Investors love Jeff Bezos's global-everything store, even though they aren't making any money from it yet—and it's not clear how they will.
Derek Thompson is a senior editor at The Atlantic, where he oversees the Business Channel. More
Thompson has written for Slate, BusinessWeek, and the Daily Beast. He has also appeared as a guest on radio and television networks, including NPR, the BBC, CNBC, and MSNBC.
Investors love Jeff Bezos's global-everything store, even though they aren't making any money from it yet—and it's not clear how they will.
The sad news that McDonald's is ending its Dollar Menu after eleven years reflects a simple truth: You can't make any money selling burgers for $1, any more.
Accounting for about one-seventh of the chain's total sales, the Dollar Menu, once a brilliant marketing gimmick, is now an anchor—both economically and metaphorically, speaking—enraging franchisees who can't make any money selling 2013 processed cow meat at 2002 prices. McDonald's has experimented with raising prices and tweaking its offerings to appease owners, but by November, the Dollar Menu will be gone, essentially.
The fact that the Dollar Menu has lasted this long might make you think fast-food prices have lagged behind other items, in real terms. But the price of beef and other staples has been turbulent. With some help from the inflation pros at BLS, I graphed this chart of "fast food" inflation (technically "limited service meals and snacks") versus all food for home consumption and core inflation minus housing, which is different from the more commonly used core inflation, but subtracts housing's recent boom.
... and remember: these are prices for end-consumers, so you're not seeing what truly angered McDonald's franchises, which is that the price of Dollar Menu items like double cheeseburgers was rising slower than the cost of ingredients, like buns and cheese and onions and manufactured mammal-based consumables, or whatever the official term is for a fast-food patty.
In January, Wendy's turned its 99-Cent Menu into the Right Price Right Size menu. Now McDonald's has turned its Dollar Menu into a Dollar-and-Up Menu, which is an awfully multisyllabic synonym for "a menu." As fast casual restaurants like Chipotle and Panera continue to expand, McDonald's should be relieved that they've taken away the promise to anchor all their food prices to $1.
In the two years since CEO Reed Hastings groveled before customers about splitting the company's streaming and rental services, Netflix's U.S. subscriber base has grown by nearly 50 percent and its stock price has quintupled.
Zachary Seward at Quartz, who is consistently great on this topic, graphs the change, which shows Netflix blasting by HBO's estimated subscriber base. Netflix said it wanted to become HBO faster than HBO could become Netflix. Well, here ya go ...
It's not clear if more Netflix consumers are good or bad for traditional TV companies. Overall pay-TV subscribers (that's cable, satellite, and telco) haven't declined in the two years since Netflix added those 10 million new customers you see above. That suggests that Netflix might be more complementary to old-fashioned TV than some analysts initially thought.
But (and this is the big point) more Netflix consumers are clearly good news for Netflix consumers. If Netflix can get one to two million more people to pay $7.99 for its service each quarter, it doesn't have to raise prices on existing customers. Indeed, Netflix hasn't changed its monthly fee ($7.99) for the last two years, which means streaming TV is actually getting cheaper each year in inflation-adjusted terms. That's amazing. Even more amazing is Hastings spending hundreds of millions of dollars (amortized over who-knows-how-long) on new contracts with Disney and exclusive rights to shows like "House of Cards" and "Orange Is the New Black." If it needs 1-2 million more customers each quarter to keep revenue and net income targets, then so far, so good ...
But is this sustainable? As Netflix gets cheaper, the entertainment catalog it's supplying is getting very expensive. In a way, Netflix is at a disadvantage here compared to Amazon Prime, since Wall Street simply doesn't care about Amazon profits, and it's not as lucky as the traditional TV world, where the richest channels (like ESPN) earn more per subscriber each year. Netflix is an amazing and astonishingly affordable service whose growing popularity makes it cheaper, in real terms, every year. That's a helluva deal, but who knows how long it can last.
Keeping tabs on past loves has a rich history in literature, from Romeo camping out under a teenage girl's balcony to Jay Gatsby buying a mansion across the water from his married ex. Fortunately for today's "stalkers"—as we're wont to call it, though the term is technically loaded—Facebook is a subtler vantage point to haunt and be haunted by exes than an Italian trellis or Long Island boat dock.
A new Pew Research Center study reports that about half of twentysomethings (18 to 29 years old) on Facebook and other social networks admit to "checking up" on an ex online. That's significantly more than the number who say they post pictures and details from dates online.
A deeper dive into the data shows that keeping tabs on past lovers online is just about as common as flirting with new ones. Men and younger people overall are slightly more likely to flirt than reminisce, but education level and income don't seem to make much of a difference.
The top-line takeaway of the report is that attitudes toward online dating have improved dramatically in the last few years. Indeed, more people now think online dating prevents people from settling down than think it's for desperate singles who can't cut it offline.
There was a time, it seems, when the Web was widely considered a inorganic extension of "real life" rather than a part of it. But the now, with nine in ten workers on computers and more than half the country on smartphones, the Internet isn't something you play and stop, so much as a thing we're always in, a constant background hum. In that light, gchatting a boyfriend, girlfriend, or spouse seems no less natural than picking up a phone. The surprising thing isn't that almost half of young Americans are flirting (and respectfully creeping) online. What's really surprising is the other half that isn't.
"Those born earlier perform better in school"—and according to a new study, it's because of the parents.
Moms and dads simply go easy on their later-born kids, according to data analyzed by economists V. Joseph Hotz and Juan Pantano, and as a result, first-born children tend to receive both the best parenting and the best grades.
The first thing to say about a study like this is that lots of readers will reflexively disagree with the assumption. With kids, as with anything, shouldn't practice make perfect? Don't parents get richer into their 30s and 40s, providing for better child-rearing resources? I'm a first child, myself, well-known within the family for being unorganized, forgetful, periodically disheveled, and persistently caught day-dreaming in the middle of conversations. For this reason, I've put stock in what you might call the First Pancake Theory of Parenting. In short: First pancakes tend to come out a little funny, and, well, so did I. And so do many first-borns.
But international surveys of birth orders and behavior (which might have offered me an empirical excuse to behave this way) aren't doing me any favors. First borns around the world, it turns out, have higher IQs, perform better in school, and are considered more accomplished by their parents. Looking at parent evaluations of children from the National Longitudinal Survey of Youth in 1979, the researchers found that mothers are much more likely to see their first children as high-achievers. They regard their subsequent children as considerably more average in their class (see table and chart below).
Let's briefly count off and nickname some of the leading older-kids-are-smarter theories reviewed by the economists, which push back against the principle of first pancakes.
1) The Divided-Attention Theory: Earlier-born siblings enjoy more time, care and attention than later-born siblings because attention is divided between fewer kids.
2) The Bad-Genes Theory: The strong evidence of higher IQs among first children leads some to believe that later kids are receiving diminished "genetic endowment."
3) The I've-Had-It-With-Kids! Theory: Some parents decide to stop having more children after a difficult experience raising one. In that case, the poorer performance of later children isn't genetic, so much as selection bias: Some parents keep having children until they have one that's so problematic it makes them say "enough."
4) The No-One-to-Teach Theory: This is the idea that older siblings benefit from the ability to teach their younger brothers and sisters. Building these teaching skills helps them build learning skills that makes them better in school.
5) The Divorce Theory: Family crises like divorce are far more likely to happen after the first child in born (first marriage, then divorce, then a first child is not a common sequence) and they can disrupt later kids' upbringing.
6) The Lazy-Parent Theory: The general idea here is that first-time parents, scared of messing up their new human, commit to memory the first chapter of Battle Hymn of the Tiger Mother but by the second or third child, they've majorly chilled out.
Hotz and Pantano settle close to Theory (6). Parents are more likely to make strict rules (about, e.g., TV-watching) and be intimately involved in the academic performance of their first children, according to survey data. They're also more likely to punish their first child's bad grades. Hotz and Pantano say moms and dads start tough and go soft to establish a "reputation" within their household for being strict—a reputation they hope will trickle down to the younger siblings who will be too respectful to misbehave later on.
The theory is interesting but not entirely persuasive. First it seems nearly-impossible to test. The survey data is much better at showing that parents chill out as they have more kids than at showing that parents chill out *because* they're explicitly establishing a reputation for strictness. Nothing in the paper seems to argue against the simpler idea that parents seem to go soft on later kids because raising four children with the same level of attention you'd afford a single child is utterly exhausting. What's more, if later-born children turn out to be less academically capable than their older simblings, it suggests that the economists' reputation theory is failing in families across the country.
Arian Foster, the star running back for the Houston Texans, is now the first athlete to go public. He has sold a 20 percent stake in his future income to Fantex Holdings, a stock market for buying and selling shares in the earnings potential of athletes.
It works like this. Arian Foster gets a check for $10 million. In exchange, Fantex gets a 20 percent "tax" on all future Arian Foster income. That means if Foster earns more than $50 million starting now, Fantex and its investors stand to make money. If Foster earns less than $50 million, he just signed a sweet deal.
Actually, forget if. Foster just signed a sweet deal. With just over $20 million left on his current contract ending in 2016, Foster will be 30 when he's up for another contract. For work-horse backs like Foster who carry the ball 300-400 times a season, 30 years old might as well be 90. He will never get another $20 million contract, which means anybody betting in his future is hoping Foster gets on ESPN and slowly works his way toward $50 million over the course of the next few decades.
But let's dig deeper. There are at least three sports reasons and three business reasons why Arian Foster is an awful investment for you. Here are the sports reasons, moving from the general to the specific.
And here are the business reasons, moving similarly from the general to the specific.
-- We have incurred significant losses since our inception and anticipate that we will continue to incur losses in the future.
-- We have a very limited operating history ...
-- To date, we have not generated any revenues or cash flow from any brand contract...
-- We will need to obtain additional funding to acquire additional brands and we may also need additional funding to continue operations. If we fail to obtain the necessary financing, or fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and we may be forced to significantly delay, scale back or discontinue our operations.
-- Our principal source of cash flow for the foreseeable future will be derived from our brand contracts.
-- We do not have any experience managing brand contracts and we do not have any historical performance data about our brand contracts.
Dear lord. In short: We're a young, unproven company losing lots of money, relying on a business that we don't have any experience in and that we cannot predict with any accuracy.
3. When you buy a stock of Arian Foster through Fantex, you're not just betting on Foster, the older, proven NFL back. You're betting on Fantex, the young, unproven company losing lots of money, relying on a business that they don't have any experience in and that they cannot predict with any accuracy.
While we intend for our Fantex Series Arian Foster to track the performance of the brand, we cannot provide any guarantee that the series will in fact track the performance of such brand.
Wait, what? So Arian Foster stock isn't really Arian Foster stock? Go on...
The board of directors has discretion to reattribute assets, liabilities, revenues, expenses and cash flows without the approval of shareholders of a particular tracking series, which discretion will be exercised in accordance with its fiduciary duties under Delaware law and only where its decisions are in the best interests of the company and the stockholders as a whole.
Essentially, the board has the right to dilute your shares if the company's investments turn sour. Felix Salmon translates into even simpler English: If Foster fails, investors lose; if Fantex fails, investors lose.
The upshot here? Fantex is a fun story. Do not become a character in it. Keep your money in that index fund.
The 16-day shutdown of the federal government cost the U.S. economy billions of dollars in lost economic activity, from an idle district, to lost personal income and higher interest payments. But exactly how many billions did it cost?
Counter-factual accounting is guess-work by definition, but a few research firms have tried to attach a number to the shutdown. Macroeconomic Advisers put the figure at $12 billion. S&P estimate the cost was twice as high, at $24 billion. Split the difference, and you're talking about $18 billion in lost work.
What's a good way to think about that kind of money—a sliver of the entire $15 trillion U.S. economy, but still, you know, $18 billion? In July this year, NASA funding was approved at around $17 billion for the fiscal year. So, there: The shutdown took a NASA-sized bite out of the U.S. economy.
But that's just a nibble compared to the total cost of the budget showdowns stretching back to 2010. According to Macroeconomic Advisers, the total cost of Congress's assault on the economy going back to 2010—including the budget cuts, including sequestration, and fights around the budget cuts—was about 3 percent of our entire economy. That's $700 billion. That's not just NASA. It's one year's entire defense budget.
According to the report, discretional spending cuts removed 1.2 million jobs from the economy, while policy uncertainty, graphed below by the New York Times, cost another 900,000. Two-plus million net new workers is 12 typical months of job creation. So, if the recession delivered a loss decade, Congress has delivered a lost year.
There are a couple reasons to push back on the sheer size of these numbers, as Brad Plumer notes. Most importantly, the report makes little mention of the Federal Reserve, which has maintained its aggressive bond-buying program for this long specifically because of the budget wars. The spending cuts and congressional showdowns weren't just body blows to GDP. They were motivation for Ben Bernanke for continuing to stimulate the economy through monetary channels, and he said so, testimony after testimony. If you believe those programs have helped the economy, in a weird way, you should credit congressional belligerence for extending them.
But let's not give Washington (in particular, one faction of one party in Washington) too much credit. The upshot is that this was a horrible financial crisis and difficult recovery made more horrible and difficult by the government. Once again, the biggest risk to the U.S. economy are the people in charge of it.
Netflix is in serious talks with Comcast and other pay-TV providers to hop onto the cable bundle as a stand-alone channel. Add it to the list of tech companies—Apple, Google, Microsoft, Intel—who have internally debated trying to "disrupt" the cable TV business, but have wound up working with the cable companies (e.g.: Apple, Xbox) or simply built their own cable equivalent (Google Fiber TV).
For those who already have cable, Netflix, and an Web TV box, this might change nothing. But it's a potential landmark moment in the pay-TV wars, precisely because it shows that the battle between Internet and traditional TV isn't as bloody as some analysts like to pretend—at least, not yet.
For a long time, the Netflix Question for the traditional pay-TV industry (e.g. the cable, satellite, and telco companies, which offer nearly equivalent services) has been: Is Netflix competition, or is Netflix complementary? In other words, are Americans switching to Netflix, or are they adding it while continuing to pay those monthly cable bills?
The simple math suggests that millions of families aren't cord-cutting. They're cord-keeping and adding accoutrements around it. Netflix has about 30 million U.S. subscribers, adding 6 million of those last year alone. Hulu Plus has more than 4 million monthly subscribers, and Amazon Prime has millions more subscribers (or, just as likely, millions of the same subscribers).
But here's the surprising part: All this growth isn't obviously coming at the expense of old-fashioned cable. The number of pay-TV households didn't decline in 2012, despite awful household formation. It grew, according to SNL Kagan, with fits and starts from quarter to quarter, as it has since the recession.
Netflix and cable TV are rivals, in a way. Young households, especially young single people living alone or with just one roommate, no doubt see Netflix as a nice alternative to full-blown cable, and at 1/9th the price.
But Netflix and cable are also complements. Most of the 100+ million TV-watching households still seem to consider Netflix a nice-to-have addition to their gotta-have linear programming. This rumored deal gives both sides something obvious. Cable companies would get America's most popular on-demand TV channel, making them more attractive. And Netflix would get easier access to millions of older families that have resisted streaming, because they prefer the old-fashioned couch-and-screen TV experience without fussing over Web boxes and iPad video.*
The era of smaller bundles might be coming. But here, today, is the area of the super-bundle: Bloated channel menus in the front, with nearly infinite on-demand video in the back, all going to tens of millions of families.
*One potential, but hardly mortal, danger that occurs to me is, what happens if TV viewers start seeing Netflix as just another channel rather than a stand-alone app? I wouldn't, e.g., pay for TBS alone, because it's just a channel, but I do pay for Netflix alone, seeing it as something between a channel and a cable provider.
Yesterday, I guessed that Congress, while immensely silly and mostly broken, was not quite crazy enough to actually blow through the debt ceiling deadline (which isn't technically for another few weeks).
Apparently, I was right. And so was Wall Street. John Boehner is ready to accept a compromise from Mitch McConnell and Harry Reid that would fund the government and raise the debt roof, according to Senate sources.
There isn't much evidence that Wall Street ever thought this eleventh-hour deal wouldn't happen. The graph at the top, via Bloomberg's Nicholas Johnston, shows the gyrations in Treasury bill yields. The debt ceiling showdown sparked fear, then uncertainty, then relief, but never outright panic.
The stock-market story paints a similar triptych: fear, then a breath of calm, followed by outright relief. The S&P is up 40 points (2.4 percent) since the start of the month and has steadily climbed the last few days. Its low point, which mirrors the October 9 spike in yields, was just 2 percent off its September close. Investors didn't quite yawn at the debt crisis, but they weren't exactly sweating spinal fluid, either. Unfortunately, Washington's unusual behavior has become, in the eyes of investors, something like business as usual.
So this debt ceiling fight was no big deal, huh? Not so fast. The shutdown cost the economy billions of dollars, inflicting pointless pain on medical research, government data, public services, and low-income families. Consumer sentiment fell more sharply than any month since the Lehman bankruptcy. Budget crises like this and the 2011 showdown have cost the U.S. an estimated 900,000 jobs in the last three years, which is the equivalent of five extra months of typical job creation.
That Washington is stupid but not quite suicidal is Wall Street's correct assumption. But that is not quite the same as permission.
On August 1, 2011, following a long, bruising, and economically harmful stand-off, a splintered House of Representatives voted to raise the debt ceiling, with 95 Democrats joining the majority and 66 Republicans voting in opposition. Days later, the ratings agency S&P voted to downgrade America's long-term debt for the first time in history.
Two years, two months, and two weeks later, history is repeating itself, with terrific precision. The deficit is much lower, the economy is considerably bigger, we are theoretically wiser from experience, and yet ... here we are.
The country is suffering another long, bruising, and economically harmful showdown over the debt limit. The House of Representatives—still divided not only between two parties but also between two factions within the GOP—seems likely to require another splintered vote to avoid economic catastrophe. Yesterday afternoon, Fitch, another major credit-rating firm, announced it was putting the U.S. on alert for a possible downgrade of the nation's AAA credit rating.
Credit-rating agencies typically don't do this sort of thing. They don't downgrade countries with low interest rates and falling debt-to-GDP ratios. American deficits aren't just falling, they're plummeting at the fastest rate since World War II demobilization, in large part due to sequestration cuts that came out of the last debt-ceiling fight (cuts that are, by most economists' measure, sapping a weak economy of jobs and growth).
But just like S&P's decision two years ago, this alert isn't about economics. It's all about politics.
"S&P didn't just downgrade the U.S. government's debt," I wrote in August 2011. "They downgraded the U.S. government. They determined that the safest asset in the world is being run by a city that is addicted to creating crises. Can you blame them?"
Two years, two months, and two weeks later, I have nothing new to say, really. Copy, print, paste.
It's fashionable to make fun of the credit-rating agencies. After all, they held themselves up as the oracles of finance, but looked like a bunch of amateur street palm readers in 2007 after offering mortgage bonds AAA-grade forecasts only to watch them evaporate with the world economy.
But in this case, S&P was nothing less than prophetic. In 2011, the agency downgraded American governance, and two years later, American governance is behaving as though it deserves to be downgraded. From the S&P report:
The downgrade reflects our view that the effectiveness, stability, and predictability of American policymaking and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011
And yesterday, from Fitch:
The repeated brinkmanship over raising the debt ceiling also dents confidence in the effectiveness of the U.S. government and political institutions, and in the coherence and credibility of economic policy. It will also have some detrimental effect on the U.S. economy.
Nothing has changed! It's like Groundhog Day, but 720 times longer and completely horrible.
The U.S. economy's ability to rebound and our capacity to borrow easily from international market has never been questioned. But American debt is not risk free. And as long as this government—in particular, one faction of one party—has a veto over our full faith and credit, it never will be.
Every day around 6pm, Luis Garcia—Brazilian, 26 years old, married without children—finishes work at his Sao Paulo bank and prepares for his night job. He takes out his Android smartphone to learn the evening’s assignment. A daily list of subjects has been forwarded from the United States. Recognizing the names on the screen, and knowing precisely where to find them, Garcia gets on his motorcycle and drives. Minutes later, arriving at his destination, he comes face-to-face with his first mission. It's a loaf of bread.
Garcia pulls out his smartphone again. He snaps a picture and uploads the image, location, time of day, and, crucially, the price. In two hours, he'll have visited a handful of stores and taken scores pictures of food, drinks, and other products. The next day, it will be the same: He will leave the bank, check his smartphone for instructions, get on his motorcycle, and take more photos.
What is Luis Garcia doing, exactly? He’s working with a team of economists in the United States who are paying people in the U.S., Brazil, India and around the world to help build a real-time measure of global prices.
One Brazilian bank employee taking photos of bread after work is, well, just a weird hobbyist. But hundreds of people in 25 cities around the world collecting the daily prices of bread, soap, fruit, razors, paper napkins, and more, every day, and merging their data with even more prices collected from millions of e-commerce sites? That could be the foundation for something bigger: A daily economic database for the world economy, powered by smartphones, smart software, and a mischievously grand ambition. Can you build a real-time stock market of world prices?
'Premise' and Prices
David Soloff—motor-mouthed, mostly unshaven—doesn’t touch his lunch as he cycles through his reasons for founding Premise, the company that pays Luis Garcia and his 700 international colleagues to take pictures of fruit and shampoo aisles in their spare time. Of course, Premise is more than an international photo-collage project. An economist, activist investor, and world-renowned leader in analytics, Soloff has designed an infrastructure that crawls e-commerce sites and merges their prices with on-the-ground data captured by people like Garcia to product a price and inflation tracker in India, China, Brazil, and the United States.
Americans have struggled to understand prices even before we could fully call ourselves “American.” During the Revolutionary War, we voraciously printed money to pay for the military. As prices soared, Massachusetts established perhaps the first price index in U.S. history to adjust soldiers’ wages as the dollar's value crashed. But it wasn't for another century that we built the first index for food, in 1904, collecting prices of 30 popular items from 800 big-city merchants.
The great challenge of measuring prices isn’t just how to measure them, but what to measure. Since it’s impossible to keep track of literally every price in the world, economists typically select a limited “basket” of goods whose prices we can follow. The contents of the basket change over time, for instance when American eating habits shift, or when different products, like new electronics, become mainstream.
The ambition to offer a clearer look at the world of prices isn't unique to Premise, which uses this same "basket" approach. MIT's Billion Prices Index monitors millions of prices on websites around the world to build a daily index. The controversial Shadowstats site offers a conspiratorial alternative to official government figures.
Soloff prizes faster data—imagine, for example, how strange it would be if the Dow only reported one number a month, and that's what we're getting for consumer prices—but faster data isn't what most excites him. With boots on the ground, he says, Premise can also build custom indices that reveal the vastly different lives of each country's citizens. Want to use prices to understand how the poor are getting by in Rio? How the rich are faring in Mumbai? What's really happening behind the bizarre official figures in China? Those are just different indices, built from different baskets, powered by different data. It’s only a matter of sending a new batch of photo assignments to 700 phones.
Even more, Premise’s photos create a portrait of local shopping culture that offers unique details for investors and policymakers. "If an analyst wants to track all of the Walmarts in Mexico City to gauge how busy or not busy they are, we can do that," Soloff said. "We can send 10-20 workers to take pictures at those Walmarts and tell: How many people are exiting and entering at 10am? How many of them are holding bags? How long are the check-out lines? How many people walked by the meat case? How many of them bought something at the meat case?"
A Big Data Answer to Food Scarcity
Soloff's ambitions are broader than helping a handful of investment bankers get an edge on Mexico City retail. He sees his company as something like a blend of Google Street View and the Consumer Price Index: a window into the world's stores to help us learn about the experience of the people behind the prices.
In the thousands of photos uploaded to Premise each day, literally seeing where food is out of stock in, say, Chennai, India, or which Rio bodegas have lines stretching out the door, can help policymakers see the beginnings of food scarcity before violent riots hit the streets. "Look at corn riots in Mexico, the food strikes in Egypt, and Syria," he said. "Water and food scarcity has become a huge story.”
I ask him about Indian inflation, which famously began with the skyrocketing price of onions. Soloff opens his laptop and swings it around to face me. There is the Premise chart of Indian onion inflation: the steady day-to-day creep, the peak, and the slow, jaggedly decline.
He takes me to the home page for India's Food and Beverage inflation. At the top is the key graph of price movements going back to May.
More than 300,000 food details—each tagged for location, time, and price—make up this index, including 27,000 observations of grains and 81,000 photos of vegetables. Double-clicking on the vegetables category takes us to a separate page for vegetable (including onion) inflation.
At the bottom of the page is the array of vegetable photos, which make up th data. Premise isn't just an inflation report, Soloff says again. It's map that tells you where prices are going up—“city by city, neighborhood by neighborhood, store by store”—to help governments and agencies track the tremor of inflation from its epicenter. Each vegetable observation comes with a price and a drop-pin on a map, to show Premise exactly where prices are moving and where they're not moving.
"From our 7,000 observations in India over last few weeks, I can go down to Chennai, I can say, when did [prices] start spiking in Chennai versus Mumbai and Calcutta?” Soloff says.
“One of the overall lessons we've learned is not just that government data is wrong, but that it's a blunter instrument than people need. And by being so blunt, people might be making wrong decisions.”
The Android Network
With the government shutdown, the country could miss at least one inflation report. Most Americans will notice nothing, but monthly reports on prices and jobs influence economic policy that affects the national economy. The Federal Reserve’s recent, surprising decision to continue buying bonds at the same, accelerated rate shocked investors, but it was driven by the sort of data points that Soloff and Premise want to make more available.
It's possible to corral a team of data collectors around the world thanks to Android, which could be the closest thing we've ever had to a universal operating system. Before smartphones, hundreds of people taking photos around the world was just sightseeing. Now it just might provide the backbone of a dataset that rivals international governments.
"People are plugged into a global infrastructure in a way they never were before," Soloff said. "In many places, people walk around with a computer, and they can be paid incrementally for it, on their way to school or their jobs. This is how Android in the last two years has become an amazing story, not just in the U.S., but around the world. It's become a global operating system. It allows us to synchronize their work."
In Sao Paulo, Luis Garcia is a member of a motley team of men and women, including part-time-workers, unemployed workers, and students ranging from 18 to early 50s who discover Premise on sites like Craigslist. Some Brazilians have quit their jobs to document prices for Premise full-time, Garcia said in an email:
One worker was an event and wedding photographer in his 40s. He lives in a very poor neighborhood and he has family. He answered the ad and now is making double what he was making before and working less, so he has more time to help with his family. His wife called the city manager to thank him for the difference that they were making.
When he and his team go to bed, a student in New Delhi is waking up, packing his smartphone, and stopping by a market before class to take pictures of a vegetable stand.
Eugene Fama revolutionized economics by proving that markets are efficient. Robert Shiller revolutionized economics by proving the markets are inefficient. Today, both share the Nobel Award for economics with Lars Peter Hansen for their contribution to the predictability (or, more often, unpredictability) of stock prices.
"There is no way to predict whether the price of stocks and bonds will go up or down over the next few days or weeks," the Royal Swedish Academy of Sciences said in awarding the 2013 Nobel Prize in Economic Science. It continued: "But it is quite possible to foresee the broad course of the prices of these assets over longer time periods, such as, the next three to five years."
Fama showed that markets are efficient, and this makes them unpredictable in the short term. Shiller showed that markets were inefficient, and this also makes them unpredictable in the short term.
Can both be true?
Sure, think about it this way. If perfectly efficient markets already reflect everything investors know, how do you "beat" them? You can't, really, unless you somehow suspect you know more than the universe of knowable information. Which is unlikely. But if inefficient markets are driven by the undiagnosable animal spirits of the investment community, how do you predict them? It's devilishly difficult. You'd have to not only outsmart a biased market, but also time your bet so that the bubble doesn't grow long enough to wipe you out.
If Fama and Shiller's research disagrees about the short term, they meet, like fundamentals and asset prices, in the long run. Shiller's research showed that periods of over-enthusiasm about a stock tend to follow periods of under-enthusiasm about a stock. The year-to-year gyrations seem wild and capricious. But the fact that they follow a pattern over the course of many years suggests that, in the long run, stocks reflect certain fundamentals, like expected future earnings.
These findings might strike you as familiar advice. They reflect the position of some financial advisors who tell families that frenetic day-in-day-out activist investing is for chumps, and the best place for your money is a passively managed portfolio or index fund.
But it's a disquieting idea for most of the financial news industry, whose 24-7 coverage of the market implicitly presumes an audience seeking guidance about which stocks to buy and sell each day. Daily, monthly, and annual stock picks are low-probability gambles according to Fama and Shiller's research. But they're the bread-and-butter of financial media.
Stock-pick columnists, "star" investors, Wall Street crystal balls, and assorted gurus on CNBC, Bloomberg, CNN, and across the Internet who claim they can outsmart the market are making a funny promise. If they think markets are efficient, they're promising to see obvious bargains in a world where obvious bargains should be impossible. If they think markets are governed by emotions, they're playing the role of economist and therapist, promising a get-rich-quick scheme that requires an expert psychological diagnosis of millions of investors.
Super-star stock-pickers exist. Maybe they're lucky. Maybe they're smart. Maybe they're divine oracles. But Fama, Shiller, and Hansen's research suggests it's very hard to consistently beat the market, and if somebody tells you otherwise, you should be very skeptical.
How come so many movies are sequels, adaptations and reboots? Why do music studios spend so much on just a handful of superstar artists? And since when did TV shows become so lush and sophisticated?
These sound like scattered questions for an entertainment guru, not an economist, but Anita Elberse, a professor at Harvard Business School, is both. And her great new book, Blockbusters, explains that the four questions share one answer. The blockbuster strategy—betting more and more money on fewer and fewer titles—has taken over the entertainment world.
The book comes out in an interesting time for Hollywood, which suffered a row of famous big-name flops this summer. Has the last year proved that the blockbuster approach is dead—or stronger than ever? That was just one question I asked Elberse in a wide-ranging interview. This conversation been edited for length and clarity.
THOMPSON: Would I be oversimplifying your thesis if I said: "In movies, music, TV, and books, people have learned that $1 spent on a blockbuster is better than $1 spent on a not-blockbuster"?
Elberse: I think that's a good way to summarize the book. Another way is to say that, although there is no way to play it safe in the entertainment industry, a blockbuster strategy is the safest way to play. In investing, we intuitively think we should make a number of small bets. A blockbuster strategy is the opposite. It means making fewer huge investments. But it turns out to be safer.
The obvious reason that you're right is that people keep showing up to big, loud sequels in movie theaters, so studios keep making big, loud sequels. But the most interesting part of your book is the not-so-obvious ways that spending more money on fewer projects is smart. For example, if you're known for making big popular movies, then you attract artists and creatives who think they're sitting on a big popular idea.
Yes. And you can price yourself out of the market for great entertainment by not spending big on high production value. This is true in film. It's true in television, where NBC tried to manage costs for a few years, saw margins decline, and lost out on some major new projects. If you're a book publisher, and you don't compete for the biggest and most promising books, you'll lose shelf space at Barnes & Noble, and leverage with Amazon, making it harder to get and promote future books.
So what you see is that efforts to save on cost might improve profitability in the short run. But in the long run, you're undermining the very essence of what builds blockbusters. Studios and publishers need help from talent and from retailers to make these big hits.
And there is a trickle-down effect. The companies that made the last successful blockbuster, whether it's a book or a TV show, tend to be well-positioned to produce the next successful blockbuster. How do blockbusters beget blockbusters?
If you haven't had a hit in a long time, it's harder to build the next one. One hit has a halo effect. [The opposite effect] is what NBC is experiencing. They haven't recovered from the period when they managed for margins.
You see the same dynamics in movies, too. Think about trailers you see in theaters. If you're seeing a Warner Bros film, the studio might have three of the five trailers. So having a hit helps you create the next hit. If Macmillan publishes Bill O'Reilly's book "Killing Jesus," and it sells well, Macmillan can urge him to interview me about my new book [also published with Henry Holt - Macmillan] driving up sales for my book. Hits create hits.
And in music?
It's very much the same. One way you see the trickle-down is in concerts. If you are the record label who owns Lady Gaga, and you have a new artist coming up, you can say, "Let's have the artist play just before Gaga." Now you've exposed the huge Gaga audience to the new artist. It's similar to showing a trailer before a movie. The hit creates a hit.
I think my friends are most familiar with the blockbuster formula playing out in movies, and my sense is that they hate it. They see big loud sequels and adaptations taking over and they want to know who to blame. So who's to blame?
There are a number of people who are negative about blockbusters, and that surprises me. Put yourself in the mind of an executive. They know everybody pays the same amount for a movie, whether the studio invested $10 million or $300 million. To complain about studios overspending is odd, because the price of the ticket doesn't change. In what other industry do we complain about companies increasing their spending when they don't raise prices? In video games, it's the opposite. People are thrilled when companies spend more on the next [Grand Theft Auto].
So consumers are to blame?
As consumers, we are at fault. These are the choices that we're making. More of us want to see Iron Man III than an artsy film. So studios will make more franchise films. More sequels to sequels.
This is to their marketing advantage, too. You have to spend a certain amount to reach everybody in the country at least once. It doesn't cost as much to reach everybody twice. There are discounts when you do these larger media buys, so the studios buy up a whole lot of advertising in one go. It's more expensive to cobble together a bunch of markets. Smaller films are released in NYC and LA first, and if they catch on, they go to other markets. That is a very expensive strategy to run for every movie.
Can we blame China, too?
The majority of revenue right now is coming from outside the U.S. If you're a film studio, you're making a movie for a foreign market. You're pursuing ideas that travel well. It changes the movies we see and how movies are made.
There were many famous flops this summer. Did this blockbuster season prove your thesis wrong?
No. In fact it confirms the arguments I made in the book. This was Hollywood's most successful summer ever [in nominal dollars]. Most of the blockbuster events, like Iron Man III, did extremely well. You also had flops like Lone Ranger. But flops are inherent in a blockbuster strategy. People aren't talking about the smaller movies that failed to overcome their costs. If you add all the smaller bets that didn't pan out, you'd see a worse failure rate than for the larger bets.
Even if this summer didn't change your mind, do you think it changed Hollywood's?
No. If anything, they will be more mindful of their blockbusters bets. Lone Ranger had a famous producer and Johnny Depp, so it seemed like a safe bet. But it wasn't a franchise that was very well known. So producers will probably bet even more on Marvel super heroes and sequels and less on original or old franchises. They will play it even safer.
What do you say to somebody who claims the sequel-adaptation-blockbuster strategy is simply ruining movies? That, as the formula is getting smarter, the movies are getting dumber?
I am sympathetic to that viewpoint, but you have to realize that a lot of people who complain about films aren't the target audience for those films. If you're not going to the theater regularly, maybe you should consider there are other people who are -- and that these movies are made for them. The movie-going audience is an under-25 crowd, and in fact mostly teenagers. Most of us who fall outside that demographic spend much more time watching television -- and some of what we find there, from Game of Thrones to Homeland, is of truly remarkable production quality.
Here's a fact: The deficit is falling.
Here's another fact: Americans don't know the deficit is falling.
The point isn't that Americans are stupid. They have busy lives and concerns that have nothing to do with the annual gap between taxes and outlays. Instead, the point is that public-opinion polls don't belong on the same plane as facts and informed analysis, because they qualify as neither.
Smash-cut to the government showdown: The last few weeks have seen a sort of media-insider debate (which I hope is interesting to people who aren't just media insiders) about whether journalists are wrong to blame both parties for a shutdown that seems rather obviously to be a Republican creation. Jim Fallows has obsessively tracked these instances of "false equivalence" or "pox on both houses" journalism that makes Democrats seem similarly blameworthy for a shutdown they're playing very little part in.
In a piece today for National Journal, Ron Fournier leans on public opinion to show that, no, in fact, both Republicans and Democrats deserve a big serving of blame for the shut-down government, because Americans think they're both to blame. He writes:
It would be false equivalence to say Republicans and Democrats are equally to blame for the government shutdown and the possibility of a debt default. Republicans engineered the shutdown to protest a three-year-old health care law, knowing their defund-or-delay demands were unattainable ...
... At the same time, voters don't absolve the Democratic majority in the Senate or President Obama himself. Only 37 percent approve of the way the president is handling his job, an anemic number. Democratic Majority Leader Harry Reid has a favorability rating of just 18 percent...
... The story and poll assess blame unequally, which is the exact opposite of false equivalence.
In other words, we can all agree that Republicans are responsible for the shutdown, but public opinion also blames the Democrats, and so [in Fournier's own words] "it is a pox on both houses."
Go back to the graph that leads this article. Imagine, briefly, if we published a story on the deficit that said, essentially: "The CBO says the deficit is rapidly shrinking, but at the same time, Americans don't seem to know that, so perhaps we need to cut the deficit even more." That's not just a meaningless juxtaposition. It's misleading, too.
Rather than free readers from the shackles of false equivalence, this sort of argument actually solidifies the worst kind of false equivalence. It holds up the misinformation of survey respondents—whose opinions have been shaped by both-parties-are-to-blame coverage—as equivalent to an informed analysis of Washington. As Fournier observes the shutdown is entirely a GOP production. The fact that voters disagree is not, by itself, a useful counter-argument. It's like we're feeding readers the false-equivalence narrative, watching them eat it, and then saying: "Well, Americans do seem to blame both sides equally, maybe there's something to that."
Public polls are a fine gauge of public opinion, but they're not to be treated as a barometer of reality. Pretending otherwise mixes up the regurgitated misinformation of readers with the careful analysis of people who are in the business of busting misinformation.
If that's not serving up false equivalence, what is?
The government is still shut down, as thousands of workers go without pay, food goes without inspection, and sick patients go without clinical trials. Meanwhile, Republicans have offered to restore funding on a piece-by-piece basis that would pay some of those workers and treat some of those patients.
The president has said no. But why, CBS White House Correspondent Mark Knoller asked at the press conference today.
Obama responded that while he's "certainly tempted" to take up the GOP offers, he didn't want to fund slivers of the government, one at a time. On the one hand, funding the discretionary budget bit by bit spares the most headline-y victims and lessens the pain of shutdown. On the other hand, the piecemeal approach ... well, spares the most headline-y victims and lessens the pain of shutdown, prolonging the crisis, itself.
So, depending on how you look at it, the piecemeal approach is both a plan to fund government as soon as possible and a plan to leave government unfunded as long as possible.
There is a graph for this, of course. Michael Linden counts up the six piecemeal non-defense appropriations bills passed by the House (and unsigned by the president) and the eight other bills the House wants to pass in the coming weeks. "Together, these 14 bills allocate approximately $83.1 billion in funding," Linden writes. That would leave 82 percent of the $470 billion non-defense discretionary government unfunded.
In other words (and colors), Obama wants to fund the whole pie below. The GOP, which would like to pair government funding with Obamacare's defunding or delay, is asking him to fund the blue slices only. The White House's logic is that passing the blue stuff makes it more likely that we go even longer without the larger, redder part of the pie.
This isn't three-dimensional chess, exactly. It's not even chess. It's just a radical wing of the Republican party exerting on House members while holding the rest of government hostage. Meanwhile, the list of casualties deepens: the roads, the patients, the kids, the border, the veterans, the economic data, the product-safety inspections ...
You're looking at it: Our new $100 bill, the product of more than a decade of research and development, and the most sophisticated piece of currency technology in U.S. history.
The note, which debuts today, includes two new features to thwart counterfeiters: (1) a "3-D" blue ribbon woven into the paper that, when tilted, shows 100s moving side-to-side or up-and-down; and (2) a camouflaged bell, seen within the copper inkwell above, that turns green when the bill is tilted. Larry Felix, the director of the Bureau of Engraving and Printing, called it "the most complex note the United States has ever produced."
But when it comes to currency art, the United States is still a second-tier talent. Our greenbacks are iconic, but in a world of dazzling polychromatic designs, they're stubbornly one-note.
Perhaps nothing that rolls out of our ATMs will ever compete with the patriotic phantasmagoria of Kazakhstan's currency, which looks like what would happen if you gave Robert Rauschenberg the keys to the Office of Printing and Engraving.
Let's start with the Kazakhstan 5,000 Tenge (about $32), the winner of the 2012 International Bank Note Society's Note of the Year. It has all the hallmarks of a Kazakh note: a combination of portrait (front) and landscape (back) orientation, a smattering of world-class security features woven into the art and the ink, and a sort of fever-dream-ish collage of national icons, from the Kazakh Eli monument, the president's residence, the national emblem, national flag, and, for good measure, two doves hovering over a pair of panthers.
It's weird. It's confusing. It's amazing. More serene, perhaps, is the 10,000 Tenge note, named the bank note of the year in 2011 by IBNS.
And here's Kazakhstan's nomination for the 2013 awards: a silhouette of the country opens up onto the Irtysh River while a holographic band along the right side displays a "stylized yurt." Below, more doves, more monuments, and four antelope outlines with four different colors.
America's new $100 bill is a respectful modulation of a theme, but the fantasy worlds conjured on the Tenge notes are a qualitatively different art form. All Kazakhstan's currency does is look classy, evoke complexity, change its outfit every year, and win every award. It's like the Meryl Streep of international bank notes.
Americans are perfectly, identically, symmetrically split on whether the GOP is justified in demanding major changes to Obamacare in exchange for funding the rest of the government, according to a new Pew Research poll. It's just another reason why this shutdown isn't likely to end any time soon.
Asked whether Obama should agree to a shutdown deal that includes changes to his health care law, the "yes" responses among Republicans, Independents, and Democrats went 77 percent-40 percent-18 percent. Asked whether the GOP should agree to a deal to fund government without health care changes, the R-I-D responses were practically palindromic: 14 percent-43 percent-75 percent.
Now in pretty-picture form:
As Molly Ball reported today, Democrats told pollsters for The Economist that they value compromise, much more than Republicans conceded. But in this specific debate, at least one poll has Americans practically perfectly divided on the issue of compromise.
This is a good time to recall that polls, while wonderful measures of what people think, are less perfect illustrations of what government should do — and the fact that politicians are motivated and self-justified by surveys doesn't mean the gyrations of public opinion should change anybody's mind about a policy debate. And if you want to know where I stand on the government-shutdown debate ...
Twitter has filed for an IPO. This document, called an S-1, is like a cover letter for a young firm trying to impress big institutional investors to buy the stock on Day One (and hold onto it). But in addition to the chest-pumping, every company is obligated to enumerate the risks that could destroy it.
Like the weaknesses part of a cover letter, the risk section is arguably the most interesting part of the S-1. It's where, for example, Facebook famously misled retail investors about its weakening desktop business, before the company had properly built out a mobile business.
Befitting any young, undeveloped, and unprofitable company, Twitter's list of risks is long and wide-ranging, from Maybe we'll stop adding users to Maybe China will ban us forever. Here are the most significant and fascinating risks the company fesses up to (for a full list, go to page 16 of the S-1).
(1) What if Twitter has simply stopped growing? There is some evidence of stagnation. Twitter announced 215 million monthly active users today, meaning "it's added only 15 million since it hit more than 200 million late last year," according to Mike Isaac. Twitter acknowledges that if users top tweeting (or if their tweets are bad and go unread), the company will slowly bleed advertising, as well.
As just one social media/news app in a crowded field, Twitter also acknowledges that its most serious competition has much, much more money, including Facebook (with Instagram), Google, LinkedIn, Microsoft and Yahoo!—and that's just in the U.S. "Facebook operates a social networking site with significantly more users than Twitter and has been introducing features similar to those of Twitter," the company admits.
(2) What if Twitter really never learns how to make serious money? Twitter generates nearly 90 percent of its revenue from advertising and more than half of its revenue from mobile advertising. It has three products -- Promoted Tweets, Promoted Accounts and Promoted Trends -- but none are quite proven. "If we are unable to demonstrate the value of our Promoted Products to advertisers and advertising agencies," Twitter says, it will suffer from both a stagnating user base and a stagnating monetization strategy.
Twitter is trying to introduce new features it can turn into money-gushers. Vine, the six-second video feature, offers another window to serve native ads. Amplify gives TV advertisers the ability to re-target viewers with Promoted Tweets. The company has also teamed with Nielsen to produce a TV rating system which, while generating no revenue today, suggests a future where Twitter sells its data. Still, these initiatives are too young to celebrate or lambast, just yet.
(3) What if Apple or Google design an operating system that ruins the Twitter experience? Twitter isn't vertically integrated. It works on other people's devices, browsers, and operating systems, like Mac OS, Windows, Android, iOS, Chrome and Firefox. "Any changes in such systems, devices or web browsers that degrade the functionality of our products and services or give preferential treatment to competitive products or services could adversely affect usage of our products and services," the company says.
(4) What if Twitter fails to expand internationally? Twitter needs more users. The trouble is that, in many populous and connected countries, it faces competition and other barriers. Twitter is blocked in China. Some countries have nearly identical or highly similar services, like Sina Weibo in China, LINE in Japan and Kakao in South Korea. In other markets, like Europe, government regulation restricts its freedom to advertise. In less developed countries, like India, poor Internet connections makes Twitter less viable. All this matters because the typical monthly unique overseas is worth 23 percent less than an American user.
(5) What if Twitter never manages to turn a profit, at all? "We may not be able to achieve or subsequently maintain profitability," Twitter acknowledges. Indeed, it's lost about $420 million in its lifespan. Although revenue has grown from practically nothing in 2009 to $317 million last year, the company expects that breakneck pace to slow as the user base slows.
(6) What if Twitter suffers the mother of all Fail Whales? Twitter is massive and mostly smooth even during peak hours. But it's still vulnerable to infrastructure breakdowns. In the company's own words:
We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing our products and services simultaneously, computer viruses and denial of service or fraud or security attacks.
(7) What if foreign governments get in the way? Around the world, governments and regulators are proposing data-protection and privacy laws that could affect Twitter's business. "These laws and regulations are subject to change and uncertain interpretation," which could cost Twitter, not just future users, but also money paid out in penalties and lawsuits.
(8) What if hackers get in the way? Twitter experiences cyber-attacks "on a regular basis." In February 2013, hackers gained access to 250,000 accounts. "Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation and a loss of confidence in the security of our products and services that could have an adverse effect on our business and operating results," Twitter said.
(9) What if Twitter gets in its own way? Throughout its risk section, the company is candid about all the ways it could screw itself: management fails, a short-term focus that compromises long-term vision; a long-term focus on innovation that takes away from quarter-to-quarter revenue growth; or a breach or massive screw-up that loses the trust of marginal users and devastates growth.
It's hard to say happens if we blast through the debt ceiling in the middle of October, because it's never happened before in American history. But it would almost certainly be something very, very bad: a crisis, if we're lucky, or a historic calamity, if we're not.
It's easier to say what happens if we get close to blasting through the debt ceiling, because that did happen in the summer of 2011.
It short: It was bad. Bad enough that anybody even remotely concerned about the stock market, the housing market, or uncertainty should abandon this ridiculous debate over the inevitable. We're going to raise it. Because we have to.
Here are the low-lights of August 2011, in the weeks before the debt ceiling vote. Consumer confidence fell 22 percent. The S&P 500 fell 17 percent. The 30-year fixed-rate mortgage spread rose by 70 basis points, adding about $100 to an average monthly mortgage payment. Taxpayers are stuck with an extra $19 billion this decade, to make up for higher borrowing costs during the last nervous days.
In picture form, this is what the lasting damage from the last debt fight looked like:
Nobody can prove that all of this happened explicitly and exclusively because of the debt ceiling showdown. After all, Europe was a bloody mess two years ago, too. But, as the Treasury Department reports (and illustrates, with the graphs above), it's reasonable to assume that the impending, unprecedented catastrophe of a debt ceiling breach was a major cause of the jitteriness, since many of these indicators turned up so soon after we raised the debt limit.
Just this morning, the New York Times reported that John Boehner privately confided that he won't allow the government to blow through the ceiling, even if it means introducing a bill that most of the House GOP says it won't support. What wonderful news that would be!
Meantime, his spokesman is still asking for concessions, saying Boehner has been clear "that a ‘clean’ debt hike cannot pass the House, that’s why the president and Senate Democrats should drop their ‘no negotiations’ stance, and work with us on a plan to raise the debt limit in a responsible way.”
But there is a way to raise the debt ceiling responsibly. Everybody in Washington knows how. You just ... raise it.
The government shutdown debate used to be about something specific: Linking the government's funding to Obamacare's defunding. Now it's about something else. But what?
“We’re not going to be disrespected,” conservative Rep. Marlin Stutzman, R-Ind., [told the Washington Examiner]. “We have to get something out of this. And I don’t know what that even is.”
And I don’t know what that even is.
On the one hand, you could say it's just a throwaway line. Representatives say empty, tired things every day. But quotes have a life of their own, and this one is already being hailed online as the perfect embodiment of the GOP's bargaining position: Equal parts resolution and deep confusion. Forty-eight hours into the shutdown negotiations, one Republican stalwart's official position is that he no longer has any idea what he's negotiating for.
The disrespect sentiment echoes vintage Newt Gingrich, who famously bragged in 1995 to have shut down the government partly because President Clinton forced him to sit in the back of Air Force One on a trip to Yitzhak Rabin’s funeral. “It’s petty,” Gingrich said then, “but I think it’s human.”
Thursday is day three of the shutdown. Something will end the stalemate. Who knows what that even is.
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