The Credit Writedowns Pro Post Framework

While I was on my Easter break, I came up with what I think is a good format to both reward paying subscribers of Credit Writedowns Pro with good content and post outside the paywall at the same time. I have been toying with various ways to start this post and haven’t really fixed on the right way to approach it. So I will just write and see what comes out on the other side.

I got into blogging as a hobby 5 years ago. It was a way to refine my thinking about economics, finance and political topics that interested me personally. Somehow, my blog caught on as the financial crisis began to overwhelm the global economy and I stuck to the blogging. Blogging is not a money-making proposition though. Frankly, it is next to impossible to write quality content on a dedicated basis without having some sort of paid model because advertising just doesn’t cover your costs and time. And that’s why I have a paid model. I remember when I switched to the paid model 15 months ago. A reader berated me by e-mail, telling me that while she was an avid reader in the past, she was appalled that I was doing this and that she would never pay one penny for any content I produced. I was appalled that she was appalled! I mean, after all, bloggers have to eat too.

See, that’s the thing about the Internet. It is the ultimate deflationary force in our society. Technology is supposed to be a deflationary force, but the Internet is even more so because of the price discovery mechanism it makes possible. Whether you are talking about buying dietary supplements, researching GPS devices, reading the daily news or getting financial advice, the Internet is a price discovery machine, the great equalizer.

People are accustomed to getting things as cheaply as possible and getting their content for free. And they are disgusted when someone tries to put up barriers to that. I don’t know what to make of it but let me give you an example of the kind of thinking I think is behind this. A few years ago I was talking to an American friend of mine who was very pro-America. We got to talking about the hollowing out of America’s manufacturing base, outsourcing and things like that. So I asked her how much more she would be willing to pay for products that were made in America Her answer: nothing.

I was stunned that she was complaining about the hollowing out of America’s middle class on the one hand and that she was unwilling to make any sacrifices to stop that from occurring. As I was recounting this event to a friend on Saturday, the friend said, “I would be willing to pay more, but I’d have to make more first.” I relate this story to what is going on with the Internet and journalism. People get the idea that they can get content for free and they come to see this as a right, not a privilege. They expect that it will remain so without any thought regarding the economics of the journalists behind that free content. And I think that’s where my reader’s anger came from.

In any event, I was reading Frank Rich on the State of Journalism just 15 minutes ago and it prompted me to start this post. Rich details the destruction of old media that the Internet has wrought but is unable to provide any inkling that old media can survive this onslaught. He talks of unemployed journalists, bankrupt newspapers and an industry in crisis. It is frightening reading for me because I keep thinking about the quality of information when I hear such accounts. Yes, the content is free but what’s the quality like? Rich had an interesting passage on this though:

What is less talked about in this difficult transition—since no one wants to offend the customers—are the adjustments that news consumers have to make if their favorite titles are to survive. Now that the “information wants to be free” hippie stage of the Internet is long over, the audience will have to pay for more of the media it wants—whatever form it comes in. It’s not an implausible idea. Free television was for decades considered an American birthright, and the notion of “pay TV” a laughable absurdity. Then came cable. Most Americans now pay for 24/7 American and foreign news networks, whether they realize it or not, in their cable and satellite packages. While digital subscriptions to the Times, the Journal, and the rest do not remotely generate the revenue needed to support their operations, it’s still too young a business to dismiss as hopeless.

Rich is looking at this through the old media prism – in terms of how old media can survive in the new digital age. But another way to look at this is in terms of what the cable business model says about what kinds of business models are likely to win out for new media. I think the cable model is perfectly transferable to the Internet. This is a model in which the content aggregator is the gatekeeper. You only get the content through her. You pay her and she pays the content providers. Here’s an example. Say you could get the Times of London, the New York Times, ESPN, The Washington Post, Discover, National Geographic, Time Magazine, and 50 other digital subscriptions for the low monthly price of $75, would you subscribe? What if the price was $50 and you could pick and choose different titles for the package? That’s the cable model, isn’t it? I think it can work on the Internet and I also think that’s probably the way forward because people will pay en masse only if there is enough aggregated content that they can’t get through other means elsewhere. Sure, you can get dedicated readers/viewers to pay for your content. But can you get the casual reader to pay too? Not unless your content is aggregated. And that’s a case in which, you could ostensibly turn a casual reader/viewer into a dedicated one. The cable model is the future of the Internet.

That’s a strange lead-in to my piece here on how I am going to style my content. But I just wanted to let you know where my head was at in thinking about where Credit Writedowns is headed. Here’s what I intend to do. Credit Writedowns will continue to carry some free content from other great writers like Marc Chandler, Marshall Auerback and Michael Pettis. However, I will write on a freemium basis. By that I mean, I will write long-form articles in which the main gist of the article is freely available to everyone. But for more in-depth analysis you will need to be a subscriber. That way, all of my work is outside of the paywall but subscribers are the only ones who get the full analysis. I have already started implementing this to a degree but there’s a bit more that I want to add now.

About two years ago, I wrote an article I called “the political economy of the European sovereign debt crisis“. I liked the way this article framed the crisis and I want to use it as a template for long form posts. The way I am looking at the economic crisis is as one of hard and soft macro constraints that interact iteratively with political constraints and the resulting political decisions. So, if you look at the political economy post, you can see that the basic framework is still operative but the political considerations have developed since then to move us to a new phase of crisis where new political decisions and outcomes are likely.

So what I want to do is construct a relatively consistent macro framework based on the economics – think of considerations like currencies, trade, currency sovereignty, financial sector balances, exchange rate, interest rates, etc – and then come up with a logical set of likely political outcomes based on my read of the political constraints – think government deficits, taxes, privatization, social unrest, etc. And the point would be to set up a reasonably robust framework that would lead to an iterative outcome based on political decisions that do get executed and the resulting changes in the political situation. I would like to think of this post framework as “Iterative political economy analysis” and my goal is to predict at any given time what the likely political decisions will be given the economic and political constraints and what the economic and market impact of those decisions will be. This is a naturally iterative process and as the decisions come in, we can re-examine the situation, tweak the framework slightly if need be and predict again.

My track record on these things has been good so far but I want to formalize the way I go about this because that will allow me to write posts the same way every time and post the overall highlight outside of the paywall while still providing the value-added analysis for paying subscribers who make my site’s continued existence possible. I will start this process now and the first post will be to update my thinking on the political economy of the European sovereign debt crisis. That’s coming next.

Best,

Edward