More on net neutrality

Thought-provoking piece here by Aaron M. Renn of the Manhattan Institute.

I don’t agree with some of his conclusions here. Namely, that Congress and the FCC should immediately launch investigations into the censoring practices of Silicon Valley social media giants, which cut off the public’s access to content that they find politically objectionable.

We technically have no right to see certain types of information. Nor do we have to use Facebook or Google. Nor should we expect that these platforms (or any platforms) ensure we only see true, unbiased, factual information when browsing. It’s up to us to be informed—it’s not Facebook’s or Google’s job. We shouldn’t trust them, or anything else, so much.

(On that note, this is why I think Trump is, perhaps unknowingly, doing us all a favor by calling everything “fake news.” The fact is, there is a lot of fake news out there, and I think were were and are all just too fascinated by the speed and availability of information on the internet to stop and wonder whether what we’re reading is true. Much of it is simply false.)

But the bigger issue that this article raises is the almost arbitrary standard we use to determine whether something is a “public utility,” or simply ubiquitous enough that it should be governed by bureaucrats, not by owners.

Yes, “natural monopoly” is supposed to that standard. But that’s an absurd concept. I realize it’s an accepted notion among the vast majority of economists, but count me in the minority (here’s some reading on that).

Aside from that, it’s becoming clear that the day is nigh when policymakers push to turn Facebook and Google (and other similar tech/information platforms/networks) into what amounts to “public utilities,” with the goal of regulating them to be “neutral” in the way these tech giants want ISPs to be neutral. They’re certainly ubiquitous enough. But they are decidedly NOT “natural monopolies.”

This very article advocates such regulation in the last paragraph (though I don’t agree).

But of course, these companies would oppose that. Because they built these services, not the government. They should make their own rules.

That said, it’s wrong to assume that big companies like Facebook, Google and Comcast will always oppose policies that hamper their freedom to set prices and their freedom, generally. It’s a trade-off. If it means further weaving themselves into the public infrastructure, even at the expense of short-term profits, they may push for strategic regulations on themselves—especially ones that create permits and licenses that boost barriers to entry in their industries.

Think hypothetically: Comcast may one day decide to advocate for net neutrality (that is, for regulating itself) if it means they in turn become an “endorsed” provider of information—that only they are allowed to deliver internet because they are “licensed” and abide by the government’s rules. This kills their competition by boosting barriers to entry for their competition. It’s called “regulatory capture.”

This issue is complicated. It’s not just about “neutral” ISP.

Me at Mises.org on net neutrality

Mises.org re-published my recent net neutrality blog post. I edited it a bit—it’s a little cleaner now. I also added a quote from Marc Andreesen:

A pure net neutrality view is difficult to sustain if you also want to have continued investment in broadband networks. … If you have these pure net neutrality rules where you can never charge a company like Netflix anything, you’re not ever going to get a return on continued network investment — which means you’ll stop investing in the network. And I would not want to be sitting here 10 or 20 years from now with the same broadband speeds we’re getting today.

The fundamental economic problem with net neutrality is that government erroneously purports to know how much internet service providers ought to be charging.

The confusion stems from the status of the ISP market as a state-enabled oligopoly.

Is it right to combat one problem of intervention (ISP oligopoly) with another intervention (net neutrality)? I think not.

Tim Ferriss’ “Rules that Change the Rules”

I know. I’m late to the party. The 4-Hour Workweek was last decade’s business bible. But these rules are timeless, and worth committing to memory.

  1. Retirement is worst-case scenario insurance. Don’t work toward it. Save money in case you become incapable of working (due to anything, for that matter—not just advanced age), but don’t make retirement the goal of your career.
  2. Interest and energy are cyclical. Alternating periods of activity and rest is necessary to survive, let alone thrive. You don’t deprive yourself of the other necessities of life—food, water, shelter. Why deprive yourself of this one?
  3. Less is not laziness. Focus on being productive instead of busy. If this means you accomplish your goals with free time to spare, celebrate! Boosting your productivity means accomplishing more in less time.
  4. The timing is never right. For all of the most important things, the timing always sucks. The stars will never align. Just take the plunge and correct your course along the way. Don’t wait around for the perfect setting, because it won’t ever happen.
  5. Ask for forgiveness, not permission. People deny things on an emotional basis that they can learn to accept after the fact. If the potential damage is moderate or in any way reversible, don’t give people the chance to say no.
  6. Emphasize strengths. Don’t fix weaknesses. Your choice is between multiplying results using your strengths or incremental improvements fixing weaknesses that will, at best, become mediocre.
  7. Things in excess become their opposites. Pacifists become militants. Freedom fighters become tyrants. Blessings become curses. Help becomes hindrance. Don’t pursue an excess of time or money. Pursue what excites you (likely a particular use of time or money).
  8. Money alone is not the solution. By using money as the scapegoat and work as our all-consuming routine, we are able to conveniently disallow ourselves the time to do otherwise. Again, focus on doing what excites you, not on making money now and figuring out how to be happy later.
  9. Relative income is more important than absolute income. Frankly, absolute income means almost nothing, and it’s not a number you should ever think about. Time is your most valuable commodity. Consider your income in terms of how much time you spend earning it.
  10. Distress is bad. Eustress is good. Not all stress is bad. Despair is bad, but being pushed and challenged keeps you happy, healthy and excited. Seek out eustress!

My economic critique of “net neutrality” from a high-level, Austrian perspective

Though the motives of net neutrality advocates differ, the most common motive seems to be a general belief that internet service providers (ISPs) face no serious competition, and therefore overcharge customers and generally treat customers poorly. In other words, ISPs have “natural monopolies” that allow them to rake in profits without improving service to customers or dealing with different customer-types in an equitable manner.

This perspective gave rise to “net neutrality,” which the FCC approved a few years back. This measure essentially transforms the internet into a public utility by regulating ISPs like other utilities (electricity, water, etc.). For convoluted reasons, regulators believe this will improve internet service is distributed equitably among all who are willing to pay the going rate—no more “special favor” for major players who can afford to crowd out smaller, less capitalized firms.

Underlying this perspective is the belief that we can decipher, in some way, the level of service that ought to be offered on the market. Regulators examine the ISP market and decide, on some grounds, that what exists ought to be differently, and that such a change can only come about through government regulation.

But by what standard are regulators judging ISPs to be acting unfairly? Who can say they are making too much or offering too little? Sure, internet service, as the technology has evolved, bears some similarity to public utilities like water and electricity, but it is not the same service.

More specifically, how can we know what ISPs ought to charge?

Some argue that ISPs have obtained special regulatory favors in the past that positioned them to build unfair monopolies in the present. That’s another argument entirely that, frankly, isn’t often made by regulators. But even if that were true, is the solution to end the market for internet service altogether, and opt instead for a pseudo-market whose bounds and limits are controlled, ultimately, by government regulators?

This brings to mind one aspect of the socialist calculation debate, whereby Austrian economists (among others) revealed the self-destructive nature of socialism. One pillar of their argument—Mises’, specifically—is that without a market to study and observe, central planners will not know what prices to mandate for what quantities of goods. The result will be over- or under-production of regulated goods—distortive resource misallocations that ripple throughout the economy and cause excess supply and/or demand.

It is not hard to see how this applies to net neutrality and regulating ISPs. By arbitrarily changing existing markets for internet service, regulators risk corrupting the fragile preconditions necessary for firms and consumers to calculate rationally. The result could be excess demand in the market for internet service if regulations force prices too low, or excess supply if regulations force prices too high. What’s worse, however, is that either way, market players will have no way to know whether related resources are being used toward their most highly-valued end.

This is not a complex point, but it’s important in this particular context, given the importance of internet service in modern economies. A more subtle but equally applicable point has to do with the nature of change in a dynamic world. In a sense, this is a more formal restatement of the problem with comparing market conditions to some model rooted in a concept of the economy as rotating in some static equilibrium. Peter Boettke explains:

Mises [explained] how the static conditions of equilibrium only solved the problem of economic calculation by hypothesis, and that the real problem was one of calculation within the dynamic world of change, in which the lure of pure profit and the penalty of loss would serve a vital error detection and correction role in the economic process.

In the context of the issue at hand, this is particularly consequential. The market for internet service is brand new and growing and evolving quickly. To decide, in a market as young and dynamic as this, that prices are not fair reveals a great degree of confidence in “hypotheses,” as Boettke puts it, about what the ideal market for internet service would look like.

Questioning “community”

A WaPo piece highlighting a sad trend among Americans: We are less neighborly than we used to be.

In 2016, the share of Americans who say they “never” socialize with their neighbors hit an all-time high of 34 percent, according to the General Social Survey. That number’s been rising steadily since 1974, when just 21 percent said they never hang out with their neighbors.

The trend holds for urban, suburban and rural neighborhoods, though is more pronounced in urban and suburban areas.

We often think of cities as fertile grounds for social interactions between neighbors and acquaintances who spontaneously bump into one another on the street, sharing news, gossip and camaraderie. But the numbers above suggest that a sizable portion of city-dwellers are determined to avoid interacting with the people who live nearby — or, perhaps, that the circumstances of their lives are so hectic as to forestall most neighborly interaction.

That last quote is especially important, I think. I’m not sure this is even a surprise to most people—especially those who’ve actually lived in urban areas. It’s no surprise to me. But so much of our framework for how to think about community—as a practical, political, and even spiritual exercise—is premised on the assumption that things like physical proximity and “collaborative” living builds community. That, for example, pooling funds to pay for your neighborhood kids’ education brings us closer together. That sharing healthcare costs as a “national community” helps build empathy and mutual understanding. That public transit is an “equalizer”—used in equal proportion by both the rich and poor.

I wonder if these things more often have the exact opposite effect. Do they stir up more bitterness than trust? Do they sow division instead of empathy, like when stakeholders cannot agree on what curriculum everyone’s taxes ought to prop up in the public schools?

My new article, plus working slower

I have a new piece at Startup Grind.  In it, I break down the essentials of designing a basic market research survey for a product or service idea.

Quantitative market research (i.e. surveys) is a great way to validate a product or service concept. Further, investors are impressed if you can show them hard data—real opinions from real people (not just your friends) about your concept.

Key here is to get your concept description right. Ideally you can test more than one. Just remember that your respondents aren’t telling you how they feel about your product, but how they feel about the product you described in the survey.

In other news

Here’s a photo of my son from Halloween. Just had to share. Can he get any cuter? He loved Halloween—fun to be outside trick-or-treating, especially now that the weather is nicer.

The cooler weather energizes me. Summer was hot. Florida is beautiful, but getting used to the heat will take some time, I think. As in, a few years. What I have learned is to stay cool in Florida weather, it’s important to relax and slow down.

That sounds cliche, or maybe odd, but it’s true quite literally. Moving fast or stressing out raises your blood pressure and makes you warmer. Combined with 100-degree heat and high humidity, that’s a recipe for an uncomfortable afternoon going to lunches and meetings with clients.

Relax and slow down to stay cool. The same is true in business.

Over the past 18 months, the dictum “Work smarter, not harder” (which, to be more accurate, ought to read “Work smarter, not faster”) has come to mean a lot. I’ve never regretted slowing down, taking an hour off here and there to reflect and strategize. To “work smarter.” It boosts the return on my working hours.

Think about it this way: The faster you work, the more mistakes you’ll make. This doesn’t just mean errors in your code or typos in your slide decks, but also to your overall strategy. Taking on work too quickly—before really thinking about the rate, the time, the investment, the return—is a mistake, and it hurts you big-time. More than anything, really.

You can work 60+ hours a week on fun projects for awesome clients at 10% margin, but at the end of the week, you’re no better off than someone working for 30% margin for 20 hours total. Or just 12 hours at 50% margin.

Yes, working at break-even can be smart, if you have a very specific plan for leveraging this work to get better deals in the near future. But I’ve found many people—fledgling freelancers especially—who work at break-even do not have a specific plan. They work week after week for almost nothing, jumping on every opportunity to earn revenue, then burn out and call it quits after earning unjustifiably low profits.

So to succeed and stay cool in business, slow down and relax. Think strategically. Build slowly. And take it easy to keep good perspective. This advice may be laughably fundamental, but I make this mistake all the time, and I’m well past the fledgling freelancer phase of my business.