Economists at the London School of Economics got some students into the lab. They got them to fill in a survey (the survey was basically a decoy). Then they said to the students ‘Thank you for filling in the survey, as a token of our appreciation, would you like a snack? What would you like: fruit, or chocolate?’ The students, being members of the human race, mostly chose chocolate.
In another variant of the experiment, the economists got the students to fill in the survey and said ‘thank you very much, next week, we’ll bring you a snack. What would you like next week, fruit or chocolate?’ And the students said ‘fruit sounds nice, thank you very much’. The next week they would turn up with the fruit and say ‘here’s the fruit you asked for … are you sure you wouldn’t like chocolate?’ At which point many students would switch: ‘Last week, when I said I would want an apple, I must have been insane!’
That’s a slightly edited excerpt from a recent speech by Tim Harford, author of The Undercover Economist and, most recently, The Logic of Life. He followed that example up with another experiment by the same economists. This time they offered the students a choice of films. When deciding what they wanted to watch that night the students chose American Pie, Mrs Doubtfire, Sleepless in Seattle and the like. When asked what films they would like to watch in two weeks’ time, the students chose Kurosawa’s Rashomon, Three Colours: Blue, Raise the Red Lantern and Schindler’s List.
My knowledge of movies is atrocious and I have to confess I had never heard of Rashomon, but you get the idea: the choices we make in the here and now aren’t necessarily the same as the choices we make over a longer time frame. Whether it’s an exercise regime, a diet program or trying to quit smoking, we’ve all been torn between satisfying our immediate desires and doing what is best for us. But what’s that got to do with the Sydney Morning Herald?
Well, many people out there fight the desire for immediate satisfaction and find a balance between the present and future. People do exercise, they do eat fruit and, in an effort to better themselves intellectually, they choose to read Fairfax’s Sydney Morning Herald over Murdoch’s Daily Telegraph. SMH’s high-brow reputation, 177 years in the making, is a valuable one; the fan base is loyal and there are plenty of advertising dollars looking for high-brow consumers. Unfortunately, it is a reputation being rapidly destroyed.
The internet gives the paper’s editors the ability to see, instantaneously, what we read. It will come as no surprise to Tim Harford that the most popular stories are about sex, nudity and, in today’s perfect example, incest – even amongst SMH’s supposedly sophisticated readers. Put chocolate in front of us, we eat it.
The powers that be see what’s popular and, presumably abiding by the motto ‘the customer is always right’, feed us more. The net result is that Bob Irwin (Steve’s father), Nicole Kidman and a hedgehog all make it onto today’s SMH homepage. Robert Mugabe does not.
That is sad. It is also faulty logic. Sure, we’re all guilty of clicking on the populist articles but our actions belie the reason we’re there. If I want to read trash, there are better places to get it. I type smh.com.au into my browser because I’m looking for serious commentary and, if I don’t get it, I’ll go elsewhere. With many of the world’s great papers now free online, there is no shortage of competition for my time.
Fairfax’s business is under assault from all sides. Its most profitable source of revenue – classified ads – has been diverted to the likes of Seek and realestate.com.au. Succumbing to populism and destroying its wonderful brand names will only accelerate the decline.
Steve Johnson
Bristlemouth | A Value Investing Blog 
Nice writing. You are on my RSS reader now so I can read more from you down the road.
Allen Taylor
Steve Johnson:
So, if Fairfax is going towards the path of populism and destroying its reputation in the process, do you think there will be a trend towards niche good quality blogs?
Some of our readers are saying that they read our publication (and by extension, other good quality blogs such as yours as well) because they are appalled with the decline standards of journalism in the mainstream media. That’s the reason they have turned to our blog, which has become their ‘morning paper.’ We have noticed this trend as well, since in the area of economics and finance, the mainstream medai are guilty of publishing mis-information from many so-called industry pundits. It’s inexcusable that even big research house are churning out untruths. And to worsen the situation, many of these mainstream media relies on advertising for their revenue stream. As one of our readers said, when one’s liverlihood is dependent on advertisers, one will ceased to be objective and rational in one’s thinking i.e. one’s thinking becomes hostage to advertisers’ propaganda and agenda.
A case in point. Recently, BIS Shrapnel released a research report, saying that house prices in Australia will rise by as much as 40% in the next 5 years (see our rebuttal against this research at Another faulty analysis: BIS Shrapnel on house prices). This research was widely quoted in the mainstream media. Guess what happened next? Yesterday, in a newspaper advertisement, another dodgy property investment spruiker quoted BIS Shrapnel’s research in an attempt to lure gullible investors into their property investment seminars (and products, etc). They even misquote Warren Buffett’s maxim about being greedy when everyone is fearful and being fearful when everyone is greedy, saying that in this current climate of fear, there are opportunities to make lots of money in property investment. As usual, this advertisement showed graphs of rosy projections to everlasting wealth and riches.
So,do you see the ascent of good quality blogs in the long run if mainstream media persists in its long term decline through the pursuit of populism?
About the BIS report, Professor Steve Keen said that BIS’s mistake is to treat houses as if they are commodities. That’s how those clowns produce such findings. Yeah, people love to hear that their houses are going up forever and the media love to give what people like to hear.
In general terms, one can only agree. The Fairfax websites have been spiralling downwards into the senstationalist/populist mire for some time, and the process does seem to have accelerated quite alarmingly of late.
But while I think you are basically correct that they are degrading their brand, etc, there are some interesting complexities worth considering. I have no idea how representative this may be of a larger class of readers, but for me, The Age/SMH is about as low as I will go. What I mean by this is that while I would prefer they didn’t cheapen themselves so blatantly, I don’t really go there expecting serious analysis, but to sample what is happening in ‘mainstream’ commentary, and to slum it a little. I do occasionally read some of their more tawdry pieces, but I would never go even further down the food chain just to read this sort of crap. And to some extent this is exactly what Fairfax and their ilk are cultivating – a place where people can read titillating drivel without feeling too embarrassed at being there in the first place. The ‘serious’ content provides a cover for the lighter and sillier stuff. While this will no longer work if it goes too much further into the mud, they can get away with quite a lot, partly because they offer a better approximation of a window into a broad common culture than others. This is something which is much harder for smaller, more specialised operations to do.
I hate to offer what may be taken as a justification for their downward slide, but it may have a (slightly) safer commercial basis than you make out. Fairfax can be – and are – quite easily beaten in a competition for serious analysis. So its not necessarily just a matter of appealing to our instant-but-shallow gratification for their short-term but ultimately self-cannibalising gain. Sadly, it may be (shudder) that something like their present path is a canny strategy in a rapidly reshaping media world.
It would certainly be nice if they could be sustainably rewarded for holding out against the more degrading aspects of modern society. That they fail to do so is indeed sad. But you will need to do more than just wave the idea of maintaining brand quality to support the claim that their present path is ‘illogical’.
Talking about Fairfax, did you see this article from the SMH? Fairfax unveils youth news website. I think this is their strategy of splitting their chocolate eating readers (read: youth) away from their fruit eating ones (read: the more sophisticated ones). What do you think Steve?
Nice comment from outtolunch (obviously not out for too long today). There’s an economic theory called Hotelling’s Law. The way they explained it at uni was with ice-cream stands on the beach. Imagine there are two vendors serving the length of the beach. The best place for them to stand from the consumers’ point of view is 1/4 from each end – that way no one person has to walk more than 1/4 of the beach for an ice-cream. But it’s in each vendor’s interest to move closer to the other – that way, they still get all of their end of the beach but they steal a few of the competition’s customers as well. The end result is that you get two ice-cream stands next to each other. In the real world, you end up with airlines with identical flight schedules and two pizza shops right next to each other.
Maybe there’s a bit of that going on in the media world as well. I doubt they’re thinking too deeply about it though – more likely they are seeing what people click and delivering more of it. I think that’s faulty logic but you’re right that it might not result in lower profitability.
This is an interesting topic – I have had separate friends/colleagues say to me in recent weeks that both the SMH and the AFR are going down hill.
Could part of the issue for decline in serious analysis be the rush to immediate gratification – that is that it has become more important to be first to release a story than it is to cover it intelligently?
Do you think the quality decline for Fairfax’s SMH/AFR is much steeper than News Corp’s The Australian? If that’s the case, then Hotelling’s Law may not be the correct explanation.
We could be wrong, but here’s a guess of what could be the reason for Fairfax’s steep decline- cost cutting. Take a look at this news article from The Australian- Fairfax goes frugal (emphasis ours):
This article was written in May 2007.
Steve: Since you guys are follow Fairfax’s financial situation much closer than us, perhaps you can shed light on whether our theory holds water or not.
The popularity of the trash stories in Fairfax papers is not as simple as it appears. Readers are presented with “TODAY’S TOP 10 ARTICLES” prominently displayed on the side of every story they read. These are the top 10 measured by readership – but it is feedback loop that serves to amplify the popularity of the stories on the list. My guess is that the popularity of stories read by those using the RSS feeds or actually reading the printed paper would be considerably different – in part because they aren’t impacted by the feedback loop.
Navigation of the paper on the web is still laborious – there is a lot to scroll through and it’s hard to tell which stories are worthy of reading (i.e. aren’t dross and actually contain something worth knowing). Perhaps the editors could have a prominently displayed list of “top 10 edifying stories” (along with a hot-link to explain what “edifying” means).
I’d firstly like to congratulate Steve for getting published in Crikey.com.au (I’m a subscriber there as well as to Intelligent Investor). Some might say that’s not really a win for improving your profile and that of your newsletter, but I found this to be both a perfect fit for Crikey who comment on the media a great deal, and a view I wholeheartedly agree with, as a regular smh.com.au reader. Tom’s views above have also been noted in crikey, and it’s not just top 10’s, but the overall selection and placement of the more populist items against those we might have come to smh for in the first place. I go there for news, but am guilty of being influenced by the feedback loops & placement of the more sensational articles despite my best intentions.
Most interesting however is what all this says about Brisbane readers. Just look on any day at what is in ‘readers most viewed’ section at the bottom of the smh page (another feedback loop). We might all be guilty of clicking on the pages with sex, nudity & incest at times, but for some reason this is a far more dominant theme for readers of the brisbane times.
Congratulations and thanks for putting in words what I have been thinking and feeling for a long time. I agree with you 100%.
Great post and I agree, smh is slipping and there are much better publications for free available out there (NY Times, BBC to name a few). I am currently living in the states, though born and bred in Australia, and I have a blog that talks about Aussie finance – http://www.financeviewpoint.com , and I am finding that I turn less and less to smh.com for my business and finance information. The Australian and Bloomberg are much better.
Also, got a trial subscription to the II (and other newsletters), which I am enjoying (see my review on the blog) and will look to become a subscriber. Also like this blog and adding to my Aussie blogroll.
Cheers,
Andy
It feels odd to be discussing media economics with a fish, but I guess you get used to it. I find it gratifying to see that readers notice the slide in standards at the Herald because I used to be one of the people paid to keep them high. Journalists like to say readers must notice when standards slip and the bottom line must therefore be affected but it can be impossible to persuade razor gangs of this linkage.
I note Contrarian Investor’s Journal’s reference to the Australian, mid-2007. That redundancy round at the Herald was aimed largely at the paper’s quality control system, ie, production journalists laying out pages, writing headlines and captions, reading text for quality and logic, etc. 20-25% of those people, including some designers and Sun-Herald production journalists, left on invitation. The business and general news desks were merged and most of the expert business production journalists left then (including me) or have since left. The CEO was warned in person by several senior journalists that the plan was flawed and he was getting bad information. He chose to proceed anyway. Now the paper rarely makes deadline and business copy is rushed through at the end by people who know nothing about the topic and might even hate it.
Andy’s note helps to explain the challenges for papers like the Herald when he says there are much better things out there “for free”. Wherever that is true in life, the service provider who wants payment is always going to lose. The service provider who wants payment for a superior product at least has a chance. That is why I’m willing to pay a few hundred dollars a year for Steve’s investment newsletter but don’t subscribe to the Herald.
I could go on and on, but will end with this: newspapers face declining readerships and profit margins because a range of players have bitten into their pie. Newspaper publishers’ internet activities aren’t taking up the slack. For an expert’s view on this, see Warren Buffett’s 2006 letter to shareholders, http://www.berkshirehathaway.com/letters/letters.html
As a cadet journalist 60 years ago I was taught male newspaper readers will always look first at a picture of a sexy young woman – and all readers are attracted to pix of children, other people, and animals, in that order. But that’s not why they buy the paper. They buy for news – and news is by definition information that will affect them personally. The sooner, the more directly, and more seriously it will affect them, the more important it is – to them. This is why any media needs to know its audience well, and “mass” media generally lacks appropriate focus for most readers – especially if it doesn’t “join the dots” with lateral thinking and connections. A reporter presents the facts to the best of his or her ability – but a journalist explains why they are important to the reader. People are motivated most by fear – that’s why bad news is “good” news. It also explains much of political scare-mongering as in the last election, and why media trumpeted it mindlessly. But if news provokes more fear than people can handle, they will turn off. Which explains the avoidance of climate change, implications of population growth, etc. I reckon modern mass media is another demonstration of the theory (Malthus?) that base coin will oust good.
Hi!
Rohan Bodman said,
If you notice, this is also happening in the IT world as well. Last time, it was the proprietry software (e.g. Microsoft, Lotus, etc) that monopolize the market- users pay for pre-packaged software. But with the advent of the Internet, the power of networks begin to turn traditional business models upside down. Today, we have the Open-Source movement where teams of software engineers collaborate together in projects, producing lots and lots of free AND high-quality software. For example, Linux is an entire operating system that qualitatively competitive with Windows. If you remember the days when Microsoft fork Windows into Windows 95/98/Me and Windows NT/2000, it becomes obvious that the quality of Microsoft’s Windows is inferior to the free open-source onces (e.g. Linux, FreeBSD Unix). Bill Gates, in a publicity stunt, had to ‘stand-down’ the entire company, telling them that Microsoft’s priority will be security over features. Another example: the Apache web server that powers most of the web is a free open-source software.
The point is that, with the advent of the network economy, price is converging on towards zero and traditional business model of making money is no longer working as well as before. Traditional business cannot compete when prices approaches zero. If you notice, the music industry is facing this problem. Very soon, the movie industry will follow as well. As we can see in this blog post, newspapers are also falling into the same decline.
Traditionally, scarcity determines value. In this new age of the network economy, abundance determines value. The underlying philosophies of Microsoft and Google are at complete odds with each other. Microsoft follows the traditional model, while Google follows the network economy model. That’s why Google is churning out lots and lots of free software and tools and yet, it remains a very high-margin profitable business. Google knows how to harness the power of network for its own advantage. Microsoft is still crippled by its traditional business model.
For those who have read Nassim Nicholas’s Black Swan book, you can say that the network lives in a world of “extremistan.” Since more and more of our daily modern life is being integrated into the network, we live in a world that is more and more towards “extremistan.” Also, we recommend Kevin Kelly’s book, New Rules for the New Economy. Kelly follows what he preaches- the book is freely downloadable.
Back to the declining quality of Fairfax- newspaper are living in the networked world of “extremistan” whereby abundance is the order of the day and price is converging towards zero. It’s business model have to change radically, otherwise it will not exist in 100 years time.
[…] am Tags: behaviour, debt, getting out of debt I was reading Bristlemouth’s* post about Fruit, Chocolate and the Sydney Morning Herald recently, in which he mentioned a study done by the London School of Economics. I won’t go […]