Economics for dummies

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Economics has never been my strong point. I still don't understand a lot of the jargon and concepts.

But, if you watch CNBC, you'll quickly see that an understanding of economics isn't really necessary. As with political programming, it's really all about the screaming.

With sound effects, yet, if you're Jim Cramer. (Actually, Cramer seems to have sobered up a bit; he still does the “booyah” routine, but the carnival sound-effects board with mooing and yelling and oinking seems to have gone by the wayside. Can it be? Can our boy Jim have grown up, a little?

Nah. I think he just had a talking-to by some folks at the network.)

CNBC features stentorian ranters like Larry Kudlow, for whom capitalism is sacrosanct, and who can't say President Obama's name without a sneer. They have Joe Kernan of “Squawk Box,” sort of a minor-league Chris Matthews, who likes to hoot and mock and talk over other people. Most chillingly of all, they have Rick Santelli, who reports from the floor of the Chicago Board of Trade, and who snorts and spins and shrieks and waves his hands in the air. In case you're not familiar with his work, Santelli credits himself (and is credited by others) with helping to found the Tea Party, with a famous / infamous on-air rant. Rick continues to fly into rages and make speeches on the air, hoping for another through-the-roof YouTube success; he did one the other day, in which he compared himself to the Founding Fathers standing up to King George. (Honestly, you can't make this stuff up.)

(To be fair, the whole hyperactively angry thing probably made Rick Santelli very successful in business; trading is notoriously competitive, and I'm sure it's an advantage to be bouncier and crazier than the other guy. On the air, however, these things don't make you a journalist; they makes you a clown.  They certainly don't make you a peer of the Founding Fathers.)

CNBC also has the pretty ones: Carl Quintanilla, Maria Bartiromo. These are mostly memorable for their fresh complexions. They seldom have anything deep to say. They ask questions that seem thoughtful and probing, but I wonder sometimes who writes these questions.

But – and here's the thing – most of these “journalists,” the pretty ones and the howlers and the sneerers, make the most howlingly ridiculous statements on a daily basis.

For example: stupid generalizations and truisms. “Markets always fluctuate.” Hell, I barely passed Econ 101, and I could have told you that.

Also: I know the difference between macroeconomics and microeconomics. Macro is the economy as a whole; micro is economics as it applies to a family, or to a business. They are vastly different.

Then why do these CNBC people treat them as the same thing?

Debt, for example. For a family, and for a business, it 's a problem. For a sovereign nation, less so. Countries can print money. I certainly can't. Countries can manipulate interest rates. Can you do that? I can't.

But the Kudlows and Kernans speak as if the rules that govern the national economy are the same that govern you and me.

So: are they experts, or idiots, or wannabe demagogues?

I don't know. It's like watching Spongebob. It's very unreal.

At least Spongebob is cute and well-meaning.

Because, I tell you frankly, these guys aren't.

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Nothing succeeds like success

 

I've always thought that, although I know almost nothing about sports, I could be a sports announcer. They mostly just spout arcane statistics, punctuated with truisms like “The team with the most points is the winner at the end of the day” and “Even a good team can play a bad game.”

Same for business commentators. They have all their own arcana – quadruple-witching days, P/E ratios, derivatives – but they always end with something like “At the end of the day, the company that makes the most money is the best investment.” I swear. If you don't believe me, tune into CNBC almost any time of day.

There was an odd little piece in the Times today about success and failure on the Internet – why Netflix and Amazon have succeeded, and Blockbuster and Barnes & Noble have failed. Turns out that this particular commentator wrote a little piece in 1997 saying that, now that Barnes & Noble was going to move onto the Internet, Amazon was doomed. We know how that story came out, right? He was a good sport about it, though, along the lines I described above - “You never know,” “Sometimes there are hidden variables,” yak yak yak.

But he mostly talks about Netflix and Blockbuster. Remember when Blockbuster was going to move into the mail-order DVD business and take all of Netflix's business away? Blockbuster was slightly cheaper, as I recall, and you could rent and return DVDs at the store locations as well as through the mail. All in all, it looked like Blockbuster had the business all sewed up.

But they failed. They're now selling for seven cents a share, by the way (I just checked).

Mister Business Analyst has all kinds of Monday-morning quarterback theories about this. (These guys are always great about explaining why things happened the way they did. Not so great at predictions, though.) Netflix had secret bar-code reading machines that were more efficient. They had a better business plan. They focused on the home-delivery business more intensively, without worrying about building brick-and-mortar stores. They made less management mistakes.

Perhaps.

Let's try looking at our own anecdotal evidence – what we do as individuals, to see if that gives us clues about general behavior.

We have been Netflix subscribers for at least seven or eight years. (We gave it up for a year or so – we found we weren't keeping up with the three-at-a-time delivery – and resubscribed with a slightly cheaper one-at-a-time plan, with which we are still very happy.)

I remember when Blockbuster came out with their mail-order plans. The ads were all over TV. “No late fees ever!” Slightly lower price than Netflix, as I said. And we had a Blockbuster store about two blocks away.

So why didn't we switch?

• One: brand loyalty. Netflix had been very reliable and easy to use: in the whole time we've used them, we've gotten maybe two or three bad disks and one wrong movie (it was Police Academy 5, and I was so bemused that I watched it anyway).

• Two: being able to rent/return from the Blockbuster store was not an appealing prospect. Video stores were fun for about ten minutes when they were new in the 1990s. After a while, I found that it was more like a death march around the store, desperately trying to find something good, being followed by the blank stare of the teenager behind the counter. Much easier, much more pleasant, to set up your queue on line.

• Three: corporate snottiness. When I told Partner what I was writing about this evening, he said very angrily, “You can say that I still have a bad taste in my mouth about all those late fees I paid over the years.” Blockbuster actually thought that people would be grateful for their discontinuation of their nasty little late fees. Instead, people thumbed their nose at the company and said, “We'll stay with Netflix, thanks.”

For a while, I saw the yellow-and-blue Blockbuster envelopes in the mailbin at work, along with the red Netflix envelopes. I wondered if Blockbuster would actually take over.

After a while, the yellow-and-blue envelopes disappeared.

At the end of the day, the more successful company succeeds.

See? I could be a business commentator too. Move over, Maria Bartiromo.