Say you write an entertainment blog and post 1 original article every day and 3 interesting links.  You get a lot of readers who come to you for your interesting writing style and insightful take on events in entertainment, and because you comb through a lot of different news media to find interesting stories/articles other people wrote for your readers to read. 

To find 3 really good articles to share every day, you need to read 15 articles a day (this is probably a low estimate).  Some of those articles will help come up with a topic for your original article and educate you enough to write about it, but say you need to find 5 older articles for background material.  So you need to read ~600 articles a month total.

Where do you find this content?  You probably have a daily list of news sites that you check for the latest stories, and you probably follow a couple of other blogs related to entertainment in case they find something you didn’t see, so that you don’t get left out of industry buzz.  After seeing a short press report about Lindsay Lohan’s latest trail appearance, you decide to write about the challenges of growing up in Hollywood. 

In checking your usual sites you see that the New York Times just did an excellent profile of Miranda Cosgrove that touches on that issue and will give you a lot of background material to use and react to.  You see they have a bunch of archived original reporting on Lindsay for you to quickly check your facts with, and a slideshow of her court outfits for you to grab a picture from.  In total you click through 5 articles. 

If that was a typical day, you would read ~150 articles a month (about 25% of what you need to read in total in a month to publish good blog content and keep your readers coming back).

Those articles save you a lot of time and help you create a great product.  So even though your readers might never be willing to pay the New York Times for content, you are, because it is an essential ingredient in your own content creation process. 

But that’s just the beginning. Because the pay wall keeps your readers from seeing more than a fraction of the content you see, you create even more value for your readers in a pay wall world when you select articles to link to.  In essence, you are using your subscription to skim and filter the New York Times for articles worth reading (like you always have) AND then giving your readers free access to that good content by linking to it.

Therein lays the potential brilliance.  The New York Times created a strategy where the heaviest users, the ones who most need or want news pay for it.   For everyone else, you only get little bit of news, unless one of the heavy users points you to an article.  As a casual reader, you are even more tied to services like bloggers and aggregators to point you to articles so that not only are you only reading the best articles, but you are reading them for free.  As a heavy user, that increased reliance on you means you are even more willing to pay.  The pay wall only makes the most diehard customers pay, and gives them even more reason to pay.  Smart.

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The problem with that interpretation is that it is about income, not wealth.  Each year, the people in the top 10% of earners can change.  For instance, in the 1970′s Cher was in the top 1%  Today, Lady Gaga is instead.  So instead of the rich getting richer, we are actually seeing the highest paid each year gettting paid increasingly more than the average.

The right message to take away is that over time, our economy has changed to be more winner take all, which makes sense.  In a knowledge economy, the best at something can get rididculous pay and the rest get near average, because the work of the best can easily be reproduced and extended to most everyone, reducing the need for anything but the best and concentrating a large markets worth of payments in fewer hands. 

In the 1920′s, bands and entertainers of all kinds still performed throughout the nation, touring around to provide entertainment.  Today, we record the best performers and replay them constantly over TV and club sound systems.  Think how many comedy acts Seinfeld reruns alone has crushed demand for. 

At the height of the financial crisis, I posted about how finance salaries would stay the same, because modern tools allow a small group of people to manage huge amounts of money.  It also allows a small group of people to entertain huge amounts of people, give legal advice to huge amounts or people, and write news articles read by huge amounts of people.  In other words, because best in class work can reach or impact more people, best in class workers (the top 1%) can earn more.  The decline in wages for everyone else is a corresponding symptom of that – we need less bad, average, and good entertainers, journalists, and lawyers when the great ones can do more of the work.

Welcome to the brave new world, where greatness is lavishly rewarded with outsized earnings and everyone else is clustered close around the median.  Only a small number of people will be able to earn an outsize salary, and an even smaller number will be able to do it year after year.  The flip side of that is you only need to do something great once to have an incredible year and change your life.  So think like a reality star and cash in big if and when you can, because the days of making big money over and over again are over.

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The Obama administration tells us that the government deficit is going to be well over $1 trillion a year for at least ten years. And that does not take into account the outlier years in the 2020s when the really heavy lifting of Social Security and Medicare kicks in.

There is a truism that goes a little like, “If something can’t happen, then it won’t.” Let me make a prediction. We won’t have a trillion-dollar deficit in ten years. Why? Because it can’t happen. The market will simply not allow it.

via Thoughts from the Frontline.

And another:

Just as I was writing in 2006 about the potential for a crisis, and yet the party went on for quite some time, I think the party can limp along now. But there will come a point when the party is over. Interest rates on the long end will rise precipitously, forcing mortgages up and making the deficit even worse. It will be an even worse crisis than the one we have just gone through. And there will be fewer options for policy makers, and none of them will be good or pleasant. And it will take most people unawares. They will see the current trend and project it into the future. And they will be hit hard.

Can we avoid this calamity? Yes, we can wrestle the US budget deficit back under some kind of control, close to nominal GDP or on a clear trajectory to get there within a reasonable time (say, a few years). As noted above, we can run deficits close to nominal GDP almost forever. But there is no political willpower to do that now. And so, the market will at some point force the hand of the political class. That investor in St. Louis, or China or (????) will decide not to buy government debt at such low rates. The avalanche will start. And everyone will be surprised at the ferocity of the crisis. Except you, gentle reader. You have been warned.

This rings very true.  I would add that I think the next crisis will be a simultaneous financial and political one.  In this crisis, policy makers stepped in put the financial markets on life support.  But now that their destinies are tied, their destinies will rise and fall together through the next crisis.

There will be no change now.  Our current leadership has shown their true colors for too long.  Hopefully, after the next crisis, we will have leaders and a leadership structure that puts a premium on effective action.

On the flip side, the article also points out how there are some positive changes that could happen – it’s just a bit scary to think we have to keep our fingers crossed that the good outweighs the bad.  We are used to dealing with this sort of uncertainty from nature, but human built systems are supposed to minimize the down side and maximize the upside.  Maybe man made things don’t defy nature as much as we think.

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Julian Stevens, of Moorfields Eye Hospital, is an expert on laser refractive surgery. He has, in the past, offered tailored treatment for members of the special forces. “They require 1,000-metre vision at night,” he said. “It is the same for fighter pilots.”

Surgeons offer eyesight tailored to an individual’s life and career – Times Online.

We are entering an age where we will have an unparalleled ability to alter ourselves, specializing or bodies as much as we have specialized our minds through education.  This kind of tinkering will forever change our society.

Look at the NFL today vs. 60 years ago.  Players are bigger, stronger, and faster.  But that difference will be nothing compared to what science will soon allow us to do.  In 50 years, what physical enhancements you have may be more meaningful than your education or experience on the job hunt.

I don’t know if it will be good or not, but it will certainly be different.

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Many have lived beyond their incomes simply because incomes have been outstripped by the costs of middle-class life. By the fall of 2008, most American workers were bringing home roughly the same weekly wages they had earned in 1983, after accounting for inflation.

via As Jobs Are Lost in Recession, So Is the Middle Class – NYTimes.com.

So with the current social engineering our system provides, we can’t all live “middle class lives” because what is now considered middle class is actually quite upper class.  The end result of the degree of income inequality in this country is that middle class is the old upper class, and the old upper class is something newer and far wealthier than anything since the days of the “robber barrons” at the turn of the century

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Today more than two-thirds of Americans own their own homes. Among whites, more than 75% are homeowners today.

Yet the story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It’s not the story of the inexorable march of the free market. It’s a different kind of American story, of government, financial regulation, and taxation.

We are a nation of homeowners and home-speculators because of Uncle Sam.

Via The New American Dream: Renting

A great analysis of the interplay between home ownership and politics.

I have the suspicion that one day, the American Dream of home ownership will be an example of the kind of policy that can only be sustained in a country by the rising tides that come with  being the most dynamic economy in the world.  I fear that we will bear the burden of the entitlement programs those years left behind long after the party is over.

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•Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair. (This IS unfair… it’s worth repeating).

•Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable. Amen, but to do this you have to do the next one first…

•Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.  Agreed completely, although we might need to do a makeover of how we explain what is covered and is not… for instance, right now my medical insurance would not cover an annual eye exam, but if undetected glaucoma blinded me and I needed eye surgery, I’d be covered… very intuitive and easy to understand as always.

•Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care. Agreed in theory, but calling for tort reform is kinda like sayiing your want to eat healthier – its much easier to say it and bury your head in a box of fried chicken than to actually do it.

•Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?  I don’t think anyone knows what medical care actually costs – there is what providers bill, what network plans pay, what non-network plans pay, and what medicare pays.  Giving consumers a copy of the bill would be a step in the right direction, but part of the problem is that it often takes weeks of back and forth between providers, patients, and insurance companies to find out who pays what and how much.

•?Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility. Let’s do Social Security too while we’re at it.

•Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.  Of the many things about taxes and tax forms that need revising, this is pretty low down on the list.

via John Mackey: The Whole Foods Alternative to ObamaCare – WSJ.com.

Aside from his reform ideas, Mackey provides one other insight that sticks out

At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly—they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an “intrinsic right to health care”? The answer is clear—no such right truly exists in either Canada or the U.K.—or in any other country.

Overall this is a very clear and succinct article about what is wrong with health care, what trade-offs exist, and what choices we make.

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Growth: Why the Stats Are Misleading – BusinessWeek.

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via Economic Principals » Blog Archive » Auctions and Politicians.

Click through to see how evolving technology is allowing for the design of sophisticated auctions that has the potential to solve problems with (and change) our economy and government.

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Another gem about why banks were so unprepared for a catastrophic economic situation:

The individuals who were running large financial institutions had an opportunity to pursue strategies that resembled, in terms of their reward structures, going short on extreme market volatility. Those strategies paid off for years but ended in disaster. Until the volatility actually arrives, this trading position will appear to yield supernormal profits, and indeed, the financial sector was enormously profitable until the asset-pricing bubbles burst.

From a publication by economist/blogger Tyler Cowen.   See the full article here.

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