As a public service, I offer these trenchant observations on currency exchange and the American dollar here.   

Maybe its just the anthropologist in me, but I am often beset by the sensation that I am surrounded by people who would be interesting to talk to. 

Now I can.  Airtroductions.com is a new service that allows me to discover who is sharing my flight to LA and to arrange, by mutual agreement, to sit together.   

What a great idea.  People here in Connecticut are dead set against exchange of most kinds.  Products, no.  Ideas, Lord no.  Capital, ok.  So my opportunity to meet and chat with new people, to do the anthropology of everyday life, is limited to airports and the places they take me. 

I always strike up conversations with the person next me, and the results are often wonderful.  Coming back from San Antonio, I found myself sitting beside a University administrator who writes historical romances and a guy who was just coming to New York to run an ad agency.  I mean, really, you can’t hope to do better than that.

But often the pickings are not so good, as when you get stuck by someone who is stupid and noisy about it.  On the way out, I resorted to my laptop and to my astonishment, the person to be just kept talking.  I thought getting out your computer was a universal lingo for "fuck off and leave me alone."  Apparently not. 

Then I got to thinking: this is an exchange waiting to happen.  I mean, we could make this an exchange system dominated by the free gift.  If I’ve got something useful to tell you, I give it to you, consulting for free.  But we could earn and store value with Airtroductions and spend this value to get to certain conversations we most want. 

Naturally, it won’t be long before hotels start up systems of this kind.  Often, we just want to eat in our hotel rooms but sometimes a free evening is a great opportunity to make contact with someone sensationally interesting and useful.  And there is a better than average chance that in a large (& especially a grand) hotel, there is someone we would find sensationally interesting and useful.  (You can see that this is where the exchange might come in here.)

The society of strangers is one of the signatures of industrial society and one of the pleasures of modernism.  We don’t know who they are.  We don’t want to know who they are.  Those strangers are merely so many walk-ons for the drama of our own lives.  (What, for instance, would Paris be without them?  And so well casted!) 

Only some of us belong to networks that constantly introduce us to really interesting people (and more networks).  Which is to say, that the new technologies must help us make contact more efficiently than before. And anything’s better than, "are you going to eat that dessert, or could I have it?" 

First, you start with a quote like this one:

Subscription services will replace the entire music purchasing experience. (David Goldberg, Vice-President and General Manager, Yahoo! Music)

Then you invent someone on the verge of a momentous decision. I like to put this someone in a midtown office staring out at the autumnal rain. This is called “atmosphere.”

Craig Norton was sitting in his midtown office staring out at the autumnal rain. He put down his BusinessWeek and thought hard. If what Goldberg said was true, Craig might as well close up shop right now. As the CEO of Bang the Drum Music and the man responsible for a website that sells music online. The motto: “a little like iTunes only totally better.”

Here we insert 800 very carefully chosen words on the music industry and sales in the second half of the 20th century, the rise of the internet as a new channel for music sales, the effects of Napster and Kazaa on the industry, and the introduction of the on-line purchase opportunity, from Apple and its competitors and then the rise of the subscription model from the likes of RealNetworks, AOL, Napster, and, as of May 10, Yahoo! Music.

We want to make the case a welter of data and interpretive possibility. We are setting the foundations for 80 minutes of classroom discussion. We want enough intellectual “noise” to jam the navigational equipment of the mass of the class but not so much that the gifted students can’t fight their way through. It’s a sweet spot calculation: enough noise to baffle everyone for about an hour, not so much as to leave all of them baffled at the 81 minute mark. If we do our job, a certain clarity should be emerging around the 65 minute mark. Revelation should arrive with the punctuality of the New Haven express at the 72 minute mark. This leaves 8 minutes to clue the other kids in.

Yada. Yada. Yada. [Consider the 800 words written. You know what to do.]

For conventional business issues, the task is straight forward. We salt the case with the key figures, findings and observations that make it possible for discussion to ensue, controversy to break out, camps to form, wits to exercise and sharpen, and then, at the 72 minute mark, to have one of the bright ones put everything together, and come thundering out of our carefully created haze to “crack the case.”

But the case I am thinking of here is not a conventional one. Certainly, Craig Norton has a real problem. I think he also has a real opportunity. The glib thing to do here, and this will tempt the less gifted students in the class, is to say, “Craig, buddy, make the move, change the model, go with subscription.” These kids will bite on the Goldberg remark and never look back. This is good for the class to have some kids setting up a position.

But the smart ones will say, “no, this is too easy.” At the very least, they will know the genre well enough to know that no one gives away the secret in the opening lines.

The trick is to give students something with which to work. Because this blog sits at the intersection of anthropology and economics, I am interested in how cultural considerations might argue against Goldberg’s advice and encourage Norton to hold his position. (In my little universe, this is the answer that cracks the case. It may be wrong, but then the point of the case study is not to promote inevitable truths, but teach people how to see past the obvious.) Here’s what we have in the case (sounding suspiciously like a passage from BrandWeek [which it is, as below]).

The online providers typically pay the music labels about $6 per person a month for a subscription that allows users to listen to music only on their PCs. The service in turn typically charges users $10 a month. After expenses such as the cost of server infrastructure and credit-card fees, that leaves a profit market of about 30%.

However, for subscriptions that allow downloads to portable players—which most people are likely to want—the fee to the label increases to about $8. That’s why RealNetworks and Napster charged $15 per month before Yahoo came in with its $7 offer.

Someone, Mr. Gates, let’s call him, will notice that Yahoo is going to have to go back to the consumer, rescind the $7.00 price, and go higher. The business model cannot be sustained. Yahoo’s price of $7.00 was introductory.

Someone will counter that Yahoo might have enough clout to force the music labels to drop their fees. But we have anticipated them in the case.

Many music execs believe Yahoo is charging too little and could get consumers hooked on unsustainably low prices. “The labels are very sensitive to the devaluation of music,” says RealNetworks chief strategy officer, Richard Walpert.

And sure enough someone will read this passage out, and the counter is challenged. Yahoo cannot hope that industry accommodation will bail them out and the class will see this. But we have something useful on the table and this is our opportunity to open a path for the class.

“So Mr. Gates, is this a problem? People change their prices all the time.”

“Well, I think if you bring in people at one price and then charge them another, they have a right to be angry.”

“Angry enough to do something about it?”

“umm.”

The HBS drill is clear. An instructor may never lecture or lead the class. As Ben Shapiro used to say, what happens in the classroom belongs to the section.” If the students don’t crack the case, they don’t crack the case. Their loss. But the instructor may ask the difficult question, forcing the student to revise the assumptions with which they construct their original positions.

“Ms. Lumin, what do you think? Will subscribers leave Yahoo because of a little price change?”

If things go well, it should be possible to draw out two larger issues that must be answered to decide whether Goldberg is right and what Norton should do. The first of these is the special relationship between the consumer and music. Music is formative of who the consumer is and the very values and objectives that define as them as people and consumers. Music takes on meaning from the life of the consumer and it gives off meaning in the life of the consumer. A special bond is formed. (This is very hard to get into the case, but it should be a clear and retrievable fact in the experience of most of the students.)

As this approach draws out, a new conclusion emerges. The instructor may wish to beard the class in the following way.

“So you are telling me that consumer really care about their music. And I guess this means that they should be prepared to pay more for it, no? A pricing increase should be ok.”

Again, the less gifted students will go for this, but the brighter ones will remain impatient. And now we are forcing them down into still deeper assumptions about the case and a still deeper knowledge of their culture. Eventually someone will say,

“Look, there is this special connection between the music and the consumer, and this means they will resent a change in pricing.”

“Tell me why.”

“Well, um, because you are holding their music hostage. You are taking advantage of the fact that they’re connected to it. This connection means they have no choice but to pay you.”

“And that’s a problem why?”

“Because you are exploiting their dependency and no one likes having no choice. This really is taking advantage.”

The smart ones will keep digging.

“It kind of stops being a contract when one party has no choice but to continuing to pay whatever the service charges. This is almost like slavery, isn’t it? The subscription model actually incents the consumer to leave the supplier…just to punish them for their temerity. I think people will want to buy, not rent because it protects them from this vulnerability. More than that, they will be incented to move from renting to buying to punish the company that exploited their connection to their music.”

If we are really lucky someone will recall the moment when the CEO of the Coca-Cola Company suggested that Coke machines would use variable pricing technology to charge more when it was really hot out. After all, his logic went, Coke was creating more value, it should harvest more value. This was one of several reasons why the CEO was removed from office. Pricing that takes advantage of the consumer does generate revenue but it also does great damage to the brand in the process.

More tomorrow.

References

Burrows, Peter, Ben Elgin, Ronald Grover, Jay Greene, Heather Green and Tom Lowry. 2005. Online Music: Rewriting the Score. BusinessWeek. May30, 2005, pp. 34-35. (NB: two passages from the “case” [specifically paragraphs 12, 13 and 16] are drawn from the BusinessWeek article, for which acknowledgment and my thanks are here noted.)

The photo above shows C. Roland Christensen who was, for fifty years, a driving force behind the development of the case method.

The Western conception of the person as a bounded, unique, more or less integrated motivational and cognitive universe, a dynamic center of awareness, emotion, judgment, and action organized into a distinctive whole and set contrastively both against other such wholes and against its social and natural background, is, however incorrigible it may seem to us, a rather peculiar idea within the context of the world’s cultures.

Geertz, Clifford. 1974/1984. ‘From the Native’s Point of View’: On the Nature of Anthropological Understanding. In Culture Theory: Essays on Mind, Self, and Emotion. Edited by Robert A. LeVine and Richard A. Shweder, 123-36. New York: Cambridge University Press, p. 126.

Sum:

I look at Stephen Karlson’s interesting question: why do people pursue Ph.D.s that will not result in academic employment. I treat this as an example of the how anthro and econ see the world.

Full text:

The intersection of anthropology and economics is badly marked, and on a rainy night, it’s easy to miss it altogether. The city put up street signs a few years ago, but one of them fell down and the other was stolen. There are stop signs but most people sail right through them without stopping. I mean, really, why bother? In this neighborhood, what are the chances you’re going to hit something?

Quite so. Anthropology and economics work from different assumptions. They don’t parse the world the same way. They have a hard time mustering much enthusiasm for one another’s “burning questions.” It’s almost as if they occupy different domains or dimensions. In point of fact, this intersection very often doesn’t.

Except today. I discovered the exemplary blog of Stephen Karlson called Cold Spring Shops. (With thanks to Brain Brew Blog for the connection.) Karlson writes like a wizard. He takes up important question. His blog is a joy. At the moment, Karlson is thinking about an interesting little puzzle: why it is that some people take Ph.D.s when there is no realistic hope of full academic employment, tenure or a sustaining career.

Dr. Karlson writes:

Let us suppose that there is common knowledge on the part of aspiring Ph.D. students in some disciplines that they face a great risk of never landing a tenure-track job, let alone tenure, and those who do so succeed will still be paid much less than otherwise comparable people in other disciplines or in industry. Why, then, do so many people participate in that market? What other constraints are they operating under, or what objectives are they pursuing, that we don’t fully understand?

Karlson contemplates two explanations, one Stiglerian, the other Stiglitzian. The first supposes that the “persistence of an anomaly is evidence of an efficiency we haven’t thought about carefully enough.” The second supposes that “conditions conducive to allocative efficiency almost never hold in practice.”

I want to propose an anthropological explanation. On one reading, this may be taken as evidence for the Stiglerian argument. On another, it can be taken as a refutation of the Stiglerian argument. Let me say in advance that this argument is going seem a little cynical. And it is. As anthropology and economics get to know one another better, in the long term it will be impossible to say which is truly the more dismal science.

I think it’s possible (and without the ethnographic work, I am just speculating) that some people take Ph.D.s that will never bring them academic employment with the full knowledge that it will never bring them academic employment. There are two possible reasons.

First, I think that people raised in the humanities and social sciences in the post modernist regime created by the likes of Foucault, Derrida, and Lacan, are inclined to see the world outside the university as unrelieved by the possibility of interest, hope, curiosity, surprise or engagement. (And here, in too telegraphic summary, is why: the postmodernists say that we can’t generalize about the world because our analytic categories are unstable, but, whew, we don’t have to because it is all about power. [And you thought I was cynical.]) This is perhaps a Stiglerian “efficiency” we have not thought about. The value of the degree is not the employment it is supposed to bring. It is its short-term prolongation of protected status.

Second, I think it’s possible (and now I am entirely out on a limb, but surely that’s what blogging is for) that people take Ph.D.s is order to “spike” their careers. Once you have a degree in an exalted field (from, one hopes, an exalted school) and no employment, you have established grounds for an act of world repudiation. You can now claim to be worthy of higher things, to have be refused those higher things, to have been forced to retire from the world, and that you are now entitled to nurse, cultivate, and frequently vent an dystopic view. The world has done you wrong. You have replied by withdrawing from it, and no one can blame you. In sum, the value of the degree is that it allows you to disengage from the world with full justification.

Let’s go back to the intersection of anthro and econ. Economics goes looking for the actor’s rationality, the pursuit of advantage. This is almost always the smart thing to do, and anthropology does it too rarely…as if Adam Smith’s assumptions are peculiar to our culture and should never be exported in the study of other cultures. Anthropology goes looking for the ways in which people build and embrace ideas about the world. It cares about behavior that is purposive because it makes the world make sense.

And that’s I think what’s going on here. This apparently irrational moment of consumer behavior, the purchase of a Ph.D. that will not bring employment, is actually knowing and deliberate. It is an act of self and world construction. It allows the individual to make certain claims to identity. It allows them to build and to occupy a certain understanding of the world.

Is this Stiglerian? Better, would Stigler (returned) accept this as a useful, intelligible explanation of the question in question. (More pressingly: what about Karlson?) Probably not. This is an “impasse” between the two fields. What economics sees as irrational, anthropology finds witting, rational, deliberate…and of course spectacularly odd.

Benn Steil recently argued that we should eliminate “monetary sovereignty,” claiming that most of the world’s currencies are an illusion of autonomy that only gets their holders into trouble (think Argentina several years ago). Poor Canada, this would be the last straw.

Nationhood in Canada has been diminishing quietly for some time now. It is regarded as appropriate for nations to have a military with which to defend the borders that assert its territorial autonomy. Recently, the Danish laid claim to one of Canada’s distant islands, and we could barely bring ourselves to rattle a sabre. (Canada has a sabre?)

National airlines have been another way that countries have declared themselves on the international stage. Canada’s airline is suffering insolvency. For a moment, it looked like it might be rescued by an investor from Hong Kong. He backed out and now it appears that the rescue will be accomplished by a German bank.

Robust economies are another marker of difference, and here too Canada limps forward. Even little Finland is more remarkable. There are dark rumors about the security of Canada’s membership in the G8. There are even questions about whether, over the long term, Canada can sustain first world status.

Culture is often seized upon as a way of defining the national difference. (Deborah Silverman notes that the French did this in the 19th century.) Canada did an especially stupid thing during the Massey commission of 1949 and insisted that the national culture would be anything that popular culture was not (so to distinguish us from the Americans). This was foolhardy and unsustainable.

Sports are sometimes still grounds for national difference. Hockey continues to do its goonish best, but scratch a Canadian exemplar in any other field and almost certainly you will find an athlete trained at an American university.

You could argue that these are small things, that they do not finally matter, that Canadianness exists somehow sui generis. But recall what Lear said when told that he didn’t really need the trappings of majesty his daughters were systematically stripping him of, “Reason not the need, else men’s lives are cheap as beasts.” “Minor” differences are major ones without which the world grows mere, dubious and contestable.

Benn’s argument may make sensationally good sense from an economics point of view, but from an anthropological one, it is dubious. You start by giving up your currency and before long you’re on a slippery slope. Before you know it, you’re Canada.

Litt, Paul. 1991. The Massey Commission, Americanization, and Canadian Cultural Nationalism. Queen’s Quarterly 98, no. 2: 375-87.

Shakespeare, William. King Lear. (Please treat this quote with caution. I have not checked it.)

Silverman, Debora. 1989. Art nouveau in fin-de-siècle France : politics, psychology, and style. Studies on the History of Society and Culture. Berkeley: University of California Press.

Steil, Benn. 2004. The Curse of Currency Autarky. Wall Street Journal. April 22, 2004. (Not available on line.)