” comes from this process of capitulation from a consumer’s perspective.

Following capitulation, the monopoly might be

  • Broken up into multiple successor firms
  • Reduced to single competitor firm in a market
  • Incorporated into the government

At some point in their history, Hudson’s Bay Company and General Motors both operated as monopolies, and all have now been reduced to being single competitors in their respective markets. AT&T used to be a monopoly and was broken up into several successor firms.

Where Did All the Jobs Go?

One reason we are in a jobless recovery is the poor quality of U.S. public schools. Schools fail everyone who cares about child development: employers cannot find qualified workers, and parents go into debt to pay the rent or mortgage in a good school district.

From How to Keep Jobs in America [PDF download]

From Why Outsource?

Something like ~25% of the reasons given in these surveys boil down to bad public schools.

America needs good public schools, which can be held accountable through good measures of student accomplishment. We don’t have them because teachers are scared of what life would be like if they were treated like professionals. This is too bad — if teachers do not embrace reform, we’ll end up with drones reading following idiot-proof scripts that put students in front of computers…

… which would still be better than the current system.

The Low Quality of the US Education System Destroys Jobs

Childcare is one of the dimensions of force in the education reform debate. The New York Times has an excellent story, How the U.S. Lost Out on iPhone work, that does a great job of emphasizing how the US educational system is failing the two stakeholders of childcare: employers and parents.

The US Public Education System Fails Employers

As the story’s authors, Charles Duhigg and Keith Badshet, make clear, the cost of labor is a small part of the cost of high-tech electronic goods. A much bigger concern is finding skilled workers, with “skilling” meaning anything from a technical degree after high school to a four-year engineering degree:

Companies like Apple “say the challenge in setting up U.S. plants is finding a technical work force,” said Martin Schmidt, associate provost at the Massachusetts Institute of Technology. In particular, companies say they need engineers with more than high school, but not necessarily a bachelor’s degree. Americans at that skill level are hard to find, executives contend. “They’re good jobs, but the country doesn’t have enough to feed the demand,” Mr. Schmidt said.

The story makes clear that America does not have enough skilled workers. Considering the high unemployment rate, it is sickening to read about factories moved overseas because they cannot find skilled workers here.

But such calculations are, in many respects, meaningless because building the iPhone in the United States would demand much more than hiring Americans — it would require transforming the national and global economies. Apple executives believe there simply aren’t enough American workers with the skills the company needs or factories with sufficient speed and flexibility. Other companies that work with Apple, like Corning, also say they must go abroad.

It is important that U.S. educators (teachers, administrators, and others) stop doing such a terrible job. They not only prevent their graduates from getting jobs on account of their shoddy education. They prevent their graduates from getting jobs on account of the shoddy educations of others.

A reply I sometimes hear is that companies like Apple should train workers themselves. Mark Safranski, a good friend of mien, wrote that “the specialized industrial skills that are required for production” should be taught by companies, at corporate expense, as part of the hiring process. The New York Times makes clear how foolish this position is: when schools produce workers that can’t work, this taxes corporations in both dollars and time.

It may or may not be wise to fund public education through taxes on large employers. But it is certainly foolish to produce an unskilled workforce that takes time to educate, and then be surprised that modern supply chains have passed you buy.

The US Public Education System Fails Parents

While companies are free to move production to other companies (or be outpaced by foreign companies that are already oversees), the “tax” of poor education for parents is more painful, because of more personal.

One of the victim’s of our inability to produce educated workers is Eric Saragoza, an engineer who was eventually laid off as middle-skills manufacturing jobs evaporated. Because there weren’t enough trained workers, this is the economy that the US public education system have given to Mr. Saragoza and his family:

Mr. Saragoza was too expensive for an unskilled position. He was also insufficiently credentialed for upper management. He was called into a small office in 2002 after a night shift, laid off and then escorted from the plant. He taught high school for a while, and then tried a return to technology. But Apple, which had helped anoint the region as “Silicon Valley North,” had by then converted much of the Elk Grove plant into an AppleCare call center, where new employees often earn $12 an hour.

There were employment prospects in Silicon Valley, but none of them panned out. “What they really want are 30-year-olds without children,” said Mr. Saragoza, who today is 48, and whose family now includes five of his own.

After a few months of looking for work, he started feeling desperate. Even teaching jobs had dried up. So he took a position with an electronics temp agency that had been hired by Apple to check returned iPhones and iPads before they were sent back to customers. Every day, Mr. Saragoza would drive to the building where he had once worked as an engineer, and for $10 an hour with no benefits, wipe thousands of glass screens and test audio ports by plugging in headphones.

Conclusion

Teachers are in it for the money. They are not any morally worse in that respect than publishers, who also want to redirect funds away from students toward themselves. But in the current education reform debate, only teachers are against improving the teaching profession in principle, because reforming the teaching profession would mean that we could hold bad teachers accountable (which means that some teachers will lose their jobs, and all teachers will have the pressure of doing a good job in order to be paid well).

The US education system hurts all Americans, even those who manage to escape the US education system with their ability to work intact. Not reforming the US education system does not only mean consigning millions of students to a sub-standard education: it means consigning tens of millions of American workers to joblessness.

The Lobotomy of Low Wages

Economic incentives matter. This is true for teaching, as for other professions. In the words of a recent academic study examining teacher wages and student outcomes, “If you pay peanuts, don’t you get monkeys?” (hat-tip to Andrew Sullivan & Stephen Pampinella. While American public schools are still awful even after correcting for low wages (think Spain, Italy, Greece, and Turkey), the relationship between teacher wages and student outcomes is pretty clear:

The real decline in wages for teachers that occurred when society stopped massive de jure and de facto discrimination against women lobotomized the teaching profession.

The reason is obvious: workers have alternatives to teaching, and if you ‘tax’ teaching by paying it less, you get fewer high quality workers in it. This matters beyond just test scores: the collapse of teachers as an influential political bloc and teachers’ embrace of such agitators as Diane Ravitch may well be explained by the emergent effects of lowering the quality of teachers through paying them less.

Teachers want money, and they want it in a way that avoids measuring teacher performance. Unfortunately for teachers as a political bloc, other powerful forces have entered the debate, including powerful federal and academic institutions.

I do not think it is politically sustainable for teachers to unaccountably deliver terrible results while loudly demanding comfortable wages. In fact, I believe this political strategy is downright foolish. It is a sign that the teaching profession has suffered the lobotomy of low wages. While teachers sit like vegetables as the world pass them by, other forces are replacing them (such as this example of a move by Districts and the Federal-Academic Complex to have some students taught by professors, not teachers at all).

If teacher advocates do seriously join the debate, and contribute to a discussion of how better paid teachers can be better measured, we will get “idiot-proof teaching” scripts and the replacement of teachers by completely fungible drones.

The Ben Bernank, Explained

Information on who exactly has viewed this video available at The Daily Beast. An excerpt:

I should point out that I was told to download the YouTube video not by some dopey trader during a slow day in the markets, but by a CEO in New York City who runs one of the biggest financial firms in the world. Bernanke’s senior staff has seen it too, I’m told, though a spokesman wouldn’t say whether the chairman has.