Derek Thompson

The 4 reasons why mobile ads are lousy

Ads are simultaneously an essential force in our lives and hardly in our lives at all. The paradox of advertising is that we spend most of our lives ignoring ads while we also spend hours browsing websites, reading articles, using apps, and "consuming" other "content" that could not exist without them.

That's why it matters that our attention seems to be moving toward screens where ad dollars are struggling to follow. My business column* in The Atlantic magazine this month is on mobile ads: Why they're so annoying and why it's so important that they get better -- not only for companies like Google and Facebook, who rely on digital advertising for 80+ percent of their revenue, but also for the entire media industry that has grown fat and happy expecting that advertising would always be there to pay their salaries.

The companies staring down the mobile ad challenge face three acute deficits: not enough data, not enough innovation, and not enough screen. None of these barriers are insurmountable. But no free ad-supported service could succeed without overcoming all three.

THE INFORMATION & INNOVATION & IMAGE DEFICIT

When you're snooping around the Internet on a desktop browser, do you ever notice that certain ads will follow you? Maybe you've checked out a par of sunglasses online, and every next site you open, the same pair of shades will re-load in the top banner ad. You might have many different words for this sort of advertising, such persistent, pleading, or creepy. Digital advertisers have a different word for it: re-marketing.

Remarketing (or re-targeting) means somebody leaves your site, and you show them ads on other sites to remind them to come back. It's just one way that our desktops use technology like cookies to learn more about us and serve us ads that we'll theoretically want to click on.

The single most important misconception we have about our smartphones is just how "smart" they are about us. We assume that, just because our phones are physically close to us, they must know us better than our computers. So, the ads must be more personal.

That's just not the case.

"Mobile targeting is very different because it doesn't give you the same information," said Gokul Rajaram, Facebook's product director for ads. "There are cookies on desktops so they can reach you later [through things like remarketing]. On a mobile phone, you're out of luck. It's a completely different universe so re-marketing goes to zero."

There's another reason why it's easier to follow people on computers than on mobile phones. It's harder to measure success -- or what the business calls "conversion" -- on mobile. Imagine you see an ad for a Best Buy product you actually want. On a computer, where you're comfortable shopping, you'll just buy it right there. That's an advertiser's dream. A successful conversion.

But most people don't shop on their phones. We research. You'll look up a local lunch place, but you'll pay for lunch at the restaurant. You'll snoop around for great headphones, but you'll buy them on your computer. How to you measure a successful "conversion" on a device that people don't spend money on? How do you know what ad worked and what ad didn't? It's a challenge that requires a lot of creativity.

Creativity. It's an underrated part of advertising economics. The most creative designers and copy writers and engineers design the best ads -- or ad "experiences" as they're often called now. And today, many of these people are not working in mobile for two simple reasons. The screen is too little, and the money is too little. The screen can't get much bigger, and the money won't grow until information gets better. Until it does, the smartest designers and creative thinkers in the advertising world are more likely to direct their considerable talents toward other screens and pages.

And that's how the information deficit, image-size deficit, and innovation deficit are all somewhat one and the same.

But there's a fourth deficit that isn't about the technology.

THE DIGITAL-ATTENTION DEFICIT

Along with books, ad-supported newspapers were once the entertainment hearths of the American living room. Then we added (ad-supported) radio. And (ad-supported) TV. With computers and phones came (ad-supported) sites and (ad-supported) apps. It's deceptively easy to think that as our focus shifts from platform to platform, screen to screen, advertising revenue will follow, simply because it always has.

I'm an optimist. I think attention moves faster than the ad business, and the ad business tends to follow, and it's too early to predict that there is something fundamentally flawed with digital advertising. But what if there is something fundamentally flawed with digital advertising, something fundamentally different about our attention on the Web?

The Internet isn't like magazines and newspapers, which buy a calmer variety of our attention less prone to multitasking (see page 18 of this multitasking report) and theoretically better for seeing and remembering ads. The Internet isn't like radio, which forces us to sit and listen to ads between songs. The Internet isn't like TV, where ads are big and lavish and presented on an HDTV, where they insinuate themselves into our lives for hours a day. "TV ad dollars are not going to become online ad dollars [because] online ads simply don't do what TV ads do," Felix Salmon wrote. Online ads, he said, are even easier to ignore than other ignorable ads ...

"There's nothing inherently interesting about them, and insofar as they grab your attention, they tend to do so in a very annoying way, by preventing you from reading or watching the thing you were looking for ...

"In a mobile world, the distinction between being online and not being online is an increasingly silly one to draw. And as a result, the idea of using "time spent online" as a useful metric of anything, really, is equally silly."

You might think: so what? Ads are annoying. The fewer the better.

But the ability of advertising to move from platform to platform, screen to screen, is precisely what's delivered this golden age of entertainment. Every bauble on your smartphone screen is a business model, and the vast majority of them are venture-backed enterprises that rely on the promise of mobile advertising actually materializing. If ad people collectively decided that  mobile is a broken platform to buy reader attention, it would mean something worse than the end of 1 inch banner ads. It would mean that our attention had finally escaped to a screen that was too small to pay. That's a pessimistic outlook, perhaps. The case for optimism is here.

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*Editorial note: The column focuses mostly on the business and technology of mobile ads, and, for space reasons, we had to cut some of my musings about how the nature of attention -- and, therefore, the efficiency of advertising -- is fundamentally different on the Internet, and especially on the nibbles of Internet we consume on our phones. It was this great Felix Salmon piece that reminded me I should circle back to the digital attention deficit.

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There's no doubt in my mind that Joe Scarborough "won" last night's debate with Paul Krugman on the debt, at least as a media event. But the conversation left me deeply confused about what the Morning Joe host himself really thinks about the deficit.

Does Joe Scarborough support more or less spending in 2013? That sounds like an easy question to answer. It's not.

On the one hand, it's fairly clear that Scarborough supports more spending this year on jobs. Up to $200 billion on top of the current budget. He said so himself. Here's the money segment from last night. Transcript below.

Charlie Rose: In terms of the short term, Paul doesn't think we have a spending problem. You think we have a spending problem, right now? This year? Next year?

Joe Scarborough: Next year? I don't think over the next, three, four, five years it's going to cause a serious problem.  I think-I think if you look again at the projections, if you look at what we need to do for Medicare, Medicaid, I think we need to start planning for that right now.  And that's, I think, where we disagree. I think Washington can do two things at once.

Paul Krugman: Let me ask a serious question. Would you support an extra $200 billion a year in spending on infrastructure and education right now?

JS: Oh yeah. I talk about it all the time.

Okay, there we have it. Scarborough supports much more spending this year.

So he should be horrified by the cuts in the sequester, right? In his recent New York Times column on the $85 billion guillotine to the budget, Scarborough had a perfect occasion to denounce the cuts and call for more spending. He didn't.

Scarborough wrote that it was "a fact" that the sequester "will not do great damage to domestic and defense programs." Rather than demand that Democrats and Republicans repeal the cuts and replace them with $200 billion in spending on infrastructure and education, he said "Democrats and Republicans need to retarget these cuts." And here's Joe -- who we just saw on the record that the economy needs more spending -- now on the record that the economy can easily take less spending:

Does Mr. Obama really want to claim that his administration, which has added $6 trillion to the national debt, is unable to save a penny out of every dollar it spends? Does he really expect Americans to believe -- after four years, the banking and auto bailouts, several stimulus bills and a run of record deficits -- that our $16 trillion economy cannot absorb $42 billion of spending reductions?

The Times column wasn't an outlier. Scarborough is very clear that he wants to cut spending, and very inconsistent in claiming he wants to raise spending.

Rather than paint Krugman as a defender of the middle class (after all, Scarborough agrees with his short-term budget), he's consistently painted him as an extremist. Rather than use the work of liberal economists to make the point that we should raise spending, he's distorted the work of economists like Alan Blinder to make make Krugman look radical. (Blinder had to write a column correcting Scarborough to clarify that he agrees with Krugman about the deficit.) Does this mean that Scarborough is lying about wanting higher deficits in 2013? Not necessarily. But selectively quoting left-of-center economists to skewer the defenders of deficit-spending is a weird way to advocate for deficit spending!

There's more. In the two weeks after Krugman first went on Morning Joe and raised this fracas, Scarborough tweeted up a storm. Five of his tweets that I counted mentioned the debt. Zero mentioned jobs. In the same two weeks, Scarborough wrote three columns for Politico. The word debt appeared in two headlines. I saw it eight more times in the columns. I didn't see one single mention of the word job.

I don't know if Scarborough is right or wrong about the economy (time will tell, I guess), but can we all agree that Joe Scarborough's position on the deficit is really, really confusing? He agrees with Paul Krugman that we should spend more in 2013, but he paints Krugman as a radical. He aligns himself with liberal economists, but distorts their work so badly they have to publish a correction. He calls for higher deficits, but defends the size of the cuts in the sequester, writes column after column about spending cuts, and never mentions jobs. And then he goes on Charlie Rose and says that of course he supports higher spending today and "I talk about it all the time."

Why does this matter? It matters because Krugman's basic point -- which looks more persuasive by the day -- is that Washington can't focus on more than one thing at a time. Attention paid to the deficit is attention not paid to jobs. I used to think Paul was wrong. The last five weeks have essentially proved him right.

Scarborough says he trusts Washington can focus on jobs and deficits simultaneously because it's easy to walk and chew gum at the same time. There's still time for him to lead by example.

Here are two things that are true about the economy today.

(1) The Dow Jones industrial average is poised to set a new record as corporate profits stretch to all-time highs.

(2) There are still fewer working Americans today than there were before the start of the Great Recession. 

The fact that these two things can be true at the same time might outrage you. But it shouldn't surprise you. In the last 30 years, there has been a great divergence between growth and workers' incomes, as the New York Times reminds us today. Corporate profits have soared, in the last decade especially, particularly because of three things: Globalization has pushed down the cost of labor available to multinational corporations; technology has allowed companies to make more with fewer workers, in general; and Big Finance has gobbled up the economy, as the banks' share of total corporate profits has tripled to about one-third since the middle of the last century, according to Evan Soltas.

Here's the short story of corporate profits, GDP, and workers' income since the Great Recession. As you can see, corporations rode a wild roller coaster, but they quickly found their way back on top. GDP has been sluggish and overall labor income has struggled to keep up with even that sluggish pace.

Here's the longer view. Zoom out to the turn of the century, and you can see that this isn't a "recession" trend. It's just a trend that the recession has amplified. Corporate profits starting eating the economy around 2003, around the time the housing market started delivering massive profits to finance companies.

And the even longer view. Zoom out to 1970, and you can see that corporate profits started to take off, relative to GDP growth, in the 1990s, before exploding in the last decade.

For another look at the long story, here's a graph that compares labor's share of the economy (BLUE) to corporate profits' share of the economy (RED). There has been a steady shift away from workers toward capital since the early 1970s but the real action comes around 2000. Corporate profits double their bite of the economy and labor's share, already at a post-WWII low, falls another four percentage points steeply.

Taken together, these graphs don't tell us that corporations have utterly decoupled from the economy. When the economy crashes, we all crash together: corporate profits, employment, and growth. But when the economy recovers, we don't recover together. Corporations rack up historic profits thanks to strong global demand, cheap global labor, and low interest rates, while American workers muddle along, their significance to these companies greatly diminished by a worldwide market for goods and people.

A growing economy and lower unemployment should eventually give U.S. workers a long-deserved raise (and so should rising labor costs overseas that persuade more companies to hire domestically). But improvements in technology and the ability of companies to hire locally as they chase worldwide demand are just two factors that should restrain any optimism we can keep corporate profits from gobbling up more and more of the economy. Workers still need help -- and they certainly won't find it in the sequester.

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Yesterday in Awesome CEO Letters, Andrew Mason, the founder and fired chief exec of Groupon, wrote perhaps one of the great self-deprecating notes in memory. "I was fired today," he said. "If you're wondering why...you haven't been paying attention."

Today in Awesome CEO Letters, Warren Buffett, the chief executive of Berkshire Hathaway, had this to say to CEOs who make a second career complaining about uncertainty in the U.S. economy on cable news:

A thought for my fellow CEOs: Of course, the immediate future is uncertain; America has faced the unknown since 1776. It's just that sometimes people focus on the myriad of uncertainties that always exist while at other times they ignore them (usually because the recent past has been uneventful).

American business will do fine over time. And stocks will do well just as certainly, since their fate is tied to business performance. Periodic setbacks will occur, yes, but investors and managers are in a game that is heavily stacked in their favor. (The Dow Jones Industrials advanced from 66 to 11,497 in the 20th Century, a staggering 17,320% increase that materialized despite four costly wars, a Great Depression and many recessions. And don't forget that shareholders received substantial dividends throughout the century as well.)

Since the basic game is so favorable, Charlie and I believe it's a terrible mistake to try to dance in and out of it based upon the turn of tarot cards, the predictions of "experts," or the ebb and flow of business activity. The risks of being out of the game are huge compared to the risks of being in it.

My own history provides a dramatic example: I made my first stock purchase in the spring of 1942 when the U.S. was suffering major losses throughout the Pacific war zone. Each day's headlines told of more setbacks. Even so, there was no talk about uncertainty; every American I knew believed we would prevail.

The country's success since that perilous time boggles the mind: On an inflation-adjusted basis, GDP per capita more than quadrupled between 1941 and 2012. Throughout that period, every tomorrow has been uncertain. America's destiny, however, has always been clear: ever-increasing abundance.

If you are a CEO who has some large, profitable project you are shelving because of short-term worries, call Berkshire. Let us unburden you.

I post this excitedly and approvingly, not because I think economic uncertainty is a myth, nor because I think Warren Buffett is a saint, but because when executives have a bone to pick with the federal government on political grounds, they too often use the umbrella excuse of "economic uncertainty" to justify their fundamentally political complaints.

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A study from Zipcar found that young people have a much stronger relationship to their phones and laptops than their (or, more likely, their parents') cars (Zipcar)

Generation Y -- aka Millennials, aka people between 18 and 34 -- don't care about driving nearly as much as the generations before them, according to a new report from Zipcar. There are many reasons why, but they boil down to less money and more options.

The less-money part is pretty straightforward. Cars are expensive -- after houses, they're the second biggest spending category among American families. But one-quarter of young people have moved back home during the recession. Their unemployment rate is significantly higher than the general population, and those who have jobs are earning less than they were just four years ago, adjusted for inflation. They're not making nearly enough money to keep up with their parents' driving habits.

On top of that, young people enjoy more options in two distinct categories -- transportation and leisure -- that are competing with our car time and car money.

First, transportation. The housing bust has slowed development of the suburbs in many cities, particularly the northeast, where metro centers are now growing faster than the 'burbs. As more young people avoid expensive gas by moving to urban and urban-lite areas, they'll drive less and subway/bus more. Where your driving miles are lower, car-sharing companies like Zipcar are more attractive as cheaper alternatives to an owned vehicle.

Second, leisure. It seems weird to say that the Internet could possibly "replace" the car. But it's not weird to say that we spend more time connecting with friends on the Web, or that we spend more time on e-commerce sites than in brick-and-mortar stores. The marketplace of things to do under your own roof has exploded in the last decade, and you can see how having more things to do at home makes you less likely to be on the road, which diminishes the appeal of a car -- or, at least, a new expensive car.

You might say: Derek, take a breath, you're projecting the decline of owned autos based on a study from a car sharing company! And yes, Zipcar has a stake in the future I've illustrated. But the biggest car companies see the same future. When Jordan Weissmann and I reported a magazine column on "cheap" Millennials stiff-arming the auto industry, we heard from Sheryl Connelly, the head of global consumer trends at Ford. "You no longer need to feel connected to your friends with a car when you have this technology that's so ubiquitous, it transcends time and space," she said.

So this isn't just the future Zipcar is hoping for. It's also the future Ford fears. That's reason to believe it's more than wishful thinking.

Washington's addiction to manufactured crises is the result of one party's stubborn economic ignorance -- time for the press to call it out.

The sequester is happening, people. At some point today, President Obama will send an order to cut $85 billion in spending in 2013, and then, slowly, those cuts will take place.

The extremely specific reason why the sequester is happening is that it's the law and there is no deal on the table to replace it with another law. The bigger picture is that the sequester is the law because the president made a deal with Republicans to avoid hitting the debt ceiling and defaulting on our debt in 2011. That deal included a guillotine to spending if we didn't cobble together a deficit-reduction plan before 2013. It's 2013. We haven't cobbled together a plan. So here comes the guillotine called Sequester.

There are many things to say about the sequester, but I want to focus on how it's not merely a silly law, but an absurd law that rewards muddled thinking about both our debt and our politics. So here are the three silliest things about this very silly law.

(1) The sequester is a crazy way to cut the this year's deficit.

If you ask 100 budget experts how to cut spending, zero of them will say: "Take a guillotine to each agency, regardless of its resources or purpose." And yet that's exactly what sequester does. In the next few days and weeks, it might have little impact. But over time it will wreak havoc with military contracts and devastate the most important parts of government spending in infrastructure and research.

The sequester wasn't designed to be a good law. It was designed to be such a bad law that Congress would feel compelled to replace it with another one. But that's the second crazy thing about the sequester: It's forcing Congress to take painful action where painful action isn't even needed yet.

(2) We don't need to cut the 2013 deficit, anyway.

Don't think of the debt as a monolithic danger. Think of it as a triptych.

In the first frame, we have this year's deficit, which is the difference between taxes and spending in 2013. If the gap were a couple hundred billion dollars bigger, it would be no problem. In fact, it would create jobs, improve infrastructure, and grow the total economy at an incredible bargain because we can borrow money at historically low rates.

In the second frame, we have the next 10 years of deficits. We don't know what's going to happen over this time (who could have predicted the Great Recession in 2003?) but it would be responsible to raise taxes and let spending fall across defense, mandatory, and discretionary spending, at least as an insurance policy against the odds that our interest rates go up more than we'd like in the next 10 years.

In the third frame, there is the long-term debt, which is the accumulation of all these deficits. The long-term debt crisis is basically a health-care crisis. If health-care costs slow down, we'll be fine, basically. If health-care costs don't slow down, we'll be screwed.

The trouble with the sequester is that it cuts spending too dramatically in the first frame of our triptych while doing nothing about the third frame, which is the most important. Even if you wanted to address the second frame in a smart way, you would never, ever use a sequester.

(3) The budget games are rewarding muddy thinking about both parties and the budget.

When negotiations between Republicans and Democrats are breaking down (which is to say, on weekdays), Washington centrists savor being above the fray and blaming each side. But occasionally they float so far above the fray that they disappear into the exosphere of evenhandedness and lose sight of the details on the ground.

We saw this happen with David Brooks, who hammered the Obama Administration for not proposing a balanced plan to replace the sequester. But not only did Obama's balanced proposal exist, but also Brooks later acknowledged that it was more balanced between taxes and spending than he preferred himself. He later apologized (to his considerable credit) in the next column.

National Journal's Ron Fournier has also been quite hard on the president for not reaching a deal on the sequester. "As the nation's chief executive, Obama is ultimately accountable for the budget fiasco," he wrote, "even if he is right on the merits and politics." This seems to blame the president for (a) being right and (b) lacking omnipotence in a divided government -- which strikes me as the best anybody could possibly hope for in a modern leader.

I asked Fournier, on Twitter, "If Obama proposed your ideal bill and accepted all your tactical advice, and still no deal was made, who would be at fault?" He replied, with a link to the article quoted above, "If the goal is assigning fault, Obama wins. Now what? If the goal is to govern, US losing -- and history remembers [the president.]"

History remembers many things, but most crucially, it remembers what journalists tell it to remember. We are, after all, the authors of its first draft. If I'm wrong about the deficit, and the sequester, and the debt, and the Republican Party, I expect history will probably remember my account rather poorly. But all the evidence I see is that the sequester is not merely a bad law foisted on the president but also a bad law motivated by a bad misreading of what the economy needs. The most frustrating part of the latest frame of the budget war has been that the media's fetish for evenhandedness prevents us from seeing the simplest truth: That there is no evidence that the deficit is a danger -- and too much evidence that the Republican Party's behavior is.

CEO Ron Johnson might be the captain of a sinking ship. But he was handed the Titanic when the dining room was already under water.

"The Worst Quarter In Retail History."

That's how Henry Blodget described JC Penney's last three months of 2012, as same-store sales took an epic 32 percent nosedive. To be clear about exactly what a disaster that is, it means that for every $100 dollars JC Penney sold in a store around Christmas 2011, it sold only $68 in that store in Christmas 2012. That doesn't look like the beginning of the end for JC Penney. That just looks like the end.

To appreciate how we arrived at this moment, let's rewind the tape about six years. It's early 2007, Steve Jobs is about to introduce the world to "iPhone", and JC Penney's stock is on fire, having tripled since the turn of the century. With 99 percent of purchases being discounts, coupons are looking like an unbeatable business strategy.

Then the recession hits. The stock promptly falls by 75 percent. While competitors like Macy's and Target limp back to recovery, JC Penney clings to its decade low.

Bill Ackman, the activist hedge fund manager who owns a sixth of the company, decides he wants to shake things up. He hires Ron Johnson from Apple. Johnson is a legend, having designed the world's most famous sleek white showrooms and having made Target a discount fashion destination. Johnson is an Ideas Guy, and, naturally, he arrives at JC Penney with an Idea: No more coupon games, just low prices.

Why would JC Penney ever entertain the idea of blowing up their core coupon business? Brett Gordon, a professor at Columbia Business School, explained to me that for a company like JC Penney, there are two kinds of shoppers: the bargain-hunter and the clock-watcher. They need less of the first and more of the second to survive.

Bargain hunters don't just like bargains. They also like the hunt. They're cheap, they're poor, and they're not getting richer in the near future. This is JC Penney's demographic, and it's not a growth demographic. Winning the war for their slim pocketbook means competing against stores like Walmart that will beat you on price every time. It's a losing game.

Johnson wants to journey upmarket. The clock-watcher likes a good bargain, but she really just wants to buy her kids' clothes and get on with life. Her time is more valuable, because she is more valuable. She's not so cheap and not so poor. This is the shopper Johnson decides he wants to attract by ditching coupons and moving to permanent low prices with occasional sales.

I've tried to present this argument as fairly as possible, but whatever you think of Johnson's fundamental insight, it is not working. Sales are in a free fall, because the bargain-hunters are hunting elsewhere and nobody is taking their place. Ron Johnson might be a genius, but he's a genius at building shopping experiences for young, hip, upwardly mobile professionals. JC Penney's target audience is older, less hip, lower middle class moms and kids.

It's very likely the JC Penney could not have been saved by anything short of a presidential executive order that all mom jeans shall henceforth be purchased from JC Penney. As I've written, department stores are in secular decline for economic reasons (the non-recovery recovery), demographic reasons (younger people are moving away from older suburbs), and technological reasons (Amazon.com is a department store in every room and Walmart wins every price war).

Ron Johnson might be the captain of a sinking ship. But he was handed the Titanic when the dining room was already under water.

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There are many sad stories to tell about the U.S. economy, but here's some good news for everybody, from radical capitalists to consumer advocates: The incredible falling price of flying

Frank Sinatra's "Come Fly With Me" was the best-selling album in the United States for five weeks in 1958, but the irony of its popularity (or, perhaps, the source of its aspirational appeal) is that practically none of us could take up the offer to "glide, starry-eyed" on an aircraft with anybody in those days. More than 80 percent of the country had never once been on an airplane. There was a simple reason. Flying was absurdly expensive.

And there was simple reason why flying was absurdly expensive. That was the law.

There are many sad stories to tell about the U.S. economy in the last 30 years, but here's a happy story for everybody (except the airlines), from radical capitalists to the most liberal consumer advocates. Getting government out of the business of regulating the skies has led to a remarkable collapse in airline prices.

Airfares have fallen by about 50 percent since 1978 ...

... and, even after you include the recent uptick in fees, the per-mile cost of flying has also been chopped in half.

A happy story for consumers isn't necessarily a happy story for the airline industry, which bled an astounding $51 billion between 2001 and 2011 and lost money in every other year since 1981.

So, why have the last three decades been so good for flyers? And why don't we appreciate it?

THE DEMOCRATIZATION OF THE AIR

If you want a two-word answer to why airfares have dropped so much since the 1970s, it's this: Deregulation worked.

Before 1978, the airlines played by Washington's rules. The government determined whether a new airline could fly to a certain city, charge a certain price, or even exist in the first place. With limited competition, airlines were guaranteed a profit, and they lavished flyers with expensive services paid with expensive airfares. The silver and cloth came at a predictable price: The vast majority of Americans couldn't afford to fly, at all.

With prices skyrocketing during the energy crisis of the 1970s, an all-star team of senators and economists decided that Washington should get out of the business of coddling the airlines. Let's hear from a young former aide to Sen. Ted Kennedy named Stephen Breyer (oh, yeah, that Stephen Breyer) reviewing the free market case for letting airlines fly solo:

In California and Texas, where fares were unregulated, they were much lower. The San Francisco-Los Angeles fare was about half that on the comparable, regulated Boston-Washington route. And an intra-Texas airline boasted that the farmers who used to drive across the state could fly for even less money -- and it would carry any chicken coops for free.

Three decades later, the lesson from Texas -- if you deregulate the skies, ticket prices will fall -- has been applied across the country. The democratization of the air is obvious enough from the frenetic bustle of every major U.S. airport. But the stats are mind-blowing, as well.

-- In 1965, no more than 20 percent of Americans had ever flown in an airplane. By 2000, 50 percent of the country took at least one round-trip flight a year. The average was two round-trip tickets.

-- The number of air passengers tripled between the 1970s and 2011.

-- In 1974, it was illegal for an airline to charge less than $1,442 in inflation-adjusted dollars for a flight between New York City and Los Angeles. On Kayak, just now, I found one for $278.

Why did deregulation create such dramatically falling prices? "Flying is neither a life necessity like tuition, milk, or medicine, nor is it addictive, like alcohol or drugs," said John Heimlich, vice president and chief economist at Airlines for America. "When you have intense competition for a product that is price sensitive, you have falling prices."

MACHINE vs. MACHINE: THE PRICE WARS

In the showdown between airlines and flyers, both sides wield a formidable weapon. Airlines use computers to move prices. We use computers to find the lowest price. It's like a multi-billion-dollar game of cat and mouse played out between competing machines -- with William Shatner caught the middle.

When the doors of an airplane close, each empty seat is lost money. So the price of a ticket should fall as we approach takeoff, right? Wrong. As you know, airfares rise in the final hours. This is because last-minute flyers tend to be desperate people (they'll pay anything) or businesspeople expensing to their companies (they'll pay anything). So airlines have to design a system that fulfills the following goals: Sell as many seats as possible, sell them a profit, but also leave some empty for desperate travelers.

That explains why the life-cycle of an airfare resembles a roller coaster. A seat is a seat is a seat, you might say. But a ticket sold three months out isn't worth the same to the buyer as a ticket sold the same day. So you can pay $200 to fly to Chicago and sit next to somebody who paid $600.

Complex and closely guarded technology owned by the airlines create a market of jiggling price points with, not just thousands of airfares, but millions of airfares, as Charles Fishman reports:

Continental launches about 2,000 flights every day. Each flight has between 10 and 20 prices. Continental starts booking flights 330 days in advance, and every flying day is different from every other flying day. Monday is a different kind of day than Tuesday; the Wednesday before Thanksgiving is different from the Wednesday before that. At any given moment, Jim Compton and Continental may have nearly 7 million prices in the market.

While airlines worked to make low prices impossible to pin down, the Internet made finding the lowest price easier than ever. In the late 1990s, Expedia and Priceline launched technologies that trawled the Web for flights and organized them by price. The airlines' magical formula was transformed into a column of bargains.

What this has done to airfares is obvious: Transparency accelerated the competition for the lowest prices. Airlines still compete on schedules, routes, and service, just like the old days, but now that flying has moved mass market, "airfare moves market share," said Henry H. Harteveldt, a travel industry analyst with Atmosphere Research. "It's allowed cheap airlines like Southwest and Jet Blue and Spirit to enter the market and grow." Just as regulation came at a price (fewer flyers), deregulation and low airfares have created their own complications: spartan service, bankrupt airlines, and a brave new world of fees.

THE RISE OF FEES (AND THE CASE FOR LOVING THEM)

Flyers hate fees. But we might learn to love them if we thought of them as savings.

After deregulation, airlines wanted to guard their slim profits in an online world of transparent prices. One solution was to offer cheap basic fares and tack on fees later for amenities that most customers would demand. Today, airline fees have grown into a $6 billion side-pot -- quadrupling in just the last five years. There are now fees for bags, WiFi, food, headsets, unaccompanied minors, the emergency row, and practically everything that cannot be simply described as "one adult sitting with a back-pack in one middle seat."
 
Why do we hate fees if they keep basic prices low? Because we're Americans, Heimlich said: "It's the American way to want a product approaching first-class for a price approaching zero." But cultural selfishness doesn't explain all of it. Bargain-hunters experience a dopamine rush (literally) when they find great prices. The drip-drip of additional fees mutes the joy of finding a great price. They kill our buzz. 

IF FLYING IS SO CHEAP, WHY DO WE THINK IT'S EXPENSIVE?

When US Airways and American Airlines announced their mega-merger this year, it set off national hysterics, as flyers claimed the new behemoth would painfully raise prices. The reaction seemed unaware that consumers have enjoyed an amazing (and unsustainable) three decades in cheap flying while the price of fuel, which accounts for more than a third of airfare costs, has gone up 260 percent since the turn of the century.

Between falling prices, 9/11, and fuel inflation, there have been 47 airline bankruptcies since 2001. Some companies died. Others merged. Others survived with leaner contracts. Through attrition and consolidation, a less crowded marketplace for flying is inevitable.

Why don't we appreciate this heyday in bargain flying? The first, and obvious, answer is that flying through the air in a big machine powered by a scarce resource will always cost a big number, and your average family expends very little energy adjusting big numbers for inflation. If you buy a round-trip ticket from New York to Columbus for $280 every year between 1986 and 2010, would you suddenly realize, after 24 years, that the real price of your ticket had dropped by exactly 50 percent? Probably not. You'd probably think, correctly, "I guess flying to Ohio costs $280."

The second, and less obvious, reason why we don't recognize the amazing fall in ticket prices is that average consumers don't know what a plane ticket "should" cost. Some prices, we know, as if by heart. Parents know the price of socks, teenagers know the price of Cheetos, and college kids know the price of PBR. These numbers hardly change. Their constancy anchors an expectation. But quick, what's *the price* of flying to Los Angeles? You have no idea. It could be $300 or $700, depending on the route, the time of day, the number of seats left, the number of days notice, and so on.

Essentially, Americans are expert shoppers, not mathematicians. Don't ask us to divine the true cost of something, or to adjust for inflation. We only know how to click the cheapest price. And, for the airlines, that's precisely the problem.

U.S. banks celebrated their second-most-profitable year in 2012 with a whopping $141 billion in net income last year. That's scarcely smaller than the record, $145 billion, set just before the crash, in 2006, according to the FDIC.

I wondered: What do the last three decades in bank profits look like? Based on FDIC data (and adjusting for inflation), they look like this.

Have you ever fantasized about suing cable companies for over-charging you for hundreds, if not thousands, of channels that you don't watch? Then please direct your attention to a new lawsuit brought by Cablevision, a cable company, against Viacom, a media company that owns channels. 

Wait. A cable company is fighting on your behalf to shrink its channel offerings? We haven't gone through the looking glass. In fact, this is a crystal-clear lesson in who really wears the pants in the TV business.

When you get mad at cable companies, you are, somewhat literally, blaming the messenger. Cable companies are messengers. They build the infrastructure that transports channels to your television. To buy channels to carry, they make deals with media companies, like Time Warner and CBS. These companies own all the channels you want and all the channels you don't want. Viacom, for example, owns some networks I love (like Comedy Central) and some networks I've never seen (like Palladia, MTV Hits, and VH1 Classic ). When Cablevision signs on the dotted line, it has to carry all of them.

Cable companies can't shop the Viacom store like it's a Best Buy and pick whatever they want. The media companies tell the cable providers to buy and carry all of their channels or none of them. Is that fair, or unfair? I don't know. I just know that your cable menu is a thousand channels long, not because your cable company hates you, but because the companies who own the channels have incredible market power to force cable providers to buy everything they're selling.

Cablevision is claiming that Viacom "abused its market power" by forcing the cable company to buy and carry all of the channels, according to The Verge. Indeed, more than 90 percent of the shows Americans watch are owned by just seven media companies, like Time Warner, Disney, and Viacom. That sounds oligopolistic, but it will be up to a judge to determine whether it's really illegal.

Media companies like Viacom and Disney and Time Warner and CBS have pulled off an incredible trick. They've used their market power to force cable companies to carry all of their channels and avoided public criticism of bloated cable menus. Imagine if Coca Cola forced New York City bodegas to sell each Diet Coke shopper an additional Vitamin Water, Sprite, and Orange Fanta ... and New Yorkers responded by burning down the city's bodegas. That's what I mean by blaming the messenger.

Global music sales rose by 0.3 percent to $16.5 billion in 2012. While decimal growth is not typically a respectable cause for jubilee, this marks the first good year for the industry since 1999. Music's 21st-century renaissance boils down to four factors: Better mobile technology, a growing global middle class, more music-listening options, and an effective crackdown on piracy that is making paid music a more attractive option.

Perhaps this was a dead-cat bounce for an industry flayed by Napster, BitTorrent, and other file-sharing programs. But here's the case that music's comeback is for real -- with help from the IFPI Digital Music Report.

MUSIC GROWING EVERYWHERE (EXCEPT IN AMERICA)

Digital music (which accounts for about 1/3 of global music sales, and more than 1/2 of U.S. sales) aren't just rising. They're accelerating. Downloads, subscriptions and ad-supported music sales all growing. Online sales are following on the heels of smartphone penetration growth around the world. All good news there, but at least half of the top 20 markets aren't growing. Chief among them: the United States, where music sales are still falling.

SUBSCRIPTIONS vs. DOWNLOADS AROUND THE WORLD

When Napster debuted, there was no iTunes, no YouTube, and no Spotify. But in the last 13 years, the market for paid downloads, ad-supported music, and subscription services has blossomed. Subscription services alone have grown 44 percent since 2011.

Different countries have different ways of getting to Internet songs. More Swedish people are familiar with Spotify (96%) than Americans are familiar with iTunes (84%), whereas French use the subscription service Deezer, which I have never heard of.

LISTENING IN OUR OWN LANGUAGE

The music market is global. But popular music is still local. Even though all of the top ten global albums and nine of the top ten global singles of 2012 were in English, Europeans still seem to prefer songs in their own languages. More than 60 percent of the top albums in key European countries were artists from that country.

THE PIRATES ARE LOSING

The last decade in the music industry has been a classic lesson in microeconomics. When the supply of digital music exploded with Napster, the price of songs dropped to zero and the music industry collapsed. As the government cracked down on file-sharing sites, the cost (and risk) of downloading illegally rose, and more consumers have shifted to legal downloads and subscriptions. 2012 was a banner year in crackdowns, with the FBI shutting down the top cyberlocker company Megaupload and big BitTorrent sites like BTJunkie.

Megaupload alone generated $175 million in revenues. That's half of global digital music growth between 2010 and 2011. Last year, cyberlocker use has fallen 18 percent. The black market for music is still enormous. But it's shrinking fast while the options for legal music (and the number of devices to play that music on) are growing.

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The statistical evidence on telecommuting suggests that (1) sometimes people just like to work from home for a change, and (2) they're actually quite good at it

Yahoo CEO Marissa Mayer has officially banned the company's employees from working from home. Here's the critical sentence: "To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices." The full memo, originally published by All Things D, is reprinted in full at the bottom of this article.

Collaboration and communication are tricky to quantify (how do you know if your employees are talking more over Gchat/conversations in the office or from home?). But productivity isn't so hard to measure. It's work over time. And some studies have shown that working from home can make certain workers more productive.

The most commonly cited study in the field of home-work and productivity comes from Stanford. The results were clear: Telecommuting is nothing to be afraid of. Workers at a Chinese travel agency took fewer breaks and sick-days, answered more calls every minute, and reported improved work satisfaction when they worked from home. Later, the agency allowed the employees in the experiment to choose if they wanted to work from home, and productivity increased by 22%.

The U.S. economy is not best understood as one large Chinese travel agency, and one Stanford study does not make an indisputable case for telecommuting. Fortunately, it is not the only case. A Cisco study found that the company saved $277 million a year by allowing employees to telecommute. One fairly skeptical survey of telecommuting studies out of California State Polytechnic University said that it was difficult "to find published materials that indicate telecommuting does not generate productivity gains, or that gains are less than 10%." 

Not only is there practically no survey evidence to suggest that telecommuting reduces productivity, but also it would help companies specifically like Yahoo: media and technology firms based in major cities. Writing can be accomplished anywhere. Coding marathons are often best done in intense solitary. What's more, Yahoo has large offices in San Francisco and New York, which have two of the worst commute times in the United States. Working from homes adds hours to peoples' days that would otherwise be spent in rather less productive grindlock.

And yet ... telecommuting isn't taking over the world. The vast majority of "telecommutable" jobs aren't done at home. They're done in the office. Why?

One half of the answer is that people like working with other people. Telecommuting can be lonely and unfulfilling. But corporate policies like Mayer's are another part. Companies are jealous of their employees' time and allegiance, especially in competitive industries like media technology, and Mayer probably doesn't want to lead a massive hiring and turn-around effort while her deputies Skype in from their living rooms. It's understandable for executives to want to build an atmosphere where the office becomes a destination, a place where workers want to come together, where ideas percolate and bounce around an office and end up on a memo in the director's inbox that becomes a Hot New Thing.

But these reasonable arguments for building a dense and collaborative workplace culture should be weighed against the preponderance of statistical evidence, which suggests that (1) sometimes people just like to work from home for a change, and (2) they're really good at it. In reaching to build a new culture in a new Yahoo, Mayer might be alienating the most brilliantly independent-minded employees just because they value flexibility and Yahoo doesn't.

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YAHOO! PROPRIETARY AND CONFIDENTIAL INFORMATION -- DO NOT FORWARD

Yahoos,

Over the past few months, we have introduced a number of great benefits and tools to make us more productive, efficient and fun. With the introduction of initiatives like FYI, Goals and PB&J, we want everyone to participate in our culture and contribute to the positive momentum. From Sunnyvale to Santa Monica, Bangalore to Beijing -- I think we can all feel the energy and buzz in our offices.

To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices. Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.

Beginning in June, we're asking all employees with work-from-home arrangements to work in Yahoo! offices. If this impacts you, your management has already been in touch with next steps. And, for the rest of us who occasionally have to stay home for the cable guy, please use your best judgment in the spirit of collaboration. Being a Yahoo isn't just about your day-to-day job, it is about the interactions and experiences that are only possible in our offices.

Thanks to all of you, we've already made remarkable progress as a company -- and the best is yet to come.

Jackie

Apple's stock has fallen by a third since September 2012, wiping out $238 billion in market cap. Some context for that mind-blowing figure. The total stock value of Walmart, the biggest company in the United States by number of workers, is $242 billion. So, in five months, Apple has shed a Walmart.

James Surowiecki's New Yorker column asks why. In tech world dominated by phones and tablets, Apple makes the world's two best-selling phones. It's the global leader in tablets, by far. And it's gobsmackingly profitable. According to one 2012 study, Apple took 69 percent of the world's mobile-phone profit. "That doesn't sound like a company whose stock deserves to trade at a price-to-earnings ratio well below the market average," Surowiecki writes.

Maybe. Or is Apple exactly the sort of company that should trade at a low PE ratio?

It's useful, for these purposes, to compare Apple and Amazon. Apple turns absurd profits in a highly competitive industry. Amazon barely turns a profit in an industry where investors deem it a quasi-monopoly. In the eyes of Wall Street, that's why Amazon is special and Apple isn't. If Apple is a glimmering castle city surrounded by invading hoards, Amazon is like a subsistence village surrounded by treacherous mountains, three deserts, and a dragon.* Its profits might be low, but at least they're safe.

Apple's sky-high earnings are a bulls-eye for competitors like Samsung that can build almost-as-good-or-better products at cheaper price points. To compete, Apple can innovate new features (which is risky: Siri and Maps were kind of disasters) or lower the price. Lower prices mean lower future profits. Lower future profits suggest lower-than-average price-to-earnings ratios.

In a nutshell, that's why Apple's doubters aren't as stupid as the company's fan boys often write.

Here's the flip side. Corporations are people. But seriously, they are. Even without Steve Jobs, the executive and engineering core of Apple is largely the same one that built miracle after shimmering miracle in the last decade. Past iPhones are no guarantee of future iTelevisions, or however that saying goes. But if you think the tech wars will eventually be won by the team that produces the best-looking, best-selling, sleekest-working consumer gadgets, it would be pretty wild to think that team is anywhere but right where we last saw them in Cupertino.

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* No, I don't consider Amazon to be tech's equivalent of a subsistence village: Its products are astounding. Its the quarterly profits that are meager.

Americans spent an estimated $52 billion on our animals in 2012, according to the American Pet Products Association. That's a lot of zeroes, so for context: It's more than we spend on coffee and bottled water combined.

The APPA has data as far back as 1994. Their inflation-adjusted numbers are graphed below. This is the American pet economy. And it is booming.

Where exactly do our 50 billion pet dollars go? Overwhelmingly to food and medicine. Also, fun fact: We spent $6.2 billion on grooming and treats for our pets in 2012. That's more money than Facebook made in advertising revenue last year.

What's more expensive: dogs or cats? Well, the National Pet Owners Survey can't tell us that exactly, but they do collect data on major spending categories on America's two most popular animals. As you can see, both basically cost the same as far as food and most medicine goes. But dogs require more expensive boarding, grooming and toys.

And finally -- this has nothing to do with money, but it's still fascinating -- how many millions of families own pets, what kind, and how many?

Dogs call 46 million American households "home," but families with cats and fish are much more likely to have more of those pets -- perhaps because one of those animals is occasionally consuming the other.

Homepage image: Patrick Clemens and his bulldog Beefy at the New Yorkie Runway Doggie Fashion Show (Reuters/Shannon Stapleton)

David Brooks asks the headline question this morning and gives this answer: The biggest problem in America today "is that business people think that government is so dysfunctional that they are afraid to invest and spur growth."

Hmmm. Washington's dysfunction is indisputable. But it is not America's first, second, or third biggest problem. Those are (1) the lingering effects of the housing bust are still impoverishing families and economic growth; (2) globalization pushing down wages for work that lives along a worldwide supply chain; and (3) essentials like health care, education, energy, and housing getting more expensive while families have to work longer hours just to keep up with microscopic inflation.

As for business investment shrinking because of Washington's dysfunction? That's not just a gut feeling. It's a measurable stat. And the data suggest its not really true.

Here's a look at the last 30 years of private fixed nonresidential investment (i.e.: companies spending on pretty much everything that isn't houses and wages). If Washington were terrifying to American business, this line would limp off after the latest recession. But it doesn't. Business investment is growing.

When you compare nonresidential investment from the very bottom of this recession to the last three recession troughs, it compares pretty favorably. In the 28 months since mid-2009, business investment has grown almost as quickly as it did from the bottom of the recession before the Reagan Recovery.

Is this evidence that American businesses like Obama more than Clinton? No. It is evidence that American businesses liked Reagan more than Bush II? No. The safest thing to say is that it is evidence that there is no evidence that American businesses are utterly and uniquely freaked out by Washington today. They are investing.

So why isn't the economy growing faster? Because we're not investing in houses. If you want to know what's America's biggest problem right now? here it is, in one magnificently simple chart showing residential investment (houses, RED) vs. non-residential investment (not houses, BLUE) since 2000:

Ladies and gentlemen, there is our non-recovery recovery, drawn in bright red. Residential investment grew 80 percent (!!!) between 2000 and 2006. Then it fell by more than half. And it's hardly recovered. The moribund housing market -- the predictable, inevitable outcome of a popped housing bubble -- is the America's biggest problem, not overall business investment, which is already nearing its pre-recession high.

Brooks' diagnosis for America isn't just statistically questionable. It's dangerous. There is a fixation in Washington to pass any sort of deficit deal to cure the the uncertainty crisis in American business. But there no measurable uncertainty crisis. And there is a measurable household earnings and debt crisis.

Here's the front page of today's Wall Street Journal. Check out that headline.

It's a story about how Walmart, Burger King, and Kraft are all complaining that domestic earnings got crushed by end of the payroll tax holiday, rising gas prices, and stagnant wages. When they're on television, American CEOs like to talk about cutting entitlements to save American growth. But when forced to defend their quarterly earnings reports, guess what they blame instead? A shrinking deficit, wage stagnation, and energy costs. I believe a chief executive in front of his shareholders before I believe him in front of a camera.

David Brooks is a thoughtful guy. I don't doubt that he has talked to some business leaders who are sincerely afraid of the deficit and the deficit debate. The business community at large, however, seems to have bigger worries than the machinations of Washington Budget Theater. Centrist Washington analysts are obligated to see the world through the lens of Washington dysfunction. The rest of the country is not obligated to pretend that this is a useful way to see the world.

On Thursday night, I moderated a boisterous debate between Andrew Sullivan and BuzzFeed's Ben Smith about making money in journalism. Actually, those terms require some clarification. By "moderated" I mean passively refereed and by "discussion" I mean relentless verbal slugfest. In a precious moment of calm, I think I compared my presence on the panel to a "para-glider entering a hurricane."*

To appreciate the fight, let's review the history. Websites like BuzzFeed (and The Atlantic) are experimenting with a newish ad format that goes by many names, including native advertising, sponsored posts, sponsored content, and advertorials. These ads look like articles. Essentially, they are articles. They have their own URLs and everything. On homepages they are called out as ads with subtle distinctions, like a soft color background and an unobtrusive marker like "Sponsored" or "Featured Partner," as you can see from my BuzzFeed screenshot below.

At BuzzFeed, I've learned, the business team (which is utterly distinct from the editorial side) acts like a digital "Mad Men" outfit by conceiving of and polishing up the ad, which winds up looking quite a lot like a BuzzFeed journalist's article. Thus, "10 Not Normal Phenomena That Actually Exist" is an Mini USA ad, and "21 Totally Inappropriate Moments in Mary-Kate and Ashley Movies" is an article.

To be perfectly clear: Making advertisements look more like articles is precisely the point of this new format. Digital ads have rather obvious limitations. Banners in squares and rectangles paint the strike zone of the webpage, practically begging readers to throw their attention down the middle and ignore everything else. So some media companies are experimenting with advertisements that take the form of clickable, sharable web pages. It's a worthwhile experiment with clear risks.

When Andrew looks at advertorials, he mostly sees the risks. His most powerful criticism of the BuzzFeed (and Atlantic) business model is that, if these advertorials are effectively indistinguishable from articles, "aren't we in danger of destroying the village in order to save it?" This is a good and smart problem to identify (I consider myself a decently savvy consumer of Internet, and I've mistaken a BuzzFeed ad for an article before). But it's really not a difficult problem to solve. Andrew probably spent 30 minutes lambasting the morals of native advertising, but he acknowledged that his concerns would be eliminated if BuzzFeed prominently printed the word ADVERTISEMENT next to the advertisement -- and perhaps darkened the background color.

The Dish finds itself in an opposite situation. Since declaring independence from the Daily Beast, it has forgone advertising and, for now, relies exclusively on subscriptions, and has raised just shy of $500,000 in six weeks. That's just awesome.

But it's extraordinary in the most literal sense of the word. Andrew Sullivan is a superstar blogger, and The Dish is a superstar online magazine. The vast majority of quality journalism has always relied, and probably will always rely, on advertising to be both high-quality and affordable to a massive audience. That's the genius of journalism's two-sided market. It allows reporting and analysis to be both good and cheap. It's fine for Andrew to say that he has found it abhorrent to be associated with advertising sold specifically to his site. It's his site. He can do as he pleases. But without advertising, how many of today's wonderful journalists and newspapers and magazines would vanish from the world? Without the largesse of Bloomberg and Reuters, probably most of them.

In retrospect, I wish both sides conceded one final point to the other. I wish Ben conceded that BuzzFeed advertorials are intimate mimics of BuzzFeed articles -- it's not unreasonable to be confused once or twice -- and it creates a tension with transparency. BuzzFeed is trying to make ads that are as charming and delightful as articles, but the more clearly they say WARNING THIS IS A WEB ADVERTISEMENT, the more likely people are to ignore their charming delights, because we have been taught to ignore all Web ads. I wish Andrew had paused in his fiery attack on advertorials and BuzzFeed to acknowledge something simple: Advertising does a good thing in the world. It pays great journalists to find and tell the truth. It's a tradition worth preserving through both experimentation and severe transparency.

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*I doubt anybody minded. Ben and Andrew fought fiercely and eloquently about the ethics of advertorials, making for a far more interesting discussion that the one I tucked into my coat so I could sip beer and enjoy fight night from the best seat in the house.

As our attention shifts to mobile phones—and their smaller screens—ads are becoming vastly less effective. And companies built on ad revenues, like Google and Facebook, should start to sweat.

When US Airways and American Airlines announced their mega-merger last week, it was greeted with the sort of shrieking with which coach passengers are all too familiar. Flyers already hate the fees, delays, cramped quarters, and "meat specials" they're subjected to on America's legacy carriers. And make no mistake, more mergers might mean worse service, higher prices and equally "special" meat dinners. But look on the bright side: It has been an astonishingly good 30 years for American flyers.

Competition and price strategy has pushed down real airfare prices "by half since 1978 to about 4.16 cents per passenger per mile, before taxes," Eduardo Porter reported in his book The Price of Everything. And here's the graph for that:

With average prices collapsing, especially with sites like Kayak making fares ultra-transparent in the 1990s and 2000s, airlines have had to stretch everywhere, Mark J. Perry reports. The industry lost an astounding $51 billion between 2001 and 2011, and it's only made a collective profit in half of the years since 1981.

So yes, mergers between enormous corporations in struggling industries often foretell less competition and higher prices. But the airline industry isn't a national transportation charity. It will eventually have to earn some money in exchange for flying us through the air around the world.

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The new deficit reduction plan from Alan Simpson and Erskine Bowles is disappointing for this simple reason. Whereas the first plan made a loud case that deficit reduction should begin with stimulus followed by a roughly equal mix of higher taxes and lower spending, the new plan is mute on stimulus, calls for 44 percent less revenue, and includes more cuts to health care and other mandatory spending programs, all the while capping discretionary spending at historic lows.

And yet. If I can beat up Simpson and Bowles for slashing their initial tax plan by 44 percent, I should also acknowledge the flip-side: They've asked Congress for more tax revenue than practically anybody else, including the president and most bipartisan groups, and that still counts for something, since taxes will eventually have to rise on more than the very, very, very richest Americans.

The first deficit reduction plan from S&B called for $2.5 trillion in higher taxes over ten years. That's $500 billion more than the Gang of Six recommendation, twice as much as the president asked for in the debt negotiations, and three times as much as John Boehner proposed in December. There's just no way to get to $2.5 trillion in new revenue without scheduling tax increases beyond the top 2 percent. Eventually, we'll probably have to do that. But Obama won't endorse that law for fear of legislative backlash, and Republicans won't sign it for fear of getting wiped out of the primaries. But S&B aren't trying to pass immigration reform. They're not elected. They don't face primaries. The only thing stopping Simpson and Bowles from reiterating that deficit reduction should be balanced are Alan Simpson and Erskine Bowles.

In his interview with Ezra Klein, Erskine Bowles suggested that the plan was designed to carve out a middle-ground between Republicans and Democrats. You can see what he means from the graph above, and it sounds reasonable.

It's actually really disappointing.The best thing to say about the first Bowles-Simpson plan was that it tried to draw a new baseline, not add the Democrat and Republican plans together and divide by two to find the arithmetic mean. Anybody with a calculator and a passing familiarity with the budget can answer the question: How do you cut $5 to $6 trillion with less than $1.5 trillion in new revenues? But that's not the right question. The right question is How do we insure against the risk of a deficit crisis later this decade while prioritizing our weak economy and workers, whose recovery is the most important step to repairing our budget? ... and I'm afraid this isn't the right answer.