The weakness if the crowd: Part 2

I wrote these two posts completely independent of one another, only to realize there is a common thread connecting them - just as there is a common thread connecting the two articles below.

 Something's going on here. 

1.http://www.salon.com/2014/08/31/why_uber_must_be_stopped/

2.
http://mobile.nytimes.com/2014/09/02/opinion/david-brooks-the-revolt-of-the-weak.html?emc=edit_th_20140902&nl=todaysheadlines&nlid=48794199&_r=0&referrer=

Here we see the weak working to tear down the rules and institutions that society has erected, leading to disorder, chaos, entropy.

In Uber's case it is the Wildwest mentality of unfettered and unregulated competition. A business model emerged so quickly that legislative powers had no time to implement a regulatory environment for it to operate within. And since ethics are a function of cultural relativism - which is to say there is no commonly shared set of them available to operate from - the competitive landscape is reduced to a bare-knuckle brawl.

Now take a look at Putin, Syria, Somalia, and other "medium-sized" conflicts playing out on the world stage in the New York Times article. The underlying dynamic is eerily similar. With no Imperial body to stop them nationstates, or tribes within them more to the point, are behaving just as they please, with complete disregard for any rational, ethical limitations. In other words they're behaving in an unfettered, Wild-west, no-holds-barred fashion -- just like Uber.

I do not believe this is a coincidence. People who feel disenfranchised, with very little or no access to the system that leads to great success, feel as if they're left with no choice but to co-opt the system.

The weakness of the crowd: part 1

The economic hollowing out of our services-based economy that defines the American economy of the 20 century is somewhat analogous to the extractive practices that drive the economies of countries that rely heavily on mining and other extractive practices. 

In this case the resource that is being mined is the relative wealth that our nation affords even an average worker. With a median household income that is greater than most developed nations in the world, we can afford discretionary spending at a level that most countries can only dream of. This means that so-called luxuries like cable TV, high speed Internet service, and vast levels of public services at the local state and national level have come to be considered near necessities for most households. This provides a juicy target for dozens, hundreds, or even thousands of entities, which are in a position to make pricing and thereby extract incrementally more and more from every household. 

With so many entities reaching into their pockets, no single individual has any chance of taking on even one of the large entities that is doing it. This is partly a problem of isolating a target to go after. And then developing a coordinated assault on that target to try to drive prices down. There are so many targets to go after and so many households to coordinate, how does one possibly begin?

This is somewhat analogous to those wildlife documentaries where the shark tries to attack a school of fish but can't single out a target to go after, so he goes away hungry. 

Companies, municipalities and other entities have come to understand this. They have come to understand that they needn't rise pricing exorbitantly. They just need to keep raising their pricing and coordinating their lobbying efforts to ensure that policy continues to move favorably in their direction.

If they all do it together it leaves the hapless individual consumer with little recourse to fight them. As a result individuals are reduced to price takers and end up being nicked away at by large entities. 

These same entities also are organizing themselves to back political policy and legislation which works in their favor. Again any single individual has very little power to fight against these coordinated assaults. And that assumes that individuals are even aware that these assaults are taking place, which in most cases they are not. So the same entities are in effect creating the rules that enable their ability to continue to hollow out the middle of our economy. 

Take for instance taxation. The prevailing political sentiment is that by lowering taxes we create the possibility for new jobs because business owners will have more money to invest in their businesses which will lead to creation of new jobs. 

Meanwhile state local and federal government have less tax revenue to deploy on public works and infrastructure projects which are the very things that lead to new jobs as well as improved public infrastructure, both of which benefit society as a whole. 

These types of investments are not done ultimately to increase any single entity's profitability. They benefit society as a whole.

Businesses, on the other hand, do not operate this way and therefore the monies that they do attract only serve to improve their own profitability, often at the expense of society as a whole. Cumulatively this has been done at a great cost and detriment to our public infrastructure as a whole over the last few decades. 

How many of us were aware of or involved in the discussions around setting pension levels for public employees in our communities, as they were taking place? 

How many of us were given the opportunity to have a say voice our opinion or vote in favor of other similar decisions which over time are coming to have a catastrophic effect on our communities?

How many people actually understand what "Net Neutrality" means, or have an opinion about whether or not the federal government should support it? For those few folks who do,what chance could they possibly have in swaying federal opinion, when they are up against millions of dollars spent by large Internet, telecomm and cable companies funding professional lobbyists?  

In all these cases there have been thousands of small, incremental decisions that move in favor of these entities that seek only profit maximization. No one of them could be viewed as significant on its own for the most part. But collectively their effect has been cumulative and devastating for the average individual.

What can be done?

Aereo and our confused Justices confuse me

“Your technological model,” Chief Justice John G. Roberts Jr. told Aereo’s lawyer, “is based solely on circumventing legal prohibitions that you don’t want to comply with.”

“What disturbs me on the other side,” Justice Stephen G. Breyer said, “is I don’t understand what the decision for you or against you when I write it is going to do to all kinds of other technologies.”

- New York Times: Justices Skeptical of Aereo’s Business

And so it went during yesterday's Supreme Court hearing of the case, ABC vs. Aereo, in which the presumable fate of the entire free-to-air television broadcast industry will be decided. The background of this case has been well covered by the media (and not just TV media) in the months and weeks leading up to yesterday's hearing. At issue is whether tech startup Aereo has the right to capture free-to-air tv signals and store them for later use by its subscribers, who pay a monthly fee of $8. The cable companies and the "big 3" tv networks are all crying foul, saying that Aereo's practice constitutes theft of copyrighted material, and if they want to rebroadcast this content they must pay the content owners.

For its part, Aereo says it is not violating anything. It is simply leasing an antenna and a DVR to willing subscribers, who will gladly pay the $8/month fee in order to get the local broadcast signals delivered to their home without the hassle of installing and managing their own antenna on their roof.

And the justices are confused as all getout because to them it looks like a flimflam scam aimed at exploiting a loophole in order to mine the airwaves for free and sell the resulting product. And they're worried about the implications this case may have for other technology innovations, particularly in the area of cloud computing (which they obviously don't understand, either - but more on that in a minute).

So here's my take on Aereo's business model and this case: Aereo wouldn't even exist were it not for the fact that most households do not have adequate access to the free signals that the broadcasters are required to provide. By failing to provide a signal that can be easily received by many households, the television broadcasters are able to package and resell their "free" local broadcasts to cable television carriers, who then charge their subscribers to view these broadcasts. It is the broadcasters, not Aereo, who are exploiting a legal loophole by appearing to comply with the letter of the law by airing their broadcasts for free, yet still managing to charge the majority of households to view them. 

Free means free, right?

The basic premise of broadcast TV is based on a covenant between the government, the broadcasters and the American public. The federal government owns the rights to the entire radio spectrum, which is considered a public good. The FCC manages access to the airwaves, making portions of the radio spectrum available for commercial, public, and private use. Because it is a public good, and because it has value, the FCC charges for access to some portions of the spectrum, including the part used for television broadcasts. It made a deal with the major tv networks way back when, basically saying the networks could have free access to the broadcast spectrum if they in turn made their broadcasts freely available to the public. As a result we got to watch All In The Family, Ed Sullivan and Bonanza for "free" - along with an unending barrage of content from Madison Avenue's finest (i.e., commercials).

Theoretically you can still put an antenna on your roof, run a wire from it to your television, and watch for free whatever shows your local tv stations are broadcasting. I say theoretically because the ability to do this in the digital tv era has become a bit challenging. TV signals require line of sight access, and residents living in the canyons of large urban areas like New York City often cannot get the line of sight access needed to receive these free signals. As a result if they want to watch local tv news they need to pay their friendly cable provider an additional fee for the local station package. Same thing goes for a large number of the tv-watching households across the US (did you happen to notice the rabbit ears sitting on top of your friend's 60" plasma when you were over watching the Superbowl? Me neither).

When broadcasters were forced to dump analog signal broadcasts and go 100% digital a few years ago it made matters worse because unlike analog signals, digital is a one or zero - you either have the signal or you don't (remember watching those "snowy" black and white shows?). And many households, particularly in suburban areas located several miles from the broadcaster or otherwise obscured due to buildings or geography, cannot in practice receive the free signals they are supposedly entitled to.

Enter Aereo

Aereo came up with a way to leverage some interesting advances in antenna technology, giving them a way to build a very capable, low-cost, dime-sized antenna, that they could use to pull down these free-to-air broadcast signals for customers who wanted to view their local stations' signals, but didn't have access to them. Aereo determined it could set up an antenna farm with thousands of individual antennas, each hooked up to a DVR, and use these to capture the local tv broadcasts, store them, and then give its customers access to the stored content via the internet using TCP/IP transmission. So now, instead of me having to figure out how to get an antenna on top of my apartment building's roof in Manhattan, I could just lease an antenna from Aereo, and skip having to put one on top of my building and running a wire from there to my tv, or having to deal with my landlord at all. Cool.

So: by the convenant between the US federal government and the tv broadcasters, everyone should have the ability to freely receive via an antenna in their home the complete suite of content broadcast by local television broadcasters, and, via a wire connecting their antenna to their tv set, watch this content on their tv for free. They should furthermore be able to save this broadcast content for viewing later on a DVR if they so choose. The broadcasters, for their part, have the right to include a specified number of minutes of advertising in their broadcasts; and can charge advertisers whatever the market will bear for inserting these ads in the broadcasts.

In the event that an individual doesn't wish to install and maintain their own antenna and dvr, or their viewing location is unfavorable for receiving the free-to-air signal from the broadcasters, why shouldn't that invidiual be permitted to lease an antenna and dvr from someone who is in a favorable location for receiving the signal? In effect that is what Aereo is doing. And instead of running a physical wire from the antenna farm to each subscriber's residence, Aereo is using the near ubiquitous TCP/IP data transmission capability of the internet to move the stored programming to a subscriber's home.

The US Supreme Court Justices are confused - but why?

The "other technologies" referenced by Justice Stephen Breyer include vague references to cloud computing, and some nebulous concern that the popular business models in use by other existing companies like Apple and Amazon could somehow be disrupted by this case if it ends up in favor of Aereo.

The network broadcasters and the cable companies both claim that what Aereo is doing amounts to theft of copyrighted material, and a violation of the laws restricting retransmission of broadcast content to public audiences. If you look at this closely, however, it doesn't quite add up.

Apple's iTunes and cloud-based music collections are not apt comparisons to what Aereo is doing. Sony and other owners of copyrighted music never intended to make their content available for free. You pay Apple for the music in your iTunes collection, and Apple pays the owner.

Radio stations pay a small fee to the copyright holder of every song they play over the air. And technically if you're in a bar (a "public place") listening to a song on a jukebox or over the air the bar is supposed to pay for making that song available to you because it is rebroadcasting the content for profit (I say "technically," because policing this has historically been a challenge).

All Aereo is doing is making available to the consumer a signal that:
a) the broadcasters had intended for the consumer to have for free; and
b) the consumer either cannot access due to physical inability to get the signal; or choose not to access for whatever reason
They are doing this by setting up a dedicated antenna, dvr and wire, for each of their customers, and leasing access to this equipment. That's it. The end result is exactly the same as it would have been had the customer been willing to set up their own antenna and DVR - assuming that they are in an area where their antenna would be able to receive the signal that they are supposed to be able to receive.

The revenue model from the broadcaster's position is not affected at all - they still have the right to charge advertisers whatever the market will bear for including ads in their free broadcasts. If anything, Aereo's model could end up increasing the number of viewers of free-to-air television, by capturing viewers who do not have cable tv, and are otherwise unable to receive the signal in their homes.

Conclusion

What Aereo is doing does not violate any copyright or rebroadcast agreements. It also seems to me that if Supreme court holds for Aereo in this case it could have quite a disruptive effect on the broadcast television industry. But it's the right thing to do, since it is consistent with current laws, and would benefit consumers.

As for the Justices and their comments, in my opinion the tenor of yesterday's discussion had more to do with positioning, and less to do with the actual facts and merits of Aereo's argument. At least, that's what I hope. Otherwise, I have great concerns about the ability of our highest court to understand and correctly evaluate the implications of other more complex technological developments that are surely coming their way. 

What happened to the middle?

We live in a society that worships excess and lionizes those who achieve it with near-total disregard for how they did it, yet marginalizes dedicated effort and success of the plodder. This is a form of social dissonance that has become the new normal. Everyone knows that not everyone can be the winner - that was the whole point of the middle class; of large corporations; of the real working man or woman.

Being average was just that - average. Statistically, by definition, that's what most people are. So how is it that we've become completely disenchanted with anything so pedestrian as being average? When did winning at all costs become an imperative; ethics, kindness, and personal integrity be damned? And when did we decide that if you were among the unfortunate masses of averageness, you would be doomed to a stagnant job in a stalled career, with zero prospects of advancement, no salary increases at all, and the constant cloud of being laid off - possibly for good - looming ever overhead?

It's interesting that companies are scrambling to keep up with technology, citing the importance of being innovative with their products and services, while they are ignoring or laying off the very employees who are best positioned to help them do it: middle aged, stalled middle managers. Instead they look to their twenty-something or thirty-something rising star MBAs, who often have little or no business experience outside the company they hired into right out of grad school, and even less life experience. Meanwhile a fifty-something middle manager with twenty or thirty years of life and work under his belt is toiling away in some corner, hoping his job isn't outsourced or turned over to some new-hire half his age as a way of saving the company a few bucks.

The missing piece, it seems to me, is that companies talk a lot about the need to be innovative and creative, and how much they value that "out of the box" thinking we hear so much about. Yet if you look at the people charged with doing the work where that sort of thinking would be the most valuable, they are often completely ill-equipped. Young, ambitious, socially adept MBAs are also often linear thinking. Focused sometimes to the point of narrow mindedness, these are conservative achievers who's very success is a function of methodical dot connecting, not quantum leaps of imagination.

What's needed is a way of defining both a company's creative needs from a business standpoint, and the employees with the requisite background, talent and skills to fulfill them. And then add to that a recognition and rewards system that values true innovation and creativity, regardless of where it comes from in ther enterprise.

What would have to change in order for such a system to exist in a large, mature company?