Archive for October, 2009

Money for nothing

October 31, 2009

buy it

Some of my photographs have been on sale at Getty Images for a few months now. The other day I received my first royalty cheque. Like Facebook, I finally have a revenue stream, if not a profit margin.

I’m not about to give up the day jobs. Putting most of my pictures online for free, then selling a few of them isn’t really a business model. As Will suggests here and here, it’s hard to see how you can sustain yourself purely through creative / artistic activity. In the case of photography, cheap digital hardware has democratised picture taking, but also flooded the market with images. Sites like Flickr function as a kind of Long Tail art gallery – nothing in the vaults, everything on the walls. And IP is all over the place.

I use a Creative Commons license for most of my pictures, largely because I want to encourage people to use them (with credit) rather than just steal them. So far it’s worked out quite well. Various shots have appeared on sites like Londonist, and on random photo blogs, bringing people back to my Flickr pages. That bumps up my stats and my place in the Flickr universe, which makes me more visible when people like Getty come calling.

As I said, I couldn’t live off this. But most creative people don’t survive purely on their creative work. For example, as part of this report for NESTA, I interviewed various fashion designers, all of whom had a portfolio of fashion-related activity – modelling, consulting, organising shows, lecturing, even some sewing – as well as designing their own collections. The pro-am economy argument has always felt a bit specious: looking back at the history of music, for example, ‘amateur practitioners’ have always been the norm. And the chance to move from ‘am’ to ‘pro’ is going to stay vanishingly small.

For bigger companies the challenges are different. As Matt Mason suggests in The Pirate’s Dilemma, the toughest issue is IP. He suggests companies find ways to embrace ‘pirates’ – by which he means both actual copyright breakers, and people doing radical innovation in the same marketplace. Getty has done this quite neatly. A company selling pictures at a premium is faced with a universe of free or cheaper online content, some of it done by professional photographers. Rather than trying to close down the internet, it imports some of the free content, exploiting its brand power and creating a (fairly) exclusive members’ club [group link]. Those 60,000-odd images then get sold through one of Getty’s existing royalty regimes, giving them a fat 80% of the selling price. Trebles all round!

High speed train-spotting

October 14, 2009

(c) Frank Baron / guardian.co.uk

California is the same size as the UK, but its public transport network is a lot worse. So perhaps it’s not surprising that High Speed Rail is a big deal here. What’s more surprising is how similar the debates seem to be turning out.

The California proposals seem further ahead than High Speed Two. In both cases there’s strong political support. Ex-Hummer driver Arnie is less evangelical than Lord Adonis, but he has put up serious money to push things forward. The California High Speed Rail Authority has a definite route, a start date – 2012 – and a slick website with impressive 3d fly-throughs. Meanwhile, the austere HS2 team is still ‘weighing high speed rail’s benefits against costs’, and only ‘where existing capacity is likely to be most constrained’. Set against Golden State optimism, it’s almost a parody of British bureaucratic restraint.

But elsewhere, there are clear parallels. First, how to pay for the thing? Both Labour and Conservatives will make high speed rail a manifesto pledge. But with the UK down £26bn a year, £34bn-worth of bullet trains seems a far-off prospect. California’s trainline is projected to cost a similar $45bn (£29bn). So far the State has committed about $10bn via a bond issue. Sacramento is now bidding for $4.5bn of Federal stimulus money: with matching local funds, that takes California towards the halfway mark. But it’s still nowhere near enough – something no-one seems that keen to talk about.

Second, the real costs of both projects will be much larger. None of these figures appear to factor in optimism bias, the tendency to under-estimate the costs of major projects, which suggests the true numbers could be two thirds as higher again.

Third, who’s on the line? California’s planners have made everyone happy by including almost every major settlement on the route, from Sacramento down to San Diego. But some stops could get chopped in future budget cuts – in which case, expect similar reactions like those in Newcastle recently.

Finally, who gains? The California plans emphasise the environmental benefits of HSR – reducing pollution and congestion. Economic benefits are almost an afterthought – apart from 400,000-odd construction opportunities, cutting congestion will improve productivity, ‘creating and sustaining high skilled jobs’. But it’s unclear how this will happen, or where these jobs will go.

Urban economics can help here. We now have robust techniques for modelling the full economic impacts of transport investments. These suggest that direct benefits from time-saving and reduced congestion are actually fairly small, and may not offset build costs. But new infrastructure also brings more people into cities, increasing the effective density of urban labour markets. This pushes up labour productivity, which in turn raises wages and helps employment growth.

As Henry points out, the environmental benefits of high speed rail are not that clear-cut. A modal shift from cars or planes could cut CO2 emissions and congestion, but not if spare landing slots or road capacity are then used for something else.

Unfortunately for both countries, the economic outcomes aren’t clear-cut either. Agglomeration modeling suggests that the major benefits accrue to large urban centres. Cutting travel times by 10% across the UK would raise London’s productivity more than in most Northern cities. So in California, workers in the big urban cores – the Bay Area, San Diego and LA – will probably have most to gain.

In the UK, that calculus suggests some Northern cities might actually be better off investing in local or city-regional links, rather than pushing for high speed rail. Similarly, better connecting Liverpool, Manchester and Leeds might do more for local people than faster links down South. And in California, less glamorous but more useful local infrastructure projects – like extending the BART light rail system from San Francisco to San Jose – might do the job for less.

Devolution on crack

October 4, 2009

(c) 2009 travellin' john photography

Ten days in at Berkeley and I’ve already had my first walkout: picket lines went up last week to protest against University budget reductions.  Spending cuts have already arrived here. Most buses now run only once an hour; bins are collected once a month. And Governor Schwarzenegger has announced a giant fire sale of state assets (an idea suggested to him via his Twitter feed).

For urban obsessives like me, the California fiscal crisis is fascinating (and depressing) stuff.  The politics of cuts is highly localised. American states and cities have a range of tax, spend and money-raising powers (in 2005-6 California and its cities raised $200bn in bonds [pdf]; in 1916 a bond issue financed the Golden Gate Bridge). Washington’s willingness to bail out localities is also limited: since 1937, at least 543 American cities have gone bankrupt.

So there’s been an intense debate here about the mix of tax rises, borrowing and spending needed to balance the books. But the state’s unique system of direct democracy make it much more fraught.

Since 1911 California has used three types of referendum to decide major issues, or ‘Propositions’. The State Legislature in Sacramento can pass proposals, which citizens then vote on. Citizens can propose new laws; if they can raise signatures for 5% of registered voters, the proposal goes to a referendum. Voters can also recall elected officials via a petition of 12% of voters (this happened to Gray Davis in 2003, bringing Schwarzenegger to power).

The Economist calls these ballot initiatives ‘the crack cocaine of democracy’. As my Berkeley colleague Malo Hutson told me earlier, it’s an apt comparison. If Propositions with spending implications pass, Sacramento has to find the money. Conversely, it’s tough to pass anything perceived as raising taxes (only about a quarter of bond issue propositions succeed). Worst of all, while most Propositions need a simple majority to pass, a 2/3 majority is required for any tax increases or other revenue-raising measures. This is the notorious Proposition 13, itself passed by referendum in 1978.

The results are dire. California’s main revenue streams are choked off, with a heavy reliance on volatile local income and sales taxes. Long term planning is very difficult, with only 25% of the budget under legislators’ direct control. But repealing the measure is seen as political suicide: after one kit-flying exercise, Arnie famously told supporter Warren Buffett to do 500 sit-ups if he mentioned it again.

This also means some very peculiar tax laws survive – for instance, local property taxes are based on initial purchase price, not the current value. (Malo explained that when his girlfriend bought a 50% share of a house, the two halves of the property were taxed at different rates.) Since land value is not properly captured, the result is a massive transfer of wealth from young to old, and huge windfall gains to property owners.

Some policy innovation arises from all of this – it turns out Tax Increment Financing was invented in California in the 1950s. But right now, extreme devolution is making it almost impossible to solve the State’s budget crisis. Voters have rejected everything proposed by Sacramento, forcing the State into emergency service cuts.

Californians seem confused about how to fix things. According to a 2008 survey, 64% favour some reforms to the system, and 78% think ballots are often too complex to understand. But 60% believe they make better public policy decisions than elected officials.

There are some resonances here for British debates about localism and public spending cuts. As Dermot points out, Labour and the Tories are still playing chicken on spending reductions. Tony Travers recently suggested that Whitehall should ‘delegate the axe’, avoiding the blame for cuts by giving local authorities the power to make their own. But centralism is so engrained in the UK that in the short term, Ministers would still face the kind of protests we’ve seen in Berkeley.

As Tim Williams argues, ‘casting off the Whitehall shackles’ should encourage British cities to develop more innovative ideas. But unlike America, I don’t think Brits would be up for city bankruptcy. There are cultural, as well as practical limits to localist self-reliance.

The California crisis also highlights the importance and limits of strong leadership. The Governor really has to direct the public conversation, but even popular leaders like Arnie have found it hard to push their favoured measures through. Still, if The Governator might be running for President in 2012, Californian  democracy is clearly a gateway drug to something much harder.

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