Bundling and the News
If I were designing a liberal arts college, I think I would start out with a year of mandatory classes dealing with basic concepts that everyone should be familiar with. I would probably include economics coupled with philosophy and history (in other words, I would try to teach people out of the gate to speak the language of economics while being aware of the many ways it is abused). I would want to cover basic quantitative concepts and some epistemology. Of course it would be a disaster, which is why no one will ever put me in charge of a college.
Anyway one sort of high-level concept in economics is that society should be designed to channel people's desires to productive purpose. It's not a particularly complicated idea, but it is not intuitive to everyone, and it comes up again and again. At a very high level, this is how capitalism and democracy are supposed to work. People who want to get rich are supposed to try to find ways to make products better or more cheaply, as opposed to joining the mob or whatever. People who want political power are supposed to seek elective office, not join the military. Basically you're confronting human desires that can lead to very bad results and you're tying them to behaviors that tend to advance public goals.
You can look at this in a much narrower way as well. Some industries are perhaps best organized as regulated monopolies. Then you design the rules so that the monopoly is required to serve some public purpose if it is going to be permitted to operate. This often amounts to cross-subsidization of favored populations—for instance, I have read that the U.S. Postal Service effectively subsidizes rural service with its much more profitable urban mail delivery. (I have not looked at the details of this, but it seems plausible to me.)
But of course the real trick is to find what Wall Street people call "regulatory arbitrage" opportunities, where you can get the good stuff without providing the socially beneficial stuff. Uber is famous for this. It operates as a taxi service that is magically free of taxi regulation. It is like someone opening a bank that is magically free of regulatory oversight. Of course if you think that taxi regulation or bank regulation is overall a bad thing, as some of my friends do, then maybe this is is actually an improvement on the status quo ante. But it means the various social goals embedded in those regulatory systems will lose their cross-subsidy and will have to be funded differently or simply abandoned.
Anyway my real point here is that the news industry operates on much the same principle. News consumers are largely driven by the desire for entertainment, and news essentially pays for itself through a bundling process. This happens at different scales. Every news story needs some spark of interest to draw attention, so you see bundling within news stories. But you also see media organizations that publish a lot of clickbait and use some of the revenues to finance investigative reporting or whatever. Buzzfeed is maybe the easiest example, since it basically justifies itself by citing this exact phenomenon, but I struggle to think of any media organization that doesn't do the same thing. Well... except for the media organizations that don't seek to inform at all. In that case entertainment is a pure product, or perhaps it is used as a vehicle for propaganda rather than information. (These are blurry categories that obviously overlap quite a bit.)
The traditional TV network model, by the way, was very explicit about all of this. If a network had dropped its informative news reporting, it would have risked losing its insanely profitable broadcast license. The advent of cable television has slowly eroded the connection between broadcast licenses and profits, and it has allowed entrants to the market who make no pretense of informing their viewers about anything. (The price Congress extracted was the creation of CSPAN, which is financed by the cable companies. I actually think CSPAN is pretty good, but you can certainly question whether its existence is worth the price we have paid. Then again, it's also fair to question whether network news reporting was ever very good.)
The same unbundling has roiled the newspaper industry. This happened early on with classified ads, which were a major revenue source for newspapers but which quickly slipped out of their grasp once Craigslist came along. But it didn't stop there, and we may be hurtling toward a world of complete unbundling. This is what Facebook sought to do with the news—you could read and share a clickbait story from a media organization without paying for it or caring precisely which media organization provided it. Facebook would take the ad revenue, and the news organization would get next to nothing to spend on its hard news reporting. The natural consequence is for the bundling to be pushed down to the story level, where it can't be stripped out by aggregators. I don't know how you would quantify this, but I notice that stories shared on Twitter almost always have some "juicy" tidbit to draw the clicks. (But this is partly a Trump era phenomenon, see below).
Finally, consider the way Trump exploited this dynamic. For all of the ineptitude of his campaign, he consistently provided one thing that no other candidate could: entertainment, and lots of it. This I believe is Trump's true genius. Would you rather listen to Hillary Clinton talk about free college or watch Trump humiliate Jeb Bush in some bizarre psychosexual ritual? It's not even close! Reality TV honed Trump's skills to a ridiculous degree. You see this in the way he communicates—his statements are almost devoid of meaning, because meaning is beside the point. The extremely annoying "don't take him literally, take him seriously" formulation elides this by pretending that there's some underlying coherence to his words. There isn't. They are designed to do nothing more than keep you around through the commercial break.
Anyway I don't have any constructive suggestions here. We are doomed by the way our desire for entertainment has become unbundled from our desire to live in an informed society.
Anyway one sort of high-level concept in economics is that society should be designed to channel people's desires to productive purpose. It's not a particularly complicated idea, but it is not intuitive to everyone, and it comes up again and again. At a very high level, this is how capitalism and democracy are supposed to work. People who want to get rich are supposed to try to find ways to make products better or more cheaply, as opposed to joining the mob or whatever. People who want political power are supposed to seek elective office, not join the military. Basically you're confronting human desires that can lead to very bad results and you're tying them to behaviors that tend to advance public goals.
You can look at this in a much narrower way as well. Some industries are perhaps best organized as regulated monopolies. Then you design the rules so that the monopoly is required to serve some public purpose if it is going to be permitted to operate. This often amounts to cross-subsidization of favored populations—for instance, I have read that the U.S. Postal Service effectively subsidizes rural service with its much more profitable urban mail delivery. (I have not looked at the details of this, but it seems plausible to me.)
But of course the real trick is to find what Wall Street people call "regulatory arbitrage" opportunities, where you can get the good stuff without providing the socially beneficial stuff. Uber is famous for this. It operates as a taxi service that is magically free of taxi regulation. It is like someone opening a bank that is magically free of regulatory oversight. Of course if you think that taxi regulation or bank regulation is overall a bad thing, as some of my friends do, then maybe this is is actually an improvement on the status quo ante. But it means the various social goals embedded in those regulatory systems will lose their cross-subsidy and will have to be funded differently or simply abandoned.
Anyway my real point here is that the news industry operates on much the same principle. News consumers are largely driven by the desire for entertainment, and news essentially pays for itself through a bundling process. This happens at different scales. Every news story needs some spark of interest to draw attention, so you see bundling within news stories. But you also see media organizations that publish a lot of clickbait and use some of the revenues to finance investigative reporting or whatever. Buzzfeed is maybe the easiest example, since it basically justifies itself by citing this exact phenomenon, but I struggle to think of any media organization that doesn't do the same thing. Well... except for the media organizations that don't seek to inform at all. In that case entertainment is a pure product, or perhaps it is used as a vehicle for propaganda rather than information. (These are blurry categories that obviously overlap quite a bit.)
The traditional TV network model, by the way, was very explicit about all of this. If a network had dropped its informative news reporting, it would have risked losing its insanely profitable broadcast license. The advent of cable television has slowly eroded the connection between broadcast licenses and profits, and it has allowed entrants to the market who make no pretense of informing their viewers about anything. (The price Congress extracted was the creation of CSPAN, which is financed by the cable companies. I actually think CSPAN is pretty good, but you can certainly question whether its existence is worth the price we have paid. Then again, it's also fair to question whether network news reporting was ever very good.)
The same unbundling has roiled the newspaper industry. This happened early on with classified ads, which were a major revenue source for newspapers but which quickly slipped out of their grasp once Craigslist came along. But it didn't stop there, and we may be hurtling toward a world of complete unbundling. This is what Facebook sought to do with the news—you could read and share a clickbait story from a media organization without paying for it or caring precisely which media organization provided it. Facebook would take the ad revenue, and the news organization would get next to nothing to spend on its hard news reporting. The natural consequence is for the bundling to be pushed down to the story level, where it can't be stripped out by aggregators. I don't know how you would quantify this, but I notice that stories shared on Twitter almost always have some "juicy" tidbit to draw the clicks. (But this is partly a Trump era phenomenon, see below).
Finally, consider the way Trump exploited this dynamic. For all of the ineptitude of his campaign, he consistently provided one thing that no other candidate could: entertainment, and lots of it. This I believe is Trump's true genius. Would you rather listen to Hillary Clinton talk about free college or watch Trump humiliate Jeb Bush in some bizarre psychosexual ritual? It's not even close! Reality TV honed Trump's skills to a ridiculous degree. You see this in the way he communicates—his statements are almost devoid of meaning, because meaning is beside the point. The extremely annoying "don't take him literally, take him seriously" formulation elides this by pretending that there's some underlying coherence to his words. There isn't. They are designed to do nothing more than keep you around through the commercial break.
Anyway I don't have any constructive suggestions here. We are doomed by the way our desire for entertainment has become unbundled from our desire to live in an informed society.
posted by James | 9:03 AM
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