Friday, March 07, 2008

The upside of expensive

Same behavioral economist. Different study.

ABC News:

The more expensive your pain medications are, the better the relief you get from taking them  even if they’re fake.

That’s according to a study published this week in the Journal of the American Medical Association, which suggests that sugar pills labeled as expensive drugs relieve pain better than sugar pills labeled as discounted drugs.

Researchers often compare real drugs to sugar pills in medical studies to account for the placebo effect, in which the illusion of taking medicine alone can cause symptoms to disappear.

But Dan Ariely, a behavioral economist at Duke University in Durham, N.C., and a team of collaborators from the Massachusetts Institute of Technology compared the placebo effect of the marketing that people are asked to swallow along with their medicine.

In the study, 82 volunteers were subjected to a series of electric shocks  a standard research protocol for measuring pain thresholds. They were then given a placebo pill alongside a fake drug company brochure for the fictitious drug “Veladone-Rx,”  ostensibly a new fast-acting painkiller made in China.

The only catch was that half of the test subjects received brochures showing that the drug had been marked down from the original price of $2.50 a pill to 10 cents a pill. These modified brochures also included circled fine print which suggested that the pills were manufactured in China.

After participants went through the shocks again, 85 percent in the full-price group reported pain relief from their sugar pill, while only 61 percent in the discount group reported pain relief.

General Tso in China: known for war not chicken

Oh the things we learn on Colbert.... In China there is no General Tso’s Chicken!

Jennifer 8. Lee tells the story of how she prepared for the interview here.

Who remembers CB? Will we remember Facebook?

Robert X. Cringely:

Do you remember Citizens’ Band radio? Though established by the Federal Communications Commission in the 1950s, CB radio didn’t become an overnight sensation until the 1970s when Moore’s Law brought down the cost of radios to where it was economically viable to buy them solely for the purpose of breaking speed-limit laws. President Nixon, who liked to wear a blue suit and keep a cozy fire burning in his White House hearth year round no matter what the outside temperature or impact on his (our) air conditioning bill, had decided we all should drive 55 miles per hour or less to save fuel following the energy crisis of 1973. So, being true Americans, which is to say cranky and prone to complain, we en masse set out to break this new law using as our primary tool CB radio technology to warn us where Smokey was or had recently been or whether there was an eye in the sky. Criminals bound by a criminal code, we flaunted CB license restrictions (you were supposed to use your Federally assigned call sign from that license you were also supposed to have but never got) and operated under handles like “Thunderchicken” and “Boot-licker.” I was “asciiboy.” CB radio sales went from zero to tens of millions of units in under two years—the highest rate of technology adoption ever seen in the U.S. before or since. Soon there was CB lore and a CB culture. CB was everywhere. When not breaking the law with it we were using CB as a huge social network to find the cheapest gas, the best hamburger or even a date for the prom. And then, quick as it started, CB was gone, worn to the bone from overuse and abuse and left to the truckers as it should have been all along. What killed CB radio was that moment when its annoyance factor exceeded its utility—a utility already driven down by low traffic conviction rates and the eventual understanding that if everyone were a speeder then most cops wouldn’t stop anyone.

I am beginning to think that Internet social networking is another CB radio, destined to crash and burn.

Social networking has a lot of problems as both a business and a cultural phenomenon. To start with there is generally no true business model. This can vary a bit from application to application but most are vying simply for eyeballs and hoping for Google ads to pay the bills until Time Warner or News Corp make them an acquisition offer they can’t refuse. That might be okay for Facebook or MySpace and maybe Linked-In, but there are more than 350 general-purpose social networks out there and I will guarantee you that no more than 5 percent of those will be still operating two years from today. [READ ON]

Troubles at NPR?

All Things Considered:

In an announcement that surprised staff, NPR’s board of directors said Thursday that CEO Ken Stern is leaving after 10 years at the network. [...]

Many staffers in NPR’s Washington headquarters were stunned - and confused - by the announcement.

One source familiar with the situation said Stern was leaving because of board criticism over his management style. Another source said the board concluded Stern was not the right person to lead a creative media company forward.

Stern arrived in 1999 as the network’s chief operating officer. Since then, NPR’s weekly audience doubled from 13 million to 26 million as it launched new programs and became a leader in podcasting.

During his tenure, Stern had pushed the radio network to expand into digital news. In an increasingly competitive media landscape, he often told staff that NPR had to find new ways to reach its audience or it could become irrelevant.

A third source said - though - that Stern had never articulated how NPR’s hundreds of member stations would fit into that multi-media future.

Stern declined to speak on tape.

Uh, to the average Joe, that sounds like a pretty successful tenure.

WaPo:

People at NPR said, however, that Stern and the organization’s 17-member board had clashed repeatedly over several of Stern’s initiatives, including NPR’s expansion into new media. Those initiatives often riled station managers, who saw them coming at the expense of serving the hundreds of public stations that pay dues annually to NPR. [...]

Stern is the latest in a recent string of high-level departures at NPR. Bill Marimow, who had been NPR’s vice president for news, left the organization in late 2006 to become editor of the Philadelphia Inquirer after serving only eight months in the top editorial job. Jay Kernis, who developed several NPR shows over two long tenures, left in January to become managing editor of CNN. And Barbara Rehm, NPR’s managing editor for news, announced her resignation in July.

It’s true. Why put up with, why pay for, those legacy stations when we can go straight to the podcast. Capitalists talk the talk but are not so big on walking Joseph Schumpeter’s creative destruction walk (even if they are state-sanctioned Kroc-Granted non-profits).

I will be eager to read more about this story.

The downside of free

For all my yacking about the economy of free, Im very aware that there is a downside.

I am watching the work of Dan Ariely. He is a behavioral economist on the faculty at MIT on leave and teaching at Duke. In his book, Predictably Irrational, he asks the question, do we get what we pay for?

Ariely was recently interviewed by Robert Siegel on All Things Considered. There he described an experiment with kids and chocolate in which he gave them all some chocolate, then made them two great offers, only one of which offered the inducement of free:

Prof. ARIELY: But in this case, the kids went largely for the free one. Basically giving up a better deal, a fantastic deal, just because of the allure of free. And, by the way, this is not just with kids. We replicated experiments with Amazon gift certificates and products and chocolates with MIT students and adults. And everybody has the same issue. That free is such a hot button. That many times it tempts us so much that we end up paying a high price to give up something better just for the allure of free. [...]

SIEGEL: Well, there’s just one last question before I let you go which is, if indeed we are as irrational as you would have us, does behavioral economics pretty well make a mess of regular economics and say, that can’t be describing human behavior since it’s not the way we behave?

Prof. ARIELY: That’s right. So behavioral economics flies in the face of standard economics in two ways. One is we say, you’re model of human being is wrong. And the second and more important thing is saying, as a consequence of this, you’re prescription for policy is also wrong. And that’s actually the most important part of this. If you understand the places where people are irrational and make mistakes, you need to think differently about the policies for health care, for saving, for driving, for smoking, for anything you want that is different from the one that standard economics prescribes.

Emphasis mine. I think if there’s any one thing we have to learn in this century, it’s that!

Moving beyond Library 2.0

Yesterday I proposed a presentation for a summer library conference titled Moving Beyond Library 2.0. Here’s what I submitted:

My title, “It’s a wwwwww1234 World: Technology and the Web from 1984 to 2020” is a play on the classic 1963 comedy film ”It’s a Mad, Mad, Mad, Mad World” that opens with a spectacular car crash in the California desert, then zooms through a comedic treasure hunt and ends with a suitcase filled with cash dumped from a swinging fire ladder on an excited crowd of passersby below. 

I plan to use a clip from the film as a fun kick-off and comedic intro to the presentation. The film also serves as a metaphor and commentary on our relationship to technology—the pace of change is quick; the influence of money and the market has meant huge economic swings from boom to bust then back again; and all of it has wrought wonderful social changes that were wholly unimaginable only a short time ago.

Or were they?

I pick 1984 as the starting point because it was the title of George Orwell’s iconic novel in which obsolete and wasteful technology is deliberately used in order to perpetuate useless fighting. 1984 is also, of course, the year the Macintosh was introduced. And 1984 is the year the term “Cyberspace” was coined popularized [yipes! Got that wrong...] in the science fiction novel Neuromancer. A line from that novel—“The future is here. It’s just not evenly distributed yet.”—has also been taken up as a mantra for the web 2.0 crowd. I end with the year 2020 because a recent report, Semantic Wave 2008: Industry Roadmap to Web 3.0 and Multibillion Dollar Market Opportunities, ends with that year.

The report actually takes us all the way through to Web 4.0, so I use it to walk us through Web 1.0, 2.0, 3.0 and 4, and also to look at Cloud Computing, Utility Computing and wrap up with a look at Chris Anderson’s forthcoming book [Free] (outlined in the much discussed March Cover Story of Wired Magazine), Free! Why $0.00 is the Future of Business, in which he argues that the Google model—the gift economy, low-cost digital distribution made possible by abundant bandwidth—will revolutionize business.

My conclusion is that in reality what we nearly always get is more of the same, just a little bit different ("new paradigms don’t eclipse old, they just spawn new business models").

I did a variation on that theme for faculty a couple weeks ago and it was a hit but I rushed through it in 11 minutes (it was supposed to be 7) so I decided I should give it its due and extend it to a full presentation.

I should say that I suffer from terrible stage fright. My presentations are often well received, despite my inability to relax and enjoy them. We’ll see if the proposal is accepted.