The long-rumored Apple console, free-to-play games, and the future of the living room

I've never worked in the games business, and I have no major reason to have opinions about it. But I've been thinking about this one for a really long time and I don't see it being fully explained anywhere. So here's my thesis about what's going to happen with console gaming.

One day, Apple will expand Apple TV into an iOS device that can support third-party apps, perhaps renaming it in the process. The biggest reason they have to take this step is the rise of free-to-play (F2P) games. F2P games have made major inroads in mobile and PC gaming, but nobody has taken them into the living room. Apple will be the company to do this, beating Sony, Microsoft, Nintendo, and Valve to the punch. It will give the company a major footprint in the living room, strengthen its position as a distributor of streaming entertainment, and grow Apple TV into a massive new product line.

Free-to-play gaming is a tidal wave

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What we mean when we say disruption

Chris Dixon:

It is true that new technologies often lead, in the short term, to lower wages and fewer jobs. Craigslist, for example, has about 30 employees yet, by replacing the classified ad industry, eliminated many thousands of jobs (local newspaper reporters, classified ad salespeople, etc). The same could be said for almost every popular website.

On the flip side, new technologies have driven down prices (Walmart and Amazon), led to massive increases in information productivity (Google and Wikipedia), and created new income sources (eBay and Craigslist). Greater productivity and lower prices at least partly compensate for part-time jobs and lower wages.

A few thoughts on this:

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In Iran, infecting the currency with protest

“The Central Bank of Iran has tried to take these banknotes out of circulation, but there are just too many of them, and gave up. For the activists’ people it’s a way of saying ‘We are here, and the green movement is going on.’”

Inheritances in continental Europe

Not being up on the finer points of international estate law, I had no idea that inheritances are treated quite differently in continental Europe. The Economist explains:

To understand one of the gulfs separating the Anglo-Saxon world from continental Europe, consider Warren Buffett’s children. Omaha’s sage investor long ago said he would leave most of his fortune to charity, with more modest sums to his offspring. For Mr Buffett, leaving vast wealth to his children would be “anti-social” in a society that “aspires to be a meritocracy.”

In 26 out of 27 European Union countries, Mr Buffett’s plans would not just be shocking, but illegal. The exception is Britain, or rather England and Wales (Scotland has its own, centuries-old legal system, with a strong continental flavour). In continental Europe a big part of an estate (often around half) is reserved for the surviving children of the deceased and must be equally divided between them. This “forced heirship” makes it impossible to disinherit feckless children (though several countries exclude bequests to “unworthy” children, who have for example murdered a parent or two). Such rules also make it hard to reward the deserving by, say, leaving more to a daughter who gave up a career to care for her ailing parents. Finally, “clawback” laws in many countries stop parents from dodging forced heirship by giving assets away while they are still alive. This applies to gifts made in the last years of life (two years in Austria, ten in Germany), or much longer: in some countries, no time limit applies.

From my American, somewhat-capitalist point of view, it strikes me as pretty odd that a government should try to tightly regulate this financial matter between individual family members. I’m down with the idea of the estate tax in general, I guess, but that’s the state defining a relationship between a wealthy individual and society as a whole, with the state as the proxy for that society. But if I’ve got three children, why is it the state’s business to say I have to treat them equally when I die?

The Buffett example is illustrative, I think, and generally why I’m not a fan of laws that are socially normative—whether those norms have to do with how much money you can bequeath your children, or who you can have sex with, or how much money to pay your hedge fund employees. No matter how well-intended those laws, unforeseen exceptions always creep in. Of course, Warren Buffett is not your typical billionaire, but I think it’s unfortunate when laws punish you for being atypical.

In fire and in flood, extra help for the rich

Another installment in the continuing series of Francis linking to embargoed content that you probably don’t have access to online, but which you should, because it’s Harper’s dammit, and you’d pay money for it if you cared about the world of letters at all you philistine.

Writing for Harper’s, McKenzie Funk reports that AIG and other insurance companies are offering enhanced private firefighting services for those who want to pay extra:

... Firebreak has a proprietary system to coat houses with liquefied Phos-Chek—the same chemical retardant used by the Forest Service and first developed in the 1960s by Monsanto. The spray is colorless and harmless, Chief Sam said, and it can protect your home for up to eight months, far longer than rival gels and foams.

In 2005, Firebreak went to work for AIG’s insurance division, now called Chartis Insurance, increasing the fleet of the division’s Private Client Group from two to twelve trucks and expanding its reach from fourteen elite California zip codes—90049, 90077, 90210, etc.—to nearly 200, plus zips in Vail, Aspen, and Breckenridge, Colorado. Chief Sam joined the company in 2006, after five years as fire chief in Monrovia. He’d been planning a second career in executive coaching until he read about AIG’s new wildfire unit in Fortune. “It was the thing of the future,” he told me, “and I wanted to get in on the ground floor.”

Firebreak was growing—Chief Sam’s friend George had just started a two-truck pilot program for Farmers Insurance—but now there was competition. Chubb insurance protects policyholders in thirteen western states through Montana’s Wildfire Defense Systems, which sprays homes with rival Thermo-Gel retardant. Fireman’s Fund contracts San Diego’s Fireprotec to clear a defensible space around clients’ homes, and offers evacuation services to its richest customers. San Diego’s Fire-Pro USA sprays homes with patented FireIce gel. Wildomar’s Pacific Fire Guard deploys “the Navy SEALs of firefighters” to spray homes with GELTEC retardant.

And the services aren’t simply limited to firefighting:

AIG has Firebreak, but where rich policyholders are clustered on risky coastlines, the Private Client Group is offering the Hurricane Protection Unit: men with GPS units and satellite phones who are on the scene after a storm blows through, boarding up broken doors and windows, patching holes in roofs, covering skylights with tarps, evacuating valuable artwork.

For what it’s worth, nothing in the Harper’s article seems to indicate that these private operators were at all interfering with the actions of government firefighters. Also, I’m one of those people who thinks that maybe California needs to set an explicit zone past which the assistance of government firefighters can’t be counted on, and maybe that the federal government shouldn’t be implicitly subsidizing development in hurricane zones either. Obviously a situation in which the poor can’t live safely in these troubled areas, but the rich can do so if they’re willing to pay for the luxury, certainly makes income inequality more glaring. But I’m not sure that governments should be funding further encroachments on unstable climes either.

Mainstream economics, and good economics

The Huffington Post has a solid article about the Federal Reserve has, accidentally or otherwise, has narrowed the range of acceptable discourse in mainstream economics through its widespread consulting relationships:

The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank’s money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.

“Try to publish an article critical of the Fed with an editor who works for the Fed,” says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.

And the Boston Globe has an even better article about Hyman Minsky, a previously obscure macroeconomist who has been getting a lot more attention of late because his writing seems to have presciently described our current million-car pileup:

Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

In other words, the one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

It’s stuff like Hyman that’s why I read economics, and why I think it would be dangerous for people on the left to disregard the entire field. Just because economics is most easily associated with Alan Greenspan and the Chicago School doesn’t mean that you can’t find people doing great work out of the mainstream. There’s mainstream economics, and then there’s good economics. I mean, I’m a big fan of movies but that doesn’t mean I’m going to tell you to see Transformers 2.

The ghost fleet of the recession

“We don’t understand why they are here. There are so many ships but no one seems to be on board. When we sail past them in our fishing boats we never see anyone. They are like real ghost ships and some people are scared of them. They believe they may bring a curse with them and that there may be bad spirits on the ships.”

Different forms of financing for different sorts of health care

David Goldhill’s Atlantic article on the U.S. health care system is one of the best things I’ve read on the subject in a while. He’s a business executive, and his interest is in setting up the right sorts of financial incentives for innovation in the sector, but from my reading he’s able to approach the subject in a way that’s ultimately pragmatic, and free of excessive free-market idolatry.

As he points out, the way we expect insurance to cover almost every sort of health care interaction is absurd and hugely inefficient:

Health insurance is the primary payment mechanism not just for expenses that are unexpected and large, but for nearly all health-care expenses. We’ve become so used to health insurance that we don’t realize how absurd that is. We can’t imagine paying for gas with our auto-insurance policy, or for our electric bills with our homeowners insurance, but we all assume that our regular checkups and dental cleanings will be covered at least partially by insurance. Most pregnancies are planned, and deliveries are predictable many months in advance, yet they’re financed the same way we finance fixing a car after a wreck—through an insurance claim.

... Insurance is probably the most complex, costly, and distortional method of financing any activity; that’s why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you’ve paid your share. An expensive and wasteful absurdity, no?

Is this really a big problem for our health-care system? Well, for every two doctors in the U.S., there is now one health-insurance employee—more than 470,000 in total.

As for single-payer systems, he notes that they might not be able to discover the necessary savings as the demographics of those countries tilt towards the aged:

Whatever their histories, nearly all developed countries are now struggling with rapidly rising health-care costs, including those with single-payer systems. From 2000 to 2005, per capita health-care spending in Canada grew by 33 percent, in France by 37 percent, in the U.K. by 47 percent—all comparable to the 40 percent growth experienced by the U.S. in that period. Cost control by way of bureaucratic price controls has its limits.

This seems right to me: Demographic pressures are real. Perversely enough, if we’d actually improved our health care system 20 or 30 years ago, we might’ve settled on a model like the NHS and got a good few decades out of it. Now that we’re finally getting around to it, it might be too late to adopt that model.

His recommendation is ambitious, and would require a long, continuous transition process, but it’s also quite thought-provoking:

A more consumer-centered health-care system would not rely on a single form of financing for health-care purchases; it would make use of different sorts of financing for different elements of care—with routine care funded largely out of our incomes; major, predictable expenses (including much end-of-life care) funded by savings and credit; and massive, unpredictable expenses funded by insurance.

Whether or not we could ever get such a system, of course, is another question entirely.

In a civilised manner

From Abstruse Goose.

Time Geithner can't sell his own house for a price he'd like

I wonder if this might be Geithner’s problem in a nutshell:

U.S. Treasury Secretary Timothy Geithner is renting his home in Westchester County, New York, for $7,500 a month after failing to find a buyer …

The inventory of similar homes for sale in the area may have affected the property’s prospects, said Debbie Meiliken, a broker at Keller Williams Realty New York.

“There was a lot of competition,” Meiliken said. “Sometimes people will put the house for rent if they’re not prepared to sell it and take a loss.”

Does Geithner think his own house price has been artificially depressed by a temporary liquidity crisis? I wonder if he realizes that asset prices will have to come down eventually and someone, somewhere, will have to bear that loss.