Macromegas #15 - Attention Economy and (online) Moats
How the Internet is shaping individual and organisational behaviour
Hi friends,
Happy Friday!
How the Internet is shaping individual and organisational behaviour
A case for taxing digital leisure and the attention economy?
True labor force participation rate is low. Even (especially?) in countries where published unemployment figures are very optimistic. This is something that worries quite a few macroeconomists, especially at what appears like the end of a growth cycle.
The (arguable) thesis of the author is that people, and more specifically young men, do not derive enough marginal utility from working (more). The extra income they could get could only be spent on buying conspicuous goods to display status. But, in their range of income, that amount of extra status-display would not bring any real utility to them. They would need to be in a much higher income band to derive any utility from it.
Since time is a zero-sum game, this very limited marginal status utility is in competition with leisure, in the form of the attention economy. Think Netflix, video games, social media, etc.
And as long as people earn enough to be able to afford the basics (food, accommodation, basic healthcare), they do prefer this form of virtual utility to increase consumption.
In a global economic system based on consumption, this certainly raises valid and worrying questions. Where states are considering Universal Basic Income (UBI), this is also an individual reaction that needs to be properly modelled. Thank God, we have microeconomists for that.
The author then expands his thinking to taxation to shift the incentive towards what we consider “better” status quo as per the values of our generation.
The main question that I always ask myself when a new tax paradigm is considered is:
Are we trying to force people to pay for a universally agreed bad behaviour? - i.e. negative externalities such as making our planet inhabitable.
Or are we actually trying to force people out of natural bias, a morally relative value framework, or an inevitable shift in the way society works? - think legacy record companies vs. iTunes or Spotify.
Read the two essays there:
Keen to get your thoughts on interesting second-order implications you can think of.
Strategy & Moats
New book on my to-read list (average review of 4.4 on goodreads, plus stellar recommendations from a few trusted influencers). It talks about the following points:
Economies of Scale
Network effects
Counter-Positioning
Switching Costs
Brand
Cornered Resource
Process Power
Nothing revolutionary, you’ll tell me. Fair. But solid explanations and carefully researched examples can bring a lot of value in themselves, and it seems like it is the case with this book.
Books like this one - or Modern Monopolies, my own summary here) - help refine our understanding of the competitive landscape out there, and the everlasting struggle between monopolies and consumers.
With the current size of the winner-takes-all online market and the tensions it creates between the US, China, and Europe, understanding those power plays perfectly becomes a necessity. Some recent examples:
Nvidia updates GeForce EULA to prohibit data center use - basically Nvidia forbidding people to use hardware they fully bought to compete with Nvidia’s own cloud services,
Apple (and Google) defending their aggregator monopoly - Epic Games tried to break their monopoly rules… and got shut down a few hours later (both from the App Store and Google Play).
Long story short, it is vital to understand what is happening. That’s where I’ll help.
Do not hesitate to share with anyone who might be interested.
In the meantime, read a thorough review and summary here: Mind the Moat, a 7 Powers Review
On Monday we’ll talk about Aftermath, a book about the global financial system.
Thanks for reading,
V