Dividing up the Ether: December 3, 2017 Snippets
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This week’s theme: how Tim Wu’s The Master Switch helps us frame one important similarity between two debates raging today: Twitter Safety and Net Neutrality. Plus some good numbers out of Box and Bustle.
Last week in Snippets, we talked about the power and paradox of information empires: how networks from the telegraph and radio to TV and social media act as “heavy” infrastructure on top of which “light” information can flow freely. Today’s epidemic of tribalism as entertainment, and the “everything is sports” phenomenon (with fans, storylines, media participants, and so much more), are in many ways inevitable consequences of this light/heavy quality of today’s information networks. We’ve been talking about this theme over the last several weeks in order to develop some perspective on the question we initially started with: how should the government address fake news, hate speech, and other consequences of “light” tribalism on social media’s heavy infrastructure? Can Google, Facebook and Twitter realistically do anything about it? What is likely to happen, and what ought to happen?
Today, we have two current debates about Rights and Freedoms on information networks going on in parallel. First, we have the free speech / hate speech debate on social platforms like Twitter: should Twitter be completely neutral as to what gets said on its platform? Or does it have a responsibility to monitor what’s being said, suspend or ban people from posting threats or other problematic content? (In other words, “allocate network resources away from people saying things we don’t like?”) And second, we have the net neutrality debate going on one level down the stack: can carriers like AT&T and Comcast treat some traffic on their network differently than others? Is it fair to suggest that these two debates are about the same thing: “Freedom from being discriminated against” from the perspective of the user, and “Freedom to allocate my network’s resources as I see fit” from the perspective of the underlying platform? How should today’s information platforms be treated differently as common carriers compared to, say, the railroads that we learned about a few weeks ago, or even the media networks of a decade ago?
The point we’ll explore this week is how both of these debates, as they proceed in parallel, show us something interesting about freedom on information networks. It’s hardly a new issue; the free speech on common carriers question has existed since their origin with the telegraph, and that has continued across many different forms of media through the decades. Tim Wu’s book The Master Switch is one of the best starting points for understanding how these information empires come together and fall apart, and is highly recommended topical reading for all Snippets readers over the holiday season if you haven’t read it already.
One of the more subtle but crucial underlying themes in Wu’s book has to do with the societal norms around the free and unrestricted use of information networks. As information networks rise and fall, from time to time we get inevitable conflict between platform operators who want to allocate resources in a way that restricts or silences some of its users, and those users who protest in response. In the United States, we have a pretty strong tradition of siding with whichever side of a conflict gets to claim “Freedom” as theirs. (A few weeks ago, for instance, we talked about how tobacco companies began to lose influence when freedom from addition and secondhand smoke became major talking points among the opposition.) But sometimes, as Wu points out, information networks evolve in a way where spontaneous free expression on the airwaves gets sidelined and silenced due to structural shifts that rearrange the information landscape, in what’s framed as a “resource allocation issue” rather than a free speech one. Consider, as Wu writes, what happened in the early 20th century when the Federal Radio Commission made the decision to shut down local radio stations across the country with General Order Number 40 to “reset the radio dial” by clearing the airwaves for larger, national commercial broadcasters:
“‘There is not room in the broadcast band for every school of thought, religious, political, social, and economic, each to have its separate broadcasting station, its mouthpiece in the ether.’ So declared the commission in the course of shutting down a well-known station in Kansas famous for its medical quackery.
What is immediately striking about this pronouncement is how much it reads like a calculated antithesis of the First Amendment. Less visceral analysis reveals it to be based on a false technological premise. It is true that interference was a problem. Without any order to the radio dial, no station could be heard. But the FRC had a real choice of whether to back more low-power stations, or fewer high-power stations. There was, in fact, room on the broadcast band for every school of thought, if broadcast rights were confined to localities and lower-wattage transmitters. It was simply a matter of how one envisioned dividing up the ether.”
What’s striking about this example, and many others that you can read about in The Master Switch, is that how the question framed at the beginning absolutely matters, because the initial discussion shapes what happens next. If it’s framed as a free speech issue, then it becomes about free speech, and free speech typically wins in the United States. But if it’s framed as a resource allocation issue, even if the outcome means that some people’s speech becomes effectively silenced, then we see it as an economic tradeoff: away from many distributed chattering voices, and towards a smaller number of national-scale broadcasts.
The question we’ll leave with today is this: thirty years from now, another book like the Master Switch will be written about today’s social media, net neutrality, and information empire conflicts. We’ll have the hindsight of looking back on Facebook, Twitter and AT&T the same way we can look back in hindsight on RCA, NBC and a previous generation’s AT&T a century ago. Will we look back at the Net Neutrality debate, from our future vantage point, as having gone down the Free Speech Issue path, or the Resource Allocation path? What about fake news and the light tribalism we learned about last week? Some issues, like safety on Twitter, are clearly about freedom rather than resources: sure, ther might be a theoretical argument that censorship on Social Media is “allocating scarce space on the feed selectively”, but you’ll probably have a hard time finding too many people who’ll go along with that. And Net Neutrality, at least for the time being, appears to be headed down the “Network operators will be able to allocate their resources as they see fit” path. But what about fake news, and light tribalism? To what extent do we believe that Facebook, Twitter and our other Social Media infrastructure companies will go the same way as the information empires of decades past? It’s worth rereading Wu’s book to try and answer these questions for ourselves, and as the situation changes over the next few months, we may have a better sense of which path our fake news problem is headed towards.
Two additional highlights from the net neutrality debate:
Pro-neutrality, anti-Title II | Ben Thompson, Stratechery
Ben Thompson is wrong about the deregulation of ISPs | Nick Heer
A noteworthy observation:
The early stage slump | Fred Wilson
Bitcoin hit 10,000! So where are the hats?
Bitcoin is an emerging systemic risk | Preston Byrne
Goldman says the Bitcoin haters just don’t get it | Susanne Barton, Bloomberg
Bloomberg also put together a list of who from the traditional investing world is on board versus who’s crying bubble at 10,000. Here are a few highlights:
Joseph Stiglitz, Nobel-winning economist (Anti)
Lloyd Blankfein of Goldman Sachs (Pro)
Bill Miller, legendary investor (Pro)
Howard Marks, Oaktree Capital (Anti)
William Dudley, New York Fed (Anti)
Warren Buffet, no introduction necessary (Anti)
Elsewhere in the world:
China’s next potential boom spot: the places people overlook | Michael Schuman, NYT
Nations agree to ban fishing in Arctic Ocean for at least 16 years | Hannah Hoag, Science
A generation in Japan faces a lonely death | Norimitsu Onishi, NYT
And other reading from around the Internet:
From a casino economy to a new golden age: Carlota Pérez at Drucker Forum 2017
What do states have against cities, anyway? | Alan Ehrenhalt, Governing
The leaning tower of morality | Kevin Simler, Ribbonfarm
State of Mozilla, looking back at 2016 and forward | Mozilla Foundation
In this week’s news and notes from the Social Capital family, some news from a few portfolio companies to share:
Box is continuing to make great progress in the enterprise software world, now as a public company for three years. Their revenue growth continues to impress, reporting $129 million in revenue for Q3 and anticipating around $505 million in revenue for 2017:
Box is cash flow positive again with 26% revenue growth | Katie Roof, TechCrunch
Box Skills applies AI and machine learning to growing content store | Ron Miller, TechCrunch
Box’s growth comes as they’ve launched several new products and services on its own content store, focused around increasing productivity and helping content management for Box’s customers. They include tools like photo tagging using Google’s Cloud Vision API, an audio transcription service, and other neat tools for content managers and Box customers more generally. CEO Aaron Levie, who has seen Box grow from its tiny origins to the great success story it is today, is overall very optimistic about Box’s progress and long-term durability, calling their latest numbers “Really really good spot from a cash generation standpoint.” Congratulations to everyone on the team at Box, and keep up the great work.
Speaking of good numbers, Bustle continues to break from the pack in digital media, posting strong numbers in what is otherwise looking like a troubling year for digital media:
Bustle eyes more deals with revenue on pace to rise 50% | Lukas Alpert, WSJ
CEO Bryan Goldberg expressed optimism about the months ahead in a recent WSJ profile, noting that although others in the space may be missing their aggressive revenue targets, Bustle is exceeding theirs while running very close to cash flow break-even. In his words, “Now is this critical make-or-break moment for the industry where digital media needs to consolidate. Few are in a position to do this, but we feel we have had significant growth and significant access to capital to make this happen.” Digital Media certainly won’t be getting any easier in the medium term, but that will likely be Bustle’s opportunity: Bryan notes, “We anticipate strong profits in 2018, but will not put them ahead of growth initiatives and attractive M&A targets.” We’re looking forward to next year, and will admit to some speculation as far as who will be the newest people and publications to join the Bustle empire.
Have a great week,
Alex & the team from Social Capital
