Broken Models, Free Lunches

As we catapult in slo-mo toward what may be the most significant recession in decades, I keep hearing the same analogy being offered in industry after industry regarding broken models of economic transactions betwixt developer and end consumer. In the business in which I work, journalism, the models of revenue generation are so broken, with ad revenues both in print and online predicted to take another steep drop in the next two quarters, that people are beginning to wonder how any news coverage outside of superficial-opinion blogs will be subsidized any more. See Brian Fuller's regular coverage of this in Greeley's Ghost.

The same is true in the electronics industry I write about. Chip developers hear of crises in broadband delivery mechanisms from everyone ranging from the top of the chain (Netflix, YouTube, Facebook) to the carriers, to the communication-equipment manufacturers, yet no one will pay them adequately for developing complex chips to handle high-speed communications. Repeat the model in the music industry, automotive, light industry, medicine -- supply chains are universally ripped asunder, folks, and they are not being cobbled back together.

In the "stakeholder" movement to push for corporate social responsibility, activists often talk of corporations having to plan for "externalities." In other words, environmental regulations, labor issues, human rights issues, are long-term external costs that don't fit into normal quarterly business plans, so companies have to work the externalities in to the way they do business.

Why wouldn't the same be true for individual consumers? We have gotten very used to the idea of free lunches in our lives, particularly since the advent of the Internet. In addition, global systems of energy, communications, and trade have gotten so complex, as Arthur C. Clarke would say, they become "indistinguishable from magic." If you wave a magic wand, you don't have to pay anyone, right?

This same factor works in state and municipal budgets. Pity the Midwestern industrial-belt states, overtaxed but unable to sustain infrastructure any longer. Then look at Western states, where libertarianism is so ingrained, folks don't want to pay for public renovation and park-system and infrastructure projects. The new model may be the mid-Atlantic and Deep South states, where people are willing to pay a little extra to get municipal redevelopment that actually works.

This might be the way to look at repairing broken supply chains in the private sector, at least as far as the end consumer is concerned, by repeating the mantra "No one rides for free, folks." We need to make explicit all the hidden costs of running shows, from maintaining a broadband Internet to making sure our bridges are in adequate states of repair. Sometimes that means paying higher bills with explicit (and well-explained) charges for externalities people take for granted. Sometimes that means (gasp) higher taxes. How do we convince people that they've been feeding off too many free-lunch troughs and that higher taxes might be good for them? Hell if I know. I just know I've lost my libertarian friends.

Bono, Fire Your Damn Manager!

It's fun to constantly point out the inconsistencies of U2 lead singer Bono, and some analysts make a career of it. Bono's work with and concern for the poor has been legitimate, but you have to wonder about a guy who actually likes to hang with Paul Wolfowitz.

While we're on the subject of company kept, Bono and The Edge and gang had better take a second look at lifelong manager Paul McGuinness. The blog world is abuzz with McGuinness' Jan. 28 speech in Cannes on the future of the music industry. Actually, his assessment of the failures and foibles of record companies and musicians is spot-on in the first half of the speech. And then he takes on Silicon Valley.

First of all, "hippie values" in the technology industry? Where has McGuinness been in analyzing uber-capitalists? These are the Ayn Rand slaves, dude! But more important, where does he come off dissing Abbie Hoffman? The most important aspect of hippie culture in the 1960s was the nihilist and comedic trend of Yippie culture. If technology supporters behind peer-to-peer music services and MP3 harbor any Steal This Book! trends (which I find laughable), it's probably a good thing. The real danger in the modern world is allowing the transnational capitalists to control the entire game, while sending the big bad Recording Industry Association of America against those poor little file-stealers. Anarchists seeking to limit the power of large corporations are a healthy rage-against-the-machine, blow-against-the-empire trend, like the Barbary Pirates during the expansion of the British empire. If I had to choose between EMI and the Yippies, I'd choose Yippies every time. And if Bono doesn't share that opinion enough to tell his manager to go take a hike, then Bono is indeed the kind of two-faced hypocrite his critics have claimed for years.