So Facebook has bought Instagram for ONE BILLION DOLLARS.

Instagram currently has zero revenue, but to earn reasonable financial return on the $1 billion investment they probably need revenues of around $200 – 300 million per year. This just doesn’t seem possible to me.

So I think Om Malik is right, it was a purely defensive acquisition for Facebook:

Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel — mobile photo sharing.

In other words, great for Instagram’s founders, not so great (but better than the alternative) for Facebook, and probably lousy for competition and for customers (ie users).

An article in the NZ Herald today is full of retailers’ lament about how consumers can buy $300 shirts online for $150 from overseas.

While that’s great for consumers, it also means a huge number of purchases that would have been made with local retailers are now going overseas and delivering little economic benefit to this country outside the freight sector.

Wrong – when I buy a shirt for $150 that I was willing to pay $300 for, I receive an “economic benefit” (otherwise known as consumer surplus) of $150. This is a genuine benefit that I receive, and while local retailers are worse off, it’s quite wrong to say there’s “little economic benefit outside the freight sector”.

More generally the issue is about the gains from (international) trade. Online retailers overseas have economies of scale that local retailers can’t match, hence their lower prices. This is a good thing for the country as a whole. It will be painful for local retailers, and some of them might go out of business or be forced to be more efficient. But overall there is a net economic benefit if shirts that formerly cost $300 can now be had for half price. We can outsource retailing activities to other countries that are relatively more efficient, and use our scarce resources to produce other things.

If you have trouble seeing this, think about it from a personal point of view. Imagine you had to produce all your own clothes, grow your own food, and build your own house. You’re probably not very good at many of those things, and you’d work extremely hard to achieve a meagre standard of living. So you don’t do that, you specialise in teaching, or law, or medicine, and trade your services for things produced by other people. If someone else is more efficient than you at producing something, you should let them do it and focus on what you do best, and this will benefit both of you.

Exactly the same logic applies from a country’s point of view as it does from your own point of view. If you think international trade is not good for the economy then you should be growing your own food.

My previous post might make me look like a fast broadband hater, but I’m not, I just hate it when costs get represented as benefits.

Many of the benefits of fast broadband are claimed to be in education. Back when I was a lecturer, I thought that video lectures were some newfangled nonsense and students wouldn’t learn anything unless they came and sat down before me.

Recently, for fun, I’ve been “taking” a Stanford University course on computer programming via iTunes U. Now that I’m on the other side of the camera, I have a different opinion. Video lectures are great! If my mind wanders, I can rewind and review, or fast-forward the boring bits. I can watch the lectures on the bus to work, and review them again when I’m doing the homework problems. At the moment iTunes U lacks the ability for students to interact and ask questions or get their homework marked, but surely these features will come.

It helps that the Stanford course is very well organised and the lecturer, Paul Hegarty, is one of the best I’ve ever seen. Actually this technology is probably bad news for most lecturers. If you’re an average lecturer, why should students come to you when they can access the best in the world? Just like digital music caused the local CD shop to close down, digital teaching might spell the end for local teaching, at least for some subjects like economics and mathematics that are suitable for mass teaching.

I predict in 10 or 20 years we’ll start to see the rise of global teaching megastars, but fewer teachers overall. There will also be opportunities to teach extremely niche subjects where local demand wouldn’t support it, but there is sufficient global demand.

I set my default search engine to DuckDuckGo, to give it a proper test. Having used it for a week, I feel a bit like the first time I installed Linux on my computer – It felt good to give Microsoft the finger, but frustrating and rough around the edges.

I like that DDG doesn’t track you and doesn’t try to filter search results according to what it thinks you are interested in. But many times when I couldn’t find what I was looking for on DDG’s first page of results, I tried the same search on Google with more success.

Part of the problem is that DDG doesn’t appear to have anything beyond a basic web search yet. It doesn’t search news, doesn’t seem to search blogs very well, and doesn’t have image search. It will need all of these things to compete properly with Google.

The other thing about DDG is that it’s just a little slow. Searches that are more or less instant on Google take several noticeable seconds on DDG. While it doesn’t seem like a lot, somehow it increases my perceived cost of searching significantly, and makes searching feel like a chore.

The new film by Gary Hustwit (of Helvetica fame) is available to rent for watching online. You can get it through iTunes, or use the player below to rent it from Distrify. The Distrify business model is interesting, if you watch the video through an embedded player, the host site gets a cut of the revenues. I wonder if Vimeo and YouTube will adopt this model too or just stick with their subscriptions / ads models.