Protecting Business

Tumblr_kteysugUmi1qz6yoko1_500 I went down to city hall yesterday to participate in a hearing on net neutrality. I realize the NYC city council has no oversight on this issue but the lobbyists were coming out in force so I figured I might as well show up too.

They were live streaming the event. My testimony is about 26 minutes into that stream.

But this post is not about net neutrality. It's about an issue that came up during the questioning. A councilmember mentioned the idea that we should help infrastructure providers protect their businesses.

I am all in favor of the survival instinct in the marketplace. All companies should be executing strategies that will result in their survival.

But the idea that government should "protect businesses" seems very dangerous to me. Businesses come and go. Jobs come and go. Products and services come and go. That's the way of capitalism.

Our government stepped in and protected a bunch of businesses during the financial crisis. Examples are Citibank, AIG, and General Motors. In a time of financial panic, government does have a role of restoring confidence and we can argue whether those actions were necessary or not to do that.

But the financial panic is long gone. We still have big economic issues in this country and it would be a mistake for our government to continue to protect businesses and jobs now that markets are functioning again.

If the telcos and cable companies can't run profitable businesses without government protections, then I think we should let them go under and allow entrepreneurs to pick up their assets and make them work instead.

I also believe that government should be fostering a lot of competition in the access business. That was the idea of the telcom reform act. But it hasn't played out that way. We have an ever increasing consolidation of power in the access business. Just like we had in the banking and brokerage business. This is not good.

I could go on and on about this issue but I'll stop here and let the discussion start in the comments. I'll be in there with you.

Reblog this post [with Zemanta]

Comments (Archived):

  1. Elie Seidman

    hard to disagree. We need less government, not more. When the government gets involved, losses get socialized and gains are privatized.As for the telecoms, that’s an infrastructure that we – the US taxpayers – own. Whether we should or not is a different story but all the monopoly telecoms are monopolies because we – as a society – decided a long time ago that it would be best if we made them so. The 96 act was supposed to introduce competition where competition was – and is – badly needed but for the most part it was a failed act; arguably because the telecoms – with their purses deep with cash – have infinite ability to lobby. That asset is ours and it needs to be used to help the US in general progress – not to make the telecom execs richer. If they want to be rich, they should go try their hand at being entrepreneurs or at innovating. But there should be very real limits on how much we allow the infrastructure we built – through the monopoly status we gave the telecoms – to be used to enrich the telecom execs. And if we want innovation in the infrastructure environment, hoping that it will come from the historical monopolies is a bit of a stretch.To the extent government is involved, it should be there to help create a competitive playing field so that we don’t have monopolies; protecting businesses, particularly monopolies that would not exist without society having made it so, is the last thing the government should be doing.

    1. fredwilson

      i’m in total agreement with you Elie

    2. the build

      Where is there documentation that our taxes paid for the building of the internet? I don’t recall ever hearing this and I was in internet telecom for 9 years. It was at the infrastructure level so I may have missed it.

      1. Elie Seidman

        who do you use at home for your internet access? In the vast vast majority of places in the US there are two real options for internet access – the cable company and the phone company (DSL). Both of those companies are historical monopolies – the infrastructure they use to bring internet into your home was built leveraging their monopoly status. For me it’s Verizon (previously Bell Atlantic before that NYNEX, etc) and Time Warner Cable. They both built their infrastructure without having to face any competition because we – as a society – decided that that made the most sense and gave them regulated monopolies – Time Warner for TV and NYNEX for phone. The services being delivered on those wires has changed a lot since we gave them monopoly status but that does change the fact that those companies grew up without having to face competition. Only we – the people – can give that right to a company and when we do, that company is – for good or bad – in large part ours.If “internet telecom” means someone like Level3, Global Crossing, Qwest (long haul – not their US West business) etc. then we are talking past each other. Those businesses were not built with taxpayer money. They were built with telecom boom money and they brutally competed with each other and have razor thin margins to show for it. Had money not flowed as freely as it did in the mid to late 90s, that infrastructure still would have been built but it would have not been as overbuilt as early as it was. The net neutrality issue is far less of an issue in the long haul market because of intense competition. But in the last mile (Bell Atlantic AKA Verizon, Qwest AKA US West, Time Warner Cable, Comcast Cable, etc) it’s extraordinarily real.

        1. the build

          Regardless, he who owns the pipes holds the reigns and I do believe that will matter in the long term future in many ways not just one. We only have control of this if we are paying attention, and lots points to a lack of that in our society en mass. Just my .2. You don’t have to agree. 🙂

          1. Elie Seidman

            I could not more strongly disagree with that suggestion. In that world Skype in the US disappears very quickly. So does AppleTV and NetFlix on demand and a whole host of others. We gave the monopolies the capital to build out the infrastructure and then we give them the right to massively limit the services we can receive? Who other than a telco exec would want that?

          2. the build

            I’ve worked in internet telecom on the infrastructure/engineering side for nine years. I don’t know the complexities of monopolies, taxes, etc. but I do intimately know the internet platform, what it is, how it works and most importantly why it is here, along with broadcast, PSTN and mobile platforms as well as print. During my career in the industry, VoIP blocking was a huge issue. Telecos even here in the states were guilty of it — in other countries, far worse. There is software to block it, efforts to block it, VoIP call quality affected by companies refusing to provision the packets, etc. This is absolutely an issue that could be seen by any company that needs a packet delivered over the IP platform, and I would assume that would only become a larger issue as platform convergence continues to happen. Can you point to where it specifically says that the public made the choice to give the telcos tax money to build the internet? I’m not familiar with anything about this, but I entered internet telecom in 1999 — perhaps it happened before then. And yes, we pretty much always give major entities the capital to build out things for us then limit the services we receive. Was that a choice or was that out of not paying attention?I’m for net neutrality. Telco execs, probably not — and really in a sense are we fueling their argument? They spent billions of dollars to pay to build the internet. I doubt that wasn’t in some small part some of their own. They created this thing and it costs money to run, yet business over the IP platform to date doesn’t want to charge consumers for products and services. Someone’s got to pay. If internet business is going to continue to put the bill on them, we are going to hand them the control.

          3. Elie Seidman

            Probably not the right forum for this debate. FWIW, I’m intimately familiar with telecom infrastructure and history. My last company, Epana, did many billions of VoIP minutes a year as far back as 2004 and 2005. We’ll pick it up offline. Best, Elie

          4. the build

            I would love that. Telco geeks are few and far between in this market. I’d love to connect!

          5. Mark Essel

            I learned a little from your chat, thanks patricia and Elie.

          6. ShanaC

            Second this.

          7. the build

            Cool. I wish more people would take time and learn about the internet. It would solve so many of the issues every market is facing. I write about a ton of this stuff on my blog if anybody’s interested.

          8. ShanaC

            I’m basically getting a degree in it, damn it.

          9. fredwilson

            what’s the URL of your blog? i’m enjoying your comments which means i’d probably enjoy your blog even more

          10. the build

            thank you.www.dailypatricia.comi write a lot about platform business and media, entertainment and internet business’ approach to it. One post you may particularly like explains monetization over a platform:

          11. fredwilson

            greati’ll check it out

          12. the build

            Yay! Very cool

          13. Elie Seidman

            elie at oyster dot com

      2. moderate capitalist

        The internet resulted from DARPA funded research in 1960s through the 1990s. It was only opened to unlimited commercial use in the early to mid 1990s. Before then, the government restricted commercial use to that which supported communication between industry, research, and the military.

        1. the build

          Right, I knew about this. I’ve studied this side of the internet at length as I’ve said (as well as broadcast TV platform, PSTN and mobile) But who funded it being built across the country from here, as a commercial platform? It’s my understanding the telcos did, and I could be wrong but i don’t recall public taxes funding it.

    3. James Riso

      I think you may be overreaching with the claim you seem to make on last-mile infrastructure on behalf of the US taxpayer. Yes, some of it was built by companies that were shielded from competition. This protection wasn’t public generosity, it was done in the interest of consumers. Of course, things didn’t play out as expected and technology has changed services drastically since then. But it’s a bit much to in hindsight pick up a sense of entitlement about all of this. Those are sunk costs. What matters now is getting it right–setting policies that will be best for the market going forward. If it turns out those are repugnant given the history of this industry, that’s a (non-economic) sacrifice a prudent regulator has to be willing to make.

      1. the build

        I’d completely agree with this.The internet is an awesome communications and information distribution platform. For starters, when a disaster or emergency happens, broadcast TV, landline telephone, mobile phone and print media are generally cut off. That’s a problem — people need to receive information. The internet is fault resistant, which means that in a situation like this, it continues to work. Second, it’s device agnostic — TV requires a specific device with specific limitations, landline phone, etc. The internet can be accessed from a variety of devices — it could be a stuffed animal if somebody makes it. Third, it’s cheaper — for example, the PSTN phone system is very expensive to operate and maintain. It’s reduced the cost of producing all kinds of things. So, everybody wins.

    4. kidmercury

      “When the government gets involved, losses get socialized and gains are privatized.”had to highlight this. it says it all.

      1. ShanaC

        There is evidence that if we sold off slowly the TARP buys and our stock in the banks we would make a profit, as promised. I met a pissed off citi guy who hates that we forget that. We have made a profit as a country. It’s just hard to see because we’re still holding our assets.It’s more that in our current system, our losses are very public and our gains are very private, because we care and see our losses because they are huge. (not that the gains aren’t, but we don’t feel the gains as quickly or as nicely)The the question really is, how do we spread the gains, and how do we show them off.

        1. kidmercury

          i doubt this “evidence” you speak of. the crew behind TARP is lacking in integrity, there is a great burden on them to prove what they are saying. the problem is simple and structural, proper regulation of the money supply solves all problems, as all problems and blessings stem from, or require, the pursuit of money.

          1. ShanaC

            Kid, we’re going to have this argument forever. I’m nipping it in the bud. I have it from a good source.

        2. JLM

          There is a huge difference between a paper gain in a portfolio and a real ring the bell CASH profit. The entire TARP bait is going to be lost and then some when the final bills come due.This is an exercise in re-arranging the deck chairs on the Titanic —regardless of how alluring Miss Rosie Scenario looks just now in that cute little ‘kini, everybody is going for a very cold swim before that wench is old enough to shave!

          1. ShanaC

            Let’s do a selloff and lets see. And I’m glad I look better in a bikini than any portofolio.TARP-like exercises have been pulled before. Not on the scale we’ve pulled, but they’ve been pulled. And they’ve always been long term profitable. I exepect things to turn out ok long term. It’s just a matter of how, and when interest rates are going to rise.Yes there is unemployment now, but it will slowly pick up. I can read the Journal just like anyone else. If Gap is posting a profit (and that’s a consumer good), then we’ll slowly see a pickup, and slowly see rise in jobs. We just can’t stay at 0% interest forever. And when we raise the rates, that will be interesting.

          2. JLM

            “TARP-like exercises have been pulled before. … And they’ve always been long term profitable.”Huh? Really? Do tell!The Troubled Assets Recovery Program itself is in big, big, big trouble. First, let’s make sure we are talking about the same program.TARP is the program whose primary focus was to have been to purchase “troubled assets” and which quickly evolved to being the slush fund from which preferred stock and warrants were acquired in the entire cross section of domestic banking companies.This was necessary to shore up balance sheets with huge holes in them and to spur banks to make loans — the “freeing up of credit” idea.Remember we had a bit of panic and the entire system was on the verge of cratering which justified doing some very silly and desperate things we never would have done if we had been either sober or able to operate Turbo Tax.This shoring up of everybody’s balance sheet ensured that the TARP funds were initially invested in banking institutions which were in both the bottom tier and the top tier.The top tier guys did not need the $$$ and in some instances have already repaid them — resulting in the unfortunate eventuality that our government’s remaining holdings are in the weakest institutions. We bought stock in the LOSERS not the winners.BTW, the notion that this would free up credit — has not happened! Not going to happen! All that was accomplished was to delay the day of reckoning.You will also remember that the TARP funds were to be leveraged through the P-PIP (Public-Private Investment Program). The TARP funds were to be the “equity” while the Fed was to provide “debt” through TALF (Troubled Asset Lending Fund) all of which was to be overseen by Tim Geitner’s new Office of Financial Stability.How’s that been working out so far? Hmmm, they have still not finished forming the OFS, Tim being a bit distracted with the continuing decline in the economy and the President being distracted by a bit of globe trotting, health care, golf and shooting hoops. The private entities have not yet actually put up any $$$ and the troubled assets to have been acquired?Well, the banks do not really want to part with them — at market prices — because they are now flush with equity (phantom equity truthfully) and they do not want to mark them to market because it will put many of them out of business even given the additional equity provided by the TARP funds themselves.So, Ollie, we’ve really got a fine kettle of fish, now don’t we?I truly do not expect the government to recover a single penny of the principal, not one penny of interest when the final tally is made though there will undoubtedly be the odd individual piece of scrip which is worth something. This will turn out to be one of the biggest head fakes in the history of the world.

          3. ShanaC

            No, commercial 30 day paper did. I remember the day Lehman fell and when the dollar broke really distinctly. it really affected my neighborhood that I grew up in strongly, and still does too. I thought I’ll never be able to buy a house ever again and I remember the reports that you couldn’t get commercial paper. I had no idea what commercial paper was.So I’m taking a business history class now. All we discuss is the modern history of stock market crashes. And people behaving badly (what is with that???). The first question I asked when we were discussing Michael Milken and the 80’s, height of bonds, how liquid is paper now, and the answer was that it was it is liquid, all things considered.If that’s liquid long term there will be a market for other kinds debt to be bought. Maybe not today, but long term. You can’t have an economy if your company can’t get a loan in paper for 30 days for payroll.Just because we stand around yelling at each other and distracting Tim trying to figure out how to unload securities doesn’t mean some of them are not being unloaded (including slowly from bad banks, which they could unload now, I should have tweeted this, from their senior exectutives the reason they are holding on to TARP money is they are a afraid of a W shaped recovery and want an extra cushion in case there is another lockup, one of them spoke in my class)The writedown is fine. People are prepared for the writedown, It’s first business, then people: Which is why I am happy when I see a typical company that I see in the mall post a profit that comes from people, buying.

          4. JLM

            Ummm, uh, so I guess even in the parallel universe which exists in conjunction with the nasty real world, we are in agreement that the TARP is not going to be a “weeeeener”? LOLUnfortunately, I lived through the Drexel, Mike Milken, junk bond saga and the TARP deal makes that mess look like kindergarten.

          5. ShanaC

            Now that, defintiely is true. TARP makes everything look ridiculous.I never said wonderful, I just worry about commercial paper because the day the dollar broke, I remember them talking about that so very distinctly and thinking it may be possible that I would never buy a house. It made me realize it is not just my credit, and if other bigger groups of people don’t have credit, then we’re screwed. And that the first thing you need to do when your in danger as a group, you need to build a wall around everybody -the best option in a games of the prisoner’s dilemma, if you can communicate.So knowing there is 30 day paper means maybe we are starting on our way towards that point. That’s pretty much it.

  2. msuster

    I agree with you. I don’t buy the comment that the telcos / cable cos need to protect their investment. We have 15 years of data to see how telcos behave and stifle innovation.I spent 8 years as a consultant to telcos in Europe in the 90’s helping them launch Internet infrastructure and offerings. They were so infuriated to see the startups come in and “steal all the value” and relegate them to pipes.The same team went and build the mobile telcos and swore not to let it happen to them again. So we had a decade of mobile “portals” or “on deck” environments that slowed innovation to the cost of the consumer. It took a major force like Apple (and now Google) to break this hegemony.Having seen what (former) monopolists running telcos have done for innovation I say “protect them at innovations peril.” Thanks for the post.

    1. JLM

      What an interesting and well informed insight and thus very, very valuable.One caution I might offer — having had lots of experience USING foreign and US phone systems — is that there are “strategic” elements of certain American industries which deserve just a smidgen of consideration given their importance in the safety of the world.Before the breakup of ATT, we had the best phone system in the world. Our automobile industry provided the ability to mass produce armaments at a time of international peril (of course, we also became the world’s largest arms dealers thereafter, so go figure).

      1. ShanaC

        Oddly, you might want to know this, one of the bigger points that was causing the fall was that Bell Labs et al didn’t want to switch to packet switching technology even after the army suggested it for security reasons, and then they kept jacking up prices. Now we’re a mess.

      2. fredwilson

        and our internet industry will protect us in the next world war which unfortunately will be fought inside our networks and computers.the thing we need to do is always be in control of the most powerful industry in the world

        1. JLM

          We are already at war with the Chinese, Russians, Iranians, Al Qaeda, the Taliban on the Internet 24/7.The convergence of the Internet, computers, cell phones, GPS, satellites (listening and looking) and UAVs has literally created a national security military-judicial nexus whereat we are simultaneously the military, law enforcement, prosecution, judge, jury and executioner.Some pimple faced “gamer” kid sipping Mountain Dew in front of a computer screen in Arizona directs a UAV to send a GPS controlled directional missile into the left nostril of a “suspected” terrorist thereby saving the US from the messiness associated with KSM and his impending NYC circus act.The “actionable” intel came from a bit of map study, electronic intercepts, probability assessments based upon the location of the cell phones with which he has communicated, satellite photos and the “eyes” of the UAV.Then, he was charged, tried, found guilty, sentenced to death, appeal denied and then the sentence was carried out at the speed of an electron.I personally have no problem with this but it sure does provoke some interesting thought.If KSM is let go in say, Afghanistan, we can execute him as described above but if we “capture” him then he gets Alan Dershowitz to defend him.A bit of judicial economy anyone?

    2. Mark Essel

      Dumb pipes are akin to my preferred form of tech. The best kinds are the ones you don’t even know are there, they’re ubiquitous and invisible. They don’t cost you cycles figuring out how you’re going to work within their incomprehensible regulations, they just work.The pipes only constrain the maximum information of the signal. Why should the container determine what goes through it?The more plentiful, and less controlling the dumb pipes are, the greater our future innovative potential is uncapped. If the government wants to step in at all, they can subsidize research for inexpensive FAT bandwidth. They’ll more than make it back by taxing any business structures that arise from the new information sharing capacity.

      1. fredwilson

        the telco CEOs rallying cry is “we won’t be relegated to dumb pipes”the funny/sad thing is that is exactly what the world needs them to be

    3. ShanaC

      Most people forget there was a period of time where you couldn’t call other phones, or it would cost something ridiculously expensive. My great grandfather a”h, lived through use, and was an early user of phones. He had a really crappy experience trying to buy fruit (he ran one of the largest fruit/veggies wholesales businesses in New England during say, the 20’s-40’s)The early centralization of phones allows you to focus on user experience, because everyone’s internal technology is the same. We’re essentially the same thing right now. IDEN is nearly gone. There are four ? five? (US cellular counts some days?) major cellphone companies, of which half are falling away, and now we are all rushing out to get smartphones, because we are playing chicken with the last two two see what “the standard” will be, but in the interim, we’re shorting them for the best quality we can get.By giving 1 or two players dominate market-share, you allow them to force onto everyone good phones. This long term will make it easier for developers.Pays to know your history. You just need to sit it out.(Hi from Hyde Park!!!)

  3. jeffjarvis

    I am appearing at a similar hearing (they call it a workshop) the FTC is holding on Dec. 1 and 2 on the “survival” (their word) of journalism. I intend to tell the commissioner to get off our lawn.The FTC’s portfolio is protecting competition. Well, we have more competition than we have had in a half-century in news and media, thanks to the internet giving everyone who wants one a press. We have more diversity of voices and viewpoints than ever. Ever. We have – as our CUNY New Business Models for News Project argues – more opportunities to create sustainable entrepreneurial news ventures thanks to lowered costs due to new efficiency (do what you do best and link to the rest).Any action government would take would be to protect legacy players. That’s all that’s being discussed: tax breaks, copyright changes, wars against new players.I fought hard within the news business for a dozen years thinking – naively, I now know – we could transform it. No, transformation will come through – as you say, Fred – the natural and Drawinian deaths and births of capitalism.At the Aspen Ideas Festival, I asked Eric Schmidt at a session about this pace of change. He said he fears it is too slow – that is, unnaturally, unhelpfully, even dangerously slowed – because of government interference. Look at where the attention and resources and money are going, he said: to the examples you give – GM, et al.Get off our lawn, government: You’re stepping on the new grass.

    1. fredwilson

      one thing incumbents do have is lobbyistsi wonder if startups need to band together and hire lobbyists

      1. jeffjarvis

        I like that. What would the agenda be? Are they the anti-lobbyists: We’re begging you *not* to do anything?News startups should lobby for ubiquitous broadband. Does that mean government investment? Encouragement of investment?Technology startups would argue for tax breaks probably and immigration changes, yes?Green startups have been looking for government money (e.g., Tesla).Is there an overarching startup agenda? You’d know far better than I would, Fred.

        1. awaldstein

          And I. On a national level, I don’t know. But locally, maybe. For example, NYC’s government has done a good job on a city level of encouraging the film industry to shoot and reside in NY. Post production, permits and more. Seems like the city might be able to have an effort, pushed by these lobbyists, for startups as well.

          1. the build

            The draw is the tax break. It can be up to $9 million a film or something like that.

          2. JLM

            Sooooo, tax breaks create immediate results?Hmmm, what an interesting thought. Maybe we should think about that as a vehicle to turn the economy around @ the national level — maybe even “stimulate” the economy?Nah! They work tooooooo well! LOL

          3. the build

            I guess its six and a half or a dozen? Cities need the taxes, businesses in cities need the business. Regardless does everybody win? 🙂

          4. JLM

            I wish that it were so.Look at the current economic impact of say — Texas v California.Unfortunately, everybody cannot be a winner all the time but tax policy, governance philosophy, social programs do determine winners.California is melting down (hell, even the Terminator cannot save them), Texas is doing better.There is probably not a more stark comparison as you cannot swing a cat these days in Texas without hitting someone who just moved from California.People vote most honestly with their own dollars and their own feet and their own families. All of the political pretense is stripped naked.

          5. awaldstein

            I agree in concept but I’m not with you on the Texas vs. California twist. I agree somewhat but both the film (studio and independent) and the growth of startups are strong in California from my vantage.

          6. JLM

            I am absolutely sure you are right. Failure is never pervasive. And is rarely complete.Nonetheless places like Wilmington, NC and Austin, TX are making inroads into film making and technology is advancing as much by SWSW and Sundance and other collaborations. These places are also able to provide a lower cost structure as well as financial incentives.While this competition is part of the rigor of capitalism, it is not particularly good for the economy as a whole as it simply moves a job from location A to location B but does not really create a net new job.I suspect that in the long run, Hollywood will be to film making what Detroit is to automobile making. A traditional center of the brainpower but not where you want to build a new plant.

          7. awaldstein

            Well said. “Failure is never pervasive. And is rarely complete” goes into my phrase list. Thanks for that.Your points about Wilmington and Austin are correct, but holds as well to SF. So yes, I agree.The major thinking point though about Hollywood and Detoit is that filmaking and startups in general are less about the ‘factory’ and more about the creative brain trust community. Folks are moving away from Hollywood cause they can because proximity to the studio is not needed to have a community of interest. That being said, lots of independent film makers live all over, Hollywood included, and have nothing to do with the studios.

          8. markslater

            also in boston – i have never seen so many movies being filmed – they are also building ‘hollywood EAST – i kid you not – that is what they named it’ on top of a favorite golf course of mine on the cape – although they ran in to some financing snags – but the tax incentives have seen movies RUIN not walk to boston in the last 5 years….

          9. markslater

            and former Tech VC Mr pagliuca who is running for teds seats is running on a platform of…….no lobbyist money if i get in – from ANYONE andJob creation through a Govt version of the venture business – investing in SMBs through health incentives, tax incentives, govt funded entrepreneurial programs and so son..

          10. fredwilson

            Hmm. I need to learn more about this guy

          11. awaldstein

            Yes Boston, and Denver for Xtreme skiing video and on and on.Sorry about your golf course 😉 but I’m a movie fanatic. Movies carry a big footprint of folks from food to post work to marketing and on. This drives a creative community. I say this is good. But from your point, not being whacko in how locales bow to the industry makes sense as well. I’m all for balance and all for seeing the ghetto of creative and production talent in LA dispersed.

          12. markslater

            its a bit of a novelty here actually – i think generally people like it. The crews are excellent at staying out of the locals way – cleaning up – and generally being respectful – being an old town – it can become an big inconvenience very quickly if not properly thought out.

          13. awaldstein

            Yup. I live in downtown Manhattan and there are shoots frequently. Of course in NY where driving is well, passe, we walk around inconveniences;) Harder if you are stuck in a car.

          14. ShanaC

            Actually they’ve done studies on yes. Yup, It’s the tax breaks, but if if the tax breaks are perceived as sticking.

          15. Mark Essel

            That’s a huge +.Films and startups share some of the same characteristics. The good thing in film, HUGE incumbent films don’t politically try to crush your chances of providing superior value/entertainment (the production houses/studios are another story).Who knows how widely films will be accepted or how powerful they’ll be at grabbing attention. And unlike startups, you can’t know just from intermediate products how healthy a film is. You can see if your budget is on or off schedule, but weaving all the elements together is an unparalleled art form. I’m always impressed with low budget films, that rock my imagination.

          16. awaldstein

            The issue that dailypatricia raised in the beginning about taxes hit it right on. Studio movies are incentivized by tax cause they have a big spend. Startups, well don’t. Even if you gave tax breaks to folks who created sandboxes for office spaces, would it work? Probably not but there is a working model hidden in here somewhere.

          17. Mark Essel

            Whatya think of cheap government grants/loans. Like SBIRs for startups?What team of two wouldn’t kill for 70k off the bat.

          18. awaldstein

            Thnx Mark. A creative twist to the idea. I like it. Healthcare, from JJarvis’s string below is another pain point that can be eased. In my short tenure here in NY as a base of businesses, I’m finding a lot of creative smart entrepreneurs doing business here because of the dynamism of the place and the community, in spite of cost. With some assistance, the pace will hockey stick.

          19. Mark Essel

            Its been done before-> check this out: Steve Blanks Secret history of silicon valley”By 1968 over 600 SBIC funds provided 75% of all venture funding in the U.S.”But the venture capitalists opted for Limited Partnerships to remove the government strings.

          20. awaldstein

            Thnx. I’m learning something new today.

          21. ShanaC

            I would bet they still provide a lot of funding. Anyone knows where to find that?

          22. Mark Essel

            There are SBIRs (small business innovative research) loans but they are mostly tagged towards existing consultants/small businesses in various areas.There are a variety of such programs (NAIH grants for biotech), but I don’t know of a widely accepted and praised venture funding system.Maybe our new gov 2.0 will change that, crowd sourced national investment in entrepreneurs would be fun. Let the taxpayers decide who to fund and how much (within a range)? Too weird?Various models are already springing up in the market.

          23. ShanaC

            Auction? I mean how do you get to that sort of funding?

          24. Mark Essel

            You write and submit proposals specific to the type of research the government agent is asking for requests on. Most agencies are open to concepts they hadn’t considered but help them in some way.Would need something strictly startup focused, that doesn’t exist now.

          25. ShanaC

            That is a ridiculously bad way of doing things. Very, umm, Apple-Esqe?Not that I am secretly worried that we are way too flushed with money right now, as in that weird post 80’s bond bust early 90’s right before the bull internet run…

          26. fredwilson

            problem was SBIC’s were not as flexible as private limited partnerships and all the best VCs moved from SBIC’s to VC LPs. the ones who stayed with SBICs were the ones who could not raise private capital. SBIC’s became the weakest investors. finally the gov’t shut them off after decades of bad performance

        2. Elie Seidman

          we could have TARP for startups. a VC or a startup loses money because their ideas or execution was bad – not to worry, the government gives you a 6% IRR anyway. It’s only fair since startups and VCs do work hard and there should be downside protection. Collectively, we startups and VCs are too big too fail – think of what would happen if we did not exist. It would be very bad for the US economy.

        3. Bryan Link

          The problem with this mentality is it leads right to the same thing that Fred expressed anxiety about in his post: government protecting business. As soon as a Startup Lobbying Group starting talking about special tax breaks, permits, immigration laws, etc., that group would be no different than the big telcos or big Agriculture lobbying for tariffs and subsidies. There shouldn’t be a startup political agenda, save removing obstacles and eliminating preference-based legislation/regulation/tax code.

        4. fredwilson

          Good question. Here’s mine: open markets, open spectrum, visas for entrepreneurs and engineers, and elimination of all software and business method patents

          1. Doug Kersten

            Engineers is a slippery slope. You are thinking purely technology startups. I’m sure there are many startups that don’t need engineers but have some other specialists that are important to them. Where do you draw the line then? Entrepreneurs make sense. How about key individuals required for the success of the business. Like executives who are required to have special life insurance policies, etc. If an individual met these requirements; 1.)key to business operations (subjective, tough one) 2.)fully insured as such (objective, better) 3.) Limited in number (you couldn’t have 50 of these guys. I would say 1-5 per company). This is off the top of my head but makes more sense.

        5. Morgan Warstler

          The danger here is using the government to try and “target” competition with tax breaks or spending (ie ubiquitous broadband) to specific ends.I’d suggest something simpler: end corporate taxes in the US, and raise taxes on income slightly to cover it. This includes taxing corporate perks at the individual level. All of it. Any form of corporate luxury – tax it as the beneficiary’s income. Country clubs memberships, jet travel, retreats. Anything worth more than Holiday Inn Express and a burger and fries, count it as income and tax it at income tax levels.Taken together, this will lead to a new form of austerity in corporate spending, and let profitable market endeavors hire freely and grow quickly.I actually think this kind of reform is political tenable right now, as entrepreneurs we should be swinging for the fences. See “Audit the Fed,” as proof.

        6. the build

          There are already startups doing this as well as producers in Hollywood, including myself, regarding net neutrality.

      2. David Binetti

        Startups should absolutely NOT hire lobbyists. You will be fighting on your opponents’ turf and will lose badly. Large companies have entire departments (called “Governmental Affairs”) that are occupied with former lawmakers/staffers and you’ll never be able to compete against the relationships and budgets that these persons command.That said, there is hope for the future. Traditional lobbying, while still a formidable force in shaping public policy, is being disrupted by what I call Lobbying 2.0. The next wave is in ‘campaign-style’ lobbying, with firms dedicating more and more resources on shaping public opinion to influence officials directly as part of the legislative process. The percentage of lobbying budgets dedicated to voter contact has jumped dramatically: where 20 years ago the average outreach component was 5% of the total budget, today it is typically 50% or more.In addition, political communication is undergoing its own disruption, as the two traditional campaign tactics (television and direct mail) plummet in effectiveness as voters increasinly turn to social media to inform their opinions. However, most large companies have zero clue how to maneuver in this space, seeing innovations like Twitter as merely another broadcast channel for their stock messaging instead of a symmetrical medium that could be used to shape public policy in their favor.Startups will be able to play the Lobbying 2.0 game much better than entrenched incumbents, and with continued disruptions in traditional lobbying due to term limits and transparency laws (and technology) this is where we should take the lead. (For an example of this approach in action see Paul Graham, Brad Feld and Dave McClure with the Startup Visa issue.)

        1. fredwilson

          yes, this is very hopeful. how can we leverage lobbying 2.0 in the net neutrality debate?

          1. the build

            I have some ideas for this Fred. If you are doing something like this, I’d love to be part. Please let me know [email protected]

          2. David Binetti

            Would be happy to set up a dedicated page at, get you a widget for your blog, or set up with the API if you want to integrate the tool to your own app.

          3. Mike O'Horo

            Just signed on to 2gov and sent a healthcare message. Very cool. Thanks for creating it.

      3. Farhan Lalji

        I think VC’s need to band together and hire lobbyists to protect not only their investments and start ups in general but competition.

        1. David Binetti

          You spend money on lobbying to get a carve-out of legislation for your business, which produces a return on your investment. You receive no benefit to fund lobbying for increased “competition” and thus it will never happen.For the winners, lobbying has a ridiculously huge ROI. You can spend $250K in fees on a particular lobbyist which has the potential to return millions of NPV in sustainable competitive advantage written into law. But only large companies play it because they signal to all potential entrants that if they choose to engage the entrant will be outspent 10X. And, since this tends to be a zero-sum game for any particular issue, only large players play.To win this at this game you have to change the rules by which it is played.

          1. fredwilson

            that makes sense to me. i’m digging lobbying 2.0

          2. Greg Solovyev

            Totally 🙂 how about taking all lobbying into public domain – all communications between lobbyists and politicians will be published in a publicly available feed. Lobbyist will not be able to meet politicians in person unless they are on live camera 🙂

          3. Mike O'Horo

            Would that that were possible. A dream state, but very attractive. Unfortunately, far too sensible to have a chance.

          4. Greg Solovyev

            Of course the way I described it is a fantasy, but the point is that we need more transparency in the way our elected officials make decisions and technology can aid in this. But then of course, no one would want to be an elected official 🙂

      4. StephenPickering

        Lobbying should be outlawed. That’s one “regulation” I’d be for. Political Parties also should be abolished. Both of these things nullify “representative” government, and so they should be unconstitutional. Look at them buying Landrieu’s vote yesterday for $300 million. Or taking away Blanche Lincoln’s, senator from my state, Agriculture Chair, if she doesn’t vote the way they want. That’s not representative democracy. That’s bullying, mafia like, racketeering like tactics. They sell us the idea of freedom, but don’t practice it.

    2. the build

      Terrifying, and that’s not because I agree.

    3. Mark Essel

      We have to fight to protect capitalism and the forces that drive change. Glad to see your views evolve in this space Jeff. The sooner more see the changes as a need being expressed in market pressures, the greater they can leverage their genuine value towards satisfying this need.I’ve got an image of incredible business variety and choices throughout all our markets. But in order to facilatate that, I’m looking towards less friction between business. Like the Internet built in layers, future micro businesses will dominate by providing the best value in their area of expertise.The current business forces that benefit horizontal growth could be balanced by a more fluid market where constant change benefits smaller entities. We have seen evidence where monopolies negatively effect competition. What about when cross business subsidies from highly profitable sectors reduce a market to a single viable player? I’m thinking about Google’s grab of the nav market.The economy of our future may have little resemblance to that of our past.

    4. ShanaC

      Two things: I was remarking how nice it was to read the actual paper (WSJ) last night. Just felt good.Give em hell for me, practically no one I know wants to go into traditional journalism. Though I’ll miss the paper part. Really.It’s closed down traditional jobs, because no one knows what the new jobs should look like. Nor what the fee structure should be. Really no one knows yet. Very untraditional. So there right now Is a vacuum. Total loss and anarchy. we’ll see what the shakedown looks like.

      1. the build

        That’s totally untrue. Plenty of people know what the future and new jobs should look like. The problem is, you have the people who do not know hustling themselves to the media to drive their “personal brand.” Media is losing the game and lost not because of anything but the wrong approach led by lack of knowledge — but the answers are all there.

        1. ShanaC

          You are going to have to deal with me which is problematic. I hate dealing with me 🙂 I read too much theory. I hang out here too, I don’t lack for knowledge.A) I’m looking for a job for six months part time, while finishing up a BA in Visual Art in Chicago, because of department issues. My speciality is (new) New Media Art: Tactical Usages, Social Networks, Identity, Location of the Human, and Communication, roughly speaking. With some fun stuff thrown in. I derive my work from people like, The Critical Art Ensemble,, mouchette, and the likes of Miltos Manetas and the Neenstars as well as whomever else is hanging out on the Rhizome Artbase.So I study a lot of this stuff in my spare time, especially on the theoretical level, stuff that other people never look at. What kind of job should I take, if we were to take me as a case study? Pure theory game, no practical implication. I draw a blank when I think about this. This might be due to stress.b) As a result of reading and hanging around with all this crazy stuff (and some days it is really crazy, one of the artist groups listed there includes someone who was arrested for bioterrism, and then they made art out of it), I don’t easily buy into this idea of the personal brand. The reason is as follows:If we buy Clay Shirky’s pretty empirical argument about linkage and fame, that some websites are heavily skewing points of contact because they have drivers of many links in and out, then how do you find jobs in media? It means the N^2 model of the internet and internet linkage is actually untrue, it is going to be, N^a, where a is some number greater than 0? but up to N?, in order to have such heavy wieghing problems between links. In theory, you can have a website on the internet that in fact links to nothing, or a website that links to nothing but itself, if it weren’t for spidering, and even then, it is possible to stop the spidering. So not all websites are equal, not all links are equal. In order to find a job in such an environment, you either have to become over the top famous yourself, which is difficult in a field of heavy competition where links are heavily skewed towards some places and not others, or alternatively find some niche where it is impossible to not be the critical person. It unfairly changes the “auction” by hiding jobs through too many choices and through too much linkage. You might as well take a tactical approach and own the niche. Or you might as well take the disruptive approach and kill the niche or create the niche. Either way, with the math stated as it is, it is very close to impossible to use a sorting mechanism to find a job, especially if you don’t know what you want to do, or are looking for something short term. For someone like me, the tactical approach, the disruptive approach, or even a sorting approach no matter what I do creates both too many choices and too little choices at the same time because of this odd weighing system that is on the web.Further complicating the matter is the growth of social networking, which implies that the links themselves are digital clothing. It complicates through the following: Linkage in this enviroment becomes one digital clothing. It complicates the matter because what you are saying is purely Mcluhan-esqe statement: That I’m pure information through my digital representation, since my social linkage should represent me. This would require me to drive for much personal linkage, much to my detriment, since the classic Mcluhan problem is that ever new extension of media kills off old senses. No representation and No drive to new media would be a fair one, because there is no true representation of human in media, without warping what it means to be human from any previous notion.Considering that we are not done with the total sense of mature growth of internet as a media in that sense, and hence not done with the social warping nor human warping, how could I know what a future job looks like. I’m reading Dot.con for class. There are Flatiron companies listed in it. A nice chunk are starred as sold to others in mergers, or gone bankrupt in the bust. I don’t buy it.I hedge for anarchy and a vacuum of power. There is no good reason for mass media to behave the way they are unless they decide they don’t understand that in fact they have power advatage just by being large, heavily linked to, and a clear arbiter of some sense of truth. They could build models off of it. They haven’t, so right now we have anarchy. It is very difficult in anarchy to establish power bases. Hobbes.Prof. Jarvis, Give ‘Em Hell For Me. If they don’t want to own their market power, someone else will.

          1. the build

            Apologies, but I really don’t understand your question, or what you’re saying at all here.Can you put it into 140 characters?? 🙂

          2. ShanaC

            No but I can shorten it:Complex idea, but media warps the sensory enviroemnt of the body.- McluhanIt’s also technically impossible if we take Clay Shirky read of linkage into account to drive media towards you: iOn the internet, you have to take in account that the weight of each link (aka the seo) will change you, because Metcalfe’s Law/Reed’s Law actually isn’t true in the internet: some links are more heavily Reed Oriented than others. Some people/places are more like axis points than others. What ends up happening is that if you drive yourself to media in the raw, particularly internet media, you’ll fall underneath the weight of places where there are core chunks of linkage. It might be better to stay out if you have some sort of need for a particular connection type, because this weight will have warped you away from needed goal. It alternatively might be better to be strategic and not build up links in the everywhere, but only in one place, for the very same reason: The weight of too many links will crush you as sort of empty making your identity as human unclear.

    5. kidmercury

      well professor jarvis i must commend you for your most excellent comment. but now i ask you, how do we best reform government, so that we can create the prosperous society we know is our destiny?9/11 was an inside job,kid mercury

    6. StephenPickering

      But the trick is, the government needs to get off the lawn in all sectors of the economy. This is why we have a dearth of connectivity in the telco space, a lack of competition and high prices in the Health Insurance Space, same for energy and finance. The people writing the legislation are the lobbyists themselves. It’s all packaged and sold to “liberals” as “regulation” that’s protecting them. It’s protecting them alright, protecting them from competition, good service, and innovation in these so called “establishment” industries. I don’t understand why you are all for disruption in the media and web development space, but not for it in these other industries that are so crucial to our lives. In your own space your view is exactly the Libertarian point of view. Yes, we do need some regulation, Food & Drug, etc., but we don’t need so called “regulation” that allows Blue Cross, for instance to have a false, unearned, monopoly in the Health Insurance market, or Comcast to have a false, unearned monopoly in the connectivity market, in my state, for instance.

    7. Doug Kersten

      I totally agree with this. I have been looking at radio like Jeff has been looking at print. It is amazing the protections in place by government organizations like the FCC. It is one of the largest barriers to entry in the radio arena. It definitely doesn’t have to be this way. There are technologies that allow bandwidth to be used so much more efficiently than it is being used today. Even getting a Low Power license is extremely difficult and restricted to non-commercial activities. Strangely, NPR supports a lot of these restrictions in issuing licenses and making sure that they are difficult to get. They use their own lobbyists to make sure this happens. They are partially funded by the government also but tend to go to extremes to protect their business model.Radio is in the same mode as print journalism. They are doing what they can to use the government to protect their business models. You have some innovations like HD radio, but they are few and far between.

      1. fredwilson

        You can start an internet radio station and don’t need a tower and spectrum to do that

        1. Doug Kersten

          That’s true but you can also see pressures there to protect the radio business model there. Look at the royalty controversy related to playing music on internet radio stations. “Performance royalties are to be paid for satellite radio and Internet radio broadcasts in addition to publishing royalties. In contrast, traditional radio broadcasters pay only publishing royalties and no performance royalties.” Smacks of good lobbying to me. New terrestrial stations are locked out and royalties are placed on internet radio stations (at least music related) in order to protect business models and reduce competition. Of course, royalties are also there to pay the artists also but that feels like a by-product to me.

          1. fredwilson


        2. Doug Kersten

          Of course, if someone built a true internet radio competitor to the radio networks using the internet’s strengths, against incumbent radio’s weaknesses, that would be something. Bet you would see an interesting response then.

          1. fredwilson


          2. Doug Kersten

            I was thinking news, not music. Pandora has done an excellent job though! They did get caught up in the royalty mess and threatened to shut down. I think they’ve worked it out and made it a barrier to entry. Smart guys.

    8. Prokofy

      This is an entirely disingenuous post, Jeff Jarvis, when you factor in how your Google has destroyed the news business and that in fact the only hope for saving that business is in fact fighting the monopoly of your Google with Microsoft’s Bing.Eric Schmidt is understandably chagrined that change favouring the increasing totalitarian monopoly of Google is coming way too slow for his taste. That’s a good thing, though.

      1. fredwilson

        News Corp won’t save their ass with a deal with bingTwo lemons don’t make lemonade

        1. Prokofy

          Watch them.You’ll have to eat your hat. Lemon squeezed on it might make it more edible.

  4. gregorylent

    governments have always been involved in utilities, water and electricity … that should be all the telecommunications and the internet are, simple ubiquitous and cheap utilities

    1. JLM

      And the companies who owned these “commodity” type utilitatian services were “widows and orphans” stocks paying small but predictable and very safe dividends. They government destroyed the tax advantages of the dividend policies (in some measure cutting off a big source of inexpensive capital) and Wall Street lured them into the growth business.

      1. ShanaC

        You could always pull an Enron here.* Most people will hate me for it, but some startups and more established tech businesses, as well as the pipes themselves, would benefit from a broadband derivative market if the move is to make yourself into pipes.Not everyone is going to use them equally at all times, and you could hedge yourself on your potential usage, even if the companies were broken down, you still can’t get past regionality as access (you can’t move fiber it is stuck in the ground). The only way to bring down costs for someone in an area might be go around the broadband companies all together and to contract on potential costs of broadband. Unless you believe in a market cap of the cost.*Enron really was a stupid cme group in a way with a lot of illiquid derivitaitves, including one in broadband.

  5. giffc

    politicians want to be seen right now as “protecting jobs and protecting businesses” (and on the side, collect from lobbyists) but I agree with you and the comments above. Apart from extreme situations like a banking collapse, major anti-trust concerns, or labor abuses, government should stay out of the way and let creative destruction run its course. It is the only way for the American economy to stay dynamic. If they want to focus on something useful, focus on education.Now if they will only come to their senses and kill off software patents…

    1. fredwilson

      yes, eliminate software patents and hack eduction!

      1. David Noël

        Just read a nice blog post today with the title “How to save capitalism” addressing this very issue. It’s worth the read:

        1. fredwilson

          Thanks I’ll check it out

      2. monkchips

        “hack eduction” – nice slogan 😉

        1. fredwilson

          hack in front of most anything turns out to be a good slogan!

      3. JLM

        I am a huge fan of industry collaboration and the setting of industry standards which thereby raise the threshold at which intellectual property becomes sufficiently unique to be “patentable” but I am cautionary as it relates to the wholesale abandonment of retaining the value of an individual’s creative genius.There is a long term strategic consideration as the Chinese, who I believe are destined to be our most significant long term trade rival and partner, are a completely lawless society as it relates to such matters.Though this is discouraging in the short term, I believe that it will improve as access to markets is going to have to be disciplined by standards of behavior — “fair” trade in addition to “free” trade — which will ultimately redound to our benefit as laws and practices pertaining to intellectual property develop along the lines of “justice”.Just as “frontier” justice in the US evolved from the “law west of the Pecos” to an elaborate and generally fair system of both civil and criminal justice, the Chinese will have to adapt as they evolve into a more sophisticated society which will also want to reap the benefits of their citizens’ intellectual property.

        1. fredwilson

          i would argue you protect a creative idea best by forming a business and commercializing it.

  6. Elia Freedman

    I think it’s time for a different kind of government. We need government to ensure a level playing field, not a government that decides who will be the winners. The parties are so black-and-white on this issue. One wants more government; the other wants less (while both parties really are all about more government). I’d argue that it’s not that we don’t need government. It’s that we need a re-prioritization of that government. We need more government when it comes to ensuring equal access, equal information and equal opportunity. And we need less in other areas.I’d love to find a party that represents my interests, that would focus on re-prioritizing our government. Neither of the existing parties want this, as they both seem to be fighting for more government, not less.So I’ve run a software company for 13 years. I battled these problems in the math education market for half of that time, finding de facto regulation to be a major factor in holding back our country from greater success in teaching our kids mathematics. My family always asks me how I can do it — run a company, deal with its stresses. It’s not the company that keeps me awake at night, I tell them, it’s whether there will be a country left for my children that does it.

    1. fredwilson

      you provide software for math education? who are your customers?

      1. Elia Freedman

        We had focused on 6-12 education, developing out an extensive set of tools for use in everything from pre-algebra through calculus.

    2. the build

      If we’re making a wish list for government to handle things, I’ve got a bunch.We need a society that takes action and is active. Or at least, paying attention.

  7. dannyallenjr

    The interesting thing about this issue is that no matter which way it goes, the government is protecting someone’s business at the expense of someone else. If telecom were a competitive business, it would actually be a clear case of the government interfering with one side’s business (the telcos) in order to benefit the other side (the Internet economy). This would seems to fly directly in the face of your argument.Where the complication arises is as you and some of the commenters correctly point out – telecom is not a competitive industry and seems to be moving toward less competition rather than more. So if the rules are going to work such that the telecoms can create monopolies (or at most duopolies), then it makes sense that the rules should also limit what they can do with that power.I think in a perfect world the real solution would be to create more competition among telecoms and then not force net neutrality on them – let the market sort it out. However, that does not seem to be anywhere on the horizon, so until then, I’m with you.

    1. fredwilson

      i agree with that last point. net neutrality regulation isn’t a great outcome but it’s better than where we are headed without it. what would be better is a highly competitive access business.

  8. Nick Giglia

    Protectionism can only stifle innovation and prevent us from moving forward. Since the start of time, people who feel threatened by change have fought it by claiming new developments will destroy their business. It’s the same as anything – adapt or die.I watched the panel yesterday. Great work, Fred – I’m amazed that there is nothing new within the net neutrality debate on the con side.

  9. mattmaroon

    Strangely in public discourse, people have forgotten what a business really is. It’s just something owned by a group of people. So when you say you want to “protect business”, what you’re really saying is you want to prioritize the interests of one group of people (entrepreneurs) over another (consumers).As an entrepreneur myself, I don’t want to be protected from the consumer. My job is to make the world a little better, one product at a time. I just want as little resistance between me and the consumer as possible. If we want to serve the general public, we don’t want to prioritize some of them over the others. We want to enable competition and let the consumer do that themselves. Deregulation of the Telecoms (forcing them to share their cables the way gas companies share pipes in many states) might be a good start, but for as long as we have natural monopolies or duopolies, as in most places, I just can’t see any argument against net neutrality.

  10. Nick Giglia

    Also, look at the example of India – the entire outsourcing/offshoring economy grew up because telcos abandoned infrastructure in the country and other firms picked it up for dirt cheap. Suddenly, the conduits were there for less money, and an entire country’s economy changed. That’s the way of things.

  11. Allen Burt

    Governments only (legitimate) role in the market place is foster the growth of industries that add value to society which would not otherwise exist without their help (i.e. pharmaceuticals and their Intellectual Property rights) and to foster competition through monopoly regulation – not to protect the old and inefficient.Long live competition and free market.

  12. the build

    The telcos are who spent the money and built the internet. Net neutrality is more about protecting everybody from this. It’s about making sure they play fair, because trust me, they do not play fair. Second, net neutrality is about ensuring that when everybody is on the same platform (the internet), everybody plays fair — so small companies and entrepreneurs can still have a place when the internet has far bigger companies as competition, because trust me, big companies do not play fair.Anybody that would suggest protecting the telcos doesn’t understand the internet.

  13. aviah laor

    The infrastructure providers real failure is in risk management. They should have hedge the risk of holding the pipes with investing in startups, in new technologies, in VOIP, in video streaming (hack, buying Google stocks would give them some nice protection). They still can do it, and they will do it, once the “regulatory protection” route is blocked for good. BTW, by the same reason the government can break “land neutrality” and charge much more for for the land usage of the cables.

  14. JLM

    Government is like spice — a pinch improves the flavor and a handful ruins the soup. The challenge, of course, is finding the right amount.Right now we are in the “crack head” phase of over indulgence leading to a “nanny state” excess that could literally destroy our national will to succeed as a people along the lines of the loss of the British Empire.Failure — creative destruction — is a natural part of the system of capitalism just as the cycle of birth and death is to any natural system. If one interferes with the natural cycle, bad things can — and usually do — happen.When individuals are able to do well in spite of or while the enterprise can otherwise do poorly, this disconnect allows personal objectives to overcome enterprise objectives.This is the fundamental dilemma of Wall Street and its struggle with fair compensation — which invites government “interference”. Intellectually, we are at the “legalized prostitution” level of moral/intellectual thought — neither the high hurdles morally nor Calculus I intellectually.We can do so much better than Nevada — built on gambling, prostitution and cheap buffets — but unfortunately we have begun to gravitate toward the lowest possible common denominator. We are much, much better than this.A guy like Dick Fuld — Chairman of Lehman as it failed — will walk away with a bit of a humbling experience but he will not have a single “real” financial impact on his lifestyle. He will have wrecked millions of other people’s lives, destroyed Lehman but will still be a multi-millionaire (sure he’s not a billionaire but how many tacos can a guy really eat?).Of course, remember I am in favor of televised public execution on the steps of the NYSE for various financial wrongdoers. I love the smell of capitalism in the morning!

    1. karen_e

      Spoken like a red-blooded Texan!

      1. JLM

        As an Army brat, I was not an accidental beneficiary of birth but I got here as fast as I could. I knew home when I finally stumbled upon it. Hook ’em, capitalism!

        1. ShanaC

          Y’all weird texan. Tacos. Tacos.

    2. fredwilson

      the government is spice comment is classic JLM; funny and so true.that said, i had some super spicy fried chicken last night that was damn good.

  15. Terry Smith

    I’m curious what your thoughts are on the government’s obligation to expand broadband access. The US is far behind other countries in access and speed, so where should they draw the line between providing them with funding to help secure that access and making sure they stay afloat? As has been mentioned before, there are still a large number of areas that only have one provider; if that telco goes under, the US slips even further behind in the broadband race even as startups no doubt pick up the pieces.

    1. the build

      The purpose of a communications and information distribution platform in a society is to deliver information and direction in the event of an emergency. Does this need to be via video, which requires high broadband speed? No. Are there any areas of the country that do not have internet service? My guess is that is all the government will care about.

      1. JLM

        This has been a test of the Emergency Broadcast System, if this had been a real emergency…

    2. fredwilson

      i am a fan of opening up big swaths of spectrum for a free for all, like we have in the wifi spectrum. i believe if we did that, we’d quickly have high speed broadband everywhere for a fraction of the cost it is provided for today

  16. Merijn Terheggen

    By saying ‘government’ should X or shouldn’t Y, it is implied that the outcome of the described approach is related to government being involved or not.This is not true. Still, it is so easy to fall for this and participate in the discussion without looking at the consequences of this.Bad government decisions have bad consequences, good decisions have good consequences. By using the word ‘government’, one skips ahead of scrutiny about decisions. That’s too bad because scrutiny about decisions is what’s needed so much. Any discussion about government involvement is bad or good forgoes the fact that it’s about the decisions and actions and implies that ALL decisions and actions taken by government inherently will be uniform. Really, we’re losing our critical view on policies when talking about who creates them instead of what they are about and how we can save guard the intent of the policy.Sure, I see that by nature government actions share a number of common characteristics. But that doesn’t mean there are no mechanisms to counter negative characteristics. Doing away with it altogether is what is implied by talking about ‘government’ instead of about the contents of the discussion and how to solve problems. That way, we can learn from what does and from what doesn’t work. This allows us to iterate and improve. It means a positive mindset and a believe in our ability to learn, apply, and succeed. Sounds a lot like lean startup methodology right? And why not? Government is made by the people who participate. Like startups. Focus on the problem at hand and come up with valuable solutions and improvements.I really believe our country is not helped by discussing government involvement or not as a solution/cause because it avoid discussing the real problems, potential solutions, pitfalls, and checks and balances to make things better incrementally. It kills a mindset that we so need: a focus on improving things. This only works when starting with the intentions because it allows for changes and improvements and solving unintended and unwanted effects.It’s easy to see this in the health care debate too. A lot of the debate is about government involvement or not. Northern European countries demonstrate that certain rules and policies can lead to multiple times lower health care costs. It’s not about the government but about how they do it. That should be scrutinize. And improved when failing instead of thrown out altogether.Can anyone help me wording the rhetorical side of things better? (maybe by doing a better job than I did in explaining that using the words ‘government involvement’ implies we all inherently accept that government can only work in only one way without researching if this is true or from a different perspective).

    1. Bryan Link

      Merijn-I see your point, but in this case I think it’s fair to paint “government” with a broad brush, because all government entities–whether local, state or national–have a unique power that no one has: the ability to make the rules of the game and enforce them. This is what I meant when I agreed with Fred’s fear of government protecting business. As an entrepreneur, I can compete and sometimes even dominate my industry, which would give me great market power, but that’s still fundamentally different from the power that governments inherently possess.Hope this helps. Cheers!

      1. Merijn Terheggen

        Because, as you say, government has the unique power to make and enforce the rules, we should even more focus on which rules work and which rules don’t and why and improve them continuously. With the focus to try to improve rules we can grow as a nation, without that we’ll fail (financial industry failed because of lack of rules). I think everybody knows this but many forget to focus on what can be done.

        1. JLM

          Please accept my apology in advance for being offensive, but I think your view is naive. There is a huge difference between legislation which advances society (my favorite example being the WWII era GI Bill) and rules which simply intend to keep the deck chairs on the Titanic in good order (SEC involvement in short selling).The more fundamental question is whether government be trusted to make “fair” laws and rules in the first place.In the instance of the WWII GI Bill, the Congress fertilized the untapped genius which had been bottled up by 5 years of war and unleashed a motivated, hard working, confident group of men who were impatient to get on with their lives having just experienced unspeakable horror. These guys made America great.In the case of the SEC, these guys tinkered with orderly markets making them unstable by allowing short selling, then attempting to control it through the uptick rule and then blew it out completely by allowing naked short selling. This was a regulatory challenge better left to actual stock markets and their member companies (not the brokerages, the companies whose stock the markets existed to trade).No company ever went public to allow its stock to be shorted — naked shorted even worse — to the detriment of the otherwise stable ownership. They were trying to create a public market not a gambling casino. The government allowed it to devolve into a casino.The same thing is true of derivatives which were essentially phantom mathematical securities which could not be delivered upon expiration nor foreclosed upon in the event of failure. They were intellectual flights of fancy rather than financial instruments.The government which does less is the government which does best.

          1. ShanaC

            I’m much less opposed to the derivatives market than you are. I just think it should be in open view, rather than closed view. Shadow markets where the security is hard to value is extremely bad.A derivative on weather is not necessarily a bad thing. People use them to even out cash flow if their business is dependent on the weather. Like if they are hotels…Or farmers…it is better to be in the regulatory market in a way that causes cash flow than in a place that cuases so much leverage and sickliness that you have no idea what is flying. That’s all.

          2. JLM

            A “security” is a financial instrument which enhances the ability to collect the promised financial obligation in the eventuality of a failure of the underlying promise to pay.By this definition many derivatives fail to actually be “securities” as one cannot foreclose and directly collect upon their default.I have no problem with many of the truly weird derivatives that existed, exist or can be created, but simply suggest they should be traded at Harrah’s on the casino floor by pimps in long fur coats and bimbettes in lingerie rather than on the floor of a legitimate securities exchange.They are not securities. They are only a “derivative” of betting on either black or red on a spinning wheel with a steel ball.Further, insurance is not a bad product with which to hedge one’s exposure to natural phenomenon but it too is not a security. It is a pooled risk which takes the premiums from the more fortunate and sends them to the less fortunate with a cut for the insuror.

          3. ShanaC

            We’ve been using them for 1000s of years. They came out of Mesopotamia. They’re apparently in cannon law, and were spread around the world by sephardic jewish traders who had to hedge on shipping. There shouldn’t be a shadow market of them.If they’ve survived Mesopotamia, I don’t think they quite belong in Harrah’s. Shadow markets are a whole other issue. Kinds of derivatives and who should be able to enter in contracts for them, also another question. To ban them is probably a bad idea, otherwise they wouldn’t be a cultural norm for so long.

          4. JLM

            Hmmm, I don’t think that simple ag futures are in quite the same league as the derivatives which cratered the MBS market and almost the entire financial system. Regardless of what the rigorous scholarship of the U of W Australia suggests.But I could be wrong!Did the Mesopotamians use a lot of mousse in their hair, drink a lot of lattes and wear Hermes ties? LOLNo I think I am talking about the designer derivatives fashioned by the smart latte drinking boys with the French cuffs and mousse which were created, securitized, tranched, insured and prayed over in such a manner that when the underlying payments stopped none of the whiz kids could really figure out what the security was, where it was located and how to foreclose on it.Nor could any of the “swappers” remember why or how they had “insured” these bogus securities in the first place.

          5. fredwilson

            now this is an interesting debate. i’m seduced by the idea that some of the “securities” wall street sells or issues are in fact gambling bets that should not be allowed. i am also a product of a Wharton MBA where I learned how hedging instruments are valuable in managing risk. let’s get this one the table next time we get together JLM, most likely in Austin.

          6. JLM

            The most important thing about gambling is that you must be able to afford your losses if the gambling gods turn against you. You cannot gamble with the rent money.I am not opposed to hedging strategies which are based upon “manufactured” securities but they must, in fact, be real securities which can be collected with ease when they expire or are able to be foreclosed upon.If you tinker around w/ the futures market, as an example, then you have to be prepared to get a phone call which says: “Hey, sport, where do you want us to deliver that 10,000 BF of Douglas fir 2 x 4s?”Additionally, if you want the confidence and regulation of public markets then you have to be appropriately capitalized to discharge ALL your duties to the marketplace not just the ones that are convenient.Lastly, while I advocate just a “pinch” of government regulation in all things financial, I do advocate the “30-second, one index card rule” — if you can’t explain the functions of a security in 30 seconds or on one index card to the SEC, then you can’t do it. And, you can’t have it blessed by the SEC.

          7. ShanaC

            I don’t think they have huge risk, and that you have to know your risk, and that lots of people are seduced by money…but it surprising that I keep meeting people who know the math cold and can’t understand that they are Orthogonal view on information if you believe that liquidity=information flow. Remember that all three econ 101 definitions of money rely on people agreeing that objects have meaning that needs to be easily exchanged.A lockup like what happened is horrible: It essentially means you had the wrong information flowing and have to correct it somehow. The real problem is the sharing of information and understanding what makes it valuable versus not valuable. Hugely difficult, especially because of new problems of understanding how we process it as individuals and as groups, plus velocity speeds of information flow that may or may not show up immediately in a market system (just because the news bleeps, does it show up in the market…)Yeah, I got into arguments over this problem in the one econ class I took…hardcore Chicago does not like this perspective at all for Undergrads. I would have taken out loans for the second major otherwise.

    2. JLM

      It is not inappropriate to look to the actual direction provided by the guys who founded the country for a bit of guidance.At their direction, the country is the United States of America and not the Federal Republic of America for a very simple reason — all power flows from the states and any powers not specifically “delegated” to the Federal government are reserved to the several states. Absent interstate commerce implications there is almost no role anticipated for the Feds in commerce.Unfortunately, today we have a system in which the power of the Federal government dwarfs that of the states and therein lies much of the problem.Health care is, in fact, a perfect example. Instead of focusing on the very real fact that 85% of America has health care, the Federal government has focused on the 15% who do not and worse have failed to recognize and respect that in a free country some folks can opt to self insure or to just not insure. The focus is even worse when illegal immigrants are removed from the statistics.

      1. fredwilson

        i’m not with you on this one JLM. I believe that we are paying for the other 15% and we are paying for it in an awfully expensive way. if i am going to pay for their health care, i’d like to do it above board in a way that we can all see and measure.

        1. JLM

          Having provided comprehensive health care for every company in which I have owned an interest for the last 28 years, I am both an avowed advocate of the pragmatic reality that employers actually “own” the problems of their employees and I have found a way to pay for it.Without one iota of government assistance other than it being a legitimate business expense for purposes of Fed income tax.I see no reason to abandon the 85% slice that is working to get at the 15% slice that is not working.If, in fact, we are already paying for it anyway, then the incremental cost would be ZERO.You do not demolish a house and rebuild it because you have a roof leak in one room.

    3. fredwilson

      good point about government being the bogeyman. we need our government for sure. it does good things. like providing confidence in the middle of the financial panic last year.

  17. charliepinto

    This is a great post and I love the reading discussions that are going around. Fred makes a great point in the below comments- why don’t entrepreneurs start lobbying? Fantastic. At the Web2.0Expo in Fred’s backyard, Deputy CTO Beth Noveck stated she wants to see MORE lobbyists. Millions more. My take on that comment is, “bring us your ideas, we simply cannot understand or learn about everything that is going on in related to innovation.”A few months ago, I sat down at Ristorante Tosca in Washington DC. It was filled with power brokers, lobbyists, politicians, and corporate executives. I overheard a gentleman at the table near me state, “I never even knew about that! Let’s get it done!” I do not know what he was specifically referring to, but I do understand the implication of his statement.The best way to get an idea to the Government, make it resonate, and build “buy in” is to lobby. I mean, how do you think Google successfully bid on the 700mhz “c” block? Do we all think they did it out of their Mountain View headquarters? All entrepreneurs and their VC’s, angels, and other investors NEED to set up a non-profit organization on K Street to be in constant contact with those who make policy decisions. Policy decisions, especially those that include government interference, need to be squashed immediately.All entrepreneurs and backers cannot silo themselves in this regard. Everyone needs to band together.

    1. the build

      There are tons of entrepreneurs, including myself, who are doing this.

    2. fredwilson

      there’s a thought elsewhere in this thread that what we need to do is reinvent lobbying. how do we give Beth what she wants?i’m not sure it is by setting up an office on K street

      1. David Binetti

        I’ve created a tool to make civic participation simpler and more meaningful in an attempt to address this problem. – Simpler: it provides a single email or twitter address to reach all public officials, federal, state and local. You don’t need to know names or offices or issues — we take care of the routing. – Meaningful: All the messages are authenticated as coming from registered voters, each person gets only one ‘vote’ per issue (though they can send as many messages as they like), and I post the results online in real-time so you can track your message and see what others are saying. Most important, I take the messages and compile them into reports in a form familiar to the legislators’ staffers and hand-deliver the reports to Congress using a former hill-staffer who also serves as a dedicated liaison back to the service.This solves the dual-problem of barriers to citizen involvement (gerrymandering, difficult webforms/busy signals/deleted email, no transparency) and barriers to legislator involvement (getting swamped by astroturf, no way to determine the authenticity of the message, no easy way to grok the overall content.)The key is verifying the voter status and enforcing one-voice, one-vote — this proves the legislator-constituent relationship, legitimizes the discussion, and doesn’t provide additional marginal value for being either louder, more obnoxious, or more annoying.It’s called and available to all registered voters.

  18. Bryan Link

    I share your fear of government protecting business–their motivation should be the opposite, meaning move obstacles out of the way. Having said that, I don’t think most people share our enthusiasm for competition and “creative destruction.” Most Americans–and politicians–see government as a way to mitigate the risks associated with free markets, even though it’s naive at best to think you can reap the benefits of free markets without embracing the risks. We just can’t have our cake and eat it too, regardless of what politicians say.

  19. karen_e

    This situation reminds me of the troubling movie Food, Inc. It’s a similar story: a mature industry (agriculture) slowly consolidates and then is able to hire armies of private investigators, lawyers, and of course, lobbyists who serve to weaken regulation, further consolidate their resources and even threaten to break the necks of those who participate outside their highly profitable system. I read some criticism of the film and I’m sure there are some legitimate minor problems with it, but overall you can’t argue with the main story line. Michael Pollan was quoted as saying that eventually there will be some fissure in the system that comes naturally – like how Apple cracked open the walls of the telcos, as msuster suggests here. I truly hope we see some fissure in the food system that allows us to ‘grow’ more healthy Americans in the future than we’re growing now (if you haven’t been out of Manhattan lately, most of the rest of the country is voluminous and diabetic). I get the feeling this is a particularly American, 21st century problem: overly protected, sickly mature industries.

    1. JLM

      The food angle is a very interesting issue. The availablity of farm subsidies — a leftover from the era of family owned farms — to “corporate” farmers creates an unusual dilemma.Part of the world is starving and part of the world is grossly overfed — so much so that farmers are paid not to produce.At the same time, despots are using famine and forced starvation and malnournishment (on several continents) as a mechanism to keep their enslaved masses so weak (e.g. N Korea) so they can consolidate and retain their power.I have often thought that the US should use food as a military weapon — bomb N Korea with wheels of Wisconsin cheese and dried, smoked catfish and flour. Martha Stewart could supply the recipes as part of her felony community service.We saved western Europe from the Communist menace in no small part by the Marshall Plan which started with feeding the hungry masses of even our allies. Ask a WWII generation Brit if they like brussel sprouts and see what they say.

      1. ShanaC

        Farm subsidies screws up our own kids. We don’t necessarily product the most nutritious food, just the easiest to produce.Public school kids notice this if they are on subsidized meals. Just go up and ask them if they like eating what they are eating. The food is gross. And it really doesn’t have anything remotely like brussel sprouts in them (which would not be in the Farm Bill, I think. I happen to love brussel sprouts, lightly roasted and would be happy to see them in public schools.)

        1. JLM

          Nothing against brussel sprouts.Englishpersons of a certain age remember all too clearly growing BRs in window boxes to provide a bit of vegetable nourishment in their WWII diets — today they hate the memory.I once spent an entire evening listening to a member of the peerage cursing equally the Boche and BRs. Apparently either could have raised a murderous rage in this Lord and his Lady.

      2. fredwilson

        you crack me up JLM!

    2. kidmercury

      i hope everyone watches that movie Food Inc. here is their web site. and, i mean you people can eat whatever you want, but i always encourage people to eat well. it will change your life. and i mean instantly, not just in avoiding bad stuff down the road, but better quality of life in the here and now. a great investment.

      1. Mike O'Horo

        Kid: You’re right about the immediate, tangible impact of improving one’s nutrition. Unfortunately, for most people that’s very hard to do because the commercial food supply is low in nutrition and poisoned by pesticides and neurotoxins. Eating organic food (to the degree available), which helps by eliminating many pesticides, hormones, etc., won’t get the job done because the soil is depleted. That means extensive supplementation to replace the nutrients, vitamins, minerals, enzymes, etc. that even good food lacks. Even more unfortunately, only a small percentage of the population has the time and money to engage this type of discipline.

        1. JLM

          Once a year, a rancher friend of mine has a barbecue. He runs a big “cow calf” operation in which he produces calves for sale.At the barbecue, he slaughters a calf which has never been weaned. It has subsisted only on “mother’s milk” and has never eaten a mouthful of grass.He butchers the calf right at the fireside and you select your own cut of meat and it goes right over the coals.If you ate this kind of beef, you would consider Kobe suitable only for resoling work boots.

          1. Mike O'Horo

            Wow. Never heard of that kind of event — beef state — before. We thought we were doing a good job jumping through hoops to find grass-fed beef to avoid corn-fed. How does one cadge an invitation to such a unique experience?As a society, we wonder at the childhood obesity epidemic, but it’s simple: what goes in your food goes in you. Beef raised on corn = people (virtually) raised on corn, which metabolizes almost instantly into fructose (sugar). We already have too much high-glycemic-index food based on corn. Read “The Omnivore’s Dilemma” to see how ubiquitous this tropical grass is in the food chain. Even the waxy stuff that makes fruits and veggies look all shiny is made from corn.Obesity isn’t all tied to diet, however. Toxins play a huge role. Anything that your body can’t identify as a nutrient, digestive enzyme or other useful item, it stores in our fat cells as a way of isolating it and buffering us against its harm. That diet soda made from chemicals and leaching aluminum from its can, the food you microwave with a phtalate-delivering Saran wrap cover, the bottled water full of bisphenyl-A from sun exposure, all are making you fat because they’re generating toxins that your body must isolate in fat cells. More toxins = more fat cells. Detox and get slim. Simple.

          2. JLM

            Next October in Llano, TX!

          3. Mike O'Horo

            Oh, wow. Talk about bad timing. That’s 11 months of sucking up to you. I guess we’ll see how bad I really want it, eh?

          4. JLM

            Mike, it is very, very, very good! Don’t even think about sucking up, I have a terrible memory anway. Get some boots, jeans and start practicing your “y’all”! LOL

          5. Mike O'Horo

            I’m ready; I got my “y’all.” Before moving to Vegas, I lived in VA for 30 years. Even in No. VA near DC, it creeps into all speech after a time, even among previously lifelong Yankees like me.

  20. Aaron Klein

    You’re dead on that the government needs to get out of the business of protecting business immediately. In my mind, the three places we need strong government regulation are: (a) making companies tell the truth, (b) making companies fulfill their agreements, and (c) stopping anti-competitive behavior.The issue with net neutrality is that the lack of it is blatantly anti-competitive behavior. These telecom companies have been granted monopolies and easements by local governments everywhere to put in their networks, and they make good solid profits on them. They have a right to do so.But you cross the line into violating other people’s rights when you start using the network to control the behavior of people on one end of your pipe or the other. That violation can come from packet blocking, extreme pricing, installing thermostats to stop me from running my air conditioner when it’s hot, etc.I wouldn’t go as far as some have to say we own those assets, but when you are a monopolistic utility and you’ve built your assets on easements through public property, you have therefore given up a lot of control over how those assets are operated. Go back and look at the agreements for those easements and monopolies, and that’s binding law.Net neutrality isn’t your typical discussion of government trying to over-regulate businesses. In fact, the telecoms voluntarily agreed to give up full control in exchange for the rights we gave them to build assets on our land. They need to live up to their agreements and go back to making money hand over fist the right way.

  21. ShanaC

    I’m reading a book called Digital Resistance. (This is what you get to read as a new media art student)One of the things the authors advocate is interception, replacement, and control of previous power structures (they’re neo-Marixsts/Critical theory).Not that I’m as crazy they are (trust me, the Critical Art Ensemble is really out there at times), if you want to win, you play by their rules: You intercept, you replace, and you control media in a cohesive action.That means getting into the banks and offering up yourselves with derrivative products based on your assets. That means playing nice with the lawyers and lobbyists. That means getting into the telecoms and and creating some better model for them. You get yourself an electerd official or two into governent: You are a consitutency.You replace.You start talking and intercepting message. After all we are all here talking and talking.You create an action. What is our action. I have no idea. But it might be more productive to think what the action will be. Clearly there are enough people here with enough connections to come up with an idea to collectively pass that they can cause an action to cause a swing in behavior in society.Then cohesive action go BOOM.Then step back and think.You cannot rely anyone else to do your work for you. That is really it. Stop arguing, do something.

    1. fredwilson

      revolution ftw

    2. Prokofy

      Why do people in college these days study the highly-conservative, outmoded texts of German and Russian Marxists who were motivated in the 1800s and early 1990s by rabid concern for protectionism in Germany?Communism is a highly conservative and provincial ideology; it’s not modern. The “critical” versions of various respected disciplines (literature, math, even art) are in fact highly conservative and even pastoralist in wishing to return people to unfree village pasts.

      1. ShanaC

        Umm, my reads on these things are considered probably post-modern or post-structuralist.I tend to be really iconoclast and care more about individuals than groups, they just are a good example of how to subvert authority…

  22. pparrot

    The government’s intent is to provide laws to ensure a competitive and fair playing field. This is not a jungle where the fittest survives at all costs. When the government creates a law that is supposed to foster competition, companies try to maximize their profit while staying within the law and the result might not be what was expected when the law was passed (cf access business). It doesn’t mean laws are not needed. The problem is that laws cannot describe or regulate all human behaviour, same as you cannot draw a circle with straight lines.These laws also don’t change fast enough to reflect the marketplace. Now, lines are blurred between the delivery of services (phone, television, music for example). Should google voice and skype be regulated the same as a phone company? The answer depends on where you stand and companies will defend their turf. Maybe there are too many regulations and we should stop adding new ones, but it should not be to the expense of existing companies that are still regulated with laws that were passed years ago in a different marketplace.

    1. David Binetti

      “The government’s intent is to provide laws to ensure a competitive and fair playing field.” Do you have evidence to support this assertion? If you are a car company competing against General Motors would you say that the playing field is level? Would you care to guess which car company has the largest lobbying budget?

      1. pparrot

        In the US, there are anti trust laws, for example. Also, if you look at the “Telecommunications Act of 1996”, it states that “The Federal Communications Commission has a tremendous role to play in creating fair rules for this new era of competition”. I am not referring to the interpretation of the law. My point is that there are two sides to a coin.

        1. David Binetti

          I’m sure that Comcast and DirecTV would have vastly different takes on the “fairness” of the Telcom act of 1996, regardless of what the preamble says.The government picks winners and losers all the time, and often capriciously: Lehman and Citibank, for instance. And as long as it does this, then it behooves companies to seek a return on investment by lobbying. If the government were to truly enforce a fair playing field there would be no return on the lobbying investment. Why would you lobby to keep things fair? You lobby to give yourself an advantage over your competitors — there is no other reason to do so.

          1. ShanaC

            That’s why it pays to act with cohesive action.

    2. Mike O'Horo

      As you point out, most legislation is of necessity reflective, not prospective. We pass laws to respond to a condition. Ergo, almost all laws are quickly superceded by stakeholders’ practical responses to the most recent legislation. We’re always playing legislative catchup and, given the number of issues on the plate of any Congress, few get revisited with any frequency unless such review/redress is stimulated by some interest group with a good reason to press for review or modification.

      1. ShanaC

        Nature of the system we set up. How do you make a law that preventative?

    3. ShanaC

      You know one of the most interesting things about “survival of the fittest” is that it is the fittest group. Otherwise you breed for mean uncoordinated individuals.Think on that. Act cohesively.

  23. Jason Crawford

    I agree that government should not be helping “protect” businesses.If businesses don’t have government “help,” then they have to protect themselves by improving their products or services, cutting costs, etc. If the government “protects” business, they restrict competitors, force consumers to pay for things they don’t want via taxpayer subsidies, etc.When businesses have to fend for themselves, there is a virtuous cycle: successful investors and businesses accumulate more capital for investment and production; unsuccessful ones contract or shut down. When government “levels the playing field”, they punish successes and reward failures. When a business is failing, it gets less money; when a government program is failing, it often gets *more* money.People fear major upheaval in any industry, fear huge businesses shutting down. But change is part of progress; we should embrace it, not “protect” anyone from it.

  24. Dave Pinsen

    I’m not so sure the financial crisis is “long gone”, though the panic may be. The liquidity-fueled rally in risky assets may have given many of us a false sense of relief. The real economy remains pretty ugly. One out of every ten American mortgages is behind on payments at least a month, and another 4.5% is in foreclosure, according to the Mortgage Bankers Association. With double digit unemployment, those numbers will get worse, and the government has essentially shot its fiscal and monetary bolts already.

    1. kidmercury

      you know it dave! short selling ftw!

      1. Dave Pinsen

        Kid, you crack me up. Say, any chance you know of a site where someone might be able to screen for good short ideas?

    2. JLM

      Absolutely correct.In addition, we have dropped onto a lower curve in a family of parallel curves and there is absolutely no assurance we will jump back up EVER.In the real unemployment statistics (including part timers who cannot find enough work, folks who have exhausted their entire unemployment insurance, folks who have stopped looking, new college grads living in their rooms at home, etc.), one in six of our countrymen is without work and perhaps another one in six is underemployed.Look for reported unemployment in the danger zones (Michigan) to top 20% and the actual unemployment to be 30%.This is exactly why the administration has begun to mumble about tax cuts, working with small businesses to create jobs and other things. The Stimulus is not working.

      1. Dave Pinsen

        Right about the unemployment. Adding in the underemployed and discouraged workers it’s at 17%+.

        1. kidmercury

          and rising!

      2. ShanaC

        Why Michigan? Why not somewhere that reflects a more typical look of the country at large? Michigan does not reflect the country as it shifts industrys. It’s emptying as a state. I suspect as the economy shifts, Michigan will empty out.I mean, I figure if you can speculate on real estate there for a buck (I know people who were pulling stunts like this)…it means that there is too much shift in the area, it’s shrinking people. They’re going. Creative capital destruction. CHoose somewhere more typical.

        1. JLM

          Michigan has been a lab experiment for the implementation of liberal governance philosophy and experiments for some considerable time — before even the election of President Obama.The results are instructive as to how such policies actually work.Democratic Governor Jennifer Grantholm has been wildly unsuccessful in managing the state’s finances and the state is on the verge of financial collapse.Tax the rich? Great idea — almost half of signatories of $1MM adjusted gross income tax returns have moved out of the state in the wake of a huge increase on such incomes.Where did they move? Florida and Texas — states with no individual income tax. Tax policy matters.Over 25,000 persons per month leave Michigan. Last one out, please put out the lights.Jobs will be created when the government provides direct financial incentives to create jobs and when tax policy provides a positive force rather than a punitive strike against success.Success reinforces success. Failure accelerates failure.Government cannot make war against the segment of society which knows how to create jobs and expect jobs to be created.

          1. fredwilson

            if you are going to tax the rich, you need to do it in a place like NYC where the rich don’t want to leave

          2. kidmercury

            yeah but you can easily get around that, cant you? derek jeter has a house in florida, i think he claims to be an FL resident since there is no state tax in FL.

          3. JLM

            Pro athletes are taxed based upon their average income per game. State income taxes are levied in the state in which each individual game is played.For state income tax purposes, an individual can elect to be taxed in a state in which he resides or conducts business for 181 days per year.When Maryland levied a 10% millionaires surtax, fully 1200 of 3000 tax payers who had declared AGI in excess of $1MM moved out of state though many elected to continue conducting business in Maryland — just for 179 days per year.The rich folk are not necessarily stupid.

      3. fredwilson

        the world is growing though, which is what matters at the end of the day. america’s days as the mightiest may be over. but the world economy continues to expand and grow. we just need to rethink our role in that.

      4. kidmercury

        “The Stimulus is not working.”damn JLM since you roll with MJ and presidents i thought you may be able to yourself get a piece of the goldman pie, but if you say the stimulus ain’t working for you, i guess not! 😀

        1. JLM

          On the next big dip, I am going to load up on Berk-Hath and Warren Buffet, so maybe I can get a bit of that Goldman cheese. I always like a bit of cheese with my whine.

    3. fredwilson

      right. what i said is the “panic is gone” and that “our economy is a mess”

  25. kidmercury

    government is needed, but good government is needed. current government is bad. IMHO cost of fixing is greater than cost of building a new govt. that’s why we need the virtual currency revolution, because re-building government is all about re-building money supply. but in order to do this we need to accept a bunch of things about existing money supply, which people don’t want to accept.we also need to accept a bunch of things about why this govt sucks if we ever hope to fix it. like real problems, like 9/11 being an inside job, as well as the suppression of technology that will enable a rapid and immensely positive transformation of the, until we can accept those truths which we are currently denying, and then use those truths to solve the government problem, we won’t get the promised land, the freeconomics-enabled utopia.the price is peace. if you don’t pay the price, you don’t get the promised land.9/11 was an inside job,kid mercury

    1. JLM

      I honestly wish we could just remove the Declaration of Independence, the Constitution including amendments from the Library of Congress — flick a match, hit the reset button and start the whole country over again.A pox on all politicians’ houses. I cannot think of a single politician of either party I would like to be in a lifeboat with right now. I feel like I am rowing as hard as I can and the politicians are throwing the anchor overboard and looking for me to thank them.Well, maybe, Sarah Palin but for reasons totally unrelated to politics. Field dressing a moose? Hmmm, very, very, very sexy! My bad! Sorry! LOL

      1. kidmercury

        i think you’re wish is going to come true. the government problem is so big there is no way to fix it, we will have to start anew i think. nobody wants that — until, of course, we experience enough of the alternative.but we have the internet, so connecting the right people and making it all happen is not as hard as it may seem. IMHO the primary challenge is psychological.

  26. Alan Wilensky

    I am sick unto death over the thought that the money, precious dollars confiscated from the populace via a corrupt tax levy, was given gratis to defunct, decrepit, and dying companies.AIG – corrupt. GM – dying. Goldman Sachs – evil, and their lot. (Did you know that some Wall Street Firms got H1N1 vaccine while middle class folks sat in lines as long as your porktfolio?For the 700 billion that was disbursed, we could have educated a generation of scholars, and paid cash for health care reform.The name of the epitaph of this country shall be on its book’s frontispiece, “How to do EVERYTHING WRONG”. My hopes for the Obama era are dashed.while you are funding the next ephemeral social media trivia geolocation game, our Chinese masters who manufacture real goods will come to collect our carcasses and our small cash assets.I, for one, will welcome our new overlords. At least the venture that I currently serve in is industrial supply chain commerce.

    1. fredwilson

      i think your preference for hard goods/assets is misplaced

      1. Alan Wilensky

        Not literally, Fred, real sciences, RT128, and less institutional capital going into music discovery and virtual goods and flash gaming.

    2. Prokofy

      So wait, why are we grabbing the tax-payers’ dollars and giving them to Google for its ad business?Why is Google so sanitized for you as a business? Do you gain from it somehow yourself?

  27. Mihai Badoiu

    Great testimony: very concise and the point was clearly made. I particularly like the many long pauses that make your testimony more powerful and decisive. It reminds me of the Duke of Windsor’s abdication speech. ( I wonder if you did it on purpose.

    1. fredwilson

      no, i was tired and it showed

  28. moderate capitalist

    The companies which provide internet communications require exclusive access to publicly owned resources to support their businesses (e.g., EM frequencies, and physical rights of way). Because they use public resources, they should be held to business practices that serve the public interest. Net neutrality serves exactly this function. Companies which operate the infrastructure should be provided some protection from risks involved in business cycles. In exchange for this protection, their profits should be regulated and limited to the current market premium + the risk-free interest rate. It is a mistake to subject these companies to capitalist risks and incentives. It inhibits the rate of innovation, as is demonstrated by the fact that other countries have much better connectivity than the US.

    1. fredwilson

      i think this is an argument to regulate the telcos and other access providers like utilities, right?

  29. lyn

    Just a thought – not every service is a profitable one [or even should be] – but a fair few are necessities. I’m all for capitalism – right up to the point where it butts up against necessity – and ISPs are closing in on that range.

  30. StephenPickering

    Fred, this is exactly the heart of the matter. Why is health insurance so high? One primary reason is that big insurance companies are “protected” at the state level from competition. These are “false” monopolies that haven’t gotten there by “earning” it. The same situation exists in telco. Tons of capital would come pouring into competition in this space if it weren’t so highly “regulated.” Regulation is the key term. The word comes across as protecting people, and so by and large, if you ask a person on the street whether they are in favor of regulation they are, but “regulation” is almost always used as cover for protecting these false monopolies, so that in some very important areas of our economy you get an oligarchic type of situation with a duopoly or monopoly. I have nothing against monopolies per se. If they are earned, then they provide some of the greatest benefit to society, but when they are formed by “regulation” which is the same as “protection” they cause the greatest harm. “Protecting” capital only retards its flow into the right direction. I am all with you on this.

  31. Greg Solovyev

    There are two contradicting sides of this. 1 – gov-t should be fostering competition in the access business. 2 – gov-t should make sure everyone has access. The former is a capitalistic approach that allows for the best product and best price, that also makes it so that those who can afford better have better access, those who cannot afford it at all have no access, etc The latter is a socialistic approach that equates everyone in their right to have broadband access. Unfortunately, the latter also means loss of competition and worsening service.

    1. Mike O'Horo

      “All access” becomes a requirement when the service in question becomes a basic necessity to function in the society. Like water, electricity, sewage, broadband Internet connection is already a necessity of modern life. Without it, you’re marginalized in the society.

    2. fredwilson

      If we really fostered hyper competition, the access costs would plummet and we’d have universal access

      1. Greg Solovyev

        Ok, so I have been thinking about it the whole morning. The government has the following tools. It can1. take money through taxes and fines2. give money through subsidies and grants3. create a government-ran enterprise to establish the baseline level of quality and price4. regulate, i.e. create lawsI actually think that these tools are enough to foster competition and solve the problem, I had a plan in mind that uses a combination of all of the above, and I could draft it right here, and you guys could rip it apart. I will skip it for now because I hope that there are enough smart people in the public offices who can create such a plan better than me. The main problem with our gov-t is not the lack of ideas but poor execution. It is just like when building a startup – the big original idea, that a company starts with and the big original problem that it targets is only 40% of success, the other 60% is execution and smaller original ideas that the come up with while solving smaller problems on the way to that goal. So, before we send our gov-t on to fail yet another trillion dollar plan, we need to fix the way it runs things.Here’s how I think it should be ran.Our gov-t needs to become more agile and flexible in the way it executes. I think that agile methodology which is now pretty much a standard in software startups can now be applied to economics and politics as well. One of the reasons why agile methodology emerged was the need to respond to fast pace of change in business environment. I will not recite it here, if anyone has not read it , here’s the link: It seems to me that the pace of change of social, economic and political environment has caught up as well to the point where any gov-t plan that takes months to draft and years to execute is obsolete before the gov-t starts acting on it. Therefore, the gov-t has to adopt the principle of “responding to change over following a plan”. We need to establish a new system of accountability and execution in which failure will be spotted early on and plans can be adjusted quickly. Leave it to historians to figure out if a particular plan was wrong to begin with or if conditions changed half way into execution. What our elected officials need to be focusing on is adjusting the plans according to the current results. If it is not working, analyze what’s not working, adjust it and move on.Here’s a simulation example. Lets say, a certian health care reform passed and we have a public health insurance option. Lets assume that a year after the option is created, health care standards are starting to drop significantly. What gov-t should do is analyze the new environment and the reasons why the standards are falling and instead of spending another term in the office defending the original plan – adjust it. If they are falling because the providers are charging the same rates for less service – address this problem. If they are falling because providers choose to keep their margins up by saving to much on equipment and supplies – address this problem. If the health of the population is worsening because people choose to go to the hospital only when it is an emergency – address this problem, etc.Most importantly – be flexible, do not just allocate ## trillions for ## years. It’s like giving a startup three series of funding all at once. We seem to be focused too much on blaming our gov-t for yet another failure and wasting our time looking for the reasons of such failure either in the depths of hundred-paged legal documents, and blaming the “values” and motives of the politicians who wrote the documents.

        1. JLM

          I agree with you completely in the methodology of incremental implementation or exploitation after conducting an experiment.I suspect the problem with that is the inability to implement the exact opposite. The death of a plan when its costs exceed its benefits.The “camel in the tent” problem appears to be insurmountable.Medicare was envisioned to be a $100MM plan at inception. Know what it costs currently?Government is not good at abandoning useless plans even when overtaken by a huge and obvious change in the underlying justification.Ooops, gotta run, my dirigible is running a bit low on helium and I have to go tap the Strategic Helium Reserve. LOLNational Helium Reserve formed in 1925 by an Act of CongressHelium Acts Amendments of 1960 which funded a 645 mile pipeline to fill the depleted helium reserve. 1960The Helium Privatization Act of 1996 which directed the Interior Dept to begin — BEGIN — liquidating the helium reserve in 2005The Helium Reserve has never been used for its initial and primary purpose once during its entire life. In 1996, we had 1 bn cubic meters or helium and $1.4 bn in debt associated with the Reserve.

          1. Greg Solovyev

            I think that unless our gov-t embraces incremental implementation or exploitation after conducting an experiment willingly it will be forced to do so by the global business environment. Just like software companies that could not embrace it are being forced out of their business environments. After all, in the global business environment, the US is just one of the big enterprises. Even its military powers can be countered (if not matched yet) by other similar enterprises.

  32. Steven Kane

    i’m in favor of net neutrality, but i’m confused:net neutrality IS government regulation… isn’t it?how can one be against government regulation but for net neutrality?net neutrality is explicitly the imposition of government restrictions on the telco/cableco business model…

    1. fredwilson

      I’d prefer no regulation and hyper competition but in the absence of that, I like very lighweight regulation. A simple ‘no discrimination’ rule would suffice for me

      1. Steven Kane

        So, you agree? Net neutrality is government regulation?

        1. fredwilson

          of course, anytime the government makes rules about business its regulation

          1. Steven Kane

            Thank you. Lately I am befuddled by people who simultaneously rant againstgovernment regulation and for net neutralityBtw, as always, I implore everyone to avoid the Olberman-Beck-ization ofissues. No one thinking clearly is either for or against “governmentregulation.”Government IS regulation. Every law is a form of regulation.And increasing government scrutiny of certain industries or situations doesnot de facto lead to Soviet-style central planningTo wit, even amongst libertarians, would want to live withoutO.S.H.A.C.O.B.R.A.MedicareMedicaidF.A.A.F.D.A.F.C.C.Bankruptcy lawsEtc…If anything, these altruistic institutions need to be reformed in order toclarify and strengthen themAnd I know, all sorts of government regulation stinks, or backfires, or justplain allows rich special interests to buy market control (farm andagricultural regulation comes quickly to mind.)But that’s an argument for reform, not for throwing the baby out with thebathwater.Sheesh, hasn’t the last two years taught us all that weakening governmentregulation can lead to disasters at least as bad‹ arguably much worse ‹ thantoo much regulation?Any case, on the issue of net neutrality, the gentleman from Massachusettsvotes, yay ‹ specifically because it is government regulatyion.

          2. Prokofy

            I’m glad you’ve flushed out that this is government regulation of capitalism of the sort that state-capitalits/technocommunists in Google and related industries do not want to admit is government regulation.However, government regulation in a liberal democratic society with free enterprise is generally looked upon as a social good that helps that liberal democratic society with free enterprise retain its nature.How does subsidizing Google’s ad business and footing the bill for net *consumption* and net *bias* in favour of big downloaders help the liberal demcoratic society with free enterprise?It’s all very well trying to sanitize the Google lobbying gambit with cries of the ill-named “net neutrality” being “like” bankruptcy logs, COBRA, or OSHA.In what way is having the taxpayer and government pay for Google to keep leveraging its fake-altruistic free search as a tool for its ad agency in the long-term interests of plurality, diversity, competition and freedom?

          3. JLM

            I generally agree with your overall sentiment but like most things, the Devil is in the details. I also agree that the extremes are never where the truth of a matter lies.Nor is going to the far left/right ever a sustainable solution, it only exists until the pendulum swings back. One only has to peruse the content of Executive Orders to see the truth of that fact.I also suspect that the branch of the government (e.g. judicial branch in your example of bankruptcy law) is material to the conversation.I do harbor a prejudice that the involvement of government must be a solution of last resort having dealt directly with several things on your list and some that are not (e.g. VA medical system).Anecdotally, I would point out the following examples not as “conclusionary” examples but rather as food for fair and honest thought.COBRA is a fair and good plan. An employee covered by an employer sponsored health care plan cannot have the coverage terminated for at least 18 months after termination of employment and under recent Obama administration laws the employer must pay 65% of the COBRA premium but receives a credit against payroll taxes for that balance making it a zero sum game for all except the employee who truly gets a 65% discount. What most folks fail to learn about COBRA is that the insurance company does not have to offer the plan at the same cost as the company is paying. Most insurance companies take about a year to wake up to this change. Why? I do not now.The FAA has a couple of features — ATC (air traffic control), FSS (flight service station) and Flight Watch — which are obviously critical to orderly skies.FSS was privatized and is now run by Lockheed-Martin. The phone use to be answered “Flight Service” and is now answered “Lockheed-Martin Flight Service”. Other than that the change was seamless and the quality of the current service is either equal of increased in quality a bit. I personally think it is quite improved. They shut down a number of regional FSS offices in the process.Flight Service provides weather briefings, general information and processes flight plans. Flight Service forwards your flight plan (IFR or VFR) to ATC for execution.One calls FSS, gets a weather briefing for the proposed route of flight, obtains warnings about severe weather and temporary flight restrictons enroute, checks NOTAMs (notice to airmen) at the departure and destination airports, files a flight plan and receives confirmation that they are “in the system”.In the COBRA instance, government has set policy and ensures enforcement but the employer and insurance company and the employee work directly to ensure it happens as planned.In the FSS example, the government has cleverly and apparently cost effectively purchased a service of equal or greater quality for a subset of government services.Both of these examples strike me as examples wherein government involvement has been limited to just a “pinch of spice” and the soup is therefore more savory.

          4. fredwilson

            JLM and Steve Kane are both members of the far center. I love it!!

      2. Prokofy

        “No discrimination” means somebody else has to pay then, the tax-payer.It’s like saying you’re for every household to have adequate electricity and you’d prefer no regulation and the fact that some households burn lots of electricity on having 4 computers should be something the electric company or other consumers should pay, but not that household because to make them pay would be “discrimination”.The most unpersuasive and manipulative aspect of the Google-led “net neutrality” campaign is the misuse of words like “neutrality” or “censorship” or “discrimination” to mask what is in fact *consumption*.*Consumption,* Fred. Why should some people get to consume more than others for free just so Google can sell ads?

        1. fredwilson

          They shouldn’t and don’t. I have a 50mb cable connection into my home. That costs me $300/monthOthers pay $30/monthThat’s how it should be

          1. Prokofy

            Yes, it should be that way.And — you are exaggerating the costs.And — the telecoms could do this charging — once Google pays them for their content *shrugs*.

          2. ShanaC

            That’s ridiculous. Something up where you live…

  33. Doug Kersten

    I don’t think that startups would have the time or money necessary to hire lobbyists. They are focused on serving customers and creating great products. However, investors in startups should hire lobbyists. In this case the investors are nicely lined up with the entrepreneurs. They both want success and a reduction of any risks/restrictions that would lower the chance of success. If it was organized it would reduce the chance that one startup investor would try to promote one of their businesses over others. The only negative I see, just thinking about this quickly, is that investors may have a tendency to push back against entrepreneurs who do not require their services. That being said, it is better to have some form of lobbyist on your side then none at all.

  34. Prokofy

    I’m glad you are an avowed capitalist, Fred. That’s heartening. Except…I’m not sure you are, because while talking a good game about the need for capitalism’s “social Darwinism” to have its way with big telecom companies, you don’t apply the same principle to Google.I’m a big critic of the fakely-named “net neutrality” which really ought to be called “net consumption” because basically, what it’s about is enabling Google to have free corporate-provided and government-subsidized bandwidth to reduce its costs for its ad agency.As long as somebody else — not you, not me, not Google — pays for the interface for me to come and click on your ads, the Google ad agency works. So not only is Google a big lobbyist for “net neutrality,” legions of geek widgeteers are lobbyists because they tend to side with Google obviously in wanting free tools and free workspace.Bandwidth is a scarce commodity that has to be paid for. The idea that telecoms are subsidized and they or the government or Google already paid for this isn’t true, as the consumer’s payments to his ISP and Google’s payment for its backbone doesn’t over the middle mile, which is on interfaces like Youtube. I don’t pay for Youtube, and Google loses money on it. So who is paying for Youtube,Fred, really? You want Obama to subsidize our Youtubing?This article on TechCrunch (… has the usual tekkie spin of hate on Google and hate on Microsoft, and yet it’s a very good development that Murdoch and Microsoft are competing with *the monopoly ad agency Google, which leverages free search for its free work space to sell ads*.I call it Net Bias (http://secondthoughts.typep…No, I do not work for telecoms, I do not like Ayn Rand, I vote for the Democratic Party. I think it’s a good thing John McCain is standing up to all the lefty verbiage on this subject and turning their own propaganda against them, and I totally call bogus the sleight-of-hand that says when telecoms slow or block *type* of content, i.e. movie download, that this is the same thing as censorship of content itself.

    1. fredwilson

      The way telcoms make money is to charge you and me. If they start charging the apps, we won’t see any more googles because it will be like the old cable business where you had to pay liberty tens of millions of dollars just to start a cable channel

      1. Prokofy

        Catastrophizing, Fred. Exaggeration.No tens of millions are required.If Google pays more for content than it hitherto has, grabbing mainly for free to sell its ads, following the tried-and-true “California business model” then there will be more revenue available (…).Once Google pays more, then fees for subscribers don’t have to be higher.It all starts with the technocommunist collective of Google paying more for licenses. They can afford it. It’s ok.

  35. jeffjarvis

    It is impossible for me to disagree more with that. Government/political support is precisely what we escaped with advertising and profitablity. In China, the government owns “journalism.” Here, the market does.

  36. JLM

    I completely agree with you. What a scary thought that journalism would be publicly financed. Wow!What does “own” journalism is the injection of the journalists’ personal politics into the story. There is plenty of room for improvement on this issue.I have absolutely no problem with advocacy as long as it is not posing as objective news reporting. I personally enjoy the juxtapositon of MSNBC v FOX — I would rather have an undiluted view as long as I can independently access the other side of the mirror.The demonization of Sarah Palin and the deification of Ronald Reagan are both symptomatic of the same ill they are just at different temporal points of the pendulum’s swing.

  37. the build

    Doesn’t the BBC receive government support? I’m not 100% familiar but just spoke on a panel at MIT with someone from it and I thought she said so.

  38. Aaron Klein

    That’s astonishingly not so. There is very little difference between ownership and subsidy, especially if they are dependent on said subsidy.He who holds the gold makes the rules.

  39. Jason Crawford

    Totally agree with Aaron. What you pay for, you own. To the extent government subsidizes journalism or anything else, they own it. (That’s why I don’t want them to subsidize my health.)

  40. JLM

    I wonder if that is like politicians for which the empirical data indicates that they are infinitely more cost effective when you RENT them as they often lose the bill of sale? LOL

  41. Mark Essel

    I suspect true impartial journalism will *could* be reported by powerful automated systems in the coming years.Factual and statistics based information systems, devoid of compassion or color. We’ll hate them.Give us our biased news back 😉

  42. fredwilson

    i’m with you JLM. I don’t have any problems with advocacy. in fact, i think the idea of “fair and balanced” journalism is a pipe dream

  43. JLM

    Journalism is only one source of information.Opinion journalism is also equally valuable. I love knowing how Huffpo, Kos, the Hill, Politico, etc. view the same information and data. Throw in Fox and MSNBC as well as NYT, WSJ, IHT, WashPo, Wash Times, SBS Pilot, the Wrightsville Beach Lumina and a dozen columnists. Flavor it with some Bloomberg, AP, Reuters, Pravda, China and Singapore, some “spook” info and the US State Dept. Pretty soon you are getting a 360 degree view of things.A good consumer of “news” is going to want to be directed to the raw data from time to time to understand the methodology in which the raw data is converted into bite sized useful information. I love the BLS and IRS info.I have multiple business units in several states and we were not “surprised” about the recent downturn because we routinely track demographics, income statistics, traffic, unemployment filings, regional GDP and sales tax receipts. The trends became volatile about Q4 2007 and were in free fall by Q3 2008 (exacerbated by the Presidential election in my view) and began to recover in Q1 2009.

  44. Mark Essel

    Ah, a fellow data miner, splendid. Have your predictions every made you so confident, and then the tables turned so fast that you didn’t know what hit you? I’ve had that experience a few times when looking at correlations that “had to be true” but ended up not being so (fooled by my own assumptions, or seeing what wasn’t there). One example was a target within a field of clutter. I was so sure I had an algorithm that detected the target, I was devastated when I realized I was just picking up the highest density clutter. Numerical data doesn’t lie, but it can certainly be misinterpreted. My continued study of web information flow has dazzled me with the strength of diverse views. Your 360 degree view analogy was awesome (how about 4*pi steradians ;). If we don’t have access to the raw data for whatever reason (resources, time, restriction), it can be tricky to fill out the image of truth.No matter how hard we try, we’re subject to our own cognitive bias.

  45. Aaron Klein

    Charlie, on your first point, we agree. I live in a small town as well, and have seen that kind of situation skewing news coverage up close and personally.I’m an optimist – I think there is a huge market for in-depth news and investigative journalism. We’ll see how it takes shape, but people absolutely will pay for good news content. How they’ll pay for it is still being figured out and it’s going to be fascinating to watch. But I really don’t think the public is willing to go without it.

  46. the build

    This is in blogs and media now in huge ways. It’ll never be something we can fully escape because it requires people to be honest, and that isn’t always something people want to do.

  47. JLM

    All of my current business related analysis is involved with taking a non-traditional multi-unit, multi-state operating niche business and using analytical concepts to drive the business and to improve margins (originally as low as 15% and now @ 30% and targeting 40%), to identify and curtail corruption and to increase customer attendance while increasing average customer spend.I have been a huge fan of analytical concepts (I have degrees in math, civil engineering and finance though my math is limited by the practical applications of engineering) to drive businesses and have done it in other industries.If I had to embrace a concept it is more along the lines of “Competing on Analytics: the New Science of Winning” which is the current “pop business culture” of what I am trying to do.The biggest problems are getting my team to think similiarly and to remember to actually do the work. There is no actual roadmap for what I am trying to do but there is huge personal gratification seeing an operating unit improve its cash flow by 300% over a three year period.In some ways it is the stripper oil well — enhanced recovery business model applied to an otherwise pedestrian and mundane business in which capital can return 30% for a long, long time.My absolute biggest blind spot has been buying businesses that I simply “like” and I have engaged in some hall of fame quality bad timing. Though I am about the luckiest guy in the whole world.

  48. ShanaC

    I’ll never tell you what I was doing when I was living in israel. Getting up at 6 am to read the news. My god…

  49. fredwilson

    yes, 100% funded by taxpayers

  50. the build

    I’m sure its not without its problems, but I guess BBC could be an example of it in a positive way?

  51. the build

    Probably but usually one of the first goals is to disable the communications infrastructure.

  52. the build

    Yes. I know the history of the internet from a build standpoint. I don’t know who funded its proliferation but it’d make sense that the government would enlist telcos to do the job, I guess.This would certainly create a case for fair consumer access to the internet, but net neutrality isn’t only about consumers having fair access. It’s also about keeping the playing field level for businesses and that’ll matter because in the future, everybody’s going to be on the same platform. That’s where my involvement is in the cause. It’ll be interesting to see how it plays out in the future.

  53. JLM

    The phases of any modern conflict will be:Find and decapitate the political/military leadership — literally;Destroy the communications/electrical infrastructure — radio, internet, telephone, power plants, electric distribution grid;Control the skies — air support, air mobility, anti-aircraft, radar and satellites;Destroy the enemy’s mobility — infrastructure including airports, ports, railway, railway switching, rail bridges, roads, bridges;Isolate the enemy’s military formations and then just find them, fix them, kill them — one by one.Tidy up.If you remember the first 72 hours of the attack on Baghdad in the first and second Gulf Wars, this was the way the target list rolled out.