The Future Will Soon Be Here

I repost Ted Gioia’s Substack post here because I couldn’t have said it all better myself. As he outlines it,  this has been tuka‘s approach all along. The one thing he doesn’t address is the winner-take-all aspect of creative markets –  why all these YT revenues end up going to a few mass influencers or curators. Blockchain and tokenization are necessary tools to decentralize and distribute rewards for value created.

A Creator-Driven Culture is Coming—and Nobody Can Stop It

By Ted Gioia

“Victory is assured!”

I’m talking about victory for creative professionals—musicians, writers, visual artists, and others who have been squeezed by the digital economy.

You’re probably surprised. Some people think I’m the Dr. Doom of the music scene. And it’s true, I’ve made a lot of depressing predictions over the last few years, Even more depressing, many of these predictions have already come true.

I’ve told horror stories about musicians who lost their gigs during the pandemic, and also saw their music royalties collapse as the audience shifted to streaming. I’ve talked about journalists fired from downsizing newspapers. And filmmakers who can’t get funded to make a movie unless a Marvel superhero is named in the title .

But now I want to tell you the rest of the story. Because the next phase in the cycle is filled with good news.

Victory is assured.

Let’s start by looking at the music business, where the squeeze has been the worst.

Whenever I do a forecast, my first step is to follow the money. And the adage that money talks has never been truer than right now. Those dollars are telling an amazing and unexpected story. Word on the street is that record labels are offering far more attractive terms to musicians than ever before.

“Here’s my craziest prediction. In the future, single individuals will have more impact in launching new artists than major record labels or streaming platforms.”

In the old days, musicians were lucky to get 15% of revenues, but I’m now hearing increasingly about deals that give artists a 50% cut, and in some instances allow them to regain ownership of their master recordings at a future date. The music moguls are positively generous—and (as we shall see) for structural reasons in the business that aren’t going away.

And it’s not just major labels giving more money to musicians. Take a look at Bandcamp, which lets musicians collect almost 90% of revenues from vinyl sales. And I’m hearing constantly from techies and entrepreneurs who are working on similar artist-centric business models. We are only in the early innings of this new game, but the shift is already enough to force huge concessions from legacy music companies.

Artist-friendly platforms are the future of music. And other creative pursuits as well—my own platform, Substack, is also allowing creators to keep close to 90% of revenues. This has spurred a huge talent migration from old media, and not merely for writers—you can find almost every kind of creative professional on Substack, from cartoonists to photographers.

For 25 long, hard years, creative professionals have been told that you must give things away for free on the Internet. But not anymore. Alternative economic models are not only emerging, but are propelling the fastest-growing platforms in arts and entertainment.

This is not only shaking up highbrow and popular culture, but capturing the attention of the next generation of tech visionaries—which is why, in the last year or so, I’ve been constantly approached by startups asking me to evaluate their business plans. This is unprecedented. It simply didn’t happen before the pandemic. But not only are these entrepreneurs trying to figure out what artists want, but they’re actually relying on creator wealth maximization as the focal point for their businesses.

In general, these young techies are smarter than the folks running the music business right now. (That’s a subject I want to discuss at a later date—I call it my ‘idiot nephew theory’ of the music business. But it has to wait.) Of course, many of these entrepreneurs are dreamers who will never go anywhere. That’s always the case with entrepreneurs. But some will succeed, and in a meaningful way.

In fact, it’s inevitable—and for the simple reason that the old institutions have stopped investing in the future. The new guard will take over because the old guard got weak and lazy.

Why is all this happening? Let’s go back to look at the music situation, because this helps us understand the larger picture.

Record labels are getting more generous because they don’t have a choice. They destroyed their own power base and source of influence. They stopped investing in R&D and new consumer technologies back in the 1980s. Twenty years later, they stopped manufacturing and distributing physical albums—and even when vinyl took off, they were asleep at the wheel. Over the same time period, they lost their marketing skills, trusting more in payola and influence peddling of various sorts.

But that’s just a start. Over a fifty-year period, record labels relentlessly dumbed-down their A&R departments. They shut down their recording studios, and let musicians handle that themselves—often even encouraging artists to record entire albums at home. Then they let huge streaming platforms control the relationship with consumers. At every juncture, they opted to do less and less, until they were left doing almost nothing at all.

The music industry’s unstated dream was to exit every part of the business, except cashing the checks. But reality doesn’t work that way. If you don’t add value, those checks eventually start shrinking.

The simple fact is that the legacy music business is living off the past—and will continue to do so until the copyrights expire. For a few more years, they will collect royalties on old songs, and make money on reissues and archival material. They know themselves that they have lost control of the future of music. That’s why, if they have spare cash, they use it to buy up catalogs and publishing rights of music from back in the day. Their favorite artists are dead artists.

But this is not a long-term game. It’s a death wish.

The major labels would like to own the music stars of the future, but they won’t. They would like to act greedy and put the squeeze on the next generation, but they can’t. They simply don’t have the leverage. And never will again.

And who will win if record labels lose? You think it might be the streaming platforms? Think again—because that’s not going to happen. Spotify and Apple Music are even less interested than the major labels in nurturing talent and building the careers of young artists.

Here’s my craziest prediction. In the future, single individuals will have more impact in launching new artists than major record labels or streaming platforms.

Just consider this: There are now 36 different YouTube channels with 50 million or more subscribers—and they’re often run by a single ambitious person, maybe with a little bit of support help. In fact, there are now seven YouTube channels with more than 100 million subscribers. By comparison, the New York Times only has nine million subscribers.

“How could a Substack column outbid major media outlets for new talent? But not only can it happen, it will inevitably happen.”

Most people don’t stop and think about the implications of this. But just ponder what it means when some dude sitting in a basement has ten times as much reach and influence as the New York Times.

If you run one of these channels and have any skill in identifying talent, you can launch the next generation of stars.

And not just in music. This works for everything—comedy, dance, animation, you name it.

Consider the case of MrBeast. Many of you have no idea what I’m talking about, but you need to find out—because MrBeast (or people like him) are going to change popular culture, whether we like it or not. MrBeast, for a start, runs 18 YouTube channels with more than 200 million total subscribers. He now has his videos translated into four languages: Spanish, Portuguese, Hindi, and Russian.

What does he do? I’m no expert on MrBeast, but I’m told he’s a good dude, and gives away a lot of money—huge sums, to be blunt. And he can afford to do it, because YouTube channels are low-overhead operations with enormous cash generation potential.

Oh, I forgot to mention that MrBeast is looking to raise capital from financial investors. He claims that his business is worth $1.5 billion, and may sell 10% to get $150 million to fund his future plans.

I’m not even beginning to pretend that MrBeast will use this money to get into the music business. But he might. And if he doesn’t, someone else like him will.

MrBeast has got the cash to shake up the music business—and if he doesn’t, someone like him will
I note that MrBeast only ranks number five in YouTube channel subscriptions. There are other people like him, or will be soon, and they are much better equipped to launch a new music act than any of the major labels.

That’s why musicians can make more money when the distribution model shifts from bloated record labels with huge overhead to alternative web-based platforms. I expect that deals for artists on these web channels will be more like 50/50. MrBeast is known for his generosity, but even if he wasn’t, his business model is much more flexible than anything Sony or Universal Music could ever dream of. These new platforms can afford to offer better terms to creators, and almost certainly will—because if they don’t someone else will.


This didn’t take place during the first wave of YouTube channels, because these influencers (I hate the term, but it’s appropriate in this setting) were focused on making themselves into money-making stars. But the next phase of growth for these people is brand extension, and that’s going to turn them into talent scouts.

I’m focusing on YouTube channels here, but the same story could be told about podcasters—or any other individual with a lock on an audience in the tens of millions. Consider them as the equivalent of the Ed Sullivan Show in the old days. The host of this long-running TV show didn’t have much talent himself, but it hardly mattered—Ed Sullivan was the curator who introduced America to Elvis Presley, the Beatles, and other rising stars. That kind of thing will happen again, but via a web channel or alternative platform.

These individuals can do absolutely everything a record label currently does, and do it better—they can launch new stars, get them instant visibility and gigs, generate millions of views for new songs, attract endorsement deals, etc. The few things they can’t do in-house (for example, press vinyl records) can be easily outsourced.

The same thing will happen in publishing. I’m already seeing a few of the more popular Substack writers using their huge subscriber base to launch the careers of other writers. By my calculations, this can be even more profitable and impactful than a book contract with a New York publisher—benefiting both the sponsoring writer and the new talent.

In fact, I might move in this direction myself. It’s too early, but 2-3 years from now I might start scouting out talented young writers or podcasters and feature them here in The Honest Broker. Everything depends on subscription numbers, but it’s possible that I could pay better than the New York Times or the Wall Street Journal.

At first blush, this seems impossible. How could a Substack column outbid major media outlets for new talent? But not only can it happen, it will inevitably happen. It’s the same story as in music. The old guard has stopped defending its base business, and everything is either up for grabs now—or will be very soon.

Newspapers have lost enormous power over the last twenty years. They have lost subscribers. They have lost ad revenues. They have even, in many instances, lost credibility and respect. Up until now, this has hurt writers—who depended on the newspapers for assignments and pay checks. But we are now arriving at the point where the trend reverses.

And this reversal opens up huge opportunities and income potential for smarter, nimbler operators.

I could give many other examples. What I’m describing is also true for Hollywood movie studios, book publishing, and every other field where the old guard has become arteriosclerotic and inflexible.

Okay, let me summarize the whole thing in a diagram.

[Note: tuka is in the blue circle here.]

There’s an elegant irony here. The very same forces putting the squeeze on creators actually serve to accelerate the happy next phase.

This is one reason why I believe karma is at work in the universe. If you run a business that depends on creativity, you can’t punish the creators without consequences. Sometimes it takes a while for the cycle to play out, but it always plays out the same way.

There are many aspects of this story I haven’t covered here. There are all sorts of Web3 angles, and there’s also a story to be told about how platforms such as Spotify will pay a price for squeezing musicians to subsidize their entry into podcasting and other ancillary businesses. But we can look at those on another occasion.

For the time being, I just want you to keep your eyes on the prize. And remember—Victory is Assured!

Data Privacy

facebook lobby

Good, thorough, and l-o-o-o-o-ng article on data privacy issues, legislation, and network value. From the NYT Magazine. Read about what’s being done to you behind closed doors…

The Unlikely Activists Who Took On Silicon Valley — and Won

Some excerpts:

Almost by accident, though, Mactaggart had thrust himself into the greatest resource grab of the 21st century. To Silicon Valley, personal information had become a kind of limitless natural deposit, formed in the digital ether by ordinary people as they browsed, used apps and messaged their friends. Like the oil barons before them, they had collected and refined that resource to build some of the most valuable companies in the world, including Facebook and Google, an emerging duopoly that today controls more than half of the worldwide market in online advertising. But the entire business model — what the philosopher and business theorist Shoshana Zuboff calls “surveillance capitalism” — rests on untrammeled access to your personal data. The tech industry didn’t want to give up its powers of surveillance. It wanted to entrench them. And as Mactaggart would soon learn, Silicon Valley almost always got what it wanted.

Through the Obama years, the tech industry enjoyed extraordinary cachet in Washington, not only among Republicans but also among Democrats. Partnering with Silicon Valley allowed Democrats to position themselves as pro-business and forward-thinking. The tech industry was both an American economic success story and a political ally to Democrats on issues like immigration. Google enjoyed particularly close ties to the Obama administration: Dozens of Google alumni would serve in the White House or elsewhere in the administration, and by one estimate Google representatives visited the White House an average of about once a week.

Mactaggart … faced an American political establishment that saw the key to its future in companies like Google and Facebook — not because of whom they supported but because of what they did. The surveillance capitalists didn’t just sell more deodorant; they had built one of the most powerful tools ever invented for winning elections. Roughly the same suite of technologies helped elect Obama, a pragmatic liberal who promised racial progress and a benevolent globalism, and Trump, a strident nationalist who adeptly employs social media to stoke racial panic and has set out to demolish the American-led world order.

In the end, not a single lawmaker in either chamber voted against the compromise.

Political power is a malleable thing, … an elaborate calculation of artifice and argument, votes and money. People and institutions — in politics, in Silicon Valley — can seem all-powerful right up to the moment they are not. And sometimes, … a thing that can’t possibly happen suddenly becomes a thing that cannot be stopped.

The promise of blockchain is to disrupt this Monopoly game.

Madmen and the Godless Algorithm

FB-vs-Google

This article from The New Yorker.

Good overview history of the advertising model that has dominated our commercialism for decades. It’s now gone on digital steroids. The disruption of ad technology has interesting implications.

How the Math Men Overthrew the Mad Men

By Ken Auletta

Once, Mad Men ruled advertising. They’ve now been eclipsed by Math Men—the engineers and data scientists whose province is machines, algorithms, pureed data, and artificial intelligence. Yet Math Men are beleaguered, as Mark Zuckerberg demonstrated when he humbled himself before Congress, in April. Math Men’s adoration of data—coupled with their truculence and an arrogant conviction that their “science” is nearly flawless—has aroused government anger, much as Microsoft did two decades ago.

The power of Math Men is awesome. Google and Facebook each has a market value exceeding the combined value of the six largest advertising and marketing holding companies. Together, they claim six out of every ten dollars spent on digital advertising, and nine out of ten new digital ad dollars. They have become more dominant in what is estimated to be an up to two-trillion-dollar annual global advertising and marketing business. Facebook alone generates more ad dollars than all of America’s newspapers, and Google has twice the ad revenues of Facebook.

In the advertising world, Big Data is the Holy Grail, because it enables marketers to target messages to individuals rather than general groups, creating what’s called addressable advertising. And only the digital giants possess state-of-the-art Big Data. “The game is no longer about sending you a mail order catalogue or even about targeting online advertising,” Shoshana Zuboff, a professor of business administration at the Harvard Business School, wrote on faz.net, in 2016. “The game is selling access to the real-time flow of your daily life—your reality—in order to directly influence and modify your behavior for profit.” Success at this “game” flows to those with the “ability to predict the future—specifically the future of behavior,” Zuboff writes. She dubs this “surveillance capitalism.” [I question whether this will really work as anticipated once everybody is hip to the game.]

However, to thrash just Facebook and Google is to miss the larger truth: everyone in advertising strives to eliminate risk by perfecting targeting data.[This is the essence of what we’re doing here – reducing the risk of uncertainty.] Protecting privacy is not foremost among the concerns of marketers; protecting and expanding their business is. The business model adopted by ad agencies and their clients parallels Facebook and Google’s. Each aims to massage data to better identify potential customers. Each aims to influence consumer behavior. To appreciate how alike their aims are, sit in an agency or client marketing meeting and you will hear wails about Facebook and Google’s “walled garden,” their unwillingness to share data on their users. When Facebook or Google counter that they must protect “the privacy” of their users, advertisers cry foul: You’re using the data to target ads we paid for—why won’t you share it, so that we can use it in other ad campaigns? [But who really owns your data? Even if you choose to give it away?]

This preoccupation with Big Data is also revealed by the trend in the advertising-agency business to have the media agency, not the creative Mad Men team, occupy the prime seat in pitches to clients, because it’s the media agency that harvests the data to help advertising clients better aim at potential consumers. Agencies compete to proclaim their own Big Data horde. W.P.P.’s GroupM, the largest media agency, has quietly assembled what it calls its “secret sauce,” a collection of forty thousand personally identifiable attributes it plans to retain on two hundred million adult Americans. Unlike Facebook or Google, GroupM can’t track most of what we do online. To parade their sensitivity to privacy, agencies reassuringly boast that they don’t know the names of people in their data bank. But they do have your I.P. address, which yields abundant information, including where you live. For marketers, the advantage of being able to track online behavior, the former senior GroupM executive Brian Lesser said—a bit hyperbolically, one hopes—is that “we know what you want even before you know you want it.”[That sounds like adman hubris rather than reality.]

Worried that Brian Lesser’s dream will become a nightmare, ProPublica has ferociously chewed on the Big Data privacy menace like a dog with a bone: in its series “Breaking the Black Box,” it wrote, “Facebook has a particularly comprehensive set of dossiers on its more than two billion members. Every time a Facebook member likes a post, tags a photo, updates their favorite movies in their profile, posts a comment about a politician, or changes their relationship status, Facebook logs it . . . When they use Instagram or WhatsApp on their phone, which are both owned by Facebook, they contribute more data to Facebook’s dossier.” Facebook offers advertisers more than thirteen hundred categories for ad targeting, according to ProPublica.

Google, for its part, has merged all the data it collects from its search, YouTube, and other services, and has introduced an About Me page, which includes your date of birth, phone number, where you work, mailing address, education, where you’ve travelled, your nickname, photo, and e-mail address. Amazon knows even more about you. Since it is the world’s largest store and sees what you’ve actually purchased, its data are unrivalled. Amazon reaches beyond what interests you (revealed by a Google search) or what your friends are saying (on Facebook) to what you actually purchase. With Amazon’s Alexa, it has an agent in your home that not only knows what you bought but when you wake up, what you watch, read, listen to, ask for, and eat. And Amazon is aggressively building up its meager ad sales, which gives it an incentive to exploit its data.

Data excite advertisers. Prowling his London office in jeans, Keith Weed, who oversees marketing and communications for Unilever, one of the world’s largest advertisers, described how mobile phones have elevated data as a marketing tool. “When I started in marketing, we were using secondhand data which was three months old,” he said. “Now with the good old mobile, I have individualized data on people. You don’t need to know their names . . . You know their telephone number. You know where they live, because it’s the same location as their PC.” Weed knows what times of the day you usually browse, watch videos, answer e-mail, travel to the office—and what travel routes you take. “From your mobile, I know whether you stay in four-star or two-star hotels, whether you go to train stations or airports. I use these insights along with what you’re browsing on your PC. I know whether you’re interested in horses or holidays in the Caribbean.” By using programmatic computers to buy ads targeting these individuals, he says, Unilever can “create a hundred thousand permutations of the same ad,” as they recently did with a thirty-second TV ad for Axe toiletries aimed at young men in Brazil. The more Keith Weed knows about a consumer, the better he can aim to target a sale.

Engineers and data scientists vacuum data. They see data as virtuous, yielding clues to the mysteries of human behavior, suggesting efficiencies (including eliminating costly middlemen, like agency Mad Men), offering answers that they believe will better serve consumers, because the marketing message is individualized. The more cool things offered, the more clicks, the more page views, the more user engagement. Data yield facts and advance a quest to be more scientific—free of guesses. As Eric Schmidt, then the executive chairman of Google’s parent company, Alphabet, said at the company’s 2017 shareholder meeting, “We start from the principles of science at Google and Alphabet.”

They believe there is nobility in their quest. By offering individualized marketing messages, they are trading something of value in exchange for a consumer’s attention. They also start from the principle, as the TV networks did, that advertising allows their product to be “free.” But, of course, as their audience swells, so does their data. Sandy Parakilas, who was Facebook’s operations manager on its platform team from 2011 to 2012, put it this way in a scathing Op-Ed for the Times, last November: “The more data it has on offer, the more value it creates for advertisers. That means it has no incentive to police the collection or use of that data—except when negative press or regulators are involved.” For the engineers, the privacy issue—like “fake news” and even fraud—was relegated to the nosebleed bleachers. [This fact should be obvious to all of us.]

With a chorus of marketers and citizens and governments now roaring their concern, the limitations of Math Men loom large. Suddenly, governments in the U.S. are almost as alive to privacy dangers as those in Western Europe, confronting Facebook by asking how the political-data company Cambridge Analytica, employed by Donald Trump’s Presidential campaign, was able to snatch personal data from eighty-seven million individual Facebook profiles. Was Facebook blind—or deliberately mute? Why, they are really asking, should we believe in the infallibility of your machines and your willingness to protect our privacy?

Ad agencies and advertisers have long been uneasy not just with the “walled gardens” of Facebook and Google but with their unwillingness to allow an independent company to monitor their results, as Nielsen does for TV and comScore does online. This mistrust escalated in 2016, when it emerged that Facebook and Google charged advertisers for ads that tricked other machines to believe an ad message was seen by humans when it was not. Advertiser confidence in Facebook was further jolted later in 2016, when it was revealed that the Math Men at Facebook overestimated the average time viewers spent watching video by up to eighty per cent. And in 2017, Math Men took another beating when news broke that Google’s YouTube and Facebook’s machines were inserting friendly ads on unfriendly platforms, including racist sites and porn sites. These were ads targeted by keywords, like “Confederacy” or “race”; placing an ad on a history site might locate it on a Nazi-history site.

The credibility of these digital giants was further subverted when Russian trolls proved how easy it was to disseminate “fake news” on social networks. When told that Facebook’s mechanized defenses had failed to screen out disinformation planted on the social network to sabotage Hillary Clinton’s Presidential campaign, Mark Zuckerberg publicly dismissed the assertion as “pretty crazy,” a position he later conceded was wrong.

By the spring of 2018, Facebook had lost control of its narrative. Their original declared mission—to “connect people” and “build a global community”—had been replaced by an implicit new narrative: we connect advertisers to people.[Indeed, connecting people on a global basis for human interaction really doesn’t make a lot of sense. A global gossip network? Unless, of course, you’re trying to monetize it.] It took Facebook and Google about five years before they figured out how to generate revenue, and today roughly ninety-five percent of Facebook’s dollars and almost ninety percent of Google’s comes from advertising. They enjoy abundant riches because they tantalize advertisers with the promise that they can corral potential customers. This is how Facebook lured developers and app makers by offering them a permissive Graph A.P.I., granting them access to the daily habits and the interchange with friends of its users. This Graph A.P.I. is how Cambridge Analytica got its paws on the data of eighty-seven million Americans.

The humiliating furor this news provoked has not subverted the faith among Math Men that their “science” will prevail. They believe advertising will be further transformed by new scientific advances like artificial intelligence that will allow machines to customize ads, marginalizing human creativity. With algorithms creating profiles of individuals, Airbnb’s then chief marketing officer, Jonathan Mildenhall, told me, “brands can engineer without the need for human creativity.” Machines will craft ads, just as machines will drive cars. But the ad community is increasingly mistrustful of the machines, and of Facebook and Google.[As they should be – the value has been over-hyped.] During a presentation at Advertising Week in New York this past September, Keith Weed offered a report to Facebook and Google. He gave them a mere “C” for policing ad fraud, and a harsher “F” for cross-platform transparency, insisting, “We’ve got to see over the walled gardens.”

That mistrust has gone viral. A powerful case for more government regulation of the digital giants was made by The Economist, a classically conservative publication that also endorsed the government’s antitrust prosecution of Microsoft, in 1999. The magazine editorialized, in May, 2017, that governments must better police the five digital giants—Facebook, Google, Amazon, Apple, and Microsoft—because data were “the oil of the digital era”: “Old ways of thinking about competition, devised in the era of oil, look outdated in what has come to be called the ‘data economy.’ ” Inevitably, an abundance of data alters the nature of competition, allowing companies to benefit from network effects, with users multiplying and companies amassing wealth to swallow potential competitors.

The politics of Silicon Valley is left of center, but its disdain for government regulation has been right of center. This is changing. A Who’s Who of Silicon notables—Tim Berners-Lee, Tim Cook, Ev Williams, Sean Parker, and Tony Fadell, among others—have harshly criticized the social harm imposed by the digital giants. Marc Benioff, the C.E.O. of Salesforce.com—echoing similar sentiments expressed by Berners-Lee—has said, “The government is going to have to be involved. You do it exactly the same way you regulated the cigarette industry.”

Cries for regulating the digital giants are almost as loud today as they were to break up Microsoft in the late nineties. Congress insisted that Facebook’s Zuckerberg, not his minions, testify. The Federal Trade Commission is investigating Facebook’s manipulation of user data. Thirty-seven state attorneys general have joined a demand to learn how Facebook safeguards privacy. The European Union has imposed huge fines on Google and wants to inspect Google’s crown jewels—its search algorithms—claiming that Google’s search results are skewed to favor their own sites. The E.U.’s twenty-eight countries this May imposed a General Data Protection Regulation to protect the privacy of users, requiring that citizens must choose to opt in before companies can horde their data.

Here’s where advertisers and the digital giants lock arms: they speak with one voice in opposing opt-in legislation, which would deny access to data without the permission of users. If consumers wish to deny advertisers access to their cookies—their data—they agree: the consumer must voluntarily opt out, meaning they must endure a cumbersome and confusing series of online steps. Amid the furor about Facebook and Google, remember these twinned and rarely acknowledged truisms: more data probably equals less privacy, while more privacy equals less advertising revenue. Thus, those who rely on advertising have business reasons to remain tone-deaf to privacy concerns.

Those reliant on advertising know: the disruption that earlier slammed the music, newspaper, magazine, taxi, and retail industries now upends advertising. Agencies are being challenged by a host of competitive frenemies: by consulting and public-relations companies that have jumped into their business; by platform customers like Google and Facebook but also the Times, NBC, and Buzzfeed, that now double as ad agencies and talk directly to their clients; by clients that increasingly perform advertising functions in-house.

But the foremost frenemy is the public, which poses an existential threat not just to agencies but to Facebook and the ad revenues on which most media rely. Citizens protest annoying, interruptive advertising, particularly on their mobile phones—a device as personal as a purse or wallet. An estimated twenty per cent of Americans, and one-third of Western Europeans, employ ad-blocker software. More than half of those who record programs on their DVRs choose to skip the ads. Netflix and Amazon, among others, have accustomed viewers to watch what they want when they want, without commercial interruption.

Understandably, those dependent on ad dollars quake. The advertising and marketing world scrambles for new ways to reach consumers. Big Data, they believe, promises ways they might better communicate with annoyed consumers—maybe unlock ways that ads can be embraced as a useful individual service rather than as an interruption. If Big Data’s use is circumscribed to protect privacy, the advertising business will suffer. In this core conviction, at least, Mad Men and Math Men are alike.

This piece is partially adapted from Auletta’s forthcoming book, “Frenemies: The Epic Disruption of the Ad Business (and Everything Else).”

 

I would guess that the ad business will be disrupted further as we find new ways to connect consumers with what they want. This will reduce the power of the Math Men at centralized network servers.

I also suspect search will become a regulated public utility. A free society cannot tolerate one or two private corporations controlling all the information data that flows through its networks.

 

The Real Scandal?

likenolike

The Real Scandal Isn’t What Cambridge Analytica Did

It’s what Facebook made possible.

A couple of excerpts:

Sinister as it sounds, “psychographic” targeting—advertising to people based on information about their attitudes, interests, and personality traits—is an imprecise science at best and “snake oil” at worst.

….

If you think of that data, and the ads, as a relatively small price to pay for the privilege of seamless connection to everyone you know and care about, then Facebook looks like the wildly successful, path-breaking company that made it all possible. But if you start to think of the bargain as Faustian—with hidden long-term costs that overshadow the obvious benefits—then that would make Facebook the devil.

What this scandal did, then, was make the grand bargain of the social web look a little more Faustian than it did before.

From that perspective, the real scandal is that this wasn’t a data breach or some egregious isolated error on Facebook’s part. What Cambridge Analytica did was, in many ways, what Facebook was optimized for—collating personal information about vast numbers of people in handy packets that could then be used to try to sell them something.

Yes, the real scandal is that most of us are giving away real value that we need to survive in the digital economy.

Vampire Squids?

 

likenolike

I would say this essay by Franklin Foer is a bit alarmist, though his book is worth reading and taking to heart. We are gradually becoming aware of the value of our personal data and I expect consumers will soon figure out how to demand a fair share of that value, else they will withdraw.

Technology is most often disrupted by newer technology that better serves the needs of users. For Web 2.0 business models, our free data is their lifeblood and soon we may be able to cut them off. Many hope that’s where Web 3.0 is going.

tuka is a technology model that seeks to do exactly that for creative content providers, their audiences, and promoter/fans.

How Silicon Valley is erasing your individuality

Washington Post, September 8, 2017

 

Franklin Foer is author of “World Without Mind: The Existential Threat of Big Tech,” from which this essay is adapted.

Until recently, it was easy to define our most widely known corporations. Any third-grader could describe their essence. Exxon sells gas; McDonald’s makes hamburgers; Walmart is a place to buy stuff. This is no longer so. Today’s ascendant monopolies aspire to encompass all of existence. Google derives from googol, a number (1 followed by 100 zeros) that mathematicians use as shorthand for unimaginably large quantities. Larry Page and Sergey Brin founded Google with the mission of organizing all knowledge, but that proved too narrow. They now aim to build driverless cars, manufacture phones and conquer death. Amazon, which once called itself “the everything store,” now produces television shows, owns Whole Foods and powers the cloud. The architect of this firm, Jeff Bezos, even owns this newspaper.

Along with Facebook, Microsoft and Apple, these companies are in a race to become our “personal assistant.” They want to wake us in the morning, have their artificial intelligence software guide us through our days and never quite leave our sides. They aspire to become the repository for precious and private items, our calendars and contacts, our photos and documents. They intend for us to turn unthinkingly to them for information and entertainment while they catalogue our intentions and aversions. Google Glass and the Apple Watch prefigure the day when these companies implant their artificial intelligence in our bodies. Brin has mused, “Perhaps in the future, we can attach a little version of Google that you just plug into your brain.”

More than any previous coterie of corporations, the tech monopolies aspire to mold humanity into their desired image of it. They think they have the opportunity to complete the long merger between man and machine — to redirect the trajectory of human evolution. How do I know this? In annual addresses and town hall meetings, the founding fathers of these companies often make big, bold pronouncements about human nature — a view that they intend for the rest of us to adhere to. Page thinks the human body amounts to a basic piece of code: “Your program algorithms aren’t that complicated,” he says. And if humans function like computers, why not hasten the day we become fully cyborg?

To take another grand theory, Facebook chief Mark Zuckerberg has exclaimed his desire to liberate humanity from phoniness, to end the dishonesty of secrets. “The days of you having a different image for your work friends or co-workers and for the other people you know are probably coming to an end pretty quickly,” he has said. “Having two identities for yourself is an example of a lack of integrity.” Of course, that’s both an expression of idealism and an elaborate justification for Facebook’s business model.

There’s an oft-used shorthand for the technologist’s view of the world. It is assumed that libertarianism dominates Silicon Valley, and that isn’t wholly wrong. High-profile devotees of Ayn Rand can be found there. But if you listen hard to the titans of tech, it’s clear that their worldview is something much closer to the opposite of a libertarian’s veneration of the heroic, solitary individual. The big tech companies think we’re fundamentally social beings, born to collective existence. They invest their faith in the network, the wisdom of crowds, collaboration. They harbor a deep desire for the atomistic world to be made whole. (“Facebook stands for bringing us closer together and building a global community,” Zuckerberg wrote in one of his many manifestos.) By stitching the world together, they can cure its ills.

Rhetorically, the tech companies gesture toward individuality — to the empowerment of the “user” — but their worldview rolls over it. Even the ubiquitous invocation of users is telling: a passive, bureaucratic description of us. The big tech companies (the Europeans have lumped them together as GAFA: Google, Apple, Facebook, Amazon) are shredding the principles that protect individuality. Their devices and sites have collapsed privacy; they disrespect the value of authorship, with their hostility toward intellectual property. In the realm of economics, they justify monopoly by suggesting that competition merely distracts from the important problems like erasing language barriers and building artificial brains. Companies should “transcend the daily brute struggle for survival,” as Facebook investor Peter Thiel has put it.

When it comes to the most central tenet of individualism — free will — the tech companies have a different way. They hope to automate the choices, both large and small, we make as we float through the day. It’s their algorithms that suggest the news we read, the goods we buy, the paths we travel, the friends we invite into our circles. [Blogger Note: As computers can’t write music like humans, algorithms cannot really define tastes. Our sensibilities are excited by serendipity, innovation, and surprise.]

It’s hard not to marvel at these companies and their inventions, which often make life infinitely easier. But we’ve spent too long marveling. The time has arrived to consider the consequences of these monopolies, to reassert our role in determining the human path. Once we cross certain thresholds — once we remake institutions such as media and publishing, once we abandon privacy — there’s no turning back, no restoring our lost individuality.

***

Over the generations, we’ve been through revolutions like this before. Many years ago, we delighted in the wonders of TV dinners and the other newfangled foods that suddenly filled our kitchens: slices of cheese encased in plastic, oozing pizzas that emerged from a crust of ice, bags of crunchy tater tots. In the history of man, these seemed like breakthrough innovations. Time-consuming tasks — shopping for ingredients, tediously preparing a recipe and tackling a trail of pots and pans — were suddenly and miraculously consigned to history.

The revolution in cuisine wasn’t just enthralling. It was transformational. New products embedded themselves deeply in everyday life, so much so that it took decades for us to understand the price we paid for their convenience, efficiency and abundance. Processed foods were feats of engineering, all right — but they were engineered to make us fat. Their delectable taste required massive quantities of sodium and sizable stockpiles of sugar, which happened to reset our palates and made it harder to satehunger. It took vast quantities of meat and corn to fabricate these dishes, and a spike in demand remade American agriculture at a terrible environmental cost. A whole new system of industrial farming emerged, with penny-conscious conglomerates cramming chickens into feces-covered pens and stuffing them full of antibiotics. By the time we came to understand the consequences of our revised patterns of consumption, the damage had been done to our waistlines, longevity, souls and planet.

Something like the midcentury food revolution is now reordering the production and consumption of knowledge. Our intellectual habits are being scrambled by the dominant firms. Giant tech companies have become the most powerful gatekeepers the world has ever known. Google helps us sort the Internet, by providing a sense of hierarchy to information; Facebook uses its algorithms and its intricate understanding of our social circles to filter the news we encounter; Amazon bestrides book publishing with its overwhelming hold on that market.

Such dominance endows these companies with the ability to remake the markets they control. As with the food giants, the big tech companies have given rise to a new science that aims to construct products that pander to their consumers. Unlike the market research and television ratings of the past, the tech companies have a bottomless collection of data, acquired as they track our travels across the Web, storing every shard about our habits in the hope that they may prove useful. They have compiled an intimate portrait of the psyche of each user — a portrait that they hope to exploit to seduce us into a compulsive spree of binge clicking and watching. And it works: On average, each Facebook user spends one-sixteenth of their day on the site.

In the realm of knowledge, monopoly and conformism are inseparable perils. The danger is that these firms will inadvertently use their dominance to squash diversity of opinion and taste. Concentration is followed by homogenization. As news media outlets have come to depend heavily on Facebook and Google for traffic — and therefore revenue — they have rushed to produce articles that will flourish on those platforms. This leads to a duplication of the news like never before, with scores of sites across the Internet piling onto the same daily outrage. It’s why a picture of a mysteriously colored dress generated endless articles, why seemingly every site recaps “Game of Thrones.” Each contribution to the genre adds little, except clicks. Old media had a pack mentality, too, but the Internet promised something much different. And the prevalence of so much data makes the temptation to pander even greater.

This is true of politics. Our era is defined by polarization, warring ideological gangs that yield no ground. Division, however, isn’t the root cause of our unworkable system. There are many causes, but a primary problem is conformism. Facebook has nurtured two hive minds, each residing in an informational ecosystem that yields head-nodding agreement and penalizes dissenting views. This is the phenomenon that the entrepreneur and author Eli Pariser famously termed the “Filter Bubble” — how Facebook mines our data to keep giving us the news and information we crave, creating a feedback loop that pushes us deeper and deeper into our own amen corners.

As the 2016 presidential election so graphically illustrated, a hive mind is an intellectually incapacitated one, with diminishing ability to tell fact from fiction, with an unshakable bias toward party line. The Russians understood this, which is why they invested so successfully in spreading dubious agitprop via Facebook. And it’s why a raft of companies sprouted — Occupy Democrats, the Angry Patriot, Being Liberal — to get rich off the Filter Bubble and to exploit our susceptibility to the lowest-quality news, if you can call it that.

Facebook represents a dangerous deviation in media history. Once upon a time, elites proudly viewed themselves as gatekeepers. They could be sycophantic to power and snobbish, but they also felt duty-bound to elevate the standards of society and readers. Executives of Silicon Valley regard gatekeeping as the stodgy enemy of innovation — they see themselves as more neutral, scientific and responsive to the market than the elites they replaced — a perspective that obscures their own power and responsibilities. So instead of shaping public opinion, they exploit the public’s worst tendencies, its tribalism and paranoia.

***

During this century, we largely have treated Silicon Valley as a force beyond our control. A broad consensus held that lead-footed government could never keep pace with the dynamism of technology. By the time government acted against a tech monopoly, a kid in a garage would have already concocted some innovation to upend the market. Or, as Google’s Eric Schmidt, put it, “Competition is one click away.” A nostrum that suggested that the very structure of the Internet defied our historic concern for monopoly.

As individuals, we have similarly accepted the omnipresence of the big tech companies as a fait accompli. We’ve enjoyed their free products and next-day delivery with only a nagging sense that we may be surrendering something important. Such blitheness can no longer be sustained. Privacy won’t survive the present trajectory of technology — and with the sense of being perpetually watched, humans will behave more cautiously, less subversively. Our ideas about the competitive marketplace are at risk. With a decreasing prospect of toppling the giants, entrepreneurs won’t bother to risk starting new firms, a primary source of jobs and innovation. And the proliferation of falsehoods and conspiracies through social media, the dissipation of our common basis for fact, is creating conditions ripe for authoritarianism. Over time, the long merger of man and machine has worked out pretty well for man. But we’re drifting into a new era, when that merger threatens the individual. We’re drifting toward monopoly, conformism, their machines. Perhaps it’s time we steer our course.

Digital Monopoly

Digital platforms force a rethink in competition theory

 

Economists need to provide regulators with tools to deal with market concentration

by: Diane Coyle, FT.com

Anxiety about the health of competition in the US economy — and elsewhere — is growing. The concern may be well founded but taking forceful action will require economists to provide some practical ways of proving and measuring the harm caused by increasing market power in the digital economy.

The forces driving concentration do not affect the US alone. In all digital markets, the cost structure of high upfront costs and low additional or marginal costs means there are large economies of scale. The broad impact of digital technology has been to increase the scope of the markets many businesses can hope to reach.

How will investment in physical networks or content get funded if an incumbent using the network and content captures all the profit downstream?

In pre-digital days, the question an economist would ask is whether the efficiencies gained by big or merging companies would be passed on to consumers in the form of lower prices. Another key question was whether it would still be possible for new entrants to break into the market.

Digital platforms make these questions harder to answer.

Read more… (Paywall – see comment below)