Blogs are Like Belly Buttons

Recently another writer asked a superb question in the Fiction Writers Guild on LinkedIn:

Blogs are sort of like belly buttons—everyone's got one. How do I get people to follow mine?

—Jeff Segal 

My response:

How do I get people to follow *my* blog? That's the question on everyone's minds. Standing out in social media is a tricky game. 

Red Lemonade would be great because the community is young. You would have the first-mover advantage: you would gain followers simply because there are currently fewer other writers competing for your reader's eyeballs. The same thing happened with Twitter—the early adopters gained lots of followers simply by showing up. 

If you do go the Wordpress, Blogger, or public-blog route, you could always cross-promote your posts. Every time you post a new installment, Tweet about in and post about it here. Make friends on Twitter and make friends among other bloggers who can give you a shout-out. Try to get the momentum going. 

Instead of starting your own independent blog, try to piggy back off of another website's social cache. See if you can find a website willing to publish your novel in installments. For instance, if I were writing literary fiction, I would pitch my idea to The Millions, Granta, or the Paris Review—all of which have websites for which they need a regular stream of quality, original content.

Pitching to an online magazine is a new idea that I'm not sure many people have tried. What do you think? Would it be a good way to gain exposure?

Having a blog following is essential for the aspiring writer. Whether you're pitching to publishers or publishing yourself, your online following can translate into the sales that make your time investment worthwhile.

Designing for Growth by Jeanne Liedtka and Tim Oglivie

Aside from a few well known graduate schools offering immersion education—notably Stanford's d.school and U. Toronto's Rotman School, there isn't a wide variety of readily available ways to gain a learning experience blending theory with technique. 

That's exactly the design challenge taken on by Jeanne Liedtka, a professor at U. Virginia's Darden Graduate School of Business and Tim Ogilvie, CEO of the innovation strategy consultancy Peer Insight, in their new book Designing for Growth: A Design Thinking Took Kit for Managers.

Pretty thorough review of Liedtka and Oglivie's book over on American Express's Open Forum.

Crush It! by Gary Vaynerchuk—Vook Edition

I just came across an advertisement for Gary Vaynerchuk's Crush It! The book looks fantastic—it's definitely going on my to-read list—but even more impressive than the paper or ebook editions is this one from Vook:

Crush It! by Gary Vaynerchuk - Vook Edition

Head to the site to watch the trailer.

Vook is an innovative publishing start-up that produces, well, Vooks—books that blend video with text. From what I gather, short videos are interwoven into the body of the book. This seems ideal for Crush It!, because Vaynerchuk is such an engaging motivational speaker. Short YouTube clips of him at conferences can run alongside the text.

Other than that, Vaynerchuk's content—and the story of his rise to fame/fortune/success—seems similar to that of Tim Ferriss.

Three Month Summary

This course has exposed me to the burgeoning field of behavioral economics. Neoclassical economics may be the “study of resource allocation under scarcity,” but behavioral economics is a blend of economics and psychology—the study of how people actually make decisions. Neoclassical models necessarily make simplifying assumptions, and behavioral economics explains the glitches and phenomena that traditional theory excludes. Laboratory experiments in both psychology and economics departments have demonstrated that while the rational consumer is a useful construct, he is ultimately fictitious.

As Clay Shirky shows in Cognitive Surplus, and as Chris Anderson to a lesser degree demonstrates in Free, people often behave in ways that are not profit-maximizing. The traditional foil to neoclassical theory is the ultimatum game: responders will turn down free money if they believe they are receiving an unfair deal. And, as William Poundstone explains in Priceless, decision-making can be influenced by hormones, blood alcohol content, race, gender, and other human variables. Poundstone’s conclusions are not new; economists have been modeling these effects for decades.

What is new is the Internet. Never before has such a market existed, and never before has it been so easily to collect data and study social groups. The Internet is unique in several ways. Firstly, there is virtually no cost to starting an online business—there are zero barriers to entry and exit. Secondly, the Internet allows information to flow phenomenally fast, thereby eliminating information asymmetries. Likewise, it distorts geography and time: individuals across the globe can communicate in real-time, and a researcher can access decades-old news articles with a quick Google search. The Internet is a nearly perfectly competitive market. The prices of goods fall to little more than their costs of production and, at first glance, there seems to be little room for profit.

The Internet’s effect is similar to that of the Industrial Revolution. Today, companies centuries old are failing while start-ups are thriving. The Internet era demands new business models. Michael Porter’s cost-leadership strategy is no longer enough; firms will have to differentiate themselves by adding value for their customers. (One way to do this, Daniel Pink suggests, is by focusing on design and those creative, human touches that cannot be replicated by software.)

The Internet also promotes super-monetary economies. With a glut of entertainment options available, a consumer’s scarcest resources are his or her time and attention. When one’s material needs have been mostly satisfied, he moves up Maslov’s hierarchy of needs. People log onto the Internet to participate, to connect with like-minded individuals. They express themselves in art, writing, and video—they will create for free—in exchange only for an audience. Furthermore, as Clay Shirky points out, people will often take on challenging tasks simply in order to master them or to feel autonomous. On the Internet, success is measured not in dollar signs but in reputation, and the primary currency is that of attribution—giving credit where credit is due.

There are several implications for aspiring managers. Daniel Pink argues that Peter Drucker’s “knowledge worker” has been supplanted by the right- and left-brained “conceptual worker.” While this may be more prediction than perception, it is not unrealistic to suggest that tomorrow’s workers will have to communicate as much as they quantify. The physical workplace is less important than the worker himself; tomorrow’s organizations will be decentralized and office hierarchies will be more fluid. Social media will both unite offices and keep them in touch with the outside world. (For a guide to becoming the ultimate mobile warrior, read Timothy Ferriss’s 4-Hour Workweek; to become a social media expert, read anything by David Meerman Scott.) Finally, in a hyper-connected world, workers will be challenged simply to define their work, to sort out critical information from what is superfluous, and to stay focused. Workers should embrace iterative design theory: “nothing will ever be perfect,” writes David Meerman Scott, suggesting that companies should launch products as soon as possible and revise them later, with user feedback. Managers may need to teach their employees how to work as much as give them orders—a copy of David Allen’s Making It All Work should suffice.

Priceless: The Myth of Fair Value (and How to Take Advantage of It) by William Poundstone

Sorry it's been so long, guys.

Priceless is a well-researched history of behavioral economics. Poundstone goes out of his way tell the stories of Sarah Lichenstein, Paul Slovic, S. S. Stevens and the other researchers who punched holes in neoclassical theory—and the result is a book that is thoroughly engaging.

Poundstone argues that prices are largely arbitrary. Just as people are relatively poor judges of absolute temperatures and weights but can easily estimate changes, so too do customers have little sense what goods should be worth. Instead, they judge whether prices are acceptable or not from environmental cues. Poundstone repeatedly demonstrates the power of anchoring: a high set price can pull subsequent estimations of value upward. For instance, amateur and professional real estate agents both conclude a house is worth more when the asking price is higher. Similarly, an overpriced watch in a designer goods store may never sell but serves to justify high prices on other products. And juries award more in damages when lawyers put arbitrarily high prices on their clients’ suffering. (Poundstone opens with an account of the landmark Liebeck v. McDonald’s case, in which a jury awarded Stella Liebeck $2.9 million in damages for the third-degree burns she received when spilled a cup of coffee on herself.)

Poundstone extrapolates the psychology of pricing to discounts in retail stores, menu layouts, and business negotiations. Some tips:

• On a menu, center-justify items and list prices without dollar signs.
• If an item is on sale, list the new price along with the original. The allure of a bargain may induce customers to spend more than they otherwise would. Instead of raising prices outright, “lower the discount” (232).
• When negotiating a business deal with a man, examine his ring finger. If he is unmarried or has a ring finger close in length to his index finger, he is less likely to walk away from a deal.

In behavioral economics, the primary research tool is the classic ultimatum game. Poundstone describes several variations (competitions between genders or races; games played under the influence of oxytocin or alcohol) and their implications. Several experiments reveal biases subjects will not consciously admit to. Poundstone’s book is a powerful study of both pricing theory and modern society.

Free: The Future of a Radical Price by Chris Anderson

Free (Hyperion, 2009) continues the line of thought Chris Anderson developed in The Long Tail. As in his previous book, Anderson approaches digital markets from an economic perspective. While his language isn’t always crystal-clear (don’t read his book before bed), his reasoning is sound and informed.

In the digital era, technological advancement has driven the costs of the inputs of production—primarily bandwidth, processing power, and storage space—down to virtually zero. The challenges this presents are primarily psychological: we need to stop thinking in terms scarcity and start thinking in terms of abundance.

Like Clay Shirky does in Cognitive Surplus, Anderson analyzes nonmonetary economies (but with more statistical data). In the Internet era, the primary currencies are attention and reputation: since consumers have only limited time, producers must compete for it. Twenty-first century business models will focus not on simply delivering a service but adding value for customers (see also Daniel Pink’s A Whole New Mind).

This applies not only to media companies but to manufacturers as well, since even physical goods have some sort of branding or intellectual property associated with them. Anderson examines the Chinese fashion market—where piracy is rampant—to illustrate how designer knock-offs actually drive demand for premium goods. In case study after case study, Anderson proves that free products create markets where there were none.

In his last chapter (pages 251-254) and in various sidebars, Anderson lists over fifty businesses that make money by offering free services. Anderson used to offer a free copy of his book on his website, and any aspiring entrepreneur would do well to read through it. In sum, there are three main business models a company can follow:

1. Direct Cross-Subsidies: Higher-paying customers subsidize lower-paying ones. Think museum admissions—adults pay while children get in free. 
2. The Three-Party Market: A third party subsidizes the cost of offering customers a product at reduced rates. This is the way the media industry operates: advertisers pay the costs of producing content that anyone can access. 
3. Freemium: Some customers purchase a premium product while others try a basic version at no cost. This is the model most software—think QuickTime (bundled with OSX) versus QuickTime Pro ($29.99)—sells with.

Why do countries have different broadband penetration rates?

Broadband penetration is a term I'm using to refer to the proportion of a country's citizens who have access to high-speed broadband Internet services. For my economics research seminar, I'm analyzing the factors that affect broadband penetration at the national. Using a fixed-effect regression, I model broadband penetration against a variety of factors such as GDP and population density. I use data freely available from the World Bank.

This paper is only a rough draft, but I welcome comments and constructive criticism that will help me refine my research. If you know of a paper that would be helpful, please send it along.

Contents

• Introuduction
• Empirical Framework
• Data
• Results
• Conclusions
• Literature Review
• Acknowledgements
• Appendix

Introduction

Today’s markets are global, and both developed and developing countries are increasingly producing service-sector goods. Widespread access to high-speed Internet can be a competitive advantage in today’s knowledge economy (Choudrie and Lee 2004; OECD 2008).

At the same time, broadband infrastructure requires significant investment. Due to economies of scale, the market may be uncompetitive—dominated by a few large firms—and rural or low-income areas may be underserved (Gillett et al 2003; Choudrie and Lee 2004). Since broadband is excludable but largely nonrival—once the infrastructure has been installed in an area, one household’s use does not significantly diminish the service provided to other households—it might be useful to consider broadband as a public good. Governments may want to encourage broadband penetration in order to address equity concerns or modernize their countries.

Gillett et al (2003) suggest that to promote broadband penetration, a government can assume the role of 1) user, 2) rule-maker, 3) financier, and/or 4) infrastructure developer. In the first role, the government stimulates demand; in the latter three, it encourages supply.

In 1999 and 2000, South Korea experimented with several initiatives to encourage broadband penetration (Choudrie and Lee 2004). With programs such as “Cyber Korea 21” and “Ten Million People Internet Education,” the government promoted Internet literacy to stimulate demand. The government also deregulated the telecommunications industry, provided “US$77m of loans [to service providers] at preferential rates,” and prepayed for broadband service to public buildings. The government planned to commit an additional US$926m to extend broadband service to rural areas by 2005. Broadband adoption in South Korea was spurred by the prevalence of Internet cafés that introduced the population to high-speed Internet access and by a highly-competitive telecommunications sector that provided next-generation services at cutthroat rates. South Korea’s high population density also facilitated the spread of the new infrastructure.

The literature suggests that broadband penetration will be influenced by several demand- and supply-side factors.

Demand

• Population: Aggregate demand for broadband will be greater among larger populations. One also expects that demand will be greater from more youthful populations. 
• Wealth: Since broadband is a “premium” service, demand should be greater from wealthier countries. 
• Education: Gillett et al (2003) argue that “white collar workers . . . are more likely to use advanced communications services.” One expects that broadband penetration will be greater in countries that have more highly-educated populations and that trade primarily in communications and services. 

Supply

• Telecommunications sector: One expects that supply will be greater in countries with robust telecommunications industries. 
• Population density: Broadband penetration should be greater in densely-populated countries. 

Gillett et al have verified this framework at the level of local municipalities in the United States using data provided by the American Public Power Association (2003), but no study has yet examined broadband penetration rates at the international level.

Empirical Framework

To analyze broadband penetration from time-varying panel data, a linear fixed-effects regression model is used.

where

• Y = broadband penetration
• X = demand-side variables
• Z = supply-side variables

Broadband penetration is measured as the number of fixed broadband Internet subscribers per 100 citizens.

Demand-side variables include the total population as well as the percentage of the population between ages 15 and 64 and the percentage of the population over the age of 64. Since the total population varies widely among the sample data, it has been transformed logarithmically. The collinearity between these three variables is insignificant. One expects all to be positively correlated with broadband penetration.

The latter two variables are included in order to isolate which age group is driving the demand for broadband. One expects that youthful populations will have a greater demand for broadband.

GDP—transformed logarithmically—has been used to measure the wealth of a country. This variable should be positively correlated with broadband penetration. Education should also increase with income levels, and although data on adult and youth literacy rates was available, it would have presented collinearity problems and was not rich enough to be included in the regression. Hence, GDP will be used as a proxy for both the wealth and education levels of a country.

The “white-collar” demand of a country is measured by the logarithmic transformations of commercial service imports and exports (both in U.S. dollars). Countries that trade a high volume of commercial services will likely have a greater demand for high-speed Internet access. The demand of highly-educated citizens is also estimated by the number of researchers and technicians per 1 million citizens. Broadband penetration should be greater in countries that are engaged in more “knowledge work.”

The sole supply-side variable is mobile cellular subscriptions per 100 citizens. Since cellular subscription rates often increase as broadband subscription rates increase (Yang et al 2009), and since broadband providers often also provide cellular service (Yang et al 2009), this variable should indicate the robustness of a country’s telecommunications sector. However, especially in developing countries, high cellular subscription rates may also indicate a lack of fixed-line infrastructure. Even in developed countries (for example, Japan), cellular subscriptions could substitute for fixed-line broadband access and may dampen demand for broadband.

Data

The World Bank freely provides data on the preceding variables for a variety of countries. However, the data was more robust for some countries than others. The dataset excludes countries for which broadband penetration rates were not available for half of the sample period (years 2001 through 2009). Since even fixed effects regressions require variation in order to run, countries for which broadband penetration did not vary from 0 during the sample period were also excluded. Hence, as one might expect, countries that were excluded from the dataset were primarily small, developing nations for which data was not readily available. The final dataset still includes a mix both developing and developed countries. (See the Appendix for a full list. The dataset is also available from the researcher upon request.)

68 countries and 318 observations were included in the sample set.

Results

Figure 1

An F-value of 79.23 and an R2 of 0.74 indicate that this regression is highly significant and explains a large degree of the variation in international broadband penetration rates. Nearly all of the variables, with the exception of GDP and commercial service exports, are as significant.

The parameter total population carries a coefficient of 26.16 and is highly significant, indicating that total population is by far the largest determinant of broadband penetration. Surprisingly, the percentage of the population between ages 15 and 64 significantly decreases broadband penetration, while the percentage of population over the age of 64 increases it by half the amount but is insignificant. These results suggest that while total population drives the demand for broadband, the working age and retiree population of a country does not.

These results could arise from including a disproportionate number of developing countries in the dataset, since in developing countries the working age population may be more likely to be engaged in manufacturing or manual labor—occupations which do not demand high-speed broadband access—rather than knowledge work. Since the number of researchers and technicians in a country do significantly drive demand (albeit only slightly), this conclusion seems valid.

The wealth and education of a country, as measured by the logarithmic transformation of GDP, would decrease the demand for broadband were it significant. Income distribution rather than total wealth may be a more important driver of broadband demand, since broadband (as a premium communication service) is more likely to be demanded by the upper classes. This is supported by the results of the regression in Figure 2. With an F-value of 133.62 and an R2 of 0.83, this regression is actually more significant (but less telling) than the one in Figure 1. In the regression in Figure 2, GDP per capita increases broadband penetration only slightly but is highly significant.

After total population, the second-largest determinant of broadband penetration appears to be a country’s commercial service imports. While commercial service exports also positively influences broadband penetration, this parameter is insignificant. These results indicate that countries heavily trading in services will have greater broadband penetration rates. Only commercial service imports could drive broadband demand if wealthier countries are importing services from developing ones, e.g., if developed nations like the United States are outsourcing programming or accounting jobs to developing countries like China and India.

Mobile cellular subscriptions also influence broadband penetration, albeit only slightly. This suggests that a robust telecommunications sector is integral to widespread broadband penetration. Because mobile cellular subscriptions appear to increase broadband penetration, there is no significant trade-off between cellular subscriptions and broadband subscriptions. Instead, the two may be complements.

Figure 2

I plan to run a similar regression using only OECD countries.

Conclusions

At the international level, demand-side variables determine broadband penetration more than supply-side variables. The largest determinant of demand is total population, which is largely outside a government’s control. From a policy perspective, governments can best encourage broadband penetration by stimulating the telecommunications and service sectors of their economies. Service-sector industries drive the demand for broadband and provide a healthy market for premium, twenty-first century telecommunications services.

Literature Review

Sharon E. Gillett, William H. Lehr, and Carlos Osorio, “Local Government Broadband Initiatives,” 2003 [pdf].

Jyoti Choudrie and Heejin Lee, “Broadband development in South Korea: institutional and cultural factors,” 2004.

Jyoti Choudrie and Anastasia Papazafeiropoulou, “Lessons learnt from the broadband diffusion in South Korea and the UK: Implications for future government intervention in technology diffusion,” 2006 [pdf].

Organisation for Economic Co-operation and Development, “The Future of the Internet Economy,” 2008 [pdf].

Heedong Yang, Youngjin Yoo, Kalle Lyytinen, and Joon-Ho Ahn, “Diffusion of Broadband Mobile Services in Korea: The Role of Standards and Its Impact on Diffusion of Complex Technology System,” 2009 [download pdf].

Acknowledgements

My thanks to Professor Ron Cheung for generously guiding my research.

Appendix

The full list of countries in the dataset is as follows: Afghanistan, Albania, Algeria, Andorra, Angola, Antigua and Barbuda, Argentina, Armenia, Aruba, Australia, Austria, the Bahamas, Bahrain, Barbados, Belarus, Belgium, Belize, Benin, Bermuda, Bhutan, Bolivia, Bosnia and Herzegovina, Botswana, Brazil, Brunei Darussalam, Bulgaria, Burkina Faso, Burundi, Cambodia, Cameroon, Canada, Cape Verde, Chad, Chile, China, Colombia, Congo, (Democratic Republic), Costa Rica, Cote d'Ivoire, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Djibouti, Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Estonia, Ethiopia, Faeroe Islands, Fiji, Finland, France, French Polynesia, Gabon, Gambia, Georgia, Germany, Ghana, Greece, Greenland, Grenada, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hong Kong SAR, Hungary, Iceland, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Jamaica, Japan, Jordan, Kazakhstan, Kenya, Korea (Republic of), Kuwait, Kyrgyz Republic, Lao PDR, Latvia, Lebanon, Lesotho, Libya, Liechtenstein, Lithuania, Luxembourg, China, Macedonia, Madagascar, Malawi, Malaysia, Maldives, Mali, Malta, Mauritania, Mauritius, Mexico, Micronesia, Moldova, Mongolia, Montenegro, Morocco, Mozambique, Myanmar, Namibia, Nepal, Netherlands, New Caledonia, New Zealand, Nicaragua, Niger, Nigeria, Northern Mariana Islands, Norway, Oman, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Puerto Rico, Qatar, Romania, Russia, Rwanda, Samoa, San Marino, Sao Tome and Principe, Saudi Arabia, Senegal, Serbia, Seychelles, Sierra Leone, Singapore, Slovak Republic, Slovenia, Solomon Islands, Somalia, South Africa, Spain, Sri Lanka, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Sudan, Suriname, Swaziland, Sweden, Switzerland, Syrian Arab Republic, Tajikistan, Tanzania, Thailand, Togo, Tonga, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vanuatu, Venezuela, Vietnam, Virgin Islands (U.S.), West Bank and Gaza, Yemen, Zambia, Zimbabwe.