Tag Archives: economics

Why bank lending can never be the same again

The government has said on a number of occasions that it wants the banks to resume lending money to home-buyers and small businesses at the same levels as before the start of the credit crunch. There’s only one problem: doing so would be a sure-fire way to bankrupt the banks. And either the government doesn’t know it (in which case it’s stupid), or it does know it (in which case it’s lying to the public).

If you want to understand why bank lending can never be the same, look no further than Robert Peston’s post on HBOS’s last financial results as an independent entity. HBOS was amongst the most willing of lenders to both companies and home-buyers, and it has ended up with 47% of its business loans going bad. And, when you’re lending a total of £116 billion to business, that’s a lot of potential for loss – a risk which will now have to be paid for by the taxpayer.

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Print is dying, right? Not so fast

Don’t expect this story to get coverage from those who always seem to be claiming that print media is dying. The Economist, the venerable newspaper (which looks like a magazine) has seen revenues, profits and print circulation all rise:

"The Economist Group’s chief executive, Helen Alexander, has signed off from her 11-year leadership of the publisher by unveiling a 16pc rise in American print advertising for its flagship title and a 23pc increase in operating profit.

The Economist’s double-digit growth comes at a time when US news media have been under pressure. Time magazine, the market leader with 3.3m readers, saw sales fall away sharply last year as prices were increased to make up for falling advertising revenues… The Economist’s circulation has doubled in a decade, including a 9pc spurt last year to 1.3m copies a week."

Of course, some of those healthy profits have to do with The Economist’s web site. But even here, it bucks the trend: rather than make everything available for free, its archives are only available to subscribers or readers who have to sit through an irritating Flash ad.

Of course, The Economist’s print strategy is simple: steal a bigger slice of the smaller pie. Rather than just run to a growing market (online advertising), it has decided to also concentrate on getting a bigger share of print advertising, too.

How does it do it? Simple: By producing content that’s better quality, better-researched, and better written than anyone else. No blogs, no Twitter, just better (and harder) work.

Will the success story of The Economist be taught in journalism schools? I doubt it. The new, shiny and cool tends to be more exciting to those in college than dull stuff like writing to a tight style, making lots of phone calls and nurturing contacts.

But hey, that’s enough of this curmudgeonliness – let’s concentrate on things like Twitter, which has a bigger user-base (1.9 million) and has never made a single cent from any of them. Now that’s a success story that the young ought to emulate…

The motivations of Steve Jobs and Bill Gates

Link: John Naughton: Steve Jobs’s presentation | Technology | The Observer.

"If Apple’s strategy succeeds, an increasing proportion of internet users will access through a gateway entirely controlled by a single company. For delighted iPhone users, this may seem like a great idea – just as it seemed like a great idea when Microsoft brought order to the chaotic PC market by developing the de facto standard operating system, and thereby acquired the kind of dominance that became so problematic. Steve Jobs and Bill Gates may have more in common than people realise."

John is sort-of right here. The difference is mostly in slightly deeper motivation. As Robert Cringely once said, Gates sees the PC as a method of transfering every spare dollar, pound and kopek into Bill Gates’ pockets. Jobs, on the other hand, sees what he does as a crusade for good taste.

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