We posted this cautionary blurb, the Gell-Mann Amnesia Effect, about how people should perhaps scrutinize what they read a little more carefully. That, essentially, a person or publication having a history of known erroneous reports, that a reader knows for a fact are in error, should really cause the reader to discount much of the other reports by that person or publication.

But the reverse is also true to some degree.

I was watching a talk on how the Venture Capital marketplace is being revolutionized, and realized that several of the bold statements he was making I knew to be true. This allowed me to raise the estimation I had that other statements he made, that I had no firm personal knowledge of, might also be true. [yes, of course this can, and is, abused all of the time by salespeople – but still, it is better than them saying things you know to be flat out wrong]

Similarly, with Mike Fremer and JV, they have made several bold [and not so bold] statements over the years that I knew to be true, and this raised, and continues to raise, my estimation that what they say [still, with very large grains of salt] about things I have not yet heard might also be true. In fact, one builds a mental model of people in general [including their motivations, which can be sticky :-)], ending up with a weighted probability that anything they say in a very narrow qualitative region may be true or not for oneself as well. This is diametrically opposed to many, many of the other reviewers who say things I know to be false, or say things that are completely nonsensical, or even more often, information-free [i.e. they are not really saying anything at all, when you get right down to it].

—————– OK. The previous post is copied here, so that you can read the above in the correct context, without having to scroll down ———–

[Hopefully people can abstract this somewhat humorously described concept below to understand that this quote is a reminder that we also have to take all high-end audio reviews with a grain of salt, to view them with trepidation and suspicion, to look askance when they are in our presence, to… 🙂 – in particular those reviews by reviewers who have shown that they will sometimes pound the table and insist that ‘wet streets cause rain’].

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.
—————————————————— Michael Crichton

I find the escalating prices of high end audio gear both frustrating and fascinating

For example, the first amp from Dan D’Agostino after he left Krell. It is $45K.

Another example is Tenor, who after a career of making more or less average priced high end amps in the $20K to $30K range went under for a bit and then came back with an amp in the $60K [hard to find a price] region.

There are many other examples. Soulution is another, although they have been around for a few years. The Continuum turntable another example.

And these are established brand names. Many, many others come from nowhere.

What is going on?

I tried to compare it to the clothing industry.

So, say, you have Versace and they come out with $1000 pair of jeans [maybe they have, I do not know]. We look at them and see a whole line of jeans [and many other types of clothing], at a wide range of prices and all fairly well-regarded, if expensive.

This is the model for most high-end audio manufacturers up to a few years ago.

OK.

Now, one can continue along this line of thought and imagine that a leading designer at Versace [as opposed to Target or Sears] leaves and creates their own line of boutique jeans. Maybe they then go and come out with their first pair of jeans and price it $1000. One looks at the pedigree/cred of the designer, and A) the quality of the jeans and …

… there will be some B) people who want their clothes to be one-off, or very unique, or to be the first to discover a new designer, and are willing to pluck down a large chunk of their money on the jeans.

The problem is that A) is quite a bit more evident for jeans than it is audio equipment [which requires lots of associated equipment to be evaluated, etc.] and B) [explorers] I do not understand, personally, but people do seem to want to own something new and unique, albeit all the time hoping that it becomes the height of [high-end audio] fashion and quite popular, making them the ‘discoverers’.

It is perhaps the case then that boutique high-end audio manufacturers that have just a few very high-priced products are catering to that small segment of us who enjoy shopping using the B) explorers approach. The problem might be that as soon as one of these becomes slightly popular and successful, the explorers will look elsewhere. They then sell the gear, which then saturates the used market.

So how to avoid this trap if you just have a few products? 1) Put out a new version of the product or 2) broaden your product line:

1) guarantees the immediate saturation of the used market – so it is a little scary if you only have a few products. Some of the previous owners will go elsewhere, but a few new owners will be added, seeing the product as maturing and more desirable now. But as versions increase, the customer base withers. Unless a miracle occurs, this kind of guarantees the manufacturer will not grow beyond a niche status and will eventually fade away.

2) this is expensive and time consuming. But it does build a sustainable brand for the long term.

So, here is a question. How many products does it take to make a ‘broad product line’?

Take it beyond audio again to… hybrid cars. The SmartCar versus Toyota’s hybrids. You can see how having several options allows a manufacturer to weather changes in fashion and economies.

As a counter example, however, take Porsche. They do not have many models [although fairly recently adding an inexpensive model and a SUV]

That is what I meant above by ‘unless a miracle occurs’. I am sure all boutique manufacturers want to be the Porsche of their niche. 🙂

But it takes both a miracle [IMHO] and work. Porsche has a long history. They race their cars. They featured them in movies. Famous people drive Porsche. They put a lot of work building their boutique brand. So I guess that gets us:

3) put a LOT of work into building your brand when it only has a very few products

———————-

I guess the whole point here is that this is really fringe behavior – where established brands are not treated any different than brand new ones, where the pedigree of the designers is not examined very closely, where products are not compared to each other so it remains this real mystery about just how good something really is.

On the other hand, of course, this is a lot of the charm of this industry too. Kind of the wild west with a lot of wild characters doing wild and crazy things. I have no problem keeping it wild, just so long as we all kind of understand and appreciate just how wild and crazy things really are.

[Hopefully people can abstract this somewhat humorously described concept below to understand that this quote is a reminder that we also have to take all high-end audio reviews with a grain of salt, to view them with trepidation and suspicion, to look askance when they are in our presence, to… 🙂 – in particular those reviews by reviewers who have shown that they will sometimes pound the table and insist that ‘wet streets cause rain’].

Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray’s case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the “wet streets cause rain” stories. Paper’s full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.
—————————————————— Michael Crichton