Why Profit Doesn't Work in the Media Business

Although I'm generally supportive of the profit incentive, I think the following clip shows one example of how it can go entirely wrong:

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Moment of Zen - Roger Ailes Defends Fox News
http://www.thedailyshow.com/
Daily Show Full Episodes Political Humor Health Care Crisis

The basic defense of the profit incentive is that you're almost always likely to getter better results when you incentivize good behavior than when you force it. Profit supposedly sets up an incentive system that induces businesses to serve the public interest as much as possible (of course, no system is perfect). Ideally, if a business makes a product that creates a lot of value for people, then that business makes a lot of profit, and investors come in to supply money to the company so that it can continue to finance its society-benefitting ways. Customers get what they want, and the business reaps the reward of going through all that effort. Everybody's happy.

Of course, this system isn't foolproof; for it to work, a couple key things must happen (at least). First, consumers need to be able to represent an effective check on business. If people in general can't tell that they're getting duped, or swindled, or cheated, or they have no alternatives (i.e. monopoly), then businesses can gain profits without actually benefitting the public. Second, it must be the case that if individual consumers are getting what they want, then society should also be better off. In other words, individual interest can't be opposed to a broader, collective interest.

The problem with profit in the media business is that neither of these criteria are satisfied. First of all, for the average American citizen getting blasted with a veritable fire hose of media all day, it's very hard to tell what's what. As David Foster Wallace puts it, in attempting to grapple with the Total Noise, we find ourselves "dealing with massive, high-entropy amounts of info and ambiguity and conflict and flux; [the alternative to narrow arrogance and pre-formed positions is] continually discovering new areas of personal ignorance and delusion. In sum, to really try to be informed and literate today is to feel stupid nearly all the time, and to need help." Because the facts can be so gray and ambiguous, and because everyone needs help figuring the truth out, news organizations have the opportunity to simultaneously pose as a guide through this media mess and produce a narrative of its own. Fox is especially good at this, which is one of the reasons why, as Mr. Ailes put it, Fox is "winning." Fox News runs such a weasely operation that it holds journalistic credibility with enough people to put the "Fair and Balanced" graphic on air with a straight face.

In a lot of cases, though, Fox News viewers know that they're hearing only what they want to hear. In fact, that's precisely why they watch it. It's called "infotainment." The problem is that in a democracy infotainment poses a serious externality. It results in polarization, passion-driven protests, and, worst of all, a crippling inability to have a serious discussion about hard choices. Our country is worse off—not better off—if millions of Americans decide they'll watch the version of the news they like the best.

Now comes the point where, after critiquing the existing system, I'm supposed to do the responsible thing and supply an alternative. Unfortunately, though, when the execs are so unapologetic about their business strategy there's not much you can do. I can't conceive of a system that would actually incentivize "fair and balanced" reporting, and companies will just find ways around regulation (which is subject to all the terrible terrible pitfalls described in Public Choice Theory). It seems that the only viable solution is to somehow effect a change of heart in the way the media execs see their business. Somehow someone has to convince them to temporarily forgo the large profits they gain from the status quo in order to change for the common good. We need a call for a higher standard, a call to service and stewardship and morality.

Creative Writing 101 by Kurt Vonnegut

[I'm posting this here for my own personal archives. I think both writers and readers can benefit from this advice, and plus it's fun to read in and of itself.]

1. Use the time of a total stranger in such a way that he or she will not feel the time was wasted.

2. Give the reader at least one character he or she can root for.

3. Every character should want something, even if it is only a glass of water.

4. Every sentence must do one of two things-reveal character or advance the action.

5. Start as close to the end as possible.

6. Be a sadist. No matter how sweet and innocent your leading characters, make awful things happen to them-in order that the reader may see what they are made of.

7. Write to please just one person. If you open a window and make love to the world, so to speak, your story will get pneumonia.

8. Give your readers as much information as possible as soon as possible. To heck with suspense. Readers should have such complete understanding of what is going on, where and why, that they could finish the story themselves, should cockroaches eat the last few pages.

The greatest American short story writer of my generation was Flannery O’Connor (1925-1964). She broke practically every one of my rules but the first. Great writers tend to do that.

Source: http://fictionway.com/2009/03/22/creative-writing-101-by-kurt-vonnegut/

The Power of Corporations

Google has announced it will exit China unless the government stops censoring its search engine, and now everyone's talking about it (see, for example, these good articles at The Economist, The New York Times, and The Wall Street Journal).

Google's actions come in response to hackers who attempted to breach the Gmail accounts of Chinese human rights activists. Now human rights activists around the world are celebrating. To show solidarity, many Chinese have laid flowers outside Google's office.

What strikes me about this development is that it dramatically demonstrates how corporations can function as powerful political actors. We're already very familiar with the rapacious-political side of corporations, but Google's case suggests that there also exists a principled-political side. Whether or not Google is truly acting on principle, as it claims, is besides the point; the move still forces China to confront its human rights problems, which is really more success than U.S. diplomacy can speak for.

Thus, in this incident we see how corporations can pick up where states fail. The U.S. government can wheedle and reprimand and scold the Chinese government indefinitely, but when it comes to business, money talks. Plus, corporations are more politically agile than governments, which are weighed down by treaties and concerns over trade relations.

In the coming decade, I expect corporations to play a larger role in internatinal affairs. They have weight and power and they can use those for good as well as for ill. Please, corporations of the next decade, don't be evil.

More Drama In Argentina

I used to think that modern-day heads of state operated within the basic confines of their constitution, but that was before I read Mary O'Grady's article, "Constitutional Showdown in Argentina," in the Wall Street Journal.

In what seems to be traditional Argentine autocratic fashion, the president, Cristina Kirchner, has sacked the central bank president, even though the constitution specifically forbids it. She has issued a decree to amend the bank's charter to force him out legally, but the court system is ruling in favor of the central bank president. Here, as O'Grady puts it, "the constitutional battle lines were drawn."

This development is very serious. What little economics I have studied has repeatedly emphasized the importance of maintaining the independence of the central bank—lest it be exploited by the government for easy money, which is exactly what has happened throughout Argentina's rocky history, and exactly what President Kircher seems to be doing now. Just as Argentina is getting its wind back after the financial meltdown of 2002-2003, President Kirchner seems to be poised to repeat the mistakes of the past.

More fundamentally, it seems Argentines have a hard time figuring out constitutional democracy. Military governments have suspended the constitution numerous times as they've come and gone. Perón came up with his own constitution when he came to power. Between 1999 and 2003 Argentina went through 5 presidents. In their press conferences, you can see that Argentines demonstrate an overt concern with following democratic principles; they talk about democracy in the abstract, as a set of values to live up to, in a way that reminds me of a recovering alcoholic who talks about the virtues of sobriety after hitting rock bottom.

Amidst this institutional fragility, a "constitutional showdown" is the last thing the country needed. Let's see how they pull through.

[For those who understand Spanish, you can find a video of President Kirchner defending her actions here.]