Covid and Cascading Collapses

https://www.ben-evans.com/benedictevans/2020/5/4/covid-and-cascading-collapses

by duck • 6 years ago

116 63 6 years ago

Re television advertising: '... As an ad agency head put it to me a couple of years ago: ‘subscriptions are down and viewing is down, but budgets are flat, so CPMs are up’

I suspect the demographic of people who still watch broadcast TV is aging out fast. TV was a 'sit back and watch at 9pm' experience for those generations, and aside from live events such as sports TV watching seems to be very short attention span if watched at all in the pervasive online video and streaming world. I therefore think TV advertising - and broadcast TV - is going to fall off a cliff soon.

jgalt212• 6 years ago

a 15 second unskippable ad spot on 55" screen vs 700 X 400 pixels (or whatever youtube is) is not a fair fight.

jeffbee• 6 years ago

There have still been recent popular TV series that release weekly, rather than all-at-once binges. Pretty much everything on HBO and FX, for starters. I don't think watching TV on a schedule has passed out of living memory. I personally remember very fondly the collective experience of watching things like The X-Files and Battlestar Galactica at the same moment as the rest of the country.

downerending• 6 years ago

It hasn't passed out of memory, but it may have passed what people are willing to put up with. I'm old, and the only ads I don't regularly block are on cable TV in hotels, which I (used to) visit a few days a year. Even then, more than an hour becomes intolerable.

One of the great boons of the 21st century will be the elimination of advertising.

bob33212• 6 years ago

My grandparents are in their 80s and they watch cable 5-7 hours a day. I cannot imagine that they would cancel it, even if it cost 400/month. At the same time I don't know anyone under 50 that watches a lot of cable other than sports fans.

phkahler• 6 years ago

I think one reason retail and a lot of other businesses in the real world will be killed by Covid is low interest rates. These have fueled several decades of rising real estate prices and rents. Cue a pandemic where they have to close for a while but still have to service debt or rent and they're done.

They've been cutting rates to stimulate the economy, but that's not sustainable and has led to fragility. We need rates in the 5 to 7 percent range IMHO to prevent this type of thing. In that range, banks may also make loans they can hang on to rather than securities, and people may actually save a bit and have that buffer.

User23• 6 years ago

The natural rate of interest is zero[1]. Anything else causes economic distortion and misallocation.

[1] http://www.moslereconomics.com/wp-content/graphs/2009/07/nat...

ceejayoz• 6 years ago

The author of that also thinks the natural speed limit is 30 miles per hour, so take the assertion with a grain of salt.

http://moslereconomics.com/2008/05/22/energy-crisis-solution...

(The claim about interest rates is a bit more complicated than "set it at zero", too. The full claim from the linked article is "the natural, nominal, risk free rate of interest is zero". Most uses of interest in our economy aren't risk free.)

mrfusion5• 6 years ago

Even it’s truly risk free, why would someone lend money for free?

zzzzzzzza• 6 years ago

according to henry george, the natural rate of interest is equal to the lowest productivity plot of available land. Which I think is an interesting perspective.

clairity2• 6 years ago

the cascade to zero percent is this crazy farce of excessively consolidated capital not knowing what to do with itself. it's the antithesis of efficient allocation.

bankers create products for timid capital to pool in safe harbors. risk arbiters, like moody's, have been pressured into rating that risk down. then interest rates drop "rationally" because risk is "lower". except it's not lower and interest rates should rather never dropped at all.

we can't arbitrarily raise interest rates until we fix the systemic tilt of the economic system toward the wealthy who are increasingly risk averse because they can afford to be that way and still earn excess returns.

jseliger2• 6 years ago

Real estate and rent prices rise in most American cities because cities restrict supply in the face of rising demand: https://www.forbes.com/sites/scottbeyer/2016/09/30/the-verdi.... Interest rates are a sideshow.

We can fix this, just like Japan did, anytime we want to, by removing impediments to supply increases. https://www.wsj.com/articles/what-housing-crisis-in-japan-ho...

maxsilver• 6 years ago

cities restrict supply in the face of rising demand

This isn't really a meaningful statement about the problem. Real estate and rent prices dramatically rose in the US, even in the cities where supply far outstripped demand, and even in cities that lost population this past decade.

While supply and demand are slightly an issue in a few specific metros (like San Francisco), US real estate in most metros is mostly a problem fueled by low interest rates and a ridiculous over-inflation in urban property values, as mentioned above.

ADent• 6 years ago

But since most people buy monthly payment (not total price) lower interest rates drive prices up.

everdrive• 6 years ago

If by “fix” you mean live in some subhuman shoebox.

piva00• 6 years ago

Or do like Switzerland and not have a huge majority of your population trying to be homeowners because someone in the 50s thought it was a good idea for families to have it as an asset and created huge financial policies to foster that. Now we see the side-effects of it, coupled with some of the lowest interest rates ever and a growing demand caused by urbanisation.

Also doesn't help that it's been ingrained in people that having your own home where you can do your own improvements, renovations, etc. is seen as a dream to be achieved to prove you've made it.

Aperocky• 6 years ago

save a bit and have that buffer.

This kills the economy. If everyone saves then by definition spend goes down. And spend is what pays everyone, the cycle goes broken and and next year pay decrease. and if you keep saving, it keeps going down, until everybody is on survival mode and nothing else is consumed.

A healthy economy is dominated by debt that can be serviced, with a saving that is comparable. The larger them both are, the more healthy the economy.

Jacking up the rates to 5-7 percent today will cause the fastest collapse in economic history. It's like communism: Yes there's equality but it means everyone is equal in being dirt poor. You might be able to avoid volatility, but at what cost?

PakG12• 6 years ago

A healthy economy is dominated by debt that can be serviced, with a saving that is comparable.

Not sure that you and gp are disagreeing. Whereas right now, statistics say that a lot of families don't have any savings. Need to save a bit to have comparable savings.

clairity2• 6 years ago

"This kills the economy. If everyone saves then by definition spend goes down. And spend is what pays everyone, the cycle goes broken and and next year pay decrease. and if you keep saving, it keeps going down, until everybody is on survival mode and nothing else is consumed."

no, it doesn't just break, the economy readjusts. there's a practical lower bound to trade and consumption (we need food, clothes, shelter, energy, water, etc.) and prices for essentials would likely rise relative to non-essentials, as demand shifts around the economy and supply adjusts to match it. labor prices likely dip, as do capital returns, during the transition period. permanent savings would lower monetary throughput, but not necessarily velocity.

azepoi• 6 years ago

yes the problem is not on the supply side. Drop the rates all you want, it mostly goes to inflate existing assets. If you are to drop billions of newly issued money on asset purchases anyway you better get some in regular people pockets. There was never a better time to experiment with helicopter money and UBI.

occamrazor• 6 years ago

Low interest rates increase real estate property prices, but at the same time tend to reduce rents. The increase in rent prices is more likely due to an increase in demand for housing in cities, by people who want to move there, which is not balanced by a similar increase in available housing (and on the last point, low interest rates make building new housing more attractive).

noad• 6 years ago

Cutting rates doesn't have much of a stimulating effect on business spending like it used to. Large companies just funnel excess cash or issue debt for more stock buybacks + equity based compensation for the executives.

The correlation between rates and increased business spending has been weakening steadily for 20 years because of this.

jayrot• 6 years ago

Just wanted to say that I found this fascinating. Don't know if Mr. Evans was already a household name, but I just discovered his writing right now (a win for HN) and got lost reading previous essays.

Just wanted to say, thanks.

renewiltord• 6 years ago

He was an Andreessen-Horowitz Partner so pretty well-known in startup circles.

macintux• 6 years ago

Here are some other analysts you may like if you’re not already familiar with them.

http://www.asymco.com/

https://stratechery.com/

https://www.aboveavalon.com/

I haven’t been actively following any of them for a few years now, but collectively they plus Ben Evans really impress me.

PakG12• 6 years ago

I'd also add to this list the following for some great writing and analysis now and then (not consistently, but good enough to make the list).

https://www.epsilontheory.com/

https://www.ribbonfarm.com/

https://slatestarcodex.com/

obiefernandez• 6 years ago

As far as I can tell, one of the coronavirus sleeper success stories has been https://outshool.com for homeschooling (and unschooling) kids. We've been using it for my 12-year old and we see both offerings and usage exploding. There's really nothing else like it on the market that we know of...

mrfusion5• 6 years ago

I can’t get it to load. What do you like about it?

vipshek• 6 years ago

Seems like a typo: https://outschool.com/

r00fus2• 6 years ago

Probably a typo - it's https://outschool.com - and it's not clear why this is better than any other mooc.

tmaly• 6 years ago

It looks interesting, but I could not see a way to browse by age.

fastball3• 6 years ago

You need to select a subject first.

https://outschool.com/online-classes/math?q=algebra&startAft...

scep12• 6 years ago

As usual, great stuff from Benedict. One of the better twitter follows I've picked up in the past few years.

The ad market reset in 2008, and the visible part is the money leaving print, but the most interesting part may be the money that’s not captured in ‘advertising’ at all.

My thinking exactly when I look at this chart. The definition of "advertising" and the criteria for inclusion in each of the 4 buckets would be interesting. I can certainly think of other ways to capture consumers' attention than spend money on print, digital, tv, or radio.

ken• 6 years ago

I'd be curious to see "junk mail" in these charts as a category of print advertising. In my experience, that's always been by far the biggest category. You can come to some mistaken conclusions when you ignore the elephant in the room.

Covid and Cascading Collapses

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