August 2003 Archives

John Berlau argues in the WSJ that if Congress overrides the FCC decision to ease media ownership rules that Bush should follow Reagan's example and veto, and I agree with him.

But Mr. Reagan, despite being savaged on the nightly newscasts of the liberal "Big 3" TV networks, stood firm on free-market principle. He vetoed the bill restoring the fairness doctrine on June 19, 1987, and issued this stirring defense of media deregulation in his veto message: "[H]istory has shown that the dangers of an overly timid or biased press cannot be averted through bureaucratic regulation, but only through the freedom and competition that the First Amendment sought to guarantee."

Tom Hazlett explains how regulators, vested interests, and misguided consumer advocates conspire to block innovation and competition in the spectrum markets, ushering in the "dental school" of spectrum regulation. This is a case in which those wary of government regulation and those wary of excessive corporate power should unite--but alas few will stand up for the would be entrepreneur.

Excerpt:

Take satellite radio, where one of two US operators (XM) has patented a means to simultaneously use assigned frequencies for ground-level communications without degrading the 100 channels beamed from orbit coast-to-coast. The breakthrough has triggered an industry firestorm, as the new system - if deployed - would permit satellite radio programmers to offer custom content in each of the 269 local radio markets, unleashing thousands of new radio stations.

It will not be allowed. For radio station owners, no local satellite news is good news. Satellite licence restrictions, espoused in the "public interest" by industry incumbents and regulators, render the competitive threat moot. Ironically, these barriers are now buttressed by the "dental school" of spectrum regulation. When maximum revenue extraction becomes the aim of public policy, upstarts (like satellite radio in local markets) are simply unable to afford the toll.

I've suggested in the past (see here and here) that perhaps the problem with spam is not spam but email itself, and that spam was merely showing us a shortcoming in that particular method of digital communication. Understanding the true nature of the spam problem is very important because if the above is right, the appropriate response is not to criminalize speech but rather to get on with the business of innovating new forms of digital communication.

As I noted here many people use IM in preference to email and RSS (or Echo/Atom/Pie or whatever we end up with eventually) may point the way to another type of solution.

For more on this, see Dan Gillmor's latest column titled Excerpt:

One of the most promising arenas for RSS is in lightening the load of e-mail, which spammers -- and overly restrictive spam-filtering software -- have all but wrecked.

Just ask Chris Pirillo, who built a business on e-mail newsletters (www.lockergnome.com). He's renounced e-mail as his preferred medium and says RSS is the way to go.

"RSS is evolving as a replacement for e-mail publishing and marketing," he says. "RSS suddenly makes the Internet work the way it should. Instead of you searching for everything, the Internet comes to you on your terms."

I wish public-relations people would get with the program, too. If they'd only start creating RSS feeds of releases, journalists and the public at large could see the material they want, and the PR industry would be able to stop blasting so much e-mail to people whose inboxes are already too cluttered.

It's fascinating to see some of the post-mortems on Red Herring, and I only now saw this one in Salon.com annoyingly called "Death of a cheerleader." Despite the obnoxious title Om Malik, who used to work for Herring, gets it mostly right. His fanciful construct, however, that Herring was about a "religion of optimism" and now is the time for a "religion of pragmatism" may be the thing that captures the imagination of Salon's editorial team (who, it seems, only saw Herring as news-worthy in its demise--I don't remember them covering any of our successes over ten years) but it only hints at the truth--and is mostly wrong.

Certainly Red Herring grew in a time of optimism, a commodity that we are now in short supply, and tended to reflect the reality of its era. And it’s true that Tony and I are perhaps more optimistic than pessimistic creatures. Yet while the Wall Street Journal called us the "bible of Silicon Valley," taking the religion metaphor too far misses the point of what Herring was about. We were about helping people become successful. That's all we wanted to do. I had zero interest in hyping an industry or proselytizing a faith--of any kind. I always felt--and employees who were at Herring before Om will remember me saying--that we were not there to herald a revolution. We didn't want to prove that the world was becoming "wired" nor that companies were becoming "fast." We had no theory to prove--except that growth happens. We knew that business and technology trends are cyclical and follow adoption curves. The first piece we ever wrote in our launch issue in May 1993, in fact, was an open letter to Trip Hawkins suggesting that he should hold off on the 3DO IPO as it was a company built more on hype that substance. We often spoke of the need for a "healthy skepticism." We were built on the idea of pragmatism. Our goal was to help those entrepreneurs trying to build companies be successful. We knew that this wasn't accomplished by hyping fanciful ideas. We weren't always perfect, of course, and many of our predictions proved wrong--that is the nature of predictive journalism.

The truth, however, is that Red Herring, like many other companies in 2000, took a gamble and ultimately lost. With fierce competition from large players we felt we had to "double down or take our chips off the table." We chose to go for it. We raised tens of millions of dollars and built a large company--for too brief a time it turns out. We didn't exit and the fall from our previous height proved fatal. But this was a corporate failure--not a market failure (though the market was surely brutal for a time it was never worse that our first 2 years of operation). Herring got tied into a pretzel and couldn't untie itself, but the need for Herring remains. Tony is capitalizing on this with AlwaysOn, and we shall see how well Alex Vieux, who now owns the rights to the brand, does with "Red Herring."

I say that Om hints at the truth with his religion metaphor—there was certainly a premium on ideas in the late 1990s, while now there is a premium on execution. But today doesn't feel a whole lot different than the early days of Red Herring in the early 1990s--we are just exiting a recession and a war with Iraq. We are recovering from a stock market bust and a VC slowdown. And yet, new technologies, new ideas, and many, many talented people abound. In fact, I feel a whole lot more optimistic now then I did 10 years ago.

David Galbraith asks whether eBay is vulnerable to the syndication model. This will be interesting to watch. Check out Tribe.net for an eBay alternative.

I toured the Tarawa, which is docked in the San Francisco Bay, yesterday and met their impressive CO Jay Bowling. An amazing ship whose primary mission is to deliver US Marines to the theater. It is the first ship after 9/11 to allow public tours. If you are in San Francisco and want a tour of a lifetime, please visit it today--it is docked on the Embarcadero, just north of Pac Bell Park.

Regulating Telecommunications in California: Are We Losing the Signal?

A Debate Discussion with

James Conran,
Chairman, California Small Business Association
and
Raymond Gifford,
President, Progress & Freedom Foundation

Thursday, August 28, 2003
8:00 – 9:30 am

Westin St. Francis Hotel
335 Powell Street
San Francisco, CA 94102

$25 in advance, $30 at the door includes continental breakfast

Two for One Special: bring one guest for free

From The Wall Street Journal:

Our political class has once more turned back to attacking those power plants we do have, especially nuclear plants, rather than thinking creatively about ensuring the kind of redundant power delivery that can avoid blackouts. Yesterday's disruption was both inconvenient and costly, but it will be cheap at the price if it awakens our politicians to act before a larger power shortage strikes.

Dear R21 Readers & Subscribers,

As we predicted, Arnold Schwarzenegger is running for governor. He may be just what California, and the Republican Party, needs: a strong leader who is socially moderate and fiscally conservative.

However, he is from Hollywood and so may not always have the best interests of the Valley in mind. Therefore we are drafting an open letter to Arnold that will outline the top ten things he should do once he takes office. Please help us help Arnold. Comment on this piece or email us at with your thoughts on what his agenda should be. We'll take the best ones (as determined by us) and will do our best to make sure he reads it.

Should he focus on the budget, energy, workers comp, trial lawyer abuses, education, environment, onerous labor laws, cutting taxes, other? Tell us what you think the most pressing issues facing California are and what Arnold should do about it. Also, please make your recommendations feasible and politically sound--Arnold won't commit political suicide so it ain't worth suggesting it--and give me specifics: "fix education" while worthwhile is not a productive suggestion. We will err on picking issues that will have the greatest impact on the Bay Area--so hit us with your best ideas on how the state can help (or get out of the way) Silicon Valley grow.

If you received this by email you are doing to because you subscribed at www.r21online.com. To unsubscribe simply send a note to . To subscribe, visit www.r21online.com and enter your email in the appropriate box on the right.

Sincerely,
Your R21 editorial team

Some fascinating discussion about new forms of journalism and new business models to go along with. There is a lot of excitement about participatory journalism and microcontent and the new revenue streams, such as Google AdSense and micropayments--and how they combine to disintermediate publishers. With CafePress.com you don't even need a publisher or printer to produce a book.

This is the real threat to Hollywood and it is what those trying to create new media models and technologies should be focused on. It shouldn't be about re-distributing Hollywood's content and ideas. It should be about creating a parallel world of content, news, and information--that takes full advantage of these new modes and methods. There is too much discussion about fair use for content that has already been created, or is being created in LA and New York, and not enough about building an infrastructure for NEW artists, reporters, writers, musicians, filmmakers who want to avoid the traditional system all together and strive for success in a meritocracy, not an oligopoly.

Problem is that Hollywood and New York can make (some, very few) musicians, filmmakers, and writers rich, and this new system will only make you a living--if that. But that's pretty good: with writers and bloggers starting to make money outside of formal publishing, music and film will soon follow. It may not be as sexy as superstardom and many will continue to roll their dice for a chance at fame and fortune, but the great news is that we are beginning to see and end to the Boolean choice between starving artist and superstar, between struggling actor and mega-celebrity. This isn't about replacing Hollywood, it's about creating a new mode for creatives to function in.

Yet talk of disintermediation can go too far. There will also be intermediaries and the real question is how this all will get re-intermediated. New York and LA should be thinking about this, rather than filing lawsuits, but Silicon Valley may beat them to the punch.

In case you missed it, see WSJ.com - Six Degrees of Exploitation? for a fairly uninsightful take on the social network space. Despite very little in the way of real business activity, this has now made the Journal.

Well my first prediction was right--Arnold will run. Will my other predictions hold: will he win? and will be be better than we expect? I stand by what I said.

As it is an unassailable notion in today's society that the state needs to provide a "safety net," how we define that term is of great importance. Hoover's Jeffrey Jones suggests that the "net" should not be a ceiling, a nest, or an entitlement, but rather should do what real saftey nets were built for: to encourage and enable risk taking and achievement.

Ideals are often difficult to translate into policy, and, regrettably, the vision of a Great Society became the defense of a meager ration. Pre-reform welfare was more concerned with standards of living than with standards of success. In the end, the safety net became a trap for millions of families: a net over rather than under the impoverished, preventing them from achieving or even desiring self-sufficiency. The passage of welfare reform in 1996 led to a new notion of the purpose of welfare, one that acknowledges the presence of injustice in poverty but points toward responsibility and character as the only effective remedies.

The change in purpose requires a critical stance toward how the term safety net has come to be used in the debate over welfare reauthorization. Thus, a redefinition of safety net may prove useful in articulating and advancing the goals of welfare reform. Consider how safety nets are used on a daily basis. They are primarily a tool for training. Trapeze artists, gymnasts, and high-wire acts come to mind when one thinks of safety nets. The net is used in practice to build skills and encourage risk taking—an apparatus that helps artists and athletes learn and grow. But when performance time comes, the safety net is removed. It is no longer needed. The trainees have gained the skills they need to complete their stunts successfully without the net. Relying on the safety net is a means to an end, not the end.

In much the same way, welfare reform has altered our understanding of a safety net for the poor. Welfare is now seen as a tool for training the impoverished, not a nest of dependence or a barrier to performance. The reforms focus on giving recipients the education, training, and support necessary to leave poverty behind. Thus, success is gauged by whether those on welfare learn and apply new skills to obtain meaningful employment, decent housing, and a good learning environment for their children. As with all training, we expect welfare recipients who have the benefit of instruction not to fall back down when difficulties emerge. The lessons already bought and paid for will serve to empower the poor first to address trying circumstances on their own. If used properly the social safety net will remain available to support the acquisition of additional skills down the road.

Much of the discussion about how to fix healthcare goes in the wrong direction--as it attempts to put the burden for our health on the state or our employers. This is the problem, not the solution, argues Hoover's Scott W. Atlas, building from many of Milton Friedman's ideas.

First and foremost, decisions to purchase medical care should be made by the patient desiring the care. People must spend money directly for medical care in order to become cost conscious. The current system encourages patients to neglect cost when they use medical care. Income allocated to health insurance costs is given special tax treatment if provided by the employer. Why is this done uniquely for health care costs? Other essential items, including even food and clothing, are not offered this exalted status. This was basically an accident of history, when companies began offering health benefits to lure employees during World War II. Because the tax code did not specify that these benefits were taxable, they were not taxed. Years later, this was codified.

Is China a paper tiger? Hugo Restall, editorial page editor of the Asian Wall Street Journal, makes the compelling case that far from being an economic threat, China's economy is complimentary to the US. And, in fact...

You might even say that China is an economic colony of the U.S., with its currency so tightly pegged to the dollar and American companies using it as a base for their low-cost manufacturing.

That might seem like a strange idea given how nationalistic the Beijing regime is. But consider the government's actual behavior, and it's not hard to imagine that if Paul Bremer were running China instead of Hu Jintao, he'd be accused of exploiting the country's economy to benefit the U.S. and other Western countries. ...

... China is using the hard-earned savings of its people, which could have been devoted to building globally competitive companies, and is instead throwing them down 100,000 state-owned ratholes so that Chinese workers can produce artificially cheap products for American consumers to enjoy. The government is even taking away the dollars earned by selling these products and loaning them back to the U.S. at low rates so that those American consumers can keep on buying.