As I said in the last post, I realized fifteen years ago that Internet TV will replace cable as the primary delivery mode. It was a radical claim then, but verging on obvious today. However, I forgot to mention that its demise will be very rapid. In fact, it could go into a dearth spiral at bay time.
The reason is the high fixed costs of cable. It works like this. Suppose a cable distributor has a service area of 200,000 homes of which 160,000 are cable customers. It charges $45 per month for a total monthly revenue of $7,200,000. This is comprised of $20 per month of variable costs, $1,000,000 of profit and $3,000,000 of fixed costs.
Now suppose that the cable distributor loses 20% of its customers. Now, the $4,000,000 must be defrayed over 128,000 and the price must increased to $51.25 per month. This increase in price causes another 20% to abandon cable and the price must be increased to $61.67. This causes another 20% to leave which causes prices to increase again to$82.50. This results in a death spiral of fewer subscribers and higher prices.
The distributors will realize that as people start relying on Internet TV, their basic 7 MBS Internet service will not stream multiple HD videos simultaneously and consequently they will upgrade to 25+ MBS service. This is a net plus for them, so they won't fight the death spiral.
The losers will be the Networks who try to do Internet TV like cable TV. The winners will be websites who can deliver a homogeneous market that will have a high density of visitors interested in a program. Polymathica will be such a market.
The main message here is that Cable will die fast and will probably do so soon. The corollary is that, with smaller audiences and crowd funding, it will provide many opportunities, especially in new markets like Polymathica.
Saturday, December 20, 2014
Friday, November 28, 2014
Internet TV is Still Only Half Here
In 1999 I wrote an article explaining why Internet delivered TV would kill Cable and what the Industry would look like after the transition. With Internet services, such as Netflix, the online presence of most networks, the episode and season purchase option through Amazon and others and now the subscription offering of CBS and HBO, there is little doubt that I was correct.
However, the transition is no more than half over. Networks, for the most part, are still broadcast era artifacts that have simply replaced local cable distributors for the old local affiliate broadcasters. Even the new networks, such as U.S.A., Fx, Syfy, etc., though never broadcast networks, still reflect that structure.
We need to take a step back and see that television has two relationships with its audience that are really quite different. The first is the premium relationship that actually exists between the producer and the viewer. For example, The Good Wife is really a relationship between Robert King, Ridley Scott, et alia and the viewers. The second is the rerun library service, such as Netflix. In both cases, the cable distributor is of no use and the Network now provides no more than marginal value added.
The first run producer has two basic needs. First, save for those who are very established, funding for a new show is needed. Networks no longer routinely provide funds directly. Rather, funds are acquired to produce a pilot. That pilot is then shopped to networks. A network may purchase 13 or more episodes and that contract is used to acquire the remaining funds required to produce the show. Ultimately, what the Network brings to the table is cheap and nearly universal access to viewers but, today, little more.
To put it simply, if you are a fan of Elementary, your allegiance is to the producers of the show, not CBS. If CBS cancelled it and it started being distributed elsewhere you would have no thoughts of loyalty to CBS You would go to wherever Elementary was being offered. This is one of the strategic problems that networks have - almost zero brand value.
One of the problems with the network business model is that the budget available to the producers is determined by the number of viewers that the network can attract multiplied by the amount that advertisers are willing to pay in order to talk to a viewer. The perceived value of the show by the viewer is irrelevant.
Internet delivery is different since it is the viewer who determines the value of an episode. If the show's budget needs to be $2.00 per episode, in the Network universe, the show is dead. If viewers are willing to pay $2.00 per episode in the Internet universe the show may continue. This ability for a highly committed subset of viewers to support a show will, over the next decade, completely transform the industry.
The beginning of the end for Networks will be when a show that they cancel, rather than going out of production, continues to be produced at a per episode fee and is marketed through Amazon, iTunes, Netflix and blogs and magazines with proper demographics. If the marketers 'take' is less than that of the Networks, the 'producer to viewer' business model will grow and the network business model will die or more likely transform.
Today Netflix, Amazon and Hulu provide access to programming, mostly shows in syndication. Netflix provides some limited original programming. This business model needs to change as well. The problem is that your subscription pays for programming that you don't want to watch. As a customer, it is in your best interest to subscribe to a service whose subscription base is homogeneous and whose viewing preferences are most like your own.
Over the next five to ten years, the broadcast and cable networks, Netflix, Hulu, Amazon and some new entrants will converge on a business model that will offer a monthly subscription that will provide unlimited access to a library of syndicated shows and older movies along with episode or season pass purchase for new shows, video magazines, sporting and other events. Right now, with Amazon Prime and Instant Access, Amazon is the closest.
Over time, because of the market pressures mentioned, these various Internet TV providers will each find their own niche. As they do, they will collide with Internet sites that already serve the niche and will find it profitable to offer Internet TV. An example is Huffington Post. It already has a sophisticated web presence with over 100 million unique visitors and a strong urban, college educated, 'soft Left' profile. 'HuffTV' would be a relatively easy start up.
There will be some interesting transitional issues. At market maturity there will be a number of enterprises each of which will have access to a specific demographic. They will offer a first run and rerun library specifically tailored to its subscribers. However, at present first run contracts and syndication ownership does not conform well to a market niche segmentation.
For example, the new subscription service offered by CBS, through its CBS Television Distribution, owns an impressive library of syndicated shows that will make it an instant contender in the streaming rerun market. However, much of it doesn't match well with its current first run lineup that skews heavily to the more intellectual crime/investigation genre. On the other hand, websites that have a strong market niche presence, such as Huffington Post, will need to acquire both a syndication and first run library.
While this will lead to a period of increased acquisition and divestiture, it has been the general pattern, albeit at a lower level, with syndicated shows in the past and doesn't cause much of a change from business as usual. The significant change will be with first run shows. Because networks have controlled the industry in the past, first run shows have traditionally been exclusive to one network. As producers take control of the industry, they will see benefit in striking distribution deals with several distributors.
Polymathica, though targeted at a much smaller market than Huff Post, still represents a wonderful opportunity to enable refined, erudite programming that in today's market simply couldn't get produced. It will simultaneously enable several thousand Knowledge Class Polymathican careers. Additionally, most shows will be financed through crowd funding which will provide high return potential to its small investors.
So, this impending development is significant on two levels as investment intelligence and as career opportunities. First, television is a growing and volatile industry that has been dominated by a handful of companies. While cable television is going to die, the same companies typically provide Internet service. As people transition to Internet TV, they will need to upgrade to higher bandwidth service. While cable companies may see their revenue decrease, their operating income may actually increase.
The broadcast and cable networks will need to choose a market niche. While that means that their viewership will almost surely decrease, their revenues may actually increase. An ad supported show will typically generate about 60¢ per viewer, which must be shared with a cable, satellite or broadcast distributor. A show that is distributed over the internet via a season pass will typically create $2.00 to $2.50 of revenue and the distribution costs decrease.
While the industry is in turmoil, it does not present much in the way of investment opportunities. The existing mainstream players will lose viewers, but will increase its revenue and income per viewer. When I wrote the 1999 article, I thought that AT&T was in the best strategic position. Now, it appears with the acquisition of the NBC family of businesses, Comcast may be best positioned.
The real opportunities will reside in new, smaller market niches, such as Polymathica, whose viewers were disenfranchised in the cable TV era, but will be enabled in the Internet TV era. PolymathicaTV will be joined by ZeitgeistTV, PolyamoryTV, ChristianTV, GothTV, AryanTV, AynrandianTV, SingularityTV, etc. that, in total, will likely capture about 15% of the market.
I estimate that PolymathicaTV will capture about 0.7% of the market, or about 15 million people. PolymathicaRerun will, at this level, generate about 1.4 billion USD in revenues. The majority of this revenue will accrue to the owners of content. PolymathicaTV should be able to support about 100 shows at an average of 1,000,000 viewers. This 4.5 billion USD of annual revenue will support about 2,500 FTE career opportunities.
It will also create impressive private equity opportunities as well. Creators of a show will acquire enough funds to produce a pilot and some marketing funds, say 1.0 million USD in the anticipation that some viewers of the pilot will purchase a season pass which will generate sufficient funds to produce the show. Most participants in the project, including the creators, will be paid scale or siilar, against a percent of revenue. This allows low risk and potentially high returns for both investors and participants.
Skills needed for a successful team include:
However, the transition is no more than half over. Networks, for the most part, are still broadcast era artifacts that have simply replaced local cable distributors for the old local affiliate broadcasters. Even the new networks, such as U.S.A., Fx, Syfy, etc., though never broadcast networks, still reflect that structure.
We need to take a step back and see that television has two relationships with its audience that are really quite different. The first is the premium relationship that actually exists between the producer and the viewer. For example, The Good Wife is really a relationship between Robert King, Ridley Scott, et alia and the viewers. The second is the rerun library service, such as Netflix. In both cases, the cable distributor is of no use and the Network now provides no more than marginal value added.
The first run producer has two basic needs. First, save for those who are very established, funding for a new show is needed. Networks no longer routinely provide funds directly. Rather, funds are acquired to produce a pilot. That pilot is then shopped to networks. A network may purchase 13 or more episodes and that contract is used to acquire the remaining funds required to produce the show. Ultimately, what the Network brings to the table is cheap and nearly universal access to viewers but, today, little more.
To put it simply, if you are a fan of Elementary, your allegiance is to the producers of the show, not CBS. If CBS cancelled it and it started being distributed elsewhere you would have no thoughts of loyalty to CBS You would go to wherever Elementary was being offered. This is one of the strategic problems that networks have - almost zero brand value.
One of the problems with the network business model is that the budget available to the producers is determined by the number of viewers that the network can attract multiplied by the amount that advertisers are willing to pay in order to talk to a viewer. The perceived value of the show by the viewer is irrelevant.
Internet delivery is different since it is the viewer who determines the value of an episode. If the show's budget needs to be $2.00 per episode, in the Network universe, the show is dead. If viewers are willing to pay $2.00 per episode in the Internet universe the show may continue. This ability for a highly committed subset of viewers to support a show will, over the next decade, completely transform the industry.
The beginning of the end for Networks will be when a show that they cancel, rather than going out of production, continues to be produced at a per episode fee and is marketed through Amazon, iTunes, Netflix and blogs and magazines with proper demographics. If the marketers 'take' is less than that of the Networks, the 'producer to viewer' business model will grow and the network business model will die or more likely transform.
Today Netflix, Amazon and Hulu provide access to programming, mostly shows in syndication. Netflix provides some limited original programming. This business model needs to change as well. The problem is that your subscription pays for programming that you don't want to watch. As a customer, it is in your best interest to subscribe to a service whose subscription base is homogeneous and whose viewing preferences are most like your own.
Over the next five to ten years, the broadcast and cable networks, Netflix, Hulu, Amazon and some new entrants will converge on a business model that will offer a monthly subscription that will provide unlimited access to a library of syndicated shows and older movies along with episode or season pass purchase for new shows, video magazines, sporting and other events. Right now, with Amazon Prime and Instant Access, Amazon is the closest.
Over time, because of the market pressures mentioned, these various Internet TV providers will each find their own niche. As they do, they will collide with Internet sites that already serve the niche and will find it profitable to offer Internet TV. An example is Huffington Post. It already has a sophisticated web presence with over 100 million unique visitors and a strong urban, college educated, 'soft Left' profile. 'HuffTV' would be a relatively easy start up.
There will be some interesting transitional issues. At market maturity there will be a number of enterprises each of which will have access to a specific demographic. They will offer a first run and rerun library specifically tailored to its subscribers. However, at present first run contracts and syndication ownership does not conform well to a market niche segmentation.
For example, the new subscription service offered by CBS, through its CBS Television Distribution, owns an impressive library of syndicated shows that will make it an instant contender in the streaming rerun market. However, much of it doesn't match well with its current first run lineup that skews heavily to the more intellectual crime/investigation genre. On the other hand, websites that have a strong market niche presence, such as Huffington Post, will need to acquire both a syndication and first run library.
While this will lead to a period of increased acquisition and divestiture, it has been the general pattern, albeit at a lower level, with syndicated shows in the past and doesn't cause much of a change from business as usual. The significant change will be with first run shows. Because networks have controlled the industry in the past, first run shows have traditionally been exclusive to one network. As producers take control of the industry, they will see benefit in striking distribution deals with several distributors.
Polymathica, though targeted at a much smaller market than Huff Post, still represents a wonderful opportunity to enable refined, erudite programming that in today's market simply couldn't get produced. It will simultaneously enable several thousand Knowledge Class Polymathican careers. Additionally, most shows will be financed through crowd funding which will provide high return potential to its small investors.
So, this impending development is significant on two levels as investment intelligence and as career opportunities. First, television is a growing and volatile industry that has been dominated by a handful of companies. While cable television is going to die, the same companies typically provide Internet service. As people transition to Internet TV, they will need to upgrade to higher bandwidth service. While cable companies may see their revenue decrease, their operating income may actually increase.
The broadcast and cable networks will need to choose a market niche. While that means that their viewership will almost surely decrease, their revenues may actually increase. An ad supported show will typically generate about 60¢ per viewer, which must be shared with a cable, satellite or broadcast distributor. A show that is distributed over the internet via a season pass will typically create $2.00 to $2.50 of revenue and the distribution costs decrease.
While the industry is in turmoil, it does not present much in the way of investment opportunities. The existing mainstream players will lose viewers, but will increase its revenue and income per viewer. When I wrote the 1999 article, I thought that AT&T was in the best strategic position. Now, it appears with the acquisition of the NBC family of businesses, Comcast may be best positioned.
The real opportunities will reside in new, smaller market niches, such as Polymathica, whose viewers were disenfranchised in the cable TV era, but will be enabled in the Internet TV era. PolymathicaTV will be joined by ZeitgeistTV, PolyamoryTV, ChristianTV, GothTV, AryanTV, AynrandianTV, SingularityTV, etc. that, in total, will likely capture about 15% of the market.
I estimate that PolymathicaTV will capture about 0.7% of the market, or about 15 million people. PolymathicaRerun will, at this level, generate about 1.4 billion USD in revenues. The majority of this revenue will accrue to the owners of content. PolymathicaTV should be able to support about 100 shows at an average of 1,000,000 viewers. This 4.5 billion USD of annual revenue will support about 2,500 FTE career opportunities.
It will also create impressive private equity opportunities as well. Creators of a show will acquire enough funds to produce a pilot and some marketing funds, say 1.0 million USD in the anticipation that some viewers of the pilot will purchase a season pass which will generate sufficient funds to produce the show. Most participants in the project, including the creators, will be paid scale or siilar, against a percent of revenue. This allows low risk and potentially high returns for both investors and participants.
Skills needed for a successful team include:
- Production
- Writing
- Directing
- Acting
- Casting
- Sets
- Wardrobe
- Editing
- Musical composition
- Special effects
- Sound
The principals will typically have mastery of several of these skills. The deal structure will usually be gross margin = Revenue - non-equity expenses. The Gross Margin will be broken into 10,000 shares and allocated to the equity participants.
Crowd funders for most projects will have a 1,000 USD minimum investment requirement, with $500 increments above that. They will be pitched with a proforma statement. For example, the show may anticipate one million viewers with an average season pass of 45 USD. Distribution services takes 25% and non equity costs are 4 million USD for a gross margin of 29,750,000 USD or 2,975 USD. A 1,000 USD investment, receiving two shares, will earn 5,950 USD per year for the run of the show. If the show gains 1.5. Million viewers the 1,000 USD investor will receive 9,325 USD per year for the run of the show.
Because of the nearly immediate high return potential and the small amount risked, investors do not need to be risk averse. An investor who invests in five projects in a year and hits on one will be cash flow positive the first year and have 100% return for the run of the show. Because of this, a lot of pilots will be produced which can be laid off to the rerun service if they don't succeed thus reducing risk.
This is an exciting end game scenario that creates thousands of opportunities within Polymathica and tens of thousands of opportunities in other market niches. Readers who are interested in polymathicaTV either as a participant or investor should subscribe to The Polymath.
Sunday, August 17, 2014
Microstate Design Group
Nearly half of the nations with the top twenty standards of living, according to the CIA Fact Book, are microstates. Generally, a microstate has an area of less than 5,000 square miles and a population of under 1,000,000 and is generally either partially or completely autonomous from a sponsor state. The classic example is Liechtenstein which is a sovereign nation but sponsored by Switzerland (the official currency is the Swiss Franc.) It has the highest standard of living in the world.
All microstates of significance, Liechtenstein, Andorra, Monaco, San Marino, Jersey, Isle of Man, Bermuda, Bahamas, the Cayman Islands, appear to have collegial relationships with their sponsor nation and the community of nations, in general. So, for the most part, microstates do not appear to be something that should be feared. In fact, I am about to argue that the larger nations should all develop processes that allow disaffected groups to create microstates. By doing so, the large nations will be legitimzing their claim to sovereignty and also will likely lower the cultural friction within their population.
The process should include the following:
New technologies in desalination and alternative energies, such as OTEC and EGS, are making coastal, arid land that historically has been uninhabitable or sparsely populated very attractive for microstates. Public water use in the U.S. is between 200 and 250 cubic meters per year per capita. Desalination costs about $0.30 per cubic meter more than groundwater or about $60 to $75 per year per capita. For an Information Age community, that averages 600,000 USD per year household income that is not significant.
This suggests that Australia, Mexico, Chile, South Africa, Namibia, Saudi Arabia, et alia, are all very attractive locations for microstates. Again, the new microstates are likely to be comprised of populations that have values very different from the prevailing values of Liberal Democracies. These will include, but not be limited to Marxists, Libertarians, Gaians, Polyamorists, Polymathicans, Pagans, Eugenicists, Transhumanists, Zeitgeist, etc.
We are entering a period when a profound transformation from an Industrial Age civilization to an Information Age civilization will take place. Microstates can be crucibles for social, political, economic and cultural experimentation. They can try new combinations that would be too radical and risky a departure from current institutions. However, they can be tested safely on smaller scales.
This is an exciting opportunity for thoughtful and intellectually disciplined people to engage in a mutual exploration of the possibilities of mirostates. For those who wish to participate, we have created a closed Facebook group. If you are interested in participating, please message me in Facebook or e-mail me at DoctorPolymath@yahoo.com.
All microstates of significance, Liechtenstein, Andorra, Monaco, San Marino, Jersey, Isle of Man, Bermuda, Bahamas, the Cayman Islands, appear to have collegial relationships with their sponsor nation and the community of nations, in general. So, for the most part, microstates do not appear to be something that should be feared. In fact, I am about to argue that the larger nations should all develop processes that allow disaffected groups to create microstates. By doing so, the large nations will be legitimzing their claim to sovereignty and also will likely lower the cultural friction within their population.
The process should include the following:
- The microstate will buy land that it will occupy from current owners.
- It will compensate any current residents who do not want to be part of the new microstate.
- The microstate and the sponsor state will negotiate an arrangement by which the sponsor state will provide certain services to the microstate at a negotiated price and will retain certain rights of sovereignty while relinquishing others.
- The microstate will likley need to enter into an ongoing payment to compensate the sponsor state for its loss of sovereignty and taxing authority.
- A series of treaties will be executed, such as visa requirements, trade status, etc.
This process will lead to an orderly and more collegial establishment of the microstate. It will generally assure the community of nations that the creation of microstates will not lead to the proliferation of rogue states.
Most Political Philosophers today rely upon some form of Social Contract as justification for the right of nation states to hold authority over its citizens. However, a contract is coercive if their are no practical alternatives. By declaring no right to secession, today's nation states are on weak philosophical ground. By having a practical mechanism for microstate alternatives, nation states, for as long as they are the dominant form of government, will stand on stronger philosophical ground.
The Internet is creating cultural fragmentation and polarization that makes the democratic processes more contentious, often leading to 'gridlock' and, in extreme cases to terrotist acts and/or insurrections. This is being caused by a relatively small percent of the population with very strong ideological positions that are fundamentally irreconcilable with the mainstream population of the nation state. Even a small number, say 5% of the population, establishing microstates can reduce political and cultural polarization sufficiently to return a degree of equanimity to the political process.
As the Information Age civilization emerges, with its Cultures of Affluence, the first principle of political philosophy will become, 'No person should be required to live under a body of laws, programs and policies that he or she considers to be fundamentally unjust.' Few people will assert the opposite, that people should be forced to live under a body of laws, programs and policies that they consider fundamentally unjust. However, few people can imagine how the problem can practically be solved. Now we see a way.
To date, microstates have been comprised of ethnic minorities within the sponsor states. However, as new microstates form, they will be comprised of international populations with shared cultural, social, political and economic values. The first of these are the planned Libertarian city-states in Honduras. This will often create a practical benefit to sponsored microstates. These microstates will be comprised of an International population who have achieved, 'live anywhere' Information Age incomes. They will become a very lucrative, new trading partner.
To date, microstates have been comprised of ethnic minorities within the sponsor states. However, as new microstates form, they will be comprised of international populations with shared cultural, social, political and economic values. The first of these are the planned Libertarian city-states in Honduras. This will often create a practical benefit to sponsored microstates. These microstates will be comprised of an International population who have achieved, 'live anywhere' Information Age incomes. They will become a very lucrative, new trading partner.
New technologies in desalination and alternative energies, such as OTEC and EGS, are making coastal, arid land that historically has been uninhabitable or sparsely populated very attractive for microstates. Public water use in the U.S. is between 200 and 250 cubic meters per year per capita. Desalination costs about $0.30 per cubic meter more than groundwater or about $60 to $75 per year per capita. For an Information Age community, that averages 600,000 USD per year household income that is not significant.
This suggests that Australia, Mexico, Chile, South Africa, Namibia, Saudi Arabia, et alia, are all very attractive locations for microstates. Again, the new microstates are likely to be comprised of populations that have values very different from the prevailing values of Liberal Democracies. These will include, but not be limited to Marxists, Libertarians, Gaians, Polyamorists, Polymathicans, Pagans, Eugenicists, Transhumanists, Zeitgeist, etc.
We are entering a period when a profound transformation from an Industrial Age civilization to an Information Age civilization will take place. Microstates can be crucibles for social, political, economic and cultural experimentation. They can try new combinations that would be too radical and risky a departure from current institutions. However, they can be tested safely on smaller scales.
This is an exciting opportunity for thoughtful and intellectually disciplined people to engage in a mutual exploration of the possibilities of mirostates. For those who wish to participate, we have created a closed Facebook group. If you are interested in participating, please message me in Facebook or e-mail me at DoctorPolymath@yahoo.com.
Friday, August 15, 2014
How the Income Explosion Happens
I am encountering, with greater frequency, people who are confused over how people losing their jobs to robots and AI can lead to an income explosion. So, here, I am going to lay it out, piece by piece and, in the process, hopefully, help people understand what we need to do in order to get through this transformation with a minimum of pain.
When a robot or AI salesperson visits the engineering or IT department with the latest gizmo, the potential customer has a form that they need to fill out and submit to the Financial Analysis department for approval. The purpose of the form is to provide the Analyst with the information that he or she needs to determine the financial impact of the purchase and implementation. The form usually quantifies expense savings, generally in labor, against the costs of the equipment or program. If the purchase is found to increase shareholder return, it will be approved. If not, it will be rejected.
So that is the first important point. Automation lowers costs and increases profits or it isn't done. What this almost invariably means as the first step is that someone loses their job and the shareholders earn more as a consequence. So far, not good. In fact, it plays right into the 1% narrative. It is a transitional phase and the situation changes in a second step.
However, before we get to step two, we are going to pause and do a little Economics. An economy has X hours of human input that results in Y output. So, Y/X = productivity or the amount of production that can be done with a unit of labor input. There is a labor constraint on the economy and through all of history, it has been so. Output is limited to Y/X times the number of hours that are available for productive activity. The number of hours can only be affected (given constant population) by changing the number of hours per worker or by changing the percent of the population that works. Both of these are severely limited in their range.
For example, if there are 120 million people who are willing to work full time and productivity is $200,000 per worker, Gross Domestic Product is limited to $24 trillion. However, economies do not function perfectly and there are always unutilized hours (unemployed or underemployed people). However, there are two things that are clear. One, the only way to sustain growth in standards of living is to increase productivity (X/Y) and that involves automation. Two, as long as X/Y is not infinite, full employment is possible; it simply requires an increase in GDP.
In other words, suppose X/Y doubled to $400,000. If GDP remained $24 trillion, 60 million people would lose their jobs. However, if GDP grew to $48 trillion, there would still be 120 million jobs and, essentially, the standard of living would double. This is always the case. If X/Y = $1,000,000, without economic growth, there would only be 24 million jobs (80% unemployment). However, if the GDP grew to $120 trillion, again, there would be 120 million jobs.
This is the explanation for why the Luddite fallacy is a fallacy, today, as it was in the 19th Century. However, there is a potential fly in this particular ointment. As we see, today we live in a labor constrained economy. It is true that there is unemployment and there are people who would work if they could get a job. However, if we completely solved those two problems and everyone who wanted a job could get a full time job, the economy would still be labor constrained at about 112% of today's GDP.
There is the possibility that with a sufficiently high X/Y the economy would become either resource or demand constrained before it became labor constrained. In other words, there would be some permanent unemployment as is feared. While this may be an issue at some time in the future, it is not in the near term.
First, the economy is becoming progressively less resource dominated which argues against a resource constraint. In other words, as the economy grows, a smaller percentage of GDP is comprised of energy, steel, cement, etc. and more is comprised of design, knowledge, content, etc. For example, a Rolls Royce costs ten times the cost of a Toyota. However, it does not use ten times more steel. Its design component comprises an enormous amount of the price difference. As we become more affluent, the economy will continue to become more design and content laden.
Second, while small parts of the economy are already demand constrained, we are a long way from the majority of the economy being constrained in this way. For example, lowering the cost of flash memory will not greatly increase demand. In other words, very few people want more flash memory but don't buy it because it is too expensive. Flash memory is essentially demand constrained. However, housing, automobiles, services, the primary components of end product consumption are far from approaching demand constraints. In other words, there is some point at which people will say, 'Enough house', but we are not even close to it.
Consequently, we can safely conclude that incomes can increase without meaningful constraints, but that it will go to the owners of enterprises, not to the employees. That is not an untrue statement and is a component of why workers' wages have stagnated over the past two decades. However, this is not the end of the process.
To this point, companies have fewer employees and higher profits. However, to the extent that free enterprise works, the lower costs will translate into lower prices as companies either attempt to increase their market share or defend their current market share. This price competition is a major reason why predominantly unregulated economies have historically outperformed centrally planned and heavily regulated economies.
Companies will continue to drop their prices until the incremental decrease in price does not pay for itself through higher market share or economies of scale. Lower prices, of course, benefit all people who buy products and services. So, on the surface, lower prices look like a good thing. However, to Economists, comprehensively lower prices, called deflation, is a bad thing and they will take measures to 'fix it'.
Because the Central Banks are full of Economists who believe that the best state of affairs is inflation in the 2% to 3% range and that deflation is bad, when automation causes deflationary pressure, they will make it go away by printing more money. Historically, this has usually been done by lowering interest rates. However, as deflationary pressures have continued, interest rates have fallen to close to zero and they can't use that method anymore. So, they have started buying debt, usually either government or mortgage debt.
Here is the really cool part. Usually, as is the case in the U.S., the Central Bank is granted a modest return and, beyond that, all the proceeds from printing money goes back to the government. Lately, that amount has been around $80 billion per year in the U.S. There is essentially no down side to this. It is a process by which a portion of the increase in GDP ends up in the Treasury without anyone being taxed.
Something similar happens when the Central Bank buys mortgage bonds, but rather than the government benefiting, home owners benefit through lower mortgage rates. The U.S. Federal Reserve did this and right now mortgage rates are historically quite low. In all likelihood, they will return to Treasury Bonds in a QE-IV.
Here is the counterintuitive part. The Central Bank can never sell the bonds and when they mature, they must replace them. They bought them to increase money supply and eliminate deflation. Selling them or allowing them to mature will undo that. It, then, would be deflationary because it would take money out of circulation and would need to be fixed just like the original purchase.
What that means is that when the Central Bank buys government bonds, the interest paid becomes income to the Central Bank and from there it goes back to the government for a net zero interest expense. The Central Bank can never accept payment on the principle or it will undo the deflation fix. So, when the Central Bank buys government bonds, they functionally disappear. They never have to pay back the principle and the interest they pay is refunded to them.
When the government spends tax dollars, it does not stimulate the Economy. The government spends it instead of the taxpayer, but there is no increase in total spending. But when the government spends the money that it receives by selling bonds to the Central Bank, the taxpayer keeps their money and is free to spend it AND the government spends the money without ever having to pay it back. This is very stimulative and GDP grows.
So, in the final step, the people who lost their jobs at the beginning of the process get jobs back because X/Y and GDP have increased such that, in the end, jobs remain constant. However, the process takes time. In a way, that is good, because the people who lost their jobs lost them to robots and AI and that loss is permanent. They need to retrain for jobs that have not been automated. And, of course, two or three years of unemployment while being retrained is a severe hardship for mid career workers.
Many Economists, accustomed to productivity gains that fall comfortably within traditional economic growth rates have difficulty imagining substantial technological unemployment. Yet, it is and always has been the case that economic growth and technological unemployment balance each other. In the long term, through the mechanisms described above, that is correct. However, if technological unemployment is very high, there is a lag and the net unemployment can, temporarily, get very high.
Suppose that structural unemployment is 4% and over ten years GDP is going to increase 10X. Productivity must grow 10X which is the equivalent of 90% of jobs being replaced by robots and AI. Further, let's suppose the process described above takes 3 years, on average, from the loss of jobs to automation to the eventual re-employment. If the Transformation takes 18 years, unemployment will need to be 90%/6+4%= 19% during that time. If it takes 24 years, unemployment will average 90%/8+4%=15.25%. On the other hand, if it takes 12 years, unemployment will average 90%/4+4%=26.5%.
If we slow down the Transformation, the unemployment peak will be less. However, the total pain will not be less. The total number of unemployment years is the same. The benefit will be in an increased ability of the economy to ameliorate the pain since it will be less in any given year. The problem is that we have mechanisms that allow us to delay the onset of the Transformation and, not surprisingly, it appears that government and industry are availing themselves of them, but we don't really have good mechanisms for delaying full implementation.
For example, some governments have asked Google to delay the introduction of their driverless vehicle technology and Google seems to be agreeable. On the other hand, once they introduce it, it is not clear how we slow full implementation. In other words, our behavior seems to be shortening the Transformation and, in the process, increasing the average and peak unemployment rate.
If we can shorten the cycle, say, from three years to two years, we then can make some significant strides to lessening the trauma of the Transformation. For example, in the 18 year example, rather than an average unemployment of 19%, it will average 90%/9 + 4% = 14%. We also can lessen the pain by using our 'deflation fix windfall' to increase unemployment benefits to two years and to fund retraining expenses.
We also see on the horizon some spectacularly disruptive individual events that are imbedded in the 90% job loss. What happens if SAP and Oracle get together and eliminate the tasks currently done by AR, AP, Payroll clerks and staff Accountants? This is within current technological capabilities and primarily require the various accounting software packages to be able to talk to each other directly. It will tend to happen all at once, because, for the most part, only two companies need to upgrade their software and it is over. What happens when three million clerks and accountants hit the unemployment line as almost the same time?
It appears that once over the road drivers start getting replaced by robot drivers, competition will drive this to be a one year event. A typical 18 wheeler may cost $0.75 per mile to operate of which about $0.50 is for the driver. If a robotic driver cuts the driver cost in half, suddenly there will be trucks that are charging $0.50 per mile. The unconverted trucks have a choice of losing money or converting. If it is a profitable implementation for one company, it will be profitable for all and the conversion of the national fleet will happen very rapidly.
Also, if the promise of drastrically reduced accident rates holds up, it is likely that the companies that insure the 18 wheelers will demand that the change out takes place as quickly as possible.
An ameliorating factor is that the faster the transformation the faster will be the deflation which leads to larger amounts of government funds that can be used to increase unemployment benefits and retraining grants. This is a theme that will come to dominate the political dialogue over the next 10 to 15 years.
So, to summarize
An enlightened government response would lead to the Income Explosion dominating the minds of people over the technological unemployment. There is also a significant advantage to people switching to Information Age careers now and the government should encourage it. The 'Jumpstart Our Business Startup' legislation, commonly referred to as 'crowd funding' is a step in that direction. There are several benefits to this. As people move to Enterprise Networks and Knowledge Class jobs, the number of people chasing a decreasing supply of Industrial Age jobs will decrease and, through supply and demand, the wage stagnation will be reduced. Second, as jobs disappear, it will lead to smaller layoffs. Much of the job loss will be handled through attrition.
It is unlikely that governments will respond in an enlightened way. However, the more we talk about it, the more we 'spread the Transformation meme', the more likely it will be. It would be wonderful if this article went viral. However, because it contains no kitties, I'm pretty sure it won't.
When a robot or AI salesperson visits the engineering or IT department with the latest gizmo, the potential customer has a form that they need to fill out and submit to the Financial Analysis department for approval. The purpose of the form is to provide the Analyst with the information that he or she needs to determine the financial impact of the purchase and implementation. The form usually quantifies expense savings, generally in labor, against the costs of the equipment or program. If the purchase is found to increase shareholder return, it will be approved. If not, it will be rejected.
So that is the first important point. Automation lowers costs and increases profits or it isn't done. What this almost invariably means as the first step is that someone loses their job and the shareholders earn more as a consequence. So far, not good. In fact, it plays right into the 1% narrative. It is a transitional phase and the situation changes in a second step.
However, before we get to step two, we are going to pause and do a little Economics. An economy has X hours of human input that results in Y output. So, Y/X = productivity or the amount of production that can be done with a unit of labor input. There is a labor constraint on the economy and through all of history, it has been so. Output is limited to Y/X times the number of hours that are available for productive activity. The number of hours can only be affected (given constant population) by changing the number of hours per worker or by changing the percent of the population that works. Both of these are severely limited in their range.
For example, if there are 120 million people who are willing to work full time and productivity is $200,000 per worker, Gross Domestic Product is limited to $24 trillion. However, economies do not function perfectly and there are always unutilized hours (unemployed or underemployed people). However, there are two things that are clear. One, the only way to sustain growth in standards of living is to increase productivity (X/Y) and that involves automation. Two, as long as X/Y is not infinite, full employment is possible; it simply requires an increase in GDP.
In other words, suppose X/Y doubled to $400,000. If GDP remained $24 trillion, 60 million people would lose their jobs. However, if GDP grew to $48 trillion, there would still be 120 million jobs and, essentially, the standard of living would double. This is always the case. If X/Y = $1,000,000, without economic growth, there would only be 24 million jobs (80% unemployment). However, if the GDP grew to $120 trillion, again, there would be 120 million jobs.
This is the explanation for why the Luddite fallacy is a fallacy, today, as it was in the 19th Century. However, there is a potential fly in this particular ointment. As we see, today we live in a labor constrained economy. It is true that there is unemployment and there are people who would work if they could get a job. However, if we completely solved those two problems and everyone who wanted a job could get a full time job, the economy would still be labor constrained at about 112% of today's GDP.
There is the possibility that with a sufficiently high X/Y the economy would become either resource or demand constrained before it became labor constrained. In other words, there would be some permanent unemployment as is feared. While this may be an issue at some time in the future, it is not in the near term.
First, the economy is becoming progressively less resource dominated which argues against a resource constraint. In other words, as the economy grows, a smaller percentage of GDP is comprised of energy, steel, cement, etc. and more is comprised of design, knowledge, content, etc. For example, a Rolls Royce costs ten times the cost of a Toyota. However, it does not use ten times more steel. Its design component comprises an enormous amount of the price difference. As we become more affluent, the economy will continue to become more design and content laden.
Second, while small parts of the economy are already demand constrained, we are a long way from the majority of the economy being constrained in this way. For example, lowering the cost of flash memory will not greatly increase demand. In other words, very few people want more flash memory but don't buy it because it is too expensive. Flash memory is essentially demand constrained. However, housing, automobiles, services, the primary components of end product consumption are far from approaching demand constraints. In other words, there is some point at which people will say, 'Enough house', but we are not even close to it.
Consequently, we can safely conclude that incomes can increase without meaningful constraints, but that it will go to the owners of enterprises, not to the employees. That is not an untrue statement and is a component of why workers' wages have stagnated over the past two decades. However, this is not the end of the process.
To this point, companies have fewer employees and higher profits. However, to the extent that free enterprise works, the lower costs will translate into lower prices as companies either attempt to increase their market share or defend their current market share. This price competition is a major reason why predominantly unregulated economies have historically outperformed centrally planned and heavily regulated economies.
Companies will continue to drop their prices until the incremental decrease in price does not pay for itself through higher market share or economies of scale. Lower prices, of course, benefit all people who buy products and services. So, on the surface, lower prices look like a good thing. However, to Economists, comprehensively lower prices, called deflation, is a bad thing and they will take measures to 'fix it'.
Because the Central Banks are full of Economists who believe that the best state of affairs is inflation in the 2% to 3% range and that deflation is bad, when automation causes deflationary pressure, they will make it go away by printing more money. Historically, this has usually been done by lowering interest rates. However, as deflationary pressures have continued, interest rates have fallen to close to zero and they can't use that method anymore. So, they have started buying debt, usually either government or mortgage debt.
Here is the really cool part. Usually, as is the case in the U.S., the Central Bank is granted a modest return and, beyond that, all the proceeds from printing money goes back to the government. Lately, that amount has been around $80 billion per year in the U.S. There is essentially no down side to this. It is a process by which a portion of the increase in GDP ends up in the Treasury without anyone being taxed.
Something similar happens when the Central Bank buys mortgage bonds, but rather than the government benefiting, home owners benefit through lower mortgage rates. The U.S. Federal Reserve did this and right now mortgage rates are historically quite low. In all likelihood, they will return to Treasury Bonds in a QE-IV.
Here is the counterintuitive part. The Central Bank can never sell the bonds and when they mature, they must replace them. They bought them to increase money supply and eliminate deflation. Selling them or allowing them to mature will undo that. It, then, would be deflationary because it would take money out of circulation and would need to be fixed just like the original purchase.
What that means is that when the Central Bank buys government bonds, the interest paid becomes income to the Central Bank and from there it goes back to the government for a net zero interest expense. The Central Bank can never accept payment on the principle or it will undo the deflation fix. So, when the Central Bank buys government bonds, they functionally disappear. They never have to pay back the principle and the interest they pay is refunded to them.
When the government spends tax dollars, it does not stimulate the Economy. The government spends it instead of the taxpayer, but there is no increase in total spending. But when the government spends the money that it receives by selling bonds to the Central Bank, the taxpayer keeps their money and is free to spend it AND the government spends the money without ever having to pay it back. This is very stimulative and GDP grows.
So, in the final step, the people who lost their jobs at the beginning of the process get jobs back because X/Y and GDP have increased such that, in the end, jobs remain constant. However, the process takes time. In a way, that is good, because the people who lost their jobs lost them to robots and AI and that loss is permanent. They need to retrain for jobs that have not been automated. And, of course, two or three years of unemployment while being retrained is a severe hardship for mid career workers.
Many Economists, accustomed to productivity gains that fall comfortably within traditional economic growth rates have difficulty imagining substantial technological unemployment. Yet, it is and always has been the case that economic growth and technological unemployment balance each other. In the long term, through the mechanisms described above, that is correct. However, if technological unemployment is very high, there is a lag and the net unemployment can, temporarily, get very high.
Suppose that structural unemployment is 4% and over ten years GDP is going to increase 10X. Productivity must grow 10X which is the equivalent of 90% of jobs being replaced by robots and AI. Further, let's suppose the process described above takes 3 years, on average, from the loss of jobs to automation to the eventual re-employment. If the Transformation takes 18 years, unemployment will need to be 90%/6+4%= 19% during that time. If it takes 24 years, unemployment will average 90%/8+4%=15.25%. On the other hand, if it takes 12 years, unemployment will average 90%/4+4%=26.5%.
If we slow down the Transformation, the unemployment peak will be less. However, the total pain will not be less. The total number of unemployment years is the same. The benefit will be in an increased ability of the economy to ameliorate the pain since it will be less in any given year. The problem is that we have mechanisms that allow us to delay the onset of the Transformation and, not surprisingly, it appears that government and industry are availing themselves of them, but we don't really have good mechanisms for delaying full implementation.
For example, some governments have asked Google to delay the introduction of their driverless vehicle technology and Google seems to be agreeable. On the other hand, once they introduce it, it is not clear how we slow full implementation. In other words, our behavior seems to be shortening the Transformation and, in the process, increasing the average and peak unemployment rate.
If we can shorten the cycle, say, from three years to two years, we then can make some significant strides to lessening the trauma of the Transformation. For example, in the 18 year example, rather than an average unemployment of 19%, it will average 90%/9 + 4% = 14%. We also can lessen the pain by using our 'deflation fix windfall' to increase unemployment benefits to two years and to fund retraining expenses.
We also see on the horizon some spectacularly disruptive individual events that are imbedded in the 90% job loss. What happens if SAP and Oracle get together and eliminate the tasks currently done by AR, AP, Payroll clerks and staff Accountants? This is within current technological capabilities and primarily require the various accounting software packages to be able to talk to each other directly. It will tend to happen all at once, because, for the most part, only two companies need to upgrade their software and it is over. What happens when three million clerks and accountants hit the unemployment line as almost the same time?
It appears that once over the road drivers start getting replaced by robot drivers, competition will drive this to be a one year event. A typical 18 wheeler may cost $0.75 per mile to operate of which about $0.50 is for the driver. If a robotic driver cuts the driver cost in half, suddenly there will be trucks that are charging $0.50 per mile. The unconverted trucks have a choice of losing money or converting. If it is a profitable implementation for one company, it will be profitable for all and the conversion of the national fleet will happen very rapidly.
Also, if the promise of drastrically reduced accident rates holds up, it is likely that the companies that insure the 18 wheelers will demand that the change out takes place as quickly as possible.
An ameliorating factor is that the faster the transformation the faster will be the deflation which leads to larger amounts of government funds that can be used to increase unemployment benefits and retraining grants. This is a theme that will come to dominate the political dialogue over the next 10 to 15 years.
So, to summarize
- Companies buy productivity enhancing robotics and AI. They lay off workers and profits increase.
- Companies 'spend' their increased profits to gain or defend market share. Prices fall.
- Falling prices, when nearly universal, creates economically destructive deflation.
- Central Banks respond by creating money by buying government bonds.
- 'Deficit spending' findanced by debt that carries no net interest expense and doesn't need to be paid back is economically stimulative and creates jobs. Unemployment decreases, X/Y is higher and standards of living are increasd.
It is unlikely that governments will respond in an enlightened way. However, the more we talk about it, the more we 'spread the Transformation meme', the more likely it will be. It would be wonderful if this article went viral. However, because it contains no kitties, I'm pretty sure it won't.
Saturday, May 17, 2014
The Polymath
The Polymath will be a weekly .pdf magazine of news, analysis and commentary for an erudite readership. It will contain feature articles on world affairs, economics, business, investing, science, technology and the arts.
We will do a crowdfunding, probably for $1,000,000 with the proceeds used primarily to build readership. I know from years of experience that with complete awareness we will be about 4.5 million subscribers. The crowfunding will be sufficient to build a 1.5 million subscribers and should be sufficient to create organic growth.
The key to success for The Polymath is to appeal to the upper 5% of the population in intellectual sophistication that, per research by D.K. Simonton, is currently substantially underserved. In other words, our articles need to be well researched, well considered and say something unlike what is flooding the press. If it is the same thing, just said differently, we shouldn't publish it.
For example, with regard to the Crimea situation, I said,
"In 1238 Crimea was taken from the Rus' and Byzantium by the Golden Horde. Crimeans were not asked if they wanted to be part of the Mongol Empire; they were told.
In 1475, Crimea became part of the Ottoman Empire. They were not asked; they were told.
In 1783, Crimea became part of the Russian Empire. Again, they were not asked; they were told.
In 1954, Crimea was made part of Ukraine. They were not asked; they were told.
Finally in 2014, they were asked. They decided that they want to be part of Russia. NO, NO, NO!! protests U.S. and EU. It is illegal. Yet one more time, they insist, the people of Crimea must be told."
This is the kind of material we need in The Polymath. It is correct, it is cogent and it is different. It raises a question that will surface again and again over the next few years. Should the community of nations make laws without the consent of national minorities that prohibit that national minority from enjoying self determination? Are the interests of Russia, the E.U. and the U.S. of greater merit than the interests of the people who actually live in the affected territory?
According to D.K. Simonton, The Polymath superstar authors will have IQs around 150 (+/- 10). We won't be asking for an IQ test result; the quality of the work is the driving factor. However, clearly, it will take some work to find our article and column writers. So, we will be looking for five or so 'Editors' whose job is to go out and find such authors, help them meet the editorial standards of The Polymath and keep them working.
The Polymath will be ad supported. In other words, people will get a 128 page weekly magazine in their inbox at no cost and will also be able to access archived articles. That is a lot of advertising. Our objective is to have all the advertisers be Members of the Polymathica Enterprise Network with adverstising placed on an affiliate basis. That is another project I will be posting on soon. We will need 'Monetizers' to go out and find appropriate advertising. They will also be expected to place the advertising properly so that the right readers are seeing the correct ads.
This is a shared enterprise. What that means is that everyone gets a piece of the revenue and is responsible for their own budget, keeping the excess as their profits. Authors will receive 35%, Editors will receive 10%, Monetizers will receive 10% and 15% will be retained for Administration. The Polymathic Institute will have 80% of the 30% profit or 24% and the crowdfunders will have 20% of the 30% or 6%. The Polymathic Institute will use its proceeds to promote polymathic research, education, careers and lifestyles. At the outset, the majority will probably be used to crowdfund enterprises in the Polymathica Enterprise Network.
Total Revenue is forecast at 1.5 million subscribers X 128 pages per week X 52 issues per week X ½¢ per page = $49,920,000. At this level, authors will receive $2,500 per page while Editors and Monetizers will receive $750 per page each. A five page article will provide authors with $12,500, Editors and Monetizers with $3,750. Clearly, Editors and Monetizers will have a reasonable opportunity to earn mid six figure USD annual income placing just three articles per week. Of course, this is only about 1/3 of what I anticipate to be our mature distribution.
We will have a tab in Polymathica.com for The Polymath which will archive all articles. Revenue from affiliate ads there will be shared in the same proportion as the .pdf magazine. The articles will have the facebook, Google+, Twitter, etc. 'share' buttons as well as a 'subscribe' box. Of course, we will work to achieve SEO. Because the articles, in order to be accepted for publication, must bring a new and intellectually rigorous perspective to the issue, the should be highly shareable within our market.
We absolutely need this to hit fast, which means crowdfunding, editors, authors and monetizers must grow and succeed quickly. If you want to be an Editor, go get an article. If you want to be an Author, write a feature article. If you want to be a monetizer, go find advertising (affiliate preferred), that is appropriate for a refined and erudite audience. We need someone who will spearhead crowdfunding. We also need an Editor-in-Chief, a layout artist and a tech-type to maintain our subscriber list and e-mail functionality. You each will receive a portion of the 15% administrative share.
Contact me at DoctorPolymath@yahoo.com if you are interested in becoming involved.
We will do a crowdfunding, probably for $1,000,000 with the proceeds used primarily to build readership. I know from years of experience that with complete awareness we will be about 4.5 million subscribers. The crowfunding will be sufficient to build a 1.5 million subscribers and should be sufficient to create organic growth.
The key to success for The Polymath is to appeal to the upper 5% of the population in intellectual sophistication that, per research by D.K. Simonton, is currently substantially underserved. In other words, our articles need to be well researched, well considered and say something unlike what is flooding the press. If it is the same thing, just said differently, we shouldn't publish it.
For example, with regard to the Crimea situation, I said,
"In 1238 Crimea was taken from the Rus' and Byzantium by the Golden Horde. Crimeans were not asked if they wanted to be part of the Mongol Empire; they were told.
In 1475, Crimea became part of the Ottoman Empire. They were not asked; they were told.
In 1783, Crimea became part of the Russian Empire. Again, they were not asked; they were told.
In 1954, Crimea was made part of Ukraine. They were not asked; they were told.
Finally in 2014, they were asked. They decided that they want to be part of Russia. NO, NO, NO!! protests U.S. and EU. It is illegal. Yet one more time, they insist, the people of Crimea must be told."
This is the kind of material we need in The Polymath. It is correct, it is cogent and it is different. It raises a question that will surface again and again over the next few years. Should the community of nations make laws without the consent of national minorities that prohibit that national minority from enjoying self determination? Are the interests of Russia, the E.U. and the U.S. of greater merit than the interests of the people who actually live in the affected territory?
According to D.K. Simonton, The Polymath superstar authors will have IQs around 150 (+/- 10). We won't be asking for an IQ test result; the quality of the work is the driving factor. However, clearly, it will take some work to find our article and column writers. So, we will be looking for five or so 'Editors' whose job is to go out and find such authors, help them meet the editorial standards of The Polymath and keep them working.
The Polymath will be ad supported. In other words, people will get a 128 page weekly magazine in their inbox at no cost and will also be able to access archived articles. That is a lot of advertising. Our objective is to have all the advertisers be Members of the Polymathica Enterprise Network with adverstising placed on an affiliate basis. That is another project I will be posting on soon. We will need 'Monetizers' to go out and find appropriate advertising. They will also be expected to place the advertising properly so that the right readers are seeing the correct ads.
This is a shared enterprise. What that means is that everyone gets a piece of the revenue and is responsible for their own budget, keeping the excess as their profits. Authors will receive 35%, Editors will receive 10%, Monetizers will receive 10% and 15% will be retained for Administration. The Polymathic Institute will have 80% of the 30% profit or 24% and the crowdfunders will have 20% of the 30% or 6%. The Polymathic Institute will use its proceeds to promote polymathic research, education, careers and lifestyles. At the outset, the majority will probably be used to crowdfund enterprises in the Polymathica Enterprise Network.
Total Revenue is forecast at 1.5 million subscribers X 128 pages per week X 52 issues per week X ½¢ per page = $49,920,000. At this level, authors will receive $2,500 per page while Editors and Monetizers will receive $750 per page each. A five page article will provide authors with $12,500, Editors and Monetizers with $3,750. Clearly, Editors and Monetizers will have a reasonable opportunity to earn mid six figure USD annual income placing just three articles per week. Of course, this is only about 1/3 of what I anticipate to be our mature distribution.
We will have a tab in Polymathica.com for The Polymath which will archive all articles. Revenue from affiliate ads there will be shared in the same proportion as the .pdf magazine. The articles will have the facebook, Google+, Twitter, etc. 'share' buttons as well as a 'subscribe' box. Of course, we will work to achieve SEO. Because the articles, in order to be accepted for publication, must bring a new and intellectually rigorous perspective to the issue, the should be highly shareable within our market.
We absolutely need this to hit fast, which means crowdfunding, editors, authors and monetizers must grow and succeed quickly. If you want to be an Editor, go get an article. If you want to be an Author, write a feature article. If you want to be a monetizer, go find advertising (affiliate preferred), that is appropriate for a refined and erudite audience. We need someone who will spearhead crowdfunding. We also need an Editor-in-Chief, a layout artist and a tech-type to maintain our subscriber list and e-mail functionality. You each will receive a portion of the 15% administrative share.
Contact me at DoctorPolymath@yahoo.com if you are interested in becoming involved.
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