

How Supermodels Are Like Toxic Assets - mcknz
http://www.3quarksdaily.com/3quarksdaily/2010/07/how-supermodels-are-like-toxic-assets.html

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gxti
It's not just "nobody knows" -- it's "there isn't a reason". Big difference.
It is impossible to reason about what intrinsic values cause one model to be
more highly touted than another because there aren't any. The value ascribed
is entirely extrinsic.

This is the obvious way in which markets are different: even though prices get
way overinflated from speculators chasing trends, there is in fact a real
fundamental value buried in the noise and sooner or later the people who are
good at finding that value will outweigh the noise traders and trend chasers.
Then the momentum turns into fear (because none of the speculators knew what
they were doing) and we have a lovely crash. It's painful and irrational but
eventually enough people wake up and realize that prices are nowhere near
valuation.

Models don't crash. They disappear, but there's no "reckoning" in which their
popularity is brought back to true values of beauty. The momentum is the only
source of value.

~~~
stcredzero
(Please don't take the following as something disparaging about your position.
It's not. Rather, it is some general observations about markets.)

The previous comment would seem to be implying that there's "a real
fundamental value buried in the noise" for investment instruments, but none
for models. I would say that there's always real fundamental value in people,
models included, and that this value is in some sense more real than anything
in any market.

 _The momentum is the only source of value._

The momentum is the only source of value modulo the market. There is indeed "a
real fundamental value" to all personnel assets, but it isn't even "buried in
the noise." The problem is that the market is almost totally disconnected from
this underlying reality. (The question seems too complex, to ever be fully
connected.)

There is a sort of fear and insecurity that overtakes tastemakers faced with
overabundant choices with no good analytical tools to help them. I'm not sure
what the solution is. An "indy" market is no solution -- these seem to merely
become the "bush leagues" for their preexisting mainstream. After awhile in
cultural markets, the noise machine takes over the market and disconnects it
from the human and cultural perceptual machinery which gave rise to it. (Which
I will call "true taste.") Subcultural 'scenes' arise with a renewed
connection to true taste, but these scenes eventually get swept up into the
same disconnected market.

I suspect that Buddhism talks about this. I suspect that this is just a part
of the human condition. Things like Rotten Tomatoes can help, in that rogue
tastemakers who are simply succumbing to bribes and other simple manipulations
can be left out in the cold. Maybe the 4chan folks have got it right, and
informational/social anarchy is the ultimate solution.

In the meantime, a dispassionate analysis of such markets might yield
opportunities to make money through trading.

~~~
gxti
Thanks for the reply.

Models may have fundamental value, but wisdom on model valuations is a little
sparse at this point in history. Same for people in general -- there just
aren't more than a few people (and I'm giving a benefit of a doubt that they
exist at all) out there making a living by estimating the future earnings
potential of an individual. Valuating corporations, on the other hand, is
quite popular and there are many thousands of highly-paid analysts who sit
around and talk about how much a company is worth, then sell that information
to their clients. Actuaries are sort of in the same ballpark and society
already frowns on them enough as it is, so while this might be a market ripe
for the taking I suppose there needs to be a really compelling reason to pay
for the service first. It would make more sense if one could purchase an
individual -- I know I've seen Robin Hanson talk about the concept of a
society where parents sell shares in the future earnings of their children to
finance their education.

But for the moment, even if there were "model analysts" who published
estimates on how much a model is worth, it would have little impact on their
popularity. Models don't get popular because they have earning potential so
much as the other way around. A model who is popular will command higher rates
and more frequent appearances. If she is diagnosed with cancer and has 6
months to live then her potential is greatly diminished, but she can leverage
it for charity purposes and get even higher rates. Valuation is interesting an
academic sense, but for the time being it is a very useless thing to have in
the fashion market. This effectively leaves the idea of a model's fundamental
value even less tangible than that of a corporation.

Considering the extent to which bubbles form even with the possibility of
valuation, the only way that a model popularity market could be analogous to
an equity market is if it lives in a perpetual bubble, effectively negating
the relevance of the fundamental value. "Reckoning" in the equity markets
might be rare, but it does in fact happen. The career of a model, on the other
hand, has zero empirical effect by their fundamental value.

~~~
stcredzero
A problem with this discussion is that both "fundamental" and "value" are
overloaded. What I am asserting is that the commonsense notion of value is
indeed real in this context, just that the market is disconnected from it.

When it comes down to it, there is such a thing as talent. There is also
something real called taste. The tragedy is that it's often really difficult
for this to be reflected in a market. Perhaps a part of the problem is that
talent is actually widespread: there is no distinct rare "superstar" talent,
just lots of cute young women with a certain kind of look. Therefore, there is
no rarefied taste that can recognize the "superstar."

The valuation of personnel is also greatly complicated by all sorts of other
factors. A musician might have amazing chops, but the wrong kind of
personality to deal with the rigors of touring or the temptations of stardom.

In essence, there are "model analysts." In the article, they are called
tastemakers. They don't publish their conclusions, instead disseminating
information at parties. They are not necessarily paid directly for their
analysis, but most certainly participate in a reputation market.

The takeaway is not that talent and taste do not exist. They do exist. It's
that truly distinct "superstars" and the talent that can recognize them are
something of a marketing fiction. I agree that such markets are perpetual
bubbles. Because of this fact, they do more harm than good -- they act to
cloud information to buyers and reduce access to resources.

Re: Trading -- knowing that certain kinds of markets are always bubbles points
to certain trading strategies.

------
philwelch
"In such situations, a few early key individuals end up having a
disproportionately large effect, such that small differences in initial
conditions create large differences later in the cascade. We see such effects
in fields ranging from consumer fads (think Atkins—everyone knows a meat-and-
cheese diet isn’t healthy for you!), science (like global warming), and
technology (VHS beat BETA in the video market, though BETA was a superior
machine)."

You can still start huge flamewars by expressing an opinion either way about
global warming or even Atkins, but VHS is a bad example--Beta had better video
quality, but VHS had longer duration and people hate getting up to change
cassettes in the middle of a movie.

As for global warming, no matter which side of the argument you agree with
there's no comparison here either--the opinions of scientists studying the
issue of global warming formed throughout the past three or four decades, and
the opinions of the general public are a result of political pressure both
ways--neither was a response to early opinion makers.

~~~
Psyonic
Agreed. That little aside nearly ruined the article for me, as I mentioned in
a comment of my own.

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Jun8
Interesting! The rise to prominence of supermodels seem to follow similar
patterns to websites and startups: Why did this startup was funded rather than
that one. People would list all kinds of theories but as the article declares
"Nobody knows".

~~~
aspiringsensei
Thanks for the tl:dr there. I was kind of hoping for a conclusion beyond
"IDK."

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anigbrowl
Another, albeit inadvertent, example of the risk factors: the Asian model
depicted midway through the article - seemingly for purely visual reasons, as
she's not mentioned at all - committed suicide unexpectedly in 2009,
apparently due to the pressures of her modeling career.

So not only is asset selection driven by hunch and/or groupthink, but the
desire to maximize ROI from a productive asset can destabilize it.

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nroach
"So our plot thickens: What’s at the center of this collective “gut feeling”
that happens to land on Coco, ratcheting up her popularity and hence, her
economic value? The answer holds parallel lessons for how traders in finance
markets were able to assign so much inflated value to relatively worthless
mortgage assets now known as “toxic assets.”

Substitute Coco for certain high-profile blogger/entrepreneurs and fashion
designers for VCs/investors and you get some interesting parallels.

Sometimes the "it" factor overrides otherwise interchangeable attributes.

~~~
baguasquirrel
True, but stocks, homes and startups all have to eventually produce value,
which is a comforting thing.

~~~
sapphirecat
> stocks, homes and startups all have to eventually produce value

I have to disagree. Companies fail and homes can burn or be subject to other
natural disasters. And, at least part of a home's value is judged not on what
the home actually provides, but how it looks. In some respects, all
countertops are the same, but for value assigned, granite beats wood.

------
Psyonic
This almost made me stop reading:

"We see such effects in fields ranging from consumer fads (think
Atkins—everyone knows a meat-and-cheese diet isn’t healthy for you!), science
(like global warming), and technology (VHS beat BETA in the video market,
though BETA was a superior machine)."

Such over-simplification made me question the rest of the article as well.

~~~
bobbyi
His account isn't "over-simplified". It is exactly wrong. VHS won _because_
VHS was a "superior machine". It could fit an entire movie on a single
cassette while the original Beta tapes could only hold an hour.

~~~
Psyonic
Agreed. Superior depends on what metric you're measuring by, and the public
chose the one most important to them. It is over-simplified about Atkins,
however. I'm not going to argue that Atkins is necessarily the best way to
eat, but it was ahead of its time in pointing out the problems of refined
carbohydrates.

------
greenlblue
So if the value of some abundant commodity, e.g. houses, models, etc. is
highly dependent on social proof or some other metric that depends on 'gut'
feelings to derive its value then that commodity is susceptible to being
irrationally valuated.

~~~
hugh3
Is it that analogous to houses?

Entire housing markets can be overvalued, but you never get individual houses
getting significantly overvalued compared to others in the same area.

This, incidentally, is what Coco Rocha looks like:
[http://fashionindie.com/wp-
content/uploads/2010/02/Coco+roch...](http://fashionindie.com/wp-
content/uploads/2010/02/Coco+rocha+face.jpg)

I don't understand it either.

~~~
jewbacca
I'm pulling this mostly out of my ass, but I'm pretty sure that to call a
fashion model misvalued because of her facial attractiveness is
misunderstanding fashion models.

Fashion models are not Maxim models; I'd imagine they're actually actually
fairly disconnected pools of talent. There is some conjunction (eg. Sports
Illustrated), but there's an availability bias -- most of the fashion models
you or I are aware of are the ones who are culturally relevant outside the
fashion world (mostly for being really hot). The value of a Maxim model comes
from how sexually attractive she is to men. They'll mostly be shorter,
healthier and have bigger breasts. Maxim models are also subject to the
cultural whims of their audience and their variable loci of attractiveness,
not all of them defined by purely physical factors -- Danica Patrick or
Hillary Duff, while I certainly wouldn't kick them out of bed, in a cultural
vacuum of pure adolescent horniness, would not be in the same league as
Miranda Kerr.

Fashion models are frames for hanging art. A weird, angular face may be an
important component in the look of a piece of clothing. Art also undeniably
interacts with the personal character it's associated with. With most art,
that's only in the creator, but I'd imagine that in fashion modeling, most of
the spectators who care will perceive a piece of clothing and the character of
a show by the composition of the personalities of the models in it. In high-
fashion, anyways, where I'd imagine, like in the highest-level in any field,
distinction is tuned down to subtle details that neophytes wouldn't even
notice: it is crudely and fundamentally complementary to a fashion show or
line to be shown off on somebody attractive; but when you get up there in
talent, every detail, including the model, must be tuned to some creative
harmony, and that value is not at all captured in the sexual attractiveness of
a model by herself.

[again, disclaimer: I actually have no idea what I'm talking about. I haven't
opened a Maxim in 6 years, I've watched a few episodes of America's Next Top
Model, and I'm otherwise a red-blooded Canadian heterosexual male nerd.]

~~~
jonny_noog
I can't claim to be an expert either, but for what it's worth I think you're
pretty spot on there. In the realms of high fashion - along side the artistic
considerations you describe - you're dealing primarily with the ideal of
female beauty as it is seen from the perspective of certain kinds of women and
gay men, as most fashion designers, commentators and other such interested
parties are women or gay men. As opposed to the stereotypical, heterosexual
male ideal that one might see on display in Maxim et al.

------
sutro
Both are like crack cocaine for investment bankers. Hay-O!

------
andrewljohnson
I always thought model jobs were decided by who was willing to sleep with the
boss.

~~~
ImFatYoureFat
I know you kid, but there is a lot to be said for the fact that lack of margin
leads to corruption. ie, the best way to discourage this kind of behavior
would be to create some sort of noticeable difference in value from one model
to the next.

